Good morning. Here’s your Daily Situational Awareness for Tuesday, 28 September 2021. You can receive this daily briefing by signing up at https://forwardobserver.com/daily-sa
TODAY’S BRIEFING:
- Yellen issues extraordinary measures warning
- China’s power problems risks factory closures
- NATO steps up patrols on Kosovo-Serbia border
- U.S. economic growth projections slow
- DARPA announces successful hypersonic test
SITUATIONAL AWARENESS
DEBT: Secretary of the Treasury Janet Yellen states in a letter to House Speaker Nancy Pelosi (D-CA) that after further review, if action is not taken to suspend or raise the debt ceiling, the “Treasury is likely to exhaust its extraordinary measures… by October 18th. At that point, we expect Treasury would be left with very limited resources that would be depleted quickly.” Yellen notes that “It is uncertain whether we could continue to meet all the nation’s commitments after that date.” (AC: Previous to today’s statement, estimates for when the Treasury would exhaust their cash and extraordinary measures were during October, but not explicitly defined. -T.W.)
ELECTRICITY: Chinese factories have experienced blackouts and power cuts over the past week, resulting in some factories slowing production or completely shutting down. Chinese electricity demand has surged after factories opened up in full force to supply the now-open post-COVID economies around the globe with goods. On top of the increase in demand, input prices like coal have been rising at a rate outpacing increases in utility costs. It’s unknown how long these power shortages will last. Still, Chinese authorities are trying to reduce the operating capacities of factories that have extremely high power consumption, such as steel, cement, and aluminum factories. (AC: If factories remain operating at reduced capacities or shut down completely, consumers worldwide may face a global shortage of goods, likely into next year. Economic health is measured largely by expenditures during the holiday season. If consumers can’t purchase goods due to a lack of availability, we’ll likely see weaker economic data. -T.W.)
NATO: Ongoing border disputes between Serbia and Kosovo risk renewing conflict between the two nations. Kosovo’s government temporarily closed the border with Serbia as an agreement for cross-border traffic expired. Serbian President Vucic said, “We will wait 24 hours for you to react as NATO and if the pogrom against our population continues Serbia will react and will not allow a repeat of what happened in 1995 and 2004.” In response, NATO’s Kosovo Force (KFOR) peacekeeping mission increased border patrols to dissuade continued fighting and Serbian military maneuvers along the border. (AC: Serbia does not recognize Kosovo’s government, and the Serbian alliance with Russia prevents the UN from recognizing Kosovo as a nation. Should a conflict erupt over this license plate issue, Russia would be positioned to provide support to Serbia from the Black Sea region but risks substantial NATO involvement and expansion of the KFOR mission. – D.M.)
GROWTH: The National Association of Business Economics has altered its economic growth projection in 2021 from 6.7% to 5.6%. The report, which aggregates data and survey responses from 47 economic experts, shows that one-third of these respondents don’t see a recovery to the job market until at least 2023. The other two-thirds of panelists agree that the job market will recover by the end of 2022. 58% of respondents believe the balance of risks for economic growth in 2021 to be on the downside. Inflation expectations for a year-over-year measure have increased by 2.3% since May earlier this year to 5.1% for 2021. Additionally, inflation expectations have risen to 2.4% for Q4 2022, a 0.1% increase from May’s forecast. The personal consumption expenditures (PCE) index predictions show a 3.8% and 2.2% forecast for 2021 and 2022, respectively. -T.W.
DARPA: The Defense Advanced Research Projects Agency (DARPA) announced a successful test of the Hypersonic Air-breathing Weapon Concept (HAWC). According to DARPA’s press release, the weapon is passively launched from an aircraft, then it ignites a fast-moving airflow mixture, propelling the cruiser at a speed greater than Mach 5. The test moves the HAWC “one step closer to… next generation capability” for hypersonic missiles. (AC: The U.S. has lagged in releasing information about hypersonic development relative to reports on Russian and Chinese developments in foreign media. Hypersonic weapon delivery vehicles and interdiction methods are considered a critical component of the next high-end conflict, likely to be in the Pacific. Payloads potentially include nuclear, non-nuclear, and electromagnetic pulse warheads for direct-fire missions or area denial. – D.M.)
Artist rendering of the Northrop Grumman HAWC. Credit: DARPA
HAZARDS WARNING
HURRICANE SEASON: Hurricane Sam is expected to cause life-threatening swells and rip current conditions on the Atlantic coast by the weekend but landfall is not currently predicted, according to the National Hurricane Center. The two areas of low pressure off the coast of Africa are expected to organize further over the next 24-48 hours, likely to a tropical depression or storm.
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