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When Centralization Scales Beyond Our Control

Feb 282015
 
 February 28, 2015  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  14 Responses »


Fenno Jacobs Schoolchildren staging a patriotic demonstration, Southington, CT 1942

In an article about NATO exercises in Estonia, just 300 yards from the Russian border, Daniel McAdams at the Ron Paul Institute makes a point that I want to use to make a much broader point. Not the provide answers, though, just to provide questions. McAdams quotes the Guardian review of a book by George Sakwa:

NATO’s Russia Border Games

Russian military plane over international waters 25 miles from the UK coast is “real and present danger” to NATO. Yet… Yet yesterday US combat vehicles conducted a military parade and show of military force in Estonia just 300 yards – yards! – from the Russian border. That is just over 60 miles from downtown St. Petersburg. This is not a provocation, we are to believe. This is not a “real and present danger” to Russia. NATO is exempt from the rules it imposes on its enemies. In the Guardian’s review of a new book by Politics professor George Sakwa, the current fallout from a near quarter century of post-Cold War NATO policies is perfectly captured:

The hawks in the Clinton administration ignored all this, Bush abandoned the anti-ballistic missile treaty and put rockets close to Russia’s borders, and now a decade later, after Russia’s angry reaction to provocations in Georgia in 2008 and Ukraine today, we have what Sakwa rightly calls a “fateful geographical paradox: that NATO exists to manage the risks created by its existence”.

That line bears repeating: “NATO exists to manage the risks created by its existence.”

Yes, that line bears repeating, but it bears much more than that: the line doesn’t go nearly far enough. Because NATO doesn’t only exist, it develops and changes. In fact, to justify its prolonged existence, NATO has turned from a force for peace into a warmonger. That way, the organization argues, consciously or not, it provides itself with a reason to exist. It now doesn’t just exist to manage the risks, it exists to create them. In doing so, NATO itself has become the biggest risk.

Regular readers will be well aware that I, like Ron Paul, have said many times that NATO should be dismantled (and not just NATO). Not only because it’s long outlived its original purpose, based in the Cold War, but because it increasingly attracts as leaders people who use ever more aggressive language for ever more elusive reasons. The latest in the series are new General Secretary Stoltenberg and General ‘Warhead’ Breedlove, both of whom seem hell bent on outdoing even Ukraine’s leadership pair of Poroshenko and Yatsenyuk when it comes to making unsubstantiated claims about Russia, and about the situation in Ukraine – and Eastern Europe – in a broader sense.

My thesis is that all supranational organizations will eventually attract a certain kind of people as their leaders, and that these are inevitably the last kind of people we should want in these positions. But in the absence of effective democratic oversight, they end up there anyway. Therefore, the only way to counter this mechanism is to dismantle and abandon the organizations, while we still can. Which is not a given, since they function like power pyramids, in which ever more active power flows to an ever smaller top, until they become ‘untouchable’ by the nations that founded them in the first place.

These organizations don’t just fail to meet their originally stated purpose, they become entities dangerous to those they were meant to serve. That’s true for NATO, for the IMF, the World Bank, and the EU. They all end up serving only their most powerful members, at the cost of the smaller and less powerful. Since there is no mechanism to prevent this from happening while they exist, we must dismantle them.

There’s a strong correlation with an example from the economic world, in which corporations were originally incorporated for a specific project (e.g. building a bridge), a specific budget and a specific duration. And look at corporations now: there is no time limit to their existence, they are free to buy political control over our societies across generations, and they have even been granted person’s rights, though persons die and corporations no longer do.

What is true for corporations is just as true for supranational organizations: it’s all about scale. They are all – well, mostly – founded by well-meaning people, but these people ignore – willingly or not – to set time, financial and legal limits to them. And that’s a surefire recipe for disaster. The IMF upon its inception had lofty ideals behind it. But look at the damage it’s done across the globe. The World Bank was intended to help fight poverty in poor nations, but, like the IMF, has become an instrument for the rich to control these nations and prey on them.

And NATO has been busy ever since the Berlin wall came down, to resurrect the Cold War, without which it knows it must fear for its continued existence. It’s a twin sister of the American military complex, which creates threats out of nowhere and fights wars that all end in disaster, creating chaos along the way that forms the reason, and the cradle, for the next theater of war.

I’ve said before that I’m somewhat hesitant to include the US in the list of supranational organizations that should be dismantled, but if the country, the union, can’t find a way to reform and refind itself, I don’t see much reason for it to live on. The concentrated power bastion in Washington simply does too much harm to too many people, both at home and abroad. Nobody should have that sort of power.

If you have an entity that comprises 300 million people, it’s inevitable that ‘rulers’ over that entity need to be curtailed and limited in their powers from the get-go, or things will go awfully wrong. In the US, arguably, that has long since started to happen. The solution – in theory – is real simple: decentralize power. The solution in practice is much less obvious, since the people in power won’t volunteer to give up what they’ve got. A critical mass has been reached from which it will be very hard to retreat.

‘Once it reaches a certain threshold, the process of institutionalization becomes counterproductive’

Those are the words from a man I’ve been thinking about for quite a while, when pondering these issues, 20th century philosopher/priest Ivan Illich, whose criticism of ‘institutionalization’, mostly published in the 1970’s from Latin America, was largely inspired by, and directed at, the Catholic Church, not coincidentally the world’s – by far – earliest truly multinational corporation. Illich basically asserted that institutions tend to monopolize parts of societies that they should leave alone, because they belong to the people, and are essential to their well-being. From Wikipedia’s entry on Illich:

[e]lite professional groups . . . have come to exert a ‘radical monopoly’ on such basic human activities as health, agriculture, home-building, and learning, leading to a ‘war on subsistence’ that robs peasant societies of their vital skills and know-how. The result of much economic development is very often not human flourishing but ‘modernized poverty,’ dependency, and an out-of-control system in which the humans become worn-down mechanical parts.”

[2] Illich proposed that we should “invert the present deep structure of tools” in order to “give people tools that guarantee their right to work with independent efficiency.”[14]

Schools should not be able to declare themselves the only valuable source of education, nor hospitals that of health care. To Illich, the fact that he did see them do this anyway, meant people were being robbed of their freedom to learn, and to heal. In the same vein, NATO should not have a monopoly on defending us from ‘evil’ enemies, because it will create that evil just to justify its own apparatus, in the process robbing people of the ability to judge what is evil and what is not.

‘[I]nstitutions create the needs and control their satisfaction, and, by so doing, turn the human being and her or his creativity into objects’

And that of course moves us real close to what I said about supranational organizations and multinationals, and to what Sakwa said: “NATO exists to manage the risks created by its existence.”. It shirks close to the Completion Backward Principle, in which first a need and a market is created and only then the product that fills that need.

My perhaps favorite Illich quote, which with a little imagination is one on one applicable to the entire institutionalization issue, is this:

Many students, especially those who are poor, intuitively know what the schools do for them. They school them to confuse process and substance. Once these become blurred, a new logic is assumed: the more treatment there is, the better are the results; or, escalation leads to success. The pupil is thereby “schooled” to confuse teaching with learning, grade advancement with education, a diploma with competence, and fluency with the ability to say something new. His imagination is “schooled” to accept service in place of value.

Medical treatment is mistaken for health care, social work for the improvement of community life, police protection for safety, military poise for national security, the rat race for productive work. Health, learning, dignity, independence, and creative endeavour are defined as little more than the performance of the institutions which claim to serve these ends, and their improvement is made to depend on allocating more resources to the management of hospitals, schools, and other agencies in question.

I never liked the education system I grew up in, any more than I like supranational institutions (it just took me a while to figure out the connection). High school was fine, because it was a breeze. But university was like running into a wall, multiple times. I just never had the idea that these people had anything I wanted. Just perhaps a degree that would have given me a ‘better’ job. But to go through 4-5-6 years of something I absolutely didn’t want, or saw the use of, seemed to be far too high a price to pay. This was way after Illich wrote what he did, though I didn’t read it until even much later again, but when I did, I still had a feeling of redemption, of: I’m not the only one who saw what I did.

And of course people will say that I’m an idiot to throw away a university degree when so many others would kill to have one. That all, however, proves Illich’s point, and it leads back to the same issue: universities have a monopoly on learning, which means people learn less and less, they only ‘learn’ to be cogs in a machine. And if you don’t get the degree, than no well-paying job for you. And that’s exactly what Illich says. It makes for societies of unhappy people, who can’t even provide for themselves, as all their ancestors could, because all they’ve learned is to be that cog.

I wanted to bring Ivan Illich into the discussion about NATO we’ve been having for a long time, with Ron Paul and myself saying it should be banned and its pieces ritually incinerated, because Illich makes the idea far more accessible that this is all part of a much larger pattern. That is to say, we tend towards centralization at all levels, mostly at first – seemingly – innocently, but soon with control moving beyond our perception.

Who controls NATO, or the IMF? I’m sure you understand it’s not you. Still, when an organization exhibits aggressive behavior in your name, or lends out your money in your name, you should at all times feel that you are in control, through those you elect to represent you. Well, do you? Or are you merely thinking: that’s too far away from me?

Organizations, like so many things in life, don’t scale up well, if at all. Beyond a certain critical mass, they become counterproductive, as Illich states. They become predators on their own creators. That goes as much for NATO, IMF and EU as it does for schools and hospitals.

Modern societies appear to create more and more institutions – and great swathes of the way we live our lives become institutionalized. ‘This process undermines people – it diminishes their confidence in themselves, and in their capacity to solve problems… It kills convivial relationships. Finally it colonizes life like a parasite or a cancer that kills creativity’ (Finger and Asún 2001: 10).

Experts and an expert culture always call for more experts. Experts also have a tendency to cartelize themselves by creating ‘institutional barricades’ – for example proclaiming themselves gatekeepers, as well as self-selecting themselves. Finally, experts control knowledge production, as they decide what valid and legitimate knowledge is, and how its acquisition is sanctioned.

Schooling – the production of knowledge, the marketing of knowledge, which is what the school amounts to, draws society into the trap of thinking that knowledge is hygienic, pure, respectable, deodorized, produced by human heads and amassed in stock…..

[B]y making school compulsory, [people] are schooled to believe that the self-taught individual is to be discriminated against; that learning and the growth of cognitive capacity, require a process of consumption of services presented in an industrial, a planned, a professional form;… that learning is a thing rather than an activity. A thing that can be amassed and measured, the possession of which is a measure of the productivity of the individual within the society. That is, of his social value.

It’s a trap we’ve set for ourselves, and over which we’ve now long lost control. Technology seems to make the world ‘smaller’, and to increase our control, but in effect it ends up doing the opposite. It makes us dumber, since we are now only cogs in a machine that others control, and over which we have no oversight. If the machine gets orders to go to war, the cogs will have to obey. That’s our world today, and that’s what the NATO issue teaches us. NATO is our Frankenstein. And if we don’t stop it now, it will end up coming after us.

Debt Rattle Sep 15 2014: The Yin and Yang of Growth and Power

Sep 152014
 
 September 15, 2014  Posted by at 5:40 pm Finance Tagged with: , , , ,  11 Responses »


Arthur Rothstein Bathgate Avenue in the Bronx Dec 1936

These are dangerous times. The dangers come from places hardly anybody ever thought to look for them. And that is a danger in itself.

The world has become an amalgamation of centralized blocks of power on the one hand, and a move away from these blocks on the other. The latter happens for good reason. Not that any such reason should be required. The plain and basic human right to, and desire for, freedom and self-governance should be enough. It isn’t, though, as we shall find out soon enough.

The centralized blocks have been able to gather far too much power, politically, socially and militarily, all concentrated in the hands of far too few people. And because we are who we are as a species, once you arrive at that sort of power concentration, it is inevitable that the people who go look for it, and obtain it, are the last ones who should have it. That is, from the point of view of all the rest of us.

It takes a certain mindset to want so much power over others, and if you don’t end up with outright psychopaths holding the reins, you’ll get something very close to it. Nevertheless, on the other hand, the process of increasingly concentrated powers is a natural one.

But then so is the move away from that concentration, the urge to break away from the huge entities and into smaller ones. It’s as yin and yang as it gets. Still, we all understand where the problem lies: those who have accumulated all that power in their few handfuls of hands, will be extremely reluctant to give up even a few crumbs of it.

They will instead look for more and more. Which will clash with the, again, entirely natural movement elsewhere in society towards the dilution of this massive power centralization. And guess who holds the arms, which in today’s setting are the most devastating ones in human history by a factor of a thousand, or a million, or more.

The drive away from condensed power is fed by deteriorating economic circumstances, even if those are not immediately clear to all (just about everyone’s still talking about, and believing in, a ‘recovery’).

The power blocks have served their purpose, which was the concentration of wealth, and have now overstayed their welcome. This is most evident in blocks such as NATO and the EU, but it applies just as much to the US, China and the Russian empire.

Our choices then are clear. We can at this moment choose to prepare a smooth path towards de-centralization, or we can prepare to fight a thousand bloody battles over it. There are no other flavors available.

What is more evident than anything else is that we live in a failed economic model. And recovery from that failure is a mere pipedream. We will need to come up with different answers than that. Before people in America and Europe start dying by the side of the road again. If we wait until they actually do, we’ll be too late.

You will hear from many sides that independence movements such as Scotland’s and Catalunya’s are founded on populist sentiments. But that’s nowhere near the whole story. People have the right to govern themselves, if they so choose. And if you try to stop that, if you let these sentiments fester, without giving them room to breathe, they may indeed well manifest in nasty ways.

If it takes a populist leader to channel the desire for independence, chances are such a leader will emerge. To prevent such things from happening, the ‘free’ world needs to assemble something akin to a blueprint for situations in which peoples express their desire for self-determination.

The absence of such a blueprint equals a surefire way towards trouble, unrest, and worse. It can’t be that 2 million Catalans take to the streets of Barcelona, and old school soldiers issue threats to kill them, or the Madrid government declares the entire movement illegal. ‘It’s against the Spanish constitution’, they proclaim. Well, then it’s high time to change that constitution, because it violates UN charters Spain has signed up to.

Self-determination is not illegal. And that should be expressed very clearly by all nations and all leaders, through the UN, but also in EU and US law, so nobody is in doubt any longer, and the path towards independence is clear for everyone to see.

The main problem of course is: how do you make a change such as this happen when all incumbents, all those who hold power, are on one side of the divide?

We could start off by realizing that presenting de-centralization as some sort of ideological drive misses the point entirely. What we’re looking at is a wholly natural sequence of events. But nature has no edicts or laws that decide against violence and bloodshed.

That’s where we come in. We can pass international agreements that ban violence against peoples who seek to become independent. Not one inch of it will come easy, but we don’t have much of a choice if we don’t want to live in some kind of ongoing war situation for years to come.

The demise of the communist block has presented a number of examples of de-centralization, some peaceful, some incredibly bloody. There are lessons in there for us to learn.

Scotland is a timely reminder of things to come. It won’t be the last, it’s in fact only the vanguard. The more it become obvious and inescapable that our economies will not recover, because they are too deep in debt and they don’t have sufficient access to cheap fossil fuels anymore, the more the call for independence will gather momentum and volume. And it will be contagious.

We have a narrow window left to regulate the process. Before countries start pulling out of international bodies because these no longer serve a purpose for them. Before the power brokers and holders sense too much threat to their acquired positions, and decide it’s time to call in the cavalry.

There’s no way we can prevent mayhem in every single case, there’ll simply be too many of them, and they will all have their very different and unique characteristics. But we still can do a lot.

Or we can close our eyes and wait for the recovery our masters will keep on promising until they pull the plug on the whole mirage.

• OECD Trims Developed World Growth Forecast as Risks Build (BW)

The Organization for Economic Cooperation and Development trimmed its growth forecasts for the biggest developed economies in the face of increasing geopolitical risks and subdued European inflation. Euro-area gross domestic product is now expected to expand 0.8% this year, down from 1.2% in May, while the U.S. will expand 2.1% instead of 2.6%, the Paris-based OECD said today in a report. “The bullishness of financial markets appears at odds with the intensification of several significant risks,” the organization said. “Continued slow growth in the euro area is the most worrying feature of the projections.” The MSCI All Country World Index has gained 6% this year even as conflicts in the Ukraine and the Middle East have intensified and inflation in the euro-area has dipped to a fraction of the European Central Bank’s target rate. The OECD, which advises its 34 member governments on economic policy, urged European officials to learn lessons from Japan where inflation expectations didn’t flag a later descent into deflation.

“The experience of Japan in the 1990s is a reminder that such expectations measures can be poor predictors of the actual future rate of inflation,” the OECD said. “The 6-to-10 year consensus expectations in Japan were similarly near 2% in the early 1990s, failing to foresee the descent into deflation.” The OECD cut its GDP forecasts for Germany, France and Italy to 1.5%, 0.4% and a contraction of 0.4%, respectively. In 2015, those economies will grow 1.5%, 1% and 0.1%, generating growth of 1.1% for the euro area as a whole. Similarly, in Brazil the OECD foresees a weak investment and uncertainty related to looming elections as keeping growth below potential at 0.3% this year and 1.4% in 2015. The outlook for other economies is brighter. The OECD sees Japan expanding 0.9% this year and 1.1% in 2015, while China is on track to grow 7.4% and 7.3%. India, the only major economy to have its growth forecast raised this year, will expand 5.7% in 2014 and 5.9% next year, the OECD said.

Read more …

“Nobel prize-winner Lars Peter Hansen described U.S. economic growth as “stunningly sluggish.”

• OECD Cuts US Growth Forecast, Warns On Risk Assets (CNBC)

A stuttering recovery in the U.S. and the continued fragility of the euro zone means that risk assets are “mispriced,” the Organization for Economic Cooperation and Development warned on Monday. In its Interim Economic Assessment, the Paris-based research organization became the latest to suggest markets are at risk of a sudden correction, stressing that the current bullishness appeared “at odds” with the “intensification of several significant risks.” The OECD forecast the U.S. would grow by 2.1% this year, down from its May projection of 2.6% growth. For 2015, the group expects the U.S. economy to grow 3.1%, down from earlier estimates of 3.5%. The euro area has also been downgraded from 1.2% growth in May to 0.8% and 1.1% for next year, and the stubbornly slow growth in the region is the most “worrying feature” of the OECD’s projections.

The anticipated tapering of U.S. monetary policy could lead to shifts in international financial flows and sharp exchange rate movements, which could be particularly disruptive for emerging market economies, the OECD noted. “A number of equity markets are reaching record highs, sovereign bond yields in several countries are near all-time lows and implied share price volatility in the United States and Europe is around pre-crisis levels,” it said. “This highlights the possibility that risk is being mispriced and the attendant dangers of a sudden correction.” Speaking to CNBC, economist Robert Shiller warned of pricey valuations in stocks last month and fellow Nobel prize-winner Lars Peter Hansen described U.S. economic growth as “stunningly sluggish.”

Read more …

That’s why it’ll come.

• BIS Warns Rate Shock Could Spark ‘Damaging Feedback Loops’ (CNBC)

The emerging markets are at risk of “damaging feedback loops” once the world’s central banks start reining in their monetary policy and raise rates, the Bank for International Settlements (BIS) warns. BIS, known as the central bank of central banks and one of the few organizations to foresee the global financial crisis of 2008, believes that non-financial companies from emerging economies have been encouraged to increase leverage and overseas borrowing but might have been left inadequately hedged and susceptible to currency risks. “These factors have increased the risks facing these companies, implying the existence of ‘pockets of risk’ in particular sectors and jurisdictions”, Michael Chui, Ingo Fender and Vladyslav Sushko said in the organization’s new quarterly report released on Sunday. “If these risks were to materialize, adding to broader (emerging market) vulnerabilities, stress on corporate balance sheets could rapidly spill over into other sectors, inflicting losses on the corporate debt holdings of global asset managers, banks and other financial institutions.”

This could be a source of “powerful feedback loops” in the event of an exchange rate or an interest rate shock, the three economists warn. The concerns come after a so-called “taper tantrum” in May 2013, when the minutes of a Federal Reserve policy meeting sparked fears the central bank could start tapering off its $85 billion-a-month bond purchasing program. Emerging market currencies tumbled on the news as investors started to bring their dollars back to the U.S. in anticipation of higher interest rates. This gave a short and sharp insight into what could happen overseas if the yields on U.S. Treasurys suddenly spiked higher, although most expect the normalizing of interest rates to be facilitated at a smooth pace with the Federal Reserve managing market expectations and being alert to financial risks.

Read more …

Tech has a booboo.

• Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market (Bloomberg)

Beneath the U.S. stock market’s record-setting gains, trouble is stirring. About 47% of stocks in the Nasdaq Composite Index are down at least 20% from their peak in the last 12 months while more than 40% have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index, which has closed at new highs 33 times in 2014 and where less than 6% of companies are in bear markets, data compiled by Bloomberg show. The divergence shows the appetite for risk is narrowing as the Federal Reserve reins in economic stimulus after a five-year rally that added almost $16 trillion to equity values.

It’s been three years since investors saw a 10% decline in the S&P 500 and they’re starting to avoid companies that will suffer the most when the market stumbles, said Skip Aylesworth, a portfolio manager for Hennessy Funds in Boston. “The small caps have had big runs and tend to get ahead of themselves,” Aylesworth said in a Sept. 10 phone interview. Hennessy Funds oversees about $5 billion. “It’s kind of like the tortoise and the hare, and they’re the hare. But then they get expensive, and when the market corrects, they get whacked.” The proportion of technology companies, small-caps and newly listed stocks stuck in their own personal bear markets has risen from 30% in March 2013, when the overall equity market surpassed its 2007 record. S&P 500 stocks with at least 20% losses have fallen since then, the data show.

Read more …

Fool me once …

• Draghi’s $3.9 Trillion Ambition May Be a Stretch to Achieve (Bloomberg)

Mario Draghi’s €3 trillion ($3.9 trillion) ambition could be a stretch to achieve. New stimulus measures ranging from long-term loans to asset purchases probably aren’t enough to expand the European Central Bank’s balance sheet back to the size its president would like, Bloomberg’s monthly survey of economists shows. The first gauge of the ECB’s success will come this week when it issues the initial funds under a four-year lending program to banks. Draghi said this month he wants to boost the ECB’s assets to the level seen at the start of 2012, an increase of as much as €1 trillion from current levels. Investors are watching to see whether he’ll take the controversial step of large-scale quantitative easing to get there. “Draghi has put himself into a corner by announcing a quantitative target,” said Elwin de Groot, senior market economist at Rabobank. “As such, we envisage the possibility that if things don’t work out the way it’s hoped they will, the Governing Council may feel compelled to do proper QE after all.”

The ECB will allot the first funds under its so-called targeted longer-term refinancing operations on Sept. 18. The median estimate in the survey is that banks will receive €150 billion. Predictions ranged from €100 billion to €300 billion. The operation comes shortly before the end of the ECB’s Comprehensive Assessment of lenders’ balance sheets, aimed at ensuring the soundness of banks’ health. The results of the review, including a stress test, will be published next month and the ECB will start as euro-area bank supervisor in November. The ultimate value of the TLTROs, which run through 2016, and programs to buy asset-backed securities and covered bonds will be €985 billion, the Bloomberg survey shows. Against that, almost €350 billion of outstanding three-year loans made by the ECB to banks at the height of the euro-area debt crisis will mature and must be repaid by early next year. That would leave the three stimulus measures adding about a net €635 billion, well below the amount Draghi’s balance-sheet target implies.

Read more …

Get ready to get rich, Europe!

• Draghi Prods Euro Area to Ready Ground for Economic Boost (Bloomberg)

Mario Draghi is about to give the euro-area economy a jump-start. He’s asking the currency bloc’s leaders to make sure they’re in gear. Over the next six weeks, the ECB will be rolling out measures that could begin to restore the central bank’s balance sheet to the levels it had at the height of the sovereign debt crisis. At a Sept. 12-13 meeting of finance ministers in Milan, he told them his efforts would have limited impact if they didn’t make their economies ready to absorb it. With the TLTRO liquidity scheme that starts on Sept. 18, an asset-purchase plan targeted at easing access to credit next month, and the potentially cathartic end to a year-long bank health review coming before November, Draghi’s ECB is increasing the intensity of its economic support. Political leaders are beginning to follow suit.

“The new measures together with the TLTROs will have a sizable impact on our balance sheet, which is expected to move toward the size it used to have at the beginning of 2012,” Draghi told reporters on Sept. 12. “No matter what the monetary and even fiscal stimulus has been decided, we won’t see much growth coming from these measures only if there are no serious structural reforms.” Draghi arrived in Milan with political will for those reforms at risk. While there are some stirrings of fiscal stimulus that could boost growth, such as a 300 billion-euro ($389 billion) plan floated by incoming EU Commission President Jean-Claude Juncker, governments are dragging their feet on measures to make the economy more efficient. Last week France and Italy were both scolded by the EU for their lack of progress.

“We need to accelerate the implementation of our ambitious structural reform agenda,” said Jeroen Dijsselbloem, the Dutch finance minister who leads meetings of euro-area finance chiefs. “We cannot solely rely on monetary policy, but need the appropriate policy mix.” In response, finance ministers said they will “take stock” of the need to reduce the tax burden on labor when discussing member states’ draft budgets in November.

Read more …

• Scots Aren’t the Only Angry Bunch (Bloomberg)

This week’s referendum in Scotland could result in the U.K. losing almost one-third of its landmass, and 8% of its population, and, very likely, its present prime minister. In a summer rich with shocks, the breakup of a United Nations Security Council member suddenly seems more likely than the long-predicted fracturing of Iraq. Most people I spoke with when traveling through Scotland last month expected the battle for independence waged by the Scottish Nationalist Party to have been lost. Recent opinion polls, however, show that almost half of Scottish voters hope to break free of their London masters on Thursday. Their disaffection was not the work of a day. It has been in the making for at least three decades. Jason Cowley, editor of Britain’s leading political weekly, the New Statesman, correctly points out that Britain’s Conservative prime minister in the 1980s, Margaret Thatcher, did more for Scottish independence with her regime of privatization, deregulation and unfair taxation than any Scottish nationalist.

By some estimates, the deindustrialization that Thatcher presided over had more devastating effects in Scotland than in England. That’s why Thatcher’s Conservative Party is almost extinct in Scotland, and its current leaders, David Cameron, George Osborne and Boris Johnson, evoke a visceral hostility and scorn. This isn’t just class hatred for privately educated and plummy-accented Tories, or for the axis of Eton College, Rupert Murdoch’s News International and the City of London that they embody. Many Scots are unhappy, too, with the City-obsessed Labour Party, which under Tony Blair, Thatcher’s self-proclaimed heir, placed itself in the avant garde of marketization, initiating among other things the privatization of the National Health Service. Recriminations have now erupted in England as financial markets finally register the prospect of Scotland’s secession. But blaming Cameron, who fecklessly called the referendum and limited it to a binary choice, obscures the fact that the Scottish mutiny is part of a larger worldwide trend.

Read more …

Yes, but …

• Alex Salmond: No Neverendum For Scotland (NS)

One question that has risen with increasing frequency, as the Scottish independence polls have narrowed, is whether a narrow No on Thursday would result in a second referendum in the near future. With the SNP expected to remain the dominant force at Holyrood, the potential exists for a “neverendum” (the term coined by Canadian writer Josh Freed to describe the repeated votes on Quebec’s status). But asked this morning on The Andrew Marr Show, whether “if it’s a No vote by a whisker”, he could come back for another “in a few years’ time”, Alex Salmond said that it was still his view that the result would stand for “a generation.” He said: “By that what I mean is that, if you remember the previous constitutional referendum in Scotland [on devolution], there was one in 1979 and then the next one was in 1997. That’s what I mean by a generation. In my opinion, and it is just my opinion, this is a once in a generation opportunity. ”

Asked whether he could pledge that “Alex Salmond will not bring back another referendum if you don’t win this one”, he added: “Well, that’s my view. In my view this is a once in a generation, perhaps even once in a lifetime opportunity for Scotland.” But as Salmond, who will turn 60 this year, was careful to state, this is just his view. Nicola Sturgeon, the 44-year-old deputy first minister, who has emerged more clearly than ever as his heir-in-waiting during the campaign, has suggested that another referendum could be held within 15 years (a generation is usually defined as 25 years). As Harry recently noted on our new May 2015 site, the nationalists’ demographic advantage means that they would be in a strong position to win a second vote. The possibility of a neverendum is one that Alistair Darling is understandably keen to forestall. He told Marr: “The one point that I do actually agree with Alex Salmond is that I think with Thursday we’ve got to decide this for a generation. I don’t know anybody who actually wants to go through another two-and-a-half year referendum.”

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Blah.

• World Waits For White Smoke From The Fed (Reuters)

The U.S. Federal Reserve may give clearer hints on when it will hike the cost of borrowing in the United States in the coming week, as struggling Europe braces for a tight vote in Scotland on whether to leave the United Kingdom. As the U.S. economy picks up pace, its central bank is inching closer to raising interest rates, a move that will send ripples across the globe. In the euro zone, however, the European Central Bank is moving in the opposite direction in a desperate bid to rekindle growth and inflation. The United States is shaking off the hangover from a financial crisis that hammered Europe and even knocked mighty China off its stride. But the U.S. rebound, thanks in large part to cheap Fed money, now means Federal Reserve Chair Janet Yellen will have to decide when to pare back this support.

Further hints as to when the first U.S. rate hike in more than eight years will happen could come on Wednesday in a statement after the bank’s governors meet. “It does seem like a done deal that it is going to increase interest rates,” said Paul Dales of economics consultancy Capital Economics. “We are going into a new phase where the Fed is trying to bring things back to normal. It can send reverberations around the world economy.” Choosing when to increase the cost of borrowing in the world’s biggest economy – a move expected next year – is a delicate balancing act. Yellen and others will be trying to work out how to keep the economic recovery on a steady keel without stopping it before the effects of the upswing lead to higher wages.

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“92% of millennials who don’t already own a home do not plan on buying one in the future. Ever.”

• California Home Sales Collapse, Prices Hit Wall (WolfStreet)

This must be part of the explanation why home sales in the expensive parts of California, which is where most people live, are collapsing: according to a Harris Poll on behalf of electronic broker Redfin, 92% of millennials who don’t already own a home do not plan on buying one in the future. Ever. These people, now between 25 and 34, are in their peak home-buying age. They’re the much sought-after first-time buyers. They’re the foundation of the market. But not this generation. Homeownership rate among them, according to the Commerce Department, already plunged from 41% in 2008 to 36% currently; as opposed to 65% for all Americans. These folks are not “pent-up demand” accumulating on the sidelines, as the wishful thinkers have proclaimed. “Millennials who flock straight from college to San Francisco and other expensive cities are making a choice to spend their income on quadruple-digit rents and eight-dollar gourmet hot dogs from trendy food trucks,” explained Redfin San Francisco agent Mark Colwell.

“This means they’re not saving for a down payment, further removing them from the housing market.” So Redfin checked Census data to find the 20 Zip codes in the country with the highest population of educated millennials. Median household income in these neighborhoods is 50% higher than in all ZIP codes. Median home prices are on average $255,000 higher as well. And the average down payment for homes in these neighborhoods is $80,000. A down payment that is out of reach for most millennials. A new report about consumer finances by the Federal Reserve shows that the median family headed by a millennial earned $35,509 in 2013 dollars, 6% less than their counterparts in the Fed’s first survey of this type in 1989. Actually, median households headed by someone under 55 also made less than their predecessors in 1989 (this is what inflation does to real wages; FOMC members who’re clamoring for more, or any, inflation should read these reports from other corners of the Fed).

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Yup.

• ECB’s Securities Purchases A Risk For Taxpayers: German Central Banker (CNBC)

European taxpayers should not be left accountable for the securities that form part of the European Central Bank’s (ECB) new asset-purchase program, Jens Weidmann, the president of the Deutsche Bundesbank has told CNBC. The central bank is about to embark on the purchase of asset-backed securities (ABS) in an attempt to boost the region’s economy and boost inflation. This means euro zone banks would sell the ECB their loans and other types of credit that have been packaged together. The ECB has said that it would only purchase less risky “senior” tranches of securitized debts and loans, but also wants to purchase riskier “mezzanine” tranches which are deemed to be more effective. These riskier tranches would require public guarantees, according to ECB President Mario Draghi, which is the stumbling block for Weidmann, who is also a member of the ECB’s Governing Council.

“I am more skeptical about these initiatives which rely on purchasing ABSs and transferring risk from banks’ balance sheets to the taxpayer,” he told CNBC in Milan on Saturday. ABS became infamous in the latter part of the last decade when the complex bundles of securities were believed to have played a key role in the global financial crash of 2008. In a speech last week Draghi said the “senior” tranches of ABS can be considered high-quality assets. He cited data from the Association of Financial Markets in Europe which estimated that only 0.12% of European residential mortgage-backed securities left outstanding in mid-2007 had defaulted since that date. Weidmann told CNBC that the revival of the ABS market can be beneficial to the economy, adding that it “liberates liquidity and liberates capital in the banks’ balance sheet.”

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With the kind of personal debt the Swedes have, such turmoil may not end well.

• Election Throws Sweden Into Turmoil as Nationalists Advance (Bloomberg)

Sweden’s election threw the nation’s political establishment into turmoil as backing for the anti-immigration Sweden Democrats more than doubled, leaving the largest Nordic economy facing a hung parliament. The three-party Social Democratic opposition led by Stefan Loefven won 43.7%, versus 39.3% for the four-party government of Prime Minister Fredrik Reinfeldt, with all the votes counted. The Sweden Democrats garnered 12.9% to become the third largest party. The result, which sent the krona lower, marks an end to eight years of rule by Reinfeldt’s conservative-led coalition, which delivered successive rounds of tax cuts without adding to Sweden’s debt.

The premier said he will hand in his resignation today as the responsibility of forming a new government falls to the Social Democrats, which won the most votes. “We have a new unique parliamentary situation in Sweden,” Loefven said at an election-night party. He vowed to keep the Sweden Democrats from influence, opening the doors to government parties to “put the interest of Sweden first.” Traders and investors have been bracing themselves for market turbulence amid signs the election would fail to produce a clear winner.

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Boom boom.

• Australians Face Repayment Shock on High-Risk Mortgages (Bloomberg)

Sydney mortgage broker Luke Gardiner, who started his business just last year, is already overwhelmed with customers. “There has not been a slow period in the last 12 months,” said the broker, whose Gardiner Financial Services Pty arranged more than A$5 million ($4.5 million) in mortgages in both June and July, about A$1 million more than in May. “I’ve been waiting for a break, but it hasn’t come.” Driving the growth is demand for high-risk mortgages such as interest-only loans and financing to buy rental properties. That’s setting the stage for a jump in mortgage delinquencies when interest rates increase from record lows, Moody’s Investors Service said this month. The easier terms are fueling housing demand, boosting prices 11% in major cities in August from a year earlier. “There has been an advent of higher-risk lending,” said Nader Naeimi, head of dynamic asset allocation at Sydney-based AMP Capital Investors Ltd., which manages about A$144 billion. The regulator “hasn’t been able to curb it.”

The Australian Prudential Regulation Authority in May warned of growing evidence of “lending with higher risk characteristics.” It issued draft guidelines urging lenders to assess whether borrowers were capable of repaying mortgages at higher interest rates. It also asked banks to conduct regular stress tests on its loan books to determine the impact of rising unemployment, interest rates and falling property prices. Interest-only mortgages jumped to 43% of all new home lending in the three months through June 30, and credit to buy rental properties climbed to 38%, both record highs, according to APRA data starting in the first quarter of 2008. “The higher proportion of investment and interest-only lending suggests that APRA’s efforts have not slowed a broad increase in higher-risk exposures,” Ilya Serov, senior credit officer at Moody’s, wrote in a Sept. 1 report.

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Time to go, François.

• France Braces For A ‘Tough Autumn’ (CNBC)

With all the sound and fury coming from the debate over the future of Scotland, the tough choices facing France appears to have slipped off the radar. A confidence vote on Prime Minister Manuel Valls’ new cabinet, scheduled for Tuesday, equally has the potential to shake up markets, analysts warn. President Francois Hollande announced the shake-up of his cabinet at the end of August – a upheaval that saw left-leaning Economy Minister Arnaud Montebourg depart. This attempt to regain a handle on power by the embattled President, who is currently under fire following the publication of a headline-grabbing memoir by his former partner which claimed he didn’t like poor people, may yet backfire. While the government is expected to pass through, there are likely to be a few key abstentions from members of Hollande’s Socialist Party (PS), which will emphasize the fragility of the government as it tries to push through economic reforms. “The vote is likely to display the growing rift inside the PS,” Antonio Barroso, senior vice president at Teneo Intelligence, wrote in a research note Monday.

It could even lead to the dissolution of the government, he warned, as he forecast a “tough autumn” for the country’s government. “It is likely that rogue deputies will continue to defy Valls in the coming months, with the 2015 budget being the first major test that the PM will face in the coming weeks,” Barroso wrote. Hollande’s budget is increasingly worrying to investors. The French economy, as measured in gross domestic product, is forecast to grow 0.4% on average this year and 1% in 2015 by the government. At the same time, inflation is expected to remain low and the government is planning to cut expenditure, but not increase taxes. This will mean that the public deficit to GDP ratio will rise to 4.4% this year, according to Barclays economists’ calculations, and that France will not hit the 3% public deficit to GDP target until 2017 – which could get it in trouble with its European Union partners.

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China can lie with the best.

• Li’s Options Narrow as China Growth Slowdown Deepens (Bloomberg)

Chinese Premier Li Keqiang’s options have narrowed: stimulate or miss his 2014 growth target. The weakest industrial-output expansion since the global financial crisis, and moderating investment and retail sales growth shown in data released Sept. 13, underscore the risks of a deepening economic slowdown led by a slumping property market. Stocks, metals and currencies including the Australian dollar fell as analysts cut their forecasts for 2014 growth. “This is a pretty important wakeup call that they need to do more,” said Helen Qiao, chief Greater China economist at Morgan Stanley in Hong Kong. “The government is trying very hard to reach this particular target rate, which will not necessarily be mission impossible if they roll out more easing measures starting from now. The risk is they could underestimate how much more easing tools they need.”

The slowdown in August economic data that included a second straight decline in imports and a 40% drop in the broadest measure of new credit will test Li’s resolve to avoid stronger monetary stimulus to meet his 7.5% goal. An unprecedented lending spree from 2009 to 2013 led to a surge in debt on a scale that’s triggered banking crises in other economies, according to the International Monetary Fund, underscoring the premier’s reluctance to open the spigot. Growth in gross domestic product may slip to 6.5% to 7% in the third quarter if September numbers are also weak, Australia & New Zealand Banking Group analysts estimate, down from 7.5% in the April-June period. A monthly GDP tracker compiled by Bloomberg shows the economy expanding 6.3% in August from a year earlier, down from 7.4% in July. Royal Bank of Scotland cut its forecast for China’s 2014 economic growth to 7.2% from 7.6%, citing weak momentum indicated by the August data.

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That should read: they will.

• Bad Loans Could Bust China (Bloomberg)

The risk of what Nobel laureate Paul Krugman calls “Japanification” – a semi-permanent economic funk – has haunted China for at least a couple years now. Last week a Bank of America Merrill Lynch report again asked, “Will China Repeat Japan’s Experience?” Let’s dispense with the suspense: Yes, China very likely will. And the outcome will have far more serious global implications than Krugman’s main worry, which focuses on the chances of stagnation in Europe. China’s “severely under-capitalized financial system,” “imbalanced growth” and chronic “overcapacity” all remind Merrill Lynch analysts Naoki Kamiyama and David Cui of Japan in 1992, when its bubble troubles first began to paralyze the economy. China is even more reliant on exports than Japan was in the 1990s, and its all-important property market now “may be tipping over.”

Most worrying is the shaky banking sector. What concerns Kamiyama and Cui is the lack of bold action in Beijing at a time when the scale of Chinese bad debt may be higher than Japan’s ever was; they believe non-performing loan ratios are “significantly into double-digit” territory. In the first half of this year, the analysts estimate, commercial banks had to book larger non-performing loan liabilities than for all of 2013. Mind you, this comes even as the government claims financial imbalances are being addressed. As recently as July, total social financing, a proxy for debt, was still growing by almost 1% y-o-y, a rate well above China’s nominal GDP growth.

In other words, China has spent much of this year adding to its debt and credit bubbles – not curbing them. If this were 1992, China could simply force state-owned banks and enterprises to rein in excesses and ride out the resulting modest hit to gross domestic product. But China passed the point of no return after the crash of Lehman Brothers in 2008, when it unleashed a $652 billion stimulus package, followed by untold smaller ones since. The moves put China, in the words of New York hedge-fund manager James Chanos, on a “treadmill to hell.” If Beijing were to attempt a broad credit shakeout now, virtually every sector of the economy would suffer. The risks of social unrest would soar.

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Somone get rid of these clowns.

• Kiev Threatens To Restart Nuclear Weapons Program (RT)

Kiev’s promise to restart its nuclear weapons program if it doesn’t get enough support from the West is completely insane, be it real or just an empty threat, political commentator Daniel Patrick Welch told RT. “If we cannot protect Ukraine today, if the world doesn’t help us, we will have to go back to the development of nuclear weapons, which will protect us from Russia,” Ukrainian Defense Minister Valery Geletey said in an interview with Ukrainian TV, also claiming that NATO members have already started supplying Kiev with conventional weapons.

RT: Is the prospect of a nuclear Ukraine something to be concerned about?

Daniel Patrick Welch: You know, your guess is as good as mine. I think what it shows first and foremost is that the inmates are fully in charge of the asylum here. This is a completely insane threat. If it is real then it is suicidal. And if it is a threat then it is petulant. In the same briefing Geletey mentioned that arms were starting to come in from their new friends in the NATO alliance. So it really is just a matter of watching, and speaks of the fragility of this truce. There is nothing there. These people in Kiev are desperate to keep the war on Russia going at all possible costs.

RT: And Ukraine’s neighboring countries, what do they have to say about that?

DPW: Well, I think slowly, I mean these people, some of them – Slovakia, to some extent the Czechs, Hungary, are creeping out of under the jackboot of American control. The Americans obviously put them up to everything they say. They know in advance. They know exactly what he is going to say. Now the Eastern European bordering states have to be realizing that they have backed a really bad horse in this race. And I can’t imagine that this isn’t seen as something incredibly destabilizing and dangerous.

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Then again, Kiev has lied about everything lese.

• Kiev Says NATO Members Have Started Supplying Weapons (RT)

NATO member states have started supplying weapons to Ukraine, the country’s Defense Minister said on TV. His comments came a few days after a similar statement by a Ukrainian presidential aide sparked a diplomatic scandal and a rash of denials. In an interview with Channel 5, Ukrainian Defense Minister Valery Geletey said that he had held verbal consultations with the defense ministers of the “leading countries of the world, those that can help us, and they heard us. We have the supply of arms under way.” “This process has begun, and I feel that this is exactly the way we need to go,” the minister said. Ukrainian President Petro Poroshenko, who attended the Sept. 4-5 NATO summit in Wales, announced that he had negotiated direct modern weapons supplies with a number of NATO member states.

Poroshenko claimed that some of the NATO member states said during bilateral consultations they are ready to supply Ukraine with lethal and non-lethal arms, including “high precision weapons,” as well as with medical equipment. NATO has had repeatedly said that the alliance is not going to supply any weapons or military equipment to Ukraine. At the same time, NATO Secretary-General Anders Fogh Rasmussen said that the alliance would not interfere if member states made decisions of their own regarding arms supply to Ukraine. When Poroshenko’s aide Yury Lutsenko wrote on his Facebook page that the US, along with France, Italy, Poland and Norway, would supply modern weapons to Ukraine, the news prompted all the countries mentioned in Lutsenko’s post to say they had no information about supplies.

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What a stupid denial this is.

• Glenn Greenwald Accuses New Zealand PM Over Spying Claims (Guardian)

An already tumultuous New Zealand election campaign took another dramatic turn less than a week before polling day when the prime minister, John Key, responded angrily to claims by the American journalist Glenn Greenwald that he had been “deceiving the public” over assurances on spying. Greenwald, who is visiting New Zealand at the invitation of the German internet entrepreneur Kim Dotcom, says he will produce documents provided by the NSA whistleblower Edward Snowden that prove the New Zealand government approved mass surveillance of its residents by the Government Communications Security Bureau (GCSB), New Zealand’s equivalent of the NSA. Dotcom, who is sought for extradition from New Zealand by the US on copyright charges relating to his now defunct Megaupload file-storage site, is hosting an event in Auckland on Monday called The Moment of Truth, which doubles as a rally for the Dotcom-founded Internet party.

Greenwald has promised to produce his evidence at the event, while Dotcom is pledging to show further links between Key and Hollywood relating to his own case. Adding to the spectacle, Julian Assange is expected to beam in via video link from the Ecuadorian embassy in London, while Dotcom has hinted that Snowden may also appear on the big screen from Moscow. In media interviews, Key has repeatedly dismissed Greenwald as “Dotcom’s little henchman”. Speaking on TVNZ’s Q+A programme, he acknowledged that the government had in 2012 considered a “mass cyber-protection” proposal, which he said was “really a Norton antivirus at a very high level”, but rejected it. Greenwald, he argued, would therefore have seen incomplete material. “This is what happens when you hack in to illegal information, when you wander down to New Zealand six days before an election trying to do Dotcom’s bidding – what happens is you get half the story,” said Key.

He said he was ready to declassify secret documents to support his argument. “There is no ambiguity here. There is no and there never has been any mass surveillance.” Greenwald responded by saying: “I absolutely stand by everything I’ve said.” He told 3 News: “They did far more than look at the idea; they adopted the idea and took steps to make it a reality.” He added: “I’ve done reporting of surveillance all over the world and a lot of governments haven’t liked what I’ve said, but I’ve never seen a head of government lose their dignity and get down in the mud and start chucking names to discredit the journalist in order to discredit the journalism.”

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One of the world’s oldest living species …

• Wild Chinese Sturgeon On Brink Of Extinction In Polluted Yangtze River (AFP)

The fish has survived for 140m years but failed to reproduce last year according to Chinese researchers The wild Chinese sturgeon is at risk of extinction after none of the rare fish were detected reproducing naturally in the polluted and crowded Yangtze river last year. One of the world’s oldest living species, the wild Chinese sturgeon is thought to have existed for more than 140m years but has seen its numbers crash as China’s economic boom has brought pollution, dams and boat traffic along the world’s third-longest river. For the first time since researchers began keeping records 32 years ago, there was no natural reproduction of wild Chinese sturgeon in 2013, according to a report published by the Chinese Academy of Fishery Sciences. No eggs were found to have been laid by wild sturgeons in an area in central China’s Hubei province, and no young sturgeons were found swimming along the Yangtze toward the sea in August, the month when they typically do so.

“No natural reproduction means that the sturgeons would not expand its population and without protection, they might risk extinction,” Wei Qiwei, an investigator with the academy, told China’s official Xinhua news agency on Saturday. The fish is classed as “critically endangered” on the International Union for the Conservation of Nature’s “red list” of threatened species, just one level ahead of “extinct in the wild”. Only around 100 of the sturgeon remain, Wei said, compared with several thousand in the 1980s. Chinese authorities have built dozens of dams – including the world’s largest, the Three Gorges – along the Yangtze river, which campaigners say have led to environmental degradation and disrupted the habitats of a range of endangered species. Many sturgeon have also been killed, injured by ship propellers or after becoming tangled in fishermen’s nets.

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Debt Rattle 9/11 2014: Shut Up George Soros

Sep 112014
 
 September 11, 2014  Posted by at 8:25 pm Finance Tagged with: , , , , ,  10 Responses »


DPC Real Estate Exchange from Dime Bank building, Detroit 1918

Someone should shut up George Soros. The Financial Times offers him a podium because he’s rich, and if you’re rich, people today think you must be smart, and right, as well. We admire money, not brains; indeed, we confuse the two.

George is not right. George is much more old than right. George writes a plea for the United Kingdom and the European Union that misses on just about every single point. Because George lives in the past. When he was not yet so old.

If the Scots want to break free from the United Kingdom, that is their god – or UN, whichever comes first -given right. And people like Soros need to butt out of that discussion.

Britain Needs Greater Unity Not A Messy Break-up

This is the worst possible time for Britain to consider leaving the EU – or for Scotland to break with Britain. The EU is an unfinished project of European states that have sacrificed part of their sovereignty to form an ever-closer union based on shared values and ideals. Those shared values are under attack on multiple fronts. Russia’s undeclared war against Ukraine is perhaps the most immediate example but it is by no means the only one. Resurgent nationalism and illiberal democracy are on the rise within Europe, at its borders and around the globe.

The EU is not an unfinished, but a failed project. It wasn’t, and isn’t, based on values and ideals, but on money. It may have once been a good idea, but it’s run many a mile off the rails. The EU, like NATO, should be disbanded. They are both organizations that have accumulated so much power that this can only possibly backfire on the people they represent.

They’re organizations in which power accumulates by itself, they can’t stop accummulating ever more of it because there are no backstops and no breaks built into their statutes. ‘Resurgent nationalism’, in Europe and elsewhere, is a direct effect of this, and the very last thing that should happen, if we know what’s good for us, is for the EU and NATO to be employed to fight against it.

How do we know, how can we be so sure? This is how: While the EU announces new sanctions against Russia, to go into effect tomorrow, and NATO builds up its ‘presence’ on Russia’s borders, Amnesty releases a report that even gets covered by the mother of all MSM’s, Newsweek:

Ukrainian Nationalist Volunteers Committing ‘ISIS-Style’ War Crimes

Groups of right-wing Ukrainian nationalists are committing war crimes in the rebel-held territories of Eastern Ukraine, according to a report from Amnesty International, as evidence emerged in local media of the volunteer militias beheading their victims. Armed volunteers who refer to themselves as the Aidar battalion “have been involved in widespread abuses, including abductions, unlawful detention, ill-treatment, theft, extortion, and possible executions”, Amnesty said.

The organisation has also published a report detailing similar alleged atrocities committed by pro-Russian militants, highlighting the brutality of the conflict which has claimed over 3,000 lives. Amnesty’s statement came before images of what appeared to be the severed heads of two civilians’ started circulating on social media today, identified by Russian news channel NTV as the heads of rebel hostages.

There are over 30 pro-nationalist, volunteer battalions similar to Aidar, such as Ukraina, DND Metinvest and Kiev 1, all funded by private investors. The Aidar battalion is publicly backed by Ukrainian oligarch Ihor Kolomoyskyi, who also funds the Azov, Donbas, Dnepr 1, Dnepr 2 volunteer battalions, operating under orders from Kiev. Last spring Kolomoyskyi offered a bounty of $10,000 of his own money for each killed Russian “saboteur”.

That is not nothing. That is a very strong condemnation of a whole range of private armies that have been executing war crimes against Ukraine citizens, private armies ‘operating under orders from Kiev’. Financed by ‘us’. And yes, Newsweek mentions ‘alleged atrocities’ committed by rebel forces (still called pro-Russian so we can imply Putin being involved). But even if that is true, it does not, not now and not ever, make our support of private armies beheading their own co-citizens ‘alright’.

These people have been able to commit their crimes because we, the US, EU and NATO, have backed them. This is not about, as George Soros claims, ‘Russia’s undeclared war against Ukraine’, this is about Kiev’s loudly declared war on its own people. Which ‘we’, along with a bunch of slumdog warlord billionaires, encouraged. And paid for.

That is why and how we know that the EU and NATO should no longer be allowed to exist. If we don’t disband both, we will, so to speak, never go to heaven, because if there is a god, (s)he will not look down kindly upon this. NATO and EU inflict too much damage on too many people, in the case of the EU economically (PIIGS), politically and now militarily (Ukraine), and in the case of NATO – obviously – militarily around the globe. NATO has degenerated from a keeper of the peace into a war mongering force, a.k.a. a means for the US to make other nations pay for its global hegemony dreams.

So we have that Amnesty report about Kiev-directed war crimes, and what do you think the Kiev parliament has as an answer to that? Well, this:

War Crimes Acceptable? Parliament Mulls Amnesty For Kiev’s Troops In East Ukraine

The Ukrainian parliament is to debate a law on amnesty for Ukrainian troops who have committed war crimes in the course of military actions in Eastern Ukraine. A bill on amnesty for military personnel who committed war crimes during the military crackdown in Eastern Ukraine was introduced in the Rada (the Ukrainian parliament) on Wednesday, its website says. The bill assumes the discharge of legal responsibility and punishment of military staff and “other people” for the actions which “bear the marks of war crime.”

The Amnesty researchers interviewed dozens of victims and witnesses of the abuses and crimes, as well as local officials, police and army commanders in Lugansk area. The watchdog pointed out that while formally operating under the command of the Ukrainian security forces combined headquarters in the region, members of the Aidar battalion act “with virtually no oversight or control, and local police are either unwilling or unable to address the abuses.”

If you live in the west and you aspire to go to heaven, you better make sure this kind of stuff, and these kinds of people, are no longer backed up by those you elect to represent you and spend you tax money. And even if you don’t believe in heaven, you should at least have an inch of decency left in your life, and that too would make it imperative that you stop these atrocities being committed in your name.

Which brings me back to Soros.

Britain Needs Greater Unity Not A Messy Break-up

Since world war two the European powers, along with the US, have been the main supporters of the prevailing international order. Yet, in recent years, overwhelmed by the euro crisis, Europe has turned inward, diminishing its ability to play a forceful role in international affairs. To make matters worse, the US has done the same, if for different reasons. Their preoccupation with domestic matters has created a vacuum that ambitious regional powers have sought to fill.

No George, you have things upside down. It’s the ‘prevailing international order’ that has caused the crisis. Not prevented it.

The resulting breakdown of international governance has given rise to a plethora of unresolved crises around the globe. The breakdown is most acute in the Middle East. The sudden emergence of the Islamic State in Iraq and the Levant, or Isis, provides the most gruesome example of how far it can go and how much human suffering it can cause. With the Russian invasion of Ukraine, military conflict has spread to Europe. Two radically different forms of government are competing for ascendancy. The EU stands for principles of liberal democracy, international governance and the rule of law.

Again, no George. And again, you got it upside down.. It’s not the breakdown of international governance – in the model of it we have today – , but its very existence that ‘has given rise to a plethora of unresolved crises around the globe’. There’s nothing wrong with international governance by itself, the problem is in the way we’ve set it up, and what we thus have allowed it to turn into.

Too much power gets concentrated at the top – this is just as true for the US as well -, and the shit that floats to the top of that should never be trusted with that kind of power. They should at best be allowed to run rural Five and Dimes, and only under strict supervision.

In Russia, President Vladimir Putin maintains the outward appearance of democracy by exploiting a narrative of ethnic and religious nationalism to generate popular support for his corrupt, authoritarian regime.

It’s not Putin who started this, George, no matter how much your past may have warned you off about Russians. Putin is not the Stalin you once knew. It’s ‘us’ who started this.

As a major power and global financial centre, Britain ought to be centrally involved in crafting a European response to this threat. But like the US and the EU itself, Britain has also been distracted by internal matters. David Cameron has been persuaded by anti-European zeal – not least within his own party – to put UK membership in the EU to a vote in 2017. A poll on Scottish independence is only days away. Just when Britain should be confronting grave threats to its way of life, it is preoccupied with divorce of one type or another. Divorce is always messy.

What can I say, George? Where do you think this ‘anti-European zeal’ comes from? As for that divorce thing, how many wives have you had? You of all people should know a divorce is not necessarily all that bad. Messy, perhaps.

For Scotland and the rest of the UK to enter into a currency union without a political union, after the euro crisis has demonstrated all the pitfalls, would be a retrograde step that neither side should contemplate. Yet without it, an independent Scotland could not benefit from the low interest rates that a strong pound has brought. These considerations ought to outweigh whatever possible benefits independence might bring.

Retrogade, you said? Am I right to interpret that to say that increased centralization is always a good thing in your view? And as for ‘benefit from the low interest rates that a strong pound has brought’, do you really think that ultra low rates have been such a blessing for the world? Or do you perhaps merely mean to imply they have been for you? In my view, an economy that can exist only through severe central bank manipulation (which is what ultra low rates represent) doesn’t have a long life expectancy.

[..] Britain has always played a balancing role between hostile blocs. Its absence would greatly diminish the weight of the EU in the world.

Oh come on, Britain has always been blood thirsty, that’s how it built an empire. Balancing role my donkey. And as for diminishing the weight of the EU, that’s something I’m all for.

The EU has proved to be the best guarantor of peace and human security since the end of the second world war. The importance of preserving the shared values underpinning a whole way of life far outweigh any possible advantages of independence. The difficult times we are facing call for increased unity, not divorce.

Georgie boy, this is not 1950 anymore. In Ukraine, the EU has proven itself the opposite of ‘the best guarantor of peace and human security’. It has supported, and still does, depraved private armies. The second world war is long gone, there are new problems today.

What has been proven since WWII is that increased unity/centralization is NOT the answer to everything, it indeed turns into a problem all by and of itself. That is what the EU and NATO represent. the problem of ‘increased unity’. Which is that power doesn’t stop accumulating, and the wrong kind of people scoop it up to execute their depraved power games.

[..] to vote for independence from the UK now would be to prematurely surrender Scottish leverage in London, and Britain’s leverage in the world.

Scotland doesn’t want leverage in London, it wants leverage in Edinburgh. Only 7% of the taxes Scots pay get distributed by their own government, the other 93% (!) goes through the hands of London. What’s wrong with no longer wanting that? What’s wrong with a dozen other European regions not wanting it?

Yes, there are cases in which extreme right will try to decide things in its favor. That may not be a good thing. But US, NATO and EU quite openly encourage just that in Ukraine. So what exactly are we talking about here? Are we going to tell the Scots and Catalans and Basque that they can’t determine their own lives, in the same way we tell that to the Donbass?

George, you’re 84, and your time is up. When it comes to – attempts at – decision making, that is. I hope you’ll live to be over 124, but leave younger people’s decisions alone. This is not 1948 anymore, and it’s not even 1984 either.

The solution to these issues is not in more centralization, be it the UK, the EU, or globalization in general. Centralization will always, of necessity, be a problem in itself. The only thing we can do, no matter how large the setting, is set up a system, based on law, that prevents the wrong kind of people from floating to the top. And the more centralized power becomes, the more harm these wrong people can do.

In the meantime, let’s let Scots be Scots and Catalans, Catalans. The worst they can do by becoming independent is accelerate the demise of an already bankrupt financial and political system.

• Separatists Threaten To Rip Europe Apart (AEP)

Europe is disintegrating. Two large and ancient kingdoms are near the point of rupture as Spain follows Britain into constitutional crisis, joined like Siamese twins. The post-Habsburg order further east is suddenly prey to a corrosive notion that settled borders are up for grabs. “Problems frozen for decades are warming up again,” said Giles Merritt, from Friends of Europe in Brussels. The best we can hope for – should tribalism prevail – is German political hegemony in Europe. The German people so far remain a bastion of rationalism, holding together as others tear themselves apart. The French are too paralysed by economic depression and the collapse of the Hollande presidency to play any serious role. The far worse outcome is that even Germany succumbs to centrifugal forces, leaving Europe bereft of coherent leadership, a parochial patchwork, wallowing in victimhood and decline, defenceless against a revanchist Russia that plays by different rules.

Former Nato chief Lord Robertson warns that a British break-up is doubly dangerous, setting off “Balkanisation” dominoes across Europe, and amounting to a body blow for global security at a time when the Middle East is out of control and China is testing its power in Asian waters. He warns that the residual UK would be distracted for years by messy divorce, a diminished power, grappling with constitutional wreckage, likely to face a resurgence of Ulster’s demons. Scotland’s refusal to allow nuclear weapons on its soil means that no US warship would be able to dock in Scottish ports, while its withdrawal from all power projection overseas would push British fighting capability below the point of critical mass. “The world has not yet caught up with the full and dramatic implications of what is going on. For the second military power in the West to shatter would be cataclysmic in geopolitical terms. Nobody should underestimate the effect this would have on existing global balances,” he said.

[..] The Scottish precedent threatens – or promises, depending on your view – to set off a chain reaction. “If the Scots votes Yes, it will be an earthquake in Spain,” said Quim Aranda, from the Catalan newspaper Punt Avui. Madrid has declared Catalonia’s secession to be illegal, if not treason. Premier Mariano Rajoy has resorted to court action to stop Catalonia’s 7.5m people – the richer part of Spain – holding a pre-referendum vote for independence on November 9. Barcelona is already covered with posters calling for civil disobedience, some evoking Martin Luther King, some more belligerent. There is a hard edge to this dispute, with echoes of the Civil War. One serving military officer has openly spoken of “1936”, warning Catalan separatists not to awaken the “sleeping lion”. The association of retired army officers has called for treason trials in military courts for anybody promoting the break-up of Spain, a threat since disavowed by the current high command. Rioja’s premier, Pedro Sanz from the ruling Partido Popular, seemed to threaten a massacre, warning Catalans that they “will die” (morirán) if they persist in playing with fire. That will not stop 1m or more taking to the streets this week for Catalonia’s “Diada”, the national day, evoking the fall of Barcelona to the Bourbons in 1714.

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• Catalans Today Demonstrate And Demand Right To Hold Referendum (Guardian)

Hundreds of thousands of Catalans will take to the streets on Thursday, the National Day of Catalonia, to demand the right to hold a referendum on their future, with some hoping that the sudden surge in support for Scottish independence might boost their cause. The demonstration will take the form of a huge “v” in the north of Barcelona, where two major thoroughfares converge. The v stands for via, vote and voluntat (will), though implicitly for victory, too. While victory may not be at hand, the separatists are gaining in confidence as their ranks continue to grow, helped by the obduracy of the Madrid government, which refuses to discuss the issue. The Catalan government has called a referendum on independence for the region of 7 million people on 9 November. Madrid said the vote will be illegal. Retired teacher Oriol Canals said: “The government treats the referendum as illegal and unconstitutional. It has subjected the independence movement to every kind of pressure, coercion and threats. As a result, the movement has grown by 20% in the past four years.”

Support for independence now stands at between 40-45%. 11 September marks the 300th anniversary of their loss of independence. Many eyes are now on Scotland and there is much talk about how the outcome of the referendum will influence the course of events here. “There are many similarities, such as the uncertainties about the economy, the currency or whether we will belong to the European Union or Nato,” said Larry Magrinyà, a Catalan who is married to a Scot. “On the other hand, Scotland enjoys greater recognition as a nation and it has, for example, its own football and rugby teams.” Magrinyà said that, while a yes vote would put wind in the separatists’ sails, it would very likely make the Spanish government even more determined to prevent a similar outcome in Catalonia. “The fact that the British government is allowing the referendum to go ahead shows that it is far more democratic than Spain,” said Mar Carrera, a communications specialist. “An key difference with Scotland is here the independence movement is capitalising more effectively on social and cultural discontent. “It’s important to bear in mind that the Catalan independence movement is heterogeneous, ranging from members of the rightwing governing party to the far left.”

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• Scotland Nationalists Claim U.K. Oil in 40-Year Campaign (Bloomberg)

The discovery of North Sea riches in the 1970s planted the seed of modern-day Scottish nationalism as supporters of independence cried “It’s our oil!” Four decades later, nothing will be more important to the economic future of Scotland than the oil industry should the country vote to end the 307-year union with the rest of the U.K. Reserves of oil and gas would be split, possibly along the so-called median line, already used to allocate fishing rights. The division would hand the Scots about 96% of annual oil production and 47% of the gas, according to estimates for 2012 by the University of Aberdeen’s Alex Kemp and Linda Stephen cited by the Scottish government.

With a week to go before the Sept. 18 referendum and opinion polls showing the result is too close to call, the question is whether oil production, which has plummeted about 40% in four years, could finance a newly created state. “There’s a lot of talk of massive new developments in the North Sea but the trend in output has been downwards for the last 10 years at least,” David Bell, professor of economics at Stirling University, said in an interview on Sept. 9.

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• Energy Minister: Half of Scottish Oil Reserves Yet to Be Exploited (RIA)

Mark Hirst – Scotland’s oil and gas sector is facing a bright future as half of oil reserves remain to be exploited, the Scottish Government’s Minister for Energy, Enterprise and Tourism Fergus Ewing said Wednesday, commenting on a new study. Earlier, world leading oil expert Professor Alex Kemp, by using detailed financial modelling, predicted significant discoveries in Scottish oil sector made over the next 30 years. “His new predictions – based on that modelling – show a bright future for Scotland’s oil and gas sector for decades to come – with 99 new economic discoveries over the next three decades,” Ewing told RIA Novosti.

The minister said the new findings, contained in a new paper entitled, “Illuminating the Future Potential from the North Sea”, showed that half of the remaining wealth from Scotland’s oil remains to be exploited. “In value terms half the wealth from Scotland’s oil remains and by grabbing the independence opportunity later this month we can put an end to poor UK stewardship of this vital resource,” Ewing said. “Scotland deserves better and only a Yes vote on September 18 will deliver the powers needed to get the maximum benefit from Scotland’s natural resources,” Ewing added.

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• Oil Demand Growth Slips To ‘Remarkable’ 2.5-Year Low (CNBC)

Demand growth in the oil markets will be more subdued than previously expected, according to the International Energy Agency, which has once again downgraded its projections for the rest of the year. “The recent slowdown in demand growth is nothing short of remarkable,” the IEA said in a new monthly report on Thursday morning. “While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued.” Its latest statistics show that demand growth slowed to below 500,000 barrels per day (b/d) in the second half of 2014 on a yearly basis. This was its lowest level in two and a half years, it added, leading the organization to revise demand projections downwards for the third quarter.

Additionally, global oil demand growth for has been lowered to 900,000 million b/d in 2014 and 1.2 million b/d for 2015. The pronounced slowdown in demand growth and a weaker outlook for Europe and China underpinned these changes, it said. In August, the IEA lowered its forecast for 2014, to 1.0 million b/d. “While festering conflicts in Iraq and Libya show no sign of abating, their effect on global oil market balances and prices remains muted amid weakening oil demand growth and plentiful supply,” it said in the report. “U.S. production continues to surge, and OPEC (Organization of the Petroleum Exporting Countries) output remains above the group’s official 30 million b/d supply target.” The euro zone was singled out for particular attention, with the IEA saying that the “macroeconomic malaise” experienced across much of Europe has been the dominant downside influence in terms of global demand.

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• Saudis Cut Oil Production as Brent Slips Below $100 a Barrel (Bloomberg)

Saudi Arabia, the world’s biggest crude exporter, said it cut production by 408,000 barrels a day last month amid signs of a supply glut and Brent oil trading below $100 a barrel. The Saudi reduction came as other members such as Nigeria and Kuwait said they increased output in submissions to the Organization of Petroleum Exporting Countries, according to the group’s monthly oil market report yesterday. Total production by the 12-member group climbed by 231,000 barrels a day to 30.347 million last month, based on secondary sources, the report showed. The Saudi decline is the largest monthly drop in production since December 2012, according to data compiled by Bloomberg. Other estimates collated by OPEC, based on secondary sources, show that the kingdom cut output by 55,200 barrels to 9.86 million a day last month.

“It does illustrate a desire not to oversupply the market, and it does illustrate they are actively defending $100 a barrel,” Mike Wittner, head of oil market research at Societe Generale SA (GLE), said by phone yesterday from New York. “A good chunk of that 400,000 cut was probably in crude exports, which is clearly supportive of prices.” Brent, a benchmark for more than half the world’s oil, fell to a 17-month low this week as supplies from Libya rebounded, and amid speculation of an oversupply. Banks including Citigroup Inc. (C) and UBS AG (UBSN) said the price decline would increase the chances of Saudi Arabia curbing supplies. “No switch gets flipped when the price goes from $100 to $99,” Wittner said. “It’s a soft floor. When they see a period of sustained weakness, and when there’s physical oversupply of light, sweet crude in the Atlantic basin, the Saudis are going to try and balance the market.”

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• Exxon, Shell Oil Deals With Russia Imperiled by Sanctions (Bloomberg)

The U.S. and European Union are poised to halt billions of dollars in oil exploration in Russia by the world’s largest energy companies in sanctions that would cut deeper than previously disclosed. The new sanctions over Ukraine would prohibit U.S. and European cooperation in searching Russia’s Arctic, deep seas or shale formations for crude, according to three U.S. officials who spoke on condition of anonymity because the measures haven’t been made public. If implemented, they would affect companies from Dallas to London, including Exxon Mobil and BP. EU ambassadors met today and will resume deliberations tomorrow in Brussels on whether to trigger added sanctions or wait longer to see if a cease-fire holds between Ukraine and pro-Russian separatists and if Russia backs moves toward a longer-term agreement.

Once the EU implemented the new ban on sharing energy technology and services, the U.S. would follow suit with a similar package, including barring the export of U.S. gear and expertise for the specialized exploration that the Russians are unequipped to pursue on their own, the U.S. officials said. EU governments agreed on these oil-related sanctions on Sept. 8 as part of a wider package of measures intended to hobble Russia’s finance, defense and energy industries, pending evaluation of the cease-fire declared in Ukraine last week, according to two European officials who also spoke on condition that they not be named. The added sanctions wouldn’t interfere with drilling and production from conventional land-based wells and those along the shallow edges of inland seas, some of which have been pumping crude for decades. The sanctions target reserves that wouldn’t begin providing crude to global energy markets for five to 10 years.

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• What Petrodollar: Russia, China To Create SWIFT Alternative (Zero Hedge)

If, when in February Victoria Nuland infamously launched a (not so) covert campaign to replace the ruling Ukraine president oblivious to the human casualties, resulting in a civil war in east Ukraine, NATO encroachment along the borders of Russia, and a near-terminal escalation in hostilities between Ukraine, Russian, and various regional NATO members, the US intention was to provoke the Kremlin so hard that the nation with the world’s largest reserves of mineral and energy resources would jettison the US Dollar and in the process begin the unraveling of the USD reserve currency status (as much as Jared Bernstein desires just such an outcome) it succeeded and then some. Because in the end it may have pushed not just Russia into the anti-petrodollar camp… it appears to have forced China in it as well.

According to Itar-Tass, Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT, First Deputy Prime Minister Igor Shuvalov told PRIME on Wednesday after negotiations in Beijing. “Yes, we have discussed and we have approved this idea,” he said. But wait: wasn’t it the UK’s desire to force Russia out of SWIFT just two weeks ago? Why yes, and the fact that Russia is happy to do so, and on its own terms, once again shows just who has all the leverage, and who really needs, or rather doesn’t, the US Dollar. More from Tass:

Russian authorities wanted to decrease the financial market’s dependence on SWIFT since the introduction of the first U.S. sanctions, when international payment systems Visa and MasterCard denied services to some Russian banks owned by blacklisted individuals. According to Shuvalov, Russia has been also discussing establishment of an independent ratings agency with China. Concrete proposals will be made by the end of 2014, he said. As regards China’s payment system UnionPay cooperation with the yet-to-be-established Russian national payment system, Shuvalov said that UnionPay is ready for a full-scale collaboration and will provide all infrastructural capacities for that.

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This may well be a complete lie. Gazprom says no way. But Ukraine may be syphoning off.

• Gazprom Limits Polish Gas Supplies as Reverse Supply Flows Halt (Bloomberg)

Russia’s OAO Gazprom limited natural gas flows to Poland, preventing the European Union member state from supplying Ukraine via so-called reverse flows. Polskie Gornictwo Naftowe i Gazownictwo, or PGNiG, got 20 to 24% less fuel than it ordered from Gazprom Export over the past two days and is compensating flows with alternative supply, the company said today in an e-mailed statement. Poland halted gas supply to Ukraine at 3 p.m. Warsaw time today, according to Ukraine’s UkrTransGaz. Ukraine is seeking to replace some of its Russian gas with fuel from Europe after Gazprom halted its supplies on June 16 in a dispute over debt and prices, echoing spats in 2006 and 2009 that left European customers short of fuel.

Gazprom Chief Executive Officer Alexey Miller said in June the company might limit supplies to gas-metering stations where it observed reverse flows. “It would appear from the outside that stopping reverse flow is something that’s in Gazprom’s interest,” Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said today by telephone. “Gazprom had said that they were studying any kind of reverse flow and that they would take steps to rectify.” Gazprom is doing pre-winter maintenance on pipelines and filling Russian storage sites, which is limiting supply to Poland at the level of the end of last week, according to a company official who declined to be named, citing policy.

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• Gazprom First-Quarter Profit Falls 41% on Ukrainian Gas Debt (Bloomberg)

Gazprom, Russia’s biggest company, said its first-quarter profit slumped 41% on a foreign currency loss and Ukraine’s debt for natural gas supplies. Net income dropped to 223 billion rubles ($6 billion) from 381 billion rubles a year earlier, the Moscow-based exporter said in a statement on its website. Gazprom, which provides 30% of the European Union’s gas, halted supplies to Ukraine in June over unpaid bills, including $1.45 billion from 2013. The Russian producer now estimates it’s owed $5.3 billion after raising the price for Ukraine in April to a level higher than it charges Germany, which the government in Kiev has rejected as unfair. The quarter marks the “start of not an easy year,” Gazprombank energy analysts wrote in an e-mailed note before the report.

While a weaker ruble is compensating for a decrease in Gazprom’s export prices, the biggest negative factor is the dispute with Ukraine, the bank said. Gazprom had a 172 billion-ruble loss on depreciation of the Russian currency as well as a 71.3 billion-ruble provision for “doubtful trade accounts” mainly related to Ukrainian gas debt, according to the statement. In August, Gazprom said its first-half net under Russian accounting standards, which is used to calculate dividends, fell 38% to 155 billion rubles, mainly because of a provision for Ukraine’s unpaid dept. Gazprom’s deliveries to Europe, its biggest market by earnings, have been falling compared with last year’s levels since June. The region has a record volume of gas in underground storage after a mild winter and accelerated pumping earlier this year.

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Propaganda.

• British Business Leaders Join Last-Ditch Effort to Save UK (Bloomberg)

Some of Britain’s best-known companies, including Royal Bank of Scotland, BP and Kingfisher, made their strongest intervention yet in the battle against Scottish independence, as RBS joined Lloyds in saying it would move parts of its business to England in the event of a breakaway. Ian Cheshire, chief executive officer of retailer Kingfisher, which employs 3,000 people in Scotland, urged voters not to make a mistake in a “once-in-a-lifetime decision,” arguing that independence would mean higher prices and lower investment. He predicted that other chief executives will make similar statements ahead of the vote on Sept. 18.

“The referendum is the most pressing political risk that businesses face,” said John Cridland, director general of the Confederation of British Industry, the country’s leading business group. “Scottish independence would be a one-way ticket to uncertainty, with no return.” The comments reflect an increasing willingness by British business leaders to abandon neutrality in the referendum debate. BP Chief Executive Officer Bob Dudley said his company considers “the future prospects for the North Sea are best served by maintaining the existing capacity and integrity of the United Kingdom.” Dudley had only said previously that he thought Great Britain should stay together, but had not made the claim that North Sea oil production would be affected by a vote for independence.

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• Scotch Whisky Makers Say Single Malt Is Best in a Single Country (Bloomberg)

At the Kilchoman Distillery Co Ltd. on Islay, a windswept island two hours by ferry from the west coast of Scotland, a banner nailed to a weathered barn proclaims “Better Together,” the group opposing Scottish independence. Unraveling the 307-year-old union with England “is not something we should even be considering,” Anthony Wills, Kilchoman’s founder and managing director, said in the distillery’s wood-floored tasting room. Islay, with eight distilleries making some of the world’s priciest whiskies, highlights a paradox of the debate leading up to the referendum a week from today: It’s tough to find support for a Yes vote among makers of a product that rivals tartan plaid and haggis as a national symbol. Last year, Scotland’s 109 distilleries sold 4.3 billion pounds ($7 billion) of whisky abroad, the country’s second-largest export, after oil, according to the Scotch Whisky Association. Many in the industry, which the association says accounts for 85% of Scotland’s food and drink exports, say they would be better off remaining part of the U.K.

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Propaganda.

• RBS, Lloyds London Move ‘Irreversible’ After Scot Turmoil (Bloomberg)

Bank of Montreal is now based 300 miles away in Toronto after bolting amid the rise of Quebec separatism. Royal Bank of Scotland and Lloyds may make the same decision to leave Edinburgh, no matter how Scotland votes next week. Rather than risk perpetual uncertainty over Scotland’s future, “the banks would want to kick off the relocation process irrespective of the decision,” said Chirantan Barua, an analyst at Sanford C. Bernstein in London. The risk has become “irreversible,” with a move costing the banks as much as 1 billion pounds ($1.6 billion) each, he estimated. RBS and Lloyds, which both received a government bailout in 2008, are the two biggest lenders in Scotland. Lloyds said in a statement late yesterday that it already has a contingency plan for establishing new legal entities in England in the event of a Yes vote, while RBS said today that such an outcome would make it necessary to re-domicile the headquarters.

“The issue could come back again in future years, so it’s entirely conceivable that in due course you’ll see the banks switching their registration to England,” even if there’s a No vote, said Ian Gordon, an analyst at Investec Ltd. in London. RBS, which has roots in Scotland dating back to 1727, said in the statement there are “a number of material uncertainties arising” from the referendum, which could impact its credit ratings as well as the “fiscal, monetary, legal and regulatory landscape to which it’s subject.” “For this reason, RBS has undertaken contingency planning for the possible business implications for a Yes vote,” it said. “In the event of a Yes vote, the decision to re-domicile should have no impact on everyday banking services.”

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• Amazon Deforestation Jumps 29% (Guardian)

The destruction of the world’s largest rainforest accelerated last year with a 29% spike in deforestation, according to final figures released by the Brazilian government on Wednesday that confirmed a reversal in gains seen since 2009. Satellite data for the 12 months through the end of July 2013 showed that 5,891 sq km of forest were cleared in the Brazilian Amazon, an area half the size of Puerto Rico. Fighting the destruction of the Amazon is considered crucial for reducing global warming because deforestation worldwide accounts for 15% of annual emissions of heat-trapping gases, more than the entire transportation sector. Besides being a giant carbon sink, the Amazon is a biodiversity sanctuary, holding billions of species yet to be studied.

Preliminary data released late last year by Brazil’s space research center INPE had indicated deforestation was on the rise again, as conservationist groups had warned. The largest increases in deforestation were seen in the states of Para and Mato Grosso, where the bulk of Brazil’s agricultural expansion is taking place. More than 1,000 sq km has been cleared in each state. Other reasons for the rebound in deforestation include illegal logging and the invasion of public lands adjacent to big infrastructure projects in the Amazon, such as roads and hydroelectric dams. Despite the increase in 2013, the cleared area is still the second-lowest annual figure since the Brazilian government began tracking deforestation in 2004, when almost 30,000 sq km of forest were lost. The Brazilian government frequently launches police operations to fight illegal loggers in the forest, but environmentalists say more is needed.

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She’s back! I thouht they would have buried her in a hole in the ground. How many blunders does one get to make in the States these days?

• Victoria Nuland: All Foreign Forces Must Be Withdrawn From Ukraine (DW)

The US has cautiously welcomed what Ukraine’s President Poroshenko described as a withdrawal of Russian troops from eastern Ukraine. The State Department said it was “a good, tiny first step,” but insufficient. Ukrainian President Petro Poroshenko said on Wednesday that Russia had removed most of its soldiers from the rebel-held eastern parts of his country, raising hopes for an end to a five-month-long violent conflict that has killed more than 2,600 people. “According to the latest information I have received from our intelligence, 70% of Russian troops have been moved back across the border,” Poroshenko said in a televised cabinet meeting. “This further strengthens our hope that the peace initiatives have good prospects.” The president said that Friday’s ceasefire – backed by both Kyiv and Moscow – had dramatically improved the security situation in Ukraine’s eastern regions. Poroshenko, however, added that the ceasefire with pro-Moscow rebels was proving to be difficult because “terrorists” were constantly trying to provoke Kyiv’s forces.

US State Department spokeswoman Marie Harf said on Wednesday evening that the United States could not confirm the Ukrainian leader’s claims. “Of course, even if we eventually can verify his claims about the Russian troops pulling back, there would still be Russian troops that remain there,” Harf said. “Obviously, any de-escalatory steps would be good ones, but there is much more work to be done here.” Victoria Nuland, the US assistant secretary of state for European and Eurasian affairs, was more cautious in her reaction. Speaking at the German Marshall Fund in Washington, Nuland said “all foreign forces have to be withdrawn” from the eastern European country. “All foreign material has to be withdrawn, the border has to be secured, there has to be the decentralization and amnesty that have been promised,” she said, adding that “there is a long way to go.”

Poroshenko said he would propose a bill to Ukrainian parliament next week offering “special status” to parts of conflict-ridden Donetsk and Luhansk regions of eastern Ukraine which are now under control of separatists. The Ukrainian president, however, rejected the calls for complete independence or the “radical federalization” of these areas as demanded by Moscow. “Ukraine will not make any concessions on issues of its territorial integrity,” he said. A pro-Russia separatist leader in Donetsk dismissed Poroshenko’s comments and said the rebels intended to become independent.

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• Law On War Crimes Amnesty For Ukraine Troops Discussed In Parliament (RT)

The Ukrainian parliament is to debate a law on amnesty for Ukrainian troops who have committed war crimes in the course of military actions in Eastern Ukraine. Earlier, an Amnesty International report confirmed the facts of large-scale crimes. A bill on amnesty for military personnel who committed war crimes during the military crackdown in Eastern Ukraine was introduced in the Rada (the Ukrainian parliament) on Wednesday, its website says. The bill assumes the discharge of legal responsibility and punishment of military staff and “other people” for the actions which “bear the marks of war crime.” Earlier, on 8 September, Amnesty International presented a report in which confirmed that such actions were committed by the Aidar volunteer battalion.

Aidar is one of over 30 volunteer battalions which appeared after Kiev started the military operation in the Donetsk and Lugansk regions. It is loosely connected with the Ukrainian security structures. “Members of the Aidar territorial defense battalion, operating in the north Luhansk [Lugansk] region, have been involved in widespread abuses, including abductions, unlawful detention, ill-treatment, theft, extortion, and possible executions,” the AI report says. The AI researchers interviewed dozens of victims and witnesses of the abuses and crimes, as well as local officials, police and army commanders in Lugansk area. The watchdog pointed out that while formally operating under the command of the Ukrainian security forces combined headquarters in the region, members of the Aidar battalion act “with virtually no oversight or control, and local police are either unwilling or unable to address the abuses.”

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Loss of trust at home …

• Trust in US Government on International, Domestic Issues at New Low (Gallup)

Americans’ trust in the federal government to handle international problems has fallen to a record-low 43% as President Barack Obama prepares to address the nation on Wednesday to outline his plan to deal with ISIS. Separately, 40% of Americans say they have a “great deal” or “fair amount” of trust in the federal government to handle domestic problems, also the lowest Gallup has measured to date. The results are based on Gallup’s annual Governance poll, conducted Sept. 4-7. This year’s poll was conducted at a time when the government is faced with instability in many parts of the world, including Iraq and Syria, the Middle East, and Ukraine.

Americans’ confidence in the government to handle international problems slid 17 %age points last year, when the Obama administration was planning military action against Syria. Russia later brokered an agreement to avert that action. Last year’s poll marked the first time that fewer than half of Americans trusted the federal government’s ability to deal with international threats. With the world stage seemingly more unstable now, the public’s trust has dipped an additional 6 %age points this year. Likewise, trust in the government’s ability to handle domestic problems dropped slightly this year after a larger decline in 2013. Although the economy has improved, it may be overshadowed by partisan gridlock in Washington, which has led to little formal government action to deal with important domestic challenges facing the United States. Indeed, Americans have consistently mentioned dissatisfaction with government as one of the most important problems facing the country in 2014.

Gallup has never measured lower levels of trust in the federal government to handle pressing issues than now. That includes the Watergate era in 1974, when 51% of Americans trusted the government’s ability to handle domestic problems and 73% trusted its ability to deal with international problems, and also at the tail end of the Bush administration when his job approval ratings were consistently below 40% and frequently below 30%. The key question going forward is whether Americans’ trust in the federal government can be restored. Although there have been short-lived increases in recent years, including in Obama’s first year in office and in his re-election year, these were not maintained. The general trend since the post-9/11 surge has been toward declining trust. [..] given the public’s frustration with the way the government is working, it may be necessary to elect federal officials who are more willing to work together with the other party to find solutions to the nation’s top problems.

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… and abroad.

• US, Obama Lose Favor with Germans Over Spying Scandal (WSJ)

The U.S. has lost favor with its traditional ally Germany over the past year, a new study shows, with German approval for President Barack Obama’s policies plummeting in the wake of the National Security Agencyspying scandal. Over the past year, the number of Germans with a positive view of the U.S. president’s policies has nose dived 20%age points to 56%, according to a study by U.S. think tank the German Marshall Fund. The study noted “the German-U.S. relationship appears to have cooled off markedly.” Trans-Atlantic ties have frayed since 2013 news reports over the NSA’s vast intelligence collection program and U.S. surveillance in Germany—including of Chancellor Angela Merkel’s cellphone. Revelations based on documents provided by former NSA contractor Edward Snowden shocked the German public and continue to burden the usually-close relationship between Washington and Berlin. The survey, which polled about 1,000 people in Germany, found “favorability of the U.S. in Germany” dropped from 68% in 2013 to 58% this year.

The poll was conducted by research company TNS Opinion from June 2 to June 26. As Berlin takes a more assertive stance on geopolitical affairs like the crises in Ukraine and Iraq, a majority of Germans polled said, for the first time, that they would prefer their country take a more independent approach from the U.S. on security and diplomatic policy. “Germany is at a crossroads in defining the role it wants to take in foreign policy and the world at large,” said Lora Anne Viola, a political scientist at Berlin’s Free University, noting that Berlin is in a unique position to react to current events like the conflict in Ukraine and the euro crisis. A departure from Germany’s historical reluctance to engage in geopolitical affairs could ultimately be a boon to Washington. The countries could shake off their traditional big brother and little brother relationship as, despite Germans’ current wariness toward the U.S., there are “too many problems the U.S. and Germany have to confront together,” Ms. Viola said.

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• China Inflation Data Show Economy Losing Momentum: Nomura (CNBC)

China’s consumer inflation eased in August while wholesale deflation intensified, clouding the outlook for an economy struggling to stage a convincing recovery. China’s consumer prices eased to 2% last month, data on Thursday showed, slower than July’s 2.3% rise and below a Reuters poll expecting a 2.2% increase. This remains below Beijing’s official target of 3.5%. Producer prices, meanwhile, continued their deflationary spiral, dipping 1.2% after falling 0.9% in July, a tad worse than the 1.1% fall expected. Producer prices in China have been declining since February 2012, weighed by falling commodity prices, overcapacity and weakening demand.

“I think the figures are consistent with a whole lot of data showing that the Chinese economy losing momentum again,” said Rob Subbaraman, chief economist at Nomura. “The PPI deflation is worsening, I think that’s a sign of overcapacity problems. The oversupply problem in the property sector is starting to have effects on the upstream industries that supply the property sector. They’re feeling the pinch now so that’s showing in the PPI,” he added. China’s economy growth slowed to 7.4% in the first quarter from a year earlier, the slowest pace in six quarters. Growth inched higher to 7.5% the second quarter, but a flurry of recent data has painted a bleak picture in credit inflows, manufacturing and the real estate market.

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• China Speculators Go Online Chasing Profits as Home Prices Drop (Bloomberg)

With just 11,000 yuan ($1,796), 50-year-old Deng Bangfu made his first property investment in China, flipping it in just two months for a profit even as the nation’s home prices fall. Deng and about 300 other investors bought a 14.9 million yuan townhouse in June in the southern Chinese city of Dongguan and sold it in August for 16 million yuan. The vehicle: a peer-to-peer lending and financing website called Tuandai, which is testing a crowdfunding product that meets developers’ desire to quicken sales by tapping demand for better returns. “Now I can tell people I once owned a townhouse, which I could never afford myself all my life,” Deng, an accountant at a technology company in Dongguan, said by phone. “We know that local governments have started loosening home-purchase restrictions. As soon as banks ease mortgage curbs, home prices will quickly rebound.”

Online investors, who since 2011 helped drive a 50-fold increase in financing through peer-to-peer websites such as Tuandai, are turning to property as falling home prices prompt the government to ease curbs aimed at stamping out speculation. Officials are seeking to revive local-government revenues at the risk of bringing home-flippers back to the market. Speculators could return, Fitch Ratings said in an Aug. 7 report. “If liquidity recovers, home prices start to go up and sentiment improves,” Andy Chang, Fitch’s Hong Kong-based property analyst, said by phone. “Peer-to-peer lending will surely play a stronger role pushing the waves because it’s pure speculation or investment demand.”

Speculative buying – selling assets in a short period of time – accounts for more than 20% of demand in first-tier cities, which include Beijing and Shanghai, JPMorgan analyst Ryan Li wrote in a report last month. Investors accounted for 40% of homebuyers in 2007, when Shenzhen World Union Properties Consultancy Inc. started asking clients their reason for buying. That was three years before former Premier Wen Jiabao imposed home-purchase curbs and raised down payments to prevent a housing bubble. Home sales plunged 10.5% in the first seven months from a year earlier amid tight credit, according to government data, reversing a 27% jump last year. New-home prices fell in 64 of the 70 cities tracked by the government in July from June, the most since January 2011.

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