http://www.zerohedge.com/fullrss2.xml en All You Need To Know About Russia, In Charts http://www.zerohedge.com/news/2014-04-20/all-you-need-know-about-russia-charts <p>With the second coming of the cold war, it is no surprise that so much of the news (if mostly propaganda) is dedicated to the rapidly escalating events in Ukraine in particular, and in Russia in general. But how much do people really know about the history and economy of the largest country in the world? Not much. Which is why we have compiled the following charts meant to provide some further insight into what this particular conflict is about and what the real motivations behind Putin's actions may be.</p> <p>First, a quick reminder of what the Russian "org chart" looks like:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20org%20chart.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20org%20chart_0.jpg" width="600" height="437" /></a></p> <p>&nbsp;</p> <p>And, as we <a href="http://www.zerohedge.com/news/2014-04-16/annotated-history-russian-empire">showed before</a>, here is an annotated history of the former (and perhaps) future empire.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140416_russia.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140416_russia_0.png" width="600" height="350" /></a></p> <p>&nbsp;</p> <p>Narrowing the timeline a bit, here is the relatively near-term history of the current conflict.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20Crisis%20chronology.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20Crisis%20chronology_0.jpg" width="600" height="438" /></a></p> <p>&nbsp;</p> <p>But enough foreplay. When one thinks Russia, all one really has to think about is commodities because exported commodities represent 20% of Russian GDP. Additionally, commanding over 10% of the global gas and oil market, Russia is a huge marginal producer of the most important commodities on a global scale (and with over 40% of the produced palladium, one can see why its price in recent weeks has exploded).</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russian%20commodities_0.jpg" width="600" height="258" /></p> <p>&nbsp;</p> <p>But nowhere is Russia's commodity dominance more important than in Europe, where Russia represents nearly all oil and gas imports for a bevy of countries. Russia supplies literally all of the natural gas that Finland and the Baltics consume and 70% of what Ukraine consumes, a key point of Russian leverage in the current dispute. Dependence is not limited to smaller, immediately neighboring countries; Germany relies on Russia for around one-third of its total gas supplies. Although seasonal and other factors could lessen the impact of disruptions to these flows, there is no doubt that such potential disruptions would negatively impact European growth. Of course, it is not one way: Europe’s saving grace is likely to be that Russia’s&nbsp; dependence on its oil and gas revenues – which amount to roughly 10% of GDP – make this a story of interdependence between Russia and Europe that neither side has economic incentives to disrupt.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20importance.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20importance_1.jpg" width="590" height="240" /></a></p> <p>&nbsp;</p> <p>It's not all energy commodities, though. Russia's vast territory covers so many resources that it is a key producer of virtually everything from agriculture to zinc.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20importance%20steel%20agri.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20importance%20steel%20agri_0.jpg" width="600" height="258" /></a></p> <p>&nbsp;</p> <p>What about the inverse: which countries would suffer should their exports to Russia be cut off. In top spot are Germany and Sweden, with about 0.87% of their GDP generated by exports to Moscow.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20exports%20europe.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20exports%20europe_0.jpg" width="600" height="364" /></a></p> <p>&nbsp;</p> <p>However, as the chart below of value added to final demand shows, while Europe could in theory lose Russia, its export exposure to China is far greater. It is here that Europe should be worried about a potential Chinese-Russian axis, since the leverage power of such an entity would be virtually unlimited.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20china%20eports.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20china%20eports_0.jpg" width="600" height="378" /></a></p> <p>&nbsp;</p> <p>Yet while total European exposure via the export and GDP channel is rather limited, Europe's exposure via the financial/bank channel is more acute. Cross-border exposures of European banks to Russia and other parts of central and eastern Europe suggests (1) these balance sheet exposures are significant; (2) the magnifying effect of the impact via central and eastern Europe is more important than the direct exposure to Russia itself; and (3) the most significant exposures are in Sweden and Italy, whose banks play an important role in neighboring CEE countries.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20bank%20exposure.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20bank%20exposure_0.jpg" width="600" height="396" /></a></p> <p>&nbsp;</p> <p>It is the financial channel that has seen the fastest impact, with substantial private capital outflows already having taken place, and much more expected to flow out in the coming months.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20capital%20flight.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20capital%20flight_0.jpg" width="600" height="539" /></a></p> <p>&nbsp;</p> <p>Ironically, unlike the great powers of the developed world which have been unable to grow at a BRIC-like pace, and thus were forced to borrow heavily from the future for some very modest growth today, Russia did not have that problem. As a result, Russian total external debt is tiny when viewed from the prism of an insolvent G-7 country.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20debt.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20debt_0.jpg" width="600" height="553" /></a></p> <p>&nbsp;</p> <p>And since the world is extremely reliant on Russia for its energy needs, and will pay it in the reserve currency du jour, it is also very likely that Russian oil production - already said to be the biggest in the world in terms of daily boes - will only increase, and with it so will Russia's leverage. In summary, it appears it is not the mutual assured destruction of epic debt amounts that is guiding Russia decision-making, but its explicit ability to crush world growth should it turn off the energy switch.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20oil%20production.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20oil%20production_0.jpg" width="600" height="576" /></a></p> <p>&nbsp;</p> <p>Finally, here is an amusing glimpse at the "experts" of the developed world, the same ones who said Putin would never dare annex Crimea - it is they who until recently said Russia was almost neck and neck with the US in terms of its "democracy"... it is they who are now shouting what an "authoritarian, despotic" state Russia has become.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20democracy%20rating.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Russia%20democracy%20rating_0.jpg" width="600" height="568" /></a></p> http://www.zerohedge.com/news/2014-04-20/all-you-need-know-about-russia-charts#comments China Eastern Europe Finland Germany Gross Domestic Product Italy Mutual Assured Destruction Natural Gas PrISM Reserve Currency Ukraine Mon, 21 Apr 2014 00:48:01 +0000 Tyler Durden 487511 at http://www.zerohedge.com JPY Drops, Nikkei Pops As Japanese Trade Balance Nears Record Deficit (36th In A Row) http://www.zerohedge.com/news/2014-04-20/jpy-drops-nikkei-pops-japanese-trade-balance-nears-record-deficit-36th-row <p>Another month, another colossal miss for the &quot;waiting-for-the-j-curve&quot; Japanese trade balance. At 1.7tn, this month&#39;s <strong>adjusted trade balance is the 2nd largest on record, and is the 36th month in a row</strong>. Exports missed dramatically (+1.8% vs 6.5% expected) so, so much for devaluation driving competitiveness in a globally interdependent product development cycle - nearly the lowest YoY gain in exports since Abenomics began. Imports rose more than expected (+18.1% vs 16.2%) as the devalued JPY makes living standards more difficult to maintain. <strong>The result of this dismal data - JPY weakness which can mean only one thing - a 120 point rally in the Nikkei</strong>.</p> <p>&nbsp;</p> <p>Export growth is collapsing... as imports surge as a devalued JPY makes the picture for importing everything uglier and uglier...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap1.png"><img height="633" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap1_0.png" width="600" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Which leaves the trade deficit near record lows for the 36th month in a row...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap2.png"><img height="319" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap2_0.png" width="600" /></a></p> <p>&nbsp;</p> <p>As we have noted previously, the J-Curve ain&#39;t coming...</p> <p><a href="http://mises.ca/posts/blog/my-letter-to-the-financial-times-london-re-educating-mr-abe/"><strong>On the terrible missing J-Curve</strong> <em>(via Patrick Barron of the Ludwig von Mises Institute of Canada)</em>:</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Perhaps I can shed some light on Japanese Prime Minister Abe&rsquo;s missing J-curve; i.e., <em>why Japan&rsquo;s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yen</em>. <strong>Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.</strong></p> <p>&nbsp;</p> <p>Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.</p> <p>&nbsp;</p> <p><strong>Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!</strong></p> <p>&nbsp;</p> <p>The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago&ndash;hard work and savings.</p> </blockquote> <p>And the latest joke from Asian trading floors: <a href="http://www.japanprobe.com/2008/01/12/why-did-prime-minister-abe-shinzo-resign-crippling-diarrhea/"><em>&quot;when asked what he thought of the recovery, Shinzo Abe responded &quot;Depends!&quot;&quot;</em></a></p> <p>&nbsp;</p> <p>The result...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap3.png"><img height="315" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_jap3_0.png" width="600" /></a></p> <p>&nbsp;</p> <p>Worst news is awesome news... well played BoJ... Of course, Abe needs that stock market higher...</p> <ul> <li><strong>*ABE CABINET SUPPORT DROPS 6 PPTS TO 49% IN APRIL: MAINICHI POLL</strong></li> </ul> <p>As its clear the people are losing faith in his magic</p> http://www.zerohedge.com/news/2014-04-20/jpy-drops-nikkei-pops-japanese-trade-balance-nears-record-deficit-36th-row#comments Japan Ludwig von Mises Mises Institute Nikkei Purchasing Power recovery Trade Balance Trade Deficit Yen Mon, 21 Apr 2014 00:17:50 +0000 Tyler Durden 487510 at http://www.zerohedge.com Japan Expands Military Footprint For 1st Time In 40 Years Ahead Of Obama's Visit http://www.zerohedge.com/news/2014-04-20/japan-expands-military-footprint-1st-time-40-years-ahead-obamas-visit <p>Mere <strong>days before President Obama is due to visit</strong> on his Asia tour, Japan is making some rather uncomfortable &#39;diplomatic&#39; moves. First, a senior Japanese cabinet official - Keiji Furuya - <strong>visited the highly controversial Yasukuni shrine</strong> (which is where &quot;Class A&quot; war criminals are enshrined alongside other war dead). And second, and perhaps even more concerning, is, as <a href="http://mobile.reuters.com/article/idUSBREA3I05X20140419?irpc=932">Reuters reports,</a> <strong><u>Japan began its first military expansion at the western end of its island chain in more than 40 years</u></strong> on Saturday, breaking ground on a radar station on a tropical island off Taiwan. Both moves risk angering China at a time when non-Chinese Asia is looking for reassurance from Obama on his willingness to suport them.</p> <p>The controversial Yasukuni shrine is back in the news...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>A Japanese Cabinet minister on Sunday visited a Tokyo shrine that honors the dead including war criminals, in what has repeatedly caused friction with Japan&#39;s neighbors.</strong></p> <p>&nbsp;</p> <p>Lawmaker Keiji Furuya, who chairs the National Public Safety Commission, said on his website that he paid respects Sunday morning at the Yasukuni shrine ahead of a festival that starts Monday.</p> <p>&nbsp;</p> <p>I believe that to honor those dead who gave up their lives for our country is the right thing for a Japanese to do,&quot; he said.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Officials&#39; visits to Yasukuni have infuriated China and both Koreas. The 2.5 million Japanese war dead enshrined there include 14 class A war criminals from World War II &mdash; national leaders who were either executed, died in prison or during their trials.</strong></p> </blockquote> <p>But it is the actual expansion of Japan&#39;s military that is most concerning...<a href="http://mobile.reuters.com/article/idUSBREA3I05X20140419?irpc=932"><em> (as Reuters reports)</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Japan began its first military expansion at the western end of its island chain in more than 40 years on Saturday, breaking ground on a radar station on a tropical island off Taiwan.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Japanese Defense Minister Itsunori Onodera, who attended a ceremony on Yonaguni island to mark the start of construction, suggested the military presence could be enlarged to other islands in the seas southwest of Japan&#39;s main islands.</p> <p>&nbsp;</p> <p><u><strong>&quot;This is the first deployment since the U.S. returned Okinawa (1972) and calls for us to be more on guard are growing,&quot; Onodera told reporters. &quot;I want to build an operation able to properly defend islands that are part of Japan&#39;s territory.&quot;</strong></u></p> <p>&nbsp;</p> <p>The military radar station on Yonaguni, part of a longstanding plan to improve defense and surveillance, gives Japan a lookout just 150 km (93 miles) from the Japanese-held islands claimed by China.</p> </blockquote> <p><strong>The new base &quot;should give Japan the ability to expand surveillance to near the Chinese mainland,&quot;</strong> said Heigo Sato, a professor at Takushoku University and a former researcher at the Defense Ministry&#39;s National Institute for Defense Studies.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;It will <strong>allow early warning of missiles and supplement the monitoring of Chinese military movements</strong>.&quot;</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Many of the islanders on nearby Yonaguni are looking forward to hosting the radar base and the 100 troops who will man it because of the economic boost it will bring.</p> <p>&nbsp;</p> <p>Others on the island, however, fear becoming a target should Japan end up in a fight.</p> <p>&nbsp;</p> <p><strong>&quot;Becoming a target is frightening, they won&#39;t talk to us about it, we haven&#39;t discussed it,&quot; a protestor, who declined to be identified said.</strong></p> </blockquote> <p>Onodera&#39;s groundbreaking ceremony on Yonaguni took place s four days before President Barack Obama lands in Tokyo for a summit with Abe, the first state visit by a U.S. president in 18 years.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The <strong>United States, which under its security pact with Tokyo has pledged to defend Japanese territory, has warned China about taking any action over the disputed islets, but has not formally recognized Japan&#39;s claim of sovereignty over the territory.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Each of the four countries on Obama&#39;s itinerary -- Japan, South Korea, Malaysia and the Philippines -- has a dispute with Beijing over islands in the South and East China Seas.</strong> Their leaders will be weighing Obama&#39;s willingness to support them if those conflicts boil over.</p> </blockquote> <p>Seems like Japan just keeps wanting to test those red lines... but one wonders just how far all these Asian nations are willing to push...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140420_asia.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140420_asia.png" style="width: 581px; height: 411px;" /></a></p> http://www.zerohedge.com/news/2014-04-20/japan-expands-military-footprint-1st-time-40-years-ahead-obamas-visit#comments Barack Obama China Japan President Obama Reuters Sun, 20 Apr 2014 23:31:36 +0000 Tyler Durden 487509 at http://www.zerohedge.com US Gas Will Never Replace Russian Gas For Europe http://www.zerohedge.com/news/2014-04-20/us-gas-will-never-replace-russian-gas-europe <p><a href="http://www.ft.com/intl/cms/s/0/96f9e220-c0cb-11e3-bd6b-00144feabdc0.html?siteedition=intl#axzz2yaLJvP6T"><em>As The FT reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Charif Souki, Cheniere&rsquo;s chief executive, said that <strong>the idea of his company&rsquo;s exports alone liberating Europe from Russia&rsquo;s Gazprom was &ldquo;nonsense&rdquo;</strong> and that only six to eight of 20-plus proposed rival export projects were &ldquo;real&rdquo;.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>The east-west stand-off over Ukraine has sparked a political debate over whether the US should loosen its energy export restrictions so Europeans can buy liquefied natural gas, or LNG, from America&rsquo;s shale energy boom.</p> <p>&nbsp;</p> <p>Asked if Cheniere&rsquo;s terminal could rescue eastern European countries from their dependence on Russia, Mr Souki said: <span style="text-decoration: underline;"><strong>&ldquo;It&rsquo;s flattering to be talked about like this, but it&rsquo;s all nonsense. It&rsquo;s so much nonsense that I can&rsquo;t believe anybody really believes it.&rdquo;</strong></span></p> </blockquote> <p><em>Submitted by Chris Martenson via <a href="http://www.peakprosperity.com/blog/85239/us-gas-will-never-replace-russian-gas-europe">Peak Prosperity</a>,</em></p> <p>Recent entreaties by various US politicians to help wean Europe off of Russian gas are simply preposterous.&nbsp; The numbers don&#39;t add up, and they never will.</p> <p>Let&#39;s begin with the facts:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><div> <p><strong>16% of natural gas consumed in Europe flows through Ukraine</strong></p> <p>&nbsp;</p> </div> <p>Mar 14, 2014</p> <p>&nbsp;</p> <p>Europe, including all EU members plus Turkey, Norway, Switzerland, and the non-EU Balkan states, consumed 18.7 trillion cubic feet (Tcf) of natural gas in 2013. <strong>Russia supplied 30% (5.7 Tcf) of this volume</strong>, with a significant amount flowing through Ukraine. EIA estimates that 16% (3.0 Tcf) of the total natural gas consumed in Europe passed through Ukraine&#39;s pipeline network, based on data reported by Gazprom and Eastern Bloc Energy.</p> <p>(<a href="http://www.eia.gov/todayinenergy/detail.cfm?id=15411" target="_blank">Source</a>)</p> </blockquote> <p>If the US wants Europe entirely off of Russian natural gas (NG), it will have to immediately replace 5.7 trillion cubic feet per year, or <strong>15 billion cubic feet per day.</strong></p> <p>The entire set of US shale gas plays, which consist of 8 major plays and a slew of minor ones, cumulatively provide the US with <a href="http://www.eia.gov/pressroom/presentations/sieminski_01042014.pdf">27 billion cubic feet per day</a>. &nbsp;That is, just over half of the entire current US shale gas play would have to be dedicated to the European cause of eliminating Russian natural gas dependency. &nbsp;</p> <p>And even with the shale plays, in April 2014&nbsp;the US remains a net gas importer. In 2013, the most recent full year of data, the US had to import 1.3 trillion cubic feet to satisfy domestic consumption.</p> <p>More pointedly, 2013 was a pretty cold winter, the kind that comes along every so often, and the US barely made it through that period without running dangerously low on NG as it was. &nbsp;</p> <p>To make it through the heavy demands of winter natural gas must be stockpiled in advance. As a result, the gas storage report always shows seasonal builds and draw downs of natural gas:</p> <p class="rtecenter"><img align="middle" alt="" src="http://media.PeakProsperity.com/images/NatGas-EIA-Storage-4-14.jpg" /></p> <p class="rtecenter">(<a href="http://ir.eia.gov/ngs/ngs.html" target="_blank">Source</a>)</p> <p>In all my years of watching the energy statistics I&#39;ve never seen NG storage get this low. Look how far below the average 5 year range it got...all the way down to just 800 billion cubic feet in storage.</p> <p>And this was <em>with</em> the &quot;shale gas miracle&quot; chugging along merrily in the background.</p> <p>If the US had magically managed to have the appropriate liquefied natural gas (LNG) terminals all built and had wanted to completely supply Europe with US gas to replace Russian gas, it could have only done so for 53 days (800 bcf/15 bcf/day) before the US would have completely run out of its gas in storage.</p> <p>Of course, this could never be done. If NG ever gets too low in storage, you run the risk of having the pressure drop in all the associated pipelines and delivery systems to such a low level that things have to be shut down. Pilot lights go out, system pressures falter in some areas before others, turbines can&#39;t be run, and industrial processes terminate.</p> <p>If you thought the winter of 2013 was hard, imagine it with the added specter of having to re-light every residential pilot light in a region.&nbsp; There are not enough service people to do that.</p> <p>And well before a crisis moment like that arrives, a form of utility triage would be implemented; Step 1 of which would be shutting off exports of LNG to Europe and any other ex-US destinations.</p> <p>What then would Europe do?&nbsp; Freeze and suffer through its own chain of shortage-related failures because the US could not actually supply what was needed?</p> <p>What would quickly happen is that Europe would return to Russia for at least part of its gas needs.&nbsp; So all that the US could ever do, realistic or not, is supplant <em>some</em> of Russia&#39;s role as NG supplier to Europe.</p> <h2>Rising US Production</h2> <p>At this point, some might say that the ability of the US to export natural gas will rise because US domestic production is rising.&nbsp; While true, two things weigh on this view to render it moot.</p> <p>The first is that European domestic gas production is falling. Norwegian production is going down, and North Africa remains a mess that cannot be counted upon to reliably increase its production over its consumption over any time frame you care to choose. &nbsp;So rising US production will be countered by rising US demand and falling European production, both of which will erode the apparent &#39;surplus&#39; in the US that so many are (innumerately) counting on.</p> <p>The second is because liquefying natural gas is enormously energy-intensive and expensive. &nbsp;To ship vast quantities of natural gas across the Atlantic, we&#39;d need to liquefy it first. Fully 25% of the energy embodied in natural gas (NG) is wasted during the process of turning it into a liquid (LNG).&nbsp; That energy is simply gone: those expended&nbsp;BTUs cannot ever be used for anything else.</p> <p>So when it&#39;s noted that Russia supplies 5.7 trillion cubic feet, that&#39;s of ordinary gas in its rightful gaseous form (NG).</p> <p>The equivalent in US gas would be (5.7/0.75) = 7.6 trillion cubic feet (of NG) to account for the energy loss in the liquefying process (to make LNG).</p> <p>In short, LNG is just an energetically stupid thing to do. It is wasteful.</p> <h2>Economically Unworkable</h2> <p>The final nail in the &quot;US will supply Europe&#39;s gas&quot; coffin is simple economics.</p> <p>US LNG could be produced and shipped for about $9 per thousand cubic feet.&nbsp; Russia produces theirs for $.50 for the same amount and can sell it for a price well below $9 for as long as they wish.</p> <p>People investing in an LNG terminal are tying up billions and billions in the project. They cannot invest in such a project because Europe might need gas for the next 2 or even 20 months because of temporary hostilities with Russia. They need 20 years of expected profitable sales to justify the expense.&nbsp;</p> <p>Who thinks that the West is in any position to place a 20+ year permanent ban on Russian energy exports to Europe?&nbsp; Anybody?</p> <p>A sanctions regime is the <em>only</em> thing that would make LNG from the US to Europe an economically workable proposition.</p> <p>The truth is, there are a great many voices asking for LNG to be exported from the US but the real reason has nothing to do with Russia or Europe.&nbsp; The real reason is that the domestic NG industry would love to get much higher prices for their product than they are currently getting and LNG terminals is one way to help level the price playing field between the US and the rest of the world.</p> <p>Europe won&#39;t get its independence from Russia, but US consumers will pay more.</p> <h2>Conclusion</h2> <p>There&#39;s nothing sensible about the recent attempts to link US LNG exports to freeing Europe from its dependence on Russian NG.</p> <p>The numbers just don&#39;t work.</p> <p>Worst of all, those proposing such schemes seem delightfully unaware that even the robust quantities of NG that the US seems to have are also finite, and that you get to use the embodied energy exactly <em>once</em>.&nbsp; But that&#39;s it.</p> <p>Use that energy to liquefy the NG in LNG and you cannot then use that energy to make fertilizer, or erect a new electrical pylon, or build out a next generation mass transit system, or rebuild depleted soils.</p> <p>By this viewpoint, calls to turn our domestic NG into LNG are ignorant at best; a crime against future generations at worst.&nbsp; Perhaps they&#39;re both.</p> <p>But have no fear, Europe is not staffed by ignorant dummies and they will not risk their present and future prosperity by cutting off Russian imports of NG simply to appease US policy hawks or help the sitting president achieve some sort of political victory back home.</p> <p>So it&#39;s highly unlikely that Europe will be clamoring for US LNG to the point that it would agree to a 20-year ban on Russian NG exports.&nbsp; Given this, it&#39;s doubtful that the Ukrainian situation will translate into any significant actions on the US LNG front.</p> http://www.zerohedge.com/news/2014-04-20/us-gas-will-never-replace-russian-gas-europe#comments Chris Martenson Natural Gas NG Norway Switzerland Turkey Ukraine Sun, 20 Apr 2014 22:47:04 +0000 Tyler Durden 487508 at http://www.zerohedge.com The "New" SATs (Summed Up In One Cartoon) http://www.zerohedge.com/news/2014-04-20/new-sats-summed-one-cartoon <p>Presented with no snark or ironic comment whatsoever...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140420_SAT.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04/20140420_SAT.png" width="565" height="451" /></a></p> <p>&nbsp;</p> <p><a href="http://www.theburningplatform.com/2014/04/20/sunday-funnies-8/"><em>Source: Sunday Funnies at The Burning Platform blog</em></a></p> http://www.zerohedge.com/news/2014-04-20/new-sats-summed-one-cartoon#comments Sun, 20 Apr 2014 22:01:13 +0000 Tyler Durden 487506 at http://www.zerohedge.com Barclays Latest To Exit Commodity Trading, Layoff Several Thousand Staff http://www.zerohedge.com/news/2014-04-20/barclays-latest-exit-commodity-trading-layoff-several-thousand-staff <p>With <a href="http://www.zerohedge.com/news/2014-03-19/goodbye-blythe-masters-jpm-sells-its-physical-commodities-business-mercuria-35-billi">JPMorgan</a> and <a href="http://www.zerohedge.com/news/2013-12-05/deutsche-bank-exits-commodity-trading-fires-200">Deutsche Bank</a> having exited the commodities business (and numerous other banks discussing it ahead of the Fed and regulators&#39; decisions over banking rules of ownership), it appears a few short months of regulatory scrutiny is enough to warrant more broad-based cuts across bulge-bracket banks historically most manipulated and profitable business units. As <a href="http://www.ft.com/cms/s/0/5761ec06-c707-11e3-aa73-00144feabdc0.html?ftcamp=crm/email/2014?ftcamp=crm/email/2014420/nbe/ExclusiveComment/product_a2___a3__/nbe/ExclusiveComment/product&amp;siteedition=intl#axzz2zSM62GXh">The FT reports</a>, <strong>Barclays, one of the world&rsquo;s biggest commodities traders, is planning to exit large parts of its metals, agricultural and energy business</strong> in a move expected to be announced this week. This comes on the heels of Barclays shuttering its power-trading operations (after refusing to pay $470mm in fines) with CEO Jenkins expected to announce <strong>several thousand layoffs</strong>.</p> <p>&nbsp;</p> <p><a href="http://www.ft.com/cms/s/0/5761ec06-c707-11e3-aa73-00144feabdc0.html?ftcamp=crm/email/2014?ftcamp=crm/email/2014420/nbe/ExclusiveComment/product_a2___a3__/nbe/ExclusiveComment/product&amp;siteedition=intl#axzz2zSM62GXh"><em>As The FT reports</em></a>, the regulatory uncertainty appears a major hurdle...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Regulators, including the US Federal Reserve, are reviewing whether to curb banks&rsquo; commodities trading operations after they were accused of manipulating markets for electricity, aluminium and other materials for their own profit.</strong></p> </blockquote> <p>And Barclays has already run afowl of regulators...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Barclays closed its US and European power trading operations in February after it was fined a record $470m for allegedly manipulating power prices</strong> by the US Federal Energy Regulatory Commission. Barclays has refused to pay the fine, shifting the dispute to a federal court.</p> </blockquote> <p>So the decision to shut its commodity business should not be a total surprise...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Barclays, one of the world&rsquo;s biggest commodities traders, is planning to exit large parts of its metals, agricultural and energy business</strong> in a move expected to be announced this week.</p> <p>&nbsp;</p> <p><strong>The shake-up comes as commodity trading suffers a sharp slide in revenues and attracts greater scrutiny from regulators</strong>, which has already led to the withdrawal of several big banks from the area.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Chief executive Antony Jenkins is preparing a strategic update for investors on May 8 and is expected to slash several thousand jobs</strong> by cutting Barclays&rsquo; exposure to areas that do not generate returns above their cost of capital. These are likely to be moved into an internal &ldquo;bad bank&rdquo; and either sold or closed down.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The retreat is being driven by tighter regulation, fresh capital constraints and lower profitability due to stable prices for oil and other commodities. </strong>Coalition, a consultancy, estimates the revenues of the top 10 banks in commodities fell last year to $4.5bn from a record $14.1bn in 2008.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Precious metals trading is likely to move into the bank&rsquo;s foreign exchange trading business.</strong> There are expected to be <strong>heavy job cuts among the 160 staff </strong>in its global commodities trading, sales and research operations, many of them in London.</p> </blockquote> <p>The base of manipulating banks is shrinking...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Barclays is one of the top five banks in commodities &ndash; which together controlled about 70 per cent of the commodities trading pot last year.</strong> But several are shrinking or disposing of these businesses, including Morgan Stanley, Deutsche Bank, UBS and Royal Bank of Scotland.</p> </blockquote> <p>and becoming ever more concentrated with Goldman, Mercuria (ex-JPM), and Glencore to run the commodities world.</p> http://www.zerohedge.com/news/2014-04-20/barclays-latest-exit-commodity-trading-layoff-several-thousand-staff#comments Bad Bank Barclays Deutsche Bank Federal Reserve Morgan Stanley Precious Metals Royal Bank of Scotland Sun, 20 Apr 2014 21:12:35 +0000 Tyler Durden 487505 at http://www.zerohedge.com Putin Would Save Obama From Drowning! http://www.zerohedge.com/contributed/2014-04-20/putin-would-save-obama-drowning <p><a href="http://www.financialjuice.com/zerohedge" style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;">Follow ZeroHedge in Real-Time on FinancialJuice</a></p> <p><img src="https://discuss.financialjuice.com/uploads/default/1793/f330e007a8293c45.jpg" style="vertical-align: middle; max-width: 100%; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;" /></p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">As the audience went from laughter to applause, Vladimir Putin responded to the question that he had just read out on a televised debate in Russia. What was the question? Quite simply it asked if the Russian leader believed that President Obama would save him and throw him a life buoy if he were drowning. The question was all prepared to win Putin the people’s hearts; adept skills of spin-doctoring and creative marketing. But it was the answer that won the Russians over more than anything on the Q&amp;A session broadcast on RT television network.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">The English translation provided by&nbsp;<strong>RT</strong>&nbsp;said: “<em>In addition to intergovernmental relations, there are some personal relations. I don’t think I have close personal relationship with&nbsp;</em><em>Obama</em><em>. I think Obama is a courageous and good person and he would for sure save me</em>.”</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Let it be said that President Obama would certainly not save him from drowning. He would more than likely not save anyone from drowning in the true fashion of a political leader. Why would you save someone from drowning? Unless of course they became eternally indebted to you! Except Vladimir Putin would not be indebted to anyone, would he? Politicians don’t get to the top-notch places with the cushy offices and the tea-serving masses that work, scuffling around, vying for favors unless they have knocked a few people off, held their heads under the water as they see them gasping for air. Who gets to the top these days without actually trampling on the underlings that are scurrying around in the dark recesses of the nation? No,&nbsp;<strong>Mr. Putin</strong>, Mr. Obama wouldn’t save you and nor would you save him. Given half the chance you would both probably look over your should to check if anyone were around, then push the other into the water, knowing full-well that they couldn’t swim a stroke.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Hypothetical altruism is a wonderful thing. Politicians can use it until the cows come home and sit back reveling in the beauty of looking and sounding like the ‘nice guy’. Altruism and politics don’t go hand in hand. It’s self-interest, Mr. Putin that drives the leaders that you are.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">There’re hardly grounds for saving either of them today. Given the recent clashes over Syria, the&nbsp;<strong>Edward Snowden</strong>&nbsp;and the&nbsp;<strong>National Security Agency</strong>, then the anti-gay question catapulted to the forefront of the Olympics, followed by&nbsp;<strong>Crimea</strong>&nbsp;and now Ukraine, it’s hardly going to be buddy-system between the two. Now, there is a brewing crisis that will leave thousands as refugees, displaced and forced to move due to partition of the country. Add to that list the fact that Putin sent a Russian jet to fly over a US Navy ship in the Black Sea (a dozen times), just to let them know that they were willing and able. Vladimir Putin complained not so long ago at the chastising patronizing way of talking in the West whenever they mentioned the word Russia. Today, it’s Obama that is looking more like the guy that does the tough talking, but it’s Putin that’s the action man. What happens next? One of them will give in and it’s doubtful that it will be Putin. Just two days ago Putin said that he hoped he would not have to use force, underlining that East Ukraine was once part of Russia. He reminded the world that he has been granted the power by the parliament to use military force if the situation is deemed to need it. In the face of escalation, it very much seems as if this will be the case. He has already donned the<em>Monomakh Cap</em>&nbsp;by referring to Eastern Ukraine as&nbsp;<em>Novorossiya</em>&nbsp;(<strong>New Russia</strong>, the Tsarist name for that part of the country).</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Even&nbsp;<strong>Edward Snowden</strong>&nbsp;called in to the TV show. “<em>A really sensational, really outrageous video message from a person who revolutionized the world by leaking information to the world about American secret services</em>” was how the call was dubbed by&nbsp;<strong>RT</strong>&nbsp;as Snowden called in. Lucky he was tuned in, wasn’t it really? The question? “<strong><em>Does Russia intercept, store or analyze in any way the communications of millions of individuals?</em></strong>” Putin’s answer was that the Russian secret services were financially poorer than the US’s and also that they were strictly controlled and guided by the law which forbade that. Nice spin-doctoring by both Snowden and Putin. A little like the question “Are you going to raise taxes”, with the political answer “I have no intention at the present time of doing so” we can easily understand that it’s the “present time” bit that counts the most. Perhaps the Russians aren’t analyzing millions, but billions of communications. Pull the other one, guys, everyone spies.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Just a few days ago the White House issued another statement suggesting that President Obama had tut-tutted and told Vladimir Putin off for escalating the situation in Ukraine.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Admittedly, it was the innocence (if we believe the story to be true, that is) of a six-year old boy that asked the question on RT.</p> <p style="font-size: 14px; line-height: 20px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Should either&nbsp;<strong>Putin</strong>&nbsp;or&nbsp;<strong>Obama</strong>&nbsp;be saved from drowning? Would you be altruistic enough to throw them a life-line today if you came across them coming up for air? Or would you just let them sink to the bottom?</p> <p><strong style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13px; line-height: 17.333332061767578px;">Originally posted:&nbsp;</strong><span style="color: #1e439a; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;"><span style="font-size: 14.44444465637207px; line-height: 20px;"><strong><a href="http://discuss.financialjuice.com/t/putin-would-save-obama-from-drowning/489">Putin Would Save Obama From Drowning!</a></strong></span></span></p> <p style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13px; line-height: 17.333332061767578px;"><span style="color: #1e439a; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;"><strong><a href="http://www.tothetick.com/">Day Trading Data Sheets&nbsp;Futures and Forex</a></strong></span></span></p> <p style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13px; line-height: 17.333332061767578px;"><a href="http://www.financialjuice.com/zerohedge" style="text-decoration: underline; color: #000000; line-height: 17.328125px;"><img src="http://www.zerohedge.com/sites/default/files/images/user22400/imageroot/2013/08/ZH.png" width="300" height="150" style="max-width: 100%; height: auto;" /></a></p> http://www.zerohedge.com/contributed/2014-04-20/putin-would-save-obama-drowning#comments national security President Obama Ukraine Vladimir Putin White House Sun, 20 Apr 2014 21:08:25 +0000 Pivotfarm 487504 at http://www.zerohedge.com This Means War: US To Target Putin's Personal $40 Billion Stash http://www.zerohedge.com/news/2014-04-20/means-war-us-target-putins-personal-40-billion-stash <p>While the White House has continually threatened further sanctions against Russia for non-de-escalation (<a href="http://www.zerohedge.com/news/2014-04-18/de-escalation-us-deploys-troops-poland">even as it un-de-escalates itself</a>), the <strong>specifics of the additional sanctions have been sparse</strong>. <a href="http://www.zerohedge.com/news/2014-03-30/german-executives-denounce-euus-leaders-over-russia-confrontation">German CEO warnings over blowback from economic sanctions</a>... the <a href="http://www.zerohedge.com/news/2014-04-11/liberation-europe-gazprom-due-nat-gas-exports-nonsense-cheniere-ceo">&quot;nonsense&quot; of replacing Russian gas with US gas</a>... <a href="http://www.zerohedge.com/news/2014-04-17/putins-top-10-qa-quotes-us-will-cut-their-nose-spite-their-face">the Russian warnings of &quot;interdependence&quot; and &quot;boomerangs&quot;</a>... all reduce the West&#39;s arsenal of financial sanctions. But, as <a href="http://www.thetimes.co.uk/tto/news/world/europe/article4066601.ece">The Times of London reports</a>, <strong>perhaps the US has found a crucial pain point for Putin - a sanctions regime that would target Putin&#39;s personal wealth, which includes a reported $40 billion stashed in Swiss bank accounts</strong>.</p> <p><a href="http://thehill.com/blogs/blog-briefing-room/news/203891-white-house-mum-on-idea-of-targeting-putins-billions"><em>As The Hill reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The White House on Friday refused to comment on reports that Russian President Vladimir Putin&#39;s personal wealth could be targeted</strong> if the West were to move ahead with additional sanctions over Ukraine.</p> <p>&nbsp;</p> <p>&quot;<strong>I&#39;m not going to get into foreshadowing particular individuals or entities that the United States may target,</strong>&quot; national security adviser Susan Rice told reporters at the White House. &quot;But let me just say <strong>we&#39;ve been clear that there are additional individuals, officials, close associates of senior leadership, oligarchs</strong> and those entities that they are associated with that remain very much potential targets of additional sanctions.&quot;</p> <p>&nbsp;</p> <p>...</p> </blockquote> <p><a href="http://www.thetimes.co.uk/tto/news/world/europe/article4066601.ece">The</a><strong><a href="http://www.thetimes.co.uk/tto/news/world/europe/article4066601.ece"> Times of London reported Friday</a> that the U.S. was preparing a sanctions regime that would target Putin&#39;s personal wealth, which includes a reported $40 billion stashed in Swiss bank accounts.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Putin&#39;s actual holdings are a tightly held secret, and the extent of his holdings are difficult to estimate. But a threat of trying to freeze the Russian president&#39;s personal assets could have played a role in a deal brokered Thursday by foreign ministers from the U.S., Ukraine, Russia and European Union.</p> </blockquote> <p>Perhaps it is worth remembering <a href="http://www.zerohedge.com/news/2014-04-17/putins-top-10-qa-quotes-us-will-cut-their-nose-spite-their-face">Putin&#39;s response from last week&#39;s Q&amp;A</a>...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Putin was asked why the US can do whatever it wants and no one punishes them, while attempts are being made to punish Russia.</p> <p>&nbsp;</p> <p>&ldquo;The US is certainly one of the world&rsquo;s leaders. At some point it seemed that it was the only leader and a uni-polar system was in place. Today it appears that is not the case. <strong>Everything in the world is interdependent and once you try to punish someone, in the end you will cut off your nose to spite your face,&rdquo;</strong> he said.</p> </blockquote> <p>Though we are sure Obama and his team have considered all the intended and unintended consequences of any such actions.</p> http://www.zerohedge.com/news/2014-04-20/means-war-us-target-putins-personal-40-billion-stash#comments European Union national security Ukraine Vladimir Putin White House Sun, 20 Apr 2014 20:24:46 +0000 Tyler Durden 487503 at http://www.zerohedge.com Gas Prices Hit 13-Month Highs, Prompt Macro Concerns http://www.zerohedge.com/news/2014-04-20/gas-prices-hit-13-month-highs-prompt-macro-concerns <p><strong>At $3.67, US Regular gasoline prices are their highest since March 2013</strong> having risen over 12% (40c) in the last 2 months. This must be great news, right? It must mean world demand is picking up and driving up prices of crude oil as global trade soars (amid a collapsing Baltic Dry and decelerating Chinese growth). This <a href="http://www.zerohedge.com/news/2014-04-17/what-oil-war-premium">can't be related to "war premia" right? - as we noted here</a> - because stocks (which always know best) have discounted all this tomfoolery. However, as the following chart shows, <strong>each time gas prices have surged up toards the Maginot Line of $3.80, US macro-economic fundamentals have collapsed</strong>... the only problem is, this time is different - because macro data is already weak going in (and expectations for the post-weather pop are high).</p> <p>&nbsp;</p> <p>Gas prices heading towards the crucial $3.80 level - and US macro is already weak ahead of this turning point...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_gas1.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140420_gas1_0.png" width="600" height="317" /></a></p> <p>&nbsp;</p> <p><em>Chart: Bloomberg</em></p> http://www.zerohedge.com/news/2014-04-20/gas-prices-hit-13-month-highs-prompt-macro-concerns#comments Baltic Dry Crude Crude Oil Sun, 20 Apr 2014 19:39:30 +0000 Tyler Durden 487502 at http://www.zerohedge.com The Week Ahead http://www.zerohedge.com/contributed/2014-04-20/week-ahead <p>We are investing in a world that that has not the reached peak of central bank balance sheets. Even with the tapering by the Federal Reserve, it is continuing to buy more long-term assets than it did when QE3+ was announced in late-2012. The Fed’s balance sheet will not peak until at least October.&nbsp;</p> <p>&nbsp;</p> <p>The recycling of its coupon payments from its massive largesse could also lead to the expansion of its balance sheet even after QE3+ formally ends. There is much speculation about the ECB’s new willingness to expand its balance sheet, and many expect the BOJ to step up its operations by the end of July.</p> <p>&nbsp;</p> <p>Moreover, even beyond QE, interest rates are likely to remain low for quite some time still. A Fed rate hike is still more than a year off. The Bank of England may hike rates earlier, but most likely not this year. It is true that some countries, like Sweden, Australia and now New Zealand can have interest rate cycles with the cycle of the larger central banks.</p> <p>&nbsp;</p> <p>Sweden's tight monetary stance may be responsible for Sweden's deflation, and a rate cut in June remains a strong possibility. Australia has had a complete cycle of rising and cutting interest rates, and now policy is on hold. New Zealand is likely to make the second move in its tightening cycle in the week ahead, but it may pause afterwards.</p> <p>&nbsp;</p> <p>At the same time, growth prospects are general good. After soft Q1, the US is thought to be accelerating toward an annualized pace of 3% here in Q2. The euro zone appears to be continuing to grow slowly. Japan’s economy is likely to weaken in Q2 due to the sales tax increase, but early anecdotal evidence suggests that as there was not a big run up before, the impact appears to be less than feared. The UK economy is sustaining the growth seen last year and is poised to be the strongest economy in the G7 this year. So says the IMF.</p> <p>&nbsp;</p> <p>The Chinese economy has slowed, but since the end of H1 12, growth in the world’s second largest economy has vacillated between about 7.4% and 7.9%, according to government figures. Given that the Chinese economy is considerably larger than say in 2000, the recent pace of growth contributes more to the world’s GDP than 10% growth did on a smaller base.</p> <p>&nbsp;</p> <p>The point is that prospects for world growth are constructive, and monetary stimulus has not peaked. At the same time, the head wind from fiscal policy has diminished. This is true not just in the US, but the euro area, as well. In addition, France and Italy are seeking some relaxation of the EC’s fiscal demands. We note that in the week ahead the EC will announce its formal review of last year's progress on deficit and debt targets.</p> <p>&nbsp;</p> <p>Taken together, these considerations suggest, however, measured capacity utilization has bottomed and that we are past the peak in the output gap. This implies that we are likely near the low point in the inflation cycle. Consistent with this is the rise in commodity prices. The CRB index is at its highest level since September 2012 and is up 14.7% off the early January lows. Copper and iron ore prices (arguable says more about China's economy) are rising, and oil prices are at the upper end of their five month trading range.</p> <p>&nbsp;</p> <p>The economic data due out in the days ahead are unlikely to challenge this overall view. The main economic data includes the US durable goods orders, the euro area flash PMIs, UK retail sales and HSBC's flash estimate of China's manufacturing PMI. It will take more than a little deviation from expectations to be truly new news.</p> <p>&nbsp;</p> <p>Japan's data may be the most important. First, six of the past nine years, Japan's trade position improved in March. However, this year, economists warn of deterioration as exports slow and imports rise. Japanese companies seem largely content to repatriate the foreign currencies it earns through exporting to buy more yen rather than reducing prices to gain market share.</p> <p>&nbsp;</p> <p>Second, Japan reports national CPI data for March and April Tokyo figures. In recent months, Japan's CPI has stabilized and as a case in point the March core rate is expected to be little changed from the December-February pace of 1.3% year-over-year.</p> <p>&nbsp;</p> <p>More interesting is Tokyo's reading for the first month of the sales tax increase. The headline rate is expected to surge to 3.1% from 1.3%. Anecdotal reports suggesting businesses are taking advantage of the sales tax increase to push through an increase in prices. This warns of upside risks to the report. Part of the increase in prices above and beyond the sales tax increase may be seasonal. Price increases at the start of the fiscal year are not uncommon. Part of it may be simply opportunistic.</p> <p>&nbsp;</p> <p>Geopolitical developments are very much part of the investment climate. There are three elements. First, the Geneva accord struck at the end of last week over Ukraine appears to have collapsed. A new round of sanctions is likely, and as the sanctions escalate, opposition by some businesses increase.</p> <p>&nbsp;</p> <p>Second, at the end of last week, the Obama Administration delayed the Keystone Pipeline XL decision, indefinitely and most likely until late this year or even next year. The pipeline essentially would link Canada's oil sands and the US refineries in the Gulf. The project is politically divisive. It pits labor (pro) against environmentalists (opposed). A delay of some kind was anticipated after a Nebraska (a state that the pipeline is to run through) court had ruled a couple months ago that its Republican governor's consent was not sufficient. The judgment has been appealed to the state's Supreme Court.</p> <p>&nbsp;</p> <p>Third, US President Obama will be visiting four countries in Asia in the week ahead: Japan, South Korea, Malaysia and the Philippines. Japan and Malaysia are part of the negotiations for the Trans-Pacific Partnership trade agreement. There are reports suggesting a deal may be in the works to break the logjam between the US and Japan. Japan, it is said, would open up its meat, dairy and sugar markets, while retaining some protection for its wheat and rice markets.</p> <p>&nbsp;</p> <p>Our understanding is that the Abe government sees the international agreement as an important part of its own reform agenda and is another component of the elusive third arrow (the first two being monetary and fiscal stimulus). The real stumbling block, we suggest, is the inability of Obama to secure "trade promotion authority" (fast track) that would allow for expedited legislative process and without which no significant trade agreement has been reached.</p> <p>&nbsp;</p> <p>Obama's trip has a security component, as well. Many observers are concerned that the US response to Russia may influence China's behavior in the Pacific. The major difference is that the US does not have a security treaty with Ukraine. It does with Japan and the Philippines.</p> <p>&nbsp;</p> <p>At the same time, it is a mistake to think that the territorial disputes are only with China. After visiting Abe in Japan, Obama will go to South Korea. Japan is claiming territory that South Korea claims. This conflict will prevent Obama from sanctioning Japan's claims. While Obama will reaffirm the US security commitment, he will likely privately urge restraint from needlessly antagonizing China.</p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="246" height="205" alt="" src="http://www.zerohedge.com/sites/default/files/images/user113905/imageroot/investment_0.jpg?1398020444" /> </div> </div> </div> http://www.zerohedge.com/contributed/2014-04-20/week-ahead#comments Australia Bank of England Central Banks China Copper CPI CRB CRB Index Federal Reserve France Gross Domestic Product International Monetary Fund Italy Japan Market Share New Zealand Obama Administration Output Gap President Obama Ukraine United Kingdom Yen Sun, 20 Apr 2014 19:01:05 +0000 Marc To Market 487501 at http://www.zerohedge.com