Russia and North Korea hold a block party

Will China crash it? [Bloomberg]( iThis is Bloomberg Opinion Today, a luxury armored train that carries Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - Russia and North Korea are [a dangerous pair](. - The oil industry has [a new nightmare](. - [Sustainable aviation]( is running on hot air. Neighbors There’s a certain camaraderie that exists between childhood neighbors. Everyone grows up with a set of rules. For me, they included: No sugar cereal on weekdays; no painting my nails without supervision; no watching Nickelodeon. I thought this was how the world worked for every kid. Until, that is, I got a new neighbor who had different rules: No candy at lunch; no Sharpies allowed; no Heelys indoors. But once we started to have playdates, all bets were off. I was watching Nickelodeon after school, a spoonful of Frosted Flakes in my hand. And the bartering was incredible: I would trade candy for Silly Bandz. A Sharpie for a rubber pencil grip. With each interaction, we dared to break the rules even more. We painted our nails on the white carpet in the upstairs bathroom. We played “hairdresser,” resulting in child bangs that haunt a person through adulthood. The friendship was one of collusion, but options for true discipline were limited, given the shared stone wall between our houses. Likewise, there can be a certain, far darker, camaraderie that exists between neighboring nations. Consider North Korea and Russia. For the past few days, Kim Jong Un and Vladimir Putin have been busy doing their own series of tradesies, no takesies backsies, with far higher stakes than who had [Yasmin Bratz](. Predating the [pandemic](, North Korea has been dealing with a series of crippling sanctions from the West. It could use some food, cash and energy supplies, all of which its neighbor has plenty of. Russia, for its part, is in need of ammunition for its war in Ukraine. Conveniently, North Korea has a treasure trove of such weapons — artillery shells, missiles and rockets — enough to make Putin drool on the spot. This type of bartering partnership could prove very fruitful for both nations. It is a friendship of collusion, but “options for interdicting any arms transfers are [limited](, given the shared border between Russia and North Korea,” Bloomberg’s editorial board [writes](. When Kim [spoke with]( reporters earlier today during his visit to Russia’s far east, he told them, “Russia has risen to the sacred fight to protect its sovereignty and security against the hegemonic forces that oppose Russia.” Andreas Kluth [wonders]( whether those “hegemonic forces'' are already shifting, writing that “America’s relative global clout seems to be slipping as other powers rise.” A hegemon, in simplified terms, is like the parent in the room, enforcing the rules and “governing everything from money flows to trade and shipping on the high seas,” Andreas explains. It’s a loaded word, but without such a force, some argue that the international system will revert to its default state of total and complete [anarchy]( (Insert DUN DUN DUN sound effect here). Some people predict China will usurp America as the global hegemon, but Andreas doubts many people are keen on having the Communist Party dictate international order. Speaking of China — the third member of the neighborhood triangle — what’s Xi Jinping up to right now? Do we think he’s scouring the press-conference photos online? Scoffing at the luxury armored train that carried North Korea’s leader? Ogling the [handshakes]( and denouncements of [imperialism](? I can picture it now: Xi, sitting in a recliner with his phone, using his index and thumb fingers to zoom in reallyyyy close until he can see Kim’s and Putin’s pores. “What are they looking up at?” He wonders. Are they talking about him? Are they his friends? His enemies? Or maybe, they’re both: Photographer: MIKHAIL METZEL/AFP Karishma Vaswani says the summit of the “anti-West” is seen as a hangover from the Cold War, but “there is an [important]( difference,” she [notes]( (free read): “Xi has the power to limit the scope of any arms deal they strike: North Korea continues to depend heavily on China for trade and Putin needs Chinese diplomatic and economic support more than ever.” Bloomberg’s editors say there are clear motives for Xi to do just that: “Deeper military ties between Moscow and Pyongyang should worry China ... Casting a blind eye to arms transfers would worsen frictions with European countries, whom China still hopes to peel away from the US” — an increasingly fraught relationship, by Lionel Laurent’s [measure](. The US, meanwhile, is attempting to piece together its own friendships in the Asia-Pacific to prepare for the non-zero possibility of a war over Taiwan, as evidenced by the trilateral US-Japan-South Korea [Summit]( in August. Hal Brands recently [visited]( Japan’s Ryukyu Islands, and he says that although America’s combat power in the Pacific is still rather weak, there is plenty of potential to turn the region’s geography to the democracies’ advantage. “If Washington and its allies can turn the Western Pacific into a series of strongpoints, studded with missiles and airbases and patrolled by attack submarines, they can make their military posture more resilient — and make the area a lethal trap for Chinese forces,” he writes. A wrinkle in that plan may be China itself, which appears to be spending much more money on its military than the West previously thought: “Revised figures based on US intelligence give an estimate of [$700 billion]( a year instead of the official figure of [$300 billion](,” James Stavridis [warns](. It’s increasingly looking like the neighborhood kids China, Russia and North Korea are gathering all the supplies they’d need to whip up widespread chaos. Let’s just hope the Western “hege-mom” can stop them before it’s too late. Telltale Charts If there’s one thing you learn today, let it be about the [elasticity of supply](, which Tyler Cowen [discussed]( earlier this week when writing about the [lithium discovery]( along the Nevada-Oregon border. He wrote: “Time and again over the centuries, economists have observed that resource shortages are often remedied by discovery, innovation and conservation — all induced by market prices. To put it simply: If a resource is scarce, and there is upward pressure on its price, new supplies will usually be found.” He went on to say that there’s been a long history of doomsayers frantically waving their hands about resource shortages, but those worries never manifested because humanity has continued to win its endless game of hide-and-seek with mother nature, whether it be with lithium, coal or oil. There is perhaps no greater proof of concept for the elasticity of supply than crude. Back in 2007 and 2008, the idea of Peak Oil was all the rage. You see, oil was spiking, and people started to wonder whether we had maxed out our finite pool of fossil fuels. “Henceforward, it would grow more expensive as supply decreased,” John Authers [explains](. But instead of that happening, “high prices attracted new supply, most famously in the form of the US shale revolution, and the oil price went into the doldrums for years.” The! Elasticity! Of! Supply! Amazing stuff, even if you already learned it in Econ 101. Of course, now, what with all the lithium-based batteries powering an ever-growing fleet of EVs, the world is guzzling less and less oil. John says the new argument is about [Peak Demand](, which may prove to be more sticky than the last one. If you do a bit of digging on the websites of the world’s biggest airlines, you can find pages and pages dedicated to sustainability. United Airlines [says]( it’s “embracing a new goal to be 100% green by 2050.” Delta [says]( its “mission is to join arms to create a better world as the industry works to reach its sustainability goals.” And American Airlines [says]( it wants to “build a resilient airline that will thrive forever.” It sounds hopeful! Promising! Like these airline CEOs finally smushed their big ol’ brains together and really figured out how to escape this climate change nightmare, right? Too bad it’s all probably one big lie: David Fickling [reminds us]( (free read!) that the industry — one of the first to pioneer dubious “carbon offsets” — still has no viable pathway to reach net-zero by, like, ever. [Rechargeable batteries]( and [hydrogen]( “won’t be taking a noticeable bite out of aviation’s emissions this side of 2070,” he writes, and the potential impact of sustainable aviation fuel, or SAF, is [equally limited](, not to mention insanely expensive. Although some passengers are [willing]( to shell out an extra $20 to cut the carbon footprint of their flight, the cost of capturing CO2 straight from the atmosphere is likely more than they’re prepared to spend. Slapping an environmental commitment on your website is one thing, but finding a way to fulfill it without crushing your customers is an entirely different ballgame. Further Reading BP’s had not two, but three CEOs [leave the company]( early in the last two decades — an anomaly for Big Oil. — Javier Blas The Republican [impeachment inquiry]( into Joe Biden marks a low point in history. — Noah Feldman The credibility of [Apple’s climate claims]( is a little fuzzier than Tim Cook wants you believe. — Mark Gongloff What if [First Republic]( was just in the wrong place at the wrong time? — Marc Rubinstein Japan appears to have misplaced the keys to its interest-rate [time machine](. — Daniel Moss and Gearoid Reidy British billionaire Jim Ratcliffe might have trouble [acquiring]( Manchester United. — Chris Bryant Walter Isaacson and Morgan Stanley give [Elon Musk]( extraordinary benefit of the doubt. — Liam Denning Vivek Ramaswamy’s [snide attack]( on Nikki Haley shows a deep misunderstanding of culture. — Bobby Ghosh Europe’s [probe]( into Chinese domestic car subsidies won’t help it win the EV race. — Chris Bryant ICYMI Mitt Romney is [not seeking]( a second Senate term. The SEC is going after [Stoner Cats](. Matt Levine has [thoughts](. Caesars Entertainment got caught in a [cyberattack](. The latest [Covid-19 vaccine]( has arrived in the US. Taylor Swift and Beyoncé get their own [beat reporters](. Kicker Instead of doing our normal kickers, we have an extra special treat for [CPI day](, courtesy of a very creative reader! Chuck Howell recently watched a tribute to Joni Mitchell as she was awarded the Library of Congress’s Gershwin Prize for Popular Song, and Annie Lennox gave a wonderful [performance]( of Both Sides Now. “Being an economics policy wonk, the phrase Both Sides Now made me think of the challenging task Jay Powell has at the Fed balancing employment and inflation goals,” he said. Naturally, Chuck made a fabulous new rendition of the song, reworking the lyrics from the perspective of the Fed chief. I like to imagine Powell singing this in a dimly lit karaoke bar after a long day of bloating his balance sheet ... Both Sides Now (as imagined if sung by Jerome Powell) by Chuck Howell Bulls and Bears and market shares And financial meltdowns in the air And inflation's flames everywhere I've looked at data that way But now the numbers are overdone There's fiscal pain for everyone So many things I would've done But data points got in my way I've looked at data from both sides now Bulls and Bears and erratic Dow It's data’s illusions, I recall I really don't know the economy at all Quants, day-traders and hedge fund deals The dizzy day trading way you feel As every fraudulent deal comes real I’ve looked at the market that way  But now that inflation's number lows I keep them wondering which way we go But if I cave, will it start to regrow I can’t give 2 percent away I've looked at the Fed from both sides now From Ben Bernanke and Greenspan Al It's finances illusions, I recall I really don't know the economy at all Tears and fears and feeling proud To say "the Fed’s pausing" right out loud Fraud and schemes and crypto crowds I've looked at the economy that way But now Jamie Dimon is acting strange He shakes his head, he says I've changed Well, jobs are strong, but inflation's not tamed In CPI every day I've looked at markets from both sides now From employment data and inflation rates It's Keynesian illusions, I recall I really don't know the economy at all Notes: Please send your best song renditions and feedback to Jessica Karl at jkarl9@bloomberg.net. 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