Early Warning for 27 February 2019

Good morning. Here’s your Early Warning for Wednesday, 27 February 2019.

ADMIN NOTE: After reviewing last month’s survey results, I’ll be making some minor changes to this daily Early Warning report. You may have noticed that EW is hitting inboxes between 0730 and 0800 Central most mornings, Monday through Friday. Waking up early and writing this report is the absolute highlight of my day, so that’s not going to change. But I’ll be minimizing some sections that are less popular and including a new section that was widely requested. You can expect those changes next week. Thank you for all the support. – S.C.

 

Early Warning: The United Methodist Church voted yesterday to uphold a ban on same-sex marriage and gay and lesbian clergy. In some regions, the United Methodist Church faces a potential split as progressive members are in discussions to leave the denomination.

EMP Threat: This afternoon, the Senate Homeland Security and Governmental Affairs Committee is holding a hearing on protecting the electric grid from EMP or geomagnetic disturbances. I will be watching live and writing a report for Intel subscribers.

Indo-Pak: This week, the Indian air force flew into Pakistani-held territory to bomb a terrorist training camp in retaliation for a suicide bombing which killed 40 Indian soldiers earlier this month. Pakistani president Imran Khan promised yesterday to retaliate for the incursion, and two Indian aircraft have reportedly been shot down. India confirmed only one downed aircraft and said that the pilot is missing. India says that it also shot down a Pakistani jet. India and Pakistan have battled over the  Khasmir region, but this is as close as the two sides have been to war in a long time. Both nations are nuclear.

 

White House

The President is scheduled to meet with Vietnamese officials, and meet and dine with Kim Jong-Un. Formal talks begin tomorrow.

National emergency: Yesterday, the House voted to block the president’s national emergency declaration. Today, the Senate gets its chance. The resolution is one vote shy of passing the Senate. If passed, however, the resolution would likely be vetoed by President Trump.

Gun laws: The Democratic House is on the verge of passing a universal background check bill that would impose further restrictions on the private sale and transfer of guns. That bill is unlikely to pass the Senate, but it’s indicative of Democratic unity on imposing more laws and regulations on firearms.


 

State Department

Secretary Pompeo will be in Vietnam and the Philippines from 24 February to 01 March. Secretary Pompeo will participate in the Trump-Kim summit in Vietnam, then travel to the Philippines to meet with President Rodrigo Duterte.


 

Defense Department

Acting Defense Secretary Patrick Shanahan has no publicly scheduled events.

 

These are the last publicly reported locations of deployed carrier groups. Those not listed were last reported in port.

The Abraham Lincoln (CVN-72) has returned to port in Norfolk.

The John Stennis (CVN-74) was last reported as in the Gulf of Tonkin.

The Ronald Reagan (CVN-76) is forward deployed to Yokosuka, Japan.


 

Congress

Significant House Activity:

  • Health Threat: Measles Outbreaks in the U.S. (Cmte on Energy and Commerce, Subcmte on Oversight and Investigations)
  • Monetary Policy and the State of the Economy (Cmte on Financial Services)

Significant Senate Activity:

  • Hearings to examine protecting the electric grid from an EMP or geomagnetic disturbance (Homeland Security & Government Affairs Cmte)

* Only events pertinent to national security are listed. Significant reporting will appear in this week’s Strategic and National Intelligence reports.


 

Economy/Finance

URGENT: The Debt Ceiling is a major issue coming up. The Treasury is scheduled to run out of money this September unless Congress approves raising the debt ceiling by 02 March. Congress may vote to suspend the debt ceiling, altogether, which would remove bars to how large the national debt becomes. In 2011, Democrats and Republicans fought over the debt ceiling, which led Standard & Poor’s to downgrade the U.S. credit rating. Politics could again influence the upcoming debate.

BlackRock CEO Larry Fink warned that the U.S.-China trade war could have additional implications for fiscal and monetary health. “What worries me about the conversation between the U.S. and China — China has a $1.3 trillion pool of U.S. Treasurys, they’ve been accumulating U.S. Treasurys because of the trade deficit. Now as China reduces its trade deficit with the U.S., the likelihood of them reducing their need for U.S. Treasurys is large.” Fink also warned that “over the next few years — and this is something we are not talking about enough and we need to be talking about this — we should expect over the number of years ahead, less ownership of U.S. Treasurys as their deficits shrink. But that’s at the same time the U.S. deficit still seems to be growing at a trillion dollars. So it is long term a little more disturbing for me to see the implications of smaller Chinese purchases of debt with rising deficits. So the bigger question is: who’s going to be the substitute buyer to buy this?” (AC: All this will lead to larger fiscal and monetary uncertainty, which is likely to lead to increased social and political instability.)

Goldman Sach’s Jan Hatzius recently wrote to investors that the global economy has probably bottomed out and to expect a pickup. “Some green shoots are emerging that suggest that sequential growth will pick up from here,” Hatzius wrote. While there’s still some downside risk, Goldman still sees 3.5 percent growth in global GDP.

JPMorgan CEO Jamie Dimon recently gave his annual presentation to shareholders in which he said, “We are prepared for a recession. We’re not predicting a recession. We’re simply pointing out that we are very conscious about the risks we bear.” Still, Dimon seemed bullish over the long term, saying that JPMorgan would take the opportunity during a downturn to expand and hire more bankers. “Financial results are going to get a little bit worse, but it’s also an opportunity to shine.”

(Analyst Comment: There seems to be a consensus opinion right now that the next recession won’t be as bad as some fear. Numerous financial elites have commented over the past several months that they see the next downturn as an opportunity to expand on the cheap and make firesale purchases of equities.)

Fed chair Jerome Powell appeared before the Senate Committee on Banking, Housing, and Urban Affairs yesterday. “While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals.” A slowdown in China and weakness in Europe are particular concerns for the Federal Reserve. Powell also said that he’s “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.” In other words, the Federal Reserve is entirely open to modifying or changing course if U.S. economic conditions worsen.

Also in yesterday’s Powell testimony: MMT. I’ve written about how progressive politicians are adopting Modern Monetary Theory, or MMT, which argues that governments who issue their own currency can borrow indefinitely to fund deficit spending. Yesterday, Powell said, “The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong.”


 

Far Left Daily

“[Imeachment is] a very disruptive process to put the country through, and it’s an opportunity cost in terms of time and resources. You don’t want to go down that path unless it is unavoidable.” – Speaker Nancy Pelosi

“I believe that impeachment is inevitable.” – Rep. Ilhan Omar (D-MN)

“We would like your support in recommending the ASDC [Association of State Democratic Committees] work towards developing a collaborative approach to battling disinformation, illicit campaign tactics, bots, trollfarms, fake accounts, altered text, audio, and video, any and all inauthentic speech in our Presidential Primary process.” – So reads a “non-aggression pact” that would prevent underhanded tactics from being employed among fellow Democratic presidential candidates


 

What I’m Looking at this Morning

U.S. Navy short 6,200 at-sea sailors

A clash is coming over America’s place in the world


 

Notable Quotable

“He once asked me if I could name a country run by a black person that wasn’t a ‘shithole.’ This was when Barack Obama was President.” – From Michael Cohen’s prepared testimony against Donald Trump

Samuel Culper is a former military intelligence NCO and contract Intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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