Tuesday, October 14, 2014

Today's Links

Today's quote: "
The IMF discussions presented a picture of a ruling class in disarray. Divided over what to do and unable to advance a program to promote anything remotely resembling an economic recovery, the ruling elites are acutely aware they are sitting on a powder keg. They are united only by their fear that the worsening social conditions and deepening inequality produced by the breakdown of the economic order over which they preside will provoke an explosion of social struggles from below." Nick Beams, WSWS

1---US Army drafts blueprint for World War III, wsws

...the United States Army has unveiled a new document entitled the Army Operating Concept (AOC), which provides a “vision of future armed conflict” that has the most ominous implications. It is the latest in a series of documents in which the Pentagon has elaborated the underlying strategy of preventive war that was unveiled in 1992—that is, the use of war as a means of destroying potential geopolitical and economic rivals before they acquire sufficient power to block American domination of the globe....

The Army’s strategic aim, according to the document, is to achieve “overmatch,” which it defines as “the application of capabilities or use of tactics in a way that renders an adversary unable to respond effectively.”
What do these words entail? In the case of a confrontation with another nuclear power, they encompass the implementation of a first-strike doctrine of mass annihilation. In regard to the subjugation and domination of other areas of the globe, they call for massive ground operations to quell popular resistance and enforce military occupation....

Only a powerful deployment of US ground forces, it argues, can deter Russian “adventurism” and “project national power and exert influence in political conflicts.”
From there, the paper proceeds to “regional powers,” in the first instance, Iran. It also accuses Iran of “pursuing comprehensive military modernization” and argues that “Taken collectively, Iranian activity has the potential to undermine US regional goals,” i.e., undisputed hegemony over the Middle East and its energy resources. Iran’s activities, it concludes, “highlight the need for Army forces to remain effective against the fielded forces of nation states as well as networked guerrilla or insurgent organizations.”
The document does not limit the “vision” of future military operations to war abroad, but includes the need to “respond and mitigate crises in the homeland,” which it describes as “a unique theater of operations for the Joint Force and the Army.” The Army’s mission within the US, it asserts, includes “defense support of civil authorities.”

2---Storm clouds gather over world economy, wsws

Elliott pointed out that the IMF and central bankers are well aware that pumping money into the financial system has not boosted the real economy through expanded investment and increased production, but led only to increased financial risk-taking. At the same time, they fear that lifting interest rates to halt speculation will push their economies into recession, and so they “cross their fingers and hope for the best.” The IMF, he continued, knows something is going “badly wrong in Europe, but was powerless to do anything about it.”

Clear evidence of the gathering slump is provided by the sharp declines in commodity prices. Oil prices are reported to be in “free fall,” with benchmark Brent Crude down 24 percent since the middle of the year. The International Energy Agency says oil prices have been “weighed down by abundant supplies” and weakening demand.....

As six years of central bank interventions have demonstrated, however, injections of money cannot bring about increased investment and production in the real economy, which is where the crisis is now centered. The only beneficiaries are the banks, finance houses and ultra-wealthy speculators.
Moreover, there are deep divisions in the ECB itself. German representatives have already voted against the present round of asset purchases and are certain to stridently oppose any central bank move to buy up government bonds and extend quantitative easing.

The IMF discussions presented a picture of a ruling class in disarray. Divided over what to do and unable to advance a program to promote anything remotely resembling an economic recovery, the ruling elites are acutely aware they are sitting on a powder keg. They are united only by their fear that the worsening social conditions and deepening inequality produced by the breakdown of the economic order over which they preside will provoke an explosion of social struggles from below.

3---Europe’s Austerity Zombies, Joseph Stiglitz

4---The Chechens are ISIL’s shock troops. Emir Omar al-Shishani’s Chechens lead the siege of Kobane, because ISIL recognizes that their violence and zealotry are a force-multiplier. The Chechens defeated the Syrian army at Raqqa, cracked the Iraqi army at Mosul, and are smashing the Kurdish army, known as the People’s Protection Unit (YPG), in Kobane

5---Spy agency says ISIS "No threat", This week

Americans are scared of ISIS. More than 70 percent believe that there are ISIS terror cells in the United States, while 90 percent believe ISIS poses a real threat to America, and 45 percent label the threat "very serious."
But that assessment is nowhere close to the reality of the ISIS threat.
Multiple U.S. intelligence agencies have repeatedly announced their consensus that ISIS is not an immediate threat to America. Gen. Martin Dempsey, the chair of the Joint Chiefs of Staff, says there's no evidence that ISIS is occupied with "active plotting against the homeland." DHS reports ISIS is not in Mexico, attempting to infiltrate the southern border. The FBI swatted down any notion that ISIS is planning an attack in the New York City subway system

6--Russia's navy warships berth in northern Iran, press tv

7---Mortgage Application Pipeline At America's Largest Mortgage Lender Drops To Lowest Since Lehman, zero hedge

according to Wells Q3 Earnings Supplement, while Mortgage Applications declined from a transitory one year high of $72 billion in Q2 to $64 billion, this number is going far lower. The reason: Wells' Morgage Application Pipeline just tumbled back to $25 billion, matching the lowest number since Lehman, and putting an end to any debate about the state of the US housing market.

In short: the only people buying houses in the US now are foreigners laundering their illegal, tax-exempt profits (ever fewer) and those as close to the Fed's ZIRP as possible, and, of course, paying all cash. Everyone else: not so much.

8---Interview with Sybil Edmonds, RT

my news organization was the first one to really break within the U.S. the training of the Syrian rebels in Turkey, and this was 6 or 5 months before anything about Syria actually made it to the news; using a U.S. airbase – and this is in Southern Turkey, close to the border with Syria – and this was NATO and the U.S. factions training and arming and sending back, having them cross the border, rebels, long before Syria actually became the news. As I said this was done in Turkey by the NATO forces, mainly U.S. and British forces, and it was something that was planned and designed and implemented by the U.S. So, for Joe Biden to come and put this out right now… of course he will get away with it, because the mainstream media here is not going to go and revisit the facts that were exposed with the activities of the U.S., what they did in Turkey, training these faction – now it’s called ISIS, it’s like the French fries or the freedom fighters: you’re looking exactly at the same fries at the same price. That’s all I’m going to say, it’s just ludicrous.

9---5 Reasons Oil Prices Are Dropping, zero hedge

10--One chart says it all, zero hedge

We have shown this chart before. We will show it again because, to nobody's surprise, nothing has changed since then.
The chart in question, which we believe demonstrates all that is wrong with the US financial and banking system, shows JPM's quarterly deposits, which in Q3 just hit a new all time record of $1.335 trillion, and its loans, which despite the much hyped rebound in Q2, once again declined to $743 billion from $747 billion in Q2 (so much for that lending-driven recovery?) leading to a new record low Loan-to-Deposit ratio of 56%. So while deposits are obviously hitting new record nominal highs quarter after quarter, when was the last time JPM's loans printed at all time highs? The answer: just as Lehman filed for bankruptcy, when the number was $761 billion.

And for those who missed our explanation last time, here it is again, updated for the times:
As the blue bar shows, total loans issued by the biggest US bank were $743 billion in Q3 2014: about $20 billion less than in the quarter Lehman blew up. Four years later, and the US commercial bank lending apparatus is still in a state of depression. Or so it would appear on the books.

11--Buy the dip!, wolf street

Cali Money Man, a seasoned wealth manager who sat at various desks during the last three crashes and hasn’t forgotten the lessons, observed that a large-scale decline in stock prices may become “disorderly on a scale we’ve not seen since 1987.”
Why? “Too many poorly understood structural changes have created unstable markets. It’s been unstable rising, which we’ve enjoyed. Now comes the dismount”:
Low liquidity in a rising market (liquidity evaporates with prices).
Phenomenally low trading volume, largely covered up by enormous volumes of high-frequency trades and ETF arbitrage.
Massive hedge fund speculators only lightly restrained by regulations on leverage, but unrestrained on selling into down markets.
Low confidence in the economy by retail and professional holders (esp. Boomers who cannot take another large drop, their 3rd in 15 years).
Record high use of technical analysis systems, which will give near-simultaneous, widely followed sell signals.

The effect of the massive switch to fee-based accounts during the past 6 years. We’re now fiduciaries (no matter what the fine print says). Collecting fees on the way up then watching it all evaporate will not look good. Yes, we tell ourselves that we’re now long-term strategic asset-allocators, hand-holding financial planners, and wealth advisors. But we forgot to tell our clients. They still think we’re investment managers. Either we’re going to sell on the way down; or get sued if the market goes down big but does not bounce back like it did last time. My guess is that we’ll sell.
And if this occurs with rising rates – so both stocks and bonds drop – it will get ugly fast.
None of these reasons have anything to do with sky-high valuations and the sheer distance that asset prices can plunge from their perch; or with corporate and economic fundamentals, a slowing world economy, or the implosion of China’s property bubble. These real-world reasons come on top of Cali Money Man’s structural reasons why the decline could become “disorderly.”

The last time the S&P 500 dropped below its 200-day moving average was in 2012, twice, but recovered quickly. It taught everyone that dips of this nature were nothing but a “buying opportunity.” Just buy the frigging dip became the rallying cry. It worked better than anything else, and the dips became shorter and shallower as dip-buying set in more and more quickly.
But beneath the skin, it looks much worse than the benign 200-day moving average: 80% of the stocks in the Russell 3000 are 10% or more below their highs, according to Bloomberg. Many of them have gotten demolished. Some have gone bankrupt as the appetite for high-risk debt at these low yields is drying up [read... Credit Bubble Begins to Exact its Pound of Flesh: GT Advanced Tech Soars, Crashes, and Burns]. That’s the bloodletting in small caps that UBS said was “actually fairly bullish.”

12--Saudis deploy the oil weapon, NC

It was only a matter of time until the evidence became irrefutable that the only way out of a global deflation on the order of the Great Depression was to address the fact that 571 U.S. billionaires simply don’t have enough hours in the day to spend adequate money to buy enough goods that would require the restocking of shelves, create new factory orders and thereby ramp up job hiring to keep a nation of 317 million people afloat.

A nation where the top 10 percent reaps more than 50 percent of the income is doomed to end up in the quicksand of deflation, dragging down the rich along with everyone else….
A key component that has allowed both the Fed and Congress to keep from taking strong measures to address a looming deflation has been the price of crude oil. Because oil impacts everything from transportation costs that inflate the price of food and other products to the cost of an airline ticket or heating a home, the high price of this commodity has, to a degree, masked the growing deflation threat.

Now the mask has been removed. Oil prices are in freefall and an oil price war has broken out among OPEC members, raising the specter of 1986 when oil prices fell by 50 percent in just an eight month span. A serious global slowdown has effectively turned the oil cartel, OPEC, into a beggar thy neighbor band of go-it-alone dealmakers who hope to sign individual contracts with customers and grab market share before prices decline further…

In other words, a sudden, sharp drop in inflation expectations caused by an oil price war raging around the globe was not present in the Fed’s crystal ball just a month ago. But it should have been: other commodity prices have been sending up red flags for some time now…
The market has delivered epiphanies to the Fed on multiple fronts – some of them blazing with sirens – but the Fed seems to have had its head in the sand just as securely as it did heading into the 2008 crisis.

13---Ukraine Refuses to Pre-Pay for Russian Gas: Energy Minister, Ria novosti

14---Americans Face Post-Foreclosure Hell As Wages Garnished And Assets Seize, BI

15--Terms laid down for taming shadow bank risk, FT

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