Wednesday Night #2158

We welcome Peter Berezin back, just in time to comment on the burning questions of recession/inflation and today’s move by the Federal Reserve
Federal Reserve raises rates for 11th time to fight inflation but gives no clear sign of next move
Previously, Peter forwarded his most recent Strategy Report: Three Scenarios In Which The US Can Avoid A Recession
• We are in the “This Time is Longer” camp rather than the “This Time is Different” camp, meaning that we expect the US to enter a recession, but later than most people are anticipating.
• Could we be too pessimistic? We see three scenarios in which the US could avert a recession entirely over the next few years.
• Scenario #1: The current unemployment rate of 3.6% turns out to be broadly equal to its full employment level. If that were the case, there would be no need for the Fed to keep GDP growth below potential.
• Scenario #2: The unemployment rate that is consistent with full employment turns out to be higher than 4%, but potential growth accelerates so much, perhaps because of AI, that actual growth does not need to fall significantly to create some slack in the economy.
• Scenario #3: The full employment level of unemployment turns out to be higher than 4%, potential growth does not accelerate, but nonetheless, the Fed is able to calibrate monetary policy well enough to achieve a soft landing.
• Examining all three scenarios, we would subjectively assign a 25% probability to a no-recession outcome. We would correspondingly assign 55% odds to a mild recession, and 20% odds to a moderate-to-severe recession.
• If the US does succumb to a recession, we would expect it to start only in 2024, and probably not until the second half of that year.
And what about Canada? Bank of Canada mindful of not overdoing rate hikes, summary of deliberations reveals – the Bank of Canada says it’s trying to not raise interest rates more than it has to, as members of the governing council are mindful of the risks associated with raising rates too much. The central bank released its summary of deliberations Wednesday, providing insight into its decision to raise interest rates again earlier this month as the economy runs hotter than expected.

There are, of course, multiple geopolitical factors at work. Heading the list for many would be Food Insecurity, the ongoing dispute over the Black Sea grain deal and its effect on relations between Global South nations and Putin’s Russia. Although the outlook is grim, in Ian Bremmer’s view, (What will be the impact of the suspension of the Black Sea grain deal?) there are some mitigating circumstances, e.g. in the past year Ukraine has meaningfully reduced its dependence on Black Sea routes for its agricultural exports, half of which now reach global markets either overland or by river through Europe (compared to just 10% before the invasion). That, combined with a record wheat crop from Russia and export increases by major producers elsewhere in the world, should keep the impact on global food prices from reaching extreme levels.

Israel
With the passage on Monday afternoon of a bill eliminating Israel’s “Reasonability Clause,” a legal tool enabling the judiciary to strike down improper government appointments and executive decisions, former Prime Minister Yair Lapid, the centrist opposition leader, said “The government has declared a war of attrition against its own citizens.”
Israel’s Crisis Is Just Beginning
On the ground in Jerusalem, the fallout from Netanyahu’s power-grab is growing.
— with skunk water cannons turned on peaceful protesters, army reservists resigning and global banks and credit ratings agencies downgrading Israel — Israel’s seven-month crisis is past and chaos has taken over.

Elections in Spain
The outcome was an inconclusive election and a political muddle that has become familiar to Spaniards since their two-party system fractured nearly a decade ago.(Inconclusive Election Thrusts Spain Into Political Muddle). General election results in Spain leave future of next government up in the air and some concern over the impact of the results on Spain’s EU presidency. Our Friend of Wednesday Night who is based in Spain forwarded Spain’s conservatives can’t win if Vox survives – Despite topping the polls, the Popular Party has been tainted by association with the far right from The Times, commenting A good analysis. This suggests that the “right” in Spain will spend much of its energy on internecine struggles, rather than battling the Socialists or “Sanchismo”. It also sets up a situation in which the national government will be in opposition to the PP/Vox majorities and in some cases coalitions, in several regions.

China has a new Foreign Minister
China is erasing mention of its former foreign minister. But it still hasn’t said why
The latest twist in the saga – the complete erasure of Qin’s swift, six-month tenure as foreign minister and his replacement by Wang, who held that post for roughly a decade before a promotion late last year – only serves to deepen the mystery.
Qin’s whereabouts, the reason for his removal, and his ultimate fate as a member of China’s Communist Party all remain unknown.
Why was Wang Yi brought back as China’s foreign minister after Qin Gang’s abrupt exit?
The Chinese Communist Party has a history of turning to senior figures to steady the ship in emergencies and Wang’s return may be in line with this precedent
Beijing will need someone to prepare the ground for some major diplomatic setpieces including a possible trip to the US by President Xi Jinping

Cleo writes that Politics Risk Derailing One of America’s Most Important Strategic Agreements China is the biggest winner from the current train wreck that is the Marshall Islands–United States COFA negotiations. Read on and learn about COFA.

Canada Federal Liberals 2023
And so to the Great Canadian Cabinet Shuffle – not a world-class event for most, but huge for those of us who live and cope here. And plenty of acerbic commentary. Seven ministers dropped from Cabinet, some welcome moves and some inexplicable ones, especially in view of recent poll results. Trudeau Liberals in trouble across much of the country, poll suggests
Wednesday’s federal cabinet shuffle coincides with the publication of a new survey suggesting the Liberals are seeing their popularity drop across most of the country while public

Paul Wells: The army you have A year ago Trudeau was already getting advice to make sharp, noticeable changes in his team, message and style. Today he put Sean Fraser in charge of Housing and Marc Miller in charge of Immigration. Those might be the two most encouraging moves among dozens, both for Liberals who hope “good communicators” won’t turn out to be a sad joke, and for citizens who hope strong administrators might, even if only occasionally, be put in charge of challenging files.

Paul Wells: Pressure for a COVID inquiry mounts
The common theme of the suite of articles and opinion pieces on Canada’s COVID-19 response in The BMJ (the leading British medical trade journal) is that Justin Trudeau’s government needs to convene an independent national inquiry into the way COVID was handled in Canada. Will Mark Holland, the new Minister of Health be up to the task?

Sara Tuzel “Excited to say I’ve just completed the first part the United Nations Institute for Training and Research (UNITAR)‘s Hague Immersion program. I look forward to more training with United Nations this fall! Grateful to all the organizations that are part of this journey.”

Wildfire preparedness and response must include planning for unhoused people and other vulnerable populations
We love immigration, we love immigrants, and we entirely recognize that our future prosperity hinges on our ability to continue to attract the world’s best and brightest. We’re just saying, and this ought not to be controversial, that every public policy has pros and cons, and in this moment, a surge in immigrants, which will be good and helpful in many ways, is inevitably going to further heat up our already molten housing market.
And this isn’t a reason to stop immigration. It’s a reason to accelerate housing construction, and more bluntly, to better align our various national policy objectives.

Canada’s decline in productivity is a sign we don’t embrace change
Without improving our productivity, we will be forced to pay more to get fewer returns in jobs, opportunities, efficiency, and long-term growth.
In this week’s Hill Times column, Andrew Caddell uses his recent participation in an annual conference of fire chiefs in Halifax as spark for an examination of Canada’s low productivity. He concludes:
For Canada to get its productivity act together, it has to reduce internal trade barriers, increase competition and innovation at home, reduce government subsidies, and get Canadians to understand it is a competitive world out there. In short, if we want to maintain our standard of living, we have to embrace new technology and change our economic ways.

AI, Chatbots, etc.
Lest you think that you can leave it to others to worry about AI and Chatbot follow Yoshua Bengio, a professor at the University of Montreal and founder of Mila, the Quebec AI institute. A giant in the field of artificial intelligence, he has issued a warning to American lawmakers at a hearing in Washington on Tuesday: Regulate this technology, and do it quickly.
Google is testing a new AI tool that can write news articles and reportedly pitching it to The New York Times and News Corp
Some executives were unsettled by the AI, but Google says it can’t replace journalists.
Several news organizations have already announced that they will implement AI in the newsroom.
At the other extreme, you can ponder the evolution of Twitter to X. Why Elon Killed the Bird – Three theories about Twitter’s seemingly nonsensical rebrand to X

It’s Time to Invoke The Responsibility to Protect in Sudan
Genocide looms
Experts and organizations from the U.S. Holocaust Memorial Museum to the UN’s Special Adviser on the Prevention of Genocide are once again warning of genocide.
Yet the world’s response remains muted and lacks a clear strategy for Sudan.

Varia

Whistleblower tells Congress the US is concealing ‘multi-decade’ program that captures UFOs
The U.S. is concealing a longstanding program that retrieves and reverse engineers unidentified flying objects, a former Air Force intelligence officer testified Wednesday to Congress. Retired Maj. David Grusch’s highly anticipated testimony before a House Oversight subcommittee was Congress’ latest foray into the world of UAPs — or “unidentified aerial phenomena,” which is the official term the U.S. government uses instead of UFOs.

Good for the Globe & Mail editorial board: What we all lose when we lose the citizenship ceremony
…gaining Canadian citizenship is too important to be voided of all ceremony for the sake of convenience.
Ceremonies and rituals matter. They unite communities around various milestones – momentous days on the calendar, births, graduations, marriages, anniversaries and deaths – and in doing so reinforce shared values.
The moment of becoming a new citizen is among those milestones. Arguably, gathering to mark it is as important as the taking of the citizenship oath itself.

I enjoyed the discussion with Sean Silcoff on CBC Cost of Living regarding what Canada can learn from the fall of Blackberry, and especially why there seem to be no major companies resulting from Canadian innovations. Pause for thought.

Long reads
Israel’s Crisis Is Just Beginning
On the ground in Jerusalem, the fallout from Netanyahu’s power-grab is growing.
Israel faces an ongoing constitutional crisis — without a constitution
Miriam Berger
Israel is on the verge of a constitutional crisis — in part because it doesn’t actually have a constitution.

Why Elon Killed the Bird
Three theories about Twitter’s seemingly nonsensical rebrand to X

The world reckons with a new ‘Oppenheimer moment’
As scientists and policymakers in the 1940s and ’50s were coming to terms with their harnessing of a power that could lead to a species-level extinction event for humanity, their successors face what could be a similarly fraught and mind-bending emergence of generative artificial intelligence.
Movie director Christopher Nolan warns of AI’s ‘Oppenheimer moment’
Developers working to make artificial intelligence more powerful face many of the same moral questions as the “father of the atomic bomb,” he said.

On a lighter note
Alan Shore up against the Supreme Court again!
There has been recent new interest in the episodes from the 2008 Boston Legal in which James Spader (yes, Sandy!) takes members of the US Supreme Court to task for conflicts of interest. Brilliant! If only …
Why Did 488 Golden Retrievers Gather in Scotland?
About every five years, owners and their dogs travel to Guisachan in the Highlands to celebrate the anniversary of the breed’s founding. This year’s edition was the biggest yet.