Thursday, September 10, 2015

Today's Links

Back on May 22, 2013, in remarks to the Joint Economic Committee of Congress, then Fed Chairman Ben Bernanke referred to the risks building up in higher risk bond markets. Bernanke explained:


“…the Committee is aware that a long period of low interest rates has costs and risks. For example, even as low interest rates have helped create jobs and supported the prices of homes and other assets, savers who rely on interest income from savings accounts or government bonds are receiving very low returns. Another cost, one that we take very seriously, is the possibility that very low interest rates, if maintained too long, could undermine financial stability. For example, investors or portfolio managers dissatisfied with low returns may ‘reach for yield’ by taking on more credit risk, duration risk, or leverage. The Federal Reserve is working to address financial stability concerns through increased monitoring, a more systemic approach to supervising financial firms, and the ongoing implementation of reforms to make the financial system more resilient.”
(The reality is that it has been the incessant chatter by the Fed about raising interest rates that has created the “insurgent dollar.” That now increasingly appears to have been a gambit to intentionally talk up the dollar to avoid capital flight)


China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.
Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources.


Oil futures will be the first Chinese contract to permit direct participation of foreign investors. However, this is not the first step for greater oil market openness in China. In July, Beijing allowed private companies to import crude. Previously importing was only done by state-run majors such as Sinopec, China National Petroleum Corporation and China National Offshore Oil Corporation, the Xinhua news agency reported.


2-- Bond markets and banks may determine who lives and who dies in the U.S. shale patch.


The shale sector is now being financially stress-tested by low prices, exposing shale’s dirty secret: many shale producers outspend cash flow and thus depend on capital market injections to fund ongoing activity," Citi analysts led by Richard Morse wrote in research published on Tuesday....


Where once even the riskiest shale borrowers were able to tap return-hungry financiers at a rate of just 7 percent, the Citi analysts are forecasting that shale's cost of capital will move closer to 15 percent, shifting the industry's breakeven price higher by from $5 to $15 a barrel.


3--Volatility is not what it used to be
4--Bond Market Sends Fed All-Clear to Raise Interest Rates


5--Election year morality


The Justice Department says it will undertake a new effort to combat white-collar crime in the wake of the financial crisis and corporate misconduct on Wall Street.
"Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the board room," Deputy Attorney General Sally Yates will say in a speech Thursday, according to excerpts obtained by CNN.

The department on Wednesday issued a new memo to prosecutors explaining how it would tackle wrongdoing that placed new restrictions on corporations that don't report misconduct and amended how settlements will be reached. Prosecutors will also increasingly pursue corporations in lawsuits rather than civil cases against individuals.

The memo could indicate which direction new Attorney General Loretta Lynch will steer the department, which in recent years has focused on terrorism.
"Our mission here is not to recover the largest amount of money from the greatest number of corporations; our job is to seek accountability from those who break our laws and victimize our citizens," Yates will say. "There is real value, however, in bringing civil cases against individuals who engage in corporate misconduct, even if that value cannot always be measured in dollars and cents


6--Obama rips GOP candidates as anti-union
7--President Barack Obama's shifting stance on gay marriage
8--Emerging markets call on Fed to lift rates and end uncertainty9--
  http://www.businessinsider.com/another-sign-global-liquidity-drying-up-2015-9#ixzz3lItXcXKP


10--US credit signals warning for risk assets


11--Citigroup: ‘Rapidly Rising Risk’ of Global Recession
A global downturn fueled by China’s woes could very well soon be upon us, warns Citi’s top economist.


We do believe that a recession is the most likely outcome during the next few years, but it is important to distinguish between a moderate recession without a regional or global financial crisis and a deep or severe recession accompanied by a regional or global financial crisis.
To clarify further, the most likely scenario (40% probability), in our view, for the next few years is that global real GDP growth at market exchange rates will decline steadily from here on and reach or fall below 2% around the middle of 2016. Growth is likely to bottom out in 2017 and start recovering again from late 2017 or early 2018. The output gap could be closed (the world exits recession) late 2018 or 2019. The next most likely outcome (30%) is that the global economy will avoid recession during the next few years and grow at a rate roughly equal to that of potential.

There is also a probability of 15% that the global economy goes into severe recession and financial crisis, and a 15% likelihood that the global economy will enter a boom (a period of overheating), with output above potential and, for a while, growing faster than potential.
In our view, the probability of some kind of recession, moderate or severe, is therefore 55%. A global recession of some kind is our modal forecast. A moderate recession is our modal forecast if we decompose recession outcomes into moderate and severe ones and assign separate probabilities to them...

There are two risks that could worsen the outlook:

1) The first is that we get another systemic debt crisis, in developed markets, in emerging markets, or both. The emerging and developed markets remain very highly leveraged. In many advanced countries, the public debt burden is higher than it has ever been except during and in the aftermath of major wars, when the political economy of spending cuts and tax increases was very different. Combined public and private non-financial gross debt burdens are at a record high. In many EMs, private leverage has soared.

We simply don’t know much about how to engage in effective macroeconomic stabilization in highly leveraged environments, or how to manage a financial crisis and limit the immediate damage it does without increasing the likelihood and the magnitude of the next crisis, and bringing it forward. The track record of the supervisory and regulatory authorities, central banks and finance ministries in most DMs (and in all large DMs) before, during and since the Great Financial Crisis has been poor. For some of these actors, this may have been because of political constraints, beyond their control, on their ability to act. Many of the supervisory, regulatory, monetary and fiscal authorities in the EMs are untested in a severe financial crisis. The last time we faced a situation like this there were, outside Japan, policy interest rates that could be cut, and most countries had more fiscal space. Today, the interest rate is out of commission as a policy instrument in most DMs and fiscal space is more severely constrained than in 2008 almost everywhere.



Russia on Sept.10 denied it was ramping up its military presence in Syria, saying it was supplying its Middle Eastern ally with humanitarian aid and military equipment in accordance with existing contracts.

"Russian planes are sending to Syria both military equipment in accordance with current contracts and humanitarian aid," Russian Foreign Minister Sergei Lavrov told reporters.
 
"We have never made our military presence (in Syria) a secret," he said, denying claims that Russia was beefing up its presence in the war-torn country.    

"Russia is not taking any additional steps," Lavrov said.
 
US officials said this week that Russia was solidifying its foothold in Syria, sending ships, armoured personnel carriers and naval infantry to the country in an apparent effort to prop up the besieged regime of President Bashar al-Assad.
 
Lavrov rubbished suggestions that Russia's greater involvement in Syria would throw a wrench in the plans of a Western coalition to fight the Islamic State of Iraq and the Levant (ISIL), which has taken control over swathes of Syrian territory.
 
"This logic is uncomprehensible to me," Russia's top diplomat said. "The Syrian army is the most effective force that can stand up to the terror threat on the ground."  

Lavrov said he had discussed his country's presence in Syria with US Secretary of State John Kerry in two phone calls in the past few days.
 
Lavrov said his American counterpart was concerned that Russia's support for Assad would ultimately strengthen ISIL because its sponsors would be forced to ramp up their military and financial support.
 
"Well, that logic has been turned upside down," Lavrov said.
 
"Once again this is an attempt to appease those who are using terrorists in their fight against unwanted regimes."  

"I believe this is a colossal mistake." 


"If we wanted, we could crush you like a bug. You have been able to live until today only because we have shown mercy to you."
These are not lines from a mafia movie. They were printed by a pro-government newspaper called Star yesterday. The “target” in question is Ahmet Hakan, a well-known TV show host on the CNN Türk TV channel. The author is a person who, in his columns, only focuses on hand-picked journalists from the Doğan media group and the Gülen movement-affiliated Zaman daily and Koza İpek Media Group. Each and every article is filled with hate speech and threats toward colleagues who in these dire times try to stand tall in their professional conduct.


Although this libelous campaign has continued for some time, there is no intervention from either the editors of Star or prosecutors. On the contrary, these types of columns printed by pro-government outlets have become the norm, with people watching by in shock and awe.
In a broader picture, we are all witnessing Turkey becoming lost at an accelerating speed. One of Turkey's most influential “centrist” dailies, Hürriyet, was attacked by angry mobs recently two nights in a row, its building left damaged and its staff scared out of their minds when on the second night, some thugs made their way to the upper floors of the building. Police arrived on the scene late and the mob -- led by a young AKP deputy -- left, shouting slogans supportive of President Recep Tayyip Erdoğan and promising to come back until Hürriyet staff "get used to it


15---The coup in ankara


What led him to believe that the AKP would do better in a new election? To answer this question we have to understand Erdoğan's assumptions. He assumed that the voters who turned against him just wanted to send a message of warning. Yes, there was some discontent with himself and his party. But he assumed that the majority of voters still preferred the economic stability and security that AKP governments had provided since 2002.


He believed people came to take Turkey's political stability and economic prosperity over the last decade for granted. As a result, all he had to do was to show that such prosperity and stability could easily be lost in the absence of an AKP majority in Parliament. The last couple of months, during which the country has declared war against the Kurdistan Workers' Party (PKK) and the Islamic State in Iraq and the Levant (ISIL) while all economic indicators and consumer confidence have collapsed, have allowed Erdoğan to make this case. How else can one interpret Erdoğan's outrageous recent comment that "everything would be different had one political party achieved a parliamentary majority with 400 deputies in Parliament"? He is basically saying that the only way out of the current chaos is to reelect the AKP and reward him with a presidential system.


Today, Erdoğan's strategy of exploiting this situation of "controlled chaos" -- showing that political instability, economic collapse and war is the only alternative to an AKP majority -- is falling apart for a simple reason. More and more people are holding the AKP and Erdoğan responsible for the collapse in the economy and security situation. The opinion polls show that while the pro-Kurdish Peoples' Democratic Party (HDP), the CHP and the Nationalist Movement Party (MHP) are all holding their ground or even improving their prospects, the trend for the AKP is in the opposite direction.


16--What we have been fearing for some time has finally happened.


The boiling tension in Turkish society has reached a threshold where hundreds of thousands of citizens have started to attack the houses and businesses of Kurdish citizens. In many cities, seasonal workers of Kurdish descent have been attacked, their cars burned and their physical security endangered. This is particularly disgraceful because these events occurred on the 60th anniversary of the Sept. 6-7, 1955 events when thousands of businesses and homes of Rums were attacked in İstanbul. It appears we have learned nothing in the last 60 years. Society is susceptible to large­-scale provocation

17--
Erdoğan is not a source of stability. On the contrary, he is source of instability. Think of a leader whom all EU countries are against; note that 40 percent of Turkey's exports are to EU countries.
“Think of a leader whom world leaders avoid calling. It is no longer a secret that the undersecretary at the State Department in the US was berated by Barack Obama just because he spoke to Erdoğan over the phone. Imagine a leader whom everyone, including Saudi Arabia and Qatar, is trying to distance themselves from. They do not want to appear in the same picture. Unfortunately, Erdoğan's image in the world is worse than that of Vladimir Putin. Will Erdoğan bring stability or instability to Turkey with this image?
...
Those who view Erdoğan as a source of stability were misled by the perception from the past. The current Erdoğan is not a person who would be able to bring stability in the world and the country. What do you think a leader who shelved the existing legal system and reshuffled the police, transformed the state into an intelligence state, banned Twitter, restricted the media, tried to shut down a bank, waged a war against a group with millions of members and promised he would do more if he gains further support would do


18--No matter who is doing what, Turkey is walking on thin ice. The Hürriyet attacks represent fascist tendencies; attacks on Kurds promise extremely dangerous ethnic conflicts. This might be the first time that Turkey has faced the danger of a civil war. Do we have the political will to prevent it, or will this political will contribute to it?




19--Workers in different parts of Turkey have been attacked just because they are Kurds. Some people have been harassed because they were speaking Kurdish. More than 400 HDP offices have been vandalized over the past two days. On the anniversary of the Sept. 6-7, 1955 incidents -- when ethnic Greeks in İstanbul and İzmir were subjected to an ethnic-cleansing operation -- similar attacks took place in a number of towns and cities in Turkey. The only difference was that the attackers were more furious this time and that Kurds, and not ethnic Greeks or non-Muslims, were the target....


The chaos plan, being implemented to ensure that the Justice and Development Party (AKP) wins a majority of seats in Parliament and President Recep Tayyip Erdoğan consolidates his power, is making Turkey pay a huge price. In two separate statements published in the media over the past month, President Erdoğan said, speaking about some groups and segments of society, “You will pay a price; you will be held accountable.” But it appears that the price he is referring to is now graver than what he initially predicted.
The main goal of Erdoğan and AKP figures is to ensure that voters will see the pro-Kurdish Peoples' Democratic Party (HDP) as no different to the Kurdistan Workers' Party (PKK) and that this perception will have an impact on the general election. The expectation of this perception is that the HDP will remain below the 10 percent election threshold and that the AKP will win a majority of seats in Parliament. They have been making this propaganda for months, but the result is that they have provoked racist-nationalist sections of society.
My sources in the affected regions note that the security forces tell them that after every PKK attack, they will make the people in the region pay the price for it. We have an environment where all Kurds, regardless of whether or not they support the PKK, are considered enemies...


This would lead to a bloodier and more chaotic Turkey. This would lead to an unmanageable Turkey.
This would lead to a civil war with ethnic, religious and ideological dimensions in Turkey. This would lead to the destruction of the values and principles that keep Turkish society together. This would lead to a situation where Turkey becomes an ungovernable country and its future uncertain.
Why are Erdoğan and the AKP obstacles that Turkey should overcome for the sake of its democratic future? The Kurds, who are currently under attack, respond to this question as follows: Do you know how you feel when your hopes are broken? Do you know how you feel when you face a government that wants to destroy you, despite the fact that you actually believed peace would be achieved? The test Turkey is facing is not whether the AKP will win a majority to form a single-party government; the test is whether or not Turkey will be able to preserve its unity and territorial integrity


20--They say they are protesting terrorist attacks. But they are producing the worst kind of racist attacks you could ever imagine. They beat people to death just because they speak Kurdish. They bring shops to the ground just because they have names on them like Diyarbakır, the cultural capital city of the Kurdish southeastern region of Turkey. When I was writing this piece I was reading Twitter messages that said the Peoples' Democratic Party (HDP) building in the province of İzmir was being surrounded by violent protesters who were chanting racist slogans and trying to set fire to the building. In cities across the country, HDP buildings have been attacked, broken into and destroyed


21--Washington’s heightened information warfare against Syria at this particular time can be read as a strong statement of how successful it feels Russia has lately been in attempting to resolve the country’s problems, as this level of soft destabilization is unprecedented since the crisis first erupted. The US never before tried using the refugee flows out of the country as a means to encourage its British and French allies to militarily involve themselves in the country, nor has it ever invented a Russian military intervention there (although it notably did so in Eastern Ukraine). Moreover, the US is clearly concerned about the humanitarian aid that Russia is giving to Syria (believing it to be a cover for covert military aid above what has been publicly declared), as it’s taken the dramatic step of asking one of the overflight states, Greece, to halt its cooperation with Moscow in order to inhibit it. All of these measures are demonstrable of the US’ fear that Russia’s physical and diplomatic assistance to Syria has finally moved it to the tipping point of reversing the terrorists’ dynamic and enacting a pivotal change in bringing the four-and-a-half-year war to a pro-government conclusion


22--Corbyn on Ukraine 2 min must see


23--How America Double-Crossed Russia and Shamed the West
“I was there when we told the Russians that we were going to make them a member, we were--observer first and then a member”: Lawrence Wilkerson, 3 October 2014, on The Real News Network, at 18:54 in the interview.
“When I spoke with Baker, he agreed that he told Gorbachev that if the Soviet Union allowed German reunification and membership in NATO, the West would not expand NATO "one inch to the east”: Bill Bradley, 22 August 2009, in Foreign Policy.


24--Refugees Flee American Aggression


The ongoing migrant crisis in Europe is a direct result of American and NATO interventions and aggressions in the Middle East. Had those partners in crime not exacted regime change in Libya, that country would not be a magnet for human trafficking and an embarkation point for desperate people. The plan to produce the same result in Syria has failed thus far but there is still chaos and suffering on a mass scale. These refugees exist because of imperialism which has laid waste to nation after nation....
The corporate media cover the journeys of the would-be migrants and act as though the cause of the catastrophe is somehow mysterious. They never state what is true and obvious, that the western nations created this misery. They and their allies among the Persian Gulf monarchies are entirely to blame....


The United States and other NATO governments have not been shy in exposing their support for so-called rebels in Syria and continue to utter the loathsome phrase, “Assad must go.” In the topsy-turvy immoral universe of the United States it is acceptable to destroy Syria without one word of condemnation coming from the nation’s editorial pages. Instead politicians and the press repeat their lies and when they speak of war at all they lay blame at the feet of the Syrian government which has a right to defend its territory and sovereignty...


While officials In Washington, London and Paris dissemble because their hands are dirty, the corporate media ratchet up the call to “do something.” If they did their job they would tell readers and viewers why families with small children risk their lives in unseaworthy boats. Instead they all call for more war. They repeat official propaganda and make up some of their own. The unrelenting effort at regime change in Syria is the cause of this crisis and more destruction will only increase the awful toll on human beings


Regime Change Refugees: On the Shores of Europe


25--
As Kolko noted, the Israeli newspaper Ha’aretz then “published a series of extremely detailed accounts, including the draft accord, confirming that Syria ‘offered a far reaching and equitable peace treaty that would provide for Israel’s security and is comprehensive’ — and divorce Syria from Iran and even create a crucial distance between it and Hezbollah and Hamas.
“The Bush Administration’s role in scuttling any peace accord was decisive. C. David Welch, Assistant Secretary of State for Near Eastern Affairs, sat in at the final meeting [and] two former senior CIA officials were present in all of these meetings and sent regular reports to Vice President Dick Cheney’s office. The press has been full of details on how the American role was decisive, because it has war, not peace, at the top of its agenda.”


26--That August, 2011 following critical reports from the United Nations and human rights organizations about the regime’s responsibility for killing and abusing civilians, President Obama joined European leaders in demanding that Assad “face the reality of the complete rejection of his regime by the Syrian people” and “step aside.” (In fact, a majority of Syrians polled in December 2011 opposed Assad’s resignation.)


The Rise of the Salafists
As early as the summer of 2012, a classified Defense Intelligence Agency report concluded, “The salafist [sic], the Muslim Brotherhood, and AQI [al-Qaeda in Iraq, later the Islamic State]” had become “the major forces driving the insurgency in Syria.”
As Vice President Joseph Biden later admitted, “The fact of the matter is . . . there was no moderate middle. . . . [O]ur allies in the region were our largest problem in Syria. . . . They poured hundreds of millions of dollars and . . . thousands of tons of weapons into anyone who would fight against Assad except that the people who were being supplied were Al Nusra and al-Qaeda and the extremist elements of jihadis.”


27-- rather than heeding such advice and seeking to promote dialogue and reconciliation, the United States and other Western powers — along with their allies in Turkey and the Gulf states — chose confrontation and a deepening civil war. As former CIA intelligence analyst Philip Giraldi warned in December 2011,
“Americans should be concerned about what is happening in Syria, if only because it threatens to become another undeclared war like Libya but much, much worse. . . . NATO is already clandestinely engaged in the Syrian conflict, with Turkey taking the lead as U.S. proxy. . . .


 Unmarked NATO warplanes are arriving at Turkish military bases close to Iskenderum on the Syrian border, delivering weapons from the late Muammar Gaddafi’s arsenals as well as volunteers from the Libyan Transitional National Council who are experienced in pitting local volunteers against trained soldiers, a skill they acquired confronting Gaddafi’s army.
“Iskenderum is also the seat of the Free Syrian Army, the armed wing of the Syrian National Council. French and British special forces trainers are on the ground, assisting the Syrian rebels while the CIA and U.S. Spec Ops are providing communications equipment and intelligence to assist the rebel cause, enabling the fighters to avoid concentrations of Syrian soldiers.”


28--Ya gotta believe!   Krugman on abenomics


Paul Krugman told an audience in Tokyo that he is "really, really worried" that Abenomics might fail. Here's Bloomberg:
Nobel laureate Paul Krugman said risks of failure are growing for Prime Minister Shinzo Abe’s "Abenomics" campaign to end Japan’s two-decade slump.

“I’m still really, really worried,” Krugman said at a conference in Tokyo on Wednesday. A big problem remains building enough momentum in the economy to escape deflation, he said.

“Japan has spent a long time in this deflationary trouble," said Krugman, who helped convince Abe to delay another planned increase in the nation’s sales tax after a hike in April last year pushed the world’s third-biggest economy into a recession.

Japan needs to reach a point where everyone believes that it has pulled out of deflation, he said. "And then if that can be believed, then it may be able to stay out of trouble thereafter,” he said.


29--US Warns Of "Unprecedented" Russian Military Buildup In Syria: "It's Starting To Look Like Crimea"


Case in point, from Reuters:
Russian forces have begun participating in military operations in Syria in support of government troops, three Lebanese sources familiar with the political and military situation there said on Wednesday.
  







 

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