Week in Review

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Week in Review

10/01/2022

For the week 9/26-9/30

[Posted 8:00 PM ET, Friday]

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Edition 1,224

Sadly, we will be talking about the destruction of Hurricane Ian for a long, long time.  It’s sickening.  Your heart goes out to those who literally lost everything, aren’t insured, might be elderly…it’s not fair.  It’s also times like these when you find out about your community, and the effectiveness of your state and local government leaders.  May they be up to the task, ditto the federal government.

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In a major escalation of the war in Ukraine, Russian President Vladimir Putin today approved the annexation of four occupied Ukrainian regions.

In a signing ceremony at the Kremlin, Putin issued new nuclear threats and called on Ukraine to immediately cease all military actions and the war “that they began in 2014,” referring to the 2014 conflict in eastern Ukraine which commenced after a pro-Russian president was toppled in Ukraine’s Maidan Revolution and Russia annexed Crimea.

Following the speech, the European Union condemned the illegal annexation and said Russia is “putting global security at risk.”

“In the face of Russia’s war of aggression as well as Moscow’s latest escalation, the European Union stands resolutely with Ukraine and its people.  We are unwavering in our support to Ukraine’s territorial integrity and sovereignty.”

In taking the four regions, Russia is annexing about 15 percent of Ukraine’s total area, equal to the size of Portugal or Serbia.

Ukraine said it would continue liberating its territory occupied by Russia and that “nothing changes” after Putin’s proclamation.

“By attempting to annex Ukraine’s Donetsk, Luhansk, Zaporizhzhia and Kherson regions, Putin tries to grab territories he doesn’t even physically control on the ground,” Foreign Minister Dmytro Kuleba wrote on Twitter.  “Nothing changes for Ukraine: we continue liberating our land and our people, restoring our territorial integrity.”

President Zelensky said the votes “are worthless and do not change reality.  The territorial integrity of Ukraine will be restored.  And our reaction to recognition of the results by Russia will be very harsh,” he said in a statement.

Tonight, Zelensky said Kyiv’s forces had achieved “significant results” in the east of the country and mentioned the Russian-occupied stronghold of Lyman, but without giving details.  Pro-Russian military bloggers this week reported that thousands of Russian troops were nearly surrounded in Lyman, cutting off their escape.

But with the annexation, Putin will claim any attack in the territories is an attack on Mother Russia, and that’s why the world is on edge, wondering if and when Vlad the Impaler will play the nuclear card.

As David Ignatius wrote in a Washington Post op-ed today:

“With his takeovers, Putin has burned the diplomatic lifeboats that might have rescued him.  Ukrainian President Volodymyr Zelensky, who in March appeared ready to negotiate a deal that would have given Putin working control of Crimea and the Donbas region, now says that after Friday’s expected seizures, there will be nothing to negotiate.  Putin might want a frozen conflict, but he will have a hot one.  Ukrainian soldiers are still advancing in Kherson, Luhansk and Donetsk.  And Ukrainian partisan fighters are killing Russian occupiers and their local puppets every day.

“Putin thinks he can outlast the West.  He’s convinced that the United States and Europe are decadent and weak, destabilized by the internal political feuds that he himself has covertly encouraged.  He has a weirdly unbalanced persecution complex about the West.  He sees NATO as an implacable foe that’s determined to humiliate Russia; yet he treats President Biden and other Western leaders with contempt, as weak and indecisive.  The West in his mind is at once a lion and a mouse…

“This is a long game.  It might be that Putin’s forced annexation of Ukrainian territory won’t be undone for years, until he is gone as leader.  He presides over a basket of snakes, but they’re more likely to bite each other than Putin.  A year ago, Defense Minister Sergei Shoigu seemed a potential successor to Putin; now he’s a likely fall guy, along with Valery Gerasimov, the chief of the general staff of the armed forces.  Ambitious courtiers wait in the wings, such as former prime minister Sergei Kiriyenko, who is running Putin’s sham referendums, and Moscow Mayor Sergei Sobyanin.

“How would we know that Putin is in trouble?  Tension within the Russian security service would be one sign; another would be open revolt from the military, which is being asked to do an impossible job; a third would be the rise of regional warlords – local governors or others who control resources – as internal chaos mounts.

“But don’t expect any easy outs.  Putin built power by avoiding stabs in the back.  The man who can’t lose will pretend – with his forced annexations – that he is winning.  But this week’s moves are the clearest sign yet that Putin, his army crumbling and his allies vanishing, has made the biggest misjudgment of his life.”

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--How the week unfolded with the war in Ukraine….

Western countries and Ukraine condemned the results from sham referendums on joining Russia in four occupied Ukrainian regions.

Kremlin-backed officials in the four claimed victory on Tuesday amid international condemnation.

President Zelensky said Ukraine will “defend” its citizens in Moscow-held regions that authorities have claimed voted in favor of merging with Russia.

Zelensky said in a video on Telegram: “We will act to protect our people, both in the Kherson region, in the Zaporizhzhia region, in the Donbas, in the currently occupied areas of the Kharkiv region, and in the Crimea.”

Secretary of State Antony Blinken said the West would never recognize Russia’s annexation of Ukrainian territory, which he called part of a “diabolical scheme” by Moscow.

NATO denounced the referendums as a “sham” and “violation of international law.”

Russian occupation authorities expect all the “voting” to end quickly.  “There will be a transition period, of course, until we teach our officials, in a good sense, when they learn the laws of the Russian Federation,” Vladimir Saldo said Tuesday, according to Moscow’s state-run TASS.  “There will be this period,” he said, “but I expect that it will not last long.”

G7 leaders said in a rare statement: “We will never recognize these referenda, which appear to be a step toward Russian annexation and we will never recognize a purported annexation if it occurs.  In addition, we deplore deliberate Russian escalatory steps, including the partial mobilization of reservists and irresponsible nuclear rhetoric.”

In response, the G7 said they are prepared to escalate further with additional sanctions, raising “economic costs on Russia, and on individuals and entities.”

NATO released its own statement condemning Putin’s referendum “in the strongest possible terms.”

“No territorial acquisition resulting from the threat or use of force shall be recognized as legal,” alliance officials said last Thursday, citing the UN charter.  “These lands are Ukraine,” they declared, and “call[ed] on all states to reject Russia’s blatant attempts at territorial conquest.”

Wednesday, in Moscow’s Red Square, a tribune with giant video screens was set up, with billboards proclaiming “Donetsk, Luhansk, Zaporizhzhia, Kherson – Russia!”

The Russian-installed administrations of the four Ukrainian provinces on Wednesday formally asked Putin to incorporate them into Russia.

“The results are clear.  Welcome home to Russia!,” said Dmitry Medvedev, the former president who serves as deputy chairman of Russia’s Security Council, said on Telegram, after the release of the results.

Residents who escaped to Ukrainian-held territory in recent days have told of people being forced to tick ballots in the street by roving officials at gunpoint.  Footage filmed during the exercise showed Russian-installed officials taking ballot boxes from house to house with armed men in tow.  Russia says voting was voluntary and turnout high.

Denis Pushilin, the Russian-installed leader in Donetsk, said he was on his way to Moscow to complete the legal process of joining Russia.

“Now we are moving to a new stage of military action,” he said, amid speculation that Putin is set to change the status of what he has so far called a “special military operation” to a counter-terrorism operation.

Vladimir Putin was then scheduled to address both houses of the Russian parliament on Friday and use the address to formally announce the accession into Russia of the territories that held referendums, the British Ministry of Defense said in its latest intelligence update.

At the same time, Russian forces in Ukraine were on the verge of one of their worst defeats of the war on Friday.  The pro-Russian leader of occupied areas in Ukraine’s Donetsk province acknowledged his forces had lost full control of Dobryshev and Yampil villages, leaving Moscow’s main garrison in northern Donetsk half-encircled in the city of Lyman.  The Ukrainian army was “trying at all costs to spoil our historic events,” Denis Pushilin said, referring to the annexation ceremony he was to attend with Putin at the Kremlin.

Elsewhere, missiles tore through a convoy of civilian cars preparing to cross from Ukrainian-held territory into the Russian-occupied zone, killing at least 25 civilians, at last report.  The convoy was to visit relatives and deliver supplies.

Friday’s missile attack in Zaporizhzhia was gruesome even by the standards of a conflict in which Russia has razed entire cities to the ground.  The regional governor called it “another terrorist attack by a terrorist country.”

President Zelensky wrote on Telegram: “The enemy is raging and seeking revenge for our steadfastness and his failures.  He cynically destroys peaceful Ukrainians because he lost everything human long ago.  Bloodthirsty scum!  You will definitely answer.  For every lost Ukrainian life!”

UN Secretary-General Antonio Guterres called the situation this week a “dangerous escalation” and a violation of the United Nations charter. 

“It can still be stopped.  But to stop it we have to stop that person in Russia who wants war more than life.  Your lives, citizens of Russia,” President Zelensky said in a Thursday evening address.

Zelensky called an emergency meeting of his defense and security chiefs today in response to the annexations.  

Putin said that “all mistakes” made in his military call-up should be corrected, his first public acknowledgement of problems in the mass round-up of hundreds of thousands of Russian men since last week. Western countries say Moscow is rushing unprepared troops to the frontlines with little or no training and inadequate equipment.  Britain’s Ministry of Defense said troops were being told to buy their own first aid kits.

Russian government officials have said that the four regions annexed will fall under Moscow’s nuclear umbrella.

President Biden pledged on Thursday the United States will never recognize Russia’s claims on Ukraine’s sovereign territory, denouncing the referendums as an “absolute sham,” saying, “The results were manufactured in Moscow.”

So, Friday, Putin marked the start of the formal annexation of the four Ukrainian territories, saying it was the beginning of a battle for a “greater historical Russia.”

“This is the will of millions of people,” he said in his speech.  Moscow’s proxies in the occupied regions claimed majorities of up to 99% in favor of joining Russia.

Putin urged Ukraine to cease military action and return to the negotiating table.  Kyiv has vowed to recapture all the lands seized by Russia and said that Russia’s decision to annex the territories has destroyed any prospect of talks.

In his speech, Putin evoked the memory of Russian heroes from the 18th century to World War II and repeated familiar accusations against the West, accusing it of colonial practices and recalling the use of nuclear weapons by the United States against Japan at the end of World War II.  He said the U.S. had created a “precedent.”

Vlad announced Russia would use “all the power and all the means” at its disposal to defend its new lands from attacks by the West or Ukraine.

The hurried annexations mean that front lines of the war will now run through territory that Russia is declaring as its own and that Putin has said he is ready to defend with nuclear weapons if necessary.

Putin said the West was “satanic” and rejected “moral norms” in a combative speech delivered from the Kremlin.  Putin attacked the West’s liberalism, saying that, unlike Russia, it had turned away from “traditional” and “religious” values.  At one point in the speech, he asked the assembled dignitaries if they wanted “children to be offered sex-change operations,” a practice he implied was widespread in the West.  In his two decades in power, Putin has routinely promoted what he says are “traditional values” and suppressed LGBTQ rights through a number of laws and by backing ultra-conservative movements.

--Meanwhile, Russian authorities said they were establishing checkpoints at some of Russia’s borders, to forcibly mobilize Russian men who are seeking to avoid forced mobilization by fleeing the country.

As of Wednesday, an estimated 194,000 Russian nationals had fled – by car, bicycle, and on foot – in the week since Putin announced a partial mobilization of reservists.

On Wednesday, the Russian Ministry of Defense denied rumors that Russian officials asked the governments of Georgia, Kazakhstan, and other border states to forcibly extradite Russian men fleeing mobilization back to Russia.

Long lines of cars, some up to 18 miles long, were spotted at Russia’s border crossings.

Angry demonstrations took place in scores of Russian cities.  A gunman opened fire in an enlistment office in a Siberian town and gravely wounded the military commandant, saying, “We will all go home now.”

“Panic. All the people I know are in panic,” said David, a Russian boy who gave only his first name out of fear of reprisals, in an interview with the Associated Press at a border crossing in Georgia.  “We are running from the regime that kills people.”

A British military intelligence report claimed the number of Russian military-age men fleeing the country likely exceeds the number of forces Moscow used to initially invade Ukraine in February.

“The better off and well educated are over-represented amongst those attempting to leave Russia,” the British said.  “When combined with those reservists who are being mobilized, the domestic economic impact of reduced availability of labor and the acceleration of ‘brain drain’ is likely to become increasingly significant.”

--Two pipelines from Russia to Germany are leaking, three separate leaks from them that were first discovered on Monday, and the natural gas inside of them is bubbling to the surface of the Baltic Sea and venting into the atmosphere.  Later in the week, Sweden’s coast guard said it found a fourth leak on the pipelines.

Swedish seismologist had detected explosions in the area, and immediately there was talk of sabotage, potentially caused by Russia, which denied this and pointed the finger at adversaries including the U.S.

“We have established a report and the crime classification is gross sabotage,” a Swedish national police spokesperson said.

European leaders said sabotage is the most likely cause of the leaks.  Denmark’s military issued an image of gas bubbling at the surface of the Baltic after the “unprecedented” damage to the pipelines.

The Nord Stream 1 and Nord Stream 2 pipelines from Russia to Germany were not operating at the time the damage occurred but were filled with natural gas to keep them pressurized.

The leaks are a potential environmental disaster, given that methane – the key ingredient in natural gas – is a potent greenhouse gas.  Methane is 80 times as potent as carbon dioxide as a greenhouse gas, so 8.5 million tons is the annual output of two million cars or two coal power plants.

How to stop the leaking is unclear before all the inventory is lost.  It’s incredibly dangerous.  You can’t just put some diving vessels down there.

Josep Borrell Fontelles, the EU high representative for foreign affairs and security, said in a statement the leaks were “not a coincidence and affect us all.”

European Commission chief Ursula von der Leyen on Tuesday said the leaks of the Nord Stream pipelines were caused by sabotage and warned of the “strongest possible response” should active European energy infrastructure be attacked.  “Spoke to (Danish Prime Minister Mette) Frederiksen on the sabotage action Nord Stream,” von der Leyen said on Twitter, adding it was paramount now to investigate the incidents to get full clarity on the “events and why.”

“Any deliberate disruption of active European energy infrastructure is unacceptable and will lead to the strongest possible response,” she warned.

Poland’s prime minister, Mateusz Morawiecki, called the leaks “an act of sabotage” that “related to the next step of escalation of the situation in Ukraine.”

NATO said Thursday the leaks appear to be “deliberate, reckless, and irresponsible acts of sabotage,” according to a statement.  “Any deliberate attack against Allies’ critical infrastructure would be met with a united and determined response,” the alliance added.

According to Russia, “This looks like an act of terrorism, possibly on a state level,” Kremlin spokesman Dmitry Peskov said Thursday.  Russia’s Foreign Ministry, meanwhile, says NATO is the most likely culprit because of alliance exercises conducted near Bornholm in July, state-run TASS says.  (A separate TASS report insists the U.S. would benefit from such a damaged pipeline because it would present an opportunity to increase exports of natural gas.)

In his speech Friday, Putin accused “Anglo-Saxon” powers of blowing up the pipelines.  “The sanctions were not enough for the Anglo-Saxons: they moved onto sabotage,” said Vlad.  “It is hard to believe but it is a fact that they organized the blasts on the Nord Stream international gas pipeline.”

As Europe braces for winter, the immediate impact of the leaks on its energy supply is expected to be limited.  But the leaks clearly exacerbate Europe’s jitters in its escalating energy war with Russia, as Putin toys with the continent’s supplies.

--Dmitry Medvedev said that the country has the right to use nuclear weapons in the war in Ukraine.  Medvedev, an ally of Vladimir Putin, stated his belief that NATO would stay out of the conflict. 

In a post on Telegram, Medvedev said that the West would not intervene even if “Russia is forced to use the most fearsome weapon against the Ukrainian regime,” because the “demagogues across the ocean and in Europe are not going to die in a nuclear apocalypse.”

Poland’s foreign minister, Zbigniew Rau, said NATO’s response to any use of nuclear weapons in Ukraine should be non-nuclear but “devastating.”

--The Biden administration is preparing a new $1.1 billion arms package for Ukraine, that would include 18 HIMARS launchers

--The Organization for Economic Cooperation and Development (the group of developed nations) estimated the cost of Russia’s invasion to the global economy will be $2.8 trillion in lost output by the end of next year.

--The head of the Russian Orthodox Church has said that Russian soldiers who die in the war against Ukraine will be cleansed of all their sins, days after Vlad the Impaler ordered the country’s first mobilization since World War II.

Patriarch Kirill, a Putin butt-boy and backer of the invasion, has previously criticized those who oppose the war and called on Russians to rally round the Kremlin.

“Many are dying on the fields of internecine warfare,” Kirill, 75, said in his first Sunday address since the order.  “The Church prays that this battle will end as soon as possible, so that as few brothers as possible will kill each other in this fratricidal war.”

“But at the same time, the Church realizes that if somebody, driven by a sense of duty and the need to fulfill their oath…goes to do what their duty calls of them, and if a person dies in the performance of this duty, then they have undoubtedly committed an act equivalent to sacrifice.  They will have sacrificed themselves for others.  And therefore, we believe that this sacrifice washes away all the sins that a person has committed.” [Reuters]

Note to Kirill.  Idi pryamo v ad.  Do not pass Go. 

--President Putin on Monday granted Russian citizenship to former U.S. intelligence contractor Edward Snowden, nine years after he exposed the scale of secret surveillance operations by the National Security Agency (NSA).

Snowden, 39, fled the United States and was given asylum in Russia after leaking secret files in 2013 that revealed vast domestic and international surveillance operations carried out by the NSA, where he worked.

U.S. authorities have for years wanted him returned to the United States to face a criminal trial on espionage charges.

--At least 17 people were killed on Monday, including 11 children, when a gunman, wearing a T-shirt with a red swastika opened fire on a school in the central Russian city of Izhevsk, Russia’s Investigative Committee reported. The gunman, reportedly armed with two weapons, also killed himself.

Among the dead were a school security guard and two schoolteachers.

It was the fourth significant school shooting in Russia in four years; the others claiming six, nine, and 21 lives.

--This afternoon, Russia vetoed a UN Security Council resolution introduced by the United States and Albania condemning Moscow’s proclaimed annexation, and China chose to abstain from the vote (ditto India and Brazil, pathetically).

Opinion….

Elisabeth Braw / Defense One

“Russia’s mobilization of a reported 300,000 reservists hasn’t proceeded very smoothly. Almost immediately after President Vladimir Putin announced that his government would be calling the reservists up for duty in Ukraine, waves of Russians began fleeing the country, rightly suspecting this was just the first wave of call-ups….

“It’s hardly surprising that the men are escaping.  War service is never pleasant in the first place.  Putin’s problem goes far beyond the ugliness of war.  Russia’s men are showing the world that Putin’s ‘partial mobilization’ demonstrates that they don’t believe in his war, and thus in his government. And it demonstrates that they don’t believe the mobilization is partial at all.

“They’re extremely perceptive.  Even though this week’s announcement introduced partial mobilization, Russians can’t be sure that it will remain so.  ‘Until Wednesday 21 September they tried recruiting volunteers, and it didn’t succeed. So they had to mobilize,’ Gudrun Persson, a Russia analyst at the Swedish Defense Research Agency and the lead author of the authoritative Russian Military Capability in a Ten-Year Perspective, told me.  ‘And there’s nothing in the presidential decree that explains what ‘partial’ means, nor is it a term in current legislation.  This is mobilization, full stop, for the third time in Russia’s history.  The previous times were 1914 and 1941.’

“Being part of the first mobilization since World War II doesn’t bode well for the men now arriving in the barracks, and those who may be about to receive their call-up notice.  ‘Until now, the problems Russian conscripts faced mostly involved dedovshchina (hazing), dying during exercises and poor, even if improving, service conditions,’ Katarzyna Zysk, an expert on the Russian military at the Norwegian Institute for Defense Studies, told me.  ‘Now, on top of that, there’s a significant risk of becoming cannon fodder.’….

“Putin, Defense Minister Sergey Shoigu, and their advisers are painfully aware that few men want to serve in Russia’s armed forces.  For decades, young Russian men have used highly innovative ways (including PhD studies) to avoid being conscripted, and since the invasion of Ukraine the armed forces have faced such recruitment problems that many contract soldiers have simply seen their contracts extended involuntarily.  ‘Since 2008, Russia has been trying to get away from its large mobilization armed forces, and instead create a professional force, mobile, with a lot of air power,’ Persson said.  ‘And now they do this.  This is like World War I, and they’ve not practiced for this contingency involving hundreds of thousands – and possibly more – rudimentarily trained ex-conscripts being sent to the war.’

“Shoigu has taken pains to emphasize that draftees will be placed in support roles rather than frontline combat, a logical message to send considering that at least 300,000 families would rebel if their sons were made immediate cannon fodder.  But Russia’s military seemed unprepared to receive even support troops.  ‘The Russian armed forces’ endemic corruption is becoming obvious once again,’ Persson said.  ‘Soldiers are arriving at their bases and there are no uniforms for them, nothing.  It’s shocking.’

“The mobilization could have some effect on the war, if Russia’s military manages to temporarily substitute reservists for exhausted contract soldiers.  But draftees are hardly going to give their best.  ‘We’ve seen in this war how decisive the will to fight is. The Ukrainians have it.  But the Russian soldiers don’t understand why they’re there.  The mobilization is hardly going to improve the men’s will to fight,’ said Zysk.

“What a contrast to Ukraine, but also to Finland, which in 1939 faced formidable Soviet invaders.  To the Soviets, Finland, a newly independent and badly divided country whose armed forces were extremely rudimentary, seemed an easy conquest. But the Finns believed in their country, they believed in their country’s leadership and especially in their commander, Field Marshal Carl Gustaf Mannerheim, a strategic genius who managed to turn the country’s rag-tag army of 90 percent reservists into a cunning insurgency force that so bedeviled the Red Army that Moscow withdrew after 105 days. While Finland was forced to relinquish some territory, it remained independent.

“Russia’s mobilization debacle is playing out for all the world to see.  And Putin is testing Russians’ faith in his war and his regime. The men now being served call-up papers may not be politically minded, but their efforts to avoid becoming cannon fodder could turn the mobilization into a movement against Putin’s war – and his regime.”

Tom Nichols / The Atlantic

“Although Putin may be willing to take greater risks as the military situation in Ukraine deteriorates, he likely knows now that the cumulative effect of his multiple blunders in Ukraine has been to jeopardize the stability of his regime and the Russian Federation itself.  Russia is a pariah state; the entire nation and its leading figures, right down to Putin’s rumored girlfriend, are under sanctions.  Young men, supposedly Russia’s great macho warriors, are jamming the roads to Finland and Georgia trying to flee the country.  Putin’s own commanders are asking for permission to retreat, and even some of Putin’s most gleeful warmongers in the Russian media, including the ghoulish Margarita Simonyan, seem freaked out by the accelerating disasters that have changed Russia’s image from a major power to a cornered weakling in only seven months.

“(Dmitry) Medvedev correctly described Russian nuclear doctrine as allowing a resort to nuclear arms if the existence of the Russian state and its territorial integrity are under existential threat. The dark paradox here is that Russian doctrine says nothing about what to do if such a threat emanates from its own president….

“Assume, for example, that Putin decides to shock the world by exploding a relatively small nuclear weapon, perhaps against Ukrainian forces close to the Russian border, claiming that he needs to halt a catastrophic Ukrainian offensive into Russia.  Putin is a product of the Soviet system; this thinking has always shown a heavy reliance on old Soviet catechisms about the West, and he would likely expect such an act to produce panic, the fracturing of NATO, unrest in the United States and Britain, and a Ukrainian capitulation under pressure from Washington and Brussels.

“That could happen, I suppose, but the lessons of the past century, from the destruction of the Nazis to the defeat of the Soviet Union to the resistance in Ukraine, suggest that it is a bad bet.  More likely, the entire world would coalesce against Putin, including China and others who have so far quietly tolerated this brutal escapade….

“Putin may think he could weather such a storm, but chaos would also erupt in Russia: One of the reasons Putin’s been able to prosecute this war is that he promised it would be quick and painless. Risking nuclear war after trying to drag hundreds of thousands of men into the military, while radiation blows across Europe after a nuclear attack on Ukraine, would likely be the breaking point for Russian society and a fair number of its elites.  As the writer Peter Pomerantsev said recently: ‘The war in Ukraine was meant to be a movie, not a personal sacrifice… If there’s one thing Russians fear more than Putin, it’s nuclear war – and now he’s the one bringing it closer.’

“Putin knows from history how fast an invulnerable position in the Kremlin can become exceedingly vulnerable.  (For one thing, Putin is well aware that Stalin’s most feared lieutenant, the secret-police boss Lavrenti Beria, fell from power in a matter of weeks and died in a basement, pleading for his life.)  Other Kremlin figures likely know these risks, too.  But if all is lost, and Russia is coming unglued both physically and psychologically because of this mad scheme in Ukraine, Putin might think that a nuclear bomb is his only option.  Whether anyone would stop Putin from giving this order, or whether the Russian high command would carry it out, is anyone’s guess.”

Joseph Cirincione / Washington Post

“Russian President Vladimir Putin is losing his war.  If the Ukrainians continue to liberate areas of their country from his invading army, would he actually use nuclear weapons as he has threatened?  If so, how? And what would the U.S. response be?

“It is difficult to put percentages on risk.  Nor does it really matter.  Given the stakes, if the chances are 10 percent or 40 percent, the response would be the same: Minimize the possibility of nuclear use, and prepare responses in advance.

“That is what U.S. military and intelligence leaders are doing – and have been doing since the early days of the war.  They are studying all the possible use scenarios.  U.S. intelligence is closely watching for any sign that a nuclear weapon is being readied.

“We should believe Putin that ‘this is not a bluff.’  The first use of nuclear weapons in a conflict is an integral part of Russian military doctrine, as it is in U.S. war plans.  Unlike the United States, Russia regularly practices for the use of nuclear weapons and integrates them into its conventional military exercises, most recently just before Putin’s invasion.

“Russian military writings describe in detail how, if Russia is losing a conflict, it could use nuclear weapons to force its enemy to retreat.  This ‘escalate to de-escalate’ or ‘escalate to win’ strategy is somewhat controversial, but it is not dissimilar to various U.S. plans for using nuclear weapons first.

“What would that look like in Ukraine?  There are numerous scenarios, with scores of variations, but they fall into a small number of broad scenarios.

“Demonstration shot.  One option is for Russia to fire a nuclear weapon over an uninhabited area – say, part of the Black Sea – as a demonstration of its seriousness in hopes that the West will back down….

“This explosion would not require a nuclear response by the United States.  To prevent further escalation, President Biden could call for Russia’s international isolation (China and India, for example, would quickly distance themselves), impose extraordinarily harsh new sanctions and issue warnings of grave consequences should Russia proceed with additional explosions.

“As shocking as this would be. Russia would likely reject this option for the same reason U.S. military leaders did in 1945: It is not shocking enough.

“Low-yield weapon: Russia could fire a ‘low-yield’ nuclear weapon on a Ukrainian military target.  The explosion would kill hundreds or thousands and cause significant damage….

“This might be the most likely scenario.  Again, it would not require a ‘response in kind’ by the United States, though some would urge that.  The likely response, in addition to those in scenario one, would be massive increases in military aid to Ukraine and possibly concerted NATO or U.S. strikes on the Russian units that launched the attack.

“Large-yield weapon.  Putin could dial up the explosive force of the attack to the 50- or 100-kiloton range, or about three to six times the Hiroshima bomb. Tens of thousands would die with massive damage and radiation plumes.  If the target were Kyiv, it would decapitate Ukraine’s leadership.  This would almost certainly trigger a direct U.S. or NATO response, though not likely nuclear.  The United States and NATO have sufficient precise, powerful conventional weapons that they could use to devastate Russian forces in Ukraine and command headquarters, including those units responsible for the attack. This would likely be accompanied by large-scale cyber operations.

“Nuclear attack on NATO.  This is the least likely scenario. Russian first-use doctrine includes the option of striking NATO targets. The attack could be by long-range missiles or air-launched cruise missiles on Central European states.  If the yield of the weapon were similar to the previous scenario, it would inflict a level of destruction on a NATO state not seen since World War II.  This could trigger a nuclear response.  Some would argue a limited nuclear counterstrike was necessary to preserve nuclear deterrence.  More likely is an all-out conventional assault to try to eliminate either Putin himself or the weapons he commands before he strikes again.

“These are horrible scenarios to consider.  If you are worried, you are having the appropriate reaction.  We should do all we can now to prepare a massive political response that might deter Putin from crossing the nuclear line.”

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Wall Street and the Economy

It was a totally bizarre week, with the bond market, globally, going bonkers, soaring rallies, sickening declines, in both bonds and equities.

Wednesday, we had a big rally, the Dow up 548 points for its best day since July, thanks to a move by the Bank of England, which said it would buy long-dated bonds after the British 10-year gilt traded above 4.50%, an intervention intended to stem a surge in yields and collapse in the price of the pound.

The British pound had dropped to an all-time low against the dollar on Monday as investors reacted negatively to Britain’s new economic plan, will hurt the country’s finances.  New Finance Minister Kwasi Kwarteng had unveiled a plan for historic tax cuts, funded by the biggest increase in borrowing since 1972, and British government bond prices collapsed.

The BoE said: “The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome.”

The message had its intended effect, as the yield fell half a percentage point to 4.01%.

These are moves that take months in normal market environments, but with central banks around the world tightening monetary policy to deal with high inflation, yields have surged all over (except for Japan, which is truly an island unto itself in so many ways).

But then Thursday, equity markets had second thoughts and the last two days of the week, the Dow fell 958 points to close out a very ugly quarter.

Also Thursday, Freddie Mac reported that the average on the key 30-year fixed-rate mortgage soared to 6.70%, up from last week’s 6.29% and the highest since July 2007.  It was 3.01% a year ago, 3.11% Dec. 30.  A massive difference in one’s monthly payment.

Former Treasury Secretary Lawrence Summers, who presciently called the rise in inflation over a year ago, said the current level of risk in global markets is reminiscent of conditions seen in 2007 ahead of the Great Recession.

Summers detailed his concerns one day after the Bank of England was forced to intervene to stabilize the UK’s cratering economy – an event that some saw as a potential “contagion” event that could infect global markets.

“I do certainly think we’re living through a period of elevated risk,” Summers said during an appearance on Bloomberg on Thursday.  “Earthquakes don’t come all of a sudden – there are tremors first.  Most of the time, when there are tremors, they’re just tremors and it goes away, but not 100% of the time.”

“In the same way that people were anxious in August of 2007, I think this is a moment when there should be increased anxiety,” Summers added.

Lastly, the OECD (the organization of developed nations) said the global economy was set to grow by 3% this year and 2.2% next year.  Before the war, it had expected growth of 4.5% in 2022 and 3.2% in 2023.

On the economic data front, the Federal Reserve received further information that will only buttress its case to hike another 75 basis points come the Nov. 1-2 Open Market Committee meeting.

Today we had August readings on personal income, up 0.3%, as expected, and consumption, up 0.4%, double estimates.

More importantly, the report contained data on the Fed’s preferred inflation benchmark, the PCE, or personal consumption expenditures index, which rose 6.2% on headline, year-over-year, with the core PCE at 4.9%, both a tick above expectations and vs. prior revised figures of 6.4% and 4.7%.  Both still way too high.

Federal Reserve Bank of St. Louis President James Bullard was among this week’s Fed speakers and he said the credibility of the central bank’s inflation target was threatened by hot price pressures and urged further interest rate hikes.

“This is a serious problem and we need to be sure we respond to it appropriately,” Bullard told an economic conference in London.  “We have increased the policy rate substantially this year and more increases are indicated” in the Fed’s latest forecasts.

“We have just now gotten to the point where we can argue we are in restrictive territory,” Bullard said.  Referring to the rate path laid out in the Fed’s dot plot, Bullard said “I think we need to stay at that higher rate for some time to make sure we’ve got the inflation problem under control.”

Meanwhile, we had an August reading on new-home sales that was far stronger than expected at 685,000 annualized, but the S&P CoreLogic Case-Shiller home price index for July fell 0.4% vs. June, the first drop since March 2012, the end of the last crash in the housing market.  Year-over-year, the 20-city index was up 15.8%, but this was down from 18.1% in June.

And a report on Chicago manufacturing for September, a good preview of next week’s national ISM figures, was far worse than forecast, 45.7, the lowest reading since June 2020, and versus a forecast 52.0 and 52.2 prior.  [50 the dividing line between growth and contraction.]

We also had our final look at second-quarter GDP, -0.6% annualized, with the first quarter at -1.6%, ergo, the standard definition of a recession…two negative quarters in a row…though most other economic indicators argue otherwise.

However, most are in agreement a recession is coming at some point in 2023.  That said, the Atlanta Fed’s GDPNow barometer for the third quarter jumped up to 2.4% today, largely on the solid personal income and consumption data.

Europe and Asia

A flash look at euro area inflation in September was awful, 10.0%, vs. 9.1% in August.  Ex-food and energy, prices rose a very hot 6.4% compared with 5.8% in August.

Again, these are estimates, but Germany’s headline inflation rate for September was 10.9%, 17.1% in the Netherlands!  France was better at 6.2%, per Eurostat.

Eurostat also reported on EA19 unemployment for August, 6.6%, stable with July and down from 7.5% in August 2021.

Germany 3.0%, France 7.3%, Italy 7.8%, Spain 12.4%, Netherlands 3.8%, Ireland 4.3%.

The OECD expects the eurozone economy to grow by just 0.3% in 2023, with Germany’s economy set to contract by 0.7%.  Should natural-gas prices rise over the remainder of the year, Europe’s 2023 growth could be 1.3 percentage points lower next year.

Britain: There are many already calling for Prime Minister Liz Truss’ head, amid the sudden collapse of the UK government’s remaining economic credibility, and the feeling that she won’t have a solid parliamentary majority for two years before the next election, but rather, she could be gone in months.

Remember, as I wrote at the time, Truss was the choice to replace Boris Johnson among the Conservative party’s members, not the choice of the MPs (members of parliament).  Fewer than a fifth of MPs backed her in the first round (before it went to the party members).

Next month, Conservatives hold a party conference and there is word it will be a bloodbath.  Truss could be gone next spring, after English council elections.

A big issue is the Northern Ireland Protocol, in which Truss (and Johnson before her), want to break the existing trade pact with the EU that was part of Brexit; the agreement designed to avoid a hard border on the island of Ireland.

Bottom line, the British budget is a disaster, with mammoth funds about to be spent to subsidize massive heating bills so that the people can eat this winter.  And then Truss called for tax cuts.

At the same time, UK retailers are facing a “mortgage time bomb,” with rising interest rates set to have twice the impact on consumer finances as the recent surge in utility bills, according to a Deutsche Bank analysis.

A “significant” increase in the cost of servicing home loans will reduce disposable incomes by about 5% in 2023, adding to pressure on consumers already struggling to contend with soaring inflation.

Separately, for the first time in history, more people in Northern Ireland identify as Catholic than Protestant.

Data from the 2021 census, released last week, indicated 45.7% of those surveyed said they were Catholic compared to 43.5% of the populace saying they were Protestant, according to the Irish Post.

A decade ago, 48% of Northern Irish considered themselves Protestants compared to 45% saying they were Catholic.  That was the first time the 101-year-old United Kingdom province counted less than 50% of its populous as Protestant.

The Catholic News Service reports that societal shift could argue for a referendum asking voters if they want to remain a part of Great Britain or unite with the predominantly Catholic Republic of Ireland.

Italy: Giorgia Meloni, the far-right firebrand and leader of the Brothers of Italy party was victorious in Sunday’s elections and is set to become Italy’s first female premier next month.  She has said she dropped her former admiration for Vladimir Putin, and has been unstinting in backing NATO’s support for Ukraine, and she has tempered her rhetoric suggesting she would splinter the European Union, seeing as Italy relies on EU largesse and infusions of pandemic relief funds.

But her seeming victory promises further turmoil across Europe, where far-right leaders are ascendant.  For now, as the Washington Post editorialized:

“The lurking danger of a Meloni government is to Europe’s ability to withstand Mr. Putin’s attempts to break Western anti-Kremlin sanctions, using Europe’s dependence on Russian energy exports as leverage.  Italy’s economy is chronically anemic, and many Italians will suffer as Moscow’s pressure mounts.  That will test Ms. Meloni’s determination to hold the line, especially given that one of her coalition partners, Matteo Salvini of the League party, opposes sanctions, and the other, former prime minister Silvio Berlusconi, is an apologist for the Russian authoritarian.

“Washington, NATO and the EU must use their considerable leverage to ensure Ms. Meloni’s spine remains stiff.”

Turning to Asia…China reported its official manufacturing PMI for September was 50.1 vs. 49.4 in August, with non-manufacturing at 50.6, down from a prior 52.6, according to the National Bureau of Statistics.

Caixin’s private manufacturing reading for September was a poor 48.1 vs. last month’s 49.5.

The World Bank slashed its growth forecast for China in 2022, in part because of the country’s zero-Covid policy and property crisis.  The bank expects the world’s second-biggest economy to grow at an annual rate of 2.8%, a little over half of its previous forecast of 5%.  Growth in the East Asia and the Pacific regions was also revised down to 3.2%.

Japan reported retail sales in August rose 4.1% year-over-year, better than expected.  We also had flash readings on manufacturing for September, 48.9, and the service sector, 51.9.

Street Bytes

--The sickening slide in the stock market continued, a three-week slide that has seen the S&P 500 lose 12%.  [Six down weeks in seven in which the S&P has fallen 16%.]

For the week, both the Dow Jones and S&P lost 2.9%, Nasdaq 2.7%.  Nasdaq has lost 19% over the seven-week period.

The S&P fell 9.3% in September, 5.3% for Q3, marking its third consecutive quarter in the red, and is down 25% for the year.

It’s all about inflation, monetary tightening, and the impact on global economic growth.

Next week we have a key jobs report for September, as well as manufacturing and service sector data that will be closely watched.  And then the following week, CPI and PPI figures for September that will be critical for the Fed, and the markets.

--U.S. Treasury Yields

6-mo. 3.90%  2-yr. 4.26%  10-yr. 3.81%  30-yr. 3.77%

The yield on the 10-year hit 4.01% earlier in the week, the highest since 2008, then fell to 3.70%, before rising anew Friday.

But since July 29…look at these moves in the 10-year across the pond.

Germany 0.81% (7/29) to 2.10% (9/30)
UK 1.86% to 4.08% (after touching 4.50%)

U.S. 2.65% to 3.81%

--Oil was up just a smidge on the week, with West Texas Intermediate at $79.67, after trading below $77 on Monday ….  The price for regular gasoline at the pump rose some for the first time in months, $3.79, though diesel continued to tick down at a still way-too-high level of $4.87.

--Home buyers are backing out of contracts in the Sun Belt, as 15.2% of homes in cities in the region that went under contract in August fell through, or roughly 64,000 homes nationwide saw deals dropped, a new report from real-estate brokerage Redfin said.

A year ago, only 12.1% of home buyers were backing out of deals.  Typically 12% of deals fell through prior to the pandemic, Redfin said.

Buyers were most likely to back out of deals in cities such as Phoenix, Tampa, and Las Vegas.  Buyers were least likely to back out of purchases in big cities, including San Francisco and New York.

Hurricane Ian certainly isn’t going to help in Florida writ large.

--Apartment rents are falling from record highs across the U.S. for the first time in nearly two years, offering the prospect of relief to millions of tenants who have seen steep increases during the pandemic.

Granted, asking rents nationally fell just 0.1% from July, according to a report from property data company CoStar Group, but it was the first monthly decline in rent since Dec. 2020.

Apartment-listing website Rent.com showed a 2.8% decrease in rent for one-bedroom apartments during the same month.

Should falling rents continue, this will show up in the official inflation figures at some point in 2023.

Nationally, rents in August were 7.1% higher than they were during the same month last year, according to CoStar.

--Lumber prices have dropped by more than 60% so far this year, as higher interest rates and inflation will continue to slow demand for single-family homes.

The most-active November futures contract for random length lumber settled at $410.80 per thousand board feet on Sept. 26, down 64% year to date, 70% off the March highs (75% off the May, 2021, pandemic peak).

Housing starts (new home construction) fell sharply in June and July, down 10.9% in each, though August starts climbed by a seasonally adjusted 12.2%, on the back of a rise in new apartment construction, which doesn’t use as much framing lumber as single-family homes.

--Government lawyers used airline executives’ own words in trying Tuesday to persuade a federal judge to kill a partnership between American Airlines and JetBlue Airways.

The Justice department and officials in California and five other states argue in their lawsuit that the deal is, in effect, a merger that will cost consumers $700 million a year in higher fares.  It said JetBlue’s pending purchase of Spirit Airlines will make matters even worse for travelers.

American and JetBlue are coordinating schedules and sharing revenue from flights in the Northeast, including New York-area airports.

JetBlue CEO Robin Hayes was questioned about his own previous statements criticizing joint ventures involving other airlines and a 2019 comment that the airline industry “has never been more concentrated than it is today,” which he said led to higher fares and poor service.

“We know how the story ends,” said William Jones, the lead attorney for the Justice Department.  “Rather than continuing to slug it out, American and JetBlue decided to collaborate rather than to continue competing.”

Lawyers for American and JetBlue countered that the government has presented no evidence that their alliance – in place for 18 months – has harmed consumers or resulted in higher fares. They said that it has allowed the airlines to add 50 new routes and create a stronger competitor to Delta and United.

--Hurricane Ian is going to do a huge number on Florida tourism.  Not just the loss from Disney World, Universal Orlando and SeaWorld, but big cruise operators were forced to cancel departures, and airlines canceled thousands of flights.

One estimate puts the physical damage to Florida’s tourism infrastructure, mostly hotels, could reach $5 billion.  Lost revenue from tourists not being able to rent boats, ride theme-park rides or buy drinks at the pool, could top $2 billion.

--More than 2,100 U.S. flights were canceled on Wednesday, mostly owing to Hurricane Ian, and another 2,077 Thursday, as well as 1,959 Friday (as I post), per FlightAware.

--TSA checkpoint travel numbers vs. 2019

9/29…84 percent of 2019 levels
9/28…82
9/27…92
9/26…92
9/25…97
9/24…97
9/23…95
9/22…94

--As reported by the Wall Street Journal’s Corrie Driebusch, “Roughly 87% of companies that went public in the U.S. last year are trading below their offering prices, down more than 49% on average as of (last) Friday’s close, according to Dealogic.”  [The S&P is down the aforementioned 25%, while Nasdaq has fallen 32%.]

With such performance scaring off fund managers, who are unlikely to return to the market before the shares stage a significant comeback, this could keep IPO activity in the doldrums for the balance of the year and beyond.

One of Europe’s largest IPOs went off on Wednesday, as Volkswagen raised $9.1 billion by spinning off Porsche, 25% in two tiers of voting and non-voting shares, but the stock was essentially unchanged its first day.

--Shares in CarMax cratered nearly 25% on Thursday after the used vehicle retailer reported mixed fiscal second-quarter results that missed analysts’ estimates.  Make that missed badly.

CarMax posted profit of $0.79 per share for the quarter ended Aug. 31, tumbling from $1.72 a year earlier and below a consensus estimate of $1.37.  Sales and operating revenue edged up 2% to $8.14 billion, but also trailed the Street’s view for $8.55 billion.

Retail used unit sales slipped 6.4% to 216,939 vehicles due to several macroeconomic factors such as inflation, diminishing consumer confidence and higher interest rates, the company said.  Wholesale vehicle unit sales fell 15% to 159,677.

--Nike shares fell 11% on Friday after the company reported earnings after the close on Thursday, the athletic giant’s outlook outweighed earnings that surpassed analysts’ expectations.

Nike predicted revenue will grow in the low- to mid-single digit range this fiscal year, negatively affected by an approximately $4 billion charge tied to foreign exchange headwinds.  Gross margins could contract between 200 and 250 basis points, compared with the prior year, management said, reflecting an annual impact of about 1.5 percentage points associated with markdowns needed to liquidate excess inventory.

Sales in the first quarter came in at $12.7 billion, up 4% from the same period last year, with Nike posting adjusted net income of $1.5 billion, generally in line with expectations.

Revenue from the greater China region declined 16% in the quarter, following a decline in the previous quarter.  Nike’s performance in China has historically been strong.

North American sales grew by 13%.

But while demand remains strong outside China, the biggest hurdle is excess inventory, which grew by 65% in North America compared with the prior year, and by 44% on a global scale.  This almost seems unfathomable.  Ergo, the company will be heavily discounting its products to get rid of the excess off-seasonal goods, management said, which will have a negative impact on margins.

--Amazon.com Inc.’s warehouse and transportation workers will receive an increased average starting pay of more than $19 per hour from $18, the world’s largest retailer said Wednesday.  The wage hike would help the company attract and retain workers in a tightening labor market as the peak season for gifting gets underway.  Amazon said the pay hikes would cost the company nearly $1 billion over the next year.

Employees will now earn about $16 and $26 per hour depending on their position and location in the U.S., the company added. The decision also comes as some workers continue to push to unionize Amazon facilities in the United States.  Only one facility has voted to do so thus far.

--Phase 3 trial results out Tuesday night from Eisai and partner Biogen on the Alzheimer’s treatment front showed that their drug lecanemab slowed cognitive decline, and the shares soared, with Biogen going from Tuesday’s close below $198 to $276 at the close Wednesday.

Investors were prepared for the trial to fail but there are still major unknowns. Eisai reported that after 18 months, lecanemab slowed cognitive decline in early-stage Alzheimer’s patients by 27%, using a scale known as CDR-SB, which measures dementia symptoms.  The company said it saw “highly statistically significant changes” between the placebo group and the treatment group beginning after six months.

The question for investors is whether the data will be good enough to satisfy not just the Food and Drug Administration, but also the Centers for Medicare and Medicaid Services, which refused to cover Biogen and Eisais’ previous Alzheimer’s drug, Aduhelm, earlier this year.

Lilly and Roche have similar drugs whose latest trial results have yet to be released.

--The Securities and Exchange Commission said late Tuesday that 16 Wall Street firms agreed to pay penalties totaling over $1.1 billion for their failure to maintain and preserve electronic communications.

The firms admitted to violating recordkeeping provisions of the federal securities laws, according to a statement by the agency.

Among the eight firms and five affiliates that are paying $125 million each are Barclays Bank, Bank of America Corp. Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS.  Others such as Jefferies, were fined $10 million to $50 million.

The SEC said an investigation discovered “pervasive off-channel communications” among the firms’ employees between January 2018 and September 2021 using text messaging apps on their personal devices, and that the firms failed to “maintain or preserve the substantial majority” of the conversations, which violates federal securities laws.

--Bed Bath & Beyond’s sales declined 28% in its fiscal second quarter, but this godawful performance met the Street’s expectations.

Sales of $1.44 billion for the three months ended Aug. 27 compared with sales of $1.99 billion a year earlier.  Same-store sales fell a whopping 26%.

Interim CEO Sue Gove said in a statement that the chain sped up markdowns and strategic promotions in order to deal with some of its inventory issues (like a zillion hand towels, my personal observation).

“Although still very early, we are seeing signs of continued progress as merchandising and inventory changes begin,” she said.

The company is looking to cut costs by about $250 million in the second half of the year to boost its available cash.  The company previously announced another series of store closings and job cuts.

BBBY lost $366.2 million, or $4.59 per share, in the quarter.  Shares fell 6% to $6 Thursday following the announcement.

--Lyft Inc. said it will freeze hiring in the U.S. at least until next year, amid economic instability that’s rattled the ride-hail giant’s stock price, down 67% this year.

“Like many other companies navigating an uncertain economy, we are pausing hiring for all U.S.-based roles through the end of the year,” a spokeswoman said in a statement.

--Shares of casino companies with operations in Macau rose on Monday after the city’s government said it would ease restrictions for visitors from mainland China, boosting hopes for an accelerated recovery for the city’s tourism-dependent economy.

Macau will resume issuing electronic visas and allowing Chinese group tours to visit the gambling hub as soon as late October. 

Macau, with a population of 650,000, has maintained strict containment measures throughout the pandemic.  At one point, quarantine for travelers from what it deemed very high-risk countries was as long as 28 days.

--Canada is scrapping its remaining Covid-19 border restrictions on Oct. 1, bringing an end to pandemic policies that have dramatically slowed cross-border traffic between Canada and the U.S.

Canada will no longer bar people that haven’t been fully vaccinated for Covid from entering the country.

The mayor of Niagara Falls, Ontario, across the river from Niagara Falls, New York, estimates the border restrictions have cost the local economy about 1 billion Canadian dollars, or the equivalent of $730 million.

Foreign Affairs, part II

China: Nicholas Burns, the U.S. ambassador to China, said the United States has not shifted its stance on Taiwan and remains committed to the one China policy, but Beijing’s “overreaction” to the visit of House Speaker Nancy Pelosi risks a peaceful resolution.

Burns, appointed last March, said countries in Southeast Asia should also be concerned about mainland China’s aggression in the Taiwan Strait, given its importance as a shipping route.

“If anyone has changed policy here, it’s really the People’s Republic of China, with their overreaction, for nearly two months now since Speaker Pelosi’s visit,” he said at a conference in Singapore.

“We’ve had a median line in the Taiwan Strait for 68 years, it has really kept the peace.  [China] tries to erase that: they fired missiles over Taiwan into the Japanese economic zone, they simulated a naval blockade and air blockade.”

Burns said rising tension over Taiwan was highly relevant for all countries in the Association of Southeast Asian Nations (Asean).

“I think the most important question that all of us…should be asking is, is the People’s Republic of China going to maintain a peaceful resolution to this dispute?  Will they keep that standard? Or will they resort to coercion, intimidation, or military force?” he said.

Separately, Russian and Chinese warships were conducting a joint operation in the Bering Sea near Alaska about ten days ago, as announced this week by the U.S. Coast Guard, which identified two Chinese naval ships in formation with four Russian naval vessels, about 75 miles from Kiska Island, Alaska, in the United States exclusive economic zone.

North Korea: Pyongyang has been firing a series of ballistic missiles off its coast, two on Thursday of the short-range variety, following two others the day before and one on Sunday.

[And just in…at least two more tonight…]

The launch Thursday came as Vice President Kamala Harris ended a visit to South Korea, during which she was strongly critical of the North.  And then embarrassingly spoke of the U.S. – “North Korean” alliance.

“The United States shares a very important relationship, which is an alliance with the Republic of North Korea,” Harris said, intending to refer to South Korea in an appearance at the DMZ.  “It is an alliance that is strong and enduring.”

Although she did not correct herself, she went on to hail the U.S.’s “ironclad” commitment to the defense of South Korea amid threats posed by North Korea.

The U.S. and South Korea concluded their first joint drills in five years this week.

Iran: The U.S. on Thursday imposed sanctions on companies it accused of involvement in Iran’s petrochemical and petroleum trade, including five based in China, pressuring Tehran as it seeks to revive the 2015 nuclear accord.

The administration has increasingly targeted Chinese companies over the export of Iran’s petrochemicals as the prospects of reviving the nuclear pact have dimmed.  Indirect talks on the deal have broken down.

Washington warned that it would continue to accelerate enforcement of sanctions on Iran’s petroleum and petrochemical sales so long as Tehran continues to accelerate its nuclear program.

As for the protests against the death of Mahsa Amini, who died in police custody after she was arrested in Tehran for wearing “unsuitable attire” by the morality police, human rights groups claimed at least 83 people had been killed in nearly two weeks of nationwide demonstrations.

Amini’s death sparked the first big show of opposition on Iran’s streets since authorities crushed protests against a rise in gasoline prices in 2019.

But a fierce crackdown appeared to be working at week’s end, and state television said police had arrested a large number of “rioters,” without giving figures.

Rights groups said dozens of activists, students and artists have been detained and the Committee to Protect Journalists said on Twitter that it had learned that security forces had arrested at least 28 journalists as of Sept. 29.

Hardline President Ebrahim Raisi said the unrest was the latest move by hostile Western powers against Iran since its Islamic revolution in 1979.

“The enemies have committed computational errors in the face of Islamic Iran for 43 years, imagining that Iran is a weak country that can be dominated,” Raisi said the other night on state television.

Afghanistan: We had a horrific suicide attack on a school in Kabul today, killing at least 19 as students, male and female, were sitting for an exam, with most of the dead being girls.  No claim of responsibility as yet.

Brazil: The first round of voting in Brazil’s presidential election commences Sunday, and Luiz Inacio Lula da Silva appears to be on the cusp of securing the simple majority needed to win the vote outright, according to a poll from DataFolha.

Lula leads incumbent President Jair Bolsonaro by a 50-36 margin, the survey showed, but Bolsonaro has long been preparing his excuse for a loss, calling it a rigged election and blaming the voting machines. Wednesday, his political party released a document that claimed, without evidence, that a group of government employees and contractors had the “absolute power to manipulate election results without leaving a trace.”

Bolsonaro’s reaction to the vote next week will be quite interesting.

Pacific Islands: The U.S. began a first-of-its-kind summit with Pacific island leaders on Wednesday, saying they had agreed on a partnership for the future and holding out the prospect of “big dollar” help to a region where it hopes to stem China’s expanding influence.

White House Indo-Pacific coordinator Kurt Campbell said last week the summit would focus on issues such as climate change and health.  Washington and its allies want to boost maritime security and island states’ communications links with countries, like Japan, Australia and India, he said.

The United States has long considered the region a maritime backyard since World War II, but China has been making steady advances, with some of the nations complaining they are caught in the middle of the superpowers’ battle for influence.

This is a highly critical issue, as it would be easy to see China negotiating to have military bases on some of the islands, which would bring it closer to Guam, among other key U.S. facilities, and allies.  With my experiences on the island of Yap (Micronesia), I’ve seen firsthand how China has tried to gain influence.

Random Musings

--Presidential approval ratings….

Gallup: 42% approve of President Biden’s job performance, 56% disapprove; 39% of independents approve (Sept. 1-16).

Rasmussen: 45% approve of Biden’s performance, 54% disapprove (Sept. 30).

--Early in the summer, John Fetterman held a nearly double-digit lead over his Republican Senate opponent Dr. Mehmet Oz in Pennsylvania.  But Oz has surged in spending and favorability and cut Fetterman’s lead to 3 points, according to a new Franklin & Marshall Poll out Thursday.  A Morning Call/Muhlenberg College poll last week showed Fetterman with a 5-point lead.  [I can’t help but add that Muhlenberg and F&M are two outstanding schools; two of scores of great schools in the Keystone State.]

--New York Gov. Kathy Hochul leads Republican challenger Lee Zeldin by 17 points and is gaining ground among suburban voters as Election Day approaches, according to a new Siena College poll.

The incumbent Democrat is seeking a full term in office after replacing disgraced former Gov. Andrew Cuomo last year.

In the city, Hochul leads by 70% to 20% (in case you needed further proof how liberal Gotham is) and has a five-point lead over him in the downstate suburbs.  The two are dead even among upstate voters.

--Senator Mark Kelly (Dem.) has a 7-point lead over his Republican challenger Blake Masters, according to a new poll of likely voters conducted for The Arizona Republic.

With early voting starting Oct. 12, Kelly leads Masters 49% to 42% in a critical race that will help determine control of the Senate.

Notably, Kelly leads Masters among independents, 51%-36%.

--In New Hampshire, Democratic Sen. Maggie Hassan leads her Republican challenger, Don Bolduc, by 8 ½ points in a Suffolk University poll, with Bolduc losing independent women to Hassan, 65 to 19 percent.  Republican incumbent governor, Chris Sununu, is leading his relative unknown Democratic rival, Tom Sherman, by a 53-36 margin. 

Biden Agenda

--A White House plan to cancel student loan debt for tens of millions of Americans will cost roughly $400 billion, according to an estimate by the nonpartisan Congressional Budget Office, increasing federal budget deficits over the next decade and beyond.  The administration’s plan to temporarily extend an existing pause on student loan payments would further increase the cost, the CBO found, by roughly $20 billion.

The latest cost estimate fueled fresh debate over President Biden’s decision to cancel up to $20,000 in student debt for eligible borrowers.  And the CBO report didn’t address a simultaneous move by the White House to lower the amount borrowers can be forced to repay each month on their student loans, from 10 percent of their current income to 5 percent. That policy is expected to cost an additional $120 billion, according to estimates from the Committee for a Responsible Federal Budget, a D.C.-based think tank that has opposed Biden’s policy.

Critics complain that the president acted unilaterally – without approval of Congress – to forgive the loans and incur the hefty costs.

The $420 billion price tag (starting cost) is equal to the cost of the $1,400 stimulus checks Biden sent to Americans at the start of his presidency.  And it exceeds the savings Democrats achieved in the recently approved Inflation Reduction Act, which Biden has touted for lowering federal budget deficits, according to Marc Goldwein of the CRFB.  [Jeff Stein and Danielle Douglas-Gabriel / Washington Post]

Well, given all the above, the administration at week’s end began pulling back on the debt relief program amid numerous legal challenges, including six new lawsuits filed by Republican-led states.  Frankly, I don’t really understand the changes, but debt relief will no longer be available for some.  The Department of Education announced Thursday that it would not forgive debt from borrowers whose student loans are owned by private entities.

--The House approved a continuing resolution to fund the federal government until Dec. 16, a day after the Senate passed the resolution.

The bill was approved in a 230-201 vote. 

Without the approval, the government would have shut down as funding for federal agencies was due to expire at midnight.

Trump World

--The final televised hearing of the House panel investigating the Jan. 6 insurrection on the Capitol was to have taken place Wednesday, but was delayed due to Hurricane Ian.  It has been said we’d see new explosive testimony.

So while we wait for it to be rescheduled, Attorney General Merrick Garland’s investigators continue to look into Trump’s handling of highly sensitive classified documents in a probe that could result in a federal indictment (though not until after the midterm elections).

Trump continues to claim he did nothing wrong – and was widely ridiculed after a Fox interview last week in which he claimed, “If you’re the president of the United States, you can declassify just by saying, ‘It’s declassified.’  Even by thinking about it.”

But U.S. District Judge Aileen Cannon, who appointed special master Raymond Dearie, ruled that Trump doesn’t have to explain his challenges, such as that FBI agents might have “planted” evidence during the search at Mar-a-Lago, yet.  Cannon gave Trump another two weeks, after Dearie had given Trump’s team until Friday to detail their concerns.

Meanwhile, you have the New York AG’s investigation into the Trump organization that is still ongoing.

But I maintain the most obvious one where Trump should be nailed is the Georgia / Fulton County special grand jury that is probing the former president and his associates’ efforts to bully officials to overturn his loss to Joe Biden in the battleground state.

--A new Gallup poll found that Americans’ trust in the Supreme Court and its job approval ratings have significantly dropped in the last two years, reaching historic lows.

Only 47% of Americans said they had a “great deal” or “fair amount” of trust in the high court, a 20-percentage point drop from 2020 and a 7-point drop from the previous year.  This year marks the lowest trust level among Americans since 1972.

--Cuba was completely without power after Hurricane Ian pummeled the western end of the island.  The electrical system experienced a total collapse, officials said, after one of the main power plants could not be brought back online.

Incredible that the failure/shutdown of one energy plant on the island killed power to 100% of the electrical circuits in the country.

--NASA managed Monday to crash a small spacecraft directly into an asteroid, a 14,000-mile-per-hour collision designed to test whether such a technology could someday be deployed to protect Earth from a potentially catastrophic impact.

The violent end of the Double Asteroid Redirection test (DART) spacecraft thrilled scientists and engineers at the Johns Hopkins University Applied Physics Laboratory in Laurel, Md., which operated the mission under a NASA contract.

The asteroid, Dimorphos, is the size of a stadium and is about 7 million miles from Earth at the moments. It orbits a larger asteroid named Didymos.  Neither poses a threat to our planet now or anytime in the foreseeable future.

The idea of what is called a kinetic impactor is to give a hypothetically dangerous asteroid just enough of a blow to alter its orbital trajectory.

There are thousands of potentially hazardous asteroids that come close to, or cross, the Earth’s orbital path around the sun.

The pictures of the DART craft (the size of a golf cart) approaching Dimorphos were phenomenal.

It will take weeks to find out if the mission was successful in moving the asteroid.

--Nearly half of the planet’s bird species are in decline, according to a definitive report that paints the grimmest picture yet of the destruction of avian life.

The State of the World’s Birds report, which is released every four years by BirdLife International, shows the expansion and intensification of agriculture is putting pressure on 73 percent of species.  Logging, invasive species, exploitation of natural resources and climate breakdown are the other main threats.

Globally, 49 percent of bird species are declining, one in eight are threatened with extinction and at least 187 species are confirmed or suspected to have gone extinct since 1500.

Most of these have been endemic species living on islands, although there is an increase in birds now going extinct on larger land masses, particularly in tropical regions.

Since 1970, 2.9 billion individual birds (29 percent of the total) have been destroyed in North America. 

Europe’s farmland birds have shown the most significant declines: 57 percent have disappeared as a result of increased mechanization, use of chemicals and converting land into crops.  In Australia, 43 percent of abundant seabird species have declined between 2000 and 2016.

The report is made up of a compendium of other studies, and because birds are the best-studied group on the planet, it gives an idea of the state of nature more generally.  “Birds are useful for telling us about the state of the planet. What they say is that nature is in poor condition, lots of species are in decline,” said Dr. Stuart Butchart, chief scientist at BirdLife International.

Birds are cornerstones of healthy ecosystems, so their disappearance is likely to have myriad negative knock-on effects. 

More recently, wildfires, successions of heatwaves, droughts and floods is leading to widespread species extinctions, researchers warn.

I totally agree with efforts to increase the number and quality of protected areas, conserving remaining habitats and restoring those that have been degraded.

One such example of something positive, according to BirdLife, is the creation of a new seabird haven the size of France in the North Atlantic, estimated to protect five million birds.

--Lastly, beginning last Friday I embarked on a little journey.  I drove seven hours to Roanoke, VA., Saturday to Winston-Salem, N.C., for the Wake Forest-Clemson football game (my first time back at my alma mater in 12 years), Sunday to Richmond, VA, to catch up with an old friend after not seeing each other for ages, Monday to Gettysburg, PA, for a little shot of history, not having been to this important spot since 2004, and then home Tuesday.  Over 21 hours on largely our nation’s interstates, more than 1,200 miles.

I must say I was amazed at just how many trucks were on the road, which is always a good sign for the economy, and I didn’t come upon one discourteous trucker, either.

And I have to add, re Gettysburg, that for those who donate to the Civil War Trust, which buys up land to expand our nation’s battlefields, your money is well spent.  On the recommendation of Gregg R., I went to Robert E. Lee’s headquarters at the Battle of Gettysburg, and this is a property that the Civil War Trust bought (acquiring buildings next to it) and returned to its original look during the battle, and you get a tremendous perspective of the first day’s action, and then how Lee, from this particular house, made some rather fateful decisions on Days 2 and 3.

So that’s your ad for the Civil War Trust.

Two weeks earlier I drove out to Pittsburgh and, frankly, I’ve had it with driving long distances for a while.

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Pray for the men and women of our armed forces…and all the fallen.

Pray for Ukraine…and those in Florida and now the Carolinas suffering from the wrath of Hurricane Ian.

God bless America.

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Gold $1669
Oil $79.67

Regular Gas: $3.79, nationally; Diesel $4.87 [$3.18 / $3.33 yr. ago]

Returns for the week 9/26-9/30

Dow Jones  -2.9%  [28725]
S&P 500  -2.9%  [3585]
S&P MidCap  -1.6%
Russell 2000  -0.9%
Nasdaq  -2.7%  [10575]

Returns for the period 1/1/22-9/30

Dow Jones  -20.9%
S&P 500  -24.8%
S&P MidCap  -22.5%
Russell 2000  -25.9%
Nasdaq  -32.4%

Bulls 25.4…lowest since Feb. 2016…which was a good time to buy
Bears 34.3

Hang in there.

Brian Trumbore

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