Archive - May 24, 2014 - Story

No matter the headline, no matter the scandal, no matter how few or how many might be involved, one thing will become crystal clear: nobody that should have known – will have known.

A month ago, when the fate of the historic (and now concluded) gas deal between Russia and China was still unknown we wrote that "Isolated Russia Makes Friends: To Hold Military Drill With China", a drill titled "Maritime Cooperation-2014", and which, coincidentally, is taking place in the northern part (ahem Japan and Taiwan) of the East China Sea, just as Russia is conducting another massive airforce drill along its border with Ukraine on the weekend of Ukraine's presidential election. Here are some snapshots of what has taken place so far.

Thailand’s twelfth coup since 1932 reveals both the sorry state of its democracy and the erosion of the monarchy. But as political tensions in Thailand have escalated, raising fears that the country could return to the unrest that followed the ouster in 2006 of Prime Minister Yingluck Shinawatra's brother, Thaksin Shinawatra, we thought it useful to note the key Thai political figures facing yet another crisis.

As The Diplomat's Serhat Unaldi notes, "If Thailand negotiates successfully, if the country avoids further bloodshed, it will soon be back on track for a positive transformation. If it fails, the consequences will be disastrous."

While the S&P 500 closed at record highs (and VIX near record lows), Marc Faber says the "momentum sell-off has caused serious internal damage to the market," with many of the most-loved and most-levered stocks down 30-50%. Interestingly Faber warns that if bond bears are correct and rates rise to 4% then stock prices "will really tumble." But it is China that worries him the most. Faber warns that Chinese growth figures are a fallacy and that "if one analyzes the data carefully" it is clear that "China is growing at most 4%" and given the "gigantic credit bubble" the outlook is not hopeful as the sharp deceleration in growth is likely to continue. Faber also has strong words for Western nations treatment of the rest of the world and "the US will have to back off.. because China is so important."

Having watched Tim Geithner's disgusting defense of the tax-payer-backed re-inflation of a corrupt and knowingly devastating banking system on Jon Stewart's Daily Show, and watching the US fine (no jail time for anyone) a Swiss bank which admits its guilt over billions of fraud yet allow them to remain a prime dealer of US Treasuries; we thought the following story from a '3rd world banking system' would open a few eyes in the US this weekend as 'we remember'. As AP reports, a billionaire businessman at the heart of a $2.6 billion state bank scam in Iran, the largest fraud case since the country's 1979 Islamic Revolution, was executed Saturday, state television reported.

Speaking like a jilted girlfriend, German finance minister Wolfgang Schaeuble exclaimed that "Russia needs Europe more than China to develop economy," following the signing of the 'holy grail' gas deal this week. But the German saved his sternest comments for his US "allies" as he explained discussions over sanctions and negotiations with Russia over Ukrains would "be even more successful if the United States understands that it is also part of the West." Reflecting on the waning US influence and slamming US Congress delays over IMF reform, Schaeuble unleashed the following: "Perhaps now more of those in power in the United States will ask themselves: Why is America's soft power, even though it is the indispensable nation, not so great as to be understood by the dumb Germans?" As the WSJ reports, Schaeuble reiterated "we won't seek military escalation, but we will of course use our political and diplomatic abilities to increase the pressure on Russia to abide by the rules."

We are confused: on one hand the Fed is injecting hundreds of billions of liquidity into the market, boosting the S&P to all time highs and making the rich richer (Piketty taking Excel lessons from Rogoff notwithstanding) while the economy remains stagnant because, according to the BLS, inflation is too low, and as everyone knows the biggest lament of the impoverished middle class is that "the value of my dollar isn't being destroyed fast enough for me to feel confident about the future." On the other hand, the very same Federal Reserve Bank (of Chicago), just announced that as a result of "prices continuing to increase between 3% and 33%" (!), beginning May 27 it is hiking the prices in its cafeteria. So, clearly prices are rising at a 33% clip due to, how does the IMF put it, lowflation, right? Oh, and harsh weather.

Contrary to blatant propaganda ignited by an insincere West, Putin’s government has no intention of enlarging the Russian Federation. All Putin, and overwhelmingly the Russian people, are after is the assurance of a buffer state in Ukraine without US missiles pointing at Moscow, and that implies a nation that would not join NATO. With the looming elections, Tymoshenko is decidedly pro-NATO but the front-runner Poroshenko has often suggested that Ukraine joining NATO would not be such a good idea. Meantime our neocon-infested State Department and the Pentagon continue to provide imprimatur to America’s corporate media to propagate lies demonizing Putin and Russia and glorifying our American empire. Yet, we are the folks who started the entire mess in Ukraine.

Do not look at this chart if you remain of the opinion that everything is fine in the world. For the 3rd time in the last 4 months, world trade volumes dropped. The 0.5% fall in March - it must have been weathery all over the world? - continues the biggest plunge in global trade since May 2009. As WSJ reports, exports from developing economies in Asia recorded the largest decline, a drop of 4.5%. Central and Eastern Europe was the only region to record a rise in exports as the decline in trade flows is consistent with other evidence that suggests the global economy got off to a weak start this year. So, $12 trillion of global money printing and world trade is unable to sustain growth...

Plenty of progressives up till literally yesterday were saying yes yes, Piketty’s theoretical framework leaves much to be desired, but he’s a top scholar when it comes to the trends he’s documented. And now that much of that empirical work might be totally bunk, the defense is to argue that yes yes, the historical data might be the exact opposite of what Piketty claimed, but boy he offers some compelling theoretical predictions with which we must grapple. Until this sorry episode, we had no idea just how much progressives hated rich people, and how little regard they had for intellectual integrity.

As the anti-China protests in Vietnam - following China's imposition of an oil-rig in disputed territorial waters - RFA reports that a vietnamese woman belonging to an outlawed Buddhist movement died Friday after setting herself on fire in protest against China's actions. The woman, 67-year-old Le Thi Tuyet Mai, surrounded herself with seven banners denouncing Beijing’s claims in the South China Sea before dousing herself in gasoline and setting it alight early Friday morning in front of the Reunification Palace in downtown Ho Chi Minh City. As the following clip shows, police put out the blaze within three minutes but she succumbed to her burns. With China showing no signs of backing down, one of Mai's banners perhaps warrants most attention for the future, "I offer my body as a torch to light the path of all patriots."For its part, the U.S. has expressed a hope of increasing engagement with Vietnam in the wake of the China-Vietnam clashes. A spokesman for the U.S. Seventh Fleet told Reuters that Washington “would welcome increased port visits with Vietnam.”

The individual or system that never experiences dissent, volatility or stress is systemically unhealthy and increasingly prone to sudden "gosh, I didn't see this coming" collapse. The individual who walks daily (i.e. aerobic exercise) is healthier than the couch potato, but the individual who routinely engages in short bouts of strenuous activity has the added benefits of triggering rebuilding/repair responses. Political economies, government agencies, enterprises and communities are no different, as all systems respond the same way: either growing brittle and vulnerable by suppressing dissent and volatility or maintaining strength, resilience and adaptability by encouraging dissent and volatility.  Our centralized government and bank have spared no expense to ruthlessly suppress these essential forces of healthy systems at every turn. The cost of their gross incompetence has yet to be paid, but it will be paid, and in full, in the years ahead.