Mar 122018
 
 March 12, 2018  Posted by at 10:17 am Finance Tagged with: , , , , , , , , , , ,  


Lewis Wickes Hine Labourer on connector, Empire State Building, New York 1930-31

 

On The Bull Market’s Ninth Birthday (CNBC)
‘No Response’ Yet From North Korea On Trump Talks (BBC)
Kim Jong Un Wants a Peace Treaty From Trump (BBG)
China Banking Crisis Warning Signal Still Flashing – BIS (BBG)
Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)
Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)
Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)
Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)
London Property Prices Fall 15% (G.)
European Commissioner Tusk Double-Crossed Poland (GEFIRA)
Half Of US Arms Exports Go To The Middle East (G.)
Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)
America’s Troll Farm Media (CP)
Winston Churchill, Mass Murderer (WaPo)

 

 

John Rubino’s comment: “Emigrate while you still can..”

On The Bull Market’s Ninth Birthday (CNBC)

The bullish run in the Dow Jones industrial average — which celebrates its ninth birthday Friday — is the longest ever and the greatest percentage gain since World War II, according to Leuthold Group. The corresponding run by the S&P 500, notes LPL Financial, is that benchmark’s second-largest and second-longest bull market ever, with only the 1990s stock market run led by technology stocks in the way. Despite a more than 10% correction in equities last month following a burst of bullish activity, Leuthold’s Doug Ramsey doesn’t think the bull is done yet. “Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Ramsey, his firm’s chief investment officer.

“Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.” The Dow hit an all-time high of 26,616.71 on Jan. 26, the same day the S&P 500 clinched its own record of 2,872.87. The major indexes are off their record highs 6.4% and 4.6% respectively. This chart from Leuthold Group shows where the Dow bull market stacks up since 1900. It’s far and away the longest in modern financial times. In terms of percentage gains, it’s third behind two bull markets pre-WWII.

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I’d guess Kim didn’t expect the answer he got, as fast as he got it, and now isn’t quite sure what to say.

‘No Response’ Yet From North Korea On Trump Talks (BBC)

South Korea says it has not received a response from Pyongyang on a summit between North Korean leader Kim Jong-un and US President Donald Trump. In a surprise development, Mr Trump on Friday accepted North Korea’s invitation to direct talks. South Korean officials said Mr Kim was prepared to give up his nuclear weapons. Details on the planned talks remain vague, with no agreement yet on the location or agenda. Analysts are sceptical about what can be achieved through talks given the complexity of the issues involved. “We have not seen nor received an official response from the North Korean regime regarding the North Korea-US summit,” a spokesman for the South Korean Ministry of Unification said on Monday. “I feel they’re approaching this matter with caution and they need time to organise their stance.” South Korean officials who spoke to Trump are now on the way to China and Japan to brief the leaders of each country on the upcoming talks.

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He’s telling his people that’s what his father wanted. They also want to reunite with the south.

Kim Jong Un Wants a Peace Treaty From Trump (BBG)

Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime. Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided. Koh Yu-hwan, who teaches North Korean studies at Dongguk University in Seoul, said the regime has long sought a peace treaty to end the more than 60-year-old ceasefire between the two sides and help guarantee its safety.

“There were agreements between the U.S. and North Korea to open up discussion on a peace treaty, but they never materialized,” Koh said, saying the conditions were key. “The U.S. wants a peace treaty at the end of the denuclearization process, while for the North, it’s the precondition for its denuclearization.” Signing a peace treaty would require addressing issues regarding the U.S. military’s presence in South Korea and its transfer of wartime operational control to South Korea and United Nations forces in South Korea, Koh said.

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China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to BIS

China Banking Crisis Warning Signal Still Flashing – BIS (BBG)

China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements. Canada – whose economy grew last year at the fastest pace since 2011 – was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study. “The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday. The study offered some surprising results: for example, Italy wasn’t shown as being at risk, despite its struggles with a slow-growing economy and banks that are mired in bad debts.

While China was flagged, a key warning indicator known as the credit-to-gross domestic product “gap” showed an improvement, said the BIS, known as the central bank for central banks. This may suggest the government is making progress in its push to reduce financial-sector risk. The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming. In China, the gap fell to 16.7% in the third quarter of 2017, down from a peak of 28.9% in March 2016 and the lowest since 2012, the study showed.

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How does Xi tell his people he doesn’t have their backs? Oh well, he’s president for life.

Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)

The belief in an “implicit guarantee” from the Chinese government on debt is a big problem, said a finance professor on Monday. “I’m concerned with what a lot of people believe, [that] the government is going to take care of investment losses. Under that impression, they are going to take up lot of leverage because they believe they will be bailed out if something does not work out,” said Zhu Ning, a professor of finance at Tsinghua University in Beijing. China has been battling high debt levels for years, but debt-to-GDP ratio is still about 260%, according to the Bank of International Settlements. While that absolute number is not alarming in itself, it is eyebrow-raising for the speed in rising to such levels, particularly in the last five years, Zhu said.

Since China’s economy is far bigger than two decades ago, the country has the size and resilience to overcome issues in the financial system, but Beijing is concerned about systemic risks that may roil the world’s second-largest economy. The key to solving any potential fallout from the ballooning debt is to remove the perception that Beijing will help solve any problems from a debt blowup, said Zhu. “This is a mentality that has taken decades to form so the government would have to do something aggressive and persistent to gradually remove this sense of implicit guarantee,” Zhu said. The Chinese government has been coming down hard on reining in systemic risks, using strong-arm tactics such as the recent state takeover of Anbang Insurance, which was aggressively expanding internationally.

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There’s the shadow banks again.

Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)

Asia’s big developers are “more vulnerable” to shocks after their profitability waned from the boom years at the start of the decade, the Bank for International Settlements warned. The “sector’s deteriorating fundamentals give reason for concern,” said the Basel, Switzerland-based institution, which watches over global financial stability. Many firms’ returns on assets are below their costs of debt, the BIS said in a quarterly review, citing a study of developers in China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.

Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said. While easy money drove property booms worldwide after the global financial crisis, the BIS argues a tightening in the years ahead could force developers to sell off inventory – driving down prices – and lay off workers.

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“Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka..”

Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)

A spiralling cronyism scandal linked to the Japanese prime minister and his wife has reached fever pitch after the finance ministry admitted to tampering with records to remove references to the first lady. Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka. The finance ministry admitted on Monday that it had altered official documents surrounding the decision to provide an 85% discount on the appraised value of the land. One document originally quoted the educational group Moritomo Gakuen as saying that Abe’s wife Akie had recommended the primary school project “move forward because it is a good plot of land”. However, this was removed in a version submitted to lawmakers investigating the sale. Kyodo News reported that the submitted papers also omitted an article in which Akie described being “moved to tears by the school’s education policy”.

Moritomo Gakuen’s existing kindergarten attracted attention for requiring its young pupils to bow before portraits of the imperial family, sing the national anthem daily, and learn the 1890 imperial rescript on education, which emphasises sacrifice for country. Akie was set to serve as honorary principal for the new primary school, but stepped down in February last year when questions were raised over the land deal. The government has previously denied claims that the first lady gave the school operator an envelope containing 1m yen (£6,775) on behalf of the prime minister during a visit she made to the existing kindergarten. The controversy fuelled a steep decline in Abe’s popularity last year but heappeared to ride out the scandal and won a snap lower house election in October. However, the forgery revelations have intensified political pressure on Abe and his long-serving finance minister, Taro Aso.

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Excellent piece by Nomi, which has two topics: Gary Cohn and steel tariffs. The latter a bit much on short term effects, but good read.

Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)

[..] my former boss from my Goldman Sachs days—Gary Cohn—just resigned from his White House post as chief economic adviser to the Chaos Producer in Chief. This was ostensibly in protest against the president’s announcement about imposing steel and aluminum tariffs. The next day, Trump signed the order sealing that deal, citing his actions as a “matter of necessity for our security.” Along the way, he said there would be no exemptions to the tariffs, then said there would be—for Canada and Mexico. Trump glowed in the light of his new-found power grab over trade agreements, leaving himself room to decide which countries would be “in” and “out” with respect to these and other tariffs in the future. And that was the week that was in Trump World.

The timing of Cohn’s departure certainly put a wrench in his plans to convene executives dependent on steel and present their case against steel tariffs to Trump. Instead, Trump signed the tariffs order flanked by steel and aluminum workers supporting it. Speaking of steel, Cohn’s nerves were seemingly made of that metal. At Goldman, he was the man who regularly waded through deals without losing his cool (unlike Trump). On 9/11, I witnessed him directing traders to keep trading oil as shreds of debris and billows of smoke engulfed the windows of the Goldman trading floor, only a few blocks away from the World Trade Center. He became president (or number two) at Goldman, continually handling the less “cool” behavior of chairman and CEO Lloyd Blankfein, who remained above him in the pecking order for decades.

Cohn commanded daily activities at Goldman that led to the firm’s creation of shady financial instruments that were later at the core of the financial crisis. Under Cohn, Goldman was bailed out by U.S. taxpayers. The firm morphed, for government subsidy purposes, into a bank holding company, though it handled scant deposits from regular people. It did this to retain access to Federal Reserve support, as it has done, over the past decade. Cohn was also at Goldman when it reached a $5 billion settlement with the Department of Justice over its consistent misconduct regarding mortgage-related securities from 2005 to 2007. That type of conflict-meets-crisis readied him for his government service. When Cohn came up against Trump, the president’s flavor-of-the-minute trade policy hawk, Peter Navarro, met “Globalist Gary” head on. Then Cohn’s Trump administration career was over.

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Just peeping over the edge for now.

London Property Prices Fall 15% (G.)

House prices in parts of London that were once at the epicentre of the UK property boom have fallen as much as 15% over the past year in fresh evidence of the impact of the EU referendum. Figures from Your Move, one of the UK’s biggest estate agency chains, reveal that the average home in Wandsworth – which includes much of Clapham, Balham and Putney – fell by more than £100,000 in value over the last 12 months. But property prices have surged in the north-west of England, with Blackburn recording the highest growth rates in the UK. Homes in the London borough of Wandsworth were fetching an average of £805,000 in January 2017 but this has now fallen to £685,000.

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Selling out his country and Putin bashing. That’s Tusk. That’s how he got his EU job.

European Commissioner Tusk Double-Crossed Poland (GEFIRA)

The current President of the EU Council has a good reputation in the EU circles, but not in Poland: he had to flee from his home country to Brussels, completely compromised. After all, his government was a catastrophe: mass emigration of young Poles, tampering with the coffers of future pensioners, corruption and benefit scandals, the Amber Gold affair, the all-pervasive nepotism in his Civic Platform (PO) party, numerous sins of omission crowned by Nord Stream. Young unemployed people can light the torch of a revolution. If you want to secure your position in politics, you leave salaries low and open the borders. The discontented young unemployed emigrate and only those who have less motivation to take to the streets remain. In 2005 Donald Tusk made this trick, this intervention on his nation. He threw Poland into the arms of the EU: since then the population has fallen significantly due to the emigration of many young Poles.

Nigel Farage aptly commented on this when he turned to Tusk in the European Parliament: “Your debate is about emigration, and time and again you’ve promised the Polish voters that young poles would return to Poland, and at the same time Mr Cameron has promised the British people that fewer Poles would come to us. Well, it turns out that you’ve both been wrong and your country has been depopulated by 2 million people since you joined the European Union and the reason is obvious: it’s money, isn’t it? And you yourself prove the point. You are the newest Polish emigre and you’ve gone from a salary of 6,000 euros a year to a salary of 30,000 euros a year. So congratulations! You’ve hit the EU jackpot!”

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A picture of the world’s sickest people. Many of them are in your governments.

Half Of US Arms Exports Go To The Middle East (G.)

Nearly half of US arms exports over the past five years have gone to the war-stricken Middle East, with Saudi Arabia consolidating its place as the world’s second biggest importer, a report has shown. The Stockholm International Peace Research Institute (Sipri) said on Monday that global transfer of major weapons systems between 2013 and 2017 rose by 10% compared with the five-year period before that, in a continuation of an upward trend that began two decades ago. The US, which is the world’s biggest exporter, increased its sales between those two periods by 25%. It supplied arms to as many as 98 states worldwide, accounting for more than a third of global exports. Russia, the world’s second biggest exporter, saw a decrease of 7.1% in its overall volume of arms exports; US exports were 58% higher than those of Russia. France, Germany and China were also among the top five exporters. The UK is the sixth biggest weapons exporter.

“Based on deals signed during the Obama administration, US arms deliveries in 2013–17 reached their highest level since the late 1990s,” said Dr Aude Fleurant, the director of the Sipri’s arms and military expenditure programme. “These deals and further major contracts signed in 2017 will ensure that the USA remains the largest arms exporter in the coming years.” The Middle East, a region where in the past five years most countries have been involved in conflict, accounted for 32% of global imports of weapons. Arms imports to the region doubled between 2013 and 2017 and in the five-year period before that. The US, the UK, and France were the main supplier of arms to the region, while Saudi Arabia, Egypt and the UAE were the main recipient countries.

The UK, which rolled out a red carpet for the Saudi crown prince on his visit to London last week, exported nearly half of its arms to the Saudi Arabia, which has increased its imports by 225%. Sipri’s report noted that Saudi Arabia uses its imported weapons in large-scale combat operations, particularly in Yemen. The Saudi-led military intervention in Yemen, which has cost hundreds of civilian lives, was launched in 2015, aiming to counter the advances of Iran-backed Houthi rebels controlling the capital, Sana’a. Saudi Arabia’s shopping list included 78 combat aircraft, 72 combat helicopters and 328 tanks. “Widespread violent conflict in the Middle East and concerns about human rights have led to political debate in western Europe and North America about restricting arms sales,” said Pieter Wezeman, senior researcher at Sipri. Yet the USA and European states remain the main arms exporters to the region and supplied over 98% of weapons imported by Saudi Arabia.”

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How do you regulate global forces? That are part of secret intelligence services?

Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)

Sir Tim Berners-Lee, inventor of the world wide web, has called for large technology firms to be regulated to prevent the web from being “weaponised at scale”. “In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data,” Berners-Lee wrote in an open letter marking the 29th anniversary of his invention. These problems have proliferated because of the concentration of power in the hands of a few platforms – including Facebook, Google, and Twitter – which “control which ideas and opinions are seen and shared”. “What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms,” said the 62-year-old British computer scientist.

These online gatekeepers can lock in their power by acquiring smaller rivals, buying up new innovations and hiring the industry’s top talent, making it harder for others to compete, he said. Google now accounts for about 87% of online searches worldwide. Facebook has more than 2.2 billion monthly active users – more than 20 times more than MySpace at its peak. Together, the two companies (including their subsidiaries Instagram and YouTube) slurp up more than 60% of digital advertising spend worldwide. Although the companies are aware of the problems and have made efforts to fix them – developing systems to tackle fake news, bots and influence operations – they have been built to “maximise profit more than maximise social good”. “A legal or regulatory framework that accounts for social objectives may help ease those tensions,” he said.

Aligning the incentives of the technology sector with those of users and society at large, he argued, will require consulting a diverse group of people from business, government, civil society, academia and the arts. Berners-Lee warned of “two myths” that “limit our collective imagination” when looking for solutions to the problems facing the web: “The myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points we need to be a little more creative,” he said. “I want the web to reflect our hopes and fulfil our dreams, rather than magnify our fears and deepen our divisions,” he said.

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Too many people still believe far too much of what they read and watch.

America’s Troll Farm Media (CP)

Despite all the smoke and mirrors, most Americans seem to see where the stenographers of corporate capitalism are taking us. A recent Gallup poll found that while 84% of Americans see media as “critical” or “very important” to democracy, only 28% see the corporatist mainstream news media (MSM) as actually supporting democracy. They’re right on both counts of course. The quality of a democracy is only as good as the information people have to make informed judgements about public policy and politicians. Even as the mainstream news media continue to lose street cred, they persist in a rumor-saturated full court press against the “Trump-Putin presidency,” which only further exposes their lack of professionalism and increasing vulgarity.

MSM management and their boardroom bosses have long understood that as long as they spice up their “nothing burger” news, ratings and advertising rates will keep them in business and please their commercial and government clients. Tabloid journalism, which can describe most American mainstream media these days, even when wrapped up as “all the news that’s fit to print,” is in constant search of sensation, scandal, gossip, and profit – and only occasionally in public-oriented investigative integrity. [..] 65% of Americans consider the so-called “free press” biased, obsessed with scandal, and full of “fake news” and therefore cannot be trusted. [..] trust in American institutions in general, that is, the government, business, NGOs, and the MSM, is going through the worst crisis in recorded history, according to the marketing firm Edelman in 2018.

[..] On January 27, 2018, the Washington Post editorial board issued this statement: “A foreign power interfered in the 2016 presidential election. U.S. law enforcement is trying to get to the bottom of that story. Congress should be doing everything possible to make sure the investigation can take place.” Obviously referring to Russia, the Post’s declaration, as the late investigative journalist Robert Parry and many other independent and respected writers have pointed out, was and remains without a shred of evidence. It’s WMD time all over again, only this time the propaganda is being trumpeted mainly by the Democrats. It would better serve the cause of democracy to investigate the Post for its covert coalition and collusion with the deep state and the Clinton (right) wing of the Democratic Party. The Post and the rest of their pack have constructed a wicked Russia foil in order to undermine Moscow’s presumed ally Trump and boost bigger Pentagon budgets.

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Britain is not strong on history. Surprising that this comes from the WaPo.

Winston Churchill, Mass Murderer (WaPo)

“History,” Winston Churchill said, “will be kind to me, for I intend to write it myself.” He needn’t have bothered. He was one of the great mass murderers of the 20th century, yet is the only one, unlike Hitler and Stalin, to have escaped historical odium in the West. He has been crowned with a Nobel Prize (for literature, no less), and now, an actor portraying him (Gary Oldman) has been awarded an Oscar. As Hollywood confirms, Churchill’s reputation (as what Harold Evans has called “the British Lionheart on the ramparts of civilization”) rests almost entirely on his stirring rhetoric and his talent for a fine phrase during World War II. “We shall not flag nor fail. We shall go on to the end. … We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets. … We shall never surrender.” (The revisionist British historian John Charmley dismissed this as “sublime nonsense.”)

Words, in the end, are all that Churchill admirers can point to. His actions are another matter altogether. During World War II, Churchill declared himself in favor of “terror bombing.” He wrote that he wanted “absolutely devastating, exterminating attacks by very heavy bombers.” Horrors such as the firebombing of Dresden were the result. In the fight for Irish independence, Churchill, in his capacity as secretary of state for war and air, was one of the few British officials in favor of bombing Irish protesters, suggesting in 1920 that airplanes should use “machine-gun fire or bombs” to scatter them. Dealing with unrest in Mesopotamia in 1921, as secretary of state for the colonies, Churchill acted as a war criminal: “I am strongly in favour of using poisoned gas against the uncivilised tribes; it would spread a lively terror.” He ordered large-scale bombing of Mesopotamia, with an entire village wiped out in 45 minutes.

In Afghanistan, Churchill declared that the Pashtuns “needed to recognise the superiority of [the British] race” and that “all who resist will be killed without quarter.” He wrote: “We proceeded systematically, village by village, and we destroyed the houses, filled up the wells, blew down the towers, cut down the great shady trees, burned the crops and broke the reservoirs in punitive devastation. … Every tribesman caught was speared or cut down at once.” In Kenya, Churchill either directed or was complicit in policies involving the forced relocation of local people from the fertile highlands to make way for white colonial settlers and the forcing of more than 150,000 people into concentration camps. Rape, castration, lit cigarettes on tender spots, and electric shocks were all used by the British authorities to torture Kenyans under Churchill’s rule.

But the principal victims of Winston Churchill were the Indians — “a beastly people with a beastly religion,” as he charmingly called them. He wanted to use chemical weapons in India but was shot down by his cabinet colleagues, whom he criticized for their “squeamishness,” declaring that “the objections of the India Office to the use of gas against natives are unreasonable.” [..] Thanks to Churchill, some 4 million Bengalis starved to death in a 1943 famine. Churchill ordered the diversion of food from starving Indian civilians to well-supplied British soldiers and even to top up European stockpiles in Greece and elsewhere. When reminded of the suffering of his Indian victims, his response was that the famine was their own fault, he said, for “breeding like rabbits.”

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Dec 292014
 
 December 29, 2014  Posted by at 11:51 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle December 29 2014


Unknown Daniels-Wells Pontiac, 3055 Broadway, Oakland 1938

Greece Faces Snap Election as Samaras Fails to Install President (Bloomberg)
Greek Stocks Tank After Presidential Vote (CNBC)
‘Life Will Go On’ Thesis About Global Economy Might Not Work In 2015 (Guardian)
Distressed Debt Losses Worst Since ’08 Credit Crisis on Oil Rout (Bloomberg)
US Bond Sentiment Worst Since Disastrous ’09 as Fed Shifts (Bloomberg)
The 94% Plunge That Shows Abenomics Losing Global Investors (Bloomberg)
Japan’s Regional Banks Face Stress Test For Ultra-Low Rates (Reuters)
Zombie Bankruptcies Top New Year Wish-List for China’s Brokerages (Bloomberg)
China Slashes Trade Target For 2015 To 6% (MarketWatch)
China Looking At Deal With US To Recover Dirty Assets (Reuters)
China First-World Quandary Exposed as $800 Billion Lending Freed (Bloomberg)
Kiev Targets Oligarchs With Budget Bill (FT)
Fed and ECB: Kudos And Problems Ahead (CNBC)
The Liberal Idiocy on Russia/Ukraine (Robert Parry)
In Reversal, Germany Cools to Russian Investment (NY Times)
Russia Must Influence Separatists To End Ukraine Crisis, Says Merkel (Reuters)
In Lieu Of Best Wishes: The Euro’s First Inkling (Varoufakis)
Winston Churchill’s Family Begged Him Not To Convert To Islam (Ind.)
The American Civil War: The Bloody Anniversary We All Forgot (Fisk)

Chaos assured in Europe as per Jan 1. Elections January 25. Expect crazy stuff from Samaras and Brussels. We’ll hear Armageddon a lot.

Greece Faces Snap Election as Samaras Fails to Install President (Bloomberg)

Greece faces snap elections early in the New Year after Prime Minister Antonis Samaras failed in his third and final attempt to persuade parliament to back his candidate for head of state. With voting continuing in Athens today, more than 121 lawmakers in the 300-seat chamber refused to support Samaras’s nominee for president, Stavros Dimas, ensuring that he’ll fall short of the 180 votes required. Under the constitution, the legislature will now be dissolved and a date for elections set within the next 10 days. The prospect of early parliamentary elections as soon as Jan. 25 has roiled financial markets in Greece, evoking memories of the height of the financial crisis in 2012 when the country’s euro membership was in jeopardy.

The benchmark Athens Stock Exchange slumped the most among 18 western-European markets ahead of the vote. The anti-austerity Syriza party led by Alexis Tsipras is ahead of Samaras’s New Democracy movement in opinion polls. Samaras, who failed to gather enough support for Dimas in two previous rounds of voting on Dec. 17 and Dec. 23, called on lawmakers before today’s session to avert a dissolution of parliament, saying that snap elections posed a danger to the country. Heading a coalition of 155 lawmakers, he’d offered to form a broader administration and hold early parliamentary elections at the end of 2015 if lawmakers backed his nominee. His coalition’s term doesn’t expire until June 2016.

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Bring in the Plunge Protectors.

Greek Stocks Tank After Presidential Vote (CNBC)

Greek stocks tumbled over 10% on Monday, after Greek politicians failed to elect a president in a key vote, paving the way for a snap election. Stavros Dimas, the Greek government’s preferred candidate, secured only 168 votes in the third round of voting on Monday, short of the 180 needed to avoid a snap election. Greece’s main stock market fell 11% on the news, while the country’s 10-year bond yields spiked above 9%. Ahead of the vote, the euro slipped to a near-28-month low against the dollar. The result of the vote came as no surprise to analysts, who had not expected Prime Minister Antonis Samaras’ candidate Dimas to get the required votes.

Elena Panaritis, a former MP for Greek social democratic party PASOK, told CNBC on Monday tat the country was heading for snap elections. There are fears that if a snap general election takes place in early 2015, Greece’s popular anti-austerity Syriza party may be elected. This could put the country’s international bailout into jeopardy, as the party has promised to scrap Greece’s tough austerity policies if it gets into power. The unpopular cost-cutting measures are a condition of the country’s bailouts – worth €240 billion ($296 billion) – implemented by the International Monetary Fund, European Central Bank and European Commission.

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OK overview.

‘Life Will Go On’ Thesis About Global Economy Might Not Work In 2015 (Guardian)

Russia is in crisis. There are concerns about the eurozone. Japan is struggling to emerge from stagnation. Booming stock markets seem divorced from economic reality. The Anglo-Saxon economies are outpacing the other developed economies of the west. This is the world as it exits 2014. But it was also the world as it was 15 years ago during a month in which the first major anti-globalisation protests took place on the streets of Seattle and preparations were made for the nonexistent millennium bug. Oil prices were low. Banks could lend money cheaply. There was talk of how technology would power a new industrial revolution. It would be a mistake, though, to think that nothing has really changed. The story of the past decade and a half is of the increasingly desperate attempts to prevent the Great Stalling of the global economy. Rock-bottom interest rates have failed to prevent growth rates from slipping. Living standards in many countries are back to the levels of the early 2000s.

Securing international cooperation to tackle climate change, to open markets to trade, to manage currencies or to create jobs has become increasingly difficult. The problems of 1999 are still the problems of 2014, but more serious and seemingly more intractable. There is no shortage of explanations for what has gone wrong and what needs to be done to put things right. One view, popular with central bankers and technologists, is that all that is needed is a bit of time. Seen from this perspective, the world is on the brink of the sort of technological shift that happens once in every 50 or 60 years. The transition, however, has been delayed by the structural changes in the global economy caused by the collapse of communism a quarter of a century ago.

Adjustment to these geopolitical shifts, such as the rise of China, is taking longer than expected but will eventually happen. Another view is that the zombie-like state of the global economy is owing to a lack of structural reform. Here there is common cause between the German government, which blames the eurozone crisis not on a lack of demand but on supply-side impediments to growth, and the free market economists who say the financial crisis of 2007-08 was caused by over regulation. The solution, therefore, is to make markets work better through reforms that sharpen incentives to work, dilute labour rights, cut taxes, reduce government spending, balance budgets and push back against growing protectionist tendencies.

Then there is the Keynesian view of the world. Here, the idea is return, as far as possible, to the world as it existed in the golden years of the 1950s and 1960s. That means governments rethinking their austerity programmes; keeping interest rates low; using redistribution to spread the fruits of growth more evenly; and returning to the sort of managed currency regime that existed until the early 1970s. What is common to the explanations is that they believe there is a short-term (sometimes a medium-term) fix that will put matters right. Growth and a steady increase in living standards has been a feature of the modern industrial world, stretching back to the 18th century: it is quite a stretch to believe that 250 years of progress have come to a halt. As a result, the assumption is that eventually the global economy will achieve escape velocity following several years in the post-global recession doldrums.

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Emerging markets on their way to the bottom.

Distressed Debt Losses Worst Since ’08 Credit Crisis on Oil Rout (Bloomberg)

Emerging-market distressed debt losses are the worst this month since the global financial crisis. Bank of America Merrill Lynch’s Distressed Emerging Markets Corporate Plus Index fell 13.4% through Dec. 26, set for its worst performance since October 2008, as a tumble in the price of oil sparked a currency crisis in Russia. That brought this year’s decline to 19.7%, the most in six years. Emerging markets accounted for 14 of the 56 global defaults this year in Standard & Poor’s coverage. Crude reached the lowest in five years earlier this month and is heading for its largest annual decline since 2008 as members of the Organization of Petroleum Exporting Countries resist production cuts to defend market share. A supply glut has also pushed metal and coal prices deeper into a bear market.

“With many moving parts to the equation, could there be a point where investors begin to interpret the circumstances as contagion?” said David Tawil, co-founder of New York-based Maglan Capital LP. “What happens if we need to add Venezuela and Russia to the mix? Contagion is good for no one.” Oil accounts for 95% of Venezuela’s exports and its government bonds have suffered as President Nicolas Maduro said he has no plans to curb fuel subsidies. Economic sanctions are also hurting Russia, pushing the country toward a recession, while corruption probes induced bond losses in Brazil and China. In Indonesia, the Bakrie family group of companies put its coal unit, PT Bumi Resources, under court protection.

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So Yellen hikes rates, and then buys up all Treasuries Kuroda-style?

US Bond Sentiment Worst Since Disastrous ’09 as Fed Shifts (Bloomberg)

Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending. With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg. Getting it right hasn’t been easy. Almost everyone who foresaw a selloff this year as the Fed ended its bond buying was caught off-guard as lackluster U.S. wage growth and turmoil in emerging markets propelled Treasuries to the biggest returns since 2011.

Now, even as the bond market’s inflation outlook tumbles, forecasters are sticking to the view that Treasuries are a losing proposition as the economy strengthens. “Next year should be the break-out year finally,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi, said by phone from New York on Dec. 23. “The market is ignoring the rhetoric that Yellen and the FOMC is getting closer and closer to tightening. The market has it wrong.” Rupkey, who is among the 74 economists and strategists surveyed by Bloomberg this month, has one of the highest projections. He said he expects 10-year yields to rise to 3.4% by the end of 2015 from 2.25% at 12:55 p.m. in Tokyo.

Back in January, Rupkey said yields would be 3.6% by now. The median forecast calls for yields to reach 3.01% during the same span. The roughly 0.75 percentage point increase would be almost twice as much as forecasters anticipated for 2014. Combined with projections for yields on the two-year note to more than double to 1.53% and those on the 30-year bond to rise 0.89 percentage point to 3.70%, the prognosticators are more bearish than any time since heading into 2009. That’s when they predicted yields on every debt maturity would rise more than a percentage point as the U.S., helped by the Fed’s easy-money policies, started to recover from its worst economic crisis since the Great Depression. Treasuries lost 3.7% that year in the biggest slide dating back to 1978.

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Investors are still not completely stupid.

The 94% Plunge That Shows Abenomics Losing Global Investors (Bloomberg)

Foreign investors have had just about enough of Abenomics. After pumping record amounts of cash into Japanese shares last year, they’ve hardly added to holdings in 2014. Inflows are down 94% this year to 898 billion yen ($7.5 billion), on pace for the smallest annual amount since the 2008 global financial crisis. The month of April 2013 alone registered almost three times as much foreign investment in the stock market as all of 2014. These figures provide the clearest look at how global investors have become disillusioned with Prime Minister Shinzo Abe after he pushed through a tax increase in April that sent Japan into recession. Fund managers from Sumitomo Mitsui to MV Financial say to lure investors back, Abe needs to move beyond short-term stimulus and start enacting the structural changes he laid out in his initial plan, dubbed Abenomics, to end Japan’s two-decade economic malaise.

“We need to see a framework where growth isn’t dependent on monetary easing,” Ayako Sera, a market strategist at Sumitomo Mitsui, which oversees $325 billion in assets. “If not growth, then at least a way to increase productivity. For now there’s nothing like that, so I imagine it’ll be hard for stocks to keep going higher and for foreigners to take an interest in them.” Purchases of the nation’s shares through Dec. 19 by investors outside Japan were less than a tenth of the 15.1 trillion yen they bought last year, according to data from the Tokyo Stock Exchange. Trust banks, which typically trade on behalf of pension funds, added 2.7 trillion yen, after offloading about 4 trillion yen of equities in 2013. Individuals were net sellers for a fourth straight year.

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Deflation tests.

Japan’s Regional Banks Face Stress Test For Ultra-Low Rates (Reuters)

Japan’s financial regulator is running stress tests to see if too much cash in the system is stifling smaller banks’ ability to earn, unlike regulatory tests elsewhere that have been designed to see whether lenders had enough capital to cope with financial shocks. Two people with direct knowledge of the process said the Financial Services Agency (FSA) had initiated the tests on concerns that with 10-year Japanese government bond yields near a record low around 0.3%, regional lenders in particular could be at risk as the gap between what they pay for deposits and what they collect on loans and bond holdings shrinks.

The action highlights one of the unintended risks of Prime Minister Shinzo Abe’s programme to end decades of deflation with the support of the Bank of Japan (BOJ), which by injecting monetary stimulus into the economy is helping to keep interest rates at rock bottom. Critics say policymakers in Europe should be considering such risks, too. The European Central Bank completed a review of the resilience of euro zone banks in October and came under fire for not including a deflationary scenario in its stress test hypotheses, even though inflation and bond yields in much of the region are hovering barely above zero. ECB Vice President Vitor Constancio defended the omission by arguing that a “deflation (scenario) is not there because indeed we don’t consider that deflation is going to happen”.

It was not immediately clear what scenario or assumptions the FSA was using in its assessment of the risk to regional and smaller banks, nor how the agency would follow up with lenders that appeared to be at particular risk from a period of persistently low, long-term interest rates. Japan’s more than 100 regional banks account for around 40% of the country’s $4.6 trillion in outstanding loans, but overall loan demand has shrunk 10% over the last 20 years. Such banks, which typically serve smaller businesses, have seen lending fall as Japan’s population ages, and many have cut the interest rates they charge to win business.

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But what about the pretense? How many zombies can they blow up before it starts hurting and cascading?

Zombie Bankruptcies Top New Year Wish-List for China’s Brokerages (Bloomberg)

Bond brokerages have a New Year’s resolution proposal for China’s policy makers: allow more defaults among so-called zombie companies. The extra yield on three-year AA rated debt over top-ranked notes surged 47 basis points this month to Dec. 25, the most for any month since October 2011, even after China’s first onshore bond payment in March failed to trigger a shakeup in the market. Borrowers graded at or below that rating need to repay a record 632.3 billion yuan ($101.6 billion) of notes in 2015, up 71% from 2014, China International Capital data show.

President Xi Jinping, who delivers a year-ahead address on Jan. 1, must balance the need to support an economy set for its slowest growth in more than two decades with reining in the world’s biggest corporate liabilities that Standard & Poor’s estimates stood at $14.2 trillion in 2013. Haitong Securities and Fitch say that will require greater use of bankruptcy laws. “Zombie companies will face higher borrowing costs, which will force more failures,” said Li Ning, a bond analyst in Shanghai at Haitong, the nation’s second-biggest brokerage. “That’s a good thing for the economy because allowing more defaults is a necessary step in building a sound financial asset pricing system.”

Haitong Securities’ Li said the number of bond defaults may increase next year and investors should shun lower-rated corporate debt because their yield premium over top-rated notes may rise. Zombie companies are using up too many lending resources, Liu Shiyu, who was deputy governor at the People’s Bank of China and is now chairman of Agricultural Bank of China, said earlier this year. In the only one onshore default China has had, investors didn’t lose a cent. Shanghai Chaori, which failed to make a full coupon payment in March, repaid all the principal and interest for its 1 billion yuan of bonds on Dec. 22. “It’s necessary to let those zombie companies default,” said Wang Ying, an analyst at Fitch Ratings in Shanghai. “If there is no real default, risks will never be priced in a correct way. Without a correct risk pricing mechanism, zombie companies can still survive by getting loans from banks.”

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That quickly withdrawn paper yesterday gave it all away. 3.5% trade growth.

China Slashes Trade Target For 2015 To 6% (MarketWatch)

China has cut its target for the growth of external trade to 6% for 2015, compared with a 7.5% target this year, the China Daily reported Monday. The paper cited Gao Hucheng, the minister of commerce, without saying where he made the remarks. With imports in particular falling short of expectations, China looks certain to miss this year’s target. In the first 11 months of 2014, total trade was up just 3.5% year-over-year in U.S. dollar terms, according to Dow Jones Newswires’ calculations. That is considerably slower than the official growth rate of the entire economy, which expanded 7.4% from a year earlier in the first three quarters.

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Sure the FBI is only too happy to chase some rich Chinese around.

China Looking At Deal With US To Recover Dirty Assets (Reuters)

China is looking at signing an agreement with the United States to target assets illegally taken out of China by corrupt officials, a newspaper said on Monday, as the government tightens the screws in its anti-graft battle. China has vowed to pursue a search, dubbed Operation “Fox Hunt,” beyond its borders for corrupt officials and business executives, and their assets. But Western countries have balked at signing extradition deals with China, partly out of concern about the integrity of its judicial system and treatment of prisoners. Rights groups say Chinese authorities use torture and that the death penalty is common in corruption cases.

The state-run China Daily said the central People’s Bank of China was talking to the U.S. Treasury Department’s Financial Crimes Enforcement Network about signing an agreement targeting ill-gotten assets held in the U.S. China is set to finalize a similar deal with Canada, Chinese state media reported this month. The central bank was also looking at a deal with Australia, the China Daily said, citing Zhang Xiaoming, deputy head of the Finance Ministry’s legal assistance and foreign affairs department. “After the agreements are made, China will share intelligence with the U.S. and Australia, which will also offer information to their enforcement agencies to conduct further investigations,” Zhang told the English-language paper.

“Once law enforcement officers in the U.S. and Australia identify illegal funds, they will immediately initiate judicial procedures to freeze and confiscate those criminal proceeds in their countries.” The United States, Canada and Australia are popular locations for corrupt officials to transfer their assets, the paper added. But legal problems have prevented China from getting these assets back, Zhang said. “Although the U.S. Federal Bureau of Investigation or Australian police have traced the assets and collected enough evidence to identify them as ill-gotten gains, they are unable to take immediate measures to freeze and confiscate them due to the lack of asset restraining orders from the Chinese courts.”

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Creative accounting.

China First-World Quandary Exposed as $800 Billion Lending Freed (Bloomberg)

China’s central bank is joining the balancing act of developed-world counterparts as it moves to free up at least $800 billion in funds for lenders, seeking to support growth without further inflaming financial risk. The world’s largest emerging market will broaden the definition of a deposit in 2015, boosting the lending capacity of Chinese banks that have to cap loans at 75% of funds held. The relaxation, reported by the official Xinhua News Agency yesterday, could make an additional 5 trillion yuan ($800 billion) to 5.5 trillion yuan available, according to analysts at Credit Agricole CIB and Guotai Junan Securities Co.

“The change in rules allows the extension of additional loans worth half of this year’s new lending,” said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong. “Policy makers across the globe are trying to boost demand by increasing bank lending, especially to businesses, so in this sense China’s efforts to boost lending fit well into the picture.” Central bankers worldwide are hunting for new ways to stimulate investment as elevated debt levels in developed nations stifle the scope of governments to respond and record-low borrowing costs limit room for monetary maneuvering. As global policy makers grapple with concern that asset bubbles are a by-product of increased liquidity, the People’s Bank of China’s challenge is supporting growth sufficiently to avoid political discontent while discouraging a renewed borrowing binge in the world’s second-largest economy.

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They’re just killing the whole economy on purpose.

Kiev Targets Oligarchs With Budget Bill (FT)

Recession-battered and war-torn Ukraine overhauled its business-choking tax system early on Monday, promising to lower the burden on small businesses and lower-income citizens while closing loopholes long exploited by oligarchs. The package of legislation adopted after 9 p.m. London time on Sunday also envisions increases in import duties to help stabilize stretched state finances and counter a balance of payments crisis. The laws will form the revenue-boosting backbone of an austerity-packed 2015 budget that officials hope will unlock fresh multibillion-dollar bailouts from the IMF and other western donors. In a 4:15 a.m. vote during the extraordinary Sunday-into-Monday session of parliament, Ukraine’s lawmakers adopted the budget, cutting subsidies and government spending.

Though many lawmakers complained the government did not show them a final version of the draft budget before voting, they were under pressure to adopt it before the end of this year in order to swiftly re-engage with the IMF. With fears of a financial meltdown spreading after central bank reserves halved this year to about one month of import coverage, the IMF concluded this month that Ukraine would need $15 billion of additional support on top of its existing $17 billion loan program. The tax legislation was only adopted after 10 hours of grueling negotiations that tested the unity of a pro-western coalition. It aims to bolster small and medium-sized businesses, reduce a massive shadow economy and squeeze what officials described as a fairer share of revenue out of oligarch-owned businesses.

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Kudos? Excuse me?

Fed and ECB: Kudos And Problems Ahead (CNBC)

It seems to me that the Fed should speed up the removal of a mind-boggling inflationary potential presented by its bloated balance sheet. The latest numbers show that during the two weeks between November 26 and December 10, the Fed shrank its balance sheet by $56.3 billion. That brought the monetary base down to $3.7 trillion, a $315.1 billion decline from its peak of last August. These liquidity withdrawals had no negative impact on U.S. money and capital markets: The federal funds rate remained well below its 0.25% target, and the yield on the Treasury’s benchmark ten-year bond closed at 2.25% last Friday. I expect to see the Fed accelerating asset reductions in the weeks and months ahead.

The European Central Bank (ECB) is in a completely different situation as a result of the weak cyclical position of the euro area economy. With the monetary union’s growth rate of 0.9% in the first nine month of this year, and the bank loans to the private sector falling at an average annual rate of 1.3% in the three months to October, the ECB has to maintain its exceptionally loose monetary policy in the months ahead. But the ECB needs no additional liquidity creation. The euro area markets are already swimming in liquidity. The problem is in an inadequate bank lending to businesses and households. Banks are gun-shy because of bad credit risks in a stagnant economy. Their balance sheets are also closely (maybe too closely) monitored by the regulatory authorities.

That means that the ECB’s most urgent and important task is to fix its dysfunctional transmission mechanism between monetary policy and real economy. The ECB’s other problem is an apparent expectation of some euro area governments that the central bank will do the heavy lifting for them. True to form, Germans are issuing stern warnings to countries (France and Italy) accused of dragging their feet on structural reforms while pushing for even looser monetary policies. German taskmasters may have a point here because it does seem that advocates of greater liquidity are the ones seeking to avoid the political fallout from unpopular reforms.

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“Kissinger argued that the West – with its strategy of pulling Ukraine into the orbit of the European Union – was responsible for the crisis by failing to understand Russian sensitivity over Ukraine ..”

The Liberal Idiocy on Russia/Ukraine (Robert Parry)

Among honest and knowledgeable people, there really isn’t much doubt about what happened in Ukraine last winter. There was a U.S.-backed coup which ousted a constitutionally elected president and replaced him with a regime more in line with U.S. interests. Even some smart people who agree with the policy of going on the offensive against Russia recognize this reality. For instance, George Friedman, the founder of the global intelligence firm Stratfor, was quoted in an interview with the Russian liberal business publication Kommersant as saying what happened on Feb. 22 in Kiev – the overthrow of President Viktor Yanukovych – “really was the most blatant coup in history.”

Brushing aside the righteous indignation and self-serving propaganda, Stratfor’s Friedman recognized that both Russia and the United States were operating in what they perceived to be their own interests. “The bottom line is that the strategic interests of the United States are to prevent Russia from becoming a hegemon,” he said. “And the strategic interests of Russia are not to allow the U.S. close to its borders.” Another relative voice of reason, at least on this topic, has been former Secretary of State Henry Kissinger who – in an interview with Der Spiegel – dismissed Official Washington’s conventional wisdom that Russian President Vladimir Putin provoked the crisis and then annexed Crimea as part of some diabolical scheme to reclaim territory lost when the Soviet Union collapsed in 1991.

“The annexation of Crimea was not a move toward global conquest,” the 91-year-old Kissinger said. “It was not Hitler moving into Czechoslovakia” – as former Secretary of State Hillary Clinton had suggested. Kissinger noted that Putin had no intention of instigating a crisis in Ukraine: “Putin spent tens of billions of dollars on the Winter Olympics in Sochi. The theme of the Olympics was that Russia is a progressive state tied to the West through its culture and, therefore, it presumably wants to be part of it. So it doesn’t make any sense that a week after the close of the Olympics, Putin would take Crimea and start a war over Ukraine.” Instead Kissinger argued that the West – with its strategy of pulling Ukraine into the orbit of the European Union – was responsible for the crisis by failing to understand Russian sensitivity over Ukraine and making the grave mistake of quickly pushing the confrontation beyond dialogue.

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A curious NY Times piece mostly made up of innuendo and slander, but which has a few relevent lines. What the Times seeks to insinuate is that German companies ‘cool on Russia’ because they no longer trust the country, whereas in reality it’s sanctions that force them out.

In Reversal, Germany Cools to Russian Investment (NY Times)

The uncertainty hanging over Germany’s strong business ties with Russia, which are more than double the value of Russian trade with the United States, is in marked contrast to the optimism and relative stability of recent years. And it has been reflected in increasingly acrimonious exchanges in Germany’s political, diplomatic and intellectual elite over how to shape relations with Moscow. Last weekend, the two most prominent Social Democrats in Chancellor Angela Merkel’s grand coalition government of center right and center left — the party leader, Sigmar Gabriel, and the foreign minister, Frank-Walter Steinmeier – voiced concern that sanctions might hobble the stricken Russian economy, and they opposed tightening them.

Ms. Merkel, clearly frustrated with the behavior of President Vladimir V. Putin of Russia, has so far taken a harder line. But the potential for conflict within Ms. Merkel’s government complicates her efforts to use Germany’s close ties with Russia as leverage to fashion a solution to the crisis in Ukraine. Business groups, normally strong backers of Ms. Merkel’s Christian Democrats, have agreed with the Social Democrats on Russia and warned against using economic means to put pressure on Mr. Putin. “Sanctions are not the proper means to resolve this political crisis,” Eckhard Cordes, a former Daimler executive who is chairman of the Committee on Eastern European Economic Relations, which represents companies doing business in the former Soviet bloc, said in an email. “The West cannot have an interest in destabilizing the Russian economy or Russian politics.”

[..] Political tensions are likely to intensify as sanctions against Russia come up for renewal in March, a year after Moscow annexed Crimea. “Anyone who believes that forcing Russia economically to its knees will lead to more security in Europe is wrong,” Mr. Steinmeier, the foreign minister, told the weekly newsmagazine Der Spiegel. Having Russia’s economy in chaos “cannot be in our interest,” he added. Mr. Gabriel, the leader of the Social Democrats, said pointedly that calls for intensifying sanctions were wrong. Gerhard Schröder, Ms. Merkel’s predecessor as chancellor and an avowed friend of Mr. Putin, was among 60 prominent signatories of an appeal entitled, “Again War in Europe?/Not in Our Name.”

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Okay, and I say Merkel should influence Kiev.

Russia Must Influence Separatists To End Ukraine Crisis, Says Merkel (Reuters)

German Chancellor Angela Merkel appealed to the Russian government on Sunday to use its influence on separatists in eastern Ukraine to implement a ceasefire plan agreed in Minsk in September aimed at ending the conflict. Planned talks involving Russia, Ukraine and the Organisation for Security and Cooperation in Europe to further the ceasefire arrangements have not yet taken place. “(Merkel said) A stabilization of the situation can only come if the agreed contact lines are finally implemented,” said a spokeswoman in a statement. “She appealed to the Russian government to use its influence on the separatists to this end,” said the spokeswoman. In a phone call with Ukrainian President Petro Poroshenko late on Saturday, Merkel expressed regret that the contact group talks had not happened.

Last week, Poroshenko had said the talks would take place on Dec. 24 and 26. Merkel, who has been closely involved in diplomatic efforts to resolve the crisis, also welcomed the exchange of prisoners between the Ukrainian government and separatists. The September truce has been flouted by both sides but violence in eastern Ukraine has decreased during December, raising hopes of further talks. The uprising by the separatists, who oppose Kiev rule and want a union with Russia, began after Russia annexed the Black Sea peninsula of Crimea from Ukraine in March. The pro-Western authorities in Kiev accuse Russia of orchestrating the uprising but the Kremlin denies it is behind the revolt.

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Long piece from Syriza advisor Varoufakis on the origins of the euro.

In Lieu Of Best Wishes: The Euro’s First Inkling (Varoufakis)

As 2015 is approaching, seemingly pregnant with crucial challenges for Europe, the euro and all those who have to live with it, I could not think of a better seasonal offering for readers of this blog than a suitable extract from my next book. I chose a piece that narrates, and interprets, the story of the first time the euro was proposed in the highest echelons of European decision making. Hope you enjoy it. With wishes for a 2015 worth remembering fondly.

An Indecent Proposal Kurt Schmücker was a man not given to strong emotions. But on the morning of March 23rd 1964 he could hardly trust his ears and only barely managed to contain his astonishment. As Germany’s Minister of the Economy, Herr Schmücker was used to meeting, regularly, with his French counterpart, Valerie Giscard d’ Estaing, President Charles De Gaulle’s finance minister and a man who would, ten years later, become President of France himself. So, when Giscard dropped by his Bonn office, for a two-hour chat, Minister Schmücker was relaxed, anticipating another anodyne meeting, like all previous get-togethers whose real purpose was to put on a show of European unity between the two erstwhile foes shouldering the burden of constructing a European Union at the early stages of its development.

Schmücker and Giscard normally exchanged polite views on how each saw the economic policies of the other, on how the two countries dealt with movements of money across their borders, on interest rates and trade balances, on their attitudes toward taxing business and, of course, on their joint efforts at cementing a European Union still in its infancy. Occasionally they would also swap tales of woe on their tense relations with their own central bankers, the Bundesbank and the Banque de France. Nothing, in other words, that might have prepared Herr Schmücker for what he was about to hear. But, that morning, once the obligatory niceties had been dispensed with, Giscard came out with a shocking proposal: France and Germany should create a common currency, inviting the other four members of the European Union to join in when and if they were ready.

It took Schmücker a few moments to recover his composure. What on earth was the aristocratic Frenchman saying? Germany and France sharing the same banknotes, the same coins, the same Central Bank? Which one? The Bundesbank? For heavens sake!, he is certain to have cried out inside his own head. Outwards, he put on a face of somber iciness, pretending not to have been taken aback. Indeed, the record shows that he responded as if he had not heard the earth-shattering proposition. Why not be more modest, he countered? Why don’t we just try to stabilize our exchange rates through our central banks and on the basis of (a conservative German’s wet-dream) “strict discipline” and “contractual rules”?

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What a shame.

Winston Churchill’s Family Begged Him Not To Convert To Islam (Ind.)

The family of Sir Winston Churchill urged him to “fight against” the desire to convert to Islam, a newly discovered letter has revealed. The Prime Minister who led Britain to victory in World War Two was apparently so taken with Islam and the culture of the Orient that his family wrote to try and persuade him not to become a Muslim. In a letter dated August 1907 Churchill’s soon to be sister-in-law wrote to him: “Please don’t become converted to Islam; I have noticed in your disposition a tendency to orientalise, Pasha-like tendencies, I really have. “If you come into contact with Islam your conversion might be effected with greater ease than you might have supposed, call of the blood, don’t you know what I mean, do fight against it.”

The letter, discovered by a history research fellow at Cambridge University, Warren Dockter, was written by Lady Gwendoline Bertie who married Churchill’s brother Jack. “Churchill never seriously considered converting,” Dr Dockter told The Independent. “He was more or less an atheist by this time anyway. He did however have a fascination with Islamic culture which was common among Victorians.” Churchill had opportunity to observe Islamic society when he served as an officer of the British Army in Sudan. In a letter written to Lady Lytton in 1907 Churchill wrote that he “wished he were” a Pasha, which was a rank of distinction in the Ottoman Empire. He even took to dressing in Arab clothes in private – an enthusiasm he shared with his good friend the poet Wilfrid S. Blunt. But Dr Dockter thinks Churchill’s family need never have worried about his interest in Islam.

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Good read.

The American Civil War: The Bloody Anniversary We All Forgot (Fisk)

Every month, my London mail package thumps on to my Beirut doorstep with An Cosantóir inside. It’s the magazine of the Irish Defence Forces – surely the glossiest-paged journal of any army, let alone one of the smallest military forces in the world. But among its accounts of Ireland’s UN missions abroad – think Golan, for example, with Syria’s civil war crashing around Irish soldiers – almost inevitably each month, there’s a piece of history we’ve forgotten. For while the start of the Great War of 1914-18 has been commemorated to the point of spiritualism these past 12 months, who remembers that this week we enter the 150th anniversary year of the end of the American Civil War?

In US history, it is a profound event that we should all remember; here, after all, lie the original bones of the Union, its victory consecrated among some of the units whose soldiers were sent to their deaths in Iraq in 2003, its brutality ghosted into the future narrative of American military records, its equalities reflected in the large number of black soldiers who died in present-day Mesopotamia. But for the Irish, too, the civil war of 1861-1865, is a sombre anniversary. They reckon that 210,000 Irish soldiers fought in British uniform in the First World War, and that 49,300 were killed. Yet almost as many Irishmen fought in the American Civil War – 200,000 in all, 180,000 in the Union army, 20,000 for the Confederates.

An estimated 20% of the Union navy were Irish-born – 26,000 men – and the total Irish dead of the American conflict came to at least 30,000. Many of the Irish fatalities were from Famine families who had fled the desperate poverty of their homes in what was then the United Kingdom, only to die at Antietam and Gettysburg. My old alma mater, Trinity College Dublin, is collating the figures and they are likely to rise much higher as Irish academics mine into the American Compiled Military Service Records for the regiments of both sides.

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