Aug 142020
 
 August 14, 2020  Posted by at 12:35 pm Finance Tagged with: , , , , , , , , , , , , ,  11 Responses »


Egon Schiele Self-Portrait with Lowered Head 1912

 

 

Regular Automatic Earth guest writer Alexander Aston this time comes not from Zimbabwe, Cambridge or Greece, but from South Carolina, where he is on family business. And that’s where he’s venting his anger about. I’m pretty sure we would all benefit from doing more of that, get it all off our chests. I think maybe the main issue with it in the present day circumstances is you have to make sure it’s your anger, and not somebody else’s that you’re merely parroting.

I personally like Alexander’s notion of: “America, a Country For Old Men”.

 

 

 

Alexander Aston: Is there any more perfect metaphor for a society in terminal decline than the senescent Joe Biden? The U.S. election has boiled down to a choice between the authoritarian versions of Mr. Magoo and P.T. Barnum. Truly, “there’s a sucker born every minute” is a far more apropos motto for the country than E. Pluribus Unum. The Republicans have adopted a Christian Nationalism that identifies with a New York shyster that says all the shitty things they’ve been feeling for decades while blaming the least powerful. It’s always easier to kick down than punch up and moral courage is not a common trait.

Likewise, the Democrats smug self-satisfied conviction of ethical superiority and sense of entitlement to the votes of every women, brown person and leftist makes them not only insufferable but delusional. The DNC managed to crush the momentum and energy of one of the most significant left- wing grassroots movements in US history. They have demoralised a huge swath of the under-45 crowd and subverted an actual political vision (regardless of whether you agree with it or not) in favour of a man with an abysmal record and signs of growing cognitive impairment. The DNC platform offers zero substantive policy other than “not Trump” (a policy that’s going to have a very short honeymoon in the face of cascading systems failure).

The Democrats have made no concessions on even one important progressive/left issue. Now they have picked a morally bankrupt prosecutor who’s deeply entangled with the prison industrial complex at a time in which “defund the police” has coalesced into a key feature of American discourse. Yet, liberals seem completely shocked and aghast by the fact that there are large numbers of young folks, minorities and women that are unwilling to shut up and put up. The level of enthusiasm beyond the party faithful, for those still willing to vote Democrat, amounts to the ever inspiring “I’ll grit my teeth.”

 

Meanwhile, I know middle aged folks that have never voted in their lives who have signed up just to support Trump. In other words, they are motivated. Like it or lump it, that’s some of the real political complexity behind the vacuous narrative management of the MSM. On a national level, the American sense of reality is becoming more unhinged than a schizophrenic dropping acid after a weeklong meth binge. George Soros funded Antifa and Putin’s army of trolls are all monsters of the same fevered social imagination. On its current trajectory, the American Right will soon believe anyone to the left of Attila the Hun is a “far-left radical.”

Likewise, U.S. liberals will be left haunted and terrified by the spectre of Russian agents stealing their precious bodily fluids. Meanwhile, the virus will continue to rage, and corporate feudalism will further entrench itself as the benefits of imperial citizenship rapidly fade. The only thing that’s certain is that huge swaths of Americans still won’t actually understand what is happening to them and continue to blame the opposing factions of management, figments of their propaganda, the dispossessed and the marginalised. I don’t believe the specific outcome of the American election is all that relevant anymore.

The sad truth is that the United States is collapsing under the weight of a microscopic entity and its own systemic contradictions. The various narratives of what is happening and what it means to be an American have become so wildly divergent that there are multiple parallel realities operating in the United States. What’s frightening is how few realise the diversity and complexity of these various perspectives, fears and aspirations. Regardless of who wins the election, trust in the political legitimacy of the American system is being fatally undermined. If the margin of the election is close, it is guaranteed that one side will not accept the results.

 

If the election is swept, then the winning party will be saddled with a crisis of unparalleled proportions in the history of the country. Furthermore, neither party has the political vision nor competence to actually address the challenges that beset them. The U.S. would need leadership on par with a Lincoln or Aurelius to rescue the political system. Whoever is in power will rapidly face multiple and intersecting forms of systemic breakdown, resistance and noncompliance as the extent of the economic devastation becomes truly apparent.

The first part of the 2020’s will consist of material deprivation, civil unrest and increasingly robust challenges to the United States’ geostrategic position. The more that authoritarians try to exert control in a high entropy environment (robbing Peter to pay Paul), the faster the system will fall apart. Ultimately, I believe that the break-up of the United States is all but inevitable at present. What I hope is that it will be a relatively peaceful dissolution and reorganisation. What should terrify us all is the prospect of real violence as the various factions and coalitions jockey for power in the new reality. A few truly smooth brained idiots think that they just need to tool up and go mow down a few “liberal snowflakes” so that they can return to the 1950’s by Christmas.

 

A conflict in North America would be a clusterfuck that would make Syria’s civil war look like a game of checkers. Forget electoralism and eschew romantic notions of purification through violence. Build solidarity networks, figure out how to make your communities economically, socially and psychologically resilient. My suggestion would be that Mutualism, Libertarian Municipalism and Democratic Confederalism offer some good starting points for thinking about these things. I would recommend setting up a micro- factory in your community so that you can start manufacturing necessary tools and goods on a local level. Here are some freely available schematics: Civilization Starter Kit.

Try to appreciate the limitations of your own understanding so that you might be more compassionate towards others. Don’t blame people for having problems they don’t know how to fix, try helping them instead. Some things, once broken, cannot be mended. This is very true for societies. I sincerely wish you all the best of luck. Please be good to one another and defend those less powerful and fortunate than yourself.

P.S. If you are in a swing state you should follow your conscience, but it should be beneath any person’s dignity to vote for either party in their safe states. If you don’t understand how the American electoral system works at this point then shame on you, stop berating people for voting Green in Montana or Libertarian in California, they’re actually displaying some political acumen.

 

 

 

 

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Jul 262020
 


Elaine de Kooning Fairfield Porter #1 1954

 

 

It won’t come as a surprise to anyone that the first half of 2020 has brought, among many other things, renewed calls for the demise of the US dollar. It’s been pretty much a non-stop call for over a decade now, and longer. But this time, like all previous ones, I’m thinking: I don’t see it. I guess my first question is always: please explain why the dollar would collapse before the euro does.

For one thing, the dollar would have to collapse/default against one or more “entities”. The dollar is not like one of those highrises that collapse upon themselves. It will have to default or collapse against something(s) else. Since it is the world reserve currency, that means there would have to be a replacement reserve currency. Yes, that could also be for example gold or SDR’s, or even a basket of currencies, and something like that may happen eventually, but it doesn’t appear in the cards in the short run.

There are really only two candidates for the role, and neither looks at all fit to play it. The euro may have some ambitions in that direction, but it has far too many problems still. The yuan/renminbi certainly has such ambitions, but the Communist party refuses to let it get on stage to show what it’s got. As I recently wrote:

 

The main sticking point for Beijing is a conundrum it cannot solve. The CCP wants to have BOTH a global currency AND total control over that currency. It will have to choose between the two, and cannot make up its mind. So it pretends it doesn’t have to choose. Sure, there has been some advancement for the yuan, but I bet most of that is on the back of the Belt and Road (BRI), and that will turn out to be one of the main victims of the coronavirus. The BRI is China’s very clever way of exporting its overproduction, but potential buyers have other things on their mind today.


Meanwhile, even with that, the yuan is used in only 1.8% of cross-currency payments. [..] The sudden, and rushed, take-over of Hong Kong with the new security law will not help China’s plans to be accepted internationally. [..] The world’s large investors will not put their money into something that Xi Jinping can declare devalued by 50% on a rainy morning when he sees fit. He will have to cede that kind of control.

The euro has made some gains vs the USD recently, going from 1.07 to 1.16 or so, but that means very little once you look at the broader picture. Moreover, the reason the financial press provides for -much of- those gains, which is that the EU supposedly showed “unity” in its recent Recovery Fund talks, is bollocks.

If it showed one thing, it was a lack of unity. That’s why these were the longest talks they ever had. And if this had not been Angela Merkel’s last hurrah, they might not have agreed at all. They paid off the Frugal Four to the tune of hundreds of millions, and that’s how they got a deal. Horse traders.

A simple screenshot from Bloomberg of the USD vs EUR over the last five years makes clear why the recent changes are no big deal. (All BBG screenshots are from July 24 just before 10 AM EDT and all cover a 5 year period.)

 

 

A reserve currency has two roles: being the currency that most international trade is conducted in, and -closely related- being the currency that countries hold most as foreign exchange (FX) reserves. After WWII, the US dollar became the most important currency for trade more or less by default, a position that it greatly strengthened with the petrodollar.

A 2015 SWIFT paper provides details about the US dollar’s share of international trade:

The US dollar prevails as the dominant international trade currency, with a 51.9% share of the value of international currency usage in 2014. The euro is second, with a 30.5% share of the total value. The British pound is third, with a 5.4% share of the total value, followed by Asian currencies such as the Japanese yen and the Chinese yuan.

That’s from five years ago, but things won’t have changed much. The system is complex and inert, it has a very strong resistance against large and sudden changes. (Do note that the euro’s share of international trade is substantially skewed because it includes payments between countries that use the euro as their currency, plus those EU countries that don’t -yet-). Single market, international trade.

And then there’s the dollar’s FX role.

In September 2019, Eswar Prasad at Brookings reported that the dollar’s share of global FX reserves remains around 65%.

The drop from 66 percent in 2015 to 62 percent in 2018, is probably a statistical artifact related to changes in the reporting of reserves. Compared with 2007, however, the dollar’s share of global FX reserves has declined by 2 percentage points while the euro’s share is down 6 percentage points. Over this period, the Japanese yen’s share has risen by 2 percentage points, while other less prominent reserve currencies have increased their total share by 4 percentage points. The renminbi, which was not an official reserve currency in 2007, now accounts for 2 percent of global FX reserves. [..] .. the euro has stumbled, the renminbi has stalled, and dollar supremacy remains unchallenged.

[..] In July 2019, China’s total official reserve assets amounted to just over $3.2 trillion, of which $3.1 trillion (97 percent of the total) was held in the form of FX reserves. Gold holdings amounted to about $89 billion [..] Coming amid rising trade tensions with the U.S., the 5 percent increase in China’s gold stock and the 24 percent increase in the value of its official gold holdings during 2019 have been interpreted as a sign of China’s attempting to diversify its reserve holdings away from U.S. dollars.

If this interpretation was indeed correct, China has a long way to go. Gold now accounts for 3 percent of China’s gross international reserves. From a global financial market perspective, and especially relative to its overall international reserves, the $18 billion increase in the value of China’s gold reserves during 2019 is trivial; it barely registers as a shift in the composition of China’s overall reserves.

Assuming that China still holds 58 percent of its FX reserves in dollar-denominated assets, the value of those assets in July 2019 was $1.8 trillion. So, the value of its gold reserves, $94 billion, is a mere one twentieth of that of China’s dollar-denominated reserves.

With the euro and yuan out of the way as potential reserve currency candidates, we can take a look at gold. Senior commenter Dr.D at the Automatic Earth recently wrote: “As advertised, the US$ is defaulting. What? Where? US$ has been cut in half compared to Silver in 3 months. US$ has been cut in half compared to BTC in 3 months. US$ has been cut in half compared to Gold in 4 years.

Like many people talking about a USD demise, perhaps that’s too much of a dollar-centric view and conclusion. Surely gold and silver can rise vs the USD without announcing an imminent collapse of the latter. And since precious metals tend to go up in times of uncertainty, and COVID has brought shovels full of just that, you would expect them to rise.

Therefore you would have to also look at how they do vs for example the euro, before concluding anything. Note: I didn’t include Bitcoin because it’s too new and volatile. Makes me think of the Lindy Effect, often cited by Nassim Taleb, the idea that the older something is, the longer it’s likely to be around in the future.

Here are a few more Bloomberg screenshots. And yes, gold has done well vs the USD in, say, the past two years, no doubt.

 

 

But gold has pretty much followed the exact same pattern vs the euro:

 

 

Silver has done even better, more recently, vs the USD, though compared to where it was in 2016 it’s not that big a step (barely more than 10%):

 

 

And the pattern of silver vs the euro is so similar it’s almost eery.

 

 

I don’t see anything there that would make me think the dollar is collapsing, no more than the euro is. What I see is gold and silver rising. People move into precious metals, perceived as safe havens; they always do when the world is in turmoil. And don’t forget there are trillions in additional recent central bank money sloshing around that have to move somewhere.

As for the changes of the USD vs the euro: we’ve already seen that they are not exceptional. Losing a few percent vs the euro will not collapse the dollar.

Also, there’s something missing in the discussion as far as I’ve seen: the option that it’s the US itself that wants a lower dollar at this point in time, and actively works to get it lower. A strong dollar works for a strong economy, but not for one weakened by a pandemic and an acrimonious political climate.

But the US has borrowed so much money!, you say. Yes, but so have Europe, and Japan, and China, everyone has who could.

 

A little more about gold, since some are clamoring for a return to the gold standard. Which is not likely, because too many parties would resist, either for ideological or practical reasons. But say you would consider it, then you would as one of the first things you do, look at gold reserves. Here are the top ten gold holding countries per March 2020, as assembled by TradingEconomics.com:

 

 

Note: Britain is not there, because “Between 1999 and 2002 the Treasury sold 401 tonnes of gold – out of its 715-tonne holding – at an average price of $275 an ounce, generating about $3.5bn during the period.” (BBC). Gold is at $1,900 today. Nuff said.

The US gold reserves are so large it would appear to give them an unfair advantage if a gold standard were considered. Same as they have in the current set-up. Then again, if you insert population numbers into the equation, Germany, Italy, Switzerland, even the Netherlands, have more in relative terms. Question is: where does that leave all the others?

Long story short: I don’t see a US dollar default or collapse in the near future. But by all means enlighten me.

 

 

 

 

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It’s very bad luck to draw the line
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Jul 162020
 
 July 16, 2020  Posted by at 7:46 pm Finance Tagged with: , , , , , , , , , , , ,  8 Responses »


Utagawa Yoshitoshi Ariko weeps as her boat drifts in the moonlight 1886

 

 

Sometimes I think I can only do this work properly if I’m angry all the time 24/7. But I don’t want to be angry all the time; what kind of life is that? Still, there are days when I just can’t help it. The British intelligence services (please let find another word for that, so as to not insult actually smart people) came out with a couple anti-Putin press releases today, and there we go again.

We can only guess at what they want this time, whether it to keep the UK’s own “RussiaRussia Putin is Hitler” flame alive, or are they seeking to help their US counterparts to rise from the ashes of their fully discredited years-long Orange Man Bad narratives, but boy, is this nauseating. What’s even worse is that people eat it up like candy.

Guys, this is your own highly paid snoops lying to you -along with your government(s)- like there’s no tomorrow, and you’re just sitting there worrying about wearing a face mask next time you go to a store. Know what that makes you? Sheep. I know y’all still know what those look like, and how they behave. So what’s the attraction?

Here’s BIGLY revelation no. 1 per the BBC. Do note the “almost certain” in both pieces, they need an easy way out if the story doesn’t stick. It also means that obviously they’re not at all certain, they’re just making it up.

Russian Hackers Target COVID19 Vaccine Research

Russian hackers are targeting organisations trying to develop a coronavirus vaccine, a group of national security services has warned. The UK’s National Cyber Security Centre (NCSC) said the hackers “almost certainly” operated as “part of Russian intelligence services”. It said the group used malware to try and steal information relating to Covid-19 vaccine development. NCSC director of operations Paul Chichester said it was “despicable”. The hackers are part of a group called APT29, also known as “the Dukes” or “Cozy Bear”.

Some people will remember the name Cozy Bear from Robert Mueller’s failed $40 million “investigation”. Is that why the NCSC put it in? But to the point: Why would Russia hack the UK for vaccine info if and when the UK has no vaccine? Put it another way: what are the odds that UK “intelligence” is not at the same time trying to hack Russia for its own info? Think British scientists are smarter than Russian ones? How much money would you want to put on that?

Everyone is spying on everyone, always have, and today that may require some hacking skills. Big surprise. You leave your backdoor open, someone may try to have a look inside. Same for everyone. Not even the beginning of a newsworthy story; it happens all the time and everywhere. Next.

Next one is even flimsier. This one implies that since Jeremy Corbyn had some papers on the NHS in the last election, RussiaRussia gave them to him. And he’s an anti-semite too. So there. Can anyone explain why Russia would want to interfere in a UK election?

This seems to allege that Putin wanted to help Corbyn win. But is that for the same reason that he wanted to help Corbyn’s ideological twin Donald Trump win? Which we now know he didn’t? Or is it just that Putin the evil mastermind wants to confuse all parties? Given what I see and hear, he needn’t bother; they’re all already confused as can be.

 

UK Says Russia Sought To Interfere In 2019 Election

Dominic Raab’s statement is the first time ministers have admitted that the Kremlin has tried to distort the workings of British democracy – a practice the foreign secretary said was “completely unacceptable”. “On the basis of extensive analysis, the government has concluded that it is almost certain that Russian actors sought to interfere in the 2019 general election through the online amplification of illicitly acquired and leaked government documents,” Raab said in a written statement.

Next. Only days ago, there was this from Britain about a court case concerning the infamous novichok “attack” in Salisbury, in which first former Russian GRU agent Sergei Skripal and his daughter, and months later two other Brits, ostensibly came in contact with what was called the deadliest nerve agent in the world.

Neither Sergei Skripal nor his daughter Yulia have ever been seen again. There was a vague message from a niece, but that was it. But the story is alive and kicking. And can thus continue to be used. By the media-intelligence cartel.

 

Russian Agents May Have Deliberately Left Bottle Of Novichok In Salisbury

Russian agents may have deliberately discarded a bottle of the deadly nerve agent novichok, used in the assassination attempt of former spy Sergei Skripal, in Salisbury in a bid to undermine UK security, the High Court today heard. The claim was made during a legal challenge by the family of Dawn Sturgess, 44, who died in 2018 after coming into contact with novichok in a fake perfume bottle which her partner had found in a park. The family are embroiled in a High Court action in a bid to get ‘key questions’ asked at Ms Sturgess’ inquest.

[..] According to the Guardian, he also referenced then UK prime minister, Theresa May, in September 2018 in which she said: ‘This chemical weapons attack on our soil was part of a wider pattern of Russian behaviour that persistently seeks to undermine our security and that of our allies around the world.’

[..] ‘The use of novichok in Salisbury was the first aggressive use of a nerve agent in Europe since the Second World War,’ said Mr Mansfield in a written case summary. ‘It put hundreds of members of the British public at risk and killed Ms Sturgess. ‘The issue of who was responsible for it is a matter of almost unparalleled public concern. ‘There is no realistic prospect that the two suspects will face a criminal trial in the UK or that the Russian state will carry out a comprehensive investigation, and no public inquiry into these events has been established.

This is the pattern: it’s nothing to do with UK security. The pattern is that both the US and UK use their lack of control over Russia as an excuse and reason to blame Russia for anything they feel like. As five-year old kids would. Robert Mueller, the liar and coward, having failed to produce one shred of evidence against Trump, left two things alive in his final report: empty accusations against Assange, who was muzzled, and against “13 Russians”, who he knew would never contest whatever he said.

And when he was challenged because Concord Management decided to show up with a lawyer, he lost that too. The official line was: “It is no longer in the best interests of justice or the country’s national security” to continue. What a bunch of losers.

And we’re not done. Assange smearer no. 1 and hidden intelligence agent Luke Harding, who invented more smear stories about Julian than anyone on the planet, had this three weeks ago. I kid you not, his point was that Russian intelligence is really really stupid. To prove it, he paints a shining portrait of … US/UK intelligence operation Bellingcat.

This is mainly about the Skripal case again, but of course we also remember their role in the never ever existing chemical attack in Syria by Assad on his own people. Yes, the one where they, the OPCW was involved too, planted the canisters and shot some grueling staged photographs.

 

A Chain Of Stupidity’: The Skripal Case And The Decline Of Russia’s Spy Agencies

Bellingcat revealed the identity of poisoner No 1 in a message on its website. Having unmasked one assassin, it seemed likely that Bellingcat would succeed in identifying Petrov, too. Sure enough, in late September I received an invitation to a press conference. It was to be held in an illustrious location: the Houses of Parliament, in an upstairs committee room, number nine. Its subject was Petrov’s real identity. By the time I arrived, the room was full. I spotted a reporter from the New York Times, Ellen Barry, together with leading representatives from the British and US media. It was hard to escape the conclusion that power in journalism was shifting.


It was moving away from established print titles and towards open-source innovators. The new hero of journalism was no longer a grizzled investigator burning shoe leather, à la All the President’s Men, but a pasty-looking kid in front of a MacBook Air. Higgins and Grozev were there, as well as a Conservative MP, Bob Seely. I found a spot on a bench and sat down. The mood was expectant. Seely set the scene. He described Bellingcat as a “truly remarkable group of digital detectives”. Their success was due to an explosion of digital technology and a rise in digital activism, he said.

Here’s Canadian journalist Eva Bartlett about Bellingcat:

Bellingcat & Atlantic Council Join To Award Exploited Syrian Child & American Mass Murderer

Is the Atlantic Council some benevolent organization handing out awards to do-gooding people? No. It’s a Washington DC-based think tank, which promulgates lies and propaganda to further imperialist wars and weapons sales, among other things. One of its Syria “experts” is none other than Bellingcat’s Eliot Higgins, who recently took to social media to tell people to suck his “big balls,” making him more of a laughing stock than this backgrounder on the man with no qualifications to his title.


Some of the Atlantic Council’s funders include: the US State Department, oil and weapons manufacturing companies, banks, NATO, various nations’ ministries of defence, and the US Air Force, Army, Marine Corps and Navy. Even just based on funding alone, and ignoring their pro-NATO policy papers, the Atlantic Council clearly exists to further the interests of those involved in weapons manufacturing, wars, and oil.

Of course the entire lying fanfare is a direct result of the west failing to capture Crimea from Russia. They lost that one too; they sure lose a lot when engaging with Russia, don’t they? All they end up with is stories. John McCain and Victoria Nuland thought they had it all in their hands, and then it slipped right through.

And from Maidan and Crimea it’s just a skip and a hop to MH17, plus more -and heavy- Bellingcat involvement. This made the news again a week ago.

 

MH17 Disaster: Dutch Take Russia To European Rights Court

Citizens of 10 different countries died on board the Boeing 777 airliner that was flying from Amsterdam to Kuala Lumpur, Malaysia. More than two-thirds of the victims were Dutch nationals. In March, a trial opened in the Netherlands of three Russian and one Ukrainian citizens – still at large – for the murder of 298 people on board the plane. They are all linked to the pro-Moscow separatists. The trial, in a court near Amsterdam’s Schiphol airport, is expected to last for months.


In a statement, the Dutch foreign ministry said the government “decided to bring Russia before the European Court of Human Rights for its role in the downing of Flight MH17”. It said that “by taking this course of action the government is offering maximum support” to individual cases already brought against Russia by victims’ families. “Achieving justice for 298 victims of the downing of Flight MH17 is and will remain the government’s highest priority,” said Mr Blok. “By taking this step today… we are moving closer to this goal,” he added.

Now, I have some interest in this, because I was born in Holland and still have the passport. But from what I can see, this is just yet another western intelligence story. I don’t know what happened with MH17, but I’m pretty sure the Dutch government doesn’t know either, or if they do they’re not telling. And my skepticism isn’t even based on pieces like this from Eric Zuesse two weeks ago (but do read it!).

 

Netherlands ‘Justice’ Is Totally Corrupt: MH17 Case as Example

[..] when Ukraine’s Government authorized Holland’s Government to investigate and rule on what caused the MH17 to be shot down, Holland’s Government signed onto a secret agreement with Ukraine’s Government that included a provision allowing Ukraine’s Government to block and prevent any finding from being issued that would implicate Ukraine’s Government in having shot it down. Holland’s Government violates its own Freedom of Information law by refusing to make public what that secret agreement says.


However, at the time when the existence of the agreement slipped through into mention by a Ukrainian news-site on 8 August 2014, that news-report said “As part of the four-party agreement signed on August 8 between Ukraine, the Netherlands, Belgium and Australia [all of which nations are allies of the United States and are cooperating with its new Cold War against Russia], information on the investigation into the disaster Malaysian ‘Boeing-777’ will not be disclosed.”

My skepticism is kind of linked to this, but it’s much older. When the plane was brought down, I noted that then-US VP Joe Biden, as well as the Ukrainian government of newly (US-)installed president Poroshenko, and also Dutch foreign minister Frans Timmermans, who got a plush job in Brussels out of it, all three declared within hours that Russia “was what did it”.

None could know at the time they made the statement. But it was a few months after the west lost Crimea, and thereby the chance to rid Russia of its only warm water port. And some people didn’t like that one bit. Some people were very unhappy about being outsmarted by Putin. Nuland must have been livid. And Hillary Clinton, and McCain.

Then when the investigation started, something odd happened. 2/3 of all victims -298 in total- were from the Netherlands. Yet the Dutch got to lead the inquest. As I wrote at the time: have you ever seen a crime series, or a murder one, or a movie, where the main victim (afflicted party) gets to lead the investigation into what happened? No, what we always see is someone taking the aggrieved detective aside saying: sorry, you’re too close to this.

And then on top of that, Ukraine, certainly one of the main suspects, since it happened in their territory, got to be part of the investigation. And not just part, as you can see in Zuesse’s piece, they could veto both what would be investigated and what could be communicated about the results. While they could well be the perpetrator!

If you go back to the murder series metaphor, a producer or writer would say: no can do, it lacks all credibility. But they did it. And it was then that I knew no matter what the report would say, it would be literally incredible. It’s 6 years later, and it’s going to take many more years, of posturing, name-calling, threats, accusations, you name it. And nothing will be proven, there will be only claims of proof. Just like in all the other cases I mentioned above. It’s how these things are done.

MH17 has become just another tool in the hands of “intelligence”.

 

 

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May 062020
 


Saul Leiter Phone call c1957

 

Don’t worry, we’re still talking virus, just from a slightly different angle. I was going to do something completely different, but then I saw an article at the South China Morning Post (SCMP) today that made me think “I don’t think that’s true”, realizing that at the same time many people would think it is.

Foreign holdings of US Treasuries are a misty environment for perhaps not just many, but most people. What triggered the SCMP piece is Trump’s threat, if it was ever meant to be one, to default on US dollar-denominated debt owned by China. Which by one estimate consists for about 70% of Treasuries.

And there are entire choirs full of voices willing to tell us that China can simply start dumping the -estimated- $1.2 trillion in Treasuries it holds, and threaten if not end the USD reserve currency status that way, if the US doesn’t “behave”. There’s little doubt that China would want this, but that doesn’t make the idea any more realistic.

What should give that away is, how easy can we make it for you, that it hasn’t done so yet. And now a conflict over the origin of a virus would trigger this? On a side note: if that origin is somewhere in China, even if it’s unintentional, how could Beijing possibly “admit” to it? How could it ever settle the lawsuits that would ensue?

No, the US cannot default on China’s holdings of its Treasuries. That alone would be a larger threat to the reserve currency status than anything anybody else could do, other then nuclear war. But at the same time, China cannot dump its Treasury holdings. because that would hurt … China.

And don’t forget that China and the US are in a symbiotic relationship of chief seller and chief buyer. Drastic changes in that relationship would -almost- certainly lead to consequences that neither can fully oversee, and that could hurt either or both tremendously.

Where are the US going to buy what they now buy from China? Who is China going to sell to what they today sell to the US? The countries are for all intents and purposes Siamese twins. Whatever can change, can only do so gradually. And even then.

No matter how much I read about it (a lot), this particular field is still not my expertise. But when I read the SCMP piece, it reminded me right off the bat of something that Michael Pettis, professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets, wrote on May 28 2019, in an update of an article he wrote in January 2018 (all pre-virustime).

I liked Michael’s take from the moment it was published, because I learned a lot. I think you might too. I can’t do this without some elaborate quotes, but at least that will make me shut up a little. Please bear with me. I don’t find the SCMP piece all that interesting, but it’s good as a failing counterweight to Pettis.

With all that in mind, let’s take the SCMP piece first:

 

China Could Cut US Debt Holdings In Response To White House COVID19 Compensation Threats

[..] White House officials have debated several measures to offset the cost of the coronavirus outbreak, including cancelling some or all of the nearly US$1.1 trillion debt that the United States government owes China. While analysts added that the US was highly unlikely to take the “nuclear option”, the mere fact that the idea has been discussed could well prompt Beijing to seek to insulate itself from the risk by reducing its US government debt holdings.

That, in turn, could spell trouble for the US government bond market at a time when Washington is significantly ramping up new issuance to pay for a series of programmes to combat the pandemic and the economic damage it is causing. “It’s such a crazy idea that anyone who has made it should really have their fitness for office reconsidered,” said Cliff Tan, East Asian head of global markets research at MUFG Bank. “We view this as largely a political ploy for [Donald Trump’s] re-election and a cynical one because it would destroy the financing of the US federal budget deficit.”

[..] any move to cancel the debt owed to China – effectively defaulting on it – would be counterproductive to US interests because it would likely destroy investors’ faith in the trustworthiness of the US government to pay its bills [..] The US Treasury two-year yield continued to trade near record low levels this week, suggesting market traders and fund managers are largely shrugging off what is widely seen as a far-fetched idea that the US could cancel some or all of China’s debt.

The whole idea that the US would default on its own Treasury debt is nonsensical. Why write about it? Is that only because you don’t understand what’s involved? And your editor doesn’t either?

Nevertheless, the news that the idea was discussed by top US officials is likely to raise concerns among Chinese leaders about the growing risks of holding a large amount of US government debt at a time when relations appear to be deteriorating rapidly, analysts said. Iris Pang, Greater China chief economist at ING Bank, said unless it had no choice, China would want to avoid quickly offloading its US government debt without first considering other punitive measures against the US.


[..] China could trigger a crash in the US dollar and financial markets by flooding the market with US Treasuries for sale, which would push down US bond prices and cause yields to spike. But that would also ignite a global financial catastrophe, hurting China as well. Instead, China could cut back or stop buying new US Treasury issues, which would gradually reduce its holdings of US government securities as old ones expire and are not replaced. “In the coming months, [China could] halt its Treasury purchases to send a clear signal of its intentions,” said Pang. “If it decides to do that, it could make actual sales [of its other holdings] at a later date.”

This is my central point here. The article says: “China could trigger a crash in the US dollar and financial markets by flooding the market with US Treasuries..”, and I don’t think that’s true. Yeah, they can do tariffs or buy less US soybeans, but then again, those have been linked by Trump to US purchases from China.

In the meantime, China may consider imposing tariffs of its own, or reducing its US agricultural purchases. China has agreed to buy an additional US$200 billion worth of US products and services over the next two years compared to 2017 levels as part of the phase one trade deal signed in January. [..] There have always been calls for China to diversify its US$3 trillion in foreign exchange reserve holdings, around one-third of which are held in US Treasuries. According to the latest US Treasury Department report, China’s holdings slipped to US$1.09 trillion in February from a peak of US$1.32 trillion in November 2013.


[..] “There’s a strong urge for countries like China, and Russia, to move away from US dollar settlements. This is simply because the US dollar can be weaponised by the US government,” said Xu Sitao, chief economist at Deloitte China, referring to the recent practise by the US government of cutting off foreign individuals, companies and governments from the global US dollar financial transaction settlement system, greatly complicating their ability to conduct business. “Clearly there’s more willingness for certain countries just to diversify and move away from US dollar settlements.”

Sure, but that’s old stuff, as old as the petrodollar. Still, the article supposedly deals with -life-during-and-after-COVID19. Has nothing changed? Well, perhaps not. But then why the article?

[..] David Chin, the founder of Basis Point Consulting, said China could be forced to toughen up its act if it no longer earned US dollars from its exports to the US because of a significant US-China decoupling. If that were to happen, China could sell its US Treasury holdings for yuan, seeking to engineer a collapse in the US dollar to end its status as the ruling currency. “Its ‘I die, you die harder’,” Chin said. “With no US export market, China would go the other way and rely on internal consumption, trade with Belt and Road countries and the rest of the world in their local currencies, and prepare to ‘eat bitter’ as local conditions worsen.”

If China doesn’t have the US as an export market, both go down, so I’m not sure why a news outlet would want to discuss this without providing the proper news “environment”. And anyway, it’s just not true. Here’s Michael Pettis very methodically putting the final nail in that coffin, and showing why the whole notion is just a load of crock.

 

China Cannot Weaponize Its US Treasury Bonds

China cannot sell off its holdings of U.S. government bonds because Chinese purchases were not made to accommodate U.S. needs. Rather, China made these purchases to accommodate a domestic demand deficiency in China: Chinese capital exports are simply the flip side of the country’s current account surplus, and without the former, they could not hold down the currency enough to permit the latter.

To see why any Chinese threat to retaliate against U.S. trade intervention would actually undermine China’s own position in the trade negotiations, consider all the ways in which Beijing can reduce its purchases of U.S. government bonds:

1) Beijing could buy fewer U.S. government bonds and more other U.S. assets, so that net capital flows from China to the United States would remain unchanged.

2) Beijing could buy fewer U.S. government and other U.S. assets, but other Chinese entities could then in turn buy more U.S. assets , so that net capital flows from China to the United States would stay unchanged.

3) Beijing and other Chinese entities could buy fewer U.S. assets and replace them with an equivalently larger amount of assets from other developed countries , so that net capital flows from China to the United States would be reduced, and net capital flows from China to other developedcountries would increase by the same amount.

4) Beijing and other Chinese entities could buy fewer U.S. assets and replace them with an equivalently larger amount of assets from other developing countries , so that net capital flows from China to the United States would be reduced, and net capital flows from China to other developing countries Beijing and other Chinese entities could buy fewer U.S. assets and not replace them by purchasing an equivalently larger amount of assets from other countries, so that net capital flows from China to the United States and to the world would be reduced.

These five paths cover every possible way Beijing can reduce official purchases of U.S. government bonds: China can buy other U.S. assets, other developed-country assets, other developing-country assets, or domestic assets. No other option is possible. The first two ways would change nothing for either China or the United States. The second two ways would change nothing for China but would cause the U.S. trade deficit to decline, either in ways that would reduce U.S. unemployment or in ways that would reduce U.S. debt.

Finally, the fifth way would also cause the U.S. trade deficit to decline in ways that would likely either reduce U.S. unemployment or reduce U.S. debt; but this would come at the expense of causing the Chinese trade surplus to decline in ways that would either increase Chinese unemployment or increase Chinese debt. By purchasing fewer U.S. government bonds, in other words, Beijing would leave the United States either unchanged or better off, while doing so would also leave China either unchanged or worse off. This doesn’t strike me as a policy Beijing is likely to pursue hotly, and Washington would certainly not be opposed to it.

I always thought this was a crystal clear explanation of what lies behind the threats that are continually uttered from both sides. One half of a Siamese twin can stab or poison the other, but what would be the outcome of that? And Pettis has more, and then much more at the link.

[..] Even if Beijing forced institutions like the People’s Bank of China to purchase fewer U.S. government bonds, such a step cannot credibly be seen as meaningful retaliation against rising trade protectionism in the United States. As I have showed, Beijing’s decision would have no impact at all on the U.S. balance of payments, or it would have a positive impact.

It would have almost no impact on U.S. interest rates, except to the extent perhaps of a slight narrowing of credit spreads to balance a slight increase in riskless rates. It would also have no impact on the Chinese balance of payments in the case that it leaves the U.S. balance of payments unaffected. To the extent that it would result in a narrower U.S. trade deficit, there are only three possible ways this might affect the Chinese balance.

First, China could export more capital to developed countries, in which case the decision would have no immediate impact on China’s overall balance of payments, but it would run the risk of angering its trade partners and inviting retaliation. Second, China could export more capital to developing countries, in which case the decision would have no immediate impact on China’s overall balance of payments, but it would run the very high risk of increasing its investment losses abroad. Or third, China could simply reduce its capital exports abroad, in which case it would be forced into running a lower trade surplus, which could only be countered, in China’s case, with higher unemployment or a much faster increase in debt.

The US cannot default on its debt because its reserve currency status would be shot. Trump knows that and still throws it out there. So what do you do as a serious journalist? Repeat that without as much as a question mark?

In the same vein, China cannot sell its USD-denominated assets, or at least not at any meaningful kind of pace. So what do you do as a serious journalist? You claim that it can?

 

 

 

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Apr 212020
 


Gordon Parks Muhammad Ali in training 1966

 

There are times when you think: now things must be easy to comprehend, but as it turns out, they are still not. Let me try once more. See, I was thinking it must have become much easier to gauge the impact in the US of COVID19 when I published the graph below from TheNewAtlantis.com a few days ago. That the stories about seasonal flu etc. at least should be dead and buried, because, well, just look at the graph.

No such “luck”. That warped comparison keeps on rearing its head. The graph is plenty clear about it, however. In a period of about 3 weeks, COVID19 obliterated all other causes of death far behind.

 


click to enlarge in new tab

 

 

I have followed the progress of the virus since early January, so plenty of graphs are available. Below are those from Worldometer and SCMP, starting February 20.

On February 2, the US had 5 cases and zero deaths. Then we get to the graphs.

On February 20, there were 75,750 global cases, 74,500 of which were in China. There were 2,130 deaths, of which just maybe 10 were outside China.

The US had fewer than 15 cases and zero deaths.

 


 

 

One month later, things had changed quite dramatically, or so it seemed.

On March 20, there were 250,000 global cases and over 10,000 deaths. Cases had tripled, deaths had almost quintupled. Italy had overtaken China in most fatalities, from zero a month earlier.

The US had emerged “on the forefront”. It now had 10,400 cases and 150 deaths. Yes, that is just one month ago, 32 days to be exact.

 


 

 

Today, on April 21 2020, you would hardly recognize the situation as it was on February 20 or March 20.

There are now over 2,500,000 cases and over 172,000 deaths.

The US has become the frontrunner, and by a very large margin. It has over 800,000 cases and over 43,000 deaths.

From those 10,400 cases and 150 deaths 32 days ago.

Moreover, of those 43,000 deaths, almost half, 20,000, died in just the past 7 days.

And it’s at this point that people want to call the peak.

 


 

Investor John Hussman developed a model from early February which he’s been updating ever since. His model followed (or actually, predicted) actual numbers quite well:

Apr 15 (637,716 cases, 30,826 deaths): Assuming sustained containment efforts, the “optimistic” projection (my adaptive model) suggests that U.S. daily new cases may have peaked. This does NOT mean these efforts can now be abandoned. Most U.S. fatalities are still ahead, and we still lack capacity to test/track/trace.

 

 

But 5 days ago, John started getting worried:

Apr 16 (667,801, 32,917): This isn’t good. U.S. fatalities just jumped off book. We shouldn’t see 31,000 yet.

Apr 18 (735,076, 38,903): So much for the optimistic scenario. We’re way off book. I had hoped this was just a one-time adjustment. Understand this:

PEAK daily new cases in a containment scenario is also PEAK infectivity if containment is abandoned at that moment.

 

 

 

I’ve long said that people are social animals, and you cannot -and shouldn’t- keep them apart for too long. But at the same time, containment measures in case of epidemics go back a very long way in history. And it’s very well for people to develop models that appear to show that the virus will do whatever it can until it no longer does, and it will soon disappear even if we didn’t do anything to prevent it from spreading.

But those are still just models, just like the one John Hussman developed. And until they are proven, which takes time, the actual numbers we have now speak loudly. Globally, we went from 250,000 to 2,500,000 cases in one month, and from 10,000 fatalities to 172.000. In the US in that same month we went from 10,400 cases to over 800,000 and from 150 deaths to 43,000.

“PEAK daily new cases in a containment scenario is also PEAK infectivity if containment is abandoned at that moment”, says Hussman. Of course everybody wants their freedom back. But at what price? If you don’t, because you can’t, know what the price will be, are you still willing to pay that price?

What I mean is, everyone’s trying to call a peak, but for most that’s merely because they want there to be a peak. The numbers don’t really say that; they may seem to do, but that’s just over 1,2 or 3 days at best. While half of all US fatalities have been over the past 7 days.

If the peak has really already occurred, we will not know it until about 10-14 days from now. So the only thing we can do is to wait that long. Perhaps it would be a good idea to listen to what those have to say who are so enthusiastically labeled “heroes” all over the globe, the doctors, nurses and other frontline caretakers.

If they are indeed your heroes, and that’s not just some empty phrase, listen to what they have to say about the pressure on them, on the system they work in, on the numbers of cases and deaths they see themselves confronted with.

But also listen when they say things you may not like to hear. If anybody deserves a relaxation of a lockdown, and of pressure overall, surely it must be them, before you.

Guess it’s too much to ask that perhaps you may have learned some lessons lately, about things that you don’t need to do but that you always did. Or to ask you if you heard the birds singing louder in the bluer skies this morning.

Just out of curiosity: Did you know that Anne Frank spent 2 whole years locked down behind a wall?

 

 

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Mar 242020
 


James Proudfoot Sun on a House, Dieppe 1937

 

 

Famous last words?!

“I would love to have it open by Easter,” Trump said in an interview Tuesday with Fox News. “I would love to have it opened up and just raring to go by Easter.” “A lot of people agree with me. Our country is not built to built to shut down. Our people are full of vim and vigor and energy. They don’t want to be locked into a house or an apartment, it’s not for our country”

Note that Trump covered himself by framing it as “I would love to…” Still, Easter is April 12, 19 days from now. I think the US is highly unlikely to even have reached its peak in infections by then, and the country will be awash in misery, sickness, death and heartbreaking stories, not uplifting ones of a roaring economy.

The US death toll is still very low compared to its active cases, but that is because the epidemic in the country is relatively new, and there are still hospital beds and ventilators available. Those days will soon be over, try the end of next week if not sooner, and the death toll will be going going gone out of there.

And remember, half of all US corona cases are still in New York State alone. There are 49 other states to go, that just about all still have open borders with each other. New York today, New Jersey, Pennsylvania, Connecticut etc. tomorrow.

If Governor Andrew Cuomo was not exaggerating too much earlier today when he said he asked FEMA for 30,000 ventilators and got only 400, the ominous path forward is beginning to look like a very eery version of a Yellow Brick Road to nowhere, with the Wizard sipping banana daiquiries on his private yacht in the Caribbean.

Our friend Mike Mish Shedlock did a bit of math on Sunday with data from the Covid Tracking Project, and came up with this:

How Long to 1 Million US Cases?

Inquiring minds are investigating a relatively new data feed from the Covid Tracking Project. I plot four data series for the US: Negative tests, positive tests, hospitalized, and deaths. Arguably, hospitalizations are the most significant column but the project only has two days worth of data. Once I have another dfats point or two, I will plot a trendline manually.


Trendlines At the current pace, the number of positive coronavirus cases would hit 100,000 on March 26, and 1,000,000 on April 3. At the current pace, the number of coronavirus deaths would hit 1,000 on March 26, and 10,000 on April 5. Those are not my projections, those are observations of what would happen if the current trends last that long at the same pace.

At that point, the US had 32,000 cases. On Monday that had become 42,000. As I write this, it’s 52,000 and the day is far from over. And remember what I said yesterday, that on March 8, just 16 days ago, the US reported 409 cases.

When I posted Mish’s numbers, I questioned his prediction of 100,000 cases by Thursday, but that’s really just details. If not Thursday, it will be Friday. Yes, that’s a doubling in 2 or 3 days. Early next week, if not his weekend, it’ll be 200,000. And so on. Mish says 1 million in 10 days from now. I see no reason to doubt him.

Either tomorrow or Thursday, March 25 or 26, the US will overtake China for the no. 1 global position in total cases -which is some 81,000 now-. With very flawed to non-existent testing procedures, with ongoing endless political bickering, and with a looming huge shortage in hospital beds and ventilators; this is beginning to look like a very bad movie.

By Easter, much of US industrial production in many parts of the country will have to be shut down, the same way China’s was -and still is-, and Italy’s is. You can’t successfully run a factory -or an office for that matter-, if your employees get sick, stay home, end up in hospital or worse. Even in the US, one single case should be enough to close the entire facility down.

The victim will have to be quarantined, as must his/her entire family, everyone (s)he worked with must be tested, and so on. It works like that everywhere, and the US is no exception. It can’t be, the risk is too high.

Brace yourself. Don’t take my word for anything, look at the numbers and draw your own conclusions. My idea is Easter is going to be different from usual this year.

 

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Oct 232019
 
 October 23, 2019  Posted by at 12:31 pm Finance, Primers Tagged with: , , , , , , , , , , ,  5 Responses »


Salvador Dali Self portrait 1921

 

On October 21 2019, Brexit became an entirely irrelevant issue. Or perhaps we should say it had already become that, but on that date it was exposed for all to see that it was. The parading into a courtroom of Julian Assange in London was all the evidence one could need that the UK government breaks its own laws as well as numerous international laws, with impunity. But that is not how the media reported on it, if it did at all.

And so, the core issue behind Brexit, i.e. who makes Britain’s laws, turned to nothing. If your government breaks its own laws all the time, what does it matter where those laws are made? They are meaningless anyway. Whether they come from Brussels or London make no difference if the government and judicial system don’t abide by them. Those million men marches for a Final Say look totally ridiculous once that reality sinks in.

I can’t get the picture of Julian Assange as he looked on Monday out of my head. I’ve written so much about him, tried so hard to find support for him, and now to see him withered away and perhaps not strong enough to see the end of his own extradition hearing is heartbreaking. So let’s go through the whole thing again; it’s not like I could write about anything else right now. I was thinking again yesterday about a song I used in an earlier article about Julian, I Fought the Law.

 

 

That is how the vast majority of people will see his case, that he fought the law and the law caught up with him. But that’s not at all what’s been happening. He doesn’t fight the law, he fights the lawless posing as the law. The only person who’s abided by the law the entire time this epic tragedy has now lasted has been Julian Assange (and his lawyers, and others who work with him, and former Ecuador president Correa). All the other players, the people who’ve been chasing, torturing and now murdering him have all broken the law consistently, one after the other, and in coordinated fashion. But they have the media on their side, and that’s how the story got turned upside down. Propaganda wins.

In 2010, Swedish police invented a rape allegation out of thin air and against the expressed wishes of the alleged victim. There’s the Swedish prosecutor who overruled his own peer who had ruled that the rape allegation was annulled and Assange was free to go the UK. Then the British prosecutor who released Assange on bail citing that fake Swedish allegation and then called him in without either country wanting to guarantee extradition to the US was off, subsequently keeping him locked in the Ecuador embassy for 7 years because of that same fake allegation without allowing him to travel to the country he’d been granted asylum in.

This was followed (after 7 years!) by the new Ecuador government that violated any and all international law by rescinding Julian’s asylum, but only after hiring a Spanish “security” company that recorded all of his -and all of his visitors’ – talks and phones etc., including client-lawyer and doctor-patient conversations that we all know are confidential -and for good reason- and up to and including Julian’s talks with his psychologist and swipes of everyone’s DNA, including his children. They even (live-) streamed all this confidential information to the CIA.

Next, the UK police arrested him inside another country’s embassy. And now he’s in a super high security prison for no apparent reason at all, after a judge (where do they find these judges in the UK, so eager to break their own laws?) said he was a risk to “abscond”. Even if that were true, how is that a reason for worse treatment than an A-level crazy terrorist, inflicted upon someone who’s never harmed a fly? And then Monday in court, a British court, it was a bunch of Americans who openly decided what should happen, as per Craig Murray who was there, and both the prosecutor and the judge complied.

 

What Assange practiced when he published “US war files” is called journalism. Which thank god is perfectly legal. Much of what those files reveal is not. What he did when he allegedly “skipped bail” in the UK is called requesting asylum. Also perfectly legal, a basic human right. He never broke a law. And that of course is why the Espionage Act was dusted off and applied to his case in a proverbial round peg/square hole fashion: they couldn’t find anything else to charge him with. And after so many laws have already been broken, what difference does one more make?

If you live in Britain and you think Brexit is a more important issue than Assange, you’re delusional. Nothing is more important to anyone in a society than a government torturing a man to death in broad daylight, a man who moreover has not broken a single law. We don’t even torture mass murderers, terrorists or child rapists to death anymore, at least not at home. But Julian Assange IS treated that way. And whether the UK will be a part of Europe or not, that is the country it has become. A lawless medieval banana republic.

 

 


 

 

 

 

Aug 052019
 


Odilon Redon Peyrelebade landscape 1880

 

It’s never easy to gauge what exactly is happening in China, or why the CCP Politburo takes the decisions it does. Today, or overnight, is no exception to that. However, one thing that appears certain, but which I don’t see reflected in all the analyses, is that Beijing pushing the value of the renminbi (yuan) down below 7 to the USD in one fell swoop, is a major setback for Xi Jinping and his government.

Yes, China may have given up hope of reaching positive conclusions in its trade talks with the US. And yes, some may think, even in China itself, that devaluing the currency is a tool that can be useful in a potential currency war. But there’s another side to this coin. It’s not even about the value itself, or the change in it, it’s the heavy-handed way it’s executed.

 

China wants, and desperately needs too, for the yuan to be a force in global financial markets. In very simple terms this is true because if it then wants to buy something, it can simply print the money for it. But only about 1% of global trade today is executed in yuan. That is not nearly enough. It means China needs dollars and euros, all the time. And devaluing the yuan means the country needs even more of those.

You’d almost think: why would you want to do that? What are the long-term prospects for a move like this? You’re telling forex markets that the value of the yuan is not trustworthy, because if Xi or the PBOC decides in the next five minutes that it should go up or down by 10% or 20%, they can do it. The Fed and ECB also have tools to manipulate their currencies (re: interest rates), but none of that magnitude.

 

The crux of the dilemma probably lies in the Belt and Road Initiative (BRI), which I’ve been saying for years is just China’s way to sell its overcapacity and overproduction abroad. Sure, there may be loftier goals, and surely in the glitzy brochures, but the fact remains that China has tried to be an economic miracle, doing in 10 years what took the US a century, and it never slowed down its growth, at least not voluntarily, even if that might have been a wise move.

Already lately, purchases by Chinese citizens and companies of real estate and businesses abroad have been curtailed, and not a little bit, by Beijing. There’s no better way to convince Chinese people of the miracle’s success than to let them travel the world and spend there, but that, too, may well soon be cut. It kills foreign reserves.

If Beijing could charge participating countries in the Belt and Road Initiative in yuan, and they could pay for the overcapacity’s steel and cement and what not in yuan, that could be a game-changing program for the entire planet. But these countries have no reason to hold yuan, other than the BRI itself. And they, too, were watching the overnight move above 7 and must have thought: let’s be careful now.

And to top it all off, China right now needs for these countries to pay in dollars instead of yuan, because its foreign reserves are shrinking so fast. It’s Catch-22 all the way down. China’s need for dollars goes against everything BRI stands for.

 

Could the move hurt the US as well? Absolutely. But the long-term view behind the tariffs, and the talks China appears to have lost faith in, is to move the US away from its near all-encompassing addiction to Chinese production, and to move at least some of that production back home. Problem of course is, that is precisely what China’s miracle growth has been built on.

If the US starts bringing production home, who is Beijing going to sell its (over-)production to? Yes, I hear you, to the BRI countries. But there it runs into the currency problems mentioned before. To Europe? The top of that trade route is also behind us. Europe will have to follow the US to an extent, and also bring factories back to the continent (and not just to Germany either).

China could perhaps sell more than it does today to Russia. But that country still does produce a lot of things, and has been forced to be much more self-sufficient due to US and EU sanctions. It’s also a mighty small market compared to 350 million North Americans and 500 million Europeans, who are on average much richer than your average Russian to boot.

 

There is a way for China to make the yuan more important in global trade (but devaluation is definitely not that way): Beijing could let go of its central and total control over the value of its currency, and let forex markets figure it out. That would give traders -and everyone else- faith in the value. Problem with that is, this is not how central control communist governments think.

Beijing wants both: central total control AND a prominent place in world trade. And it may take them a long time to figure out that is not going to happen, unless of course they first conquer the entire world militarily. That is not an option, at least not for the foreseeable future. Come see me next century.

 

It wouldn’t be the first time for me to say I can see China retreat into itself, into its own borders and culture and market (1.3 billion people!). If the Communist Party wants to remain in power, and there’s no doubt it does, this may be only possible choice going forward. If growth has indeed left the miracle -as many observers think-, it can implode in very rapid succession. And even if growth hasn’t yet evaporated, it may well very soon. Without the growth, there is no miracle anymore.

And if China can no longer grow its exports, its domestic growth will also become a thing of the past. Domestic consumption can only grow as long as exports do too. Seen from that angle, the problems with trade and the currency look downright ominous. If you need dollars that badly, and you notice that you’re already getting fewer of them, not more, you’re in trouble.

Devaluing your currency may afford you some temporary respite, but it can’t possibly solve your troubles. It can make them much worse though.

I think China has wanted too much too fast, got carried away and forgot to take care of a few potential barriers to its growth, in particular the standing its currency had and still has in the world, and the grinding need for dollars that stems from it. And the Communists have no answer to this problem.

 

 

 

 

Jul 252019
 
 July 25, 2019  Posted by at 1:43 pm Finance Tagged with: , , , , , , , , ,  4 Responses »


Salvador Dali The knight of death 1934

 

 

Another article from Alexander Aston, from whom I published among other things the series Quantum, Dada and Jazz this past November.

 

 

“Dulce et Decorum est” is a poem written by Wilfred Owen during World War I, and published posthumously in 1920. The Latin title is taken from Ode 3.2 of the Roman poet Horace and means “it is sweet and fitting …”. It is followed there by “pro patria mori”, which means “to die for one’s country”.

 

 

“The muffled tongue of Big Ben tolled nine by the clock as the cortege left the palace, but on history’s clock it was sunset, and the sun of the old world was setting in a dying blaze of splendour never to be seen again.”

– Barbara W. Tuchman, The Guns of August

 

Alexander Aston: If you have not read Barbara Tuchman’s The Guns of August you should do so, it is one of the great, accessible works of history. Tuchman details with great clarity the diplomatic failures, miscalculations and political logics that ensnared the imperial powers of Europe into the cataclysm of the Great War. It was the book that Kennedy drew upon when navigating the Cuban missile crisis. Just over a century since the guns fell silent in Europe, and nearly fifty years since nuclear holocaust was averted, the world is teetering on what might very well be the largest regional, potentially global, conflict since the second world war.

The United States is a warfare economy, its primary export is violence and it is through violence that it creates the demand for its products. The markets of the Empire are the failed states, grinding civil conflicts, escalating regional tensions and human immiseration created by gun-boat diplomacy. In true entrepreneurial spirit, the United States has repeatedly overestimated its abilities to control the course of events and underestimated the complexities of a market predicated on violence. However, since the beginning of the twenty-first century the American Imperium has proven itself as incompetent as it is vicious. After nearly two decades of intensifying conflicts, a fundamentally broken global economy and a dysfunctional political system, Washington has turned feral, lashing out against decline.

The points of instability in the global system are various and growing, and the only geo-political logics that the Imperium appears to be operating under are threats, coercion, and violence. It is at this moment, with the most erratic president in the country’s history, surrounded by some of the most extreme neo-conservative voices, that the United States has been belligerently stumbling across the globe. In the past few months we have witnessed a surrealistic reimagining of the Latin American coup, the medieval melodrama of Canadian vassals taking a royal hostage from the Middle Kingdom and British buccaneers’ privateering off the coast of Gibraltar. The Imperial system is in a paroxysm of incoherent but sustained aggression.

 

It has long been clear that if another Great War were to emerge, it would likely begin in the Middle East. Just over a century later, we have found ourselves amidst another July crisis of escalating military and diplomatic confrontations. European modernity immolated itself in the Balkans though miscalculation, overconfidence and the prisoners dilemma of national prestige. The conditions of the contemporary Middle East are no less volatile than those of Europe when the Austro-Hungarian Empire decided to attack Serbia. If anything, conditions are far more complex in a region entangled with allegiances and enmities that transgress and supersede the national borders imposed in the wake of the first world war.

The United States’ withdrawal from the JCPOA and the stated aim of reducing Iranian oil exports to zero has enforced a zero-sum logic between the American Imperium and Persia. With each move and counter move the two countries are further entangled into the dynamics of a conflict. Much like the run up to July 28th 1914, tanker seizures, drone shoot downs, sanctions, military deployments and general bellicosity reinforce the rational of the opposing sides and make it harder to back down without losing face and appearing weak.

Due to the asymmetry of the two powers the Iranians have the fewest options for de-escalation while the American establishment perceives the least incentive. This dynamic is further exacerbated by major regional powers agitating for a conflict they believe they will benefit from. Indeed, the slide to war might be inexorable at this point, the momentum of historical causality may have already exceeded the abilities of those in power to control. Czar Nicholas and Kaiser Wilhelm were cousins that desperately wanted to avoid war and were nonetheless impotent to avert disaster. There is nowhere near such intimacy, communication and motivation in our current context.

If war with Iran erupts, the Pax Americana will come to an end and humanity will fully enter a new historical epoch. The most unlikely scenario is an easy victory for the United States, yet even this outcome will only exacerbate the decline of the Empire. The other great powers would expedite their exit from the dollar system and drastically increase investment into the means to counter American hegemony. Likewise, victory would further reinforce Washington’s hubris, generating more serious challenges to the Imperial order and making the US prone to take on even bigger fights. Ironically, easy military success would almost assure the outbreak of a third world war in the long-term.

 

War with Iran would likely ignite violence in Israel-Palestine, Lebanon and Iraq, re-energise and expand the ongoing wars in Syria and Yemen as well as generate sectarian violence and domestic insurgencies across the Middle East. Under such conditions regional actors would likely utilise a dramatically intensifying conflict as cover for their own agendas, for example with a renewed Turkish assault on the Syrian Kurds. The conditions for rapid escalation are extremely high in which non-linear dynamics could easily take hold and quickly outstrip any attempts to maintain control of the situation.

Pyrrhic victory for either side is the most likely outcome, making the parallels to the Great War all the more salient. Global conflagration is a possibility, but with “luck” the fighting could be contained to the region. Nonetheless, amplified refugee crises, supply chain disruptions and immense geopolitical realignments will cascade out of such an event. Undoubtedly, there would be concerted efforts to abandon the dollar system as quickly as possible. Furthermore, rapid increases in the price of oil would all but grind the global economy to a halt within a matter of months, tipping citizenries already saturated with private debt into financial crises.

Furthermore, the entanglement of the military-industrial complex, the petrodollar reserve currency system and the omni-bubble generated by quantitative easing has left the Empire systemically fragile. Particularly, the bubble in non-conventional fuels precipitated by QE, depressed oil prices with scaled down exploration, R&D and maintenance makes the possibility of a self-reinforcing collapse in the American energy and financial systems extremely plausible. It is a Gordian knot which war with Persia would leave in fetters.

The most likely long-term outcome of a war with Iran would be the economic isolation and political fragmentation of the United States. What is assured is that whatever world results it will not look anything like the world since 1945. The first world war collapsed the European world system, dynasties that had persisted for centuries were left in ruins and the surviving great powers crippled by the overwhelming expenditures of blood and treasure. We are on the precipice of another such moment. The American world system is fundamentally dependent upon the relationship between warfare, energy dominance and debt.

 

Conflict is required to maintain control of the energy markets which prop up a financialised economy. A dynamic that puts the nation deeper in hock while amplifying resistance to financial vassalage. Losing energy dominance undermines the country’s reserve currency status and weakens the Empires ability to generate the debt necessary to sustain the warfare economy. Likewise, the system of national and international debt peonage parasitizes global populations to work against their own best interests. This fuels resentment and resistance which further drives the warfare economy. It is, in the inimitably American expression, a “self-licking ice cream cone.”

On August 3rd 1914, one week into the war, the British Foreign Secretary Edward Grey famously remarked that “the lamps are going out across Europe and we shall not see them relit in our lifetime.” At the beginning of the twenty-first century, we face similar, terrifying prospects. Indeed, we could witness the collapse of democratic societies for a very long time to come. If we have any hope of averting calamity we need to generate loud opposition to imperialist warfare.

This does not mean some hackneyed anti-war movement based on past glories and the parochialism of domestic politics, but earnest effort to find common cause in resisting the insanity of those that seek profit in our collective suffering. This means working with people that we have very deep disagreements with by respecting our mutual opposition to the masters of war. It also means serious commitment to strategies such as tax and debt strikes as expressions of non-consent as well as other peaceful means of direct action. Indeed, it is from a place of agreement that we can potentially rebuild civil discourse and renew our trust in the ability of democratic institutions to mediate our quarrels. Perhaps it is too late to change course, but how sweet and fitting it is to face madness with dignity.

 

“What is the cause of historical events? Power. What is power? …power is a word the meaning of which we do not understand. ”

“Kings are the slaves of history.”

– Tolstoy, War and Peace

 

 

Just a thought from Beau of the Fifth Column:

 

 

Dulce et Decorum Est

by Wilfred Owen

Bent double, like old beggars under sacks,
Knock-kneed, coughing like hags, we cursed through sludge,
Till on the haunting flares we turned our backs,
And towards our distant rest began to trudge.
Men marched asleep. Many had lost their boots,
But limped on, blood-shod. All went lame; all blind;
Drunk with fatigue; deaf even to the hoots
Of gas-shells dropping softly behind.

Gas! GAS! Quick, boys!—An ecstasy of fumbling
Fitting the clumsy helmets just in time,
But someone still was yelling out and stumbling
And flound’ring like a man in fire or lime.—
Dim through the misty panes and thick green light,
As under a green sea, I saw him drowning.

In all my dreams before my helpless sight,
He plunges at me, guttering, choking, drowning.

If in some smothering dreams, you too could pace
Behind the wagon that we flung him in,
And watch the white eyes writhing in his face,
His hanging face, like a devil’s sick of sin;
If you could hear, at every jolt, the blood
Come gargling from the froth-corrupted lungs,
Obscene as cancer, bitter as the cud
Of vile, incurable sores on innocent tongues,—
My friend, you would not tell with such high zest
To children ardent for some desperate glory,
The old Lie: Dulce et decorum est
Pro patria mori.

 

 

Alexander Aston is a doctoral candidate in archaeology at the University of Oxford and is on the board of directors with the Centre for Cognitive Archaeology at the University of Colorado in Colorado Springs. He has prior degrees in philosophy and history. His work lays at the intersection of Cognitive Archaeology, Deep History and Natural Philosophy, examining the relationship between ecology, material culture and social cognition. Alexander grew up between Zimbabwe, Greece and the United States.

 

 

 

 

Jul 022019
 


Salvador Dali Remorse, or Sphinx Embedded In Sand 1931

 

Any image of a dead child is always harrowing, for everyone but the most deranged psychopaths among us. If the child has drowned while seeking a better life it is possibly worse. The public reaction of politicians to such images, which varies from doing very little, or nothing, to solve the issues that have led to a child drowning, to trying to make cheap political gains from the image, must be the worst.

On September 2 2015, this photo of Syrian Kurdish 2 year-old Alan Kurdi, lifeless on a beach near Bodrum, Turkey, went viral. Almost 4 years later, all Europe has done is try to hide the problems that led to his death, by handing Turkey billions of euros to keep refugees inside that country. And still today conditions in Lesbos, Greece are appalling. Hardly a thing has changed.

 

 

Improvements to the situation that lead to Alan Kurdi’s death, within Syria itself, have had very little to do with European efforts. Russia had a much bigger role in that. And Syria is not the only source, or place, of troubles and refugees. Libya has turned into an open air slave market thanks to US and EU “efforts” under Obama. And Iraq is not exactly a land of milk and honey either. Or Afghanistan.

And then this week another picture of a drowned child made the frontpages -and more. That child, too, drowned due to a situation that has a long history: the US seeking to turn Central America into a dirt-poor, chaotic and unsafe environment that local people desperately want to escape. Same difference. And again, in the US and EU it is used as propaganda material.

 

 

 

So who do you blame for this? Trump of course. Who also gets the blame for the conditions in which children are held at the US-Mexico border, in “cages”. A disaster that caused Alexandria Ocasio-Cortez to stage a scene in which she cried her heart out while looking at an empty parking lot in an expensive dress.

The truth is, it doesn’t seem to matter anymore. The people who are on AOC’s side of the divide will never see the reports on her faking the scene, that’s how segregated America has become. The “appropriate media” will convey the “appropriate” message” to the “appropriate audience”. Chuck Schumer even took the photograph to Capitol Hill for some quick and easy points.

 

What Schumer et al do not mention was that the “cages” AOC -ostensibly- cried about were built by the Obama government, i.e. Schumer’s own party. And there’s a few other things he conveniently left out. Like the fact that the horrible situations in their home countries that these people face are caused by the US itself, including Democrats like Schumer.

But first, some of the press on June 26, when the pictures came out:

A Grim Border Drowning Underlines Peril Facing Many Migrants

The searing photograph of the sad discovery of their bodies on Monday, captured by journalist Julia Le Duc and published by Mexican newspaper La Jornada, highlights the perils faced by mostly Central American migrants fleeing violence and poverty and hoping for asylum in the United States. According to Le Duc’s reporting for La Jornada, Óscar Alberto Martínez Ramírez, frustrated because the family from El Salvador was unable to present themselves to U.S. authorities and request asylum, swam across the river on Sunday with his daughter, Valeria.


He set her on the U.S. bank of the river and started back for his wife, Tania Vanessa Ávalos, but seeing him move away the girl threw herself into the waters. Martínez returned and was able to grab Valeria, but the current swept them both away. The account was based on remarks by Ávalos to police at the scene — “amid tears” and “screams” — Le Duc told The Associated Press.

That border did not become “grim” overnight, it has been exactly that for many years. We have proof of that. But first, more easy points.

‘Trump Is Responsible’

The Democratic presidential candidates rushed to condemn the “inhumane” situation on the US border with Mexico – with some directly blaming Donald Trump – after a picture of a Salvadoran father and his toddler daughter found dead in the Rio Grande shocked the nation. The photograph, which emerged on Tuesday night, showed Óscar Alberto Martínez Ramírez, 26, and his 23-month-old daughter Valeria laying facedown near Matamoros, Mexico, on the bank of the river that marks the US border – reopening a fierce debate about the scale of the crisis.

The picture, by journalist Julia Le Duc, has drawn comparisons to the 2015 image of three-year-old Syrian boy Alan Jurdi, who drowned off Kos in Greece – sparking a significant moment in the European debate over migrants and refugees. Beto O’Rourke said: “Trump is responsible for these deaths.” Writing on Twitter, the former Texas congressman added: “As his administration refuses to follow our laws – preventing refugees from presenting themselves for asylum at our ports of entry – they cause families to cross between ports, ensuring greater suffering & death. At the expense of our humanity, not to the benefit of our safety.”

Fellow 2020 hopeful senator Kamala Harris condemned the picture as “a stain on our moral conscience”. She wrote: “These families seeking asylum are often fleeing extreme violence. And what happens when they arrive? Trump says, ‘Go back to where you came from.’ That is inhumane. Children are dying.” Corey Booker, New Jersey senator and 2020 candidate, also blamed the president. “We should not look away. These are the consequences of Donald Trump’s inhumane and immoral immigration policy. This is being done in our name,” he tweeted.

 

These people don’t appear to have any knowledge of their own history, their own party. Either that or they’re flat-out lying. Kamala Harris: “..what happens when they arrive? Trump says, ‘Go back to where you came from.’ That is inhumane. Children are dying.” Here Kamala, Corey, Beto, take a listen to what Obama said in both 2007 and again in 2014. Take your time, we’ll wait:

While it’s impossible to quantify misery, and we should not even try, perhaps the closest we can get to doing it anyway is by looking at the number of people who have died at the US Southwest border. And if you can do that over an entire 20-year period, you at least have some indication.

And what do we see? The number of deaths under Trump is not high at all, at least in relative terms. Every death is one too many, true enough. But still. Since 2000, there was only one year, 2015, in which there were fewer deaths than in the two Trump years, 2017 and 2018.

 

 

Here’s a more detailed version of this (click for larger pic in new tab):

 

 

But yes, I know how much people love to hate Trump and his administration, and often for good reason too. But this whole thing appears to be about issues that existed during the previous Obama administration- and W. Bush- just as much, if not more. When Chuck Schumer and Nancy Pelosi already were where they are now: in positions of -real- power. So you know, what do you do when they try and blame Trump for the very things they were complicit in?

And then there’s Salvini in Italy refusing entry to a ship filled with refugees. Which pretty much says he’s trying to force captains to break age-old maritime law (or the Law of the Sea, admiralty?!). And you can say he’s an idiot for doing it, and he is, but he is also telling the EU that Italy can’t accept 10 times more refugees than other EU nations just because it happens to have a coastline.

And sure Salvini is a belligerent fool, and so is Trump, but if you want to understand what happens you can’t stop at blaming only them. It’s tempting but it’s also far too easy. Even the Dalai Lama said people should stay in their own countries. But also that they should receive help from the west. Which for many decades have only been terrorizing them. This is as true in Africa as it is in Central America.

 

Arguably, all we need to do to stop children like Alan Kurdi and Valeria from drowning at border crossings is to make their home countries safe from our own criminal and deathly activities. But that’s not going to be easy. I read this piece today from think tanking US professors Mark Hannah and Stephen Wertheim, and it doesn’t even make sense beyond the initial message:

Here’s One Way Democrats Can Defeat Trump: Be Radically Anti-War

The last two presidents, Obama and Trump, were unlikely aspirants to the office partly because they bucked national-security orthodoxy, blasting Middle East wars and the political class that started them. Obama and Trump won their elections partly for the same reason. Once in office, however, they struggled to deliver. Endless war continues; diplomacy is in tatters; Americans suffer from underinvestment where they live and work; and the greatest threats, like climate change, loom larger across the globe. In 2020, the candidate who not only identifies these problems, but offers real solutions, will benefit.

Problem is, the Democrats are a radically pro-war party, just like the Republicans. The writers silently admit this by not naming one Democrat who is anti-war, and by not at all naming the one presidential candidate who is, Tulsi Gabbard. Which makes one suspect that they and their backers are not so much anti-war as they are anti-Trump, but since many Americans are anti-war these days, they see it as a possibly winning platform.

Given that Wertheim is a co-founder with George Soros and the Koch brothers of the Quincy Institute for Responsible Statecraft, none of this is surprising. They just want the power back, and if that takes promising no more forever war during an election campaign, hey, that’s fine with them. And then once the election’s done, they can go back to their merry ways of inciting wars. They might as well claim they’re going to save us from climate change too.

 

The solution to the problem of children -and adults- drowning at border crossings is dead -pun intended- simple. Stop bombing people, stop interfering in their countries altogether, stop strangling them with economic sanctions. Implementing these very easy policies, though, is far from simple. And so the problem keeps growing.

 

 

The most important take-away from all this is that the problem is not Salvini or Trump, but the EU and US, the entire “body politic” of both. Where left and right are on the same side, that of power and money, and their ‘differences’ are mere distractions that serve to entertain their audiences. And the media whipping up a blind hatred of everything Salvini or Trump, is not going to make this world a better place.

Left and right alike dance to the tunes of the arms industries and other large corporations, which profit from chaos and misery, both in ‘powerless’ countries and at home. We’re stuck with “progressives” who have no meaningful link to progress and conservatives whose very last idea seems to be to conserve anything of value.

But be critical of the left and you’re labeled right wing, and vise versa. We live in a modern version of a segregated society, not progressing anywhere and not conserving a single thing on its way there.

We need to do better, much better, if we are to prevent the next child from drowning.