Monday, June 30, 2014

Today's links

1---BIS Warns About Destabilizing Low Interest Rates, naked capitalism

Bill Mitchell explains how the BIS mouths some of the right words but recommends more of the same failed neoliberal medicine:
The BIS tell us that the GFC was a ‘balance sheet recession’. This is true and highlights that it is imperative to understand the nature of any real downturn because when they are linked to financial downturns the consequences for the economy and the correct policy response is different to situations when the real cycle is self-promoting….
The sequence of events that define a balance sheet recession are:
• The private sector builds up massive debt levels to buy property and speculative assets.
• The asset prices rise as demand rises but then eventually the bubble bursts and the private sector is left with declining wealth but huge debt.
• The private sector then start restructuring their balance sheets – and stop borrowing – no matter how low interest rates go.
• All effort is devoted to paying back debt (de-leveraging) and households increase their saving and reduced spending because they become pessimistic about the future.
• A credit crunch emerges – not because there is enough funds but because banks cannot find credit-worthy borrowers to lend to.
• Attempts at pumping liquidity into the banks will fail because they are not reserve-constrained. They are not lending because no-one worthy wants to borrow.
• The faltering spending causes the macroeconomy to melt and output collapses and unemployment rises.
• Balance sheet restructuring for the private sector is a long process of saving and debt retrenchment.
• With this private contraction (reducing debt, saving) the only way out of the balance sheet recession is via public sector deficit spending.
Increased public deficits above the norm are required for an extended period to support income growth that allows the private sector to save and restore the viability of their balance sheets.

2--Another global financial crisis in the making, Bank for International Settlements warns, wsws

3---Federal Regulator Details Crazy Risk-Taking By Banks, Blames Fed , Testosterone Pit

Low market volatility causes banks to “understate trading risk”
First the culprit: the Fed’s “unprecedented monetary policy easing has resulted in sharply lower interest rates, higher stock prices, and lower market volatility.” That volatility is a “key factor” in how banks compute risk measures. When volatility is very low, something happens to the Value at Risk models that banks use to measure and disclose the risk of their trading activities:
Aggregate VaR has dropped significantly since the end of the financial crisis at the five largest U.S. banking companies with trading operations. While some of the VaR decline is a result of lower client activity and reduced bank trading risk appetite, the low-volatility environment is the primary cause of lower VaR. In a more normal volatility environment, one without sustained monetary policy accommodation by the Federal Reserve, bank VaR would be meaningfully higher. Thus, current VaR calculations may understate trading risk in the banking system....

Subprime auto loans
Auto lending jumped 12.9% in the fourth quarter 2013 from a year earlier – the report uses data through December 31, leaving banks with $250 billion or 31% of outstanding auto loans. A mad scramble has ensued across the industry to lend to auto buyers. Deadbeats, no problem. Subprime auto lending is booming. Loan to value ratios are on average over 100% across the industry. Used vehicle LTV ratios are hitting 120% at banks (and 150% at finance companies!). Everything gets rolled into the new loans: title and taxes, aftermarket warranties, credit life insurance, and other fluff-and-buff, plus the amount buyers are upside-down in their trade-in. To bring the payments down on these monster loans, banks lengthen the terms. Average charge-offs have been rising. “Signs of increasing risk are evident,” the report notes dryly. Then it swings from retail to corporate subprime....
Ballooning leveraged loans accompanied by loosey-goosey underwriting:
Syndicated leveraged loan issuance reached a record high in 2013 as the search for yield in the low interest rate environment drove an increase in risk appetite across institutional investors such as collateralized loan obligations (CLO) and retail loan funds. 

4--Russia Reveals "Plan B": Gazprom Says Gas Transit Via Ukraine May Be Stopped Completely, zero hedge

5--Waging war against Russia, one pipeline at a time, RT

6--The deflating Chinese real estate bubble could destabilize the world economy , oc housing

Chinese leaders want to shift from export-driven to domestic-led growth. But in promoting a consumer-led economy, China is way behind the goal post. The latest data from 2012 show that consumer spending only accounted for about 36 percent of GDP, far behind the developed countries. …
The government knows that to increase consumer spending it must increase incomes and reduce savings. Chinese households don’t have much of a safety net to fall back on, so they save almost 30 percent of their income to cover health care, retirement and education.

7---Who is responsible for the catastrophes in the Middle East?, wsws

The destruction that the US oligarchs have wrought in the Middle East, with all of its terrible human consequences, is the external manifestation of their destructive role within the US itself—smashing up the country’s manufacturing base, turning its economy into a gambling casino for financial parasites, destroying the jobs and living standards of millions of people. With no answers to the growing crisis at home, they turn to violence abroad, only compounding the catastrophes they have created overseas.

8--In Japan, dividends, buybacks take the stage, marketwatch

Mr. Abe is pushing the biggest Japanese institutional investor, the Government Pension Investment Fund, to shed its conservatism and seek higher- yielding investments.
Another catalyst is a growing number of return-conscious foreign investors, who have shown renewed interest in Japanese stocks since Mr. Abe took over a year and a half ago. Foreigners and overseas institutions held a record 31% of Japanese stocks at the end of March, according to the Tokyo Stock Exchange, up from 28% a year earlier. ...

The quest for more dividends is prompting a slight uptick in public activism. During the current annual-meeting season, which peaks at the end of June, research firm IR Japan has tallied 15 formal shareholder proposals seeking higher returns for investors, including dividends and buybacks. While that is tiny given the 2,400-plus listed companies IR Japan tracks, it was the highest total ever, up from 10 a year earlier.
Behind the scenes, analysts say, more is happening. A greater number of investors are demanding increased dividends and share buybacks than they have seen before.
"I think this is going to be a much more interesting season for annual meetings," said Nicholas Smith, Japan strategist at the brokerage firm CLSA.
Japanese companies are already responding, partly because they are sitting on a record amount of cash: about $3 trillion at the end of March, when the most recent fiscal year ended, according to the Ministry of Finance. The companies have been helped by government policies that weakened the yen, lifting the value of overseas sales when converted into the Japanese currency...

In addition to raising dividends, a number of large Japanese companies, including Toyota, NTT Docomo and Mitsubishi Corp., have announced plans for big stock buybacks, which improve shareholder returns by increasing the value of the remaining shares outstanding. ...

He said he expected an increase in shareholders demanding higher returns. "The distinctive feature this year is likely to be the inclusion of shareholder proposals for share buybacks," he wrote.

9---Sunni vs Shiite? Not really, Bert Sachs, cp

Do you remember the famous deck of cards given to American soldiers, with pictures of the key members of Saddam Hussein’s regime?  If this story were true, of the deck of 55 cards why were 35 of them Shiites?  Like it or not, Saddam Hussein was an equal opportunity employer and oppressor.

The major Shiite population in Iraq is in and around the city of Basra.  Yet when the British troops arrived to liberate the oppressed Shiites of Basra, they were not welcomed.  The Shiite population fought them off, seeing themselves first as Iraqis being invaded by foreigners.  Some while later, two British soldiers were captured driving in Basra, dressed as Arabs and carrying explosives in their vehicle.  This was reported in The Boston Globe for about two days, then the story disappeared from our press, as far as I could tell.  What were they doing?  Perhaps planting explosives in a Shiite mosque, the crime to be blamed on Sunnis¾certainly the 2006 bombing of the Shia Golden mosque was only attributed to (the predominantly Sunni) al-Qa’ida, never proven. They usually claim their actions

Friday, June 27, 2014

Today's links

1--Yellen Spending Mix Lacks Ingredient of Higher Pay: Economy, Bloomberg

Janet Yellen and her Federal Reserve colleagues are finally succeeding in their efforts to generate higher inflation. Now they must do the same for wages to prevent U.S. households from getting squeezed.
The price measure tracked by the central bank rose 1.8 percent in May from a year earlier, the biggest 12-month gain since October 2012, and just shy of policy makers’ 2 percent goal, data showed yesterday. After adjusting for inflation, consumer spending dropped for a second consecutive month.
Americans are paying more to fill up their grocery carts and cars’ fuel tanks, leaving less for discretionary items, including the latest fashions, restaurant meals and movie tickets

Commerce Department data yesterday showed those concerns weren’t misplaced. Consumer purchases, after accounting for the influence of prices, fell 0.1 percent in May after a 0.2 percent decline a month earlier, signaling the rebound in growth this quarter will be more muted than previously projected.

The economy contracted in the first quarter at a 2.9 percent annualized rate, the most since the depths of the recession that ended in June 2009, the agency reported this week. Consumer spending was the weakest in five years.
“My own expectation is that as the labor market begins to tighten, we will see wage growth pick up some,” Yellen told reporters on June 18 after the Fed’s policy meeting. “If we were to fail to see that, frankly I would worry about downside risk to consumer spending.”

Wages, Salaries

Wages and salaries have increased 2.5 percent year-over-year on average since the last recession, compared with 4.3 percent in the previous expansion. Consumer spending, which accounts for almost 70 percent of the economy, has grown an average 2.2 percent in this recovery, lagging behind the 3 percent advance in the prior one...

One reason for the cutbacks is that Americans want to have more cash available for a rainy day. The nation’s saving rate jumped to 4.8 percent in May, the highest since September, yesterday’s Commerce Department data showed. ...

The consumer has, right now in their wallets, the ability to go out and spend, but they lack the confidence to do that,” said Tom Porcelli, chief U.S. economist at RBC in New York and the second-best forecaster of personal spending in the past two years, according to data compiled by Bloomberg. “One of the key ingredients that’s missing is confidence in their income growth and job growth.

2--Bank of Japan, more confident about recovery, quietly eyes stimulus exit, Reuters

- The Bank of Japan has begun shifting its focus from supporting growth to ways of phasing out its massive stimulus, taking first tentative steps towards a potentially momentous move for the world economy.
Current and former central bankers familiar with internal discussions say an informal debate is under way on how to prepare for an exit from the BOJ's 13-month-old "quantitative and qualitative monetary easing."

3--US planning to split Iraq, gulf news

4--Are the Wars in the Middle East and North Africa Really About Oil?, WA blog

5--Terror In Iraq: Roots And Motivation, Global Research

6--Abenomics picks up speed, Economist
The battle for Japan...

Mr Abe’s high approval ratings are tied to the stockmarket, so he first paid attention to its investors. He promised to cut Japan’s corporate-tax rate from its current level of around 35%, first to 29% and then lower—a symbolic step long demanded by Japan Inc. He also wants to push the ultraconservative Government Pension Investment Fund (GPIF), the world’s deepest pot of savings, into taking greater risks to boost returns. The GPIF’s leadership has accused the government of cynically using it to lift the stockmarket.

Anti-reformers argued for stopping there, doing little to disrupt ordinary Japanese lives. Instead, the government is starting to tackle the so-called “bedrock” regulations holding back three important parts of the economy: farming; medical services; and the labour market. When Mr Koizumi tried to break through these rules, by, for example, allowing manufacturers to hire temporary workers from firms such as Pasona, it provoked a public backlash.

A controversial proposal of recent weeks, known as the “white-collar exemption”, seeks to tackle Japan’s culture of inhumanely long working hours and low productivity, particularly in services. Highly paid professionals, as elsewhere, will no longer earn “overtime” pay. Mr Abe wants workers paid for work, not hours. But labour unions have misrepresented the measure as a ruse to cut pay for the rank-and-file. “Salarymen” are shown on television furiously opposing it, even though the exemption will not touch most of them. Yet the plan is to go much further in labour-market reform and give firms the right to fire workers. Sacking permanent employees, still the majority of the labour force, is in effect impossible today. Unpopular as it would be, this reform would have the biggest economic impact of any.

Despite his past image as a social conservative intent on maintaining Japan’s traditional gender roles, Mr Abe’s government is to allow foreign workers to care for children and the elderly in a series of “special economic zones”, and so help women climb the career ladder. This has elicited the usual xenophobia, including from the labour minister. Mr Tamura suggested that foreign influences might damage the development of Japanese youngsters. The LDP may also change the tax system to stop penalising working wives. Millions of couples who benefit from the current system will be up in arms
Mr Abe also seems willing to take on powerful vested interests in farming and in health care. Supporters see as among his boldest moves an attempt to overhaul Japan Agriculture (JA), a network of agricultural co-operatives that is one of the LDP’s most powerful political supporters. In health care, the government will allow patients to combine private medical care with publicly covered medicine in many more cases, rather than forcing them to forfeit their public coverage when opting for advanced treatments. That should boost advanced health care and lay the ground for increased medical tourism.

7---Did the federal reserve’s taper slow housing and cause a new recession? , oc housing

8---Abenomics: Prices climb most in 32 years as wages limp along, JT
(wage deflation)

Consumer prices climbed in May at their fastest pace in 32 years, swelled by the hike in the consumption tax and higher utility charges that are squeezing Japanese budgets as wage gains remain limited.
Consumer prices excluding fresh food but not energy, rose 3.4 percent from a year earlier, the Statistics Bureau said Friday, matching the median forecast in a Bloomberg survey of 30 economists.
Household spending subsequently sank 8 percent, more than the forecast fall of 2.3 percent, separate data showed.

Accelerating inflation is a boost for the Bank of Japan as it targets 2 percent inflation — a goal that strips out the impact of April’s 3 percentage point tax rise. At the same time, wages are failing to keep pace with price gains.
“It’s likely CPI gains will slow down from here and stay around 1 percent as the impact of a weak yen and energy prices fade,” Takuji Aida, chief economist at Societe Generale SA in Tokyo, said before Friday’s report. “The key is wage growth” as pay rises are needed to support inflation, Aida said.

In an interview this week, Prime Minister Shinzo Abe declared the end of the deflation that wiped out much of Japan’s growth over the past 15 years.
Wages excluding overtime payments and bonuses fell for a 23rd month in April. Regular gasoline prices were the highest since September 2008 as of Monday, according to the trade ministry.
All 14 major gas and electricity companies raised prices from May to the highest level since the current pricing system began in May 2009, according to the Asahi Shimbun. Tokyo Electric Power Co. announced a price hike of 5.3 percent in May for households, reflecting the higher tax, rising energy costs and other factors.

9---Corporate tax cut no ‘magic wand,’ warns ministry adviser, JT

10--Subprime credit card, Testosterone Pit

During the first quarter, 3.7 million credit cards were issued to subprime borrowers, up a head-scratching 39% from a year earlier, and the most since 2008. A third of all cards issued were subprime, also the most since 2008, according to Equifax. That was the glorious year when “subprime” transitioned from industry jargon to common word. It had become an essential component of the Financial Crisis.

As before, subprime borrowers pay usurious rates. These are people who think they have no other options, or who have trouble reading the promo details, or who simply don’t care as long as they get the money. In the first quarter, the average rate was 21.1%, up from 20.2% a year ago, while prime borrowers paid an average of 12.9% on their credit cards, and while banks that are lending them the money paid nearly 0%

11--The Pipeline That Could Keep the Peace in Afghanistan, wsj

Here's where the U.S. comes in. In recent years, both Chevron and Exxon-Mobil have expressed interest in TAPI. But there is a sticking point. Turkmenistan says it won't sign an agreement on TAPI until the U.S. government indicates that it is firmly behind the project. Two years ago, Turkmenistan President Gurbanguly Berdimuhamedow received a letter backing Chevron's project from then-Secretary of State Hillary Clinton. But he knew that there had been not a word of support from the National Security Council or White House, let alone the U.S. president. This led to suspicions in Ashgabat that Mr. Obama was hanging back.

Some say this silence was caused by Turkmenistan's bad record on democracy and human rights. But there are winds of change as thousands of Turkmen students sent abroad for study are now returning with new ideas from the larger world. Whether they enter government service, business or education, they are bound to have a liberalizing effect. Meanwhile, a refusal to back TAPI would deny the U.S. any possibility of influencing Turkmenistan in the future.

Now the silence from Washington has ended. Earlier this month, President Obama sent a letter to President Berdimuhamedow emphasizing a common interest in helping develop Afghanistan and expressing Mr. Obama's support for TAPI and his desire for a major U.S. firm to construct it.

Japan's household spending fell sharply in May as the consumption tax hike took its toll. While some decline was expected, the 8% year-on-year drop puts the BOJ's optimistic economic forecast in doubt. As inflation cools with the diminishing impact of weaker yen (discussed here), the central bank is likely to accelerate asset purchases later this year.

15-- Q2 Buyback Announcements Lowest In 7 Quarters by Cullen Roche via Pragmatic Capitalist
"'Stock buyback announcements in the second quarter are on track to be the lowest in seven quarters,' said David Santschi, Chief Executive Officer of TrimTabs.  'Buybacks in June have sunk to just $11.5 billion, the lowest level since May 2012.'
'The sharp slowdown in buybacks is a negative sign for the U.S. stock market,' Santschi said.  'Share repurchases are the main way companies reduce the float of shares. Perhaps fewer companies like what they see when they look into the future.'
TrimTabs explained that the decline in buybacks is not the only cautionary sign for U.S. equity investors. Merger activity has skyrocketed, while companies are selling new shares at the fastest pace since last autumn. 'Our liquidity indicators aren’t as positive for U.S. equities as they were a month ago,' said Santschi.  'While the bull market isn’t necessarily ending, investors should be more cautious on the long side.'"

16--The Beginning Of The End Of The Bull Market? by Mark Hulbert via WSJ Marketwatch
"Few paid attention a couple of weeks ago when the government announced that corporate profitability had declined markedly last quarter.

Yet future historians may eventually look back and pinpoint that report as the beginning of the end of this aging bull market. That’s because the first-quarter’s decrease could signal the long-awaited return to historically average profitability levels. If so, the stock market will have to struggle mightily just to keep its head above water over the next five years.

Once we make these assumptions, calculating the stock market’s return over the next five years becomes a matter of simple math. The picture isn’t pretty: Its five-year return, annualized, is minus 2.8%." 

17--Region-wide war threatens as Iraqi state disintegrates, wsws

18--ACLU report exposes US federal government’s role in creating “paramilitary police, wsws

19--Japan Prices Rise Most Since ’82 on Tax, Utility Fees: Economy , Bloomberg

20--Waging war against Russia, one pipeline at a time, Eric Draitser, RT

Thursday, June 26, 2014

Today's Links

1--When QE ends, stocks will fall, marketanthropology

...we believe current market conditions will at the very least place a governor on the impetus for rising long-term yields despite the fact that inflation is starting to pulse strongly through the system. ...

In an effort to keep interest rates low during and directly following WWII and avoid another chapter of the near-view Great Depression, the Fed purchased all available short-term US Treasuries and virtually all long-term US Treasuries from the market starting in April of 1942. When all was said and done, the US had a debt to GDP ratio that was almost 20% larger than where it currently resides today.

In Milton Friedman and Anna Schwartz's A Monetary History of the United States 1867-1960, the market climate in the 40's is described as being so sensitive and suspect of the Fed and Treasury's very visible hand, that the entire equity market rally (150+%) from the April 1942 low through the cyclical high in 1946 was viewed with great skepticism and likely to end with another pronounced economic contraction. The fresh scars of the Great Depression provided abundant fear for market participants of a possible revival of kindred economic instabilities, despite the countervailing strength of the equity markets that continued to rally more than 20% even through the recession in 1945. 

What happened in 1946 when the Fed and Treasury stepped away from their extraordinary support of the Treasury markets? Similar to the air pockets experienced with the Fed pauses in QE I and QE II, the equity markets swiftly revalued expectations. From our perspective a similar fate awaits the current equity market rally, which in turn should continue to support the Treasury market - despite rising inflation expectations and the calls by many that the Fed will begin raising rates as early as next year. 

2--ISIS Iraq Offensive: Can the Empire Reassert Control of the Jihadists?, Black Agenda Report

The jihadists cannot be controlled by their imperial enablers – as the U.S. ambassador to Libya learned, in his last moments – not reliably, in the short term, and not at all in the long term. The contradictions of the relationship are now acute, the unraveling has begun, and the U.S. has no substitute for the services the jihadists provided to Empire.

So, yes, the ISIS-led offensive in Iraq is a horrific crisis for the peoples of the region, another descent into Hell. But it is also a crisis for U.S. imperialism, whose options diminish by the day.

3---Turkmenistan, Afghanistan, Pakistan, India gas pipeline (TAPI): - afghan news

Turkmenistan is one of the rich Central Asian States in terms of natural gas reservoirs. In 1989, Turkmenistan offered extension of its natural gas to the Asia market via Afghanistan, Pakistan and subsequently to India. The Unocal cooperation situated in California, working in extraction of oil and gas in other parts of the world also hinted at investment in the project. Back in 1991- 1994 during the Taliban regime, the company invested $1million for conducting the survey but it could not get the support for the project from then harliners’ regime. Those sorts of development led the TAPI project to hit a snag. - ...

The project was further strengthened after the signing of a landmark agreement by the four countries back in 2010.
The agreement said around 33 billion metric tons of gas would be extended to the members’ states annually out of which Afghanistan would get 16% share while Pakistan and India 42% respectively.
It was also decided to invite brilliant companies to initiate work on the much-delayed pipeline and to complete within three years but things could not be taken forward as per agreed plans.
In recent days, officials concerned from Afghanistan, Turkmenistan, Pakistan and India met in Ashgabat, the capital of Turkmenistan, to discuss the launch of the pipeline in the 2014 and complete it by the end of 2016....

4--The Pipeline That Could Keep the Peace in Afghanistan, WSJ

The White House should understand that if TAPI isn't built, neither U.S. nor U.N. sanctions will prevent Pakistan from building a pipeline from Iran. This supposedly "shovel ready" project will enrich Tehran and greatly enhance Iran's voice in Afghanistan and the region. If Washington drops the ball on TAPI, China, India or Russia will be tempted to take it up. That will generate tensions among these often competing nuclear powers and leave the U.S. on the sidelines. Russia has already begun pressing India to make it a partner in TAPI.
Strong U.S. support for TAPI is essential. President Obama's meeting this week with Pakistani Prime Minister Nawaz Sharif is a good place to begin. Other opportunities must be seized or created to move TAPI swiftly forward. Only in this way will peace and prosperity come to a region too long embroiled in conflict
One of the most ambitious and frustrating geopolitical projects on the planet is now within reach—if the U.S. leads in its development. The project is TAPI, a proposed gas pipeline from Turkmenistan through Afghanistan, Pakistan and India. The stakes are high. When U.S. forces withdraw from Afghanistan in 2014, the pipeline and the cooperation needed to maintain it may be the best hope for regional stability.

The future success of Afghanistan, and relations among Pakistan, Afghanistan, India and the U.S., are just the beginning of potential benefits. Without the pipeline, Iran will be able to manipulate its neighbors more. America's ability to balance the growing influence of China and Russia in Central Asia and Afghanistan, and U.S. credibility throughout the region, also may depend on TAPI's completion....

Here's where the U.S. comes in. In recent years, both Chevron and Exxon-Mobil have expressed interest in TAPI. But there is a sticking point. Turkmenistan says it won't sign an agreement on TAPI until the U.S. government indicates that it is firmly behind the project. Two years ago, Turkmenistan President Gurbanguly Berdimuhamedow received a letter backing Chevron's project from then-Secretary of State Hillary Clinton. But he knew that there had been not a word of support from the National Security Council or White House, let alone the U.S. president. This led to suspicions in Ashgabat that Mr. Obama was hanging back.....

6--Pipedreams---Pepe Escobar notes: WA Blog
Under newly elected president George W Bush… Unocal snuck back into the game and, as early as January 2001, was cozying up to the Taliban yet again, this time supported by a star-studded governmental cast of characters, including undersecretary of state Richard Armitage, himself a former Unocal lobbyist.
Negotiations eventually broke down because of those pesky transit fees the Taliban demanded. Beware the Empire’s fury. At a Group of Eight summit meeting in Genoa in July 2001, Western diplomats indicated that the Bush administration had decided to take the Taliban down before year’s end. (Pakistani diplomats in Islamabad would later confirm this to me.) The attacks of September 11, 2001 just slightly accelerated the schedule.
Soon after the start of the Afghan war, Karzai became president (while Le Monde reported that Karzai was a Unocal consultant, it is possible that it was a mix-up with the Unocal consultant and neocon who got Karzai elected, Zalmay Khalilzad). In any event, a mere year later, a U.S.-friendly Afghani regime signed onto TAPI.

Competing Pipe Dreams

Virtually all of the current global geopolitical tension is based upon whose vision of the “New Silk Road” will control....

Indeed, the “Great Game” being played right now by the world powers largely boils down to the United States and Russia fighting for control over Eurasian oil and gas resources:
Russia and the USA have been in a state of competition in this region, ever since the former Soviet Union split up, and Russia is adamant on keeping the Americans out of its Central Asian backyard. Russia aims to increase European gas dominance on its resources whereas the US wants the European Union (EU) to diversify its energy supply, primarily away from Russian dominance. There are already around three major Russian pipelines that are supplying energy to Europe and Russia has planned two new pipelines.
The rising power China is also getting into this Great Game:

TrimTabs Investment Research reported today that announced stock buybacks have slowed to $92.7 billion in the second quarter, down from $138.5 billion in the first quarter.
Stock buyback announcements in the second quarter are on track to be the lowest in seven quarters,” said David Santschi, Chief Executive Officer of TrimTabs.  “Buybacks in June have sunk to just $11.5 billion, the lowest level since May 2012.”

In a research note, TrimTabs noted that the decline in share repurchase announcements began in May, when they fell to $24.8 billion, and has persisted into June.  Only four companies have announced buybacks of at least $1 billion so far this month.
“The sharp slowdown in buybacks is a negative sign for the U.S. stock market,” Santschi said.  “Share repurchases are the main way companies reduce the float of shares.  Perhaps fewer companies like what they see when they look into the future.”

“This project, which has been in the planning stages for several years, consists in creating an arc of instability, chaos, and violence extending from Lebanon, Palestine, and Syria to Iraq, the Persian Gulf, Iran, and the borders of NATO-garrisoned Afghanistan.
The ‘New Middle East’ project was introduced publicly by Washington and Tel Aviv with the expectation that Lebanon would be the pressure point for realigning the whole Middle East and thereby unleashing the forces of “constructive chaos.” This “constructive chaos” –which generates conditions of violence and warfare throughout the region– would in turn be used so that the United States, Britain, and Israel could redraw the map of the Middle East in accordance with their geo-strategic needs and objectives. …
The redrawing and partition of the Middle East from the Eastern Mediterranean shores of Lebanon and Syria to Anatolia (Asia Minor), Arabia, the Persian Gulf, and the Iranian Plateau responds to broad economic, strategic and military objectives, which are part of a longstanding Anglo-American and Israeli agenda in the region…
A wider war in the Middle East could result in redrawn borders that are strategically advantageous to Anglo-American interests and Israel…

Attempts at intentionally creating animosity between the different ethno-cultural and religious groups of the Middle East have been systematic. In fact, they are part of a carefully designed covert intelligence agenda.

Even more ominous, many Middle Eastern governments, such as that of Saudi Arabia, are assisting Washington in fomenting divisions between Middle Eastern populations. The ultimate objective is to weaken the resistance movement against foreign occupation through a “divide and conquer strategy” which serves Anglo-American and Israeli interests in the broader region.” (Mahdi Darius Nazemroaya, Plans for Redrawing the Middle East: The Project for a “New Middle East”, November 2006)
7--Chart o’ the day: Dividends and Buybacks Jump to new All-time High, prag cap

8--Chart O’ the Day: Round Trippin’ it, prag cap
.  Just a chart of the volatility index.  Right back to where we were before the crisis occurred and fast approaching the all-time lows

9--GDP Hits Air Pocket: Recession Warning or False Alarm?, naked capitalism

Particularly disturbing in this revision was the downgrade in consumer spending. The American shopper was supposed to be the bright spot in this recovery, reliably trudging to the malls and filling their online shopping carts despite government shutdowns and wintry snowstorms. Consumer spending jumped 3.3 percent at the end of last year, and the data initially showed a similarly strong increase during the first quarter. Wednesday’s release showed the cracks in that pillar.

10--NYSE Margin debt falls in April for 2nd straight month, Reuters

11--Terrible Recovery, House of Debt

Real GDP growth for 2014q1 was revised downward today to -3.0% on an annualized basis. Yes, our reading of Table 1.1.3 of NIPA shows -3.0%, not -2.9%.
Here is real GDP indexed to the quarter before each recession for all 10 recessions since 1950, taking into account this morning’s revision. Notice the significant bend downward in the last quarter for the 2007-2009 recession (solid red line). It makes the recent recovery look even  worse relative to previous recoveries.
Just a terrible recovery. Terrible.

There is no direct relationship between the tax cuts Mr. Cochrane has supported and the cuts in discretionary spending that Congress and President Obama agreed to. The cuts came about because of a commitment to hit arbitrary deficit targets. Given the vast amount of unemployment and underemployment in the economy, there is no reason to be reducing the deficit. There is no reason that we could not have both maintained higher levels of discretionary spending and left the tax cuts in place.
It is important to be clear on this issue since the public needs to know that the main factor slowing growth and keeping millions of people out of work is simply a perverse cult of low deficits, not the need to raise taxes on anyone.

14--US economic output tumbled by 2.9 percent in the first quarter, wsws

A further drag on economic growth was a collapse in investment, which fell by 11.7 percent compared to the previous estimate of a 6.1 percent fall. Even as corporations are sitting on massive cash hoards or initiating stock buybacks to inflate the wealth of their shareholders, they are generally refusing to invest in production.

According to a separate report released Wednesday, US orders for durable goods—products designed to last more than three years, such as cars and refrigerators—tumbled one percent last month. The figure was the first decline in four months and was significantly worse than expected by economists...

Speaking last week, Fed Chair Janet Yellen reiterated that the Federal Reserve would keep its benchmark federal funds rate near zero “for a considerable time,” guaranteeing that the flow of virtually free credit to the banks would continue. The Fed has held its federal funds rate at near zero since December 2008.
This influx of free cash is fueling a huge asset bubble, with stock markets hitting record levels day after day despite the near-moribund state of the economy. The increasingly speculative character of Wall Street’s activities was reflected in a report published Wednesday by the Office of the Comptroller of Currency (OCC), which warned that “credit risk is building in supervised national banks and federal savings associations,” and that “easing in underwriting and increased risk layering is also occurring in commercial loans.”
The so-called economic “recovery” is, in fact, a vast redistribution of wealth from the great majority of the population to the super-rich, whose wealth has more than doubled since 2009..

15---The fiasco of Kerry’s Middle East tour, wsws

Kerry’s tour only deepened the debacle created by US policy in Iraq. In the course of the trip, he made the most astounding statement at a news conference in Cairo, declaring, “The United States of America is not responsible for what happened in Libya, nor is it responsible for what is happening in Iraq today.” He went on to add, “The United States shed blood and worked hard for years for the Iraqis to have their own governance.”

What arrogance and hypocrisy! Not only is US imperialism responsible for the crises in Iraq and Libya (not to mention Syria), the crimes it has carried out in each of these countries have come together to create the current Iraqi disaster.

In Iraq, the full force of the US military was unleashed to decimate an entire society, destroying every institution and the country’s entire infrastructure, while claiming the lives of over one million people. Employing a strategy of divide and rule, Washington deliberately implanted a system of sectarian politics to extinguish Iraqi nationalism, thereby unleashing the bitter sectarian civil war that is now reigniting.

In Libya and Syria, Washington armed and funded Islamist militias, including ISIS, as shock troops in sectarian civil wars for regime-change that again claimed hundreds of thousands of lives. Now, ISIS, which the US and its reactionary allies in Turkey, Saudi Arabia and the Gulf monarchies have backed against the regime of Bashar al-Assad, have crossed the border into Iraq, turning a war fanned by US imperialism into a regional conflagration. On the Syrian side of the border, Washington denounces the existing government for military strikes against ISIS, while on the Iraqi side it is desperately attempting to organize government forces to defeat ISIS.

14---Did the federal reserve’s taper slow housing and cause a new recession? , oc housing

Tuesday, June 24, 2014

Today's Links

1--Memo on drone killings of US citizens makes case for presidential dictatorship, wsws

The US Court of Appeals for the Second Circuit on Monday released a redacted version of the hitherto secret Obama administration memo arguing for the legality of presidential assassinations, without charges or trial, of US citizens. The 47-page memo, dating from July 2010, was drafted and signed by then head of the Justice Department’s Office of Legal Counsel, David Barron, and addressed to Attorney General Eric Holder.

The memo constitutes prima facie evidence of crimes against international law, the US Constitution, and the democratic rights of the American people. It could serve as a key exhibit in impeachment proceedings and criminal prosecutions against high-level American officials, beginning with President Barack Obama, Attorney General Holder, US intelligence and military leaders and the author of the memo, Barron....

It is notable that the document deals only cursorily with the Fifth Amendment to the US Constitution, which states: [N]or shall any person…be deprived of life, liberty, or property, without due process of law.” (These words are not cited in the memo). It is also striking that most of the redactions in the released document occur in the section dealing with the constitutional rights of US citizens.

Instead, the memo restates the now standard pseudolegal argument that in prosecuting the “war on terror” against Al Qaeda and “associated forces,” the president and his unelected military/intelligence aides have virtually unlimited powers, including the power to wage war and carry out killings, kidnappings and indefinite detention anywhere in the world, including within the US itself. It ignores the fact that the so-called “war on terror” was never declared by Congress and has no geographical or temporal limit.

The memo repeatedly cites the congressional Authorization for Use of Military Force, passed three days after the 9/11 attacks, as legal support for any and all actions taken in the name of fighting terrorists, including the assassination of US citizens and other repressive measures against Americans. At the time it was passed, the AUMF was presented as a narrowly defined sanction for retaliation against those responsible for the attacks.
It also cites the 2004 Supreme Court ruling in Hamdi vs. Rumsfeld, even though the court ruled 8 to 1 against the Bush administration’s asserted right to detain people without trial or due process

2--Senate Democrats confirm drone memo author for second-highest US court, wsws

3---Poll Finds Dissatisfaction Over Iraq, NYT

The poll found that 58 percent of Americans disapprove of the way Mr. Obama is handling foreign policy, a jump of 10 points in the last month to the highest level since Mr. Obama took office in 2009. The spike in disapproval is especially striking among Democrats, nearly a third of whom said they did not approve of his handling of foreign policy

4--Will lower business tax aid economy?, JT

5--Record Japan Buybacks Salvaging Stocks Left Out of Rally , Bloomberg

Japanese businesses left behind this year as global equities rallied to a record found a winning strategy in buying back shares the rest of the world preferred to avoid....

“It’s a pretty big sea change,” said Kieran Calder, head of equities for Asia at Coutts & Co., which manages about 28.5 billion pounds ($48.6 billion). “Corporate mindsets are definitely changing,” he said. “It makes Japan more of a normal market.” ....

“Share buybacks have the effect of supporting the market when it’s weak,” Daiwa Securities Group Inc. quantitative analyst Masahiro Suzuki wrote in a report on June 10. “Return to shareholders is a big theme.”
Companies’ purchases of their own equity can be seen as a vote of confidence by executives that their stock has room to rise. The buybacks can also suggest a company has run out of things to spend money on, curbing its growth potential.
While gross domestic product expanded 6.7 percent in the first quarter, it’s forecast to contract 4.4 percent in the second, reflecting buying before a tax increase. Japan’s exports fell in May for the first time in 15 months on weak demand from the U.S. and Asia.

6---Gallup: Public Confidence in TV News at All-Time Low , gallup

Only 18 percent of the Americans surveyed expressed either a “great deal” or “quite a lot” of confidence in that news medium.
Gallup has been asking the following question annually since 1993: “Now I am going to read you a list of institutions in American society. Please tell me how much confidence you, yourself, have in each one--a great deal, quite a lot, some or very little?”  (See Gallup Confidence Survey.pdf) One of the institutions listed is "television news."
In the latest survey, conducted June 5-8, only 10 percent said they had “a great deal” of confidence in T.V. news, and 8 percent said they had “quite a lot” of confidence.
television news

In 1993, the first year Gallup asked Americans about their confidence in T.V. news, 46 percent said they had a great deal or quite a lot of confidence in it. It's never been that high again.

7---Greenwald: New NSA disclosure 'imminent', politico

8---In Baghdad, Kerry threatens US military action, wsws
  Speaking at the end of a day-long series of meetings in Baghdad, US Secretary of State John Kerry warned Monday that President Obama could order military strikes against Sunni militants without waiting for the political restructuring of the Iraqi government that Washington has been demanding...
Underscoring the threat of a wider war, Israeli warplanes and missiles struck nine targets within Syria Monday, the biggest military action by Israel against Syria in the three years of mounting civil war in that country. The Israeli Defense Forces claimed the attack was retaliation for an incident in which an Israeli teenager was killed near the Syrian border, allegedly by an anti-tank missile. The IDF policy is to treat any armed attack from Syria, whether conducted by Assad supporters or rebels, as an official government action, and to target the Syrian military in response..

“I think we have to understand first how we got here,” he said on CNN. “We have been arming ISIS in Syria.” He (Rand Paul) continued, “We are where we are because we armed the Syrian rebels. We have been fighting alongside al Qaeda, fighting alongside ISIS. ISIS is now emboldened and in two countries. But here’s the anomaly. We’re with ISIS in Syria. We’re on the same side of the war. So, those who want to get involved to stop ISIS in Iraq are allied with ISIS in Syria. That is the real contradiction to this whole policy. “

9---Washington’s persecution of immigrant children, wsws

The White House has vowed to set up new detention centers for children and “enhance our enforcement and removal proceedings” with its own “surge” of agents, judges and prosecutors to speed up deportations....

The Obama White House already has the ignominious distinction of having deported more people—over 2 million—than any other administration. In the last fiscal year alone, it deported 106,000 people to Guatemala, Honduras and El Salvador, in many cases tearing families apart and inflicting serious economic and emotional hardship on children.
Now its solution is to escalate these repressive measures
Washington’s policy of criminalizing and persecuting immigrants found its most horrific expression over the past week with the discovery in south Texas of mass graves into which the bodies of immigrants who died trying to make their way into the US had been dumped. The corpses were packed three to a body bag or crammed into garbage, biohazard and even shopping bags, treated worse than animals and in a fashion that ironically and hideously recalls Lazarus’s line about “wretched refuse.”
One can only imagine the response of the American corporate media if similar mass graves were found in Russia, China or Iran. The discovery of such a gruesome site in the US itself, however, was largely ignored.

Meanwhile, by the government’s count some 52,000 unaccompanied minors have arrived in the US since last October (together with 39,000 adults with children). The immigrants are being held in the most outrageous conditions, packed into windowless warehouses encircled by razor-wire fences, lacking adequate sanitation, medical care or bed space. One Arizona newspaper commented that the detention center in Nogales had “the look and feel of the livestock areas at the State Fair.”

10---Abe Unveils Japan's New Growth Strategy, wsj

The broad package calls for cutting the corporate tax rate and knocking down long-standing regulations in various aspects of the economy from employment rules to agriculture and health care. Mr. Abe also emphasized his plan would address the problems stemming from a shrinking working-age population by encouraging women to enter the workforce and bringing in more foreign workers. ....
Among the pillars of the latest package is a plan to cut the nation's 35.64% corporate tax rate to below 30% over the next few years, as well as labor reforms that would allow more flexible work patterns, changes in the health-care sector that would give patients more treatment options, and changes to Japan's agricultural cooperatives with the hope of making the farming industry more productive.

11--Bond Market Has $900 Billion Mom-and-Pop Problem When Rates Rise, Bloomberg

That concern is also revealed in BlackRock Inc.’s pitch in a paper published last month that regulators should consider redemption restrictions for some bond mutual funds, including extra fees for large redeemers.
A year ago, bond funds suffered record withdrawals amid hysteria about a sudden increase in benchmark yields. A 0.8 percentage point rise in the 10-year Treasury yield in May and June last year spurred a sell-off that caused $248 billion of market value losses on the Bank of America Merrill Lynch U.S. Corporate and High Yield Index
Now, as the Federal Reserve discusses ending its easy-money policies, concern is mounting that the withdrawal of stimulus will lead to an exodus that’ll cause credit markets to freeze up. While new regulations have forced banks to reduce their balance-sheet risk, analysts at JPMorgan Chase & Co. (JPM) are focusing on the problems that individual investors could cause by yanking money from funds.
There’s a bigger risk “that when the the Fed starts hiking in earnest, outflows from high-yielding and less-liquid debt will lead to a free fall in prices,” JPMorgan strategists led by Jan Loeys wrote in a June 20 report. “In extremis, this could force a closing of the primary market and have serious economic impact.”

Liquidity Risk

Last week, Fed Chair Janet Yellen said she didn’t see more than a moderate level of risk to financial stability from leverage or the ballooning volumes of debt. Even though it may be concerning that Bank of America Merrill Lynch index data shows yields on junk bonds have plunged to 5.6 percent, the lowest ever and 3.4 percentage points below the decade-long average, the outlook for defaults does look pretty good.

12--- Record Stock Buybacks: First In The US, Now In Japan, zero hedge

It was a month ago when Zero Hedge first revealed that as QE was "tapering", a just as powerful and even more indiscriminate force had stepped in to make up for the loss of Fed buying of last resort: corporations themselves, almost exclusively on a levered basis (issuing debt whose use of proceeds are stock buybacks). Specifically, we showed that the total amount of stock bought back by corporations in Q1 was the highest since the bursting of the last credit bubble. In fact it was the highest ever.

This was promptly noticed by both the WSJ and the FT. What the two financial media outlets likely have not grasped is that based on trading desk commentary, according to which the bulk of "flow" now originates almost exclusively at C-suites ordering banks to continue the buyback activity, the Q2 stock repurchase totals will be even greater than Q1, and likely surpass $200 billion. This means that every month this quarter companies are buying back about $70 billion of their own stock: an amount which at this runrate will surpass the Fed's original QE(3) amount of $85 billion within a quarter!

But while the "mysterious, indiscriminate" buyer of US stocks has been fully unmasked now, what most likely do not know is that just this is happening at a comparable record pace nowhere else but the place which is mirroring and repeating every single Fed mistake tit for tit.


According to Bloomberg, companies in the Topix index are acquiring their own stock at the fastest pace ever, led by NTT Docomo Inc. and Toyota Motor Corp., with $25 billion of announced purchases so far this year, data compiled by Bloomberg show. The buybacks are limiting losses in the world’s worst-performing developed equity market: Companies using the strategy have gained even as the Topix slid.

13---Investment Bank: The End Of US Economic Growth, Testosterone Pit

The conundrum is this: Real incomes of 80% of American households, including the beleaguered middle class, have been declining since 1995; and income has been transferred to the top 5% who have a relatively low propensity to consume and a relatively high propensity to save. Those two factors should have caused the economy to stall.
But growth – with exception of some dry spells – has been more or less strong. How is this possible in a consumption-based economy when 80% of the consumers have less purchasing power than before?

Monetary stimulus, said a new report by Natixis, the asset management and investment banking division of Groupe BPCE, the second largest bank in France. Alas, that stimulus – the only thing that kept GDP growing over the period – is about to disappear.
The US Census reported late last year that in 2012, 46.5 million people were living in poverty, the largest number ever. The poverty rate has been rising from a low of 11.3% in 2000 to 15% in 2012. Many researchers claim that the official poverty rate understates the actual problem. For example, a study found that 38% of Americans lives from paycheck to paycheck – including parts of the maxed-out middle class.

Based on the Census data, the real incomes of the lowest 20% of households has edged down since 1980 to $11,490. The next quintile experienced a 4.3% increase spread over the 32 years – the definition of stagnation. The third quintile saw a gain of 8.5% over that 32-year period. The fourth quintile was up 18.8%. The top quintile was up 47%. But the top 5% – the happy campers in this economy – saw their incomes soar 72.5% to $318,052.

The scenario since 1997 has been even drearier: the purchasing power of the bottom 80% – a sign of our crazy times that these kinds of expressions are now common – declined or remained stuck. Only the top quintile saw an increase in purchasing power. And even within this group, the increase was concentrated at the top 5%. But these people have a high propensity to save, instead of blowing all their scarce money on bare essentials – which is what the vast majority of Americans have to do.

14---Was Iraq War worth the cost? 75% of Americans say no - poll, RT

15--Putin asks Upper House to repeal decision allowing use of military force in Ukraine, RT

The EU welcomed Putin’s decision to reject the right to use military force to settle the crisis in Ukraine and welcomes its earliest realization, the press-secretary of EU foreign affairs chief Catherine Ashton stated. ....

Despite the “unilateral ceasefire” announced by Kiev the fighting in eastern Ukraine continued, and there have been clashes in some areas, the Lugansk People’s Republic said in a statement. It was reported that an artillery shell hit the roof of a kindergarten in Kramatorsk, partly destroying the building. At the same time, self-defense troops of the Donetsk People’s Republic targeted Ukrainian armed forces positions at Karachun Mountain, Itar-Tass reports.

16--​ISIS in Iraq stinks of CIA/NATO ‘dirty war’ , William Engdahl

ISIS, as in the ancient Egyptian cult of the goddess of fertility and magic. The media picture being presented adds up less and less. ...

Details leaking out suggest that ISIS and the major military ‘surge’ in Iraq - and less so in neighboring Syria - is being shaped and controlled out of Langley, Virginia, and other CIA and Pentagon outposts as the next stage in spreading chaos in the world’s second-largest oil state, Iraq, as well as weakening the recent Syrian stabilization efforts....

In 2009, US ‘Iraqi surge’ General David Petraeus, at the time heading the US Central Command, claimed to reporters that Douri was in Syria. Iraqi parliamentarians claimed he was in Qatar. The curious fact is that despite being on the US most wanted list since 2003, Douri has miraculously managed to avoid capture and now to return with a vengeance to retake huge parts of Sunni Iraq. Luck or well-placed friends in Washington?
The financial backing for ISIS jihadists reportedly also comes from three of the closest US allies in the Sunni world—Kuwait, Qatar and Saudi Arabia. ...

Key members of ISIS it now emerges were trained by US CIA and Special Forces command at a secret camp in Jordan in 2012, according to informed Jordanian officials. The US, Turkish and Jordanian intelligence were running a training base for the Syrian rebels in the Jordanian town of Safawi in the country’s northern desert region, conveniently near the borders to both Syria and Iraq. Saudi Arabia and Qatar, the two Gulf monarchies most involved in funding the war against Syria’s Assad, financed the Jordan ISIS training. ....

Iranian journalist Sabah Zanganeh notes, "ISIS did not have the power to occupy and conquer Mosul by itself. What has happened is the result of security-intelligence collaborations of some regional countries with some extremist groups inside the Iraqi government."

Iraq’s Chechen commander

The next bizarre part of the ISIS puzzle involves the Jihadist credited with being the ‘military mastermind’ of the recent ISIS victories, Tarkhan Batirashvili. If his name doesn’t sound very Arabic, it’s because it’s not. Tarkhan Batrashvili is a Russian - actually an ethnic Chechen from near the Chechen border to Georgia. But to give himself a more Arabic flair, he also goes by the name Emir (what else?) Umar al Shishani. The problem is he doesn’t look at all Arabic. No dark swarthy black beard: rather a long red beard, a kind of Chechen Barbarossa.

According to a November, 2013 report in The Wall Street Journal, Emir Umar or Batrashvili as you prefer, has made the wars in Syria and Iraq “into a geopolitical struggle between the US and Russia.”
That has been the objective of leading neo-conservatives in the CIA, Pentagon and State Department all along. The CIA transported hundreds of Mujahideen Saudis and other foreign veterans of the 1980s Afghan war against the Soviets in Afghanistan into Chechnya to disrupt the struggling Russia in the early 1990s, particularly to sabotage the Russian oil pipeline running directly from Baku on the Caspian Sea into Russia. James Baker III and his friends in Anglo-American Big Oil had other plans. It was called the BTC pipeline, owned by a BP-US oil consortium and running through Tbilisi into NATO-member Turkey, free of Russian territory...

Very revealing is the fact that almost two weeks after the dramatic fall of Mosul and the ‘capture’ by ISIS forces of the huge weapons and military vehicle resources provided by the US to the Iraqi army. Washington has done virtually nothing but make a few silly speeches about their ‘concern’ and dispatch 275 US special forces to allegedly protect US personnel in Iraq.
Whatever the final details that emerge, what is clear in the days since the fall of Mosul is that some of the world’s largest oilfields in Iraq are suddenly held by Jihadists and no longer by an Iraqi government determined to increase the oil export significantly. More on this aspect in an upcoming article

17---Japan: inflation is not a sensible policy , FT

Deflation is usually bad for investment, but not for consumption. It is often claimed consumers postpone their spending when they expect prices to fall, ie, they increase their savings. The evidence is strongly against this....

As Japan needs more consumption and less investment (a subject I plan to write about later), inflation is unlikely to help.
Another much misunderstood aspect of inflation is the claim that it helps reduce the national debt relative to GDP. This is only true under two conditions. First that debt is not much more than 100 per cent of GDP or second, that interest rates do not rise in line with inflation.
If real interest rates do not change, then nominal rates will rise by the same amount as inflation. If debt is below 100 per cent of GDP this will mean that interest payments rise more slowly than nominal GDP and, if debt is above 100 per cent, they will rise more rapidly....

Japan has a gross national debt of 230 per cent of GDP and is therefore likely to find that within a year or so inflation will increase rather than reduce the fiscal deficit. A small rise in inflation to, say, 2 per cent would probably have little impact. But anything above that is likely to cause a panic in the bond market.

18--Stanford economist warns of Japanese fiscal crisis, Stanford

19--Japan: increase in household savings keeps yen strong, macronomy

What so far has been hindering the Japanese reflation story has been Mrs Watanabe's household savings even though the dollar-yen rate has been seriously impacted by the Bank of Japan's aggressive monetary stance as displayed in the below Bloomberg graph:

Of course the depreciation story has led as well Japanese CPI higher in conjunction with higher durable goods prices and furniture and utensils prices - graph source Bloomberg:

20---Welcome to Jihadistan!, Gilbert Mercier, counterpunch

Who might ultimately profit from fueling a fratricidal war within Islam? Could this be a strategy of ash and ruins, preliminary to the expansion of the Jewish state into the so-called Greater Israel?...

Iraqi Prime Minister Nouri al-Maliki has rightly accused Saudi Arabia and Qatar of having sponsored the Jihadists of ISIS for about three years, ever since the start of the Syrian civil war. Al-Maliki should also blame the US and its European allies. By invading Iraq in 2003, toppling Saddam Hussein, and then fostering and sponsoring of the Jihadists in Syria since 2011, Qatar, Saudi Arabia and the US have opened a geopolitical pandora’s box. Out of it came ISIS. United States foreign policy has been schizophrenic for decades, but it recently reached the apex of contradiction: to please Saudis and Qataris, Washington has supported the Jihadist fighters against Assad in Syria, and simultaneously in Iraq, Washington has supported (sort of) al-Maliki’s government against those same Jihadists.

The outcome was predictable, and one could wish that top policymakers would be held accountable for this crime of astonishing stupidity. As early as February 2012, we were raising concerns that Syria’s civil/proxy war could easily become a full-blown regional sectarian war between Sunnis and Shiites. Again, on June 26, 2012, I commented in a Russia Today (RT) interview that the US was backing up a de facto Talibanization of the Middle East, just like the Reagan administration did in Afghanistan during the 1980s...

 Those who should be most concerned about the Jihadists’ blitzkrieg in Iraq might be ISIS’ own biological fathers: the kings and sheiks of the Gulf States. If ISIS takes Baghdad, who can stop the Jihadist march on Doha (Qatar), Riyadh (Saudi Arabia), or even Amman (Jordan), in a most unwelcome return of the prodigal son.

21--Obama hopes to fix Iraq - and Syria, too, M K Bhadrakumar   

Washington may not after all wait for Iraqi politicians to form a new government before taking further military action.

22--Dennis Ross on Syria-Iraq, LA Times

The Qatar pipeline theory makes sense but is entirely consistent with Isis as a western intelligence front. Europe wants that gas, now more than ever. The only quibble between us is to what degree the CIA subcontracts it's work to Qatar. An interesting question, but hardly one that refutes the main point; Isis is a US sponsored creation that does its bidding.

For the Qatari plan to work, though, you have to overthrow the Syrian government. Which ultimately means a NATO bombing campaign. Isis, combined with bombing in Iraq provides a distraction. Compared with the political situation of August and September of 2013, this is a much better position that the US can attack from. And Syria's chemical arsenal is gone.
This doesn't mean they will attack or their goals will be achieved, but there should be no mistaking what they want to do.
Posted by: Lysander

Monday, June 23, 2014

Today's Links

Today's quote:  "Nothing testifies so clearly to the dysfunctional state of American democracy than the fact that Cheney is still paraded before the public as a distinguished authority on foreign policy. He exemplifies the absence of any real legal or political accountability for the crimes committed by the ruling oligarchy. Even in the midst of a major foreign policy disaster, there has been no call for even the formality of congressional hearings into the history of the US intervention in Iraq and the so-called “war on terror.”" Bill Van Auken, WSWS

1---NY Times pushes idea that Iraq is already divided, NYT

At the same time, efforts to persuade the government to be more inclusive to Sunnis and provide a counterweight to the intimidation and coercive approach of the militants are making little headway. The government of Prime Minister Nuri Kamal al-Maliki has turned to tens of thousands of Shiite militiamen and volunteers that Sunnis see as a threat, and so far has not reached out in any meaningful way to Sunni Arabs and Kurds.

Taken together, the picture that emerges is of an Iraq where the lines on the map mean little. The north and west have become a haven for Sunni extremists who have largely succeeded in erasing the border between their territory in Syria and Iraq. On Saturday, the militants took Qaim, a checkpoint on the border with Syria, giving them the ability to move large quantities of weapons and men into Iraq.

With a newly expanded Kurdistan in the north, Baghdad and the south remain under government control.
“Now we are just in the position of protecting what we have left of our territory,” said an Iraqi Army commander in Diyala, where ISIS fighters and other Sunni groups are fighting. “Our army soldiers are really down,” said the commander, who asked not to be identified because he was not authorized to speak with reporters....

Western officials describe ISIS as a far tougher enemy than the one the American military faced when it was battling Al Qaeda in Iraq from 2004 through 2009. Assessments of the militants’ capabilities vary, but there is a consensus that despite their small numbers they are well equipped, trained and financed. They also appear dedicated to their cause of vanquishing the forces of the modern world and returning the territory they take to an earlier form of Isla....

With an estimated 10,000 fighters, about 5,000-6,000 of them ISIS and about 4,000 allied Iraqi Sunni groups, ISIS has been able to seize stores of military equipment and plan small offensive missions that, when coupled with a propaganda campaign, have proved highly effective. When the militants overran Mosul they captured the second-largest ammunition storage site in Iraq, which one expert described as a “Walmart of ammunition.”
The militants also captured 52 artillery pieces, including Howitzers, which were abandoned by Iraqi troops as they fled south. It is unclear if ISIS can figure out how to use them, but if it did so that would add to its already substantial firepower.

So far the fighters seem impervious to combat losses, quickly replenishing their ranks with fighters from Syria, Saudi Arabia, Lebanon, Chechnya and Europe, who appear to be drawn by the successes in Iraq. They have also found recruits by freeing prisoners in brazen prison breaks, like one last July, in which 800 prisoners were helped to escape from Abu Ghraib. During the recent assault on Mosul, ISIS released some 2,500 inmates from Badoosh prison. A number of them were Sunni insurgent operatives and some almost certainly rejoined the fight, although it is impossible to know how many did so.

2---IMF Frets About Giant Sucking Sound of Hot Money, Wants to Take Over Global Monetary Policy , Testosterone Pit

The IMF was lulled into its comfort zone by worldwide central-bank money-printing to bail out and enrich bondholders, bank investors, counterparties, and other investors via the masterful creation of magnificent asset bubbles. Now it’s waking up to the reality that the Fed, which instigated all this, is thinking out loud about pulling back. And that sent IMF heads fretting about “spillovers” to the rest of the world.

3--Low-end Calif housing sales collapse, zero hedge

What stands out is that while California is by far the most vibrant market when it comes to the most expensive segment (at +6%, the highest in the nation), it is shambles when it also comes to the two lowest price buckets, both of which blow out any myth of a recovery for the "non-1%" out of the water, with a collapse of 40% in sales in the $0-100K range, and a 20% plunge in the prime $100-$250K market (the Median existing home price across the US in May was $213,400).

4---ISIS and the Gulf Cooperation Council, cp

Saudi Arabia, Qatar, Kuwait and the United Arab Emirates are quite content to see militants from ISIS, Jabhat al-Nusra and others operate far from their borders, although they are keenly aware the Frankensteins they created will turn on them in an instant if given the opportunity. Hence, these jihadist groups are kept at an arm’s length, busy settling scores and waging their financiers’ sectarian battles elsewhere in Lebanon, Syria and Iraq. But early developments already point to the unintended consequences the ISIS-GCC alliance will inevitably bring, to the chagrin of both King Abdullah and the Emir of Qatar. Indeed, as Hasan Nasrallah recently stated, the magic may yet turn against the magicians.

Although the hope is for the Maliki government to fall and amicable ties with Iran severed, recognition of the danger posed by groups like ISIS will only hasten a rapprochement between the United States and Iran as they share a common enemy. The notion of joint military action by U.S. and Iranian forces is fanciful, yet the media’s mere mention of the possibility certainly sent shockwaves through Doha and Riyadh (and Tel Aviv). In addition, the United Kingdom already announced its embassy in Tehran is set to reopen with limited staff.

5--ISIS Iraq Offensive: Can the Empire Reassert Control of the Jihadists?, Black Agenda Report

The jihadists cannot be controlled by their imperial enablers – as the U.S. ambassador to Libya learned, in his last moments – not reliably, in the short term, and not at all in the long term. The contradictions of the relationship are now acute, the unraveling has begun, and the U.S. has no substitute for the services the jihadists provided to Empire.

So, yes, the ISIS-led offensive in Iraq is a horrific crisis for the peoples of the region, another descent into Hell. But it is also a crisis for U.S. imperialism, whose options diminish by the day

6--Out-of-control Central Banks are Buying Up the Planet, Ellen Brown

In China and elsewhere, central banks are turning from monetary policy to asset grabs

7--Fallujah: US Marines – Further Allegations of War Crimes Surface, Felicity Arbuthnot

8--Wall Street and Washington want you to believe the stock market isn't rigged. Guess what? It still is, Guardian

Let's get one thing straight: Investor confidence is not the problem. The screwed-up stock market is the problem. It's time to break down the polite fiction that investing in the stock market is something that sane, rational, sensible people do. It is a high-risk contact sport for your money.....

Michael Lewis woke up Average Joe investors, but the fat cats are still trying to lull you into financial submission with their intellectual dishonesty...

Most Americans don't think much about the stock market, and that's just fine with Wall Street. Because once you wake up to how screwed up the stock market really is, the financial industry knows you're likely to get very nervous and take your money out.
Many are catching on: between 2007 and 2014, investors pulled $345bn from the stock market. E-Trades are down and worries are up, with 73% of Americans still not inclined to buy stocks, five years after the financial crisis.

No wonder "investor confidence" – the mass delusion that the stock market is trustworthy – has been in short supply this year. Nothing has done more to decimate it than Michael Lewis's new book, Flash Boys, which focuses on the predatory behavior of high-frequency trading. Nobody – including Congress – cared much about the "high-tech predator stalking the equity markets" before Flash Boys hit the bestseller list, reaching beyond the walled garden of the financial industry into American dining rooms and Washington hearing chambers. It didn't leave all spring.

9---Details Leak On How Secret Global Treaty Will Force Countries To Further Deregulate Financial Sector

In a significant anti-transparency manoeuvre by the parties, the draft has been classified to keep it secret not just during the negotiations but for five years after the TISA enters into force. 

Despite the failures in financial regulation evident during the 2007-2008 Global Financial Crisis and calls for improvement of relevant regulatory structures, proponents of TISA aim to further deregulate global financial services markets. The draft Financial Services Annex sets rules which would assist the expansion of financial multi-nationals -- mainly headquartered in New York, London, Paris and Frankfurt -- into other nations by preventing regulatory barriers. The leaked draft also shows that the US is particularly keen on boosting cross-border data flow, which would allow uninhibited exchange of personal and financial data.

The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.

10--'It fell on deaf ears': CIA and MI6 knew about ISIS assault in advance, failed to react, RT 

11--Leaked tape has Polish FM comparing ties with US to giving oral sex, RT

According to Wprost, Sikorski is skeptical about the reliance of Poland, one of the staunchest allies of Washington in Eastern Europe, on American protection.
“The Polish-American alliance is not worth anything. It’s even damaging, because it creates a false sense of security in Poland,” Sikorski allegedly said.

“Complete bullshit,” the tape purportedly records Sikorski as saying. “We will get a conflict with both Russians and Germans, and we’re going to think that everything is great, because we gave the Americans a blowjob. Suckers. Total suckers.”

12---Rand Paul: US created ‘jihadist wonderland’ in Syria, Libya and Iraq, RT

13--Appalling! wsws

“I came here today to reaffirm the strength of the important partnership, the historic partnership between the United States and Egypt, and also to consult on the critical situations that we face in the region—obviously, particularly Iraq, Syria and Libya,” Kerry said....

Al-Sisi led the US-backed coup against Mursi last July, following an explosion of mass protests against the Islamist president, whom Washington had previously supported. Since the coup, al-Sisi has overseen massacres and large-scale repression...

In a show of support for the blood-soaked military regime in Egypt, US Secretary of State John Kerry visited Cairo on Sunday. He met with his counterpart, Foreign Minister Sameh Shoukry, and Egyptian President and de facto dictator Abdel Fattah al-Sisi.
Kerry announced that the US had released $575 million in military aid that had been frozen since the military coup that overthrew Islamist President Mohamed Mursi last July.

As an immediate measure, the US will supply the Egyptian army with ten Apache attack helicopters. “The apaches will come and they will come very, very soon,” Kerry said at a joint press conference with Shoukry.

Washington’s demonstrative show of support for the regime came only one day after an Egyptian court upheld death sentences against 183 supporters and members of the Muslim Brotherhood (MB), including its supreme guide, Mohamed Badie. The ruling by the Minya Criminal Court is the largest confirmed mass death sentence in recent history. It was handed down by Judge Said Youssef, who had sentenced to death over 2,000 people in mass trials in April

14--US moves inciting sectarian warfare throughout the Middle East, wsws

both Kerry and President Obama have left no doubt that Washington is conspiring to oust Iraqi Prime Minister Nouri al-Maliki, an Iranian-supported Shiite fundamentalist politician who took office in 2006 with Washington’s backing. The American political and media establishment is blaming Maliki for the religious and ethnic conflicts that US imperialism consciously fomented in Iraq to secure its grip over the country. Over one million Iraqis lost their lives due to the US military repression and sectarian bloodshed that consolidated the position of the Shiite-dominated government that Maliki heads...

Iranian president Hassan Rohani denounced, without naming them, the ruling elites of Saudi Arabia and the Gulf states for financing Sunni extremism in Syria, Iraq and throughout the region. “Those who spend their money and oil dollars to help terrorists today,” he stated, “know that tomorrow is your turn… Stop it. Stop the bloodshed.”...

15---Democracy and the debacle in Iraq, wsws

Nothing testifies so clearly to the dysfunctional state of American democracy than the fact that Cheney is still paraded before the public as a distinguished authority on foreign policy. He exemplifies the absence of any real legal or political accountability for the crimes committed by the ruling oligarchy. Even in the midst of a major foreign policy disaster, there has been no call for even the formality of congressional hearings into the history of the US intervention in Iraq and the so-called “war on terror.”....

Nothing of that remains today. Foreign policy is carried out exclusively behind the backs of the people. It is decided by a criminal cabal that operates with full knowledge that there will be—at least from within the political establishment—no consequences for its actions. These are the features of a political system thoroughly corrupted by unrestrained militarism and extreme social inequality......

First, while the US may have been caught off guard by the rapidity with which the Iraqi state has disintegrated over the past several weeks, it is by no means unfamiliar with ISIS. The Islamic fundamentalist group has received funding from the US and its autocratic Gulf allies as part of the imperialist-backed insurgency against President Bashar al-Assad in Syria. Once again, the United States is reaping what it has sowed.

Moreover, ISIS’s advance in Iraq is certainly seen by sections of the American (and Israeli) ruling class as a positive development to the extent that it undermines the influence Iran exerts over the government of Iraq and its current prime minister, Nouri al-Maliki.
Despite Kerry’s protestations, it is understood throughout the world that the United States is principally responsible for the catastrophe that threatens to plunge the entire region into generalized civil war