Gross Domestic Product
Let's examine what happened from the beginning. An extreme right wing group, with US and NATO support (according to released internal transcripts), overthrew the legitimate Ukrainian government (illegally) via violent coup. The fact that this group had western support is not important really, but should be noted. So according to 'international law' - this 'country' is NOT Ukraine. Ukraine cease to exist when this happened. The new 'government' - not popularly elected, seized control by force.
While Naftogaz (Ukraine's gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining. Shipments are down over 4% from the prior week and also lower to Ukraine. This 'adjustment' follows increased sanctions by the West as Medvedev's notable statement this morning that Ukraine owes Russia $16bn. Furthermore, Gazprom has cut its Diesel output by the most in 7 months... and just to rub some Black Sea salt into the wound, NY Times reports that Russia's asking price for natgas to Europe is soaring.
"It is clear to us that speculative and Ponzi finance dominate China’s economy at this stage. The question is when and how the system’s current instability resolves itself. The Minsky Moment refers to the moment at which a credit boom driven by speculative and Ponzi borrowers begins to unwind. It is the point at which Ponzi and speculative borrowers are no longer able to roll over their debts or borrow additional capital to make interest payments.... We believe that China finds itself today at exactly this juncture."
For five long years, we have pursued the fantasy that we could return to "growth" without having to fix or change anything. The core policy of the fantasy is the consensus of "serious economists," i.e. those accepted into the priesthood of PhD economists protected by academic tenure or state positions: what we suffered in 2009 was not the collapse of leveraged crony-state financialization but a temporary decline of "aggregate demand" and productive capacity. The five-year fantasy that free money would fix all the distortions and systemic problems is drawing to a close. Why can't the fantasy run forever? The two-word answer: diminishing returns. Handing out subprime auto loans works at first because it pulls demand forward: anyone who wants or needs a new car buys one now, rather than put the purchase off a year or two. Eventually the marginal buyers default and demand falls off, and the distortions cause an even greater collapse in demand and auto loan quality.
In the aftermath in the recent surge in China's renminbi volatility which saw it plunge at the fastest pace in years, many, us included, suggested that the immediate next step in China's "fight with speculators" (not to mention the second biggest trade deficit in history), was for the PBOC to promptly widen the Yuan trading band, something it hasn't done since April 2012, with the stated objective of further liberalizing its monetary system and bringing the currency that much closer to being freely traded and market-set. Overnight it did just that, when it announced it would widen the Yuan's trading band against the dollar from 1% to 2%.
While most understand that Ukraine owes Russia a few billion here or there for its energy bills that are past due, there is a more concerning issue. The Ukraine owes $3 billion to Russia in bonds that have been issued under UK law. One of the stipulations of the bonds is that if the Ukraine's debt-to-GDP ratio should exceed 60%, the bonds will become immediately callable. Once the Ukraine gets funding from the IMF, this is of course going to happen right away – its debt-to-GDP ratio will then most definitely exceed 60%, so the first $3 billion of any aid the Ukraine receives in the form of loans will right away flow into Russia's coffers. The American and European tax cows will no doubt be thrilled.
- Index of largest Chinese stocks drops to lowest since February 2009 (BBG)
- Plane-Debris Hunters Seek Suspected Aircraft Window Part (BBG)
- New-Home Building Is Shifting to Apartments (WSJ)
- Forward Guidance Risks Stoking Instability, BIS Says (BBG)
- Alleged Bitcoin Millionaire Nakamoto Gets $28,000 Donations (BBG)
- Mexico kills drug kingpin reported dead years ago (Reuters)
- Tencent to Buy 15% Stake in JD.com to Boost E-Commerce (BBG)
- Bitcoin exchange MtGox 'faced 150,000 hack attacks every second’ (Telegraph)
- Noyer Says Stronger Euro Creates Unwarranted Pressure on Economy (BBG)
- Russian Forces Gain in Ukraine as Separatist Vote Looms (BBG)
There probably isn’t a more over-used phrase thrown across the media landscape than, “It’s different this time.” One can’t look at the financial markets, the political stage, and more without shaking ones head. Nothing seems to make sense. Yet if one wants to lazily answer, “It’s different this time.” Things become crystal clear. Water now seems to run uphill. The definition of words no longer mean what they once did. (we’re still marveling on what is – is) Free society means the loss of only a few freedoms per year, as opposed to everything at once. Work is a bad thing however, if someone else goes to work and pay for your things – then that’s good. You can keep your plan if you like your plan – but if we don’t like it – well – you can’t. The Federal Reserve would never monetize the debt – however if you’re a preferred dealer in the QE (quantitative easing) program – they’ll do it for you. These precarious times leave many scratching their heads. Expressed another way, When everyone is on the band wagon – except the band. You had better take notice.
Near-Bankrupt Rome Bailed Out As Italy Unemployment Rises To All Time High, Grows By Most On Record In 2013Submitted by Tyler Durden on 03/01/2014 15:34 -0400
A few days ago, we reported that, seemingly out of the blue, the city of Rome was on the verge of a "Detroit-style bankruptcy." " And just as expected, yesterday Rome was bailed out. What is certain is that this year will not be the last one Rome is bailed out either. In fact, it will continue getting rescued for years to come because contrary to the propaganda, the Italian economy continues to get worse with every passing month, yields on Italian bonds notwithstanding. Ansa reports that in January the Italian unemployment rate rose to a record 12.9%, and that "reducing Italy's "shocking" rate of unemployment must be the government's highest priority, Premier Matteo Renzi said Friday." How, by pretending everything is ok, kicking the Roman can and hoping things improve by bailing out anyone that is insolvent? Putting 2013 in perspective, this is the year when according to national statistical agency Istat, some 478,000 jobs were lost in Italy in 2013, the worst year since the global financial crisis of 2008-2009, with an average annual jobless rate of 12.2% last year.
According to the Economic Policy Institute, a Washington think tank supported by organized labor, the answer to generating up to 6 million more jobs is as simple as ending global currency manipulation. But not in the sense of ramping USDJPY or AUDUSD at key market inflection points which mostly benefits such FX-rigging chatrooms as "the Cartel", no: they are thinking more big picture, in the "central bank manipulation sense." The report says that "several foreign countries devalue their currencies to make their products cheaper, making it difficult for U.S. manufacturers to compete, the report said." In essence what the group suggests is that the US currency is overvalued relative to the rest of the world, and that by "realigning exchange rates, U.S. trade deficits would be reduced by up to $500 billion per year by 2015. Such a move would increase U.S. gross domestic product by up to $720 billion per year and create up to 5.8 million jobs, the report said." Said otherwise: stop foreign currency manipulation, but allow and encourage the US to keep pushing its own currency even lower.
"The extent of unproductive investment in China today is much greater than was the case for Japan at a comparable phase of development," warns Deutsche's EM strategist John-Paul Smith, and one glance at the chart below suggests China is tracing an ominous path towards the same "lost-decade" that un-inspired Japan since the mid-80s. While the PBOC is less interested in goosing its own stock market (since ownership is so low), Chinese stocks (down 60% from 2007 highs) "seem to be saying that there is a significant risk of a major slowdown."
"There is no money in Ukraine's Treasury account," exclaimed 'Interim President' Oleksandr Turchynov to the Ukrainian parliament; adding that the Ukraine economy is in a "catastrophic state."
*THERE ARE PROBLEMS WITH BANKING SYSTEM AND HRYVNIA: TURCHYNOV
*PROBLEMS WITH PENSION FUND ARE "COLOSSAL": TURCHYNOV
*UKRAINE'S ECONOMY IS IN A 'PRE-DEFAULT' SITUATION: TURCHYNOV
Hardly surprising given the months of protest; but with Russia 'conditionally' postponing its EUR2bn 'loan', the Europeans are riding to the nation's aid with promises of EUR20bn (if Ukrainian authorities meet certain conditions). But, as the map below shows, a great deal of the nation's wealth lies in the eastern (pro-Russia) region.
Once we get rid of these obsolete middleman parasites - Wall Street, the banking sector and the Federal Reserve - we have a delightful question to answer: what else can we do with the $1.25 trillion we'll save every year by eliminating these obsolete financial middleman parasites? A lot.
Everyone knows that without the German export-driven growth dynamo, the European economy would quickly wither and disappear into nothingness. Which is why today's report that the German economy grew by just 0.4% last year, its worst performance since the global financial crisis in 2009, with strong domestic demand only partially offsetting the continued negative impact of the euro crisis, should be reason for significant concern to all especially since all the artificial, goalseeked GDP readings from the periphery are just that, and are completely meaningless in the grand scheme of things - should Germany's growth falter, as it clearly has been over the past two years, may as well put the lights out.
The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last. What the chart may not show are the dramatic transformations in Italy's government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy's next Prime Minister. In fact as some, certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB's then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity, and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup.... And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact.