Thursday, January 26, 2017

Today's Links

1--Trump & Yellen's Collision Course The Fed's plan to torpedo Trump's economic plan


In the coming quarters, the Federal Reserve will march rates higher. But more importantly, the more Trump pushes on the fiscal accelerator, the harder the Fed will lean on the brake....


It seems obvious the Federal Reserve is intent on withdrawing monetary accommodation until something breaks. There is no sense fighting it.....

Although a few years ago Fed officials were begging for some help from fiscal policy, with employment now running at a “perceived” tight pace, FOMC participants have switched to viewing fiscal stimulus as a potential inflationary concern that needs to be offset with tighter monetary policy....

Federal Reserve Governor Lael Brainard said the U.S. central bank may accelerate interest-rate increases and measures to shrink its balance sheet if Congress approves a sustained, material increase in fiscal stimulus that pressures inflation without lifting productivity.

“Based on recent spending indicators, we might expect progress to continue to be gradual and steady,” Brainard said Tuesday in Washington. “However, if fiscal policy changes lead to a more rapid elimination of slack, policy adjustment would, all else being equal, likely be more rapid than otherwise.”
Brainard is the most dovish member of the Federal Open Market Committee, yet she is openly warning about higher rates. Other FOMC members are even going so far as to signal upcoming balance sheet reductions and even higher rates than the market has currently priced in.
Chair Yellen is also making some hawkish chirping noises. Have a look at the first paragraph from her recent Stanford speech:

In my remarks today, I will review the considerable progress the economy has made toward the attainment of the two objectives that the Congress has assigned to the Federal Reserve–maximum employment and price stability. The upshot is that labor utilization is close to its estimated longer-run normal level, and we are closing in on our 2 percent inflation objective. I will then discuss the prospects for adjusting monetary policy in the manner needed to sustain a strong job market while maintaining low and stable inflation

“Labour utilization is close to its estimated longer-run normal level, and we are closing in on our 2 percent inflation objective” is the key line...


Make no mistake - rates are going higher. Probably a lot higher than the market realizes. Just look at this comment buried in Yellen’s speech:

That said, I think that allowing the economy to run markedly and persistently “hot” would be risky and unwise. Waiting too long to remove accommodation could cause inflation expectations to begin ratcheting up, driving actual inflation higher and making it harder to control. The combination of persistently low interest rates and strong labor market conditions could lead to undesirable increases in leverage and other financial imbalances, although such risks would likely take time to emerge. Finally waiting too long to tighten policy could require the FOMC to eventually raise interest rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. For these reasons, I consider it prudent to adjust the stance of monetary policy gradually over time–a strategy that should improve the prospects that the economy will achieve sustainable growth with the labor market operating at full employment and inflation running at about 2 percent.

2--‘Trump didn’t consult Moscow on Syria safe zone plan, should consider all consequences’ – Kremlin

“Setting up of safe zones is something Turkey has advocated from the start. The best example is in Jarablus,” Muftuoglu stated, mentioning a town near the Turkish border that was freed from Islamic State (IS, formerly ISIS/ISIL) by Turkish-backed Syrian opposition forces in August last year.


(note-- "safe zones" President Trump made a surprise move, ordering the State Department and Pentagon to prepare for the establishment of safe zones in Syria, giving them 90 days to provide a full blueprint for how they would go about it. This has all been discussed by top Pentagon Generals, they have indicated that these zones would need to be no fly zones, Gen Dunford... “Right now… for us to control all of the airspace in Syria would require us to go to war against Syria and Russia,” Dunford replied, drawing a rebuke from committee chairman John McCain (R-Arizona), who argued a no-fly zone was possible without war.)



The same month, Turkey launched its Euphrates Shield operation, a military offensive into Syria that involved Turkish special forces, tanks and warplanes entering the country to drive IS terrorists out of the border territories. It drove the militants from the last 100km (62-mile) strip of border territory they still controlled and created what Turkish officials have already dubbed a “
The territory is now controlled by Turkish-backed Syrian rebels, essentially meaning it’s largely governed by Turkey itself.

Muftuoglu stressed that Ankara remains firm in its belief that Syrian President Bashar Assad has no place in the country's future.
Meanwhile Qatar, which also supports Syrian rebels fighting Assad, welcomed Trump's pledge to order safe zones in Syria, with Foreign Ministry Director of Information Ahmed Rumaihi saying the initiative would help protect civilians suffering from the ongoing conflict.

[Qatar] emphasized the need to provide safe havens in Syria and to impose no-fly zones to ensure the safety of civilians,” Rumaihi said in a statement to state news agency QNA.
Both Qatar and Turkey are working alongside Saudi Arabia and Western nations to back Syrian rebels in a military aid program overseen by the United States. They provide so-called moderate groups with arms and training.

3--Was the Berlin Christmas market attacker an undercover agent?

4--Wall Street’s Trump euphoria propels Dow above 20,000

Trump is the embodiment of the American financial aristocracy, in all its brutish and violent backwardness and criminality. What the markets are celebrating is a government that in an unprecedented manner openly functions as the instrument of this oligarchy.

On Wednesday, the Wall Street Journal if anything understated the greed-driven euphoria in corporate and financial circles in an article headlined “CEOs Savor New Washington Status.”
“For CEOs,” the Journal wrote, “the moves have sent a message that their stock is rising in Washington, with some betting that they will have a bigger say in running the country…

“Along with [former Exxon Mobil CEO Rex] Tillerson at State, billionaire investor Wilbur Ross [Commerce], former Windquest Group chairwoman Betsy DeVos [Education], Andy Puzder, chief executive of CKE Restaurant Holdings [Labor] and former World Wrestling Entertainment CEO Linda McMahon [Small Business Administration] have been tapped to play big roles in his administration.”

The Journal could have added, among others, longtime Goldman Sachs lawyer Jay Clayton the head the main Wall Street regulation, the Securities and Exchange Commission.
The presence of three former Goldman Sachs executives in top positions in the Trump administration, in addition to Clayton, helps explain the frenzied runup in the share prices of major banks. Goldman Sachs and JPMorgan Chase together account for some 20 percent of the rise in the Dow since November 22.
Trump’s plan to “make America great again” is a drive to wipe out every social gain won by the working class in the course of more than a century of struggle and return to a supposed “golden age” when the corporations could plunder and pollute the country to their heart's content

Trump hailed the record-breaking close with a tweet: “Great!#Dow20K.” His senior economic adviser, the former hedge fund boss Anthony Scaramucci, congratulated Trump for the market surge, tweeting, “Stock market performance in 6 weeks following President Trump’s victory is best among all elections since 1900#ThankYouTrump.”...

On Monday, Trump told a meeting of a dozen CEOs that his advisers thought “we can cut regulations 75 percent, maybe more.”
Other actions Trump has taken in the five days since his inauguration include a freeze on all pending regulations and a hiring freeze for all federal agencies

5--Financialization of Rents Gets Taxpayer Guarantees

Government Buckles, Guarantees Buy-to-Rent Mortgage-Backed Securities for First Time Ever. Wall Street Wins Again....(gov guarantees privately owned rental units)

The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.
Some of this debt will be refinanced with the proceeds from the sale of the $1 billion of government-guaranteed rental-home mortgage backed securities.

6--On Day One, Trump Suspends Obama's Mortgage Insurance Premium Cut


7--Breitbart’s influence grows inside White House


8--Game Change: Syria, Interrupted


I don’t see how any leftist could continue to cling to the dominant Western narrative now that we have the American Secretary of State admitting that: 1) the US poured an “extraordinary amount of arms” into Syria to help the opposition; 2) the US wanted to “manage” ISIS, and watched approvingly as ISIS grew stronger and become threatening to Damascus itself; 3) Russia entered the war in order to prevent an ISIS victory, and did so; and 4) the Russian intervention, which “changed the equation,” is legal, because Russia is invited in by the “legitimate regime,” and the US has no legal basis for intervention, because the US hasn’t gotten the UN to swallow the “Responsibility to Protect” doctrine as a substitute for international law....

Without Russian military intervention, al-Nusra and allied jihadis would have been rampaging through the streets of Damascus. Saving Syria from that fate is a result I welcome as a leftist.
Again, at the time of the Russian intervention (and still)—especially with the threat of imminent American military attacks on Syrian forces—military action was the only way to stop the jihadi regime-change train, and Russia was the only geopolitical actor capable of intervening with the necessary force. Russia was responding, decisively and legally, to an invitation to defend an independent sovereign state....

It’s increasingly clear that the United States can achieve nothing but destruction, in Syria or anywhere else.


9--Death of the Syrian ‘Moderate’ Fantasy


Neocons and liberal hawks sold the fantasy that Syrian “moderate” rebels were a viable option when all they did was help arm Al Qaeda jihadists and worsen the bloodshed, as Jonathan Marshall explains....In her memoir Hard Choices, former Secretary of State Hillary Clinton recounted her hope that “if the United States could train and equip a reliable and effective moderate rebel force, it could help hold the country together during a transition . . . and prevent ethnic cleansing and score settling.”...

An Arab intelligence source confirmed to Ignatius, “the FSA is a kind of mafia. Everyone wants to be head. People inside Syria are tired of this mafia. There is no structure. It’s nothing.” Based on this experience, Ignatius declared flatly, “The problem is that the ‘moderate opposition’ that the United States is backing is still largely a fantasy.”

10--Why Ben Bernanke Thinks The Fed Shouldn't Shrink Its Balance Sheet


11--Further observations on social inequality and the politics of the pseudo-left


12--The Fragile Economic Foundation of Dow 20000-- Divergence between stocks and bonds shows optimism about Trump outweighs concern about protectionism and European populism


Britain is leaving the European Union, a protectionist is in the White House, the front-runner in France’s presidential election wants out of the euro. Yet paradoxically, investors have concluded the world is getting less risky, not more. The result: a hunger for shares that carried the Dow Jones Industrial Average over the 20000 mark Wednesday for the first time.

It is hard to explain this with economic fundamentals. They have improved since Donald Trump’s improbable election victory in November, but not by much. ​After the election, economists surveyed by The Wall Street Journal added 0.3 percentage point to expected growth over the next two years. At their December meeting, Federal Reserve officials barely touched their growth forecast. Analysts’ profit estimates haven’t changed much either....

Are investors getting carried away? Perhaps. Congress and Mr. Trump both want to cut taxes but haven’t agreed how and will be hemmed in by the deficit. Nor does Congress have much appetite for Mr. Trump’s infrastructure push. Much of Mr. Obama’s financial and health-care laws may survive....

And while there is little sign yet the economy has broken out of the low-growth rut of the past seven years, that too could change. If companies’ animal spirits mirror those of the market, capital spending and risk-taking could revive, dragging productivity higher.

Nonetheless, the market needs a reality check. The U.S. expansion is​ more than seven years old and retains little momentum from using up spare capacity from the recession. At 4.7%, the unemployment rate is at levels the Fed considers a fully employed workforce. Indeed, recessions usually happen with unemployment around or below 5%.

Eight years of ultra-easy monetary policy have left a worrisome legacy of inflated asset prices and financial engineering. Gail Fosler, a New York-based economic consultant, says corporate profit growth has slowed, companies’ cash flow barely covers capital investment and dividends,​and the ​bond market is signaling that the Fed has to raise interest rates more quickly. Ms. Fosler says these are the ingredients of a financial squeeze that will trigger a recession in 2018.

13--Gabbard statement:

The U.S. must stop supporting terrorists who are destroying Syria and her people. The U.S. and other countries fueling this war must stop immediately. We must allow the Syrian people to try to recover from this terrible war....

Their message to the American people was powerful and consistent: There is no difference between “moderate” rebels and al-Qaeda (al-Nusra) or ISIS — they are all the same. This is a war between terrorists under the command of groups like ISIS and al-Qaeda and the Syrian government. They cry out for the U.S. and other countries to stop supporting those who are destroying Syria and her people.
...
I heard testimony about how peaceful protests against the government that began in 2011 were quickly overtaken by Wahhabi jihadist groups like al-Qaeda (al-Nusra) who were funded and supported by Saudi Arabia, Turkey, Qatar, the United States, and others. They exploited the peaceful protesters, occupied their communities, and killed and tortured Syrians who would not cooperate with them in their fight to overthrow the government....

if the Wahhabi jihadists, fueled by foreign governments, are successful in overthrowing the Syrian state, it would destroy Syria and its long history of a secular, pluralist society where people of all religions have lived peacefully side by side. Although this political opposition continues to seek reforms, they are adamant that as long as foreign governments wage a proxy regime change war against Syria using jihadist terrorist groups, they will stand with the Syrian state as they work peacefully toward a stronger Syria for all Syrians.
Originally, I had no intention of meeting with Assad, but when given the opportunity, I felt it was important to take it. I think we should be ready to meet with anyone if there’s a chance it can help bring about an end to this war, which is causing the Syrian people so much suffering.

14--Seymour Hersh Blasts Media for Uncritically Promoting Russian Hacking Story


15--The super rich are preparing for the end of the world


16--Fake economics exposed--Austerity economics has just been smashed. By the IMF


17--Dennis Kucinich cheers President Donald Trump

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