Good morning. Here’s your Daily SITREP for Thursday, 14 September 2023.
- READ TIME: 5 Minutes, 22 Seconds
- Inside the Beltway
- (1) White House Demands Negative GOP Media Coverage
- (2) McCarthy Pushing Stopgap After DOD Bill Goes Down in Flames
- Domestic INTSUM
- (3) Mortgage Demand Falls to Near 30-Year Lows
- (4) JetBlue CEO: We Are Selling Flights We Can’t Operate
- Global SITREP
- (5) Nickel Futures Trading Possibly Moving to China
- (6) Australia and Philippines to Jointly Patrol SCS
- (7) Hungary Likely to Block Ukraine’s Membership to European Union
- (8) China and Venezuela Sign New Trade Agreements
INSIDE THE BELTWAY
- (1) WHITE HOUSE DEMANDS NEGATIVE GOP MEDIA COVERAGE: In a letter to news executives at CNN, AP, Fox News, and the New York Times, White House Counsel’s Office spokesman Ian Sams said “it’s time for the media to ramp up its scrutiny of House Republicans” after the House GOP announced a formal impeachment inquiry against President Biden.
- House Democrats, including Delegate Stacey Plaskett (D-VI) and Rep. Jamie Raskin (D-MD), outlined a larger impeachment defense strategy that will attempt to distance President Biden from his son Hunter’s overseas business deals.
- Why It Matters: The letter from the White House to media execs has the blatant appearance of orders from the Biden administration directing reporters how to cover the coming impeachment inquiry. It is only one part of a larger impeachment strategy that includes attempting to sever links between Biden and Hunter to get ahead of negative media coverage from the impeachment and Hunter’s pending prosecution. This is a significant escalation in the White House and media relationship from the 2020 election when media outlets and social media platforms censored a potential October surprise without explicit direction, especially after federal courts ruled that Biden administration communications with tech companies amounted to government censorship. – R.C.
- (2) MCCARTHY PUSHING STOPGAP AFTER DOD BILL GOES DOWN IN FLAMES: House Speaker Kevin McCarthy (R-CA) told Republicans during a conference meeting that he will propose a four-week Continuing Resolution (CR) to avert a shutdown after Republican leadership called off an attempted vote on the Department of Defense (DOD) funding bill.
- Rep. Dan Bishop (R-NC) said he was “voting against every bill” until Republican leadership implemented spending cuts demanded by the House Freedom Caucus.
- Why It Matters: McCarthy can’t seem to win with the House Freedom Caucus, and proposing a CR will jeopardize his Speakership. Rep. Matt Gaetz (R-FL) said he will propose a Motion to Vacate immediately after McCarthy puts a CR on the floor, and some Democrats may even join in that vote to hurt Republican leadership. So far, McCarthy’s moves in the House are making a shutdown more likely. – R.C.
- (3) MORTGAGE DEMAND FALLS TO NEAR 30-YEAR LOWS: Higher interest rates have pushed new and refinance mortgage demand down to 1996 levels.
- “Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate,” said Joel Kan, a Mortgage Bankers Association economist.
- Applications for mortgages to purchase a home are down 27% from last year, and demand for refinances dropped 31% year-over-year.
- Why It Matters: The drop in mortgage demand is even more pronounced when factoring in U.S. population growth, which has increased by 24% from 1996 to today (269 million versus 334 million). Many Americans are shut out of owning a home, and those who qualify are using more adjustable-rate teaser mortgages to lower their monthly payments. If mortgage rates rise or even hold steady over the next few years, these buyers could default, leading to more banking failures. – H.B.
- (4) JETBLUE CEO: WE ARE SELLING FLIGHTS WE CAN’T OPERATE: JetBlue Airways CEO Robin Hayes said airlines cannot cope with the number of daily flights in the face of a nationwide shortage of 3000 air traffic controllers (ATC) and added that airlines are selling tickets for flights they cannot operate because of the shortage.
- House Aviation Subcommittee chair Rep. Garret Graves (R-LA) said lawmakers are working on a stopgap bill to keep the Federal Aviation Administration (FAA) open after the 01 October deadline to stop a government shutdown.
- Why It Matters: As we have previously covered, the Government Accountability Office reported that the FAA acknowledges the ATC shortage but has made no plans to fix it. Even if the Department of Transportation moved to fill the shortage, the time frame to bring on 3,000 new ATCs is likely six or more years due to a three-year training and certification pipeline and annual recruiting goals hitting only 1,500. There is also a pilot shortage, and the debate over required flight hours is holding up the FAA reauthorization in the Senate. – R.C.
- (5) NICKEL FUTURES TRADING POSSIBLY MOVING TO CHINA: The Shanghai Futures Exchange may launch an international nickel futures market, challenging the London Metal Exchange (LME).
- The LME has served as a global benchmark for commodity traders, nickel producers, and consumers who use nickel to manufacture stainless steel and electric vehicle batteries.
- Confidence in the LME was shaken in March 2022, when the exchange suspended trading for over a week and canceled all orders after nickel prices spiked to a record above $100,000 per metric ton.
- Why It Matters: The Shanghai Futures Exchange already hosts futures trading in copper, crude oil, rubber, and other commodities in the Chinese yuan. This nickel futures announcement is another sign that China is challenging Western financial dominance. – H.B.
- (6) AUSTRALIA AND PHILIPPINES TO JOINTLY PATROL SCS: The Australian and Philippine governments formally agreed to begin joint patrols in the South China Sea (SCS) recently.
- Australia and the Philippines conducted their first bilateral amphibious exercise last month.
- This is a response to the Chinese attempting to thwart the Philippines’ resupply of an outpost on the Second Thomas Shoal.
- Why It Matters: While regional partners might not join the U.S. in a war against China, they continue to strengthen their own regional partnerships against China. Australia’s Navy is small but technologically advanced, which will significantly bolster the Filipino Navy’s presence around the SCS. This will make it harder for the Chinese to assert their territorial claims in the region and put additional stress on the Xi government. – J.V.
- (7) HUNGARY LIKELY TO BLOCK UKRAINE’S MEMBERSHIP TO EUROPEAN UNION: On Wednesday, E.U. Chief Ursula von der Leyen set out her vision for Ukrainian membership in the E.U., but Hungary is likely to block any such attempt.
- EU countries could decide in December whether to allow Ukraine to begin accession negotiations – a move requiring unanimous backing of all the 27 countries in the bloc.
- Budapest has protested several times over Ukraine’s treatment of ethnic Hungarians and their forced conscription into Ukraine’s military.
- Why It Matters: Kiev has routinely discriminated against ethnic Hungarians living along its western borders, treating them as second-class minorities. Budapest has also clashed with Kiev over the inclusion of Hungary’s OTP Bank on a Ukrainian blacklist of companies accused of financially supporting Russia’s war, an accusation that both Hungary and the bank denied. It is unlikely that Budapest will support Ukrainian admittance into the E.U., which may pave the way for other nations like France to join in opposition to von der Leyan’s plan. – M.M.
- (8) CHINA AND VENEZUELA SIGN NEW TRADE AGREEMENTS: China and Venezuela signed several bilateral cooperation agreements on Wednesday. The agreements focused on the economy, trade, and tourism.
- China’s President Xi Jinping signed the deals with Venezuela President Nicolás Maduro after a meeting in Beijing.
- Maduro said Venezuela is willing to closely communicate and cooperate with China within multilateral frameworks such as the BRICS mechanism and the United Nations.
- Why It Matters: Venezuela is a key fossil fuel exporter and one of several socialist South American countries that have switched to the Chinese sphere of influence. Venezuela is also currently seeking membership in BRICS. Despite earlier diplomatic moves by the Biden administration towards normalizing relations with Venezuela, it is unlikely that the Maduro regime will carry water for Washington, leading to another Latin American domino falling to the Eastern Alliance. – 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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