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At this time we do not know the outcome of the meeting in Moscow between Merkel, Hollande, and Putin.
The meeting with Putin was initiated by Merkel and Hollande, because they are disturbed by the aggressive position that Washington has taken toward Russia and are fearful that Washington is pushing Europe into a conflict that Europe does not want. However, Merkel and Hollande cannot resolve the NATO/EU/Ukraine situation unless Merkel and Hollande are willing to break with Washington’s foreign policy and assert the right as sovereign states to conduct their own foreign policy.
Unless Washington’s war-lust has finally driven Europeans to take control over their own fate, the most likely outcome of the Putin-Merkel-Hollande meeting will be more meetings that go nowhere. If Merkel and Hollande are not negotiating from a position of independence, one likely outcome after more meetings will be that Merkel and Hollande will say, in order to appease Washington, that they tried to reason with Putin but that Putin was unreasonable.
Based on Lavrov’s meeting in Munich with the Europeans, the hope for any sign of intelligence and independence in Europe seems misplaced. Russian diplomacy relied on European independence, but as Putin has acknowledged Europe has shown no independence from Washington. Putin has said that negotiating with vassals is pointless. Yet, Putin continues to negotiate with vassals.
Perhaps Putin’s patience is finally paying off. There are reports that Germany and France oppose Washington’s plan to send weapons to Ukraine. French president Hollande now supports autonomy for the break-away republics in Ukraine. His predecessor, Sarkozy, said that Crimea chose Russia and we cannot blame them, and that the interests of Americans and Europeans diverge when it comes to Russia. Germany’s foreign minister says that Washington’s plan to arm Ukraine is risky and reckless. And on top of it all, Cyprus has offered Russia an air base.
Arthur Rothstein Going to church to pray for rain, Grassy Butte, North Dakota Jul 1936 Greek PM Alexis Tsipras yesterday laid out Syriza’s stance, and from what I saw he didn’t pull even one punch. Despite all the suggestions from the financial press throughout the past week that Tsipras and Varoufakis reneged on campaign promises to seek debt write-downs, they didn’t, and never have – other than perhaps in semantics.
Which I don’t find the slightest bit surprising. I would have been very surprised if they had. The misinterpretation, and the faulty expectations, are easily explained through the fact that – most of – these guys are not politicians, which they very deliberately expressed in the way they dressed for their meetings with ‘Europe’s finest’.
They don’t see the ‘space’ career politicians see to negotiate away the mandate their voters have given them. For them it’s simple: we were elected on our program – which in this case happens to be to end the misery forced upon Greece by the European and Troika schemes -, and we’re not going to move away from that just because ‘the other side’ starts threatening us, or (a crucial difference in politics) because our voters may not vote for us again in a next election.
In their view, trying to scare Greece into even more submission, which is the overlying message emanating from Brussels and beyond, is entirely null and void because Greece can’t – and shouldn’t – sink any lower than it has. Very and refreshingly simple. No surprise there, but, at least on my part, just support and admiration. Syriza is fighting the fight many others don’t have the intellect, the chutzpah and/or the courage for.
I know too well that the current thinking on the economy and labor is that any activity is “good” activity, and thus better something happens than resources remain idle. I think that notion is easily disproved by common sense, as waste is not just “wrong” but harmful over the longer run. But economics is impervious to anything related to the calendar, owing so to Keynes himself, so all that matters is what happens tomorrow rather than how what happens tomorrow affects what happens next year (or five years from now).
My sense of problems in the economy relate to “demand” more than anything because of this narrowness in not just scholarship but in dramatic interventions based upon these assumptions. The establishment of the economic narrative is predicated on the Establishment Survey and the unemployment rate, but yet downstream indications that should be in agreement are decidedly not. So happily married to trend cycle analysis are economists that they haven’t even noticed their other half has strayed to a new mistress, economic reality.
Count me among those that see not just a statistical “science” evolving from description and observation to influencing and yes pandering; haranguing from the BLS at the upper extremes of highly volatile but ephemerally “solid” math. However, focusing too much inside the math courts danger of being thought nothing but a crank and crackpot no matter how inconsistent and debased the justified ire. The Establishment Survey is a sacred cow and likely to remain as much to the last when everything will suddenly become “unexpected” yet again.
But nothing has erased the activity “problem.” Setting aside all questions of propriety about the payroll estimates, there is still the rather major deficiency in all features of “demand.” The global economy suffers (perpetually post-crisis) from a distinct lack of it, which causes all sorts of problems for something that solely counts the number of payrolls (and not even that, but the variation of payroll changes around some statistically estimated benchmark; but I digress again). Even if we assume that the count of payrolls is correct, that has not solved the “demand” problem yet after seven years of constant “stimulus.”
It is not outside the realm of experience that the entire marginal array of consumer and household preferences may have been altered lastingly by related events. There is, of course, historical experience in just this kind of “mystery.” The 1930’s was replete with permanent alterations to prior economic assumptions, as the reality of the deficiencies of that era caused actual changes in behavior – including financial behavior.
After the ECB has made Greek debt no longer eligible for repos (note that this mainly concerns government bonds however, bank bonds that have been “guaranteed” by the government will however no longer be eligible after February 28 2015 either – these amount to a quite large € 25 billion), fears of an intensifying bank run in Greece are growing. At the end of December, Greek banks owed about € 56 billion to the euro system. This is estimated to have jumped to about € 70 billion since then.
These debts to the system have grown concurrently with a sharp decline in deposit liabilities since November last year, when it dawned on people that there might be an election. Unfortunately more up-to-date data aren’t available as of yet, but we will try to post them as soon as the Bank of Greece makes them available. However, there exist estimates regarding the extent of the decline in deposits since the end of December as well – very likely an additional € 15 billion has fled from the Greek banking system since then.
Photo credit: Pressmaster via Shutterstock
Below are two charts showing assorted liabilities of the Greek banking system, with deposit liabilities shown separately in the second one:
Assorted liabilities of Greek banks – the boom and bust are nicely illustrated by this (assets have of course taken a similar course). “Liabilities to Bank of Greece” designate central bank credit to the banking system. This is estimated to have grown to around € 70 billion, replacing the approx. € 15 billion in deposit money that has likely been withdrawn since the end of December – click to enlarge.
Deposit liabilities of Greek banks – total and domestic until the end of December 2014. A further € 15 bn. decline is estimated to have occurred since the end of December; this has been replaced with central bank funding. Some of this will take the form of “ELA” from February 11 onward, when the eligibility of Greek debt as collateral for ECB funding is withdrawn – click to enlarge.
Submitted by William Bonner, Chairman – Bonner & Partners
The Dow shot up 212 points, or 1.2% on Thursday. The biggest challenge is to figure out what to laugh at first. So many frauds. So much nonsense. So little time.
Last week, Zero Hedge reported that a bubble was inflating in the burger business. Shake Shack Inc. – which was taken public last week – was initially priced at between $14 and $16 a share. But a pre-IPO frenzy pushed the IPO price to $21 a share.
Then things got really silly …
Photo credit: Shake-Shack
On its first day of trading … for no apparent reason other than that investors had taken leave of their senses… the share price jumped to a peak of $52.50 – a 150% increase.
Shake Shack is a milkshake and hamburger joint. According to Zero Hedge, the company’s “EBITDA multiple” – a more sophisticated version of the price-to-earnings ratio – is 108.
Think of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) as a quasi-estimate of free cash flow. At an EBITDA multiple of 108, investors are willing to pay 108 times the free cash flow Shake Shack produces.
The Double ShackBurger sells for $7.99. So to put it another way, a $10,000 investment gives you the equivalent, in cash-flow terms, of about 11 hamburgers. Maybe they’ll give you fries with that.
What’s so special about the Shake Shack’s burgers? We don’t know. But we suspect it has more to do with the heady flavor of the stock market than the taste of its fries.
In 1958, economist W.H. Phillips wrote a paper that argued an inverse relationship existed between wage inflation and unemployment. The crux of his theory was when unemployment is high wage growth is absent; but when the unemployment rate is low wages rise rapidly. Philips established his theory under the framework of a curve and it was aptly referred to as “The Phillips Curve”. However, many economists wrongly adopted the Phillips Curve by relating it to general price inflation, rather than to just wage inflation. Sadly for Phillips Curve enthusiasts, the high inflation and high employment rates of the 1970’s turned this metric on its head.
Stagflation in the U.S. throughout the 1970’s proved high inflation and high unemployment can—and often do–exist concurrently, thus rendering the Phillips Curve obsolete. This same phenomenon where rising inflation coincides with a rising unemployment rate has also been witnessed throughout the globe. Fittingly, the notion that more people working was the cause of inflation should have found its place in the Wall of Shame of economic theories, sandwiched in between other items falling out of vogue at the time, such as toe socks and the pet rock.
However, the Keynesian economists who held this curve in such high esteem in the 1960’s, were somehow unable to let it go. Therefore, a new metric was created rooted in the Phillips Curve, but conveniently much more ambiguous. They called this metric the Nonaccelerating Inflation Rate of Unemployment (NAIRU). The idea behind NAIRU is inflation and unemployment really only become correlated once unemployment falls below a certain calculated rate. But you have to understand that the Fed’s number for NAIRU is more elastic and flexible than Gumby. And when it does fall below that predetermined rate, as it did from 1996-2000, and inflation (as the Fed measures it) is still absent, the Fed must come up with an excuse for its inaction.
Submitted by James Howard Kunstler – www.kunstler.com
Bruce Jenner’s journey to transgender sainthood was interrupted Saturday on the road to Malibu, and with it perhaps the Kardashian Klan’s hopes and dreams for achieving supremacy of the known universe. All of America was twerking at the news because that is what we do and who we are now. The nation’s attention these blizzardy days would have otherwise gone straight from the Super-bowl halftime hallucination to the stupendous narcissistic grandiosity of the Grammy Awards. America becomes, day upon day, one gigantic act of “performance art” geared to shocking a bourgeoisie that has dwindled so deeply that, curiously, there may be absolutely nobody left to shock.
Of course the Kardashians are a mere metaphor for what has happened to this country, and Bruce Jenner is a metaphor for what has happened to American men. Maybe that’s why they persist in the spotlight. It is a well-known fact that motorists on a highway always slow down to see just what happened at the grisly scene of the accident. We can’t take our eyes off these freaks and geeks.
The Romans, on their journey to decadence, lacked the voltage and the wiring to amplify the anomie overtaking them. We’re bathed and bombarded with the images of exactly how disgusting we are. People of WalMart, throw off your chains of debt, indeed! Imagine trying to govern a land of such vicious dolts. Well, here’s a news flash: no one is really trying — whether from a lack of conviction or courage or intelligence, or out of sheer contempt, it is hard to say.
It is heartening, finally, to see Europe attempt to creep away from the intrigues of our Klown Konfederacy at least in the current matter of Ukraine, that poor perpetually over-trodden land of potato-eaters lately torn asunder by America’s idiotic wish to wrest it away from Russia’s 1000-year sphere of influence. Merkel and Hollande stole over to Moscow last week to confab with Mr. Putin. They evidently omitted to inform the haircut-in-search-of-a-brain, Secretary of State John Kerry. Who would want that mule-faced ninny at the table? The Europeans are beginning to say some sane and arresting things, such as: Russia and Europe are part of the same civilization — note the implication that perhaps America is not so much in that club anymore. Perhaps it should be left twerking out on one of its fabulous lost highways until it is all twerked out.
Submitted by Mark O’Byrne – GoldCore
– Chinese imports, primarily of raw materials, crashed 19.9% in January
– Exports fall 3.3% against expectations of 6.3% rise
– Total Chinese debt rose from $7.4 trillion in 2007 to $28.2 trillion in 2014
– Capital outflows last quarter were the highest on record
– China may devalue yuan to boost exports
– Currency depreciation by worlds biggest exporter may trigger global deflation and depression
China’s debt-driven economy and monumentally wasteful building boom which has created entire cities with no inhabitants looks set to unwind as figures show that Chinese imports of raw materials continue to decline.
Imports fell 19.9% year on year in January. While such a dramatic slump can largely be explained by considerably lower prices for raw materials the data shows that imports are down in terms of volume also.
Iron ore imports fell by 9.4% in volume (YoY) while coal imports fell almost 40% by volume and oil by 7.9% between December and January. Imports into China have been declining every month since October.
Last year the Chinese Lunar New Year fell in January which caused factories to close for a week. This year, Chinese New Year falls this month. So these figures are particularly shocking given that industrial capacity was roughly 25% higher this January than in January 2014. Continue reading