Things in China are getting downright biblical. First it was the floating animal apocalypse: who can forget the 16,000 floating pigs, followed by a thousand dead ducks, culminating with 5 dead black swans. But nothing quite beats the dramatic impact of the inner river of Wenzhou flowing blood red.
Tomorrow is the 100th anniversary of the start of World War I. Perhaps just as importantly, this weekend is also the 120th anniversary of the first Sino-Japanese war: a war between China's Qing dynasty and Meiji Japan. A war which China lost, and which has been a chip on China's shoulder ever since. As Hong Kong's SCMP reports "China's loss of the first Sino-Japanese war has been attributed to a disorganised navy. Although the northern fleet equalled, some say exceeded, the Meiji navy in terms of firepower, it was annihilated because it lacked coordination among its military units." In the context of constant recent flare ups over various contested East China Sea islands, one can see why the anniversary of the war coupled with a sudden spike in nationalistic ambitions of Japan's PM Abe, would be a sensitive issue to China. However, as we can see below, China no longer has an inferiority complex when it comes to its navy compared to that of Japan.
There never seems to be a day that goes by without someone predicting that China is going to go down the Yangtze and end up some creek without a paddle.
In a surprise announcement, China revealed that in addition to scheduled naval drills to be held near Vietnam (in case there isn't nearly enough tensions between China and the former US war foe) the country's Military of Defense announced that it would expand military drills in the East China Sea, which will re-escalate the already boiling territorial disputes which involve Japan, the Philippines and Vietnam. While the scale of the current drills is bigger than in the past, it’s a coincidence the annual exercises are being held at the same time, Beijing News reported yesterday, citing Zhang Junshe, a researcher at Navy Military Research Institute. The irony that this is happening as China is already conducting a massive live-fire drill off Beibu Bay, also known as Gulf ot Tonkin, will hardly escape readers, although we doubt even China will be so daring as to troll the US with a follow up "false flag" operation that launches a "contained" regional war. In addition to Tonkin, China is also engaging in a drill in the Bohai Strait next to North Korea, and now: the East China Sea, just to make sure Japan and Taiwan are also covered just in case.
When it comes to the rise of Eurasia as the ascendent axis set to oppose US global hegemony, conventional wisdom focuses on the roles of China and Russia. However, the changing geopolitical landscape is certainly far more nuanced than merely the "west" versus the BRICS, and as the following infographic from SCMP shows, China has been quietly working to recreate one of the most legendary trade routes, "the Silk Road", linking Africa to the Middle East (Iraq and Iran) to India, to Indonesia and all culminating in Beijing, while at the same time the reverse leg of the route goes to Kazakhstan, Moscow and ultimately, Germany. The purpose: "to enhance political and economic ties with southeast Asia and beyond."
Better luck next time.
The trend of the end of the dollar hegemony continues to slowly creep through the world's financial systems (no matter how many mainstream media 'king dollar' stories we see). The Swiss National Bank and the People’s Bank of China reached a currency swap agreement this week. While this is not a huge trend changer in the near-term, it demonstrates the continued rising roled of China as the largest economy and to be the next financial capital of the world when Europe and the USA blow themselves apart with defaulting socialism.
It's one thing to implicitly admit that there is a physical gold shortage and as a result nations - such as Germany - are unable to repatriate their physical gold held in the safe and trusted confines 90 feet below the NY Fed, gold which may or may not be there and has likely been leased out exponentially to cover paper shorts by virtually every BIS-overseen central bank (and the BIS paper gold selling team itself of course). It is something totally different to corzine, as in vaporize, 87,000 ounces of physical gold, some 2.7 tons, and blame it on a computer upgrade glitch. Which is precisely what Rand, Afrrica's largest refinery and processor of about a third of the world's gold since 1920, has done after it "discovered" that $113 million in precious metal was missing after "adopting a new computer system."
- Argentine holdout NML says government "choosing" to default (Reuters)
- Crunch time for Gaza truce talks as death toll passes 800 (Reuters)
- Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
- U.S. Accuses Russia of Shelling Eastern Ukraine (BBG)
- France’s Wheat Exports in Question as Rain Spoils Quality (BBG)
- Tapering in action: Lower printer sales hurt Xerox's revenue (Reuters)
- No liquidity? No Problem, there's an ETF for that: Bond ETFs Swelling in Europe as Trading Debt Gets Tougher (BBG)
- Herbalife hires ex-Biden chief to fend off regulators (NYPost)
- GM recalls far from calamity for some dealers who find new customers, business (Reuters)
- Bad weather likely cause of fatal Air Algerie crash: French officials (Reuters)
Following yesterday's disappointing results by Visa, which is the largest DJIA component accounting for 8% of the index and which dropped nearly 3%, while AMZN's 10% tumble has weighed heavily on NASDAQ futures, it has been up to the USDJPY to push US equity futures from dropping further, which it has done admirably so far with the tried and true levitation pump taking place just as Europe opened. One thing to keep in mind: yesterday the CME quietly hiked ES and NQ margins by 6% and 11% respectively. A modest warning shot across the bow of what may be coming down the line?
30 years ago, the great outsourcing wave took millions of US low-skilled jobs and planted them right in the heart of China, which was about to undergo the fastest industrialization-commercialization-financialization experiment in history. $26 trillion in bank assets later, the world's biggest housing bubble, and a teetering financial system that every day depends on Beijing making the correct central-planning decision (of kicking the can one more day, of course) or else the biggest financial collapse in history will take place, all lubricated by years of inflation in everything and most certainly wages, and suddenly outsourding jobs in China is not all that attractive. In fact, it has gotten so bad that China itself is now forced to outsource its own labor to cheaper offshore markets. Such as this one.
Why are so many plagues hitting the United States all of a sudden? Yes, one can always point out bad stuff that is happening somewhere in the country, but right now we are facing a nightmarish combination of crippling drought, devastating wildfires, disastrous viruses, dying crops and superbugs that scientists don’t know how to kill.
While Iraqi crude represents about 4.4% of world production, or around 3.4 mmbd (5th largest in the world); enabling investors to shrug at any fears that ISIS will spread to the South and interrupt this supply (since it will be 'contained'); what many do not comprehend is that in such a tight oil market as we currently have, Goldman warns that as much as 60% of OPEC’s expected capacity growth over the next five years to come from Iraq. Production losses so far have been fairly small, and have only been felt domestically. However, the larger impact of the conflict potentially lies in the medium to long term.
Ten dark suited men entered the premises of FBME bank in Cyprus on Friday afternoon and took it hostage. The men were from the Central Bank of Cyprus (CBC). And they commandeered FBME because an obscure agency within the US government recently issued a report accusing the bank of laundering money. It just so happens that FBME... and Cyprus in general... is where a lot of wealthy Russians hold their vast fortunes. Bear in mind, there has been no proof that any crime was committed.