Worth a Thousand Words

By John Mauldin 


Happy Thanksgiving! I hope everyone had a good holiday. 

I’m writing this issue early in the week while enroute to join family in Dallas. 

Today will be different and I hope you like it.

COVID Retirement Boom

“Where did all the workers go?” is a recurring question lately. 

This chart has a partial answer. 

The blue line shows retirees as a percentage of the US population. 

As you would expect, it turned higher after the first Baby Boomers turned 65 in 2010. 

The red dotted line shows the smoothed trend for that period.


Source:  Federal Reserve Bank of St. Louis


Then came 2020, and we see by the red arrow the percentage of retirees rising sharply above the previous decade’s trend. 

COVID-19 appears to have motivated a bunch of early retirements, which seem to be accelerating. 

Everyone has their own reasons, but we suspect this isn’t entirely health concerns. 

Some retirees probably saw big portfolio gains as markets surged, and decided they could afford to retire earlier than planned.

The percentage may look small, but this divergence represents something like 3 million “excess retirees” above what the prior trend predicted. 

That’s substantial labor force shrinkage.

Massive Distortions

The common thread between rising inflation and growing supply chain problems seems to be increased US consumer goods demand. 

People want to buy more stuff because they have higher incomes. 

This chart illuminates the timing of recent income growth.

We can see that real disposable personal income was rising at a generally steady pace in the years leading up to 2020. 

Then came the pandemic, after which we see three sharp income peaks. 

These coincide with the three rounds of stimulus payments most Americans received, the first in 2020 and two more in early 2021.


Source:  Rosenberg Research


Disposable income dropped after all three payments but far faster in the two 2021 installments. 

The last few months show it roughly back to the pre-COVID trend.

If personal income goes back to this pace, the supply chain problems and inflation may also recede. 

For now, we can only observe massive distortions, with consequences not yet fully understood.

Gas x 42

You may have noticed rising gasoline prices this year. 

This is a function of rising crude oil prices, since gasoline is refined from oil. In theory, the two prices don’t necessarily move together. 

Yet one simple trick produces a chart showing their close connection. 

Simply divide crude oil’s price by 42 and plot it against the US average gasoline price, and you get this.


Source:  Paul Krugman


Look closely and you can spot short periods when they diverged, but over time the two series have moved mostly in tandem.

Technically minded investors may notice one possibly important difference, though. 

Crude oil seems to be encountering resistance near its last peak just before the COVID recession. 

Meanwhile gasoline broke through its 2018–2019 highs several months ago. 

That could be significant, but exactly how remains to be seen.

Car Buyer Confidence

Speaking of sharp divergences, here’s a doozy. 

Each month for decades, University of Michigan surveys have asked consumers if they think now is a good time to buy a car. 

The latest data shows a sharp decline in confidence.


Source:  University of Michigan


You can see such declines happened before. 

In every case they coincided with a recession, until now. 

Now consumers are losing confidence a year after the brief COVID recession ended.

The difference may be that the survey question doesn’t identify why people think it is a bad time to buy cars. 

In today’s context, it may be because they’ve tried to buy a car and couldn’t find the model they wanted, due to microchip shortages and other logistical issues. 

Confidence may return once inventories normalize. 

But it’s hard to know when that will be.

Poverty Lines

This map shows US poverty by state. 

The colors indicate the percentage of each state’s population below the federal poverty line. 

The least-impoverished state is New Hampshire while Mississippi is the poorest.

But as with inflation and other stats, this raises measurement issues. For one, it doesn’t consider cost of living. 

High-cost places like California and Hawaii may have more struggling residents than their poverty rate suggests. 

Nevertheless, the map shows yet another way in which the US remains sadly divided.


Source:  Bianco Research


Household Deleveraging

We know debt grew sharply since COVID struck, and not by accident. 

Federal Reserve policy was explicitly designed to encourage debt. 

This chart shows how well it worked, at least relative to GDP.


Source:  Federal Reserve Bank of St. Louis


Looking at the right-hand side, you can see government, household, and business debt shot higher in 2020. 

Government debt rose far more and has receded much less. 

Business debt, even after a pullback, is still far above the pre-pandemic level.

The most interesting part is household debt. It didn’t jump as much, has now pulled back toward the prior trend, and is still far lower than it was in the financial crisis years—during which the government and businesses had far more debt.

Households spent the last decade steadily deleveraging, and COVID looks like only a temporary distraction. 

That’s not the case with business debt and certainly not government debt. 

Those are the problems now.

Default Warning

Remember the debt ceiling? 

We avoided a crisis when Congress extended it in October. 

Treasury Secretary Janet Yellen estimated last week the debt will again reach the limit on December 15. 

Bond traders noticed, as this chart shows.


Source:  Bianco Research


The green line shows Treasury bill yields on November 15, before Yellen’s statement. 

The red line shows yields a few days later. 

They spiked higher for bills maturing after mid-December. 

That reflects the small but significant risk Treasury will be late to repay those debts.

This is a potentially wider problem that could force money market funds to mark down some of their Treasury bill holdings and maybe even “break the buck.”

But it’s also easily avoidable if Congress acts before the deadline. 

We suspect that will happen, but there’s no guarantee.

Recession Ratio

The Conference Board publishes several popular indexes like Leading Economic Indicators. Their Coincident Economic Indicators index is less well-known. Unlike LEI, which tries to project future conditions, CEI looks at current conditions. But the ratio of both indexes may be even more useful.

This chart shows LEI/CEI tends to start falling a few months before a recession begins. 

Since 1969 it signaled them 2–9 months in advance. 

There were also some false alarms, but sharp downturns seem to be a pretty reliable indicator. 

As of now this ratio is still rising, so recession doesn’t look like a near-term risk.


Source:  Advisor Perspectives


Those are just a few of the clips Over My Shoulder members get every week. 

We send not only charts but also economic analysis and outlooks from my wide (and growing) expert network. 

This is the source material behind what you read in my free letters. 

So if you like what you read from me every week, you’ll love Over My Shoulder.

Home for the Holidays

I am writing this from the airport lounge on Monday as I leave for Dallas. 

I’m filing early while the Mauldin Economics production staff takes a well-deserved long weekend. 

Shane and I will already be back home in San Juan by the time you read this. 

Barring some last-minute trip somewhere, we are home for the holidays.

Because of COVID, it has been a long time since I have seen all my kids, except when they come to see us. 

I will be up early (at least for me) on Thursday cooking prime rib with my special rub and mushrooms and a few sides, but my grown children now all bring something. 

Looks like we will have to feed almost 40. 

The prime they sent me a picture of is HUGE! 

At 20 minutes a pound, this one may take four hours.

I am thankful for so many things, and one of them is you. 

Truly, writing this letter is such a joy because of all the feedback I get wherever I go and through emails. 

It is a small way to make a difference.

Have a great week!

Your likely 4–5 pounds heavier today than last Monday analyst,



John Mauldin
Co-Founder, Mauldin Economics

martes, noviembre 30, 2021

CHINA´S OTHER DEBT PROBLEM / THE ECONOMIST

|

China’s other debt problem

Evergrande is not the only looming danger in China’s financial system

Crony capitalism has flourished among the country’s small and mid-tier banks


Scares about toxic debt are an ever-present feature of China’s economy. 

The latest involves Evergrande, a troubled developer that threatens to cripple the property sector. 

The firm also has tentacles that reach into the darkest corners of the Chinese financial system, wrapping around banks and shadow lenders. 

Yet even as Evergrande catches the eye, another risk is emerging: crony capitalism at smaller banks.

A government crackdown on leverage in property has pushed Evergrande to the brink of collapse. 

Other large developers are weighed down by $5trn of debts. 

Speculation is swirling that one of them, Kaisa, is also struggling to make payments (it has asked investors for “time and patience”). 

The turmoil may intensify as more debts come due. 

According to Nomura, a Japanese bank, the property industry must repay $20bn of offshore bonds in the first quarter of 2022, twice the level of this quarter.

Foreign investors have been quick to grasp the risks. 

The yield on Chinese junk dollar-bonds has reached a crippling 24%, shutting most issuers out of the market. 

Some homebuyers are holding off purchases, worried about handing over deposits to weak firms. 

Building has stalled at many of Evergrande’s 1,000 or more projects.


It is unclear who is exposed to losses, and to what extent. 

Many developers use shell companies, masking their debts, while stockmarket regulators have allowed them to keep investors in the dark. 

On November 8th the Federal Reserve warned that China’s property troubles threaten the global economy.

Losses on property loans will hurt the banking system, although by how much remains to be seen. 

But as we explain this week, lenders also face another danger. 

Crony capitalism has flourished among the country’s small and mid-tier banks. 

Because the biggest state-owned lenders prefer to make loans to other state firms, private companies and entrepreneurs have bought stakes in banks in the hope of getting preferential access to credit.

Although the banks involved are often small they add up to a giant problem. 

The Economist calculates that up to 20% of the commercial-banking system may have close links with tycoons or private businesses. 

There have already been blow-ups. 

In 2019 the collapse of a small lender caused a spike in interbank borrowing rates; several more failures have followed. 

Evergrande was until recently the owner of a captive bank in north-east China and is said to be under investigation for some 100bn yuan ($15.7bn) in related-party deals.

For Xi Jinping, China’s leader, state control is the answer to both the property and banking threats. 

To keep building sites ticking over, local governments are taking control of some unfinished projects. 

At smaller banks many corporate shareholders are being forced out and replaced by local-government asset managers.

This reveals the limitations of Mr Xi’s economic philosophy. 

The expanding reach of state control may prevent a full-blown panic, because it shows that almost all banks are underwritten by the government. 

But it fails to acknowledge an important truth about the economy.

Many of the distortions that plague China’s markets were created by rigid state control. 

In plenty of private firms, insider dealing with lenders has been a way to cope with a state-dominated banking system that discriminates against them. 

Mr Xi may succeed in averting a sudden bad-debt crisis by reasserting state authority. 

But his reluctance to be bound by rules, treat state and private firms equally, and offer predictability to investors will ensure that the financial system is doomed to suffer yet more dangerous distortions in the future. 

The Fed chair will tell lawmakers that Omicron increases inflation uncertainty.

Jerome Powell, the chair of the Federal Reserve, in September.Credit...Stefani Reynolds for The New York Times


Jerome H. Powell, the Federal Reserve chair, will tell lawmakers on Tuesday that inflation is likely to last well into next year and that the new Omicron variant of the coronavirus creates more uncertainty around the economic outlook, according to a copy of his prepared remarks.

The remarks by Mr. Powell, who will testify before the Senate Banking Committee alongside Treasury Secretary Janet Yellen, convey a sense of wariness at a time when price increases are running at their fastest pace in three decades.

“It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year,” Mr. Powell plans to say. 

“In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace.”

Mr. Powell will also address the new variant, which governments and scientists are racing to assess and contain.

“The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Mr. Powell said. 

“Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”

Much is unknown about the new mutation of the coronavirus, but it represents something Fed officials worry about: The possibility that the pandemic will continue to flare up, shutting down factories, roiling supply lines and keeping the economy out of balance. 

If that happens, as it did with the Delta variant earlier this summer and fall, it could perpetuate high prices.

Inflation has surged in 2021 as strong consumer demand has crashed into the barrier of limited supply. 

Production line closures, port pileups and part shortages have kept goods from getting onto shelves and to customers, prompting companies to charge more. 

At the same time, a dearth of labor in certain industries caused by virus wariness and pandemic-related child-care shortages has been pushing up wages and prices for some services.

It’s too early to know if the new virus strain will contribute to those trends, making inflation last longer than it otherwise would. 

But the new mutation strikes at a delicate moment for monetary policy.

Central bankers are slowing their bond-purchase program, a move that should give them more flexibility to raise interest rates — their more traditional and powerful tool for stoking the economy — if doing so should prove necessary next year.

Several Fed officials have signaled that they may speed up their so-called bond-buying “taper” given how high and how stubborn inflation is proving. 

Many economists think officials could announce a plan to do so at their meeting in December.

But if the coronavirus again hits the economy, it could make such a decision — and the timing and pace of eventual rate increases — more challenging.

That’s because the Fed balances two goals, controlling inflation and stoking employment, when it sets its policy. 

A faster and fuller removal of help for the economy might slow down price gains by weighing down demand, but it would likely slow business expansions and hiring in the process.

“We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched,” Mr. Powell 

The Choking of the Global Minotaur

The supply disruptions plaguing the US economy are not the result of "excessive demand," "central planning," or a lack of efficiency. Rather, it is that a logistics ecosystem that was developed to feed the beast of American consumption was not designed for a pandemic.

James K. Galbraith


AUSTIN – A supply chain is like a Rorschach Test: each economic analyst sees in it a pattern reflecting his or her own preconceptions. 

This may be inevitable, since everyone is a product of differing educations, backgrounds, and prejudices. 

But some observed patterns are more plausible than others.

Consider the following sampling of perspectives. 

For Jason Furman, formerly US President Barack Obama’s chief economic adviser, and Lawrence H. Summers, a former US secretary of the treasury, today’s supply-chain problem is one of excessive demand. 

According to Furman, it is a “high class” issue that reflects a strong economy. 

The “original sin” was the American Rescue Plan, which provided too much support through funds disbursed directly to US households.

For John Tamny of RealClearMarkets, the supply-chain problem is one of “central planning.” 

Had President Joe Biden’s administration not sent directives to port managers, free markets would have sorted everything out. 

And for Awi Federgruen, a professor of management at the Columbia Business School, the issue is inefficiency, the remedy for which is to work harder and do more with less.

None of these interpretations withstands scrutiny. The excess demand story fails on a glance. 

After all, there is no shortage of goods. 

Ships bearing the supply – 30 million tons of it – are sitting right now outside US ports, with more on the way. 

Nor have production prices risen by much. Most of the “inflation” so far has been in energy (driven partly by a rebound from the pandemic slump) and in used cars and trucks, previously produced goods that are in demand because of the semiconductor shortage affecting automakers.

And no, that particular shortage is not the result of “excess demand,” either. 

During the pandemic, chipmakers predicted a bigger shift in the composition of demand – toward household gizmos and away from cars – than actually occurred. 

Now they have too much of one kind of chip and not enough of another.

As for the “central planning” jibe, that is to be expected from certain circles. 

The implication is that all would be well if only the Biden administration had not been paying attention. 

Never mind that the extent of Biden’s intervention was merely to urge port managers to work “24/7” to get the boats unloaded – an idea that one assumes would have already crossed their minds.

The point about “efficiency” gets closer to reality, except that the problem is not too little efficiency, but too much. 

To be precise, the extreme efficiency of today’s global supply chains is also their fatal flaw. 

Well-run ports are models of high throughput and low costs. 

They incorporate docks, railheads, truck bays, storage areas, and heavy-lifting equipment to suit the traffic they expect. 

Building capacity beyond a small margin of safety would be a waste.

In normal times, any excess capacity sits idle, yielding no revenue while interest on the debt issued to build it still must be paid. 

Over time, efficient operators will minimize the excess and keep the docks and machinery they have humming away. 

The spectacular success of global supply chains – up until now – reflects the relentless operation of this principle.

In the pandemic slump, much of America’s port capacity was briefly idle. 

When production stopped and container ships remained anchored in Asian ports, American trucks left their own empty containers to pile up at the ports, awaiting ships to carry them back to Asia. 

But then demand revived and production restarted – even accelerated – as households diverted income from services to goods. The ships bearing the goods started showing up again. 

But there was a new problem: to offload full containers, one must have a place to put them. 

According to press reports, the yards and warehouses were already filled with empties. 

Moreover, trucks bearing fresh empties could not unload them, and thus could not take on new containers.

And so, the cargoes sit and wait. 

Partial solutions – stacking the empties higher, for example – can go only so far. 

Over a longer period, new docks and rail lines can be built. 

But all of that takes time, land (which is not easy to find, it turns out), and heavy equipment, which itself must come from somewhere, possibly by ship.

A supply chain is an entire ecology, a biophysical entity. 

It requires all of its parts to function smoothly all of the time. 

Failures are not isolated to one segment, nor can they be fixed with a simple increase in prices or fees, or by some rapid change in techniques. 

Instead, they cascade through a system that was built in a specific way; a breakdown in one part can become a general one.

In his remarkable 2011 book, The Global Minotaur, the economist (and future Greek finance minister) Yanis Varoufakis compared the United States to the mythical monster that lived in a labyrinth from which nothing that entered could escape. 

For 40 years, the US economy has taken in the consumption goods produced by Japan, South Korea, China, and others. 

To sustain the insatiable Minotaur, the world built a global labyrinth of ports, ships, more ports, warehouses, storage yards, roads, and rails.

Then, one day, the Minotaur got sick and missed a meal. 

The next day, he sought to catch up by eating four meals, only to find that his gullet was not quite wide enough to get them all down. 

So, now the Minotaur sits, choking and helpless, hoping the blockage will clear. 

If it doesn’t, the consequences could be grave. 

If choking the beast in this way had occurred to Theseus, he might not have needed Ariadne, her sword, or her ball of yarn.


James K. Galbraith, a trustee of Economists for Peace and Security, holds the Lloyd M. Bentsen, Jr. Chair in Government/Business Relations at the LBJ School of Public Affairs at the University of Texas at Austin. From 1993-97, he served as chief technical adviser for macroeconomic reform to China’s State Planning Commission. He is the author of Inequality: What Everyone Needs to Know and Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe.

Arcane, hereditary, all-male — and at the heart of British democracy

How a small blue-blooded band of peers clings on to power in the House of Lords

George Parker

© Robert Darch


The Earl of Devon prides himself on the “delicious” cream teas served at Powderham Castle, the imposing fortress inhabited by his family since 1390. 

This culinary treat was, he noted in his maiden speech in the House of Lords, first served by a predecessor named Ordwulf, Saxon Ealdorman of Devon, who “ordered bread, cream and jam for workers rebuilding Tavistock Abbey after the Viking raids of 997AD”.

The six-foot-five Earl — Charles Peregrine Courtenay — calls the business he runs at Powderham — a castle open to the public, with a farm, shop and café attached — “a family-owned SME that’s 700 years old”. 

But it’s far from your average small business. 

The crenellated towers look down over a park of grazing fallow deer, with the ground falling away to the Exe estuary beyond.

The family has everything you could want from the English aristocracy. 

The Courtenays arrived with Eleanor of Aquitaine in 1154 and one forebear, Richard Courtenay, was buried with Henry V in Westminster Abbey, after dying of dysentery in Henry’s tent at the Siege of Harfleur. 

“A very close male relationship,” is how Courtenay, who sports a rainbow badge on his country jacket, describes it.

There are, he tells me, a “good few gay stories” in the family history. 

Meanwhile, it turned out that Timothy the family tortoise, who died in 2004 at the age of 160, was “actually a female”. 

The Earl says this “transgender issue” was only identified when Timmy had to go to the vet, but the ancient creature kept its name until its dying day.

Things have not always been easy. 

“We were beheaded several times,” Courtenay notes of some of his more unfortunate ancestors. 

And the current Earl admits that when he married AJ Langer, an actor with roles on Baywatch and My So-Called Life whom he met in a Las Vegas bar, his family did not regard the match as “their obvious choice”.

Charles Courtenay, 19th Earl of Devon © Robert Darch


Earnest, Eton-educated and radiating a floppy-haired rural sense of wellbeing, the 46-year-old 19th Earl of Devon looks like he was born to rule. 

And, thanks to one of the weirdest quirks in Britain’s eccentric system of government, in a sense Charlie Courtenay still does.

This is because even though it’s been more than 20 years since Tony Blair’s Labour government defenestrated most of the 750 aristocrats who sat in the House of Lords, the upper chamber of Britain’s legislature, a murky backroom deal ensured that 92 places were reserved on a “temporary basis” for a rump of hereditary peers.

Needless to say, today they are still there, just as they have been for centuries. 

And so, thanks to the circumstances of his birth, the Earl of Devon is able to attend debates in the Lords, a revising chamber and frequent thorn in the side of the elected House of Commons, and to vote on the laws of the land.

The House of Lords forms one part of the ancient triumvirate of the British constitution, along with the monarchy and the House of Commons. 

Its inhabitants include dukes, earls, viscounts, barons and other exotica from the aristocracy. 

Before former prime minister Blair’s attempt to modernise the place in 1999, most seats in the legislature were passed down the line from generation to generation, almost exclusively to a male heir.

The House of Lords Act of 1999 ended the 700-year-old right of all peers to sit and vote on the red benches. 

With most hereditary peers ejected, today’s Lords is mainly an appointed chamber, with political leaders taking their pick of former MPs, lawyers, doctors, actors, athletes and so on to sit as “life peers” on the red benches. 

Their titles cannot be inherited.



The filling of the upper house with political cronies is a frequent source of controversy and is back in the news as Boris Johnson battles “sleaze” allegations. 

On Saturday, The Sunday Times reported that the Conservative party systematically offered seats in the House of Lords to a select group of multi-millionaire donors, who paid more than £3m to the party. 

The Tories said they were entrepreneurs and philanthropists.

The Lords today is — at almost 800 members — one of the world’s most bloated legislative assemblies. 

Only China’s National People’s Congress is bigger. 

The fact that no one in it is directly elected is still regarded by many as a democratic outrage. 

The continued presence of peers who sit in a legislative assembly merely by birthright is seen as even more egregious. 

It doesn’t help that all of the 92 hereditary peers that remain are white and male. 

According to research by The Sunday Times, nearly half went to one school: Eton College. 

Because most aristocratic titles pass to the firstborn son or the closest male relative, this blue-blooded band is unlikely to become more diverse.

Under the terms of that “temporary” deal agreed by Blair, the number of hereditaries is fixed: when one of the 92 dies or retires, an extraordinary by-election procedure takes place, where another peer on a reserve list of more than 200 hereditaries — House of Lords wannabes — is chosen to take their place. 

The electors are made up of hereditary peers already in the upper chamber, usually members of the party group where the vacancy arose. 

The result is one of the weirdest “democratic” contests in the world. 

And it is through that process that, in 2018, the Earl of Devon assumed his seat in the Lords.

There have been about 40 by-elections held among hereditary peers since 2002, when the first such contests took place. 

Manifestos are nugatory or downright bizarre — in 2015 the Earl of Limerick’s ended with the words “from your seats so well entrenched, please vote that mine may be embenched”. 

He was beaten by the ninth Duke of Wellington, whose forebear won the Battle of Waterloo, and who has recently been fighting a 21st-century legislative battle to stop water companies dumping sewage into rivers.

Arthur Wellesley, first Duke of Wellington, 1769-1852 © GL Archive/Alamy

Charles Wellesley, ninth Duke of Wellington, born 1945 © PA Images/Alamy


In a Tory by-election contest this year, Viscount Mountgarret offered “no statement” in support of his candidacy, while Lord Ashcombe’s credentials included the fact that he “races on the Solent and gardens enthusiastically”. 

Earl De La Warr is the “proprietor of the village pub”. 

Lord Milverton, running to join the unaligned crossbench peers, offered an eight-word prospectus promising to be “as objective and reasonable as possible”.

Each candidate makes a pitch for support, usually to peers from the party group that they aspire to join. 

Hustings, if they take place at all, are polite affairs, with candidates invited to make a four-minute “elevator pitch” and then take a few questions. 

Campaigning is largely frowned upon. 

As Courtenay recalls: “Some people try to lobby and try to get in touch with others. 

But I got the understanding that wasn’t really appropriate.” 

The Earl of Devon was among 19 candidates for a seat in the non-party political group of crossbench peers. 

There were 31 electors and Courtenay won a run-off with a whopping seven votes.

Sometimes the people standing in an election outnumber those allowed to vote in it. 

The Lib Dems, for example, have just three hereditary peers entitled to vote to appoint a replacement Lib Dem peer; when a seat became vacant recently seven peers stood for election. 

Once elected, a peer can sit in the House of Lords for decades until they retire or die.

For one particular peer, the by-election system for hereditary peers is “beyond satire”. 

Lord Bruce Grocott, a former parliamentary aide to Blair, has waged a personal campaign for years to legislate to stop it. 

His next attempt, almost certainly futile, will come when he brings forward his own private member’s bill in early December.

“I can’t believe anyone can think having 92 places without a single woman or any member of an ethnic minority is acceptable,” the former college lecturer says. 

“It’s worse than that — there isn’t any possibility of having one either.”

Indeed, leaving aside connections to the Norman and Plantagenet baronies, the British aristocracy is not known for its ethnic diversity. 

And of the 204 hereditary peers registered to stand in by-elections when a place becomes vacant, there is only one woman. 

Sadly, Grocott notes, “She doesn’t seem to want to stand.”

Before this, the only woman among the remaining hereditaries was the formidable 31st Countess of Mar, who retired last year, age 79. 

The holder of the oldest peerage title in the UK, and a renowned maker of goats’ cheese, Mar declared she did not want to be one of those people who “staggers around with a Zimmer frame and needs people to tell them where they are going”.

Grocott, a life peer who has just turned 81, has made three previous attempts to end the by-election system in a bid to ensure that hereditary peers would eventually, by dying, or retiring as Mar did, disappear from the upper house. 

But on each occasion, he has been thwarted, as opponents strangle the legislation with filibusters or parliamentary procedure. 

“I’m the world’s leading expert on this,” Grocott says ruefully. 

“It’s not an easily transferable skill.”

He adds: “For reasons that are unfathomable, the government won’t support the bill.” 

And, without Boris Johnson’s support, it stands no chance of getting through parliament and the hereditaries will continue to sit in the House of Lords.

The Conservative peer Lord David Trefgarne, 80, has previously proposed “wrecking” amendments to scupper Grocott’s legislation and, asked whether he would oppose it again next month, he says: “I’m afraid I will.” 

Like many hereditary peers, Trefgarne says that — of course — he would favour a largely elected second chamber, but in the meantime, it was wrong to have the place stuffed with peers appointed by the prime minister.

Trefgarne likes to take a long view in these matters. 

“Cast your mind back to 1215,” he says wistfully, recalling it was the hereditary peers and bishops who forced King John to make his Magna Carta concessions at Runnymede. 

“Don’t tell me we know nothing about democracy,” he exclaims. “We invented it!”

While many hereditary peers insist they are only sitting in the House of Lords until a properly reformed upper chamber comes along, the Earl of Devon believes the aristocracy should have a role in the second chamber, partly because of the continuity with Britain’s past that they represent. 

“We first took a seat in, I think 1280-something, and have been doing so ever since,” he says of his own family history. 

“There is a great global cacophony of different political systems — so that continuity is of itself of great value. 

We don’t tip things over and start afresh very often. 

There’s value to that and the stories that gives.”

Courtenay, who practised law in California and specialises in intellectual property and technology litigation, says he has something to offer to the upper house. 

He also says he wants to be a “champion” of Devon, the county over whose green hills Powderham Castle presides. 

And, with his 3,500-acre estate and up to 20 full-time employees, the Earl probably makes a bigger contribution to the local economy than his ancestor Isabella, Countess of Devon, who built a weir across the River Exe in the 13th century to stop ships travelling to Exeter, thus ensuring they had to dock at the family’s own port at Topsham.

Courtenay, who says women have been a driving force in his family’s history, is campaigning for a change in the law to allow hereditary peerages to pass to the eldest daughter, rather than son. 

“I think the sex discrimination aspect is unforgivable,” he says. 

But changing the law of primogeniture will never satisfy those, such as Grocott, who believe that hereditary peers have no place in a 21st-century legislature.

The survival of 92 hereditary peers as lawmakers in 21st-century Britain is a testament to the durability of the aristocracy and an apparently innate sense of how to bend the will of the state to their own advantage.

When he won a landslide election victory in 1997, Blair’s intention was clear enough. 

Labour’s manifesto said the “right of hereditary peers to sit and vote in the House of Lords will be ended by statute”. 

The fact that some are still there almost 25 years later is a particular tribute to one man: Robert Michael James Gascoyne-Cecil, seventh Marquess of Salisbury.

The Cecils have excelled at high-level politics for more than 400 years, since the days of Elizabeth I. 

The third Marquess of Salisbury served as prime minister three times during the 19th century. 

In the late 1990s the current Salisbury — who was leader of the Conservative peers at the time — set about negotiating a deal with Blair that would see some hereditaries keep their seats pending a second-stage reform creating a fully reformed house — a second stage, which to nobody’s great surprise, never arrived. 

“The arrangement was supposed to last six months,” he chuckles now.

Salisbury’s negotiations to keep the aristocracy in the upper house made him a figure of interest in republican France at the time. 

“I had a letter from a Marxist professor at the Sorbonne, who noted ‘Il n’y a que le provisoire qui dure,’” he recalls. 

How exactly Salisbury achieved his objective is a story, he says, he has not recounted for a while.

Robert Cecil, first Earl of Salisbury, 1563-1612 © Culture Club/Getty Images

Robert Michael James Gascoyne-Cecil, seventh Marquess of Salisbury, born 1946 © Avalon.Red


Back in 1998 he warned Blair that unless some hereditaries were retained, there would be legislative carnage in the upper house, with the aristocrats delaying and filibustering the prime minister’s more urgent legislative priorities. 

“My whole tactic was to make their flesh creep,” recalls the 75-year-old peer and former merchant banker. “I threatened them with the Somme and Passchendaele.

I didn’t mean it — it would have been a constitutional outrage! 

But I said it.”

Blair was spooked and ordered Lord Derry Irvine, Labour leader in the Lords, to broker a compromise with Salisbury. 

“Derry offered us 15 hereditary peers. 

I thought I might as well be ambitious, so I said, ‘How about 100?’ 

He said that was ridiculous.” 

But in the end Irvine bowed to the blue-blooded backlash.

Salisbury recalls: “I thought we might need some kind of rationale for this. 

So I said that 75 would be about 10 per cent of the existing hereditaries, then we’d need a few more — perhaps 15 — with experience of running committees, that sort of thing, to help with the transition. 

It was frightful bullshit really.”

The deal to retain 90 hereditaries — plus two other peers who conducted royal functions — came together in Blair’s Downing Street flat. 

Aristocrats already entitled to sit in the Lords would hold an election among themselves to choose who could remain — a quirk that hereditary peers like to joke makes them more “democratic” than their appointed colleagues.

The secret pact was sealed by Salisbury, Irvine and the Labour prime minister behind the back of William Hague, the Tory leader at the time. 

“Big mistake,” Salisbury recalls. “To say he was upset would be something of an understatement.” 

Salisbury was sacked, acknowledging at the time that he had “rushed in like an ill-trained spaniel”, but the deal stuck.

The Tory chief whip in the Lords at the time, Lord Tom Strathclyde, said Irvine insisted that by-elections would never happen because he was busy preparing his stage-two reforms for a more democratic upper chamber. 

Strathclyde, or to give him his full name Thomas Galloway Dunlop du Roy de Blicquy Galbraith, recalls: “I said: ‘Just in case.’ 

And had another drink.”

Speaking from his Scottish home, where he is “chopping logs, watching the grass grow”, Strathclyde says: “I’m not arguing for the continuation of the system; of course, if an elected house were to come along, we would lay down our burden.” 

A jovial figure with a perma-twinkle in his eye, he claims — like Salisbury — that the by-election system is so anachronistic that it will serve as “sand in the shoe” and force politicians to fully reform the House of Lords.

But Labour cynics believe that is self-serving tosh. Lord Charlie Falconer, a Labour peer, says: “He’s just saying that. 

He knows very well the Commons would never accept an elected Lords because it would undermine the primacy of the Commons. 

It was a means, as he saw it, to ensure the hereditaries were there for ever.”

Attempts to reform this very British version of “democracy” have been going on for more than 100 years, from the Liberal government’s move to clip the wings of the upper house in the 1911 Parliament Act, through to attempts in 2012 by Nick Clegg, leader of the Liberal Democrats, to move to a largely elected second chamber as part of David Cameron’s Con-Lib coalition.

Yet descendants of Norman conquerors, philandering kings and royal suck-ups continue to sit on the red benches. 

On each occasion, potential House of Lords reform becomes bogged down in parliamentary wrangling and gridlock. 

Ultimately prime ministers abandon the fight and return to the business of dealing with other, more pressing matters.

Lady Olly Grender, a Lib Dem life peer and a former Clegg adviser, was looking on in 2012 as the last big attempt to reform the upper chamber drowned in a parliamentary quagmire. 

Cameron did not exactly help, she claims: “He didn’t give a damn about it.”

Indeed, Cameron once joked that House of Lords reform was “a third-term priority”. 

Grender says: “The fact there isn’t a single female hereditary peer is an affront to a modern democracy.” 

But almost 10 years on, there still seems little appetite in government to tackle the issue.

Jacob Rees-Mogg, leader of the House of Commons in the current Conservative government, admits the idea of hereditary peers electing their own replacements is “wonderfully arcane” and that it is “rather splendid” that the by-elections are about the most democratic element in the upper house. 

But Rees-Mogg argues that the more ludicrous the House of Lords appears, the less likely it is to throw its weight around.

“How do you reform the House of Lords without taking power from the Commons?” he asks. 

He fears that if the Lords acquired more democratic legitimacy it would challenge the elected MPs in the Commons, risking “US-style gridlock”. 

Instead of which, the patently undemocratic House of Lords will continue its low-profile job as a revising chamber, scrutinising and tweaking draft laws, with MPs retaining the upper hand. 

There is no sign of Johnson’s government reforming the Lords any time soon.

A beneficiary of Salisbury’s sinuous dealmaking is one of the most recent Labour hereditary peers to take his seat in a by-election: Viscount Stansgate, otherwise known as Stephen Benn, son of the Labour leftwing hero Tony Benn, who six decades earlier renounced his hereditary title in order to continue to sit in the House of Commons.

Tony Benn called the hereditary peerage system “absolutely mad”, once saying that allowing someone to make laws because their father had was a curious concept in a modern democracy. 

“I wouldn’t like to go to a dentist who, just before he drilled my teeth, told me he was not a dentist himself, but that his father had been a very good dentist.”

In his maiden speech last month the latest Viscount Stansgate, who will be able to claim up to £323 in daily allowances for attending sittings in the Lords, declined to mention his father’s famous thoughts on the hereditary peerage. 

He was said by a Labour spokesman to be “getting his feet under the desk” and was unable to comment for this article.

Falconer says: “He’s a decent policymaker. 

But this is history stood on its head.” 

Why does he think people like Stansgate want to take up a seat in the Lords? 

“It’s not the allowance,” he says. 

“They want to be in parliament.”

For many, the situation has already gone on too long. Labour’s leader in the Lords, Lady Angela Smith, said peers were “hugely embarrassed” about hereditary peerages and the by-elections that sustain the aristocratic element of the upper chamber. 

“The ball remains in the government’s court but they refuse to act, even though ministers know it would have our support,” she says.

But Boris Johnson, like most prime ministers, has other priorities. 

So the curious case of the hereditary peers and their bizarre by-elections continues into the 21st century with no end in sight. 

And democracy campaigners continue to rage impotently against the system.

The 19th Earl of Devon concedes the situation could last for some time yet. 

“It’s too difficult a nut to crack,” he says. 

“It’s, well, if you get rid of that, you’ve got to do something else. 

And no one wants to decide what that should be.

“I think at present the hereditary presence in the House is consistent, it’s valuable.” 

He says other aspects of society work on the hereditary principle — families pass on assets — so why not the right to sit in a legislative chamber?

Is he driven by a sense of noblesse oblige? 

“I don’t know if I’d put it in those terms,” he says. 

“There’s a sense that there’s a job to be done. 

I think it’s an opportunity rather than an obligation — an opportunity to give something back and to provide some service.”

Courtenay remembers fondly listening to his father give his own maiden speech in the Lords — he was allowed to sit on the steps of the throne — in the late 1990s. 

The words have stuck with him to this day. 

“He gave a good speech,” he recalls. 

“It was, like, ‘I was never interested in being here, but I’m here because we’ve been here forever. 

It’s part of the job.’”


George Parker is the FT’s political editor

Black Friday

Doug Nolan


I posted a link Thursday morning to a Bloomberg article, “New Coronavirus Variant a ‘Serious Concern’ in South Africa.” 

The seemingly small outbreak generated minimal media attention. 

Within 24 hours, however, global markets were in a tailspin, with Crisis Dynamics gaining critical momentum. 

The World Health Organization Friday in an emergency meeting designated the new B.1.1.529 - “Omicron” - a “variant of concern.”

From Thursday’s Bloomberg article, “Virologists have detected almost 100 cases linked to the variant in the country to date…” 

By Friday, there were individual cases reported in Hong Kong, Brussels and Israel, all travelers from South Africa, along with a number of infections in Botswana. 

Friday from Bloomberg: 

“Early PCR test results showed that 90% of 1,100 new cases reported Wednesday in the South African province that includes Johannesburg were caused by the new variant.” “This new variant, B.1.1.529 seems to spread very quick! In less than 2 weeks now dominates all infections following a devastating Delta wave in South Africa.”

It could take scientists several weeks to better understand what the world is dealing with.

November 26 – Financial Times (Clive Cookson and Oliver Barnes): 

“The 50 mutations on the new B.1.1.529 variant… include more than 30 on the spike protein, the exposed part of the virus that binds with human cells. 

These changes could make it more transmissible than the dominant Delta variant and more likely to evade the immune protection conferred by vaccines or prior infection. Scientists are concerned for two main reasons. 

One is epidemiological and relates to the speed with which the variant that emerged this month is spreading in South Africa, particularly in Gauteng province... 

Daily cases have more than tripled in South Africa since Tuesday, with 2,828 cases recorded on Friday. 

Early testing results indicated that 90% of the new cases on Wednesday in Gauteng were caused by the new variant… 

The other cause for concern is its highly unusual genetic profile. 

Jeffrey Barrett, director of the Covid-19 Genomics Initiative at the Wellcome Sanger Institute, described Omicron as ‘an unprecedented sampling’ of mutations from four earlier variants of concern: Alpha, Beta, Gamma and Delta. 

There are other genetic changes that have not been seen before, whose significance is as yet unknown, he added. 

Worryingly, said Jacob Glanville, a computational immunologist and founder of California therapeutics company Centivax, 15 of the mutations are on the ‘receptor binding domain’ — which acts like a ‘grappling hook’ for the Sars-Cov-2 virus to enter human cells. 

These mutations help the virus circumvent the body’s immune defences because it is trained by vaccines or prior infection to recognise and fight the original Wuhan strain. 

By comparison, the Delta variant which accounts for almost all sequenced cases worldwide dented the effectiveness of vaccines with just three mutations in this region.”

November 26 – Business Insider (Aria Bendix):

“South African researchers identified the first Omicron case on November 9, then reported the variant to the WHO on Wednesday. 

Scientists are hopeful that they spotted the variant early, since the majority of known cases are still concentrated in southern Africa… 

Still, a number of markers suggest that Omicron is highly transmissible relative to other coronavirus strains. 

For one, South Africa's coronavirus cases have risen sharply over the last few weeks: Average daily cases have risen 13-fold since the variant was first discovered on November 9, from around 275 to 3,700 cases per day. 

Omicron also contains several worrisome mutations found in other variants of concern — including Delta and Alpha — that could help it spread, render vaccines less effective, or potentially lead to more severe disease. 

The new variant carries some unfamiliar mutations, as well. 

‘There are a number of mutations that we don't have any information about,’ Jetelina said. 

‘They've never seen them on previous variants of concern. 

So I think one of the first questions is: What are these? 

Do we need to worry about them or not?’ 

So far, scientists have identified 32 mutations on the variant’s spike protein — the sharp, crown-like bumps on the surface of the virus that help it invade our cells. 

Other variants of concern have had fewer spike mutations.”

November 26 – Bloomberg: 

“Based on omicron’s mutation profile, partial immune escape is likely, the European Centre for Disease Prevention and Control said in a threat assessment report Friday. 

The EU’s health agency is among the first official authorities to acknowledge that vaccines may not work well against the new strain. 

‘The omicron variant is the most divergent variant that has been detected in significant numbers during the pandemic so far, which raises concerns that it may be associated with increased transmissibility, significant reduction in vaccine effectiveness and increased risk for reinfections,’ the ECDC said.”

Market reaction was swift and, in many cases, brutal. 

Pundits suggested panicked markets were overreacting. 

There is as yet no evidence of more severe symptoms from Omicron, and South Africa’s early recognition and communication offer the possibility of more successful global containment efforts. 

The U.K. and European Union moved quickly to restrict travel from South Africa, followed by Singapore, Japan, the U.S., Canada and others.

Once again, the wily Covid virus boasts ghostly timing. 

Omicron barges in with de-risking/deleveraging and global Crisis Dynamics attaining pivotal momentum. 

And with contagion rapidly enveloping the emerging markets (EM), disaster strikes for the vulnerable South African domino already in line for trouble.

The South African rand this week sank 3.4%, increasing 2021 losses to 9.8%. 

South African 10-year yields jumped 19 bps Friday (high since April 2020), boosting the week’s yield spike to 43 bps. 

South African CDS Friday surged 25 (43 for the week) to 252 bps – the high since March.

An index of EM CDS surged 19 Friday - the largest one-day rise since September 2020 - to 221 bps, the high back to October 2020. 

EM CDS surged 34 for the week, the biggest weekly gain since September 2020. 

Friday saw sovereign CDS surge 17.5 in Brazil to 268 bps (high since June 2020), 17.5 in Colombia to 218 bps (May 2020), and nine in Chile to 99 bps (May 2020). 

For the week, CDS jumped 26 bps in Brazil, 32 bps in Colombia, 27 bps in Mexico, and 11 bps in Indonesia.

November 25 – Wall Street Journal (Jared Malsin and Anna Hirtenstein): 

“A currency crisis here is battering Turks’ confidence in their government’s ability to manage the economy, causing droves of people to buy U.S. dollars and sending crowds of people into the streets to oppose President Recep Tayyip Erdogan’s policies. 

Riot police lined the streets in parts of Istanbul as the country braced for a third night of scattered protests over Mr. Erdogan’s inability to stop a precipitous drop in the Turkish lira. 

The lira’s depreciation has undermined nearly two decades of economic gains that had lent Turks a sense that they were ascending into the world’s club of top economies. 

Such protests have been rare since Mr. Erdogan concentrated power following a 2016 coup attempt…”

The last thing Turkey needed was a stiff forearm shove toward a full-fledged financial and economic crisis. 

The Turkish lira sank another 2.8% Friday, pushing losses for the week to 8.9% - for the month to 22.1% and for 2021 to about 40%. 

Turkey’s 10-year (lira) yields spiked 80 bps this week, trading above 20% for the first time since May 2019. 

Turkey CDS surged 28 Friday (58 for the week) to a one-year high 504 bps. 

For a country with a population of 84 million – that saw living standards and expectations inflate right along with its Credit Bubble – the collapse is turning increasingly desperate.

Mexico is another key EM domino – with self-inflicted wounds placing it directly in the line of fire.

November 24 – Financial Times (Christine Murray and Eric Platt): 

“Mexico’s president unnerved financial markets on Wednesday by nominating an obscure public sector economist to head the country’s central bank, causing the peso to slide to its lowest level since March. 

The announcement came a day after unexpected news that President Andrés Manuel López Obrador had withdrawn his previous nominee Arturo Herrera — a former finance minister better known to investors. 

At his morning news conference, López Obrador gave little explanation for his change of heart but tried to calm fears that he wants to interfere in the bank’s policymaking.”

The Mexican peso sank 5.0% this week, boosting y-t-d losses to 9.2%. 

Mexico’s local currency yields jumped 21 bps to 7.68%, the high since the March 2020 market crisis. 

Mexico’s dollar bond yields rose 16 bps to 3.16% (high since March). 

Mexico CDS jumped 14 Friday to 125 bps (October 2020), with the week’s 27 bps jump the biggest gain since June 2020. Mexican stocks dropped 2.6% this week.

Fragile Brazil’s dollar bond yields surged another 34 bps this week to 4.99%, the high since June 2020. Brazil’s mid-November annual inflation jumped to 10.73%. 

From Goldman Sachs chief Latin America economist Alberto Ramos (from Bloomberg): “Overall, inflation is now very generalized with overwhelming evidence of significant second-round effects.”

So-called “strongman” leaders from Ankara to Mexico City and beyond have not taken inflationary surges seriously. 

They act as if the world hasn’t changed from earlier halcyon days of seemingly endless global liquidity and yield-chasing EM “hot money” inflows. 

Especially these days, there is no overstating the critical role played by disciplined, principled, and independent central banking. 

Enormous speculative leverage throughout the emerging markets left no room for error. 

Tons of erroneous policies and market perceptions created currency and bond market fragilities, with Crisis Dynamics now unleashed.

Bubbles at their core are pernicious mechanisms for wealth redistribution and destruction. 

Geopolitical risk is a key Bubble manifestation, with the current most protracted global Bubble unmatched in this regard. 

Competing head-to-head with Covid in terms of stubborn persistency, there was similarly no relief this week from mounting geopolitical risks.

November 26 – Wall Street Journal (Ann M. Simmons): 

“Ukrainian President Volodymyr Zelensky accused Russia of backing a plan to overthrow him, in remarks that threaten to aggravate tense relations between Kyiv and Moscow as Western officials warn of a possible Russian invasion of Ukraine. 

Mr. Zelensky told reporters Friday that he had received information through Ukrainian security services that a coup would be undertaken on Dec. 1-2, according to Ukraine’s national news agency, Ukrinform. 

He said the Ukrainian government had intelligence as well as audio intercepts.”

November 22 – Bloomberg (Alberto Nardelli and Jennifer Jacobs): 

“The U.S. has shared intelligence including maps with European allies that shows a buildup of Russian troops and artillery to prepare for a rapid, large-scale push into Ukraine from multiple locations if President Vladimir Putin decided to invade… 

That intelligence has been conveyed to some NATO members over the past week to back up U.S. concerns about Putin’s possible intentions and an increasingly frantic diplomatic effort to deter him from any incursion, with European leaders engaging directly with the Russian president. 

The diplomacy is informed by an American assessment that Putin could be weighing an invasion early next year as his troops again mass near the border.”

The Russian ruble was slammed 2.8% this week. 

Russia’s 10-year yields traded to an almost three-year high 8.64% in Tuesday trading, before ending the week up 10 bps to 8.46%. 

Russia CDS jumped 12 Friday (24 for the week) to a one-year high 124 bps. 

Russian stocks were pummeled 5.1%. 

Ukraine dollar bond yields surged 30 bps Friday - and 91 bps for the week - to 8.31% (high since May 2020). 

Ukraine CDS jumped 33 Friday – 66 bps for the week – to 554 bps, the high back to April 2020.

With Crisis Dynamics now in full swing within the global “Periphery,” the “Core” is in heightened jeopardy. 

European stocks were hammered this week. 

France’s CAC40 sank 4.8% in Friday trading (down 5.2% for the week), with major indices down 4.2% in Germany (down 5.6%), 5.0% in Spain (down 4.0%), 4.6% in Italy (down 5.4%), and 3.6% in the U.K. (down 2.5%). 

Ominously, Italian bank stocks were slammed 7.8%, with European banks down 5.9%. 

An index of bank (subordinate) debt CDS surged 19 this week to 131 bps, the largest increase in over a year.

Greek yields jumped 13 bps to 1.28%, trading Thursday to the high since June 2020. 

Italian yields surged to 1.12% in Wednesday trading, before ending the week up 11 bps at 0.97%. 

With German bund yields increasingly only one basis point, European periphery yield spreads (to bunds) widened meaningfully this week.

JPMorgan CDS jumped 4.8 Friday (6 for the week) to a 13-month high 52.25 bps, the largest one-day increase since June 11, 2020. 

Bank of America CDS rose five Friday to the high since July 2020. 

Highflying U.S. bank stocks (KBX) sank 4.2% Friday, in what could prove a wake-up call for stocks that have remained oblivious to mounting risks.

“Core” U.S. corporate Credit is indicating vulnerability. Investment-grade CDS jumped 4.5 Friday (largest gain in two months) to an eight-month high 57.5 bps. 

High-yield CDS surged 20 (biggest gain since March) to a one-year high 327 bps. 

High-yield bond funds suffered outflows the past week of a notable $3.3 billion.

The week brought no respite to the wild west Treasury marketplace. 

Ten-year Treasury yields rose to 1.69% in Wednesday trading, only to reverse sharply lower Friday to close the week down seven bps to 1.48%. 

The market Wednesday priced in 2.8 rate increases by the Fed’s December 14, 2022 meeting. 

It had dropped to 2.1 by Friday’s close.

It was definitely Black Friday for crude and some other commodities. 

WTI was slammed $10.24, or 13%, to an 11-week low $68.15. 

The Bloomberg Commodities Index dropped 2.2%. 

If there were any doubts, the cryptocurrencies are vulnerable speculative vehicles. Bitcoin was hammered for more than 7%.

Where is it safe these days for levered speculation? 

It is a fundamental CBB tenet that contemporary finance works wonderfully, so long as leverage and speculation are expanding. 

It does not function well in reverse. 

Global “risk off” de-risking/deleveraging took a meaningful leap this week. 

China’s historic Bubble continues to deflate, while virulent contagion ruthlessly targets the weak and vulnerable throughout the emerging markets. 

And, importantly, a bout of risk aversion Friday slammed the “Core.” 

At this point, a lot has to go right to restrain energized Crisis Dynamics hellbent on engulfing an unprepared world.