Menu Icon

Theater Opening

Aug 012022
 
 August 1, 2022  Posted by at 8:14 pm Finance Tagged with: , , , , , , , , , ,  12 Responses »


Salvador Dali The knight of death 1934

 

 

If you’re Chinese or Russian, and you watch videos of the top three “most powerful” people in the US, Biden, Kamala and Pelosi, what do you think? You think all three are incoherent and should not be anywhere near any decisive, let alone nuclear, lever.

If you’re anybody anywhere, and you look at the top three “most powerful” people in the world, Xi, Putin and Biden, what do you think? You think two of them have got it together (nothing to do with you liking them or not), and one can’t even read coherently from a teleprompter.

Nowhere near half of Americans understand these two things to be true, but probably some 90% of Chinese and Russians do, as well as a vast majority of people in other non-US/NATO/EU countries.

Another threesome: Sergei Lavrov (Russia), Tony Blinken (US) and Liz Truss (UK) are all foreign ministers (or Secretaries of State, give the beast a name). Who would you trust to represent your own interests best in the field of diplomacy? It’s not even a question, is it? If the US or UK had a Lavrov, he would be their man (he would most likely decline). But they don’t. The US has a nobody (they have lots of those!) in the role, and the UK has someone with zero qualifications who dreams of getting the top job.

The world outside of the G7 or G20 (give the wheel a spin) sees this happening. Is it any wonder they clamor to be part of BRICS? The “collective west” is fast finishing off itself, and yes, you’re right, that is a dangerous moment. It’s also why it very much looks like the “collective west” is trying to open a second theater of war in Europe. One that looks a lot like the one they opened in Ukraine. And the EU, to its utter shame, does nothing to prevent this from happening – on its “own” soil!.

I know, there’s Crazy Nancy on her way to Taipei as well as we speak, we’ll get to that yet. Imagine: you’re 80-odd years old, and you want your legacy to be WWIII. Not your grandchildren, but live nukes. Just imagine that.

Kosovo’s unilateral secession from Serbia was recognized by the “main Western powers” in 2008. But not China, Russia, or the UN!. Not too long after Bill Clinton’s NATO bombed the heebeejeebees out of former Yugoslavia in 1990. Just because they could. Today, the US -and NATO- try to use a tiny sliver of former Yugoslavia to ignite a major fire in Europe, a second fire besides Ukraine.

Kosovo is the size of half a postage stamp, only two US states are smaller, Rhode Island and Delaware. 1.8 million people live there, it’s like one NYC borough. But you can use the historic hatred to rekindle the flames. Right, Blinken? Well, turns out there are still some Serbs living in Kosovo, because that’s where they grew up.

The brilliant Kosovo PM now has the fantastic idea to start a fight with these Serbs, over the fact that their cars have Serb license plates and they themselves have Serb IDs, a whole 14(!) years later. Yeah, that’s worth a fight, obviously.

So America’s “top diplomat” Blinken invited Kosovo president Osmani and PM Albin Kurti to DC last week.

 

 

I’ll let some people other than me explain this to you. First, political analyst Alexandar Pavic:

In Kosovo As In Ukraine, The Same Western ‘Invisible Hand’ Foments Conflict

In addition to the conflict in Ukraine, Europe is now faced with the prospect of renewed conflict in Kosovo, Serbia’s breakaway province (officially named Kosovo and Metohija according to the Serbian constitution). Kosovo’s unilateral secession was recognized by the main Western powers in 2008. This came nine years after NATO’s attack on Serbia and the Federal Republic of Yugoslavia, after which NATO forces occupied the province and helped install an ethnic Albanian-led government dominated by former members of the Kosovo Liberation Army terrorist organization.

The current crisis was triggered by Kosovo’s ethnic Albanian Prime Minister, Albin Kurti, who initially wanted to force the majority Serb population in the north of the region to accept Kosovan license plates and ID papers starting from August 1, and to ban entry to the province or issue temporary papers to travelers with Serbian-issued plates and documents.

Kurti attempted a similar stunt in September 2021, triggering a crisis where local Serbs in northern Kosovo organized roadblocks and Kosovo police reportedly beat up and intimidated Serb civilians, while the authorities in Belgrade put the Serbian military on high alert and ordered overflights by fighter planes over the administrative border between Serbia proper and Kosovo. The EU eventually brokered a temporary agreement, pending a final deal that was supposed to have been reached by April 2022, under EU auspices. However, nothing has come of that.

From Kosovo to Ukraine, it seems there’s a pattern regarding agreements in which Western powers have a hand. Since the start of this year’s special military operation in Ukraine, Russian officials have repeated time and again that the West had never pressed Kiev to fulfill its part of the 2015 Minsk 2 peace agreement, intended to end Kiev’s standoff with the Donbass republics. Recently, former Ukrainian president Pyotr Poroshenko openly admitted that Ukraine never intended to fulfill the agreement but was merely buying time until it could build up an army capable of overrunning Donbass.

The situation with Kosovo is not much different. The EU brokered an agreement between Pristina and Belgrade in April 2013, the so-called Brussels Agreement, by which Serbia was supposed to dismantle its “parallel” police and judicial structures in Kosovo and convince the Kosovo Serbs to accept integration into the Kosovo police and legal system, without recognizing the territory’s independence. And the Belgrade authorities did this, despite a large public outcry over the move.

 

However, there was a second part to the agreement, by which Pristina was obligated to form an Association of Serb Municipalities, with substantial local powers and ties to Serbia proper. The Albanian part of the Brussels Agreement has not been fulfilled to the present day. Or, as Serbian President Aleksandar Vucic noted on July 31, that 3,390 days have passed since the Brussels Agreement was signed, and still no sign of the Association.

As in the case of Ukraine, the collective West has put absolutely zero pressure on the side it supports to fulfill its part of a signed international agreement. And again, as in the case of Ukraine, this has encouraged Pristina to take an increasingly belligerent stance, which may very well lead to a more serious conflict.

There’s an additional ingredient to the Kosovo mix, thanks to the Ukraine conflict. Namely, the Serbs – both in Serbia and in Bosnia and Herzegovina – stand practically alone among European peoples in refusing to join Western sanctions against Russia, and in consistently demonstrating open support for Russia’s special military operation in Ukraine. As a result, the government in Belgrade has been under constant, increasing pressure by the main Western capitals, as well as the EU and NATO, to change its policy and join the West’s collective economic suicide.

Since Belgrade has proven to be a tough nut for the West to diplomatically crack when it comes to opposing Russia, it’s not at all far-fetched to imagine that the Kosovo Albanians just might be seen by the West as a useful tool by which to additionally turn the screws on Belgrade. In the same cynical way in which the unfortunate Ukrainians are being used to pressure and weaken Russia.

 

Next, from RT, about Richard Grenell. No love lost on my part about him, but he did negotiate a bunch of peace deals, and knows the territory much better than Blinken.

Trump’s Kosovo Envoy Slams US Over Crisis

Richard Grenell, who negotiated a Kosovo-Serbia deal under the Trump administration after a turn in charge of the US intelligence community, blamed the “reckless” prime minister in Pristina for the renewed tensions with Belgrade on Sunday and slammed the State Department for enabling him. “What’s happening in the Balkans isn’t Russia. Whoever says this to you is trying to manipulate you,” Grenell tweeted on Sunday evening. “This is about Albin Kurti trying once again to give it [to] Serbia. He is living in the past.”

“The people of Kosovo want peace and jobs, Albin. Stop picking fights,” Grenell added. Serbian military was placed on high alert and local Serbs put up roadblocks earlier in the day, after Kosovo police showed up at two administrative crossings with Serbia, intending to enforce Kurti’s decision to confiscate Serbian license plates and documents. This would have effectively cut off the remaining Serbs living in the north of the breakaway province.

According to Grenell, this was all about Kurti “making unilateral moves to reject Serbian IDs and license plates inside Kosovo,” which he called “unnecessary.” Describing the PM a “far left radical and experienced fascist,” Grenell further called his actions “foolish” and “reckless,” and urged Serbian leaders to “not take the bait.” “Even the Albanians know Kurti is the problem,”Grenell tweeted. He also blamed Secretary of State Antony Blinken, who met with Kurti and Kosovo president Vjosa Osmani earlier in the week.

US President Joe Biden has “ignored the Balkans,” the envoy added, pointing out that he had negotiated multiple agreements between Kosovo and Serbia under President Donald Trump, trying to overcome the conflict through economic cooperation. Grenell also accused the EU of orchestrating war crimes charges against Kosovo President Hashim Thaci to punish him for working with Trump – resulting in Kurti and Osmani taking power.

And then Fyodor Lukyanov, the editor-in-chief of Russia in Global Affairs, chairman of the Presidium of the Council on Foreign and Defense Policy, and research director of the Valdai International Discussion Club.

Why Are Serbia And Kosovo On The Brink Of War Again?

Tensions between Belgrade and Pristina occur regularly, as a result of the fact that the Kosovo issue has not been resolved since 1999, when the province de facto gained independence after the US-led NATO campaign against the former Yugoslavia. However, this time there is a risk of more or less routine friction escalating into a dangerous conflict, because the context has changed dramatically.

The problem of Kosovo was solved at the end of the twentieth century in strict accordance with the then dominant approach, and in the seeming absence of an alternative. Disputes in most of Europe (ie. outside the former USSR) were settled according to the EU’s ideas of fairness, and where they could not be worked out amicably, pressure was exerted on those who rebelled, up to the use of military force (primarily American, as always).

[..] it was the EU that regulated the processes taking place locally, and, in general, this setup was taken for granted. Moreover, other powers which have been traditionally active and important in the Balkans – Russia and Turkey – indicated their presence (sometimes quite clearly), but did not pretend to have a decisive voice in the way things were arranged. This framework also defined the room to maneuver for the countries of the region, including those who were most loudly dissatisfied, like Serbia.

Now two main circumstances have changed. First, the EU is in such a vulnerable state that it is not ready to take full responsibility for the extremely complex political situation in its immediate periphery. It cannot promise membership, and more precisely – even if such a pledge were made, it doesn’t guarantee anything.

The EU’s management of the central Balkan problems – in Bosnia and Kosovo – has not led to the desired outcome over the past quarter of a century. Thus, it’s all the less likely that it will work out now. Because the second circumstance is that Russia and the West (the EU plus the US and NATO) are in a state of acute confrontation.

As a result, there is no reason to expect Moscow’s assistance in resolving the situation (be it Kosovo or Bosnia). Right now, the West’s favorite practice of “selective interaction” (we work together with Russia where we need it, we refuse to engage on other issues) can no longer be applied. There will be no cooperation: Russia and the West will be on opposite sides of the barricades everywhere, no matter the issue at hand. We are in a systemic cold war. And this reality can greatly influence what will happen in the Balkans.

The question is to what extent regional actors have retained their passion for showdown, revenge or expansion. There are suspicions that this zeal has been exhausted and emasculated. But if it still burns, then external forces will enter the fray this time, supporting opposing sides.

Blinken et al, which very much includes his EU counterparts, see the past struggles in the Balkans as something they can reignite at their convenience today. The initial boundaries are simple. Russia will come to the aid of Serbia. Kosovo will appeal to Albania. And then to NATO. So the idea is you got this hot cauldron, with 5-6-15 nations, and NATO can do whatever it wants in there.

But NATO has no chance in Ukraine, and it doesn’t have one in Kosovo. But it can ship billions worth of weapons in there and pay Raytheon. Problem I see with this genius plan is that Russia saw it coming from lightyears away. And that is the same issue as the difference between Lavrov and Blinken: they may have the same job title, but there’s no comparison.

 

 

 

We try to run the Automatic Earth on donations. Since ad revenue has collapsed, you are now not just a reader, but an integral part of the process that builds this site. Thank you for your support.

 

 

Support the Automatic Earth in virustime with Paypal, Bitcoin and Patreon.

 

Save Earth Get Rich

Apr 232021
 
 April 23, 2021  Posted by at 4:10 pm Finance Tagged with: , , , , , , , , , , , ,  18 Responses »


Henri Matisse Flowers 1907

 

 

I sometimes can’t believe I think I must revisit this theme time and again, but here we are. Joe Biden is chairing a virtual climate plan/summit/whatever, and absolutely nothing has changed since the last time I tried to explain why it is nonsense, or all the other times before that. But this is the biggest boondoggle/cheat/trick ever played on mankind, so what choice do I have?

It’s still a bunch of politicians all over the world who are beholden to a bunch of extremely rich people for their cushy positions and claim they intend to save the world hand in hand with these rich people. In other words, our resident sociopaths and psychopaths are the only ones who can save us. But you’re going to have to pay up, or they won’t do it.

It’s all an intensely moronic piece of theater (no, I won’t insult Kabuki!), but since all the media is in on it, who would know that? It’s the biggest show on earth! Your carrots are jobs, profit, and a saved planet for your children. What’s not to like?

Biden’s billionaire political sponsors promise to save you, but of course they do need to make a profit off it. One that is preferably larger than the profits they have been making over the past decades off of the very things they now pretend to condemn, and are still invested in, fossil fuels.

Of course they know that will never happen, but they also know that you do not. So here goes. This intro from the Guardian, written before Ol’ Joe opened Day Two, tries some critical notes, but that’s just to lift the party mode even higher.

 

Joe Biden To Stress Green Jobs As Key To Tackling Crisis At Climate Summit

Joe Biden will take the podium in the east room at the White House very shortly. The title of his address is: “The Economic Opportunities of Climate Action.” The White House is bringing out the billionaires, the CEOs and the union executives Friday to help sell Joe Biden’s climate-friendly transformation of the US economy at his virtual summit of world leaders.

The closing day of the two-day summit on the climate crisis is to feature Bill Gates and Mike Bloomberg, steelworker and electrical union leaders and executives for solar and other renewable energy. Biden vows to slash US emissions by half to meet ‘existential crisis of our time’.

It’s all in service of an argument US officials say will make or break the president’s climate agenda: pouring trillions of dollars into clean-energy technology, research and infrastructure will jet-pack a competitive US economy into the future and create jobs, while saving the planet.

The new urgency comes as scientists say that the climate crisis caused by coal plants, car engines and other fossil fuel use is worsening droughts, floods, hurricanes, wildfires and other disasters and that humans are running out of time to stave off catastrophic extremes of global warming.

The event has featured the world’s major powers – and major polluters – pledging to cooperate on cutting petroleum and coal emissions that are rapidly warming the planet. Yesterday, Biden called upon the world to confront the climate crisis and “overcome the existential crisis of our time”, as he unveiled an ambitious new pledge to slash US planet-heating emissions in half by the end of the decade.

Addressing the opening of a gathering of more than 40 world leaders in an Earth Day climate summit, Biden warned that “time is short” to address dangerous global heating and urged other countries to do more.

Shortly before the start of the summit, the White House said the US will aim to reduce its greenhouse gas emissions by between 50% and 52% by 2030, based on 2005 levels. Biden said the new US goal will set it on the path to net zero emissions by 2050 and that other countries now needed to also raise their ambition.

By 2050, Joe Biden would have lived longer than Noah, Methusalem and Abraham put together. Same goes for Gates and Bloomberg and all the other “leaders”. These people greatly prefer power today over a saved planet, whatever that may mean, when they are dead -or, alternatively, can no longer remember where or who they are.

By 2030, whoever remains will shift the blame onto Biden et al, who will then have departed either politics or the planet. And then you will be told that the trillions from the 2021 Biden plan were not nearly enough to save the planet, so we MUST play double or nothing. Or your children will burn, not in hell, but right where they were born.

The biggest carrot of all is that we can shift from fossil fuels to some other energy source -which wind and solar are not, but who understands that?- and keep on motoring. It’s like the myth -or is it?- that lemmings all jump off cliffs together, but then you find Disney, for a movie, built a large treadmill that only made it look that way.

Yes, you are the lemming, and Gates and Bloomberg, and all of Wall Street, are Disney. Joe Biden is the treadmill, along with Merkel and Macron and the rest of the “well-meaning” gang. It makes no difference if a story like that is true, it’s a good metaphor.

 

 

Look, I covered this topic so many times, just read back, will you please? On December 16 2016, I wrote Heal the Planet for Profit and on February 15 2021 Heal the Planet for Profit – Redux . It’s all there. And I wish people would stop paying attention to the sociopath-laden events like COP 21 through 26, and these Biden-chaired summits.

They spell nothing good for you or your children. The only thing that could, is using less energy, not some other kind, let alone source, of energy. That’s for people who don’t understand thermodynamics, or physics in general. And I know: that’s most people and that’s the biggest tragedy of all.

But still, why would anyone think some of the richest people in the world, after having made fortunes reminiscent only of entire empires of yore, using fossil fuels, now be serious about salvaging Joe Blow? No matter how the media sell and push and propagandize that notion, how can anyone fall for it?

 

 

 

We try to run the Automatic Earth on donations. Since ad revenue has collapsed, you are now not just a reader, but an integral part of the process that builds this site. Thank you for your support.

 

 

Support the Automatic Earth in virustime. Click at the top of the sidebars to donate with Paypal and Patreon.

 

The American Nightmare

Oct 122020
 
 October 12, 2020  Posted by at 5:53 pm Finance Tagged with: , , , , , , ,  6 Responses »


Edward Hopper The barber shop 1931

 

 

How their beloved neighbors see America, a comment by Automatic Earth commenter ByronBishop. I don’t think I need to add much. Took the title from a comment on the comment.

 

 

ByronBishop: I live in rural Canada and I do not have television, so my information on the American presidential election comes from newspapers and some online blogs. But what impresses me the most in this cycle is what good theatre it is!

It is my view that the choice for American voters is simply this: which collection of billionaires will run the country? The Democrats or Republicans? At root, their policies are not very different; their principal goal is to maintain and extend their privilege, and to continue to develop the legal and fiscal framework that supports their activities. This framework consists of, among other things, the following policies, and most crucially, broad public acceptance of the righteousness of these policies:

• To maintain very low taxes on income and capital gains, favourable treatment of dividend and interest income, and no inheritance tax

• In the financial manipulation field, improve public and regulatory acceptance of the attitude usefully articulated by JH Kuntsler as “nothing matters and anything goes”. This allows (among many other things) private equity firms to buy up useful and productive enterprises, strip out all the assets in fees and special dividends and through the sale of high-yield (and chancy) bonds, and to then release the debt-ridden hulk back into the marketplace to sink (mostly) or swim (rarely). Also supports share buybacks, collateralised debt instruments, relocation of factories to low-wage states and countries.

• Keep the American military actively working around the world, preferably using expensive armaments. Where possible avoid stationing troops in warzones as casualties provoke bad publicity. Promote demand for novel and very expensive war materiel. (Smart bombs and drones sell to government on a cost-plus basis.)

• Support the National Rifle Association, which is in fact an association of arms manufacturers and merchants with a noisy public relations arm consisting of private members defending their Second Amendment rights. Until forty years ago the Second Amendment right was the right to join a well-regulated militia, but now it is the right to have many expensive weapons in your house.

• Everyone must recognise that public healthcare is un-American. It is a moral issue: if you cannot afford healthcare you do not deserve it. Some of the highest paid executive teams in the US are in the healthcare field, while executive teams in Canadian and European countries are mostly paid on a civil service scale. Shareholders in American healthcare companies become very rich. Were healthcare to become nationalised like in Canada and most European nations, most of the private profit would be lost

• Large corporations must be permitted to manipulate share prices through buybacks and curious business practices (Boeing, the airlines), but must then be protected by bailouts if their business falters.

• The financialisation of the economy must be regulated as lightly as possible so that fees can continue to flow.

• Regulatory capture must be celebrated (under a different name). The two-way flow of personnel from regulated industries to regulatory government departments ensures that little impedes business development.

• To ensure that the courts at all levels are staffed with conservative, business-friendly judges.

• To ensure that environmental protection regulations do not unduly interfere with business operations

I do not for a moment think that the billionaires and multi-millionaires conspire to run the American system. They are not a cabal; they do not meet. Rather, theirs is an emergent system: many individuals working towards their own goals will thus help others pursuing their own goals. It is like a flock of shorebirds wheeling and swooping in perfect unison; they are not directed, but they are simply responding to the actions of their neighbouring birds.

The billionaires achieve this through owning mainstream media companies, funding think tanks and policy research institutes, and supporting lobbyist groups and public relations shills. And they have been astonished , I am sure, to discover how cheaply they can buy the support of members of Congress. Chump-change donations to campaign funding pays off in spades. Lobbyists have language ready to drop in to any bill, to achieve corporate aims. That’s how emergency support of American workers became bailouts for cruise companies, who are based offshore and pay few American taxes.

And then members of Congress have to be made part of the investing class. For example, a fabulous oil & gas play is spun off into a Special Purpose Vehicle whose success is assured, and select politicians are invited to invest in it. If they cannot afford to purchase shares a private loan is arranged and documented and subsequently repaid, all above board. The company is spectacularly successful and the “investors” score big-time and repay any loans. Didn’t George W Bush succeed in an investment in professional sports in Texas, in a similar way? And by the way, how did Senate Majority Leader McConnell amass a self-declared net worth of $10 million after a lifetime of working as a civil servant at $200k per year?

All of the rest is theatre. In this election cycle the hot-button issues are access to abortion (again), racism and social justice (again), overseas wars, China as an economic threat, Russia! Russia! Russia!, voting systems and practices, and the age and personalities of the presidential candidates. All theatre. The billionaires don’t care about any of these things, as almost none of these things personally affect them. Safe and discreet abortion is always available somewhere in the world where private jets fly. Billionaires do not ever see people of different colour or status or class unless they choose to, and then only in circumstances they control. Russia and China are opportunities, not threats. And the presidential candidates can be influenced very cheaply. A Nevada casino magnate had the American embassy moved from Tel Aviv to Jerusalem for only $25 million in campaign donations to a notoriously cheap candidate.

The one thing that most amazes me is how the billionaires can continue to convince people to vote against their own best interests, whether economic interest, social interest or even national interest. At one time they used “race” quite openly, appealing to feelings of racial superiority or to fears of being electorally overwhelmed by “those people”, whether black or brown or oriental or poor. When openly racist campaigning became no longer acceptable, some genius concluded that “abortion” would make an excellent substitute, as it can combine all of the race and class issues and can bring in all of the family values baggage as well. Few other issues can motivate such a wide cross-section of the American public, and it can motivate people on either side of the issue. With so much focus on abortion who has time to worry about the domination of government by corporate interests?

Many commentators focus on the gross inequality of incomes and wealth in the USA, and a recent report by the Rand Corporation brings this in to clear focus. They analysed the growth in incomes across the entire working population of the USA for the period from the end of World War II to the present, and they found that up until 1975 or so the increase in general prosperity in the nation was shared equally across all income groups. Starting in the mid-1970’s however, most of the increase in prosperity was arrogated by the top income earners, so that the rich got richer and no-one else shared in the good times. The astonishing figure that the Rand researchers came up with was that the top 1% has actually taken all of the $50 trillion dollars in new wealth from everyone else in the 45 year period to 2020. There is a reason why so many people feel that the American Dream has passed them by – it’s because it actually has.

The usual remedy for this sort of gross inequality of power and wealth in society is revolution. The French Revolution comes to mind, but also the Russian Revolution. I wonder what was the root cause of the great social and political upheavals in Europe in 1848? (I can’t remember.) A less frequent remedy is the rise of a genuine populist movement, one that can actually re-distribute power (and thus wealth and opportunity). As Gwnne Dyer usefully says: populism is not an ideology, it is a technique. In America, I suspect that a true populist leader could only arise at the state level, and then from outside the two main parties.

If the current polarisation in American politics continues, the states may become the primary protector of social values (progressive or conservative) and the regulations that flow from them (access to abortion, gun rights and restrictions, access to health care, role of religion in public life, etc), and it may be that a true populist, charismatic leader can emerge and accrue the political power and authenticity to restrict the ability of the elites to organise state society. And that might spread, state by state. We outsiders can only hope that our fellow citizens in the USA can get their sh!t together at some point. Watching civil unrest unfold is no fun – I have cousins in America.

 

 

 

We try to run the Automatic Earth on donations. Since ad revenue has collapsed, you are now not just a reader, but an integral part of the process that builds this site.

Click at the top of the sidebars for Paypal and Patreon donations. Thank you for your support.

 

 

Support the Automatic Earth in virustime, election time, all the time. Click at the top of the sidebars for Paypal and Patreon.

 

Debt Rattle Sep 12 2014: The Fed Has A Big Surprise Waiting For You

Sep 122014
 
 September 12, 2014  Posted by at 8:07 pm Finance Tagged with: , , , ,  18 Responses »


Risdon Tillery Greenwich House day care, New York May 1944

The topic of potential interest rate hikes by central banks is no longer ever far from any serious mind interested in finance. Still, the consensus remains that it will take a while longer, it will take place in a very gradual fashion, and it will all be telegraphed through forward guidance to anyone who feels they have a need or a right to know. Sounds like complacency, doesn’t it?

Now, it seems obvious that the Bank of Japan and the ECB are not about to hike rates tomorrow morning. In Europe, dozens of national politicians wouldn’t accept it, and in Japan, it would mean an early end to many things including Shinzo Abe.

But the Bank of England and the Fed are another story. Though if the Yes side wins in Scotland next week, the narrative may change a lot of Mark Carney and the City. That leaves the Fed. And it’s important to realize and remember that, certainly after Greenspan entered the scene, speaking in tongues, the Fed has become a piece of theater. The Fed is about perception. About trying to make people believe something, and make them act a certain way that they choose for them.

That’s why after the Oracle left they pushed first a bearded gnome and then a grandma forward as the public face. The kind of people nobody would perceive as a threat. Putting a guy who looks like second hand car salesman in charge of the Fed wouldn’t work.

Not when a big financial crisis looms, and then continues on for a decade and counting. That makes keeping up appearances the no. 1 priority. That’s when you want a grandma, or you’d lose your credibility real fast. You need grandma for your theater, for the next play you’re going to stage.

That market volatility today is at record lows is part of a big play, or a big scene in a play if you will. And the goal is not to make markets look good, as many people think. Making markets look good, making the economy look good, is just an intermediate step designed to lure everyone in.

You make people believe you got their back. All the big investors. Because they make tons of money, while they thought maybe the crisis could have really hurt them. Even the public at large feels you got their back. Because they don’t understand what the sleight of hand is.

The big investors understand, but you got them believing you will play that hand forever, or let them know well ahead of time when you intend to fold. The big investors think you will skim the public, but not them. They think you’re all on the same side. And the public thinks you’re healing the economy, and saving their jobs and homes and pensions.

When rate hikes are discussed, like I did two weeks ago in This Is Why The Fed Will Raise Interest Rates, most people have similar initial reactions. ‘They can’t do that, it would kill the economy, or at least the recovery’.

But the truth is, there is no recovery. It’s just a scene in a play. And the economy is completely shot, it only appears to be left standing because the Fed poured oodles of money into it. Or rather, into a part of the economy that it can control, that it can get the money out of again easily: Wall Street banks. And Wall Street equals the Fed.

Charles Hugh Smith, in What If the Easy Money Is Now on the Bear Side?, notices that there are hardly any bears left in the market, and that shorts are disappearing as a source of revenue for bulls. Interesting, but he doesn’t yet connect all the dots. CHS thinks big money managers can make ‘the play’, that they can fool the rest of the market and unleash a tsunami that will bury the bulls.

I don’t think so. I think what goes on is that the Wall Street banks, many times bigger than the biggest money managers, see their revenues plunge. As they knew they would, because free money and ultra low rates are not some infinite source of income, since other market participants adapt their tactics to those things as well.

Which is what Charles Hugh Smith points to, but doesn’t fully exploit. And it’s not as Wolf Richter presumes either:

After years of using its scorched-earth monetary policies to engineer the greatest wealth transfer of all times, the Fed seems to be fretting about getting blamed for yet another implosion of the very asset bubbles these policies have purposefully created.

The Fed doesn’t fret. The Fed has known for years that the US economy is dead on arrival. They’ve spent trillions of dollars backed, in the end, by American taxpayers, knowing full well that it would have no effect other than to fool people into believing something else than what reality says loud and clear.

Philip Van Doorn, who I quoted two weeks ago, got quite a bit closer in Big US Banks Prepare To Make Even More Money

For most banks, the extended period of low interest rates has become quite a drag on earnings. Net interest margins – the spread between the average yield on loans and investments and the average cost for deposits and borrowings – are still being squeezed, since banks realized the bulk of the benefit of very low interest rates years ago …

That is the essence, and that is why grandma will announce higher rates, against a backdrop of 4% GDP growth numbers and a plethora of other ‘great’ economic data and military chest thumping abroad.

The US economy is dead. The Fed has known this for a long time, but pumped it up to where it is now to draw in all the greater fools, the so-called big investors who have made money like honey from QE and ZIRP. They are the greater fools. The American real economy ceased being a consideration long ago.

We’re in for big surprises, and they won’t be pretty, they’ll be pretty nasty. There are far too many people who think of themselves as smart who don’t see the difference between a theater play and a reality show. And I don’t mean CHS or Wolf, they’re much more clever than your average investment advisor.

The Fed will raise rates because that will make the biggest banks the most money. There’s nothing else that matters. The Fed can’t revive the US economy, that’s just a foolish notion. But it can suck a lot of wealth out of it.

• America, Your Days As A Global Superpower Are Numbered (Telegraph)

They say what goes up must come down. It’s been true of every global superpower throughout history, and now it’s coming to America. Within the next five years, China could account for a larger share of global GDP than any other country and knock the US off its perch as the world’s biggest economy, according to analysts at Deutsche Bank. “Based on current trends China’s economy will overtake America’s in purchasing power terms within the next few years,” Tim Reid of Deutsche Bank wrote in a research note. “Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower.”

The US’ economic prowess has been waning since the 1950s, but the downturn has sharpened over the last 15-or-so years. Part of this is due to internal political and economic issues in the US. Political polarization in the US is at its highest level in decades, economic confidence is drooping and most Americans are no longer in favour of international military intervention – once one of the pillars of American freedom and might. As Reid points out, America’s share of world output, on a purchasing power parity basis, has already slipped below 20pc, which has historically been the marker of a global superpower, from the Roman to the British empires.

But this is not just the story of America’s decline. China is on the way up – and could account for more of global GDP than the US by 2018, according to the IMF’s World Economic Outlook index. Another report, released earlier this week, said that China’s nominal GDP will overtake that of the US by 2024, buoyed by a three-fold increase in consumer spending. “China has begun to return to the position in the global economy it occupied for millenia before the industrial revolution,” Reid wrote, adding that China is on its way to overcoming the “centuries-long economic underperformance” that has held it back until recently.

Read more …

Beggar thy neighbor.

• US Dollar Heads For Best Run In 17 Years (Reuters)

– The U.S. dollar headed for its ninth straight week of gains on Friday, some measure of how the economic fortunes of the United States and its major economic peers are diverging after six years of financial turmoil. Benchmark 10-year U.S. Treasury yields rose to their highest in over a month, while European stocks shrugged off weakness in Asia to inch higher. A broad rise for the greenback was the main bet of most major investment houses this year but it has taken a very long run of relatively good U.S. numbers and a surge in concern over European and Japanese growth for the currency to deliver. Investors are convinced a Federal Reserve meeting next Wednesday will rubberstamp a shift towards higher interest rates next year suggested by a study by researchers from the U.S. central bank this week.

A 2% rise on the week in response took the U.S. currency to a six-year high of 107.39 yen on Friday. Against the euro it gained 0.2% on the week at 1.2921, broadly flat on the day. EUR= “The dollar generally remains firm but the dollar index has started to show some hesitation,” Swedish bank SEB said in a note to clients on Friday. The dollar index, a measure of the greenback’s value against a basket of six major currencies, remained on course for its longest streak of weekly gains since the first quarter of 1997. A range of political shocks to the system, from turmoil in the Middle East to fighting in Ukraine and a referendum on Scottish independence, have added to the backing for the dollar against a range of emerging and developed world currencies. But the euro, hammered by worsening economic numbers and further easing of monetary policy by the European Central Bank in the past month, has begun to find some support in the last few days.

Read more …

No! How is that possible?

• American Credit Card Debt Hits Post-Recession High (MarketWatch)

Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website CardHub.com. After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter. The average household’s credit-card balance now stands at $6,802, up slightly from $6,628 in the first quarter, but still down from $8,431 at the end of 2008.

By the end of the year, this figure is expected to exceed $7,000, reaching levels not seen since the end of 2010. U.S. consumers will be roughly $1,300 away from the credit card debt “tipping point,” where minimum payments become unsustainable and delinquencies skyrocket, the report says. Experts say that consumer spending accounts for more than two-thirds of U.S. economic output, and credit-card spending in particular shows that people are feeling more confident about their job security and the economic recovery. Earlier this week, the U.S. Federal Reserve said that outstanding revolving credit, which is mostly made up by credit-card debt, increased by 7.4% in July to $880.54 billion, and has been gradually rising since falling to $840 billion in 2010.

Read more …

Cute.

• Apple May Now Be Regulated As A Financial Institution (MarketWatch)

Did Apple just inadvertently take on a new financial regulatory burden with the rollout of Apple Pay? That’s the question pondered by Georgetown law professor Adam Levitin in a Credit Slips blog post that’s well worth a read. Levitin, whose specialties include financial regulation, suspects the answer is yes:

I think Apple may have just become a regulated financial institution, unwittingly. Basically, I think Apple is now a “service provider” for purposes of the Consumer Financial Protection Act, which means Apple is subject to CFPB examination and UDAAP.

The CFPB is the Consumer Financial Protection Bureau. UDAAP stands for “unfair, deceptive or abusive acts and practices,” regulatory provisions described as the “most dangerous weapon in the CFPB’s arsenal.” Apple didn’t respond to requests for comment. In an emailed response, a CFPB spokesperson said the agency will continue to closely monitor developments in mobile-payments technology in order to identify any consumer-protection issues. “The bureau’s role is not to choose market winners and losers, but to protect consumers and to make sure that companies offering consumer financial products or services play by the same rules. By and large, those rules are technologically neutral. Rules that apply to plastic card payments generally also apply to payments with a phone. For example, disclosures must be clear, consumers must be protected from unauthorized transactions, and conduct towards consumers must not be unfair, deceptive, or abusive,” the agency said.

Read more …

??

• Spain Heads For Autumn Of Trouble, Buys €1 Million In Riot Gear (Guardian)

The Spanish government is readying itself for an autumn of discontent, spending nearly €1m on riot gear for police units as disparate protest groups prepare a string of demonstrations. Since June, the interior ministry has tendered four contracts to purchase riot equipment ranging from shields to stab vests. The ministry also finalised its purchase of a new truck-mounted water cannon, an anti-riot measure used during Spain’s dictatorship and the transition to democracy but little seen in recent years. Despite attempts by opposition Socialist politician Antonio Trevín to paint the purchase as “a return to times that we would rather forget”, the ministry said in its tender that the water cannon was necessary, “given the current social dynamic”. The government’s spending spree comes as groups across Spain are predicting a season of protests. “We’re calling it the autumn of confronting power and institutions,” said the activist group Coordinadora 25-S which has its roots in the indignados movement.

Rallies are being planned to counter draft laws by the governing People’s party that would curtail access to abortion in Spain or see unauthorised protests levied fines of up to €600,000. Months after former King Juan Carlos abdicated the throne in favour of his son King Felipe VI, protests are also being planned to demand a referendum on the monarchy. In Catalonia, the push continues for a vote on independence, while the Canary Islands has said it wants to put the idea of oil exploration in the waters around the region to a referendum. Amnesty International in Spain said the purchase of riot gear was a worrying development. “They say they buy this material to control disturbances, but how exactly will it be used?” said Amnesty’s Ángel Gonzalo. “In Greece we have documented how these water cannons, when used a short distance, can provoke severe injuries and commotions.”

Read more …

They mean business.

• Up To 2 Million Catalans March For Independence (RT)

Hundreds of thousands of Catalans have flooded the streets of Barcelona in the region’s national day to demand the right to vote on independence from Spain. The demonstrators have formed a big V in red and yellow, symbolizing “vote.” People who wanted to make their voices heard, were wearing red and yellow, the traditional Catalonian colors during La Diada, the Catalan National Day. Almost half a million Catalans have signed up to form a “V for vote,” a show of support for the right to decide on their independence from Spain. “It would be the people’s triumph if we were allowed to vote. If we live in a democracy we should be allowed to vote,” Montserrat, a 58-year-old homemaker, told Reuters.

Local leaders believe that the region is politically, economically and socially better on its own. “We think that we could administer our own resources. We could do it better with much more proximity to the people and also we would have a better chance of meeting our needs,” Alfred Bosch, a Spanish MP from the Catalonia Republican left party told RT. “So especially in times of crisis when we feel the pinch of the economy and people are really feeling a pinch of this crisis,” he added. On Wednesday, Artur Mas, first minister of the relatively prosperous region in Spain’s northeast, said that it was “practically impossible” to stop Catalonia from voting. “If the Catalan population wants to vote on its future, it’s practically impossible to stop that forever,” Mas told AFP. Spanish authorities, however, are opposing the independence referendum, saying that the referendum is illegal since the Constitution does not provide such an option initiated by a region, and needs to be blocked.

Read more …

So?

• Pound Seen Tumbling Up to 10% on Scottish Yes Vote (Bloomberg)

The pound, already suffering its worst month in more than a year, has the potential to tumble 10% should the Scots vote for independence from the U.K., according to economists surveyed by Bloomberg. A victory by Scottish First Minister Alex Salmond’s Yes campaign would mean a 5% to 10% slide versus the dollar within a month, said 61% of the 31 respondents polled by Bloomberg Sept. 5-11. Sterling is already down 5.6% from a five-year high in July, and touched its lowest level in 10 months this week as momentum for the separatists increased.

“The question is if it’s one bad day or if it just continues and continues as people take fright,” Alan Clarke, an economist at Bank of Nova Scotia’s Scotiabank unit in London, who took part in Bloomberg’s survey, said yesterday by phone. The pound may weaken to about $1.55 the day after a Yes vote, he said. The currency traded at $1.6241 at 7:39 a.m. in New York. The result of the Sept. 18 vote is on a knife edge, with an ICM Research Ltd. poll on the Guardian website today putting support for the Yes campaign at 49%, versus 51% for those wanting to keep the 307-year-old union. That followed a poll for Glasgow’s Daily Record newspaper two days ago putting support for the separatists at 47% versus 53% for No. Firms from Standard Life to Royal Bank of Scotland have announced plans to move operations south of the border if Salmond wins the campaign.

Read more …

Blah blah.

• Scottish Referendum Yes Vote Threatens Market Turmoil, Warns IMF (Guardian)

The International Monetary Fund has warned that a yes vote in next week’s Scottish independence referendum could result in financial market turmoil. A vote for independence would create “uncertainty” while a number of “complicated issues” were being thrashed out, in particular over which currency an independent Scotland would use, the Washington-based organisation said. The long-term impact on the economy would be determined by the outcome of the detailed negotiations carried out in the aftermath of the referendum, which is less than a week away. The IMF deputy spokesman, William Murray, said at a press briefing on Thursday evening: “A yes vote would raise a number of important and complicated issues that would have to be negotiated. The main immediate effect is likely to be uncertainty over the transition to potentially new and different monetary, financial, and fiscal frameworks in Scotland.

“While this uncertainty could lead to negative market reactions in the short-term, longer-term effects would depend on the decisions being made during the transition. And I would not want to speculate on this.” The warning came as a new YouGov poll showed support for separation weakening by three%age points. The latest poll for the Times and the Sun found that support for remaining in the UK has risen to 52%, leaving support for a yes vote four points behind at 48%, excluding don’t knows. A YouGov poll last week showed the yes vote leading for the first time, taking a two-point lead over no by 51% to 49%, sending shockwaves through the no campaign and causing delight among yes campaigners. That poll led to a fall in the value of the pound, and to more than £2bn being temporarily wiped off the value of leading Scottish companies. It also forced David Cameron, Ed Miliband and Nick Clegg to abandon prime minister’s questions and head to Scotland for a day of campaigning to shore up the no vote.

Read more …

Can’t wait for the response.

• EU Imposes Further Russia Sanctions (Guardian)

Some of Russia’s best-known companies, including arms-maker Kalashnikov and energy firms Rosneft and Gazprom, have been targeted in the latest round of EU sanctions over the Ukraine crisis. Under the sanctions, published on Friday in the EU’s official journal, Rosneft, Transneft and Gazprom Neft will be prevented from raising long-term debt on European capital markets. There are also travel bans and asset freezes against leading members of Vladimir Putin’s inner circle, including the businessman Sergei Chemezov, chairman of defence and industrial group Rostec and a close associate of Putin from his KGB days in East Germany. Others targeted are Igor Lebedev, deputy speaker of the Russian lower house of parliament, and Vladimir Zhirinovsky, an outspoken nationalist politician, as well as a number of leaders of pro-Russia separatists in eastern Ukraine.

The US is understood to be planning to limit access to Russian banks, including Sberbank, later on Friday as part of a concerted western effort to penalise what it sees as Russian attempts to destablise Ukraine by backing pro-Russia separatists with troops and weapons. Last week, Russia and Ukraine agreed to a ceasefire that remains in place despite repeated violations. As part of the agreement, on Friday the Ukrainian government and rebel forces exchanged dozens of prisoners captured during fighting. The transfer took place in early hours outside the main rebel stronghold of Donetsk under the watch of international observers. Ukraine’s president, Petro Poroshenko, said 36 Ukrainian servicemen were released after negotiations. He said a further 21 soldiers were freed the day before. Ukrainian forces handed over 31 pro-Russia rebels detained over the course of the five-month conflict.

Read more …

• Moscow On Sanctions: ‘EU Unwilling To See Russia’s Efforts On Ukraine’ (RT)

The EU “does not see or is unwilling to see” Russia’s efforts to establish peace in Ukraine, Moscow said in response to the bloc’s new sanctions. Despite Brussels’ “non-constructive” policy, Moscow is committed to helping implement the peace plan. “We are sorry that the European Union has adopted a new round of sanctions. We have repeatedly expressed our discontent with the previously-imposed sanctions and our disagreement with them. We also considered them illegal,” Putin’s spokesperson Dmitry Peskov said. The EU decision “is absolutely beyond understanding and explanation,” Peskov added, especially given Russia’s recent efforts to help stop the bloodshed in Ukraine and peacefully resolve the conflict between Kiev and southeastern regions.

The presidential spokesman stressed that Brussels either fails to see or “is unwilling to see the real situation in Donbass and does not want to get informed about the steps the parties are taking towards settlement.” Moscow regrets that the EU still “prefers talking the language of sanctions,” rather than to “contribute to the peaceful settlement” of the conflict, “not in words but in deeds.” “At the same time, it is impossible not to understand that one way or another, European companies will have to pay for those sanctions as well as taxpayers,” Peskov said. “This is actually happening already.”

Read more …

Declaration of war.

• Ukraine Vows Return To Union With Crimea (CNBC)

As the European Union announced a fresh wave of sanctions against Moscow, Ukraine’s President Petro Poroshenko vowed Friday to reunite the Russian-held region of Crimea with the rest of the country. The annexation of Crimea, which sparked a diplomatic crisis with the West, will be reversed not by military force, but by an “economic and democratic petition” Poroshenko declared. “We have a significant problem. They said we lost the Crimea. No, we had an invasion in Crimea – but Crimea will be back together with us,” he said, speaking at the 11th Yalta European Strategy (YES) conference in Kiev. Speaking to CNBC, Poroshenko said the key issue for Ukraine is its “independence, sovereignty and territorial integrity” as he called for the total withdrawal of Russian troops from the border.

Viktor Yushchenko, the pro-Western former president of the Ukraine, added that current relations with the Kremlin were in tatters as President Putin refuses to take part in discussions himself. “It is impossible to negotiate with Putin, he is not even participating in the discussions. His puppets are talking instead of him,” he told CNBC through an interpreter at the conference. The EU put new sanctions into effect against Russia on Friday, including restrictions on financing from some Russian state-owned companies and asset freezes on leading Russian politicians. Poroshenko said the sanctions showed Europe’s level of solidarity with Ukraine in the face of confrontation with Russia. “I am proud to be Ukrainian. I feel myself a full member of the European Union family,” he said.

Read more …

Kiev never says anything that’s true.

• Moscow Mocks Kiev’s ‘Intelligence’ On Killed Russian Troops In Ukraine (RT)

The alleged deaths of “thousands of Russian soldiers” in battles in eastern Ukraine are absolute nonsense, the Russian Defense Ministry said, advising Kiev officials to be more careful when preparing their public speeches based on Ukrainian media reports. “The Russian Military Department considers ‘nonsense’ the statement by Andrey Lysenko, who said, citing data from ‘operational intelligence’ that thousands of Russian troops died on the territory of Ukraine,” the Defense Ministry’s official representative, Igor Konashenkov, said in a statement. Ukrainian National Security and Defense Council spokesman Andrey Lysenko had earlier made a statement claiming that about 2,000 Russian soldiers were killed in Ukraine while at least 8,000 were injured. The Russian ministry points out that the so-called “intelligence” data echoes the statements of the alleged human rights activist, Elena Vasileva, who shared those unsubstantiated figures with the Ukrainian UNIAN news agency over a week ago.

“I’d recommend that Mr. Lysenko be more careful when preparing his public statements and to read the Ukrainian media from time to time,” Konashenkov said, adding that Lysenko apparently gave away one of their undercover intelligence officers. “Now we understand what was behind the September 9 dismissal of the Defense Ministry’s intelligence chief Sergey Grymza who created such a unique ‘agent network’,” Konashenkov added. The same scenario was noticed on numerous occasions, Konashenkov pointed out on a serious note, reminding that unconfirmed or purely fake reports are often turned into “facts” by being repeatedly re-quoted by the media. “Today there’s just one element lacking in this merry-go-round. Namely the publication of this nonsense in one of the leading Western media. But I guess it wouldn’t make us waiting for long,” Konashenkov said.

Read more …

• China Credit Gauge Misses Estimates as Growth Risks Escalate (Bloomberg)

China’s broadest measure of new credit trailed analyst estimates in August, adding to the government’s challenge to meet its economic-growth target amid a slumping property market and a pullback in manufacturing. Aggregate financing was 957.4 billion yuan ($156 billion), the People’s Bank of China said today in Beijing, compared with the 1.135 trillion yuan median estimate of economists surveyed by Bloomberg. New local-currency loans were 702.5 billion yuan, and M2 money supply grew 12.8% from a year earlier. Today’s report adds to evidence the economy is losing steam after July aggregate financing slumped and recent data showed moderation in manufacturing and a drop in imports. Premier Li Keqiang this month said some volatility in growth is inevitable and the government will stick with targeted policies.

“Banks are reluctant to lend because there aren’t enough good projects,” said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “That’s a real headache. Besides political pressure to lend, you have to give the banks a sweeter deal. In the next couple of months, a cut in the reserve-requirement ratio or the loan-deposit ratio is quite likely.” New yuan loans, which measures new lending minus loans repaid, compared with economists’ median estimate of 700 billion yuan and figures of 385.2 billion yuan in July and 712.8 billion yuan a year earlier. The slowdown in M2 growth from 13.5% in July was flagged by Premier Li on Sept. 9. The figure compared with the median estimate of 13.5% in a survey of analysts conducted before his disclosure.

Read more …

Scary shit.

• Majority In China Expect War With Japan (FT)

China and Japan are heading towards military conflict, according to a majority of Chinese surveyed on ties between the Asian powers in a Sino-Japanese poll. The Genron/China Daily survey found that 53% of Chinese respondents – and 29% of the Japanese polled – expect their nations to go to war. The poll was released ahead of the second anniversary of Japan’s move to nationalise some of the contested Senkaku Islands in the East China Sea. Relations between Japan and China have soured since Japan bought three of the tiny islands – which China claims and calls the Diaoyu – in 2012. Japan defended the move as an effort to thwart a plan by the anti-China governor of Tokyo to buy them, but China accused it of breaching an unwritten deal to keep the status quo. According to the poll, 38% of Japanese think war will be avoided, but that marked a nine point drop from 2013.

It also found that a record 93% of Japanese have an unfavourable view of their Chinese neighbours, while the number of Chinese who view Japanese unfavourably fell 6 points to 87%. Jeff Kingston, a Japan expert at Temple University in Philadelphia, said Japanese tabloid media were driving the already negative sentiment towards China by focusing on its “warmongering”. He added that the government was “amplifying the anxiety” by talking about the threat from China. Sino-Japanese relations started to improve about a year ago, spurring Tokyo to start laying the groundwork for a possible first meeting between Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping. But ties deteriorated rapidly again after Mr Abe’s visit in December to Yasukuni, a controversial shrine dedicated to Japan’s war dead including a handful of convicted war criminals.

Mr Abe wants to hold a summit with Mr Xi in November on the sidelines of an Apec summit in Beijing but China has shown no sign of interest. Critics say Mr Abe has hurt efforts to repair ties by visiting Yasukuni and also because of the perception that he is an unrepentant ultranationalist. This week two members of Mr Abe’s ruling Liberal Democratic party, including a new cabinet minister, were forced to distance themselves from photographs that showed them posing with the leader of a Japanese neo-Nazi party. “He just replaced the rightwing loonies [in his cabinet] with another group of rightwing loonies,” said Mr Kingston.

Read more …

More loans! Just what China needs!

• Yuan Loan-Backed Bond Surge Prompts China Risk Warnings (Bloomberg)

Chinese banks are selling notes backed by loans at a record pace as they seek to offset a slump in deposits, prompting credit analysts to warn of the risks of securities that sparked the global financial crisis. Lenders in the world’s second-biggest economy have issued 148.7 billion yuan ($24.2 billion) of collateralized debt obligations this year, almost five times what’s been sold since 2012 when a ban on the securities was lifted, Bloomberg data show. The central bank and finance watchdog both must approve issuance of the securities, which take assets off balance sheets for accounting purposes, allowing lenders to seek more business without breaching regulatory limits. China is experimenting with new types of securities at a time when deposits are dropping at a record pace and soured debt is rising amid a property slump.

Non-performing loans rose to the highest in five years in June as China Construction Bank Corp. to Bank of China Ltd. reported sluggish profit growth. “Because most asset-backed securities investors are banks, securitization doesn’t help lower the lending risks the whole banking system is exposed to,” said Li Ning, a bond analyst in Shanghai at Haitong Securities Co., the nation’s second-biggest brokerage. “The risks one bank issuer faces are simply transferred to the bank investor.” Premier Li Keqiang is seeking to shift financing to official channels after shadow-banking assets jumped 32% in 2013 to 38.8 trillion yuan, according to Barclays Plc estimates. The banking regulator tightened rules on new trust products in April, after failures of such investments sparked protests. Authorities approved the first asset-backed security tradable on the Shanghai stock exchange in June, and in July authorized the first mortgage-backed notes since 2007.

Read more …

Yes.

• There’s No Fear In The Markets: Time To Worry? (CNBC)

Even by summer’s traditionally low stock volume standards, this year has been very light, culminating in a “dismal” August which has left volumes down year-over-year, according to traders. While the general absence of rollercoaster style moves in stock indexes and hairpin changes in price may cause many investors and companies to breathe a sigh of relief, it does drastically reduce the opportunity for investors to make money from speculating on movements in the market. One area of concern is the stubbornly low levels of the so-called “fear index” – the CBOE’s Volatility Index or VIX – which measures traders’ expectations for future market volatility. As U.S. stock indexes continued to hit new all-time highs in 2014, traders have wondered why the VIX, considered by many to be the world’s best barometer of investor sentiment and market volatility, is down around 6%.

Optimists would say the VIX is rightly at a multi-year low given that the S&P 500 is repeatedly hitting fresh all-time highs. Pessimists contend that a low VIX shows investors have let their guard down, dropping demand for S&P 500 stock-portfolio insurance just when they may need it. Meanwhile, monthly equity and index options, derivatives that allow investors to buy or sell an index like the S&P 500 at an agreed price before a certain date, and act as insurance, hit levels in August this year not seen since 2011. “The VIX is often called the ‘fear index’, and while investors don’t seem to be worried right now, our survey respondents say a little fear may be in order,” said brokerage firm ConvergEx Group in a recent survey of investor sentiment. “We also have a clear picture of how record-low volatility has hurt the sell-side: two-thirds of banks and brokers say the current environment has been bad or very bad for business,” the company added.

Read more …

Check it out.

• The High Cost of Renewables (Euan Mearns)

We hear a lot about the plummeting cost of renewables and escalating costs of nuclear power. Looking just at capacity installation costs, nuclear comes in at $8000 / kW and wind at around $2000 / kW. But these figures need to be adjusted for load capacity factors (nuclear 0.9, wind 0.17) and for the longevity of the installations (nuclear 50 years, wind 20 years). Applying these adjustments wind works out at 3 times and solar at 10 times the cost of installing nuclear power.

Read more …

Figures.

• Soldiers From Poor Countries Have Become the World’s Peacekeepers (TIME)

On Aug. 27, rebels from the al-Qaeda-allied al-Nusra Front stormed the Golan Heights border crossing between Syria and Israel, home to one of the oldest U.N. peacekeeping operations. While two contingents of Philippine peacekeepers managed to flee the rebel attack, 45 Fijian troops were captured and taken away by the rebels to parts unknown. The Fijians were finally released on Sept. 11, but the two-week crisis crystallized a persistent yet under-reported fact: while the U.N. calls upon the international community to act in times of crises, it is often soldiers from developing nations who shoulder the stiffest burden. In 1994, on the heels of the Rwandan genocide, the permanent members of the U.N. Security Council (China, Russia, France, the U.K. and the U.S.) provided 20% of all U.N. peacekeeping personnel.

But by 2004, Security Council nations contributed only 5% of U.N. personnel. This July, amid a tumultuous summer of violent conflicts, that figure had dropped to a miserly 4%, while the governments of Pakistan, India, Bangladesh, Fiji, Ethiopia, Rwanda and the Philippines provided a staggering 39% of all U.N. forces. Critics can counter this charge with stats of their own. After all, they say, the permanent members contribute 53% of the U.N.’s annual budget, far outstripping financial contributions made by countries of the global south. But recent years have also seen sluggish rates of payment from wealthier nations — delays that further strain an overburdened system supporting 16 peacekeeping missions around the world.

On balance, the troops contributed by developing countries are more likely to be less well trained, under-supplied and ill equipped for the missions. Delays in financial contributions only complicate the challenges of modern peacekeeping. So does the fractured nature of modern conflicts. Military experts, like General Sir Rupert Smith, have noted the shift from “industrial wars” of the past to today’s “war amongst the people.” Modern conflicts involve combatants whose ends are not merely the control of territory or the monopoly of politics. They wage war with their own rules, without concern for the U.N.’s mission to referee. In response, peacekeeping has been hurriedly ramped up: more comprehensive mandates are issued and troops are cleared to use force in defense of civilians. But in the end, peacekeepers are redundant where there is no peace to keep.

Read more …