Rabo: Keep on Rocketing in the Free World
Michel Every
Market comments
Stocks up, Stonks up, bonds up, gold up, crypto up, and copper up to a new record high. Almost everything rocketed after US CPI came a slither lower than expected --and 30 minutes earlier than scheduled on the BLS website, which markets looking only at Bloomberg didn’t notice(!)-- but with no decline in crucial core services from near 5% y-o-y, even as retail sales came in much weaker. So, more stagflation overall really, but that’s markets in the free world now, as traders priced in the Fed cuts in September and December which our Philip Marey was already calling.
Meanwhile, US Secretary of State Blinken played ‘Keep on Rockin’ in the Free World’ in Kyiv as Russia rocketed Ukraine and took even more territory from it: the situation there officially remains “worrying.” That’s after humiliating US retreats from Afghanistan and Niger, ally Colombia moving out of the US orbit, Venezuela moving armed forces to the border of Guyana’s oil-rich region of Essequibo; White House calls of a calm Middle East pre-October 7, as war there now goes on, with US forces regularly struck by pro-Iran militias; Iran cooperating with North Korea more; and Filipino (with a US defence treaty) and Chinese flotillas in another tense stand-off in the South China Sea. Realpolitik is saying, “OK, boomer” to those who cover Neil Young.
In the EU, there was an attempted assassination of Slovakia’s pro-Russia Prime Minister Fico, who is still in critical condition: the alleged culprit is a liberal, pro-EU poet. In the Netherlands, the farright Party for Freedom (PVV) of Geert Wilders announced a coalition government with the centre-right People’s Party for Freedom and Democracy (VVD), the New Social Contract party (NSC), and the Farmer-Citizen Movement (BBB), though Wilders will not be PM, just éminence grise. Near the EU, Moldova signed an agreement with it on cooperation in security and defence: but the EU almost certainly won’t defend it from Russia. The ‘free world’ keeps rocking.
In the US, we are promised Biden-Trump debates on 27 June and 10 September in a new format with no studio audience or third-party candidates: cynics will say markets must therefore stay bid until July at least. Regardless, both men at the debate mean huge fiscal deficits ahead, and the latest tariffs show markets will get ‘Triden’ or ‘Brump’. The ‘free markets world’ keeps rocking too.
More so as China suggested it may institute what I always said was the inevitable endgame for its housing market: using state funds to buy up millions of unwanted homes, and turning them into social housing, effectively nationalising it. A flurry of related questions remain, including the staggering price tag, but the overall plan is clear: houses are for living in, not speculation, and Chinese capital will be freed up from mortgage lending to focus on (military) industrial production.
And what has the free world got to offer by contrast? In Australia, a housing auctioneer bewails the barista who serves him his coffee has to work for 45 years just to get a deposit. Even the Prime Minister is kicking a tenant out of his rental property because he can cash in on higher house prices. In short, housing is for speculation and not for living in; and western capital is tied up in mortgage lending instead of focusing on (military) industrial production.
This underlines how radically Western policy needs to change. After all, Russia is now spending 8.7% of GDP on defence: economists who pooh-poohed war in early 2022 might note that’s FIVE ‘Italys’, with far higher purchasing power parity. President Putin is talking ‘guns or butter’ choices and appointed an economist as defence minister to make the war economy run more efficiently. The West can’t work out just guns, butter, or housing, let alone ‘guns or butter or housing’.
Linking this all up, the brilliant and needling ‘Keep on Rockin’ in the Free World’ was an attack on the worst side of free-market America that was a global hyperpower that didn’t look after its own poor well, not a way to praise it. Just read the lyrics or watch the video:
“There’s colours on the street; Red, white, and blue
People shuffling their feet; People sleeping in their shoes
There’s a warning sign on the road ahead; There’s a lot of people saying we’d be better off dead
Don’t feel like Satan, but I am to them; So I try to forget it any way I can
Keep on rockin' in the free world (x4)
I see a woman in the night; With a baby in her hand
There's an old street light; Near a garbage can
Now she put the kid away and she’s gone to get a hit;
She hates her life and what she’s done to it
There’s one more kid that’ll never go to school; Never get to fall in love, never get to be cool Keep on rockin' in the free world (x4)
We got a thousand points of light; For the homeless man; We got a kinder, gentler machine gun hand
We've got department stores and toilet paper; Got styrofoam boxes for the ozone layer
Got a man of the people says keep hope alive; Got fuel to burn, got roads to drive
Keep on rockin' in the free world (x4)”
If Neil Young were to update the lyrics today, he might add something about Stonks and crypto perhaps, but an awful lot of it still stings as it is: even more so as America is no longer a hyperpower, and others keep on rocketing the free world.