Sarajevo Is The Fulcrum Of Modern History: The Great War And Its Terrible Aftermath

One hundred years ago today the world was shook loose of its moorings. Every school boy knows that the assassination of the archduke of Austria at Sarajevo was the trigger that incited the bloody, destructive conflagration of the world’s nations known as the Great War. But this senseless eruption of unprecedented industrial state violence did not end with the armistice four years later. In fact, 1914 is the fulcrum of modern history. It is the year the Fed opened-up for business just as the carnage in northern France closed-down the prior magnificent half-century era of liberal internationalism and honest gold-backed money. So it was the Great War’s terrible aftermath - a century of drift toward statism, militarism and fiat money - that was actually triggered by the events at Sarajevo.

"The Battle For Baghdad" - A Backgrounder On ISIS' Grand Plan

It is no secret that the extremist al-Qaeda Jihadist group known as ISIS for short, which in the span of weeks has overrun the northern part of Iraq, has grand ambitions to not only preserve its power in the north and central regions, as well as the border with Syria, but to ultimately proceed south where not only Baghdad is located but also the great energy infrastructure of the country: "the grand prize" for ISIS as it would make the extremist group viable and financially self-sustaining. But how and when will this "Battle for Baghdad" take place? For the answer we go to a backgrounder prepared by the Institute for the Study of War titled, as expected, "ISIS Battle Plan for Baghdad" which lays it out in detail.

Crushing The Q2 "Recovery" Dream In 1 Simple Chart

For a week or two, the 'news' appeared to confirm the 'hope'; faith that Q1's dysphoria would emerge phoenix-like into Q2 euphoria as a 'hibernating' American public emerging from their weather-shelter and spent-spent-spent all their borrowed-borrowed-borrowed money. That ended last week! Despite the dramatically low volume liftathon in stocks since the FOMC meeting, major risk markets around the world are cracking. European bonds and stocks had a bad week, Treasuries rallied the most in 6 weeks, and the key to it all, USDJPY, slipped to 4 week lows. Why? As the chart below shows, US macro data is collapsing again (right on cue) and stands at 2-month lows... (and is the worst-performing macro nation in the world this year!)

 

Is Obamacare Bad For US Economic Growth?

Following the rather stunning shenanigans of Q1 GDP with regard healthcare spending (as we detailed here), we thought, four years after its passage in 2010, it worth analyzing Obamacare's economic impact? Beforehand, economists generally believed that the broader coverage would raise the demand for healthcare goods and services, although there was some disagreement about related effects on healthcare inflation. In reality, as UBS notes, there was too much optimism about a positive immediate economic impact and a negative price inflation effect.

13 Ways Of Looking At Record Low Volatility

Since everyone and their pundit grandmother has opined on volatility in the past month, we will say no more and instead of Wall Street, we will do a Wallace Stevens, with 13 ways of looking at record low volatility, in charts.

"Massive Change Is Upon Us" - The Three 'E's

"It is fair to say that this particular constellation of issues, problems if you will, has never been faced before at these levels. Never," warns Chris Martenson (of The Crash Course) but what does he mean when he says "Great change is upon us." This brief condensed look at The Three 'E's of - Economy, Energy, and Environment are all one needs to understand the current situation is anything but a sustainable status quo (no matter how reassured by record high stock prices the general public may be).

Q2 Economic "Hope" Misses The Point

As individuals, it is entirely acceptable to be "optimistic" about the future. However, "optimism" and "pessimism" are emotional biases that tend to obfuscate the critical thinking required to effectively assess the "risks". The current "hope" that Q1 was simply a "weather related" anomaly is also an emotionally driven skew. The underlying data suggests that while "weather" did play a role in the sluggishness of the economy, it was also just a reflection of the continued "boom bust" cycle that has existed since the end of the financial crisis. The current downturn in real final sales suggests that the underlying strength in the economy remains extremely fragile.  More importantly, with final sales below levels normally associated with the onset of recessions, it suggests that the current rebound in activity from the sharp decline in Q1 could be transient.

Forget "The January Effect", Fall Is The Season Of Volatility

There are a few “market anomalies” affecting the seasonality of stock returns that have captured some investor attention, like the day-of-the-week effect or the January effect, for example. They are called anomalies because – according to financial theory – the market should arbitrage away the regularity of such patterns. But in reality, it does not. As Goldman notes, there are similar patterns exist with respect to market volatility; and they are equally puzzling.

"To My Fellow Filthy Rich Americans: Wake Up, People. The Pitchforks Are Coming"

To: My Fellow Zillionaires - "You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries - from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor... But let’s speak frankly to each other. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now? I see pitchforks... And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us."

Mexican Military Chopper Shoots At US Border Guards After Entering American Airspace; Mexico Denies

Late last week, Mexico appears to have taken the US "border-crossing" issue to a whole new level even if it was really a case of a drug bust gone horribly wrong,  when as AP reported, on Thursday Mexican law enforcement crossed into Arizona by helicopter and fired two shots at U.S. border agents, a border patrol union leader says.  According to the Customs and Border Protection: "At approximately 5:45 a.m. Thursday morning, a Mexican law-enforcement helicopter crossed approximately 100 yards north into Arizona nearly 8 miles southwest of the Village of San Miguel on the Tohono O'odham Indian Nation while on a law-enforcement operation near the border. Two shots were fired from the helicopter, but no injuries or damage to U.S. property were reported. The incident is currently under investigation." Art del Cueto, president of the local border patrol union, said four agents were in a marked patrol vehicle when they were shot at. "They could say they didn't fire at the agents intentionally. But for them to say that they were no shots fired within the United States, toward the United States Border Patrol, is a lie. They got in contact with our managers and apologized for the incident," del Cueto said.

What's The Biggest Business In Your State?

A state economy is nothing without the businesses that call it home. But, as WaPo notes, those businesses are not created equally - bigger businesses naturally have outsized influence, generating more revenue, paying more taxes and employing more people. As Bloomberg notes below, some are less surprising - GM runs Michigan, ExxonMobil runs Texas, and Berkshire Hathaway runs Nebraska but for Washington (home of Microsoft), it is CostCo that runs the state. So what's the biggest business in your state?

Networks Vs. Hierarchies: Which Will Win?

Many believe the most significant battle of our era is between the forces of Decentralization vs. Centralization. Niall Furguson takes that battle and looks at it from a historical perspective, describing it as Networks vs. Hierarchies, and warns we "need networks, for no political hierarchy, no matter how powerful, can plan all the clever things that networks spontaneously generate. But if the hierarchy comes to control the networks so much as to compromise their benign self-organizing capacities, then innovation is bound to wane."

China's Replica Of Manhattan Results In Yet Another Ghost City

China's own Big Apple may be rotting from the core. A new central business district modeled after New York City is going up in Tianjin but the project is in jeopardy. While the growth of China's ghost cities of entirely derelict and unlived-in residential real estate have become anathema; the story of the nation's 'if we build it they will come' commercial real estate bubble has been less exposed but is no less incredible. As Bloomberg reports, China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation’s unprecedented investment boom. Stunningly, the development has failed to attract tenants since the first building was finished in 2010 leaving one commercial real estate investor to proclaim, "Investing here won’t be better than throwing money into the water... There will be no way out - it will be very difficult to find the next buyer."

The Keynesian End Game Is Near: No Escape Velocity This Year, Either

The economic releases of the past few days are putting the lie to the Keynesian escape velocity myth. The latter is not just around the corner—-and 2014 is now virtually certain to mark the fifth year running when the boom predicted by Wall Street economist at the beginning of the year fizzled as actual results unfolded.

The Pentagon Has A Problem: "Vetting Moderate Al Qaeda Rebels Can Be Tough" - So Here Is A Simple Solution...

Moments ago, none other than the Pentagon's rear admiral John Kirby confirmed that there is a glaring problem with Obama's intentions to disburse $500 million to "moderate" Syrian rebels.

  • KIRBY SAYS A LOT OF WORK NEEDED TO VET MODERATE SYRIAN REBELS
  • KIRBY SAYS CONCERNED ABOUT AID `ENDING UP IN THE WRONG HANDS'

While we share his sentiment (which we doubt is much of a concern to the US MIC as it will merely provide one set of US-made weapons to destroy another set of US-made weapons), we repeat that there is a simple solution. It comes from Andy Borowitz, who appears to have read our mind, and is breathtakingly simple. Presenting: The Moderate Syrian Rebel Application Form.

How The Fed Distorts Everything

Jeff Deist, of The Mises View, explains how the Fed has created a perilous landscape in which there is no 'honest' pricing left - everything has been distorted. As David Stockman exclaimed, "The system we have now is one in which the Fed decides, through a Politburo of planners sitting in Washington, how much liquidity is necessary, what the interest rates should be, what the unemployment rate should be, and what economic growth should be."

What The CEOs Are Really Saying In Q2: "The Recovery Remains Fragile"

Despite exuberant Services and Manufacturing PMIs, Bloomberg's index of CEO sentiment remains stagnant near 2014 lows as April's hope for Q2 has faded into 'more of the same' by June. As Bloomberg's Rich Yamarone points out, in reality (in spite of all the hope), the second quarter is drawing to a close and it was a rough one for corporate America, with CEOs citing "slower growth in household income overall", "the recovery remains fragile, especially for customers on a budget", and perhaps most concerning, "whether or not this softness in store traffic is representative of a permanent sea change in customer behavior or a temporary phenomenon is hard to tell at this stage."