Monday, August 29, 2016

Today's Links

Today's quote:  "The Turkish move into Syria should bury once and for all any idea that Turkey is in the process of undertaking a geopolitical realignment away from the West and towards the Eurasian powers.  Not only is Turkey still a US and NATO ally,  but it is now conducting an illegal military operation against Russian opposition in Syria with US military support.  That is not the action of a country in the process of carrying out a realignment and preparing to switch alliances from the West to Beijing and Moscow....Turkey remains, as it has always been, an ally not of Russia and the Eurasian powers, but of the US and the West, and its actions in Syria are a clear demonstration of that." Alexander Mercouris

Yesterday, in our post-mortem on the Jackson Hole symposium, we found one particular highlight most notable: according to Princeton University economist Christopher Sims, "policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future." And, as has been customary over the past year, the place where this "shock therapy" will be tested first, will be the same place where 30 years of unconventional monetary policy has so far failed: Japan.

That is the scenario envisioned by Mark Haefele, global chief investment officer at UBS Wealth Management who oversees the investment policy and strategy for about $2 trillion in invested assets.
In a Bloomberg Television interview, on Monday, Haegele said that the BOJ could announce a “massive stimulus program” as the nation desperately seeks to reach a 2% inflation target.

It is how much they do, and whether they can create that kind of shock and awe at this point in the cycle,” said Haefele, adding “they could announce a massive stimulus program both on the monetary and fiscal side or they could end up reducing their inflation targets. Right now, it looks like they are going to use more stimulus.”...

for everyone else another sharp plunge in the Yen will mean a surge in imported inflation, a drop in purchasing power, even more negative savings rates, deteriorating economic fundamentals, and a general decline in the standards of living. However, since Japan is now all in, its only option remains to double down, and when that fails, to double down again until its entire financial system finally cracks

2--Talking tough to boost the sagging dollar and recycle foreign capital into US markets: Federal Reserve Chairwoman Janet Yellen, Friday, in a keynote speech at the conference: (many quotes)

When asked whether the Fed could raise rates at its meeting next month and again before the end of the year, he said Ms. Yellen's speech "was consistent with answering yes to both of your questions, but these are not things we know until we see the data."

3--Jackson Hole roundup; Fiscal stimulus needed

During the meeting Yellen and three regional Fed bank presidents -- Robert Kaplan of Dallas, Eric Rosengren of Boston and Loretta Mester of Cleveland -- all urged fiscal policy makers to step up.
“Central bankers, we are increasingly talking about this, about the need for fiscal policy and other economic tools beyond monetary policy,” Kaplan said during a luncheon Friday, although he cautioned it could be “many years” for there to be action

4--QE, End of the Private Sector? Japanese Government Now Largest Shareholder of 474 Big Companies ((Central Banks manage the capital accumulation process. "Wealth effect" is a fake Public relations device to confuse people about what is really happening...Why you never hear the term "political economy" to explain the looting of the oligarchs)

The Bank of Japan and the Government Pension Investment Fund (GPIF) have been buying stocks to inflate the market, create some kind of “wealth effect,” and bamboozle regular Japanese into pouring once again into stocks, after many of them lost a big chunk of their savings when the prior bubble imploded without ever recovering....

But even after Japanese stocks took a licking over the past year, the fund’s allocation to domestic equities is still 21%, so near its range and no longer a powerful buyer. But to make up for any holes left behind by the pension fund, the BOJ announced on July 28 that it would nearly double its annual purchases of equity ETFs to ¥6 trillion ($59 billion)....

The holdings of Japanese stocks by these two entities have nearly tripled over the past five fiscal years to about ¥39 trillion ($381 billion), according to The Nikkei. During that time, the Nikkei stock index soared 70%, “demonstrating their powerful support.”
But, but, but… the index remains 57% below its bubble peak of 1989

5---As Fed nears rate hikes, policymakers plan for 'brave new world'; Fed explores new policies to assist the accumulation process

uture policymakers might choose to consider some additional tools that have been employed by other central banks," including buying a wider range of assets or raising the inflation target. She also cited the possibility of targeting the average level of prices in the economy rather than their rate of change.

Notably, her laundry list of possible tools did not include negative rates, an idea that has been nearly universally panned by Fed officials. She said the Fed is not actively considering additional policy tools but participants at the conference suggested the process is already well underway.
"You are seeing an exploration of how are we going to operate in a quite different world than before the crisis," Lockhart said.

6--Years of Fed Missteps Fueled Disillusion With the Economy and Washington; Fed offers mea culpa on the economy promising to do more of the same in the future, WSJ, Hilsenrath, the Fed Mouthpiece

7---Global central bankers, stuck at zero, unite in plea for help from governments

8--Global central bankers, stuck at zero, unite in plea for help from governments: CBs consider fiscal jolt to boost flagging corporate earnings

Fed Chair Janet Yellen devoted the final page of her keynote talk on possible monetary policy reforms to a list of fiscal and structural policies she feels would help the economy.

Fiscal policy was not on the formal agenda for the conference, but it was a steady part of the dialogue as policymakers thought through policies for a post-crisis world. One of the central worries is that households and businesses have become so cautious and set in their outlooks - expecting little growth and little inflation - that they do not respond in expected ways to the efforts central banks have made.
That has included flooding the financial system with cash, and voicing a steady commitment to their inflation targets in an effort to make people believe they will be met....

In a lunch address by Princeton University economist Christopher Sims, policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future.
"Fiscal expansion can replace ineffective monetary policy at the zero lower bound," Sims said. "It requires deficits aimed at, and conditioned on, generating inflation. The deficits must be seen as financed by future inflation, not future taxes or spending cuts."
It was not clear whether such ideas will catch on. But there was a broad sense here that the other side of government may need to up its game.

9--United States Corporate Profits, Mosler  The reason CBs are concerned

Corporate profits in the United States decreased by 2.4 percent or $36.3 billion to $1469.7 billion in the second quarter of 2016, after rising an upwardly revised 8.1 percent in the previous period, preliminary estimates showed. Dividends decreased 0.9 percent or $8.2 billion in the second quarter (compared to a gain of 0.8 percent or $7.3 billion in Q1) and undistributed profits dropped 5.2 percent or $28.1 billion (compared to a rise of 24.3 percent or $106.1 billion in Q1). Also, net cash flow with inventory valuation adjustment, the internal funds available to corporations for investment, fell 1.1 percent or $22 billion, after going up by 5.7 percent or $112.7 billion in the previous period

10--Has the recession already started?; Bank loans continue to decelerate

This is not about one month’s numbers. It’s been a full retreat ever since the collapse of oil capex at the end of 2014, with no sign yet of anything but more of same until deficit spending- private or public- picks up sufficiently to offset the ‘normal’ amount of unspent incomes.
And as previously discussed, it wouldn’t surprise me if future revisions show that the recession started a year ago or maybe even before that

11---Check out this map where the housing bubble is biggest

June marked 50 consecutive months of annual national home price appreciation, with prices up 33 percent from the post-recession bottom in 2012, according to a new report from Black Knight Financial Services. It measured the average national home price in June at $265,000, which is within just 1.1 percent of a record high.

Some markets, however, have surpassed their previous price height. These include cities where tech jobs are driving population growth. Seattle and Portland, Oregon, top the list, as workers migrate north from pricey San Francisco. Denver, Austin, Texas, and Pittsburgh are also seeing a heavy influx of tech-sector jobs, pushing demand for housing higher and pulling prices along.

12--A new housing bubble?

13--Euphrates Shield': Turkish Operation to Reshape Balance of Power in Syria

Faysal Itani, resident senior fellow at the Rafik Hariri Center for the Middle East at the Atlantic Council, suggests in his article for the Foreign Policy Magazine, that Turkey may become Washington's long-anticipated "professional military ally" against Daesh in Syria. Itani believes that Turkey's involvement in the conflict "will shape the war on the extremist group to Washington's advantage." On the other hand, "the campaign itself may launch a new era of US-Turkish cooperation in Syria," he insists.

14--The Turkish Invasion Of Syria As Path To "Regime Change"; Compelling but wrong

15--Anatomy of the Turkish Invasion: Official Narrative vs. True Objectives

What I had not considered in February, was the probability of Turkey openly utilizing its military units to support, and co-mingle with, Turkmen militants and Islamic terrorist groups. It appears that the Turkish political establishment learned some lessons from the Russian and U.S. experience with military intervention in Syria. Russian special operations and air force assets support the Syrian Arab Army on the ground, while the U.S. has chosen to infuse special operations forces with YPG and SDF units. Instead of a direct military invasion in force, it was decided that proxies should bear the brunt of the fighting and provide a thin venire of legitimacy by portraying it as a majority Syrian rebel operation. Additionally, the reason given for the operation is to fight ISIS, remove them as a national security threat and to establish a buffer zone between the varied forces fighting within Syria and Turkey, and to provide a protected, humanitarian zone. It can easily be deduced that all of these explanations are a cover for the real Turkish objectives behind this operation


It becomes readily apparent, after a mere tertiary review of the events, that the limited Turkish operation to combat ISIS is a false narrative to cover the reality that Turkey is invading Syria with its Islamic proxies to secure its own national goals. These goals are those of the corrupt Erdogan regime only, and not those of the Turkish people. Turkish security will not be served by continuing the spiral of violence and injustice in Syria, nor by filling the pockets of the Erdogan family and their mafia allies through money made from war profiteering and illicit smuggling. Turkey and the United States are hoodwinking the Turkish and Kurdish people, and feeding them a lie that has convinced them to subordinate their own interests. Turkey defeated the non-existent ISIS threat in Jarablus, which evaporated within hours, and will capitalize on the door that has been opened to them as much as possible. Russia will rue the day it trusted Erdogan again, and the Kurds must learn the truths of the past. The United States will continue to use them to its own ends until the Kurds finally stop acting like the battered spouse in the relationship.

16--Note by the Saker: I have to admit that I still am rather puzzled by the Turkish “invasion” of Syria.  There are several hypotheses about what the Turks are really up to and what their real goal is.  Since my friends Alexander Mercouris and Mark Sleboda seem to have a much better understanding of what is happening than I, I submit to your attention their analysis rather than to exposes you to my confused guesses

17--Erdogan double-crosses Putin

The article makes it clear that Turkey did not coordinate the Jarablus operation with Moscow or Damascus, and that it was much bigger than Moscow was led to expect.  The Russians are also clearly annoyed by the extent to which the operation has been coordinated by Turkey with the US, which is providing air support.
“For Moscow, Ankara’s operation was an unpleasant surprise, demonstrating that the expectations for a convergence of the countries’ positions on Syria that emerged after the meeting between Putin and Erdogan were premature.  In deciding about the operation in Jarabulus, the Turkish leader has sent a signal that relations with the U.S. remain a priority for him, and he prefers to act in the framework of the antiterrorist coalition led not by Moscow, but Washington.”

I have repeatedly warned against over-high expectations that the recent rapprochement between Turkey and Russia amounted to any sort of realignment.  I have also said that despite Turkish annoyance with the US over the recent coup attempt, Turkey remains a US ally, continues to be committed to regime change in Syria, and is not going to throw the US out of Incirlik or allow Russia to use the base.  My only surprise is that judging from this comment it appears there were some people in Moscow who thought otherwise. ...

Mark Sleboda has explained to me that the principal corridor to supply the rebels in Syria has always been through the area of north east Syria around Jarablus.  In his words
“Idlib is not an acceptable supply route from Turkey to forces in Aleppo province because the Turkish-Syrian border in Idlib is mountainous terrain – small and bad roads and then long routes all the way through Idlib past SAA held territory into Aleppo province. The Jarablus Corridor north of Aleppo is and has always been absolutely vital for the insurgency,. That’s why Turkey, Brookings, etc have always placed so much priority on a no fly zone there. Now its come to realisation.”
In other words the Turkish capture of Jarablus before it could be captured by the YPG was not primarily intended to prevent the linking together of two areas within Syria under Kurdish control – though that may have been a secondary factor – but was primarily intended to secure the main supply route (or “ratline”) Turkey uses to supply the Jihadi fighters attacking Aleppo....

Going back to the war in Syria, my own view remains that this will not in the end decide the outcome of the battle of Aleppo, where reports suggest that the Syrian army is continuing to gain ground despite the uninterrupted – and in fact increasing – flow of supplies to the Jihadi fighters across the Turkish border. My longer term view also remains that if the Syrian government succeeds in recapturing the whole of Aleppo and eventually Idlib, then it will have won the war.  However what this episode shows is that the war is far from won, and that the Turks and their US backers are still prepared to go on escalating it in order to prevent the Syrian army winning it....

Setting up a rebel “safe zone” inside Syria in the teeth of the opposition of the YPG is however what Erdogan and the Turks – backed by the US – have now decided to do....

Regardless of this, the Turkish move into Syria should bury once and for all any idea that Turkey is in the process of undertaking a geopolitical realignment away from the West and towards the Eurasian powers.  Not only is Turkey still a US and NATO ally,  but it is now conducting an illegal military operation against Russian opposition in Syria with US military support.  That is not the action of a country in the process of carrying out a realignment and preparing to switch alliances from the West to Beijing and Moscow.

The Russians and the Turks are now talking to each other, which for several months they had stopped doing.  The Kremlin’s summary of Friday’s conversation between Putin and Erdogan shows that they are still talking about improving their trade links and economic ties.  However, as the Kommersant article shows, even that limited progress now appears to be in jeopardy as the two countries’ conflicting stances in the Syrian war once again threaten to pull them apart. 
In other words Turkey remains, as it has always been, an ally not of Russia and the Eurasian powers, but of the US and the West, and its actions in Syria are a clear demonstration of that.

18--Bernie Sanders fake revolution: A farce propped up on a sticking pile of lies

Our Revolution “will focus on three distinct areas of work,” according to email and Facebook announcements: “(1) bringing millions of working people and young people into the political system; (2) inspiring, recruiting and supporting progressive candidates across the entire spectrum of government—from school board to the US Senate; (3) educating the public about the most pressing issues confronting our nation and the bold solutions needed to address them.”
What this means in reality is (1) registering people as Democrats and encouraging them to vote for the Democratic Party; (2) supporting candidates in Democratic Party primaries and Democratic candidates in general elections; (3) conducting propaganda to portray the reactionary capitalist and imperialist politics of the Democratic Party as the solution to the social problems confronting working people....

Every one of the candidates endorsed on the Our Revolution web site is a Democrat, including such longtime party standard-bearers as former Senator Russ Feingold of Wisconsin, who is seeking his old job after being defeated in 2010 by a right-wing Republican; incumbent Democratic representatives Raul Grijalva of Arizona, Tulsi Gabbard of Hawaii, Keith Ellison of Minnesota and Marcy Kaptur of Ohio; and a slew of Democratic candidates for Congress and state and local office..

As was the case throughout the primary campaign, Sanders made no mention of the growing threat of war and no criticism of the Obama administration’s foreign policy, including the escalation of US warfare in Syria and Iraq, the widespread use of drone-fired missiles to assassinate those targeted by the CIA and Pentagon, and the continuing military buildup against Russia and China. The “Our Issues” section of the Our Revolution web site lists 17 subjects, every one of them related to domestic concerns. There is not a single reference to foreign policy or war....

The entire operation underscores the real political function of the Sanders campaign from its outset. .... to channel mass anger against social inequality and the domination of the political system by Wall Street back behind the Democratic Party, where it could be strangled and dissipated.
( and support for wall streets favorite candidate, crooked Hillary)

19---Turkish President Recep Tayyip Erdogan made clear that Turkey’s intervention would be a long and bloody one

In response to a question on the creation of so-called safe zones within Syria, Earnest denied that this was being considered as a policy option by the Obama administration because it would require additional military forces. This was thoroughly disingenuous, given that Washington is backing a Turkish operation whose explicit goal is the creation of a zone in northern Syria controlled by Turkish troops.

Violence continued to spread within Turkey following a bomb attack Friday by PKK-aligned militants, which killed 11 Turkish police officers and wounded 78 people. PKK rebels launched a grenade attack on the airport in Diyarbakir Sunday, and a Turkish soldier and 10 PKK militants were killed in clashes in Hakkari province.

Speaking at a rally Sunday in Gaziantep, 30 kilometres from the Syrian border, Turkish President Recep Tayyip Erdogan made clear that Turkey’s intervention would be a long and bloody one. He indicated that Ankara would not distinguish between the PKK, with which it has been in a virtual state of war since last year, and the YPG in Syria. After vowing to wipe out Islamic State in Syria and Iraq, Erdogan declared, “We are as determined about the PYD [Democratic Union Party], the separatist terror organisation’s Syrian wing… We will continue until we uproot this terror organisation.”

There has been a virtual blackout of the dramatic escalation of the Syrian conflict in the US media and it has not been raised as a major issue by either candidate of the two big business parties in the presidential election campaign. News coverage of Syria on Sunday focused on reports accusing the Assad regime of dropping barrel bombs on a civilian neighborhood in “rebel”-occupied Aleppo, while the killing of civilians by Turkish forces was passed over in virtual silence.

Democratic candidate Hillary Clinton, who enjoys the overwhelming backing of the military and intelligence establishment, has left no doubt about her readiness to vastly intensify US military operations in Syria after November, even if this means direct confrontation with Russia. The Center for a New American Security think tank, which was co-founded by Michele Flournoy, a former Defense Department official who is reportedly on the short list for the secretary of defense position in a Clinton administration, called in June for a future US administration to authorize military strikes against Assad’s forces.

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