by ilene - August 31st, 2014 7:20 pm
Courtesy of Mish.
Putin threw fat into the Ukrainian fire today by calling for Talks on Eastern Ukraine Statehood.
The question at hand is” What precisely does Putin mean by “statehood” ?
Russian President Vladimir Putin called on Sunday for immediate talks on the “statehood” of southern and eastern Ukraine, although his spokesman said this did not mean Moscow now endorsed rebel calls for independence for territory they have seized.
The Kremlin leader’s remarks, two days after a public appearance in which he compared the Kiev government with Nazis and warned the West not to “mess with us”, came as Europe and the United States prepared possible further sanctions to halt what they say is direct Russian military involvement in the war in Ukraine.
Germany aired suspicions that Moscow might be trying to create a land corridor to supply Crimea, which it annexed from Ukraine in March, while the four-month conflict moved onto the sea for the first time on Sunday. The separatists said they had fired on a Ukrainian vessel in the Azov Sea using land-based artillery, and a military spokesman in Kiev said a rescue operation was under way.
Ukrainian troops and local residents were reinforcing the port of Mariupol on Sunday, the next big city in the path of pro-Russian fighters who pushed back government forces along the Azov Sea this past week in an offensive on a new front.
Talks should be held immediately “and not just on technical issues but on the political organization of society and statehood in southeastern Ukraine”, Putin said in an interview with Channel 1 state television, his hair tousled by wind on the shore of a lake.
Moscow, for its part, he said, could not stand aside while people were being shot “almost at point blank”.
Putin’s spokesman Dmitry Peskov said there was no new endorsement from Moscow for rebel independence. Asked if “New Russia”, a term pro-Moscow rebels use for their territory, should still be part of Ukraine, Peskov said: “Of course.”
“Only Ukraine can reach an agreement with New Russia, taking into account the interests of New Russia, and this is the only way to reach a political settlement.”
Federation or Totally Independent Eastern State?
If one takes the statements from Russia at face value, it appears
by ilene - August 31st, 2014 6:39 pm
Courtesy of Lee Adler of the Wall Street Examiner
Lee Adler tells CNBC Africa that the Fed may be tapering, but the key to the US market will now be in the actions of the BoJ and ECB.
Copyright © 2012 The Wall Street Examiner. All Rights Reserved.
by ilene - August 31st, 2014 5:00 pm
Courtesy of Acting Man, Pater Tenebrarum
A Jumble of Memes
It has recently become quite fashionable to drag up the old Luddite argument that technological progress will destroy jobs, which is to say, destroy them on a net basis. Allegedly, the “rise of the Robots” will accomplish what centuries of economic and technological progress in the capitalist market economy have failed to do.
As you will see in the video below, the purveyors of this idea assure us that “this time, it's different”. Allegedly, humans are now in the same position that horses found themselves in when the automobile was invented. If you are not groaning inwardly by the time this argument is proposed, then you urgently need to brush up on your knowledge of economics (the same obviously goes for the makers of the video).
Closely associated with this idea is the meme of a “basic income for everyone”, to be provided by the State. People arguing in favor of such a program have apparently forgotten that nothing really comes for “free”. Not only must this redistribution be funded by others who produce real wealth and the State would have to forcibly expropriate them in order to provide this basic income, but we may rest assured that this “gift” will come with strings attached. A crypto-communist State providing basic incomes to all citizens will strip them not only of the incentive to work, it will inevitably also abridge their freedom in many other spheres of life. The State never provides something for “free”.
Another close cousin of this “free income” idea is a recent proposal mentioned in “Foreign Affairs”, that central banks should not only keep printing money, but should alter their modus operandi by paying this newly printed money directly into the accounts of all citizens, so as to spur demand. Not only is this proposal based on the economic fallacy that spending and “demand” are the causes of economic growth, it also fails on the grounds that the authors cannot pick and choose between the inflationary effects that will result. In other words, they won't only get the “good stuff” that they like, but also all the bad…
by ilene - August 31st, 2014 12:33 pm
The real, human costs of war cannot be measured.
I am tired and sick of war. Its glory is all moonshine. It is only those who have neither fired a shot nor heard the shrieks and groans of the wounded who cry aloud for blood, for vengeance, for desolation. War is hell. ~ William Tecumseh Sherman
(Read more at Brainy Quote)
As President Obama prepares to unleash his new 'strategery' to deal with ISIS, Syria, Putin… and so on, we thought a subtle reminder of the real cost of war was prescient…
Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn’t
by ilene - August 31st, 2014 12:06 pm
Courtesy of Mish.
The currency and fiscal battleground front lines in Europe remains the same. France wants QE, fiscal stimulus, and more leeway on meeting fiscal deficit targets. Germany doesn’t. And the fighting has strengthened.
The idea that ECB can produce nirvana by devaluing the euro is ridiculous. Yet, that’s the battle cry of the day.
Bloomberg reports France Asks for More Action From ECB to Correct Overvalued Euro.
French Prime Minister Manuel Valls called for more action from the European Central Bank to lower the value of the euro, amid concerns the 18-nation region might be headed toward deflation.
“The monetary policy has started to change,” Valls said today in a speech made at the Socialist Party’s summer school in La Rochelle, France. While he called the ECB’s package of measures taken in June a “strong signal,” he also said that “one will have to go even further.”
Valls’s comments come after ECB President Mario Draghi, who’ll meet French President Francois Hollande tomorrow in Paris, signaled that declining inflation expectations are pushing the central bank toward introducing quantitative easing. Policy makers will gather in Frankfurt on Sept. 4 for their monetary-policy meeting.
Inflation in the currency bloc slowed to 0.3 percent in August from a year earlier, the lowest since 2009, compared with an ECB target for price growth of just under 2 percent. Draghi has said that the ECB stands ready to embark on unconventional measures such as broad-based asset purchases to avoid a deflationary spiral of falling prices and households postponing their spending plans.
In his speech, Draghi also called for complementary action on a European level and “a large public investment program.” German Chancellor Angela Merkel was disgruntled with the comments and called Draghi to ask if the ECB had changed course on austerity, Der Spiegel reported, without saying where it got the information.
The magazine’s assertion that Merkel “demanded answers” from Draghi “in no way corresponds to the facts,” Merkel spokesman Steffen Seibert said in a text message.
Inflation Won’t Cure France
Contrary to popular belief, inflation will not spur consumer spending. Nor will inflation create any jobs or cause wage inflation.
Nonetheless, France demands the ECB wizards fix something that cannot be fixed by monetary policy.
Problem number one is
by ilene - August 31st, 2014 12:58 am
Courtesy of Mish.
As the tide in the Ukraine civil war turns, the EU threatens Russia with more mindless sanctions.
Bloomberg reports EU Vows More Russia Sanctions If War in Ukraine Worsens.
European Union leaders agreed to impose tougher sanctions on Russia, possibly targeting energy and finance, if the war in Ukraine worsens.
Leaders early today gave the European Commission a week to deliver proposals for the penalties. The EU left open the precise trigger for further sanctions, contrasting with a four-point ultimatum issued to Russian President Vladimir Putin on June 27 that preceded the latest curbs.
“We are close to the point of no return,” Ukrainian President Petro Poroshenko told reporters at the EU summit. “Thousands of foreign troops and hundreds of foreign tanks are now on the territory of Ukraine.”
Earlier, EU leaders selected Polish Prime Minister Donald Tusk as the bloc’s next president and Italian Foreign Minister Federica Mogherini as chief diplomat after a bitter contest that showed the 28-nation EU’s divisions on how to deal with the Kremlin. Tusk has pushed for tougher sanctions on Russia while Mogherini has favored diplomacy. Leaders also met with Poroshenko.
The EU and the U.S. have already slapped visa bans and asset freezes on Russian individuals and companies, and since July have imposed steadily tougher sanctions targeting the country’s energy, finance and defense industries.
Merkel said the EU is looking at more measures to target Russia’s energy and finance industry.
Leaders disagreed about possible military assistance to Ukraine, with Lithuanian President Dalia Grybauskaite telling reporters before the meeting: “We need militarily to support and send military materials to Ukraine.”
The entire, yet unstated, gist of the above article is there are disagreements everywhere: On sanctions, on military aid, on diplomacy vs. sanctions, and on triggers.
If this is a bluff, it is easily transparent. If it’s not a bluff, it’s economically stupid.
Merkel a Liar or a Fool? …
by ilene - August 30th, 2014 7:10 pm
Courtesy of Charles Hugh Smith of Two Minds
The more the Status Quo pursues the same old Keynesian Cargo Cult script of central planning and free money for financiers, the more self-liquidating the system becomes.
Judging by the mainstream media, the most pressing problems facing capitalism are:
1) income inequality, the basis of Thomas Piketty’s bestseller Capital in the Twenty-First Century, and
2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism.
The proposed reforms align with each analyst’s basic ideological bent. Piketty’s solution to rising wealth inequality is the ultimate in statist centralization: a global wealth tax.These critiques (and many similar diagnoses) reach a widely shared conclusion: capitalism must be reformed to save it from itself.
Roberts and others recommend reforming capitalism to embody social purpose and recognize environmental limits. Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is generally accepted by left, right and libertarian alike.
Socio-economist Immanuel Wallerstein asks a larger question: can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other arrangement?
Wallerstein and four colleagues explored this question in Does Capitalism Have a Future? (Oxford University Press, 2013).
Wallerstein is known as a proponent of world systems, the notion that each dominant economic-political arrangement eventually reaches its limits and is replaced by a new globally hegemonic system.
Wallerstein draws his basic definition of the current dominant system--let’s call it Global Capitalism 1.0--from his mentor, historian Fernand Braudel, who meticulously traced modern capitalism back to its developmental roots in the 15th century in an influential three-volume history, Civilization & Capitalism, 15th to 18th Centuries:
by ilene - August 30th, 2014 5:29 pm
Courtesy of SoberLook.com
In addition to property market challenges and the unexpected slowdown in manufacturing expansion, we continue to see markets signaling a significant loss of momentum in China's economic growth. Earlier in the year the country's economic trajectory was quite uncertain. This was followed by a strong pickup in manufacturing activity early this summer and economists suggested that the worst is over. But it seems that China is once again facing significant headwinds.
Iron Ore 62% Fe, CFR China; Jan-2015 contract (barchart)
|SHFE Steel Rebar January 2015; Jan-2015 contract (barchart)|
Other commodities linked to construction, such as fiberboard, have been declining as well. Moreover, the recent stock market rally has stalled. Perhaps the most telling sign of weakening fundamentals in China has been the nation's rates market. Rates implied by SHIBOR-based interest rate swaps have declined materially over the past month. More importantly the yield curve has become inverted.
|Swap rates by maturity (yrs)|
As discussed before, economic weakness in China is reverberating globally – from Australia to the Eurozone – and is in part responsible for the bond yield compression across developed economies. We are likely to see the central government step in with more stimulus in order to stabilize the situation. However, as Beijing is beginning to realize, limited new stimulus directed at boosting growth is becoming less effective. A much larger effort may be required.
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by ilene - August 30th, 2014 4:58 pm
Courtesy of EconMatters
How to properly value European Bonds
This seems to be the biggest question in financial markets for me right now because the math just doesn`t add up any way you slice it. When you look at the pricing for European bonds this conclusion jumps out from an analyst perspective, either European bonds were analyzed and incorrectly priced two years ago, or they are currently being analyzed and mispriced today!
Possible Explanations for Large Valuation Gap
One might say it is a little of both, the yields shouldn`t have been that high two years ago, and they shouldn`t be this low right now. However, the gap is just too large from a valuation standpoint to hold much water or relevance here. The next possible answer is that central banks have made interest rates for borrowing money so low that this has incentivized bondholders to accumulate more bonds in search of a yield vehicle to invest this ZIRPMoney.
Ireland 10 Year Bond Yield
Also, the US QE Program of $85 Billion per month, much of this money may have found its way into the European banking and financial markets further incentivizing liquidity driven asset purchases of all kinds in Europe. But remember, Europe itself has done very little besides the main weapon of ZIRP compared with the United States, and these are European bonds we are talking about. But if it just comes down to ZIRP offering enough of an incentive to buy what were perceived as risky bonds for investors just two years ago, why weren`t these yields much lower as soon as ZIRP began in Europe?
One answer might be that there was a scale issue regarding liquidity, and ultimately there was a lag effect, until liquidity reached a certain threshold, first of filling the deleveraging credit gap, then there is enough to spill over into alternative investments like chasing yield trades. However this two year period also
by ilene - August 30th, 2014 3:15 pm
By Patrick Cox
Godzilla, Zombies, and Cultural Coping Mechanisms
Before the Internet, there were libraries. We still have libraries, of course, but they were a lot more important a half century ago, before the Web brought the totality of human knowledge and art into our homes and phones. In my mind, at least, the now archaic libraries of the past century were a lot more fun than the sterile stripped down semi-electronic versions common today.
There are still some libraries with multistoried labyrinthine complexes of overcrowded shelves where you can get lost in knowledge, but they’re pretty rare. I hesitate to admit it but, prior to the Web, travel for me always involved searching out the most interesting and hopefully antiquated libraries whenever I traveled. I’ve spent a lot of hours wandering through bookshelves waiting for a book title to pull me into some subject that I didn’t even know existed.
The Japanese culture and history section often pulled me in so I was exposed to theories, at a very young age, about the cultural significance of Gojira, translated as Godzilla in English. Essentially, it’s proposed that Godzilla was Japan’s way of dealing with the combined and lasting emotional impact of the bombing of Hiroshima and Nagasaki.
Godzilla first appeared in full form in the 1954 movie, Gojira. I think there is truth to the belief that the giant monster that towered over and destroyed Japanese cities was a metaphor for nuclear weapons that could be psychologically compartmentalized. In the world Godzilla inhabits, a giant, destructive lizard would be the scariest thing possible. By dealing with Godzilla in art, the Japanese dealt with the reality of nuclear destruction. In fact, the plot of the original movie had it that Gojira was created by American nuclear weapons testing so the connection is direct.
When the Cold War brought the fear of nuclear weapons to the West, Godzilla crossed the Pacific and entered American theaters and televisions. The horror of nuclear weaponry resonated with humanity as a whole more poignantly than any other weapon has in the past. Prior to the advent of the bomb, the only weapon to have such a revolutionary impact on warfare was the gun.
The widespread adoption of