Gordon T Long

Gordon T Long

Global Macro Research | Macro-Technical Analysis 

MACRO

US PUBLIC POLICY

BIDEN’S “INCREDIBLE TRANSITION”!

I personally don’t recall anytime during the last US Presidential election voting for any “Incredible Transition”! Amongst other forums, I listened to all the Presidential debates and there never was a mention of any such plan or policy by either party.
 
The United States now, within one year of assuming the US Presidency, according to President Joe Biden, is in the midst of an “incredible transition”— one that will pave the way for a Green Economy!
 
President Biden used the word “transition” during an unscripted impromptu Q&A session May 23 at a joint press conference in Japan. He, “off the cuff’, seemingly admitted that soaring gasoline prices are just part of his administration’s overall plan for moving from hydrocarbons to renewables.
 
“When it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over.”
 
The comment seems to suggest that ensuring the country’s gas supply is not high on the Biden administrations agenda, especially when a day before the press conference, Biden’s top economic advisor, Brian Deese told Fox News Sunday that the U.S. economy “is in a period of transition”! This was said only when he refused to directly answer a question on whether the economy is entering a recession.
 
“We’re moving from the strongest economic recovery in modern history to what can be a period of more stable and resilient growth.”
 
While the administration may tout the benefits of a sustainable future, the question remains as to what will happen to average Americans while this “transition” takes place. The current administration doesn’t appear to be willing or interested in fixing things, when it comes to the matters that Americans all worried about. Rather, it seems as though they’re planning for a transition to a green future in a manner and form which they want and never received nor asked for a mandate by the US electorate to implement.
 
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WHAT YOU NEED TO KNOW
 
  • According to President Biden we are in the midst of an “Incredible Transition” which the US consumer is facing the brunt of and never gave the Biden administration a mandate to implement.
  • This Transition has driven Crude prices from $36/bl to $117/bl and prices at the US pump to over $4.70/gal for gasoline.
  • This price shock has made the “transition” to EV technology more affordable, but is still a premium to the current rising costs of fossil fuel transportation alternatives.
  • A big problem is EV solutions are getting more expansion at an alarming rate because of rising commodity costs associated with battery mineral requirements (Lithium, cobalt and nickel).
  • Rising EV costs are further evidence that the “Incredible Transition” as currently envisaged is terribly flawed. EV is not the future – Green Hydrogen is! Electricity production will not be dominated by Solar and Wind, but rather by new Nuclear technologies.
  • This misjudgment will result in a terrible uncalled for financial burden on an already financial strapped US consumer.
  • The Globalist’s “Great Reset” is now adding Global Food Shortages & Famine to its pandemic and energy change catalysts.
  • As a result of these developments, Economic Confidence has plummeted to levels last seen during the 2008 Financial Crisis. We can expect increasing social unrest both in the US and globally as the public reacts to rapidly falling standards of living driven by inflation and reduced disposable incomes.
 
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During the Trump Administration oil prices approached $10/bl as the administration tried to raise prices to $40, because they were felt to be too low as US oil exports were capturing world export markets due to the “Fracking” Revolution.
 
When the Biden administration assumed power oil was trading at $36/bl. The commitment to Net Zero and the “Great Transition” has meant raising prices to over $117/bl. The goal has been to make the transition to EV (electric vehicle) viable from a cost perspective. Though still short this has been at unprecedented sacrifice by the American taxpayer.
 
CHART: Below — Even if battery prices fall less than previous expectations, the oil strength will likely support EV sales.
 
 
 
 
 
 
 
 
 
The expectations of the Biden regime is for the hyper-adoption rate shown to the right.
 
The accepted mantra is that EV battery costs will fall forever, since they have steadily fallen 90% over the past 10 years. This is a cornerstone to the ideal of EV’s reaching price parity with traditional cars and hence heralding the end of gasoline & diesel consumption. But what if that’s not right?
 
 
It would have big implications for the cost of EVs and hence oil demand. Well… as you can see on the chart above, Sanford Bernstein expect battery costs to rise 25% this year due to higher raw material costs. That bump actually delays the breakeven point by a few years and that assumes flat metals pricing from here. The problem is that raw materials are actually increasing as a percentage of overall costs. In 2017, they were 50% of the cell and today they are 70%.
 
The recent surge in prices of key battery metals like lithium has cast a shadow of doubt over their future. As EV battery prices keep dropping, the global supply of EVs and demand for their batteries are ramping up. How will EV battery prices evolve going forward?
 
Since 2010, the average price of a lithium-ion (Li-ion) EV battery pack has fallen from $1,200 per kilowatt-hour (kWh) to just $132/kWh in 2021. Inside each EV battery pack are multiple interconnected modules made up of tens to hundreds of rechargeable Li-ion cells. Collectively, these cells make up roughly 77% of the total cost of an average battery pack, or about $101/kWh. So, what drives the cost of these individual battery cells?
 
THE COST OF A BATTERY CELL
 
According to data from BloombergNEF, the cost of each cell’s cathode adds up to more than half of the overall cell cost.
 
 
WHY ARE CATHODES SO EXPENSIVE?
 
The cathode is the positively charged electrode of the battery. When a battery is discharged, both electrons and positively-charged molecules (the eponymous lithium ions) flow from the anode to the cathode, which stores both until the battery is charged again.
 
That means that cathodes effectively determine the performance, range, and thermal safety of a battery, and therefore of an EV itself, making them one of the most important components.
 
They are composed of various metals (in refined forms) depending on cell chemistry, typically including lithium and nickel. Common cathode compositions in modern use include:
 
    • Lithium iron phosphate (LFP)
    • Lithium nickel manganese cobalt (NMC)
    • Lithium nickel cobalt aluminum oxide (NCA)
The battery metals that make up the cathode are in high demand, with automakers like Tesla rushing to secure supplies as EV sales charge ahead. In fact, the commodities in the cathode, along with those in other parts of the cell, account for roughly 40% of the overall cell cost.
 
OTHER EV BATTERY CELL COMPONENTS
 
Components outside of the cathode make up the other 49% of a cell’s cost.
 
The manufacturing process, which involves producing the electrodes, assembling the different components and finishing the cell, makes up 24% of the total cost.
 
The anode is another significant component of the battery, and it makes up 12% of the total cost—around one-fourth of the cathode’s share. The anode in a Li-ion cell is typically made of natural or synthetic graphite, which tends to be less expensive than other battery commodities.
 
EV IS NOT THE FUTURE DUE TO SUPPLY REALITIES
 
GREEN HYDROGEN IS THE FUTURE
 
SOLAR PANELS AND WIND IS NOT THE FUTURE DUE TO STORAGE & CAPACITY LIMITATIONS
 
NEW NUCLEAR TECHNOLOGY IS THE FUTURE
 
(For more on the above statements see the 2022 Thesis Paper: “SUSTAINABILITY: For Whom?”)
 
The current Green Energy movement is flawed for the most basic and practical reasons. However, that is not the concern of those currently driving the Zero Carbon and eradication of Fossil Fuels narrative. Their goal is a shifting of power and a New World Order.
 
In parallel with Biden’s “Incredible Transition” comments the Global Elite, who are the drivers of the “Incredible Transition” or “Great Reset”, met in Davos for the first time since Covid-19. Their focus has expanded from Green Energy to a Global Food Famine in advancing their Globalist Agenda.
 
HERE ARE SOME HIGHLIGHTS:
 
 
DAVOS 2022 & THE GREAT RESET
 
For decades, one of the Davos globalists’ central preoccupations was that the world’s energy situation would be radically different.
 
  • Canada’s tar sands wouldn’t have been demonized and the country would have built the Keystone XL Pipeline and other pipelines to transport ever greater quantities of energy across the continent and beyond.
  • Liquefied natural gas facilities on the Atlantic and Pacific coasts of Asia, the Americas, and Europe would have been built to ship and receive plentiful natural gas.
  • “Net Zero” policies wouldn’t be crippling the financing of new fossil fuel facilities. Carbon taxes wouldn’t be making energy ever more expensive.
  • In the same way that the United States quickly became the world’s largest oil and gas exporter once the Trump administration scaled back crippling climate-related regulation, Europe would have been awash in energy had bans on fracking and offshore fossil-fuel development been lifted to allow development of its immense oil and gas reserves. Instead of fuel poverty, Europe would be experiencing fuel plenty.
 
 
Two Crises: Energy and Food
 
Food and energy security and two crises linked to the war in Ukraine were also high on the agenda.
 
  • It was the first truly global energy crisis.
  • We face a multi-year food crisis if things don’t change.
 
John Kerry, Bill Gates, Brad Smith, Mikael Damberg, Marc Benioff and Ruth Porat launched an expansion of the First Movers Coalition.
 
“It’ll all need paying for, of course. We need an energy transformation on the scale of the industrial revolution at the speed of the digital transformation. And therefore we need a revolution in finance.” – Mark Carney
GOOD SCIENCE OR JUST MORE GLOBALIST PROPAGANDA?
 
The globalists pushing climate change policies tell us there is no choice if the planet is to be saved from catastrophe many decades if not centuries from now. What they don’t tell us is that their prophecies of doom are based on computer climate models, all of which have proven false to date.
 
Following Excerpt: The State of the Climate 2021
 
Not a single claim—whether that the Arctic ice caps would melt or polar bear populations would decline or tornadoes would increase—have materialized.
 
Reasonable people can dispute whether the prophecies of doom will materialize in the future. Reasonable people cannot dispute that the globalists’ past decisions to override the free market have created today’s energy crisis.
 
Despite the globalists’ climate change policies, carbon dioxide in the atmosphere—now at 400 parts per million—have reached record levels. This has been a boon for the planet because CO2—also known as nature’s fertilizer—has produced a bounty of bumper crops. Australia reports record wheat, barley, and canola crops and near-record sorghum crop. India, the world’s second-largest producer of wheat, expects record exports this year. Brazil expects record corn. Russia, with another record crop, will be the world’s largest wheat exporter.
 
A COMING GLOBAL FOOD CRISIS
 
The United Nations warns that we’re in the midst of a “global food crisis” in which “44 million people in 38 countries are at emergency levels of hunger.” Here, too, the responsibility rests with globalist policies that make food unaffordable.
 
Epoch Times reports:
 
A dominant contributor to the famine is the supply chain disruptions caused by the globalists’ decision to abandon traditional responses to pandemics in favor of an experimental lock-down of much of the world’s economy. The chaos and costs from this decision by governments to apply their COVID-19 lock-down theory upended the world’s food distribution systems and soared the cost of food. The inflation created when governments printed money to support industries and individuals sidelined during the lock-downs then made food prices even more prohibitive.
 
Exacerbating the supply chain disruptions was the globalists’ decision to perpetuate the Russia-Ukraine war by providing Ukraine with billions in armaments, a departure from the past norm of pressuring combatants to resolve their differences through negotiations. As a result, agricultural production in Ukraine, once known as the breadbasket of Europe, collapsed, with wheat production falling by 44 percent and corn by 39 percent.
 
Reasonable people can dispute whether Western governments were wise to implement and fund the lock-downs, or to perpetuate the Russia-Ukraine war, but they cannot dispute that their actions spurred the increase in famine that the world is experiencing today.
 
The globalists may believe that the world needs their new world order. But they also exemplify the adage that the road to hell is paved with good intentions.

 
 
 
CONCLUSION
 
 
All of a sudden, just about everyone is upset about inflation. It would have been nice if everyone would have been this upset back when our leaders were making the exceedingly foolish decisions that resulted in this crisis. In May 2012, the federal government was 15 trillion dollars in debt. Now we are 30 trillion dollars in debt, but our politicians continue to spend money as if tomorrow will never come. Meanwhile, the Federal Reserve has pumped trillions of dollars that they created out of thin air into the financial system in recent years. For a very long time, I passionately denounced what our leaders were doing, because I knew what would happen. Now a day of reckoning has arrived, and millions upon millions of Americans are absolutely desperate for things to return to normal!
 
 
 
THE WORST IS STILL IN FRONT OF US
 
EXPECT A SHORT TERM BEAR MARKET CONTER RALLY
 
FADE THE UNFOLDING COUNTER RALLY – SELL THE RIPS
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ADDENDUM: NOTE OF IMPORTANCE
 
It can’t be stressed strong enough how US sanctions against the Russian Central Bank has de-stabilized the Global perceptions of US Dollar FX Reserves. The ramifications are much larger than Ukraine & Russia. The following comments from Yu Yongding sheds further light on what is going on behind the scenes as the Bilderberger meeting takes place In Washington DC on the heels of the annual Davos meeting.
 
Though obviously not in attendance at Davos nor the Bilderberger meeting, the powerful and influential Yu Yongding, from the Chinese Academy of Social Sciences (CASS) and a former member of the Monetary Policy Committee of the Central Bank, recently stated
 
”the global financial system and the US dollar have been weaponized into geopolitical tools. The nefarious behavior of the US in freezing foreign exchange reserves has not only seriously damaged the international credibility of the US but has also shaken the credit foundation of the dominant international financial system in the West.”
 
He expresses the consensus among Chinese intel, that: 
 
“if there is a geopolitical conflict between the US and China, then China’s overseas assets will be seriously threatened, especially its huge reserves. Therefore, the composition of China’s external financial assets and liabilities urgently needs to be adjusted and the portion of US dollar denominated assets in its reserves portfolio should be reduced.”
 
A serious debate is raging across virtually all sectors of Chinese society on the American weaponization of the world financial casino. The conclusions are inevitable: get rid of US Treasuries, fast, by any means necessary; more imports of commodities and strategic materials (thus the importance of the Russia-China strategic partnership); and firmly secure overseas assets, especially those foreign currency reserves.
 

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