France

"He’s butchered his own people, he’s helped create this conflict and this migration crisis, he’s one of the great recruiting sergeants for ISIL."

Neoliberal economics is blind to reality and serves to justify the destruction of the economic prospects of the Western World. It remains to be seen if Russia and China can develop a different economics or whether these rising superpowers will fall victim to the “junk economics” that has destroyed the West. With so many Chinese and Russian economists educated in the US tradition, the prospects of Russia and China might not be any better than ours. The entire world could go down the tubes together.

After borrowing (and largely wasting) $15 trillion during the Great Recession, China now looks like a typical decadent developed-world country, complete with slow growth, anemic consumer spending and unstable financial markets. But it’s not France, Canada or the US, where recessions happen and voters peacefully replace one major party with the other. China, within living memory, has seen civil unrest beget open rebellion beget multi-decade civil war. Take a surplus of young men (the result of China’s one-child policy which put a premium on male children), combine it with a shortage of good jobs, and the obvious result is instability.

When will the “nothing is happening” crowd finally wake up?

Fed credibility questioned and Yellen sick - Palladium surges 8% - Russia and central banks buy gold - Smart money rebalancing and selling overvalued assets to buy depressed assets especially silver

• Global Markets Rebound on Yellen Speech (WSJ)
• Obama and Putin to meet; Syria and Ukraine vie for attention (Reuters)
• Obama to host China's President Xi amid simmering tensions (Reuters)
• Don't Fall for It, Xi! Chinese Take to Web to Scorn U.S.—and China, Too (BBG)
• Yellen Confirms Fed Still on Track to Raise Rates This Year (BBG)... but is still China dependent?
• Abe's New Economic Plan Confounds Analysts (BBG)
• It's All `Perverted' Now as U.S. Swap Spreads Tumble Below Zero (BBG)

The outlook for diesel looks grim after U.S. regulators found that the world’s second biggest car manufacturer cheated on its emission tests. Now that diesel is not as clean as it appeared (with stricter emissions tests and perhaps even stricter regulation to be expected), one has to ask; does this mean the end of diesel for light vehicles? This is not just alarming for the automotive industry, but could also lead to a structural demand shift in fuel products. That shift could not have come at a worse time for diesel.

Since Francois Hollande was elected (in May 2012), France has seen its joblessness ranks rise 36 of 39 months by a stunning 648,000. The lastest month added another 20,000 as it appears the brief respite in June and July is well and truly over. At 3.571 million, this is the highest number of jobseekers France has ever had...

European equity have been weighed on by BMW after reports in German press that the Co.'s emission tests for their X3 model could show worse results than that of the Volkswagen Passat. The Norwegian and Taiwanese central banks have both cut interest rates, taking the number of central banks to cut rates this year to 40. Today's highlights include US weekly jobs data and durable goods orders as well as comments from ECB's Praet and Fed's Yellen. Of note US data, including jobless claims, durables and home sales will be delayed today & not released to newswires 1st due to Pope's visit

"The politicians cannot understand that they are destroying your future. All they can see is their need to retain power... We are reaching the end of this noose around our neck that was placed there by Marx. What you need to do is take back government. You cannot create a solution with the same line of thinking that created the current mess. The future belongs to the youth. Understand the devil you are dancing with. It is time to become politically active and challenge the establishment for that is the only way to save the future."

• Global Stocks Steady Despite China Slowdown (WSJ)
• European Recovery Saves Markets From China Gloom as Stocks Rally (BBG)
• Pope starts U.S. trip with tone of conciliation (Reuters)
• FBI Said to Recover Personal E-Mails From Hillary Clinton Server (BBG)
• Volkswagen chief faces grilling by board over diesel scandal (Reuters)
• 'European Detroit' Fear Grips VW Company Town as Scandal Widens (BBG)
• Berlin finds itself caught up in Volkswagen scandal (FT)

News That Matters

In many ways, the overnight market has so far been a reversal of yesterday, when a stable Asia session (with China stocks rising) gave way to a European tumble which in turn dragged the US lower.

“Unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late.”

After 35 years of falling and now zero rates, the direction is only up for the cost of money, as is the cost to service debt, along with the burden to those who are most indebted (i.e. the U.S.). What should no longer be unthinkable is that the clock is ticking on America’s status as the holder of the reserve currency. If you still doubt this proposition, consider that China is in the process of setting up a third benchmark for oil, along with Brent and West Texas Intermediate, for trading oil futures contracts. And unlike the existing contracts, these will be traded in Renminbi. Who needs the dollar?