Good morning. Here’s your Daily SITREP for Wednesday, 27 September 2023.
- READ TIME: 6 Minutes, 37 Seconds
- Inside the Beltway
- (1) Attempts to Stop Shutdown May End Up Causing it
- (2) Industry to Congress: Aviation System at Risk During Shutdown
- Domestic INTSUM
- (3) Philadelphia Hit By Widespread Looting After Protest
- (4) Target Closes Stores Due to Organized Retail Theft
- (5) America’s Newest Spy Agency
- (6) Ford Pauses Flagship EV Plant Amid UAW Strike
- Global SITREP
- (7) Dimon: The Bigger Risk Than Inflation or Recession
- (8) China Will Devour More Coal
- (9) U.K. Home Secretary: Uncontrolled Immigration Existential Threat
- (10) Russia’s Black Sea Commander Reappears After Ukraine Claims Assassination
- (11) Maersk Backs Away From U.S. Military Contracts
INSIDE THE BELTWAY
- (1) ATTEMPTS TO STOP SHUTDOWN MAY END UP CAUSING IT: The Senate officially announced a bipartisan stopgap bill they say will avert a shutdown, and House Speaker Kevin McCarthy (R-CA) announced that House Republicans will pass a stopgap bill that includes new border security measures.
- Senate Majority Leader Chuck Schumer (D-NY) said the Senate’s bill will not include “everything everyone wants,” and Minority Leader Mitch McConnell (R-KY) called the stopgap bill a responsible step forward.
- Why It Matters: Every attempt to avert the shutdown by 01 October includes non-starters for one side or the other, increasing the likelihood of a shutdown. – R.C.
- (2) INDUSTRY TO CONGRESS: AVIATION SYSTEM AT RISK DURING SHUTDOWN: A coalition of airline industry groups, including American Airlines and the U.S. Chamber of Commerce, warned lawmakers that any interruption of Federal Aviation Administration (FAA) programs for “even a few hours or days” would undermine public confidence and interfere with progress on critical initiatives.
- According to the Department of Transportation (DOT) shutdown plan, 18,744 FAA employees, 35% of the Federal Railroad Administration, and 75% of the Office of Inspector General would be furloughed.
- Why It Matters: The DOT and FAA are already plagued by issues, including shortages of air traffic controllers and pilots, which will take years to address. The shutdown will likely exacerbate these issues as the FAA reauthorization bill is held up in the Senate. While Transportation Security Administration employees and air traffic controllers will continue to work without pay, travel disruptions are likely. – R.C.
- (3) PHILADELPHIA HIT BY WIDESPREAD LOOTING AFTER PROTEST: Businesses across City Center Philadelphia were hit by looters following a protest against a municipal judge’s decision to drop all charges against Philadelphia Police Officer Mark Dial in the death of Eddie Irizarry.
- Acting Police Commissioner John Stanford said they were investigating reports that an organized caravan was going from business to business. It added that the looters were “a bunch of criminal opportunists” and unconnected to the protest.
- Why It Matters: A recession, high youth unemployment, inflation, stimulus, and a general election next year will be accelerators of low intensity conflict likely to culminate into a 2020 “Summer of Love” redux. What’s happening in Philadelphia is a glimpse into the coming repeat, which I believe is likely. – M.S.
- (4) TARGET CLOSES STORES DUE TO ORGANIZED RETAIL THEFT: Target said it will close nine stores across four states because theft and organized retail crime are threatening the safety of employees and customers and contributing to “unsustainable business performance.”
- The National Retail Federation said theft, fraud, and damage cost retailers $112.1 billion in 2022, up from $93.9 billion in 2021.
- Why It Matters: Cities are feeling a double pinch of organized retail crime and loss of economic opportunity, which is creating more “deserts.” Socialists in Chicago last week floated city-run grocery stores in response to “food deserts,” or areas without grocers. The closure of key infrastructure, such as Target and other retailers like CVS and Walgreens, will likely lead to increased calls for government solutions, including socialist-style grocery stores. – M.S.
- (5) AMERICA’S NEWEST SPY AGENCY: The U.S. Securities & Exchange Commission (SEC) has created a database to aggregate and track U.S. investors’ financial and personal information, including Social Security numbers.
- The Consolidated Audit Trail (CAT) regulation instructs financial institutions to identify “every order, cancellation, modification, and trade execution for all exchange-listed equities and options across all U.S. markets.”
- Representative Barry Loudermilk (R-GA) and Senator John Kennedy (R-LA) recently introduced legislation to stop this unconstitutional action.
- Why It Matters: The SEC issued this rule in response to the 2010 “flash crash” to better protect against fraud and manipulation in financial markets. However, the final CAT design veered from the original design and into personal data collection, a Fourth Amendment violation. If the regulation stands, CAT data will be available to about 3,000 contractors, creating a “honeypot” for domestic and foreign hackers to exploit. – H.B.
- (6) FORD PAUSES FLAGSHIP EV PLANT AMID UAW STRIKE: Ford announced that the company will halt work on a new $3.5 billion electric vehicle (EV) battery plant until company leadership is “confident in [Ford’s] ability to competitively operate the plant.”
- United Auto Workers (UAW) Union President Shawn Fain said the announcement was a “barely-veiled threat by Ford to cut jobs,” while union members are calling for increased wages and benefits.
- Why It Matters: This could be a significant blow to the Biden administration’s electric vehicle push, which is already mired in issues including controversy over Ford working with the Chinese Contemporary Amperex Technology Co., Limited (CATL), a non-existent battery supply chain, and lack of charging infrastructure. – R.C.
- (7) DIMON: THE BIGGER RISK THAN INFLATION OR RECESSION: JPMorgan Chase CEO Jamie Dimon said yesterday that geopolitics is the biggest risk to the economy and financial markets – even higher than inflation and recession risks.
- “I think the geopolitical situation is the thing that most concerns me… We may be at an inflection point for the free democratic world. That’s how seriously I take it,” Dimon said.
- Dimon also warned clients to be prepared for a hard landing, adding that interest rates rising from 5% to 7% would be more economically painful than rates rising from 3% to 5%.
- “I am not sure if the world is prepared for 7%. I ask people in business, ‘are you prepared for something like 7%?’ The worst case is 7% with stagflation… We urge our clients to be prepared for that kind of stress. Warren Buffett says you find out who is swimming naked when the tide goes out. That will be the tide going out,” Dimon said in a recent interview.
- Why It Matters: Self-described “American patriot” Jamie Dimon has been far more effective at maintaining positive international relations than U.S. Secretary of State Antony Blinken. Powerful business leaders and multinational corporations should be the biggest global peace and trade advocates while geopolitical tensions continue to rise. – H.B.
- (8) CHINA WILL DEVOUR MORE COAL: Coal traders supplying China and mining company representatives struck deals in Indonesia at the world’s largest coal industry conference that ended yesterday.
- China “will burn more coal because they are more worried about the economy than blue skies,” a trader from a large international trading firm said.
- Surging electricity demand should increase China’s coal imports to a record 329 million tonnes this year, according to Noble Research’s head of commodity research, who spoke at the conference.
- Why It Matters: Western countries have agreed to global climate goals that limit coal usage. But developing countries across Latin America, Asia, Africa, plus India and China – the world’s largest coal consumer and importer – won’t go along with Western countries’ attack on the coal industry, which is necessary for their economic growth. – H.B.
- (9) U.K. HOME SECRETARY: UNCONTROLLED IMMIGRATION EXISTENTIAL THREAT: The United Kingdom’s Home Secretary Suella Braverman warned on Tuesday that uncontrolled immigration poses an “existential challenge” to Western nations.
- Braverman called for the rewriting of a treaty that has influenced global asylum policy, saying the United Nations refugee convention has expanded the definition of “persecution” and increased the number of people qualifying for refugee protection.
- Why It Matters: The United States and most of Europe have been inundated with immigrants using asylum policies to gain legitimate access to Western nations without going through the legal immigration process. Europe has likely reached the breaking point on immigration but it remains to be seen whether its dysfunctional culture can put the breaks on immigration policies that are rapidly looking like national and cultural suicide. Braverman’s warning could be a bellwether moment for both Europe and the U.S. regarding immigration policies – M.M.
- (10) RUSSIA’S BLACK SEA COMMANDER REAPPEARS AFTER UKRAINE CLAIMS ASSASSINATION: Russian Admiral Viktor Sokolov, the commander of Russia’s Black Sea Fleet, was shown on Russian state television on Tuesday attending a Ministry of Defense meeting the day after Ukrainian special forces said they had killed him.
- Ukraine claimed on Monday that Sokolov had been killed along with 33 other officers in a missile attack last week on the headquarters of Russia’s Black Sea Fleet in the port of Sevastopol.
- The debunked claim follows revelations that an alleged Russian missile strike that killed civilians in a market on September 6th was actually an errant Ukrainian missile.
- Why It Matters: The constant drumbeat of debunked Ukrainian claims appears to be wearing down support in the West and particularly in the U.S., where defunding Ukraine is a key position in the Republican-controlled House of Representatives negotiations on a potential government shutdown. If this latest revelation holds true it could harden Republican opposition to Ukraine funding.- M.M.
- (11) MAERSK BACKS AWAY FROM U.S. MILITARY CONTRACTS: Danish-owned shipping company Maersk, a major U.S. military contractor, has decided to divest its U.S.-flagged tanker fleet and multiple military contracts.
- Maersk is concurrently escalating its investments globally, including in China.
- The Department of Defense is projected to need about one hundred civilian tankers of various sizes in the event of a serious conflict in the Pacific.
- Why It Matters: To date, the U.S. Maritime Administration has been woefully underfunded, even while the U.S. faces a militarized and expansionist China in the Pacific. The U.S. does not have the necessary organic transport assets to successfully fight a war in the Pacific, and now, with reduced contract assets from Maersk, the situation appears even more dire. – M.M.
— END REPORT
M.S. indicates analyst commentary from Mike Shelby
M.M. indicates analyst commentary from Max Morton
J.V. indicates analyst commentary from Jared Vaughn
R.C. indicates analyst commentary from Robert Cook
H.B. indicates analyst commentary from Harrison Burge
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