Friday, July 3, 2015

Today's Links

1--Putin: We don’t expect any change in hostile policies toward Russia
2--Economic Policy Turned Inside Out, Stephen Roach

If you were wondering why I refer to the Obama jobs recovery as nothing but low paying service level shit jobs, here is your proof. Manufacturing jobs paid a wage that could support a family. We’ve lost 1.4 million of them since 2007. They have been replaced by fry cooks, waiters, bartenders and dishwashers. These jobs have no healthcare, low wages, and can barely support one person.

Hourly earnings were flat in June.

4--How Putin Forged a Pipeline Deal That Derailed, NYT

For years, Mr. Putin bullied and cajoled Bulgaria, one of the European Union’s weakest nations, into doing Russia’s bidding on South Stream. And he seemed poised to succeed, but for one fundamental miscalculation: He underestimated the West’s response to his aggression in Ukraine. Faced with punishing sanctions, a petro-economy pushed to the brink by plunging oil prices and the wildly gyrating value of the ruble, Mr. Putin this month halted the project....

In desperate need of the European funds, the prime minister announced the next day that South Stream would be halted until it had full European Union approval.
At almost exactly the same moment, an unexpected panic swept through bank depositors in Sofia; a mysterious bank run had started at Corporate Commercial, the bank that had partnered with the Russian investment firm VTB Capital, and the financial institution of the state holding company overseeing Bulgarian involvement in South Stream.
Some speculated that VTB Capital, with its nearly 10 percent stake, would join other shareholders in riding to the bank’s rescue. But after Mr. Oresharski’s decision to halt the Bulgarian leg of South Stream, the Russian bank declined to participate in a bailout. Corporate Commercial collapsed, and in the ensuing crisis so did Mr. Oresharski’s government

5--Putin's Pipeline Predicament
6--What does Vladimir Putin’s 89% rating really mean?
7--They just follow Washington’s recommendations, Sergei Glaziev

8--Santelli Exchange: Following the flow of money

9--Want to escalate U.S.-Russia tension? Arm Ukraine 

Today's Links

1--US to send first group of trained militants into Syria: Officials
2--Foreign Ministry praises law banning undesirable foreign groups in Russia
3--‘Confrontational’: Kremlin spokesman slams anti-Russian provisions of fresh US military doctrine

4---Dragon Rising: Is China Capable of Challenging US Global Dominance?

5--US labor force participation rate hits lowest level in nearly four decades
The share of the US population that is either employed or actively trying to find work, known as the labor force participation rate, has fallen to its lowest level in 38 years.
The last time this figure was below its present level of 62.6 was 1977, before tens of millions of women entered the labor force.

The US labor force participation rate for men, meanwhile, last month hit its lowest level ever on records dating back nearly seven decades. In 1948, 86 percent of men of working age were engaged in the labor force: now, that figure is down to 69 percent: a decline of 17 percentage points.
For adults aged 25 to 54, there has been no increase in the labor force participation rate over the whole of the past year, despite a steady decline in the official unemployment rate.
The persistent fall in the labor force participation rate reflects the fact that millions if not tens of millions of people have simply given up looking for work, either because there are no jobs available, or because of the terrible pay and working conditions at those that are.

6---Atmospheric temperatures rise to record levels as glaciers disintegrate
7--A summer of trouble and strife awaits markets

8---New Silk Road A Disaster Waiting To Happen?
When china builds a pipeline its political.
When the US builds a pipeline its economic
Got that?

9--The payroll disaster

Thursday, July 2, 2015

Today's links

1---US military strategy for world domination targets Russia and China

The Pentagon equates peace, democracy, human rights, etc. with what it calls “a rules-based international order advanced by US leadership.” This is a euphemism for US imperialist hegemony over the entire planet, where Washington makes the rules and everyone follows, or else.
The American ruling class is acutely aware that its power is declining relative to rival powers, particularly China, and that US military superiority is itself threatened by the decline in the world economic position of US capitalism and growth of internal social antagonisms, which make it more difficult to sustain overseas military interventions.

The document declares, “We support China’s rise and encourage it to become a partner for greater international security,” and then proceeds to outline the US strategy to economically and militarily encircle the country. It states: “[W]e will press forward with the rebalance to the Asia-Pacific region, placing our most advanced capabilities and greater capacity in that vital theater. We will strengthen our alliances with Australia, Japan, the Republic of Korea, the Philippines, and Thailand. We also will deepen our security relationship with India and build upon our partnerships with New Zealand, Singapore, Indonesia, Malaysia, Vietnam, and Bangladesh

2--Global parasitism creates conditions for a new financial meltdown

3--"When People Jump In Even Though It's Overpriced, That's A Bubble" Shiller Warns

4---Mortgage applications drop as interest rates rise to 9-month high
The spring selling season is over
Mortgage applications decreased 4.7% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 26, 2015.
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5% compared with the previous week. The Refinance Index decreased 5% from the previous week to its lowest level since December 2014

Russ Wetherill 01-07-2015, 12:26
Recovery from what exactly?
A typical recession results from disconnects between supply and demand as companies overproduce to meet consumer spending. This contraction is hardly ordinary, so the recovery won’t be either. It’s not just a difference in degree, but a difference in kind as well.
Three decades of falling rates buoyed consumer spending allowing corporations to cut benefits and hold down salaries. As stock prices rose and yields fell, financial products evolved to capture above market yields via riskier products.
The net result was large amounts of debt at historically low yields weighing on consumer, corporate, and sovereign spending. Rates have fallen dramatically since the housing crash, but debt levels are largely the same.
Taking into account the loss of pensions, high debt levels, and a lost decade of saving, rising wages won’t result in rising prices as in prior recoveries. If the Fed raises interest rates in this recovery like normal recessions, then they will soon see how weak the recovery is.
Wage growth needs to cover a lot more now than in recessions past: underfunded self-funded pensions, rising healthcare costs, existing debts, savings shortfalls, and normalizing rates. If the Fed’s approach is to raise rates once inflation is at 2%, then they are missing the real issues

5---US has long wanted to bring Ukraine to West new Assange revelations
The United States has spent “a lot of time trying to bring Ukraine to the West," the WikiLeaks founder said in an interview to Pagina/12, Argentinian newspaper on Monday.
“If it cannot be with a NATO membership, at least it becomes independent from Moscow's sphere of influence, to reduce Russian industrial-military complex and its naval bases in Crimea.” -

6---The Pentagon has released a new National Military Strategy listing of the greatest threats to the US hegemony

The Pentagon’s new military strategy proposes that Russia is a major US adversary, that there might be a war between the two countries, and that the US is losing its military technology supremacy, says Brian Becker from the anti-war Answer Coalition.
The Pentagon has released a new National Military Strategy listing of the greatest threats to the US. It includes states such as Russia, Iran and North Korea, and groups, particularly ‘violent extremist organizations’ (VEO) such as Islamic State and the Taliban

The US realizes that its dream of a unipolar world, the dream that started to become an operational doctrine for the US following the collapse of the Soviet Union in 1991, that that dream has turned into an impossible goal, that in fact Russia is back on its feet, it’s asserting its own interests. China is growing, it’s trying to grow peacefully and rise peacefully and become a medium range power. But the US sees that Russia, China, Iran and other countries in the world including South Africa, Brazil and India are unwilling to be just victims of the US hegemony, that they are asserting the wrong national interests, and so I think the US sees that now as a threat to its fantasy of unipolar domination following the collapse of the USSR.

RT: The US apparently wants to "support China's rise" but also resist Beijing's efforts to expand its regional control. Aren't these two goals incompatible?
BB: They are not compatible. In fact if you look at what the US is doing, not what it says in this sort of carefully worded military doctrine, the pivot towards Asia is a pivot of containment. The new military strategy which is to take all the non-Chinese republics and nations of the Asia-Pacific region and forge them into a US-led military alliance can’t be perceived in China as anything but a great threat to Chinese national interest in China’s own backyard, in its own territory, in the East China Sea and South China Sea and right up to the Chinese border. So deeds here say a great deal more than words. I think it’s carefully worded, but clearly the Chinese know that the pivot towards Asia is a pivot against China and not with China

7--Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 Levels

The devastation of the US labor force continues.
In what was an "unambiguously" unpleasant June jobs payrolls report, with both April and May jobs revised lower, the fact that the number of Americans not in the labor force soared once again, this time by a whopping 640,000 or the most since April 2014 to a record 93.6 million, with the result being a participation rate of 62.6 or where itt was in September 1977, will merely catalyze even more upside to the so called "market" which continues to reflect nothing but central bank liquidity, and thus - the accelerating deterioration of the broader economy.

8---Grantham on stock buybacks

Grantham argues that capitalism is failing for now. He blames the rise of “stock option culture” and a complicit U.S. fed for the problem. Up to 80% of executive compensation now flows from stock options, which are tied to short-term performance of a company’s stock rather than long-term performance of the company. People respond to the incentives they’re given, so managers tend toward those actions which increase the value of their stock options. Investing in the company is slow, uncertain and risky, and so capital expenditures (“capex”) by publicly-traded firms is falling. Buying back stock (overpriced or not) and issuing dividends is quick, clean and safe, and so that sort of financial engineering expands. Interest rates at or near zero even encourage the issuance of debt to fund buybacks (“Peter, meet Paul”). It would be possible to constrain the exercise of options, but we choose not to. And so firms are not moving capital into new ventures or into improving existing capabilities which, in the short run, continues to underwrite record profit margins.

9--US Military of high alert for 4th of july

The Defense Department joined the Department of Homeland Security and the FBI on Wednesday in warning of the threat of an ISIS attack in the U.S. over the 4th of July holiday weekend.
"Those who seek to harm this nation take no holiday," Defense Secretary Ashton Carter said at a Pentagon press briefing with Joint Chiefs Chairman Gen. Martin Dempsey.
Dempsey said U.S. bases nationwide were on higher alert, and Carter said that "some of our service members will be hard at work" over the weekend to deter the threat, without specifying what would be involved.

The bulletin to local law enforcement came after “intelligence was picked up in various ways indicating something could be happening over the Fourth of July that was initiated by ISIS supporters,” Rep. Pete King (R-N.Y.) said during an interview on CNN’s “Wolf Blitzer Reports.”

“There was enough intelligence out there indicating that something could well be planned for the Fourth of July. Now, this is more than just the usual Fourth of July or Memorial Day warning that goes out to stay alert, to keep your eyes and ears open,” according to King, a member of the House Intelligence and Homeland Security panels.
“I mean, going back to dealing with the FBI and Homeland Security over the last two or three weeks, I would say this is the most intense level of concern I've seen, maybe since 9/11,” he added.

10--Arm Ukraine? Carter says yes

While both the United States and Russia should step back from the brink, many Obama administration officials are pushing for a dangerous escalatory step: the shipment of billions of dollars of lethal weapons to the post-Maidan government in Ukraine.
The lobbying to arm Ukraine began in February when three of the nation’s leading think tanks released a widely-read report arguing for the United States to provide Ukraine with $3 billion of lethal arms. Since then both the Senate and House passed legislation calling for the United States to arm Ukraine, while Secretary of State Kerry, Secretary of Defense Ashton Carter and U.S. Air Force General and NATO Supreme Allied Commander Philip Breedlove publicly advocated this policy. In fact, the only senior official not pushing this agenda is President Barack Obama — though the pressure on him to do so is growing.

11--New military strategy or old wine in new bottles?
12--US means Russia harm

"Russia's military actions are undermining regional security directly and through proxy forces," it added, naming Russia among "revisionist-minded" states.
13--Factory Orders Scream Recession: Annual Drop Biggest Since 2008

14--Here Is What’s Fraying Nerves Among the Financial Stability Folks at Treasury

15--Russia Stops Gas Supplies to Ukraine

Monday, June 29, 2015

Today's links

1--Eastring vs. Balkan Stream: The Battle For Greece  (must read)
2--Five Myths About the Iran Deal
3--Oil Firms In Talks With Iran Ahead Of Nuclear Deal
4--Greek collapse, global turbulence loom as Syriza imposes capital controls

5--Yield-starved investors driving asset prices to dangerous levels: OECD

6--No capex recovery

7---Wall Street On Parade has uncovered a major new area of concern. For more than two years now, SEC Chair Mary Jo White has been aware that the most dangerous banks on Wall Street, which are publicly traded securities, have been engaging in “capital relief trades” with hedge funds and private equity firms to dress up the appearance of stronger capital while keeping the deteriorating assets on their books. But neither White nor her Director of Enforcement, Andrew Ceresney, have put a halt to the practice.

8---Worst capex recovery ever

9--3.5 Million Foreclosures Delayed Through Can-Kicking

Fannie Mae and Freddie Mac combined to complete 65,960 foreclosure prevention actions in Q1 this year, bringing the total of such actions up to almost 3. 5 million between the two GSEs since September 2008 when the conservatorships began, according to the Federal Housing Finance Agency (FHFA)’s Q1 2015 Foreclosure Prevention Report released on Tuesday.

Out of those 3.5 million foreclosure prevention actions in nearly seven years, 2.9 million borrowers completed home retention actions that helped them stay in their homes. About 1.8 million of those borrowers received permanent loan modifications, according to FHFA. Borrowers completed 41,321 permanent loan modifications in Q1, a slight increase from 40,922 in Q4. Approximately 31 percent of borrowers receiving permanent loan modifications in Q1 saw their monthly mortgage payments reduced by 30 percent or more. FHFA reported that as of the end of the first quarter, approximately 17 percent of loans modified in the first quarter of 2014 had missed two or more payments.

Of those nearly 66,000 foreclosure prevention actions completed during Q1, 56,451 of them were home retention actions (loan modifications, repayment plans, forbearance plans, or charge-offs-in-lieu). According to FHFA, 9,509 of those Q1 foreclosure prevention actions were home forfeiture actions (short sales or deeds-in-lieu of foreclosure).
Third-party sales and foreclosure sales totaled 34,873 during the quarter, foreclosure starts totaled 70,267, and REO inventory for both Fannie Mae and Freddie Mac was 100,279, according to FHFA

11--- NATO increases support for Ukrainian regime, warns of renewed fighting

12--Oil glut fakery?


14---New U.S. single-family home sales increased in May to a more than seven-year high, further brightening the outlook for the housing market and the broader economy. (Tweet this)
The Commerce Department said on Tuesday sales rose 2.2 percent to a seasonally adjusted annual rate of 546,000 units, the highest level since February 2008. April’s sales pace was revised to 534,000 units from the previously reported 517,000 units.
Economists polled by Reuters had forecast new home sales, which account for 9.3 percent of the market, rising to a 525,000-unit pace last month.

15---California housing market slows considerably
California’s massive housing market is slowing down in almost every way imaginable, according to the latest California Real Property Report from PropertyRadar.
California single-family home and condominium sales dropped 3.5% to 36,912 in May from 38,249 in April.
However, the report explained that what is unusual this month is that the decrease in sales was due to a decline in both distressed and non-distressed property sales that fell 8.6% and 2.5%, respectively. The monthly decline in non-distressed sales is the first May decline since 2005.

On a yearly basis, sales were up slightly, gaining 2.3% from 36,096 in May 2014.
“With the exception of a few counties, price increases have slowed considerably,” said Madeline Schnapp, director of economic research for PropertyRadar. “You cannot defy gravity.”
“The environment of rising prices on lower sales volumes was destined not to last. Higher borrowing costs since the beginning of the year and decreased affordability was bound to impact sales sooner or later. We may also be seeing the fourth year in a row where prices jumped early in the year, only to roll-over and head lower later the rest of the year,” Schnapp continued.

Thursday, June 25, 2015

Today's Links

1---The “American Dream” denied----US home ownership rate hits lowest level in two decades\
2---NATO announces expansion of military force targeting Russia

NATO defense ministers meeting in Brussels Wednesday and Thursday agreed to the enlargement of the organization’s Response Force to 40,000 troops from the current level of 13,000. On Tuesday, ahead of the meeting, US Defense Secretary Ashton Carter announced the positioning of hundreds of American tanks, military vehicles and heavy artillery pieces in the Baltic States as well as Poland, Romania and Bulgaria.

This buildup of troops and military equipment is part of a long-term reorientation of NATO directed against Russia. There is only one conclusion the Kremlin can draw from such threatening and aggressive measures: Washington and its European allies are preparing to go to war against Russia. Moscow is undoubtedly preparing accordingly.
Polish Defense Minister Tomasz Siemoniak spelled out the implications of the US-NATO policy at the conclusion of NATO war games in Poland last week, declaring: “The peaceful period after the Second World War is over. We cannot defend our European way of life if we don’t do more for our defense....

The report stated that overall defense spending by NATO will fall by 1.5 percent in 2015 to $893 billion. ...On Monday, US Defense Secretary Carter announced that Washington would contribute bombers, fighter jets, surveillance drones, Special Operations troops and other military resources to the VJTF....

In testimony earlier this month, Robert Scher, the US assistant secretary of defense for strategy, plans and capabilities, Defense Secretary Carter’s key nuclear policy aide, told Congress that the Pentagon was considering a variety of options for responding to alleged violations of the INF treaty, including preemptive missile strikes against Russia

3---anti-Uber mayhem, cars set ablaze in Paris
4--Class war: Transport workers plan militant alliance, general strike against anti-union laws
5--​‘We always knew missile defense shield was against Russia & China’ – top Moscow security official
6---Russia to Deploy S-400 Air Defense Systems Near Western Borders by End 2015

7---World Wide Web: Russia to Launch 672 Satellites for Global Internet Service

8--US ups the ante

Russia complains that the year 2002 saw a dramatic turn for the worse when the United States withdrew from the 1972 Anti-Ballistic Missile (ABM) Treaty, becoming the first nation since World War II to exit a major arms control agreement. This move was followed by the development of the US Missile Defense System, intending to deploy its elements in several countries in Eastern Europe right by the Russian borders.
Moscow also repeatedly airs its grievances regarding NATO. Despite the dissolution of the Soviet era military Warsaw Pact, NATO, far from following that example, has expanded its membership from 12 nations to 28 and does not want to stop there. Furthermore, the US still keeps significant nuclear arsenals in some European countries, apart from NATO having an overwhelming superiority over Russia in terms of conventional weapons in Europe...

The latest public opinion polls show that only 38 percent of Americans approve of Obama’s foreign policy while 50 percent disapprove of it. As for the members of Congress only 10 percent of Americans think that they do a good job while 60 percent believe that the job they do is poor.
9---What Would A Saudi-Russian Partnership Mean For World Energy?

Tuesday, June 23, 2015

Today's links

1--Gazprom-Shell Partnership Flies In The Face Of Sanctions

Gazprom and Royal Dutch Shell are teaming up on several energy projects that will benefit both. The two energy companies have agreed to build an expansion of the Nord Stream Pipeline, a major natural gas pipeline that travels beneath the Baltic Sea. The pipeline is a priority for Russia, which will allow it to expand its natural gas exports to Europe while also cutting out Ukraine from the mix.
Gazprom, Shell, along with E.ON and OMV – two gas importers in Western Europe – have agreed to build the $11 billion expansion of Nord Stream.

Moreover, the growing relationship between the two energy giants could also be seen as a victory for Kremlin in its ongoing duel with Brussels over energy dependence. The European Union has sought to reduce its reliance on Russia for energy, but the expansion of Nord Stream will only swell Russian gas imports to Europe.
Gazprom’s Alexei Miller also went out of his way to say that the Nord Stream expansion would not be a replacement for Russia’s proposed Turkish Stream pipeline, which would connect Russian gas to Southern Europe

2--Is This What Our Bond Bear Market Already Looks Like?

then, earlier this year, something happened. Bonds came down hard, hedge funds were all over them, and the mood changed.
“We’re entering a bear market in fixed income,” Michael Novogratz, principal at Fortress Investment Group, told Bloomberg at the SkyBridge Alternatives Conference in Las Vegas in early May. “It’s time to get off the train and stay off the train,” he said, loudly talking his book. “We’ve seen probably a low yield in 30-year Treasuries.”
But the transition from bull market to bear market won’t have a major impact on stocks and bonds until the Fed actually begins to raise rates, he said. By that time, the bond-market swoon was well under way, particularly in euro bonds, and most particularly in German government bonds which were plunging from their ludicrous heights reached in far, in the sixth month of the year 2015: negative market return.

3--Get out now while you still can

Recently, it’s become readily apparent that some of the world’s top money managers are getting concerned about what might happen when a mass exodus from bond funds collides head on with a completely illiquid secondary market for corporate credit.
Indeed, bond market illiquidity is the topic du jour and has almost become something of a cliche among pundits and mainstream financial media outlets years after we first raised the issue in these pages. But just because something has become fashionable to discuss doesn’t mean it’s not worth discussing and indeed, we’re at least pleased to see that the world is suddenly awake to the fact that a primary market supply bonanza catalyzed by rock-bottom borrowing costs and yield-starved investors could spell disaster when paired with shrinking dealer inventories. ...

TCW isn’t alone: Bond funds are holding about 8 percent of their assets as cash-like securities, the highest proportion since at least 1999, according to FTN Financial, citing Investment Company Institute data.

Cudzil’s reasoning is that the Federal Reserve is moving toward its first interest-rate increase since 2006, and the end of record monetary stimulus will rattle the herds of investors who poured cash into risky debt to try and get some yield,,,

TCW Group Inc. is taking the possibility of a bond-market selloff seriously.

So seriously that the Los Angeles-based money manager, which oversees almost $140 billion of U.S. debt, has been accumulating more and more cash in its credit funds, with the proportion rising to the highest since the 2008 crisis. ....

“If you distort markets for long periods of time and then you remove those distortions, you’re subject to unanticipated volatility,” said Cudzil, who traded high-yield bonds at Morgan Stanley and Deutsche Bank AG before joining TCW in 2012. He declined to specify the exact amount of cash he’s holding in the funds he runs.

Price swings will also likely be magnified by investors’ inability to quickly trade bonds, he said. New regulations have made it less profitable for banks to grease the wheels of markets that are traded over the counter and, as a result, they’re devoting fewer traders and money to the operations.

To boot, record-low yields have prompted investors to pile into the same types of risky investors -- so it may be even more painful to get out with few potential buyers able to absorb mass selling.

“We think the market’s telling you to upgrade your portfolio,” Cudzil said. “Whether it happens tomorrow or in six months, do you want look silly before the market sells off or after?”

4--Housing is on the 'verge of a breakout'
5--As Fraud Metastasizes on Wall Street, Regulators Ponder the Culture

Thomas Hayes was on trial in another section of London over charges that he rigged the benchmark interest rate, Libor, on which interest rates on loans and financial instruments are set around the world. Yesterday, Hayes produced for the jury a “Guide to Publishing Libor Rates,” which his superiors at UBS had crafted for traders, teaching them how to manipulate Libor to benefit trading positions of UBS. Hayes’ bosses are not on trial....

Then there was the SEC’s case against a shady and illegal deal called ABACUS at Goldman Sachs. On April 16, 2010, the SEC explained the deal as follows:
“The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.”
In other words, Paulson helped Goldman select dogs that would default or receive credit downgrades and then made easy bets that they would. That sure sounds a lot like fraud to a lot of folks.
The SEC complaint goes on: “…after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS [Residential Mortgage Backed Securities] portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.’s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors

6--- Nothing wrong with that, is there?

The most dangerous banks on Wall Street, which are publicly traded securities, have been engaging in “capital relief trades” with hedge funds and private equity firms to dress up the appearance of stronger capital while keeping the deteriorating assets on their books. But neither White nor her Director of Enforcement, Andrew Ceresney, have put a halt to the practice.

7---Hold Cash

Two notable concerns stood out in Berner’s talk. First was a concern about liquidity in bond markets evaporating rapidly for reasons they don’t yet “sufficiently understand.” Berner explained:

“…liquidity appears to have become increasingly brittle, even in the world’s largest bond markets. Although liquidity in these markets looks adequate during normal conditions, it seems to disappear abruptly during episodes of market stress, contributing to disorderly price changes. In some markets, these episodes are occurring with greater frequency. Examples include the mid-2013 sell-off in U.S. fixed-income markets, the October 2014 dislocation in U.S. Treasuries and futures markets, and the sharp moves in euro-area government bonds in early May of this year and in the past few days. None of these episodes disrupted U.S. financial stability, nor do we yet sufficiently understand their causes. But together they highlight a potential weakness in markets that could amplify the impact of financial shocks.”

Another major concern are the bond mutual funds and ETFs that have mushroomed since the 2008 crisis and are stuffed full of illiquid assets or assets which might become illiquid in a financial panic. Berner quoted SEC Commissioner Michael Piwowar on this issue, who has said:
“The growth of bond mutual funds and exchange-traded funds (ETFs) in recent years means that these funds now hold a much higher fraction of the available stock of relatively less liquid assets than they did before the financial crisis…their growth heightens the potential for a forced sale in the underlying markets if some event were to trigger large volumes of redemptions.”

The Financial Times article noted the same concerns as those of the OFR, writing:

“Adding to the concerns of bond bears, the market’s liquidity — the ability of traders to buy and sell securities smoothly and without moving prices excessively — has diminished dramatically. That exacerbates sell-offs and could in the worst case turn a natural correction into a crash — especially if retail investors are frightened by the fact that their supposedly safe bond funds can lose money and dump the asset class.”

According to Bloomberg data, corporations have issued an astounding $9.3 trillion of bonds since the start of 2009 as borrowing costs have plummeted as the Fed cut and maintained its Fed Funds rate in the zero bound range. Much of the proceeds of those corporate bond offerings found their way into the stock market through corporate share buybacks, pushing stock prices artificially higher.
When you put all of these factors together, it’s clear this is an unprecedented era of risk with little visibility on how markets will behave during periods of extreme stress

8--Russia's Su-35 Fighter: A Trump Card Up Beijing's Sleeve in South China Sea

9--Paul predicts dollar demise

The end result of this needless bullying by the United States will hasten the one thing Washington fears the most: a world monetary system in which the US has no say and the dollar is relegated to playing second fiddle," the former congressman warned.

10--Socialist collapse in greece

The summit’s outcome is not only a new humiliating surrender by Tsipras’s Syriza party, but a bitter lesson on the bankruptcy of its pro-capitalist perspective of opposing austerity through deals negotiated with the EU.
Workers overwhelmingly reject EU austerity in Greece and throughout Europe. This was the driving force behind the election of Syriza in Greece. It is reflected in mass protests against austerity held last weekend in Britain, bitter opposition to the Hartz IV social cuts in Germany, and the discrediting of the Socialist Party (PS) in France. Nonetheless, the EU has succeeded in forcing Syriza to impose ever more draconian austerity measures and cross all its own “red lines,” accepting all of the cuts demanded by the banks, and more.

This is not an expression of great strength on the part of the EU, a widely reviled organization that speaks for a financial aristocracy comprised of a tiny minority of the European population. Rather, it is an expression of the class character of Syriza and its hostility to socialist revolution and the working class.
As a party speaking for sections of the Greek capitalist class and affluent layers of the middle class, it accepts the entire free-market economic and social framework of the EU. From the outset it pledged not to repudiate the Greek debt or impose capital controls to halt the outflow of cash from Greek banks.

Facing a cutoff of credit from the EU, it raided billions of euros of cash reserves from Greek public institutions to pay off its creditors. Among these creditors is Greece’s own not insubstantial banking sector, where Syriza officials and their financial bankers store much of their wealth.
Tsipras and other Syriza officials have spent untold hours cajoling and pleading with the representatives of finance capital in one country after another. They have never made an appeal to the working class, either in Greece or the rest of Europe, to mobilize in opposition to the attacks by the various governments or the EU.

The leaders of the EU, for their part, had already taken the measure of Syriza before it came to power. They saw it as the representative not of the insurgent Greek masses, but of bankrupt Greek capitalism. That is why, even as Europe teetered on the brink of a financial crisis provoked by the EU’s reckless cuts and its threats to expel Greece from the euro zone, EU officials ruthlessly pressed their advantage.

11--Spy Agency’s Secret Plans to Foster Online “Conformity” and “Obedience” Exposed

Though its existence was secret until last year, JTRIG quickly developed a distinctive profile in the public understanding, after documents from NSA whistleblower Edward Snowden revealed that the unit had engaged in “dirty tricks” like deploying sexual “honey traps” designed to discredit targets, launching denial-of-service attacks to shut down internet chat rooms, pushing veiled propaganda onto social networks, and generally warping discourse online.

Among the most troubling revelations is a 42-page internal JTRIG memo that describes in detail how the elite unit developed, maintained, and apparently sought to expand its “scientific and psychological research into how human thinking and behavior can be influenced” in order to increase its ability to “manipulate public opinion” via online tools like email, social media, video, discussion forums, and other platforms.
Greenwald and Fishman argue JTRIG’s self-documented exploits are most notable because of their “extensive use of propaganda methods and other online tactics of deceit and manipulation” that are not only reserved for “suspected foreign enemies” or criminals, as the agency continues to claim, but have also been used against other groups and individuals that the agency deems threatening or “politically radical.”

12---The Rise of the “Non Leftist Left”. The Radical Reconfiguration of Southern European Politics

Today the radicalized middle class looks for practical, specifically defined and government-sponsored policies that can restore their past prosperity.  They do not aim to ‘level the playing field’ for everyone but to prevent their proletariazation.  They reject the politics of the traditional left parties because class struggle and worker-centered ideologies do not promote their own social aspirations

For most radicalized middle class activists the culprits are ‘austerity’, the mega-bank swindlers and the political kleptocrats.  They seek parties that can reform or moralize capitalism and restore ‘individual dignity’.  They want to kick out corrupt officials.  They demand ‘participatory democracy’ rather than the traditional left’s goal of public ownership under worker control...

Syriza’s personalist leader, Alexis Tsipra,s appointed right wingers from former regimes to key posts.  He negotiated with the Troika and caved on all strategic issues dealing with debt payments, austerity and privatizations.  Syriza never considered ‘going to the people’Syriza’smoral crusade’ against capital is mended by their embracing capitalism and the colonial Eurozone system.
Syriza’s lack of class analysis, class struggle and class mobilization and its total commitment to working within amoralized capitalism and the Eurozone to restore middle class status and security has resulted in the most abject conformity and surrender – punctuated by shameless buffoonery on the part of some leaders...

On a much broader front, the leaders of theNLL have not organized any mass protests – let alone formed a mass movement which would seriously challenge the imperialist powers, NATO, the Middle East wars and US-EU sanctions against Russia......

M5S’, like Podemos and Syriza, expresses the disorganized radicalism of the young, frustrated lower middle class raging against their downward mobility, while refusing to break with the EU. They rail against the concentration of power in the hands of the banks, but refuse to pursue their nationalization. M5Smobilized 800,000 people in Rome recently but led them nowhere. ‘Five Stars’ convokes crowds to meet and cheer its leaders and to ridicule the power brokers.  Afterwards they all go home....

13--Nomi Prins, Keynote Speaker Who Addressed The Fed, IMF And World Bank, Warns There Is No Saving This Global Financial System
14--'It's time to hold physical cash,' says one of Britain's most senior fund managers
It may be time to put money under the mattress. High profile fund managers explain how to prepare for a 'systemic event'

15--(Gazprom deal with Germany gets the nod after) EU extends economic sanctions against Russia for 6 months - official

16---The Euro Was Doomed From The Start—–And Still Is

17--The Flash-Crash Trader's Kafkaesque Nightmare

Saturday, June 20, 2015

Today's Links

Robert McNamara on firebombing Japan

1--Carl Icahn: Donald Trump Is Completely Correct That "We Are In A Bubble Like You've Never Seen Before"

2---European Central Bank extends credit on fears of Greek bank collapse, wsws

In his latest blog, Finance Minister Yanis Varoufakis summed up some of the indices of the social catastrophe this has already produced in Greece. Since 2010, “Wages fell by 37 percent, pensions were reduced by up to 48 percent, state employment diminished by 30 percent,” and “Consumer spending was curtailed by 33 percent,” he wrote.
“Around 1 million families survive today on the meagre pension of a grandfather or a grandmother as the rest of the family members are unemployed in a country where only 9% of the unemployed receive any unemployment benefit. Cutting that one, solitary pension is tantamount to turning a family into the streets.”...

Tsipras’s speech, speaking alongside Putin only days after the EU extended sanctions against Russia for six months, contained an implicit threat. “The economic centre of the planet has shifted. There are new economic forces that are playing a role,” he said. “Russia is one of the most important partners for us.”  Repeal the bill of rights???
4---Iran Woos Oil Companies Ahead of Nuclear Deadline

Speaking of Russia, this week saw movement on two key natural gas projects for the Kremlin. Gazprom announced that it has agreed to build an expansion of the Nord Stream pipeline, which delivers gas to Germany via a pipeline beneath the Baltic Sea. Phase 3 and 4 of the Nord Stream would see 55 billion cubic meters of natural gas per year heading to Europe. The pipeline has been an important plank in Russia’s effort to bypass Ukraine.

Separately, Russia signed a preliminary deal with the Greek government, pushing forward Russia’s “Turkish Stream” pipeline. The agreement is not binding. And one can’t help but notice the timing. It comes just as Greece is in emergency talks with Europe over its debt, and Russia has even said that it would consider providing financial assistance to the Greek government. The announcement will give Greece added leverage in negotiations, and it also helps Russia push its project forward.

5---War dangers in South China Sea continue to rise

The Obama administration has attempted to portray China’s reclamation and construction as a sinister and threatening challenge to “freedom of navigation.” In reality, they are a belated reaction to the activities of other claimants over the disputed territories and a response to the US military build-up in the region as part of the “pivot” to Asia.
Since the 1980s, Vietnam has constructed numerous facilities and reclaimed land on the 28 islets and reefs that it occupies in the Spratlys, including lighthouses, airstrips, ports and troop barracks. The Philippines has done the same on the 10 islands and reefs it holds. Malaysia, which occupies seven islands and reefs, has an airfield on the largest and stations troops on all them.

While the US refuses to sign the United Nations Convention on the Law of the Sea (UNCLOS), it has backed the legal action initiated in 2013 by the Philippines to challenge China’s claims in the Permanent Court of Arbitration in The Hague. In December 2014, Washington, while posturing as “neutral” in the territorial disputes, issued a State Department report asserting that China’s claims were contrary to international law—laws which the US does not recognise.
China has stated that it will not accept any UN court ruling against its claims and its activities in the South China Sea are at least in part motivated by concerns that the Philippines, backed by the US, could seek to exploit a decision in Manila’s favour to occupy the disputed territories.

The construction of airfields and docking facilities on islands and reefs is also a response to the tactics that the US would employ in a war against China. In the event of conflict, American strategists, as part of their openly discussed “AirSea Battle” plans, advocate the imposition of a naval blockade that prevents Chinese shipping passing through the key sea lanes between the Indian and Pacific Oceans into the South China Sea. If China’s access to oil and other resources from the Middle East and Africa was cut off, its economy would collapse...

Next week, the Philippines military will carry out separate training exercises with both US and Japanese forces near Palawan Island in the South China Sea. Both the operations will involve surveillance aircraft—which Washington specifically threatened to use to fly into the exclusive zone around Chinese-held territory.....

The operations that China will be following most closely, however, is the massive Talisman Sabre exercise that will take place in July in northern Australia involving the US and Australian militaries, along with contingents from New Zealand and Japan. The George Washington aircraft carrier battlegroup arrived in Brisbane this week ahead of the exercise. In total, some 33,000 troops, 21 ships and submarines and over 200 aircraft will carry out what amounts to a rehearsal for a military confrontation with China in the South China Sea by a joint US-Australian task force

6---if the United States does decide to impose tariffs on China, Chen said, American companies operating in China, which account for more than 60 percent of China's exports to the United States, would surely be hurt the most. (China's commerce minister: U.S. has the most to lose in a trade war Washington Post, 2010

7---US-China Diplomatic Negotiations: Military Encirclement and Encroachment, James Petras

Obama’s so-called ‘pivot to Asia’ is best understood as a rapid escalation of military threats and exclusionary trade pacts designed to provoke, isolate, weaken and degrade China and push back its rise to economic supremacy in Asia.
So far the US strategy has failed. Washington’s diplomatic gestures have lacked the necessary economic substance and incentives to its ‘allies’; its much-ballyhooed trade agreements have floundered in the face of far superior and inclusive Chinese initiatives, including its new $100 billion-dollar Infrastructure Investment Bank and its more than $40 billion dollar economic agreements with the government of India.

In the face of its economic failures the Pentagon has opted for flagrant military encroachments on Chinese airspace. Specifically, US warplanes are directed to overfly China’s ongoing construction of military installations on atolls in the South China Sea. The Chinese Foreign Office and Defense Ministry have vigorously protested these violations of its sovereignty. The Obama regime has brashly rejected China’s diplomatic protests and affirmed Washington’s ‘right’ to encroach on Chinese territorial waters.
After a quarter of a century of failing to dominate China via economic penetration by US multi-nationals and through the liberalization of its financial system, Washington has discarded its ‘softer’ diplomatic approach and adopted a ‘proto-war’ stand. This policy uses economic boycotts, military encirclement and encroachment on Chinese maritime, aerial and land sovereignty in the hope of provoking a military response and then evoking a second ‘Pearl Harbor’ as a pretext for a full scale war engulfing its Asian allies (and Australia) in a major war in the Asia-Pacific region.

China’s market successes have replaced the US as the dominant economic power in Asia, Latin America and Africa. In the face of this ‘usurpation’ the US has dropped the velvet glove of diplomacy in favor of the iron fist of military provocation and escalation. The US military budget is five times greater than China’s, whereas China’s investments and financing of economic projects throughout Asia, Latin America and the BRIC countries are ten times greater than those of the US.
China’s ‘economic pivot’ will clearly enhance Beijing’s global position over the medium and long-run, if the US’s reckless and short-term military superiority and territorial aggression does not lead to a devastating world war!

In the meantime, China is developing its military capacity to confront the ‘US pivot to war’. China’s leaders have devised a new defensive strategy, boosting its naval capacity and shifting from strictly territorial defense to both defense and offense on land, air and sea. Off shore defense is combined with open sea protection to enhance China’s capability for a strategic deterrent and counter-attack. China’s annual military spending had increased on average ten percent per annum in anticipation of the Pentagon shifting 60% of its fleet to the Pacific over the next five years.

8--Damning survey shows Ukrainians want peace

9--Judaism vs Jewish Identity Politics – Rabbi Yaakov Shapiro and Gilad Atzmon
Watch minute 29 thru 43 Is it all true or not?  I don't know

10--"Thucydides's trap"? China vs US not inevitable

The United States has intervened the South China Sea issue time and again lately. China firmly opposes it and reiterated that the united states is not a party in the South China Sea disputes, which are between China and other claimants and should be handled by those directly involved.
The situation has many people pondering how the two countries can avoid "Thucydides's trap" -- the notion an established power becomes so anxious about the rise of a new power that a struggle leading to war becomes inevitable. And how can they build their new-model relationship featuring peaceful coexistence and common development?

China and the United States should realize that the targeting of this new relationship is a strategic choice by both sides and requires unremitting efforts despite challenges. The sides have more incentives to enhance communication and cooperation than they do differences.
It should be kept in mind that a solid foundation has been established for the formation of the new relationship. In 2014, bilateral trade exceeded 550 billion U.S. dollars. China and the United States are each other's second-largest trading partners.

The number of Chinese traveling to the United States and Americans traveling to China each day adds up to more than 10,000.
The more than 90 dialogue mechanisms existing between China and the United States, with the S&ED and CPE included, have ensured smooth channels for communication, and for dispute settlement to some extent.
Heads of the two states have had several fruitful meetings. Besides their first summit in 2013, Obama paid a visit to China in November 2014. The two leaders have also met on the sidelines of multilateral meetings, such as the eighth summit of the G20 in September 2013 and the third Nuclear Security Summit in March 2014. Their talks touched upon a wide range of issues and face-to-face meetings helped enhance understanding and trust

11--Carter : "there will not be a single state of Iraq."
Carter addressed what would happen if a "multi-sectarian Iraq" -- a country where Sunnis, Shiites and Kurds live together -- is not possible.
"If that government can't do what it's supposed to do, then we will still try to enable local ground forces, if they're willing to partner with us, to keep stability in Iraq," he said. "But there will not be a single state of Iraq."

13--Carter speaks out against partition (then why are they arming ISIS?)

“This type of legislation risks fracturing the government of Iraq,” Carter told Senate Armed Services Chairman John McCain (R-Ariz.). “Directly arming the Kurds or other groups within Iraq is inconsistent with the longstanding U.S. foreign policy of working to maintain a stable, unified Iraq and could be viewed by the government of Iraq as directly interfering in Iraq’s internal affairs.”
Carter also said the amendment “fuels false narratives in Iraq and elsewhere in the region that the United States intends to partition the country.”....

At the State Department, spokeswoman Pooja Jhunjhunwala said it was U.S. policy that all arms transfers to Iraq “must be coordinated via the sovereign central government.”
The provision pits the new Iraqi government led by Prime Minister Haider al-Abadi against the Kurdistan Regional Government in Northern Iraq, with both sides employing high-powered Washington lobbyists to press their interests.
The Iraqi government is represented by the Podesta Group, according to disclosure forms, while the Kurds have retained Squire Patton Boggs, Greenberg Traurig and other firms.

14--Who Is the Biggest Aggressor in the South China Sea?

In 1996, Vietnam occupied 24 features in the Spratly Islands (source).  At that time, according to the same source, China occupied nine. By 2015, according to the United States government, Vietnam occupied 48 features, and China occupied eight.
On May 13, U.S. Assistant Secretary of Defense, David Shear, said this to the Senate Foreign relations Committee: “Vietnam has 48 outposts; the Philippines, 8; China, 8; Malaysia, 5, and Taiwan, 1.”
In the past 20 years, according to the United States, China has not physically occupied additional features. By contrast, Vietnam has doubled its holdings, and much of that activity has occurred recently. The Vietnamese occupations appear to have increased from 30 to 48 in the last six years.
Shear also pointed out that as of his speech, China did not have an airfield as other claimants did. He said:
All of these same claimants have also engaged in construction activity of differing scope and degree. The types of outpost upgrades vary across claimants but broadly are comprised of land reclamation, building construction and extension, and defense emplacements. Between 2009 and 2014, Vietnam was the most active claimant in terms of both outpost upgrades and land reclamation, reclaiming approximately 60 acres. All territorial claimants, with the exception of China and Brunei, have also already built airstrips of varying sizes and functionality on disputed features in the Spratlys.

It appears China has now built an airfield and that this was already visible in April 2015, when the Daily Mail reported that “images showed a paved section of runway 505m by 53m on the northeastern side” of Fiery Cross Reef. Now media pundits are engaged in a debate about how many acres China has


 China’s two-pronged strategy of what I term “incremental assertiveness” in the South China Sea is designed to change facts on the water to strengthen China’s position while simultaneously cementing economic ties with neighboring states to draw them closer into China’s orbit, thereby making them think twice about challenging Beijing (See: “Will China Change its South China Sea Approach in 2015?”). ....

China is also approaching a series of important meetings where it would prefer to have the South China Sea issue not dominate discussions and hamper progress in other areas, beginning with the annual Strategic and Economic Dialogue (S&ED) in Washington, D.C. later this week ahead of President Xi Jinping’s visit to the United States in September