Friday, July 31, 2015

Today's Links

1--Worst Wage Growth In History Sparks Bond & Stock Buying Frenzy, Rate Hike Expectations Crater

2--Say A Little Prayer" Bill Gross Warns, "Zombie Corporations Now Roam The Real Economy"

3--Outflows from EM funds accelerate Financial Times. Central bankers of emerging markets countries have been complaining about Fed-induced hot money flows for years, and the Fed has acted as if it has nothing to do with

4--Big companies warn on China slowdown Financial Times

5--One In Eight Americans Burdened By Student Loan Debt, Including 700,000 Seniors
6--US homeownership rate hits lowest level since 1967
By Tom Hall
31 July 2015
Last month marked six years since the official end of the 2007-2009 recession, and, if official commentators are to be believed, six years since the beginning of the economic “recovery.”
Yet by many indicators, American households are actually far worse off than they were during the depths of the 2008 crisis.
According to data released on Tuesday by the US Census Bureau, the share of Americans who own their homes has fallen to the lowest level since 1967.
Only 63.4 percent of American households owned their homes in the second quarter of 2015. This was a decline of 1.1 percentage points over only twelve months, and 5.8 percentage points less than the peak of 69.2 percent reached in 2004.
7--Fifty years on: Medicare under assault
8---National home prices reach housing bubble peak nine years later

9--RealtyTrac: Single-family home sales reach highest level since 2006

FHA buyer share climbs to two-year high; Cash buyers dwindle

Wednesday, July 29, 2015

Today's Links

1--US, EU 'Give Up' Ukraine to Seek Russian Political Support

The United States and the European Union (EU) are "selling out" Ukraine to Russia to gain the Kremlin's support in dealing with Iran's nuclear program and looking for Moscow's approval of taking out Syrian leader Bashar al-Assad, the Atlantic Magazine reported.
According to Brian Whitmore, over the past few weeks, the Europeans and Americans have been busy trying to strike a political deal with Vladimir Putin.
"The United States and Europe might give up Ukraine in exchange for Russia's support of securing a deal to curb Iran's nuclear program. Additionally, Washington has been seeking Moscow's backing in securing a managed, orderly, and negotiated exit for Syrian leader Bashar al-Assad," Whitmore said in the Atlantic.

Then, US Deputy Assistant Secretary of State Victoria Nuland went to Kiev and persuaded Ukrainian lawmakers to make changes in their constitution to recognize the special status of the Donetsk and Lugansk People's Republics. Something that Kiev has been long opposed to, Whitmore argued.

2--AKP, MHP reject inquiry about ISIL, PKK terror

A proposal for the establishment an inquiry commission by the Republican People’s Party (CHP) was rejected by votes from the Justice and Development Party (AKP) and the Nationalist Movement Party (MHP).

Meanwhile, the Peoples’ Democratic Party (HDP) supported the proposal. CHP and HDP lawmakers then protested the AKP-MHP rejection of the establishment of the commission.

Lawmakers from the four political parties came together upon the initiative of the CHP, with the intention of discussing a terror wave by the Islamic State of Iraq and the Levant (ISIL) and the Kurdistan Workers’ Party (PKK) in the last 10 days.

“We warned the government about the birth of the ISIL and we have submitted necessary motions to the parliament for an in-depth examination but all have been rejected by the government,” deputy parliamentary group leader of the CHP, Levent Gök said in his address to parliament. “If we do not form a commission to inquire into the ISIL threat, what else will we do?”

3---On the Causes of Investment Decline in the US Economy , Jack Rasmus

the chronically stagnant US economic recovery since 2009 (predicted in my 2010 book, ‘Epic Recession: Prelude to Global Depression’), the result of insufficient income growth for most households—that is then necessary to stimulate consumption demand that, in turn would result in real investment that would create jobs? Or has the escalation of financial asset prices since 2009—itself the consequence of $10-$15 trillion of Fed and central bank liquidity injections— resulted in lower real investment in the US and thus the failure of job and income growth?

To restate more simply: does the lack of wage and income growth determine real asset investment; or are the expanding opportunities for more profitable financial asset speculative profits globally driving the decline of US real asset investment (and thus jobs, wages, and income growth)?
Which is the more primary causal relationship? If one believes lack of income is the primary cause of declining real investment today in the USA, then the solution is simply to raise wages and income of households that typically spend by whatever means—tax cuts, subsidies, etc. The problem is simply an insufficient level of income.

4--Turkey stepped up its offensive against Kurdish militias in northern Iraq early Wednesday, pounding targets in six locations from the air, officials said.
The Iraqi government condemned the airstrikes, calling them “a dangerous escalation and an assault on Iraqi sovereignty.”
Turkish officials said the airstrikes were carried out in response to a string of terrorist attacks in Turkey by militants of the Kurdistan Workers’ Party, or P.K.K., a separatist group that waged a 30-year insurgency against Turkish rule. The office of Prime Minister Ahmet Davutoglu said in a written statement that the strikes on Wednesday were against shelters, depots and caves used as hide-outs by the group. No information was released concerning casualties

5---Restoring peak housing prices required record low mortgage rates during a period of weak growth and a falling home ownership rate

It’s time to celebrate! National home prices reached the peak of 2006. Surviving homedebtors are regaining equity, surviving lenders have collateral backing behind the bad debt they’ve preserved for the last decade, and new homeowners are stretched to the max to repay the bad debts of previous generations, albeit at lower rates.
Since the housing market peaked in 2006, the powers-that-be resisted the price decline with a variety of government relief programs, and most importantly, record low mortgage rates. The recession caused by the 2006-2009 housing market crash left many people unemployed and underemployed, removing their demand from the housing market, and millions of foreclosures caused the home ownership rate to plummet — not the conditions one would expect to cause a robust price rally in house prices.

However, house prices did go up — a lot. When the market manipulations finally worked in 2012, house prices went nearly vertical. While economic fundamentals were slowly improving in the background, there was no significant fundamental support for the rally that reflated the housing bubble, certainly not a level of economic improvement commensurate with the dramatic increase observed in prices.
The entire rally was fueled by record low mortgage rates engineered by the federal reserve. Plus, changes in policy at the major banks held back the tide of foreclosures and greatly restricted the MLS inventory. Demand was up slightly, mostly due to investors as owner-occupants remained absent from the market, and first-time homebuyer participation fell to very low levels.

Homes are officially being sold at the highest prices, ever

Existing-home sales also reach highest pace in 8 years

Thanks to rising demand and shrinking supply, the median existing-home price for all housing types reached an all-time high in June.
According to the latest data from the National Association of Realtors, the median existing-homes sales price rose to $236,400, which exceeds the previous peak median sales price set in July 2006 of $230,400. …

Despite record prices, existing-home sales also reached their highest pace in more than eight years.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.2% to a seasonally adjusted annual rate of 5.49 million in June from a downwardly revised 5.32 million in May.
Sales are now at their highest pace since February 2007 (5.79 million), have increased year-over-year for nine consecutive months and are 9.6% above a year ago (5.01 million)....

All-cash sales dropped to the lowest share since December 2009, reaching just 22% of transactions in June, down from 24% in May and 32% a year ago....

The problem is that Potential buyers can’t afford peak prices at higher interest rates. When interest rates go up, sales volumes will fall, and house prices may follow

6--Pentagon chief threatens Iran with war, despite nuclear agreement

7--Supreme Leader's Sermons at Eid ul-Fitr Prayers, July 18th, 2015
Sayed Ali Khamenei, the Supreme Leader of the Islamic Revolution    

The following is the full text of the sermons delivered on July 18, 2015 by Ayatollah Khamenei, the Supreme Leader of the Islamic Revolution, at the Eid ul-Fitr prayers in Tehran.

Another issue is a domestic one: the issue of the nuclear negotiations. I deem it necessary to raise a few points in this regard......The next point is that one will be allowed to take advantage of this document in any way and to undermine the fundamental principles of the Islamic Republic whether this document is ratified or not. ..... The Islamic Republic will never give in to the enemy's greed in the area of protecting its defense capabilities and security- particularly in this environment filled with the enemies' threats...
The next point is that whether this document is ratified or not, we will not abandon our regional friends: the oppressed people of Palestine, the oppressed people of Yemen, the people and government of Syria, the people and government of Iraq, the oppressed people of Bahrain and the sincere mujahids of the Resistance in Lebanon and Palestine. These people will always enjoy our support.

The next point is that our policy towards the arrogant government of America will not change in any way despite these negotiations and the document that has been prepared..... As we have said many times, we have no negotiations with America on different global and regional issues. We have no bilateral negotiations with America. Sometimes, we have negotiated with them in exceptional cases such as the nuclear issue and we have done so because of our interests. The nuclear issue was not the only case. There were other cases as well which I have referred to in my previous public speeches. The American policies in the region are 180 degrees the opposite of the policies of the Islamic Republic.....

There was one point in the statements that the American president made in recent days: he admitted to America's past mistakes. Of course, he said a hodgepodge of things. He admitted that the Americans made a mistake in Iran on the 28th of Mordad. He admitted that the Americans made a mistake in helping Saddam Hussein. He admitted to two, three mistakes, but he did not mention tens of others. He did not speak about the 25-year oppressive and treacherous rule of the second Pahlavi monarch. He did not speak about the many instances of torture, looting, massacre, disaster and calamity that were caused by America. He did not speak about the destruction of the Iranian peoples' dignity and America's efforts to trample upon their domestic and foreign interests. He did not speak about the Zionists' domination, the killing of Iranian passengers on a passenger plane and many other things. Nonetheless, he mentioned a number of mistakes. ......

.... today they have signed on paper that they have no problem with our nuclear industry. Apart from stressing the power of the Iranian people, what other meaning does this have?....This has been achieved because of the people's resistance and steadfastness and our dear scientists' courage and innovation.....God's mercy be upon our nuclear martyrs. God's mercy be upon their families. God's mercy be upon a people who stand by their truthful claims and rights.



Today's links

1--Our monumental Turkey blunder, Salon

Erdoğan’s No. 1 ambition remains, by much evidence, deposing Assad; defeating ISIS is secondary in his priorities—if, indeed, it is that. Turkey’s record as a conduit for weapons and anti-Assad foreign fighters into Syria is beyond question. Even since the accord Erdoğan signed with Obama last week we have indications that his view of ISIS is at the very least ambivalent.
Second point. This agreement effectively licenses the Erdoğan government to break a two-year cease-fire with Turkey’s Kurdish minority, arrest dissident Kurds wholesale and begin shelling Kurdish positions in Iraq and Syria. In effect, Erdoğan now has American approval to attack one of America’s most loyal allies against ISIS in northern Iraq in the service of his domestic political conflicts.
We must try to rewrite the old adage to accommodate this absolutely wild arrangement. The enemy of my unstable tactical ally is my enemy even if he is my friend. Doesn’t quite make sense, does it? Exactly right: It makes none.
The big payoff for Washington in this pact is that American fighter jets will now fly missions into Syria and Iraq from two bases in southern Turkey. The logic is purely tactical but plain: Turkish bases are far closer to zones of conflict in Iraq and Syria than bases in the Persian Gulf are; surveillance planes and bombers can spend less time commuting and more finding and bombing targets.
The initial report of the accord in the New York Times noted, “The agreement was described by one senior administration official as a ‘game changer.’” Think about this. Put the two new realities just outlined next to the military expedient of having bomber bases closer to the warfront....

Obama named John Allen his special envoy last year to manage what we are calling the coalition against ISIS. It was Allen who wangled the deal wherein U.S. fighter jets will now operate from southern Turkey. To be clear, the BBC called the negotiating process “arm-twisting.”
Consider who this man is: Here is Allen’s State Department biography. He retired from the Marine Corps a four-star general after commanding U.S. forces in Afghanistan for a year and a half. In a 38-year career, Allen held senior positions in NATO and the Defense Department, in the latter assignment advising on Marine Corps positioning in the Pacific (where the Marines are key to the American security structure).
By way of training, Allen’s degrees include  a bachelor’s from Annapolis, a master’s from the National Intelligence College and an honorary doctorate from the National Intelligence University. (He has another honorary doctorate, this one in humane letters, from Monmouth College, and one cannot quite make out where this fits.)

Allen is an operations man only recently out of uniform, in short. He is versed in military strategy, tactics, intelligence and not much else (unless we count “humane letters”). What is a soldier with this narrow a purview doing negotiating a deal with a leader whose position on Middle Eastern questions is as politically, ideologically and, indeed, religiously charged as Erdoğan’s?
Second question: What kind of deal did the Obama White House expect Allen to produce? Third: What kind did it want?
All the answers lie in the deal Allen got. It is a military deal, nothing more. As such is it a near-perfect specimen of what Washington gets in consequence of the militarization of foreign policy that has proceeded more or less unchecked since Truman armed the Greek monarchy at the start of the Cold War in 1947

Apart from relocating American warplanes, the pact also mobilizes Turkish F-16s to begin their own bombing runs as part of the coalition Allen oversees. In this the Erdoğan government wasted not a minute. The day after the Obama- Erdoğan telephone call, Turkish tank and artillery units shelled militants across the border into Syria for the first time; Turkish fighter jets began bombing runs into Iraq and Syria the next day. The latter continue....

Until last week. Speaking at a security forum in Aspen after the agreement was announced, Allen said of the no-fly zone, “No. It was not part of the discussion.” It took the BBC’s Mark Lowen a few hours to sort out the semantic ruse: The agreement provides for a “safe area” in northern Syria, not a no-fly zone. On Monday, cat out of the bag, American officials finally acknowledged plans for a “buffer zone,” or an “Islamic State-free zone,” and we will have to see what this amounts to: There is simply no saying now.....

Then came the agreement with Washington, and Turkish authorities have since arrested hundreds of “extremists.” On Sunday afternoon a source in Istanbul wrote, “About 20 supporters of Daesh [the Arabic for ISIS] were taken in and about 200 were Kurdish militants.”
How is that for a telling proportion? Here is the same source on the Turkish F-16s airborne since Friday: “The Turkish airstrikes on Kurdish positions in Syria and Iraq were much heavier and more numerous than on the Daesh positions in Syria.”
That is to put it too mildly. Of eight air raids flown last Friday, three targeted ISIS units and the other five Kurdish positions in Iraq and Syria. And shame, shame on the government-supervised Times for its report in Saturday’s paper: “Turkey Strikes 3 ISIS Targets in Syria With Jets,” the headline announced. You had to read three paragraphs in to discover the five attacks on Kurds, and these were “not independently verified.” Sure thing....

Jens Stoltenberg, NATO’s Norwegian secretary-general, suggested Monday that Turkey was unlikely to get “any substantial NATO military support.” This was a straw man: Material support is not what the Erdoğan government wants. In its fight against ISIS and the Kurds—against both, note—it wants “solidarity and support from our NATO allies,” as the foreign ministry in Ankara later made clear.
Legitimacy, in other words. And it got it Tuesday in Brussels, where Stoltenberg announced, “We all stand united in condemning terrorism, in solidarity with Turkey.”  See the problem? Not “united against ISIS,” but “united in condemning terrorism.”
Erdoğan understood. Within hours he declared that no peace process with the Kurds is possible—and then urged parliament to strip legislators with ties to the PKK of immunity from prosecution. An Istanbul source wrote Tuesday afternoon to say that some sitting parliamentarians have already been arrested.

2---China’s Stock Market Falling Off a Cliff: Why, and Why Care?

3---Kurd leader attacks Turkey's 'safe zone' plan for Syria

A "safe zone" Turkey and the US are creating in Syria is an attempt by Ankara to stop Kurds from forming their own territory, the leader of Turkey's pro-Kurdish party has told the BBC

State Department spokesman John Kirby said "more coalition effort and energy" would now be focused on the border area.
But he rejected suggestions that the US had sanctioned Turkey's air strike on Kurdish forces in northern Iraq.
Over the past week, analysts say, Turkey has turned its approach to the US-led coalition against IS on its head

But Mr Demirtas, who leads the HDP (People's Democratic Party), told the BBC that Turkey's real intention was to make an incursion into Kurdish areas in Syria so as to stop Syrian Kurds from controlling contiguous territory.
"Turkey doesn't intend to target IS with this safe zone. The Turkish government was seriously disturbed by Kurds trying to create an autonomous state in Syria," Mr Demirtas said.
Tuesday also saw Nato discuss the Turkish campaigns against IS and Kurdish militants. All 28 Nato member countries met in Brussels to discuss what it called "the threats against Turkey", a key member of the alliance.
In a final communique, Nato expressed "strong solidarity" with Turkey, and sent condolences to Ankara and "the families of the victims in Suruc and other attacks against police and military officers".
However, Nato officials quoted by news agencies said alliance members used the closed-door meeting to urge Turkey not to use excessive force, and to continue peace talks with representatives of its Kurdish minority

4---Fighting ISIS??? Turkey launches heaviest air strikes yet on PKK, stoking Kurdish ire

Turkish jets launched their heaviest assault on Kurdish militants in northern Iraq overnight since air strikes began last week, hours after President Tayyip Erdogan said a peace process had become impossible.
The strikes hit Kurdistan Workers Party (PKK) targets including shelters, depots and caves in six areas, a statement from Prime Minister Ahmet Davutoglu's office said. A senior official told Reuters it was the biggest assault since the campaign started.
Iraq condemned the air strikes as a "dangerous escalation and an assault on Iraqi sovereignty", saying it was committed to ensuring militant attacks on Turkey were not carried out from within its territory.
Turkey launched near-simultaneous strikes against PKK camps in Iraq and Islamic State fighters in Syria last Friday, in what Davutoglu has called a "synchronised fight against terror".
The NATO member also opened up its air bases to the U.S.-led coalition against Islamic State, joining the front-line in the battle against the jihadists after years of reluctance. NATO gave Turkey its full political support on Tuesday.
But Turkey's assaults on the PKK have so far been far heavier than its strikes against Islamic State, fuelling suspicions that its real agenda is keeping Kurdish political and territorial ambitions in check, something the government denies....

On Tuesday, fighter jets also bombed PKK targets in the southeastern Turkish province of Sirnak, bordering Iraq, after an attack on a group of gendarmes.
The PKK has said the strikes are an attempt to "crush" the Kurdish political movement and create an "authoritarian, hegemonic system" in Turkey.

Many Kurds believe that by reviving conflict with the PKK, Erdogan seeks to undermine support for the HDP ahead of a possible fresh election. He has made no secret of his desire to change the constitution and amass stronger powers, virtually impossible without a strong single-party AKP government.

5---Russell Napier: What Happens When Markets Realize China Is A Forced Seller Of Treasuries

The Great Reset , which began with China’s first reported foreign reserve decline in 2012, is now accelerating. The ultimate destination for China is either to continue to support the exchange rate and accept ever lower growth, probably accompanied by deflation, or to devalue. Either option will further exacerbate global deflationary pressures and place huge pressure on other EMs that compete with China and are linked to the USD.
So could the liquidation of US Treasuries by EMs, in an effort to defend their exchange rates, also push up Treasury yields? This was the forecast in the May 2011 paper and it was very wrong. It was wrong because the Fed was an aggressive buyer of Treasuries, but the Fed is not currently in the marketplace.

Today the yield on Treasuries is set by the actions of foreign central bank activity and the global private sector. The Solid Ground has long wondered how US Treasury bulls in the private sector would react if they knew in advance that the second largest owner of Treasuries, the PBOC, was a forced seller of Treasuries. Such compelled selling would be obvious before US markets opened each morning as downward pressure on the RMB exchange rate in Asia forced the PBOC to liquidate foreign currency assets to defend the fixed exchange rate. Would even Treasury bulls stand in the way of such a large and predictable liquidation? If they didn’t then the second phase of The Great Reset would come to pass and the decline of EM external deficits would force tighter monetary policy in both EM and DM.
The Great Reset was very wrong about the US. US equities simply ignored the travails of Europe, EM and commodity markets and sailed ever higher. Ask any fund manager why developed-world equities ignored the deflationary trends since 2011 and they will point to the monetary love spread by The Federal Reserve, The Bank of Japan, The Bank of England and The European Central Bank. But fixating on the expansion of these central bank balance sheets has only distracted investors from the monetary tightening that started in 2011 and is now accelerating in EM as forecast in The Great Reset....

This is why The Solid Ground considered the end of the rise in EM foreign exchange reserves to be so key in shifting the outlook towards deflation and not inflation. The lack of reserve accumulation would either force deflation upon EMs or force them to devalue. The impact of either adjustment, whether through lower growth or lowered USD selling prices, would be deflationary and not inflationary.
Given the huge role China has played since its 1994 devaluation in spurring global growth, the adjustment process in China could be particularly detrimental to the stability of global prices. Events of the past few weeks are finally focusing investors’ attention on the lack of monetary control in China and thus on the lack of control generally. Local owners of RMB denominated capital have been voting with their feet since 2012 and capital has been pouring out of the country

6---Ongoing Security Concerns In Kurdistan Have Oil Companies On Edge

7---As cited in written evidence by Nafeez Ahmed to a UK Parliamentary inquiry in 2010: “According to Graham Fuller, former Deputy Director of the CIA’s National Council on Intelligence, the selective sponsorship of al-Qaeda terrorist groups after the Cold War continued in the Balkans and Central Asia to intensify the rollback of Russian and Chinese power (2000): ‘The policy of guiding the evolution of Islam and of helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia.

8--Lawmakers consider how to stop US heroin epidemic

9---Prosecutors have recognized NED’s activities in Russia as undesirable and undermining national security after the US NGO spent millions on attempts to question the legitimacy of Russian elections and tarnish the prestige of military service.
According to the release published on the Prosecutor General Office’s website deputy head of the agency Vladimir Malinovsky on Tuesday signed the decision to recognize as undesirable on the territory of the Russian Federation all activities of the foreign non-government organization the National Endowment for Democracy. On the same day this decision was forwarded to the Justice Ministry that must now include NED in the list of undesirable foreign organizations

10--McCain: US Must Improve Propaganda to Win Cold War Without Firing a Shot

“One of the key elements of winning the Cold War without firing a shot… is the propaganda, the message, the social networking,” McCain said in a speech to the Hudson Institute.
McCain, however, argued that US messaging to Russian speaking audiences is something “we are going to have to do a lot more of.”
The US Congress has recently taken action to increase funding to the government-sponsored media agency, the Broadcasting Board of Governors (BBG). In April 2015, the BBG requested $15.4 million to expand its Russian-language programming and social media content.

11--S&P 500 Companies Spend 95% of Profits on Buybacks and CEOs have increased the proportion of cash flow allocated to stock buybacks to more than 30 percent, almost double where it was in 2002, data from Barclays show. During the same period, the portion used for capital spending has fallen to about 40 percent from more than 50 percent. - See more at:

12--Nuclear deal paves way for Iran's full SCO membership: SCO secy. gen

13---Turkish generals afraid of breaking Internatl law  Haaretz

was convinced that as on previous occasions, national security would suffice for the government to do as it wished. Turkey was planning to send 18,000 troops 30 kilometers deep and 90 to 110 kilometers wide to set up refugee camps, but the plan was actually designed to set up a buffer zone between the two Kurdish-controlled areas.
But Erdogan realized that not only did the opposition — some of them potential coalition partners — object, but the army wasn’t rushing to battle. The high command demanded clearly written directives from the politicians for fear of violating international law. It also demanded that the government consult with Russia and Iran to ensure that Turkish military involvement wouldn’t spur direct involvement by those countries.
It’s a weighty argument, though the army didn’t hesitate a few months ago to enter Syria to capture the ancient tomb of Suleyman Shah and rescue Turkish soldiers guarding it. The main reason for the army’s objection this time was the understanding that any invasion of Syria to establish a buffer zone meant long-term involvement in the Syrian war.
The public dispute between the army and government laid bare something in the wake of Erdogan’s expulsion of the army from politics: The army still has widespread support and can challenge the president, even after Erdogan made changes to the high command.
Erdogan held an urgent meeting of the National Security Council, resulting in the decision not to invade Syria. At the same time, Turkey deployed tanks and other armor along the border near the cities of Sanliurfa and Gaziantep, a few kilometers from the Syrian border where the Syrian Kurds are in control. ...

Despite Erdogan’s efforts, these Kurdish militias, which have recruited a few hundred volunteers from abroad, are winning. The fighters have driven Islamic State forces out of dozens of villages along the border, helped from the air by Western, particularly American, planes.
American praise for the Kurds showed Erdogan that the Kurdish threat isn't only on the border. The Kurds have become Washington’s ally, and Erdogan’s plan to block their control of the border region is doomed to failure. Special U.S. envoy John Allen visited Turkey to express Washington’s objections to a Turkish operation in Syria.
Officially, Allen discussed possible military cooperation with Turkey, but in practice Washington clarified its opposition to a buffer zone and warned against Turkey’s continued cooperation with radical forces in Syria, based on reports that the Islamic State continues to use Turkish border crossings to reach Syria.
The United States is struggling to establish rebel ground forces to operate in tandem with airstrikes. The effort to recruit rebels for this grandiose plan in the war against the Islamic State, for which Congress has allocated $500 million to train 3,000 fighters, is facing intense difficulties. According to Secretary of Defense Ashton Carter, only 60 of 7,000 volunteers have been trained so far.
While the air campaign has stung some of the Islamic State’s income sources and halted its progress at least in Iraq, it’s far from turning things around. The control territory between the militias and the government is becoming permanent, without any side capable of making a decisive blow.

13----“The level of US investment is at its lowest since 1947. - Tom Hartmann

As Edward Luce pointed out in a recent piece for The Financial Times, “The level of US investment is at its lowest since 1947. Last year, according to Goldman Sachs, S&P 500 companies spent more than $500bn on share buybacks. This year it is expected to hit $600bn…. For every dollar the top US public companies spend on investment, they are returning eight or nine dollars to shareholders.” - See more at:

This is the sign of an economy that’s gone insane. Stock buybacks don’t grow the economy as a whole; they just make giant rich corporations - and their CEOS - even richer. They’re the perfect symbol of a system that puts profits before people, progress, and, well, pretty much everything else. It’s hard to imagine given the state of American capitalism these days, but things weren’t always this way. Between the 1930s and the 1980s, corporate America actually behaved - or was made to behave as a result of smart regulations - in ways that benefited everyone, not just their shareholders or CEOs. Back then, the saying “what’s good for GM is good for America and what’s good for America is good for GM” wasn’t just a saying - it was a statement of fact.

But then Reagan came to town and everything changed. As part of his big push to “reform” the economy, Reagan changed the compensation laws for CEOs so that they could be paid in stock options. Their income now depended on the value of their company’s stock. Theoretically, this was supposed to give executives an incentive to make good business decisions, but what it actually did was give them an incentive to skim their bit off the top and screw everyone else. Instead of long-term success, the focus was now on boosting stocks as quickly as possible and therefore making as much money as quickly possible. This is why big corporations are now spending billions and billions of dollars to buy back their own stock -- they’re just trying to keep their CEOS rich and happy. And who do you think suffers as a result of all this? The American worker, of course! Who else? - See more at:

14--NATO backs Turkish/US regime-change offensive in Syria
  While the US had for several years rejected Erdoğan’s Justice and Development Party (AKP) proposals for “no fly zones” in Syria, it has now agreed to “safe zones” that are tantamount to the same thing....
The latest plans are a blatant attack on Syrian sovereignty and amount to a de facto declaration of war on Damascus. They are part of Washington’s broader strategy of dominating the entire resource-rich Middle East.

Mevlut Cavusoglu, Turkey’s foreign minister,...“There is no difference between PKK and Daesh [ISIS]. You can’t say that PKK is better because it is fighting Daesh.”
NATO on Tuesday gave President Recep Tayyip Erdoğan unanimous support for Turkey joining the US-led military offensive against the Islamic State of Iraq and Syria (ISIS), which is being used as a cover to escalate Washington’s intervention against the Syrian regime of President Bashar al-Assad.
The quid pro quo secured by Turkey involves US support for attacks on Kurdish forces that, until last week, were being hailed by Washington, Berlin and other NATO powers as the bedrock of the anti-ISIS struggle.
NATO Secretary General Jens Stoltenberg said, “We stand in strong solidarity with our ally Turkey… to address instability on Turkey's doorstep and on NATO's border.”
Turkey, which has a 700,000-strong army, the second largest in NATO, is planning to invade Syria, seize territory and establish buffer zones along the Turkish border that will allow its forces to target ISIS militants. Such zones will also provide staging posts against the Syrian Kurdish forces of the Democratic Unity Party and its militia, the Popular Protection Units (PYD/YPG)....

For all its talk of a global war on terror, in its supposed efforts to contain ISIS, the US military will likely provide air cover for Al Qaeda-linked forces on the ground, serving as their de facto air force.
The 90-minute meeting in Brussels was preparation for a full blown NATO war for regime-change in Syria. It was called at Turkey’s request under Article 4 of the NATO Treaty, to enable Ankara to consult with its allies over threats to its security.
Erdoğan said, “At the moment, Turkey has come under attack and is exercising its right to defend itself and will exercise this right until the end.” He added, “there could be a duty for NATO, and we ask NATO to be prepared for this.”

15--Deconstructing Syria: A new strategy for America’s most hopeless war , Michael E. O'Hanlon , Brookings

The plan would be directed not only against ISIL but in part against Assad as well. In a bow to reality, however, it would not explicitly seek to overthrow him, so much as deny him control of territory that he might still aspire to govern again. The autonomous zones would be liberated with the clear understanding that there was no going back to rule by Assad or a successor. In any case, Assad would not be a military target under this concept, but areas he currently controls (and cruelly bombs) would be. And if Assad delayed too long in accepting a deal for exile, he could inevitably face direct dangers to his rule and even his person. ....

The idea would be to help moderate elements establish reliable safe zones within Syria once they were able. American, as well as Saudi and Turkish and British and Jordanian and other Arab forces would act in support, not only from the air but eventually on the ground via special forces. The approach would benefit from Syria’s open desert terrain which could allow creation of buffer zones that could be monitored for possible signs of enemy attack. Western forces themselves would remain in more secure positions in general—within the safe zones but back from the front lines—at least until the reliability of such defenses, and also local allied forces, made it practical to deploy and live in more forward locations.

Creation of these sanctuaries would produce autonomous zones that would never again have to face the prospect of rule by either Assad or ISIL. They would also represent areas where humanitarian relief could be supplied, schools reopened, and larger opposition fighting forces recruited, trained, and based. U.N. agencies and NGOs would help to the extent possible; regardless, relief could certainly be provided far more effectively than is the case today. 

The end-game for these zones would not have to be determined in advance. The interim goal might be a confederal Syria, with several highly autonomous zones and a modest (eventual) national government. The confederation would likely require support from an international peacekeeping force, if this arrangement could ever be formalized by accord. But in the short term, the ambitions would be lower—to make these zones defensible and governable, to help provide relief for populations within them, and to train and equip more recruits so that the zones could be stabilized and then gradually expanded....

Third, multilateral support teams, grounded in special forces detachments and air-defense capabilities as needed, would be prepared for deployment into parts of Syria once opposition elements were able to seize and reliably hold strong points. 
This last part would of course be the most challenging, and the actual deployment of any such teams the most fraught. It need not be rushed. It could be undertaken in the safest zones first—perhaps in Kurdish areas, for example, and then near the Jordanian border in conjunction with Jordanian forces. But it’s a necessary part of the effort. Beginning the planning immediately would not only help prove American seriousness about the overall campaign plan, but also allow for coordination with humanitarian and development groups (So the terrorists seize the ground in Syria and then US special forces come in and hold it)

Tuesday, July 28, 2015

Today's links

 1--Housing Hangover, Santelli Hanson
2--US Middle Class Stays Dead: Homeownership Drops To 48 Year Low; Median Asking Rent Soars To All Time High

3---With US backing, Turkey prepares to seize buffer zones inside Syria

Preparation for a US-Turkish intervention in Syria marks a major escalation in the imperialist-led re-division of the Middle East. While the intervention’s ostensible target is ISIS, it is also aimed at the regime of Syrian President Bashar al-Assad and Kurdish forces in northern Syria and Iraq, bordering Turkey.

4--US, Turkey Eye 60-Mile ‘Safe Zone’ in Northern Syria
5--Syrian Kurds: Turkish Forces Shelling Our Fighters Near Kobani
6--Are the U.S. and Allies Getting Too Cozy With Al Qaeda’s Affiliate in Syria

7---Turkey Conflict with Kurds
8--Turkey and U.S. Plan to Create Syria ‘Safe Zone’ Free of ISIS, NYT

14--Olive oil prices surge due to drought and disease in Spain and Italy
15--How the Euro Turned Into a Trap
16--Emerging Market Currencies Tumble to Record Low in 'Violent' Selloff
17--Emerging market currencies crash on Fed fears and China slump

18---US Set to Deploy More Troops, Combat Aircraft to Turkey

19--NATO, Saudi Arabia back Turkey’s Syria, Iraq military campaign


Friday, July 24, 2015

Today's Links

1---The greatest sustained EM reserve slump in 20 years, FT

Bigger than Greece, bigger than China (or at least one of the most significant parts of the China story) is the massive shift occurring in global currency reserves. Long story short: they’re being depleted, rapidly. Especially the reserves of emerging market sovereigns.

On Thursday we suggested the evolving dynamic could be linked to a contraction of petrodollar/sweatdollars in the global monetary system, thanks to growing US energy independence and US labour/tech-based re-shoring.
We failed to mention, however, how the situation is exacerbated by China’s growing inability to throw renminbi at its export competitiveness problem due to not insubstantial dollar leverage exposure on the country’s books. Which is to say: China can only help its exporters — and by extension other emerging markets — by shedding a whole bunch of dollar reserves at the same time.
(Remember China’s rapacious appetite for resources to this day has to be funded by matching dollar receivables, as commodity markets don’t tend to settle in RMB — not yet anyway).
To wit, see the following from BNP Paribas’ EM analysts on Friday.
As they note (our emphasis):
In a highly unusual development, emerging-market FX reserves have been falling steadily since the middle of last year. The IMF’s COFER figures, the gold standard for FX reserve data, show that emerging-market reserves have dropped for three successive quarters, from a peak of USD 8.06trn at end Q2 2014 to USD 7.5trn by end Q1 2015. COFER data are not yet available for Q2, but we have been able to build an estimate from already released second-quarter national data. Our bottom-up estimate of around USD 6.9trn at the end of Q1 captures 92% of the IMF’s emerging-market aggregate. By our estimates, emerging-market reserves continued to fall in Q2, albeit marginally, by USD 21bn or so.
Q2’s modest fall brings the drop-off in emerging-market reserves to USD 575bn since the middle of last year. Looking at a longer run of COFER data from 1995 shows how unusual recent developments are. Even in the jaws of the global financial crisis, emerging-market reserves only dropped for two quarters before snapping back vigorously. Emerging-market reserves have not fallen on such a sustained basis in at least 20 years

Here’s BNP Paribas in any case on the connection between the strong dollar and the reserve depletion situation (our emphasis):
The strong US dollar, which really began to appreciate in earnest last July, is inevitably the key driver, working simultaneously to depress commodity prices and reduce inflows, so eating away at the emerging-market complex’s balance-of-payments position.
USD appreciation is, in effect, a double whammy for many emerging markets, sapping income growth and reducing inflows. Slower or falling FX reserves also crimp base-money growth and, other things being equal, tighten financial conditions. USD strength, therefore, produces a global monetary tightening. ...

So what about the China effect?
Well, this is where it gets really interesting. According to BNP Paribas, China accounts for almost 50 per cent of emerging-market reserves, meaning its influence is critical. Yet, as per the overall EM picture, the gross change in China’s FX reserves shows four successive quarterly declines since 2014, with a cumulative drop of just under $300bn vs a total emerging-market fall of $575bn. In other words, a huge amount of the decline is China’s alone.
But, if you adjust the valuation using the IMF COFER weights, China’s FX reserve slide accelerates even more

Q2’s record fall in (adjusted) FX reserves suggests that capital flight from China – which was already running at a record USD 800bn annualised in Q1, according to the country’s official balance-of-payments data – may have gathered further pace in Q2, even before the A-share equity market’s recent rout ....., capital flight from China probably picked up again in Q2, potentially to a USD 1trn annualised rate. Record capital flight and its corollary, falling FX reserves, sap base monetary growth and, in turn, nominal GDP growth...keeping pressure on the People’s Bank of China to deliver further cuts to the reserve-requirement ratio and to accelerate its domestic asset purchases and loans to help reflate the economy and maintain top-line growth rates.

Which brings us back to the point we originally made in 2012: if the RMB was allowed to float freely it would at this stage fall in value versus the dollar, not rise — and the only thing that could stop/slow that fall, and consequently protect the purchasing power of Chinese billionaires on the international stage, would be the deployment of China’s own USD reserves. How prepared China would be to do that was always the question.

2---Hoisington Review and Outlook – Second Quarter 2015

3---the US destabilization of Iraq is part and parcel of the fight against China.

 Just to clarify that last point, the article repeated it: “Chang….noted that the United States would actually be in a stronger economic position with Iraqi oil off the market.” ....This is the context in which the rise of ISIS has to be read. A stable Iraq, able to develop its oil infrastructure in peace, has turned out to be not only unnecessary to the US project of global domination, but actually antithetical to it. The Pivot to Asia, then – that is, the attempt to block and stifle China’s rise - is not separate from US policy towards Iraq: a destabilized, dysfunctional Iraq is an integral part of it.

Two years ago, the US ‘think tank’ Jamestown Foundation published a fascinating analysis of China’s oil policy in Iraq. This report described, in detail, how China had become the main winner of oil contracts under the new Iraqi government, and had helped restore the battered industry back to impressive production levels. “China was able to secure the first major oil accord between the Iraqi government and a foreign entity since 2003,” the report notes, when “in 2008, China’s state-owned China National Petroleum Corporation (CNPC) concluded a $3.5 billion deal with Iraq’s North Oil Company (NOC) to develop the al-Ahdab oil field—a relatively small oil field by Iraqi standards—in the province of al-Wasit.”

While unlikely to prove a particularly lucrative investment in itself, its significance was as “an early foothold in the Iraqi oil sector that would lay the groundwork for future dealings on larger and more lucrative projects.” Indeed, this turned out to be the case, with a deal signed the following year giving a joint venture between BP and CNPC access to Iraq’s biggest oil field Rumalia. Further deals followed, including a 20-year agreement over the Missan oilfield in 2010, with the result that “at least one third of all future production of Iraqi oil will be derived from oil fields owned outright or co-owned by Chinese concerns.”

The gradual re-emergence of a functioning Iraqi economy, then, was benefiting not the US, but rather the US’s number one strategic rival, China. Iraq’s peaceful development, in this context, was proving to be a direct threat to continued US domination.

Nor was this growing Iraqi-China co-operation solely economic. Jamestown’s report concluded that “the convergence of mutual interests between China and Iraq over the buying and selling of oil will serve to underpin a long-term strategic partnership.” A long-term strategic partnership between Iraq and China? Is this what the US spent $3 trillion to bring about?....

4---Russia’s rating agency to start by year end – Central Bank

The BRICS countries are also discussing setting up a rating agency. Russia and China planned to launch a new Universal Credit Rating Group (UCRG) in 2015, but market participants said talks have stumbled due to political reasons.

5---Nuclear Buildup in EU: Who Benefits From Aggravating US-Russian Tensions

It should be noted that Pifer is not the only US expert who is beating the war drums about Russia's phantom menace. The Pentagon report entitled 2015 National Military Strategy obviously targets Russia and China, experts say.
Meanwhile the US Joint Chief of Staff nominee General Joseph Dunford has put it clear: "If you want to talk about a nation that could pose an existential threat to the United States, I'd have to point to Russia...

According to Heritage Foundation estimates, the US should increase its number of deployed TNWs [tactical nuclear weapons] in Europe from a few hundred today to a minimum of 800 weapons so that it is able to meet requirements of the protect and defend nuclear targeting strategy with respect to the Russian TNWs. These weapons should be modernized for rapid delivery. Heritage's approach also recognizes that the US targeting list will continually evolve in accordance with the threat to US interests and allies," the report stated.
The article shows that the US "party of war" had considered Russia a potential rival long before the Ukrainian crisis spiraled out of control.
Some experts suggest that the US "needs" some sort of an "external threat" to maintain its political, economic and military leadership.

6--All singing from the same songbook

General Mark A. Milley has become the latest high-ranking US military official to embrace the anti-Russian hysteria, apparently rampant among US hawks.
Milley, expected to become the next chief of staff of the US Army, listed several challenges the US faces, naming Russia the top and biggest existential threat for Washington. He also pointed to Moscow's overwhelming nuclear capabilities.
"As a soldier, as a military officer, I'd have to say it is Russia," the general told the Senate Armed Services Committee. "Russia is the only country on earth that retains a nuclear capability to destroy the United States. It's an existential threat."

As long as we’re talking about a war close to Russia’s borders - conversely defense-minded Russia military is no threat to the US or western Europe

8--US Stops Pretending Missile Shield Was Aimed at Iran
Not that anyone with half a brain cell was buying it - US will press ahead with the missile shield despite Iran deal proving it was always aimed at Russia

9---The pseudo-left covers up for Syriza’s betrayal

Syriza is based on a political model common to countless pseudo-left and petty-bourgeois organizations: the building of a party around a charismatic media personality, inevitably a right-wing scoundrel. “Sexy Alexi” plays within Syriza the role played by Pablo Iglesias in Spain’s Podemos party, Olivier Besancenot of France’s New Anti-capitalist Party, and Beppe Grillo of the Five-Star Movement in Italy. These are organizations whose policies can be manipulated and turned around by finance capital whenever it is required....

The coming to power of Syriza was not a historic victory, but a historic fraud, and SY is simply covering for that fraud. Even as it insists that there should be no criticism of Syriza’s record, it presents Tsipras’s referendum—which he rapidly followed by imposing mass austerity on the Greek people—as yet another victory.
Recovery from the impact of the betrayal in Greece is possible only through a scathing exposure of the class and political role of the pseudo-left as petty-bourgeois, anti-Marxist agencies of finance capital

10--US defense secretary visits Iraq as Pentagon prepares new offensive in Anbar

President Obama vowed in May that Washington would take steps to “get the Sunni tribes more activated.”
During congressional testimony last month, Carter threatened that the US has prepared a strategy to dissolve the unified Iraqi state if Washington deems it necessary, bypassing Baghdad and instead ruling portions of the country on the basis of separate alliances with Sunni and Kurdish elements.

These same “brave” and “capable” partners have been implicated in atrocities against civilians. Photos published by ABC News earlier this year showed the US-trained Special Forces troops posing with corpses and severed heads...

Additional hundreds of Sunni tribal forces mobilized by the US are expected to support the assault. The Sunni forces will be tasked with holding Ramadi and the surrounding territory after ISIS is driven out, US military officials said.
These Sunni tribal elements will participate in the operations as an autonomous force, not subject to the central Iraqi command structure, according to US officials.
“They are essentially operating together, but without a strict and formalized command and control relationship being established,” Warren said.
US imperialism is seeking to promote the Sunni militias as a means of deepening its penetration of Iraqi society and gaining leverage over the Iranian-backed central government. Just as during the 2003-2011 US occupation, American imperialism is striving to maintain its stranglehold over Iraq through the stoking up of sectarian divisions and the mobilization of tribal-based militias.
Despite the humiliating blows the group has delivered to US-trained government forces in Iraq, ISIS continues to serve as a useful cat’s paw for US imperialism’s machinations on both sides of the Iraq-Syria border. It has become the central pretext for a much broader escalation of the US “war on terror” across large areas of Africa and Asia, and within the US itself.

11---US and NATO engage in unprecedented military exercises in Europe

The United States and its European and NATO allies are currently engaged in or preparing to undertake the largest military exercises ever to take place in the host countries involved. These operations include the deployment of American and NATO soldiers and heavy military equipment across the breadth of the European continent, with a focus on Russia’s western border....

In addition to ongoing exercises in Eastern Europe, Trident Juncture 2015, the largest NATO military exercise since 2002, is scheduled to begin in late September and will involve 36,000 troops form more than 30 countries. The exercises will take place in Spain, Italy and Portugal, with all 28 NATO countries plus five allies participating....

The US and its European allies backed the coup as part of its long-term strategy of removing Ukraine from Russia’s historic sphere of economic and military influence, with the ultimate aim of encircling and transforming Russia into a semi-colony....

12--Abenomics needs to be ‘reloaded’, warns IMF

13--Greece: Out of the Mouth of “Foreign Affairs” Comes the Truth
14--It's time I reminded you how expensive stocks are — a 50% plunge would not be a surprise

What my analysis is telling me is:
1) stocks are extremely expensive and will eventually revert toward historical means, probably via a sharp correction of 30% to 50%
2) long-term stock returns from today's level will be about 2% per year — nothing to write home about...
1966-2014Business Insider, St. Louis Fed
Now lets zoom in. In many of these time periods, you'll see that sustained Fed tightening has often been followed by a decline in stock prices. Again, not immediately, and not always, but often. You'll also see that most major declines in stock prices over this period have been preceded by Fed tightening.

15---The problem is liquidity

From the looks of JPMorgan’s share price, one would think the financial world is bathing in a sea of tranquility rather than experiencing crashing commodity prices, tremors in the Eurozone, Canada acknowledging two quarters of contraction, ruptures in China’s stock markets, and energy and mining junk bonds losing 20 to 30 percent in a month....

BlackRock is an extremely dangerous company,’ Mr. Icahn proclaimed at CNBC’s Delivering Alpha conference in New York…Mr. Icahn steered the bulk of the conversation away from activism—the billing of the event—to his growing fears about a bubble in high-yield bonds and what he called dangers of exchange-traded funds [ETFs] run by firms like Mr. Fink’s.

“Mr. Icahn blamed the increasing prices for such relatively risky debt partly on Mr. Fink’s sprawling, $4 trillion asset manager and its exchange-traded funds, which Mr. Icahn said were causing a liquidity problem because they have snapped up so many assets…”
The fear is that there will be no buyers if investors in junk bond ETFs panic and stampede for the exits. Icahn is not the only person worrying about this scenario. In June, Richard Berner, Director of the Office of Financial Research, appeared at the Brookings Institution to discuss recent bouts of bond market illiquidity. Berner quoted SEC Commissioner Michael Piwowar on the issue of ETFs, who has said:

“The growth of bond mutual funds and exchange-traded funds in recent years means that these funds now hold a much higher fraction of the available stock of relatively less liquid assets than they did before the financial crisis…their growth heightens the potential for a forced sale in the underlying markets if some event were to trigger large volumes of redemptions.”
We may be closer to that trigger than many investors realize. Bloomberg Business is reporting this morning that “SandRidge Energy Inc. bonds have lost almost 30 percent since June, while notes of miner Cliffs Natural Resources Inc. are down more than 27 percent.” The article also notes that bonds of distressed debt issuers “are on pace to lose more than 20 percent for the second straight year, the worst performance since 2008.”

16--What could go wrong?

A dark pool (also called an Alternative Trading System or ATS) is a private, unregulated trading venue that functions like a stock exchange by matching buyers with sellers – but it does so in the dark, without showing its bids and offers on stocks to the public. That has the potential for a great deal of price manipulation.
What could possibly go wrong?

We think it might have far more to do with the really bad market structure in the U.S. As we wrote lost year:
“Goldman Sachs, under current market structure, can underwrite stocks and bonds for its customers; trade stocks in its own private stock exchange it runs behind a dark curtain; put out buy and sell recommendations that move stock prices up or down; co-locate its computer servers next to the computers of the regulated stock exchanges in order to get a speed advantage and an early peek at other traders’ orders; and, to round out the picture, it’s allowed to own and operate an FDIC-insured commercial bank where it can dole out lines of credit.”

Yesterday, domestic oil (West Texas Intermediate or WTI) dipped below $50 a barrel during intraday trading, reaching a level not seen since April. Gold closed at the lowest price in five years while sugar traded at a six year low. Wheat has lost almost 9 percent since last week. The Bloomberg Commodities Index traded at a 13-year low yesterday.

The selloff in commodity prices is sending the following market messages: China is highly likely overestimating its economic growth rate of 7 percent that it reported last week; despite six years of central banks’ efforts to rev up economic engines, the money isn’t reaching consumers – it’s still flowing to the one percent.
The chart below showing the relapse in commodity prices and stock prices in 1937, after the Fed thought it had beaten the worst of the Great Depression, should send an important warning message to today’s Fed.
Producer Price Index for All Commodities During Great Depression vs Dow Jones Industrial Average (Chart Courtesy of St. Louis Fed)
Producer Price Index for All Commodities During Great Depression vs Dow Jones Industrial Average (Chart Courtesy of St. Louis Fed

Thursday, July 23, 2015

Today's links

“It is clear that the administration has adopted the rigid attitude that any nation that has an independent foreign policy and does not simply capitulate and conform to Washington’s preferences and desires is a threat to the United States."   American scholar James Henry

"Every bomb, refugee crisis, civilian death toll and jihadist success can be laid at America’s doorstep but Iran is made out to be the villain. America’s insistence on imperialism and control of other countries is the cause of every catastrophe.....the United States is still the main threat to world peace." Margaret Kimberley

1--The police murder of Sandra Bland

The evolution of the police into heavily-armed occupation forces in working-class communities is a central feature of the domination of political reaction over all aspects of US society. Over this period, the methods employed by the US military in its wars abroad have been used ever more directly to deal with explosive social tensions within the United States.
Thuggish actions such as those carried out by Encinia are deliberately encouraged in America’s police forces, which attract the most backward and violent social elements. This type of brutality is promoted at the highest levels of the state, beginning with the presidency. President Barack Obama boasts of “taking out” alleged terrorists by means of drone assassinations.

Police officers are trained to respond with extreme aggressiveness to any questioning of their authority. When an officer commits an act of violence or even murder, the entire political apparatus springs to his defense. He or she is given the most favorable possible coverage on the news, while prosecutors maneuver to avoid bringing charges.
The Obama administration, while posing as an opponent of excessive force by the police, does everything in its power to prevent the bringing to justice of killer cops.

The White House has not brought federal civil rights charges against officers in any of the high-profile police murders in recent months, including the killing of Freddie Grey in Baltimore last April, the murder of Eric Garner in New York City in July of 2014, the fatal shooting of Michael Brown in Ferguson, Missouri in August of last year, and the killing of 12-year-old Tamir Rice in Cleveland last November. The administration has taken the side of the police every time a police violence case has come before the Supreme Court.
Police in the US have killed 647 people so far this year—an average of more than three per day. This follows the 1,100 deaths in 2014, according to one database.

While thousands of people have been killed at the hands of police over the past decade, only 54 officers have been charged for killing people in the line of duty, of whom only 11 were convicted, receiving mostly wrist-slap sentences, according to a recent analysis by the Washington Post.
The Obama administration has facilitated the militarization of the police, having transferred billions of dollars in military hardware to local police departments. This steady flow of advanced weaponry has continued unabated despite mass protests against police killings over the past year.

The death of Sandra Bland has once again produced popular shock and anger that such things should happen in America. Not only do they happen, they occur with nauseating regularity. Every new killing produces nothing but empty expressions of concern and self-serving rationalizations by the political establishment. No one is held to account. Nothing is done to prevent such outrages from happening again.

2---Japanese government ramps up tensions with China

3--Global commodity prices in sharp decline-

The decline reflects the slowdown in the Chinese economy and the attempts of Beijing to shift away from the credit-based investment and infrastructure boom it initiated to counter the impact of the 2008-2009 global financial crisis.
Industrial metals, including copper and zinc, have experienced a significant decline and have now been joined by aluminium, a key input in many products. Its price hit a six-year low this week on the news that China was going to export excess supplies of aluminium, rather than close old or inefficient producers.
China accounts for about 40 percent of global demand in industrial metals. Concerns over its slowdown—annual gross domestic product growth is at its lowest rate in a quarter of a century—are certain to have increased following the recent turbulence in Chinese share markets that saw $3 trillion wiped off market capitalisations.
In Australia, the eyes of financial authorities are firmly fixed on the price of iron ore. In both countries, the central bank has cut official interest rates in a bid to boost flagging economic growth. This has had perverse effects, however, by fueling a housing price bubble. In Toronto and Vancouver, house prices have risen by as much as 9 percent over the past year, even as the economy stagnates.
In Sydney, Australia’s largest city, house price escalation has been even steeper. The median price of a home has reached more than $A1 million, after rising by almost 23 percent over the past year.
As house prices go into the stratosphere, the vulnerability of the underlying economy to the shift in commodity prices was highlighted in a recent article in the London-based Daily Telegraph warning that Australia could turn into a “new Greece.”
The economy enjoyed a boom during what has become known as a commodities “super-cycle.”

4---"No demand" global economy. Workers being squeezed everywhere to divert more $ to 1percent

US corporations have spent more on stock buybacks so far this year than on factories and equipment.....The intractable nature of this crisis, within the framework of capitalism, is underscored by the IMF’s updated World Economic Outlook, released earlier this month, which projects that 2015 will be the worst year for economic growth since the height of the recession in 2009

The Fed reported that factory production failed to increase in June for the second straight month and output in the auto sector fell 3.7 percent. The Commerce Department reported that retail sales unexpectedly fell in June, declining by 0.3 percent.
These statistics follow the employment report for June, which showed that the share of the US working-age population either employed or actively looking for work, known as the labor force participation rate, fell to 62.6 percent, its lowest level in 38 years. During the month, some 432,000 people in the US gave up looking for a job.

The report incorporates the Fed’s projections for US economic growth, published following the June meeting of the central bank’s policy-setting Federal Open Market Committee. They include a downward revision of the projection for 2015 to 1.8 percent-2.0 percent from the March projection of 2.3 percent to 2.7 percent.

Since the recession began, the gains in… nominal compensation [workers’ wages and benefits] have fallen well short of their pre-recession averages, and growth of real compensation has fallen short of productivity growth over much of this period.”
* “Overall business investment has turned down as investment in the energy sector has plunged. Business investment fell at an annual rate of 2 percent in first quarter… Business outlays for structures outside of the energy sector also declined in the first quarter…”

Yellen’s remarks and the Fed report indicate, the explosion of asset values and wealth accumulation at the very top of the economic ladder has occurred alongside an intractable and continuing slump in the real economy.
In her prepared testimony to the House Financial Services Committee and the Senate Banking Committee, Yellen noted the following features of the performance of the US economy over the first six months of 2015:
* A sharp decline in the rate of economic growth as compared to 2014, including an actual contraction in the first quarter of the year.
* A substantial slackening (19 percent) in average monthly job-creation, from 260,000 last year to 210,000 thus far in 2015.

* Declines in domestic spending and industrial production.
In her July 10 speech to the City Club of Cleveland, Yellen cited an even longer list of negative indices, including:
* Growth in real gross domestic product (GDP) since the official beginning of the recovery in June, 2009 has averaged a mere 2.25 percent per year, a full one percentage point less than the average rate over the 25 years preceding what Yellen called the “Great Recession.”
* While manufacturing employment nationwide has increased by about 850,000 since the end of 2009, there are still almost 1.5 million fewer manufacturing jobs than just before the recession.
* Real GDP and industrial production both declined in the first quarter of this year. Industrial production continued to fall in April and May.

* Residential construction (despite extremely low mortgage rates by historical standards) has remained “quite soft.”
* Productivity growth has been “weak,” largely because “Business owners and managers… have not substantially increased their capital expenditures,” and “Businesses are holding large amounts of cash on their balance sheets.”

* Reflecting the general stagnation and even slump in the real economy, core inflation rose by only 1.2 percent over the past 12 months

5---"Far Worse Than 1986": The Oil Downturn Has No Parallel In Recorded History, Morgan Stanley Says

The forward curve has started to price this in: as the chart shows, the forward curve currently points towards a recovery in prices that is far worse than in 1986. This means the industrial downturn could also be worse. In that case, there would be little in analysable history that could be a guide to this cycle...

OPEC has added 1.5 mb/d to global supply in the last four months alone.

Our commodity analyst Adam Longson argues that the oil market is currently ~800,000 b/d oversupplied. This suggests that the current oversupply in the oil market is fully due to OPEC's production increase since February alone...

which brings us right back to what we've been saying for months: the expiration date for heavily indebted US drillers is fast approaching, and if Morgan Stanley thinks the oil downturn has no parallel in "analysable history," wait until they see the carnage that will unfold in HY credit when a few high profile defaults in the oil patch send the retail crowd running for the junk bond ETF exits.

6---Neoliberalism has triggered global slowdown

World trade isn’t down for just one month, or just one region. It wasn’t bad weather or an election somewhere or whatever. The swoon has now lasted five months. In addition, the CPB decorated its report with sharp downward revisions of the prior months. And it isn’t limited to just one region. The report explains:
The decline was widespread, import and export volumes decreasing in most regions and countries, both advanced and emerging. Import and export growth turned heavily negative in Japan. Among emerging economies, Central and Eastern Europe was one of the worst performers.

7--The myth that the bailout was to save French and German banks

So I think the more incendiary rhetoric — anything claiming that the 2010 bailout was a con-trick that was only organised to prevent a state bailout of the French and German banks — can’t be stood up. Nonetheless, I do think there’s a lot of truth to the view that a strong motivation for the bailout was to preserve financial stability in Europe.
Bear in mind that I think Davies overstat
es his case a bit. Deutsche Bank was fabulously thinly capitalized. Moreover, we saw in the US how losses (here due to subprime loans and bonds and CDOs) could put an institution with derivatives exposures into a death spiral. Losses lead to credit downgrades. Credit downgrades lead to bigger haircuts on derivatives positions where the bank has to post collateral. Downgrades also lead to higher funding costs. That can lead to more downgrades….And SocGen and Paribas were very big derivatives players.

8---RIA Novosti Ukraine news agency headlined on July 19th“Ukraine Today: Poverty, Absolute Poverty, and Retirees Dream of Death,”  and reported that, "Two years ago, the average salary of Ukrainians in dollar terms amounted to 275 American money. Now it’s less than 100 dollars.”
This RIAN report says that, “Neither the President of Ukraine Petro Poroshenko, nor Prime Minister Yatsenyuk, nor Speaker of Rada [Parliament] Volodymyr Groisman — none of them — expresses public concern about the lowered living standards; no one has called to review them, much less to improve these economic conditions.”

It goes on to say, "Expert of the Public Safety Fund Yuri Havrylchenko believes that the current level of income of the majority of the Ukrainian population is poverty, and retirees are in a state of slow death from starvation. … [He says,] 'In Ukraine, all workers live in poverty. The level of their income and consumption is less than 17 dollars a day. With a few exceptions, almost all pensioners live below the absolute poverty line, consumption is less than $5 a day. This means that they are dying of hunger, only slowly. If they do not even have enough to eat, then what can we say about the cost of everything else?'

9---Capital exodus from China reaches $800bn as crisis deepens
China is reverting to credit stimulus after attempts to engineer a stock market boom failed horribly. The day of reckoning is delayed again

10--EU refuses to acknowledge mistakes made in Greek bailout, Richard Koo

IMF has forgotten lesson of Japan’s failed fiscal consolidation

In 1997 the IMF did not recognize that Japan was in a balance sheet recession, in which the private sector refuses to borrow money even at zero interest rates, and demanded that the government implement fiscal consolidation measures. It also argued that the economic toll of those measures would be offset by a boost to the economy from the necessary structural reforms.
The Hashimoto administration boldly undertook six major reforms, among which was fiscal consolidation, which caused the economy to contract for five straight quarters (based on data available at the time) in what was reported to be the nation’s worst postwar recession. It also led to massive problems in the banking sector, with the Japanese economy eventually described as being in “meltdown” mode.

11--Mining shares plunge as commodities index hits 13-year low

12--Ray Dalio: "They've (China) stopped buying ... foreign sovereigns because they don't have the capital to do it."

13--Plan to siphon capital from foreign markets to boost wall street

China's main stock index, the Shanghai composite, recently plummeted 30 percent after running up more than 150 percent in about a year. In response, the government imposed a series of restrictions to stem the fall, including a ban on new initial public offerings and a measure preventing large stakeholders from selling their shares.

At the same time, the Reuters CRB Commodity Index has recently sunk, with gold at its lowest levels since March 2010 and a rally in crude oil sputtering out.
Economic weakness is not limited to China, El-Erian said. Of the BRICS countries, only India is looking good, while he sees problems in China, Russia, Brazil and South Africa.
"If you look around the world there is no longer a dynamic source of growth," he said.

The market is also starting to price in the high likelihood the Federal Reserve will hike interest rates this year, putting further pressure on commodities.
Higher interest rates would presumably draw investors into the U.S. bond market, pushing up the value of the dollar. A stronger greenback makes dollar-denominated commodities more expensive to holders of other currencies.

14--Existing home sales surge, prices hit record
15--Lukoil returns to Iran

According to the text of the Joint Comprehensive Plan of Action (JCPOA), Iran will be recognized by the United Nations as a nuclear power and will continue its uranium enrichment program.
Some restrictions will be placed on Iran’s nuclear program in exchange for the removal of sanctions against the Islamic Republic.

17--US to place AMD components in Poland despite Iranian deal – Kerry’s deputy

18--Iran preparing to enter WTO, set up preferential trade with EU

Tehran is also interested in a preferential trade deal with the EU,

The world’s developing economies, BRICS and Shanghai Cooperation Organization (SCO) are also interested in strengthening ties with the Iran. In July, Iranian President Hassan Rouhani attended the BRICS/SCO summits in Ufa, Russia to discuss various questions with Russian President Vladimir Putin and leaders of other nations that attended the summits. Iran’s joining the SCO after the embargo is withdrawn was among the questions raised. Iran now has an observer status with the bloc.

19--Gaining Ground: BRICS, SCO Blocs Acquire New Security, Economic Dimensions

With the planned lifting now of US economic sanctions on Iran, this could mean a huge economic deepening of the Eurasian economic space from Shanghai to St. Petersburg to Tehran and beyond, the nightmare scenario of US geopolitical actors like Zbigniew Brzezinski or Henry Kissinger," Engdahl underscored.

"Both trade proposals are a desperate attempt by Washington strategists and their corporate backers in agribusiness such as Monsanto or the pharmaceutical industry to dominate world trade and finance," he remarked.
20--The Imperial Designs on Iran

On July 18, even before the UN unanimous vote, Iran’s Supreme Leader Ayatollah Khamenei re-entered the scene with a bang, clarifying where Iran is heading next, geopolitically. He emphasized the nuclear deal would not change Tehran's policy toward the "arrogant" US government. John Kerry was mortified; as if he didn’t know, based on his extensive conversations with Zarif.

So there we have it. Washington carrots will buy nothing – as the stick also didn’t. What Iran post-sanctions is aiming at is what’s brewing in the New Great Game in Eurasia; the interlocking integration promoted by the Chinese-led New Silk Roads and the Russia-led Eurasia Economic Union (EEU); the infrastructure financing of the BRICS New Development Bank (NDB) and the China-led Asian Infrastructure Investment Bank (AIIB); the prospect of soon joining the Shanghai Cooperation Organization (SCO); the Eurasia-wide offensive to bypass the US dollar; and of course the normalization of trade and commerce with Europe.

21--Has The Land War Begun: Turkish Tanks Are Firing Into Syria

22--Will Turkey invade Syria?  Brookings

the theory goes that Syrian Kurdish advances against ISIS have caused such concern in Turkey that the Kurds will create some sort of state or autonomous region along Turkey’s southern border. To prevent that outcome, the Turkish government, we are told, is finally willing to intervene in Syria.
Well, maybe. But, in our view, the reason that Turkey might now finally be contemplating such a step says more about changes in the domestic and international standing of the Turkish government than about the course of events in Syria.
Internationally, Turkey may be driven by the sense the White House now prefers their Kurdish partners in Syria to Turkey. The Turkish government is extremely angry about the emerging alliance between the United States and the Syrian Kurds, especially the Kurdish Democratic Union Party (PYD), a Syrian affiliate of the Turkish Kurdistan Workers' Party (PKK). They attribute Kurdish success against ISIS to the American willingness to support Syrian Kurdish forces with air power and supplies. In the Turkish view, the PYD is simply a branch of the PKK, which both Turkey and the United States have branded a terrorist group. Allowing the PYD to unite the Kurdish areas of Syria would therefore represent an existential threat to Turkey.
By threatening to intervene in Syria, the Turkish government seeks to change a U.S. policy that it finds potentially very damaging to Turkish interests

23--Terrorism or false flag in Turkey?