Sunday, December 21, 2014

Today's Links

 “A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. The traitor rots the soul of a nation…he infects the body politic so that it can no longer resist. A murderer is less to fear.” Cicero


                  "Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation." The "state theory of money" refers to money created by governments rather than private banks. Henry Liu  


Quote Ilargi:   "Existing wells, those already drilled, will be allowed to be emptied, but then it’s over. Who’s going to continue to pump millions upon millions into something that’s a guaranteed loss? Nobody. .... That’s about all we need to know. Shale was never a viable industry, it was all about gambling on land prices from the start. And now that wager is over, even if the players don’t get it yet. So strictly speaking... we’re not drilling our way into oblivion, the drilling is about to grind to a halt. But it will still end in oblivion."             


1--How A Texas Plumber's Truck Turned Up In Syria, zero hedge
The CIA at work


2---Dr. Paul Craig Roberts, audio (How Russia can defend itself)


3--Why The US Is About To Be Flooded With Record Oil Production Due To Plunging Oil Prices, zero hedge


4--Michael Hudson on Putin, NATO etc


the American sanctions and the new Cold War policy of the neocons are driving these Asian countries together, in association with the Shanghai Cooperation Organization, as an alternative to NATO, and the BRICS are trying to make an alternative to dealing with the dollar area and with the IMF and the World Bank that represent U.S. policy.


So, regarding Europe, America’s insistence that it join this new Cold War policy by imposing sanctions on Russia, and especially by blocking Russian oil and gas imports, is–aggravated the Eurozone’s austerity, and it’s just turning it into a dead zone. And, a few days ago, a number of German leading politicians, diplomats, and cultural celebrities wrote an open letter in the newspaper Excite to Angela Merkel protesting her pro-U.S. policy and saying that America’s NATO policy and the new Cold War, it threatens just to wreck not only the German economy, but to split up Europe. So, instead of integrating sort of American power and breaking up the rest of the world, Europe and Asia, American policies overplayed its hand and is actually driving all of the rest of the world in a defensive alliance to what they look at as a danger of war. The whole idea of NATO was supposed to be to protect Europe for more. And now, with all of its saber rattling and its offer of heavy weapons to the Ukraine, NATO’s putting Europe in military danger. And this is just–it’s reversed a whole half-century of American foreign policy. And there’s been no discussion of what’s happening in the United States.


Yeah, as you point out, Turkey is already moving out of the U.S.-European orbit by turning to Russia for its energy needs. The South Stream pipeline has been redirected away from Southern Europe to Turkey. Iran is also moving into an alliance with Russia, not only for oil and gas, but for atomic energy and for weaponry and becoming a participating member in the Shanghai Cooperation Organization. And now, as you pointed out, India is negotiating trade....


We’re putting together our own banks clearing system as an alternative to the U.S. system. We’re putting together our own currency swaps with other countries. So, essentially Russia and the rest of Asia have been insulating their economies from the United States, just the opposite of the U.S. strategy of trying to make them more dependent on the United States


5---Wackage in HY;  High-Yield Bond Funds, Loan Funds Hit by “Market Conditions”, wolf street


Junk bonds and leveraged loans performed miracles over the past few years. Companies with low credit ratings and too much debt were able to issue even more debt that, thanks to the Fed’s machinations, cost them very little and didn’t reward investors for the risk they were taking on. Some of this money funded the fracking boom in the US. But now that the price of oil has plunged 45% in six months, this debt is becoming precarious. And retail investors’ loss of appetite for it and their determination to let someone else eat the potential losses appear to be, for once, impeccably timed......


Over the two-week period, the average remains 157 basis points in the hole. And it’s down 536 basis points for the year. This chart of S&P’s High-Yield Corporate Bond Index, via LCD, goes back to the peak of the junk-bond bubble in June. Since then, junk bond values have dropped nearly 8%.
US-high-yield-bond-index-value-2014-12-19
Investors have started to vote with their feet....
But for the week just ended, retail-cash outflows from junk-bond funds jumped to $3.1 billion, LCD reported. It was the third outflow in a row, and the second-worst outflow in 2014. With outflows of $5.8 billion over the last three weeks, junk-bond funds experienced net outflows of $5 billion for the year:
US-high-yield-fund-flows-2014-12-19
Junk-bond fund assets were also ...


Then there are leveraged loans, the ugly sisters of junk bonds. They’re bank loans to junk-rated over-indebted corporations. Banks can retain these loans, sell them to institutional investors, such as loan mutual funds, or repackage them into Collateralized Loan Obligations and then sell those. CLOs should have “Financial Crisis Material” stamped all over them [read… Treasury Warns Congress (and Investors): This Financial Creature Could Sink the System].


Last year, a record $606.7 billion in leveraged loans were issued. This year started out white-hot too. But then retail investors began pulling their money out of leveraged-loan funds. Tremors went through the market, and issuance plunged to $529.5 billion for the full year.
For the week ended December 17, retail investors pulled $1.8 billion out of leveraged-loan funds, S&P Capital IQ reported. It was the worst outflow since the week ended August 17, 2011, when fretting over a double-dip recession in the US and the debt crisis in the Eurozone hung over investors. And “market conditions” ate up another $1.2 billion during the week.
It was the 23rd cash outflow in a row, and the 34th in 36 weeks


6---Turkish PM Erdogan in Need of Alliance Against Imam Gülen- The Plot Thickens - See more at: http://www.boilingfrogspost.com/2014/01/17/turkish-pm-erdogan-in-need-of-alliance-against-imam-gulen-the-plot-thickens/#sthash.F1hpoLWD.dpuf


Initially, the U.S. had few allies more faithful than Erdogan, but in recent years the relationship went downhill. The climax was reached last month when he put his conflict with Gülen in the framework of a conspiracy, with the U.S. as one of the main conspirators. In this manner, Erdogan rapidly returns to the Milli Görüs ideology of his old mentor, former Prime Minister Necmettin Erbakan. Erbakan’s staunch anti-Western views certainly contributed to the U.S. decision not to put any obstacles in the way of the Turkish military when they forced him to resign in 1997. -


7--Libya all about oil, or central banking?,  Ellen Brown     


Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank - this before they even had a government. Robert Wenzel wrote in the Economic Policy Journal:
I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.
Alex Newman wrote in the New American:
In a statement released last week, the rebels reported on the results of a meeting held on March 19. Among other things, the supposed rag-tag revolutionaries announced the "[d]esignation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi."...


Libyans] are entitled to free treatment, and their hospitals provide the best in the world of medical equipment. Education in Libya is free, capable young people have the opportunity to study abroad at government expense. When marrying, young couples receive 60,000 Libyan dinars (about 50,000 US dollars) of financial assistance. Non-interest state loans, and as practice shows, undated. Due to government subsidies the price of cars is much lower than in Europe, and they are affordable for every family. Gasoline and bread cost a penny, no taxes for those who are engaged in agriculture. The Libyan people are quiet and peaceful, are not inclined to drink, and are very religious...


The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr, writing on Examiner.com, noted that "[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar."

According to a Russian article titled "Bombing of Libya - Punishment for Ghaddafi for His Attempt to Refuse US Dollar", Gaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gaddafi suggested establishing a united African continent, with its 200 million people using this single currency...



And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed:
One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned ... Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations.
Libya not only has oil. According to the International Monetary Fund (IMF), its central bank has nearly 144 tonnes of gold in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules?...


He added, "Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation." The "state theory of money" refers to money created by governments rather than private banks.     


8--Turkish PM Erdogan: The Speedy Transformation of an Imperial Puppet  Sybil Edmonds
CIA Operations via Imam Fethullah Gulen The downfall of Turkey’s Erdogan began with a rift between him and the CIA-Created Muslim Preacher Imam Fethullah Gulen. One of our authors has been covering the rift for Boiling Frogs Post. You can read his latest analysis here and here. However, one cannot truly understand Erdogan’s downfall without knowing the importance and power of CIA’s Fethullah Gulen. Since 2009 I have been a lone voice in reporting, analyzing and exposing the Imam and his multi-billion dollar Islamic network and operations around the globe, fully orchestrated and backed by the Central Intelligence Agency-CIA. Allow me to provide you with a few highlights from my reports since 2009 -...


For Erdogan the rift with Imam Fethullah Gulen means a rift with the CIA. And we all know what happens to those puppets when they end up in a rift with the CIA. Don’t we? The rift always brings expiration. Once a puppet is considered expired, then lo and behold, all of a sudden, the reversal branding and marketing begins: All old skeletons are dug out of the deep closets and leaked to the media. His previously overlooked human rights violations are looked at and scrutinized under a microscope. The terrorist card is brought into the equation. And the list goes on … Violating Imperial Commandments All Empire-installed puppets and regimes must commit to the Empire’s


commandments. This is a fact. It is the reality. Thou shall not violate the Imperial commandments. Because if you do, thou shall be disgraced, exposed, uninstalled, and may even be given death. All you have to do is look at the past century’s history. See what happens when an installed puppet gets too confident and inflicted with hubris, and ignores one or more commandments. This is when they are reborn as dictators, despots, torturers, and yes, terrorists. This is when their backyards get dug up to find a few grams of weapons of mass destruction. So did Erdogan get too confident? Did he violate a commandment or two? It seems that he did -


9--Turkey issues arrest warrant for Erdoğan rival Fethullah Gülen, guardian


EU enlargement commissioner Johannes Hahn described the police operation as “not really an invitation to move further forward” with Turkey. The US State Department has also expressed concern, urging Turkish authorities “to ensure their actions do not violate [the] core values [media freedom, due process, and judicial independence]”....


The power and influence of the elderly cleric and his far-reaching network have long been a defining issue of Turkish politics. The domination of Erdoğan’s AKP in Turkey was aided by his alliance with Gülen, who has lived in self-imposed exile in Pennsylvania since 1998. Those who dared to speak up and criticise the Gülen movement were swiftly punished, often through dubious court cases and on fabricated charges      


10--PETER HITCHENS: Forget 'evil' Putin - we are the bloodthirsty warmonger Daily Mail


Until a year ago, Ukraine remained non-aligned between the two great European powers. But the EU wanted its land, its 48 million people (such a reservoir of cheap labour!) its Black Sea coast, its coal and its wheat.
So first, it spent £300 million (some of it yours) on anti-Russian ‘civil society’ groups in Ukraine.
Then EU and Nato politicians broke all the rules of diplomacy and descended on Kiev to take sides with demonstrators who demanded that Ukraine align itself with the EU...

There is a complacent joy abroad about the collapse of the rouble, brought about by the mysterious fall in the world’s oil price.
It’s odd to gloat about this strange development, which is also destroying jobs and business in this country. Why are the Gulf oil states not acting – as they easily could and normally would – to prop up the price of the product that makes them rich


Existing wells, those already drilled, will be allowed to be emptied, but then it’s over. Who’s going to continue to pump millions upon millions into something that’s a guaranteed loss? Nobody. And not only that, but lenders will start calling in their loans, and issue margin calls. “The average borrowing cost for energy companies in the U.S. high-yield debt market has almost doubled to 10.43% from an all-time low of 5.68% in June”, says BoAML.
That’s about all we need to know. Shale was never a viable industry, it was all about gambling on land prices from the start. And now that wager is over, even if the players don’t get it yet. So strictly speaking my title is a tad off: we’re not drilling our way into oblivion, the drilling is about to grind to a halt. But it will still end in oblivion.

Your pension fund, your government, they’re all losing. BIG. They’ll try and hide those losses as long as they can. But trust me on this one: all major funds have oil in a prominent place in their portfolios. And there’s a Bloomberg index that says the average share values of 76 North American oil companies, i.e. not just the price of oil, have lost 49% of their value since June. There will be Blood with a capital B....

 this is what we have on offer: the oil industry faces a triple whammy. Oil prices are down 50%, oil company share valuations are also down 50%, and their production costs are rising, in quite a few cases exponentially so. That’s what they, and we, face while slip-sliding into the new year. Do I need to explain that that does not bode well

The average borrowing cost for energy companies in the U.S. high-yield debt market has almost doubled to 10.43% from an all-time low of 5.68% in June, Bank of America Merrill Lynch data show...

The shale patch can exist in its present form only if it has access to nigh limitless credit, and only if prices are in the $100 or up range. Wells in the patch deplete faster than you can say POOF, and drilling new wells costs $10 million or more a piece. Without access to credit, that’s simply not going to happen. 


"David Cameron in the H of commons says "we have a ground offensive against Ukraine, ...now we have a financial initiative against the ruble...implying that it was his traders working with the City of London acting with America to attack the ruble.

Russian debt is $2.1 billion while GDP is $2 trillion. (debt is miniscule)
oil is 2 thirds of exports but only 15% of GDP


So while a number of other top officials in the Western world couldn't contain their 'schadenfreude' at the apparent success of their economic warfare, the fact is that Russia is not isolated and quite a number of countries such as the BRICS and the 'Global South' are not interested in seeing Russia go down. China was quick to voice support for the Russian leadership in its handling of the economic attack and was perhaps even actively supporting the ruble. It is a fact that the downhill slide of the ruble stopped and has come back from 80 rubles to the dollar to around 60. That's an impressive recovery in such a short time

...the UK, and specifically its North Sea oil industry which according to the BBC is in a "crisis", and according to Robin Allan, chairman of the independent explorers' association Brindex, "close to collapse".

The story is the same on every shale patch, only in the far colder and stormier North Sea, "Almost no new projects in the North Sea are profitable with oil below $60 a barrel, he claims. 'Everyone is retreating'."

"It's almost impossible to make money at these oil prices", Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. "It's a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country."

"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone.
 

The Institute had this commentary to add:
The jobs recovery since the 2008 recession has been the slowest of any post recession recovery in the U.S. since World War II. The number of people employed has yet to return to the 2007 level. The country has suffered a deeper and longer-lasting period of job loss than has followed any of the ten other recessions since 1945.

There has, however, been one employment bright spot: jobs in America’s oil & gas sector and related industries. Since 2003, more than 400,000 jobs have been created in the direct production of oil & gas and some 2 million more in indirect employment in industries such as transportation, construction, and information services associated with finding, transporting, and storing fuels from the new shale bounty.

In addition, America is seeing revitalized growth and jobs in previously stagnant sectors of the economy, from chemicals production and manufacturing to steel and even textiles because of access to lower cost and reliable energy.
...
The surge in American oil & gas production has become reasonably well-known; far less appreciated are two key features, which are the focus of this paper: the widespread geographic dispersion of the jobs created; and the fact that the majority of the jobs have been created not in the ranks of the Big Oil companies but in small businesses, even more widely dispersed.
16--European Union ramps up sanctions against Russia amid ruble crisis, wsws


But despite the potentially catastrophic consequences, the EU summit aligned itself with the US policy of waging economic war for regime-change in Russia unless the Kremlin submits to US-NATO hegemony in Eurasia. The dominant forces at the summit demanded that sanctions be maintained until Moscow abandoned all opposition to the far-right, pro-Western regime in Kiev.....


On Thursday, as the EU summit opened, US President Obama signed new legislation that allows Washington to impose a raft of new punitive sanctions on Russia. The impact of the sanctions that have already been enacted, cutting off credit to the Russian economy, has been crippling. The Russian currency has lost roughly half of its value against the US dollar this year, and economists say Russia’s economy could contract by 5 percent next year...


17--What happened to the Ruble?, Russ-Europe


We are to face then the problem of the Central Bank policy. Its interest rates were previously largely determined by the rate of inflation, and this was why it decided first for a 10,5% interest rates. But the willingness to cut short speculation on the exchange market made mandatory to sharply raise interest rates. This is leading to interest rates that are largely unfavourable to the development of a small and medium-sized enterprises sector. The Central Bank appears then to be the main stumbling block on the path of development of economic liberalization in Russia. What sanction have been unable to do, what even the drop of oil prices have been unable to do, that is to push Russian economy into a depression, the Central Bank policy could well do the job. It is highly paradoxical. Russia is to self-inflict what could be a disastrous shock to its economy. Now, if this hike is for just some days and if we would see interest rates going down by early January then consequences would be very mild. But, if this hike is to stay for quite long, results could be very disruptive for Russia development......


This raises the possibility of another option: capital controls. Of course this idea was dismissed several times by the government and is not liked by the Central Bank neither. But they could be the near perfect answer to the current situation. They would allow the Central Bank to disconnect interest rates form the target of fighting the speculation. The interest rates could then be lowered down to levels more compatible with investment needs of private entrepreneurs. It is to be added that these controls would have to target only short-term capital movement that is only speculative capital. There is no need to introduce controls over capital flows for a duration of more than one year, and may be even 6 months. Hence Foreign Direct Investment would not be harmed. Some countries are already under such a system, notably China. But it is to be understood that there is a political cost of doing so: to be accused by Western medias of “going back to Soviet times”. Would this cost be “real” is another issues, knowing how much Western medias are prejudiced against Russia today. But still, there would be a cost.
There is however another solution. If the Russian government is strongly prejudiced against capital controls, it could try to by-pass the interest rates issues by creating special channel to cheaply fund enterprises. This could take the form of premium to be paid by the government on some interest rates paid by entrepreneurs (the government paying the difference between a normal interest rates and those now in operation). Another possibility for the government would be to directly subsidize investment-making project through budget funding.
...
But, then, high-speculation entered the picture. This had to be figured out. It is now pretty obvious that some Western hedge funds and some Russian banks began to heavily speculate against the ruble. Why they did so is open to question. If pure greed could account for some actors, a political agenda was clearly playing a strong role for others. In that sense, events on the exchange market are clearly linked to the current geopolitical situation.
As a result of this speculation the ruble went down very quickly and entered a movement of free fall by Monday 15th and Tuesday 16th. The Central Bank then hiked its interest rate from 10,5% to 17% but to no effect. The movement went on and the exchange rate flirted to 77 rubles for one USD by Tuesday evening, creating a huge and understandable emotion in the Russian population.....


Not only is the fact that Central bank reserves are quite impressive (over 400 billions USD), and the Ministry of Finance is too having ample foreign currencies reserves, but the Central Bank established a swap agreement with the Chinese Central Bank (the PBOC) which allows for swaps operations. There is no doubt market interventions could be sustained for some weeks. It is clear that Russian authorities believe that it would be enough to restore confidence.


We could hope so but there are also hidden costs. The Central Bank raised the interest rates at 17% or more than 7 points over the inflation rate. At this level it would stop cold all investment project. This interest rates is effectively strangulating the Russian economy. Paradoxically the twin movement of ruble depreciation and some sanctions implemented by Western governments are offering Russian economy its best prospect for a fast growth in many years. The import substitution mechanism is to play here a major role. But, to do so, it is important that enterprises could invest. Quite clearly they couldn’t with so high interest rates.



As one of our nation's strongest peace advocates, your yes vote on H. R Res. 758  for authorizing  military aid for Russian "agression" is incomprehensible to me.  I read it
to my shock, consternation and despair.  You, more than anyone, Congressman Ron Dellum's disciple,  know of  his long, principled struggle to cut our nation's military
and the  red-baiting and harrassment he took for it.  At a time when the US has brought war and chaos to the entire Middle East, it is incomprehensible to me
that you should take the path of political expendiency in order to avoid political fallout. 

Congresswoman Lee, you come from the strongest peace district in the entire nation.  You not need to support this rightwing, Russophobic resolution based on lies,
and US hegemonic imperialism that has plunged the Middle East into chaos and which the Pentagon and US militarists now want to spread to Eastern Europe.
John Pilger recently wrote that this US-instituted war in the Ukraine represents the Triumph of the Media in this country.  The Western press is full of nonstop
outrageous lies and Russian and Putin-bashing.  No less than Patrick Buchanan recently wrote in " A Foreign Policy of Russophobia
           

No comments:

Post a Comment