Hungary

• Contrarian CEOs tell the Fed: Go ahead, raise my rates (Reuters)
• Goldman Warns Markets Unprepared for Fed as Treasuries Seesaw (BBG)
• Investors Look Beyond Fed Meeting, See Low Rates (WSJ)
• Volatility seen lingering no matter what the Fed does (Reuters)
• What Rising Interest Rates Would Mean for You (BBG)
• China Stocks Jump in Last Hour of Trading on State Support Signs (BBG)
• No Escape for China Hedge Funds Overwhelmed by Stocks Crash (BBG)
• Hedge Fund Bridgewater Defends Its ‘Risk-Parity’ Strategy (WSJ)

While influential voices like the Pope are correct that this is a travesty, the policies promoted by him and other government officials will only make this worse. Offering assistance to migrants by rescuing them when they become troubled or allowing migrants to remain without changing the underlying bureaucratic issue will only create greater incentives for more and more people to take the same dangerous routes. Risk compensation has to be considered — the greater the safety mechanisms in place, the more risky the behavior will become. Unfortunately, the current solutions presented by officials will likely result in boats even more overloaded with people and even greater numbers traversing dangerous jungle passes.

As thousands of refugees pour into Europe to escape the horrors of war, with many dying along the way, a different sort of tragedy has played out in many of the European Union’s newest member states. The states known collectively as “Eastern Europe,” including my native Poland, have revealed themselves to be intolerant, illiberal, xenophobic, and incapable of remembering the spirit of solidarity that carried them to freedom a quarter-century ago.

Europe's refugee crisis is getting worse by the day. Less than 24 hours after Germany announced it would impose border controls with Austria, followed promptly by the Czech Republic, Slovenia and now the Netherlands, German vice chancellor Sigmar Gabriel predicted that as many as 1 million refugees may arrive by the end of the year as other nations moved to fortify their frontiers. In the meantime, however, Europe is dramatically escalating measures to halt the influx and as AFP reported earlier today, the European Union has now approved military action against human traffickers in the Mediterranean Sea.

We Americans are in something approaching complete denial about how truly horrible our nation’s recent impact on the rest of the world has been. We are universally hated, even by those who have their hands out to receive their Danegeld, and the world is undoubtedly shaking its head as it listens to the bile coming out of the mouths of our presidential candidates. Shakespeare observed that the “evil that men do lives after them,” but he had no experience of the United States.

This level of global inter-connected financial risk is hazardous in Mexico, where it’s peppered by high bank concentration risk. No one wants another major financial crisis. Yet, that’s where we are headed absent major reconstructions of the banking framework and the central bank policies that exude extreme power over global economies and markets, in the US, Mexico, and throughout the world. Mexico’s problems could again ripple through Latin America where eroding confidence, volatility, and US dollar strength are already hurting economies and markets. The difference is that now, in contrast to the 1980s and 1990s debt crises, loan and bond amounts have not just been extended by private banks, but subsidized by the Fed and the ECB.  The risk platform is elevated. The fall, for both Mexico and its trading partners like the US, likely much harder.

"The fence, in part being built by prisoners along the 175-km (109-mile) border, would be completed sooner than planned, by the beginning rather than the end of October. 'This 3.5-4-metre tall fence can be adequate to protect the country, especially if policemen are patrolling on the other side,"' Minister Viktor Orban's chief of staff Janos Lazar told a weekly news conference."

Following Hungarian cameramen kicking 10-year-old girl refugees, and Czech police hauling immigrants of trains and writing numbers on their arms, it appears the horrors of the past are quickly forgotten when it comes to 'solutions' for the present. As The Jerusalem Post reports, the leader of the Czech 'nationalist' National Democracy Party, has called for refugees to be placed in Terezin - a former Nazi concentration camp - "Why build tent camps for the aliens? We have the beautiful fortress town of Terezin where the aliens could concentrate before they are taken home by trains." Police are investigating whether his comments constitute a criminal act and Czech Jewish leaders have refused to comment on the incident.

As WSJ reports, "the European Union on Wednesday proposed redistributing 160,000 refugees across the bloc and speeding up procedures to send back those who don’t qualify for asylum, in a bid to improve a stuttering response to the largest wave of migration on the continent since the aftermath of World War II."

The refugee crisis in Europe - sparked in large part by Syria’s four-year old, bloody civil war - recently reached a tipping point and the scramble to find a workable solution both in terms of allocating asylum seekers and finding the funds to accommodate them has become the single most pressing challenge facing European policy makers. Amid the chaos, Goldman may have found the silver lining. 

The last time we looked at Chinese stocks, just a few hours ago, they were on pace to close back under 3000, following the latest collapse in trade, where in August exports dropped 5.5% (last -8.3%) while imports tumbled -13.8% in dollar terms (worse than the -8.1% prior). As the Reuters chart below shows, this was the 10th month in a row of declines and the worst stretch since the 2008 crisis, confirming China will need far more currency devaluation to stabilize the trade pain. And then Chinese authorities intervened with gusto, waiting until the start of the afternoon session, at which point a massive buying orgy ensued, and pushed the SHCOMP from down more than 2% to close at the day highs, up some 2.9%!

While the media focuses on the human tragedy of so many people uprooted and traveling in dangerous circumstances, there is very little attention given to the events that led them to leave their countries. Certainly we all feel for the displaced people, especially the children, but let’s not forget that this is a man-made crisis and it is a government-made crisis.

Don’t expect to see any end to desperation and instability in MENA, but do expect new demographic crises out of other regions: Indonesia, Ukraine, Pakistan, West Africa, and Brazil, with its cratering economy. It’s not inconceivable that China might bust apart politically, with centrifugal consequences. The global economy is contracting. We have indeed attained the limits to growth. Cheap oil is bygone and the capital infrastructure we have won’t run on expensive oil — including the oil industry itself. New technology or further central bank legerdemain is not going to fix that. We’re in population overshoot and a scramble is underway to bail on the places that just can’t support the people who live there. National boundaries will be defended. Sentimentalists will have to step aside. History is not a bedtime story about bunnies and kittens.