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From spy balloons to trial balloons, the dark forces of distraction and misdirection are already in play to start the week.

We have to talk about the spy balloon. Not because I want to. More because there's a temptation to make a mountain out of a molehill. No, I couldn't think of any balloon analogies.

The Chinese balloon saga is a great example of the "Why am I seeing this now?" principle.

That line always sounds a little conspiratorial. As if big gubenment is actively engaging in misinformation for nefarious reasons.

We know they'd never do that. We can trust them entirely and they always have our best interests at heart.

So why are we supposed to freak out over a Chinese spy balloon? After all, everyone knows that China (like most developed nations) has loads of satellites orbiting the Earth at any one time.

The DoD isn't freaking out about it either. 👇

The United States Government has detected and is tracking a high altitude surveillance balloon that is over the continental United States right now. The U.S. government, to include NORAD, continues to track and monitor it closely. The balloon is currently traveling at an altitude well above commercial air traffic and does not present a military or physical threat to people on the ground. Instances of this kind of balloon activity have been observed previously over the past several years.

Yet the media has dragged up every possible 'military and geopolitical expert" while covering this story and created a frenzy.

By all accounts, it was a local Montana newspaper that originally ran with the story. If they hadn't, would this all have passed by un-noticed (again)?

"Just some hicks think they sin UFO's. Go on boutcha business"

To the point. Why am I seeing this now? 👇

You’re not saying that the article is a lie. You’re not saying that the article isn’t important. You’re saying that there is a metagame at play here with the author and the sources of that article. You’re saying that you are aware of that metagame and you’re going to take that into account before deciding your behavior in reaction to that article.
Who are the Writers of the World-As-It-Is? They are Republicans. They are Democrats. They are central bankers. They are pundits. They are politicians. They are oligarchs. They are in every nation on Earth. They have ONE thing in common. They’re writing for their own political and economic advantage. And they’re really, really good at shaping our behaviors with their words.
~Epsilon Theory

What's the metagame here? The US administration wants to be seen to be tough on China. Or they're worried about looking weak against China in case the opposition use that against them. Either way the response is the same...

Send a fighter jet to take it down and cancel Blinken's visit to China. Nice and dramatic. Story successfully spun for maximum effect.

There's not always a grand strategy around this stuff. There's not always even any meaning to it. The only takeaway is that US China relations are still strained, as they have been for many years now.


US-China Trade Is Close to a Record, Defying Talk of Decoupling
Trade between the US and China is on track to break records, a signal of resilient links between the world’s top economies amid the heated national security rhetoric in Washington and fears of “decoupling.”

Record trade shows that neither side has made much progress (yet) on 'reshoring' or turning away from each other.

It's a long term process and there are no guarantees of any endgame. Relationships have ebbs and flows, peaks and troughs, and trade relationships are no different 👇

When Will China’s Economy Overtake The US?
Never. Honestly. Stop asking. Xi’s congress speech was just more of the same

Then there's Japan and their trial balloons. Far less nefarious, way more deliberate.

Japan’s government has sounded out Amamiya about becoming BOJ governor - Nikkei
Japan’s government has sounded out Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya to succeed incumbent Haruhiko Kuroda as central bank governor, the Nikkei newspaper reported on Monday, citing anonymous government and ruling party sources.

If you haven't been following the story, the Bank of Japan is set to name a new governor. Kuroda's retiring on April 8th and February's the month they'll announce his successor.

Amamiya is very much seen as the continuation candidate. Reuters summed it up with this line 👇

Many analysts see him as a pragmatic policymaker who will prefer tip-toeing toward any exit, rather than make sudden changes to a stimulus programme he helped create.

USDJPY gapped up on the open. After Friday's bumper jobs and ISM services reports gave the dollar a boost, the (perceived) confirmation of Amamiya as next BoJ governor with a continuation of dovish policies weakened the yen further.

Prime Minister Kishida says there's no official decision yet, but these stories don't leak themselves...

Still, like most central banks right now, they're slaves to the data. If the previously unthinkable happens and Japanese wages grind higher, the continued normalisation of monetary policy would be a near inevitable outcome, regardless of who sits in the chair.

Likewise, if the Cleveland Fed inflation Nowcast is anything close to accurate, Valentine's Day CPI could come in hot at 0.63% MoM.

Just as the Fed acknowledges disinflation... Say goodbye to those 2023 rate cuts and hello to a stronger dollar?