Tag Archives: #Economics

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Yet another tragedy in Philadelphia

No, this isn’t about homicides in the City of Brotherly Love, though Broad + Liberty has counted 39 as of this writing. No, this is about a horrible, awful, doubtlessly racist, sexist, homophobic and transphobic tragedy that has gotten major play in the very #woke[1]From Wikipedia: Woke (/ˈwoʊk/) as a political term of African-American origin refers to a perceived awareness of issues concerning social justice and racial justice. It is derived from … Continue reading Philadelphia Inquirer!

As Philly gathers in bars to watch the Super Bowl, another reminder for the LGBTQ community of the lack of lesbian bars

Lesbian sports fans who want to watch the game in community are scrambling to find spaces that are affirming and feel safe.

by Massarah Mikati | Saturday, February 4, 2023

The Toasted Walnut, November 2020, via Google Maps. The homeless guy on his ass in front of the place probably didn’t help business much. Click to enlarge.

Leona Thomas made her way to the middle of the dance floor.Eighties music pulsed through the air, the dance floor full of women moving with it. Large TV screens — or at least, what was considered a big TV screen in 1985 — wrapped around the room, so the fans there could watch the Super Bowl without having to sacrifice dancing.

Thomas was a teen coming out, and the former Gatsby’s in Cherry Hill was one of the first lesbian bars she visited in the process. It was a space that not only welcomed her but wrapped her authentic self with acceptance. A space that normalized being queer. And a space that felt safe — especially to watch the Super Bowl.

Fast-forward 40 years, and the lesbian bar scene has dropped from 200 nationally to fewer than 25 today, according to the Lesbian Bar Project. In Philadelphia, that number has been zero since Toasted Walnut, its last lesbian bar and a popular place to watch the Eagles in their last Super Bowl, closed in 2021. Which leaves the question: Now that the Eagles have made it to the Super Bowl again, where will the lesbian community be able to comfortably cheer on the Birds?

There’s more at the link.

Naturally, I followed the internal link to the story about Toasted Walnut closing, and discovered what I expected from a story in a homosexual-supporting city like Philly: it wasn’t somehow hounded out of business, but, the closing in the spring of 2021 seems to have been one due to economic and business reasons. While the story didn’t mention it specifically, it included another link which said:

The Toasted Walnut, a lesbian bar in Philadelphia’s Gayborhood that was refuge to queer women for the past five years, will close for good, according to Billy Penn. Run by the former manager of Sisters — another lesbian bar that closed in Philly in 2013 — the Toasted Walnut was a staple for the lesbian community at its home on 13th and Walnut. The bar had been hibernating since November, but with additional financial pressure, it will no longer be able to reopen.

Toasted Walnut’s owner Denise Cohen tells Billy Penn that the pandemic made it especially challenging to keep the lights on, but that her own personal health problems have made it impossible. Cohen began going blind in her left eye in 2019 as a result of diabetes, then was diagnosed with uterine cancer at the end of 2020. Meanwhile, Cohen says her landlords wouldn’t meet at the negotiating table regarding the rent at the bar, which Cohen says costs $11,000 a month. With the additional costs for her healthcare, it would have been too much of a hardship to keep open. Cohen’s community has organized a GoFundMe to help pay for her healthcare.

Translation: in a city in which the Democratic leadership kept COVID-19 restrictions both stricter and longer-lasting than most, the Toasted Walnut was an economic casualty just like hundreds of others. But, as you might have guessed, that wasn’t really the reason the original article cited:

There are myriad reasons why lesbian bars have dwindled over the years, many rooted in gender disparities and economic barriers that women and nonbinary people face.

So, according to the author, Massarah Mikati, who “cover(s) what makes Philadelphia great: our communities of color,” it’s not that the Walnut drew too few customers, who spent enough money, to succeed economically, but that “gender disparities” and “economic barriers” shut the place down. Miss Mikati didn’t even mention that a huge number of bars, restaurants and other businesses which depended on a sufficient volume of in traffic failed during the panicdemic — no, that’s not a typographical error; panic is exactly how I see the restrictions imposed — failed.

The Walnut was located at 1316 Walnut Street, which is Philly’s Center City neighborhood, a block and a half from the Walnut-Locust Street SEPTA subway station, and there are two SEPTA bus stops within a block. There’s plenty of public transportation, and the area is about as safe as any in Philly. But the Lesbian Bar Project stated that “in the 1980s, there were roughly 200 Lesbian Bars in the United States. Today, there are fewer than 25.” Could it possibly be that a lesbian bar just isn’t a particularly strong business model?

The real thrust of Miss Mikati’s article was a lament that there aren’t “spaces” in which there are few, if any, men present, “spaces” in which non-heterosexual women can really feel “safe.” Were it more about economics, I’d probably not have written about it, but the author’s entire piece is a subtle lament, trying to convey the feeling that lesbians, in a very homosexual-supportive city, are somehow being deprived of something they deserve, when it’s really just simple economics.

IF another lesbian bar springs up in Philly, I really won’t care. It will face the same problems as any bar or restaurant, the problem of making money.

References

References
↑1 From Wikipedia:

Woke (/ˈwoʊk/) as a political term of African-American origin refers to a perceived awareness of issues concerning social justice and racial justice. It is derived from the African-American Vernacular English expression “stay woke“, whose grammatical aspect refers to a continuing awareness of these issues.
By the late 2010s, woke had been adopted as a more generic slang term broadly associated with left-wing politics and cultural issues (with the terms woke culture and woke politics also being used). It has been the subject of memes and ironic usage. Its widespread use since 2014 is a result of the Black Lives Matter movement.

I shall confess to sometimes “ironic usage” of the term. To put it bluntly, I think that the ‘woke’ are just boneheadedly stupid.
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We tell you what the government will not: you’re going to get poorer this year

It was September of 2016, and the Obama Administration was having none of the bad economic news. The economy was doing great, we were told, unemployment was way down as the economy recovered from the 2008-9 recession, and everything was peaches but the cream. Trouble is, the American people just didn’t quite believe it:

Problem: Most Americans don’t believe the unemployment rate is 5%

by Heather Long | September 6, 2016 | 3:18 PM EDT

Americans think the economy is in far worse shape than it is. The U.S. unemployment rate is only 4.9%, but 57% of Americans believe it’s a lot higher than that, according to a new survey by the John J. Heldrich Center for Workforce Development at Rutgers University.

The general public has “extremely little factual knowledge” about the job market and labor force, Rutgers found.

It’s another example of how experts on Wall Street and in Washington see the economy differently than the regular Joe. Many of the nation’s top economic experts say that America is “near full employment.” The unemployment rate has actually been at or below 5% for almost a year — millions of people have found jobs in what is the best period of hiring since the late 1990s.

But regular people appear to have their doubts about how healthy America’s employment picture is. Nearly a third of those survey by Rutgers believe unemployment is actually at 9%, or higher.

Republican candidate Donald Trump has tapped into this confusion. He has repeatedly called the official unemployment rate a “joke” and a even “hoax.”

As it happened, the U-6 unemployment rate — “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.” — was in the nine percent range, 9.6% to be more precise, and if few people actually look at the various unemployment categories, the public can sort of feel them in their bones.

Well, the supposed good news is that the current ‘official’ unemployment rate has dropped to a multi-year low of 3.5% as the non-farm economy added 223,000 jobs in December. But, with the labor force participation rate still lower than before the disruptions caused by government reaction to the panicdemic — no, that’s not a typographical error, but exactly the spelling I believe it should have — the unemployment number is being held artificially low. The civilian labor force stood at 164,966,000 in December, just 262,000 higher than it was in December of 2019, the last pre-virus year, but the workforce-eligible population, those aged 16 and over, not in the military nor incarcerated, is 4,633,000 higher than in December of 2019, 264,814,000 vs 260,181,000.

When I say that the public feel it in their bones, I look at other indicators, and this story stood out for me:

Macy’s warns holiday-quarter sales will come in light, citing squeeze on shoppers’ wallets

by Melissa Repko | Friday, January 6 2023 | 4:33 PM EST | Updated Friday, January 6 2023 | 7:43 PM EST

Macy’s on Friday warned its holiday-quarter sales will come in on the lighter side, saying consumers’ budgets are under pressure and that it anticipates that squeeze to continue into this year.

The department store operator said net sales are now expected to be at the low- to midpoint of its previously expected range of $8.16 billion to $8.4 billion. It expects adjusted diluted earnings per share to be in the previously issued range of $1.47 to $1.67.

For the year-ago period, Macy’s reported revenue of $8.67 billion and adjusted earnings per share of $2.45.

Shares of the company fell about 4% in aftermarket trading Friday.

Macy’s is the latest retailer to provide clues about the consumer, as investors await holiday results and look for signs of whether demand is holding up as inflation remains high

There’s more at the original, and no, it isn’t behind a paywall.

So, Macy’s, a very-sensitive-to-Christmas retailer, is going to see an absolute drop in holiday revenue, yet the inflation rate in November — the December inflation figures are not out yet — was 7.1%. Macy’s has seen a total holiday revenue decline of roughly 5%, at a time when prices have increased 7.1%. And this was during the first real Christmas season in which people weren’t under mask mandates and the general malaise of the panicdemic.

There are real, solid reasons for this. The Bureau of Labor Statistics reported that average hourly earnings were 4.6% higher in December over December of 2021. That would be great . . . if the inflation rate hadn’t been much higher. The average American was poorer, in real terms, this Christmas than he was last Christmas. The Biden Administration doesn’t want people to know that, but the public can see it, can feel it, in their wallets and in their bones. And that’s why Macy’s saw a drop of revenue.

There’s more: we might not be in a recession now, but economists believe there will be one before 2023 is over:

Big banks are predicting that an economic downturn is fast approaching.

More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023. Two others are predicting a recession in 2024.

The firms, known as primary dealers, are a collection of trading firms and investment banks that include companies such as Barclays PLC, Bank of America Corp., TD Securities and UBS Group AG. They cite a number of red flags: Americans are spending down their pandemic savings. The housing market is in decline, and banks are tightening their lending standards.

“We expect a downturn in global GDP growth in 2023, led by recessions in both the U.S. and the eurozone,” economists at BNP Paribas SA wrote in the bank’s 2023 outlook, titled “Steering Into Recession.”

The main culprit is the Federal Reserve, economists said, which has been raising rates for months to try to slow the economy and curb inflation. Though inflation has eased recently, it is still much higher than the Fed’s desired target.

The Fed raised rates seven times in 2022, pushing its benchmark from a range of 0% to 0.25% to the current 4.25% to 4.50%, a 15-year high. Officials signaled in December that they plan to keep raising rates to between 5% and 5.5% in 2023.

There’s more at the original, but it all boils down to one thing: if you’re wealthy, you’ll see some economic losses, but you’ll still be able to live. If you are living paycheck-to-paycheck, you’re in for some real pain.
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Bidenflation How many of those 81,283,501 people who voted for Joe Biden would have done so if they'd known they'd be five percent poorer in two years?

You may have heard the supposedly good news: the year-over-year inflation rate declined to 7.1%:

Consumer prices rose last month at the slowest 12-month pace since December 2021, closing out a year in which inflation hit the highest level in four decades and challenged the Federal Reserve’s ability to keep the U.S. economy on track.

The Labor Department on Tuesday said that its consumer-price index, a measurement of what consumers pay for goods and services, climbed 7.1% in November from a year ago, down sharply from 7.7% in October. The pace built on a trend of moderating price increases since June’s 9.1% peak, but it remained well above the 2.1% average rate in the three years before the pandemic.

There’s a lot more in The Wall Street Journal’s original.

Of course, the inflation rate only makes sense when compared to earnings. According to the Bureau of Labor Statistics, Table B-3, average private sector hourly earnings increased from $31.23 in November of 2021 to $32.64, a 5.09% increase, while average weekly earnings moved from $1,086.80 to $1,129.01, which was only a 3.88% increase. Compared to hourly wages, the average American worker is 2.01% poorer, in real terms, than he was in November of 2021; compared to average weekly earnings, he’s 3.22% poorer.

That isn’t the whole story. From November of 2020 to November of 2021, Table B-3 Historical Tables, average wages increased from $29.95 to $31.23, a 4.27% increase, while average weekly earnings went from $1,031.82 to $1,086.80, a 5.33% rise. Remember: this was moving from a COVID-19 restricted economy to one where almost all of the restrictions had been removed. But the November 2021 year-over-year inflation rate was 6.8%.

So, not only was the average American worker 3.22% poorer in November of 2022 than he was a year earlier, that’s on top of being 1.47% poorer, in real terms, the previous year. Due to the compounding effect of the math, average consumer prices were 14.38% higher in November of 2022 than in November of 2020,[1]1.068 x 1.071 = 1.1438 while average weekly earnings were 9.42% higher. That’s a loss of real earning power of 4.96%.

I wonder how many of those 81,283,501 people who voted for Joe Biden in November of 2020 would have done so if they’d known they’d be five percent poorer in two years.

And it’s going to get worse:

The figures leave the Fed on track to lift interest rates by 0.5 percentage point on Wednesday, following larger increases of 0.75 point at their past four meetings.

So, while economists anticipate home prices to start to fall, as demand is lowered due to higher interest rates, that does not mean that rent prices will fall. If the demand for buying homes declines, the demand for rental property necessarily increases, and that means higher rents. Rent increases for existing tenants normally occur just once a year, but rental increases for people moving during the year can and do occur at any time.

In 1849, Scottish writer Thomas Carlyle called economics the dismal science, and in a lot of ways, he was right. Economic reduces things to numbers, and a lot of people don’t like that, but it doesn’t mean that the numbers aren’t true.

The numbers I gave were averages, and I’m sure that many of the 81,283,501 Biden voters have managed to weather the inflation of the past two years reasonably well. But for every Biden voter who hasn’t had a problem with inflation, there’s another who has had Bidenflation eat up more of his earnings than the average. For every Biden voter who hasn’t seen any appreciable loss of economic well-being, there’s another who is worse off than the already-depressing averages.

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References
↑1 1.068 x 1.071 = 1.1438
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The plague of public-sector unions

It was actually a minor line in an article by Robert Stacy McCain about Democrats not accepting election results that didn’t go their way, but one I found very important:

Government employee unions are a conspiracy against taxpayers, and when the people of Wisconsin elected (Scott) Walker to fight these unions, Democrats refused to accept the legislative consequences.

As it happens, I still have a Scott Walker t-shirt, from his failed campaign for the 2016 Republican presidential nomination. Yeah, it’s pretty worn and threadbare, but it’s still good for work around the farm in hot, humid Kentucky summers.

Economically, unions in the private sector have to, in the end, be partners with the unionized businesses, because businesses can fail. If the unions demand so much that the business cannot make a profit, the business fails and the unionized employees’ wages drop to $0.00 per hour. And as much as some union leaders hate business, see themselves opposed to corporations, they do realize that a $0.00 per hour wage is possible if they drive the business out of business. Sometimes those private sector unions don’t get it right, as the bankruptcy and failure of Hostess brand demonstrates.

But public-sector unions are different, because the public sector cannot be driven out of business! Where private companies are trying to sell their products to customers who have the ability to choose to buy or not buy their goods, the public sector takes in its revenue through taxation, which is enforced by the law, and ultimately, by law enforcement. If public-sector unions demand so much that the government agencies cannot afford it under their current revenues, the government has the option of raising taxes, to increase its revenues at, in the end, the point of a gun.

Governor Walker tried fighting the public-sector unions, and succeeded, sort of, for a brief time. Governor Matt Bevin (R-KY) tried to get the Commonwealth’s rising retirement indebtedness under control, and the teachers’ unions went absolutely ape, and campaigned so vigorously against him that he lost his bid for re-election, in a very red state, to the odious — anyone who can simply suspend our constitutional rights and get away with it is by definition odious — Andy Beshear, 709,577 (49.20%) to 704,388 (48.83%), a margin if just 5,189 out of 1,442,390 ballots cast.

Public-sector unions have so much power because they are workers in an ‘industry’ that cannot fail, and they are bargaining for contracts with people who have little experience in business and no pressure to keep the ‘company’ in business. That’s why Virginia has become a ‘blue’ state, as wealthier federal government workers have metastasized into northern Virginia, and why public-school teachers are paid significantly more than the median income in the districts that support them.

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The Fed finally admits it: they don’t know what they are doing! Fighting Bidenflation by causing a recession

The Federal Reserve’s Board of Governors once again raises interest rates to try to fight inflation, but they’ve admitted what people who pay attention to economics already knew: the Board don’t really know what they are doing, or what effects their decisions will have. From The Wall Street Journal:

Fed Approves Fourth 0.75-Point Rate Rise, Hints at Smaller Hikes

Officials signal a possible slowdown in the pace of rate rises by acknowledging how increases influence the economy with a lag

by Nick Timiraos | All Soul’s Day, November 2, 2022 | 2:31 PM EDT

WASHINGTON—The Federal Reserve lifted interest rates by 0.75 percentage point to combat inflation and signaled plans to keep raising them, though possibly in smaller increments.

Members of the Fed’s rate-setting committee acknowledged Wednesday that it could take time for their rate increases this year to be reflected in the economy, and they indicated they might reduce the size of coming hikes. “In determining the pace of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation,” they said in a statement released at the conclusion of their two-day meeting.

Fed Chairman Jerome Powell, at a news conference Wednesday, said officials could consider approving a smaller 0.5-percentage-point increase in December or January, but they had made no decision yet. He added, however, “The question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive.”

Officials are boosting interest rates at the fastest pace since the early 1980s to reduce inflation that is running near a 40-year high. They have raised rates by 0.75 point at four consecutive meetings, with the latest one taking the central bank’s benchmark federal-funds to a range between 3.75% and 4%.

If the Board of Governors recognize that it takes time for their increases to do what they project will happen, why go for such large increases? Stock prices fell following release of the interest rate hike, even though the 75 basis point increase had been widely anticipated. Had the Fed increased the rate by only 50 basis points, stocks would almost certainly have risen, which would lift the value of the retirement accounts for most people. As it is, the Fed made retirees and those close to retirement age poorer, at least on paper.

Thirty-year fixed mortgage rates topped 7% last week, as Freddie Mac reported the average was 7.08%, rising from 6.94% the previous week. The last time rates were above 7.00% was in April of 2002. At this point in 2021, the average rate was 3.14%.[1]As I previously noted, we bought a house last December, which was negotiated in November, and the interest rate would have been 2.75%. However, since we weren’t going to be living in the house … Continue reading So, while the increase in home prices has moderated, the cost of buying a house is increasing due to the interest rate hikes.

The Fed wants to rein in inflation, but do so without causing a steep recession. Yet the Board of Governors keeps making 75 basis point increases — four in a row now — when they admit that they do not know exactly what the effects on the economy will be and that we won’t be able to see, or measure, them for a year.

The last time inflation was at the rates we have seen for the last year was during Jimmy Carter’s stagflation of the late 1970s into 1980. Inflation was beaten then the hard way: with a steep and painful recession in 1981-82. And that’s what will happen again, regardless of what the Fed tries to do.

References

References
↑1 As I previously noted, we bought a house last December, which was negotiated in November, and the interest rate would have been 2.75%. However, since we weren’t going to be living in the house — it’s rental property for my sister-in-law — the rate became 3.75%.
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If a private business did its accounting the way the Fed does, in which federal prison would the business’ chief financial officer serve his sentence?

While you sometimes see decent stories on economics in The New York Times and The Washington Post, The Wall Street Journal is really the place to go.

Higher Interest Rates Fuel Losses at the Federal Reserve

The central bank is now paying out more in interest expenses than it earns in interest income

by Nick Timiraos | Hallowe’en, October 31, 2022 | 5:30 AM EDT

The Federal Reserve’s aggressive interest-rate rises to fight inflation are leading the central bank to do something it has never consistently done before: lose money.

The central bank’s operating losses have increased in recent weeks because the interest it is paying banks and money-market funds to keep money at the Fed now exceeds the income it earns on some $8.3 trillion in Treasury and mortgage-backed securities it accumulated during bond-buying stimulus programs over the past 14 years.

The paywall hits right here; aren’t you glad you have a writer shelling out his hard-earned money to subscribe for you?

Of course, that $8.3 trillion in Treasury and mortgage-backed securities it accumulated were accumulated via ‘quantitative easing,’ in which the Fed spent money it didn’t actually have, but, with no one to bounce the ‘checks’ — not that checks are written anymore; it’s all done with electronic funds transfers — the money was just ‘created.’

The losses don’t interfere with the Fed’s ability to conduct monetary policy, and they follow years in which the central bank earned profits of around $100 billion, which it sent to the U.S. Treasury. Those remittances reduced federal deficits, and as they end, the federal government could face marginally higher borrowing needs.

If the Fed runs sustained losses, it won’t have to turn to Congress, hat in hand. Instead, it will simply create an IOU on its balance sheet called a deferred asset. When the Fed runs a surplus again in future years, it would first pay off the IOU before sending surpluses to the Treasury.

And there you have it: unlike regular banks, which would have to borrow money from someone else, incur a real liability that they’d hope to be able to pay off in the future, our central bank simply creates “a deferred asset,” something that you or I or commercial banks can’t just do. If a If for some reason the Fed didn’t run a surplus again, the deferred assets would simply be deferred longer.

In accounting for real people, a deferred asset is something very different:

A deferred asset is an expenditure that is made in advance and has not yet been consumed. It arises from one of the following two situations:

  • Short Consumption Period: The expenditure is made in advance, and the item purchased is expected to be consumed within a few months. This deferred asset is recorded as a prepaid expense, so it initially appears in the balance sheet as a current asset.
  • Long Consumption Period: The expenditure is made in advance, and the item purchased is not expected to be fully consumed until a large number of reporting periods have passed. In this case, the deferred asset is more likely to be recorded as a long-term asset in the balance sheet.

In other words, a deferred asset in the real world is something completely opposite of what the Fed could do. In the real world, a deferred asset is created when an individual or business spends money it already has for something before that something is actually acquired. What the Fed would do is claim that money that it is spending that it does not have is an asset it will have in the future. A private business could take out a loan, based on anticipated future revenues, but to simply declare that the asset is there just doesn’t work.

If a private business did that, the Chief Financial Officer would go to jail.

The arrangement is akin to an institution facing a 100% tax rate and offsetting current losses with future income, said Seth Carpenter, chief global economist at Morgan Stanley.

The losses stem from some obscure monetary plumbing. The Fed’s $8.7 trillion asset portfolio is full of mostly interest-bearing assets—Treasury and mortgage securities—with an average yield of 2.3%. On the other side of the ledger—the liability side of the Fed’s balance sheet—are bank deposits held at the Fed known as reserves and overnight loans called reverse-repurchase agreements.

Before the 2008 financial crisis, the Fed kept its portfolio relatively small, at less than $1 trillion. Its main liability was the amount of currency in circulation. The Fed shifted reserves up and down in incremental amounts if it wanted to lower or raise short-term interest rates.

After the crisis, the Fed cut interest rates to zero and purchased large quantities of bonds to provide additional economic stimulus. Those purchases flooded the banking system with reserves. To maintain control over interest rates with a larger balance sheet, the Fed revamped the way it manages rates. The new system, which was already in use by many other central banks, controlled short-term rates by paying interest on bank reserves.

For the past decade, relatively low short-term interest rates meant the Fed earned more on its securities than it paid out as interest on reserves or other overnight loans. After covering its expenses, the Fed last year handed back about $107 billion to the government.

Did you understand all of that? Well, the WSJ commenters were almost all laughing at the article, with at least one CPA noting that this was the way to jail for a private corporation.

The United States gets away with this because the dollar is the world’s reserve currency, and our debts are all denominated in dollars. Five American territories and eleven independent nations use the dollar as their official currency. We can always pay our debts, because we control our own currency, and the ‘checks’ are all written on a ‘bank’ that doesn’t bounce them. But I’m old enough to remember when OPEC floated the trial balloon of requiring payment in euros rather than dollars, and the panic concern to which that led. In one way, the entire world’s economic system is being propped up by the United States Federal Reserve. But if we keep up with the acco9unting tricks, that could change.

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Joe Biden has earned exactly what he’s getting from Saudi Arabia Are there no adults in the White House?

We have previously noted that the oil production cut by OPEC+ was primarily engineered by Russia and Saudi Arabia, and that President Biden’s statements condemning Saudi Crown Prince Mohammed bin Salman, the country’s de facto ruler, might not have exactly persuaded that nation to work charitably with the United States. Now, from Business Insider:

The US and Saudi Arabia traded petty insults in an feud over oil after a reported secret deal fell apart

by Tom Porter | Thursday, October 27, 2022 | 7:00 AM EDT

A US official mocked a comment by a Saudi prince who claimed the White House was acting immaturely, the latest exchange in an embarrassing feud between the nations over oil.

“It’s not like some high school romance here,” John Kirby, the communications coordinator at the National Security Council, said when asked about a comment by Saudi Energy Minister Prince Abdulaziz bin Salman.

The prince had criticized the White House for releasing some of its vast oil reserves to reduce prices, painting the move as childish and describing Saudi Arabia as the “maturer” country.

Kirby was not happy. “We’re talking about a significant, important bilateral relationship, a partnership that has survived over 80 years,” he said. “I don’t think talking about it in terms like that necessarily lends the gravity of how important this relationship is, to the way that we’re considering it.”

The New York Times reported on it from a different angle:

U.S. Officials Had a Secret Oil Deal With the Saudis. Or So They Thought.

After Saudi leaders pushed to slash oil production despite a visit by President Biden, American officials have been left fuming that they were duped.

By Mark Mazzetti, Edward Wong and Adam Entous | Tuesday, October 25, 2022

WASHINGTON — As President Biden was planning a politically risky trip to Saudi Arabia this summer, his top aides thought they had struck a secret deal to boost oil production through the end of the year — an arrangement that could have helped justify breaking a campaign pledge to shun the kingdom and its crown prince.

It didn’t work out that way.

Mr. Biden went through with the trip. But earlier this month, Saudi Arabia and Russia steered a group of oil-producing countries in voting to slash oil production by two million barrels per day, the opposite of the outcome the administration thought it had secured as the Democratic Party struggles to deal with inflation and high gas prices heading into the November elections.

So, President Biden went through with what the Times called a “politically risky trip”, but while on that trip, raised the Jamal Khashoggi killing at the very beginning:

“I raised it at the top of the meeting, making clear what I thought at the time and what I think of it now,” Mr. Biden said. “I was straightforward and direct in discussing it. I made my view crystal clear. I said very straightforwardly for an American president to be silent on an issue of human rights is inconsistent with who we are and who I am. I always stand up for our values.”

He reported that Prince Mohammed, often known by his initials M.B.S., denied culpability.

“He basically said that he was not personally responsible for it,” Mr. Biden said. “I indicated that I thought he was.”

Somehow, some way. no one in the Biden Administration was adult enough to realize that the President’s supposedly private conversations with the Crown Prince, which Mr Biden then reiterated publicly, might just sabotage the deal that had been previously negotiated to help “justify breaking a campaign pledge to shun the kingdom and its crown prince.”

The move led angry Biden administration officials to reassess America’s relationship with the kingdom and produced a flurry of accusatory statements between the two governments — including a charge by the White House that Saudi Arabia was helping Russia in its war in Ukraine.

Lawmakers who had been told about the trip’s benefits in classified briefings and other conversations that included details of the oil deal — which has not been previously disclosed and was supposed to lead to a surge in production between September and December — have been left fuming that Crown Prince Mohammed bin Salman duped the administration.

An obvious point: the Arabs have a completely different culture than do Americans — yes, I know: we Americans do not really seem to have just one culture ourselves — and perhaps it shouldn’t have been expected that the Crown Prince would shrug off a little public insult the way Americans seem to believe he should have. Mr Khasoggi’s murder was arranged sometime after the Saudi exile, who wrote for The Washington Post, essentially called Mr bin Salman a liar. It was a political risk for the Crown Prince to arrange, order, or at least suggest — “Will no one rid me of this turbulent priest?” — that Mr Khasoggi needed to be eliminated, but it happened anyway. A savvy foreign policy expert might have realized that Mr bin Salman took things, took criticism, personally.

Of course, when I look at the silliness, right before an election in which the Democrats are expected to lose control of the House of Representatives, in which the Biden Administration has engaged, I don’t see a lot of savviness evident.

Perhaps those congressmen “fuming that Crown Prince Mohammed bin Salman duped the administration” might start asking themselves: was it Mr bin Salman who duped the Biden Administration, or was that Mr Biden himself?
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Cross-posted on American Free News Network.

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No surprise: fuel prices are beginning to rise again

We noted, on Wednesday, October 5th, that very much contrary to President Joe Biden’s wishes, Russia and Saudi Arabia pushed OPEC+ to set a reduction in petroleum production of 2,000,000 barrels per day:

Saudi Arabia and Russia, acting as leaders of the OPEC Plus energy cartel, agreed on Wednesday to their biggest production cuts in more than two years in a bid to raise prices, countering efforts by the United States and Europe to choke off the enormous revenue that Moscow reaps from the sale of crude.

President Biden and European leaders have urged more oil production to ease gasoline prices and punish Moscow for its aggression in Ukraine. Russia has been accused of using energy as a weapon against countries opposing its invasion of Ukraine, and the optics of the decision could not be missed.

“This is completely not what the White House wants, and it is exactly what Russia wants,” said Bill Farren-Price, the head of macro oil and gas analysis at Enverus, a research firm. It also puts Saudi Arabia on a diplomatic “collision course” with the United States, he said.

The cut of two million barrels a day represents about 2 percent of global oil production.

Karine Jean-Pierre, the White House press secretary, told reporters that the decision was a “mistake and misguided. “It’s clear that OPEC Plus is aligning with Russia with today’s announcement,” she said.

The United States is hardly a nation President Vladimir Putin wants to please: the US continues to send money and war materiel to Ukraine, which is directly at war with Russia, so the US is, in effect, engaged in a proxy war with Russia. Maybe, just maybe, Vladimir Vladimirovich isn’t in any mood to do favors for Mr Biden.

And, of course, Mr Biden directly accused Saudi Crown Prince of ordering the murder of Jamal Khashoggi, and called teh Crown Prince a liar for denying it. Could it possibly be that the de facto ruler of the world’s largest petroleum exporter is not really inclined to be nice to our President?

Well, now the effects of the OPEC+ decision are becoming known:

Why gas prices are going back up after nearly 100 days of declines

by Rob Wile | Monday, October 10, 2022

It was the longest losing streak for gasoline prices since the early months of the pandemic: For 98-consecutive days this summer, American drivers experienced declining gas prices thanks in part to a slower worldwide demand for oil.

Now, a cut in oil production signaled by the OPEC+ group last week has sent global crude prices higher, bringing upward pressure back to prices at the pump.

According to AAA, the national average gas price climbed to $3.92 a gallon Monday.

Prices are likely to keep going higher from here as oil prices continue to climb, according to Patrick De Haan, chief petroleum analyst at gas price tracking group GasBuddy.com.

“With OPEC+ deciding to cut oil production by two million barrels a day, we’ve seen oil prices surge 20%, which is the primary factor in the national average rising for the third straight week,” he said in a blog post Monday.

For the rest of the country, De Haan said he expects prices to rise as much as $0.30 from their September lows, which would put them at around $4 a gallon.

It’s not all peaches and cream in OPEC+: as The Wall Street Journal reported, Iraq is concerned that it cannot afford the mandated production cuts, but that’s somewhat counterbalanced by a strike among Iranian oil workers. That does mean that projections that gasoline will reach into the $4.00+ per gallon range a bit more guesswork than straight statistical modeling.

The most important point? The election is in 29 days.

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This year’s “October surprise” As Joe Biden tries to lower inflation, his actions have pushed OPEC to increase prices

In his efforts to dial down the inflation rate, one would think that President Joe Biden wouldn’t want to see OPEC cut oil production, decreasing petroleum supplies and thereby increasing prices. But perhaps Mr Biden’s actions have had precisely the opposite effect. From The New York Times:

In Rebuke to West, OPEC and Russia Aim to Raise Oil Prices With Big Supply Cut

by Stanley Reed | Wednesday, October 5, 2022 | Updated 3:42 PM EDT

Saudi Arabia and Russia, acting as leaders of the OPEC Plus energy cartel, agreed on Wednesday to their biggest production cuts in more than two years in a bid to raise prices, countering efforts by the United States and Europe to choke off the enormous revenue that Moscow reaps from the sale of crude.

President Biden and European leaders have urged more oil production to ease gasoline prices and punish Moscow for its aggression in Ukraine. Russia has been accused of using energy as a weapon against countries opposing its invasion of Ukraine, and the optics of the decision could not be missed.

“This is completely not what the White House wants, and it is exactly what Russia wants,” said Bill Farren-Price, the head of macro oil and gas analysis at Enverus, a research firm. It also puts Saudi Arabia on a diplomatic “collision course” with the United States, he said.

The cut of two million barrels a day represents about 2 percent of global oil production.

Karine Jean-Pierre, the White House press secretary, told reporters that the decision was a “mistake and misguided. “It’s clear that OPEC Plus is aligning with Russia with today’s announcement,” she said.

There’s more at the original.

As The Wall Street Journal reported, the stop-gap emergency funding bill to avoid a government shutdown included some major funding for Ukraine:

The stopgap legislation included several provisions beyond funding the federal government’s current operations.

The resolution contains more than $12 billion in aid to Ukraine to help fortify the country’s military with new weapons and support the government in Kyiv as it fights off Russia’s invasion.

That aid includes $3 billion for training, equipment, weapons and other support—such as salaries and stipends—for Ukraine’s military and security forces, and $4.5 billion in budgetary support for Ukrainian government operations. It also dedicates $1.5 billion to replenishing U.S. military stockpiles and those of foreign allies who sent supplies to Ukraine at the request of the U.S.; it also includes $540 million to increase production of critical munitions and $2.8 billion to bolster Defense Department operations in support of Ukraine.

So, in trying to prevent Russia from forcing the price of crude oil higher, President Biden and the United States government will continue to send money to the nation with which Russia is at war. Perhaps, just perhaps, that isn’t the best way to get Vladimir Vladimirovich to pay attention to what the United States wants.

Of course, it wasn’t just Russia pushing for the production cut; Saudi Arabia was as well. From The New York Times again:

Biden Says He Told Saudi Prince He Blames Him for Khashoggi Murder

by Peter Baker | Friday, July 15, 2022 | Updated: Monday, July 18, 2022

President Biden said Friday night that he brought up the murder of Jamal Khashoggi during his closed-door meeting with Crown Prince Mohammed bin Salman and told the prince that he considered him to blame.

While Mr. Biden said nothing about Mr. Khashoggi during the public part of his meeting with the crown prince, he told reporters afterward that he considered the killing “outrageous” and directly confronted Prince Mohammed, who was judged responsible by the C.I.A. for the assassination carried out in Istanbul by a team of Saudi operatives in 2018.

“I raised it at the top of the meeting, making clear what I thought at the time and what I think of it now,” Mr. Biden said. “I was straightforward and direct in discussing it. I made my view crystal clear. I said very straightforwardly for an American president to be silent on an issue of human rights is inconsistent with who we are and who I am. I always stand up for our values.”

He reported that Prince Mohammed, often known by his initials M.B.S., denied culpability.

“He basically said that he was not personally responsible for it,” Mr. Biden said. “I indicated that I thought he was.” . . . .

Mr. Khashoggi was a Saudi contributor to The Washington Post who was critical of the prince’s rule. After his killing, Mr. Biden had said he would make Saudi Arabia a “pariah,” but aides say world events have left him little choice but to deal with the kingdom.

Asked about that remark on Friday, he said, “I don’t regret anything I said.”

But Mr. Biden’s decision to meet with the crown prince left human rights activists and Mr. Khashoggi’s family outraged. Hatice Cengiz, his fiancée, tweeted what she said Mr. Khashoggi would have thought: “Is this the accountability you promised for my murder? The blood of MBS’s next victims is on your hands.”

Mohammed bin Salman, the Crown Prince, was already the de facto ruler of Saudi Arabia, and his father, King Salman bin Abdulaziz, 86, just appointed him Prime Minister as well.

So, the two nations which have been the number one and number two petroleum exporting nations, and the two nations which lead and drive OPEC, are the two nations President Biden has decided he’s going to piss off. So, when Karine Jean-Pierre, the White House press secretary, told reporters that the decision was a “mistake and misguided,” and that, “It’s clear that OPEC Plus is aligning with Russia with today’s announcement,” perhaps, just perhaps she might have noted that her boss helped to give Russia and Saudi Arabia a common cause.

Full disclosure: I have been very opposed to the United States and NATO providing military aid to Ukraine. Not only did Ukraine decide to decline NATO membership previously, but the idea that we are fighting a proxy war with Russia directly, with a nation which has a strategic nuclear arsenal easily capable of destroying the United States and Europe, strikes me as utter madness. President Putin is, in some reports — though who can really know what to believe here — thinking very much differently than a Western leader would only means that he could, though not necessarily would, think very differently than we would about the use of tactical nuclear weapons against Ukrainian troop concentrations, and once the nuclear threshold is crossed, all bets are off. No, I do not want Russia to win its war of aggression against Ukraine, but I don’t want it so badly that I’m willing to risk a nuclear war to prevent it.

Now, Mr Putin is using one of the weapons he does have, a weapon to raise oil prices around the world, just as the northern hemisphere has exited summer and is heading toward winter. This year’s “October surprise,” just a month before the congressional elections, will just take more money out of the pockets of working Americans. And now you know why I call him the dummkopf from Delaware.