When one studies history, all events seem to revolve around the applications and degenerations of war. Great feats of human understanding, realization and enlightenment barely register in the mental footnotes of the average person. War is what we remember, idealize and aggrandize, which is why war is the tool most often exploited by oligarchy to distract the masses while it centralizes power. With the exception of a few revolutions, most wars are instigated and controlled by financial elites, manipulating governments on both sides of the game to produce a preconceived result. Every major international crisis for the past century or more has ended with an even greater consolidation of world power into the hands of the few, and this is no accident.
The UAE, Saudi Arabia and Bahrain said on Wednesday they were withdrawing their ambassadors from Qatar after it had not implemented an agreement among Gulf Arab countries not to interfere in each others' internal affairs. The move, unprecedented in the 30-year history of the Gulf Cooperation Council (GCC), follows the Bahrain state minister for information Samira Rajab saying she has evidence of Qatari media provocation against her country. As Gulf News reports, Qatar has been a maverick in the region, backing Islamist groups in Egypt, Syria and elsewhere in the Middle East that are viewed with suspicion or outright hostility by some fellow GCC members. Not a good sign for the oil-generating center of the world.
- High Stakes Limit Bid to Cow Putin (WSJ)
- Russia says can't control Crimea troops ahead of U.S. talks (Reuters)
- Crimea Crisis Haunted by Ghosts of Bungled World War I Diplomacy (BBG)
- Putin’s Ukraine Gambit Hurts Economy as Allies Lose Billions (BBG)
- Germany Says It Provided Equipment and Training to Ukraine's Riot Police (WSJ)
- China signals focus on reforms and leaner, cleaner growth (Reuters)
- China Shares in Hong Kong Decline Amid Default Concern (BBG)
- Beijing Signals New Worry on Growth (WSJ)
Russia’s seizure of Crimea is the most naked example of peacetime aggression that Europe has witnessed since Nazi Germany invaded the Sudetenland in 1938. It may be fashionable to belittle the “lessons of Munich,” when Neville Chamberlain and Édouard Daladier appeased Hitler, deferring to his claims on Czechoslovakia. But if the West acquiesces to Crimea’s annexation – the second time Russian President Vladimir Putin has stolen territory from a sovereign state, following Russia’s seizure of Georgia’s Abkhazia and South Ossetia regions in 2008 – today’s democratic leaders will surely regret their inaction. When Chamberlain returned from Munich, Winston Churchill said, “You were given the choice between war and dishonor. You chose dishonor and you will have war.” Obama and other Western leaders face a similar choice. And if they choose dishonor, one can be certain that an undeterred Putin will eventually give them more war.
The Big Picture: The U.S. and NATO Have Been Trying to Encircle Russia Militarily Since 1991
As the big questions surrounding the future of the Ukraine crisis persist, the countries neighboring the former communist nation, and especially the Baltic states which are members of NATO, are asking for safeguards should Russian ambitions end up just a little too big to be contained solely by the Ukraine. As a result, the WSJ reports, they are considering calling for a greater North Atlantic Treaty Organization presence in their countries “if the situation gets worse” in the Ukraine, Ojars Kalnins, the chairman of the foreign-affairs committee of the Latvian parliament, said Monday. Mr. Kalnins said that a worsening of the Ukraine crisis “such as an outright invasion” of areas outside Crimea would present a threat to all of Russia’s neighbors, including the Baltic states–which are members of NATO. Such an expanded conflict should be reason for NATO to “bring extra military support to the Baltic region as a safeguard.”
Why is the periphery crumbling? It's simple: the conditions that enabled rising national surpluses and the distribution of spoils is breaking down for three reasons:
- Energy is no longer cheap (compared to past prices)
- The low-hanging fruit of higher productivity has all been plucked
- The free-money flood of cheap, limitless credit is drying up
As regimes find surplus and credit are both contracting, their ability to placate every key group with spoils is also declining, and the conflicts between them can no longer be patched over with bribery or brutality. Instability starts on the periphery and moves into the core.
President Of China's Marine Institute For Security: "Glory Drenched In Blood Will Pave China’s Road To Revitalization"Submitted by Tyler Durden on 02/27/2014 22:02 -0500
"In 2013, China embarks on a new road after the conclusion of the Third Plenum of the 18th National Congress of the Chinese Communist Party. On December 26, China solemnly commemorated the 120th anniversary of the birth of Mao Zedong. On this same day, Japanese Prime Minister Shinzo Abe provoked China by visiting the Yaksukuni Shrine in Tokyo. In response, the Chinese Foreign Ministry spokesman quoted Mao Zedong’s “On Protracted War,” and implied that the final victory will belong to China. The new China is born in blood and fire, and is not only unafraid of war, but also courageous in welcoming reasonable and lawful conflict, because defending the country from aggression serves to further boost the development of the state’s power. The Chinese nation loves peace, but there is little doubt that glory drenched in blood will pave China’s road to revitalization. This is the glory that generations to come will treasure. Sound the alarms for war preparation, remold our firm convictions, wake up the fearless people, and revive our strategic industries—our country is moving forward and our future is bright!" - President Of China's Marine Institute For Security And Cooperation
For the second night in a row, China, and specifically its currency rate which saw the Yuan weaken once more, preoccupied investors - and certainly those who had bet on endless strenghtening of the Chinese currency - however this time it appeared more "priced in, and after trading as low as 2000, the SHCOMP managed to close modestly green, which however is more than can be said about the Nikkei which ended the session down 0.5%. Still, the USDJPY was firmly supported by the 102.00 "fundamental" fair value barrier and as a result equity futures, which had to reallign from tracking the AUDUSD to the old faithful Yen carry, have been propped up once more and are set to open at all time highs. If equities fail to breach the record barrier for the third time in a row and a selloff ensues after the open in deja vu trading, it will be time to watch out below if only purely for technical reasons.
There was a time when Vietnam was America's staunchest proxy war foe. This is not those times which explains why yesterday the president signed a landmark, controversial and not to mention hypocritical deal with Vietnam in which allows the U.S. to sell nuclear fuel and technology to its former foe, which will then be allowed to further enrich it. Why (because there is always a reason when the US does something so unexpected, and especially when nuclear power is involved)? Simple: as the Hill explains, the US "aims to help guarantee Vietnams' energy independence as China asserts a more prominent role in the region." Of course, the last time the US sought to prevent Vietnam's affiliation with a foreign superpower, the results were quite disastrous. One can only hope this time it's different.
All eyes were on China overnight, where first the PBOC drained a quite substantial CNY 100 billion in liquidity via 14 day repos in the month following the biggest credit injection on record, pushing those worried about China's credit schizophrenia to the edge, and then things got even more bizarre when in an act of clear PBOC intervention, the CNY dropped to the lowest since August 2013 as concerns about the global carry trade's impact on China (as noted here previously) start to reverberate. We will have more to say about China's Yuan intervention, but what should be noted is that the Shanghai Composite has tumbled nearly 10% in the past week, and was down another 2% overnight and is once again just barely above 2000, a level it can't seem to get away from for years (which is fine: recall that the real bubble in China is not the stock but the housing market). Chinese property stocks dropped to 8-month lows as concern continues about bank's withdrawing some liquidity for the asset class.The USDJPY drifted along and after rising to a resistance level of about 102.600 has since slide just shy of its 102.20 support area which means US equity futures are now in the red, and concerns that the S&P 500 may not close at a new record high are start to worry the technicians.
To summarize: in an act of complete disregard for the official diplomatic song and dance, both Israel and the US are now providing military support to Iran, which in turn is providing military support to Syria, which is also getting military support from Russia. And now, just to make things more interesting, the same labyrinth of "military support" is about to be unleashed in the Ukraine, whose western half is just as likely getting arms and military equipment (not to mention funding)from the West under the table, while Russia, whose main Black Sea port is in the Ukraine's Crimean peninsula, is arming the Eastern part of the Ukraine.
What can possibly go wrong?
When the Arab Spring sprung a few years ago, the world's eyes only really cared about one nation. If Saudi Arabia's elite could not keep paying off their poor, an uprising in the world's largest oil supplier could have significant (and catastrophic) consequences for the rest of the world. Of course, between being paid to lose weight (in gold) and raising unemployment insurance, the government has kept trouble at bay. However, things are shifting. As DPA repots, two police were killed after coming under heavy gunfire while trying to arrest several Shiite activists. Of course, this is a one off but notable in its occurrence for the first time since 2011. Saudi Arabia blames Iran of inciting its Shiite citizens to disturb security and stability.
After learning that it snowed in China this winter following the release of the abysmal February Flash HSBC PMI numbers, we found out that there had also been snow in Europe, following misses across virtually all key French, German and composite PMIs with the exception of the German Services PMI which was the sole "beater" out of 6. To wit:
- Eurozone PMI Manufacturing (Feb A) M/M 53.0 vs Exp. 54.0 (Prev. 54.0); Eurozone PMI Services (Feb A) M/M 51.7 vs Exp. 51.9 (Prev. 51.6)
- German Manufacturing PMI (Feb A) M/M 54.7 vs. Exp. 56.3 (Prev. 56.5); German PMI Services (Feb A) M/M 55.4 vs Exp. 53.4 (Prev. 53.1)
- French PMI Manufacturing (Feb P) M/M 48.5 vs. Exp. 49.6 (Prev. 49.3); French PMI Services (Feb P) M/M 46.9 vs. Exp. 49.4 (Prev. 48.9)
Of course, economic data is the last thing that matters in a manipulated market. Instead, all that does matter is what the USDJPY does overnight, and as we forecast yesterday, the USDJPY 102 tractor beam is alive and well and managed to pull equity futures from a -10 drop overnight to nearly unchanged, despite the now traditional pattern of USDJPY selling during the overnight session and buying during the US session.
- Euro-Area Growth Eases Pressure on Draghi for Stimulus (BBG)
- Germany Beats Growth Estimates With France Amid Recovery (BBG)
- Argentina revises ‘bogus’ inflation figures (FT)
- Wells Fargo edges back into subprime as U.S. mortgage market thaws (Reuters)
- China Banks’ Bad Loans Reach Highest Since Financial Crisis (BBG)
- Time Warner Cable Deal to Test Comcast CEO's Washington Clout (WSJ)
- Risky Loans in Europe Banks’ Dark Corners to Be Exposed (BBG) - yeah, right... sure
- Gold Extends Climb Above $1,300 as Investors Boost SPDR Holdings (BBG)
- SEC Takes Steps to Stem Courtroom Defeats (WSJ)