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Daily Archives: May 19, 2022

Charts: U.K. Inflation Hits 40-year High

Source : Reuters

Chart: Comparison of Charging Power of Selected EV Models

Japan is lagging behind US, Korea and Germany

Source : Nikkei

Charts: World Economies Growth Slowed in Q1 2022

IMF revised down forecast of growth

Source : Nikkei

Music Video: Come Together

Why Ukraine’s Undersized Military Is Resisting Supposedly Superior Russian Forces

Liam Collins wrote . . . . . . . . .

Before Russia’s invasion of Ukraine on Feb. 24, 2022, many observers looked at Russia’s overwhelming combat power and thought Russia would achieve a quick victory.

Because Russia has a US$62 billion defense budget and holds numerical advantages in weapon systems such as tanks, artillery, attack helicopters and planes, many analysts asked not whether Russia would win but rather how quickly it would do so.

What these observers and less experienced analysts are not taking into account is that wartime performance is influenced by more than how weapon systems function.

Success in battle is also a function of strategy, operational employment, doctrine, training, leadership, culture and the will to fight.

Russia held and continues to hold an overwhelming numerical advantage in manpower and weapon systems, but Ukraine holds the advantage in every other factor.

Ukraine’s military competence goes a long way to explain why Russia failed to seize Kyiv and Kharkiv and why Russia’s attempts to seize the entirety of the Donetsk and Luhansk provinces in its latest offensive in the east will likely fail.

Ukraine’s military reforms

Following its miserable performance in 2014 against Russia, when demonstrations by pro-Russian groups in the Donbas region of Ukraine escalated into a war between the Ukrainian military and Russian-backed separatists, Ukraine conducted a comprehensive review of its security and defense establishment.

The ensuing report led former president Petro Poroshenko to enact the Strategic Defense Bulletin of Ukraine in May 2016.

The bulletin mandated broad and sweeping reform across the defense establishment, with the goal of producing a force capable of performing up to NATO standards by 2020.

Over the next six years, Ukraine reformed its military with the help of Western advisers, trainers and equipment. From 2016 to 2018, I served as the executive officer to the U.S. senior defense adviser to Ukraine and was able to witness some of these reforms.

In that position I met with dozens of members of Ukraine’s security establishment, including then-President Poroshenko and then-Defense Minister Stepan Poltorak.

It was clear that Ukrainian leaders feared a large-scale Russian invasion, and they knew they had little time to make difficult reforms in five categories: command and control, planning, operations, medical and logistics, and professional development of the force.

Battlefield experience

By the time Russia invaded Ukraine on Feb. 24, Ukraine had built a well-led, professional force with a culture that encouraged junior leader initiative on the battlefield.

These initiatives occur when original battlefield orders are no longer relevant or fit the changing situation.

Before reforms were enacted, the lieutenants and captains who were conducting the fighting on the ground were unable to make decisions and were required to seek permission before they could act.

Benefiting from eight years of fighting in the Donbas and six years of Western trainers and advisers, Ukraine’s military in 2022 wasn’t the same as it had been in 2014, much to Russia’s surprise.

In fact, it was far superior to Russia’s military in nearly every measure but size.

As a result, Russia’s latest invasion pitted a large but poorly trained force against a much smaller but well-trained, well-led and motivated force.

As the war moves east, Ukrainian levels of proficiency, training, leadership, culture and motivation remain constant.

Russian levels of troops and equipment also remain constant – and their poorly led forces cannot be fixed in weeks or months.

It took Ukraine six years to reform its military.

Deploying combat troops

Many media reports have focused on the fact that Russian forces’ moving from the north of Ukraine to support operations in the east will increase Russia’s likelihood of success of occupying Ukraine’s eastern region.

Yet, what is often ignored is that Ukraine is also able to move forces east. Sure, a small element of Ukrainian forces will remain to defend Kyiv.

But others will move east, meaning the overall ratio between Russian and Ukrainian forces is unlikely to change much unless Russia decides to ship in even more troops.

Likewise, Russia does not seem capable of changing how it employs its troops when they meet stiff Ukrainian resistance.

Although much was made of the appointment of Gen. Alexander Dvornikov to command Russian operations in Ukraine, his promotion seems to have changed little on the ground.

Operations over the past few weeks have demonstrated that Russia is still incapable of executing large-scale attacks that result in Russian control over Ukrainian territory.

The only real change that gives hope to Russia is the geographic terrain.

The land in the north of Ukraine consists largely of wetlands, which forced Russia to stick to the roads and thus limited the number of routes it could use to advance on Kyiv.

The terrain in the east contains more open space and would enable Russia to move its troops and tanks along multiple routes instead of one.

Critical military aid

A key to Ukraine’s holding off this much larger force is the ability to rapidly replace military equipment that gets depleted or destroyed.

Western aid since the start of the war in February 2022 has been absolutely critical to Ukraine’s continued success.

Ukraine’s needs have not changed since then.

As Ukraine Foreign Minister Dmytro Kuleba explained during a meeting with NATO officials in April 2022, his wish list “only has three items on it. It’s weapons, weapons, and weapons.”

Ukraine can likely hold out, provided it can get more of everything. But given questions about the continued U.S. supply of Javelin anti-tank missiles, getting more weapons is not a guarantee.

Source : The Conversation

Infographic: The Top 10 Largest Nuclear Explosions

See large image . . . . . .

Source : Visual Capitalist

Powell’s “Soft Landing” Is Impossible

Daniel Lacalle wrote . . . . . . . . .

After more than a decade of chained stimulus packages and extremely low rates, with trillions of dollars of monetary stimulus fuelling elevated asset valuations and incentivising an enormous leveraged bet on risk, the idea of a controlled explosion or a “soft landing” is impossible.

Powell’s “Soft Landing” Is Impossible

In an interview with Marketplace, Federal Reserve chairman admitted that “a soft landing is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now”. He went on to say that “nonetheless, we think there are pathways … for us to get there.”

The first problem of a soft landing is the evidence of the weak economic data. While headline unemployment rate appears robust, both the labor participation and employment rate show a different picture, as they have been stagnant for almost a year. Both the labor force participation rate, at 62.2 percent, and the employment-population ratio, at 60.0 percent remain each 1.2 percentage points below their February 2020 values, as the April Jobs Report shows. Real wages are down, as inflation completely eats away the nominal wage increase. According to the Bureau of Labor Statistics, real average hourly earnings decreased 2.6 percent, seasonally adjusted, from April 2021 to April 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.4-percent decrease in real average weekly earnings over this period.

The University of Michigan consumer confidence in early May fell to an 11-year low of 59.1, from 65.2, deep into recessionary territory. The current conditions index fell to 63.6, from 69.4, but the expectations index plummeted to 56.3, from 62.5.

The second problem of believing in a soft landing is underestimating the chain reaction impact of even allegedly small corrections in markets. With global debt at all-time highs and margin debt in the US alone at $773 billion, expectations of a controlled explosion where markets and the indebted sectors will absorb the rate hikes without a significant damage to the economy are simply too optimistic. Margin debt remains more than $170 billion above the 2019 level, which was an all-time high at the time.

However, the biggest problem is that the Federal Reserve wants to curb inflation while at the same time the Federal government is unwilling to reduce spending. Ultimately, inflation is reduced by cutting the amount of broad money in the economy, and if government spending remains the same, the efforts to reduce inflation will only come from obliterating the private sector through higher cost of debt and a collapse in consumption. You know that the economy is in trouble when the fiscal deficit is only reduced to $360 billion in the first seven months of fiscal year 2022 despite record receipts and the tailwind of a strong recovery in GDP. Now, with GDP growth likely to be flat in the first six months but mandatory and discretional spending still virtually intact, government consumption of monetary reserves is likely to keep core inflation elevated even if oil and gas prices moderate.

The Federal Reserve cannot expect a soft landing when the economy did not even take off, it was bloated with a chain of newly printed stimulus packages that have made the debt soar and created the perverse incentive to monetize all that the Federal government overspends.

The idea of a gradual cooling down of the economy is also negated by the reality of emerging markets and European banks. The relative strength of the US dollar is already creating enormous financial holes in the assets of a financial system that has built the largest carry trade against the dollar in decades. It is almost impossible to calculate the nominal and real losses in pension funds and the negative result of financial institutions in the most aggressively priced assets, from socially responsible investment and technology to infrastructure and private equity. We can see that markets have lost more than $7 trillion in capitalization in the year so far with a very modest move from the Federal Reserve. The impact of these losses is not evident yet in financial institutions, but the write-downs are likely to be significant into the second half of 2022, leading to a credit crunch exacerbated by rate hikes.

Central banks always underestimate how quickly the core capital of a financial institution can dissolve into inexistence. Even the financial system itself is unable to really understand the complexity of the cross-asset impact of a widespread slump in extremely generous valuations throughout all kinds of assets. That is why stress tests always fail. And financial institutions all over the world have abandoned the healthy process of provisioning expecting a lengthy and solid recovery.

The Federal Reserve tries to convince the world that rates will remain negative in real terms for a long time, but borrowing costs globally are surging while the US dollar is strengthening, creating an enormous vacuum effect that can create significant negative effects on the real economy before the Federal Reserve even realizes that the market is weaker than they anticipated, and liquidity is significantly lower than they calculated.

There is no easy solution. There is no possible painless normalization path. After a massive monetary binge there is no soft hangover. The only thing that the Federal Reserve should have learnt is that the enormous stimulus plans of 2020 created the worst outcome: stubbornly high core inflation with weakening economic growth. There are only two possibilities: To truly tackle inflation and risk a financial crisis led by the US dollar vacuum effect or to forget about inflation, make citizens poorer and maintain the so-called bubble of everything. None is good but they wanted a decisive and unprecedented response to the pandemic lockdowns and created a decisive and unprecedented global financial risk. They thought money creation was not an issue and now the accumulated risk is so high it is hard to see how to tackle it.

One day someone may finally understand that supply shocks are addressed with supply-side policies, not with demand ones. Now it is too late. Powell will have to choose between the risk of a global financial meltdown or prolonged inflation.

Source : Daniel Lacalle

Increased Infectious Disease Risk Likely from Climate Change

Drew Costley wrote . . . . . . . . .

Climate change will result in thousands of new viruses spread among animal species by 2070 — and that’s likely to increase the risk of emerging infectious diseases jumping from animals to humans, according to a new study.

This is especially true for Africa and Asia, continents that have been hotspots for deadly disease spread from humans to animals or vice versa over the last several decades, including the flu, HIV, Ebola and coronavirus.

Researchers, who published their findings Thursday in the journal Nature, used a model to examine how over 3,000 mammal species might migrate and and share viruses over the next 50 years if the world warms by 2 degrees Celsius (3.6 degrees Fahrenheit), which recent research shows is possible.

They found that cross-species virus spread will happen over 4,000 times among mammals alone. Birds and marine animals weren’t included in the study.

Researchers said not all viruses will spread to humans or become pandemics the scale of the coronavirus but the number of cross-species viruses increases the risk of spread to humans.

The study highlights two global crises — climate change and infectious disease spread — as the world grapples with what to do about both.

Previous research has looked at how deforestation and extinction and wildlife trade lead to animal-human disease spread, but there’s less research about how climate change could influence this type of disease transmission, the researchers said at a media briefing Wednesday.

“We don’t talk about climate a lot in the context of zoonoses” — diseases that can spread from animals to people, said study co-author Colin Carlson, an assistant professor of biology at Georgetown University. “Our study … brings together the two most pressing global crises we have.”

Experts on climate change and infectious disease agreed that a warming planet will likely lead to increased risk for the emergence of new viruses.

Daniel R. Brooks, a biologist at University of Nebraska State Museum and co-author of the book “The Stockholm Paradigm: Climate Change and Emerging Disease,” said the study acknowledges the threat posed by climate change in terms of increasing risk of infectious diseases.

“This particular contribution is an extremely conservative estimate for potential” emerging infectious disease spread caused by climate change, said Brooks.

Aaron Bernstein, a pediatrician and interim director of The Center for Climate, Health, and the Global Environment at Harvard T.H. Chan School of Public Health, said the study confirms long-held suspicions about the impact of warming on infectious disease emergence.

“Of particular note is that the study indicates that these encounters may already be happening with greater frequency and in places near where many people live,” Bernstein said.

Study co-author Gregory Albery, a disease ecologist at Georgetown University, said that because climate-driven infectious disease emergence is likely already happening, the world should be doing more to learn about and prepare for it.

“It is not preventable, even in the best case climate change scenarios,” Albery said.

Carlson, who was also an author on the latest report from the Intergovernmental Panel on Climate Change, said we must cut greenhouse gas and phase out fossil fuels to reduce the risk of infectious disease spread.

Jaron Browne, organizing director of the climate justice group Grassroots Global Justice Alliance, said the study highlights climate injustices experienced by people living in African and Asian nations.

“African and Asian nations face the greatest threat of increased virus exposure, once again illustrating how those on the frontlines of the crisis have very often done the least to create climate change,” Browne said.

Source : AP