Middle East

If Obama was betting on a "rally 'round the flag" effect ahead of the US attack of Syria as a result on an endless chain of false flag-based interventions in the middle east which started with Colin Powell's lies to the UN, and has never ended, he appears to have completed his latest epic foreign policy blunder and miscalculation. As Reuters reports, Americans strongly oppose U.S. intervention in Syria's civil war and believe Washington should stay out of the conflict even if reports that Syria's government used deadly chemicals to attack civilians are confirmed, a Reuters/Ipsos poll says. About 60 percent of Americans surveyed said the United States should not intervene in Syria's civil war, while just 9 percent thought President Barack Obama should act.

Iran is backing Assad. Gulf states are against Assad! Assad is against Muslim Brotherhood. Muslim Brotherhood and Obama are against General Sisi. But Gulf states are pro Sisi! Which means they are against Muslim Brotherhood! Iran is pro Hamas, but Hamas is backing Muslim Brotherhood! Obama is backing Muslim Brotherhood, yet Hamas is against the US! Gulf states are pro US. But Turkey is with Gulf states against Assad; yet Turkey is pro Muslim Brotherhood against General Sisi. And General Sisi is being backed by the Gulf states!

Let’s see. Consumers are carrying more debt than they did in 2007. Corporations are carrying more debt than they did in 2007. The Federal government is carrying 60% more debt than it did in 2007. Cities and States are carrying more debt than they did in 2007. Interest rates have jumped by 80% in the last three months. The economy is clearly in recession, as retailer after retailer reports horrific results. Stocks are as overvalued as they were in 1929, 2000, and 2007. China is experiencing a real estate collapse. Japan is experiencing a cultural/economic/societal collapse. The Middle East is awash in blood. The European Union is held together by lies, delusion and false promises. What could possibly go wrong?

One of the most published academics on gold in the world is Dr Brian Lucey of Trinity College Dublin (TCD) and he and another academic who has frequently covered the gold market, Dr Constantin Gurdgiev have just this week had an excellent research paper on gold published.

They have researched the gold market, along with Dr Cetin Ciner of the University of North Carolina and their paper,  ‘Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates’ finds that gold is a hedge against US dollar and British pound risk due to “its monetary asset role.”

The USA puts men behind bars for revealing what the country and the world should have been told a long time ago: the laws are different for those in one place that is high on the hill and for the rest of the population we can whistle until the cows come home because those laws will be applied in a different way

• Lew warns Congress to strike debt ceiling deal (FT)
• Central-Bank Moves Blur the View (WSJ)
• Brazil, Indonesia launch measures to shore up their currencies (FT)
• More mainstream media reminded about Fukushima - Radioactive ground water under Fukushima nears sea (AP)
• Fukushima inspectors 'careless', Japan agency says, as nuclear crisis grows (Reuters)
• New York Banker Arrested on Rape Charges in East Hampton (NYT)
• This time they mean business, for real: CFTC Moves to Rein In High-Speed Traders (WSJ)
• Britain operates secret monitoring station in Middle East (Reuters)
• Moody’s considers downgrading top US banks (FT)
• China's Bo calls wife mad after she testifies against him (Reuters)
• JPMorgan Sub-New Normal Growth Seen Vexing Next Fed Chief (BBG)
• SEC calls for cooling-off period for more staff (Reuters)

Premiums on the Shanghai Gold Exchange rose from $21 yesterday to $22.40 (0800 GMT) over London spot showing robust physical demand in China. Demand from the over 2 billion people, rich and poor,  in China and India alone this year alone is set to be 1,000 metric tonnes which is worth over $87 billion or roughly what the Federal Reserve is printing every single month.

Even after seven years of writing macroeconomic analysis and bearing witness to astonishing displays of financial and political stupidity by more “skeptics” than we can count, it never ceases to amaze us the amount of blind faith average Americans place in the strength of the U.S. dollar. One could explain in vast categorical detail the history of fiat currencies, the inevitable destruction caused by inflationary printing and the conundrum caused when any country decides to monetize its own debt just to stay afloat - often, to no avail. The dollar is no more invincible than any other fiat currency in history. In some ways, it is actually far weaker than any that came before. The dollar is entirely reliant on its own world reserve status in order to hold its value on the global market.

The yield on 10 year U.S. Treasuries is skyrocketing, the Dow has been down for 5 days in a row and troubling economic news is pouring in from all over the planet.  The much anticipated "financial correction" is rapidly approaching, and investors are starting to race for the exits.  We have not seen so many financial trouble signs all come together at one time like this since just prior to the last major financial crisis.  It is almost as if a "perfect storm" is brewing, and a lot of the "smart money" has already gotten out of stocks and bonds. Of course a lot of people believe that we will never see another major financial crisis like we experienced in 2008 ever again.  A lot of people think that this type of "doom and gloom" talk is foolish.  It is those kinds of people that did not see the last financial crash coming and that are choosing not to prepare for the next one even though the warning signs are exceedingly clear.  The following are 18 signs that global financial markets are heading for a vicious circle...

Liquidated ETF gold holdings are being shipped from the U.K to Switzerland for refining into smaller one kilogramme gold bars, Australian bank Macquarie wrote in a note yesterday. These were then sent to Asia and bought by Asian investors. The note  confirmed, what has been known anecdotally for some weeks.

• So no great rotation into EM? Capital Flows Back to U.S. as Markets Slump Across Asia (BBG)
• Muslim Brotherhood leader arrested in Egypt (Reuters)
• Allies Thwart America in Egypt: Israel, Saudis and U.A.E. Support Military Moves (WSJ)
• Dear Bloomberg: when you buy the loans of a distressed retailer, you are not betting on a rebound, you are betting on being the fulcrum security in a bankruptcy: Kyle Bass Said to Bet on J.C. Penney Comeback With Loan Purchase (BBG)
• Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas (BBG)
• Britain rejects Spanish request for Gibraltar talks (Reuters)
• U.K. Mortgage Lending Rises to Highest Since Lehman Collapse (BBG)
• Pension Funds Dispute Math in Detroit Bankruptcy (WSJ)
• Christie Says Gayness Inborn as He Signs Therapy Measure (BBG)

With Greek haircuts likely (or Cyprus-style bail-ins), Merkel elections (and the potential for less positive coalitions and post-election 'sternness'), and the possibility for the German court to curtail plans for OMT; there is plenty to  remove the 'magic' that is supporting Europe's market 'recovery'. However one topic not often discussed is the ongoing surge in people seeking refuge in EU countries from North Africa and the Middle East. Countries such as Greece or Italy that make up the European Union's southern border have long struggled to deal with flows of refugees from across the Mediterranean. The issue, as Stratfor notes, has been magnified by high unemployment rates in destination countries, where social security systems are strained and anti-immigrant sentiment is high. However, the combination of continued northern flows of European migrants, the increase in asylum applications and the spread of the European economic crisis appears primed to weaken some of the achievements Europe has seen in integration.

Just in case the borderline civil war in Egypt isn't enough to inflame hostilities in the middle east region sufficiently so the US finally gets involved, the US-funded, Al-Qaeda backed Syrian rebels decided to launch a second escalation offensive, this time near the very headquarters of the pro-Damascus Shiite group Hezbollah when a powerful car bomb killed at least 14 people and wounded about 200 others, national news agency NNA said. AFP reports that a previously unknown group believed to be a Syrian rebel cell said it carried out the attack. The bombing, reminiscent of the frequent attacks during Lebanon's 1975-1990 civil war, caused enormous damage to buildings. Whether this provocation (US funded or not) will be sufficient to force a Lebanon escalation in the Syrian conflict is unknown, but there is only so much more that the region, already at its breaking point, can take.

The latest World Gold Council Gold Demand Trends report, which covers the period April-June 2013, confirms again how recent falls in the gold price were due to speculators selling paper gold rather than a decline in actual demand for physical gold.

It highlights, once again, that the price falls have generated significant increases in demand, most notably from store of wealth, jewelry, bullion coin and bar buyers  in Turkey, Dubai and the Middle East, Vietnam, India, China and the rest of Asia.

Meanwhile speculators, primarily banks and hedge funds, exited their positions in the gold ETFs and futures markets. This led to liquidations of just 402 tonnes of ETF gold worth only $18.3 billion.