Welcome to Bloomberg Opinion. I'm Bonnie Quinn. This week, the people are not willing to back down to a bully. Taipei based Tim Coulpan on the ramifications of Speaker Pelosi's visit to Taiwan, and later David Fickling on the reopening of the Port of Odessa for grain shipments. But first to markets and John Authors. So John, quite the week. Yes, I wouldn't have thought so the first week in August. But here we are. Let's talk about false all clears. Is that what we've just got? I think so certainly. What you've seen was I thought an extreme overreaction to the notion that the FED was ready to pivot already, that the in some ways, that the battle against inflation was already one. Now, it's true that markets are about what's happening in the future, they're not about what's just happened. But when it comes to fighting inflation, rates do have to go up, and that has to tighten economic activity before inflation is beaten. You can't just skip those steps. You have to wait for them to work out in the real economy before you trade. Accordingly, he's saying, it's almost like the market is trying to trade both things at the same time. Yes, there might be very clear economic logic behind the notion that rates are going to go up, then the economy will slow, and then rachel will come down again. We've all read our economic textbooks, and you do want to guard against the future. But you can't thereby assume that you can already buy bonds as there's no nothing to worry about plainly the terms. There's a lot of problems, and you point out Lisa Shallad's points and also Ed Hyman's points, both of whom are excellent market commentators and should never be ignored. Right, We're in a genuinely unprecedented situation, in an era of international finance and unprecedented global pandemic. Any number of possibilities are sensibly open. Nobody can confidently say that anybody else is wrong about this. But there are very strong forces pushing bonds in both directions. And I think that's an important point because it is both directions. It's not like it's an ambivalent market here. It's a market that's very convinced of two different things. That's why there yeah, and that's why the Eel curve is a little bit like a slinky these days, but also because Nancy Pelosi decided to complicate things, if you want to put it that way this week. Yes, I think from the cold blooded view of a macro trader, the potential Taiwan straight issue adds up potentially to the Ukraine War plus the trade war with China all at once, only worse. It's absolutely not what anybody wants to see happen. And so the degree of saber rattling ahead of her trip, which I have to say I don't quite understand what the re for doing it this week was was very scary. I think you could see we had on Tuesday, we had a remarkable rise in bond yields I people sold their bonds, and in large part that was because there have been a somewhat extreme rush to the havens. People were wondering whether the Chinese are going to shoot Pelosi's plane down. I'm not joking that that that was going around there as a possibility, and the fact that she just landed safely and got out of the plane caused the bond market turn around. Um, so certainly you could see some kind of a short term sentiment extreme caused just by that event that seems to have gone away though in twenty four hours. Unless something else happens. China seems to have made its moves. It's already imposed economic you know, well, I guess sanctions. Yeah, there are sanctions on Taiwan, and it's going to engage in some drills. But this may not be the kick off to the retaking of Taiwan that market is looking for at some point in the future. Yeah, I mean, I mean, certainly, I am not a expert on military strategy, but I've read quite a number of notes now that have come out from people who are both the sanctions and the military exercises are quite a lot more lenient, quite a lot less aggressive than they could have been. There are much nastier sanctions packages they could have done, and they could be much more menacing when it comes to playing around with their military. So it looks as though sieg In Ping might have blinked and Nancy Pelosi hasn't. Can't imagine you'll get any great domestic political credit for it in the US, but it looks as though Pelosi might actually have one that particular contrado. Yes, they're not exactly equals, I guess in that respect, but but she may have one. So we're in August. We've had this huge move in bond market. We also saw the NASDAK reclaim lots of territory so far this week. It's very hard to believe in the idea that this could be a false or clear when you watch what's happening in the market. But I guess that's the essence of being a good trader, right. It's a very difficult one. Certainly a number of usual technical trading measures. I'm not normally a great fan of technical analysis, but it's at times like this, when markets have really been scared and when trading really is about mass psychology, that technical measures can be quite useful. And the degree to which we have had such a big reversal of such a big sell off doesn't usually happen unless the bottom is in, and that deserves some degree of respect. The nisy Fang plus index, so that the index just includes ten huge internet platform companies Apple, Amazon, Tesla, etcetera, is actually at this point up almost exactly from its low, which was in May. Some technicians would say that the rise means it's back in the bull market, still a long way below its peak, from last year, but that rise is in very very liquid stocks that people know about and are thinking about again can't be gainsaid. It doesn't seem to make sense to me, and that does imply I may in the long term be right right in inverted commas, but certainly in the short term there's something I must be missing that that you do need to have some degree of respect for that kind of a market movement. Well, listeners, if there's something you think John is missing, definitely let us know. John. Authors have you from Taipei now. On the House Speaker's visit to Taiwan with Tim Colburn, there were rumblings of the visit by the House Speaker, followed by nothing at all official on the agenda, and then suddenly as Morga's Board of meetings and press briefings talk to us about what the lasting consequences of this will be for Taiwan, both positive and negative. I mean there will be some positive ones. I guess it was a display of unity with the island. I think there will be more positive than negative. What we're hearing so far globally is a lot of pundits from around the world who have their take. You know, We're hearing from people in d C, in London and elsewhere, but there's not that many people in Taiwan who are talking about it. So so let me give you that perspective, and that is the Taiwanese people in general, see this is a positive thing. The world seems to have just suddenly realized that Taiwan is under threat, and all of the belligerents and saber rattling seems to have come as a bit of surprise too many people outside Taiwan, but people in Taiwan have been used to that. We've been dealing with for decades, various types of threats, direct indirect threats, military threats, economic threats, and even legal threats with passing of various laws in China that impact Taiwanese directly. So the positive really for the Taiwanese these and this is what I'm hearing from many many people, is that now the world has woken up. Now the world has got Taiwan on their radar, and they're very aware of the existence of threat from China, the belligerents from China. The downside, of course, is that the military have increased as we speak, China is going to be holding the largest military exercises around Taiwan since the Chinese Civil War. Essentially, they will be ringing the island of Taiwan with the various war games at six different points, very uncomfortably close to Taiwan. You know, you say that the world has woken up, but China has been ramping up things like military drills and so on. We've seen that, and I feel like, at least in markets, there was preparation for an effort to retake Taiwan or something like that in the near future. And then Ukraine happened, and some people thought that those chances went up in the near term. Some thought that that meant those chances went down in the near term. But why would it be in Taiwan's interest to just poke the bear? If you like, it's predicating the idea of victim blaming. I think it's got to reremembered that Taiwan has not threatened China, has not threatened to invade, has not threatened any military action, and it's not even threatened to change the status quo. So since President saying when got in and then got reelected, she's actually annoyed some people in her own party by not moving anywhere towards independence, And of course she's annoyed Paging by not going anywhere close to the idea of unification. She has not budged either way, and that's kind of annoyed everybody. But it needs to be remembered that Taiwan has not threatened anybody. Taiwan has not invited any of it. Pelosi wanted to come to Taiwan, and of course Taiwanese people welcome that. The President of Taiwan welcomed that. But China has d percent agency over how it acts and reacts. To think it's up to China to decide how it acts and reacts to the visit of the speaker of a democratically elected nation to the president of another democratic, ple elective nation. And to say that Taiwan is poking the bear or inviting some kind of reaction is victim blaming, and it takes away agency from Beijing to control its temper and decide what it wants to do. So great that needs to be remembered. Yeah, absolutely, that is a great reminder. At the same time, is Taiwan ready if there is some military action? Has Taiwan built up enough military Are the people interested in getting involved in some kind of a conflict. I don't think anybody in any any nation is interested in getting involved in a conflict. You know, I don't believe the pure, but we can't live in denial either of to him. I mean, there may be a conflict coming at some point, sure, absolutely, But when you're living in Taiwan and you're you're facing the threats constantly, the Taiwanese people are not willing to back down to a bully. Just because China wants something doesn't mean in the eyes of the Taiwanese people that they should do it. They have been bullied by China for a long time. They've seen what happened to Hong Kong, and the idea of one country to assist a which was dangled in front of the Taiwanese people for quite a long time, has disappeared. So it really don't how much choice. Yeah, no, absolutely. In the meantime, there have been some economic actions taken as well, so far, I guess not a massive amount of actions, but still, you know, it will hurt citrus farmers in Taiwan. Sand is not natural. Sand is not going to be exported to Taiwan, and so on. There's also the danger that the chip manufacturing industry might be hurt in some way by this. What is the view on the economic impact so far? Yeah, you're right, there's been close to two thousand food items supposedly banned from import. Citrus fruits are as types of snack foods. From an economic point of view, it's like one percent of export, but symbolically it's important, and these are kind of traditional, smaller industries that have a relatively higher labor employment rate. So you know, it's a bit of a pain. But one thing that I'm hearing from Taiwanese is great, it will make us less reliant on China, as many many people in Taiwan who feel that Taiwan is too reliant on China as an export market. I mean right, yeah, yeah, Well, the second largest economy and largest growing economy, even though China is slowing down, still a very very important market for everybody, not just for Taiwan, for everybody. Taiwanese aware of that, but they also a bit pragmatic, going well, economically, that doesn't make sense for us to be so reliant on a nation that is threatening to invade us. You know, there's there's definitely an issue there. So there's a certain amount of pragmatism by many Taiwanese right now saying, well, that kind of sucks, but it's your loss, not ours. On the chip side, there is definitely a risk. But Mark Leo, the chairman of t SMC, just said recently, if China was to invade, they would render t SMC inoperable. People who know the industry know very well, but you can't just invade Taiwan and take over the factories and somehow run it yourself. The factories are not just the equipment, it's to know how, it's the technology, it's the people, the software behind it, and actually just doesn't have the technical ability to make chips like the Taiwanese do. We know this for a fact because they've been trying. So if there was actually some kind of military action on the main island, everybody would lose, and Taiwan certainly would lose, but China would not get access to the chips. China needs Taiwan made chips just as much as everybody else, right, so they really would be shooting themselves in the foot. And the Chinese economy, which is growing very fast and it's got a very strong consumer in middle class economy needs the electronic products that are made by the Taiwanese. So it would be a very big risky move to try and take action on that front. Yeah, and I almost set to annunciated, but China could just nationalize the chip industry, you know, once it's taken over the island Milton. Well, they'd have to take over the island first, and that wouldn't be easy. You know, first of all, they'd have to take out the power stations. This is how the military started to think about it. They take out military installations first, take out power stations, take out infrastructure. And you know, if they do manage to love a whole lot of missiles and bombs of Taiwan and miss the semiconductor manufacturing factories and then managed to get boots on the ground and then managed to get people into the factories and then nationalize it, I don't think they have much left actually nationalize the The amount of destruction involved in the process of actually taking over the factories would render them useless. Anyway, Tim couldn as always do get in touch. Comments and opinions always welcome at Volley Quinn on Twitter or email v Quinn at Bloomberg dot net. The Inflation Reduction Act is a potential boon to many areas of the green economy. And it turns out the top ten districts for solar wind and battery compacity are eight six percent red. So if Republican districts tend to benefit from the green transition, why the disconnect? Why are Republicans not outwardly at least in favor. Liam Denning has been looking at the data. Liam, Why are Republicans at least outwardly not more in favor of the green transition? Well, I guess it's probably explained mostly ideology more than anything else. The genesis of this piece was I worked with an outside data firm called in a Section, and we wanted to really see if the reality is on the ground in terms of where stuff actually gets cited comports with this received wisdom on the sector in the US. You know this color code we have that basically green mixes with blue, but it doesn't mix with red. And actually, when you you know, you download all the data on where solar wind and batteries are cited or where they're planned to be cited, and then you cross references with where this stuff is being built. It's overwhelmingly in districts that are represented by Republicans. The other thing that you mapped when you mapped Green America was the emissions side of things, So the not so green America. It turns out that it's also the case that Republican congressional districts have the most emissions. Tell us a little bit about where these districts are. So, for example, Kevin McCarthy's district, it's a huge green energy district, and yet Kevin McCarthy is not exactly beer prototypical green energy. Yeah, we focused in on Kevin McCarthy obviously because he's very prominent. He's the House Minority leader, and his district is fascinating because, as you say, it is a big green energy hub in in California. In fact, in terms of planned and operating battery capacity, it's the number one district, not just in California but in the country. At the same time, it's also a big wind and solar area. His district hosts the cradle of California's wind industry, has the Harvey Desert, which hosts a lot of solar farms, and his district centers on Bakersfield, which is also the unofficial oil capital of California. So, you know, one of the takeaways we took from not just his district, but the entire project is that the underlying complexity is very different from what you hear, both in terms of kind of SoundBite politics, but also you know the left right battles you see play out on social media. Well, and some of this is do to the system too, I guess, right, because while the transition is happening, people are still working in the old energy quote unquote areas and particularly in these districts, so they want to hold on to their jobs, and there's an elector to consider it too. Yeah, I think there's a few things going on. So, as you say, there's that element of transition to use the word that everyone uses, and in a transition, you go from old to new. And one of the things that Bedevil's climate politics is that climate change operates on a geological time scale, and society operates on two year election cycles or you know, two second Twitter cycles, definitely not geological cycles. So while there is fairly consistent concern about climate change expressed by Americans in whichever pole you care to mention. You know, it doesn't always necessarily come to the top of the list around election time. I think the other thing that underlies all this is that a big reason why green infrastructure is built in red soil is that that red soil will tends to be more rural or semi rural. And you know, guess what we tend to build Giant wind turbines, giant solar farms, big battery projects, and big plant in general, whether it's power stations or industrial plants. Those tend to get built where the land is cheap. You know. A good example is wind power, which is very much a Midwestern phenomenal, at least in the onshore sector, mainly because that's where the wind blows. You know, of the country's wind potential is intense states down the middle of the country, and the house districts in those states are Republicans. So part of this is simply geography and geography being at odds with ideology. Well, and that's the only thing. It's going to take a long time to enact the screen transition, and probably a lot longer than we thought. And even countries in Europe are reconsidering things like nuclear now because they're being forced to so back to the United States. If it's going to take a lot longer than we thought to enact this transition, is it possible that the electorate will change and that perhaps even representatives change their mind. You know, a cynic would say that the one thing that tends to change a politician's mind is money. And I think one of the things that we kind of did some back of the envelope math On was saying, if measures like the Inflation Reduction Act are pasted and we see stimulus dollars flow into clean tech projects at scale, where will that money go? And when we think about the planned capacity for batteries, wind and sober in the US, three quarters to four fifths of that money is going to end up in red districts. And I think over time, as we see green energy facts on the ground being created and when they reach critical mass, bringing with them that sort of investment, creating a tax base and a constituency all their own, whether it's a business constituency or a local individual constituency, at some point that does have an impact. At some point a politician who is maybe saying we don't need any of this stuff, a local business leader is going to tap them on the back and say, actually, this stuff is making us money, Liam Denning. Many commodity prices are down substantially from their peaks. That's, however, cold comfort for nearly eight hundred million food insecure around the world. Let's get to David Fickling for some explanation. So, David, there was huge relief in grain markets when we saw that first ship leave the port of Odessa for Elebanon. Prices have come down for all sorts of grains and oil seeds, and it's a big difference from when we spoke earlier in the year about the difficulties in palm oil, wheat and other markets. But in terms of food security, the situation is much more complicated and multi factored than simply prices are too high. I think that's right. It's very much feels like we've passed the sort of acute phase of food crisis. But I think there's a chronic problem underlying this. To use the sort of medical metaphor, I mean, you look at a bunch of commodities, spring wheats, the benchmark in the US, it's done more than a third at this point from where it was in March palm all. You mentioned oil feeds that forty percent in papril corn prices, and by nearly a course in my sugar and Arabic a coffee. They're all a one year, nine months load. But although the price of these commodities are still actually reasonably hired by ten years standards, certainly compared to where we where a few months ago, there's come down a great deal and we're starting to see signs that maybe certain these things were returning to normal. So that's great, and we should be very excited for the world's poor and hungry that perhaps they have a chance to get food again. But that's not quite the case, is it. That's right, because I think there's a tendency for us in rich countries looking at commodity markets to rather overestimate the importance of the prices of benchmark commodity futures as a sort of index of the affordability of food for the world's poorest. It's certainly a factor, but one of many factors, and not even I would say the most important factor. You know, if I was to say one factor above all that affects food insecurity, and bear in mind the population of people facing under nourishment who don't have enough food through the year to give them a balanced diet. It's looking now at being the highest in one since the mid two thousands, about seven hundred and sixty eight million people, possibly higher than that. One in ten people in the world very nearly do not have enough nourishment to provide them with a balanced diet or a real improvement. That number, far from us of eight hundred million we're seeing now was in the five hundred to six hundred millions. It was quite significantly lower. A couple of factors. I mentioned war and insecurity that really is probably the biggest of all factors. And you know, one sort of measure for the sort of human cost of that is probably if you look at the number of displaced people, refugees and internally displaced people. It's been soaring over the past decade. It's it's now running a double its level of a decade ago one. It rose eight percent in one year. And there's a tendency obviously to see these benchmark bology prices as the field and end all of food prices. But actually, I mean, you know, I always go back to the great Indian economists that much of fen and his analysis of famine that previously people talked about famine as something where there simply wasn't enough food in the world to feed people, or food in that particular region to feed people. And he went back and went back at the Dayton fans and said, well, it's very rarely a general sortage of food. It's generally actually that the price of food has has risen beyond the level of people's ability to afford it. And that can be caused by rising food prices, it can be caused by falling incomes, and it can be caused by other indexes of civil disorder, and a lot of folks that we're seeing right now civil disorder, but even things like insurance on ships, crew for ships, and so on. So many varied factors go into the price of something and the delivery of something. In fact, I was looking at the overall world food price Index and it's still at one fifty four point two, which is not that far off this year's March I oft seven. So in spite of large jobs, nearly eight hundred million people are going hungry right now, and that could rise. Talk to us a little bit of about the effect of the dollar and how that set in motion a whole range of things like the evaluations and so on that also affected the price and the deliverability of food. Absolutely, I mean, I think that's crucially important. We tend to look at these quantity price in dollars and most agricultural commodities a few exceptions. Palm oil is one of price in US dollars. Obviously, we've seen a lot of dollar strength in recent months, and that's particularly bad for a lot of emerging market currencies. These are countries that are some of the world's biggest food importers and are most dependent on imports from overseas. So take Egypt for instance. Egypt is the world's largest wheat importer. The Egyptian pand has absolutely been collapsing over the past years. So whereas the rise of the US dollar price of wheat has driven up costs by about twenty three, if you add in the evaluation of the Egyptian pan, that's added in another twenty on top of that. Pakistan is not actually a huge wheat importer, but it is dependent on imports to some extent. The rupee slump has added fifty three the scent on top of that twenty three percent increase from the U S dollar price. And Turkey, I mean, Turkey's a wealthier country, but of course the Turkish era has been in the terrible States. So the collapsing there is about a hundred and seventy one percent on top of that twenty three percent increase from from the US dollar week. It's horrifying. We talk about nine eight percent invation. We're looking for to go below that in the United States. But if you're in one of these countries, you're literally talking about what nearly two added to costs. That's that's hyperinflation. That's insane. You can't feed your people of that. Yeah, And of course, you know, if you think about how a lot of these governments managed this, Egypt in particular, I think he's an interesting example because subsidized bread is really the central part of the Egyptian welfare spect. In fact, if you look at their physical numbers, their fruit subsidies, they spend as much on pretty much all other aspects of social security put together. So of course, what happens when the Egyptian pan is devalued and wheat prices go up further, Well, Egypt has been at in the market, making big purchases of of wheat. Of course, it was one of the big buyers of Ukrainian and Russian weeks, so it's sort of suffered from that, but it's still needs to buy this because it's a sort of crucial element of social stability. And what's happening as a result of that that is of course impacting Egypt's physical balances. So this is going to be an impact that will linger their physical balances, and their external balances are deteriorating as a result of this. Now, I don't have a macro economic crystal ball for Egypt and know where they're going in the next two years. But if you look at the situation of countries like Pakistan and Sri Lanka that have been making their trips to the IMF recently, you can be put in a very difficult situation when you're having to subsidize something like that in the context of weaker fiscal and external balances, right, and then you're subject to a whole range of I MF conditions for the foreseeable future. And of course you mentioned Sri Lanka, it's interval to Pakistana staring at the fold and they both no coincidence, have massive social unrest, in part because people have to stand in line for food for days. And if you're somebody with mouths to feed, or you've lost your job because of COVID and suddenly there's no tourism in your country, you must be living under severe stress, never mind being undernourished. The jobs thing I think is crucial, and it's often underestimate. This is another of these long COVID effects. A hundred million people worldwide were laid off. The global labor force of employed people dropped by a hundred million in twenty for the first time in living memory. And in terms of the people who are living below the global poverty line one dollar ninety a day, about ninety seven million were pushed below the global policy line by COVID. And so if you're in the top forty percent of the world's population, your incomes at this point down about two point eight percent, a low way you've expected to be before the pandemic. But if you're in the bottom forty percent, it's six point seven percent down. And of course those are the people who are most constrained and most dependent on being able to afford food. David, you mentioned some Southeast Asian nations that we have been talking about on the program. Tell us where else is suffering badly? Obviously many countries in Africa. Yeah, I think Africa is always on the front lines of a lot of these things. If you look at the number of people who are undernourished, the rate in Africa is just different to anywhere else in the world, even now where things have ticked up. It's probably about ten percent population of the world of the whole faces under nourishment. In Africa it's about is double the level. So although there are a larger aggregate number of people in Asia, for instance, who are affected by hunger, just because the population is so much larger, I think around five million in Asia, but two million people in Africa really affits to the population are affected by that. One interesting thing about Africa that also makes it a little bit different to a lot of these other parts of the world is that because so many countries in Sub Saharan Africa are really at the bottom end of the income distribution, they're particularly disconnected from the global commodity markets. So there are actually particularly unaffected by a lot of what we're talking about in terms of the week price and the harmorld price simply because the incoming supply chains and the availability of cash to afford imported global commodities are simply not there. So people are really very heavily dependent on locally produced produced and the price a locally produced good. So it's really quite a different picture to what we're talked frombout. Certainly in a lot of Middle Eastern and Asian countries where there is poverty, these global flows matter a little bit more well. And that's another question about globalization because of the fact that we have globalized commodity markets and we need to have because countries can't feed themselves. There's no way back from this, right, There's no sort of let's have our own supply chain because some countries just can't produce indeed, and you know, I'd say most countries are actually better off being able to be plugged into those global supply chains, being able to benempit from those commodity flows. Of course, one of the other areas that we've not talked about it's a big driver of hunger, is local climate and weather conditions. Of course, there's been a very severe three year drought in East Africa in recent years. You're just seeing in the news recently these very severe flogged in Pakistan. Pakistan, as a country that's more plugged into those global community flows, will probably in many ways do a lot better than East Africa because despite their own fiscal problems, they can benefit from food imports. They can afford food imports, but a lot of those countries in West Africa can't afford. So these chips that are leaving Ukraine. While it's wonderful and everything in the Porto Wolds are being open again with the Humanitarian Corridor is fantastic, it's really not going to provide that much relief for that many people. It will, it'll it will help certain parts of the world, a sort of more middle income parts to the world, like the Middle East, like parts of South Asia, the lower income parts the world. They have much more severe problems than It's going to take more than that to actually solve those problems. David Fickling, We're now choosing to end all conversations not with you, though, please do get in touch. I'm at Vonnie Quinn on Twitter, or send your thoughts to v Quinn at Bloomberg dot Net. Opinions and comments always very welcome. We're produced, as always by Eric mollow and don't forget. We're also available as a podcast as on Apple, Spotify or your preferred platform. To next Time on Boomberg Opinion and Vonnie Quinn mh

Welcome to Bloomberg Opinion. I'm Bonnie Quinn. This week, the people are not willing to back down to a bully. Taipei based Tim Coulpan on the ramifications of Speaker Pelosi's visit to Taiwan, and later David Fickling on the reopening of the Port of Odessa for grain shipments. But first to markets and John Authors. So John, quite the week. Yes, I wouldn't have thought so the first week in August. But here we are. Let's talk about false all clears. Is that what we've just got? I think so certainly. What you've seen was I thought an extreme overreaction to the notion that the FED was ready to pivot already, that the in some ways, that the battle against inflation was already one. Now, it's true that markets are about what's happening in the future, they're not about what's just happened. But when it comes to fighting inflation, rates do have to go up, and that has to tighten economic activity before inflation is beaten. You can't just skip those steps. You have to wait for them to work out in the real economy before you trade. Accordingly, he's saying, it's almost like the market is trying to trade both things at the same time. Yes, there might be very clear economic logic behind the notion that rates are going to go up, then the economy will slow, and then rachel will come down again. We've all read our economic textbooks, and you do want to guard against the future. But you can't thereby assume that you can already buy bonds as there's no nothing to worry about plainly the terms. There's a lot of problems, and you point out Lisa Shallad's points and also Ed Hyman's points, both of whom are excellent market commentators and should never be ignored. Right, We're in a genuinely unprecedented situation, in an era of international finance and unprecedented global pandemic. Any number of possibilities are sensibly open. Nobody can confidently say that anybody else is wrong about this. But there are very strong forces pushing bonds in both directions. And I think that's an important point because it is both directions. It's not like it's an ambivalent market here. It's a market that's very convinced of two different things. That's why there yeah, and that's why the Eel curve is a little bit like a slinky these days, but also because Nancy Pelosi decided to complicate things, if you want to put it that way this week. Yes, I think from the cold blooded view of a macro trader, the potential Taiwan straight issue adds up potentially to the Ukraine War plus the trade war with China all at once, only worse. It's absolutely not what anybody wants to see happen. And so the degree of saber rattling ahead of her trip, which I have to say I don't quite understand what the re for doing it this week was was very scary. I think you could see we had on Tuesday, we had a remarkable rise in bond yields I people sold their bonds, and in large part that was because there have been a somewhat extreme rush to the havens. People were wondering whether the Chinese are going to shoot Pelosi's plane down. I'm not joking that that that was going around there as a possibility, and the fact that she just landed safely and got out of the plane caused the bond market turn around. Um, so certainly you could see some kind of a short term sentiment extreme caused just by that event that seems to have gone away though in twenty four hours. Unless something else happens. China seems to have made its moves. It's already imposed economic you know, well, I guess sanctions. Yeah, there are sanctions on Taiwan, and it's going to engage in some drills. But this may not be the kick off to the retaking of Taiwan that market is looking for at some point in the future. Yeah, I mean, I mean, certainly, I am not a expert on military strategy, but I've read quite a number of notes now that have come out from people who are both the sanctions and the military exercises are quite a lot more lenient, quite a lot less aggressive than they could have been. There are much nastier sanctions packages they could have done, and they could be much more menacing when it comes to playing around with their military. So it looks as though sieg In Ping might have blinked and Nancy Pelosi hasn't. Can't imagine you'll get any great domestic political credit for it in the US, but it looks as though Pelosi might actually have one that particular contrado. Yes, they're not exactly equals, I guess in that respect, but but she may have one. So we're in August. We've had this huge move in bond market. We also saw the NASDAK reclaim lots of territory so far this week. It's very hard to believe in the idea that this could be a false or clear when you watch what's happening in the market. But I guess that's the essence of being a good trader, right. It's a very difficult one. Certainly a number of usual technical trading measures. I'm not normally a great fan of technical analysis, but it's at times like this, when markets have really been scared and when trading really is about mass psychology, that technical measures can be quite useful. And the degree to which we have had such a big reversal of such a big sell off doesn't usually happen unless the bottom is in, and that deserves some degree of respect. The nisy Fang plus index, so that the index just includes ten huge internet platform companies Apple, Amazon, Tesla, etcetera, is actually at this point up almost exactly from its low, which was in May. Some technicians would say that the rise means it's back in the bull market, still a long way below its peak, from last year, but that rise is in very very liquid stocks that people know about and are thinking about again can't be gainsaid. It doesn't seem to make sense to me, and that does imply I may in the long term be right right in inverted commas, but certainly in the short term there's something I must be missing that that you do need to have some degree of respect for that kind of a market movement. Well, listeners, if there's something you think John is missing, definitely let us know. John. Authors have you from Taipei now. On the House Speaker's visit to Taiwan with Tim Colburn, there were rumblings of the visit by the House Speaker, followed by nothing at all official on the agenda, and then suddenly as Morga's Board of meetings and press briefings talk to us about what the lasting consequences of this will be for Taiwan, both positive and negative. I mean there will be some positive ones. I guess it was a display of unity with the island. I think there will be more positive than negative. What we're hearing so far globally is a lot of pundits from around the world who have their take. You know, We're hearing from people in d C, in London and elsewhere, but there's not that many people in Taiwan who are talking about it. So so let me give you that perspective, and that is the Taiwanese people in general, see this is a positive thing. The world seems to have just suddenly realized that Taiwan is under threat, and all of the belligerents and saber rattling seems to have come as a bit of surprise too many people outside Taiwan, but people in Taiwan have been used to that. We've been dealing with for decades, various types of threats, direct indirect threats, military threats, economic threats, and even legal threats with passing of various laws in China that impact Taiwanese directly. So the positive really for the Taiwanese these and this is what I'm hearing from many many people, is that now the world has woken up. Now the world has got Taiwan on their radar, and they're very aware of the existence of threat from China, the belligerents from China. The downside, of course, is that the military have increased as we speak, China is going to be holding the largest military exercises around Taiwan since the Chinese Civil War. Essentially, they will be ringing the island of Taiwan with the various war games at six different points, very uncomfortably close to Taiwan. You know, you say that the world has woken up, but China has been ramping up things like military drills and so on. We've seen that, and I feel like, at least in markets, there was preparation for an effort to retake Taiwan or something like that in the near future. And then Ukraine happened, and some people thought that those chances went up in the near term. Some thought that that meant those chances went down in the near term. But why would it be in Taiwan's interest to just poke the bear? If you like, it's predicating the idea of victim blaming. I think it's got to reremembered that Taiwan has not threatened China, has not threatened to invade, has not threatened any military action, and it's not even threatened to change the status quo. So since President saying when got in and then got reelected, she's actually annoyed some people in her own party by not moving anywhere towards independence, And of course she's annoyed Paging by not going anywhere close to the idea of unification. She has not budged either way, and that's kind of annoyed everybody. But it needs to be remembered that Taiwan has not threatened anybody. Taiwan has not invited any of it. Pelosi wanted to come to Taiwan, and of course Taiwanese people welcome that. The President of Taiwan welcomed that. But China has d percent agency over how it acts and reacts. To think it's up to China to decide how it acts and reacts to the visit of the speaker of a democratically elected nation to the president of another democratic, ple elective nation. And to say that Taiwan is poking the bear or inviting some kind of reaction is victim blaming, and it takes away agency from Beijing to control its temper and decide what it wants to do. So great that needs to be remembered. Yeah, absolutely, that is a great reminder. At the same time, is Taiwan ready if there is some military action? Has Taiwan built up enough military Are the people interested in getting involved in some kind of a conflict. I don't think anybody in any any nation is interested in getting involved in a conflict. You know, I don't believe the pure, but we can't live in denial either of to him. I mean, there may be a conflict coming at some point, sure, absolutely, But when you're living in Taiwan and you're you're facing the threats constantly, the Taiwanese people are not willing to back down to a bully. Just because China wants something doesn't mean in the eyes of the Taiwanese people that they should do it. They have been bullied by China for a long time. They've seen what happened to Hong Kong, and the idea of one country to assist a which was dangled in front of the Taiwanese people for quite a long time, has disappeared. So it really don't how much choice. Yeah, no, absolutely. In the meantime, there have been some economic actions taken as well, so far, I guess not a massive amount of actions, but still, you know, it will hurt citrus farmers in Taiwan. Sand is not natural. Sand is not going to be exported to Taiwan, and so on. There's also the danger that the chip manufacturing industry might be hurt in some way by this. What is the view on the economic impact so far? Yeah, you're right, there's been close to two thousand food items supposedly banned from import. Citrus fruits are as types of snack foods. From an economic point of view, it's like one percent of export, but symbolically it's important, and these are kind of traditional, smaller industries that have a relatively higher labor employment rate. So you know, it's a bit of a pain. But one thing that I'm hearing from Taiwanese is great, it will make us less reliant on China, as many many people in Taiwan who feel that Taiwan is too reliant on China as an export market. I mean right, yeah, yeah, Well, the second largest economy and largest growing economy, even though China is slowing down, still a very very important market for everybody, not just for Taiwan, for everybody. Taiwanese aware of that, but they also a bit pragmatic, going well, economically, that doesn't make sense for us to be so reliant on a nation that is threatening to invade us. You know, there's there's definitely an issue there. So there's a certain amount of pragmatism by many Taiwanese right now saying, well, that kind of sucks, but it's your loss, not ours. On the chip side, there is definitely a risk. But Mark Leo, the chairman of t SMC, just said recently, if China was to invade, they would render t SMC inoperable. People who know the industry know very well, but you can't just invade Taiwan and take over the factories and somehow run it yourself. The factories are not just the equipment, it's to know how, it's the technology, it's the people, the software behind it, and actually just doesn't have the technical ability to make chips like the Taiwanese do. We know this for a fact because they've been trying. So if there was actually some kind of military action on the main island, everybody would lose, and Taiwan certainly would lose, but China would not get access to the chips. China needs Taiwan made chips just as much as everybody else, right, so they really would be shooting themselves in the foot. And the Chinese economy, which is growing very fast and it's got a very strong consumer in middle class economy needs the electronic products that are made by the Taiwanese. So it would be a very big risky move to try and take action on that front. Yeah, and I almost set to annunciated, but China could just nationalize the chip industry, you know, once it's taken over the island Milton. Well, they'd have to take over the island first, and that wouldn't be easy. You know, first of all, they'd have to take out the power stations. This is how the military started to think about it. They take out military installations first, take out power stations, take out infrastructure. And you know, if they do manage to love a whole lot of missiles and bombs of Taiwan and miss the semiconductor manufacturing factories and then managed to get boots on the ground and then managed to get people into the factories and then nationalize it, I don't think they have much left actually nationalize the The amount of destruction involved in the process of actually taking over the factories would render them useless. Anyway, Tim couldn as always do get in touch. Comments and opinions always welcome at Volley Quinn on Twitter or email v Quinn at Bloomberg dot net. The Inflation Reduction Act is a potential boon to many areas of the green economy. And it turns out the top ten districts for solar wind and battery compacity are eight six percent red. So if Republican districts tend to benefit from the green transition, why the disconnect? Why are Republicans not outwardly at least in favor. Liam Denning has been looking at the data. Liam, Why are Republicans at least outwardly not more in favor of the green transition? Well, I guess it's probably explained mostly ideology more than anything else. The genesis of this piece was I worked with an outside data firm called in a Section, and we wanted to really see if the reality is on the ground in terms of where stuff actually gets cited comports with this received wisdom on the sector in the US. You know this color code we have that basically green mixes with blue, but it doesn't mix with red. And actually, when you you know, you download all the data on where solar wind and batteries are cited or where they're planned to be cited, and then you cross references with where this stuff is being built. It's overwhelmingly in districts that are represented by Republicans. The other thing that you mapped when you mapped Green America was the emissions side of things, So the not so green America. It turns out that it's also the case that Republican congressional districts have the most emissions. Tell us a little bit about where these districts are. So, for example, Kevin McCarthy's district, it's a huge green energy district, and yet Kevin McCarthy is not exactly beer prototypical green energy. Yeah, we focused in on Kevin McCarthy obviously because he's very prominent. He's the House Minority leader, and his district is fascinating because, as you say, it is a big green energy hub in in California. In fact, in terms of planned and operating battery capacity, it's the number one district, not just in California but in the country. At the same time, it's also a big wind and solar area. His district hosts the cradle of California's wind industry, has the Harvey Desert, which hosts a lot of solar farms, and his district centers on Bakersfield, which is also the unofficial oil capital of California. So, you know, one of the takeaways we took from not just his district, but the entire project is that the underlying complexity is very different from what you hear, both in terms of kind of SoundBite politics, but also you know the left right battles you see play out on social media. Well, and some of this is do to the system too, I guess, right, because while the transition is happening, people are still working in the old energy quote unquote areas and particularly in these districts, so they want to hold on to their jobs, and there's an elector to consider it too. Yeah, I think there's a few things going on. So, as you say, there's that element of transition to use the word that everyone uses, and in a transition, you go from old to new. And one of the things that Bedevil's climate politics is that climate change operates on a geological time scale, and society operates on two year election cycles or you know, two second Twitter cycles, definitely not geological cycles. So while there is fairly consistent concern about climate change expressed by Americans in whichever pole you care to mention. You know, it doesn't always necessarily come to the top of the list around election time. I think the other thing that underlies all this is that a big reason why green infrastructure is built in red soil is that that red soil will tends to be more rural or semi rural. And you know, guess what we tend to build Giant wind turbines, giant solar farms, big battery projects, and big plant in general, whether it's power stations or industrial plants. Those tend to get built where the land is cheap. You know. A good example is wind power, which is very much a Midwestern phenomenal, at least in the onshore sector, mainly because that's where the wind blows. You know, of the country's wind potential is intense states down the middle of the country, and the house districts in those states are Republicans. So part of this is simply geography and geography being at odds with ideology. Well, and that's the only thing. It's going to take a long time to enact the screen transition, and probably a lot longer than we thought. And even countries in Europe are reconsidering things like nuclear now because they're being forced to so back to the United States. If it's going to take a lot longer than we thought to enact this transition, is it possible that the electorate will change and that perhaps even representatives change their mind. You know, a cynic would say that the one thing that tends to change a politician's mind is money. And I think one of the things that we kind of did some back of the envelope math On was saying, if measures like the Inflation Reduction Act are pasted and we see stimulus dollars flow into clean tech projects at scale, where will that money go? And when we think about the planned capacity for batteries, wind and sober in the US, three quarters to four fifths of that money is going to end up in red districts. And I think over time, as we see green energy facts on the ground being created and when they reach critical mass, bringing with them that sort of investment, creating a tax base and a constituency all their own, whether it's a business constituency or a local individual constituency, at some point that does have an impact. At some point a politician who is maybe saying we don't need any of this stuff, a local business leader is going to tap them on the back and say, actually, this stuff is making us money, Liam Denning. Many commodity prices are down substantially from their peaks. That's, however, cold comfort for nearly eight hundred million food insecure around the world. Let's get to David Fickling for some explanation. So, David, there was huge relief in grain markets when we saw that first ship leave the port of Odessa for Elebanon. Prices have come down for all sorts of grains and oil seeds, and it's a big difference from when we spoke earlier in the year about the difficulties in palm oil, wheat and other markets. But in terms of food security, the situation is much more complicated and multi factored than simply prices are too high. I think that's right. It's very much feels like we've passed the sort of acute phase of food crisis. But I think there's a chronic problem underlying this. To use the sort of medical metaphor, I mean, you look at a bunch of commodities, spring wheats, the benchmark in the US, it's done more than a third at this point from where it was in March palm all. You mentioned oil feeds that forty percent in papril corn prices, and by nearly a course in my sugar and Arabic a coffee. They're all a one year, nine months load. But although the price of these commodities are still actually reasonably hired by ten years standards, certainly compared to where we where a few months ago, there's come down a great deal and we're starting to see signs that maybe certain these things were returning to normal. So that's great, and we should be very excited for the world's poor and hungry that perhaps they have a chance to get food again. But that's not quite the case, is it. That's right, because I think there's a tendency for us in rich countries looking at commodity markets to rather overestimate the importance of the prices of benchmark commodity futures as a sort of index of the affordability of food for the world's poorest. It's certainly a factor, but one of many factors, and not even I would say the most important factor. You know, if I was to say one factor above all that affects food insecurity, and bear in mind the population of people facing under nourishment who don't have enough food through the year to give them a balanced diet. It's looking now at being the highest in one since the mid two thousands, about seven hundred and sixty eight million people, possibly higher than that. One in ten people in the world very nearly do not have enough nourishment to provide them with a balanced diet or a real improvement. That number, far from us of eight hundred million we're seeing now was in the five hundred to six hundred millions. It was quite significantly lower. A couple of factors. I mentioned war and insecurity that really is probably the biggest of all factors. And you know, one sort of measure for the sort of human cost of that is probably if you look at the number of displaced people, refugees and internally displaced people. It's been soaring over the past decade. It's it's now running a double its level of a decade ago one. It rose eight percent in one year. And there's a tendency obviously to see these benchmark bology prices as the field and end all of food prices. But actually, I mean, you know, I always go back to the great Indian economists that much of fen and his analysis of famine that previously people talked about famine as something where there simply wasn't enough food in the world to feed people, or food in that particular region to feed people. And he went back and went back at the Dayton fans and said, well, it's very rarely a general sortage of food. It's generally actually that the price of food has has risen beyond the level of people's ability to afford it. And that can be caused by rising food prices, it can be caused by falling incomes, and it can be caused by other indexes of civil disorder, and a lot of folks that we're seeing right now civil disorder, but even things like insurance on ships, crew for ships, and so on. So many varied factors go into the price of something and the delivery of something. In fact, I was looking at the overall world food price Index and it's still at one fifty four point two, which is not that far off this year's March I oft seven. So in spite of large jobs, nearly eight hundred million people are going hungry right now, and that could rise. Talk to us a little bit of about the effect of the dollar and how that set in motion a whole range of things like the evaluations and so on that also affected the price and the deliverability of food. Absolutely, I mean, I think that's crucially important. We tend to look at these quantity price in dollars and most agricultural commodities a few exceptions. Palm oil is one of price in US dollars. Obviously, we've seen a lot of dollar strength in recent months, and that's particularly bad for a lot of emerging market currencies. These are countries that are some of the world's biggest food importers and are most dependent on imports from overseas. So take Egypt for instance. Egypt is the world's largest wheat importer. The Egyptian pand has absolutely been collapsing over the past years. So whereas the rise of the US dollar price of wheat has driven up costs by about twenty three, if you add in the evaluation of the Egyptian pan, that's added in another twenty on top of that. Pakistan is not actually a huge wheat importer, but it is dependent on imports to some extent. The rupee slump has added fifty three the scent on top of that twenty three percent increase from the U S dollar price. And Turkey, I mean, Turkey's a wealthier country, but of course the Turkish era has been in the terrible States. So the collapsing there is about a hundred and seventy one percent on top of that twenty three percent increase from from the US dollar week. It's horrifying. We talk about nine eight percent invation. We're looking for to go below that in the United States. But if you're in one of these countries, you're literally talking about what nearly two added to costs. That's that's hyperinflation. That's insane. You can't feed your people of that. Yeah, And of course, you know, if you think about how a lot of these governments managed this, Egypt in particular, I think he's an interesting example because subsidized bread is really the central part of the Egyptian welfare spect. In fact, if you look at their physical numbers, their fruit subsidies, they spend as much on pretty much all other aspects of social security put together. So of course, what happens when the Egyptian pan is devalued and wheat prices go up further, Well, Egypt has been at in the market, making big purchases of of wheat. Of course, it was one of the big buyers of Ukrainian and Russian weeks, so it's sort of suffered from that, but it's still needs to buy this because it's a sort of crucial element of social stability. And what's happening as a result of that that is of course impacting Egypt's physical balances. So this is going to be an impact that will linger their physical balances, and their external balances are deteriorating as a result of this. Now, I don't have a macro economic crystal ball for Egypt and know where they're going in the next two years. But if you look at the situation of countries like Pakistan and Sri Lanka that have been making their trips to the IMF recently, you can be put in a very difficult situation when you're having to subsidize something like that in the context of weaker fiscal and external balances, right, and then you're subject to a whole range of I MF conditions for the foreseeable future. And of course you mentioned Sri Lanka, it's interval to Pakistana staring at the fold and they both no coincidence, have massive social unrest, in part because people have to stand in line for food for days. And if you're somebody with mouths to feed, or you've lost your job because of COVID and suddenly there's no tourism in your country, you must be living under severe stress, never mind being undernourished. The jobs thing I think is crucial, and it's often underestimate. This is another of these long COVID effects. A hundred million people worldwide were laid off. The global labor force of employed people dropped by a hundred million in twenty for the first time in living memory. And in terms of the people who are living below the global poverty line one dollar ninety a day, about ninety seven million were pushed below the global policy line by COVID. And so if you're in the top forty percent of the world's population, your incomes at this point down about two point eight percent, a low way you've expected to be before the pandemic. But if you're in the bottom forty percent, it's six point seven percent down. And of course those are the people who are most constrained and most dependent on being able to afford food. David, you mentioned some Southeast Asian nations that we have been talking about on the program. Tell us where else is suffering badly? Obviously many countries in Africa. Yeah, I think Africa is always on the front lines of a lot of these things. If you look at the number of people who are undernourished, the rate in Africa is just different to anywhere else in the world, even now where things have ticked up. It's probably about ten percent population of the world of the whole faces under nourishment. In Africa it's about is double the level. So although there are a larger aggregate number of people in Asia, for instance, who are affected by hunger, just because the population is so much larger, I think around five million in Asia, but two million people in Africa really affits to the population are affected by that. One interesting thing about Africa that also makes it a little bit different to a lot of these other parts of the world is that because so many countries in Sub Saharan Africa are really at the bottom end of the income distribution, they're particularly disconnected from the global commodity markets. So there are actually particularly unaffected by a lot of what we're talking about in terms of the week price and the harmorld price simply because the incoming supply chains and the availability of cash to afford imported global commodities are simply not there. So people are really very heavily dependent on locally produced produced and the price a locally produced good. So it's really quite a different picture to what we're talked frombout. Certainly in a lot of Middle Eastern and Asian countries where there is poverty, these global flows matter a little bit more well. And that's another question about globalization because of the fact that we have globalized commodity markets and we need to have because countries can't feed themselves. There's no way back from this, right, There's no sort of let's have our own supply chain because some countries just can't produce indeed, and you know, I'd say most countries are actually better off being able to be plugged into those global supply chains, being able to benempit from those commodity flows. Of course, one of the other areas that we've not talked about it's a big driver of hunger, is local climate and weather conditions. Of course, there's been a very severe three year drought in East Africa in recent years. You're just seeing in the news recently these very severe flogged in Pakistan. Pakistan, as a country that's more plugged into those global community flows, will probably in many ways do a lot better than East Africa because despite their own fiscal problems, they can benefit from food imports. They can afford food imports, but a lot of those countries in West Africa can't afford. So these chips that are leaving Ukraine. While it's wonderful and everything in the Porto Wolds are being open again with the Humanitarian Corridor is fantastic, it's really not going to provide that much relief for that many people. It will, it'll it will help certain parts of the world, a sort of more middle income parts to the world, like the Middle East, like parts of South Asia, the lower income parts the world. They have much more severe problems than It's going to take more than that to actually solve those problems. David Fickling, We're now choosing to end all conversations not with you, though, please do get in touch. I'm at Vonnie Quinn on Twitter, or send your thoughts to v Quinn at Bloomberg dot Net. Opinions and comments always very welcome. We're produced, as always by Eric mollow and don't forget. We're also available as a podcast as on Apple, Spotify or your preferred platform. To next Time on Boomberg Opinion and Vonnie Quinn mh