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?

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