Archive - Aug 2014 - Story

"The greater-than-expected weakness in the consumption snapback signals significant downside risk to our forecast of 4.6% decline for Q2 real GDP (sequential annualized). While we expect lower imports, higher inventories, and other factors to support GDP to some extent, we see negative real GDP growth of around -6.5% as likely, based on the data currently available."

Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud. But we have been keeping track of a few things.

With the spigot of propaganda wide open and Washington appearing increasingly bent on instigating the next war, we thought lessons from past "wars" might help the people when thinking about what is spoon-fed to them each and every day. "To Sell A War" is a documentary that first aired in December 1992 exposing the Citizens for a Free Kuwait campaign as public relations spin to gain public opinion support for the Gulf War. Among other things, it reveals that Nurse Nayirah was in fact Nijirah al-Sabah, the daughter of Kuwait's ambassador to the United States Saud Nasir Al-Sabah, coached by Hill & Knowlton to forge her infamous testimony about Iraqi soldiers removing babies from incubators, which was widely reported and repeated throughout the media.

A plane carrying Dr. Kent Brantly, the American doctor who contracted Ebola while treating patients in West Africa, landed at Dobbins Air Reserve Base in Marietta, Georgia, at around 11am this morning - the first ever case of Ebola on US soil. He is being escorted to Emory Hospital under police escort. His colleague Nancy Writebol will arrive later on a separate flight as the planes are equipped to deal with one quarantined patient at a time. As ABC reports, both are listed in "serious but stable condition." The CDC's director explained the infected patients pose little risk to others, adding "these are American citizens. American citizens have a right of return. I certainly hope people’s fear doesn’t trump their compassion." What is perhaps raising that fear among Americans (and frankly the world after yesterday's WHO warning of "high risks of spread to other countries") is the fact that, as Reuters reports, more than 100 health workers fighting Ebola have contracted it themselves.

A stunning $5.3 trillion in goods cross South China Sea every year, and as we previously explained, 190 trillion cubic feet of gas reserves sit below the ocean floor - enough to replace China's natural gas imports for over a century - so it is hardly surprising that the world's largest importer of oil wants control of such a critical region. As Bloomberg illustrates in these 10 incredible graphics, everyone has a claim on the same territory and tensions are rising. “The Chinese believe they have the right to be a great power,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “What we are seeing is a hardening of China’s stance about its place in the world.”

...but stocks are at record highs...

"Where does [The Fed's] confidence come from?" demanded Stanley Druckenmiller recently. Grant Williams has an answer - Their “confidence” comes from a series of academic models and a lifetime spent studying theoretical finance and then applying it to real-world situations, often with disastrous effect. The day these people admit to themselves (let alone to the public) that what they have believed to be foolproof doesn’t actually work, is the day they render pointless their entire lives’ work... But that could change in a heartbeat.

The conflict in Ukraine and the related imposition of sanctions against Russia signal an escalation of geopolitical tensions that is already being felt in the Russian (and increasingly world) financial markets. As The IMF describes in this chartapalooza, a deterioration in the conflict, with or even without a further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels. But, perhaps more importantly to the West-sponsored IMF, what would be the repercussions for the rest of Europe if there were to be disruptions in trade or financial flows with Russia, or if economic growth in Russia were to take a sharp downturn?

Ahead of the US-Africa Summit this week, and given that President Obama explained "Africa also happens to be one of the continents where America is most popular," we thought the following map of just what the West thinks of Africa would be helpful...

It was ten days ago when on the heels of Russia's 30-minute detailed presentation of what it believes happened to MH-17, the US government released a satellite trajectory map of what it says was the flight's path and the site from which the missile was shot as well as various other satellite images "proving" the missile that took down the Boeing 777 was fired by the pro-Russian separatists.  Yesterday the Russian defense ministry finally responded to the US release stating that the "satellite images Kiev published as ‘proof’ it didn’t deploy anti-aircraft batteries around the MH17 crash site carry altered time-stamps and are from days after the MH17 tragedy." In other words, the evidence the US has present to form public opinion was in the form of "altered images carrying wrong time-stamps."

"By all measures, the U.S. stock market is currently frothy," warns Paul Singer, founder of $24.8 billion hedge fund firm Elliott Management, ominously concluding, "The apparent stability of the world financial system is superficial – financial asset prices are not real, the equilibrium is temporary, the lack of volatility is a trap, and when the whole thing goes haywire, there will truly be hell to pay."

Economics is haunted by more fallacies than any other study known to man. There is a persistent tendency of men to see only the immediate effects of a given policy. In this lies the whole difference between good economics and bad... There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

As we previously commented, when scientists start using phrases such as "the worst drought" and "as bad as you can imagine" to describe what is going on in the western half of the country, you know that things are bad. However, in recent weeks the dreadful situation in California has gone from bad to catastrophic as the U.S. Drought Monitor reported that more than half of the state is now in experiencing 'exceptional' drought, the most severe category available. And most of the state – 81% – currently has one of the two most intense levels of drought.

The 100th anniversary of the beginning of World War I is upon us. Well we should mourn this cataclysmic event and continue to draw lessons from it. We see the same dangers today in the petty but growing conflict over Ukraine between the US and its European satraps and Russia. A conflict over a quasi-nation of absolutely no strategic interest to the United States. American neocons and their Congressional mouthpieces are now calling for NATO to take control of Moldova and Georgia. Conrad von Hotzendorf would have approved. No one in the west is ready to die for Luhansk or Donetsk, but few in 1914 Europe were ready to die for Verdun or Ypres – but millions did.

Last night, minutes before the most ineffectual Congress in US history took off for a well-deserved 5 week vacation, the republican-controlled House escalated the immigration duel with Obama, and passed what democrats called "mean-spirited" border legislation late Friday which as Politico reported was "full of political red meat for their conservative base, including revisions to a 2008 anti-trafficking law and more money for the National Guard." And just to make sure that immigration is a key divisive topic during the midterm elections, one which further splits the nation along predominantly ethnic lines, they also passed a bill to rein in Obama’s program to shield undocumented immigrants from deportations.