Geopolitical Developments: Biden Can Be Blamed For High Inflation But Indirectly The Left Bears Blame For Intensifying Climate Change Too

Today’s CPI print is sending markets lower and blame can be easily pinned on Biden’s unnecessary stimulus payments of 2021 as well as the war in Ukraine. But the financial hurt felt since January pales to the suffering across Asia due to climate change, and the impotence of the West to remediate this global problem in any way. Big unfocused government and the proclivity of the Left to pile on more for governments to do is the clear link between the two. At some point global investors will see this relationship clearly and demand a strict focus for governments, leaving individuals to independently solve man-made economic and cultural problems. Until then we have to deal with a poor macroeconomic environment buffeted by terrible policies and misguided leaders. The volatility risk premium points to a higher market over the next few days, but my technical reading of key stocks in the S&P 500 is bearish. There are several negative factors across global asset classes. Oil is pointing to stagflationary conditions. The action in currencies signifies $US strength. The US yield curve is bear flattening. Expect the S&P 500 to fall over the next few days.

Inflation, culture wars and the real war in Ukraine have dominated minds and newsflow of late, so it’s easy to marginalize issues that are so awful they portend long-term disaster. Chief among these issues is the effect of climate change on the Middle East, and what that means for terrorism against the West and the fate of democracy around the world.

The key relationship is the visceral feeling among West Asians that the US and Europe are partly or even largely responsible for their misfortunes. This is easily if superficially adduced by considering the two major wars the US fought in the 21st century in Afghanistan and Iraq. Both were obvious failures, achieving nothing for the US or Europe, and inadvertently creating the bigger and more vicious terror network ISIS. The blend of nihilistic violence and administrative state building that ISIS embodies is an attractive and toxic lure to any deeply dissatisfied young muslim male, of which there are scores in the region. To the long list of grievances that these men possess is the amplifying and rolling disaster of climate change. Here too the US and Europe can be easily blamed, since it’s broad economic development in the West that contributed the largest share of greenhouse gases. So climate change affecting West Asia likely redounds to the West in the form of violent and virulent anti-liberalism.

France24 notes “Another sandstorm descended Monday on Iraq forcing the closure of airports, schools, universities and public administrations across the country, officials said. It is the eighth duststorm since mid-April to hit Iraq, which has been battered by soil degradation, intense droughts and low rainfall linked to climate change. The trend has been associated with overuse of river water, more dams, overgrazing and deforestation. But the supply of water has been declining for years and Iraq is classified as one of the world's five countries most vulnerable to climate change and desertification. In April, an environment ministry official warned that Iraq could face "272 days of dust" a year over the next two decades.”

And it’s not just the Middle East, but the south Asian subcontinent that is reeling this summer. The conversation notes “India, Pakistan and other Southern and Eastern Asian countries are starting to take steps to improve air quality, but progress is slow. Reducing pollution will have an unintended consequence of likely accelerating warming at a local scale, as pollution has helped mask some of the greenhouse gas-induced warming in the region. While reduced air pollution will have many health benefits, it will also likely lead to greater heatwave intensity and frequency over the Indian subcontinent, as less sunlight is reflected by aerosols. If Earth warms by 2℃ this century, which is roughly how much the world will warm if all government pledges are met, then we can expect large increases in hot temperature extremes over South Asia. This includes parts of Pakistan and northwest India, which will endure more than 30 additional days over 40℃, compared with an early-industrial climate.”

We have already seen what anti-liberalism in Pakistan can do to the West. The War On Terror is not over and will likely get worse until the West comes up with a feasible plan to limit climate change. That can only happen when individuals are expected to independently solve their economic and social problems, leaving democratic government to solve macro problems of geopolitics, climate change and pandemics. The rise of big government in the West has had a transparent impact on today’s report of rising inflation, and soon we will see the effect of big and unfocused government on climate change and its devastating impact on the disgruntled poor.

My current positions include a large cash position, Goldman Sachs (GS), 3M (MMM), Pfizer (PFE), Starbucks (SBUX), Titan Machinery (TITN) and the levered ETF UPRO.