Monday, May 27, 2013

Today's links

1---Japanese share sell-off a sign of growing financial instability, wsws

The Abe government also aims to utilise its quantitative easing program to help finance and push through economic restructuring plans to attack the working class—such as pension cuts, value-added tax increases, industrial restructuring, and other reactionary measures. This is in line with policies in the US and Europe, where quantitative easing has been combined with deep social cuts, mass layoffs, and deep wage cuts and productivity speed-up....

Japanese government debt, equivalent to around 245 percent of gross domestic product (GDP), has been financed by investment houses and domestic savings. But this may not continue. A government panel’s draft report has reportedly warned that there is “absolutely no guarantee” that domestic investors will keep financing government debt

2---Spike in excess reserves has not impacted lending, sober look
Here is a quick followup to an earlier post on pushing the elevator button more than once. It will not make the elevator come any sooner.

The Fed's securities purchases have sharply increased banks' excess reserves, while credit expansion continues roughly on its original path. That's because excess reserves have already been elevated prior to the start of QE3 (the elevator button has already been pushed). The banking system has effectively been saturated with liquidity, and massive incremental liquidity adds little additional incentive or ability for banks to extend credit.

Unit = $1bn

3---China Said to Study U.S. Property Investments With Reserves, Bloomberg
4---Economic reality finally cracks market fervor, Reuters
The underlying momentum in the global economy is weaker than it should be at this point of the economic cycle, five years after the global crisis," said Lena Komileva, director of G+ Economics consultancy in London."We have yet to see evidence of a convincing, self-sustained positive feedback loop between real growth and market value inflation."
Now, the world economic growth seems to be moving into a soft patch, although there is no sign of anything that will curb it significantly.
Last week's purchasing managers indexes showed factory activity in China declined slightly for the first time in seven months, while in the United States manufacturing grew at its slowest pace since October.

"These surveys suggest that the Chinese economy is doing a bit worse than expected and the euro zone marginally better, but they do not alter our view that global growth will remain weak, and imbalanced, for the rest of this year," said Andrew Kenningham, senior global economist at Capital Economics.

5---US, EU poised to escalate intervention as Syrian war spreads to Lebanon, wsws

Hezbollah leader Hasan Nasrallah declared that his movement will not back away from its support for Assad. “We will continue to the end of the road. We accept this responsibility and will accept all sacrifices and expected consequences of this position,” Nasrallah said in the speech Saturday.

The fighting in Lebanon demonstrates the explosive repercussions of Washington’s policy of stoking sectarian conflict to advance its strategic aims. As the Washington Post wrote last week, “the two-year Syrian conflict has become a regional war and a de facto US proxy fight with Iran.” Iran, which is aligned with Assad and with Hezbollah, has allegedly been flying weapons to the regime in Syria with the support of the Shi'ite majority regime in Iraq.

Fawaz Gerges of the London School of Economics told CNN’s Fareed Zakaria that Iran, as well as Hezbollah, “have made it very clear, Assad is a red line.” The situation points to a massive, region-wide conflict.

While peace talks are scheduled, dubbed Geneva 2, the US and its regional allies are using the occasion to prepare for war. The US is using the possibility of talks to consolidate its “coalition of the willing,” which includes Britain, Turkey, Egypt, Saudi Arabia, Qatar and the United Arab Emirates....

Republican Senator Rand Paul criticized the vote, saying: “This is an important moment. You will be funding, today, the allies of Al Qaeda.” In fact, Washington, both the major US parties, and Washington’s Middle East allies have been backing Al Qaeda-linked forces throughout the US proxy war in Syria, which began in 2011.

6---So Much for the Impending Economic Armageddon Federal Budget Deficit, economic populist

7---What happens when QE ends?, VOX

What will we learn the day Ben Bernanke announces that we are starting that path towards normalization? It might be that we simply learn that he is becoming optimistic about growth in the US. This will be good news. It might not be a surprise to some who expected that type of growth going forward, but it could be a positive surprise to others that thought growth would never come back. In this scenario, it is difficult to think about such an announcement as bad news. We know that QE will end one day, we know that short-term rates will have to increase, so if the announcement was to be a surprise in the sense that it is coming too early, it would mean that there is a positive surprise in terms of growth happening early than expected -- and this has to be good news.

There is a second and more pessimistic scenario: the day Ben Bernanke announces that QE is ending we learn that the economy is not doing much better but that the FOMC has simply changed their mind. That they do not care about low growth, that they want to be tough and that they are ready to stop QE to signal a change in policy. This would be bad news because it represents a change in policy and not a change in our expectations about growth

8---Understanding Shadow Banking, prag cap video

9---Rockets Hit Hezbollah Strongholds in Beirut, WSJ

In his first explicit admission of Hezbollah's role in Syria, Mr. Nasrallah framed the fight as necessary for the survival of the alliance between Hezbollah, the Syrian regime, and regional Shiite superpower Iran.
"Syria is the backbone of the resistance," Mr. Nasrallah, referring to his party, said in a televised speech on Saturday. "The resistance cannot sit idly by, arms crossed, as its back is exposed or its support broken," he said, mocking Lebanon as "a state of sects and a state of regions."...

Hezbollah fighters joined the battle in Syria in earnest earlier this year, to defend Shiite-majority Syrian towns along the Lebanese border and to protect a Shiite shrine in Damascus.

The Hezbollah fighters have been locked in battle alongside Syrian troops for a week in the town of Qusayr, about 10 kilometers, or 6 miles, from the border with Lebanon. The border area around the town, a rebel stronghold, is a strategic land link for Hezbollah in Lebanon with its ally Iran, and a supply route between Hezbollah and the Syrian regime.

Speaking Saturday on the anniversary of Israel's withdrawal from south Lebanon in 2000, Mr. Nasrallah conceded that Hezbollah had become involved in Syria "in the last few months" to defend border towns against what he called Sunni extremists backed by Israel and the West. He said so many of the party's fighters have volunteered to join the battle, he has had to turn some away.
"Brother and sisters: If Syria falls into the hands of the U.S., Israel, takfiri [extremists], and the tools of America in the region that call themselves regional states," he said, "the resistance will be besieged and Israel will enter Lebanon."

The U.S., which supports the Syrian opposition, has warned of the risks of more spillover of the crisis into Lebanon. President Barack Obama has expressed concern to Lebanese President Michel Suleiman over Hezbollah's role in Syria. Mr. Suleiman, in turn, cautioned Hezbollah on Friday against acting against the interests of national security.

Mr. Nasrallah's defiant speech on Saturday underscored how Hezbollah has come to view the war in Syria as a threat to its own existence, a position he appeared to reiterate to his Shiite constituency.
His opponents in Lebanon's government, which is split between camps allied with and opposed to the Syrian regime immediately slammed it as defiant and dangerous. "Nasrallah is calling the entire Lebanese entity into question," said Mohamad Chatah, a former minister and adviser allied with the anti-Hezbollah, pro-Western opposition in Lebanon. "What we are seeing is almost unprecedented….It is the complete disregard of other Lebanese and the Lebanese state," Mr. Chatah told a local TV channel.
In the Shiite-majority neighborhoods around where the rockets struck Sunday, residents—largely Hezbollah supporters—backed the party chief's characterization of the war in Syria as a fight for survival.

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