With 9 Days To Go Before Another Shutdown, Trump Wants GOP To Buy Time "To Work On Our Agenda"

With nine days to go before yet another government shutdown, President Trump has encouraged Republicans to buy time "to work on our Agenda" with another Continuing Resolution (CR) -aka kicking the can again.

House Speaker Mike Johnson and Donald Trump during a news conference, Friday, April 12, 2024, at Mar-a-Lago in Palm Beach, Fla. Wilfredo Lee / AP

"Government funding runs out next week, and Democrats are threatening to shut down the Government - But I am working with the GREAT House Republicans on a Continuing Resolution to fund the Government until September to give us some needed time to work on our Agenda," Trump posted on Truth Social, adding that doing so would allow for the administration to "cut Taxes and Spending in Reconciliation, all while effectively FREEZING Spending this year."

To that end, House Speaker Mike Johnson has proposed a "clean" stopgap funding bill that would maintain current federal spending levels through September 30.

That said, Republicans will have to do this without support for Democrats - which means that it all comes down to whether Johnson can gain the support of all Republicans given the razor-thin Republican majority in the House - before the Senate weighs in.

Most of the House Freedom Caucus, which opposes the temporary funding measures, met with Trump at the White House Wednesday to discuss the funding plan, which could receive a vote as early as next week. Rep. Lauren Boebert (R-CO) said following the meeting that they're ready to move forward with the CR, however other caucus members said they would need to see the text first.

"Look, we haven't seen the final form of the CR," said Rep. Andy Harris (R-MD), adding "In concept, the president has said he needs this for his agenda. We support the president's agenda."

More via Politico:

One catch: There are a whole lot of House Republicans who have never voted for a CR before, and getting them to play along this time is crucial. Because of the anger over Trump’s slashing of the federal bureaucracy, Democrats who usually put those stopgaps over the finish line probably won’t be on board this time.

So it fell to Trump himself to make the sale to the House’s fiscal hawks at the White House on Wednesday, and he seemed to make some progress. Missouri Rep. Eric Burlison said he’s now open to supporting a CR. And two key Freedom Caucus members — Texas Rep. Chip Roy (Texas) and Chair Andy Harris (Md.)— told reporters other holdouts will eventually get on board.

Massie Blocks Path

Rep. Thomas Massie (R-KY) may be the fly in the ointment, however, after say he'll "vote against a clean CR that funds everything in 2025 at 2024 levels," because (among other things) - Johnson "isn't following the provision in law that would have cut everything by 1% if the CR extended past April. 2," and that the government "should not fund the waste, fraud, and abuse that Doge has found."

I’ll vote against a clean CR that funds everything in 2025 at 2024 levels because:

1. @SpeakerJohnson isn’t following the provision in law that would have cut everything by 1% if the CR extended past April.

2. We should not fund the waste, fraud, and abuse that Doge has found.…

— Thomas Massie (@RepThomasMassie) March 4, 2025

In comments to the press, Johnson said on Tuesday that he hopes to release the text of the CR by the end of the week.

In short, without support from Democrats, House Republicans will need to rally their entire conference in order to approve the stopgap measure.

During the last funding fight in December, Johnson pushed for an extension until March so that Republicans could come up with an agreement on new spending bills with Trump in office, before the March 14 deadline.

Tyler Durden Thu, 03/06/2025 - 10:55

Hunter Biden Claims Financial Distress In Seeking To Drop Lawsuit Against Ex-White House Official

Authored by Jonathan Turley,

There is a notable filing this week in Los Angeles where Hunter Biden is seeking to dismiss one of his many lawsuits against individuals associated with disclosing or discussing the contents of his infamous laptop. While Hunter spent years suggesting that the laptop images and emails might be Russian disinformation (with the help of obliging mainstream media), the contents were found to be authentic by courts and agencies. In seeking to drop his lawsuit against an ex-White House aide, Garrett Ziegler, Biden claims to be, again, in financial ruin.

What is notable is not just the underlying claims of economic distress but who filed them. The attorney, Bryan M. Sullivan, a partner at Early Sullivan Wright Gizer & McRae LLP, previously threatened me and others with lawsuits for writing on the scandal in relation to support that Hunter received from lawyer Kevin Morris (who appeared to be both his financial backer and his lawyer).

Years ago, I wrote about how the Biden team had decided to use a scorched earth strategy to target critics. Various people, including myself, were threatened with lawsuits—actions that could drain the targets of hundreds of thousands of dollars and tie them up in court for years.

In my case, I received a letter from Sullivan that I could face a defamation action if I do not retract (or if I repeat) my criticism of Morris’s representational relationship with Hunter. 

I responded by immediately revealing the contents of his letter and repeating those allegations. Sullivan and Morris never sued.

Now, however, Sullivan is filing as counsel for Hunter and claiming that he is the victim of circumstances and that it would be unfair to continue litigation that he started in targeting one of his critics.

The filing cites the loss of the home in the recent fires. He does not own the home.

“Moreover, this lack of resources has been exacerbated after the fires in the Pacific Palisades in early January upended Plaintiff’s life by rendering his rental house unlivable for an extended period of time and, like many others in that situation, Plaintiff has had difficulty in finding a new permanent place to live as well as finding it difficult to earn a living… So, Plaintiff must focus his time and resources dealing with his relocation, the damage he has incurred due to the fires, and paying for his family’s living expenses as opposed to this litigation.”

Hunter notes that the home is now “unlivable” and that he and his family are struggling to find permanent housing. He adds that he has “suffered a significant downturn in his income and has significant debt in the millions of dollars range.”

Hunter has reportedly received millions not just from alleged influence peddling over the years, but from friends in the forms of loans and support. Throughout those years, he has continued to live a relatively extravagant lifestyle.

One line of income was created through his art sales. However, there were reports of a collapse in the value of Hunter’s art with the departure of his father from office. With the loss in the value of his influence, there was a telling drop in the demand for his art.

However, there are now indications that even the prior demand was inflated by media reports.

Georges Bergès, Hunter Biden’s art gallerist, contradicted the White House’s claims about the handling of the art. Hunter reportedly did know who purchased roughly 70% of the value of his art, including Democratic donors Morris and Elizabeth Hirsh Naftali.

Biden’s allies in the media hyped the sales to show that Hunter was a legitimate artist. However, Bergès admitted that Morris actually purchased much of the art. Morris has reportedly given Hunter millions to cover unpaid taxes and expenses. Hunter only sold paintings to ten people for $1.5 million, according to congressional testimony from 2024. Morris bought 11 works for $875,000 in total.

The fires added an interesting wrinkle to the art controversy. As I explored in a prior column, the question was whether reports of some of the art being lost in the fire could result in the purchasers filing for insurance at inflated rates. There was even the possibility of Hunter filing for lost art.

Yet his lawyers are now claiming that he is in dire financial shape and cannot support the continuation of the lawsuit that he brought against Ziegler. What they seem most concerned about is that Ziegler will now seek fees and costs from Hunter. (Previously, Hunter was able to secure such costs from Ziegler for a filing that the court found meritless.)

The motion (below) provides new insights into how Hunter’s financial situation has declined due to his father and his family’s political influence.

The filing includes representations that:

“In the 2 to 3 years prior to December 2023, I sold 27 pieces of art at an average price of $54,481.48, but since then I have only sold 1 piece of art for $36,000. Similarly, for my book sales, in the six month period before the statements (April 1, 2023 through September 30, 2023), based on the September 30, 2023 statement, 3,161 copies of my book were sold, but in the six months after the statements, only approximately 1,100 books were sold.”

Notably, Hunter also says he cannot tap others for financial support. If true, that itself would be an alarming change for the scion of the Biden family. Hunter has long been the Blanche DuBois of presidential children and “always depended on the kindness of strangers.” Now, he is claiming that “in that Plaintiff has suffered significant financial setbacks in the past year and cannot borrow any more money.”

The filing also acknowledged that he has brought lawsuits against other targets that may now have to be reexamined:

“Plaintiff acknowledges that he has other civil actions pending and is assessing each one on a case-by-case basis to allocate his limited resources. (Biden Decl., at ¶ 7). Plaintiff cannot describe the details of those analyses as it involves attorney-client communications and the attorney work doctrine.”

Yet, these litigants were also forced to spend money after being targeted by the Biden team. Now that Hunter has secured a pardon from his father and is ready to move on, he suggests that these other litigants see their cases dropped. They are also likely to balk at the suggestion that they should not go quietly into that night (without recouping some of their fees and costs).

While Hunter insists that he “does not have the resources to continue to litigate this matter,” Ziegler and other litigants are likely to point to the aggressive pattern of lawsuits as evidence of an effort to drain critics, including the role of Sullivan himself.

It is not clear if Ziegler and others are going to note the aggressive litigation strategy of Hunter and his lawyers in seeking fees or costs. Years ago, the Washington Post details how Morris called for a “more aggressive” response to those seeking to investigate the alleged influence peddling, including hitting critics, such as Fox News, with possible defamation lawsuits.

For those critics, the message (which was notably fed to the Post) was clear: criticize the Bidens and face financial or personal ruin. Now, the team may find that their targets may not want to simply dismiss the case and walk away. It is the litigation version of the old Chinese proverb that the problem with riding a tiger is always the dismount. The problem with hitting critics with aggressive lawsuits is always the dismissal.

Here is the filing: Hunter Biden Motion

Tyler Durden Thu, 03/06/2025 - 10:35

Europe's 'ReArm' Plan "Is Going To Come At A Vast Cost"; Rabobank

Via Rabobank,

“And he shall judge among the nations and shall rebuke many people; and they shall beat their ploughshares into swords, and their pruning hooks into spears; nation shall lift up sword against nation, neither shall they forget war anymore.”

(With apologies to Isiah 2:4)

The US has increased its pressure on Ukraine to pause the war by turning off military intelligence to it, removing Kyiv’s ability to fire missiles into Russia. This action has further outraged and --given their reliance on US systems in NATO-- terrified Europe. Note President Eisenhower did the same vis-à-vis then-and-current ally South Korea in 1953, which didn’t want to stop fighting; the US didn’t want a direct war with China, or more inflation, and made it clear military aid would stop until an armistice was achieved. That frozen conflict seems where Ukraine-Russia is heading, especially as President Zelenskyy just said what rejected what the Russian terms for any formal peace deal (demilitarisation, formal renouncement of lost territories) would be.

Europe has added its own pressure on Zelenskyy as Germany’s ministry of defence admits it can’t supply more materiel to Ukraine either as it’s out of stock. 

That underlines the need for the German announcement on infrastructure investment and rearmament yesterday, which saw 10-year Bund yields rise 31bp on the day, their worst performance since 1997. EUR jumped.

Ahead of today’s EU ReArm summit President Macron addressed his nation, stating:

“Our prosperity and security have become more uncertain, and it must be said, we are entering a new era… if a country can invade its neighbour in Europe with impunity, then no one can be sure of anything anymore, and it is the law of the strongest that applies, and peace can no longer be guaranteed on our continent itself.” 

He added that the future of Europe will not be set by the Kremlin or Washington, DC, and spoke of extending the French nuclear umbrella to Europe.

 

You will find more infographics at Statista

This is going to come at a vast cost. If you think a 31bp rise in Bunds captures the scale of shocks involved in a soft-power Europe trying to set its own future in a hard-power world then you spend too much time in soft-power circles. For starters, the FT op-eds today that ‘Europe must trim its welfare state to build a warfare state’: like it or not, that is starting to sound a bit MEGA (Europe, not America) and DOGE. One wonders what the ECB will say about it today.

Europe is outraged by US actions vs Ukraine and what some call the White House’s “reverse Nixon” strategy (so, ‘Noxin’?) of trying to split Russia from China, as with China vs the USSR in the 1970s: there is talk of Trump–Putin kinship or kompromat even in the financial press. However, facing a united China and Russia, when until this week Europe refused to rearm, is something all geostrategists, some belatedly, see as a deeply flawed US strategy. Moreover, the eurocentric fail to spot that Trump is not only pivoting from Europe to focus on Asia --which the EU largely thinks of in terms of trade not security-- but is trying to use the quid pro quo gained there for Putin’s help with nuclear negotiations with Iran.

After all, Tehran is close to a nuclear weapon and Israel, who just rehearsed a joint strike on it with the US, to having to remove what it sees as an existential threat the hard way. Were that to occur, it would have a vast negative impact on the US and European economies. That key issue isn’t even part of current EU conversations; but as Europe rearms and tries to find its own place in the world, it will find it has to join more such dots in more locations at an ever-higher price.

It also goes without saying that the odds of ‘Noxin’ and an Iran deal success are very low; but the alternative scenarios are not ones markets want to think about. 

Again, they do not imply just a 31bp move higher in 10-year Bunds. Especially not when the Chinese embassy in the US tweets: “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”

On the first of those fronts, President Trump granted a one-month pause on 25% tariffs on autos from Canada and Mexico, and is reportedly considering exempting some agri products, as well as potash. Markets obviously loved that, presumably because it affirmed their view that ‘there aren’t going to be any tariffs really’ – which is certainly easier to model.

What they won’t love at all is the Wall Street Journal’s Fed whisperer Nick Timiraos saying, ‘The Two-Headed Monster Stalking the Economy Has a Name: Stagflation’. 

Because nobody is allowed to use the S word. Trump is using the term, “A little disturbance” instead.

Markets think the White House won’t do anything that allows them to go down, as if the 100+ radical executive orders so far, and constant talk of tariffs and resetting Bretton Woods, is just talk and the actual US focus is the old economic policy play of tax cuts and deregulation. An economic commentator I heard on TV yesterday was noting Trump was “using the art of the deal” with Canada and Mexico. What deal is this art working towards, exactly? Fiddling with efficient free trade just for the sake of it?! Saying “because markets” without thinking “because what?” is not a real response, or a predictor; sometimes headlines saying ‘European rearmament’ can mean an explosive surge in Bund yields.

Yet Trump hasn’t mentioned stocks so far, and the word from D.C. is their focus is on Main Street, not Wall Street, with willingness to tolerate “disturbance” for at least the next six to eight months, while blaming it on Biden, in order to get a framework in place that allows for growth based on what Trump thinks GDP is *for*, e.g., the new office of ship building in the White House.

That doesn’t mean there aren’t some market- and inflation-friendly measures being floated: as one example, Trump economic advisor Navarro wants to see oil in the $50s. 

That would certainly offset some tariff inflation. However, that is also the point at which the US oil industry makes its money, so some serious economic statecraft is going to be required there, not economic policy.

On which note, as all is in flux, former Australian PM Abbot is publicly lobbying for a free-movement and free-trade deal for Australia, New Zealand, Canada, and the UK, so a slimline Anglosphere version of the EU. That could easily appeal to all four countries worried about the US direction under President Trump. However, don’t think for a moment that the US wouldn’t then want to bolt that mechanism on to itself provided there was a joint external tariff vs China. In fact, you could bank on it.

In the US, and purely on the bank/economic front, the latest Fed Beige Book noted

 “Overall economic activity rose slightly since mid-January. Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions. Consumer spending was lower on balance, with reports of solid demand for essential goods mixed with increased price sensitivity for discretionary items, particularly among lower-income shoppers… Manufacturing activity exhibited slight to modest increases across a majority of Districts. Contacts in manufacturing, ranging from petrochemical products to office equipment, expressed concerns over the potential impact of looming trade policy changes.”

You know what that doesn’t sound like? An Atlanta Fed GDPNow at -1.5% q-o-q annualised, apparently a recession warning, but largely due to a surge in imports into the US to try to front-run tariffs.

Tyler Durden Thu, 03/06/2025 - 09:45

ECB Cuts Rates, Says Policy Becoming "Meaningfully Less Restrictive"

While the ECB's rate cut this morning was not in doubt by anyone, and the ECB did not disappoint, cutting rates for the 6th time in a row by 25bps across the board (Deposit rate to 2.5% from 2.75%; Refinancing Rate to 2.65% from 2.90%, marginal lending to 2.60% from 2.85%)...

.... what everyone was focusing on was whether the ECB would use the word "restrictive" in the statement. And while it did use it, here is what it said: "Monetary policy is becoming meaningfully less restrictive, as the interest rate cuts are making new borrowing less expensive for firms and households and loan growth is picking up." True, but one wonders just how restrictive fiscal policy is becoming now that European interest rates are exploding higher at the fastest pace since covid, we'll find out soon enough. The ECB also said that "a headwind to the easing of financing conditions comes from past interest rate hikes still transmitting to the stock of credit, and lending remains subdued overall." As a result, the economy faces continued challenges "and staff have again marked down their growth projections – to 0.9% for 2025, 1.2% for 2026 and 1.3% for 2027. The downward revisions for 2025 and 2026 reflect lower exports and ongoing weakness in investment, in part originating from high trade policy uncertainty as well as broader policy uncertainty." Meanwhile, rising real incomes and the gradually fading effects of past rate hikes remain the key drivers underpinning the expected pick-up in demand over time.

 

Commenting on its policy stance, the ECB said the following:

• Monetary policy is becoming meaningfully less restrictive (previously it said "monetary policy remains restrictive")
• ECB will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
• In particular, rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.
• Governing Council is not pre-committing to a particular rate path.

And here is what it said about inflation:

• Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target, especially in current conditions of rising uncertainty.
• Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay.  
• But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.

The ECB delivered the following forecast, cutting 2025 and 2026 GDP, lowering 2025 core inflation while raising 2025 headline inflation. Here are the details starting with HICP inflation:

• 2025: 2.3% (prev. 2.1%)
• 2026: 1.9% (prev. 1.9%)
• 2027: 2.0% (prev. 2.1%)

HICP Core inflation (ex-energy and food)

• 2025: 2.2% (prev. 2.3%)
• 2026: 2.0% (prev. 1.9%)
• 2027: 1.9% (prev. 1.9%)

GDP:

• 2025: 0.9% (prev. 1.1%)
• 2026: 1.2% (prev. 1.4%)
• 2027: 1.3% (prev. 1.3%)

And the visual summary for inflation:

This is what the ECB said about inflation:

Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis. Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.

Aside from a modest kneejerk reaction, the market was not surprise: as expected and priced, the ECB cut its policy rates by 25bps taking the deposit rate to 2.50% but as noted above, the most pertinent update was the adjustment to language around restrictiveness, with the ECB now saying "monetary policy is becoming meaningfully less restrictive” (prev. “monetary policy remains restrictive”), a tweak which some say opens the door to a pause in the easing cycle, something the likes of Schnabel have flagged in recent weeks, hence the initial hawkish reaction which sent the EURUSD to session highs of 1.082

Given this, traders will be keenly awaiting the press conference from Lagarde for insight into the discussion around the future path for policy, the statement itself maintained a data-dependent and meeting- by-meeting approach.

Today's statement aside, also look for Lagarde's views on the recent German fiscal announcements, EU proposals/reports and the significant market reaction to these events and what impact Lagarde thinks it has on their path ahead.

One thing is certain: monetary policy may be becoming "meaningfully less restrictive" but the explosive move higher in yields across Europe just made fiscal policy the most restrictive it has been in years.

Tyler Durden Thu, 03/06/2025 - 08:47

DOGE Deep-State Demolition Sparks Surge In Layoffs

Despite strong employment indications from the US PMI sub-components, ADP was a disappointment yesterday, and this morning saw global outplacement and business and executive coaching firm Challenger, Gray & Christmas report that U.S.-based employers announced 172,017 job cuts in February, the highest total for the month since 2009 when 186,350 job cuts were recorded. 

Source: Bloomberg

It is the highest monthly total since July 2020 when 262,649 cuts were announced.

“Private companies announced plans to shed thousands of jobs last month, particularly in Retail and Technology. With the impact of the Department of Government Efficiency [DOGE] actions, as well as canceled Government contracts, fear of trade wars, and bankruptcies, job cuts soared in February,“ said Andrew Challenger, Senior Vice President and workplace expert for Challenger, Gray & Christmas.

The Government led all sectors in job cuts in February. Challenger tracked 62,242 announced job cuts by the Federal Government from 17 different agencies last month. So far this year, the Government has cut 62,530, an increase of 41,311% from the 151 cuts announced through February 2024.

Retailers followed with 38,956 job cut plans for a total of 45,375. This is a 572% increase from the 6,751 Retail job cuts announced in the first two months of 2024.

So far this year, the East region has experienced a steep increase in job cuts, primarily due to the cuts recorded for Federal Agencies. The East experienced a 109% year-over-year increase from 51,186 to 107,109. The District of Columbia saw the largest increase from 60 in 2024 to 61,795 in 2025.

Source: Bloomberg

In fact, Challenger, Gray, & Christmas report that “DOGE Impact” leads job cut reasons this year and was attributed to 63,583 layoffs, both directly to the Federal workforce and to contractors.

None of which should be a surprise, but when we look at the government-supplied data, things look a little different?

The number of Americans filing for jobless benefits for the first time slowed last week...

Source: Bloomberg

Adding to that peculiarity, jobless claims in the DC area fell last week??

Source: Bloomberg

But New York saw initial jobless claims explode higher...

However, year-to-date, DC dominates the rise in jobless claimants...

Continuing Jobless Claims rose back up near 1.9 million Americans...

Source: Bloomberg

Given the number of lawsuits desperately trying to slow/delay the firing of government workers (we use that term loosely), we would expect to se the number of initial claims in DC (and therefore the nation) accelerate further in coming weeks as 'judges' are forced to allow Trump and Musk to do what 'we, the people' asked them to do...

Tyler Durden Thu, 03/06/2025 - 08:37

Futures Plunge As German Bond Rout Goes Global

Futures tumble, led by Tech as the world is hammered by soaring yields from Europe to Japan. As of 8:00am ET, S&P futures are down 1.1%, and Nasdaq futures plunged 1.4% as Marvell Technology shares were among the biggest premarket losers, dropping about 15%, after the chipmaker’s result and revenue forecast failed to live up to investors’ lofty expectations. MongoDB Inc. dropped 17% after the database software company gave a disappointing forecast. Mag 7 underperform: NVDA (-1.8%), TSLA (-1.6%) and META (-1.5%) pre-market. 10y yields are +2bps higher while 2y is -1.5bp lower this morning but the move is nothing compared to Germany where yields earlier soared as much as 15bps (they have since retraced much of the move) extending yesterday's record rout; the USD plunge continues, just as Bessent wanted, with the rest of the world about to find out what soared trade deficits really mean. Commodities are mixed: oil saw small gains (+0.5%) after yesterday’s selloff; basic metals are rallying this morning, while precious metals are lower. Since yesterday’s close, the equity weakness was not contributed by single catalyst but more due to a number of macro uncertainties (the auto tariffs delay will not resolve the tariffs risks; more evidence of sentiment impacts from Beige book) and rotation to international stocks. Today, we will hear from AVGO on AI outlooks; MRVL fell -15% post earnings release yesterday (after-market) despite numbers are mostly in line with expectation.

In premarket trading, Tesla and Nvidia fall more than 2% are leading premarket losses among the Magnificent Seven stocks on Thursday. Amazon, Microsoft, Alphabet, Meta and Apple fall less than 1%. Burlington Stores (BURL US) shares rise 14% in premarket trading after the retailer reported fourth-quarter comparable sales and profit that topped Wall Street expectations. Still, its annual forecasts fell short, with Chief Executive Officer Michael O’Sullivan saying the outlook for 2025 is “very uncertain.” Here are the other notable premarket movers:

• ALX Oncology (ALXO US) shares rise 13% in premarket trading after Jefferies upgraded the drug developer to buy from hold, citing “limited theoretical downside.”
• CoreCivic Inc. (TH US) will resume operations at the South Texas Residential Center under an amended intergovernmental services agreement (IGSA).
• JD.com ADRs (JD US) jump as much as 11% in premarket trading on Thursday after the Chinese e-commerce firm reported net revenue for the fourth quarter that beat the average analyst estimate. Peers PDD Holdings climbs 4.4% and Alibaba Group rises 3.8%. .
• MongoDB shares (MDB US) are down 18% in premarket trading Thursday, after the database software company gave a full-year forecast that is weaker than expected.
• ON Semiconductor (ON US) analysts are generally positive on the company’s bid to buy Allegro Microsystems (ALGM US), seeing synergies between the two, though some questioned the offer price, which values the company at $6.9 billion including debt.
• Shares of ECARX Holdings (ECX US), a mobility technology provider, are up 9.1% in premarket trading after the company said it won an award to provide Volkswagen and Skoda with digital cockpit solutions.
• Victoria’s Secret (VSCO US) shares fall as much as 2.7% in US premarket trading after the lingerie retailer’s forecasts for the first quarter and for the full year fell short of analyst expectations with the company citing an uncertain backdrop and shift in consumer confidence. Analysts at BMO and JPMorgan cut their price targets on the stock.

Chip shares came under renewed pressure after Alibaba Group Holding Ltd. introduced its Qwen platform, a model that it claims performs as well as Chinese start-up DeepSeek but with a fraction of the data. The news, alongside the underwhelming earnings, are denting investor confidence in US companies’ dominance in AI.

“Clearly Alibaba is weighing on sentiment,” said Alexandre Hezez, chief investment officer at Group Richelieu in Paris. “The tech sector has been weakened lately, if you combine that with Marvell, it’s a pretty sour cocktail for US stocks”

Europe’s Stoxx 600 index slipped 0.6%, as real estate and consumer product names underperform, reacting to sharply higher bond yields across the continent, following Germany’s announcement earlier this week that it would deploy hundreds of billions of euros in additional spending. Indeed, German government bonds fall again, extending their worst daily drop since 1990 and pushing 10-year yields up another 6 bps to 2.85%. And this time the selling has spilled over across Europe and is also hammering Japan.

Auto shares bucked the trend, however, after President Donald Trump offered the sector a one-month reprieve from the tariffs levied on Mexican and Canadian imports. The DAX is up 0.4% as bonds sell off across the world. Automakers extend rally following a delay in some US tariffs on Mexico and China. Focus is also on the European Central Bank meeting later Thursday.  Here are some of the biggest movers on Thursday:

• German stocks touched a record high, rising for a second day after chancellor-in-waiting Friedrich Merz said that the country would unlock hundreds of billions of euros for defense and infrastructure investments. Meanwhile, news that the US will delay Canadian and Mexican tariffs on automakers for a month also boosted German car companies.
• Lufthansa shares rise as much as 9.1%, the biggest jump since March 2022. The German flag carrier reported a return to adjusted Ebit growth in the fourth quarter and guided a “significant” increase in 2025.
• Air France-KLM shares soar as much as 20%. Strong unit revenues drove a fourth-quarter Ebit beat, while management commentary that operating profit guidance for fiscal year 2025 would be at least €300 million higher than the previous year across the business reassured the market.
• Deutsche Post advances as much as 13% following fourth-quarter results that saw a strong performance from the company’s Express unit.
• Kenmare shares jump as much as 52%, the most since 2015, after the titanium minerals company said it rejected a takeover offer tabled by a consortium that includes its former managing director Michael Carvill.
• JCDecaux shares rise as much as 20%, the most since November 2020, as results and guidance from the French outdoor advertising firm were met with an outpouring of relief.
• European real estate and utility stocks are underperforming again on Thursday as a global bond selloff continued due to Germany’s spending plans, with investors looking ahead to the European Central Bank’s interest-rate decision later today.
• Spire Healthcare falls as much as 25% as the UK hospital operator’s full-year guidance misses analyst estimates.
• Galderma shares drop as much as 9.3%, the most on record, after the Swiss skincare company forecast “clearly subdued” net sales growth in the first quarter from a year earlier due to phasing.

Germany’s spending plan drove Bunds on Wednesday to their worst session since 1990 and the selloff extended on Thursday. The moves rippled into markets across the euro area and beyond, with Japanese 10-year borrowing costs earlier reaching the highest in over a decade and Treasury yields rising three basis points.

Investors are now waiting for the European Central Bank’s meeting, which is expected to deliver a 25 basis-point interest rate cut, and could yield clues on how rate-setters might react to the additional spending plan.

“This is ultimately a reassessment of the reality that Europe needs to find some financing,” Rabobank strategist Matthew Cairns said of the bond selloff. “Some more repricing is likely, then the ECB will come in and attempt to settle market sentiment.”

Earlier in the session, Asian stocks rose as Chinese shares extended their rally and Donald Trump exempted automakers from newly imposed tariffs on Mexico and Canada for one month. The MSCI Asia Pacific Index rose as much as 1.5%, set for second day of gains, with Alibaba among the biggest boosts after unveiling its latest AI model. Hong Kong’s Hang Seng Index led advances, rising 3.3%. Stocks also climbed in mainland China, Japan and South Korea. Ongoing anticipation of further stimulus as well as vows to support the development of new technologies such as AI are powering China’s rally after the nation set bullish growth targets for the year at the start of the National People’s Congress on Wednesday. While China’s ambitious goals signal its preparedness for a looming trade war, investors remain cautious on the sustainability of share-price gains amid increasing geopolitical uncertainty. Elsewhere, Japanese stocks climbed on boosts from the US tariff delay as well as Germany’s historic spending plans. Malaysian equities slipped ahead of an interest rate decision, with the central bank standing pat as expected.

In FX, the euro is little changed just below $1.08 ahead of the European Central bank decision, having ventured above that level earlier. 

In rates, treasuries are mixed as US trading gets under way with belly to long-end yields higher on the day while front end outperforms, leaving 2s10s spread near widest levels of past month. France and Germany lead bigger selloff in core European rates, weighing on Treasuries and extending this week’s global yield-curve steepening move. US 10- to 30-year yields are more than 3bp higher on the day with 2-year little changed, leaving 2s10s near 32bp, last seen Feb. 4; German 10-year adds more than 6bp to Wednesday’s 30bp surge, French 10-year is 8bp higher after rising 26bp.Focal points of US session include weekly jobless claims data and three Fed speakers, following ECB rate decision at 8:15am New York time; President Christine Lagarde speaks 30 minutes later. German government bonds fall again, extending their worst daily drop since 1990 and pushing 10-year yields up another 6 bps to 2.85%. And this time the selling has spilled over across Europe and is also hammering Japan.

In commodities, oil prices advance, with WTI up 0.5% near $66.60 a barrel. Spot gold falls $20 to around $2,898/oz. Bitcoin rises 1% and above $91,000.

The US economic data calendar includes February Challenger job cuts (7:30am), January trade balance, 4Q final productivity and unit labor costs, and jobless claims (8:30am) and January wholesale trade sales (10am). Fed speaker slate includes Harker (8:45am), Waller (3:30pm) and Bostic (7pm)

Market Snapshot

• S&P 500 futures down 1.0% to 5,794.50
• STOXX Europe 600 down 0.2% to 554.81
• MXAP up 1.5% to 189.77
• MXAPJ up 1.2% to 594.54
• Nikkei up 0.8% to 37,704.93
• Topix up 1.2% to 2,751.41
• Hang Seng Index up 3.3% to 24,369.71
• Shanghai Composite up 1.2% to 3,381.10
• Sensex up 0.9% to 74,375.12
• Australia S&P/ASX 200 down 0.6% to 8,094.71
• Kospi up 0.7% to 2,576.16
• Brent Futures up 0.5% to $69.65/bbl
• Gold spot down 0.7% to $2,900.07
• US Dollar Index little changed at 104.21
• German 10Y yield little changed at 2.86%
• Euro little changed at $1.0789
• Brent Futures up 0.5% to $69.64/bbl

Top Overnight news

• US President Trump said he is collaborating with House Republicans on a Continuing Resolution to fund the government through September. It was separately reported that Trump is expected to issue an executive order as soon as Thursday aimed at abolishing the Education Department, according to WSJ.
• The Trump administration is weighing more exemptions from the new tariffs on Canada and Mexico — this time for the agriculture industry. Officials are discussing waiving the 25 percent duty on some agriculture products, including Canadian potash, a key ingredient in fertilizer. Politico
• Trump executive order could be released as soon as Tues calling for the Dept. of Education to be abolished (although doing so would require an act of Congress). WSJ
• Walmart Inc. has asked some Chinese suppliers for major price reductions, with the US retail giant’s efforts to shift the burden of President Donald Trump’s tariffs facing strong pushback from firms in the Asian nation, according to people familiar with the matter. Some suppliers, including producers of kitchenware and clothing, have been asked to lower their prices by as much as 10% per round of tariffs, essentially shouldering the full cost of Trump’s duties. BBG
• New York Fed's Perli said balance sheet drawdown has been smooth and financial system reserves remain abundant but flagged the challenge of managing balance sheet cuts amid debt ceiling debate. Perli added that the Fed’s reverse repos can likely shrink further and the Fed may bring back early morning SRF operations at quarter-end.
• BofA card spending (March 1st): 1.4% Y/Y (1.9% January average), spending growth -0.3%
• Germany’s “fiscal bazooka” is positive for the country’s AAA credit rating according to S&P as Berlin has plenty of capacity for higher spending levels and will see a benefit to growth from the move. RTRS
• China is considering scrapping a price cap for local governments buying unsold apartments to help clear of millions of empty homes, people familiar said. Property stocks extended gains. BBG
• South Korea’s CPI for Feb comes in a bit below expectations, including headline +2% (down from +2.2% in Jan, and below the Street’s +2.1% forecast) and core +1.8% (down from +1.9% in Jan, and below the Street’s +1.9% forecast). BBG
• Japan’s biggest union group demanded an average wage hike of 6.09% this year, the most since 1993, signaling the kind of sustainable pay growth that may help drive the economy. BBG
• President Emmanuel Macron has said he will hold talks with allies over how France’s nuclear weapons could protect Europe, as the continent steps up efforts to guard against an emboldened Russia. Macron responded to a call by Germany’s Merz about whether France and the UK would be willing to do some sort of “nuclear sharing” if US became less reliable partner. FT
• The ECB is expected to cut rates by a quarter-point to 2.5% but focus will be on the outlook. Beyond today, opinions vary with one analyst seeing no more reductions while others reckon the benchmark will go down to 1% in early 2026. BBG

A more detailed look at global markets courtesy of Newsquawk

Russian Foreign Minister Lavrov says a "solution in Ukraine is possible within weeks if the West stops supporting Kiev", via Sky News Arabia. Ukrainian President Zelensky anticipates positive outcomes from US cooperation next week. It was also reported that Zelensky’s top aide discussed with the US National Security Advisor steps to achieve just peace, while Ukraine and the US agreed on a meeting in the near future. Four senior members of Trump's entourage have held secret discussions with some of Kyiv’s top political opponents to Ukrainian President Zelensky, according to Politico.

Top Asian News

• PBoC Governor Pan says they will study, establish new structural policy tools, will cut interest rates and Bank's RRR at appropriate time. Wil prevent FX rate overshooting risks. Will roll out tech board on the debt market. Will expand relending facility for tech sector. Will expand relending facility from CNY 500bln to CNY 800bln-1tln.
• Rengo, Japan's largest labour union, is seeking a wage hike of 6.09% for 2025 (sought 5.85% in 2024)
• A team from China recently unveiled its general-purpose AI Agent product, Manus, which is said to outperform the OpenAI model of the same level, according to Shanghai Securities News.
• China's State Planner, on the 2025 GDP target, says external uncertainties are increasing and domestic demand is not sufficient; complete confidence in attaining the growth target.
• China's Finance Minister, on fiscal policy, says China has ample policy room in the scenario of possible uncertain factors bother external and internal.

European bourses (STOXX 600 -0.5%) opened with a clear positive bias, but as the morning progressed, indices gradually drifted lower to display a more negative picture in Europe. European sectors are mixed vs initially opening with a positive bias. Autos is the clear outperformer today with optimism stemming from the White House, which said it will give one month exemptions on any autos coming through USMCA; Stellantis (+2.3%), Porsche AG (+2%). Real Estate is once again towards the foot of the pile, as yields continue to tick higher in the fall out from Germany’s spending plans. US equity futures are entirely in the red, with clear underperformance in the tech-heavy NQ (-1.2%); sentiment for the index is hit following Marvell results; the co. beat on headline metrics but its Q1 guidance disappointed – shares are lower by 15% in pre-market trade.

Top European News

• Goldman Sachs expects the ECB's benchmark interest rate to reach 2% by June 2025 but no longer expects a 25bps cut in July. Goldman Sachs raised Germany's 2025 economic growth forecast by 0.2 percentage points to 0.2% citing higher public spending on defence and infrastructure and raised the euro area's 2025 economic growth forecast by 0.1 percentage point to 0.8%, while it sees some spillovers from Germany into neighbouring countries and now expects the rest of the euro area to step up military spending somewhat more quickly in response to the German shift.
• BoE Monthly Decision Maker Panel data - February 2025. Expectations for CPI inflation a year ahead rose from 3.0% to 3.1% in the three months to February. The corresponding measure for three-year ahead CPI inflation expectations was 2.8% in the three months to February, which was unchanged from the three months to January. Expected year-ahead wage growth remains unchanged at 3.9% on a three-month moving-average basis in February.
• Germany's lower house to start discussing debt brake reform on March 13, via Reuters citing sources; to vote on debt brake reform on March 18.
• Turkish CBT Weekly Repo Rate (Feb) 42.5% (Prev. 45.0%)

FX

• DXY remains pressured and has extended its losing streak to a fourth session in a row. Recent price action has largely been a EUR story which has had a mechanical impact on the USD, with the JPY today also acting as a drag. From a US lens, this week has been characterised by soft US data and tariff angst given actions taken earlier in the week. From a US lens, this week has been characterised by soft US data and tariff angst given actions taken earlier in the week. On the latter, Trump has offered some tentative olive branches in the past 24 hours by providing a one-month exemption on any autos coming through the USMCA and reportedly considering agricultural carve-outs for Mexico and Canada. If downside in DXY extends, focus is on a test on 104; not breached since 6th Nov (103.70 was the low that day).
• EUR/USD has pulled back a touch in recent trade but ultimately remains buoyed by the latest stimulus efforts from Germany. The German 10yr yield is up around 50bps since the start of the week with ING writing that "risks are probably skewed to the 3% handle in 10-year bunds". Subsequently, EUR/USD hit another YTD peak overnight at 1.0821. Today, the ECB is expected to deliver another 25bps rate cut. Greater attention lies on whether policymakers will still view policy as restrictive in lieu of recent economic developments.
• JPY is the best performer across the majors and even outpacing the rampant EUR. USD/JPY was already softer in early European trade before extending the move to the downside after news that Rengo, Japan's largest labour union, is seeking a wage hike of 6.09% for 2025 (sought 5.85% in 2024). USD/JPY has printed a fresh YTD low at 147.78 with the next target coming via the 8th Oct low at 147.34.
• Cable has made its way onto a 1.29 handle for the first time since November 2024 before fading gains. It remains the case that fresh macro drivers for the UK have been on the light side and as such the pair is taking its cues from the broad softness in the USD. The latest DMP release showed the 1-year ahead inflation expectation rise to 3.1% from 3.0% with the 3-year metric holding steady at 2.8%.
• The recent rally in the Antipodeans vs. the USD has extended once again. Overnight, AUD/USD was unreactive to the mostly better-than-expected Australian data and instead tracked the cautious mood in APAC trade.
• PBoC set USD/CNY mid-point at 7.1692 vs exp. 7.2386 (prev. 7.1714).

Bunds

• Bunds once again under marked pressure with losses of over 100 ticks at worst to a 129.64 low vs the 131.71 opening level for the week. Action which has lifted the 10yr yield to a 2.93% peak into the ECB. Into that, markets are fully pricing a 25bps cut with focus on the labelling of restrictive or not and what the trajectory is thereafter.
• For EGBs, pressure today stems in a continuation of recent German-led action and on recent reports in Politico that Germany is expected to propose an idea of loosening the Stability and Growth Pact (the pact which keeps debt to 60% of GDP and deficits to 3%). Updates on this could come from today’s EU leaders meeting and/or the Finance Minister gathering on Monday.
• Gilts and USTs follow suit, but to slightly less degrees with downside of around 30 and 10 ticks respectively. Updates from the UK include the latest BoE DMP where the one-year inflation view was lifted modestly.
• For USTs, focus is on updates on the tariff/trade front as always while the region awaits data post-ECB in the form of weekly jobs (does not match the BLS survey period), Q4 labour revisions and wholesale inventory/trade data; following the latter points, the Atlanta Fed will update its GDPnow model for Q1 which was last tracking at -2.8% on March 3rd.
• Spain sells EUR 5.3bln vs. Exp. EUR 4.5-5.5bln 3.10% 2031 & 3.15% 2035 Bono & EUR 0.514bln EUR 0.25-0.75bln 0.7% 2033 I/L Bono.
• France sells EUR 13bln vs. Exp. EUR 11-13bln 4.00% 2035, 3.20% 2035, 1.75% 2039, and 2.50% 2043 OAT.

Commodities

• Crude is on a firmer footing attempting to pare back some of the pressure seen this week; the complex was pressured in early European trade, in tandem with a dip in risk sentiment, but the downside has since subsided. Brent May'25 currently around USD 69.50/bbl.
• Spot gold is now trading around the USD 2.9k/oz mark; overnight price action was rangebound, but did dip lower in European trade; currently trades within a USD 2,891.41-2,926.20/oz range.
• Base metals are mixed; 3M LME Copper is a little firmer today, benefiting from the commentary from PBoC Governor Pan who noted that rates will be cut at an "appropriate" time.
• A global aluminium producer is reportedly seeking a USD 245/T April-June premium in Japan discussions, via Reuters citing sources; +7% Q/Q.
• UBS expects platinum to be undersupplied by 500k/oz in 2025, keeping the metal in a deficit for a third consecutive year; targets platinum price of USD 1100/oz by mid-2025. Expects Platinum to lag Gold until lower rates support stronger industrial activity.

Geopolitics: Middle East

• Discussions took place Wednesday evening between US President Trump's envoy, Hamas leaders and mediators from Egypt and Qatar, according to Reuters sources. Sources say American-Egyptian talks discussed governance of Gaza after end of war, names of who would manage the strip. Notes that discussions ended positively, and indicate a near transition to a second phase of the Gaza ceasefire agreement.
• US President Trump posted on Truth Social a warning for Hamas to release all hostages now not later and return all the dead bodies or it is over for them. Trump stated "only sick and twisted people keep bodies, and you are sick and twisted! I am sending Israel everything it needs to finish the job, not a single Hamas member will be safe if you don’t do as I say. I have just met with your former Hostages whose lives you have destroyed. This is your last warning! For the leadership, now is the time to leave Gaza, while you still have a chance."
• Hamas said US President Trump's threats demonstrate the US administration's insistence on continuing as a partner in genocide against their people.
• US Treasury Secretary Bessent and Israel’s Minister of Finance Smotrich held a meeting to discuss the ongoing economic partnership between the US and Israel.

Geopolitics: Ukraine

• Russian Foreign Minister Lavrov says a "solution in Ukraine is possible within weeks if the West stops supporting Kiev", via Sky News Arabia.
• Ukrainian President Zelensky anticipates positive outcomes from US cooperation next week. It was also reported that Zelensky’s top aide discussed with the US National Security Advisor steps to achieve just peace, while Ukraine and the US agreed on a meeting in the near future.
• Four senior members of Trump's entourage have held secret discussions with some of Kyiv’s top political opponents to Ukrainian President Zelensky, according to Politico.

Geopolitics: Other

• Eight were hurt after a shell dropped on a civilian town at Pocheon, South Korea during a live-fire military drill, according to Reuters citing a fire official.

US event calendar

• 07:30: Feb. Challenger Job Cuts 103.2% YoY, prior -39.5%
• 08:30: 4Q Unit Labor Costs, est. 3.0%, prior 3.0%
• 08:30: 4Q Nonfarm Productivity, est. 1.2%, prior 1.2%
• 08:30: March Initial Jobless Claims, est. 233,000, prior 242,000
• 08:30: Feb. Continuing Claims, est. 1.87m, prior 1.86m
• 08:30: Jan. Trade Balance, est. -$128.8b, prior -$98.4b
• 10:00: Jan. Wholesale Trade Sales MoM, est. 0.5%, prior 1.0%
• 10:00: Jan. Wholesale Inventories MoM, est. 0.7%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

On what will be the hottest day of the year so far in London (it's all relative), I'm writing this late at night in Chicago watching snow lightly come down outside my hotel room. Given the flight and the time difference I've been awake for pretty much most of what has been another remarkable 24 hours for markets, especially in Germany. The reality is that I still don't think the enormity of the news has got close to being fully comprehended and digested by global investors yet. This is a seismic shift of the most epic proportions from Germany and perhaps only fast money and nimble investors have responded so far. However, over the days, weeks and months to come, investment committees and asset allocators will slowly and surely have to adjust their thoughts and positioning on what is the 3rd largest economy in the world, especially after five years of essentially zero growth.

In terms of reactions, the rise in the 10yr bund yield (+29.8bps) was the biggest daily jump since German reunification in 1990. So that beats the previous record, which was a +22.8bps move in late-2011 at the height of the Euro crisis. On top of that, we’ve just seen the biggest 3-day jump in the Euro (+3.99%) since August 2015, and the German DAX (+3.38%) just posted its best daily performance since late-2022. So there’s no doubt that markets are pricing in a once-in-a-generation policy regime shift, which has brought about a huge risk-on move for European assets.

Those moves were clearly in train at the market open, following the announcement from Germany the previous evening. But they then got further momentum in the middle of the day, as Bloomberg reported that Germany had called for reform of the EU’s fiscal rules to allow more defence spending. On Tuesday the European Commission proposed a 4-year fiscal rule exemption for defence spending but, according to the FT, Germany has called for a longer-lasting change. That’s a massive shift from previous positions, as Germany has traditionally been among the most resistant to looser fiscal policy at the EU level. Remember that EU leaders are meeting again tonight in Brussels for a summit on Ukraine and defence, with President Zelensky also attending, so keep an eye out for further headlines. Ahead of the summit France’s President Macron said last night that he wanted to open talks on extending France’s nuclear deterrent to European allies.

All this led to a massive surge for European bond yields, as investors faced up to a huge wave of new spending. As I put it in my chart of the day yesterday (link here), this could see Germany run the largest sustained deficits in its post-war history, so the scale of the reaction is understandable. Indeed, it pushed the 10yr bund yield up to 2.79%, the highest since late-2023. And it was much the same story elsewhere, with France’s 10yr yield (+26.0bps) posting its biggest daily jump since late-2011, moving up to 3.49%. Meanwhile in Italy, bond yields have long been more volatile given the higher political risk, but their 10yr yields (+27.6bps) also posted their biggest daily jump since late-2022.

The moves also led to a huge surge for European equities, with the DAX (+3.38%) leading the way. That continues an absolute rollercoaster ride for the index, which saw the best day since 2022 on Monday (+2.64%), followed by the worst day since 2022 on Tuesday (-3.54%), and then the best move since 2022 again yesterday. Elsewhere in Europe, there were sizeable gains for both France’s CAC (+1.56%) and Italy’s FTSE MIB (+2.08%). However, with the FSTE 100 (-0.04%) flat on the day, the STOXX 600 (+0.91%) posted a more moderate gain and is still down -0.20% so far this week, which if sustained would end a run of 10 consecutive weekly gains.

All that will create an interesting backdrop for today’s ECB decision, along with President Lagarde’s press conference. In terms of the decision itself, it’s widely expected they’ll announce another 25bp cut in their deposit rate, taking it down to 2.5%, and bringing the total cuts to 150bps since last summer. However, the potential for a huge fiscal impulse has suddenly rewritten the medium-term outlook, leading to speculation about whether they’ll stop cutting quicker than previously thought. Indeed, yesterday saw investors dial back their rate cut pricing this year, with 69bps of further cuts now expected by the December meeting, down -15.4bps on the previous day.

Over in the US, and it's hard to believe it's taken us this long to get here given all that's going on there, tariffs again dominated the headlines and ultimately a more positive narrative emerged as the US announced a 1-month delay to the 25% Canada/Mexico tariffs for automakers so US car producers “are not at an economic disadvantage”. Cars and auto parts account for just under 25% of total US imports from Canada and Mexico so most of the tariffs that came in force on Tuesday will remain in place. But the delay added to hopes that the US administration may limit the most economically disruptive tariffs and the White House Press Secretary said that Trump “is open to hearing about other exemptions”. The tariff noise had remained tense earlier in the day, with Bloomberg citing Canadian officials that its government would not lift retaliatory tariffs if the US leaves any tariffs in place as it was cool on the idea of a “middle ground” settlement.

Ultimately, improved sentiment on the auto tariff delay sent the S&P 500 +1.12% higher by the close, having been -0.5% down intra-day before Bloomberg first reported that a delay for autos was being considered. Automakers rebounded, with Stellantis (+9.24%), GM (+7.21%) and Ford (+5.81%) essentially reversing their losses earlier in the week. Tech stocks saw a modest outperformance with the NASDAQ and Mag-7 +1.46% and +1.83% higher respectively. Elsewhere, there were contrasting moves for commodity-linked stocks. Energy (-1.51%) was the weakest sector in the S&P 500 as Brent crude (-2.45% to $69.30/bbl) closed below $70/bbl for the first time since September amid growing fears of an oil market surplus. By contrast, materials stocks (+2.63%) were the strongest performers as copper (+5.28%) saw its biggest daily spike since 2022.

Treasury yields closed higher on the auto tariff delay news, with the 2yr yield up +1.4bps to 4.01% and the 10yr yield up +3.5bps to 4.28%. Treasuries had earlier seen a sizeable round-trip amid a mixed batch of US data. The 2yr yield traded as low as 3.89% following an underwhelming ADP report of private payrolls for February, which came in at just +77k (vs. +140k expected). So that raised some fears about what the jobs report on Friday might show. But shortly afterwards, yields rebounded as the ISM services index painted a much more positive picture, coming in stronger than expected at 53.5 (vs. 52.5 expected). Moreover, the employment component moved up to 53.9, the strongest it’s been since December 2021.

The global bond selloff continued in Asia with yields on 10yr Japanese government bonds crossing 1.5% for the first time since June 2009 and those on the 30yr breach the 2.5% mark for the first time since 2008. Yields on 10yr USTs (+4.22bps) pushed upwards for a third consecutive day, reaching 4.32% as I type. Yields on Australian 10yr government bonds surged by 13bps.

Asian equity markets are mostly climbing this morning, mirroring Wall Street’s rally. The Hang Seng tech index (+4.72%) is leading gains, surging to a three-year high after Alibaba released a new open-source AI model that appears to perform as well as DeepSeek’s R1 on a fraction of the training data. The Hang Seng (+2.64%), the CSI (+1.09%) and the Shanghai Composite (+0.95%) are all up, a day after Beijing set an ambitious economic growth target and vowed more support for domestic consumption. Elsewhere, the Nikkei (+0.88%) and the KOSPI (+0.41%) are also trading in positive territory while the S&P/ASX 200 (-0.50%) is a notable exception in early trade. Outside of Asia, US equity futures tied to the S&P 500 (-0.06%) are trading flat.

Early morning data showed that South Korea experienced a slowdown in consumer inflation for the first time in four months in February. Prices rose +2.0% y/y (v/s +2.1% expected), following January’s +2.2% rise, thus offering some breathing room for policymakers intent on easing monetary policy. On a m/m basis, CPI growth slowed to +0.3%, compared to a +0.7% increase in January.

To the day ahead now, and EU leaders will be meeting in Brussels for a summit on Ukraine and defence. Otherwise, the main highlight will be the ECB’s policy decision, along with President Lagarde’s subsequent press conference. Other central bank speakers include the Fed’s Harker and Waller. Finally on the data side, US releases include the weekly initial jobless claims and the January trade balance, and we’ll also get Euro Area retail sales for January.

Tyler Durden Thu, 03/06/2025 - 08:20

ECB Preview: Market Reaction Hinges On Just One Word

The European Central Bank will almost certainly cut rates by 25bp today, its sixth cut in a row, and an outcome that is fully priced in though a volatile economic backdrop is sowing divisions over where to take borrowing costs from here. With the deposit rate being lowered to 2.5%, the question - as ING Economics writes - is whether ECB President Christine Lagarde will still characterize policy as “restrictive”. ING thinks she will, but failing to do so could trigger further hawkish repricing for a currency that has already soared 300 pips in the past 48 hours, breaking out of a key range.

Indeed, while today's 25bps rate cut is fully priced in, the outlook for next month is already becoming a lot less certain: a cut in April is seen with only a 60% probability. The market is homing in on a quarterly cutting schedule after this week. It is also still eyeing the possibility of the ECB cutting rates below 2% eventually, with the forward OIS for the year end below 1.9%. US tariffs could yet become more concrete and weigh on the macro outlook. But the perceived chances of the ECB cutting faster and further have slimmed noticeably again after the latest flash inflation readings declined less than markets had hoped.

Given the ECB’s recent tendency to give little away in terms of forward guidance, ING thinks the determinant for market reaction will be whether President Lagarde continues to characterise monetary policy as “restrictive”. This is particularly relevant as a 25bp cut would take the deposit rate to 2.5%, which is the upper-bound of the neutral rate range. As shown in our scenario analysis above, we think the “restrictive” reference will remain in place for now, which could be received by the market as a moderately dovish signal.

Meanwhile, analysts polled by Bloomberg almost unanimously predict a quarter-point decrease in the deposit rate, to 2.5%, on Thursday. Beyond that, opinions vary greatly: One sees no more reductions while others reckon the benchmark will go all the way to 1% in early 2026.

Such stark differences reflect fraying unity among officials themselves. While there’s been little major disagreement over the monetary loosening to date, views are diverging on whether inflation is in more danger of over- or undershooting, and how much support should be offered to the region’s misfiring economy.

Muddying the waters further are the implications of the US’s sudden decision to pull back military support for Ukraine and Europe, sparking a rush to rearm that will bring hundreds of billions of euros in spending across the region in the years ahead. European leaders are set to further discuss the issue at a summit Thursday in Brussels, with markets now favoring just two more ECB rate cuts this year.

Lingering questions on EU defense spending impact

The ECB Council remains constrained by sticky core inflation readings. While it's forecasting the data to eventually fall in line with targets, this uncertainty around inflation limits the Council’s ability to sound more dovish as policy rates close in on the neutral rate. It will only add to any ECB caution that larger stimulus is now being discussed by eurozone countries and importantly in Germany, and not just for defence spending. The numbers involved look huge with €900bn across two special funds, one for defence and one for infrastructure investments. But so far, there is very little known about the crucial details, such as the time frame or whether these numbers reflect the final outcome.

Markets would not be surprised if the ECB were questioned about its stance on the implications of defense spending for longer term bond markets, and potentially the impact on those countries with already constrained finances. We suspect that as long as eurozone government bond spreads remain relatively stable, the ECB will be content with a standard pointer to the Transmission Protection Mechanism (TPI). One question to ask would be whether the EU plans to trigger national escape clauses from the deficit rules, which would also impact the conditionality of the backstop.

Going back to the market, Bloomberg notes that traders price 62 basis points of easing — including a quarter point reduction today — down from 65 basis points on Wednesday and 85 basis points last week

“The decision this Thursday should be straightforward, but the discussions within the Governing Council are undoubtedly going to become more heated,” said Sonja Marten, head of research currencies and monetary policy at DZ Bank. “This may be the last ‘clear-cut’ decision from the ECB this year.”

While policymakers including Executive Board member Isabel Schnabel have urged the ECB to begin discussing a pause in rate cuts, or halting them altogether, no one appears to object strongly to this week’s move.  Should it transpire, easing since June would reach 150 basis points, twice what the Bank of England has so far managed during its cutting cycle and also more than the Federal Reserve’s 100 basis points.

Discord at the ECB is intensifying in part over how much monetary policy is restraining the economy. Schnabel is “no longer sure whether it is still restrictive.” Greece’s Yannis Stournaras thinks “we are definitely still in restrictive territory.”

Officials concur that rates should be brought to levels that no longer constrain activity, known as neutral. Only a few, though, have floated the idea of pushing even lower to stimulate demand. While a recent study by ECB staff put neutral at 1.75% to 2.25%, some hawks say it may be higher.

Communication

Analysts and investors will focus on whether the ECB continues to describe policy as “restrictive.” Removing that wording from this month’s statement was already seen as an option after January’s meeting. Sticking to this language would signal rates will be reduced further — the next time probably coming in April. Omitting it would set the stage for a pause, maybe as soon as next month, but could also be interpreted by some as an end to cuts.

Perhaps the likeliest outcome is a compromise. That would see the language modified without being removed entirely, as the ECB and Lagarde are expected to steer clear of giving firm guidance given the unpredictable global picture. “Macro indicators can quickly become outdated with the currently very fast-paced and sometimes erratic political environment,“ said Carsten Brzeski, head of macro research at ING. “The ECB’s best approach therefore is to run on sight.”

Geopolitics

Complicating the ECB’s task is the rapidly shifting geopolitical environment. President Donald Trump’s escalating trade war and the knock-on effects of his decision to recalibrate US security alliances are the main challenges for policymakers.
While tariffs are generally seen as negative for Europe’s economic outlook, the implications for inflation are less clear. There may be growth benefits from the continent ramping up defense spending and from Chancellor-in-waiting Friedrich Merz pushing for huge infrastructure outlays in Germany.

EU leaders are meeting Thursday in Brussels to discuss more military aid for Ukraine, as well as plans to bolster the capabilities of their own armed forces. Greece’s Stournaras said last week that “if there’s going to be a common objective of the EU to boost defense spending, we can discuss what the ECB can do to support that goal.”

Economists at Allianz warned that if heftier budget deficits threaten debt sustainability and trigger widening government bond spreads, the ECB may have to restart large-scale bond purchases through its Transmission Protection Instrument.

Forecasts

Analysts expect only marginal changes to quarterly projections for economic growth and inflation — supporting the ECB’s overall assessment that consumer-price growth is on track to hit 2% and conditions for a euro-area recovery are in place.
Average inflation for 2025, though, could be revised up from December’s 2.1% forecast — mainly due to higher energy costs.

Morgan Stanley’s Jens Eisenschmidt, a former ECB economist, expects the updated outlook to show price growth only returning to target in the first three months of 2026, instead of this year as envisaged before. While coming in just above analyst expectations, inflation cooled to 2.4% in February from 2.5% the previous month, with the closely watched services gauge sinking to 3.7%.

Source: ING Economics, Bloomberg

Tyler Durden Thu, 03/06/2025 - 07:49

Walmart Asks Chinese Suppliers To Absorb Tariff Costs

Walmart asked Chinese suppliers to lower prices, aiming to absorb the new tariff burden at the supplier level rather than passing it on to consumers. The move is part of its strategy to maintain pricing power amid a value war with other retailers competing for cash-strapped consumers. 

Bloomberg reports that the big-box retailer has asked Chinese suppliers, including those producing clothing and kitchenware, to reduce prices by about 10% per round of tariffs, likely shouldering the full cost of President Trump's duties. The report was based on information from people familiar with the matter. 

The people said that few suppliers have complied with Walmart's request. 

Here's more: 

So far, few have acquiesced. Suppliers' margins are already razor thin due to Walmart's strategy of procuring goods cheaply in order to maintain its competitive advantage, according to the people.

For some, any reduction greater than 2% would see them make a loss, the people said. Others have had their own upstream vendors refuse requests to cut prices more than 3%, forcing manufacturers to consider purchasing some parts from Vietnam, according to one of the people. That move has raised concerns that the lower prices will come at the expense of product quality, the person said.

...

Walmart initially requested price reductions from manufacturers when Trump's first round of 10% tariffs on goods from China took effect in early February, with the request for additional cuts coming later the same month when the US president threatened to double duties, said the people.

The report comes days after Trump doubled the tariff on Chinese products to 20%, up from last month's 10% tax. (Everything you need to know about tariff wars here.)

On Tuesday night, Trump addressed a joint session of Congress, in which he downplayed the growing trade war concerns: 

"Tariffs are about making America rich again and making America great again. There'll be a little disturbance, but we're OK with that. It won't be much."

Trump noted: 

"We inherited from the last administration an economic catastrophe and an inflation nightmare. Their policies drove up energy prices, pushed up grocery costs and drove the necessities of life out of reach for millions and millions of Americans." 

Last month, Walmart shares plunged on a dismal earnings forecast for the year that did not include the potential impact of tariffs. The retailer did warn about the uncertain geopolitical landscape and elevated interest rates.

Other top US retailers have warned about the trade war. Target warned on Tuesday that tariffs and a soft consumer environment plagued its full-year outlook. The CEO told investors during a call that he is having discussions with vendors. 

Tyler Durden Thu, 03/06/2025 - 07:45

100,000 Rejected Asylum Seeker Lawsuits In 2024: Migrants Are Increasingly Suing To Stay In Germany

Via Remix News,

On top of soaring healthcare costs, rising crime, and overburdened schools, the German court system can add itself to the list of institutions feeling pressure due to soaring migration numbers. Rejected asylum seekers are once again suing to stay in Germany in growing numbers, with the administrative courts seeing 100,494 new cases in 2024.

The rules in Germany allow asylum seekers to sue if their asylum case is rejected, with the state of Brandenburg seeing the sharpest increase, with 6,138 cases, a 134 percent increase.

In 2023, there were 72,000 such cases, while in 2022, there were 62,000, according to a survey conducted by the German Judges’ Journal. That means there has been a 62 percent increase since 2022, according to Welt newspaper.

In 2017 and 2018, the number of such lawsuits was much higher but then fell from that time.

The courts are once again struggling to deal with the influx as the Federal Office for Migration and Refugees (BAMF) is now processing asylum claims more quickly.

The highest number of cases were seen in North Rhine-Westphalia at 19,267 cases, while Bavaria (15,278) and Baden-Württemberg (12,755) were in second and third place.

Wait times are also up for decisions and well beyond the target of six months set by the Conference of Minister Presidents.

Sven Rebehn, Federal Director of the German Judges’ Association, which also publishes the German Judges’ Journal, said “The administrative courts are gradually getting ahead of the wave, and their processing times are declining significantly. However, if the current dynamic increase in the number of complaints continues, the trend could stall again.”

He called for the hiring of more judges.

Read more here...

Tyler Durden Thu, 03/06/2025 - 05:00

British 'Mercenary' Captured Inside Russian Territory Given 19-Years In Prison

A 22-year old British man who had been fighting for Ukraine was slapped with a lengthy prison sentence of 19-years by a Russian court on Wednesday in southwestern Kursk region. He's been charged with terrorism and acting as a foreign fighter.

The detained man, identified as James Scott Rhys Anderson, has been dubbed a mercenary by Russian authorities, though it's unclear whether he was fighting within the ranks of a private firm or perhaps Ukraine's national armed forces.

He was detained in November reportedly inside Russian territory, fighting on behalf of Ukraine as part of the Kursk incursion, which has been on since last August.

Anderson pleaded guilty to the charges, and the British embassy has committed to giving him "all the support we can" - but likely with the guilty plea there's little the UK government can do - other than a possible future prisoner swap arrangement.

Given that Russia has deemed Anderson a mercenary, he was not provided prisoner-of-war protections under the Geneva Conventions and thus was charged under Russia's civil criminal code.

It's expected that he'll serve an initial five years in a local prison, after which he'll be transferred to spend the remainder 14-years in a maximum security facility.

When he was first captured over three months ago, a 'proof of life' video was widely circulated on social media channels:

In a video posted on pro-war Russian Telegram channels on Sunday, a man wearing combat fatigues identifies himself as 22-year-old James Scott Rhys Anderson from the UK.

The man, speaking with an English accent, says that he served as a signalman in the British army until 2023 before joining the International Legion in Ukraine to fight against Russia.

In the footage, which has not been verified, the captured man appears with his hands tied. It is unclear when the clip was recorded.

Anderson appeared in court looking gaunt after months in jail awaiting trial...

James Scott Rhys Anderson. Pic: sudrfkursk via Storyfu/Sky News

Russian investigators said Anderson illegally entered Russia in November as part of an armed group committing "criminal acts against civilians". However, the precise circumstances of his capture remain unclear. 

Early in the more than 3-year long conflict, UK authorities - including Liz Truss at the time - positively encouraged citizens to go and fight on behalf of Ukraine. Since then an estimated 20,000 foreigners from over 50 countries are believed to have traveled to Ukraine to assist. But these official calls from Western officials have grown silent as Ukraine's battlefield chances have dimmed, and the front lines have seen continued Russian advances.

Tyler Durden Thu, 03/06/2025 - 04:15

Will Ukraine's Future Be As A "Buffer State" Or A "Bridge State"?

Authored by Andrew Korybko via substack,

This scenario is increasingly in America and Russia’s shared interests vis-à-vis their “New Détente”...

Hungarian Prime Minister Viktor Orban predicted late last month that “Ukraine, or what remains of it, will once again be a buffer zone” between NATO and Russia once the conflict inevitably ends. His rationale is that it’ll be kept out of NATO but also is unlikely to fall completely under Russia’s sway. This is logical, but another scenario is also possible, namely that Ukraine turns into a “bridge state” instead, which could help repair Russian-Western or at least Russian-American relations.

To explain, Russia’s goals of demilitarizing and denazifying Ukraine can’t easily be obtained unilaterally in the sense of Moscow forcibly imposing this, let alone indefinitely maintaining it. They much more realistically require a compliant government in Kiev to carry them out. This explains the terms contained in the spring 2022’s draft peace treaty that was sabotaged by the UK and Poland. Those two and their shared US patron didn’t want that outcome since they thought they could strategically defeat Russia.

America’s strategic calculations changed after Trump’s historic election victory, however, to the point where the US is now ready to make more concessions than Russia in pursuit of a “New Détente”. This arrangement that they’re working towards is deemed much more important to the US than continuing to weaponize Ukraine against Russia since it could lead to eroding some of China’s competitive edge vis-à-vis the US by incentivizing Russia into limiting resource and military cooperation with it.

Readers can learn more about the contours of their emerging deal here, here, and here, which could of course also be offset by unexpected developments or not be reached in full but is generally what they want to agree upon. In the event that they’re successful, a so-called “moderate government” might eventually take power in Kiev after elections are held, especially if Trump coerces Zelensky into not running or authorizes his intelligence services to support whoever his rival might be given their tensions.

That would be an historic outcome since whoever replaces Zelensky might very well implement the demilitarization and denazification goals that Russia has sought to achieve over the past three years with the full approval of Trump’s America as a quid pro quo for whatever else Russia and the US agree upon. While Russian-Ukrainian trade might never return to its pre-2014 level due to Ukraine’s EU Association Agreement and other such economic pacts, that would still go a long way towards a rapprochement.

The relative normalization of Russian-Ukrainian relations can therefore lead to Ukraine becoming much more of a “bridge state” than a “buffer state” in terms of maintaining the “New Détente” between Russia and the US. Whether or not it leads to a gradual rapprochement in Russian-EU relations would depend on Brussels’ response to these potential developments as well as Warsaw’s since Poland serves as the EU’s gateway to Ukraine. Neither appear likely for now but they also can’t be ruled out either.

As the Russian-US talks progress, it would be in both of their interests to do everything possible to turn Ukraine into a “bridge state”, which Putin might have expected to be a potential outcome all along and could explain his decision not to wage an all-out war on Ukraine. By being careful to avoid collateral damage to civilians, including inconveniences like if Russia bombed bridges across the Dnieper or totally destroyed Ukraine’s energy infrastructure, he made this comparatively easier.

The keyword is comparatively since there’ll still be some Ukrainians who’ll hate Russia no matter what and have felt that way for whatever their personal reasons may be even before the special operation. Nevertheless, the point is that the self-restraint that Russia has exercised throughout the course of the conflict kept viable the scenario of a rapprochement with Ukraine, which now increasingly aligns with American interests as Trump 2.0 conceptualizes them to be and is thus more likely than ever before.

Tyler Durden Thu, 03/06/2025 - 02:00

Is Pakistan The Canary In China's BRI Coal Mine?

Authored by Milton Ezrati via The Epoch Times,

Pakistan is failing, in large part because of its close association with Beijing’s Belt and Road Initiative (BRI).

Because coal mines tend to emit large quantities of poisonous carbon monoxide, miners in the old days would carry a caged canary into the mine with them. The bird’s more delicate constitution would succumb to rising gas levels long before the miners and signal that human life might be in jeopardy. The bird’s death cued the miners to get out. Pakistan, as an early and enthusiastic participant in the BRI, is suffering as a consequence and may well be issuing a signal for other participants to leave this particular “mine.”

Pakistan’s biggest problem centers on the power grid built for the country by the BRI, also known as “One Belt, One Road.” It was expensive from the start, and because China built considerably more generating capacity than Pakistan needs, the burden of debt Pakistan now faces is simply unsupportable.

Tellingly, the problem is not just an unfortunate miscalculation of the sort that occurs frequently when nations invest. More ominously for all BRI participants, it is a feature of how Beijing’s scheme works.

In the scheme, Beijing approaches a less developed nation and offers to build the kind of infrastructure that presumably will help that nation make economic gains. Beijing offers to arrange loans for the recipient to pay for the project, always from state-owned Chinese banks. It also arranges for Chinese contractors to do the construction and for Chinese management to run the project once it is complete.

All the advantages lie on Beijing’s side. If, for some reason, the recipient nation cannot meet the financial obligations of the loan, ownership will revert to Beijing. Even if the recipient nation can repay the loan, that recipient remains beholden to Beijing to sustain the project and make it worthwhile.

There is another source of difficulty. Because Chinese authorities choose the projects, always for political and diplomatic rather than economic reasons, the projects often miss the needs of the recipient nation’s economy or are too large or too small. Since Beijing is using the recipient nation’s money, albeit in a loan, it has little incentive to match the projects to needs. What makes matters worse is that the nations approached by the Chinese regime seldom have the ability to assess the economic needs accurately.

For Pakistan, China’s initial offer, about a decade ago, looked attractive. The country was short of electric generating capacity. China came in and built a whole series of coal, solar, and hydroelectric plants, an effort that cost the equivalent of some $25 billion, a huge sum for Pakistan. In addition to the obligation to repay the loan in only 10 years, Pakistan also had to pledge to take all the electricity generated by the array of Chinese-managed facilities for the next 40 years and further promised the Chinese state companies running them a 34 percent return on the effort.

It should have been obvious from the start that Pakistan could never deliver on these terms. Because the calculations were political and diplomatic rather than economic, China built much more generating capacity than Pakistan will need for many years to come, by some calculations, 40 percent more. But the terms make Pakistan buy all they generate anyway.

To meet all these onerous obligations, Pakistan has raised the price of electricity to higher levels than in some developed and considerably richer nations. Electricity for a few lights, a small refrigerator, and a couple of fans can cost a Pakistani family the equivalent of $60 a month, a steep sum indeed considering that the country’s per-capita income amounts to the equivalent of some $125 a month.

Pakistan is already the equivalent of $1.0 billion in arrears on the debt to Chinese state banks, and that does not include the $9.0 billion more it will owe on two new Chinese nuclear plants.

Pakistan is in worse shape than most other BRI participants, largely because it was an early player, not because the deals with other countries have different characters, though each has different specifics. Already, Sri Lanka has defaulted, and several African participants have had to renegotiate terms they can no longer support. Not too long ago, Chinese leader Xi Jinping had to promise additional lending in Africa just to keep several participants from backing out of the program.

If Pakistan is any indication, the BRI scheme is fundamentally flawed. What may be worse, the failing participants will force strains on Chinese finance and contractors at a time when China’s debt-heavy, underperforming economy can ill afford it.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Wed, 03/05/2025 - 23:50

The Sahel Is The Global Epicenter For Terrorism

Terrorism remains a persistent threat in many countries around the world.

While there were fewer terrorism-related deaths and attacks in 2024 than in the previous year, the number of countries that experienced at least one attack rose from 58 to 68. Meanwhile, as conditions improved in 34 countries overall in 2024, they deteriorated in 45 others - the highest number since 2018.

This is according to the latest edition of the Global Terrorism Index, which measures the impact of terrorism around the world by tracking the number of incidents recorded each year. The index is published annually by the Institute for Economics & Peace (IEP), a think-tank dedicated to promoting understanding of the economic, cultural and political factors that lead to peace.

As Statista's Anna Fleck reports, data compiled by the IEP show that the Sahel remained the epicenter of terrorism in 2024, marking the second year in a row. 

 

You will find more infographics at Statista

The region accounted for nearly half of all terrorism-related deaths last year at 3,885, which is also a ten-fold increase since 2019. 

Niger was the country to see the biggest increase in terrorism deaths year-on-year, rising by 94 percent to a total of 930 people.

While far less frequent and far less deadly, terrorist attacks have also surged in Western democracies, with the number of incidents in Europe having doubled in 2024 to a total of 67. 

The report states that lone actor terrorism is particularly on the rise in the West and that these acts are typically carried out by teenagers who have no formal ties to terrorist organizations but instead “become radicalized through online content, constructing personal ideologies that often blend conflicting viewpoints influenced via access to fringe forums, gaming environments, encrypted messaging apps and the dark web.”

Tyler Durden Wed, 03/05/2025 - 23:00

Why Is Organic Food More Expensive?

Authored by Travis Gillmore via The Epoch Times (emphasis ours),

Grocery shoppers in the United States have an abundance of options to choose from, and a wide range of prices accompanying varying selections.

Organic produce for sale at a Ralph's Supermarket in Irvine, Calif., on Nov. 28, 2016. Robyn Beck/AFP via Getty Images

Items labeled as organic typically sell for a premium over non-organic counterparts, but many consumers are unaware of the market forces that factor into the pricing.

Premiums, once as high as 170 percent for some items—such as spinach in 2015—are on the decline and are currently about 20 percent higher than conventionally grown produce, according to data from the U.S. Department of Agriculture (USDA).

While all farms face certain regulatory hurdles at the federal, state, and local levels, organic producers are saddled with more comprehensive rules to abide by.

Organic food production is heavily regulated—forbidding genetically modified organisms as well as approximately 700 chemicals that are used in non-organic agriculture—and certification is required.

To achieve organic certification, farmers spend hundreds of hours and thousands of dollars annually to comply with record keeping requirements and prepare for regular document and facility inspections.

Non-organic farms do not have such overhead costs and thus have fewer expenses priced into the cost of goods sold.

Throughout the growing seasons, organic farms cost more to operate for a variety of reasons, and subsidies that disproportionately benefit chemically intensive agriculture exacerbate the price discrepancies, according to advocates for the organic industry.

Approximately 2 percent of the money allocated for research by the federal government since 2018 was focused on organic food production, according to data collected by the Organic Trade Association.

“We would really like to see more of a balance for the research money, especially because funds used for organic studies tend to benefit the entire Ag industry,” a spokesperson for the trade group told The Epoch Times.

*  *  *

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Past research related to integrated pest management—where beneficial insects are used to manage invasive pests—for example, was initiated by organic producers, but the subsequent findings are now widely used.

One study from the U.S. National Institute of Health found a 95 percent reduction in insecticide use when pests are managed using natural methods.

With the bulk of federal dollars going to study non-organic practices such as how to use pesticides and herbicides banned in organic production, critics of the current system suggest the playing field is tilted toward farmers who use a wide range of chemicals.

It has resulted in significantly lower prices for some non-organic foods, including heavily processed fast foods, compared with organic, natural ingredients.

Advocates are currently lobbying federal lawmakers to boost investment in organic agriculture research.

More Expensive Inputs

Fertilizers used in organic production—including manure, alfalfa meal, and composted material, among other things—are more costly than synthetic versions like urea and ammonium nitrate, with estimates ranging from 20 to 50 percent higher for organic nutrients.

Conventional farms rely on synthetic materials developed since the 1950s with the invention of chemically intensive agriculture.

Organic farmers utilize crop rotation and cover crops to fix nitrogen in the soil, a method that builds soil health, improves water retention, outcompetes weeds, and reduces insect populations.

Spreading natural fertilizers and planting and plowing under clover, winter rye, and other cover crops requires the use of heavy equipment or laborers, depending on the size of the operation, which further adds to the cost of production.

Labor Intensive

Removing weeds is one of the costliest aspects of organic agriculture, as mechanical removal using weed eaters or flamethrowers is the preferred method and requires many hours of labor to eradicate nuisance plants.

“During part of the year, we spend more hours removing weeds than doing anything else,” Juan Guzman, a managing farmhand for organic vineyards in Northern California, told The Epoch Times.

“It’s the most important job because the weeds will steal food from the vines and reduce the yields if we don’t get rid of them.”

Non-organic farmers typically use glyphosate, sold under the brand name Roundup, to manage weeds. The cost of the chemical is offset by the ease of application, which helps lower production costs.

Supply and Demand

Also impacting pricing are the perennial forces of supply and demand, with health-conscious consumers seeking high-quality foods at increasing levels, while production has plateaued in recent years, and organic yields are slightly lower than conventional crops.

A thin market, with fewer producers than in the conventional sector, creates a situation where more dollars are chasing fewer goods, thus leading to higher pricing strategies at retail levels.

Imports of organic produce are increasing to meet the demand, with more than $4 billion of goods imported in 2023, according to the USDA.

However, margins for organic farms are slightly below the national average for non-organic farms, ranging from negative 3 percent to slightly higher than 20 percent, the National Center for Appropriate Technology concluded in a 2019 report.

Consumers Want Healthy, Affordable Food

Demand for organic food is at an all-time high, with approximately $64 billion worth of certified organic food sold in the United States last year, up from about $11 billion in 2000, according to the Agriculture Department’s 2025 situation report.

Families of all backgrounds across the United States are prioritizing healthy living, and a growing movement is popularizing a return to traditional farming methods that avoid synthetic chemicals.

“I don’t want that going into my child’s body,” Megan Armstrong, a resident of Huntsville, Texas, and mother of a 3-year-old, told The Epoch Times.

“It’s worth the extra bucks to keep my child safe.”

Another mother from Texas, Kelsey Facundo, said she prioritizes organic food for her children, while she and her husband oftentimes have to make do with what they can afford.

A homesteading mother said the difference in quality of organic and conventional meats is stark.

Animals raised for organic production are fed certified organic hay and grains, allowed to graze in pastures, and are strictly forbidden from eating genetically modified grains, which is the standard fare for conventional livestock production.

“I started finding local butchers to buy all my meat from,” Shanna Dixon told The Epoch Times.

“It’s worth the price because the taste is on another level, which really goes to show you what they are doing to the meat between the slaughter and the table to change the taste.”

Newly appointed Health and Human Services Secretary Robert F. Kennedy, Jr. has long championed organic agriculture as part of his Make America Healthy Again agenda, and many advocates are anxiously watching his actions to see how new policies could impact the industry.

Regarding prospective reviews of the U.S. food supply, he said, “Nothing is going to be off limits,” during introductory remarks to his department on Feb. 18.

Tyler Durden Wed, 03/05/2025 - 22:35

Woke Implodes: Disney Preparing To Fire 6% Of Staff At ABC News, Disney Entertainment Networks

A new report indicates that 200 employees across Disney's ABC News Group and Disney Entertainment Networks unit are set to be laid off as early as Wednesday, accounting for roughly 6% of the combined workforce. The move is part of a broader consolidation wave within far-left corporate media amid ratings implosion as Americans gravitate towards X and new media outlets in the Trump era. 

The Wall Street Journal reports that the layoffs, which represent 6% of the combined units, will be announced at some point today. The report is based on people knowledgeable about the cuts. 

Additional color by WSJ of the cuts: 

• The ABC news magazine shows "20/20" and "Nightline" are consolidating into one unit, resulting in job cuts, the people said. ABC is also eliminating the political and data-driven news site 538, which had about 15 employees.

• All three hours of "Good Morning America" branded shows will be consolidated under one person; previously, the third hour had a separate production team.

• At the Disney Entertainment Networks unit, which houses broadcast networks and cable channels such as Freeform and FX, there will be staffing reductions in program planning and scheduling.

WSJ noted, "The cuts are the latest of several staff reductions over the past few years at Disney, which like many entertainment companies is looking for ways to save on what used to be core businesses as it spends more on sports and entertainment content to compete in the streaming marketplace," adding, "Ratings and revenue are down at many cable channels as consumers ditch cable packages and advertisers flee for streaming services and digital platforms." 

The imminent cuts at ABC (and entertainment unit) come a little more than one week after race-baiting propagandist Joy Reid was fired from MSNBC. Ratings at the far-left network—full of wild conspiracies—have collapsed since Trump secured the White House in last November's presidential election. Many hosts on the network suffer from a severe case of "TDS."

Watch: Joy Reid Breaks Down In Tears After Getting Fired From MSNBC https://t.co/3bSuqteYAH

— zerohedge (@zerohedge) February 24, 2025

Also.

Chuck Todd Out At NBC News In Latest MSM Shakeup https://t.co/Co58WOAxj8

— zerohedge (@zerohedge) January 31, 2025

And. 

Jim Acosta To Leave CNN After 18 Years: Report https://t.co/h7LVZXI6qn

— zerohedge (@zerohedge) January 28, 2025

Millions of Americans have turned off leftist corporate media, instead opening their X app for the news. They now listen to long-form podcasts with Joe Rogan and increasingly read altranterive media outlets. Many folks feel betrayed by the left's propaganda machine, which misled them on critical stories ranging from Hunter Biden's laptop to Covid's origins to the economy. 

Now, the Overton Window has shifted from far-left to center-right (woke era over). With Trump signing an executive order banning government censorship, a new era of free thought has emerged—driven by new media pushing humanity forward. 

Tyler Durden Wed, 03/05/2025 - 22:10

What We Can Learn From George Washington Today

Authored by Bradley Jackson via RealClearPublicAffairs,

February 22nd marked the 293rd anniversary of George Washington’s birth. It seems that few Americans, however, really know the man or understand what makes him important.

Some accounts of Washington are hagiographic and instructive, after the fashion of a fable. Parson Weems, for example, invented the tale about him chopping down a cherry tree. In contrast, others have attempted to cut a tall man down to size by emphasizing Washington’s moral shortcomings, most importantly his ownership of slaves, which he himself admitted was an immoral trade.

Washington has much more to offer us, however, than simple morality tales about his virtues and vices. He was a man of extraordinary depth and complexity. He was in tight control of himself, and his life was always choreographed to the rhythms of propriety and morality as he understood them.

Washington held himself to the highest standard and inspired others to meet it as well.

His private life, well known to us through his contracts, travels, and investments, is nonetheless hidden from us by his wish that Martha, his wife, burn their personal correspondence, which she fulfilled. Penetrating to the heart of the man beyond the image he wished to portray can be difficult.

To recover the real Washington, we should start with what he cherished beyond all else – his country. To understand the character of his patriotism is to understand what he believed America to be.

For Washington, America is defined by liberty, which he spoke about in his Farewell Address. Liberty, he said, is “interwoven … with every ligament” of the American heart.

The Constitution, he believed, was based upon the “fundamental maxims of true Liberty” and the great principle of “the power and the right of the People to establish Government.” It is because of the Constitution’s liberal and democratic character that we should show “respect for its authority, compliance with its Laws, acquiescence in its measures.” Only the people have the right to alter the Constitution, said Washington, and “’till changed by an explicit and authentic act of the whole People, [it] is sacredly obligatory upon all.”

It is in this context that Washington warns Americans, “in the most solemn manner,” of the dangers of partisanship and what we today call polarization. He argues that while parties and factions “may now and then answer popular ends, they are likely, in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the Power of the People, and to usurp for themselves the reins of Government.” Partisanship, in other words, is a danger to liberty and constitutional government. For this reason it is “the interest and the duty of a wise People to discourage and restrain it.”

Washington’s preferred phrase to describe partisanship is “the spirit of Party.” This spirit, he says, “agitates the Community with ill founded jealousies and false alarms, kindles the animosity of one part against another, foments occasionally riot and insurrection.”

Partisanship makes countrymen into enemies, silencing what Abraham Lincoln would later call the “better angels of our nature.” As we look within for enemies, Washington feared we would ignore the real enemies outside our borders. He warns us that the spirit of party “opens the door to foreign influence and corruption, which find a facilitated access to the government itself through the channels of party passions.”

Partisanship, in other words, distracts us from our true self-interest, divides us, and weakens us before our enemies. Washington, even after two terms as president, was still a military man at heart.

What must we do to prevent these dangers, especially since partisanship is “inseparable from our nature, having its root in the strongest passions of the human Mind”? For Washington, it all comes down to our fidelity to the Constitution and the system of checks and balances it prescribes.

Public servants, he states, must “confine themselves within their respective Constitutional spheres, avoiding in the exercise of the Powers of one department to encroach upon another.” Congress must let the president enforce the law, and the president must allow Congress to decide what that law is.

If we do not follow Washington’s advice, he is very clear about the outcome: “The spirit of encroachment tends to consolidate the powers of all the departments in one and thus to create, whatever the form of government, a real despotism.”

The overriding importance of Washington for America today is not so much that he was a moral exemplar, nor that he bears the moral failure of not seeking ways to free his slaves prior to his death, though both claims are, in different ways, true. Rather, it is that Washington understood this country as a father understands his children, knowing their strengths and their weaknesses.

Washington can teach us something about how to be Americans, but only if we see him as more than a proxy for our own partisan fights. It is long past time that we returned to the actual political teachings of our founders, for it is in these that true civic education can be found.

Bradley Jackson is the vice president of policy at the American Council of Trustees and Alumni.

Tyler Durden Wed, 03/05/2025 - 21:45

What CCP Fears If US Can Negotiate An End to Russia–Ukraine War: Analysts

Authored by Dorothy Li via The Epoch Times (emphasis ours),

If President Donald Trump can negotiate a peace deal between Russia and Ukraine, communist China could become the next target of the United States, analysts say.

Chinese security guards look at military delegates during the speech of Chinese leader Xi Jinping at the Communist Party's 19th Congress in Beijing on Oct. 18, 2017. Fred Dufour/AFP via Getty Images

During a phone call on Feb. 24, Chinese leader Xi Jinping reaffirmed the “no limit” partnership he declared three years ago with Russian President Vladimir Putin.

In a show of unity, Xi told Putin that their nations are “good neighbors” and “true friends who have been through thick and thin together,” according to Beijing’s readout.

Analysts said the warm sentiments expressed as the war in Ukraine marks its third year reflect the Chinese regime’s serious concerns.

“Xi Jinping’s greatest fear is that Putin might lean towards Trump” or even facilitate U.S. efforts to contain his regime, Cai Shenkun, an independent Chinese current affairs commentator, told The Epoch Times.

According to Cai, the alliance between the two autocracies is not as solid as it appears. He said that the war in Ukraine has acted as a catalyst, forging a closer bond between Beijing and Moscow and their economies. Once a cease-fire is reached, however, some longstanding friction points in their partnership, such as territorial disputes along their shared border, may resurface.

Additionally, Beijing’s support of Moscow’s war effort has strained its ties with Washington and Brussels, he said.

U.S. officials have repeatedly criticized China for helping Russia to rebuild its defense-industrial complex through the export of goods that can be used for both civilian and military purposes, thus providing Moscow an economic lifeline amid Western sanctions.

Meanwhile, European leaders, including the NATO secretary-general, are reconsidering their reliance on authoritarian regimes, especially in light of the largest armed conflict in Europe since World War II.

“In the past, we made the mistake of becoming dependent on Russian oil and gas. We must not repeat that mistake with China: Depending on its money, its raw materials, and its technologies,” NATO Secretary-General Jens Stoltenberg said at an event in April 2024. “Dependencies make us vulnerable.”

Cai said that as global distrust toward communist China rises, the regime could find itself sidelined once the conflict in Ukraine ends and Putin no longer needs Xi’s support.

“Neither Ukraine nor Russia will be grateful to China [for the war]. Europe certainly won’t either,” Cai said. “Xi was left with little choice but to place his bets on Putin.”

A Shift in US Focus Toward China

Chen Shih-min, an expert on Western Europe security and the Chinese military at the National Taiwan University in Taipei, echoed those viewpoints. Beijing and Moscow are bonded by common interests, he said, which means they'll diverge once these interests conflict.

Chen said that once the Ukraine war is settled, the Trump administration’s intention may be to shift its focus to driving Beijing and Moscow apart and confronting the Chinese Communist Party (CCP).

“Trump will come down hard on the CCP,” Chen told The Epoch Times.

U.S. defense leaders have indicated a strategic pivot toward countering threats from communist China.

Defense Secretary Pete Hegseth has described communist China as a peer competitor with the “capability and intent to threaten our homeland and core national interests in the Indo-Pacific.”

“The U.S. is prioritizing deterring war with China in the Pacific, recognizing the reality of scarcity, and making the resourcing tradeoffs to ensure deterrence does not fail,” Hegseth said in his opening remarks at the Ukraine Defense Contact Group in Brussels on Feb. 12.

This shift in focus extends beyond the U.S. military.

“To bring manufacturing back to the United States and to address the trade deficit, Trump has to target the root of these problems: the CCP,” Chen said.

A container ship is loaded at the port in Lianyungang, in China's eastern Jiangsu province on Dec. 10, 2024. STR/AFP via Getty Images Challenges Facing Beijing at Home

As external pressures mount, can the CCP withstand the scrutiny? Cheng Cheng-ping, a professor at Taiwan’s National Yunlin University of Science and Technology, said he hasn’t seen any sign indicating the immediate end of the CCP’s rule, although there are indicators of “regime decay and decline,” such as political infighting and a faltering economy.

The world’s second-largest economy is grappling with sluggish domestic demand, an aging population, and a protracted crisis in the real estate sector.

The unemployment rate for people aged 16 to 24 has soared to levels that haven’t been seen in decades. Chinese authorities temporarily paused reporting the figures in June 2023 after official data showed one in five young Chinese were not employed. Many college graduates have turned to low-paying jobs, as the economy falters and foreign companies withdraw, leading to rising public discontent.

Chen said that although public discontent or a slowing economy will not fundamentally threaten the party’s rule—given its mass surveillance and tight social control—it could create a scenario where Xi considers aggressive military action, such as an invasion of Taiwan, to deflect criticism from himself.

“Public discontent is very strong. From another point of view, there must be a way to vent this discontent, and a war would be enough to divert the public’s attention from Xi Jinping,” Cheng told The Epoch Times.

The CCP has never ruled Taiwan but views the self-ruled democracy as its own territory and would not rule out using force to seize control. The People’s Liberation Army frequently sends its aircraft and warships to conduct large-scale drills near Taiwan to wear down the island’s defenses.

The most recent live-fire exercises occurred roughly 40 nautical miles off the coast of Kaohsiung City in southern Taiwan. On Feb. 26, Taiwan’s defense ministry reported that 45 Chinese military aircraft and 16 Chinese warships were detected near the island.

Cheng, who visited Kyiv, Odesa, and two other Ukrainian cities in 2023 to study how Taiwan can learn from the war in Europe, said he disagrees with the idea that Xi might act cautiously during the second Trump term.

According to his analysis, the likelihood of an invasion increases as Beijing advances its defense sector, which has outpaced that of the United States in key areas such as shipbuilding.

A leaked U.S. Office of Naval Intelligence report showed China’s shipbuilding capability is more than 200 times greater than that of the United States.

However, a rush into a military attack against Taiwan, according to Cheng, may lead to “the endgame” of Communist rule in China.

The Endgame of Communist Rule in China?

Activist Qin Jin said that despite the absence of any “clear sign” pointing to an immediate fall of the CCP, he won’t be surprised if it all unravels overnight, much like the collapse of the Soviet Union, which few in the West foresaw until it actually happened in 1991.

Qin highlighted the secrecy that cloaks authoritarian regimes, likening the CCP’s internal workings to the Iron Curtain of the Soviet era, dubbing it the “Bamboo Curtain” in China.

“What lies behind the Bamboo Curtain is almost impossible to know until the authorities choose to reveal it,” Qin, the chairman of the pro-democracy Federation for a Democratic China in Australia, told The Epoch Times.

As an example of the regime’s opacity, Qin cited Beijing’s tight control of information related to COVID-19, which first emerged in the central Chinese city of Wuhan five years ago.

To this day, Beijing has resisted any international investigation into the origin of the pandemic, leaving the world in the dark about how the pandemic erupted in China.

A Chinese soldier stands at the gate during the second plenary session of the first session of the 13th National People's Congress at the Great Hall of the People in Beijing on March 9, 2018. Fred Dufour/AFP via Getty Images

It only becomes more secretive when it comes to the country’s power center.

Qin pointed to the mystery surrounding the death of former No. 2 official Li Keqiang in October 2023, seven months after he stepped down as premier.

Li’s death at the age of 68 raised eyebrows among China watchers, who highlighted the Party elites’ record of longevity. Li’s two immediate predecessors, Wen Jiabao, 83, and Zhu Rongji, 96, are still living.

Some commentators speculated that Li’s passing coincides with political infighting within the Party’s top brass. A string of senior officials and military commanders, including the former foreign minister Qin Gang and defense minister Li Shangfu, had been abruptly removed from office after unexplained disappearances.

“The details of Li Keqiang’s death will surely be disclosed in the future,” Qin said. “When? After the collapse of the communist regime.”

Discontent among law enforcement personnel is surging within the major cities. Recently, Qin spoke with a police chief from a provincial capital who had fled overseas—an indication of unrest even among the high ranks of the public security bureaus, which are usually under tight CCP control.

“It’s akin to a big earthquake,” he said. “Humans may not feel it coming, but animals sense [the danger] beforehand.”

He cautioned that the regime’s collapse could happen unexpectedly, catching the world off-guard.

“It’s entirely possible,” he said. “And I look forward to that day.”

Luo Ya contributed to this report.

Tyler Durden Wed, 03/05/2025 - 20:55

Visualizing Americans' Views On Aid To Ukraine By Political Party

Since Russia’s full-scale invasion, America’s views on Ukraine have shifted significantly.

Just months after the war broke out, 6% of Republicans polled by the Wall Street Journal said America was doing too much for Ukraine. By December of 2023, this share jumped to 56%. In line with Trump’s “America First” policies, many Republicans today want to cut military aid and instead focus on domestic issues.

This graphic, via Visual Capitalist's Dorothy Neufeld, shows America’s views on aid to Ukraine, based on data from YouGov.

Figures are based on a survey of 1,603 U.S. adults conducted between Feb 16-18, 2025.

Republicans Most in Favor of Decreasing Aid

As the table below shows, Americans hold mixed views on the Ukraine war, clearly influenced by their political party.

Overall, 30% of Americans think aid to Ukraine should be decreased, just surpassing those that think it should remain the same.

Notably, 45% of Republicans think that America should reduce military aid to Ukraine. An even greater share of Republicans (60%) think that U.S. foreign aid should be cut or eliminated altogether.

By contrast, Democrats are the most in favor of increasing military aid, at 35% in this party. Looking beyond views on aid, 62% of Americans sympathize with Ukraine compared to 4% with Russia in the ongoing conflict. Meanwhile, 24% do not sympathize with either.

For a global perspective on this topic, check out this graphic on country-level views on the likelihood of the Russia-Ukraine war ending in 2025.

Tyler Durden Wed, 03/05/2025 - 20:30

Normal Vitamin B12 Levels May Still Be Too Low For Brain Health, Study Finds

Authored by George Citroner via The Epoch Times (emphasis ours),

Older adults with vitamin B12 levels considered normal may still face cognitive decline and brain damage, according to a new study.

Michelle Lee Photography/Shutterstock

Participants with lower—yet technically acceptable—B12 levels showed measurable brain white matter damage and slower cognitive processing, prompting researchers to call for a reevaluation of what constitutes “healthy” B12 levels in aging populations.

These lower levels could “impact cognition to a greater extent than what we previously thought, and may affect a much larger proportion of the population than we realize,” Alexandra Beaudry-Richard, co-first author, said in a press release.

Rethinking B12 Levels

Recent research published in Annals of Neurology found that older, healthy people with concentrations of B12 in their blood on the lower side of normal showed signs of neurological and cognitive deficiency. The study found that lower B12 was linked to damage in the brain’s white matter, which helps brain regions communicate.

Researchers enrolled 231 healthy participants without dementia or mild cognitive impairment, with an average age of 71. Their average blood B12 level was 414.8 pmol/L, which exceeds the U.S. minimum threshold of 148 pmol/L, indicating that, on average, they do not exhibit B12 deficiency. Normal values for B12 are often cited as being roughly between 118 to 701 pmol/L.

Assessments of cognitive performance indicated that lower active B12 levels were associated with slower processing speeds, suggesting a potential for subtle cognitive decline. This effect was more pronounced in older participants.

The results raise questions about current B12 requirements and suggest the recommendations need updating, according to Dr. Ari J. Green, chief of the division of neuroimmunology and glial biology in the Department of Neurology at the University of California at San Francisco, and senior author of the study.

Older people are more prone to lower vitamin B12 levels because their stomach acid production, which is crucial for properly absorbing B12 from food, decreases as they age. This malabsorption, combined with potential dietary inadequacies, can lead to deficiency.

Low B12 levels are linked to brain lesions because B12 is vital for the health of nerve cells in the brain, so a deficiency can cause damage to the white matter, leading to lesions that can impact cognitive function.

“Previous studies that defined healthy amounts of B12 may have missed subtle functional manifestations of high or low levels that can affect people without causing overt symptoms,” Green stated.

“Revisiting the definition of B12 deficiency to incorporate functional biomarkers could lead to earlier intervention and prevention of cognitive decline,” he added.

Read the rest here...

And grab some potent B-Vitamins here...

Satisfaction guaranteed or your money back... Tyler Durden Wed, 03/05/2025 - 20:05

Elon Musk's DOGE Is Zero-Basing The Federal Government

Authored by Bruce Abramson via RealClearMarkets,

What is DOGE really doing—and why is it so controversial?  The answer lies in an esoteric if straightforward concept that began in the world of  budgeting:  Zero-basing.

As a general rule, most organizations, businesses, agencies, and even households building budgets start by asking themselves a simple question: What did we spend last year?  To answer, they compile a list of expense categories and the amounts spent in each one.  Next, they look ahead to the coming year to see which categories will require a bump up and where they can cut.  Finally, they look at projected revenues to see whether they can expect to cover planned spending.

In such a process, last year’s budget serves as the “baseline” for this year’s budget.

That’s a perfectly reasonable approach if the goal is performance more-or-less on par with last year’s.  An entity displeased with past performance and contemplating major reforms must take a radically different approach.

“Zero-Based Budgeting” rejects using last year’s budget as a baseline.  Instead, it sets the baseline for each category at zero.  It then considers each contemplated expenditure, one at a time, and asks whether current circumstances can justify it or require it.  If so, it gets added to the budget.  If not, it’s rejected.

Though zero-basing may have begun in the world of budgeting, it’s a powerful concept that can be applied quite broadly.  I’ve long advocated its deployment in regulatory reform, and I’ve used it in my day job to revamp college admissions processes. 

Stripped to its essentials, zero-based reforms reject inertia and incumbency as reasons for doing anything.  They begin assuming nothing, review everything from first principles, and retain only that which is justifiable given current circumstances.

President Trump assumed office believing that the performance of the Executive Branch—not just last year, but for decades—has been entirely unacceptable.  A majority of Americans agree with that assessment.  Under such circumstances, preserving existing structures as a baseline would have been deeply foolish—not to mention counterproductive and destructive.

He thus called upon Elon Musk and his team at DOGE to zero base the entire government.  That’s exactly what DOGE has been doing. 

Consider, for example, a pair of messages that started with an announcement on X:  “Consistent with President @realDonaldTrump’s instructions, all federal employees will shortly receive an email requesting to understand what they got done last week. Failure to respond will be taken as a resignation.”  The promised email requested approximately five bullet points describing the employee’s accomplishments.

This request raised a furor.  Why?  Because it inverted the “normal” order. 

Under normal circumstances, new management inherits a workforce, then makes decisions about who to retain and who to cut.  Even if management suspects that payrolls have been padded with phantom employees and kickbacks, they typically leave things in place until they can identify the improprieties.  If you’re on payroll, you’re assumed to be earning your keep until someone proves otherwise.

In other words, the status quo defines the baseline. 

Musk’s message went wisely in the opposite direction.  It reset the federal workforce to zero and shifted the burden of proving value.  The “proof” required was negligible—but noticeably greater than the zero to which federal employees had grown accustomed. 

Anyone receiving the e-mail message—in effect, anyone claiming to be a federal employee—was given a minimal but real challenge: Reply with an e-mail stating “I exist, I read e-mail from my employer, and at least in my own opinion, I confer value in exchange for my paycheck.”

Hardly a high standard, but enough to infuriate those who believe that the status quo must be maintained at all costs independent of the acceptability of past performance.

Even a quick glimpse at DOGE’s other moves highlights their consistency, appropriateness, and brilliance—with parallels emerging throughout the Trump Administration:

First, announce the termination or planned demise of an agency—say, USAID or the Department of Education.  That resets its baseline to zero and shifts the burden to those claiming that said agency confers value in excess of cost upon the American people.

Next, let those who wish to preserve the program make their case: Justify the continuation of this expense given current circumstances.  Past importance is irrelevant.  Perhaps this program, when first introduced, solved a pressing problem.  So what?  Why do we need it in 2025?

In most cases, the burden of proving value should be higher than the one Musk set for employee maintenance—but still something that reasonable people making a reasonable case can meet.  Activities capable of clearing that hurdle will be preserved; even if the agency housing them is eliminated, they can be relocated to one of the many agencies that will prove their worth.

The beauty of this approach is that it achieves two great results simultaneously:

One, it maximizes the chances of eliminating deadweight bloat and outright fraud by cutting as a default, then adding back only what can be justified.

Two, it aligns incentives appropriately by making the people best positioned to justify each governmental activity responsible for providing the justifications.

That’s what it means to zero-base a federal government returning far too little on the taxpayer dollar. 

That’s precisely what DOGE is doing. 

It’s far beyond time.

Bruce Abramson is a senior administrator at New College of Florida and a Fellow of the Coalition for America. His books include The New Civil War (RealClearPublishing, 2021) and most recently, American Spirit or Great Awokening? (Academica Press, 2024).

Tyler Durden Wed, 03/05/2025 - 19:15