Archive - Mar 2014 - Story

A picture explains things best, and The South China Morning Post's Jake van der Kamp's chart on China's net capital flows certainly says all you need to know about why Beijing is "playing silly games with the yuan again".

Here is what is and is not known about the location of US naval forces.

Since the start of 2014 the Russian Ruble has been for sale, and BofA's Macneil Curry warns, that trend will persist. With desk chatter that Russia's 2nd largest state owned bank VTB setting USDRUB exchange rate to 39.45 (a huge shift relative to Friday's close on MICEX was 36.05), trendlines are in peril.

With Friday's farcical 3:30pmET ramp firmly in mind, USDJPY has opened decidedly down-beat in very early (and illiquid) trading suggesting a rude-awakening for US equity futures when they open...

Following last week's confirmation that capital expenditure in the land of the Free runs a very poor third to buybacks and dividends (and well anything that props up the over-inflated share prices of US corporates), and merely confirming what we have been discussing for the last few years (that Fed policy has focused management on short-term gratification and not long-term growth and stability), ex-PIMCO shit-cleaner-upper Mohamed El-Erian notes six reasons why the collapse in capex spend will continue and how central banks have failed to prime the pump of the real economy.

Overnight, there had been numerous rumors that the newly appointed chief of the Ukraine navy, who was just made head of the navy on Saturday, had defected to the Crimean people explicitly, and to pro-Russian forced in the region implicitly. The sourcing of most were various Russian outlets so we discounted these until we got confirmation from a "western" source. The BBC did just that moments ago: "The newly appointed head of Ukraine's navy has sworn allegiance to the Crimea region, in the presence of its unrecognised pro-Russian leader. Rear Admiral Denis Berezovsky was only made head of the navy on Saturday, as the government in Kiev reacted to the threat of Russian invasion."

As we warned on Friday, the military escalation in Ukraine has had dire consequences for the financial state of the country, its banks, and ultimately its people. The central bank promised to rescue domestic banks so long as they agreed to its complete control and it appears the first consequences of that "we are here to help you" promise is coming true:

UKRAINE'S PRIVATBANK LIMITS ATM WITHDRAWALS TO UAH1,000/DAY ($103/day)

Privatbank is Ukraine's largest bank and while claiming this move is temporary (just like Cyprus' capital controls), the bank has also ceased new loans amid what it calls "geopolitical instability". In summary, you can't have your money back! Expect long angry lines at Ukrainian banks on Monday morning (and at the pace of collapse in the Hyrvnia, hyperinflation next).

While the developed world is focusing on the rapidly deteriorating developments in the Crimean, China, which has kept a very low profile on the Ukraine situation aside from the token diplomatic statement, is taking advantage of this latest distraction to do what it does best: quietly take over the global periphery while nobody is looking. We learn that China has just achieved what every ascendent superpower in preparation for "gunboat diplomacy" mode needs: a key strategic airforce base, located in one time economic zombie, Zimbabwe, which incidentally just adopted the Chinese Yuan as a legal currency, and whose president just happens to be on China's payroll.

Just in case Obama's Friday message of "costs" should Russia invade Ukraine, which it did, was lost in translation, here is NATO with the clarification, and more harsh language: Russia "threatens peace and security in Europe. Russia must stop its military activities and its threats." And just in case both Obama and NATO were misunderstood, here is Kerry appearing on CBS' Face the Nation laying down the law, and even more harsh language: John Kerry on Sunday condemned Russia's "incredible act of aggression" in Ukraine and threatened "very serious repercussions." "It's an incredible act of aggression. It is really a stunning, willful choice by President (Vladimir) Putin to invade another country. Russia is in violation of the sovereignty of Ukraine. Russia is in violation of its international obligations." Russia's response? "No comment at the moment," Peskov said.

With less than 6 hours left until FX trading opens, no resolution to the Ukraine crisis is in sight. Instead the situation has devolved even more and overnight Ukraine has ordered a full military mobilisation in response to Russia's build-up of its forces in Crimea. Prime Minster Arseniy Yatsenyuk said the country was "on the brink of disaster." The BBC adds that it has seen what appear to be Russian troops digging trenches on the Crimean border.  Furthermore, a standoff between Ukrainian troops who have fortified a base in the crimean city of Privolnoye, and Russians who have surrounded them, may be the match that set it all off. Fox reports that hundreds of unidentified gunmen surrounded a Ukraine's infantry base in Privolnoye in its Crimea region Sunday. The convoy included at least 13 troop vehicles each containing 30 soldiers and four armored vehicles with mounted machine guns. The vehicles -- which have Russian license plates -- have surrounded the base and are blocking Ukrainian soldiers from entering or leaving it. In response, acting Prime Minister Arseniy Yatsenyuk said the move by Russian forces to surround military bases in Crimea was "a declaration of war."

The map below is keeping an accurate running update of all the most recent developments in the staggered Russian invasion of the Ukraine.

Curious how Ukraine, which with its population of 44 million and size of 603,628 square km makes it the largest single country entirely in Europe, stacks up against Russia? The following infographic should answer some questions regarding the (im)balance of power.

As the West Wing tweeted earlier, the White House released this photo of president Obama on the phone with Russian president Putin. Because there is always a professional photographer handy when the fate of a nation is on the line, so to speak.

There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false. The so called Fed’s transcripts, which were released last week, fall into the latter category... But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized.  What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time.

All the latest major headlines on the Ukraine crisis.