“Markets are fatally complacent about the risks of World War Three… The ‘great illusion’ that trade has made war less likely threatens to leave us perilously exposed…
“As far as I can tell, there is no attempt whatsoever by investors to discount what the politicians increasingly frame as a clear and present danger, even by way of what is known as “tail risk”…
“There is of course a sense in which there is no point in worrying about possible but not yet baked-in events. In a third world war, all bets would be off the table, and finance would change beyond recognition. Any such catastrophe cannot be priced in.
“The current complacency is nonetheless an oddity which seems to stand an ever-higher chance of breaking asunder on the rocks of harsh realities.”
“The U.S. and Iran say they don’t want a war, but the risks are mounting as Biden readies retaliation…
“…after months of attacks and spiraling tensions in the Middle East — culminating in the killing of three American soldiers in a drone strike by Tehran-backed militants — former officials and analysts from the West warn the two countries may be sleepwalking toward conflict.”
“Iran has told the US via intermediaries that if it strikes Iranian soil directly, Tehran will itself hit back at American assets in the Middle East, drawing the two sides into a direct conflict.
“The warning comes as Iran waits on high alert to see how Joe Biden responds to the death of three US servicemen deemed by Washington to have been killed by a Tehran-backed militia based in Syria.”
“Syria says several Iranian advisers killed in airstrike near Damascus.
“Syrian state media said on Monday that “a number of Iranian advisers” were killed in an alleged Israeli attack south of the capital, in a rare acknowledgment by Damascus of Iranian casualties in strikes on Syrian territory attributed to Israel.”
“Netanyahu rules out ceasefire deal that would mean Gaza withdrawal.
“Benjamin Netanyahu has said he will not accept any ceasefire deal that requires the release of thousands of Palestinian prisoners or the departure of Israeli troops from Gaza, as the Hamas leader, Ismail Haniyeh, said he was willing to travel to Cairo to discuss the proposals.”
“Houthis ready for ‘long-term confrontation’ with UK [and US] in the Red Sea…
““We are prepared for a long-term confrontation with the forces of tyranny. The Americans, the British, and those who co-ordinated with them must realise the power of the sovereign Yemeni decision and that there is no debate or dispute over it,” said al-Atifi, the Houthi defence minister, in a statement on Tuesday.”
“Britain set to deploy aircraft carrier to Red Sea…
“The Royal Navy is preparing to step in to replace USS Dwight D Eisenhower when it returns to America, as the Houthis warned of a “long-term confrontation” in one of the world’s busiest shipping lanes.”
“US arms exports hit record high in fiscal 2023.
“The US State Department said on Monday (Jan 29) that sales of American military equipment to foreign governments rose 16 per cent to a record $238 billion in 2023. A statement released by the US department noted that arms transfers and defence trade are important aspects of the US foreign policy.”
“Nassim Taleb Says US Faces a ‘Death Spiral’ of Swelling Debt…
“Taleb defined the ballooning debt load as a “white swan,” a risk that’s more probable than a surprise “black swan” event. While he didn’t identify specific outcomes in markets, he did say white swans include both the US deficit and an economy that’s far more vulnerable to shocks than in prior years.”
“Britain hits lowest ever score on global corruption index…
“Britain, which is now below countries such as Seychelles, Uruguay and Estonia in the ranking, has been rocked by a string of scandals in recent months, from government procurement during the pandemic to a Post Office “cover up” during the Horizon scandal.”
“If we [the UK] need to prepare for a Third World War, the Swedes and Finns are way ahead of us.
“Why was the suggestion of a British citizen’s army met with such alarm, asks Lucy Denyer. Military service is already compulsory in many countries – add to that regular bunker drills, siren tests and a young population fully motivated to fight for their homeland, and there are many lessons we could learn.”
“French and German weakness leaves eurozone stuck in fourth-quarter rut.
“The eurozone is struggling to avoid a second consecutive quarterly dip in gross domestic product after a German contraction and a flatlining of France’s economy offset a rebound in Spanish and Italian growth in the final quarter of 2023.”
“French farmers lay siege to Paris with vow to cut off food… Capital ‘only has supplies for three days’ as tractor protesters angry at EU red tape blockade roads…
“Long lines of tractors blocked motorways at eight entry points to the city as one militant union promised to take control of the world’s biggest fresh food market.”
“The Belgian port of Zeebrugge was blockaded on Tuesday, causing gridlock on surrounding roads as a wave of farmer protests spread across Europe.
“Authorities at the North Sea port, one of the biggest in Europe, said all access roads were blocked by 5pm on Tuesday, in a demonstration that will hit commercial trade, including imports and exports of food to and from the UK, Ireland and Scandinavia.”
“Italy fears Russia plans nuclear base in Libya…
“Fears are growing in Italy that Russia will base nuclear submarines at a naval port it hopes to establish in eastern Libya, dramatically boosting Russian influence in the central Mediterranean and placing nuclear weapons on Europe’s southern flank.”
“Serbia considers reintroducing conscription as regional tensions grow…
“President Aleksandar Vučić said top army commanders gave him “a strong argumentation” in favour of the reintroduction of a mandatory draft, which was suspended in 2011 in a push to professionalise the armed forces.”
“Evergrande collapse means foreign investors in China face even greater uncertainty.
“…foreign bondholders – including Top Shine Global, which brought the winding-up petition against the Evergrande – will be “hung out to dry”, says George Magnus, an economist and associate at Soas University of London. And a bailout is unlikely.”
“China’s manufacturing activity contracts for fourth month as economic recovery lags.
“China’s manufacturing activity contracted in January for the fourth month in a row, reflecting sluggish momentum in the world’s second-largest economy at the start of the year despite policymakers’ efforts to boost confidence in the recovery.”
“Taiwan fumes over China’s ‘unilateral’ change to Taiwan Strait status quo; detects Chinese vessels, aircraft.
“Taiwan’s government expressed its anger after China “unilaterally” changed a flight path close to the sensitive median line in the Taiwan Strait and accused Beijing of deliberately trying to change the status quo for possible military reasons.”
“Saudi Arabia surprises oil markets by ditching plan to increase production…
“The decision has raised questions over the future of global oil demand growth… The move may also help to support the flagging oil markets in a blow for the US president, Joe Biden, who would benefit from weaker pump prices ahead of the election later this year.”
“The U.S. Is Preparing to Reimpose Sanctions on Venezuela.
“The United States has ordered all U.S. entities involved in business relations with Venezuelan miner Minerven to start unwinding these relations ahead of a return to a sanction regime in April, after the six-month sanction relief agreed in October 2023 expires.”
“A week of road blockades in Bolivia has led to food and fuel shortages as supporters of former president Evo Morales protest his disqualification from 2025 elections, authorities said Monday.
“Protesters, led by coca growers — the mainstay of Morales’ political base — began by blocking eight highways a week ago with stones, logs and bonfires.”
“Argentine Recession To Deepen, Milei Battles To Pass Reforms…
“Milei’s political party has only 38 of 257 seats in Congress, and opposition pressure has already forced him to ditch almost half of the articles in his bill, including key fiscal reforms. The official debate on the law has been delayed as he tries to shore up support, and is now expected Wednesday.”
“Sudan’s army and its rival paramilitary force are committing war crimes in Darfur, the International Criminal Court’s (ICC) chief prosecutor has said…
“Fighting broke out between the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF) in April last year, the latest flare-up in a conflict that has been simmering for more than 20 years.”
“Ethiopia’s dangerous game in East Africa could spark conflict.
“…Addis Ababa’s actions are threatening to spark yet another war in East Africa. Unless forces of reason prevail among Ethiopian leaders, the whole region could be dragged into conflict.”
“Police in Sri Lanka use tear gas to disperse opposition protest against dire economic conditions.
““The government is not concerned with the people suffering and being unable to provide for themselves,” said opposition lawmaker Sarath Fonseka who was at the protest. “People can no longer pay their bills or buy their children school supplies,” he said.”
“Imran Khan: Former Pakistan PM and his wife jailed 14 years for corruption.
“Khan, who was ousted as PM by his opponents in 2022, is already serving a three-year jail term after being convicted of corruption… It is the second conviction against him in as many days- and the verdicts come a week before Pakistan’s elections.”
“Tajikistan’s president urges public to stockpile food for two years (again)…
““I emphasize that every family in the country should have the necessary food supply for two years,” he said. Rahmon cited the crowding challenges of climate change, population growth, and the unpredictability of the global food supply chain among the reasons to follow his advice.”
“Debt relief delays could mean ‘disorderly’ defaults: IMF official…
“The flagship debt restructuring process for low income countries needs to speed up, otherwise there could be a series of “disorderly” sovereign debt defaults, an International Monetary Fund official said on Tuesday.”
You can read the previous “Economy” thread here. I’ll be back tomorrow with a “Climate” thread.
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