Having discussed the links between economic growth and energy resource constraints, and with the current geo-political fireworks as much about energy (costs, supply, and demand) as they are human rights, it would appear the following chart may well become the most-important indicator of future tensions...
HSBC's Flash China Manufacturing PMI printed at 48.1 (against a hope-strewn 48.7 bounce expectation). This is the lowest in 8 months and among the lowest prints since Lehman. Even the usually silver-lining-seeing HSBC Chief economist had little positive to add, "weakness is broad-based with domestic demand softening further." Early strength in CNY, stocks, and copper is eroding fast.
People around the world were astounded by Vladimir Putin’s rapid decision to annex Crimea in response to the latter’s referendum to secede from Ukraine and join Russia, which Kiev and the West view as illegal. The decision also drew worldwide criticism and vehement condemnation by the West and Ukraine, and triggered a second wave of economic sanctions from the United States, and soon afterwards Europe. Relations between Russia and the West are at their chilliest since the end of the Cold War. So why has Putin risked Russia’s economic welfare and political space to swallow Crimea, push Ukraine out, and alienate the entire Western world? Is Putin “in another world” as German Chancellor Angela Merkel claimed he is?
Since the early twentieth century, Saudi Arabia has enjoyed a close relationship with the United States. From the development of the Saudi oil fields,to the First Gulf War, this relationship has been an uneasy cooperation—each side received something out of the alliance while nervously watching the other. So recently we have the first open break between the two powers culminating in the Saudi’s refusing a seat on the U.N Security Council due to anger with U.S. Middle Eastern policies. It is foolish for America to offend and promote distrust with another ally in a long list of broken long-standing relationships. These include Poland, United Kingdom, Israel, Egypt, etc. One wonders whether the results of American diplomacy stems from extreme incompetence or is evidence of a much darker agenda.
Following China's unwillingness to vote against Russia at the UN and yesterday's news that China will sue Ukraine for $3bn loan repayment, it seems Russia is returning the favor. Speaking at the Chinese Economic Development Forum, ITAR-TASS reports, the Chief Economist of Russia's largest bank stated that "China's Yuan may become the third reserve currency in the in the future."
"I'm here to fight for my children's future," exclaims one father as Spaniards rallied in Madrid against poverty and EU-imposed austerity. As Reuters reports, the largely peaceful protest later marred by violent clashes in which police fired rubber bullets. The so-called "Dignity Marches" brought hundreds of thousands to the capital with banners making it clear what their feelings about record 26% unemployment were - "Bread, jobs and housing for everyone" and "Corruption and robbery, Spain's trademark." One protester summed up the people's views of the government, "I'm sick of this system they call democracy... I want things to change."
Inspired by Scotland's hopes for independence and hot on the heels of Crime'a 95% preference for accession to Russia, 89% of the citizens of Venice voted for their own sovereign state in a ‘referendum’ on independence from Italy. As The Daily Mail reports, the proposed ‘Repubblica Veneta’ includes the five million inhabitants of the Veneto region and has been largely driven by the wealthy 'who are tired of supporting the poor and crime-ridden south' (Venice pays EUR71bn in taxes and receives only EUR21bn in services and investment). The ballot appointed a committee of ten who immediately declared independence from Italy. Venice may now start withholding taxes from Rome. Wonder why the US, Europe, and Japan have not announced the referendum "illegal" and announced sanctions yet?
Having complained for years of China's electronic espiohange, it is perhaps only fitting that, thanks to documents provided by Edward Snowden, the NY Times reports, the NSA pried its way into the servers in Huawei’s sealed headquarters in Shenzhen (Huawei connects a third of the world’s population). The NSA monitored communications of the company’s top executives in an operation called "ShotGiant" looking for links between Huawei and the People's liberation Army. Furthermore, the NSA documents confirm, “we want to make sure that we know how to exploit these products,” it added, to “gain access to networks of interest” around the world. We await the repurcussions...
Apparently China did not get the memo that the Fed's apologists are furiously scrambling to packpedal on Yellen's "6 month" guidance in virtually all media outlets. The is the only way to explain why Vice Minister of Finance Zhu Guangyao said overnight that "the U.S. Federal Reserve will begin boosting interest rates within six months after exiting “unconventional” monetary policy, and that will have a “significant impact” on the U.S. and world economy, as Market News International reported earlier. Zhu told China Development Forum this weekend “we believe a the Fed meeting this October, the exit of their quantiative easing will complete." In other words while the spin for public and algo consumption is that the Fed will continue placating those long the stock market until everyone's price target on the S&P 500 is hit and everyone can comfortably sell into an ever-present bid, China is already looking for the exits. But while the end of QE appears a given, at least until the market realizes there is no handover to an economy that is a moribund as it has ever been in the past five years, and the Fed has no choice but to untaper and return with an "even more QE" vengeance (it certainly won't be the first time - just recall the "end" of QE1, QE2, Op Twist, etc), a bigger question surrounds whether China, already sliding in credit contraction and suffering a plunging stock market with its housing sector also on the edge of a bubble bust, is about to take over from the Fed and proceed with its own stimulus program. The answer is no.
I think we are now even more strongly in a good-news-is-bad-news (and vice-versa) world. If we start seeing some strong economic data come out over the next few weeks and months, then I think the market - particularly the bond market and emerging markets - could get pretty squirrelly. Not that US stocks would be immune from this. Remember, the modern day Goldilocks environment for stocks has nothing to do with a happy medium between growth and inflation, but everything to do with growth being weak enough to keep an accommodative Fed in play. Strong growth data would augment a Common Knowledge structure that the Fed is on track to raise rates sooner and more rather than later and less, and that's no fun for anyone. Then again, if global growth data remains weak - and you really can't look at what's coming out of China, Europe, or Japan and think that the global growth story is anything but weak - that creates enough uncertainty about the Fed's path (not to mention the cover for political and economic Powers That Be to wage a full-scale media war to keep monetary policy in QE la-la land forever) to support the markets. Sounds a lot like Freedonia to me. Rufus T. Firefly for President?
In the aftermath of what appears a tenuous detente over the Crimea while Putin plans his next step of how to "merge" with east Ukraine as he sets off to rebuild the USSR, Syria just may be set to regain its place at the top of the global geopolitical risk pyramid. Case in point, early this morning, the fragile ceasefire between Syria and Turkey was shatered after a Turkish F- 16 shot down a Syrian plane on Sunday after it crossed into Turkish air space in a border region where Syrian rebels have been battling President Bashar al-Assad's forces.
Ukraine Official Warns "Chance Of War With Russia Growing" As Mike Rogers Calls For Sending Weapons To UkraineSubmitted by Tyler Durden on 03/23/2014 12:44 -0400
Concurrently with out post on what the odds are of a war between the US and Russia over Ukraine, the House Intelligence Committee Chairman Mike Rogers, and war hawk, appeared on TV this morning saying that the United States ought to provide weapons to the Ukrainian army "so it could defend the country from a Russian invasion." This is the same Mike Rogers who last August did everything in his power to perpetuate the lie that Syrians had used chemical weapons against "rebels" (who subsequently turned out to be mostly Qatari-funded Al Qaeda mercenaries and other Islamic extremists) “There are things that we can do that I think we’re not doing. I don’t think the rhetoric (from Obama administration officials) matches the reality on the ground,” he said. And while US neocons are warmongering, Ukraine is all too happy to raise the tension level just a bit more, hoping that NATO will finally intervene and present Putin with at least some hurdle to overrunning all of East Ukraine, using exactly the same template as already show in Crimea: Ukraine’s top diplomat warned Sunday that the chances of war with Russia “are growing” due to the buildup of Moscow’s forces along his country’s eastern border. In an interview with ABC’s “This Week,” acting Ukrainian Foreign Minister Andrii Deshchytsia said Kiev “is ready to respond” should Russia–which has already seized the Crimea–move further in Ukrainian territory.
Vice President Biden was in Warsaw last week to reassure our eastern NATO allies that they have the support of a “steadfast ally.” But if Russia moved against Poland or the Baltic States, would the United States really go to war? Or would we do nothing and effectively destroy the NATO alliance? President Obama has ruled out a “military excursion” in Ukraine. America is not obligated legally to take action against Russia for annexing Crimea. We would not go to war if Russia mounted a large-scale invasion of Ukraine to restore the ousted, pro-Moscow government of Viktor Yanukovych, currently under U.S. sanctions. And we would not even send troops if Ukraine was partitioned, or absorbed by Russia. Americans have no interest in such a conflict, and no stomach for it.