Daily SITREP: Deutsche Bank: The U.S. Should Already Be in a Recession (Wed, 08 November 23) – Forward Observer

Daily SITREP: Deutsche Bank: The U.S. Should Already Be in a Recession (Wed, 08 November 23)


Good morning. Here’s your Daily SITREP for Wednesday, 08 November 2023.

ADMIN NOTE: Veteran’s Day is being observed on Friday, 10 November. The Early Warning brief will be published on Thursday, and the Early Warning Roundtable will begin at 0900 Central on Thursday. We will not be publishing a report on Friday in observance of Veterans Day. – M.S.


  • READ TIME: 5 Minutes, 44 Seconds
  • Inside the Beltway
    • (1) Dem Lawmakers Urge Temp Protected Status for Palestine
    • (2) New FISA Bill to Include Warrant Requirement
  • Domestic INTSUM
    • (3) Deutsche Bank: The U.S. Should Already Be in a Recession
    • (4) Dems See Big Wins in Yesterday’s Elections
  • Global SITREP
    • (5) Gold & Gold Market Shifting to China
    • (6) Goldman Sachs: Crypto’s “Uptober” Market Shift
    • (7) Israel Plans On Indefinite Control of Gaza
    • (8) Ukraine’s Zelensky Calls for Unity After Key General Declares War a Stalemate


  • (1) DEM LAWMAKERS URGE TEMP PROTECTED STATUS FOR PALESTINE: Senator Dick Durbin (D-IL) and Rep. Pramila Jayapal (D-WA) are gathering signatures for a draft letter urging President Biden to designate the Palestinian territories for Temporary Protected Status (TPS) and Deferred Enforced Departure (DED).
    • According to the letter, 7,241 nonimmigrant visas were issued to individuals with Palestinian Authority travel documents in 2022.
    • Why It Matters: Granting Temporary Protected Status to Palestinians on nonimmigrant visas already in the U.S. could be setting up for a surge of refugees who would also have protected status once they reach the border. Screening a surge of refugees for ideological support for Hamas would be impossible. If the Israel-Palestine split on the left continues, Palestinian refugees would likely join demonstrations and could potentially engage in terrorism if the Biden administration continues support for Israel. Biden’s support among Arab and Muslim Americans has tanked in the last month, and this could be a low risk way for Biden to make up some of that support ahead of the 2024 election. – R.C.
  • (2) NEW FISA BILL TO INCLUDE WARRANT REQUIREMENT: The draft version of the Foreign Intelligence Surveillance Act (FISA) reauthorization bill will include a new warrant requirement for FBI searches of the controversial Section 702 collections database.
    • The draft bill also includes language from the proposed Fourth Amendment is Not For Sale Act, which would bar law enforcement from buying data from brokers and circumventing the judicial process, and create a clear warrant requirement for all federal agencies to use cell site simulators.
    • Why It Matters: There is bipartisan sentiment toward curtailing some of the abuses of Section 702 authorities and database searches, making this bill likely to pass with minimal changes. Cell site simulators are used extensively by law enforcement and federal agencies to capture unique identifying data of cellular devices, and only California has a warrant requirement for their use at the state level. Some cell site simulators go beyond collecting unique identifiers and geolocation data and can eavesdrop on phone calls and intercept SMS messages. – R.C.


  • (3) DEUTSCHE BANK: THE U.S. SHOULD ALREADY BE IN A RECESSION: Deutsche Bank analysts wrote that the Conference Board’s Leading Economic Index (LEI) – which includes new manufacturing orders, new building permits, initial unemployment claims, and seven other components – has only been this low and for this long during recessions.
    • The LEI has been negative on a year-on-year basis for the second-longest period on record.
    • Why It Matters: The Conference Board’s LEI has been a reliable recession indicator for nearly three decades. But the U.S. may avoid an officially-declared recession in 2024, as trillions in unspent federal dollars should boost government spending and, thereby, gross domestic product (GDP). Even if U.S. GDP were to fall, the National Bureau of Economic Research may feel political pressure to not officially announce a recession in a presidential election year. – H.B.
  • (4) DEMS SEE BIG WINS IN YESTERDAY’S ELECTIONS: Virginia Democrats, which already controlled the state senate, flipped the state’s House of Delegates yesterday, gaining a narrow four-seat majority in the House.
    • Meanwhile, Kentucky’s Democratic Governor Andy Beshear won reelection in a statewide race that supporters say is an indicator of the country’s mood heading into the 2024 elections.
    • New Jersey’s Ed Durr, a Republican who won a major upset victory over an incumbent Democrat in 2021, lost his state senate seat to Democratic opponent John Burzichelli.
    • Why It Matters: Virginia, and other off-year elections won by Democratic candidates, may be a bellwether for the 2024 election, with abortion still mobilizing the Democratic base to the polls despite Americans’ economic pain. Virginia Republicans were also facing an uphill battle to take the State Senate and keep the House of Delegates, with many Democratic candidates running unopposed. In New Jersey, Durr’s comments earlier this year on abortion, and his subsequent denial days before the election, likely played a role in Burzichelli’s victory. – R.C.


  • (5) GOLD & GOLD MARKET SHIFTING TO CHINA: China, the world’s largest gold producer, has been stockpiling more gold for 11 consecutive months, while trading volumes on the Shanghai Gold Exchange (SGE) are trending up.
    • China’s official gold reserves – which are likely not the actual holdings – are 2,192 tonnes, the fifth largest in the world.
    • Gold has traded at a premium on the Shanghai Gold Exchange compared to Western gold markets this year.
    • Why It Matters: China’s gold stockpile and decreased U.S. Treasury holdings reveal that the country is slowly de-dollarizing. Western gold markets, which don’t allow true price discovery, are incentivizing global gold producers to transact on the Shanghai Gold Exchange. Higher trade volume could eventually shift the global gold market to Shanghai and deal another blow to the U.S.-led financial system. – H.B.
  • (6) GOLDMAN SACHS: CRYPTO’S “UPTOBER” MARKET SHIFT: October – or “Uptober” – is historically a strong month for bitcoin’s (BTC) price performance, but this Uptober may have signaled a change in the cryptocurrency market, according to Goldman Sachs analysts.
    • Bitcoin’s October price has appreciated eight of the last 10 years, Goldman’s analysts noted.
    • October 2023’s rally may be different, as bitcoin-focused investment products and funds had the largest single-week inflows since July 2022, and open interest across BTC options reached an all-time high of $15.4 billion in late October.
    • Why It Matters: October may have been a turning point for Bitcoin. Long-term BTC holders remain bullish, which means that even less of the already capped BTC supply will be offered on crypto exchanges. Meanwhile, BTC demand is growing, as the race is on for a spot Bitcoin exchange-traded fund (ETF) that would allow more people and institutions easy access to BTC exposure. – H.B.
  • (7) ISRAEL PLANS ON INDEFINITE CONTROL OF GAZA:  Israeli Prime Minister Benjamin Netanyahu said Israel will maintain full security responsibility for Gaza “for an indefinite period” after the war.
    • Israeli officials emphasized that they had no desire to govern Gaza following the end of the conflict.
    • Israeli Defense Forces are reportedly destroying tunnel networks around Gaza City with explosives and have advanced to their declared southern Gaza limit of advance as of Tuesday.
    • Why It Matters: At some point, Iran will either enter the fight directly or severely damage its self-proclaimed status as the Palestinian’s patron and protector. It remains unlikely that U.S. and United Nations pressure to implement a ceasefire in Gaza will succeed in the short term. – M.M.
  • (8) UKRAINE’S ZELENSKY CALLS FOR UNITY AFTER KEY GENERAL DECLARES WAR A STALEMATE: Ukrainian President Volodymyr Zelensky called for unity and a halt to internal infighting following Ukrainian Commander of the Armed Forces General Valery Zaluzhnyi’s claim that the war had devolved into a stalemate.
    • Zelensky rejected Zaluzhnyi’s statement, which appeared in an article in The Economist, and was described by his close advisors as strange and something that could “play into the hands of Russia.”
    • Zaluzhnyi’s aide-de-camp was murdered and his son seriously injured on Monday in an apparent assassination attempt involving a live grenade hidden in a birthday gift.  
    • On Friday, Zelensky replaced the head of his Special Operations Forces, who said he only learned of his dismissal from media reports.
    • Ukrainian military intelligence took credit this morning for assassinating Russian-backed lawmaker Mikhail Filiponenko in Luhansk with a car bomb. The statement says the operation was carried out jointly with resistance elements operating in the area.
    • Why It Matters: Ukraine is beginning the process of disintegration as its much-vaunted counteroffensive fails and Russian forces make gains ahead of a promised winter offensive. Zelensky is in a bind as Western patrons are increasingly recommending a negotiated settlement – a move Zelensky has rejected. Much of the Ukrainian defense and security establishment has been fired or is currently under investigation for corruption. A building conflict in the Middle East distracting Western governments that have kept Kiev alive throughout the conflict could prove the end for the Zelensky government. The U.S. untangling itself from a losing proxy war in Ukraine could shore up the U.S.’ ability to prepare for what could be an emerging World War III scenario – though it may be politically fatal for those that advocated on behalf of Kiev. – M.M.


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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