Ukraine's acting PM Arseniy Yatsenyuk speaks. Highlights below:
- UKRAINE TO FULFILL ALL IMF REQUIREMENTS, PREMIER SAYS - like Greece?
- UKRAINE PM SAYS BELIEVES RUSSIAN TROOPS WON'T INVADE E. UKRAINE - because they are there already?
- UKRAINE PM SEEKS TO INCREASE RESERVES TO EASE FX FLUCTUATIONS - "Whatever it takes", even printing dollars
- UKRAINE PM SAYS NAFTOGAZ SHOULD BE PRIVATIZED - Ukraine oligarchs delighted by this development
- UKRAINE PM SAYS NEW GOVERNMENT HAS NO INTENTION OF NATIONALISING PRIVATE COMPANIES" - Ukraine oligarchs even more delighted by this development
And finally, why all the above was irrelevant:
- UKRAINE PM SAYS RUSSIA REFUSES TO HOLD BILATERAL UKRAINE TALKS
Oh well, as long as it fools those USDJPY ramp algos if only for a few minutes.
We were perhaps even more amused than our readers by our Friday headline "Stocks Close At New Record High On Russian Invasion, GDP Decline And Pending Home Sales Miss." It appears that today the market forgot to take its lithium, and is finally focusing on the Ukraine part of the headline, at least until 3:30 pm again when everything should once again be back to market ramp normal. As expected, the PMI data from China and Europe in February, was promptly ignored and it was all about Ukraine again, where Russia sternly refuses to yield to Western demands, forcing the shocked market to retreat lower, and sending Russian stocks lower by over 11%. This is happening even as Ukraine is sending Russian gas to European consumers as normal, gas transport monopoly Ukrtransgas said on Monday. "Ukrtransgas is carrying out all its obligations, fulfilling all agreements with Gazprom. The transit (via Ukraine to Europe) totalled 200 million cubic meters as of March 1," Ukrtransgas spokesman Maksim Belyavsky said. In other words, it can easily get worse should Russia indeed use its trump card.
Why is the periphery crumbling? It's simple: the conditions that enabled rising national surpluses and the distribution of spoils is breaking down for three reasons:
- Energy is no longer cheap (compared to past prices)
- The low-hanging fruit of higher productivity has all been plucked
- The free-money flood of cheap, limitless credit is drying up
As regimes find surplus and credit are both contracting, their ability to placate every key group with spoils is also declining, and the conflicts between them can no longer be patched over with bribery or brutality. Instability starts on the periphery and moves into the core.
It doesn't take any special insight into the situation in Ukraine to conclude that no one narrative illuminates all the dynamics. Various contesting Grand Narratives have emerged in the media--neofascist coup, rampant corruption, east versus west, to name a few--but these only describe a few of the regional fault lines and complexities... I describe the U.S. Deep State as the National Security State which enables a vast Imperial structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence. One key feature of the Deep State everywhere is that it makes decisions behind closed doors and the surface government simply ratifies and implements the decisions. I have covered various aspects of geopolitics and the Deep State for years, for example:
Government spending is out of control. But even if voters and politicians wanted to stop, they couldn't. The root of the problem is a flaw in the nature of the dollar.
All eyes were on China overnight, where first the PBOC drained a quite substantial CNY 100 billion in liquidity via 14 day repos in the month following the biggest credit injection on record, pushing those worried about China's credit schizophrenia to the edge, and then things got even more bizarre when in an act of clear PBOC intervention, the CNY dropped to the lowest since August 2013 as concerns about the global carry trade's impact on China (as noted here previously) start to reverberate. We will have more to say about China's Yuan intervention, but what should be noted is that the Shanghai Composite has tumbled nearly 10% in the past week, and was down another 2% overnight and is once again just barely above 2000, a level it can't seem to get away from for years (which is fine: recall that the real bubble in China is not the stock but the housing market). Chinese property stocks dropped to 8-month lows as concern continues about bank's withdrawing some liquidity for the asset class.The USDJPY drifted along and after rising to a resistance level of about 102.600 has since slide just shy of its 102.20 support area which means US equity futures are now in the red, and concerns that the S&P 500 may not close at a new record high are start to worry the technicians.
It’s like 34 drunken sailors holding each other up. That’s the best way I can think of to describe the latest product from the good idea factory that is the OECD. Over the weekend in yet another cushy five-star hotel, representatives from this unelected supranational bureaucracy announced plans for world governments to exchange all their citizens’ tax and financial data with one another. It’s a pathetic display of exactly the sort of tactics that governments embrace when they go broke. And most of these OECD countries ARE broke – Italy, Japan, the US, Spain, Greece, etc.
"If you like your bailout, you can keep your bailout," is the message from the latest Troika mission to Greece; but there is one (or two) big 'but's... As ekathimerini reports, Greece is "very close" to a deal with the Troika for the next EUR8.8 billion with negotiations hanging on a few final things including... the troika wants Greece to extend the shelf life of fresh milk! Maybe they should just rename it 'greek yoghurt'.
Asian equities are trading lower across the board on the back of some negative credit stories from China. Shanghai Securities News noted that ICBC and some other banks have curbed loans to developers in sectors such as steel and cement. Slower gains in home property prices in China’s tier 1 cities are also not helping sentiment. Beijing and Shenzhen prices rose 0.4% in January, which looks to be the slowest monthly gain since October 2012 according to Bloomberg. Elsewhere there are reports that a property developer in Hangzhou (Tier 2 city in China) is reducing its unit prices by 19%. Our property analysts noted that given the strong gains seen in Tier-1 and some bigger Tier-2 cities in 2013, a slowdown or negative trends in price growth should not be a surprise. Nevertheless, it has been a very weak day for Chinese and HK markets with the Shanghai Composite and the Hang Seng indices down -2.0% and -1.2% lower as we type. Across the region, bourses in Japan and Korea are down -1.0% and -0.6%, respectively.
To summarize: in an act of complete disregard for the official diplomatic song and dance, both Israel and the US are now providing military support to Iran, which in turn is providing military support to Syria, which is also getting military support from Russia. And now, just to make things more interesting, the same labyrinth of "military support" is about to be unleashed in the Ukraine, whose western half is just as likely getting arms and military equipment (not to mention funding)from the West under the table, while Russia, whose main Black Sea port is in the Ukraine's Crimean peninsula, is arming the Eastern part of the Ukraine.
What can possibly go wrong?
Have you noticed that people are becoming angrier? You can see it everywhere – in our homes, in our schools, in our workplaces, in our television shows, in our movies, and certainly in Washington. In fact, many have said that there is an “epidemic” of anger in America today. And it is undeniably true. As you will see below, a whole host of surveys and opinion polls show that America has become a seething cauldron of anger and frustration unlike anything that we have ever seen before. The very fabric of our society is coming apart at the seams and the thin veneer of civilization that we all take for granted is beginning to disappear. What is America going to look like if we continue to go even farther down this road?
Our entire monetary system requires that we all trust the high priests of central banking and economics. Those that stray from the state’s message and spread economic heresy are cast down and vilified. Recall the case of Harvard professors Ken Rogoff and Carmen Reinhart who wrote the seminal work: 'This Time is Different: Eight Centuries of Financial Folly' highlighting dozens of shocking historical patterns where once powerful nations accumulated too much debt and entered into terminal decline. The premise of their book was very simple: debt is bad. And when nations rack up too much of it, they get into serious trouble. This message was not terribly convenient for governments that have racked up unprecedented levels of debt. Not to worry, though, the IMF has now stepped up with a work of its own to fill the void. Translation: Keep racking up that debt, boys and girls, it’s nothing but smooth sailing ahead.
Nearly two months ago, when we commented on the recent string of unprecedented failures by the ECB to sterilize its legacy bond buying operation, the SMP, we commented that "judging by the feverish pace of purchases of every peripheral bond available, is this merely just another indication how little the ECB cares about sterilization, and is just a hint at an upcoming full-blown and unsterilized bond monetization about to be launched by Mario Draghi?" Sure enough at the subsequent February 6 ECB meeting Mario Draghi hinted as much when he said that among the things the ECB was looking at was precisely the "de"sterilizing of the SMP program. However, one stumbling block was getting the Bundebsbank's tacit approval to proceed with this plan which would make the ECB's bond monetization mirror that of the Fed where bonds are purchased on an unsterilized basis. And, as expected, overnight the Bundesbank threw in the towel on sterilization, meaning that the SMP will no longer be sterilized with an announcement divulging just this likely as soon as the next ECB meeting.
Keynes will be remembered as "a man with a great many ideas that knew very little economics," Friedrich Hayek notes in this brief interview and when challenged on his 'parochial' knowledge of economic history he was "not sheepish in the least... he was much too self-assured." Hayek's perspective casts Keynes in a very different light than his fan's apostolic adoration might suggest, "he was utterly contemptuous of anything that had been done before." While Hayek describes Keynes as one of the most intelligent people he had known, he perhaps sums up the man's work in this brief phrase - "economics was just a side-line for him." As we note below, many describe Keynesian policy as 'dumb', however a more appropriate word would be 'foolish'.
The global crisis that began in 2007/8 has unmasked many unsustainable economic dispositions. Unfortunately, the proper conclusions have still not been arrived at, as evidenced by the fact that the same old Keynesian recipes that have failed over and over again are being implemented on an even grander scale. One must not be misled by the claims of 'austerity' being imposed, as this has evidently little bearing on government spending as such, but is rather an attempt to squeeze more blood out of an already shriveled turnip, namely what remains of the private sector. Puerto Rico seems – at least so far – not any different in that respect.