American foreign policy theory divides into two main schools. Both have been useful in the past, but neither fits the world we have to deal with now. On one side are realists, who believe that nations try to ‘balance’, try to make sure that no one of their potential rivals becomes powerful enough to dominate them. Wars, in realist theories, occur when the relative capabilities of nations change, and serve to ratify such changes. In such a dangerous world, national security is a concern that trumps everything else, and weakness only encourages aggression. On the other side are Wilsonians, who are impressed by the historical evidence that democracies don’t fight democracies. They essentially agree with Immanuel Kant, who argued, in Perpetual Peace, that a world of liberal states would be a world free of war. Kant, however, went one step further, suggesting that such a world would eventually become a sort of global federation, as the long habit of peaceful collaboration caused mutual trust to harden into mutual obligation. Once this occurred, of course, the Wilsonian foreign policy model would no longer apply, because international war would cease to be the issue – the security problem would then revolve around the potential for civil wars within the federation.
As Buffett Talks Down Japanese Devastation, His Munich Re Announces Massive Loss, Forecast Miss Due To EarthquakeSubmitted by Tyler Durden on 03/22/2011 - 19:17
If one was merely listening to the Octogenarian of Omaha this morning on CNBC, one could easily have left the latest cheerleading attempt by the man who has made both an art and a science of frontrunning the government's rescues of the most incompetent and insolvent organizations in America (and later writing oped's both thanking and criticizing Uncle Sam for doing everything possible to transfer as much taxpayer money into Warren's right pocket just before the hypocrisy medication kicks in) to hypnotize the lemmings into believing all is fine in Japan. If indeed that would be the case, one may therefore be excused for not noting the killer irony of one Munich Re coming out just a few short hours later, saying it expects to not only see $2 billion in losses due the events in Japan, but miss its 2011 profit target by a mile, considering the firm had a $3.4 billion profit target. The kicker, of course, is that Munich Re is owned more than 10% by the same demented individual noted above, who has now gone full retard in his attempts to sucker as many sheep into the slaughter just so he can recover, through secondary and tertiary channels, some of his imminent losses in Japanese insurers and reinsurers. And considering that the Nikkei just reported total earthquake-related losses may be up to ¥25 trillion, or roughly ¥20 trillion more than covered by the Japanese Reinsurance Fund, Buffett better be right...Or if not, he better be petitioning the Japanese government to bend over just like America did 3 years ago, and once again bail out his "genius investor" derriere.
Earlier today, JPMorgan made waves by claiming, some would say rather uncouthly, that Portugal's government is about to keel over and die (even if it is undisputed- after all, on Wall Street no one can hear you speak the truth). Never one to be left wanting, here comes Citi with some charts of "parabolic" moves in the Irish 2 Year bond, and some even scarier claims. As expected any research report that starts with the words: "Oh dear...The picture on Irish interest rate markets is taking a very grim turn" - well, it is clear where it is going from there. In summary, Citi now believes that Ireland is essentially done for, or as Tom Fitzpatrick ever so more diplomatically puts it "things are about to get ugly", and recommends going long CDS since the entire short end of the curve has gone parabolic, now that Europe seems set to watch the island country explode, 2s10s has inverted in the past few days, and overall the Emerald Isle is now a dead man walking in the dumbest game of chicken since the creation of the euro. Too bad neither side is willing to back out, which will ultimately end with the eventual destruction of the eurozone and the euro.
Fukushima Update: Reactor 1 Core Now At 380 Degrees Celsius, 80 More Than Normal Running TemperatureSubmitted by Tyler Durden on 03/22/2011 - 15:35
The latest news from Japan is not the radiation has now been found in various leaf vegetables in Fukushima, including cabbage and parsley: after all that was to be expected following the radioactive rain of the past few days. The news this time comes straight from TEPCO which finally admits that the temperature of Reactor 1 is 380-390 Celsius (715-735 Fahrenheit), which apparently is a "worry" as the reactor was meant to run at a temperature of 302 C (575 F). That is when the reactor is fully operational, not when it is supposed to be in a cold shut down mode.
This week's Straight Talk contributor is John Rubino, publisher of DollarCollapse.com, a popular hub for news impacting the economy. John is the author of several best-selling books foretelling (years in advance) the collapse of the housing market and the decline of the US dollar. Before starting his website, John was a featured columnist with theStreet.com, Institutional Investor, and a number of other influential financial publications. His perspective on Wall Street and the currency markets is shaped by his past roles as a Eurodollar trader, equity analyst and junk bond analyst in the 1980s.
There has been a lot of speculation about just what the JPMorgan note that claims the Portuguese government can fall as soon as tomorrow, says. The speculation can now end. "The likelihood that the Portuguese government will fall this week looks high. This suggests that the sovereign will likely access the EFSF in the near term, despite the current government's efforts to avoid this outcome." Incidentally if JPM is right, the market better have priced in the next insolvent domino to drop in Europe, although judging by where the EURUSD is these days, the market decided to take a long hard sabbatical about 2 weeks ago.
Chasing all the fluttering glow in the dark swans over the past month has put some of the key issues facing the US economy on the backburner. But just like today's surging inflation update in the UK confirmed, there is only so long that any given crisis can be used a distraction from the real problems at hand. And here is where we stand: per a quick check with the recently released and constantly updated MIT billion price project, which just happens to correlate 93% with the CPI, 2011 inflation in the US is trending at an 8.3% annual rate of increase. This is only comparable to China, which just happens to have a growth rate (presumably that is double that of the US), and is almost three times higher than the latest inflation data released by... Zimbabwe. Below is the most recent inverse disinflationary data confirmation from MIT (and plotted by John Lohman). By now we hope readers are honing their iPad eating skills.
Following Radioactive Rain, Radiation In Tokyo Jumps 10 Fold, Hitachinaka Iodine 131 Surges To 85,000 BecquerelsSubmitted by Tyler Durden on 03/22/2011 - 13:25
Once again, we are left scratching our heads as to just where is it that the mass media is seeing an improvement in the Japanese radiation crisis. Because reading domestic media leaves one with a completely different impression. To wit, from the Asahi: "Iodine 131 detected in Tokyo hit 12,000 becquerels, compared with the
previous day: a tenfold increase in both radioactive Iodine and Cesium." As for Hitachinaka City, which according to SPEEDI has seen a surge in radiation over the past 24 hours, things are far worse: "Hitachinaka City, Ibaraki Prefecture, saw the highest radioactive values
recorded, with 12,000 becquerels of cesium, iodine
and 85,000 becquerels."
BofA's chief chartist Mary Ann Bartels chimed in on last week's market correction, in which as many observed, the market briefly dipped to unchanged for 2011. As Bartels points out, with the August uptrend now breached, and various technical supports taken out, there is a possibility for another 10% drop in the broader index. Of course, it wouldn't be a Bank of America report if the conclusion was not the one and only permitted one: BTFD.
It seems Egyptians are so enamored with revolting they have decided to do the whole thing all over again. And this just one month after the first peaceful revolution in MENA claimed the 30 year rule of Hosni Mubarak, and everyone thought Gaddafi would step down just as quietly and peacefully. Well, while Gaddafi appears rather set on staying, and protecting his 144 tons of gold, the Egyptians have decided to burn the place down once again.In the meantime we keep awaiting the Bank of Egypt's official updated recount of its gold stash which, admittedly, was half of Libya's.
Whenever you intervene in a country, whatever your intentions, you are intervening on someone’s side. In this case, the United States, France and Britain are intervening in favor of a poorly defined group of mutually hostile and suspicious tribes and factions that have failed to coalesce, at least so far, into a meaningful military force. The intervention may well succeed. The question is whether the outcome will create a morally superior nation. It is said that there can’t be anything worse than Gadhafi. But Gadhafi did not rule for 42 years because he was simply a dictator using force against innocents, but rather because he speaks to a real and powerful dimension of Libya.
Here's a simple test of whether the economic recovery is self-sustaining or not: cut Federal spending back to 2007 levels (a $1 trillion reduction) and cancel all Fed intervention such as quantitative easing. If the economy is self-sustaining, it will move forward without Federal spending and Fed intervention. If "self-sustaining" is a fiction, an illusion, a mere figment of propaganda deployed to enable the Status Quo to feast off the remaining productive elements of the U.S. economy, then the economy will absolutely crater.
And just as oil was trending lower on the day, we receive our now daily news of Israel conflict escalation, as Reuters reports that tank fire has killed 3 Palestinians in Gaza, wounding another four including children. Bloomberg also chimes in:
- ISRAEL ARMY SAYS FOUR PROJECTILES LAUNCHED FROM GAZA HIT SOUTH
- FOUR PALESTINIANS KILLED BY ISRAELI FIRE IN GAZA, OFFICIAL SAYS
The result is an immediate jump in oil as the market apparently, and contrary to our expectations, has to digest this latest piece of geopolitical news.
The linear thinkers that dominate the mainstream media and the halls of power in Washington D.C. are assessing the series of disasters in Japan without connecting the dots of history. Their ideological desire to convince people that things will go back to normal in short order flies in the face of the facts. It makes me wonder whether these supposed thought leaders lack true intelligence or whether their ideological biases convince them to lie. At the end of the day it comes down to wealth, power and control. If those in power were to tell the truth about the true consequences of demographics, debt, disasters, and devaluation, their subjects would revolt and toss them out. Before the multiple disasters struck Japan last week, the sun was already setting on this empire. The recent tragic events will accelerate that descent.
Even as gas continues to creep ever higher, removing substantial marginal purchasing capacity from the US consumer, a topic beaten to death previously, the oil exporting cartel remembers that in a world strapped for energy, oil prices can and will be quite sticky. Which is why now that OPEC has had its refreshed taste for $120 brent after a three year hiatus, it will most certainly not let the price of crude drop into double digit territory absent another massive deflationary shock a la the fall of 2008. To wit, OPEC has just announced that $120 oil is an acceptable level and will "not hinder global growth." Funny - if one pulls OPEC press releases from the summer of 2008, the cartel used verbatim words to describe $150 oil, and its impact on the world economy. Then again, as Dallas Fed's Fisher pointed out earlier today, commodities are now exposed to the same excess liquidity bubble that took crude to its all time highs. We expect nothing less this time around, especially now that for some inexplicable reason, the world believes that the Fukushima situation is contained and thus the "demand destruction" part of the equation can fall out.