[The recent American failure to train and equip anti-Assad forces in Syria is not an isolated incident. It is a symptom of a systemic problem. This article, which recently appeared in the Russian press, explains why.]
Yevgeny Krutikov, Vzglyad
The scandal around the “30th Divison,” which was prepared by American trainers for war against Assad, and which immediately surrendered to the Islamist An-Nusra Front as soon as it crossed the border from Turkey, is now resounding around the entire planet. There will be many such scandals. They have been predetermined by the methodology of American training of “allies”—in Syria, in Georgia and in the Ukraine.
Let’s recall that as a result An-Nusra Front (a branch Al-Qaeda) received weapons, equipment and a few pickup trucks from the USA. The commander of the “30th Division” assured representatives of the Front that he fooled the American military in order to get weapons. The problems which caused this to happen can be split into three uneven categories.
Problems with intelligence and psychology
The image of a CIA operative who decides whom to choose as an ally in the Middle East has been unduly exaggerated by Hollywood. In an absolute majority of cases the operatives latch onto anyone who shows even the most perfunctory signs of being loyal. But if somebody seems useful but does not show enough of the required signs, then they prefer to purchase his loyalty, even though such “partners” have been considered unreliable at all times. These are, roughly, the principles according to which the anti-Assad coalition was knocked together.
Add to this that the behavior of CIA operatives is very tightly regulated. Just about every eventuality is accounted for by a written instruction, which they are required to know almost by heart. Disagreement with operational instructions brings official sanction. The freedom of action of an operative is limited, and at times they are simply forced to fulfill the letter of the instructions instead of reacting to the situation. This problem plagues many intelligence services, but the American ones are, in addition, built on ideological and, to a lesser extent, on ethnic stereotypes. Generally speaking, any authentic-looking towelhead who is able to intelligibly pronounce the word “democracy” has a chance to receive financing and weapons. But nobody has any control over where he will then go with these weapons. By the way, Soviet intelligence services of the Brezhnev era had the same problem, latching onto any tribal chieftain who knew how to pronounce words like “Marx” and “Lenin.” Continue reading
And so it goes, back to the Asian “dollar” again. The reverberations back and forth are nothing if not remarkable, revealing, I believe, some very real divisions between the general and “traditional” eurodollar and the new(ish) Asian “dollar.” Last week, it was the eurodollar out front while China and Hong Kong were seemingly enjoying the relief. This week started with the eurodollar still primed, but now China is back to the center of the storm. The “dollar” system as it grew up was always fragmented (how could it be any other way, built in trading integration of banking systems all over the world) but it was only extreme pressure that illuminated the fault lines and why that matters.
As noted last week, you can understand somewhat why the PBOC would choose to put out and then actively enforce a financial target. Letting O/N SHIBOR, for example, skyrocket would not be helpful for maintaining orderly liquidity particularly between the stressed Asian “dollar” (bank balance sheets operating dark leverage and wholesale “dollars” in Asian markets) and internal renminbi liquidity. However, it isn’t at all clear that preventing that occurrence has gained much either. In other words, by pegging SHIBOR, the PBOC is generally and widely signaling its presence, which the “market” rightly interprets in much the same way as if SHIBOR were spiking anyway.
Gray Swans and Black Swans
By Monday’s close, the S&P 500 Index was closing in on the low established in the August swoon – such a retest was essentially our minimum expectation, as V-shaped rebounds are very rare. The question is now whether it will only be a retest, or if something worse is in the offing. No-one knows for sure of course, but we’ll briefly discuss what we are looking at in this context.
Image via NYTimes
It is interesting that as the market has declined in recent days, the news-flow accompanying this move has steadily worsened. This is fairly typical for downward trends: suddenly the frequency of bad news increases, and more importantly, suddenly bad news seem to matter. Not only have economic data releases generally been weak regardless of their provenance (yesterday: China’s manufacturing PMI, Dallas manufacturing survey), but assorted black swans, or at least “gray” swans are suddenly popping up left and right.
The SPX is approaching lateral support – click to enlarge. Continue reading
Today is the 70th anniversary of the UN. It is not clear how much good the UN has done. Some UN Blue Hemet peacekeeping operations had limited success. But mainly Washington has used the UN for war, such as the Korean War and Washington’s Cold War against the Soviet Union. In our time Washington had UN tanks sent in against Bosnian Serbs during the period that Washington was dismantling Yugoslavia and Serbia and accusing Serbian leaders, who tried to defend the integrity of their country against Washington’s aggression, of “war crimes.”
The UN supported Washington’s sanctions against Iraq that resulted in the deaths of 500,000 Iraqi children. When asked about it, Clinton’s Secretary of State said, with typical American heartlessness, that the deaths of the children were worth it. In 2006 the UN voted sanctions against Iran for exercising its right as a signatory of the non-proliferation treaty to develop atomic energy. Washington claimed without any evidence that Iran was building a nuclear weapon in violation of the non-proliferation treaty, and this lie was accepted by the UN. Washington’s false claim was repudiated by all 16 US intelligence agencies and by the International Atomic Energy Agency inspectors on the ground in Iran, but in the face of the factual evidence the US government and its presstitute media pressed the claim to the point that Russia had to intervene and take the matter out of Washington’s warmonger hands. Russia’s intervention to prevent US military attacks on Iran and Syria resulted in the demonization of Russia and its president, Vladimir Putin. “Facts?!, Washington don’t need no stinkin’ facts! We got power!” Today at the UN Obama asserted America’s over-riding power many times: the strongest military in the world, the strongest economy in the world.
The UN has done nothing to stop Washington’s invasions and bombings, illegal under international law, of seven countries or Obama’s overthrow by coup of democratic governments in Honduras and Ukraine, with more in the works.
The UN does provide a forum for countries and populations within countries that are suffering oppression to post complaints—except, of course, for the Palestinians, who, despite the boundaries shown on maps and centuries of habitation by Palestinians, are not even recognized by the UN as a state. Continue reading
Submitted by William Bonner, Chairman – Bonner & Partners
The Yellow Machines Go Silent
PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70.
We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet.
At the Diary, we write about the world of money. About economic policy and how it affects you. But what if, in your world of money, you are running short? What should you do to get more? Check under the seat cushions? Rob a bank?
We’ll come back to this question in a few moments. First, let’s take a look at the big picture.
It appears that the world economy is headed for recession. An economy makes and takes. Whatever you make – whether it is an apartment building or a plastic toy – you have to begin by taking dirt out of the ground.
Caterpillar-made fleet of mining trucks
Photo credit: Caterpillar Continue reading
On this side of the “dollar” world, credit markets have all but written Janet Yellen into irrelevance. Despite her pleas (because of?) last week, there isn’t any part of money dealing or fixed income that is taking her “certainty” about recovery and “inflation” as even a partial setting. So lost is the FOMC, that everywhere you turn these markets are moving opposite.
Where that has to sting the most is “inflation expectations.” Proving to be far more than just crude prices (which have largely been stable since August, at least in the view of not crashing again), breakevens are now at lows last seen in the dark days of 2009, surpassing that first “wave” earlier this year. Trading in the past few days has seen TIPS hedging interest drop sharply, which can only count as credit markets giving up on the recovery narrative in full – once (to January 14) might be “transitory”, but twice eight months later and at new lows is goodnight Yellen.
What really drives home that point is that the same new low has been visited in the FOMC’s “preferred” measure of forward inflation expectations, the 5-year/5-year forward rate. That measure (through yesterday’s liquidation) has dropped more than 10 bps just since Thursday’s close – when Yellen was last seen meekly projecting her “professional forecasters” of long-term expectations anchoring. This can only be interpreted as a direct market rebuke. Continue reading
The US stock market has been inflating almost continuously since Black Monday in October 1987 when the newly arrived Fed Chairman, Alan Greenspan, panicked and opened up the money spigots.
^SPX data by YCharts
In fact, the S&P 500 had risen by nearly 1000% as of the recent May peak, but that was not owing to a traditional domestic business cycle or booming growth in the main street economy. To the contrary, real median household income in 1989 was $53,000 in constant 2013 dollars—–or exactly where it still sits today.
Instead, the big cap US stock index depicted above floated upwards for more than two decades owing to the great central bank Financial Bubble. On the back of $225 trillion of debt, the world economy got drastically overbuilt—–from the boom’s epicenter in China and throughout the global food chain of Emerging Market (EM) economies which supplied it, the petro-states which powered it, and the Development Market (DM) economies which consumed more than they produced and financed it from borrowings and speculative windfalls. Continue reading
Submitted by Mark O’Byrne – GoldCore
In his article for Bloomberg Business Ranjeetha Pakiam takes a look at China’s recent accumulations in gold and how the country now compares in the world league table on gold holdings. He observes that there is a deliberate policy of increased transparency in China “as the country improves data quality, increases its presence in commodities trading and promotes the international role of the yuan”.
- China has overtaken Russia to become the country with the fifth-largest gold hoard
- China’s accumulation of physical gold is being tipped to continue by market experts
- Monthly reporting increases Chinese transparency after years of mystery
You can read the full article on Bloomberg Business
Today’s Gold Prices: USD 1122.50, EUR 1000.08 and GBP 739.12 per ounce.
Yesterday’s Gold Prices: USD 1124.60, EUR 1001.16 and GBP 741.36 per ounce.
Gold in GBP – 1 month
Gold closed at $1127.50 yesterday with a $4.40 loss on the day. Silver was up $0.05 at close to $14.64, a gain of 0.34%. Euro gold fell to about €1002, platinum remained at $914.
“Every man has a right to his own opinion, but no man has a right to be wrong in his facts” ― Bernard M. Baruch
“The main purpose of the stock market is to make fools of as many men as possible.” ― Bernard M. Baruch
As the market drops 200 to 300 points daily on a fairly frequent basis these days, and has now dropped 13% in the last four months, John Hussman’s valuation analysis based upon historical facts is proving to be accurate. He’s not an “I told you so” type of person, but I am. The MSM stories follow the same old storyline – this is just a correction, time to buy the dip, stocks are undervalued, the Fed won’t let the market fall. We’ve been here before, twice in the last fifteen years. Wall Street and their media mouthpieces attempted to spread misinformation about the nature of the markets in 2000 and 2007, as epic bear markets were just getting underway. John Hussman cut through their crap then and he is cutting through it now.
“Is our profession really so lazy that we would advise people to risk their financial security based on tinker-toy models and pretty pictures that we don’t even have the rigor to test historically? Investors appear eager to ‘scoop up’ so-called ‘bargains’ on the belief that stocks are ‘cheap relative to bonds.’ All of this is predicated on the belief that profit margins will remain at record highs, that the Fed Model is correct, and that P/E ratios based on extremely elevated measures of earnings should be evaluated based on norms for much more restrained measures of earnings. Based on daily closing prices, the S&P 500 has not even experienced a 10% correction, yet the recent decline has been characterized as if investors are acting ‘like the world is about to end.’ This is not the pinnacle of human irrationality, but in fact, quite a shallow selloff from a historical standpoint. The fact that Wall Street is branding it otherwise is evidence that investors have completely forgotten how deep the market’s losses can periodically become.” Continue reading
While central banks would prefer to isolate oil prices as if in their own world with nothing at all to do with finance and economy more generally, it is oil prices that continue the disappointment connecting the “dollar” to the growing market (and therefore economic) wreck. Front month and spot crude prices had bounced around more favorably since the August 24 low, but the rest of the curve has been far less responsive. The outer maturities for oil prices remain seriously depressed without any visible means to correct that no matter what Janet Yellen declares about 2% inflation anchors.
With oil liquidating again, the outer end of the futures curve participated as strongly (if not more so: futures price for November delivery was down $1.22 while the December 2017 price was off $1.47; December 2018 -$1.36) as the front, which means again the economic foundation of that part of the curve is more validating of the “dollar” to its downside rather than the rebound since late August.
Copper prices in the past week are clearly running in that direction, too. The October futures price settled at $2.251 which actually makes a new multi-year low closing price. The low trade for the day of $2.236 was only pennies above the August 24 extreme.