en "They'll Return To Their Countries In A Wooden Coffin": Iran, Syria Warn Saudis, Turks Against Ground Troops <p dir="ltr">Two days ago, a Saudi military spokesperson <a href="">told AP</a> that the kingdom is ready to send ground troops to Syria “to fight ISIS.”</p> <p dir="ltr">That served as confirmation of what we’ve been saying for months and represented an affirmative answer to the following question that we posed in December: "<a href="">Did Saudi Arabia just clear the way for an invasion of Syria?</a>"</p> <p dir="ltr">Four months ago, we previewed the “promised” battle for Aleppo, Syria’s second largest city, which is controlled by a mishmash of rebels and is one of the hardest hit urban centers in Syria. In October, Iran called up Shiite militias from Iraq, rallied thousands of Hezbollah troops, and coordinated with the Russian air force on the way to planning an assault on the city. Victory would mean effectively restoring Assad’s grip on power. So important was the battle, that Iran sent Quds commander Qassem Soleimani to the frontlines to spearhead a kind of pep rally prior to the assault.</p> <p dir="ltr">Fast forward four months and <strong>Russia, Iran, and Hezbollah <a href="">are on the verge</a>&nbsp;of routing the Syrian opposition.</strong> After an arduous push north from Russia’s air field in Latakia, Aleppo is now encircled. Rebels and terrorists alike (assuming there’s a difference) are cut off from their supply lines in Turkey and Moscow’s warplanes are bearing down. Tens of thousands of people <a href="">are fleeing</a> the city ahead of what promises to be a truly epic battle.</p> <p dir="ltr"><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p dir="ltr">Put simply: this is it. It’s almost over for the opposition.</p> <p dir="ltr">That’s not to say ISIS isn’t still operating in the east. That, as we’ve said on a number of occasions, is another fight. </p> <p dir="ltr">But the “moderate” opposition backed by the West and its regional allies is on the ropes. That’s why Saudi Arabia is floating the ground troop trial balloon. It has nothing to do with Islamic State and everything to do with making a last ditch effort to keep arch rival Iran from restoring the Alawite government in Damascus on the way to preserving the Shiite crescent and the supply line to Hezbollah in neighboring Lebanon.</p> <p dir="ltr">Now, it’s do or die time. Either the Saudis and the Turks invade or it’s all over for the rebels.</p> <p dir="ltr">And Iran knows it.</p> <p dir="ltr">"<strong>I think Saudi Arabia is desperate to do something in Syria,</strong>" Andreas Krieg of the Department of Defence Studies at King's College London, <a href="">told AFP</a>. He also notes that “the ‘moderate’ opposition is in danger of being routed if Aleppo falls to the regime.” </p> <p dir="ltr">"Turkey is enthusiastic about the ground troop option since the Russians started their air operation and tried to push Turkey outside the equation," Mustafa Alani of the independent Gulf Research Centre added, underscoring <a href="">Russia’s warning</a> that Turkey may be preparing a ground assault.</p> <p dir="ltr">On Saturday, Tehran openly mocked the Saudis. "They claim they will send troops (to Syria), but I don't think they will dare do so," Maj. Gen. Ali Jafari told reporters. "<strong>They have a classic army and history tells us such armies stand no chance in fighting irregular resistance forces</strong>."</p> <p dir="ltr">In other words, Iran just said the Saudis are useless when it comes to asymmetric warfare. </p> <p dir="ltr">Readers will recall <a href="">what we said</a> back in October: “... it’s worth noting that using Hezbollah and Shiite militias to fight the ground war decreases the odds of Moscow getting mired in asymmetric warfare with an enemy they don’t fully understand.”</p> <p><span style="font-size: 1em; line-height: 1.3em;">In other words, <span style="text-decoration: underline;"><strong>Hezbollah has no problem engaging in urban warfare - they practically invented it.</strong></span> </span></p> <p><span style="font-size: 1em; line-height: 1.3em;">The Saudis - not so much. </span><span style="font-size: 1em; line-height: 1.3em;">"This will be like a coup de grace for them,” Jafari continued. “Apparently, they see no other way but this, and if this is the case, then their fate is sealed.”</span></p> <p dir="ltr">Yes, “their fate will be sealed,” or, as Foreign Minister Walid al-Moualem said on Saturday, “<strong>I assure you any aggressor will return to their country in a wooden coffin, whether they be Saudis or Turks</strong>.” </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="882" height="520" alt="" src="" /> </div> </div> </div> Iran Iraq Saudi Arabia Turkey Sat, 06 Feb 2016 20:51:56 +0000 Tyler Durden 522954 at Is Shorting The Yuan Dangeorus? <p><a href=""><em>Submitted by Alasdair Macleod via,</em></a></p> <p class="Richtext"><strong><em>Last Sunday (31 January) <a href="" target="_blank">Zero Hedge ran an article</a> drawing attention to the big names in the hedge fund community who are betting heavily that the yuan will suffer a major devaluation any time between the next few months and perhaps the next three years.</em></strong></p> <p class="Richtext">The impression given is that this view is universal, almost to the exclusion of any other.</p> <p class="Richtext">A market cynic would point out that when everyone is short, there is no one left to sell, so it is a good time to buy. This may indeed be true, and gives the Chinese authorities the opportunity to squeeze the bears mercilessly should they so choose. However, as Zero Hedge points out, some bear positions are in the form of put options rather than naked shorts, so hedge fund losses in this case would be limited to option money if the trade goes wrong. Instead, whoever sold the options to them will ultimately absorb the losses to the extent they have not hedged their corresponding positions in turn.</p> <p class="Richtext">The advantage of buying long-dated OTC put options is that you can wait for a financial strategy to come right. <strong>The motivation for buying them is therefore less to do with market timing, and more to do with economic expectations.</strong></p> <p class="Richtext"><strong>At its simplest, the common view appears to be that China is suffering from the debt problems that follow an excessive expansion of bank credit, the unwinding of which is expected to lead to crippling deflation.</strong> This view is variously informed by the findings of Irving Fisher in his analysis of the 1930s depression, and perhaps the Austrian school&#39;s description of credit-driven business cycles thrown in. To these can be added the experience of modern credit bubbles, particularly the aftermath of the sub-prime crisis of 2007/08, which remains fresh in hedge-fund managers&#39; minds. It amounts to a rag-bag of impulsive thought, and consequently it is assumed a large devaluation will be required to reduce the prices of China&#39;s exports, so that China&#39;s labour force will remain competitive and employed.</p> <p class="Richtext"><strong>There are many empirical examples that disprove the idea that devaluation is the route to export success, so it is something of a mystery why it should be seen as a certain outcome for the yuan. </strong>The root of the idea that devaluation for China is an economic cure-all is the supposed improvement it gives to the balance of trade. And here the mystery deepens, because the fall in prices for imported commodities has actually increased China&#39;s trade surplus, so much so that the trade surplus for all of 2014, which was $382bn equivalent, was exceeded by just the last seven months of 2015, while at the same time the economy was supposed to be collapsing. The total trade surplus for 2015 at $613bn was a record by a very large margin. A devaluation is definitely not required on trade grounds.</p> <p class="Richtext">Instead, China&#39;s trade surplus is a secure platform from which to pursue market-based reforms. And here the objective is more about permitting the population to build personal wealth, increasing the numbers of the middle class instead of destroying it. <strong>This is an alien concept to western macroeconomists, leaving them uncomfortable with their anti-market, pro-interventionist ambitions.</strong> They have a monetarist and Keynesian notion that devaluation counters the price deflation they think China faces, encourages moderate inflation, and stimulates animal spirits. This depends on the broad question as to whether or not a retreat into monetary manipulation actually solves anything, and more importantly, whether or not the Chinese authorities also believe in these theories.</p> <p class="Richtext"><strong>The Chinese authorities appear to show little interest in fashionable macroeconomic suppositions.</strong> Instead, the leadership&#39;s motivation runs counter to western political thinking. China is made up of over forty different ethnic groups, which without a strong central government, would probably be at each other&#39;s throats. Western-style democracy would simply lead to civil war and a disintegration of the state, as evidenced elsewhere in Iraq, Afghanistan, Egypt, Libya and now Syria. It is for this reason that the state communist party ruthlessly suppresses all political discord.</p> <p class="Richtext"><u><strong>The Chinese leaders know that political oppression can only work if it is not in the masses&#39; economic interest to oppose their government.</strong></u> For this reason, they use the market to enhance individual wealth, and are acutely aware that a failure to better the people&#39;s condition risks fomenting dissent. Economic factors align the leadership&#39;s interest with those of the people, not democratic representation.</p> <p class="Richtext"><strong>This is what drives economic policy. </strong>The leadership is mercantilist in its approach, rather like the East India Company when it ruled India. Individuals working with John Company, as it was known, had the opportunity to accumulate great fortunes, and if they survived the diseases and fevers, these nabobs returned home to Britain and became landed gentry. The elite in China is motivated in a similar fashion and are conditioned on loyalty to the state and its commercial objectives.</p> <p class="Richtext"><strong>This forms the basis of the cycle of five-year economic plans, which can be regarded as the equivalent of business plans, something unknown in western politics. </strong>The thirteenth version commences with the year of the monkey on Monday, the full details of which are due to be released in March. We already know that it will tell us how production will be directed to improve the earnings and the standard of living of the lowest paid workers. Greater controls will be imposed on pollution and the use of water resources. The internet will be accorded greater economic resources within the &quot;Internet Plus&quot; project. <strong>Social insurance will be increased and extended towards better healthcare and pensions. </strong>And lastly, financial reforms will continue to liberalise markets.</p> <p class="Richtext"><u><strong>What will not be mentioned in these plans, which are for domestic consumption, is geopolitics, the financial war between China and America.</strong></u> It is this aspect of China&#39;s future about which the hedge fund managers seem woefully ignorant. And it is a bad mistake to ignore the importance of geopolitics to both China and America, because it has the potential to have a far larger effect on the CNY/USD exchange rate than anything else. If there is any doubt in the reader&#39;s mind that there is a financial war being waged, it is worth reading in its entirety a speech given last April by Major-General Qiao Liang, the Peoples Liberation Army strategist. <a href="" target="_blank">There is a translation here.</a> Of the many quotes available the best one to show why financial power is seen by the Chinese to supplant military power is the following:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="Richtext"><em><strong>&quot;A few strokes on a computer keyboard can move billions or even trillions [of dollars] of capital from one location to another. An aircraft carrier can keep up with the speed of logistics, but it can&#39;t keep up with the flow of capital. It is thus unable to control global capital.&quot;</strong></em></p> </blockquote> <p class="Richtext">It is appropriate at this juncture to make a simple observation: <u><em><strong>you do not win a financial war by undermining your own currency. Instead, you should undermine the enemy&#39;s currency.</strong></em></u></p> <p class="Richtext"><strong>This is precisely what China is doing to the dollar. </strong>Last year China elevated her currency&#39;s standing on the world stage by forcing the IMF, against America&#39;s will, to include it in the SDR basket. This year she plans to establish gold and oil contracts priced in yuan, two key commodity markets which Chinese demand now dominates. China has also established the Asian Infrastructure Investment Bank to act as the financing arm for an Asia-wide industrial revolution, to be spearheaded by China. She has successfully replaced, for the purpose of this trans-Asia project, the various multinational organisations set up in the wake of the Bretton Woods agreement.</p> <p class="Richtext"><u><em><strong>So 2015 was the year when China did the groundwork to replace the dollar throughout Asia, the Middle East and North Africa, as well as sub-Saharan Africa, which she also dominates commercially. 2016 will be the year when the dollar finds its hegemonic status is increasingly confined to the Americas, Western Europe, Japan, diminishing parts of South-East Asia and western financial markets.</strong></em></u></p> <p class="Richtext">This brings us to another consideration ignored by the US-centric hedge fund community: <strong>the dollar itself is likely to take a big hit in 2016</strong>. Besides the damage inflicted by the internationalisation of the Chinese currency and the loss of hegemonic status that it imparts to the dollar, deflationary forces are increasing in America&#39;s domestic economy, because it is suffocating under a debt burden now too great to bear.<strong><em> The analysis hedge funds are applying to China would be more appropriately applied closer to home, and in this case the Fed will probably seek ways to devalue the dollar to counter a gathering slump. </em></strong>And unlike China, which has a record trade surplus, the US has an increasing trade deficit.</p> <p class="Richtext"><strong>American monetary policy is failing, and the Fed is on the back foot. </strong>China meanwhile has a plan, and that is to redeploy labour currently making cheap price-sensitive goods for America and elsewhere. The low-end of the labour force will be retrained and re-employed into both higher-value production and in the development of infrastructure on an Asia-wide basis. Asian development will be spearheaded by the yuan as the common currency for cross-border settlements.</p> <p class="Richtext"><strong>In summary, a significant devaluation for the yuan is neither necessary nor desired by the Chinese authorities.</strong> The announcement that China will start targeting the yuan against a basket of currencies and not the dollar is consistent with the strategy of undermining the dollar&#39;s value. With dollar reserves accumulating at a record rate because of the trade surplus, China should have no problem maintaining a yuan rate of her choosing. If anything she will seek to dispose of dollars on the basis they are over-valued relative to the commodities she needs for the future.<strong> China will sell her dollars not to protect the yuan, but to dispose of an overvalued currency.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="204" height="159" alt="" src="" /> </div> </div> </div> Afghanistan China Fisher India Iraq Japan Market Timing Middle East Monetary Policy OTC Trade Deficit Yuan Sat, 06 Feb 2016 20:15:00 +0000 Tyler Durden 522940 at Anti-Refugee Rallies Sweep Europe As Nationalists Declare "We Will Not Surrender Europe To Islam" <p dir="ltr">Europe’s worsening migrant crisis is the best thing that ever happened to the PEGIDA movement.</p> <p dir="ltr">The group very nearly faded into obscurity early last year after then-leader Lutz Bachmann posted a picture of himself dressed as Hitler on Facebook with the caption “He’s back.”</p> <p dir="ltr"><img src="" width="562" height="378" style="max-width: 100%; height: auto; font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13.3333px; line-height: 17.3333px;" /></p> <p dir="ltr">Then, 1.1 million Mid-East asylum seekers flooded across Germany’s borders.</p> <p dir="ltr">At first the German people welcomed the refugees with open arms. Then, things quickly deteriorated. The Paris attacks instilled fear in the hearts of many Europeans who previously supported Angela Merkel’s open-door policies and then, the wave of sexual assaults that swept through Europe on New Year’s Eve killed whatever goodwill was left.</p> <p dir="ltr"><strong>Far-right movements like PEGIDA have flourished amid the turmoil as nationalism - an ideology many assumed died with Hitler and Mussolini - is once again on the rise alongside a creeping sense of xenophobia among the bloc’s increasingly exasperated populace</strong>.</p> <p dir="ltr">On Saturday, Europe’s unease was on full display as PEGIDA staged simultaneous protests in multiple cities. "We must succeed in guarding and controlling Europe's external borders as well as its internal borders once again," PEGIDA member Siegfried Daebritz told a crowd on the banks of the River Elbe who chanted "Merkel must go!". </p> <p>Demonstrations were staged in Amsterdam, Prague, Calais (site of the infamous “jungle” migrant encampment), Dublin, and the English city of Birmingham. </p> <p>"At lunchtime Saturday, several hundred protesters gathered in front of a local eatery in Calais, chanting slogans such as "We are one" and singing the French national anthem," <a href="">CNN reports</a>.&nbsp;"You don't understand the problems we have here," on demonstrator shouted at journalists covering the protest.</p> <p dir="ltr">“German media put the number [of protesters in Dresden] at up to 8,000,” <a href="">Reuters notes</a>.</p> <p>"<strong>We're demonstrating against the Islamisation of Europe, we're demonstrating against immigration, against an invasion,</strong>" Robert Winnicki, leader of Poland's far-right Ruch Narodowy (National Movement), told a crowd of hundreds in Warsaw.</p> <p>At the rally in&nbsp;Birmingham, PEGIDA supporters carried signs that read "Trump is right."</p> <p>There were also rallies in Slovakia and Estonia.</p> <p>Here are the visuals.</p> <p>From&nbsp;Birmingham:</p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p>From Calais:</p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p>From Dreseden:</p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p>From Dublin:</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">Irish members of the public block attempts by <a href="">#Pegida</a> &amp; other <a href="">#fascist</a> from marching in <a href="">#Dublin</a> <a href="">#Ireland</a> <a href="">#refugees</a> <a href=""></a></p> <p>— Citizen Journalist (@ProDemocracy11) <a href="">February 6, 2016</a></p></blockquote> <script src="//"></script><p>A rather chilling manifesto, dubbed "The Prague Declaration", was released by PEGIDA prior to the coordinated rallies. It reads as follows:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Being aware of the fact that <strong>the thousand-year history of Western civilization could soon come to an end through Islam conquering Europe, and the fact that the political elites have betrayed us</strong>, we, representatives of different European nations, declare the following:</em></p> <ul> <li><em><span style="font-size: 1em; line-height: 1.3em;">We will not surrender Europe to our enemies.<strong> We are prepared to stand up and oppose political Islam, extreme Islamic regimes, and their European collaborators.</strong></span></em></li> <li><em><span style="font-size: 1em; line-height: 1.3em;">We are prepared to risk our freedoms, properties, jobs and careers and maybe even to put our lives at stakes, as it was done by the generations before us. It is our duty to future generations.</span></em></li> <li><em><span style="font-size: 1em; line-height: 1.3em;"><strong>We refuse to submit to the Central European government</strong>. The rules of the global elites have brought only poverty, unemployment, corruption, chaos and moral collapse. It is about time to end this.</span></em></li> <li><em><span style="font-size: 1em; line-height: 1.3em;">We fully respect the sovereignty of European nations and the right of the people of every European country to govern their matters as they see fit.</span></em></li> <li><em><span style="font-size: 1em; line-height: 1.3em;">We esteem as sacred the right of the citizens of every European country to protect the borders of their country and their right to decide which immigrants to accept and which not to accept into their country.</span></em></li> <li><em><span style="font-size: 1em; line-height: 1.3em;">We refer to our common European roots, traditions and values as well as the historic alliances of our nations. We are determined to protect Europe, the freedom of speech and other civic freedoms as well as our way of life together.</span></em></li> </ul> <p><em>We will manifest this determination by our participation in a joint demonstration which will take place in many European cities on February 6, 2016.</em></p> </blockquote> <p>This, ladies and gentlemen, is when things get dangerous. All the movement needs now is a charismatic leader capable of turning this groundswell of discontent into an organized political push. </p> <p>As&nbsp;Europe's citizenry becomes increasingly frustrated with the bloc's politicans, and as the flow of migrants is set to increase with warmer weather and the siege of Aleppo, we wonder if somewhere out there, an as yet unknown, aspiring politician is busy penning his or her "<a href="">struggle</a>."</p> Corruption Estonia Ireland Nationalism Reuters Slovakia Twitter Twitter Unemployment Sat, 06 Feb 2016 19:39:43 +0000 Tyler Durden 522946 at The Truth About Politics <p><a href=""><em>Submitted by Llewellyn Rockwell via The Mises Institute,</em></a></p> <p>The very first votes of the 2016 presidential election season were cast this week in the Iowa caucuses. This is <strong>supposed to fill us with happy thoughts about self-government, civic virtue, rational deliberation, and about politics as the way the people&rsquo;s will is put into effect.</strong></p> <p><span style="text-decoration: underline;"><strong>But to the contrary, we should spurn what the establishment would have us celebrate.</strong></span> Politics operates according to principles that would horrify us if we observed them in our private lives, and that would get us arrested if we tried to live by them. <em><strong>The state can steal and call it taxation, kidnap and call it conscription, kill and call it war.</strong></em></p> <p><em><strong>And yet we are taught to fear capitalism, of all things.</strong></em></p> <p>But what, after all, are capitalism and the free market? They are nothing more than the sum total of voluntary exchanges in society.</p> <p>When we engage in a voluntary exchange &mdash; when I buy apples for $5, or when you hire someone for $25 per hour &mdash; both sides are better off than they would have been in the absence of the exchange.</p> <p>We can&rsquo;t say the same for our interactions with the state, since we pay the state under threat of violence. The state sure winds up better off, though. That&rsquo;s for sure.</p> <p>Business firms that increase their profits thanks to some new innovation cannot rest on their laurels. Other firms will adopt the innovation themselves, and those abnormally high profits will dissipate. The original firm must continue to press forward, striving to devise still newer ways to please their fellow men.</p> <p>The state operates under no such conditions. It can remain as backward as it likes. Other firms are typically prohibited from competing with it.</p> <p><strong>The state&rsquo;s priorities arbitrarily override your own.</strong> Ethanol &ldquo;is important for the farmers,&rdquo; one candidate says. So because the state has decided some interest group&rsquo;s foolish and economically nonsensical pet project is &ldquo;important,&rdquo; what you yourself would have preferred to do with your money is simply set aside and ignored, and you are forced to subsidize what the state seeks to privilege.</p> <p>Our schools and media portray corporations as sinister, and government as benign. <em><strong>But who wouldn&rsquo;t rather take a sales call from Norwegian Cruise Line than an audit demand from the Internal Revenue Service?</strong></em></p> <p>Or imagine if a corporation fabricated a web of untruths, used them as a pretext to launch a violent attack on a people that had never caused Americans any harm, and brought about as many as a million deaths and millions more internal and external refugees. That corporation would be broken up and never heard from again. It would be denounced ceaselessly until the end of time.</p> <p><strong>Now all those things did happen, but they were carried out by the state. </strong>And as we all know, there have been no repercussions for anyone. No one has been punished. In fact, the perpetrators earn six-figure speaking fees. The whole thing is shrugged off as at worst an honest mistake. Some people are still outraged about it, but even they seem to take for granted that there&rsquo;s really nothing that can be done about behavior like this on the part of the American regime.</p> <p><em><strong>Imagine there were a corporation that was somehow so entrenched that despite being responsible for a staggering death toll, it evaded all responsibility and simply carried on as before. </strong></em>The outrage would be deafening and overwhelming.</p> <p>But so relentless has been the propaganda, ever since all of us were children, about the state&rsquo;s benign nature that many people simply cannot bring themselves to think as badly about the state as they have been taught to think about corporations &mdash; even though the crimes of the state put to shame all the misdeeds of all existing corporations put together. <strong>Meanwhile, opponents of the state are routinely portrayed as incorrigible misanthropes, when in fact, in light of the state&rsquo;s true nature, we are mankind&rsquo;s greatest advocates.</strong></p> <p><u><strong>The market brings people together. </strong></u>People of divergent and sometimes antagonistic racial, religious, and philosophical backgrounds are happy to trade with one another. Beyond that, the international division of labor as it exists today is the greatest and most extraordinary example of human cooperation in the history of the world. Countless firms produce countless intermediate goods that eventually combine to become finished consumer products. And the entire structure of production, in all its complexity, is aimed at satisfying consumer preferences as effectively as possible.</p> <p><u><strong>The state, on the other hand, pits us against each other.</strong></u> If one of us wins a state favor, it comes at the expense of everyone else. For one group to be benefited, another must first be expropriated. At one time or another the state has pitted the old against the young, blacks against whites, the poor against the rich, the industrialists against agriculture, women against men.</p> <p>Meanwhile, all the anti-social effort devoted to extracting favors from the state is effort that is not available to produce goods and services and increase the general prosperity.</p> <p>The market is about anticipating the needs of our fellow men and exerting ourselves to meet those needs in the most cost-effective manner &mdash; in other words, by wasting the fewest possible resources, and making what we offer as affordable as we can for those we serve.</p> <p><strong>Ah, but we need the state, virtually everyone tells us.</strong> Whether it&rsquo;s &ldquo;monopoly,&rdquo; or drugs, the bad guys overseas, or the scores of other bogeymen the state uses to justify itself, we&rsquo;re constantly being reminded of why the state is supposed to be indispensable. To be sure, these and other rationales for the state sound plausible enough, which is why the state and its apologists use them. But the first halting steps toward intellectual liberation come when someone considers the possibility that the truth about these things might be different from what he hears on TV, or learned in school.</p> <p><strong>The small minority of people who administer the state with funds expropriated by the productive private sector need to justify this situation, lest the public become restless or entertain subversive ideas about the real relationship between the state and themselves. </strong>And this is where the state&rsquo;s various platitudes about the people governing themselves, or taxation being voluntary, or government employees being the servants of the people, enter the picture.</p> <p>Think for a moment just about this last claim: that government employees are our servants. These people staff an institution that decides how much of our income and wealth to expropriate in order to fund itself. They will imprison us if we do not pay. And we are to believe that <em>these people </em>are<em> our servants</em>?</p> <p>For those not gullible enough to fall for such a transparent canard, the rationales become mildly more sophisticated. All right, all right, the state may say, it&rsquo;s not quite right to say that the people govern themselves. But, they hasten to add, we can offer the next best thing:<strong> the people will be <em>represented</em> by individuals chosen from among them.</strong></p> <p>As Gerard Casey has argued, though, the idea of political representation is not meaningful. When an agent represents a business owner in a negotiation, he ensures that the owner&#39;s interests are pursued.<strong><em> If the owner&rsquo;s interests are defended only weakly, ignored, or downright defied, the owner chooses different representation.</em></strong></p> <p><u><strong>None of this bears any resemblance to political representation.</strong></u> Here, a so-called representative is chosen by some people but actively opposed by others. Yet he is said to &ldquo;represent&rdquo; all of them. But how can this be, when he can&rsquo;t possibly know them all, and even if he did, he&rsquo;d discover they have mutually exclusive views and priorities?</p> <p><strong>Even if we focus entirely on those people who did vote for the representative, is their vote supposed to imply consent to his every decision?</strong> Some of them may have voted for him not for his positions or merits, but simply because he was less bad than the alternative. Others may have chosen him for one or two of his stances, but may be indifferent or hostile on everything else. How can even these people &mdash; who actually voted for the representative &mdash; seriously be said to be &ldquo;represented&rdquo; by him?</p> <p>But the idea of political representation, while meaningless, is not without its usefulness to the modern state. It helps to conceal the brute fact that, despite all the talk about &ldquo;popular rule&rdquo; and &ldquo;governing ourselves,&rdquo; even the &ldquo;free societies&rdquo; of the West amount to some people ruling, and others being ruled.</p> <p><strong>When the results are announced this primary season amid cheers and celebration, then, remember what it all represents:</strong> <u><strong><em>the triumph of compulsion over cooperation, coercion over freedom, and propaganda over truth.</em></strong></u></p> <p>The civics textbooks may write with breathless awe about the American political system, but this is by far the worst thing about the US. Rather than celebrate the anti-social world of politics,<strong> let us raise a glass to the anti-politics of the free market, </strong>which has yielded more wealth and prosperity through peace and cooperation than the state and its politicians could with all the coercion in the world.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="209" height="160" alt="" src="" /> </div> </div> </div> Mises Institute None Sat, 06 Feb 2016 19:00:00 +0000 Tyler Durden 522939 at Economics Explained (In 1 Simple Cartoon) <p><em>"That's good, right?"</em></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="356" /></a></p> <p>&nbsp;</p> <p><em>h/t @BrattleStCap<br /></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="924" height="548" alt="" src="" /> </div> </div> </div> Sat, 06 Feb 2016 18:20:00 +0000 Tyler Durden 522938 at Is This How The Smart Money Is Betting On A Market Crash? <p>Instead of allocating capital to expensive tail risk bets on direct asset class collapse (in equities, credit, and commodities), it appears, <a href="">just as we detailed previously</a>, the &#39;smartest money in the room&#39; is &quot;betting&quot; <em><strong>indirectly </strong></em>on a stock market crash through eurodollar options.</p> <p><a href="">As we previously detailed,</a> the <strong>costs of tail risk protection in credit and equity markets are soaring</strong> (<em>and perhaps the crash in global financial stocks and spike in systemic credit risk supports that concerning possibility</em>).</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 316px;" /></a></p> <p>And so<strong> traders are looking for cheaper alternatives to place large bets on significant downside</strong> in over-inflated assets.</p> <p><a href="">As we noted previously,</a> since the Fed folded in September (under the same conditions that are playing out now), basically admitting it is terrified to raise rates and willing to backtrack due to market fragility, IceFarm Capital&#39;s Michael Green explains, it appears many market participants are piling into par Eurodollar calls:</p> <p><a href=""><img height="303" src="" width="600" /></a></p> <p><em>[<strong>the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative</strong>]</em></p> <p>When queried whether this is indeed a trade to bet on a market drop, Michael Green responded as follows:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>[A reader] thought&nbsp; this might be an attempt by hedge funds to hedge out their exposure to rising interest rates very cheaply.</p> <p>&nbsp;</p> <p>My initial idea was that it actually could be a bet on negative rates (if for some reason the Fed had to come back into the picture with QE4).</p> <p>&nbsp;</p> <p>The bottom line:</p> <p>&nbsp;</p> <p>&quot;Deep OTM puts on the S&amp;P are very expensive <strong>while par ED calls are relatively cheap. </strong></p> <p>&nbsp;</p> <p>In my view, <strong><u>we are that inflection point where the Fed is going to start to waffle&hellip;the bear market beckons and they will not be able to stick with their interest rate guidance. Of course, markets tend to frown on Central Bankers revealed as less than omniscient...</u>&quot;</strong></p> </blockquote> <p>As the chart makes clear, since the initial exposure of this trade, Open Interest has soared as market fragility, The BoJ&#39;s shift to NIRP (and Peter Panic Policy), along with various Fed speakers indirectly hinting at the possibility, <a href="">as we detailed previously</a>...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The Fed may &quot;seriously consider&quot; negative rates </strong>after moving rates back to zero, reintroducing forward guidance and making <strong>&quot;stronger pleas&quot; to Congress for fiscal policy action</strong> as there are complications for money markets, according to BofAML strategist Mark Cabana.</p> <p>&nbsp;</p> <p>This would not be a total surprise as<a href=""> Mises Institute&#39;s Joseph Salerno </a>warns <em><strong>recent Fed commentary suggests they want to test-drive negative interest rates...</strong></em></p> <p>&nbsp;</p> <p>In 2016,<a href="" target="_blank"> the Fed&#39;s&nbsp;annual stress test&nbsp;on banks</a> will include a scenario in which&nbsp;the interest rate on the three-month U.S. Treasury bill&nbsp;becomes negative in the second quarter of 2016 and then declines to -0.5%, remaining at&nbsp;that level until the first quarter of 2019. &nbsp;According to the Fed,&nbsp;&quot;The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities.&quot; &nbsp;<strong>In other words, including this scenario in its stress test is not supposed to signal&nbsp;that the Fed is contemplating adopting&nbsp;a&nbsp;deliberate policy of negative interest rates. &nbsp;It is simply testing the resilience of big banks in the face of&nbsp;&nbsp;a severe recession that precipitates a &quot;flight to safety&quot;&nbsp;which&nbsp;spontaneously drives rates on short-term Treasury securities into negative territory. <span style="text-decoration: underline;">&nbsp;Or so they would have us believe.</span></strong></p> </blockquote> <div class="body-content"> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div> <p>Recent remarks by those associated with the Fed,&nbsp;however, seem to suggest otherwise. &nbsp;For example, former Fed official Roberto Perli, now a partner at Cornerstone Macro LLC, commented&nbsp;&quot;It doesn&rsquo;t signal anything&quot; about future monetary policy, but then added,&nbsp;<strong>it is &quot;another sign that the Fed would not be entirely adverse&quot; to reducing its target rate below zero if economic conditions should warrant. </strong>&nbsp;In mid-January,&nbsp;New York Fed President William Dudley denied that policy makers were &quot;thinking at all seriously of moving to negative interest rates.&quot; &nbsp;However, he conceded,&nbsp;&quot;I suppose if the economy were to unexpectedly weaken dramatically, and we decided that we needed to use a full array of monetary policy tools to provide stimulus, it&rsquo;s something that we would contemplate as a potential action.&quot; &nbsp;Most tellingly,&nbsp;just this past Monday,&nbsp;<strong><a href="" target="_blank">Fed Vice Chairman Stanley Fischer gave&nbsp;a talk</a> to the Council on Foreign Relations in New York in which he approvingly discussed negative interest rates in some detail.</strong> &nbsp;Because a speech&nbsp;by a&nbsp;Fed Vice Chairman sometimes turns out to be a bellwether of a radical shift in&nbsp;monetary&nbsp;policy--recall<a href="" target="_blank"> Bernanke&#39;s infamous&nbsp;speech</a> on deflation and unconventional&nbsp;monetary policy in November 2002--Fischer&#39;s remarks are worth quoting:</p> <p>&nbsp;</p> <p>[W]e believed that we could not get interest rates to go below zero. Well, it turns out that . . . four European and one Asian country have now done that. And how can you do that when currency has a zero rate of return? You can do it because it turns out that holding currency is not so easy. If you&rsquo;re going to keep your billion dollars in currency, you&rsquo;re going to have to find a place to store it,&nbsp;you&rsquo;re going to have to insure it, and you&rsquo;re going to have to have it guarded. And by the time that&rsquo;s done . . .&nbsp;<strong>zero is no longer the lower bound</strong>. All those costs are the lower bound, and those costs seem to be significantly below zero in the sense that we have a Denmark and one other country having a negative 75 basis point interest rate, which worked. . . .&nbsp;<strong>So that idea is there. And that&rsquo;s what they&rsquo;re pursuing.</strong> And, you know, everybody is looking at . . . how that works. . . . &nbsp;[W]e have actual experience of countries that have used negative interest rates. . . . Countries that have used it continue to use it. They haven&rsquo;t given it up. . . .&nbsp;So it&rsquo;s working more than I can say that I expected in 2012. . . .</p> <p>&nbsp;</p> <p><strong>And, lest we forget, <a href="" target="_blank">Fed Chairman Yellen&nbsp;went on record</a>&nbsp;as conditionally favoring negative interest rates </strong>as&nbsp;President of the Federal Reserve Bank of San Francisco in 2010:</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><em><strong>If it were positive to take interest rates into negative territory I would be voting for that.&nbsp;</strong></em></span></p> </blockquote> </div> <p>And then, of course, there is this...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;I think negative rates are something the Fed will and probably should consider if the situation arises&rdquo;</strong></em>. Former Fed Chairman Ben Bernanke</p> </blockquote> <p><u><strong>So simply put</strong></u> - instead of paying up for expensive bets on dramatic equity downside, &quot;smart money&quot; traders are thinking cause and effect - <em><strong>what would it take to get The &quot;data dependent&quot; Fed to go NIRP?</strong></em></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 410px;" /></a></p> <p><em><strong>A stock market crash, because they certainly don&#39;t give a crap about the economic data, </strong></em>and thus - buying Par Eurodollar calls is a 2nd order trade on a looming stock market crash - and is a lot cheaper than the record high skews in equity options markets:</p> <p><a href=""><img src="" style="width: 600px; height: 300px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="958" height="484" alt="" src="" /> </div> </div> </div> Bear Market Ben Bernanke Ben Bernanke CRAP Equity Markets EuroDollar Federal Reserve Federal Reserve Bank Flight to Safety Market Crash Mises Institute Monetary Policy New York Fed Recession Smart Money Stress Test William Dudley Sat, 06 Feb 2016 17:45:32 +0000 Tyler Durden 522929 at "Back Then I Was A True Believer" - How A Military Officer's Life Changed Forever 13 Years Ago <p><a href=""><em>Submitted by Simon Black via,</em></a></p> <p><strong>Thirteen years ago my life changed forever.</strong></p> <p>Colin Powell, then US Secretary of State and the most credible person in George W. Bush&rsquo;s cabinet, made the case for war in Iraq on February 5, 2003.</p> <p>As a young military intelligence officer at the time,&nbsp;watching from a makeshift army base in Kuwait not far from the Iraq border.</p> <p><em><strong>Back then I was a true believer, trusting that the government was a force for good &ldquo;making the world safe for democracy. . .&rdquo;</strong></em></p> <p><strong>But that night it all changed.</strong></p> <p>Powell told the world unequivocally that Iraq had weapons of mass destruction, an assertion that history has proven categorically wrong.</p> <p><span style="text-decoration: underline;"><strong>But within the intelligence community, many people knew the appalling truth immediately.</strong></span></p> <p>That night it became clear to me that the government was lying and that the whole case for war was being fabricated.</p> <p><strong>It was crushing, like finding out everything I&rsquo;d been told throughout my life was total bullshit.</strong></p> <p>So for the first time, I broke out of the spell and began questioning. Everything.</p> <p><strong>I started learning about the extraordinary political power of the military industrial complex that President Eisenhower warned about.</strong></p> <p><strong>That led me to the fraud of many previous wars</strong> going as far as the Mexican War in 1845, one deeply criticized by Abraham Lincoln himself.</p> <p><strong>That led me to the Constitution,</strong> to which all military officers swear an oath to support and defend&hellip;</p> <p>&hellip; and it surely didn&rsquo;t seem like supporting or defending the Constitution in waging an ill-conceived, illegal war.</p> <p><u><strong>Needless to say I couldn&rsquo;t talk to my professional colleagues. Everyone was so gung-ho, I felt like an outcast.</strong></u></p> <p>When I returned home, things didn&rsquo;t improve.</p> <p>While I was away the country had noticeably turned into a police state.</p> <p>Yet people seemed oblivious to the change, drinking in the propaganda like a spiked punch bowl.</p> <p>All the loud, bombastic nonsense and pledges of allegiance were merely illusions masking modern day serfdom.</p> <p>It was the summer of 2004, I remember hearing on TV that the Libertarian Party&rsquo;s national convention was starting in Atlanta.</p> <p>I immediately hopped in the car hoping to find some sympathetic minds.</p> <p>And at the convention I did meet some wonderful, freedom-minded people.</p> <p>But the event was an unproductive circus, something like a cross between a high school pep rally and a Star Trek convention.</p> <p>People in costume ran up and down the aisles chanting for their favorite candidate and getting into impromptu debates about the Constitution and Ayn Rand.</p> <p>As nice and intelligent as everyone was, it felt like a giant freedom pity party.</p> <p>I didn&rsquo;t just want to complain. I wanted to fix it. I wanted to do something about it. And solutions were sorely lacking.</p> <p><strong>So I started educating myself more.</strong></p> <p>I dove into the federal balance sheet. I learned about the petrodollar and the debt.</p> <p><strong>That led me to the complete scam of central banking, fiat currency, and the fractional reserve system.</strong></p> <p><strong>I realized that the political and banking elite have given us more war, instability, and epic financial crises.</strong></p> <p>They&rsquo;ve turned Western civilization into a giant police state. And they&rsquo;ve managed to brainwash the great masses so effectively that the people are crying out for more.</p> <p>And after this emotional, gut-wrenching awakening, I spent years traveling to more than 100 countries looking for freedom and opportunity.</p> <p><strong>Eventually I learned that education, prudent planning, and global thinking can rebuild much of our stolen liberty.</strong></p> <p>Yes, things are crazy.</p> <p><u><strong>Freedom is in decline. Governments are bankrupt. Central banks are borderline insolvent.</strong></u></p> <p>The financial system is in precarious condition barely held together by a patchwork of negative interest rates, currency manipulation, and misguided confidence.</p> <p>We award our most esteemed prizes for intellectual achievement to phony scientists who tell us to spend our way into prosperity and borrow our way out of debt.</p> <p>We give absolute power to control the money supply (and hence manipulate the price of nearly everything) to unelected bureaucrats who have a track record of failure.</p> <p><strong>Yet we call ourselves &lsquo;free&rsquo;.</strong></p> <p><u><strong>It&rsquo;s complete madness. And it gets crazier with each passing month.</strong></u></p> <p>But history shows that in any episode of great turmoil, there are always winners and losers.</p> <p>I learned that by taking some basic, sensible steps, it&rsquo;s possible to drastically eliminate my exposure to the risks and avoid being a loser.</p> <p>So no matter what happens or how crazy things get, I know I&rsquo;ll be OK.</p> <p><em><strong>For years I&rsquo;ve called this my &ldquo;Plan B&rdquo;.</strong></em></p> <p>I know I won&rsquo;t be worse off for being able to grow my own organic food, holding some savings in a well-capitalized bank outside of my home government&rsquo;s jurisdiction, or keeping some physical gold and cash.</p> <p>Having another passport gives me more freedom to live, work, and travel.</p> <p>Legally reducing my tax burden helps me vote my conscience with my dollars and put my money where my mouth is.</p> <p>I&rsquo;ve learned that all of these steps make sense no matter what happens. Or doesn&rsquo;t happen.</p> <p>But should the negative trend in freedom and global finance get worse, I know I&rsquo;ll be OK.</p> <p>This confidence has allowed me to focus on all the incredible opportunities I&rsquo;ve seen.</p> <p>Institutions that have existed for centuries are now being disrupted by digital technology.</p> <p>Banking as we know it, for example, is finished thanks to digital technology.</p> <p>The digital age is even changing the way we organize ourselves as a society.</p> <p>Geography no longer matters, and nearly everything is global.</p> <p>A billion people are rising into the middle class in Asia and Africa. Countries are emerging from war and isolation. Wealth and power are shifting.</p> <p>These extraordinary changes bring extraordinary opportunity.</p> <p><strong>So as crazy as things are, I think this is an incredibly exciting time to be alive.</strong></p> <p>I&rsquo;m grateful to be active in a time that future scholars will likely regard as one of the most tumultuous and revolutionary in history.</p> <p><u><em><strong>And I&rsquo;m grateful for having started the philosophical journey that began thirteen years ago today.</strong></em></u></p> B+ Central Banks Iraq Kuwait Money Supply Sat, 06 Feb 2016 17:42:44 +0000 Tyler Durden 522931 at A Badly Wounded Deutsche Bank Lashes Out At Central Bankers: Stop Easing, You Are Crushing Us <p>Ten days ago, when Deutsche Bank stock was about 10% higher, the biggest German commercial bank <a href="">declared war on Mario Draghi</a>, as we put it, warning him that any further easing by the ECB would only push stocks (with an emphasis on DB stock which has gotten pummeled over the past few months) lower. What it got, instead, was a slap in the face in the form of a major new easing program when the Bank of Japan announced it is unveiling negative rates just three days later. </p> <p>Which is why overnight a badly wounded Deutsche Bank has expanded its war against the ECB to include the BOJ as well, and in a note titled "The Risks From Further ECB and BOJ Easing" it wants that with the Zero Lower Bound already breached in nearly a third of global markets, the benefits to risk assets from further easing no longer exist, and in fact it says that while central banks have hoped that such measures would "push investors out the risk spectrum" the "impact has been exactly the opposite."</p> <p>In other words, we have reached that fork in the road within the monetary twilight zone, <strong>where Europe's largest bank is openly defying central bank policy and demanding an end to easy money. </strong>Alas, since tighter monetary policy assures just as much if not more pain, one can't help but wonder just how the central banks get themselves out of this particular trap they set up for themselves.</p> <p><em>Here is DB's Parag Thatte explaining the "<strong>The risks from further ECB and BOJ easing"</strong></em></p> <p><strong>The BOJ surprised with a move to negative rates last week, while ECB rhetoric suggests additional easing measures forthcoming in March. </strong>While a fundamental tenet of these measures, in particular negative rates, has been to push investors out the risk spectrum, we remind that arguably <em><strong>the impact has been exactly the opposite</strong></em>:</p> <ul> <li><strong>Declining bond yields have been robustly associated with larger inflows into bonds at the expense of equities. </strong>Though a large over allocation to fixed income at the expense of equities already exists as a result of past Fed QEs and a lack of normalization of rates, further easing by the ECB and BOJ that lower bond yields globally will only exacerbate the over allocation to bonds;</li> <li><strong>Asynchronous easing by the ECB and BOJ while the Fed is on hold risks speeding up the dollar’s up cycle, pushing oil prices lower and exacerbating credit concerns in the Energy, Metals and Mining sectors. </strong>It is notable that the ECB’s adoption of negative rates in mid-2014 which prompted the large move in the dollar and collapse in oil prices, marked the beginning of the now huge outflows from High Yield. These flows out of High Yield rotated into High Grade, ironically moving up not down the risk spectrum. The downside risk to oil prices is tempered somewhat by the fact that they look cheap and look to be already pricing in the next leg of dollar strength;</li> <li><strong>Asynchronous easing by the ECB and BOJ that is reflected in the US dollar commensurately raises the trade-weighted RMB and increase the risk of a disorderly devaluation by China.</strong> The risk of further declines in the JPY is tempered by the fact that it is already very (-29%) cheap, but there is plenty of valuation room for the euro to fall.</li> </ul> <p><strong>Broad-based move across asset classes towards neutral amidst uncertainties</strong></p> <ul> <li>US equity fund positioning inched closer to neutral; as anticipated the returning buyback bid is being offset by large persistent outflows (-$42bn ytd);</li> <li>European equity positioning is also close to neutral amidst slowing inflows; Japanese funds trimmed exposure from very overweight levels while flows turned negative for the first time in 2 months;</li> <li>The large short in US bond futures has started to be cut; 2y bond shorts were cut by half this week while short-dated rates futures are already long. Robust inflows into government bond funds which began this year have continued while the pace of outflows from HY and EM funds has slowed;</li> <li>A move toward neutral was also evident in FX positions. The surprise BoJ cut to negative rates caught yen longs by surprise, with the large initial subsequent depreciation in the yen partly reflecting a paring of positions. Meanwhile, the euro rose to a 3 month high as crowded leveraged fund shorts were being covered despite the ECB’s dovish rhetoric;</li> <li>As the dollar fell, net speculative long positions in oil rose, reflecting mainly an increase in gross longs while shorts remain at record highs; copper shorts continue to edge back from extremes; gold longs are rising.</li> </ul> <p><strong>Declining bond yields mean larger inflows into bonds at the expense of equities</strong></p> <ul> <li>A fundamental tenet of central bank easing has been to push investors out the risk spectrum. The impact has arguably been exactly the opposite</li> <li>Beyond any negative signal further monetary easing sends on underlying growth prospects, historically falling bond yields with the attendant capital gains on bonds have seen inflows rotate into bonds at the expense of equities. The correlation between equities and bond yields remains strongly positive. Notably, the best period of inflows for equities was after the taper announcement in 2013 when bond yields rose sharply</li> </ul> <p><a href=""><img src="" width="600" height="183" /></a></p> <p><strong>Large over-allocation to fixed income already</strong></p> <ul> <li>Past Fed QEs, a lack of normalization of Fed rates and easing by other central banks means that a large over-allocation already exists in fixed income while the underallocation in equities remains massive</li> <li><strong>Additional easing by the ECB and BoJ by encouraging inflows into bonds will only exacerbate the over allocation to fixed income</strong></li> </ul> <p><a href=""><img src="" width="600" height="222" /></a></p> <p><strong>Asynchronous easing behind decline in oil and flight from HY</strong></p> <ul> <li>Asynchronous monetary easing by the ECB or BoJ while the Fed is on hold <strong>puts upward pressure on the dollar, downward pressure on oil prices and heightens credit concerns in the Energy, Metals and Mining sectors </strong></li> <li>It is notable that the huge outflows from HY began to the day with the ECB’s adoption of negative rates in Jun 2014. Those outflows from HY moved into HG, ironically moving up not down the risk spectrum</li> <li>The risk to oil prices is somewhat tempered by the fact that oil prices are cheap to fair value and look to be pricing in the next leg of dollar strength</li> </ul> <p><a href=""><img src="" width="600" height="185" /></a></p> <p><strong>Asynchronous easing that is reflected in a higher dollar is reflected commensurately in the trade-weighted RMB</strong></p> <ul> <li>By virtue of the near-peg to the US dollar, by early 2015 the trade-weighted RMB had risen along with the US dollar by 32% in trade-weighted terms and has been in a relatively narrow range since</li> <li>A variety of Chinese economic indicators have been strongly negatively correlated with the US dollar: Chinese data surprises (-42%); IP (-65%); and retail sales (-59%)</li> </ul> <p><a href=""><img src="" width="600" height="211" /></a></p> <p><strong>Further dollar strength raises the risk of a disorderly Chinese devaluation</strong></p> <ul> <li>Asynchronous easing by the ECB and BOJ reflected in the US dollar and in turn the trade-weighted RMB increases the risk of a disorderly devaluation by China</li> <li>The risk of further declines in the JPY is tempered by the fact that it is already very cheap (-29%), but there is plenty of valuation room for the euro to fall</li> <li>The surprise BoJ easing in January prompted a paring of longs, while investors are unwinding short positions in the euro despite dovish rhetoric by the ECB</li> </ul> <p><a href=""><img src="" width="600" height="200" /></a></p> <p>* * * </p> <p>A few last words. Since DB, <a href="">whose CDS has soared to very dangerous levels </a>in recent days suggesting the market is suddenly concerned about its counterparty status, is effectively the Bundesbank, one can make the argument that any incremental easing by the jawboning Mario Draghi during the ECB's next meeting suddenly looks very precarious. </p> <p>On the other hand if Draghi once again isolates Weidmann and <em>does </em>cut rates to -0.40% as the market has largely priced in, because the ECB head fulfills the desires of his former employer Goldman Sachs first and foremost, one would wonder if as we speculated last summer Deutsche Bank is not indeed the next Lehman, if for no other reason than Goldman has decided the German financial behemoth should be the next bank to fail, and unleash the next global taxpayer-funded bailout episode.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="294" height="172" alt="" src="" /> </div> </div> </div> Bank of Japan Bond CDS Central Banks China Copper Deutsche Bank Fail fixed goldman sachs Goldman Sachs High Yield Japan Lehman Monetary Policy Yen Sat, 06 Feb 2016 17:33:30 +0000 Tyler Durden 522920 at UN Rules WikiLeaks Founder Julian Assange Being Detained Unlawfully <p><a href=""><em>Submitted by Claire Bernish via,</em></a></p> <p>Wikileaks founder Julian Assange&rsquo;s years-long confinement in the Ecuadorian embassy in London <strong>has been ruled unlawful</strong> by the U.N.&rsquo;s Working Group on Arbitrary Detention, and his lawyers have now called for Sweden&rsquo;s extradition request to be dropped immediately.</p> <p><strong>The ruling is not binding and the British Foreign Office maintains the legal obligation to extradite Assange</strong>. Accordingly, he will be arrested should he decide to vacate the embassy premises.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;We have been consistently clear that Mr. Assange has never been arbitrarily detained by the U.K., but is, in fact, voluntarily avoiding lawful arrest by choosing to remain in the Ecuadorian embassy,&rdquo;</em> said the Foreign Office in a statement, <a href="" target="_blank">according to</a> the&nbsp;<em>Guardian</em>. <em>&ldquo;An allegation of rape is still outstanding and a European arrest warrant in place, so the U.K. continues to have a legal obligation to extradite Mr. Assange to Sweden.&rdquo;</em></p> </blockquote> <p>Prior to the U.N. panel&rsquo;s ruling, Assange had said he would <a href="" target="_blank">leave the embassy voluntarily</a> and accept arrest should a determination against him be handed down, <em>&ldquo;as there is no meaningful prospect of further appeal. However, <strong>should I appeal and the state parties be found to have acted unlawfully, I expect the immediate return of my passport and the termination of further attempts to arrest me</strong>.&rdquo;</em></p> <p>Though the panel concluded its investigation and ruled on December 4, it is unclear whether Assange was informed of the findings. Anna Ekberg of the Swedish foreign ministry <a href="" target="_blank">said</a> there would be no statement before the ruling is formally published on Friday.</p> <p><strong>Should the Swedish or U.K. governments ignore the panel&rsquo;s decision, an unnamed and unverified source <em>&ldquo;familiar with the U.N. working group&rdquo;</em> <a href="" target="_blank">told the <em>Guardian</em></a> <em>&ldquo;it would make it very difficult for them to make use of U.N. human rights council decisions in the future to bring pressure on other countries over human rights violations &mdash; the ruling sends a strong political message.&rdquo;</em></strong></p> <p>Julian Assange reportedly fears not only extradition to Sweden, but secondary extradition to the U.S. over charges of espionage for an historic leak of classified military and diplomatic documents, including infamous <a href="">footage</a>&nbsp;taken from an Apache helicopter in Baghdad in 2007 that appeared to show the arbitrary assassination of twelve people &mdash; including two Reuters journalists.</p> <p>Ahead of the ruling, one of Assange&rsquo;s attorney&rsquo;s, Per Samuelson, said <strong>a determination in his client&rsquo;s favor should lead to his immediate release</strong>; and, <a href="" target="_blank">as he told <em>Reuters</em></a>, <em>&ldquo;It is a very important body that would then be saying that Sweden&rsquo;s actions are inconsistent with the European Commission on Human Rights. And it is international common practice to follow those decisions.&rdquo;</em></p> <p><a href=";utm_source=facebook&amp;utm_medium=cpc&amp;utm_campaign=social&amp;eid=socialn:fac-14omn0012-optim-nnn:paid-25062014-social_traffic-all-postprom-nnn-smh-o&amp;campaign_code=nocode&amp;promote_channel=social_facebook" target="_blank">As <em>The Sydney Morning Herald</em> noted</a>,<strong> the U.N. group </strong><em><strong>&ldquo;has made previous rulings on illegal detention which were followed by their release,</strong> such as Aung San Suu Kyi in Myanmar. However, in 2014 they called for the release of former Egyptian president Mohamed Morsi, who is still in jail.&rdquo;</em></p> <p><a href="">As Paul Craig Roberts notes however,</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>At the beginning of Assange&rsquo;s arbitary detention, I said that the detention was in violation of the rights of asylum and is akin to the Soviet Government&rsquo;s refusal to allow Cardinal Mindszenty free passage from the US Embassy in Hungary when he was granted political asylum by the US government. I pointed out that in our time<strong> Washington now behaves like the Soviet dictatorship half a century ago.</strong></p> <p>&nbsp;</p> <p><em><strong>The illegal actions of the Swedish and UK governments were on the orders of Washington, the corrupt government of which is determined to get Assange for publishing leaked documents revealing the criminality and mendacity of the US government.</strong></em></p> <p>&nbsp;</p> <p>Washington and its UK vassal claim to be defenders of the rule of law, but, of course, both governments are lawless. <strong>We will see if the ruling has any effect on the behavior of &ldquo;the two great champions of liberty.&rdquo;</strong> My prediction is that the gang of criminals in Washington will not allow its vassal governments to abide by the UN decision. I hope that I am wrong.</p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="459" height="282" alt="" src="" /> </div> </div> </div> Hungary Reuters Sat, 06 Feb 2016 16:21:02 +0000 Tyler Durden 522926 at PBOC Hedge Fund Battle (Video) <p>&nbsp;</p> <p class="separator" style="text-align: center; clear: both;"><a href="" style="margin-right: 1em; margin-left: 1em;"><img src="" width="400" height="253" border="0" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><span style="line-height: 20.8px;">By&nbsp;</span><a href="" style="line-height: 20.8px;">EconMatters</a>&nbsp;</p> <p>The China currency debate in financial markets is rather interesting right now with many market ramifications. A rapid depreciation in the Chinese currency could lead to an Asian currency market crisis. I can see both sides of the current debate of a rapid devaluation versus a prolonged drawn out devaluation of the currency.</p> <p>&nbsp;</p> <p class="separator" style="text-align: center; clear: both;"><iframe src="" width="640" height="360" frameborder="0"></iframe></p> <div style="text-align: center;"> <p><span style="font-size: 1em; line-height: 1.3em;">© </span><a href="" style="font-size: 1em; line-height: 1.3em;">EconMatters</a><span style="font-size: 1em; line-height: 1.3em;"> All Rights Reserved | </span><a href="" style="font-size: 1em; line-height: 1.3em;">Facebook</a><span style="font-size: 1em; line-height: 1.3em;"> | </span><a href="!/EconMatters" style="font-size: 1em; line-height: 1.3em;">Twitter</a><span style="font-size: 1em; line-height: 1.3em;"> | </span><a href="" style="font-size: 1em; line-height: 1.3em;">YouTube</a><span style="font-size: 1em; line-height: 1.3em;"> | </span><a href="" style="font-size: 1em; line-height: 1.3em;">Email Digest</a><span style="font-size: 1em; line-height: 1.3em;"> | </span><a href=";node=80" style="font-size: 1em; line-height: 1.3em;">Kindle</a></p> </div> China Twitter Twitter Sat, 06 Feb 2016 15:57:46 +0000 EconMatters 522925 at