http://www.zerohedge.com/fullrss2.xml/article/article/%3Ca%20href%3D en Ukraine: A Perspective From Europe http://www.zerohedge.com/news/2014-08-22/ukraine-perspective-europe <p><em>Submitted by <a href="http://www.peakprosperity.com/blog/86672/ukraine-perspective-europe">Alasdair Macleod via Peak Prosperity</a>,</em></p> <div class="content clearfix"> <p>The eminent historian Niall Ferguson in an op-ed for the <em>Financial Times</em> (Friday August 1<sup>st</sup>) made a comparison between the events leading up to the start of WW1 and the Ukraine situation today. While the comparison is apposite given the 100-year anniversary of the former, these are very different times. The assassination of the successor to the Austria-Hungarian Empire in Sarajevo by anarchists was initially dismissed as a local difficulty in an obscure province, which had been annexed from the Ottoman Empire in 1906. While regrettable and unexpected to observers outside the Balkans there was no reason to suspect the chain of events that followed would lead to the greatest war in history.</p> <p>It is still a mystery to many historians as to how and why this event led to the slaughter of nine million people, and this uncertainty is admitted in Ferguson’s article. But his analysis of different parties to the original event pursuing their own vested interests without a grasp of the bigger picture certainly rings true of the Ukrainian situation today with regards to the West, embodied in a disparate committee called NATO. <strong>The similarity with the chaotic diplomacy that led to WW1 stops there: Russia under Vladimir Putin’s leadership appears to have a good grasp of its objective.</strong></p> <h2>The History Is Important</h2> <p>The relevant history of Ukraine and the interests of the great powers go back to the Second World War, when it was fought over between Germany and Russia with tremendous loss of life. When Germany was finally defeated Ukraine ended deep in Soviet territory. Stalin subdued all nationalism by executing dissenters or transporting them to the gulags rarely to return. There was a high element of ethnic cleansing, and this affects political relationships to this day.</p> <p>It was inevitable that following the collapse of the Soviet Union Ukrainian nationalism would reassert itself. But Ukraine’s borders had never been fixed and its claim to be a well-defined state is dubious: at best it was no more than a federation of provinces that retained their individual identities over the centuries. Crimea was never part of Ukraine: it had been “gifted” by Khrushchev in 1954 it is said in a drunken moment. The eastern provinces of Luhansk and Donetsk are heavily populated with ethnic Russians. Luhansk held a referendum in early May and the organisers claimed that 96% of the population voted in favour of self-rule (allied to Russia) on a turn-out of 81%. A similar referendum in Donetsk claimed 88% in favour on a 75% turnout.</p> <p>Putin distanced Russia from these referendums, asking the breakaway governments to delay them, there being at that time a degree of diplomatic cooperation between Russia and the other G8 nations. This has now evaporated, but Putin had at least tried even though he probably smiled on the result. And everyone has forgotten that imperfect though the polling process might have been (lack of international observers, alleged intimidation of minorities etc.) there can be no doubt the clear majority in these two provinces wish to secede to Russia.</p> <p>Europe in the knowledge the referendum results were certain to back independence condemned this show of democracy when first proposed. European politicians have a fundamental problem with the idea that geographical parts of a country’s population might want political independence anyway. Think Basque separatists and think Scotland. So far as Brussels is concerned, the existence of individual member countries is a passing phase towards full political integration, so fragmentation is a retrograde step. What happened in Luhansk and Donetsk was counter to all the EU’s own statist ambitions which are behind the development and continuing integration of the EU. This sets the tone behind the automatic support Europe affords the Ukrainian government. Furthermore European politicians have an unquestioning belief in the benefits of EU membership and expect anyone who shares the EU’s socio-economic ideals to align themselves accordingly.</p> <p>So on the political level there is a natural dialog between the Kiev government desperate to escape the embrace of the Russian Bear and the EU. On a military level relationships and geopolitical interests are managed through NATO, which is funded mostly by the US. And as the principal financial backer, America expects and usually gets the deference from Europe it wants. America’s military and strategic objectives are however very different from the EU’s economic interests, because the EU is dependent on Russian energy, other raw materials and trade.</p> <p>There is however a military fly in the ointment so far as NATO is concerned. Ukraine is surrounded by Russia and Russian-supporting enclaves, including Belarus to the north and north-west of Ukraine, and the breakaway state of Transnistria, which lies along the border between Moldova and Ukraine. Only about 20% of Ukraine’s borders are with NATO allies. NATO simply cannot afford to have boots on Ukrainian soil, because its supply lines can be cut off by Russia. Perhaps for this reason the approach favoured by the west has been to undermine the Ukrainian relationship with Russia by encouraging Kiev towards both economic and military cooperation with the west, rather than upping the west’s presence.</p> <h2>The Russian Dimension</h2> <p>Russia’s reactions to NATO and the EU’s policy ambitions towards Ukraine have been perfectly logical and could easily have been foreseen by any competent analyst. In this context there are two elements to consider, Russia itself and the personality of President Putin.</p> <p>The Russian people have enjoyed a significant uplift in their standard of living under Putin, and a new middle class has emerged, which is growing and becoming wealthier by the day. Unlike more advanced, welfare driven economies this improvement has been real and not degraded by ever-accumulating debt. There is much that is wrong in Russia as western critics continually tell us, but the fact is that Russia is economically more resilient than its western counterparts, and her people are thankful and loyal to a strong leader.</p> <p>This strength is seriously underestimated by western economists who have been brought up in the ivory-tower world of Keynesian and monetarist economics. This is why they mistakenly think cutting Russia off from western capital markets is a severe punishment. It is not: the Russian leadership are not dependant on access to debt finance, not intimidated, and they feel no need to hurry their responses. Putin’s advisers are fully aware that implementing sanctions will harm NATO members far more than Russia, and nothing done so far is likely to affect their minimum objective of ensuring Ukraine does not become a vassal state of the west.</p> <p>Now that Russia has recovered her identity following the fall of communism her people naturally wish to secure and enhance it. They see their own “flesh and blood” in Luhansk and Donetsk being subjugated by a corrupt Nazi-sympathising Ukrainian regime. They know that America and NATO have been actively undermining Russo-Ukrainian ties having supported first the Orange Revolution and more latterly the fall of Viktor Yanukovych earlier this year. They also know that the west supported the neo-fascists in Yanukovych’s overthrow, reviving for the Russians memories of the terrible losses inflicted by the Nazis in the Second World War.</p> <p>At this stage to counter economic threats Russia is generally content with sending signals that she is not dependent on the west for trade. To this end she has concluded pan-Asian energy deals with China and India, deals that were in the pipeline, so to speak, anyway. Russia is activating her relationships within the Shanghai Cooperation Organisation (the SCO), which was set up with China twelve years ago for this purpose. Furthermore, the population of full SCO members is set to double to over 3.5 billion people in September, when India, Pakistan, Iran and Mongolia become full members.</p> <h2>Putin’s Personality</h2> <p>President Putin, like many of Russia’s political in-crowd and some of the supporting oligarchs, is an ex-KGB officer. By all accounts he is controlling, hard-working, focused and dedicated. He is 5’6” tall which compared with western male leaders is noticeably short (though his Prime Minister, Dmitry Medvedev is only 5’3”). Short men often feel a need to assert themselves in the company of taller men, and Putin appears to exhibit these traits, with his annual holiday pictures depicting him as an action-man. As judo black-belt he throws larger men with ease and has been deliberately filmed doing so.</p> <p>Putin is a man who the west turned its back on when he would have personally wanted to be accepted at the top-table of world leaders. This is the second time: the first was the spat with the UK over the murder by polonium poisoning of an ex-KGB officer, Alexander Litvinenko, in London in 2006. The Russians refused extradition requests for the principal suspect, Andrey Lugovoy and four others. In July 2007 Britain expelled four Russian diplomats.</p> <p>It took a long time for the dust to settle from the Litvinenko affair, and it was only in the last eighteen months that the UK went out of her way to repair foreign relations with Russia, putting the Litvinenko affair behind it. So when the Ukrainian crisis broke six months ago there were very few entrenched vested interests at the political level between the UK and Russia, and therefore little invested on the British side to maintain relations.</p> <p>The western view of Vladimir Putin as portrayed by the media is often very wide of the mark. And it is with some irony that we observe left-wing European politicians denouncing this pragmatic ex-communist, but their instincts, that he is a modern mercantilist are correct. His wealth and position are built on the wealth of his people: socialism’s power by contrast is derived from wealth destruction, which explains much of the political divide. While European socialists have no coherent political and economic philosophy, Putin is a realist. He doesn’t care who he deals with, so long as the profit, or reason, stacks up. And it is Russia’s vast natural resources, making her the world’s largest exporter of energy and with monopoly or duopoly power in a range of strategically important elements that gives him the power to forge a favourable political settlement anywhere he chooses.</p> <p>We should think of Putin as the ringmaster in control of the Mackinder Heartland, which Mackinder summed up as follows:</p> <p style="margin-left: .5in;"><strong>Who rules East Europe commands the Heartland;</strong></p> <p style="margin-left: .5in;"><strong>Who rules the Heartland commands the World-Island;</strong></p> <p style="margin-left: .5in;"><strong>Who rules the World-Island controls the world.</strong></p> <p>The Heartland runs from the Volga to the Yangtze, and the World-Island is the inter-linked continents of Europe, Asia and Africa. Halford Mackinder’s paper was presented to the Royal Geographical Society in London in 1904. Since then the Russia he knew has been destroyed twice, once by the October Revolution of 1914 and once by communism. Yet still Russia survives, her power remains, and Putin is now master of it all.</p> <h2>The Consequences for Western Europe</h2> <p><strong>The greatest concerns over Russia’s actions come from the countries that were previously suppressed by the Soviet Union and are proximate to Russia.</strong> These include Poland, the Baltic States, and ex-members of the Austrian-Hungarian Empire in middle Europe. Twelve of the twenty-eight NATO members were former communist satellites and very sensitive to Russia’s real or imagined territorial ambitions. They are a large bloc in voting terms, a frightened group sometimes aggressively supportive of intervention.</p> <p>The other main category of European states is the welfare economies of the original European Union, some of which have significant economic and financial ties with Russia. Best known in this group is Germany, dependent on Russia for 38% of her gas, 35% of her oil and 25% of her coal imports. There are no suitable alternatives in sight that could cover shortfalls of these magnitudes. Short-term, some extra gas could be piped from the Netherlands and Norway, two of her other import sources; but this is North Sea gas which is being rapidly depleted and demanded by other customers. Fracking from shale rocks is possible in North Rhine-Westphalia, but this takes time to establish and strong environmental opposition would have to be overcome. Then there are the commercial energy deals. Gazprom and Germany’s Wintershall, a subsidiary of BASF, have executed a large share swap. They jointly own Germany’s “Gascade” 2,000 km pipeline and Russia through Gazprom now controls all Germany’s gas storage facilities.</p> <p>Naturally, an increasingly wealthy Russian middle class buys large quantities of Mercedes, BMWs and VWs. Furthermore, Russia imports from Germany chemical products, food and agricultural products. It is estimated that one in ten German exporters traded with Russia last year exporting €36bn worth of goods. German companies have invested €16bn in Russia.</p> <p>France and Italy export about €10bn each to Russia, and import €11bn and €18bn respectively, mostly energy. France has also built one Mistral Class helicopter carrier which is undergoing sea trials and crew training, and a second carrier is in production. At President Holland’s insistence, this deal is excluded from the EU’s arms embargo: a good litmus test for the degree of EU solidarity.</p> <p><strong>Western Europe’s banking system also has significant exposure to Russia.</strong> French banks have an estimated $50bn, Italian $28.6bn, German $23.7bn, British $19.1, Dutch $17.6, Swedish $14bn, and Swiss $6.8bn out of an estimated $184bn, or 76% of total foreign bank lending to Russia. Individual banks with high exposure include France’s Society Generale with $30bn, representing half this highly geared bank’s equity. Unicredit of Italy has exposure of $25bn, representing 40% of its shareholder funds. These are two prominent examples of potential casualties in a financial war with Russia. Furthermore European corporates also have substantial investments in Russia, notably BP.</p> <p><strong>It is clearly not in the interests of the long-standing members of the EU to escalate a 'sanctions and financial conflict' with Russia.</strong> The European Central Bank will have almost certainly discussed contingency plans with the major regional central banks in the Eurozone, because the banking system might have to make available special credit and financing facilities, i.e. a rescue from a financial crisis if NATO goes much further down the sanctions route. This is why politicians are walking on eggshells, paying lip-service to America and the scared Eastern fringe members of NATO while hoping this goes no further.</p> <p><strong>So long as this is the case it is clear that NATO members are powerless to stop Russia from wresting control of all or parts of Ukraine from the government in Kiev.</strong> Putin knows this; unfortunately it is not clear to us that the American government does. All in all it seems likely that after a period of slow-burn as Putin dictates the pace of developments, the political situation in Ukraine will deteriorate with some unhelpful nudges from Russia.</p> <p><em>In <a href="http://www.peakprosperity.com/insider/86673/rise-east" target="_blank">Part 2: The Rise of the East</a>, we outline how the Ukrainian situation is likely to develop. Spoiler alert: Russia has a hand full of aces.</em></p> <p><em>And on a higher level, we explore the growing commitment in the East to charting its own course, one much more separated from western influence than seen in the past century. Increasingly, the East is challenging why the needs of its population of 5 billion should be so deferential to the West's 1 billion.</em></p> <p><em><a href="http://www.peakprosperity.com/insider/86673/rise-east" target="_blank">Click here to access Part 2</a> of this report (free executive summary; <a href="http://www.peakprosperity.com/enroll" target="_blank">enrollment</a> required for full access)</em></p> </div> http://www.zerohedge.com/news/2014-08-22/ukraine-perspective-europe#comments Capital Markets Central Banks China ETC European Central Bank European Union Eurozone fixed France Germany India Iran Italy Judo Nationalism Netherlands Niall Ferguson Norway Poland Ukraine Vladimir Putin Fri, 22 Aug 2014 22:36:14 +0000 Tyler Durden 493372 at http://www.zerohedge.com The Chart That The US Police Force Does Not Want You To See http://www.zerohedge.com/news/2014-08-22/chart-us-police-force-does-not-want-you-see <p>USA is #1 once again... that'll teach the cynics. Oh wait...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_copkillers.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_copkillers_0.jpg" width="600" height="318" /></a></p> <p><a href="http://www.economist.com/news/united-states/21613272-police-missouri-suburb-demonstrate-how-not-quell-riot-overkill"><em>Source: The Economist</em></a></p> <p><em>h/t @ConradHackett</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="1153" height="611" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_copkillers.jpg?1408724373" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/chart-us-police-force-does-not-want-you-see#comments The Economist Fri, 22 Aug 2014 22:06:31 +0000 Tyler Durden 493371 at http://www.zerohedge.com U.S. Wants to Bomb ISIS In Syria ... Maybe We Should (cough) First Stop ARMING THEM? http://www.zerohedge.com/news/2014-08-22/best-way-stop-isis-syria-stop-arming-isis-syria <p>U.S. foreign policy is schizophrenic.</p> <p>The <a href="http://www.nytimes.com/2014/08/22/world/middleeast/isis-believed-to-have-as-many-as-17000-fighters.html?_r=0" target="_blank" title="chairman of the Joint Chiefs of Staff">chairman of the Joint Chiefs of Staff</a> says we need to attack the Sunni militants in Syria.</p> <p>The <a href="http://www.businessinsider.com/us-action-against-isis-in-syria-2014-8" target="_blank" title="deputy national security adviser">deputy national security adviser</a> to President Obama says we should go after ISIS in Syria.</p> <p>Okay &hellip;</p> <p>But the U.S. and our closest allies have <a href="http://www.washingtonsblog.com/2013/05/the-u-s-is-supporting-the-most-violent-muslim-terrorists-in-order-to-wage-war-for-oil.html" title="long supported">long supported</a> Sunni militants.</p> <p>And the U.S. and our closest allies have been <a href="http://www.washingtonsblog.com/2014/08/pentagon-crazies-weve-armed-supported-now-going-attack-us.html" title="arming and training Islamic jihadists in Syria for years"><em>arming</em> and <em>training</em> Islamic jihadists in Syria for <em>years</em></a>. And see <a href="http://online.wsj.com/news/articles/SB10001424052702304626304579509401865454762" target="_blank" title="this">this</a>, <a href="http://www.pbs.org/wgbh/pages/frontline/foreign-affairs-defense/syria-arming-the-rebels/syrian-rebels-describe-u-s-backed-training-in-qatar/" target="_blank" title="this">this</a>, <a href="http://www.tomdispatch.com/blog/175884/" target="_blank" title="this">this</a> and <a href="http://www.cnn.com/2013/09/12/politics/syria-arming-rebels/" target="_blank" title="this">this</a>.</p> <p>You don&rsquo;t have to be a rocket scientist or a fortune-teller to have known this was a bad idea.</p> <p>As Michael Shank &ndash; Adjunct Faculty and Board Member at George Mason University&rsquo;s School for Conflict Analysis and Resolution, and director of foreign policy at the Friends Committee on National Legislation &ndash; <a href="http://www.huffingtonpost.com/michael-shank/how-arming-syrian-rebels_b_3689592.html" target="_blank" title="warned">warned</a> a year ago:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The Senate and House Intelligence <a href="http://rt.com/usa/joint-chiefs-us-options-syria-445/" target="_hplink" title="committees’ about-face decision last week">committees&rsquo; about-face decision last week</a> to arm the rebels in Syria is dangerous and disconcerting. <strong>The weapons will assuredly end up in the wrong hands</strong> and will only escalate the slaughter in Syria. Regardless of the vetting procedures in place, the sheer factionalized nature of the opposition guarantees that the arms will end up in some unsavory hands. The same militant fighters who have committed gross atrocities are among the best-positioned of the rebel groups to seize the weapons that the United States sends to Syria.</p> <p>&nbsp;</p> <p>Congress can still join with the <a href="http://www.people-press.org/2013/06/17/public-remains-opposed-to-arming-syrian-rebels/" target="_hplink" title="70 percent of Americans">70 percent of Americans</a> who oppose arming Syria rebels and heed former National Security Advisor Zbigniew Brzezinski&rsquo;s caution against arming the rebels (he called the Obama administration&rsquo;s decision to do so &ldquo;<a href="https://twitter.com/zbig/status/345570098939035649" target="_hplink" title="a mess in the making">a mess in the making</a>&ldquo;) &hellip;.</p> <p>&nbsp;</p> <p>Arming one side of Syria&rsquo;s multi-sided and bloody civil war <strong>will come back to haunt us</strong>. Past decisions by the U.S. to arm insurgencies in Libya, Angola, Central America and Afghanistan helped sustain brutal conflicts in those regions for decades. In the case of Afghanistan, arming the mujahideen in the 1980s created the instability that emboldened extreme militant groups and gave rise to the Taliban, which ultimately created an environment for al Qaeda to thrive.</p> <p>&nbsp;</p> <p>There is no unified command or control in the Syrian opposition, as was the case of the Afghan mujahideen. And due to the United States&rsquo; long history of diplomatically isolating Syria, we know even less about the nature of Syria&rsquo;s opposition. The excuse that &ldquo;the enemy of my enemy is my friend&rdquo; is often invoked to justify anti-Assad forces. This short-sighted excuse has gained the U.S. enemies around the world, undermining U.S. national security. The same justification <a href="http://www.huffingtonpost.co.uk/2013/02/05/extraordinary-rendition-axis-of-evil-iran-syria-cia_n_2621401.html" target="_hplink" title="was used by the Bush administration">was used by the Bush administration</a> in its collaboration with the Assad regime to torture suspected militants in Syria. Arming the enemies of our enemies hasn&rsquo;t made the U.S. more friends; it has made the U.S. more enemies.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>Some armed opposition factions, including powerful Islamist coalitions, <a href="https://www.fas.org/sgp/crs/mideast/RL33487.pdf" target="_hplink" title="reject negotiation altogether">reject negotiation altogether</a>. Yet these are the same groups that will<strong> likely seize control of U.S.-supplied weapons, just as they&rsquo;ve already seized control of the bulk of the rebels&rsquo; weaponry</strong>.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>When you lift the curtain on the armed groups with the most formidable military presence on the ground in Syria, you find the Al Nusra Front and Al Farough Brigades. Both groups are closely aligned with Al Qaeda and have directly perpetrated barbaric atrocities. The Al Nusra Front has been charged with beheadings of civilians, while a commander from the Al Farough Brigades reportedly ate the heart of a pro-Assad soldier.</p> </blockquote> <p>Shank&rsquo;s warning was ignored, and his worst fears came to pass.</p> <p>And the U.S. is <em>still</em> financing the jihadis in Syria. For example, the government is pushing an additional <a href="http://abcnews.go.com/blogs/politics/2014/08/isis-threat-focuses-on-syria-but-us-in-no-hurry-to-act/" target="_blank" title="$500 million">$500 million</a> in arms to the jihadis.</p> <p>We are literally <a href="https://www.google.com/search?q=bombing+our+own+weapons+iraq+syria&amp;ie=utf-8&amp;oe=utf-8&amp;aq=t&amp;rls=org.mozilla:en-US:official&amp;client=firefox-a&amp;channel=sb" target="_blank" title="bombing our own weapons">bombing our own weapons</a>.</p> <p>A similar dynamic is operating in Iraq. Specifically, the U.S. is now arming the &ldquo;Peshmerga&rdquo; (i.e. the Kurdish soldiers).</p> <p>But the Wall Street Journal <a href="http://online.wsj.com/articles/kurds-with-u-s-aid-push-to-take-mosul-dam-1408322338" target="_blank" title="notes">notes</a> that there are reports that Peshmerga are fighting side-by-side with the PKK&nbsp; &hellip; a group designated as terrorists by the U.S.:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A U.S. defense official couldn&rsquo;t confirm whether the meeting took place and stressed in response to reports that the PKK was fighting alongside the Peshmerga that &ldquo;it&rsquo;s hard to tell from Washington who&rsquo;s on the front line in a Kurdish-Iraqi fight.&rdquo;</p> <p>&nbsp;</p> <p>The U.S. has designated the PKK a terrorist organization, and the U.S. &ldquo;doesn&rsquo;t do business with them,&rdquo; the official added.</p> </blockquote> <p>By arming the Peshmerga, the U.S. is also putting weapons into the hands of the PKK.</p> <p>If we stop arming, funding and training terrorists, then maybe we won&rsquo;t have to bomb them later.</p> http://www.zerohedge.com/news/2014-08-22/best-way-stop-isis-syria-stop-arming-isis-syria#comments Afghanistan Iraq national security Obama Administration President Obama Wall Street Journal Fri, 22 Aug 2014 21:59:09 +0000 George Washington 493370 at http://www.zerohedge.com Janet Yellen Is An Insult To Americans http://www.zerohedge.com/news/2014-08-22/janet-yellen-insult-americans <p><em>By Raul Ilargi Meijer of <a href="http://www.theautomaticearth.com/debt-rattle-aug-22-2014-janet-yellen-is-an-insult-to-americans/">The Automatic Earth</a></em><a href="http://www.theautomaticearth.com/debt-rattle-aug-22-2014-janet-yellen-is-an-insult-to-americans/"></a></p> <p><strong>Janet Yellen Is An Insult To Americans</strong></p> <p style="text-align: center;"><a href="http://www.shorpy.com/node/18390?size=_original#caption" target="new"><img src="http://www.theautomaticearth.com/wp-content/uploads/2014/08/SilerCity1939.jpg" border="0" /></a></p> <p style="text-align: center;"><em>Dorothea Lange Siler City, North Carolina Jul 1939 </em></p> <p>If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think they select Fed heads them on purpose for how well they would fit into the Shire?</p> <p>Janet Yellen has a serious problem: the story no longer fits. The Fed under Bernanke said in its forward guidance that it would taper if certain job market conditions were met. And now they have been, at least on paper, but Yellen knows only too well that those are not the real numbers <em>[ZH: as we <a href="http://www.zerohedge.com/news/2012-12-12/regime-change-critical-message-todays-fomc-announcement">explicitly warned would happen in December 2012</a>]</em>.</p> <p>She’s acutely aware of how the BLS calculates US unemployment numbers. She knows about all the millions of people who are not counted as being in the labor force anymore, all the millions who are forced to work part time jobs, all those working more than one job just to make ends meet, and all of the above who simply don’t bring home enough money at the end of the month to pay the bills.</p> <p>She knows it all, but she has to go by the official numbers, lest the US government looks like a bunch of manipulative inglourious lying bastards. So this afternoon she once again went off into that staple most boring and elaborate speech this side of your least favorite librarian. It’s a routine job for Janet.</p> <p>But imagine, or maybe you don’t have to because you actively experience it on a daily basis, that you’re unemployed or you’re working 3 jobs or you’re simply just scraping by and still always falling behind, you got credit card debt, maybe a looming foreclosure. And then Janet Yellen speaks, at Jackson Hole, an event you will certainly never be invited to, but she talks about the policies she and her minions decide on that will greatly influence your life too.</p> <p>How about this fine paragraph courtesy of her spin writers:</p> <blockquote><p><em> … wage developments reflect not only cyclical but also secular trends that have likely affected the evolution of labor’s share of income in recent years. As I noted, real wages have been rising less rapidly than productivity, implying that real unit labor costs have been declining, a pattern suggesting that there is scope for nominal wages to accelerate from their recent pace without creating meaningful inflationary pressure. However, research suggests that the decline in real unit labor costs may partly reflect secular factors that predate the recession, including changing patterns of production and international trade, as well as measurement issues. If so, productivity growth could continue to outpace real wage gains even when the economy is again operating at its potential.</em></p> </blockquote> <p>If you’re an unemployed American, like millions of your fellow country(wo)men, what are you supposed to think about that, or do with it? If you’re busting your behind just to feed your kids, and perhaps provide a decent education for them, so they don’t end up in the streets in some gang or drug operation, what do those words mean?</p> <p>Janet Yellen is not talking to you. But she IS talking about you. Just in a language you don’t understand. And that you’re not supposed to understand. Or she would choose to use different words. Yellen and her fellow ” the ring is mine” chasers won’t invite you to their meetings, and they won’t talk in a language that relates to you. They will, however, make decisions that affect your life, and often to a great extent.</p> <p>What Yellen said in her speech today is that while she’s bound to go by the official numbers, she knows very well those numbers have very little to do with the reality Americans experience in their lives.</p> <p>Which is why she says things like:</p> <blockquote><p><em> More jobs have now been created in the recovery than were lost in the downturn</em></p> </blockquote> <p>And follows up with:</p> <blockquote><p><em>... it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover.</em></p></blockquote> <p>More jobs created than lost, but the job market hasn’t recovered. Go figure. Yellen could tell the BLS to redo their numbers, but instead says “the labor market has yet to fully recover”, which is a polite way of saying it’s a mess out there (always note the choice of words). More Yellen:</p> <blockquote><p><em> I would like to provide some context concerning the role of the labor market in shaping monetary policy over the past several years. During that time, the FOMC has maintained a highly accommodative monetary policy in pursuit of its congressionally mandated goals of maximum employment and stable prices.</em></p> </blockquote> <p>This in nonsense, and she knows it very well. The Fed’s ‘highly accommodative monetary policy’ was never aimed at the job market, and even if it were, it failed so badly, once you count part time and poorly paid and not in the labor force, that it should have been abandoned. Instead, the policy was – always – aimed at keeping banks standing up, zombified as they are, at the cost of the people scrambling for their share of the jobs market, and their children too.</p> <blockquote><p><em> As the recovery progresses, assessments of the degree of remaining slack in the labor market need to become more nuanced because of considerable uncertainty about the level of employment consistent with the Federal Reserve’s dual mandate</em></p> </blockquote> <p>How empty can a speech be? What does this have to do with Americans who only seek to feed their kids? How is this not mere gobbledy gook designed to put the unemployed to sleep while their few remaining future resources are being looted?</p> <blockquote><p><em> As an accounting matter, the drop in the participation rate since 2008 can be attributed to increases in four factors: retirement, disability, school enrollment, and other reasons, including worker discouragement. Of these, greater worker discouragement is most directly the result of a weak labor market, so we could reasonably expect further increases in labor demand to pull a sizable share of discouraged workers back into the workforce.</em></p> <p>&nbsp;</p> <p><em>Indeed, the flattening out of the labor force participation rate since late last year could partly reflect discouraged workers rejoining the labor force in response to the significant improvements that we have seen in labor market conditions. If so, the cyclical shortfall in labor force participation may have diminished.</em></p> </blockquote> <p>I’m going to leave it at this as far as quotes are concerned. I’m bad at never ending empty. And that’s all Yellen has to offer.</p> <p>Janet Yellen was brought up with the idea of economic cycles. The short term ones. She doesn’t look like a huge 70 year Kondratieff cycle afficionado.</p> <p>The scary thing about these people is that they seem to believe in what they say. Which is based on some hodgepodge stew of Keynes and Milton Friedman, not exactly people with proven track records outside of college class rooms.</p> <p>But wouldn’t you know, while Janet did her show and tell, the international financial press is overflowing with experts and analysts who insist Europe’s state is so bad that trillions of euros in not even yet existent taxpayer money must be thrown at whatever the problem is Europe have got.</p> <p>The only counter voice is Germany, but Germany landed a negative GDP number. So the pressure on Draghi continues. From all the people who claim that QE has been such a great success in the US and UK. Which sounds cute as long as you don’t count all the debt added to get to what US and UK seem to be at now. Without adding that debt.</p> <p>London and Washington look good for now, but then so does China, which has launched more debt into the new global stratosphere than anyone else. Will that end well? How about Japan, which has QE’d itself into a trough we will only see the true despair of as we go forward? How good do they make US and UK look? Beyond next week?</p> <p>All these people who sing the praises of QE, and who say Europe should pour in a trillion or two, they live in their rear-view mirrors. Thay want to go back to what once was, and at all costs. But how realistic is that? And moreover, how wise is it? Do we really want to return, even if it were possible, to, let’s say, the situation of 10 years ago?</p> <p>It may be tempting when you look at certain sets of numbers, like GDP growth and housing markets, but once you realize all that was achieved only through a huge accumulation of additional debt, is it still all that attractive? And do we really want to risk adding more debt, before the old piles are paid off or restructured, just to return there?</p> <p>Europe’s problem is the entire western world’s problem: people don’t spend nearly enough to keep the economy growing. And it’s not as if nothing has been done to lure them into more spending. The thing is, you won’t get there by making them borrow. People will spend more only when they have more. But rapidly increasing numbers of them have precious little. And if they don’t spend, you’re not going to get more of the so-called inflation (which is defined as rising prices).</p> <p>It’s a dead end street, the whole thing. There’s only one school left in economics, and it was never a serious field to start with, let alone a science. But the nincompoops who emanate from the various schools and universities end up having an enormous influence on government and central bank policies, all at the cost of you and me. All they have is theories about how things should go, but nothing for when they don’t.</p> <p>Central banks exist to protect banks, and the banking system as a whole, from danger. They pretend that they protect the larger economy, and the people on Main Street, but that’s just a convenient little story. Enhanced by the idea that what is good for banks is also good for you. Which is absolute baloney, but it works like a charm.</p> <p>More often than not, banks’ interests are 180º opposites of Main Street, they certainly demonstrably have been since 2007. But then, how would you ever know? The Fed and Wall Street and Washington and all the media that are supposed to inform you but in reality promote only their propaganda, have got an iron grip on how the picture is painted.</p> <p>So what if the banks themselves are the danger, and not the real economy? Well, then you’re out of luck, because the first thing on the agenda is always to save the banks, no matter what its costs Main Street or the children of Main Street.</p> <p>And that’s why Janet Yellen holds stupid and insulting speeches like the one today. To tell you that she knows, but she just doesn’t care.</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="500" height="333" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/janet-yellen.jpg?1408743286" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/janet-yellen-insult-americans#comments BLS Central Banks China Germany Janet Yellen Japan Main Street Market Conditions Milton Friedman Monetary Policy Reality Recession recovery Unemployment Fri, 22 Aug 2014 21:38:15 +0000 Tyler Durden 493369 at http://www.zerohedge.com Did The Fed's Magic Just Run Out? http://www.zerohedge.com/news/2014-08-22/did-feds-magic-just-run-out <p>Jackson Hole - that magical place where the world's greatest monetary central planners gather once a year to yarn long into the night about how they are printing money, crushing the middle-class, monetizing debt, and ramping asset prices; all in the name of economic progress and saving the world from the c-word... "counterfactual" that is. The last few years, Jackson Hole has also been a guaranteed <em>Buy-The-Rumor and Buy-The-New</em>s moment for the smartest traders in the world... except this time something just changed.<strong>&nbsp;</strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_jhokle.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_jhokle_0.jpg" width="600" height="529" /></a></p> <p>&nbsp;</p> <ul> <li><strong>2014 AUG 22 Yellen, Draghi, &amp; Kuroda Let-Down</strong> - 1992.4 to 1988.4, <strong>-4 <br /></strong></li> <li><strong>2013 AUG 22-23 No Bernanke Speech, Yellen Dovishness</strong> -&nbsp; 1642.8 to 1663.50, <strong>+21 <br /></strong></li> <li><strong>2012 AUG 31-SEP 1 Bernanke QE3 Case</strong> - 1399 to 1413, <strong>+14</strong></li> <li><strong>2011 AUG 26-27 Bernanke Moar</strong>&nbsp; - 1159 to 1210, <strong>+51</strong></li> <li><strong>2010 AUG 27 Bernanke QE2 unveiled</strong> - 1047 to 1064, <strong>+17</strong></li> </ul> <p>*&nbsp; *&nbsp; *</p> <p><strong>Did the Fed's magic just run out?</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="651" height="574" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_jhokle.jpg?1408741830" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/did-feds-magic-just-run-out#comments Fri, 22 Aug 2014 21:13:53 +0000 Tyler Durden 493368 at http://www.zerohedge.com Chinese Fighter Crosses Within 30 Feet Of US P-8, White House Blasts "Provocative Action" http://www.zerohedge.com/news/2014-08-22/chinese-fighter-crosses-within-30-feet-us-p-8-white-house-blasts-provocative-action <p><strong>It appears China is as happy as Russia to show just how little respect it has for the US' superpower 'hegemony' status</strong>. <a href="http://www.zerohedge.com/news/2014-05-25/china-scrambles-fighter-jet-flies-within-50-meters-japanese-airplanes">In May China flew close to Japan's airforce</a>; <a href="http://www.zerohedge.com/news/2014-06-03/pentagon-admits-russian-fighter-flew-within-30-meters-us-spy-plane">in June, Russia flew nose-to-nose with the US</a>; and now <strong>The Pentagon reports a Chinese fighter plane came within 30 feet of a US Navy Poseidon 8 plane</strong>. The 'Top-Gun' move came after several passes across the nose of the P-8 about 220km east of China's Hainan Island. The US has registered "strong concerns" with the Chinese government about "unsafe and unprofessional" conduct and <strong>The White House called the incident a "provocative action."</strong></p> <p>&nbsp;</p> <p>As DPA reports,</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The United States charged Friday that <strong>a Chinese war plane made a "dangerous intercept" of a US Navy aircraft over international waters this week in the South China Sea.</strong></p> <p>&nbsp;</p> <p>The US has registered "strong concerns" with the Chinese government about "unsafe and unprofessional" conduct by its air force that put the safety of the US crew at risk, said Rear Admiral John Kirby, the Pentagon spokesman.</p> <p>&nbsp;</p> <p><strong>The incident happened Tuesday, within 220 kilometres east of China's Hainan Island, Kirby said.</strong></p> <p>&nbsp;</p> <p><strong><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_hainan.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_hainan.jpg" width="320" height="279" /></a><br /></strong></p> <p>&nbsp;</p> <p>The Chinese war plane made several passes around the US Navy's Poseidon 8 plane, <span style="text-decoration: underline;"><strong>coming at one point within 9 metres of the P8's wing.</strong></span></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_hainan1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_hainan1_0.jpg" width="600" height="425" /></a><br /></strong></span></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>The Chinese plane passed the nose of the P8 at a 90-degree angel, showing its belly and most likely its weapons load, Kirby said, and conducted a barrel roll over the top of the P8 at 15 metres.</strong></span> </p> <p>&nbsp;</p> <p><strong>"This kind of behaviour is not only unprofessional. It's unsafe,"</strong> Kirby said. "It undermines efforts to continue developing military to military relations with the Chinese military." Kirby said he was not aware of any radio communications from the Chinese plane before the intercept.</p> <p>&nbsp;</p> <p><strong>"The message we are sending back to China is that it is unacceptable,"</strong> Kirby said.</p> </blockquote> <p>This is not the first time...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>In 2001 a Chinese jet collided with a U.S. Navy surveillance aircraft off Hainan Island, killing the Chinese pilot and forcing the Navy plane to make an emergency landing </strong>on the island. Washington severed military relations with China after that episode.</p> </blockquote> <p>And The White House National Securty Advisor blasted:</p> <ul> <li><strong>*RHODES CALLS CHINA JET INCIDENT PROVOCATIVE ACTION</strong></li> </ul> <p>*&nbsp; *&nbsp; *</p> <p>So if its not the military, what else is backing the USDollar's hegemony?</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="678" height="480" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_hainan1.jpg?1408734322" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/chinese-fighter-crosses-within-30-feet-us-p-8-white-house-blasts-provocative-action#comments China White House Fri, 22 Aug 2014 21:04:03 +0000 Tyler Durden 493367 at http://www.zerohedge.com 5 Things To Ponder: Interesting Stuff http://www.zerohedge.com/news/2014-08-22/5-things-ponder-interesting-stuff <p><em>Submitted by <a href="http://streettalklive.com/index.php/blog.html?id=2356">Lance Roberts of STA Wealth Management</a>,</em></p> <div class="highslide-gallery"> <p>I had to laugh this morning when I read <a href="http://www.crossingwallstreet.com/archives/2014/08/horrifying-bear-market-ends.html">Eddy Elfenbein&#39;s</a> commentary on the recent market correction:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The vicious bear market that rocked Wall Street for a full two weeks has finally come to an end. Measuring from close to close, the S&amp;P 500 plunged for a massive 3.94 loss between July 24 and August 7.&quot;</p> </blockquote> <p>He is correct. As I<a href="http://streettalklive.com/index.php/blog.html?id=2354"> discussed recently</a>, there has been an ever <strong>DECREASING</strong> rate of corrective actions in the markets over the last couple of years as the Federal Reserve has been heavily engaged in accommodative monetary interventions.&nbsp; To wit:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;There is an interesting phenomenon occurring in the financial markets that absolutely, positively, will not last indefinitely &ndash; the &#39;<strong>Giant Shrinking Correction.&#39;</strong> The chart below shows the S&amp;P 500 (weekly closing data) since the beginning of 2009, with all relevant corrections identified in terms of percentage.&quot;</em></p> </blockquote> <p><em><a class="highslide ageent-ru" href="http://streettalklive.com/images/1dailyxchange/2014/SP500-CorrectionSizes-081414.PNG" target="_blank" title="SP500-CorrectionSizes-081414"><img alt="SP500-CorrectionSizes-081414" class="i_want_img5" src="http://streettalklive.com/images/1dailyxchange/2014/SP500-CorrectionSizes-081414.PNG" style="width: 601px; height: 453px;" /></a></em></p> <p>As a reminder, this kind of market action is neither normal or healthy longer term and has only seen near historical major market peaks. Of course, timing is everything.</p> <p>With the current influx of liquidity coming to an end in October, combined with a plan to start to increasing interest rates in 2015, the Fed has clearly begun to signal the end of 5 years of ultra-accommodative policies. The question that remains to be answered is whether or not the economy is actually strong enough to be removed from <em>&quot;life support?&quot;</em></p> <p>This weekend&#39;s <em>&quot;Things To Ponder&quot;</em> is just a smattering of interesting articles cover a wide range of topics that I hope you will find interesting, informative and contemplative.</p> <p><strong>1) The Market Is Richly Valued - Should You Worry?</strong> <a href="http://www.morningstar.com/cover/videocenter.aspx?id=662225">by Jeremy Glaser via Morningstar</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;It&#39;s one thing to say that the market is richly valued relative to historical standards. It&#39;s a completely different thing to say that this means stocks are going to decline over the next one year, three years, or even five years. As I mentioned, in 1996 and in 2002, the S&amp;P 500 was valued at similar levels and went on to have a great run over the next five years<strong> until it ended in a crash.</strong> So even over a time period as long as five years, saying that the market is relatively richly valued relative to history doesn&#39;t tell you much about what stocks are actually going to do in the near term.&quot;</em></p> </blockquote> <p><strong><em>[Note: Time horizons are critically important.]</em></strong></p> <p><strong><em><span style="color: #dc0000;">Read Also:</span> <strong>The Fed Is Screwed</strong> <a href="http://www.minyanville.com/trading-and-investing/fixed-income/articles/federal-reserve-inflation-expectations-treasuries/8/21/2014/id/55672">by Michael Gayed via MinyanVille Pro</a></em></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;This is a humongous problem for the Fed.&nbsp; If the marketplace does not believe inflation is coming, after trillions of dollars in stimulus, then what is it going to take for reflation to finally take hold?&nbsp; The fact that this is happening at the same time the Fed is going to be ending Quantitative Easing is, to put it mildly, somewhat disturbing and suggests that equities may be nearing a moment of truth as bonds scream that things are nowhere near as optimistic as all-time stock market highs would lead you to believe.&quot;</em></p> </blockquote> <p><strong>2) The Shiller P/E Weekend Reading List</strong></p> <p>There was a litany of articles out this past week in particular debating Shiller&#39;s CAPE P/E ratio.&nbsp; I have discussed this issue previously in <a href="http://streettalklive.com/index.php/blog/2-analysis/the-daily-x-change/2266-shiller-s-cape-is-it-really-just-b-s.html">&quot;Is Shiller&#39;s CAPE Just B.S.&quot; </a>and <a href="http://streettalklive.com/index.php/blog/2-analysis/the-daily-x-change/2268-shiller-s-cape-is-there-a-better-measure.html">&quot;Shiller&#39;s CAPE, A Better Method.&quot;</a> <span style="color: #005dab;"><em><strong>(One important note</strong> is that looking back in history, about the time that mainstream analysts start trying to &quot;debunk&quot; the value of valuation, we are closer to historical market peaks than not.)</em></span></p> <p>Below is a reading list of more arguments over Shiller&#39;s CAPE <a href="http://pragcap.com/cape-round-up">by Cullen Roche via Pragmatic Capitalist</a></p> <ul> <li><em><a href="http://www.nytimes.com/2014/08/17/upshot/the-mystery-of-lofty-elevations.html?abt=0002&amp;abg=1" target="_blank">The Mystery of Lofty Stock Market Elevations</a> &ndash; Robert Shiller</em></li> <li><em><a href="http://www.bloombergview.com/articles/2014-08-21/the-stock-market-s-missing-ingredient" target="_blank">The Stock Market&rsquo;s Missing Ingredient</a> &ndash; Barry Ritholtz</em></li> <li><em><a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0CB0QFjAA&amp;url=https%3A%2F%2Fwww.aqr.com%2FPortals%2F1%2FResearchPapers%2FShillerPECommentary_AQRCliffAsness.pdf&amp;ei=dqf2U5OgOrH2igLyhIH4Cw&amp;usg=AFQjCNG4_ExBT8lqvvxqx1XG9CEtORUK1A&amp;sig2=7NrLYwQ_sHCP0BYzabBg3g&amp;bvm=bv.73373277,d.cGE" target="_blank">An Old Friend: The Stock Market&rsquo;s Shiller P/E</a> &ndash; Cliff Asness</em></li> <li><em><a href="http://marginalrevolution.com/marginalrevolution/2014/08/from-the-comments-on-bob-shiller-and-cape.html" target="_blank">on Bob Shiller and CAPE</a> &ndash; Marginal Revolution</em></li> <li><em><a href="http://delong.typepad.com/sdj/2014/08/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16.html" target="_blank">Under What Circumstances Should You Worry That The Stock Market Is &#39;Too High&#39;? </a>- Brad Delong</em></li> <li><em><a href="http://www.kitces.com/blog/shiller-cape-market-valuation-terrible-for-market-timing-but-valuable-for-long-term-retirement-planning/" target="_blank">Shiller CAPE Market Valuation: Terrible For Market Timing, But Valuable For Long-Term Retirement Planning</a> &ndash; Michael Kitces</em></li> <li><em><a href="http://www.philosophicaleconomics.com/2013/12/shiller/" target="_blank">Fixing the Shiller Cape</a> &ndash; Philosophical Economics</em></li> <li><em><a href="http://pragcap.com/more-thoughts-on-the-cape-and-valulations" target="_blank">More Thoughts on the CAPE and Valuations</a> &ndash; Cullen Roche</em></li> </ul> <p><strong>3) Economists Warn Over Loss Of Important Economic Strength</strong> <a href="http://ca.reuters.com/article/businessNews/idCAKBN0GM0WM20140822">by Howard Schneider via Reuters</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The U.S. labor market has become steadily less dynamic since 1990, with workers seemingly locked into particular jobs and a more sluggish process of job creation and destruction in the private sector, according to research to be presented to global central bankers on Friday.</p> <p>&nbsp;</p> <p>The research by two top labor economists portrayed the United States as potentially losing one of its notable economic strengths - the robust flow of workers between jobs, and the churn of employment as companies succeed and fail.&quot;</p> </blockquote> <p><strong><em><span style="color: #dc0000;">Read Also:</span> Median Household Incomes 5 Years After The Great Recession</em></strong><em> <a href="http://www.advisorperspectives.com/dshort/commentaries/Real-Incomes-Five-Years-After-the-Great-Recession.php">by Doug Short via Advisor Perspectives</a></em></p> <p><a class="highslide ageent-ru" href="http://streettalklive.com/images/1dailyxchange/misc/Dshort-082214.PNG" target="_blank" title="Dshort-082214"><img alt="Dshort-082214" class="i_want_img5" src="http://streettalklive.com/images/1dailyxchange/misc/Dshort-082214.PNG" style="width: 599px; height: 364px;" /></a></p> <p><strong>4) Fed Optimism Will Give Way To Economic Meltdown</strong> <a href="http://nypost.com/2014/08/20/fed-optimism-will-give-way-to-total-economic-meltdown/">by John Crudele via New York Post</a><strong> </strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Even if Yellen and Draghi say exactly the opposite, Wall Street &mdash; which is like an industrial-size clothes dryer on the high setting &mdash; will spin whatever words come out of the mouths of the world&rsquo;s two most important bankers into the magical phrase, &#39;Low interest rates will last forever.&#39;</p> <p>&nbsp;</p> <p>Stocks prices will rise. Investors will be delighted. Members of the media won&rsquo;t look very deeply into the matter as they head off for another glorious summer weekend.</p> <p>And because of our inattention, the financial markets will become even more dangerous.&quot;</p> </blockquote> <p><em><strong><span style="color: #dc0000;">Read Also:</span> If QE Is Ending Because Of Success, Here Are Simple Questions</strong> </em><a href="http://www.zerohedge.com/news/2014-08-21/if-qe-ending-because-it-was-so-successful-then-here-are-few-simple-questions">by Guy Haselmann of Scotiabank via ZeroHedge</a></p> <ul> <li><em>&quot;If QE is ending because it was so successful, then why is aggressive forward guidance necessary? </em></li> <li><em>If QE worked so well, then why will Yellen likely need to mention &lsquo;the elevated number of part time workers&rsquo;, &lsquo;under-utilization of labor resources&rsquo; or &lsquo;room for improvement in the labor market&rsquo;? </em></li> <li><em>In regard to its inflation mandate, there is no evidence that QE has had any impact other than causing asset price inflation.</em></li> <li><em>Shouldn&rsquo;t the lack of success at achieving the desired results in the US and Japan have curtailed such hasty Pavlovian responses?&quot;</em></li> </ul> <p><strong>5) Is Oil Price Sending A Message?</strong> <a href="http://www.alhambrapartners.com/2014/08/19/its-not-all-oil-and-gas/">via Jeffrey Snider via Alhambra Partners</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;I think oil prices might actually have overstated the spring &ldquo;forward&rdquo; this year &ndash; perhaps owing more to the geopolitics end of it than optimism about the perpetual and perpetually elusive recovery. In any case, the recent drop in oil prices is potentially indicative of, with these other correlations in mind, not just an end to the spring &ldquo;bounce&rdquo; but something perhaps more destabilizing economically. With WTI now within earshot of the winter low point, there is at least some scale to that idea as we look for further observation for the rest of the third quarter and beyond. Given the <a href="http://www.alhambrapartners.com/2014/08/15/did-the-fed-start-all-this-bond-bearishness/" target="_blank">performance of credit markets</a> as well, there is more than a good deal of pessimism about economic prospects however the <a href="http://www.alhambrapartners.com/2014/08/18/the-jackson-hole-spin/" target="_blank">conclave at Jackson Hole</a> and the pyramid of economists that parrot it stand.&quot;</em></p> </blockquote> <p><strong><em><span style="color: #dc0000;">Read Also:</span> Is The Fed Too Hawkish?</em></strong><a href="http://www.cnbc.com/id/101934670">by Ron Isana via CNBC</a></p> <hr /> <p>Please continue sending all the thoughtful comments and commentary to me&nbsp;<a href="mailto:lance@stawealth.com">via email&nbsp;</a>or on&nbsp;<a href="http://www.twitter.com/lanceroberts">Twitter.</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;One time the police stopped me for speeding, and they said, &lsquo;don&rsquo;t you know the speed limit is 55 miles an hour?&rsquo; I said, &lsquo;Yeah, I know, but I wasn&rsquo;t gonna be out that long&rsquo;&rdquo;. &ndash; Steven Wright</em></p> </blockquote> <p>Have a great weekend.</p> </div> <p>&nbsp;</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="589" height="348" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_5.jpg?1408735122" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/5-things-ponder-interesting-stuff#comments B+ B.S. Bear Market Fail Federal Reserve Japan Market Timing Meltdown Morningstar New York Post Quantitative Easing Recession recovery Reuters Twitter Twitter Fri, 22 Aug 2014 20:35:05 +0000 Tyler Durden 493366 at http://www.zerohedge.com Stocks Stumble On J-Hole But Close Best Week In 4 Months http://www.zerohedge.com/news/2014-08-22/stocks-stumble-j-hole-close-best-week-4-months <p>US equity markets were <strong>led by the stodgy old low-beta Dow this week</strong> - not the high-flying muppetry of the Russell or Nasdaq - as <strong>stocks enjoyed the best week in 4 months</strong> amidst escalation of geopolitical time-bombs in Israel, Iraq, and Ukraine. Dow and Trannies gained 2% by the close as today&#39;s disappointment in Yellen and Draghi took the exuberant shine off an otherwise bottom-left-to-top-right Birinyi ruler-based market. The <strong>USDollar gained 1.1% on the week - its best week since November - closing at one-year highs</strong>. Gold was slapped almost 2% lower (worst week in almost 3 months) as did WTI (back at $1280 and $93.50 respectively). <strong>Copper surged 3.2% on the week </strong>(2nd best week in a year) on China restocking chatter. Treasuries were a mixed bag with <strong>dramatic flattening on the week (30Y +2bps, 5Y +12bps)</strong> to 2009 flat. <strong>Credit markets cratered on the day - ignoring equity&#39;s relative shrug.</strong></p> <p>&nbsp;</p> <p>From Yellen&#39;s speech....</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD6_0.jpg" style="width: 600px; height: 535px;" /></a></p> <p>&nbsp;</p> <p>Stocks on the week led by The Dow...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD5_0.jpg" style="width: 600px; height: 492px;" /></a></p> <p>&nbsp;</p> <p>Today was all about the machines and VWAP...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD7_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>It appears algos were all set for mashing VIX-mode once Draghi spoke but stocks were caught between that algo buying pressure and credit&#39;s massive selling pressure...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD8_0.jpg" style="width: 600px; height: 590px;" /></a></p> <p>&nbsp;</p> <p>Credit was not happy...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD4_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Tresasuries a mixed bag this week with 30Y ending marginally changed on the week...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD1_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p>The USD had a big week...as JPY got mashed back ove 104...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD2_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>&nbsp;</p> <p>Commodities were very active... Copper&#39;s 2nd best week in a year, gold&#39;s worst in 3 months...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140822_EOD3_0.jpg" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</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="954" height="498" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_EOD4.jpg?1408737706" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/stocks-stumble-j-hole-close-best-week-4-months#comments China Copper Equity Markets Iraq Israel NASDAQ Ukraine Fri, 22 Aug 2014 20:04:49 +0000 Tyler Durden 493364 at http://www.zerohedge.com California Droughts: Then And Now http://www.zerohedge.com/news/2014-08-22/california-droughts-then-and-now <p><em>Submitted by <a href="https://www.linkedin.com/today/post/article/20140821215010-1088431-california-droughts-then-and-now?trk=mp-reader-card">Erico Matias Tavares of Sinclair &amp; Co</a>,</em></p> <p><strong><a href="http://www.zerohedge.com/news/2014-08-12/las-vegas-will-go-dry-if-water-levels-drop-7-further-lake-mead-hits-record-lows">The obstinate drought in California is showing no signs of letting up</a>, and is now being compared to the last major drought which took place during 1976 and 1977.</strong></p> <p>Back then, the state was not as well equipped to cope with severe dryness. The sharp decline of surface water supplies coupled with the lack of backup reservoirs and waterways caused a lot of damage to the state’s agriculture, in particular to the livestock industry. <strong>As it turned out, the drought reversed itself completely a year later, and California powered on to become the major agro-industrial player it is today.</strong></p> <p>At the height of the drought, predictions about California’s water future were just as dire as the ones we are hearing today. Here’s an interesting snippet from a U.S. Government Accountability Office report published in October 1977:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“The State water plan shows that dependable water supplies will not provide for State needs through the year 2000, even if certain conditions are met. These conditions include completion of planned federal, State, and local surface and groundwater projects, as well as reclamation and reuse of wastewater. To compensate, more groundwater will have to be extracted than is replaced. Continued, excessive extraction of groundwater can lead to land subsistence, poor water quality, and high energy costs as pumping depths increase.”</p> </blockquote> <p><strong>But actions were undertaken to improve efficiency and significantly boost infrastructure</strong>, and with generally favorable precipitation patterns water supplies have lasted well beyond the year 2000. Yet another example of California’s engineering and ingenuity.</p> <p><span style="text-decoration: underline;"><strong>However, the current drought may get much trickier if we don’t see a sharp reversal in rainfall patterns soon (which is conceivable given the hydro-climatic variability of the southwest).</strong></span></p> <p><strong>Climate models predict that California could become warmer and drier in the future. </strong>So the weather may turn out to be much less cooperative than suggested by recent history. There are 23 million more people now than in the late 1970s and virtually every drop of water is accounted for. And the agricultural industry, the state’s largest consumer of water, is of course much bigger today.</p> <p>The Wild West was conquered by enterprising and optimistic pioneers, and successive water rights officials in California seem to have inherited those qualities in spades. According to a recent study by Theodore Grantham and Joshua Viers, both from the University of California, <span style="text-decoration: underline;"><strong>water right allocations total almost *five times* the state’s mean annual runoff, and account for up to 1000% of natural surface water supplies in the major river basins.</strong></span></p> <p><strong>It seems that there is a conflict brewing</strong> as </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“(…) the state simply does not have accurate knowledge of how much water is being used by most water rights holders. As such, it is nearly impossible to curtail or re-allocate water in an equitable manner among water users and to effectively manage for environmental water needs.”</p> </blockquote> <p>The stakes are very high now and out-of-the-box solutions are needed. <span style="text-decoration: underline;"><strong>Otherwise this time might turn out to be different indeed.</strong></span></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="561" height="438" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140822_drought.jpg?1408729981" /> </div> </div> </div> http://www.zerohedge.com/news/2014-08-22/california-droughts-then-and-now#comments University of California Fri, 22 Aug 2014 19:54:58 +0000 Tyler Durden 493363 at http://www.zerohedge.com Pentagon Demands Russia Remove Convoy "Immediately" As NYT Reports Russians Firing Artillery In Ukraine http://www.zerohedge.com/news/2014-08-22/pentagon-demands-russia-remove-convoy-immediately-nyt-reports-russians-firing-artill <p><strong>The Russian military has moved artillery units manned by Russian personnel inside Ukrainian territory in recent days and is using them to fire at Ukrainian forces,</strong> New York Times reported, citing NATO officials. The Russian move, NYTimes reports, represents a significant escalation of the Kremlin’s involvement in the fighting there and comes as a convoy of Russian trucks with humanitarian provisions has crossed into Ukrainian territory without Kiev’s permission. The US is now getting involved, as WSJ reports,</p> <ul> <li><strong>Pentagon calls on Russia to 'Remove Vehicles Immediately' From Ukraine</strong></li> <li><strong>Kirby says "very concerned" by Russian convoy in Ukraine.</strong></li> </ul> <p>Ukrainian Security Service chief Valentyn Nalyvaichenko said the <strong>move amounted to a "direct invasion,"</strong> and The Pentagon has warned <strong>"failure to [remove its vehicles] will result in further costs and isolation."</strong></p> <ul> <li><strong>NATO SAYS RUSSIAN ARTILLERY SUPPORT BEING USED AGAINST UKRAINE<br />NATO SAYS MULTIPLE REPORTS OF DIRECT RUSSIAN INVOLVEMENT</strong></li> </ul> <p><strong><span style="text-decoration: underline;">Time for some YouTube clips?</span><br /></strong></p> <p>*&nbsp; *&nbsp; *</p> <p><a href="http://www.nytimes.com/2014/08/23/world/europe/russia-moves-artillery-units-into-ukraine-nato-says.html?smid=tw-bna&amp;_r=0">As NYTimes reports,</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The Russian military has moved artillery units manned by Russian personnel inside Ukrainian territory in recent days and is using them to fire at Ukrainian forces</strong>, NATO officials said on Friday.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Since mid-August NATO has received multiple reports of the direct involvement of Russian forces, “including Russian airborne, air defense and special operations forces in Eastern Ukraine,” </strong>said Oana Lungescu, a spokeswoman for NATO.</p> <p>&nbsp;</p> <p>“Russian artillery support — both cross-border and from within Ukraine — is <strong>being employed against the Ukrainian armed forces</strong>,” she added.</p> </blockquote> <p><a href="http://online.wsj.com/articles/russia-accuses-kiev-of-deliberately-halting-humanitarian-aid-convoy-1408697601">And as WSJ reports, The US is not happy...</a></p> <ul> <li><strong>*KIRBY SAYS RUSSIA FACES COSTS, ISOLATION IF CONVOY REMAINS</strong></li> <li><strong>*KIRBY SAYS AID CONVOY SHOULDN'T BE EXCUSE TO CROSS BORDER</strong></li> <li><strong>*KIRBY SAYS RUSSIA CONTINUES TO ADD TROOPS NEAR UKRAINE BORDER</strong></li> <li><strong>*KIRBY SAYS RUSSIAN FORCE NEAR UKRAINE INCREASINGLY READY, ARMED</strong></li> <li><strong>*KIRBY SAYS `A LOT OF EQUIPMENT' HAS BEEN MOVED INTO UKRAINE</strong></li> <li><strong>*GENERAL BREEDLOVE SAYS RUSSIAN CONVOY IN UKRAINE A CAUSE FOR CONCERN</strong></li> </ul> <p>&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The United States is very concerned about the movement of a Russian convoy into Ukraine in violation of its territorial integrity and is calling on Moscow to withdraw its equipment and personnel immediately, the Pentagon said on Friday.</p> <p>&nbsp;</p> <p>"This is a violation of Ukraine's sovereignty and territorial integrity by Russia," Rear Admiral John Kirby, the Pentagon press secretary, told a briefing. "<strong>Russia must remove its vehicles and its personnel from the territory of Ukraine immediately.</strong> <span style="text-decoration: underline;"><strong>Failure to do so will result in additional costs and isolation."</strong></span></p> </blockquote> <p>No, not more "costs" - Germany, which is about to enter full blown recession, is crying uncle already. Just ask the NSA...</p> <p>And the Russian denial...</p> <ul> <li><strong>CHURKIN: NO RUSSIAN MILITARY FORCES IN UKRAINE</strong></li> <li><strong>CHURKIN: NO PROOF OF RUSSIAN ARTILLERY IN UKRAINE</strong></li> </ul> http://www.zerohedge.com/news/2014-08-22/pentagon-demands-russia-remove-convoy-immediately-nyt-reports-russians-firing-artill#comments Germany New York Times Recession Ukraine Fri, 22 Aug 2014 19:32:14 +0000 Tyler Durden 493354 at http://www.zerohedge.com