The EU came to the table with some big concessions for the Northern Ireland Protocol yesterday, with the vast majority of checks on goods crossing the Irish Sea set to go, and the amount of paperwork required to be slashed. The move would be incredibly welcome, but it still doesn’t suit the UK’s latest position that the ECJ being judge and jury to any dispute is a red line and the European’s position that the ECJ is almighty. However, there does seem to be a bit of a loophole emerging that might allow both sides to get what they want; put an arbitration panel below the ECJ and maybe even someone else in between, with the ECJ only called in to interpret narrow bands of legislation, thus creating enough distance between a dispute arising and the ECJ having to fully weigh in, that in practice it never gets that far – let’s hope so.


The limited choice and empty shelves that Northern Ireland are facing will be coming to a supermarket near all of us, soon: Felixstowe is currently turning away ships because the backlog in processing containers means there’s no room to offload cargoes, which is invariably going to lead to lower availability in shops. Felixstowe port have said they have 50,000 containers awaiting collection, but the lack of HGV drivers means that the pile is just going up, not down. Toy manufacturers warned yesterday that though shelves won’t necessarily be empty in toy shops, there is going to be a very limited availability of Christmas favourites, and major UK retailers are already sold out of video games consoles. Still, this isn’t just a problem that the UK is facing and yesterday Joe Biden announced that Los Angeles port would operate 24/7 (we were just as surprised as you are, that it wasn’t already) in a bid to clear up the log jam that they’ve got, hopefully easing the flow.  US logistics companies have also pledged to play their part and do more overnight work to try and ease the flow of goods.


The G20 are meeting in the US at the moment and have made a couple of significant agreements: They’ve endorsed the IMF’s plan to create a new ‘Resilience and Sustainability Trust’, which will allow richer countries to redistribute their share of undrawn reserves (known as special drawing rights) to island states and middle-income countries that need help and support. Last week finance ministers also ratified the new 15% minimum tax threshold put forward by the OECD, though interestingly Italy have said that the quid pro quo of removing digital services levies against US companies might take them as long as two years to implement. The Biden administration was keen that these taxes would be removed by the time the new tax deal is implemented, which is set to be 2023, but there isn’t set legislation for that to be the case. Italy will lose the tax revenues when they do cancel the digital levy, but this should be offset by the new tax laws which give the country where goods and services are marketed to lay claim to a portion of the tax revenues that are generated. The G20 have also agreed to include the Taliban when sending aid to Afghanistan. It was a grudging admission that they have no choice but to include them, but this does bring that government closer towards international recognition, though Mario Draghi has said that it doesn’t. In dealing with the Taliban, countries, NGO’s and charities might find themselves falling afoul of international sanction laws, as Afghan’s interior minister is the son of the founder of the Haqqani network, which the US designates as a terrorist organisation and is therefore blacklisted.


Joe Biden has announced plans for a network of offshore windfarms that will stretch practically the entire length of the US east coast. The plans would see 30 gigawatts of generation capacity built by 2030, which could create as many as 77,000 jobs and power more than ten million homes. The US is well behind most countries with offshore wind, but the catch-up effort would be rapid; for context the UK currently has about ten gigawatts of offshore wind capacity, though Boris wants that up to 40 gigawatts by 2030. The New York Times has the story on the wind farms and some other plans that Biden has to try and improve the uptake of renewables in the country.


Bitcoin could cause a financial meltdown, according to the deputy governor of the Bank of England:  Sir John Cunliffe believes that without regulation the frenetic growth of the digital currency market/bubble might lead to a crash that could suck in financial institutions and then ripple out to wider contagion. He’s mindful that the market is ‘only’ worth $2.3 trillion, which is around 1% of the size of the global financial system, but said “as the financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems – sub-prime was valued at about $1.2trn in 2008.” For the time being the market isn’t built on much leverage, meaning the risk of losses outweighing the money invested remains small, though this trend is changing and is expected to change rapidly as the market matures, which without standards and regulations based on lessons learned elsewhere could cause major issues. The Guardian has the story.


I’ve just tried to search for how big the global financial system was back in 2008 to provide some context, but with little success, though did stumble across this visualisation of the global financial system as of May last year, which seemed interesting.


Evergrande have effectively shut the Chinese property sector out of the global bond market, The FT report. They say that international bond sales have all but dried up as concerns grow over whether or not Evergrande can meet its obligations to global investors and is going to weigh heavily on the sector. The funds being raised would be used for development but also for servicing and refinancing existing debt, which if the funds don’t materialise could become problematic. The market was hoping for the Chinese central bank to step in and bailout the market more aggressively, but as the quote of the day from the article points out “they are looking for kung fu but they’re getting tai chi”! The point of views is that if international funding dries up then the PBoC will have to act more substantially to avoid defaults in the local bond market and contagion across sectors.


Looking to today: We’re all about consumer prices from Europe this morning and producer prices from the US this afternoon. There are also a host of Fed speakers and oil and gas inventories to add a little more perspective to the current state of play.


Have a great day.


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