Extraterrestrial Inflation Phenomena

X-Files references were pervasive on Monday.

“If the truth is out there, it certainly is not apparent yet,” The New York Times joked, in a lead article documenting the Pentagon’s efforts “to make sense” of the three UFOs US fighter pilots shot down over Alaska, Canada and Michigan since Friday.

A NORAD general refused to rule out “aliens or extraterrestrials.” “I’ll let the intel community figure that out,” he told a reporter. That’s just conspiracy fodder for Americans who desperately want to believe. The general, Glen VanHerck, may as well have said, “Agents Mulder and Scully have been dispatched to Lake Huron.” A US official later clarified that no one in the national security community is seriously entertaining the notion that the Air Force was sparring with flying saucers.

Plainly, the Pentagon is paranoid in the wake of the balloon incident, and having revealed the existence of the Chinese spy program publicly, the White House could be concerned about optics. Americans love UFO-spotting. Now, every time they see one (or think they see one), they’ll wonder if it’s a Chinese airship. Congress is irritated about the situation and “tough on China” is one of the few policy bents the Biden administration kept after ousting the Trump regime.

There’s no increase in the prevalence of aerial phenomena over US and Canadian skies during the past week. It’d be some coincidence if “extraterrestrials” just happened to show up during the same week the US decided to engage a Chinese surveillance balloon. Just like you find more virus cases the more you test, the closer you monitor the skies, the more aerial phenomena you’re likely to identify. As the Times wrote, “NORAD is picking up more incursions because it is looking for them. After the transit of the spy balloon this month… NORAD adjusted its radar system to make it more sensitive [and] as a result, the number of objects it detected increased sharply.”

It’s also possible (indeed, I’d suggest it’s likely) that the US military sees unidentified objects all day, every day, but in light of recent geopolitical events and the generally adversarial character of Sino-US relations, the Pentagon is now more inclined to shoot them down. Nearly half of 366 unidentified aerial phenomena analyzed in a recently declassified report were later determined to be balloons. 30 were either drones, birds or flying “trash.”

On Monday, a spokesperson for the Chinese foreign ministry said US balloons were seen over China at least 10 times last year. “It’s nothing rare,” Wang Wenbin told the press, reiterating that China “reserves the right to take necessary means to deal with relevant incidents.” There was some speculation on Sunday that the PLA might shoot down a UFO over Qingdao. Wenbin effectively declined to comment on those rumors.

The key question, assuming these objects aren’t determined to be wholly innocuous (e.g., civilian research craft or, I don’t know, some previously unknown species of giant seagull), is who’s sending them? Maybe it’s China, maybe it’s not, but it probably isn’t France. Or Germany. Or the UK. Or, you know, Portugal. If it’s an adversary, that’s a problem. And if the last eight days are any indication, the Pentagon’s tolerance for these sorts of incursions is now very, very low. That raises the specter of ongoing “kinetic” activity above the US and Canada, and lots of accusations, assuming recovered wreckage is indicative of malign actors.

Remember: Geopolitics can hijack markets, precisely because geopolitical tensions are sometimes born of motivations unrelated to financial assets. “If you think this backdrop doesn’t matter for unidentified flying inflation, which we are going to look at this week via US CPI on Tuesday, then your head is up in the clouds,” Rabobank’s Michael Every wrote Monday.

“Current risks are of a close encounter with inflation of the third kind,” Every added. “Not the cyclical, transitory, supply-driven kind we can ignore; nor the cyclical, demand- driven kind we easily fought with monetary or fiscal policy; but rather the nasty structural mixture of supply- and demand-driven inflation that comes with unstable geopolitics, the weaponization of commodities and supply chains, and a shift back to national security, industrial policy and protectionism.”