BOOM Finance and Economics 1st September 2024 -- a Global Review
WEEKLY -- On Sunday -- All previous Editorials are available on the Substack Archive and for long term archive -- Visit LinkedIn and/or Wordpress https://boomfinanceandeconomics.wordpress.com/
CHINA IMPORTS RECORD AMOUNTS OF IRANIAN AND RUSSIAN OIL
MORE DEVELOPMENTS FROM THE CRYPTO CRIME SCENE – DISTURBING NEWS –SOME BINANCE CRYPTO ACCOUNTS FROZEN
THE DIVERGENCE BETWEEN SHANGHAI AND HONG KONG STOCK MARKETS CONTINUES
MORE THREAT IDEOLOGY -- IN ENERGY AND FOOD
WE CAN FORGET COW FARTS -- FOOD PRODUCTION IS NOW A THREAT
SO CAN HYDROGEN SAVE US? OR IS THE PLANET DOOMED AS THE ENVIRONMENTALISTS TELL US?
FALSE ASSUMPTION IN OPERATION?
CHINA IMPORTS RECORD AMOUNTS OF IRANIAN AND RUSSIAN OIL
China is a nation marooned by a lack of energy and, thus, has become the largest importer of hydrocarbon based energy in the world. BOOM has previously explained that China sources oil and gas from many nations. For example, supplier nations include Russia, Saudi Arabia, Iraq, Malaysia, Oman, UAE, Brazil, Angola, Kuwait and the USA. Unknown amounts come from Venezuela and Iran.
In fact, in 2023, Russia became China's top crude oil supplier, as the world's biggest crude importer defied Western sanctions to purchase vast quantities of discounted oil for its processing plants. All settlements were presumably not made with US Dollars.
Russia shipped a record 107.02 million metric tons of crude oil to China last year, equivalent to 2.14 million barrels per day (bpd), according to Chinese customs data, far more than other major oil exporters such as Saudi Arabia and Iraq.
President Vladimir Putin will visit Mongolia this week. Why? Because Russia is aiming to build a new gas pipeline, Power of Siberia 2, via Mongolia to China. Mongolia has given assurances to Russia that it will not arrest Putin as a member of the International Criminal Court. This is also a major development. The rumour is that China has guaranteed Putin’s safety on the trip.
In January, Reuters reported the following analysis of China’s Oil Imports. Volumes are stated in Millions of Metric Tons. A metric ton is equivalent to 7.3 Barrels of Crude Oil.
Shipments to China from the US last year surged 81.1% despite so-called “geopolitical tensions between Beijing and Washington” as US crude production increased. The great unknown is in regard to supplies to China from Iran and Venezuela.
This chart was published last week by Kpler.com. Kpler is a major supplier of data and analytics for global trade. The chart shows actual numbers for increasing Chinese oil purchases from Iran – now above 1.5 Million Barrels Per Day. If this is true, then Iran is already a larger volume supplier than Iraq to China and should be third on the list, just below Saudi Arabia. The Iranian total would be approximately 75 Million Barrels of Oil.
If Iran continues to grow its supplies to China while Saudi Arabia continues to reduce supplies, then Iran will eventually become the second major supplier.
Please Note: BOOM presumes that these oil purchases from Iran are not settled in US Dollars.
Officially, China hasn’t purchased any Iranian barrels since June 2022, according to government data. Unofficially, it is buying record amounts which are seen as coming from Malaysia. In the seas off Malaysia, crude oil is often transferred from one tanker to another. This masks the real origin of the oil and is officially recognised as oil from Malaysia. Readers should note the 53.72 % increase in Oil from Malaysia to China in the Chart from Reuters above.
The Kpler.com chart
MORE DEVELOPMENTS FROM THE CRYPTO CRIME SCENE – DISTURBING NEWS –SOME CRYPTO ACCOUNTS FROZEN
Cryptos are sometimes called “Cryptocurrencies” by people who don’t understand what a currency is or is not and who don’t understand what money is either. Crypto tokens are more accurately described as digital assets (or perhaps digital commodities in some instances) which reside on digital ledgers, as do all digital assets. They are similar to Casino Chips except that they are in digital form and not physical.
We have been using digital assets since the 1960’s when computers arrived and we began keeping digital ledgers. The world of banking and finance was an early adopter for obvious reasons. Now, in the advanced economies, 97 - 98 % of all fresh new money at origination is digital, most often created as a bank loan and residing on the ledgers of the banking system. Money is simply a contractual exchange of promises and trust. That is the key to understanding it. It evolves from the ground up in complex societies to enable ease of transaction settlements and the sharing of resources and the outcomes of labour. The remaining 2 – 3 % is physical cash, notes and coins, usually originated by government mints under the purvey of national Treasuries and some central banks.
And, by the way, a Blockchain is just a digital ledger that is immutable. In other words, the transactions cannot be erased or adjusted, unlike conventional digital ledgers. Immutable means not changing or unable to be changed, according to Dictionary.com.
BOOM has written extensively in the past about the Wild West crime scene otherwise known as the world of Crypto where many Billions of Dollars have been lost by innocent victims.
In the United States, the Federal Trade Commission is tasked with consumer protection of American citizens. The FTC Consumer Protection Data Spotlight report issued in June 2022 detailed that more than 46,000 people had reported losing over US $1 Billion in Crypto scams since the beginning of 2021. Losses of US$ 1 Billion in just 18 months is sobering to those who have lost it. And, remember, this number is only the scam losses in the USA. It does not include the rest of the planet. And then it is instructive to remember that the Crypto world began way back in 2008 – so the total losses accumulated over the last 16 years are many Billions of Dollars in value.
In fact, the losses from Crypto investment scams in the United States alone totalled US $ 3.94 Billion in 2023, an increase of 53% compared to US $2.57 Billion in 2022 according to a report by the Federal Bureau of Investigation (FBI).
The report showed that overall total investment frauds grew by 38% to $4.57 Billion from $3.31 Billion. Crypto scams accounted for the majority of those frauds, highlighting the prominent role that cryptocurrency plays in the area of online crime.
Total US Fraud Losses in 2023 amount to US$ 12.5 BILLION
Total US Fraud Losses over the last 5 years amount to US$ 37.4 BILLION
If you don’t believe these amazing numbers, you can check out the Report here.
Internet Crime Report FBI -- 2023
https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3Report.pdf
IC3 BY THE NUMBERS
By the way, the funds used to purchase those digital assets called Cryptos were all national, fiat currency transferred into the bank accounts of the scammers, sometimes directly, other times less directly so.
The latest group of potential Crypto victims are clients of the giant Crypto exchange, Binance. Those victims happen to be Palestinian. Apparently, on August 26th, at the request of the Israeli government, the accounts of those Palestinians were either blocked or frozen or the funds confiscated by Binance, depending upon which narrative you wish to believe.
One report in the financial media that day stated that Ray Youssef, co-founder of the crypto marketplace Paxful, said that Binance had "[refused] to return the funds. All appeals denied."
That report went on to quote Youssef saying "All Palestinians are affected, and judging by the way things are going, all Lebanese and Syrians will get the same treatment. Not your keys, not your coins”.
However, Richard Teng, the CEO of Binance was quoted as saying on 28th August …. "Only a limited number of user accounts linked to illicit funds were blocked from transacting. There have been some incorrect statements about this".
"As a global crypto exchange, we comply with internationally accepted anti-money laundering legislation, just like any other financial institution," he added.
Binance has (reportedly) yet to provide details on the number of affected users and when the restrictions were enforced.
Teng (reportedly) emphasised that these actions are part of standard compliance practices and not a blanket freeze on all Palestinian accounts. The confusion comes against the backdrop of ongoing geopolitical tensions and the use of Cryptocurrencies by various entities, including terrorist organisations.
Globally, regulators have increasingly focused on the role of cryptocurrencies in terror financing. Singapore has reported a rise in such activities, although traditional methods remain predominant. The complexity of tracking and verifying individual wallet ownership adds to the challenges faced by exchanges like Binance.
THE DIVERGENCE BETWEEN SHANGHAI AND HONG KONG STOCK MARKETS CONTINUES
Regular readers will know that BOOM has been watching China’s external trade indicators and stock markets very closely indeed. BOOM’s secret key trade indicator for China did not rise (or fall) last week. The respective Stock markets of Shanghai and Hong Kong continued to diverge.
The Hong Kong Stock Index finished the week up by 0.73 %. Its uptrend since early August is intact.
DAILY CHART OVER 6 MONTHS
The Shanghai Stock Index finished the week down by 0.43 %. However, on Friday strong buying emerged at the Open and during the day’s trade it was up by 1.77 % at its highest point at 1.40 pm. It then retreated and finished the day up by 0.68 %. That could have been significant. Next week will continue to tell the story. BOOM will continue to watch closely.
DAILY CHART OVER 6 MONTHS
MORE THREAT IDEOLOGY -- IN ENERGY AND FOOD
In the June 30th BOOM editorial, BOOM made the following observations about Power and Threat Ideology. Keir Starmer, the new Prime Minister of the UK has since illustrated the theme very clearly indeed. But he is just the latest in a conga line of politicians in the advanced Western economies who see “Threats” as the way to solidify their positions of power.
June 30th – BOOM on Threat Ideology:
(Almost) all politicians now use Threat Ideology to subdue and control the voting public. They see the People as the enemy and they seek to control that enemy. Why?
The question is easy to answer. Their goal is to maintain their privileged positions of power and influence, not to mention their lavish life styles, fame and compensation packages. After all, as Lord Acton, the 19th century British politician once observed -- “power corrupts and absolute power corrupts absolutely”.
In BOOM’s view, this has happened because politicians who stand for nothing and who have no coherent philosophy of thought and coherent plan for the future must ultimately stand for only one thing and one thing alone – and that is their quest for power above all else. But they must hide this quest because it is too hideous, too embarrassing to admit. They pay lip service to political ideology but that is becoming rarer over time. And so, almost ALL of them have decided that their power is best achieved and maintained by keeping people (the voters) fearful, anxious, uncertain and thoughtless. This is a clever strategy, carefully conceived by their handlers.
Their Modus Operandus is to endlessly identify threats and bring them forward to the public one after another. They do not allow a pause for calm reflection or reasoned debate.”
One “threat” with which we are all familiar is the Threat of Coal, “dirty coal”. But we are all reliant upon this black energy source for 26 % of the world’s energy and that reliance comes through all of the goods which we import from China and other Asian nations.
BOOM saw an interesting Graphic last week from Visual Capitalist which readers may like to study closely. The graphic was in an article titled “Global Coal Consumption by Region”. It will, hopefully, enlighten rather than cause concern. BOOM looks at Visual Capitalist on a regular basis and can recommend it because charts can enlighten quickly. You may have noticed that BOOM likes Charts and uses them often to illustrate financial and economic matters.
The Graphic shows that 83 % of Coal Consumption is happening in the Asia-Pacific including China. China’s consumption is 56.1 % of the global total. The Asia Pacific’s consumption is 26.7 %.
But the most interesting numbers are seen in nations that are now terrified of The Threat of Global Warming and coal’s contribution to it. All of Europe, for example, only consumes 5.1 %. North America (Canada and the USA) and South America consume a little more, just 6.1 %.
The Threat of Coal’s contribution to the Threat of Global Warming is greatest in the nations that only use 11.2 % of the coal that is burned to provide energy. That is paradoxical.
BOOM recently saw a new electric car with a prominent sticker demanding Climate Action Now (!). The car also had a “Zero Carbon” sticker on the back bumper. The more interesting observation to make, however, was that the car was made in China. BOOM is yet to see a “Coal Made Car” sticker.
WE CAN FORGET COW FARTS -- FOOD PRODUCTION IS NOW A THREAT
Another “threat” is now coming from Nitrogen and its “dangerous” gas, Nitrous Oxide. However, according to the United Nations website titled – “Facts about Nitrogen Pollution” --
“The discovery a century ago of an industrial process that converted nitrogen in the air to ammonia that made the manufacture of nitrogen fertilizers possible was followed by a spectacular increase in global food production.”
Now surely that is a good thing? Feeding 8 Billion people on Earth could not be done without Nitrogen fertilizers. But no. Feeding so many people is apparently a very bad thing. It is a “threat” to life on Earth. Go figure. The UN website explains --
“Nitrous oxide is 300 times more potent than methane and carbon dioxide as a greenhouse gas.
It is also the biggest human-made threat to the ozone layer.
With an atmospheric lifetime of 200 years, nitrous oxide poses a much more long-term threat than other forms of pollutants”
But Nitrogen fixation is essential to life on Earth. As part of the nitrogen cycle, it is essential for soil fertility and the growth of terrestrial and semiaquatic vegetations upon which all consumers of those ecosystems rely for biomass. Nitrogen fixation is thus crucial to the food security of human societies in sustaining agricultural yields (especially staple crops), livestock feeds (forage or fodder) and fishery (both wild and farmed) harvests. It is also indirectly relevant to the manufacture of all nitrogenous industrial products, which include fertilizers, pharmaceuticals, textiles, dyes and explosives.
Sounds good? No, of course not. The threat is real (apparently) – again according to the UN …..
“Nitrogen pollution is the biggest driver of biodiversity loss on the planet, after habitat destruction and greenhouse gas emissions.
Nitrogen pollution can degrade soils.
It can cause the inadvertent fertilization of trees and grasslands or nitrogen tolerant species to outcompete more sensitive wild plants and fungi.
Nitrogen pollution can create “dead zones” in the ocean and cause toxic algal blooms to spread in marine ecosystems. “
And “Today, nitrogen pollution is one of the most pressing pollution issues facing humanity, threatening our environment, health, climate and ecosystems.
Countries must step up their joint efforts to reduce nitrogen waste by 2030.”
SO CAN HYDROGEN SAVE US? OR IS THE PLANET DOOMED AS THE ENVIRONMENTALISTS TELL US?
BOOM is confused. Life on Earth seems to be a threat to .... (wait for it) … life on Earth.
So how about Hydrogen as an energy source? Surely Green Hydrogen, the new wonder gas, will save us from a catastrophic future full of environmental threats caused by deadly Carbon Dioxide, Nitrogen and Nitrous Oxide?
But no, Green Hydrogen is simply impractical according to a report just published in the Journal of Energy, Science and Engineering titled “A review of challenges with using the natural gas system for hydrogen”.
The Abstract of the paper states -- “Hydrogen, as an energy carrier, is attractive to many stakeholders based on the assumption that the extensive global network of natural gas infrastructure can be repurposed to transport hydrogen as part of a zero-carbon energy future.”
However, it finds “We find that every value chain component is challenged by reuse. Hydrogen blending can circumvent many challenges but offers only a small reduction in greenhouse gas emissions due to hydrogen's low volumetric energy density. Furthermore, a transition to pure hydrogen is not possible without significant retrofits and replacements. Even if technical and economic barriers are overcome, serious safety and environmental risks remain.”
And in the Conclusion, the paper seriously pricks the Hydrogen balloon --
“Although many of the concerns associated with deploying pure hydrogen energy systems can be mitigated by blending hydrogen with natural gas, doing so will not help decarbonize the economy as it does not facilitate a gradual transition to pure hydrogen, and it only offers a small reduction in GHG emissions (GHG - Greenhouse Gases). The benefits from reduced GHG emissions are limited due to the greatly lower volumetric energy density of hydrogen relative to the gas it displaces. For example, a mixture of 20% hydrogen (by volume) into natural gas is only about 7% hydrogen in terms of energy content and, in the best case, represents only a 7% reduction in carbon dioxide emissions per joule of heat generated by its combustion. Furthermore, blending hydrogen with natural gas still has safety and climate risks from leakage and NOx emissions.”
BOOM is confused. Food production is harmful to life on Earth. Carbon Dioxide is harmful to life on Earth. Burning Coal is harmful to life on Earth. All Hydrocarbon energy sources are harmful to life on Earth. And Hydrogen is not a viable, practical alternative.
FALSE ASSUMPTION IN OPERATION?
Last week, BOOM discussed Abductive Reasoning and the risks associated with False Assumptions and False Positive Tests.
In regard to the movement of environmentalism, BOOM is concerned that a false assumption may be operating which distorts all reasoning and conclusions. That possible false assumption is that the Earth’s climate is progressively warming to “dangerous” levels. The objective evidence does not seem to fully support this hypothesis and thus, it is open to question. Climate has multiple feed back loops and is therefore hideously complex, not dissimilar to the physiology within the human body.
If the basic assumption of global warming is false, then all conclusions reached will be false and the environmentalists will have been revealed as a following a cult, not a science. BOOM will end with a warning that applies to all situations.
Beware of False Assumptions and False Positive Testing.
In economics, things work until they don’t. Until next week, make your own conclusions, do your own research. BOOM does not offer investment advice.
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Sources: BOOM uses charts from Trading Economics, Incredible Charts and Stockcharts. Investopedia is useful source for financial definitions.
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