Iran is not blameless, and continues to provoke Israel through its support for Hamas and Hezbollah and through eliminationist rhetoric. But given the level of provocation from the Israeli and American side, it is astonishing that Iran remains free of nuclear weapons. Yet it is a fact that Iran is not armed with nuclear weapons, and it remains a fact that Iran has not attacked nor occupied any foreign lands since World War 2. Iran is not an expansionistic country. As neocon provocateur Patrick Clawson essentially admitted in advocating for a false flag attack to get America to war, Iran is not likely to attack either the United States or Israel. So when it comes to drawing red lines, we in the West would do well to draw a red line around our behaviour — because right now, we in the West are the ones who are stirring up trouble by threatening to strike first.
Desperate North Korea has exported more than 2 tons to gold hungry China over the past year to earn US $100 million. Even in tough times during the Kim Il-sung and Kim Jong-il regimes, North Korea refused to let go of its precious gold reserves. Chosun media reports that “a mysterious agency known as Room 39, which manages Kim Jong-un's money, and the People's Armed Forces are spearheading exports of gold, said an informed source in China. "They are selling not only gold that was produced since December last year, when Kim Jong-un came to power, but also gold from the country's reserves and bought from its people." This is a sign of the desperation of the North Korean regime and also signals China’s intent to vastly increase the People’s Bank of China’s gold reserves.
A regional war in the Middle East could result, potentially sucking in the United States and Eurasian powers like China, Pakistan and Russia. China and Pakistan have both hinted that they could defend Iran if Iran were attacked — and for good reason, as Iran supplies significant quantities of energy. And with the American government deep in debt to foreign powers like China who are broadly supportive of Iran’s regime, America’s ability to get involved in a war on Israel’s behalf is highly questionable. And even without a war, further hostility and tension between America and her creditors would surely result in an even faster rush toward more bilateral and multilateral agreements to ditch the dollar for trade, something that America will almost certainly seek to avoid. So even with a President in the White House significantly more sympathetic to Netanyahu than Obama, America may find herself constrained by the realities of global economics, and unable to assist Israel. Most discouragingly, such a high risk operation seems to offer very little reward — a successful Israeli strike on Iran is estimated to set back Iran’s program by only one to three years. And such an operation would likely require bombings over many days and in many locations. If Netanyahu wishes to go ahead with such a scheme then that is his prerogative. But if he will not listen to Dagan’s wise counsel, why should the West rush to his aid if his scheme backfires?
Where is the bacon, Mrs. Clinton?
Monopolies contribute to many problems - the record of evidence illustrates the potential inefficiency, waste and price fixing. Yet the greatest trouble with monopolies is what they take away - competition. Competition is a beautiful mechanism; in exercising their purchasing power and demand preferences, individuals run the economy. If we are for competition in goods and services, why should we disclude competition in the money industry? Would competition in the money industry not benefit the consumer in the manner that competition in other industries does? Why should the form and nature of the medium of exchange be monopolised? Shouldn’t the people - as individuals - be able to make up their own mind about the kind of money that they want to use to engage in transactions? Earlier, this year Ben Bernanke and Ron Paul had an exchange on this subject. It is often said in Keynesian circles that Bernanke is too tame a money printer, and that the people need a greater money supply. Well, set the wider society free to determine their own money supply based on the demand for money.
- Australian minister says resources boom is over (Reuters)
- China dismisses reports of lost gold reserves (China Daily) - so China really did lose 80 tons of gold.
- Inconceivable: Former JPM CEO and Chairman William B Harrison Jr come out "In Defense Of Big Banks"
- Qantas Cancels 787 Order After Posting Annual Net Loss (Bloomberg)
- EU Official Says Crisis is Eroding Influence (WSJ)
- Greece Faces New Pressure on Cuts (WSJ)
- Philippines' black market is China's golden connection (Reuters)
- Hollande government responds to criticism (FT)
- LG Display Starts Touch Screens Output Before New IPhone (Bloomberg)
- Greek Crisis Evasion to Fore as Merkel Hosts Hollande in Berlin (Bloomberg)
- Stakes rise as US warned of double-dip (FT)
- Brazil’s Richest Woman Unmasked With $13 Billion Fortune (Bloomberg)
"Personally, I look at the Americans and I see a people who have been very effectively brainwashed, or who simply have given in to the entirely human tendency to shuffle unquestioningly onto the path of least resistance and let themselves go. I see a people who, on a wholesale basis, have consciously or unconsciously decided to trade the idea of America for the false security of a totalitarian state."
And the hard reality is that the vast majority would raise their hands in favor of the current system that has the state deeply involved in pretty much every aspect of the economy and society at large. The level of support for the very same tangled body of state-controlled handouts, regulations and central economic planning now choking the last gasps of life out of the body politic is obvious and overwhelming. The champions of liberty are fighting against a very entrenched and increasingly dangerous public mindset. Today the enemy (of true freedom) is within. In fact, the nation is overrun by them... they dominate in most every community, in most businesses and even in most families.
In today's episode of blast from the past, Bloomberg's Jonathan Weil takes us on a time journey, which presents the Too Big To Fail bank problem from a different perspective: that of the Cocaine Cowboy roaming the streets of Miami in the late 1970s and early 1980s. Just like today's big banks they were untouchable; just like today's banks they were collaborating and existing in perfect symbiosis with the Federal Reserve; just like today the Cocaine Cowboys existed in an untouchable vacuum courtesy of endless bribes to the local law enforcement and judicial officials, and just like today, the TBTF institution du jour isn't "merely an economic problem. It is a great moral failing of our society that poisons our democracy." Back then, Ronald Reagan stepped in just when Miami (whose real estate market had soared in 1979-1981 courtesy of rampant crime and money laundering: hint hint NAR anti money-laundering exemptions) was about to be overrun, forming a task force that in the nick of time restored law and order. Today we are not that lucky, as there is not a single politican willing to risk it all just to eradicate the modern version of a classic scourge: only this time they don't hand out 8 balls; they give away 0% introductory APR cards and 3 Year NINJA Adjustable Rate Mortgages. Both however get you hooked for life: either on drugs or on debt. Will someone step up this time and form a task force to eliminate the second coming of the Cocaine Cowboy? Sadly, we don't think so. At least not until the next great crash happens.
The major European bourses are down as US participants come to their desks, volumes still thin but higher than yesterday’s, and underperformance once again observed in the peripheries, with the IBEX down 2.5% and the FTSE MIB down 1.2%. Last night’s outlook changes on German sovereign debt caused a sell-off in the bund futures, with the effect being compounded as Germany comes to market with a 30-year offering tomorrow. The rating agency moves, as well as softer Euro-zone PMIs and reports that Spain is considering requesting a full international bailout have weighed on the riskier asset classes, taking EUR/USD back below the 1.2100 level. Furthermore, with Greece and a potential Greek exit now back in the news, investor caution is rife as the Troika begin their Greek report of the troubled country today.
European equities are trading in minor positive territory on light volume and a light economic calendar with the exception of the IBEX and the FTSE MIB which are down 0.3% and 0.4% respectively as US participants begin to come to their desks. Headline employment data from the UK was for the most part in-line with expectations, though the jobless claims change for June showed a 6.1K increase compared with the 5.0K expected, with downward revisions to May’s figures. The BoE minutes showed the July increase in APF was not unanimous at 7-2, and a GBP 75bln increase was also discussed, and that should the additional easing measures not work, a further rate cut would be examined. The final comment caused a spike to the upside in the short Sterling strip of 6 ticks, Gilt futures rose to make highs of 121.78, and GBP/USD to slide back below 1.5600, though the pair has since come off its lows and trades back above this level.
Hillary Clinton just made a very memorable statement.
I do not believe that Russia and China are paying any price at all – nothing at all – for standing up on behalf of the Assad regime. The only way that will change is if every nation represented here directly and urgently makes it clear that Russia and China will pay a price
So — exactly what price must Russia and China pay? The real question though, is what Hillary Clinton thinks she can achieve through throwing unveiled threats around and destabilising the fragile global system?
Swiss Minister of Defense speaks up while Merkel joins the Axis of Evil
The question of whether conflict between US and China is inevitable is among the most important for the world as the US-China relationship, as JPMorgan's Michael Cembalest notes, is likely to be one of the most important issues of the 21st century. The inevitability view is sometimes explained by the thesis that countries rarely rise economically without also doing so militarily. The chart below looks at the major economic powers of the world since the year 1 at various intervals. Ignore for the moment some of the abstract issues which this kind of data involves; it’s pretty clear that China’s rise, fall and subsequent rise is something that hasn’t happened a lot over the past 2,000 years, and that the United States is on the front lines of having to adjust to it. Cembalest's recent interview with Henry Kissinger noted the impact of China's troubled relations with the West during the 19th century, which remains on China's political consciousness, and how China might define its interests in different ways than the West would, whether they relate to global energy security, North Korea, global warming, currency management or trade.
Equity markets have traded with moderate volatility so far today as peripheral news concerning Spain and Italy continues to be keenly watched by market participants. Overnight the Italian PM Mario Monti said he does not see any need for a bailout either now or in the future with the Italian and Spanish 10yr yields seen off their highs yesterday, lower by 9.8bps and 7.6bps respectively. On a sector breakdown tobacco stocks saw some slight support after US firm Philip Morris announced a new USD 18bln 3yr share buyback program, however, industrials have lagged as a whole following a profit warning from Swedish firm SKF. In terms of fixed income, the bund has continued yesterday's slide with the Bundesbank coming to market with a July 2022 tap. In initial reaction to the results, bunds saw a 20 tick spike higher, off session lows, following what was perceived to have been a "smooth" auction despite some concerns about the eventual credit worthiness of Germany given the recent bailout of the peripheral nations. Meanwhile, the long end of the EUR curve steepened in early trade as reports from the Danish government who have agreed to change the discount rate that pension funds estimate liabilities being noted. In FX, EUR/USD trades higher into the N.American cross-over with an Asian sovereign name being a touted buyer this morning. In other news the AUD also caught a bid shortly after comments from the German central bank who said that they are considering buying the antipodean currency.
One of breakout standup routines from the late, great George Carlin was his 1972 monologue “Seven Words You Can Never Say on Television.” In the presence of polite company, I shall not repeat them… but rest assured, the routine is still hilarious to this day. I wish I could say the same about the Department of Homeland Security… I wish I could say this is all a big joke… that the government’s “377 words you can never use online” is just some stupid comedy routine. But it’s not. And you just can’t make this stuff. After vigorous resistance, the Department of Homeland Security was finally forced into releasing it’s 2011 Analyst’s Desktop Binder. It’s a manual of sorts, teaching all the storm troopers who monitor our Internet activity all day which key words to look for.