Saturday, January 9, 2016

Today's links

"Cushing's syndrome" aka central banking "overmedication" leads to a rise in "positive correlations

1--Global markets continue to fall

Global stock markets have experienced their worst opening week in a new year in two decades as concerns over the Chinese economy, the value of the renminbi and the policies of Chinese financial authorities sent out a series of shock waves. More than $2.3 trillion was wiped off the value of global stocks for the week.

Markets in the US had their worst opening week ever. Shares closed down about 1 percent on Friday, after falls in Japan and Europe, with the German Dax index posting its biggest loss since 2011.
The Dow lost 6.19 percent in value for the week, and the S&P 500 was down by almost 6 percent, with falls across all ten sectors of the index. The high-tech-based Nasdaq composite index fell by more than 7 percent.
The continued decline came despite a stronger-than-expected jobs report in the US, which indicated that an additional 292,000 jobs were created last month. There was also an upturn in the Chinese market, after trading was suspended for two days last week when falls in share prices exceeded 7 percent, triggering circuit-breaker mechanisms.....

Authers pointed to the “greatest fear prevailing in the west: deflation” which impacts on the ability of companies to maintain, let alone increase, their profits. With central banks desperately trying to escape this situation “anything that threatens to intensify the problem is very serious.”
According to Authers, the “stark reaction to this week’s Chinese events reveals a deep lack of confidence in the health of the western corporate sector.”
He drew a parallel with events in February 2007, when a 9 percent fall in the Shanghai index triggered a major fall on Wall Street which, amid growing concerns about the state of the subprime mortgage market, signified the end of the “Great Moderation” when market volatility had remained relatively low....

It is not clear where the present course of events will lead. However, the rise in corporate debt in the US, where the trillions of dollar pumped into the financial system by the Federal Reserve have been used to finance a speculative bubble in stocks, as well as in emerging markets, where corporate debt has increased rapidly over the past four years, have created the conditions for another major financial crisis.

2--(archive) Margolis: North Korea 2003
The Greater Threat
A menace grows from Bush’s Korean blind spot.
As of today, South Korea fears more what it calls “unexpected reunification”—the total collapse of North Korea, producing 24 million starving refugees —than invasion...

North Korea has vowed to treat the sanctions being threatened by Washington as an act of war. A few 10,000-shell barrages on U.S. troops along the DMZ would ably deliver his riposte.....

3-- Mein Kampf hits stores in tense Germany

4---Central Bank independence in Russia. No way.

anyone following Pepe's article re necessity for Putin to escape the IMF/Fed system.
I can't imagine why Pepe wd think Putin wants to escape. Nabuillina is a protege of his, was his econ adviser, was helping to interview possible cadidates for Central Bank head when Putin hired her instead; she's not really qualified. He could have had several different economists who want more independent policies. Others speculated at the time that because she is known to be close to Putin, she wd have more authority. She and her policies have been highly criticized-- but not by Putin. Her policies are EXACTLY the Washington Consensus. One economist actually said that she had been given a Fed memo as to how to handle the devaluation crisis and had followed it to the letter.
She received an Annual Central Banker of the Year Award (or something like that) at an IMF/WTO dinner.

In Putin's defense, he CANNOT fire Nabuillina. (Maybe Pepe's just ignorant.) That nice constitution that the US wrote for Russia in the 90s writes the laws governing the Russian Central Bank (RCB) right into it. I don't know how many other countries are similarly shackled. Central banks are INDEPENDENT from govts (& therefore ruled by the international bankers.) N cannot be dismissed, nor can she be ordered to change her policies. The purpose of the whole Washington Consensus, monetarist IMF/Fed system is to prevent any other economies from emerging.

Starikov lays it all out for you here, spoon-feeds you the parts of the constitution pertaining to RCB, ways in which monetary laws prevent Russia's development, etc. Same stuff I've been saying forever: Countries labelled developing can issue their own currency only in an amount equal to their export income. So they have to give insane priority to exporting instead of serving the domestic needs. Also they have to borrow dollars, euros or pounds to meet their investment needs. That's why nations everywhere are in debt-slavery. Dollar as reserve currency is only a small part of it. Nothing will suffice except for nations to take back monetary and trade sovereignty. Putin has not even hinted at either. But we know he's a patriot, so maybe he's under compulsion.'s_freedom.pdf 

5--New Emails Expose Hillary’s Dirty War in Libya

The New Year’s Eve release of over 3000 new Hillary Clinton emails from the State Department has CNN abuzz over gossipy text messages, the “who gets to ride with Hillary” selection process set up by her staff, and how a “cute” Hillary photo fared on Facebook.
But historians of the 2011 NATO war in Libya will be sure to notice a few of the truly explosive confirmations contained in the new emails: admissions of rebel war crimes, special ops trainers inside Libya from nearly the start of protests, Al Qaeda embedded in the U.S. backed opposition, Western nations jockeying for access to Libyan oil, the nefarious origins of the absurd Viagra mass rape claim, and concern over Gaddafi’s gold and silver reserves threatening European currency....

While analysts have long speculated as to the “when and where” of Western ground troop presence in the Libyan War, this email serves as definitive proof that special forces were on the ground only within a month of the earliest protests which broke out in the middle to end of February 2011 in Benghazi.
By March 27 of what was commonly assumed a simple “popular uprising” external special operatives were already “overseeing the transfer of weapons and supplies to the rebels” including “a seemingly endless supply of AK47 assault rifles and ammunition.”
Yet only a few paragraphs after this admission, caution is voiced about the very militias these Western special forces were training because of concern that, “radical/terrorist groups such as the Libyan Fighting Groups and Al Qa’ida in the Islamic Maghreb (AQIM) are infiltrating the NLC and its military command.”
Most astounding is the lengthy section delineating the huge threat that Gaddafi’s gold and silver reserves, estimated at “143 tons of gold, and a similar amount in silver,” posed to the French franc (CFA) circulating as a prime African currency. In place of the noble sounding “Responsibility to Protect” (R2P) doctrine fed to the public, there is this “confidential” explanation of what was really driving the war [emphasis mine]:
This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an alternative to the French franc (CFA).
(Source Comment: According to knowledgeable individuals this quantity of gold and silver is valued at more than $7 billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya.)
the Viagra mass rape hoax likely originated with Sidney Blumenthal himself.

6---Trotsky's godson?
I Meet the Leading Authority on the Babylonian and Near East Tradition of Debt Cancellation

Yesterday I was with an American economist who says of himself that he is a Marxist, whose godfather was Leon Trotsky, whose father was thrown in prison in the US in 1941 for advocating the overthrow of the government, who has worked for the Chase Manhattan Bank as their balance of payments expert, and who is now an authority on the Babylonian and Near East tradition of debt cancellation. I was with someone who in another guise, as musician, once auditioned to conduct the orchestra of the Stockholm Opera Company: – someone whom I had been told I would find extremely rude, with a verbal bite as sharp as his bark, and who I found, in fact, to be as sensitive and friendly as I like to imagine myself to be.
I had come from Sweden to London to meet this man and hear him talk to an audience of Christian monetary reformers on the history of debt forgiveness.
I am referring to Michael Hudson, or if you like, Professor Michael Hudson, whom I have written about on a number of occasions as having something important to say about how Judaism and Christianity have their roots in economics, and specifically debt management....

It seems that there is a Law of Fraudulent Conveyance in the US (or in New York state, at least, so Wall Street) by which debts entered into when it is known that the debtor will not be able to repay the debt can be declared illegal. Almost all, if not all, national debts are now of this order, with new debt taken on to finance the servicing of unrepayable old debts....

The debt issue effects every aspect of the economy,” said Michael Hudson, in his concluding statement. “You have to change the whole system, in its entirety, and this requires a preparatory period of training in systems analysis, for an overall plan to emerge, which all can agree to.” Basic to the overall plan would be the clean slate cancellation of debts, not out of charity, but for economic survival, out of enlightened self-interest.

7---US Ground Troops Deployed in Syria’s Aleppo
(FNA) ~ The US ground forces have been stationed in the surrounding areas of Tishrin Dam Northeast of Aleppo province after the [so called] “Syrian Democratic Forces” (SDF) seized full control of the dam from the ISIL nearly two weeks ago, media reports disclosed on Friday.
“The US troops are presently in control of the Tishrin Dam,” the Arabic service of Deutsche Welle news channel quoted Syria’s Local Coordinating Committees as saying on Friday.
This is the first US deployment of ground forces in Syria after crisis started in the country in March 2011.
The US deployment runs counter to President Obama’s repeated claims that his country would have “no boots on the ground” in Iraq and Syria.

8-- Kurdish Forces Battle IS to Keep Control of Strategic Syrian Dam

Nearly two weeks after regaining control of a strategic dam in northern Syria, Kurdish-led forces are struggling with continued blitzes from Islamic State militants who want to retake the area.
The fighting centers on the 900-meter-long Tishrin Dam, held by IS for more than a year until Kurdish and coalition forces retook it in December. It supplies electricity to much of northern Syria....
“Daesh [IS] wants to retake Tishrin Dam for strategic and symbolic reasons at the same time,” said Shervan Derwish, a spokesman for the Syrian Democratic Forces (SDF), a group of Kurdish, Arab and Christian fighters....

The latest advances made by SDF near Tishrin and other areas south of Kobani have placed more pressure on IS militants, who are having difficulty moving from areas in eastern Syria to the parts they control in Aleppo and elsewhere.
“Tishrin Dam is now no longer in their [IS] hands, so they have to go all the way around,” said Brett McGurk, U.S. special presidential envoy for the Global Coalition to Counter IS, during a recent briefing at the State Department....

“We’re going to continue to isolate and constrict [IS] in Raqqa,” McGurk said.
Turkish officials, however, continue to express concerns about Kurdish advances in northern Syria. Military leaders in Ankara this week told U.S. General Joseph Dunford that Syrian Kurdish forces were attempting to create a “Kurdish corridor” in Syria’s north, according to Turkish news reports.
Dunford was in Turkey to meet with Turkish officials, including Prime Minister Ahmet Davutoglu, and to visit U.S. troops who are stationed at Incirlik Air Base.
Turkey considers Kurdish forces in Syria as part of the Kurdistan Workers’ Party (PKK), which Ankara and Washington see as a terrorist group

9--You can thank Uncle Sam: US-made refugee crisis

There are, in addition, millions of displaced persons who have lost their homes and livelihoods, many of whom are among the human wave currently engulfing Europe. There are currently an estimated 2,590,000 refugees who have fled their homes from Afghanistan, 370,000 from Iraq, 3,880,000 million from Syria, and 1,100,000 from Somalia. The United Nations Refugee Agency is expecting at least 130,000 refugees from Yemen as fighting in that country accelerates. Between 600,000 and one million Libyans are living precariously in neighboring Tunisia.

The number of internally displaced within each country is roughly double the number of those who have actually fled and are seeking to resettle outside their homelands. Many of the latter have wound up in temporary camps run by the United Nations while others are paying criminals to transport them into Europe.
Significantly, the countries that have generated most of the refugees are all places where the United States has invaded, overthrown governments, supported insurgencies, or intervened in a civil war..."  Giraldi

With the PYD seizing the only intact bridge across the Euphrates River for several hundred miles and the Syrian army potentially advancing further north or west, a large group of IS fighters in the Aleppo area could be left without land access to their capital in Raqqa. This prospect raises the question of who would benefit from eliminating IS on this front, and how."  WINEP

As I said in an earlier post "the wheels are coming off" the rebel wagons.  In this case it is an IS wagon but all the wagons are falling apart.
IS is reported to have made a major effort to re-take the Tishriin Dam and bridge across the Euphrates.  They apparently failed and lost a lot of men in the process.  If, as the WINEP piece suggests, there may be a linkup between R+6 forces going north and NE from Kuweires air base east of Aleppo and the YPG Kurds who are now across the Euphrates then a large number of IS will be cut off from their main center at Raqqa.  If that happens, IS will have to break this encirclement or withdraw their force north of the encirclement into Turkey.  At the same time R+6 is attacking west and south of Aleppo and east from Lattakia.

View a larger version (PDF).

11--The die is cast
 the PYD offensive has been supported by coalition airstrikes, indicating that the move was at least partly coordinated with the United States and was not a unilateral PYD decision. From that perspective, the advance toward Manbij could be part of a strategy to win back Raqqa. If Manbij falls, the capital of the "caliphate" could eventually become isolated from the rest of IS territory in Syria. All of the Euphrates bridges from the Turkish border south to Assad Lake have been destroyed or are controlled by the Kurds. If the PYD moves further south and the Syrian army launches an offensive toward al-Bab or Assad Lake, many IS personnel would be trapped in east Aleppo province....

Since the November terrorist attack in Paris, Europeans have insisted that the Islamic State's two-way route through Turkey be closed for good. In the absence of a moderate Arab Sunni force able to meet this demand, the West would prefer that the corridor be closed by Kurds rather than al-Qaeda-linked groups such as Ahrar al-Sham or Jabhat al-Nusra. The Kurds are eager to fulfill their dream of a united Rojava along the entire northern border, and to deny them at least some progress toward that goal would be to stop the only effective ally against IS in northern Syria. If the West does not work with them on this objective, it will push them into the arms of Moscow, which has made clear to the PYD that it is quite willing to help; in fact, there is already clear Kurdish coordination with Russian forces in northern Aleppo province.

At the same time, allowing the PYD to seize the entire border is unacceptable to Turkey, and the West needs Ankara's assistance on several fronts, including the refugee issue and the fight against IS. Therefore, if the PYD offensive continues toward Manbij and perhaps even further beyond Turkey's Euphrates redline, the United States and its coalition partners will need to be careful in determining whether, where, and how to support the advance -- and what to say in response to Turkish protests. For its part, Ankara will need to decide how far it is willing to go in enforcing that redline given the political and diplomatic risks of deeper intervention, especially against the only ground force making progress against IS in Syria. In that sense, the PYD's offensive is as clear a signal as Caesar's crossing of the Rubicon: the die is cast.

12--Bernanke: "The worst financial crisis in global history....of the 13 most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two."

Lenders tried to sell the collateral into a market panic, accepting lower and lower prices  just to get out. That drove down the values of the securities, not just for themselves but for everyone in the market. The spiral threatened the solvency of the cash pools that could no longer finance themselves on the repurchase market.
That’s what Federal Reserve Chairman Ben Bernanke was talking about when he told the Financial Crisis Inquiry Commission:
As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression. If you look at the firms that came under pressure in that period. . . only one . . . was not at serious risk of failure. So out of maybe the 13 — 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.

13--End of the low rate debt-binge
The non-dollar world has piled on nearly $10 trillion in dollar-denominated debt, betting that the dollar would never rise, and that US interest rates would stay low. But the dollar has soared and US interest rates are rising. The last time this happened was 1997. It triggered massive currency outflows from those countries and all kinds of crises, including the big one at the time, the Asian Financial Crisis, according to the economists at National Bank of Canada, who added, “It would be foolish to rule out a similar if not a more devastating outcome.” 

14--2016: Oil Limits and the End of the Debt Supercycle

15--Why Donald Trump will be the next President of the United States

16--The jobs report looks suspect to me. For one thing, with GDP growth way down, and little if any top line corporate growth, why the hiring? That is, if the numbers are not revised, it means productivity is running negative- more jobs for the same output., Mosler

Revolving credit showed substantial life in November, up $5.7 billion and helping to boost total consumer credit by $14.0 billion

17--Bad Week for U.S. Stocks Dims Outlook---Major indexes have worst start to year as China’s deepening woes bring new worries

18--The End of the Monetary Illusion Magnifies Shocks for Markets

19-- Capital flight pushes China to the brink of devaluation
Beijing cannot keep burning through reserves at a record pace to defend the yuan and at the same time loosen monetary policy. It has to choose

20--The Truth About Deflation

Mosler which wraps it up in one paragraph:
“Theory and evidence tell me it’s impossible for the Fed to create inflation, no matter how much it tries. The reason is because all the Fed does is shift dollars from one type of account to another, never changing the net financial assets held by the economy. Changing interest rates only shifts dollars between ‘savers’ and ‘borrowers’ and QE only shifts dollars from securities accounts to reserve accounts. And so theory and evidence tells us not to expect much change in the macro economy from these primary Fed tools, making it impossible for the Fed to create inflation.” (“It must be impossible for the Fed to create inflation“, Warren Mosler, Huffington Post)
CLSA’s prescient analyst, Russell Napier, believes the world is about to experience a “deflationary shock” that will send raw materials, manufactured goods, and stocks plunging. Here’s a short excerpt from his article titled “An Ill Wind” via zero hedge:
“Three times since 1997 inflation has fallen below 1% with very negative impacts for equity investors. On all three occasions an existing low level of inflation was forced lower by dramatic events: the bankruptcy of Russia and collapse of LTCM in 1998; the terrorist attacks of 11 September 2001; and the bankruptcy of Lehman Brothers in September 2008. While nobody would attribute the 11 September atrocity with extant global deflationary forces, the other two episodes can clearly be associated with such forces. So perhaps it is global deflationary forces creating a bankruptcy event, somewhere in the world, that is the catalyst for a sudden change in inflationary expectations in the developed world. It can all happen very quickly; and it is dangerous to stay at an equity party driven by disinflation when it can spill so rapidly into deflation.

In 1998 falling export prices triggered a Russian default, and in 2008 falling US house prices triggered the Lehman bankruptcy. Going back further, deflation in the oil price in 1982 produced a Mexican default and a credit event which threatened to bring down the US banking system. Deflation in these key prices produced a credit event which rapidly produced a major reassessment of the outlook for the general price level. Across the world today we see falling commodity prices and, primarily due to the weak yen, falling manufactured-goods prices. When there is plenty of leverage in the system and any key price starts to decline then a credit event and a sudden change in inflationary expectations are much more possible than the consensus believes.” ( “An Ill Wind”, Russell Napier, CLSA, selected excerpts, zero hedge)
The threat of deflation is quite real, in fact, it’s probably just one bank failure away.



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