Friday, March 13, 2015

Today's Links

The Global Currency Wars, Jack Rasmus, CP


A final area of emerging new rules for inter-capitalist competition is the emergence of greater resort to introduce economic sanctions as a competitive measure.  The best case is Russia today, and the US-led sanctions.  It should not be misunderstood: the sanctions on Russia are in the last analysis an economic competitive measure, not a politically motivated initiative.  Behind the sanctions is the USA objective of driving Russia out of the European economy.  Europe was becoming too integrated and dependent on Russia. Not only its gas and raw materials, but trade relations and money capital flows were deepening on many fronts between Russia and Europe in general prior to the Ukraine crisis that has provided the cover for the introduction of the sanctions.  Russia’s growing economic integration with Europe threatened the long term economic interests of US capitalists. Strategically, the US precipitated coup in the Ukraine can be viewed, therefore as a means by which to provoke Russian military intervention, i.e. a necessary event in order to deepen and expand economic sanctions that would ultimately sever the growing economic ties between Europe and Russia long term. That severance in turn would not only ensure US economic interests remain dominant in Europe, but would also open up new opportunities for profit making for US interests in Europe and Ukraine as well....


War with Russia?


Washington is pressing ahead despite stark warnings from Moscow that it views massive weapons deliveries by NATO to hostile states on its borders as an intolerable threat to Russian national security.
“Without a doubt, if such a decision is reached, it will cause colossal damage to US-Russian relations, especially if residents of the Donbass [east Ukraine] start to be killed by American weapons,” Russian Foreign Ministry spokesman Alexander Lukashevich said last month. He called NATO’s plans “very worrying,” adding: “This is about creating additional operational capabilities that would allow the alliance to react near Russia’s borders... Such decisions will naturally be taken into account in our military planning.”..... 




1--US Rebukes UK for Joining Beijing's World Bank, sputnik


In October last year, 21 Asian nations signed a Memorandum of Understanding [MoU] on the establishment of the new bank, which is intended to finance infrastructure projects and promote regional cooperation in the Asia-Pacific region. The bank represents an alternative source of funds from the Washington-based International Monetary Fund and World Bank, and the Asian Development Bank, which is based in Manila and whose largest shareholders are Japan and the



"Joining the AIIB at the founding stage will create an unrivaled opportunity for the UK and Asia to invest and grow together," said UK Chancellor of the Exchequer George Osborne, adding that his government "has actively promoted closer political and economic engagement with the Asia-Pacific region" as a key part of the country's long-term economic plan.
However, officials from the US signaled their unhappiness about the UK's decision to pursue greater economic engagement with China through the institution, and repeated criticism US State Department spokesperson Jen Psaki voiced last year that the project does not "meet international standards of governance and transparency."
"This is the UK’s sovereign decision," said the White House in a statement. "We hope and expect that the UK will use its voice to push for adoption of high standards."
A US official speaking to the Financial Times was forthright with their criticism: "We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power," he said, complaining that the British government had not consulted with the US before taking the decision.




2--Eyes on dollar parity as euro steadies after brutal week, Reuters


"I don't think its an exaggeration to say this week has been a gamechanger," said Neil Mellor, a currency strategist with Bank of New York Mellon in London.
"The combination of last Friday's jobs numbers and the launch of QE in Europe this week has cemented the picture of monetary policy divergence. People are now convinced the Federal Reserve will be able to move in the middle of this year. In that context, talk of parity and even below it is not overdone."


3--US Producer Prices Tumble Most Since 2009 (And Don't Blame Oil) ZH
And finally, perhaps it's time to rethink this whole "central banker" thing...




US Producer Price Index (ex food and energy) fell 0.5% MoM in February (against expectations of a 0.1% rise) - the biggest drop on record (since 2009).The great news for Americans is that the drop in overall producer prices was led by a 1.6% fall in food prices. Year-over-Year PPI Final Demand has fallen (-0.6%) for the first time on record.


4--US Producer Price Index down 0.5% in Feb vs. up 0.3% expected, cnbc


5--Recession? ZH


For context, let's start with a chart I published earlier this week of new manufacturing orders--which look unambiguously recessionary:
 
 
Here is a chart of real final sales (as a percentage of change) and the S&P 500 (SPX). The percentage of change of real sales declined for four years in the 2000s while the stock market soared--a remarkably long-lasting divergence


My colleague Dave P. at Market Daily Briefing has posted information on arecession detector based on the work of economists Chauvet and Piger.
 
In essence, the model considers four data series: real personal income, nonfarm payrolls, industrial production and real final sales (as a percentage of change). If all four are rising, the probability of recession is low.
 
If all four roll over and decline, the probability of recession (generally defined as a decline in gross domestic product for two consecutive quarters) approaches 100%.
 
This makes intuitive sense: if personal income, industrial production, real final sales and payrolls are all declining, how can GDP continue expanding?




Central banks may be spreading deflation by easing monetary policy and weakening their currencies, but the biggest threat is that China will wade into the battlefield, analysts say.
"The three trillion dollar question is whether the People's Bank of China (PBoC) will allow the yuan to depreciate and export their own disinflation to the rest of the world, setting off a series of competitive devaluations in the region," Nicholas Ferres, investment director at Eastspring Investment said in a note on Friday.
Twenty-four central banks have eased monetary policy this year amid slowing economic growth and deflationary pressure as oil prices hover near six-year lows. In February, the PBoC cut the one-year deposit rate by 25 basis points to 5.35 percent.


9---Be Happy: Fed says you are richer!  The rich get richer, according to Fed


Fueled by higher stock and home values, Americans' net worth reached a record high in the final three months of 2014.
Household wealth rose 1.9 percent during the October-December quarter to nearly $83 trillion, the Federal Reserve said Thursday. Stock and mutual fund portfolios gained $742 billion, while the value of Americans' homes rose $356 billion.
The typical household didn't benefit much, though. Most of the wealth remains concentrated among richer families. The wealthiest 10 percent of U.S. households own about 80 percent of stocks.
Still, greater wealth could help lift spending and economic growth. Higher stock and home values can make people feel more financially secure and more willing to spend, and consumer spending fuels about 70 percent of the economy.


10--The investor buying party in real estate: In last four years institutional investors have purchased over half a million homes. 2014 was a four year low in investor buying
http://www.doctorhousingbubble.com/all-cash-investors-real-estate-housing-institutional-investors-us/


11--Repeat foreclosures result from failed lender can-kicking , OCH


12--Household Debt Soars in Canada, “Stability” at Risk, wolf street


Canada-household-leverage-indicators-1992-2014_Q4
The ratio of debt to disposable income picked up speed from 2001 on. It blew through the financial crisis even as US households were whittling down their debt by deleveraging and defaulting. Canadian households didn’t even stop to breathe. They kept spending and piled on debt at an astounding rate. Their incomes rose also, but not nearly enough. It wasn’t until 2011 that the red-hot growth rate started to lose some of its fire, bumping into all sorts of resistance from reality...


Years of low interest rates encouraged this dreadful level of leverage. Now it’s an albatross around the neck of the Bank of Canada, and for decades to come. And for the economy, it’s a high-risk burden that could quickly, as Equifax suggested, blow up


13--The Global Currency Wars, Jack Rasmus, CP


A final area of emerging new rules for inter-capitalist competition is the emergence of greater resort to introduce economic sanctions as a competitive measure.  The best case is Russia today, and the US-led sanctions.  It should not be misunderstood: the sanctions on Russia are in the last analysis an economic competitive measure, not a politically motivated initiative.  Behind the sanctions is the USA objective of driving Russia out of the European economy.  Europe was becoming too integrated and dependent on Russia. Not only its gas and raw materials, but trade relations and money capital flows were deepening on many fronts between Russia and Europe in general prior to the Ukraine crisis that has provided the cover for the introduction of the sanctions.  Russia’s growing economic integration with Europe threatened the long term economic interests of US capitalists. Strategically, the US precipitated coup in the Ukraine can be viewed, therefore as a means by which to provoke Russian military intervention, i.e. a necessary event in order to deepen and expand economic sanctions that would ultimately sever the growing economic ties between Europe and Russia long term. That severance in turn would not only ensure US economic interests remain dominant in Europe, but would also open up new opportunities for profit making for US interests in Europe and Ukraine as well....


When the rules of the competition game between capitalists break down altogether, the result is war—i.e. the ultimate form of inter-capitalist competition.   The two World Wars of the 20th century immediately come to mind. The fight for colonies and resources was particularly obvious in the case of the First World War, while the Second War was the consequence of unresolved issues left over from the First World War, as well as the consequence of the economic collapse of global capitalism in the 1920s and 1930s.


More recent and on-going, USA led wars in the middle east this century are also testimony of the periodic resort to war and military conflict on behalf of national capitalists interest. The Middle East wars starting in 1990 and intensifying in the early 21st century, have been fundamentally about ensuring resource availability to USA and the other advanced economies, especially oil.
Memoirs of key members of the US economic elite after the 2003 invasion of Iraq have admitted that the Iraq invasion was fundamentally about oil—even if that acknowledgement by US politicians and the press still has not been forthcoming.


More contemporary still, there’s the USA direct intervention to pull off a coup d’etat in the Ukraine last year, and then subsequently the setting up of USA neocon-cum-shadow bankers to run that country’s economy that took place last December 2014...


But what their desperate QE initiatives fundamentally means is that Europe and Japan have engaged in government-assisted programs, aimed at ‘stealing’ global export market share from other capitalist economies, both in the advanced economy sector, as well as from China, the BRICs, and emerging markets in general.  Their QE programs represent a desperate competitive move, after their prior policies for five years have proved dismal failures, as their economies sink further into stagnation or worse.  Were it not for the economic desperation now engulfing these two important wings of the advanced economies region of the global economy, their shift to ‘competition by competitive devaluation’—a development not seen since the 1930s—would not be occurring.


14--Sharing’ the Wealth , Robert Parry


In exchange for those “reforms,” the IMF approved $17.5 billion in aid that will be handled by Ukraine’s Finance Minister Natalie Jaresko, who until last December was a former U.S. diplomat responsible for a U.S. taxpayer-financed $150 million investment fund for Ukraine that was drained of money as she engaged in lucrative insider deals – deals that she has fought to keep secret. Now, Ms. Jaresko and her cronies will get a chance to be the caretakers of more than 100 times more money. [See Consortiumnews.com’s “Ukraine’s Finance Minister’s American ‘Values.’”]
Other prominent Americans have been circling around Ukraine’s “democratic” opportunities. For instance, Vice President Joe Biden’s son Hunter was named to the board of directors of Burisma Holdings, Ukraine’s largest private gas firm, a shadowy Cyprus-based company linked to Privat Bank.


Privat Bank is controlled by the thuggish billionaire oligarch Ihor Kolomoysky, who was appointed by the Kiev regime to be governor of Dnipropetrovsk Oblast, a south-central province of Ukraine. In this tribute to “democracy,” the U.S.-backed Ukrainian authorities gave an oligarch his own province to rule. Kolomoysky also has helped finance paramilitary forces killing ethnic Russians in eastern Ukraine.
Burisma has been lining up well-connected American lobbyists, too, some with ties to Secretary of State John Kerry, including Kerry’s former Senate chief of staff David Leiter, according to lobbying disclosures.


As Time magazine reported, “Leiter’s involvement in the firm rounds out a power-packed team of politically-connected Americans that also includes a second new board member, Devon Archer, a Democratic bundler and former adviser to John Kerry’s 2004 presidential campaign. Both Archer and Hunter Biden have worked as business partners with Kerry’s son-in-law, Christopher Heinz, the founding partner of Rosemont Capital, a private-equity company.” [See Consortiumnews.com’s “The Whys Behind the Ukraine Crisis.”]
So, it seems even this modern form of “democracy” has some “sharing the wealth” aspects.


15--Mosler economics


Even if the Fed keeps rates at their near-zero level until next year, he said, inflation probably won’t reach the Fed’s 2-percent goal until the end of 2018. And if his forecast proves wrong and the economy begins to run too hot too fast, he said, the Fed would have “ample time” to raise rates moderately to head off excessively high inflation..Evans


payrolls-feb-5


Wage pressure?
payrolls-feb-7


The factory sector has not been contributing to economic growth, the result of weakness in the oil patch and weakness in foreign demand.
factory-orders-jan-graph
Posted in Employment |

.car sales fall again.....


GDP below ‘stall speed’?
gdp-stall


Posted in GDP, Oil |

16--Wage pressure?


17----Danger of war with Russia grows as US sends military equipment to Ukraine, wsws
 wsws By Johannes Stern and Alex Lantier
13 March 2015
Washington is pressing ahead despite stark warnings from Moscow that it views massive weapons deliveries by NATO to hostile states on its borders as an intolerable threat to Russian national security.
“Without a doubt, if such a decision is reached, it will cause colossal damage to US-Russian relations, especially if residents of the Donbass [east Ukraine] start to be killed by American weapons,” Russian Foreign Ministry spokesman Alexander Lukashevich said last month. He called NATO’s plans “very worrying,” adding: “This is about creating additional operational capabilities that would allow the alliance to react near Russia’s borders... Such decisions will naturally be taken into account in our military planning.”..... 
Washington has begun delivering military hardware to Ukraine as part of NATO’s ongoing anti-Russian military build-up in eastern Europe, escalating the risk of all-out war between the NATO alliance and Russia, a nuclear-armed power.
The Obama administration announced on Wednesday that it would transfer 30 armored Humvees and 200 unarmored Humvees, as well as $75 million in equipment, including reconnaissance drones, radios and military ambulances. The US Congress has also prepared legislation to arm the Kiev regime with $3 billion in lethal weaponry.


Washington is at the same time deploying 3,000 heavily armed troops to the Baltic republics, near the Russian metropolis of St. Petersburg. Their 750 Abrams main battle tanks, Bradley armored personnel carriers, and other vehicles are slated to remain behind after the US troops leave. This handover is aimed at “showing our determination to stand together” against Russian President Vladimir Putin, US Major General John O’Connor said in the Latvian capital, Riga
...

This week, Pentagon and Congressional officials called for Washington to arm Kiev, pressing for faster action from the White House. Defense Secretary Ashton Carter and Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey are pressing for large-scale weapons deliveries to Kiev, as are leading members of Congress from both big-business parties


The ECB program is pushing the US dollar higher against all major global currencies. There are growing concerns that the higher dollar is worsening the international competitive position of US corporations and impacting their bottom line.
These profit concerns appear to be behind the recent falls on Wall Street, coupled with fear that an ostensibly favourable US jobs report last Friday will encourage the Fed to begin lifting official interest rates from their current record low level of 0.25 percent. It is a sign of the way in which the financial markets have entered a “through the looking glass world” that what should be a sign of an improving real economy gives rise to a stock market fall.


The rise in the dollar’s value has reignited fears that so-called emerging markets could face financial problems because the more expensive dollar increases the real debt and interest burden from by dollar-denominated loans. In 2013, emerging market currencies fell sharply following indications by the US Federal Reserve that it was going to wind down its asset-purchasing program. Now there are signs that the “taper tantrum” could be repeated.


Last week, the JPMorgan Emerging Market Currency index fell to a record low after the release of the latest US jobs data. A JPMorgan analyst told the Financial Times that divergences in monetary policy between the US and emerging economies would become more relevant in the months ahead. If the Fed lifts interest rates, the money that has flowed into emerging markets over the past two years could rush for the exit.


19--Debate around the 2015 rate hike intensifies
Posted by Walter

Following Janet Yellen's Senate Banking Committee testimony, the Fed seems to be quite deliberate in preparing for a rate hike in 2015. It's hard to imagine taking such action in the disinflationary environment we find ourselves in, but market participants are increasingly accepting that possibility. That's why we've seen the equity markets pull back somewhat and the dollar continue climbing.

20--IMF loans $17 billion to Ukraine to repay banks, loot economy

21--“Ukraine Tomorrow”: Domestic oligarchs and western politicians plunder Ukraine, wsws

22--Dollar Strength: The Crunch Cometh , SA             



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