Apr 222015
 
 April 22, 2015  Posted by at 11:08 am Finance Tagged with: , , , , , , , , ,  


Jack Delano AT&SF Railroad locomotive shops, San Bernardino, CA 1943

Appalled doesn’t cover it. Disgusted won’t do either. Angry doesn’t come close. Maybe I have yet to learn of a word that would express my feelings on the following topic. There’s a disease, an epidemic, that spreads through out the western world. We are all turning into accomplices to murder. And I still believe we are better than that. Just perhaps not all of us.

The US, and the rest of the west, have made plenty enemies already without needing to create their own out of thin air – as if there were ever a need to create enemies. But that’s still what we’ve been doing in many places in the world, including Ukraine. And there’s an entire multi-billion machine working just to make us think what someone else wants us to think about these ‘enemies’.

These days, when you call someone ‘pro-Russian’, that’s about on on the same level as ‘murderer’, rapist, things like that. And that must be why the western press once again resorts to ‘pro-Russian’ as a swear word, or even curse, in reporting on the murders of at least 10 people in Ukraine over the past 3 months. As far as we can see, all were considered ‘allies’ of former President Yanukovych (whatever ‘allies’ may mean in this context) and 2 were journalists (of whom at least 1 was also a historian).

Yanukovych was (or is, actually) not a saint. He was the utterly corrupt president of a country that has been utterly corrupt for a very long time. It still is today, and it’s getting worse, fast. Whereas Russia didn’t feel it had the right or need to interfere in the country, the west did. Its interference culminated in the ouster of Yanukovych in late February 2014, and the introduction of a ‘government’ that is extremely pro-western and extremely anti-anything-‘that has anything to do’-with Russia (including the language).

First, we saw the US install its puppet Yatsenyuk as PM (we know about this through leaked tapes of US Dep. Secretary Victoria Nuland). ‘Yats’ to this day has never been elected to office by ‘his’ people (or any other people, for that matter) . A few months later came oligarch Poroshenko as president, who was.

Both men have been instrumental in waging a very bloody and deadly war against a significant segment (a third) of their own population, in east Ukraine. This warfare has coincided with an ever more blatant propaganda war against anything-‘that has anything to do’-with Russia, both in Ukraine and across the west. Need I repeat not one of the accusations against Russia has, still to date, ever been substantiated, despite the best spy satellites etc. equipment in human history?

Whereas someone who cannot be accused of anything worse than being pro-Russian is merely equal to a murderer or rapist, being – labeled as – pro-Putin is several levels worse than that. Meanwhile, Russian President Putin himself has been compared to the biggest mass-murderers in human history, amongst others by US presidential candidate Hillary Clinton.

And lest we forget, Yatsenyuk has labeled all east Ukrainians ‘subhuman’. Let’s see any other prime minster in any other country in the world do that and remain in office.

So far, nothing new. Why then get back to this? Because of all those people who are being killed. The Kiev regime for quite a while attempted to label them all ‘suicides’ (something that was eagerly quoted in western media), hindered in this ‘policy’ only by facts getting in the way.

And when these facts get in the way, they blame Russia for the murders. The ‘rationale’ being that Moscow sought to prevent all these now deceased Ukrainians from divulging details about ‘anti-Maidan’ protests they may have been involved in (can’t have that in a democracy).

One western ‘news source’ even quoted an ‘expert’ just the other day as claiming Putin had ordered two of the murders to coincide with his latest yearly phone-in TV show last week: “political analyst Volodymyr Fesenko said the fact that the killings coincided with Vladimir Putin’s annual phone-in “aroused great suspicion”.

What remains most galling – well, other than us supporting cold blooded murder – is the extent to which western media blindly keep reporting whatever Kiev says, despite the fact that it should be clear to every single reporter that neither Poroshenko nor Yatsenyuk has ever been caught saying anything of substance that proved to be true.

Putin did mention the murder of journalist and historian Oles Buzina last week briefly on that show, and added there has been a series of murders recently in Ukraine, which are not being (or don’t seem to be) properly investigated by Kiev. “”This is not the first political assassination. Ukraine is dealing with a whole string of such murders..”

‘The difference with Russia, Vladimir Putin said, was that killings such as that of opposition figure Boris Nemtsov got properly investigated, leading to arrests. “In Ukraine, which pretends to be a democratic state and wants to be part of a democratic Europe, nothing like that is happening. Where are the murderers of these people? They are simply not there, neither those who carried them out nor those who ordered them, But Europe and North America prefer not to notice.“’

While the killing spree is ongoing, US troops arrived last week to ‘train’ the Ukraine government (and oligarchs) army. The British have had ‘instructors’ there for a long time. We know Blackwater aka XE aka Academi has boots on the ground. We also know that Right Sector leader Dmitro Yarosh (known for various photographs with his ‘troops’ which feature swastikas), was appointed to a high post in that same Ukraine army. Yarosh is also an MP. Nice assembly.

And ‘we’ support this? By we, I mean not only the US, Europe is just as hungry for a fight, and just as blind when it comes to facts vs fiction. But what on earth are we doing paying for all this? Have we all completely lost our heads, hearts and minds? We’re supposed to support democracies, not death squads!

Here’s a list of the victims, largely taken from a piece by Justin Raimondo last week, with a few additions on my part. As you can see, most of them would be considered intellectuals. The ‘cream’ of what was left in Ukraine and did not support Poroshenko, Yatsenyuk and their supporters abroad, in the west, is systemically being eradicated and may now be gone.

• January 26 – Nikolai Sergienko, former deputy chief of Ukrainian Railways and a supporter of Viktor Yanukoych’s Party of Regions, reportedly shot himself with a hunting rifle. The windows were all locked from inside, and no note was found.

• January 29 – Aleksey Kolesnik, the former chairman of the Kharkov regional government and a prominent supporter of the now-banned Party of Regions, supposedly hung himself. There was no suicide note.

• February 24 – Stanislav Melnik, another former Party of Regions member of parliament, was found dead in his bathroom: he is said to have shot himself with a hunting rifle. We are told he left a suicide note of “apologies,” but what he was apologizing for has never been revealed, since the note has not been released.

• February 25 – Sergey Valter, former Party of Regions activist and Mayor of Melitopol, was found hanged hours before his trial on charges of “abuse of office” was set to begin. Whoever was responsible neglected to leave a “suicide” note.

• February 26 – Aleksandr Bordyuga, Valter’s lawyer and former deputy chief of Melitopol police, was found in his garage, dead, another “suicide.”

• February 26 – Oleksandr Peklushenko, a former Party of Regions member of parliament and chairman of Zaporozhye Regional State Administration, was found dead in the street with a gun wound to his neck. Officially declared a “suicide.”

• February 28 – Mikhail Chechetov, a professor of economics and engineering, former member of parliament from the Party of Regions, and former head of the privatization board, supposedly jumped from the seventeenth floor window of his Kiev apartment. Another “suicide”!

• March 14 – Sergey Melnichuk, a prosecutor and Party of Regions loyalist, “fell” from the ninth floor window of an apartment building in Odessa. Or was he pushed?

• April 15 – Oleg Kalashnikov, yet another prominent Party of Regions leader, died of a gunshot wound – the eighth since the beginning of the year.

• April 16 – Oles Buzina, historian and journalist, shot dead.

• April 16 – Serhiy Sukhobok, journalist, shot dead.

• April 17? – Olga Moroz, editor-in-chief of the Neteshinskiy Vestnik, found dead in her home. Her body showed ‘signs of violent death’.

Moreover, in a perhaps separate incident, on March 22, Yanukovych’s 33-year-old son Viktor Jr., a former Ukraine MP, died after his car ‘apparently fell through ice on Russia’s Lake Baikal’.

There are also an unknown number of people who simply disappeared. This happened for instance on April 15 with Dr. Skorokhodov Vitali and ‘militiaman’ Alexey Astanin. There may be many more. Which reminds me of an interview that Patrick Smith posted a few days ago in Salon, with Stephen F. Cohen, arguably America’s top expert on Russia. One of the things Cohen said – more of him later – puts a major question mark behind official – UN – numbers of Ukraine civil war casualties:

The horror of this has been Kiev’s use of its artillery, mortars and even its airplanes, until recently, to bombard large residential cities, not only Donetsk and Luhansk, but other cities. These are cities of 500,000, I imagine, or 2 million to 3 million. This is against the law. These are war crimes, unless we assume the rebels were bombing their mothers and grandmothers and fathers and sisters.

This was Kiev, backed by the United States. So the United States has been deeply complicit in the destruction of these eastern cities and peoples. When Nuland tells Congress there are 5,000 to 6,000 dead, that’s the U.N. number. That’s just a count of bodies they found in the morgues. Lots of bodies are never found. German intelligence says 50,000.

We haven’t seen the German data Cohen cites, but we see no reason to doubt him either. It would place the entire matter in a whole different light, however.

There are some details behind the murder spree coming to the surface. There’s a site called ‘Peacemaker’ (psb4ukr.org), supported by Ukraine MP and government advisor Anton Gerashchenko, who has said: “Information from the website of the “Peacemaker” center has long enjoyed the Ministry of Internal Affairs, security service, intelligence, border service to collect information to open criminal cases and obtaining a court decision on the detention and arrest of separatists and terrorists.”. Gerashenko is also involved in financing the operation.

“Peacemaker”
RESEARCH CENTRE FEATURES OF CRIMES AGAINST UKRAINE’S NATIONAL SECURITY, PEACE, SECURITY AND HUMANITY international law
Information for law enforcement authorities and special services about pro-Russian terrorists, separatists, mercenaries, war criminals, and murderers.

The site apparently has a list to download with some 7,700 names of “saboteurs” and “terrorists”. People are invited to post personal information, including addresses and phone numbers, of people deemed hostile to the Kiev regime. Such information for Buzina and Kalashnikov was posted on the site less than 48 hours before they were murdered.

A few people in the west have done some further digging into the site’s origins (with ‘traceroutes’, ‘nslookup’, ‘reverse nslookup’ etc.), and they claim to have found links to Dallas, Texas and Calgary, Alberta, as well as one to a NATO server – located in Dallas. You can find further details at Moon of Alabama and Niqnaq.

Meanwhile, the murders were claimed by a group that calls itself Ukrainian Insurgent Army, quoted by the BBC as having written: “We are unleashing a ruthless insurgency against the anti-Ukrainian regime of traitors and Moscow’s lackeys. From now on, we will only speak to them using the language of weapons, all the way to their elimination.”

As far as I can tell, nobody has been arrested for any of the murders to date.

And yes, we are all involved in this. You, me, all of us. How did we get there? Perhaps the second quote from that interview with Stephen F. Cohen serves to explain how we did:

Stephen F. Cohen on the U.S./Russia/Ukraine History the Media Won’t Tell You
(The New York Times “basically rewrites whatever the Kiev authorities say”)

I wrote an article in, I think, 2012 called the “The Demonization of Putin,” arguing that there is very little basis for many of the allegations made against Putin, and that the net result was to make rational analysis in Washington on Russian affairs at home and abroad impossible, because it was all filtered through this demonization. If we didn’t stop, I argued, it was only going to get worse to the point where we would become like heroin addicts at fix time, unable to think about anything except our obsession with Putin. We couldn’t think about other issues. This has now happened fully. The article was turned down by the New York Times, and an editor I knew at Reuters published it on Reuters.com.

The history of how this came about [begins] when Putin came to power, promoted by Yeltsin and the people around Yeltsin, who were all connected in Washington. These people in Moscow included Anatoly Chubais, who had overseen the privatizations, had relations with the IMF and had fostered a lot of the corruption. He came to United States to assure us that Putin was a democrat, even though he had been at the KGB.

When he came to power, both the Times and the Post wrote that Putin was a democrat and, better yet, he was sober, unlike Yeltsin. How we got from 2000 to now, when he’s Hitler, Saddam, Stalin, Gaddafi, everybody that we have to get rid of, whom we know killed Boris Nemtsov because from the bridge where Nemtsov was killed [on February 27] you can see the Kremlin…. Well, remember, Sarah Palin could see Russia from Alaska! It’s preposterous. But the demonization of Putin has become an institution in America. It is literally a political institution that prevents the kind of discussion that you and I are having.

Kissinger had the same thought. He wrote, last year, I think, “The demonization of Putin is not a policy. It’s an alibi for not having a policy.” That’s half correct. It’s much worse now, because they did have a policy. I think the “policy” growing in some minds was how to get rid of Putin. The question is, “Do they have the capacity to make decisions?” I didn’t think so, but now I’m not so sure, because in a lot of what comes out of Washington, including the State Department, the implication is that Putin has to go.

I asked a question rhetorically several years ago of these regime changers: Have you thought about what would happen in Russia in the event of regime change? If what you say is true, if Putin is the pivot of the whole system, you remove Putin the whole system collapses. Russia has every known weapon of mass destruction in vast quantities. What would be the consequence of that conceit on your part—that we’re going to get rid of Putin—for the rest of the world?

So this Putin phenomenon has to be explained. How did he go from a democrat for sure, now to maybe the worst Russian leader since Ivan the Terrible. How do you explain it? Does that tell us more about Putin or more about us?

I guess the main question is not ‘How did we get here?’, but ‘How do we get out?’.

Here’s the now unfortunately no longer among us Oles’ Buzina talking about the history of Ukraine (don’t forget to turn on subtitles/CC)

May 122014
 
 May 12, 2014  Posted by at 7:12 pm Finance Tagged with: , , ,  


Russell Lee Agricultural day laborer family near Spiro, Sequoyah County, Oklahoma June 1939

Every people has the right to self-determination, but only if it pleases a bunch of self-elected overlords and if it serves their purpose. How else can we interpret the fact that the Donetsk self-organized referendum was rejected by the West and even labeled criminal by the Kiev government that in turn is labeled criminal in Donetsk, all of whom say the May 25 across-Ukraine election is the real and legal thing, as the Donetsk region has already vowed to boycott that election? You can have a referendum to separate yourself from Ukraine, but only under Ukraine law. That is, the law of a government that has threatened to ban your language from being used where you live and that has been put in place, and maintained there, by armed groups that are shooting at you, must decide your right to self-determination.

The biggest irony in my view came from a Bloomberg article this weekend, which said:

EU leaders say the [situation] may be spiraling out of Putin’s control. “Armed thugs with modern weapons are stirring old tensions and stoking new hatreds,” U.K. Foreign Secretary William Hague said [..] Putin “seems to have unleashed forces that he cannot control.”

Which made me think: if according to you he’s not in control, how can you threaten him with more sanctions? How does that work? Do you mean to say you want him to seize control, as in send in his army? I think maybe you it’s you guys who have lost control, and you think that’s somehow working in your favor. So you let it go.

I have no – reason to – doubt that Hague’s MI5 and MI6 have elbowed their asses into Kiev too, but it’s the American involvement that so far stands out. A recount: It seems like ages ago that we heard of the active roles played by Assistant Secretary of State Victoria Nuland and US ambassador to Ukraine Geoffrey Pyatt, who hand-picked Yatsenyuk for the PM role after their hand-picked overthrow of the elected Yakunovich government. And who, when the protests by grandmothers in Maidan square didn’t move fast enough, or would perhaps even have threatened to fail – without much, if any, violence on the part of the government, lest we forget – started supporting the Right Sector and Svoboda party, which had not only the gun power needed to finish what the grandmothers could not, but also links to, and insignia of, a past that no well thinking modern American should want anything to do with.

But Nuland, along with the people she shares her ideas with stateside, has never been a thinking modern American. Still, that’s just one aberration. What followed were visits to Kiev by Senator McCain handing out sweets to those grandmothers who could have been his daughters while the insignia guys moved in on the elected government’s quarters with the ever heavier artillery McCain himself may well have had a hand in delivering. By now were definitely in a place America should never have wanted to be in. And it was all just getting started. And $5 billion had already been spent on NGO infiltration measures, that they wanted to get a return on.

Yanukovich didn’t flee because either the grandmothers, or the right wing militia, or even the US and EU, didn’t want him. He left because Putin didn’t want him. Or at least not enough to risk a fight for him. Something that may well have been missed by everyone who’s not a chess player. Putin knew, every step of the way, what the western involvement was. Not just the overt war-mongering Nuland and McCain brought to the table, but the whole scala. Putin’s only mistake may have been that he didn’t think the US would be stupid enough to do what they did end up doing; a serious enough mistake in itself.

After the Yats coup, which the west still claims was somehow legal, unlike the Crimea and Donetsk referendums, CIA chief John Brennan visited Kiev. What happened after that is that since Ukrainian soldiers have been very reluctant to fire on their own people, and there was a plan in place to attack the ethnic Russian eastern part of Ukraine, which holds the industrial base, the attacks in the east are now executed by Special Forces, in which the not exactly sparkly clean Right Sector plays a major role, as does Blackwater, which has 400 operatives on the ground, according to German media. The Right Sector and Blackwater get help from dozens of CIA and FBI agents also on the scene.

By now you’re talking serious US presence. And then you get the Odessa “incident” 10 days ago. In which an occupied building was set on fire, many people were burnt alive, and those who tried to escape the flames were shot or even clubbed to death by the crowd that surrounded the burning edifice. Today’s count: 42 dead, 60 hospitalized of which 26 are in grave condition, 48 missing. A scene reminiscent of a 70 year-old past in that part of the world that everybody claims they never wanted to see again, but that never would have happened had not the US and EU supported the perpetrators. The burning building tactic, apparently, was repeated a few days ago in the eastern coastal city of Mariupol.

If you live in the US or the EU, you must realize these things are executed in your name, and if you don’t protest them, you have no “Ich hab es nicht gewusst” excuse if and when the people come calling who were the victims or have family and friends who were. The “official” Ukraine elections take place less than 2 weeks from today, and they are guaranteed to take place among an avalanche of mayhem, violence and deaths. For which Putin will be handed all the blame and then some by the western governments and media, but which will carry a heavy handed signature from the people who represent you and me. You can sit in an office tower in Manhattan or London or Paris, or a retail store in Boise, Idaho, or Berlin or Madrid, but that doesn’t mean you can wash your hands of the bloodshed and look the other way. What is being committed in your name is what we call crimes against humanity. And it’s going to get worse. And this is just Ukraine.

Great graphs.

Are Stocks Cheap? (Zero Hedge)

As if the question actually needs to be asked, we thought the following 3 charts would provide at least some defense against the constant barrage of “healthy rotation” bullshit currently being used to maintain assets-under-management as professionals unwind their levered longs into a newly-willing retail public. As Gavekal notes, the following charts show that the median stock is trading at valuation levels only seen at the previous stock market highs of 2007 and 2000. Measuring the valuation level of the median stock in an index can help mitigate the market-cap-weighted bias associated with many index level valuation statistics. This is important because index level valuations that are heavily influenced by a handful of large companies can give a misleading representation of prevailing valuations for most stocks. In the below charts we show the median valuation for stocks in the MSCI World Index (red line, right axis) and compare it to the Index price (blue line, left axis).

Are Stocks Cheap? Price-to-Sales – Nope!

Read more …

The system rots not at the surface, but from within.

As Smart Money “Harvests” Gains, Small Caps And Greater Fools Get Killed (TPit)

Leon Black, epitome of the smart money and CEO of private equity giant Apollo Global Management, explained the phenomenon this way during Thursday’s earnings call:

At a conference in the spring of last year, I was somewhat infamously quoted as saying that we were selling everything that was not nailed down. Here, at Apollo, since then, it’s no secret we’ve been very active in monetizing the existing investments of the funds we manage, but even I didn’t foresee the remarkable pace of the activity to come…. For now, in terms of harvesting, we intend to remain active in capitalizing on market conditions as appropriate.

This “harvesting” takes place when the smart money sells its investments at peak valuations and at the peak of the market to the dumb money, often mutual funds that get stuffed into the retirement nest eggs of the unwitting. So this had to happen. With stock markets soaring for five years straight, with home prices jumping in the double digits two years in a row, and with other assets defying gravity each in its own manner, regular folks started doing the math and extending straight lines from these data points decades into the future, and they discovered that they’ll be able to retire once again comfortably. Or more precisely, 50% of them made that discovery, according to Gallup. The highest percentage since 2007, just before all heck broke lose.

This optimism of regular folks is required for the smart money to be able to “harvest” its gains. The mainstream media has been playing along by breathlessly covering the Dow, which set another all-time high on Friday, and the S&P 500 which is just a smidgen off its all-time high. But beneath the surface, stock after stock has been getting slaughtered. It just doesn’t show up in these two indices. The stocks of the largest corporations have been doing pretty well. Due to their enormous market capitalization, they dominate mathematically the capitalization-weighted indices. And in that capacity, they paper over the systematic, wholesale destruction of smaller stocks, and particularly of the darlings of the last few years. Some of this destruction has gnawed through the layers of large-cap stocks in other indices: the NASDAQ is down 6.9% from its 52-week high in March; the small-cap Russell 2000 is down 8.8%; the IBB Biotech Index 17.8%; the FDN Internet Index 18.9%; the SOCL social media index 27.0%…. It’s brutal out there.

Read more …

Democracy needs a redefinition.

Hedge Fund Titans Are Testing The Quality Of US Democracy (FT)

John Paulson made his fortune by taking a massive short position against the US housing bubble. Today the hedge fund billionaire is betting that the US political system will fail. This time he has company. Other billionaires have launched a lawsuit to force the US Treasury to pay shareholders vast sums from the government-sponsored housing enterprises that it bailed out in 2008. Betting on Washington’s largesse has become a routine investment strategy. Whether this one works, aspiring billionaires should take note: if you want to strike it lucky, try shorting American democracy. The risk is small and the rewards are spectacular.

In 2008, the US government did “whatever it takes” to save the world economy from a rerun of the 1930s. Bailing out the people who had caused the crisis was an ugly spectacle that helped embitter politics in the US and elsewhere. But it was a necessary evil. The alternative was too dire to contemplate. As it usually does, the US system got its act together in an emergency. The real problem is how it functions in normal times. Two of the largest beneficiaries of Washington’s firefighting were Fannie Mae and Freddie Mac, the mortgage underwriters, which took $187.5bn in taxpayers’ money to keep them alive. Without that infusion, the entire US housing finance system would have seized up – and with it the global economy. And Fannie and Freddie would have ceased to exist.

Six years later, some of the richest people on the planet are petitioning the courts to reward Fannie and Freddie’s shareholders for having been rescued by the US taxpayer. Last week, the two enterprises, which are in government “conservatorship” – a step short of nationalisation – said they would bring their total dividend payments to the US Treasury to $213bn since 2009, which is above the original bailout. Although both enterprises were delisted, investors bought their common and preferred shares on the grey market and now want their speculation redeemed. The US Treasury rightly argues that the dividends do not qualify as a repayment of the bailout. Moreover, it is the government that will pick up the bill if the housing market goes into reverse. The losses will continue to be socialised even if the gains are temporarily flowing to the taxpayer.

Bill Ackman, the activist investor, last week predicted that the case would go all the way to the US Supreme Court. Given its recent record, that should be little comfort to American taxpayers. But the hedge funds’ real game is to stop Congress from passing legislation that would wind down the two behemoths and share part of their vast mortgage risk with the private market. As long as Fannie and Freddie stay alive, there is hope for the speculators.

Read more …

The fall of capitalism was predicted a long time ago.

This 1 Quote And Who Said It Prove Capitalism Is Dying (Paul B. Farrell)

Quiz. One question. Your answer will tell who you are, deep within, your moral conscience. And why America has lost its moral compass, but doesn’t know it’s lost, nor why. And that’s an economy killer. Yes, just one answer tells all. Ask yourself, who said: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our morals.” No, it’s not who you think. But your answer will reveal why America lost its moral compass. And why capitalism is dying. Was it some extreme leftist? Karl Marx? Pope Francis? Obama? Maybe a hard-right conservative criticizing progressives: Ayn Rand? Paul Ryan? Billionaire Koch Bros.? An academic: Thomas Piketty, Jared Diamond. Economist Joseph Stiglitz? Nouriel Roubini? Maybe an entertainer: Bono, Springsteen, Jay-Z? [..]

Another possible guess: Thomas Piketty? Does the answer come from his new book, “Capital in the Twentieth-First Century?” [..] … here’s everything you need to know about Piketty’s attack on capitalism and its inherent tendency to widen the world’s inequality gap: “When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first,” said Piketty, “capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”

So go back to the quiz question: If neither Piketty nor Pope Francis, nor someone on the extreme left or hard-right said it … then who said: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.” Answer: Adam Smith, the father, creator, patron saint of American capitalism. Yes, Adam Smith, in his “Treatise on Moral Sentiments.”

Read more …

Q1 Imports Below 2012 – No Keynesian Escape Velocity Here (Alhambra)

April trade data for Chinese exports purportedly show a rebound forming, though its size and even legitimacy is still much in doubt. The fake Hong Kong invoice scandal of last year is making comparisons to this year difficult, but that doesn’t and won’t quell the extrapolations.

The export data are “somewhat inconsistent with the weakness seen in new export orders” in purchasing managers’ indexes from the government and HSBC Holdings Plc, said Barclays Plc analysts led by Chang Jian, chief China economist in Hong Kong.

This disparity doesn’t exclude the possibility of a rebound, only that any conclusions may need corroborative evidence to be consistent.

Exports fell 6.6% in March from a year earlier and plunged 18.1% in February, the biggest drop since the global financial crisis, based on previously released data.

According to the Chinese figures, then, exports were still down in March after an atrocious February. That should be matched at the other end of the trade link in the destination countries. The problem, particularly for US trade with China, is that the Census Bureau estimated that imports from China rebounded in March rather than fell further as the Chinese claim. [..] To clear up some of this mess, we can look at the figures YTD. What that shows is that the March rebound was only enough to partially offset serious weakness in earlier months.

That’s trouble for China because last year was just as feeble. Their entire growth and credit orientation is predicated on swift growth in end markets. Slow growth (or none) instead ends up feeding back as brewing credit issues from companies that were expecting robust growth projections to actually come to fruition in order to maintain the credit flow. After two years of this, accumulating defaults may just be inevitable.

Read more …

Doug Kass: 7 Important Bubbles In Our Current Market (Benzinga)

Aptly-named financial bubbles can disappear just as quickly as they form. Seabreeze Partners Management Inc. President Doug Kass was a special guest on Benzinga’s #PreMarket Prep, and he talked about where he thinks the biggest bubbles are right now. Depending on your point of view, Kass said, there’s about eight or nine. Here are the seven he outlined for us:

IPOs Kass called the IPO market the most obvious bubble, because more than 75% of the IPOs brought to market haven’t been profitable.

Social Media Social media stocks are being valued on the notion of addressable markets. Kass said this is similar to 1999, when Internet stocks were priced “relative to eyeballs.”

Debt “There’s obviously a bubble in the amount of debt as a percentage of global GDP that is held by the major central banks,” Kass said.

Quantitative Easing Another bubble is the belief that the Federal quantitative easing policy is sufficient, by itself, to generate a self-sustaining recovery in the domestic economy.

Credit There’s a strange situation when Spanish and Italian yields converge with U.S. ones, Kass said, and there’s a problem when Greece is able to sell bonds at the rate they recently did about three weeks ago.

Chinese and Shadow Banking “There’s certainly excesses of bubbles in the Chinese banking and shadow banking industries, as well as how many hundreds of trillions of dollars of derivatives notional outstanding exist,” he said.

Buybacks The last bubble that Kass mentioned was buybacks. Goldman Sachs reported that this past March was its busiest on record with nearly $75 billion in buyback authorizations. The first quarter saw almost 300 authorizations that totaled nearly $200 billion, which sets a pace for over $700 billion in authorizations for this year. “That’s the second most ever behind 2007, which was the market top. And we all know that corporations typically buy high and sell low,” Kass said. “The last time we saw this rush to buy was 2007 – the year the market peaked.”

Kass believes the bubbles already have begun to pop. What he calls the “high-beta earthquake” began in the first week of March, when the league-leading biotech stocks began to break down. Then it continued in the following weeks, as [tech] companies all got “schmeissed” in the market, Kass said. “I think this is the first shot across the bow,” he said. Although share prices are benefiting from a combination of massive liquidity and zero interest rate policy, Kass thinks investors are increasingly realizing that each progressive quantitative easing is having a more measured impact on domestic growth. “We have rates at zero. They have been for some time. QE has obviously become a blunt tool,” he said. “Think about it. We’ve had it easy for five years, and we have 0.1% real GDP in the first quarter announced yesterday.” Even though a Fed run by ‘Helicopter’ Ben (Bernanke) and, who I call ‘Whirlybird’ Janet Yellen can change how things look, they can’t change how things are,” he said.

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Tick, tick, tock ….

Xi Says China Must Adapt to ‘New Normal’ of Slower Growth (Bloomberg)

Chinese President Xi Jinping said the nation needs to adapt to a “new normal” in the pace of economic growth and remain “cool-minded” amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. China’s growth fundamentals haven’t changed and the country is still in a “significant period of strategic opportunity,” Xi said, according to a Xinhua News Agency report on the central government website on May 10. At the same time, the government must prevent risks and take “timely countermeasures to reduce potential negative effects,” he said. Policy makers are trying to keep economic expansion from slipping below Premier Li Keqiang’s 2014 target of about 7.5% while reining in a credit boom that a central bank official said threatens to undermine the financial system.

The government has so far limited its support to tax breaks, and speeding up infrastructure and social housing investment, with Li saying last week the focus remains on the quality of growth and on changing the structure of the economy. “Xi’s comment showed that the Chinese government is reluctant to roll out large stimulus now,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing, who previously worked for the World Bank. “At the same time, economic weakness remains and pressure from the property market is rising. The government has to gradually step up policy easing, especially on the monetary policy side.”

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Yes, it is.

Chinese Housing Apocalypse On The Way? (MarketWatch)

The possibility of a collapse in China’s bubbly housing market has long been a threat hanging over the nation’s markets and economy. But exactly what would happen if the bubble bursts in a messy way? Barclays sent a note out Friday looking at a trio of scenarios: a base case in which housing prices continue their slow-but-steady path lower, a “downside risk” case in which prices drop by 10% or so, and a “hard landing” situation in which a housing crash tanks the economy. “Is China’s property bubble at the bursting point? Our answer is not yet. Our base case remains for a gradual deflating of the bubble over 2014-15,” writes Barclays economist Jian Chang.

“But self-fulfilling expectations of falling house prices, financial difficulties among developers on the back of a highly leveraged economy with huge local-government debt, and a fragile financial system with a large shadow-banking sector, suggest the risks of a disorderly adjustment are real and rising,” she writes. In the base case, a gradual drop in prices and slower property sales would “weigh on overall investment and limit 2014 GDP growth to around 7.2%,” which is also the bank’s current forecast for China’s gross domestic product expansion. In the “downside risk” scenario, which Jian Chang assigns a 25% probability, “consumption growth would slow by more than in our baseline scenario but remain resilient, given the mild price correction,” while GDP growth would slow to between 6% and 6.5% this year and next.

As for the worst case, housing prices would tumble by more 30% nationwide, leading to “widespread defaults, insolvencies and bankruptcies,” as well as a liquidity crisis and GDP growth falling below 5% “for a couple of quarters.” While Barclays doesn’t assign a numerical probability for this last scenario, it offers some “factors” to watch out for. Possible precursors for such a collapse include “a sharp shift in financial-market risk attitude,” “failure of a major developer or a sizable financial institution,” and “policy mistakes as the government pushes reforms.”

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A 90.9% drop …

Japan Current Account Surplus Shrinks Amid Weak Exports (Reuters)

Japan posted a much lower-than-expected current account surplus in March on weak demand for exports and rising imports, reinforcing recent signs that the recovery in the world’s third-biggest economy is being hampered by slow shipments. The surplus stood at 116.4 billion yen (676 million pounds), much less than the median forecast for a 305.0 billion yen surplus, finance ministry data showed. That was also well below a 612.7 billion yen surplus in February. Imports jumped in March partly due to increased demand before a sales tax increase at the start of April.

Excluding this one-off factor, economists say the data shows that a steady shift of manufacturing capacity overseas means Japan can no longer export its way to growth, and that it needs to boost its services sector to rebalance its economy. “The current account surplus could stabilise in the second quarter,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. “But structural changes mean exports are likely to remain weak. We need to respond to this change by increasing productivity in the services sector to meet domestic demand.” Imports jumped an annual 23.2% in March, the data showed. On the other hand, exports rose only 6.2% from the previous year.

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Japan Balance Of Payments Current Account Collapses To Record Deficit (ZH)

Any day, week, month, quarter, year now… that J-Curve ‘recovery’ will come bounding over the horizon and save the Japanese economy from its inevitable death spiral… for now, presented with little comment aside for historical confirmation (as even Goldman Sachs has now given up on hope of a bounce), Japan’s largest (seasonally-adjusted) Balance of Payment Trade Deficit ever…

Must be the weather… As Bloomberg notes, this seems related to the tax hike…

Consumers splurged on items such as refrigerators and computers in March before the 3 percentage point tax rise, boosting imports already climbing due to a weaker yen and nuclear plant closures pushing up energy costs. A slide into a sustained deficit could make Japan more reliant on overseas funding to service the world’s biggest debt burden.

But… don’t worry…

“It’d be a problem if the government fails to demonstrate a clear path for budget consolidation should Japan fall into a structural current account deficit,” Tsutomu Saito, an economist at Daiwa Institute of Research in Tokyo
Oh yeah – they have a plan.

Goldman provides a little more color (and it’s just as uninspiring)…

For FY2013 as a whole, the current account recorded a surplus of +¥789.9bn but was far lower than the +¥4.2tn in FY2012 and the lowest since comparable records became available in FY1985.

The breakdown of the March balance of payments (non-adjusted) shows the trade deficit widening to -¥1.13tn (February: -¥533.4bn), as export growth slowed to +6.2% yoy (February: +15.7%) and import growth accelerated +23.2% (February: +14.1%). The services deficit narrowed to -¥58.4bn (February: -¥193.4bn).

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Hey, Martin …

What is Yours Ain’t Yours: Cameron, Confiscation (Armstrong)

David Cameron has come out and argued that taxes will rise unless he can raid bank accounts in the UK. Cameron argues he will “have to put up taxes” unless tax officials are given draconian powers to raid people’s bank accounts if they think they even owe money. Trust me – all politicians share ideas. Obama is already conniving a way to do the same thing – you can bet on that. There is no elite private conspiracy of some dominating group. That implies some comprehension of what is even possible. I have sat in the room with such people and these conspiracy stories give these people way too much credit for being intelligent. Nobody smart enough to handle the job ever seeks such positions. Governments are run by lawyer-politicians who think they need only decree some law that solves the problem. They understand nothing. Why should people keep money in a bank in the UK after Cameron makes such a statement? He is way too stupid to realize people act in anticipation.

If I said I was going to punch you in the face, would you stand there or act in anticipation like move or fight back? Politicians cannot get this through their head that the economy functions always in anticipation of future events. They are just crazy – although not out of their mind entirely just yet. They can read a script, but they are incapable of understanding the people or math. These people are simply beyond control. All they can see is the immediate issue to survive day-by-day. They have absolutely zero comprehension of what they are doing and even less understanding of what happens when there is no more money they can raid. Those at the helm of the world need no elite-conspiracy. They are too stupid to have long-term plans beyond 30 days. This is how Empires Collapse – they are following the precise step-by-step guide for total chaos.

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No kidding.

‘We have not dealt with European bank crisis’ (Telegraph)

Europe’s banks need a fundamental restructuring to sort out the mess from the 2008 financial crisis and enable them to fund the growth that the eurozone and British economies so desperately need, a former senior aide to European Commission president José Manuel Barroso has claimed. Philippe Legrain, who in February ended a three-year stint as Mr Barroso’s independent economic adviser, believes that a banking shake-up is essential as the first part of a three-pronged strategy to get Europe back on track. “Europe needs to restructure its banking system,” he said in an interview with The Telegraph. “The Americans have been much more vigorous in that than we have.”

“There has been a belief that it’s best to try to preserve existing banks and exercise regulatory forbearance rather than force them to face up to their losses, sorting viable banks from unviable ones, recapitalising viable ones and closing down the unviable – the usual standard policy for dealing with a banking crisis. “The rule book has been broken here in Europe and the result is that we have a zombie banking system that keeps alive zombie companies that should go bust, while failing to extend credit to promising new companies that could deliver future growth. “That’s one of the big reasons why productivity in Britain has been so poor. The justification has been to stabilise the system but you end up freezing the economy. “You might say that this is all old hat and that the UK is growing again but that growth is coming almost entirely from increased consumption, with real wages that are still falling and from a housing bubble that returns to the old model of boom and bust.”

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Nice history.

‘It Was The Point Where The Eurozone Could Have Exploded’ (FT)

When the history of the eurozone crisis is written, the period from late 2011 through 2012 will be remembered as the months that forever changed the European project. Strict budget rules were made inviolable; banking oversight was stripped from national authorities; and the printing presses of the European Central Bank would become the lender of last resort for failing eurozone sovereigns.

Next week, European voters will go to the polls to render a verdict on what EU leaders created over those 12 months. If opinion polling is any indication, their judgment will be harsh: anti-EU parties are poised for unprecedented gains from France to Finland, Athens to Amsterdam. Over the course of the past six months, the Financial Times has interviewed dozens of participants in those decisions to tell the full story of how this new eurozone was created. From mid-level bureaucrats to prime ministers, they tell an unsettling tale of accidents, near misses and seemingly foolhardy brinkmanship. But in the end, these same leaders appear to have prevailed. The euro has been saved. The Europe they have created, for good or for ill, will be their legacy. [..]

To the astonishment of almost everyone in the room, Angela Merkel began to cry. “Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide. For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears. But the scene was even more remarkable, those present said, for the two objects of her ire: the man sitting next to her, French President Nicolas Sarkozy, and the other across the table, US President Barack Obama.

It would be the low point in a brutal, recrimination-filled night, one many participants would recall as the nadir of the three-year eurozone crisis. Mr Sarkozy had hoped his leadership of the Group of 20 summit would cement his standing on the global stage en route to re-election. Instead, everything was falling apart. Greece was imploding politically; Italy, a country too big to bail out, appeared just days away from being cut off from global financial markets; and Ms Merkel, try as Mr Sarkozy and Mr Obama might, could not be convinced to increase German contributions to the eurozone’s “firewall” – the “big bazooka” or “wall of money” they believed had to grow dramatically to fend off attacks by panicking bond traders.

Instead, a cornered Ms Merkel threw the French and American criticism back in their faces. If Mr Sarkozy or Mr Obama did not like the way her government ran, they had only themselves to blame. After all, it was their allied militaries that had “imposed” the German constitution on a defeated wartime foe six decades earlier. “It was the point where clearly the eurozone as we know it could have exploded,” said a member of the French delegation at Cannes. “It was the feeling [that with] the contagion, at this point, you were on the brink of explosion.

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And Durden’s great comment on it:

US-Funded Global Bailout Prevented Collapse Of The Eurozone (Zero Hedge)

Goldman’s recent ascendent to the head of the ECB, Mario Draghi, sent Italian bond yields soaring in the process forcing Berlusconi to quit, Greece’s G-Pap also quit after his failed referendum gambit, and the one thing that prevented the all out collapse of the Eurozone, was the (latest) US-Funded global bailout of November 30, 2011. And ever since then it has been one lie after another, starting with Draghi’s “Whatever it takes” bluff to prevent the collapse the Euro, knowing full well the ECB is unable to monetize bonds at will like the US Fed (in his own words), and which has since transformed to a “whatever it takes” to push the Euro lower (confirming that the Eurozone is only viable in a EURUSD 1.20-1.40 corridor, and proceeding with the OMT “program” which still doesn’t actually exist, nearly two years after its introduction.

So what has happened in Europe since the fateful Cannes G-20 summit in 2011 which made Merkel cry? Why nothing. Absolutely nothing has changed, that infamous austerity which everyone hates never actually happened (those confused about this are urged to look at all time record high (and rising fast) debt numbers across the Eurozone periphery), and worst of all, that most important Keynesian variable – private sector loan growth – never picked up. As the chart below shows, Eurozone lending to private business remains at a record low, and very deflationary, -2.2%.

The reason: since European government merely kicked the can courtesy of yet another global central bank “put” exercise, all the politicians were spared the dread of actually implementing painful reforms. So what did Europe do? It changed the definition of GDP sufficiently to make Spain and Italy appear as if the two fulcrum nations are growing, and also suckered US hedge funds and private equity firms to chase after European non-performing loans and bad debt, now that the scramble for distressed real estate is finally over as US housing has finished its fourth dead cat bounce.

But at least Merkel did not have to cry any more, as the return of the Deutsche Mark was delayed by a few more years, at the expense of all those peripheral workers (the lucky ones who did not lose their job of course) who devoid of the capacity for an external, FX, rebalancing have seen their wages crater for years, just so Germany can keep its export machine humming courtesy of a cheaper currency. We wonder if once the effect of the liquidity tsunami fades alongside the Fed taper (especially since the ECB’s bluff of full, Fed-style QE will remain nothing more than just that, a bluff), and European bonds are finally reacquainted with selling, in turn sending the continent in yet another recession because, we will repeat again, nothing in Europe has been fixed, whether European stubbornness wins out again, and the member nations would opt out for disintegration of the most artificial union in history, or whether Angela Merkel will cry one final time?

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A small world.

2 Banking Giants Implore US Authorities to Go Easy (NY Times)

Two of the world’s biggest banks, facing the threat of criminal charges, are mounting final bids for leniency. To avoid the fallout from pleading guilty — no giant bank has done so in more than two decades — BNP Paribas and Credit Suisse made last-ditch appeals to prosecutors and regulators in recent weeks, according to people briefed on the talks. The private meetings came after prosecutors sought guilty pleas from the parent companies of both banks: BNP of France over doing business with countries like Sudan that the United States has blacklisted, and Credit Suisse for offering tax shelters to wealthy Americans.

While BNP and Credit Suisse proposed more modest guilty pleas from their subsidiaries rather than parent companies, the people briefed on the talks said, prosecutors appeared to balk at those overtures, challenging broader public concerns that banks have grown so important to the economy that they are effectively “too big to jail.” In the case of Credit Suisse, which recently created a subsidiary to house the “U.S. offshore business,” prosecutors have privately indicated that they are unwilling to charge the newly formed unit. The bank is now expected to strike a deal with prosecutors as soon as this week, the people briefed on the talks said. BNP made its own appeals. Underscoring the gravity of a guilty plea for the bank, BNP’s chief executive and two of his top lieutenants traveled to Washington and New York to make their case last week, the people said.

They reserved last Thursday for meeting BNP’s regulators in Manhattan — the Federal Reserve Bank of New York and Benjamin M. Lawsky, New York State’s top financial regulator. At a morning meeting in Mr. Lawsky’s conference room overlooking the Statue of Liberty, according to two of the people briefed on the talks, the regulator explained his plans to penalize at least a dozen BNP employees for their role in processing transactions for Sudan and Iran. But the crucial meeting occurred two days earlier in Washington, the people said, on Tuesday afternoon at the Justice Department’s headquarters. It was there that the executives outlined concerns about a guilty plea to the three prosecutors leading the case [..] The pitch was simple. The executives and lawyers warned that a guilty plea could wreak havoc on BNP and the broader economy well beyond France’s borders.

The argument — playing on the fear that criminal charges could prompt regulators to revoke a bank’s license to operate, the corporate equivalent of the death penalty — helped the British bank HSBC escape criminal charges in 2012. It also stoked a public outcry that Wall Street giants have grown so large and important that they cannot be charged. But the prosecutors appeared to brush off the concerns, according to the people briefed on the talks, having heard similar appeals in cases involving softer penalties like so-called deferred prosecution agreements. Mr. O’Neil and Mr. Bharara, in questioning the bank’s lawyers and executives, indicated they had doubts that a guilty plea would imperil the bank or the economy.

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Credit Suisse Chief Urged To Quit As US Tax Spat Nears End (FT)

A senior Swiss politician has called for Credit Suisse’s chief executive and chairman to step down, as political pressure mounts on the bank ahead of an expected settlement to its long-running tax spat with the US. Since forcing UBS, Credit Suisse’s domestic rival, to pay a $780m fine in 2009 for helping US citizens evade taxes, the Department of Justice has been pursuing other Swiss banks that it believes committed similar offences. It is considering criminal charges against Credit Suisse, and a settlement in which Credit Suisse’s parent or subsidiary pleads guilty could be announced within weeks, people familiar with the matter have said.

Against this backdrop, Christian Levrat, head of the Swiss Social Democrats, said that Urs Rohner and Brady Dougan, Credit Suisse’s chairman and chief executive, as well as general counsel, Romeo Cerutti, should all resign. “They are a liability for the bank,” he said in an interview with the NZZ am Sonntag newspaper. “I was surprised that they didn’t offer to step down at the bank’s annual general meeting on Friday. That would have been responsible and in the interest of the bank and Switzerland.”

Credit Suisse has been attempting to resolve the US dispute for three years, and Mr Rohner stressed at the AGM that the bank was “doing everything” it could to bring matters to a close. However, he gave no details of how a final resolution might be constituted, and rejected a call from one shareholder that Mr Dougan resign. Mr Levrat criticised Credit Suisse for saying in 2009 that it was unaffected by the US’s allegations, and also criticised Mr Dougan for saying in a senate hearing earlier this year that wrongdoing at Credit Suisse had been restricted to a small group of employees. “A few months after Mr Dougan said under oath that there had been no systematic wrongdoing by the bank, Credit Suisse is probably going to have to make a guilty plea on behalf of the whole bank. The credibility of Credit Suisse’s management is dead,” he said.

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Tick tock …

Europe’s Companies Write Off $500 Billion In Late Paid And Unpaid Debt (FT)

The debt written off by Europe’s companies due to late payment or non-payment of bills has swelled to €360bn despite the pick-up in economic activity in the region. The late payment consequences for businesses pose a real threat to Europe s competitiveness and social wellbeing, said Lars Wollung, president of Intrum Justitia, a credit management group. Hardest hit by the problem . . . are small and medium enterprises. Justitia surveyed more than 10,000 business managers in 33 European countries, including Russia, for the annual European Payment Index.

Bad debts – bills or invoices which companies have written off due to late or non-payment – grew from 3% of annual revenues in 2013, or €350bn, to 3.1% this year, or €360bn. Nearly three-quarters of the companies taking part in the research said that there had been no improvement in the late payments problem in the past three months despite the economic pick-up, and 46% believed late and non-payment risks were actually increasing. Graeme Fisher, head of policy at the UK s Federation of Small Businesses, said that, although the public sector had upped the speed with which it paid suppliers, there was still a serious problem in the private sector.

Even when the public sector pays promptly, the money doesn t sloosh down the system promptly because of the culture of late payment, he said. 40% of the companies which took part in the EPI research said the severity of late payment problems was preventing them from hiring staff. Unemployment in the eurozone was nearly 12% of the labour force in March according to Eurostat. Suppliers are often unwilling to go public about late payment problems for fear of jeopardising relationships with their most important customers. Late payments can be a massive problem, mainly for cash flow reasons, said one small business owner, based in Gloucester, England, who spoke to the FT on condition of anonymity.

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Darn!

Japanese Dump Most Euro Bonds on Record (Bloomberg)

Japanese investors sold a record amount of euro-denominated long and medium-term bonds in March, Ministry of Finance data showed today. Money managers in Japan made net sales of 1.96 trillion yen ($19.2 billion), capping four months of reductions, the Tokyo-based Ministry of Finance said today. That’s the longest stretch of sales since the 10 months ended December 2011, during the euro region’s sovereign-debt crisis. Last year, Japanese investors bought a net 5.39 trillion yen of such bonds. “The situation in Ukraine may have played a part,” Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., said in reference to euro debt selling.

“It’s possible Japanese money will be forced to go back into some of the higher yielding countries in the region going forward. The global hunt for yield is likely to continue for some time.” Japanese investors sold 1.79 trillion yen of long-term German bunds in March, also the highest reported in data going back to 2005, the MOF report showed. They bought a net 536.3 billion yen of long-term U.S. Treasuries, the most since November, and snapped up 68.7 billion yen of Australian sovereign debt, adding to purchases in January and February. Investors also sold 481.1 billion yen of Dutch sovereign bonds and 71.6 billion yen of Italian debt.

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Finnish Finance Minister Ousted as Party Head Over Austerity

Finnish Finance Minister Jutta Urpilainen was ousted as Social Democratic leader yesterday as her party turned to a trade union leader advocating more stimulus to promote growth in the northernmost euro member. Antti Rinne, head of the trade union Pro, won the backing of 257 party members against Urpilainen’s 243 at a congress yesterday in Seinaejoki, northwest of Helsinki. Urpilainen said she will step down as finance minister and leave the government. “Social democrats in Finland and in Europe must again target full employment,” Rinne, 51, said in a speech today. “Economic policies must target strengthening nascent growth and creating confidence in the future. The key are investments that create the foundations for rapid growth in the future.”

Voters have grown dissatisfied with austerity policies that have collided with a broader decline in Finnish business, as Nokia shrinks and the paper industry struggles. Finland’s economy has contracted in three of the past five years, pushing unemployment to 9.5% in March. Industrial production shrank for the 17th consecutive month in March.

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Chrysler’s Phony Recovery (David Stockman)

One theme of the false recovery narrative peddled by the Wall Street/Washington axis is that the leading symbols of the 2008 crisis—-the big banks, AIG, housing, the auto industry—-are all fixed owing to Washington’s drastic and massive interventions at the time and since then. But the truth is just the opposite: Nothing has been fixed because all cans have been floated down the road by the Fed’s deluge of money printing. What has happened is that credit market debt outstanding—public and private— has soared from $52 trillion on the eve of the crisis to $59 trillion today, thereby putting a floor under the economy temporarily, but one which will become a huge burden down the road to households, business and governments alike as interest rates eventually normalize.

Likewise, the liquidity driven stock market is up by nearly 200%. This is temporarily providing a “wealth effects” boost to the discretionary spending habits of the top 10-20% of households, but one which will quickly reverse when today’s giant stock and “risk asset” bubble finally bursts. And sectors such as autos which were hit by a sharp one-time inventory liquidation in the winter-spring of 2008-2009 have had a modest rebound to more normal levels of production and inventory. But this doesn’t represent investment and productivity based organic growth – just a natural, short-term rebound from crisis conditions. The truth is that the auto bailouts did not save or create a single new auto job. [..]

The illusion of recovery stems from violent inventory fluctuations that were triggered by the Fed’s bubble finance. Chrysler’s sales and production numbers can be made to look impressive on a three-to-four year basis because the 2009 low-point of US sales at 10.5 million units was an artifact of the crisis and the current run-rate in the 15-16 million unit range is a unsustainable peak fueled by a renewed explosion of sub-prime auto lending. In truth, the trend rate of US new car sales never really dropped below 12-13 million. And it will probably fallback to the 13-14 million unit level—once the Fed’s latest financial bubble collapses and sub-prime loans dry-up and go into a new cycle of defaults. In that context, the idea that Chrysler’s North American sales will grow by nearly 50% of the next five years, as Marchionne proclaimed at Chrysler’s recent analyst day, is a laughable delusion.

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More great graphs.

Everything You Wanted To Know About Global Oil Fundamentals (Zero Hedge)

There’s more than one oil price around the world and as the following comprehensive (but brief) overview from Morgan Stanley’s Global Energy Teach In shows, crude oil pricing across the world is dynamic and multi-factorial – from fundamental factors (such as simple supply and demand and seasonality) to macro factors (such as USD strength, macro sentiment, and “burden”) and risk premia (e.g. geopolitics), the following provides everything you wanted to know about global crude oil fundamentals, but were afraid to ask…

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“About 90,000 “mass incidents” – a euphemism for protests – occur each year in China, triggered by corruption, pollution, illegal land grabs and other grievances.”

Chinese Police Hunt For Protesters After Waste Plant Clash (Reuters)

Protesters in eastern China clashed with police at a rally against plans to build a huge waste incinerator that residents fear will be harmful to their health and add to pollution. Choking smog blankets many Chinese cities and the environmental degradation resulting from the country’s breakneck economic growth is angering its increasingly well-educated and affluent population. The demonstrations, which have run for more than two weeks, turned violent on Saturday, with hundreds of police descending on to the streets of Yuhang, close to the tourist city of Hangzhou. At least 10 protesters and 29 policemen were injured, more than 30 cars were overturned, two police cars set on fire and four more smashed up, according to state media.

The government says it will shelve plans to build the plant if it does not have popular support. Two suspects involved in the violence had already turned themselves in, the official China Daily said, adding that police were urging others to surrender. Nobody died in the protests, the Yuhang government said on its website. Similar protests have also succeeded in getting projects shut down elsewhere in China. The eastern city of Ningbo suspended a petrochemical project after days of demonstrations in November 2012, and protests forced the suspension of a paraxylene plant in the northeastern city of Dalian the year before.

Hangzhou, capital of prosperous Zhejiang province and best known in China as the site of a famous lake, has seen its lustre dimmed in recent years by a recurrent smog problem. Pictures on China’s Twitter-like Weibo site showed police fighting with protesters and at least two protesters with blood streaming down their faces. Another picture showed several hundred people surrounding a large group of police. “We don’t want our children and grandchildren to get cancer. Give us back our beautiful home,” read one letter of protest carried on Weibo. About 90,000 “mass incidents” – a euphemism for protests – occur each year in China, triggered by corruption, pollution, illegal land grabs and other grievances.

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The EU’s Approach To Ukraine Has Been Catastrophic (Telegraph)

Arguing that the EU blundered badly in Ukraine doesn’t mean you support Putin. That really shouldn’t need saying. Let me get the Godwin’s Law reference out of the way right at the beginning: most historians believe that Neville Chamberlain could have played his hand better in 1938, but this doesn’t make them Nazis. The West in general, and the EU in particular, chose to intervene directly in domestic Ukrainian politics, backing opponents of the thuggish but none the less freely-elected President Yanukovych. It doesn’t seem to have occurred to them that they were thereby inviting others to intervene.

Ukraine was always going to matter more to Moscow than to Brussels, yet EU diplomats seemed genuinely nonplussed when, after they had sponsored undemocratic regime change in Kiev, Putin did the same in Crimea. To repeat, none of this is to exculpate the Russian leader. He runs a paranoid and autocratic regime, in which opponents are imprisoned, critics harassed, journalists murdered. Annexing Crimea was not simply a violation of the law of nations; it was an explicit betrayal of Russia’s solemn promises to respect its neighbour’s territorial integrity. Ukraine is not the first country to have felt the weight of Putin’s revanchism; which makes the EU’s decision to goad him from a position of weakness even more bewildering.

European and other Western diplomats might reasonably have pursued one of two strategies vis-à-vis Russia. They could have decided to overlook Putin’s authoritarianism and treat him, albeit guardedly, as a partner. They could have taken the view that, in the long term, the main strategic threats to the West were likely to come from further afield than Russia, and drawn Moscow into an entente cordiale. This would have meant accepting Putin’s offer of a Lisbon-to-Vladivostok free trade zone, and so sparing Ukraine from having to choose between the EU and Putin’s customs union.

Alternatively, Washington and Brussels might have taken the view that the Kremlin’s values were incompatible with theirs, that Russia’s readiness to resort to force put it beyond the comity of nations, and that the freedom of action of former Soviet states was too high a price to pay for Moscow’s goodwill. It could have encouraged these republics to join the West, and guaranteed their sovereignty by placing Nato bases on their eastern or northern marches. Both these approaches would have had their drawbacks; but the milk-and-water diplomacy pursued instead has been nothing short of calamitous.

When Viktor Yanukovych rejected economic ties with Brussels, the EU backed his overthrow and signed the accord with the interim regime that had toppled him. All the assurances that European politicians had given about fresh elections, respect for the Russian language and so on were forgotten. The uneasy balance that had existed between (to borrow nineteenth-century Russian terminology ) Slavophiles and Westernisers, was upset, and many Eastern Ukrainians openly renounced their allegiance to Kiev, giving Putin the opening he needed. It’s easy to criticise with hindsight, you might say. But the Russian intervention was, I’m afraid, wholly predictable. It’s the ineptness on our side is so shocking.

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Odessa 10 Days On: 42 Dead, 60 Hospitalized, 48 Missing (RT)

Residents of Odessa, Ukraine have gathered for a memorial service to commemorate the victims of the May 2 bloodshed who died in a fire in the city’s House of Trade Unions which was set ablaze by pro-Kiev radicals. Several hundred people turned up Saturday on Kulikovo Pole Square in central Odessa – the site of the tragedy that shocked the entire international community. The participants of the memorial service brought flowers, candles and lit icon-lamps. The square used to house anti-Maidan encampment where protesters were collecting signatures in support of a referendum on the federalization of Ukraine and granting Russian status of a second official language.

On May 2, violent clashes erupted between rallies of anti-government protesters and that of radicals supporting the Maidan-imposed authorities in Kiev. The confrontation lead to the tragedy that left 46 people dead and over 200 injured as nationalists burnt the protesters camp and then set on fire the Trade Unions House with opposition activists trapped inside. According to a witness of the massacre, many of those who managed to escape the flames were then strangled or finished with bats by radicals.

Forty two of those killed in the massacre have been identified by local and social media. Odessa news portal dumskaya.net published an unofficial list of the victims and the reasons of death: for a majority of victims it allegedly was “gas poisoning”. However, several victims reportedly died of gunshots, while others burnt alive or crashed on the ground after jumping out of windows trying to escape the deadly flames. Their ages vary from about 20 to 70. Up to 48 people according to various sources are still considered missing. Over 60 remain in hospitals, including 26 in a grave condition.

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US Involvement In Ukraine: Sickening Hypocrisy (Ron Paul Institute)

As most in the former USSR celebrated the 69th Victory Day over Nazi Germany today, the US-backed government in Kiev (which took power after the February coup) decided to launch one of its bloodiest military operations thus far, this time against the anti-coup protesters Mariupol, eastern Ukraine. As much of the Ukrainian military has proven unreliable to the post-coup regime in Kiev, the new interim authorities have assembled their own “national guard” and other militias from the extreme nationalists who were behind the violence in Kiev just two months ago. The result is an extremely aggressive “shock troop” force that seems to shoot first when faced with protesters.

The US government has repeatedly claimed that protesters in eastern Ukraine who reject the legitimacy of the post-coup government in Kiev are in fact Russian agents. With an intelligence budget of nearly $100 billion, however, US authorities have only been able to put forth debunked claim after debunked claim. First it was satellite imagery proving Russian troops massing on the border. Debunked. Then it was the blatant “anti-Semitic” forgery which Kerry insisted he was certain had been issued by the anti-Kiev authorities in the east. Debunked. Then it was photos hustled by the State Department said to show Russian special forces active in Ukraine. Debunked. And so on.

It seems that to the US government, facts simply do not matter. In pre-February 22 Kiev, the legitimate government was warned against using any force to put down an armed revolt. That rebellion, now in power, is actually encouraged by the US to use military force against civilians in eastern Ukraine. And force it uses. Here, protesters armed only with folding chairs found themselves under live fire from Kiev forces. Warning: two unarmed protesters are shot in the video, which is extremely graphic. One of them is shot in the head, to the horror of the crowd all around him. Here is another angle.

Here, Kiev forces open fire on a police station in Mariupol that announced it would no longer take orders from Kiev. You can see one of the troops — in a civilian neighborhood — fire a rocket-propelled grenade directly into the police headquarters. The police building was demolished with an unknown number of dead.

Still, protesters continue to resist the rule of Kiev. Today, as the pro-Kiev governor of Kerson oblast spoke fondly of Hitler’s forces trying to “liberate” Ukraine from communist rule, one brave mother could take it no longer. She marched right up to the podium (starting at 1:40) with her baby in arms, told the politician off, grabbed his microphone, and threw it to the ground. That’s non-violent resistance at its best.

Things weren’t much better for coup-installed president Turchynov and prime minister Yatsenyuk. In Kiev, capitol of the revolution, they were heckled by the crowd at the Victory Day gathering, who drowned them out chanting “Hitler Kaputt! Bandera Kaputt!”

Nevertheless, they retain support from the force that still matters: the US government and its NATO war machine, which seems totally uninterested in military violence against civilians. In fact, the US administration has called these military operations against unarmed civilians “proportionate and reasonable.” US Ambassador to the United Nations Samantha Power, who had just two months ago cheered on armed protesters seeking to overthrow the elected government in Kiev and warned that government against any response to the violent protests, was singing a different tune now that the US-backed insurgents have attained power. As Ukrainian military forces launched a bloody operation last week in the eastern city of Slavyansk, she told her UN counterparts that the Kiev “response is reasonable, it is proportional, and frankly it is what any one of our countries would have done in the face of this threat.” Even Salon.com is finding it difficult to stomach the odious Samantha Power,

calling her a “brazen hypocrite.” What other word could be used to describe the sickening silence from the White House and State Department as their allies burn unarmed protesters alive in Odessa (warning!), murder civilians at random in Slavyansk, and shoot Victory Day celebrators in the head in Mariupol? Hypocrisy. Sickening hypocrisy.

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Russia Banks Should Be Targets in Sanctions, Boehner Says (Bloomberg)

Russian banks should bear some economic penalties for Vladimir Putin’s government and President Barack Obama needs to push harder to get a tougher response from European nations, House Speaker John Boehner said. “You go after their banks,” Boehner said on Fox News Channel’s “Sunday Morning Futures with Maria Bartiromo” in an interview airing today. “I’m concerned that we’ve not pushed the Europeans hard enough to take a firmer line against the Russians. And our allies in the region are scared to death.”

While U.S. officials have discussed targeting sectors of the Russian economy, such as energy and finance, they have so far only sanctioned 45 individuals and 19 entities, including SMP Bank and Bank Rossiya. The European Union is preparing to punish Russian companies that expropriated assets in Crimea, and may approve a list early next week, EU officials said. “What Putin is doing is making the world less safe, and certainly making Europe less safe,” Boehner said.

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Lessons of World War II Forgotten: Will Germany Be The Peacemaker? (RT)

Some 69 years ago, the world celebrated its deliverance from some of the darkest forces in human history. At least 27 million Russians, Ukrainians and other Soviet citizens as well as hundreds of thousands of American and British servicemen paid with their lives in the unprecedented struggle to overthrow that monstrous power. Yet today, we are allowing our country to be sucked into a potentially catastrophic confrontation with Russia in defense of violent forces that openly revere the Nazi collaborators that tortured the Ukrainian people all those years ago. Judging from the statements coming from the White House, Congress and the State Department, it looks unlikely that there is any consideration in these high places for compromise. We only hear about the demand for new sanctions which must ruin the Russian economy.

Appealing to moral principles in the foreign policy where cynicism is often prevailing is a pretty naïve undertaking, but if one understands that the current horror in Ukraine is only the beginning of much more devastating events, perhaps there are some people who can offer a way out of this doomsday scenario? As Hans Werner Sinn, president of the Ifo Institute for Economy Research in Germany, wrote in the Wall Street Journal on May 2: “It must be borne in mind that the present crisis was triggered by the West… after killing millions of Russians in World War II and enjoying the good fortune of a peaceful reunification thanks also to Russia’s support, it is the duty of Germany in particular to de-escalate the conflict with Russia.”

We live in Alice’s Wonderland: Reason and common sense have fled and the bitterly won lessons of history have been thrown overboard. Who can save us from our own ignorance and stupidity? So far the only things we hear from President Obama are demands for sanctions, sanctions, and more sanctions against Russia. It sounds more like an invitation to dance on the brink of a very frightening precipice. Wouldn’t it be the greatest historical irony if it turns out to be German Chancellor Angela Merkel who can do it? At least her first name sounds like an invitation to peace.

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400 US Mercenaries ‘Deployed On Ground’ In Ukraine Military Op (RT)

About 400 elite mercenaries from the notorious US private security firm Academi (formerly Blackwater) are taking part in the Ukrainian military operation against anti-government protesters in southeastern regions of the country, German media reports. The Bild am Sonntag newspaper, citing a source in intelligence circles, wrote Sunday that Academi employees are involved in the Kiev military crackdown on pro-autonomy activists in near the town of Slavyansk, in the Donetsk region. On April 29, German Intelligence Service (BND) informed Chancellor Angela Merkel’s government about the mercenaries’ participation in the operation, the paper said, RIA Novosti reported. It is not clear who commands the private military contractors and pays for their services, however.

In March, media reports appeared suggesting that the coup-imposed government in Kiev could have employed up to 300 mercenaries.That was before the new government launched a military operation against anti-Maidan activists, or “terrorists” as Kiev put it, in southeast Ukraine. At the time, the Russian Foreign Ministry said then that reports claiming Kiev was planning to involve “involve staff from foreign military companies to ‘ensure the rule of law,’” could suggest that it wanted “to suppress civil protests and dissatisfaction.”

In particular, Greystone Limited, which is currently registered in Barbados and is a part of Academi Corporation, is a candidate for such a gendarme role. It is a similar and probably an affiliated structure of the Blackwater private army, whose staff have been accused of cruel and systematic violations of human rights in various trouble spots on many occasions. “Among the candidates for the role of gendarme is the Barbados-registered company Greystone Limited, which is integrated with the Academi corporation,” the Foreign Ministry said in a statement. “It is an analogue, and, probably and affiliated body of the Blackwater private army, whose employees have repeatedly been accused of committing grievous and systematic human rights abuses in different troubled regions.”

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Russia Signals ‘Respect’ for Ukraine’s Separatist Ballots

Russia said it’s treating “with respect” the results of referendums held by separatists in eastern Ukraine and called on the government in Kiev to engage in dialogue with representatives from Donetsk and Luhansk. The votes yesterday had high turnout despite the “use of heavy weapons against peaceful civilians, leading to people’s deaths,” according to a statement e-mailed by Russian President Vladimir Putin’s press service today. Russia “assumes that the practical implementation of the referendums will be realized in a civilized manner, without any relapses of violence.”

Russia is breaking with the central government in Kiev and its U.S. and European allies, who’ve criticized the ballots as illegitimate. Pro-Russian groups said large majorities voted in favor of secession, with final results due later today. The votes went ahead amid violent clashes between government troops and pro-Russian rebels. Putin has been accused by Kiev and its allies of stoking the separatist unrest. Russia would welcome any efforts, including through mediation by the Organization for Security and Cooperation in Europe, to facilitate dialogue in Ukraine, according to today’s statement.

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Ukraine Regional Vote Deemed Illegal by European Leaders (Bloomberg)

EU leaders say the [situation] may be spiraling out of Putin’s control. “Armed thugs with modern weapons are stirring old tensions and stoking new hatreds,” U.K. Foreign Secretary William Hague said in an interview yesterday in the Daily Telegraph. Putin “seems to have unleashed forces that he cannot control.” [..]

The U.S. rejected the votes as “illegal under Ukrainian law” and “an attempt to create further division and disorder,” U.S. State Department spokeswoman Jen Psaki said in a statement. “The Russian leadership must know that if it continues to destabilize eastern Ukraine and disrupt this month’s presidential election, we will move quickly to impose greater costs on Russia.”

“The Russian president must send out more signals of de-escalation so the elections can take place,” German Chancellor Angela Merkel said yesterday after talks with French President Francois Hollande in Stralsund, Germany. “We’ve had first signs, but these have to get stronger so eastern and southern Ukraine also get the message that everyone wants free and general presidential elections.”

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Apr 082014
 
 April 8, 2014  Posted by at 3:30 pm Finance Tagged with: , , , ,  


MGM Mickey Rooney and Spencer Tracy in the film Riffraff 1936

Well, that’s great news, isn’t it? Blackwater is back. After a first wave of negative publicity over its involvement in Iraq, a major PR hush-hush campaign led to a series of mergers, takeovers and name changes; first, in 2009, it became Xe Services, only to turn into Academi in 2011. What a brilliant moniker for a bunch of modern day mercenaries that is. Who would expect a ruthless killing machine behind a name like that?

Russia quite matter of factly mentioned that it doesn’t appreciate the presence of 150 mercenaries from Academi affiliate Greystone in Ukraine, wearing, no less, Ukrainian special task police uniforms, where the soldiers of fortune are apparently being deployed, by US/EU/Ukraine, to stifle the protests in eastern cities like Donetsk and Kharkiv. Does make you wonder if the US would be just as matter of factly if a heavily armed Navy Seal style Russian or Chinese private army were active in Mexico or Canada.

The Russians are very aware of what Blackwater did in Iraq and Afghanistan, far more so than we as the public are. And even we, with the limited information we got, didn’t like what we saw one bit. Of course Blackwater wasn’t the only private contractor the US paid vast amounts of money to operate with impunity in Iraq and Afghanistan. It merely turned into the symbol of everything that’s wrong with hiring private entities to do, again: with impunity, that part of an army’s work that’s too dirty to live up to daylight exposure.

This next chapter in the sordid tale of one of the frighteningly deep black crevices in recent American history comes just as the US Congress declassified a report on what the perpetrators label ‘enhanced interrogation’ and everybody else says is called torture. And that brings back to mind the whole story of the “job well done” in Iraq by Halliburton, the company with such strong links to Dick Cheney, and it brings back Cheney and Rumsfeld to the forefront of news media, albeit only for a day or so, after which they can go back to bragging at private cocktail and hunting parties about their achievements in public service. Where’s Parkinson when you need him?

Mind you, both of these career psychopaths had some 50 years to refine their warped notions of what the nation should stand for while riding the revolving door train known as Capitol Hill. And when they finally got to step up to the big jobs, they weren’t going to be held back by such ideas as the ones they themselves were the first to loudly proclaim in front of every camera they could find: promoting democracy, freeing foreign nations from dictators, and bringing prosperity to the whole world. No, Rummy and Cheney had bigger things on their mind: there were huge power games to be played, and these came with a great bonus: you got to kill and torture people, and if you played your cards well, be praised for it.

Jon Stewart summarized it very eloquently last night: America has a history of doing a tremendous amount of things ‘we don’t do’. But America does do these things, and when a neutral observer gets to write the history books, the picture that emerges will be very different from the one the nation itself likes to propagate. And things don’t seem to get any better, either. While elite Special Ops forces were deployed in some 60 countries when Rummy and Cheney were still in charge, today that number has risen to 134. And that’s without the likes of Blackwater being added to the tally. Of which, incidentally, in its present Academi shape, Rummy/Cheney chum John Ashcroft, the Attorney General who forced his people into elaborate morning prayer sessions every day, is a key board member.

Here’s what Russian press agency ITAR-TASS said this morning:

Russia Urges Ukraine To Halt Military Preparations To Avert Civil War

The Russian Foreign Ministry urged Ukraine to halt any interior military preparations, which could instigate a civil war in the country, the ministry was quoted as saying on its Facebook.com account.

According to numerous reports, Ukraine is redeploying special task police units from all over the country to the southeastern regions of Ukraine in a bid to thwart anti-government protests, which flared up over the weekend. “According to our information, units of the Interior troops and Ukraine’s national guards as well as militants from the illegal armed formation ‘The Right Sector’ are being amassed in the southeastern parts of Ukraine and in the city of Donetsk,” the ministry said.

“We are particularly concerned that the operation involves some 150 American mercenaries from a private company Greystone Ltd., dressed in the uniform of the [Ukrainian] special task police unit Sokol,” the ministry said. “Organizers and participants of such incitement are assuming a huge responsibility for threatening upon the rights, freedoms and lives of Ukrainian citizens as well as the stability of Ukraine,” the ministry added.

Ukraine makes no effort to try and deny Blackwater’s presence. Which points to the country’s conviction, along with the US and EU, that the portrayal of Putin and all Russians as blood thirsty land hungry bogeymen is working in the west:

Ukrainian parliament-appointed Interior Minister Arsen Avakov confirmed late on Monday night that special task police units have been redeployed to the southern and eastern parts of the country from other regions of Ukraine. “These special task units are ready to solve immediate tasks without paying attention to local peculiarities,” Avakov said. “I call on all hotheads to refrain from criticism and panic sentiments and help the police to take the situation under control.”

As for why the western “coalition” has deemed in necessary to engage Blackwater troops, the answer is the Ukrainian army and police force refuse to do the bidding of the new Kiev government under “Yats”:

The current situation particularly in the city of Kharkiv remained tense, but under control, Avakov said, adding that the majority of policemen failed to comply with their duties. “I had an opportunity today to evaluate the police work in Kharkiv and have to admit that the majority of the Interior Ministry’s law enforcers failed to appropriately fulfil their duties,” he said adding that the personnel reshuffle would follow.

A government that doesn’t have the support of either its army or its police force. That’s never a good sign. Moreover, a fight broke out in the Ukraine parliament today when communist MP Petro Symonenko accused the sitting government, and the right wing Svoboda party in particular, of instigating fights with, intimidating and arresting peaceful protesters. Good thing “Yats” brought in Blackwater when he did, right?

Americans really need to ask themselves if they want Blackwater/Academi to represent them around the world, in the same spirit the Cheney/Rummy/Halliburton interests did. When you ponder these things, it becomes hilariously ridiculous to claim that America stands for promoting democracy, or human rights, or any of the lofty goals people like to associate with the country, and the Constitution it was founded upon. It may not be too late yet to get that spirit back, but it’s certainly getting late.

S&P Tumbles From Record-High To Red Year-To-Date In 2 Days (Zero Hedge)

Well that didn’t take long… Friday morning’s post-payrolls record all-time high in the S&P 500 (because, as Steve Liesman said, “he can’t find any reason to be bearish about jobs data”) has rapidly collapsed to being negative year-to-date (and worst start to a year since 2009’s crash). Only the Transports remain green in 2014, with the Dow, Nasdaq (worst start to a year since 2008), and Russell all coincidentally gathered around a 2% negative return YTD.

But April is the best seasonal month in the year? Of course USDJPY is about to test 103 again so prepare for a bounce…

Biotechs are back to red after bouncing to various VWAPs (and Friday’s major volume plunge VWAP levels)… and breaking back below its 200DMA at $132

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Will Fed tapering lead to Asian countries hoarding US dollars? How could it not?

The Coming Currency Clash in Asia (WSJ)

Emerging markets realize that, no matter how sound their policies may be, they are subject to whiplash from the policies of advanced economy central banks. Top G-20 officials spoke loftily of central bank coordination at their recent summit in Sydney. But in reality, there is no mechanism to make central banks take measures that would contravene their national mandates for the benefit of other countries. So it’s not irrational for emerging-economy policy makers to conclude that the best way to insure themselves against a future crisis is to act today in a way that would encourage developed-economy leaders to help. And a reading of the criteria the Fed used when parceling out international assistance suggests dollar reserve accumulation is the best way to force the Fed to take notice.

The key question now is how much of a reserve is enough. Conventional views of reserve adequacy—enough to cover short-term external debt or six months of imports—are no longer relevant. During the worst of the crisis, some emerging markets with massive reserves lost nearly a third of them in less than a year. What’s for sure is that once speculators smell blood, they attack a currency relentlessly and reserves can evaporate quickly. The only way to protect a currency is to have enough reserves to deter speculators. No one knows exactly how much that will take. So the motto of central bankers has become more is better.

Today, while the Fed continues to taper, private capital has begun to flow back to emerging markets. Even economies such as India and Indonesia that were battered by capital flight last year have benefited. The Bank of Japan recently signaled it was getting ready to open the monetary spigots wider. The People’s Bank of China has taken forceful steps to prevent the yuan from appreciating even as it widened the currency’s trading band. These trends only add to the pressure on other Asian emerging economies to hold down the value of their currencies and accumulate reserves. All told, the events of the past year presage a return to uphill flows of capital and rising currency tensions. It certainly feels like monetary déjà vu all over again.

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Entertainment!

Accounting Trick Turns UK Into Nation Of Savers (FT)

A radical overhaul of the national accounts this autumn will double the official measure of household savings, presenting Britons as a nation of unexpected prudence and undercutting their widely held reputation for profligacy. For the first time in 15 years, the Office for National Statistics is preparing to rip up the way it measures Britain’s economy, with the new techniques showing a huge increase in the size of the economy, a higher level of public debt and a much increased savings ratio. There is also a good chance that the statisticians will significantly revise up growth recorded in the economy in 2012 and last year.

The reforms will have the potential both to overturn Britain’s reputation as a spendthrift nation and significantly improve the poor productivity performance of the past few years. The ONS will introduce new global accounting standards to gross domestic product and related measures in September, following similar changes already introduced in the US, Canada, Australia. Under the new system of accounts, research and development spending will count towards GDP rather than being seen as a cost of production, and building aircraft carriers and other weapons of war will also add to the size of the economy. The ONS said the change would add between 2.5% and 5% to the level of GDP, adding £40bn to £75bn to the total.

One of the largest changes, announced by ONS officials on Monday, arises from how savings are measured. From now on, the official figures will count future pension rights as if they were present income. With Britain one of the few countries to have a large funded defined-benefit pension system, the change will significantly raise measured household incomes, thereby increasing the savings ratio. Officials said the savings ratio would rise “by around 5 percentage points”, practically doubling the current 5.1% and putting it around 10%, far closer to those seen in other European countries.

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And more entertainment.

Nigeria Just Doubled The Size Of Its Economy With The Stroke Of A Pen (Simon Black)

Over the weekend, Nigeria’s government made an accounting adjustment in how it calculates its GDP statistics. By changing the base-year in GDP calculations from 1990 to 2010, Nigeria increased the reported size of its economy by 89% over the weekend. So with a stroke of a pen, the West African nation leapfrogged South Africa to become the continent’s largest economy. And in doing so the country’s debt-to-GDP ratio fell below 20%. The ratio of bad loans in the banking system when compared to the overall size of the economy also dramatically declined in proportion.

The same thing happened in Poland last year when the government there made a grab for private pensions, then counted those new assets against government debt. It was just another accounting scam. But it dramatically lowered Poland’s debt-to-GDP ratio on paper, even though the government had not actually gotten any ‘richer’. Just hours ago, the European Central Bank released its 2013 annual report, showing a massive 44% surge in profits. Diving into the numbers, though, it turns out that most of the ECB’s profits come from funny accounting tricks—revaluing a permanent swap line they have with the Federal Reserve, and moving funds from the “risk provision” column into the profit column.

I’m also reminded of the Federal Reserve’s own admission that they had $50+ billion in ‘unrealized losses’ due to the erosion of their portfolio of US Treasuries. This is almost as much as their entire capital reserve… meaning that the Fed is practically insolvent by its own admission. Not to worry, though. The Fed gets to employ its own accounting tricks to make these losses disappear, marking the assets on the balance sheet at their much higher ‘book value’, rather than the much lower ‘market value’. Of course, the US government does exactly the same thing… often conveniently leaving out huge portions of its total debt such as the non-marketable securities it owes to the Social Security trust funds.

All of this really just goes to show how absurd it is to rely on these numbers conjured by politicians and central bankers. Sure, the statistics are computed to multiple decimal places and wrapped up in lengthy reports. But there’s not a shred of truth to any of this false precision. It’s all about maintaining a false sense of confidence at all costs, no matter what lies they have to fabricate, no matter what fraud they have to commit.

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Russia Warns Use Of Force Could Tip Ukraine Into Civil War (AFP)

Russia on Tuesday warned Kiev that any use of force in Ukraine’s east, where pro-Kremlin militants have seized government buildings in several cities, could tip the country into civil war. “We call for the immediate cessation of any military preparations, which are fraught with the risk of unleashing civil war,” the Russian foreign ministry said in a statement. The warning came after pro-Russia activists seized state buildings in the eastern cities of Kharkiv, Lugansk and Donetsk, where they also declared independence and vowed to vote on joining Russia.

Kiev accused Russia of fomenting the unrest and Washington warned the Kremlin to stop efforts to “destabilise Ukraine,” accusations that Moscow brushed off. The Russian foreign ministry said on Tuesday it had information that Ukraine was sending internal security forces and volunteers from its National Guard including fighters from Pravy Sektor (Right Sector) ultra-nationalist group, to southeastern Ukraine including Donetsk.

It also alleged that Ukraine was deploying US private security operatives dressed as Ukrainian special forces. It said the mercenaries came from the Greystone Ltd security firm. It said Ukraine had tasked the forces with “suppression using force of the residents of the southeast of the country against the policies of the current Kiev authorities.” “The organisers and participants in this provocation are taking on a huge responsibility for creating a threat to the rights, freedoms and lives of peaceful Ukrainian citizens and to the stability of the Ukrainian state” it warned.

The ministry released the statement on its website following talks late Monday between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Andriy Deshchytsya. The ministry said in a statement that Lavrov stressed the “necessity of a respectful attitude to the aspirations of the inhabitants of southeastern Ukraine.” Lavrov said Kiev must not allow “attempts to react by force to their legal demands for their linguistic, cultural and social-economic rights.” Lavrov called for Kiev to take “urgent measures” to organise a national dialogue, saying it was ready to “support this process along with the European Union and the United States.”

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Russia Accuses US Mercenaries Of Inciting Civil War In Ukraine (Zero Hedge)

In response to claims by the Ukraine government (and the west) that Russia provoking trouble in Eastern Europe – with The White House’s Jary Carney even suggesting that pro-Russia demonstrators were paid – Russia’s foreign ministry has responded. Posting via their Facebook page, Russia urged Ukraine to halt any interior military preparations which could instigate a civil war. But the kicker, for which we anxiously await a rebuttal, is Russia’s comment that they “are particularly concerned that the operation involves some 150 American mercenaries.”

The US administration perspective… (via WaPo)

In Washington, the Obama administration expressed deep skepticism that the scattered uprisings and building takeovers in cities such as Donetsk and Kharkiv have been spontaneous. “There is strong evidence suggesting some of these demonstrators were paid,” said Jay Carney, the White House spokesman. “If Russia moves into eastern Ukraine, either overtly or covertly, this would be a very serious escalation,” Carney said.

The Ukrainian perspective…

The Ukrainian government dispatched its highest-level police and security officials to the region Monday in an effort to put down the separatist agitation. Kiev is confronting an attempt to “destabilize the situation,” Prime Minister Arseniy Yatsenyuk said at an emergency cabinet meeting Monday. “The plan is for foreign troops to cross the border and seize the country’s territory, which we will not allow.”

And the Russian perspective, as ITAR-TASS reports,

The Russian Foreign Ministry urged Ukraine to halt any interior military preparations, which could instigate a civil war in the country, the ministry was quoted as saying on its Facebook.com account. “According to our information, units of the Interior troops and Ukraine’s national guards as well as militants from the illegal armed formation ‘The Right Sector’ are being amassed in the southeastern parts of Ukraine and in the city of Donetsk,” the ministry said. “We are particularly concerned that the operation involves some 150 American mercenaries from a private company Greystone Ltd., dressed in the uniform of the [Ukrainian] special task police unit Sokol,” the ministry said.

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Still the only sane voice in the US when it comes to Ukraine. And still utterly silenced in US media.

Ron Paul: ‘Ukraine Needs Economic Freedom, Not Foreign Aid’ (RT)

Ukraine needs a new economic system but not just a bailout program that would impoverish people rather than help them, former US Congressman and presidential candidate Ron Paul told RT. “If you just bail them out, like we just bailed out all our rich people during 2008-09, the system continues, but the poor get poorer and the middle class keeps shrinking,” he said on RT’s SophieCo show. Ron Paul believes that the Ukrainian people need “freedom, and the concept of property rights,” – they also need to work hard, have an incentive system and get rid of central economic planning, and “they would recover.”

“I don’t think a penny is going to go to the people; they’re going to get a freeze in their wages, and they are going to have higher prices for their fuel and their taxes are going to go up. So there is no benefit,” Paul added. He claims that the foreign aid packages never go to the people as that money is actually taken from them, which makes them even poorer. “It’s taken from the poor and it’s given to the rich in another country, because there is always the rich in the different countries and that of course is what we have to change,” he said.

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Not sure this is true.

Russia’s South Stream Pipeline In Deep Freeze As EU Tightens Sanctions (AEP)

The European Union is close to freezing plans to complete the $50bn (£30bn) South Stream gas pipeline through the Black Sea from Russia, the first serious EU action to punish the Kremlin for the seizure of Crimea. Key details emerged in a leaked briefing by the European Commission’s chief, Jose Manuel Barroso, to Bulgarian politicians, warning the country not to stand in the way of the EU’s tough new line on the project, or attempt to undercut a unified EU response over Ukraine. “We are telling Bulgaria to be very careful,” he said, according to reports in Bulgaria’s press. Mr Barroso said there are “people in Bulgaria who are agents of Russia”, a reference to figures in the ruling Socialist party who have been trying to clinch a bilateral deal with the Kremlin.

The warning came as Ukraine once again rattled investors. Russia’s Micex index of stocks fell 2.4% and the rouble slid 1pc against the dollar after armed pro-Russian protesters seized government buildings in the eastern Ukrainian city of Donetsk and declared the region “independent”. They also stormed offices in Kharkiv and Luhansk. Ukraine’s premier, Arseniy Yatsenyuk, accused Russian president Vladimir Putin of preparing the ground for seizure of the Donbass region, home to most of Ukraine’s heavy industry. “The aim of this scenario is to divide Ukraine into parts and turn part of Ukraine into a slave territory under a Russian dictatorship,” he said.

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Greece’s “revival” is a nothing but a great accounting trick.

Doom-to-Darling Greece’s Fault Lines Exposed by Cleaners (Bloomberg)

The fault line in Greece’s unprecedented return to favor with investors runs the length of 5-7 Nikis Street in Athens. There, in front of the six-story Greek Finance Ministry, a dozen or so of the 595 cleaning ladies set to lose their state-paid jobs staged protests almost daily at being added to the 27.5 percent of Greeks who are unemployed. The women were watched over by helmeted, baton-carrying riot police, among a group of security personnel due for a bonus next month. “They picked on us because they thought we wouldn’t speak up,” said Dimitra Manoli, 52, a mother of two who made 500 euros ($687) a month cleaning the tax office in the port of Volos, 320 kilometers from Athens. “They thought we would just go away, but we won’t. We can’t.”

The shrinking of Greece’s state employment machine slashed 8.75 billion euros from the public payroll, removing a hurdle to further international aid and ushering a return to capital markets in coming months. Yet beneath the headline figures, most of the 200,000 former state workers retired or were short-term contractors while the roster remains bloated with staff whose jobs-for-life are protected by the constitution. “The burden sharing has been extremely uneven,” said Jens Bastian, a former member of the European Commission’s Greek taskforce. Monthly unemployment bulletins “speak a terrifying language about who has had to do the heavy lifting,” he said.

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From the “Don’t touch my bonus” category.

Banks Urge Basel U-Turn on Global Asset-Backed Debt Rules (Bloomberg)

Banks from Deutsche Bank to Barclays attacked proposals to overhaul global capital rules for asset-backed debt, saying they risk choking securitization while clashing with efforts to boost lending to businesses. Proposals by the Basel Committee on Banking Supervision would be so onerous for some securitizations that banks would shun investments in the debt, according to consultation responses published on the group’s website. “Left unchanged, the proposed rules would substantially reduce the incentives for banks to participate in securitizations” and could hamper “the availability of affordable credit to the wider economy,” Deutsche Bank said in its public response to the Basel group.

The rules risk being “very punitive,” Europe’s biggest investment bank by revenue said. Basel regulators have been grappling with how to set capital rules for asset-backed debt since the market collapsed in the wake of the 2008 bankruptcy of Lehman Brothers Holdings Inc. While the Basel group has focused on ensuring banks have enough capital to cover risks from their holdings, other authorities have focused on ways to revive high-quality securitizations.

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Will Mario save the zombies?

Mario Draghi’s QE Catch 22 (RT)

Last week ‘Super Mario’ (the financial press fawn over central bankers with a certain ironic gusto) emerged from an ECB Council meeting to announce that finally the ECB was edging towards perhaps deploying a full QE program. As Britain, America and even Japan, amongst others, printed money with alacrity, the euro has, despite its broad range of fundamental maladies, actually increased in value! This has impacted on Europe’s export competitiveness, at a time when nations like Greece and Spain are still teetering somewhat on the cusp of economic survival. Therefore, faced with an overvalued currency, 12 percent average unemployment and, at best, economic stagnancy…well maybe it is time to do “whatever it takes.”

So is Mario Draghi’s finger poised over the red button to activate the money printing presses? Actually, Super Mario faces an incredible dilemma – damned if he does and damned if he doesn’t. To work, QE must trickle into the real economy. Even in UK/US schemes, often the cash has remained stubbornly within the investment world chasing paper assets as opposed to invigorating the manufacturing and service economy. Within the EU the problem is not just this trickle down aspect. Rather vital issues with the banks themselves have not been addressed. Put simply: the political class remain in denial at the extent of banks’ problems. Many EU banks may fail the autumn round of stress tests. Gutless eurozone governments have palpably failed to take control of the economic situation, wrapping bandages around vast festering wounds.

Thus throughout the eurozone, there are many zombie banks, de facto insolvent entities being protected by stubborn (scared) politicians. These walking dead institutions are not merely in the depressed Mediterranean nations with rampant unemployment, they even exist in Angela Merkel’s otherwise prosperous German hinterlands. Given how she has sought to ‘punish’ incompetent governments, her hypocrisy in punishing other citizens (e.g. in Ireland) to protect her banks is rather incredible. It also threatens the long-term survival of the euro, let alone the EU. Mario Draghi faces a genuine Catch-22 situation. If he launches QE it may reduce the euro in value, but at the same time, even by the standards of QE, his ability to pump prime the economy through a trickle-down effect through the banking system is very modest. A massive tsunami of freshly minted euro might simply end up propping up zombie banks which need to be closed.

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US Warns China After Renminbi Depreciation (FT)

The US has warned Beijing not to go back to manipulating its currency, following a sharp depreciation of the renminbi since the start of 2014. “If the recent currency weakness signals a change in China’s policy away from allowing adjustment and moving toward a market-determined exchange rate, that would raise serious concerns,” said a senior Treasury official ahead of this week’s IMF, World Bank and G20 meetings in Washington.

The renminbi has fallen more than 2.5% against the US dollar since mid-February, a small amount for most emerging markets but a dramatic shift for the Chinese currency following years of slow and steady appreciation. It trades at Rmb 6.20 against the US dollar, roughly the same level as this time last year. The US comments highlight concern in Washington that China will be tempted to respond to a slowing economy by holding down its currency in order to boost exports. Such moves could lead China to reduce global demand at a time when several other regions of the world, such as the eurozone, are weak. That in turn could hamper US growth.

The fall in the renminbi has been widely seen as an engineered policy move by the country’s central bank, which has the ability to move the currency through a daily fixing rate, and through direct intervention. The renminbi can now trade higher or lower from its mandated fix by 2% a day following the recent widening of the official trading band.

However, most analysts believe that Beijing’s decision to weaken the renminbi was not a ploy to boost competitiveness. Instead, the authorities have sought to stamp out currency speculation from companies and investors who had treated the renminbi as a one-way bet by introducing more meaningful two-way volatility. It also has the positive side-effect of increasing domestic liquidity at a time when stress within the financial system is rising.

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Turns out the bubble’s entirely self defeating.

Hot Air Hisses Out Of Housing Bubble 2.0 (Wolf RIchter)

As home prices have soared in cities around the country, sales have cratered. The weather has been blamed, though the weather has been gorgeous in California where sales have crashed too, even in temporary boom town San Francisco. The “lack of inventory” and other excuses have been dragged out as well. In reality, homes have gotten too expensive …

Even for hedge funds, private equity funds, REITs, and other forms of Big Money with access to the Fed’s limitless free juice. They’d become powerful buyers over the last two years, gobbling up vacant homes sight-unseen by the thousands, in order to get them off the closely watched for-sale list and shuffle them over to the ignored for-rent list, where they might languish undisturbed. The hope is that they might rent them out somehow and sell them later at a big fat profit, to the dumb money via a ridiculously hyped IPO. But now their business model has collapsed.

“Prices have gotten to the stage where we cannot buy a house, renovate it, rent it, and still make a reasonable return,” explained Peter Rose, a spokesman for Blackstone Group, a private equity giant whose real-estate division, Invitation Homes, has grown in two short years from nothing to the largest landlord in the country with 41,000 rental single-family houses to is name. “There was a moment in time where it made sense,” Rose said. Not anymore. Blackstone already cut its purchases in California by 90% last year. It wasn’t alone. Another mega-buyer with access to nearly free money, Colony Capital, is doing the same thing. Oaktree Capital is trying to dump its portfolio of 500 homes before prices head south.

“Private capital made a lot of money early, and now they’re starting to pull back,” Dave Bragg, head of Residential Research at Green Street Advisors, told the LA Times. “Home prices are up significantly, and houses are definitely less attractive.” With these mass-buyers out of the market, volumes have collapsed to a four-year low, according to Redfin, an electronic real-estate broker that covers 19 large metro areas around the country. Because, let’s face it, who can still afford to buy these homes? Forget first-time buyers, the crux of a healthy housing market. In February, they only bought 28% of the homes, down from 30% a year earlier, down from the three-decade average of 40%, and down from the mid-40% range during good times. That hapless lot has been pushed out of the market a while ago.

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Father Of High Speed Trading: “The Market We Created Is A Casino” (Patterson)

The speaker who would set off the most fireworks was Peterffy, the founder of Timber Hill, one of early users of Island. He looked out over the podium at the upturned faces of his peers and grimaced. Peterffy had become extremely disillusioned with the market he’d helped create. It wasn’t just the deceptive tactics of firms like Trillium, it was the unregulated speed traders who were picking off his own firm’s orders, with no firm obligation to stick in the market during tough times. The stock market had been turned into a Wild West of dueling algos — and some firms, it seemed, had special advantages. Like Haim Bodek at Trading Machines, Peterffy was steamed that his orders were getting clipped time and time again. He wasn’t going to take the abuse without fighting back.

He cleared his throat, adjusted his glasses, and launched into his speech. “An exchange used to be a place, yes, a physical place, where people would come together to buy or sell, hoping to achieve the best price for themselves,” he said. “The more the exchange was able to attract all of the buy and sell interests in a product, the more the prices on the exchange would reflect the true state of supply and demand.” It was the old mantra: liquidity breeds liquidity. But something had changed.

“In the last twenty years came computers, electronic communications, electronic exchanges, dark pools, flash orders, multiple exchanges, alternative trading venues, direct access brokers, OTC derivatives, high-frequency traders … Reg NMS in the U.S. – and what we have today is a complete mess.” He looked out at the crowd. Dead silence. Peterffy hadn’t bothered to warm the audience up with a joke, a humorous anecdote. He cut straight to the point – and most in that room didn’t like what he was saying.

“It is not so much anymore that the public does not trust their brokers. They do not trust the markets, the exchanges, or the regulators either. And why should they, given our showing the past few years? To the public the financial markets may increasingly seem like a casino, except that the casino is more transparent and simpler to understand.” Visible tension spread through the room. Did Thomas Peterffy just call the market a casino? That was an attack they might have expected from the likes of Arnuk and Saluzzi or Senator Ted Kaufman – but from the founder of Timber Hill and Interactive Brokers, the godfather of electronic trading?

TP Speech Oct2010

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China’s economy is very much like an ocean liner: hard to change course, let alone turn around.

The Global Origins of China’s Domestic Conflicts (Diplomat)

Globalization divided China into two unequal parts: the successful, aligned and satisfied people on the top, versus the poor, frustrated and marginalized on the bottom. The large-scale outbreaks of social tensions in recent years, including the tensions in Xinjiang and Tibet, should not just be seen as isolated cultural or political battles, but rather should be heard as both the battle cry of China’s new class struggle and as a conflict of globalization. Based on the recent public opinion surveys, Chinese citizens have frequently ranked corruption, pollution, and social tension as their top concerns. In fact, all these issues are directly related to the factors of globalization that have helped China rise. The opportunities brought by globalization have hidden costs.

China’s embrace of globalization has aligned once fractious elites behind a banner of shared economic interest. China’s globalization dividends, including its trade surplus and the world’s highest reserves of foreign currency, have provided the government with huge resources to buy the loyalty of the intellectual and economic elites. Scholars, entrepreneurs, and government officials, who just 25 years prior stood divided in Tiananmen Square, have now found themselves as allies. They have become the stakeholders and co-owners of the new China Inc. People on the top are content, sharing the dividends of their prosperity while harmoniously singing the praises of globalization and the stability of one party rule.

By hitching its fate to the opportunities brought by globalization, China has risen at a roaring speed. However, the real danger for the regime is that it has now become reliant on the speed of economic development. Only if China can maintain its unbridled growth rate can it continue to meet the masses’ expectations regarding employment and a standard of living. Beijing used to call an 8% GDP growth rate as a “red line” of life or death. During the recent National People’s Congress session, Premier Li Keqiang tried to persuade the delegates to agree to lower the rate to around 7.5%. To some extent, Chinese society is now like the bus in the Hollywood movie Speed that must keep moving at a speed of 50 miles per hour; to fall below this speed will explode the bomb sitting just beneath the bus. Beijing is indeed playing a dangerous game.

Globalization has also tied Western leaders to the top of the bus, because a failed China would be catastrophic for the world’s economy. However, staying above the red line means that the wealth gap and socioeconomic marginalization will continue. Unfortunately, this may also mean that conflict will continue, especially when the marginalized have learned that the world will pay attention when violence is the messenger. Neither China nor the rest of the world can ignore this dilemma and paradox; with every “made in China” product we buy we are contributing to this rise in wealth, and the rise in frustration, social tension and air pollution.

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Overbuilding, oversupply, overpriced.

Chinese Developers Seen Facing More Challenges on Oversupply (Bloomberg)

Chinese developers will probably face more challenges this year because of an oversupply of housing in smaller cities, according to a Bloomberg News survey. Developers in regions where the housing market slowed and access to financing shrunk face rising default risks, Standard & Poor’s Ratings Services said in a Jan. 17 report. “Oversupply remains the top concern of the real estate sector,” Qinwei Wang, London-based economist at Capital Economics Ltd., wrote in the survey. “Inventories have continued to rise, with the situation vulnerable in some third cities. Looking ahead, the increase of demand for new properties will probably be far weaker than over the last decade.”

The pressure on Chinese developers as economic growth slows and the government allows local cities to implement their own housing curbs was underscored by the collapse of a developer in a city south of Shanghai last month. About 67% of housing under construction in China last year was in less affluent cities, according to Nomura Holdings Inc. While most respondents didn’t expect China’s property market to collapse this year, four out of five respondents, who see a crash, expect it to happen in smaller third-tier cities, according to the survey.

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When the economy goes down for real, Québec will revisit this.

Quebec Separatist Party Suffers Crushing Election Defeat (AP)

Quebec voters gave a resounding no to the prospects of holding a third referendum on independence from Canada, handing the main separatist party in the French-speaking province one of its worst electoral defeats ever. The Liberal Party, staunch supporters of Canadian unity, won Quebec’s legislative elections Monday, while the pro-independence Parti Quebecois suffered a crushing defeat that puts its dream of a sovereign Quebec on hold for years. The results will allow the Liberals to form a majority government, less than 18 months after voters had booted the party from power for the first time in nine years amid allegations of corruption.

With all but a handful of polling stations reporting, the Liberals had 41.5% of the vote and took 70 seats in the 125-member National Assembly. The Parti Quebecois had 25.4% and won 30 seats. The Coalition for Quebec’s Future, which downplayed the sovereignty issue to focus on the economy, was close behind with 23.1% and 22 seats. Quebec Premier Pauline Marois, who led a minority government, called the snap elections last month in hopes of securing a majority for her PQ party. But the campaign stirred up speculation that a PQ majority would ultimately lead to another referendum on independence from Canada, an idea that has lacked support in recent years. Fears of a referendum galvanized supporters of the Liberals. Marois suffered a humiliating defeat, even losing her own seat, and announced that she would step down as party leader.

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Canada’s Economy Will Go to a Vote (Bloomberg)

Canada’s first Conservative majority government in a generation is facing an election next year, just as the country’s post-recession comeback is starting to falter. So this is a good time to start thinking about how to judge the Conservatives’ signature project: managing Canada’s economy. In a series of posts, I’ve looked at that question from different angles: Slowing growth rates, the uncertain labor market, stagnant wages and rising debt levels, rising poverty rates for seniors and more households going hungry, and carbon intensity figures moving in the wrong direction.

How much of this is the current government’s fault? Not all of it, to be sure. Many of these changes reflect a mix of forces, from global economic pressure to demographic and technological shifts. Some may have been too strong for the federal government to overcome, whichever party held the reins. But government action matters, especially when one party makes a strong economy the core of its argument for public support. So the question that ought to define the next election is whether, beneath the slogans and the happy talk, Canada’s economy can be judged a success — and what exactly the other parties propose doing differently.

Sounds obvious, right? If you think so, go back and watch the sole English-language debate among party leaders during Canada’s last federal election, when the opposition parties rambled on about the Conservatives’ perceived ethical faults, leaving Prime Minister Stephen Harper’s mantle of economic super-manager all but unchallenged. The scandals have only piled up since then, and with them the temptation to make the next campaign another attempt for the opposition to claim the moral high ground. They shouldn’t. If there’s one lesson from the last election, it’s that bad behavior is inherently subjective.

The economy, on the other hand, isn’t — or at least it doesn’t need to be. But an election campaign that fails to generate a debate on a handful of key economic problems, with each party explaining how it would address those problems and why, is one that gives the winners a free hand to act as they please, pursuing a mandate so vague — who does not want a stronger economy, for the middle class or anyone else? — as to be meaningless.

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Forward Guidance (Jim Kunstler)

Guess what? There is none. Rather, the Federal Reserve practice of Delphically divulging its intentions ought to be understood as the master pretense of US economic life — the delusion that wise persons are actually in control of anything. The result of this guidance continues to be the mis-pricing of everything, especially the cost of money as represented in the operations of debt, and hence the value of everything denominated in money.

The interventions of our central bank have really been aimed at one objective: to compensate for the contraction of real wealth in an economy that replaced purposeful activity with Kardashian studies and tattoo art. Purposeful economic activity provides surpluses that allow for the repayment of debt. Kardashian study and tattoo art lead to entropic entrapment, aka, a death spiral of culture and economy. That’s where we are at. The debt is now eating us alive, and the central bank trick of piling on additional debt to mask the failure of repaying old debt is losing its palliative punch.

One big problem with the Fed’s policies is that the mis-pricing of everything ends up being expressed in the very statistics (GDP, unemployment, inflation) that are used to justify further interventions that produce ever deeper perversities. That is, the Fed distorts prices, which distort statistics used to make policy, which prompt the fed to ramp up policies that further distort prices, a dangerous recursive dynamic. Since prices are the basic information for running an economy, we end up in a situation where nothing really adds up. The antidote to that has been pervasive accounting fraud — the covering-up of mis-pricing, pretending that things add up when they don’t.

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Welcome To Terminus (Jim Quinn)

As I watch the hordes of hideous brain dead zombies shuffling across the apocalyptic landscape seeking to satiate their basest cravings I can’t help but see the parallels with the millions of mindless tattooed obese slobs waddling across mall parking lots past vacant store fronts staring zombielike at their iGadgets as they seek to satisfy their basest desires at Macy’s and Chipotle. A virus has overspread our country causing a vast swath of the population to gratuitously assuage their every want without thinking of the consequences. The sickness is caused by being imprisoned for twelve years in government run public schools, watching thousands of hours of propaganda emitted by the corporate media, viewing hundreds of brain cell destroying reality TV shows, reading and sending thousands of texts and tweets, and being overwhelmed by the delusional belief spending more than they make, saving nothing, and piling up mountains of debt is the path to success in our contaminated society. [..]

There are 318 million Americans and a majority of them fall into the category of zombies in my estimation. Every American has the zombie virus within them. It has been incubated by corrupt vote seeking politicians, control hungry government sociopaths, mind numbingly worthless public education, and the relentless dumbing down through corporate media propaganda and vacuous reality TV entertainment. Once cogent thinking aware citizens have been zombiefied into mindless impulsive consumers.

How can you not see the parallels between American society and the zombies in the Walking Dead? Walk down any city street in America and you see hordes shuffling along staring with blank faces and glazed over eyes at their iGadgets. Black Friday is identical to flinging a freshly slaughtered hog in front of the flesh eating zombies. Americans flock to malls across our apocalyptic suburban sprawl landscape and proceed to stampede, gouge, and punch their way to an fantastic bargain on a Chinese slave labor produced microwave they must have to cook their toxic frankenfood created by one of our corporate food conglomerates. The Black Friday crowds actually make the zombies from the Walking Dead seem well behaved. While the American zombies are shambling through superficial lives of pleasure seeking, mass consumption, and a delusional faith in debt based wealth, there is still a minority of rational thinking people who can control their impulses and resist the disease devouring our culture.

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Australian Unemployment Heads For 11-Year High (Guardian)

Australia’s sluggish economy could need further rate cuts by the end of the year as unemployment looks set to hit an 11-year high, economists have warned. Business confidence fell from seven points in February to four in March, according to the National Australia Bank monthly survey on Tuesday. Business conditions remained subdued but lifted slightly to one point in March. Optimism was at its lowest level since its post-federal election bounce last year and mining was the least confident industry, the report said.

“Rather than conditions rising to confirm the improvement in confidence, it seems that confidence is beginning to succumb to the continuing softness in conditions,” NAB economists said. With unemployment figures on Thursday expected to show the jobless rate at 6.1%, its highest since 2003, the authors of the report believe that the Reserve Bank of Australia may be forced to reduce the cost of borrowing again.

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Wonderful!

This Couple Built Their Own Tiny Home For $10,000 (Yahoo!)

McMansions may be making a comeback in the U.S., but it’s nice to see the tiny-house movement is still going strong. Tiny-home singles even have their own dating site, Tinyhousedating.com. The site launched two weeks ago and already has more than 400 members, according to founder Kai Rostcheck. “It’s hard to meet other people who are making that same [lifestyle] choice,” Rostcheck told Yahoo Finance. But is it really possible to thrive as a couple in such a, well, tiny space? What do you do when the inevitable argument heats up and you’ve only got 100 square feet of breathing room? How do you pare down not only your life but your partner’s life to fit in a home no bigger than a tool shed?

We caught up with Rhode Island couple Jess Belhumeur, 28, and Dan Sullivan, 26, who chronicle their tiny-home lifestyle on their blog, Living In A Tiny House. In January they completed their 128-square-foot abode, which they built and furnished for a mere $10,000. “I had already owned a home before this and I realized that I only used two rooms — the kitchen and the living room,” Jess says. “I felt ridiculous. I was in a stressful financial situation and I wasn’t even making use of the house I had.”

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Oklahoma Swamped by Surge in Earthquakes Near Fracking (Bloomberg)

There have been more earthquakes strong enough to be felt in Oklahoma this year than in all of 2013, overwhelming state officials who are trying to determine if the temblors are linked to oil and natural gas production. The state on April 6 experienced its 109th earthquake of a magnitude 3 or higher, matching the total for all of 2013, according to Austin Holland, a research seismologist with the Oklahoma Geological Survey. More quakes followed, including a magnitude 4 near Langston about 40 miles (64 kilometers) north of Oklahoma City.

A surge in U.S. oil and gas production by fracturing, or fracking, in which drillers use a mix of water and chemicals to coax liquids from rock formations, has generated large volumes of wastewater. As fracking expanded to more fields, reports have become more frequent from Texas to Ohio of earthquakes linked to wells that drillers use to pump wastewater underground. “We certainly likely have cases of earthquakes being caused by different oil and gas activity,” Holland said in an interview. “Evaluating those carefully can take significant amounts of time, especially when we’re swamped.”

Within the past year, earthquakes thought to be tied to wastewater disposal wells were recorded in Azle, Texas; Jones, Oklahoma; and northeastern Ohio, according to Art McGarr, a geophysicist with the U.S. Geological Survey in Menlo Park, California. Pumping fracking wastewater underground has been linked to a sixfold jump in quakes in the central U.S. from 2000 to 2011, according to the science agency, part of the Interior Department.

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Why money needs to be banned from politics, chapter 826.

Monsanto And Co. Pouring Money Into Defeating County Measure To Ban GMOs (RT)

Monsanto and five other top agrochemical companies have donated a combined $455,000 to defeat an Oregon county ballot initiative that would restrict the growth of genetically-modified crops in area farms. The internationally-powerful “Big Six” chemical companies are flooding the Measure 15-119 ballot campaign in Jackson County, Oregon with lucrative donations that have helped opponents of the measure amass an eight-to-one spending advantage, according to state figures.

Monsanto ($183,294), DuPont Pioneer ($129,647), Syngenta ($75,000), Bayer ($22,353), BASF ($22,353), and Dow AgroSciences ($22,353) have donated a combined $455,000 to Good Neighbor Farmers, the political action committee fighting Measure 15-119, which county voters will consider on the May 20 ballot. “This is a staggering amount of money for a local ordinance,” said Center for Food Safety senior attorney George Kimbrell. “For every vote they might get, Monsanto and its pals could afford to take each voter out for a fancy steak dinner.” Overall, Good Neighbor Farmers has $556,000 cash on hand, according to the Oregon Secretary of State. The Center for Food Safety reported that, all in all, opponents of the measure have a total of $799,000.

Meanwhile, two political action committees supporting the measure, GMO Free Jackson County and Our Family Farms Coalition, have a combined $102,368. Measure 15-119 “would ban any person from propagating, cultivating, raising or growing ‘genetically-engineered’(defined) plants in Jackson County.” Kimbrell’s group says that even before the latest contribution avalanche from the “Big Six,” about 95% of donations in the campaign had come from outside Jackson County. “It goes to prove just how much money is coming from outside of our county,” Elise Higley, director of Our Family Farms Coalition, told The Oregonian. “The general reaction is that people are really angry that outsiders are pouring this much money into a county measure.” [..]

The vast majority of conventional processed foods in the US are made with genetically-modified organisms (GMOs). Around 93% of all soybean crops planted in the US last year involved genetically-modified, herbicide-tolerant (HT) variants, the US Department of Agriculture has acknowledged. HT corn and HT cotton constituted about 85 and 82% of total acreage, respectively. GMO crops are now grown in 28 countries, or on 12% of the world’s arable land, with the acreage doubling every five years. However, in the European Union, only two GMO varieties (compared to 96 in the USA) have so far been licensed for commercial harvesting. Russia, for instance, recently barred the import of GMO products.

Powerful food industry and biotechnology players are currently banding together on other fronts to protect their investment in GMO technology despite national and international pushback. Their main effort in the US is seen in potential federal legislation that would block states from passing mandatory GMO labeling measures despite the “right to know” movement’s rising popularity.

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