Steve Bull's Blog, page 1288
October 12, 2017
Trump’s Scary Nuclear Doctrine
Pleasing Israeli Prime Minister Netanyahu and terrifying almost everybody else, President Trump is threatening nuclear war against North Korea and, by implication, war with Iran, as ex-British diplomat Alastair Crooke explains.
There are acres of print analyzing “will he, or won’t he” in respect to President Trump taking military action in North Korea. And equally, volumes on what Trump may intend to do in respect of Iran: Is he engaged primarily in rhetorical “theatre” to please his base, and earn press plaudits; or is he girding up for attrition (hot or cold) against Iran?
Illustration by Chesley Bonestell of nuclear bombs detonating over New York City, entitled “Hiroshima U.S.A.” Colliers, Aug. 5, 1950.
The unanswered question is: does President Trump regard North Korea and Iran as somehow connected (albeit that Iran has no nuclear weapons, and no nuclear weapons program)? Certainly one person – one who talks to the Trump family a lot – does think the two are directly linked.
Jeffrey Sachs, who listened to Trump’s speech at the United Nations, in which the President said he was ready to “totally destroy” North Korea, tells us about the audience reaction: “Well, you could hear shuffling, chuckles, amazement, gasps, a few applause. There was Netanyahu enthusiastically applauding. It was a very odd scene. I am still a bit shaken by it.”
Of course, for Israeli Prime Minister Benjamin Netanyahu and some neoconservatives, a U.S. attack on the Korean nuclear program sets a wonderful precedent for Iran – for now or for the future.
We just do not know. Trump’s former career as a reality TV host has left him with a predilection for teasing and hype (“just tune in again next week, to learn more”). What is increasingly plain is that those on the inside – such as the Chair of the Senate Foreign Affairs Committee – are equally unsure whether President Trump is about to unleash “World War III” – or not.
…click on the above link to read the rest of the article…
Only China Can Restore Stability in The Global Economy
Fan Ho East meets west 1963
For those of you who don’t know Andy Xie, he’s an MIT-educated former IMF economist and was once Morgan Stanley’s chief Asia-Pacific economist. Xie is known for a bearish view of China, and not Beijing’s favorite person. He’s now an ‘independent’ economist based in Shanghai. He gained respect for multiple bubble predictions, including the 1997 Asian crisis and the 2008 US subprime crisis.
Andy Xie posted an article in the South China Morning Post a few days ago that warrants attention. Quite a lot of it, actually. In it, he mentions some pretty stunning numbers and predictions. Perhaps most significant are:
“only China can restore stability in the global economy”
and
“The festering political tension [in the West] could boil over. Radical politicians aiming for class struggle may rise to the top. The US midterm elections in 2018 and presidential election in 2020 are the events that could upend the applecart.”
Here are some highlights.
The bubble economy is set to burst, and US elections may well be the trigger
Central banks continue to focus on consumption inflation, not asset inflation, in their decisions. Their attitude has supported one bubble after another. These bubbles have led to rising inequality and made mass consumer inflation less likely. Since the 2008 financial crisis, asset inflation has fully recovered, and then some.
The US household net worth is 34% above the peak in 2007, versus 30% for nominal GDP. China’s property value may have surpassed the total in the rest of the world combined. The world is stuck in a vicious cycle of asset bubbles, low consumer inflation, stagnant productivity and low wage growth.
…click on the above link to read the rest of the article…
NorCal Wildfires Death Toll Climbs To 23 As “Destructive” Winds Fan Flames
After slackening earlier in the week, the dry, nearly hurricane-force winds that have been fanning the flames in Northern California picked up again overnight, revitalizing what some are already describing as the most devastating wildfires in the state’s modern history.
As of Thursday morning, 23 people have been confirmed dead in Sonoma, Napa, Mendocino and Yuba counties. Another 200 are missing. Fires have swallowed more than 3,500 homes and businesses over more than 170,000 acres. And the state’s emergency shelters are rapidly approaching their limits as more than 25,000 people have fled with more than 4,000 staying in the shelters, according to the Washington Post.
The death toll is expected to rise significantly as officers reenter the “hot zones” that were totally destroyed by the fires.
“We can’t even get into most of the areas,” Sonoma County Sheriff Robert Giordano said. “When we start doing searches, I expect that number to go up.”
Though the official cause of the fires has yet to be determined, California utility PG&E has acknowledged that the extreme winds late Sunday and early Monday had knocked trees into power lines, potentially causing dry foliage and grass to ignite.
Destroyed residential neighborhood in Santa Rosa.
“The historic wind event that swept across PG&E’s service area late Sunday and early Monday packed hurricane-strength winds in excess of 75 mph in some cases,” said Ari Vanrenen, a PG&E spokeswoman, in a statement released after the San Jose Mercury News first revealed a possible link between the wildfires and downed power lines.
“These destructive winds, along with millions of trees weakened by years of drought and recent renewed vegetation growth from winter storms, all contributed to some trees, branches and debris impacting our electric lines across the North Bay,” she said.
…click on the above link to read the rest of the article…
Schäuble Warns of Coming Economic Crisis
In his farewell interview for the Financial Times, Federal Minister of Finance Wolfgang Schäuble warned of a new global financial crisis predicated upon the Quantity of Money theory that the central banks had pumped trillions of dollars into the financial system that is creating a risk of “new bubbles”. Indeed, many just do not comprehend what is going on and are blaming the new highs in share markets on concerns about the increased risks from the accumulation of more and more liquidity and the growth of public and private debt.
The IMF CEO Christine Lagarde has also gone on record warning of a new debt crisis. The Bank for International Settlements (BIS) has also joined the crowd who see the Quantitative Easing as increasing the risk of asset bubbles. Schäuble has made it clear that he sees the risk is greater in the Eurozone because of the excessive amount of bad loans held by banks.
This is the view that has driven Schäuble calling for the continuation of austerity policy in southern Europe. Schäuble is to be elected president of the new Bundestag at the end of October. The problem with austerity is that this has been directed at the people – not government. The QE policies have brought in government debt, so the added liquidity has FAILED to stimulate the economy and capital has been driven into assets by negative interest rates. Austerity will only further punish the private sector while the public sector continues to spend and then raises taxes maintaining deflation and the negative interest rates rob people of any income from their savings.
If You Give the State an Inch, It Will Take a Mile
If You Give the State an Inch, It Will Take a Mile
There’s No Such Thing as Neutral Intervention
Humans are imperfect beings. Try as we may, each of us is subject to some degree of inconsistency in our own thought patterns. Even the greatest champions of liberty who have made invaluable contributions to the study of classical liberalism have fallen prey to error. And while these heroes and geniuses may come to an inconsistent conclusion every now and then, our admiration continues.
Hayek wasn’t infallible. And in chapter three of The Road to Serfdom, he makes some arguments in favor of “harmless” market intervention that call for scrutiny.
No Such Thing as Harmless Regulation
As I made my way through chapter three, I did a doubletake after coming across this passage:
To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements is fully compatible with the preservation of competition.”
In this chapter, Hayek regularly uses the word “competition” to mean free market. He also asserts that “planning” is, in and of itself, the enemy of competition. Hayek argues that not all state action qualifies as “planning” and as an encroachment on “competition.”
Hayek reasons that since these types of regulation do not interfere with the means of production themselves, it is fully compatible with free market capitalism. He has also argued that since these are “blanket” regulations—no one can use these substances— and not individual regulations—only this group can’t use them—they do not inhibit the market’s ability to function freely. In Hayek’s mind, for example, the state limiting the number of widgets you can produce is far more intrusive than outlawing certain harmful substances.
…click on the above link to read the rest of the article…
The European Union Is Doomed to Fail
The European Union Is Doomed to Fail
How on earth can the European Union unite that which history forced asunder?
Have you ever heard of Deutsch Jahrndorf? No? I don’t blame you. The tiny Austrian village, which is situated four miles from the Danube, is utterly unremarkable, except for the fact that it sits on the border of three countries. To the east is Slovakia. To the south lies Hungary. As such, within shouting distance of one another, live three peoples speaking completely unintelligible languages. Austria belongs to the West Germanic language group, Hungary to Finno-Ugric and Slovakia to West Slavic.
I thought about the exquisitely rich tapestry of European languages, cultures, customs, and nationalities as I watched the sad spectacle of Spanish riot police and Catalan separatists confronting one another on the streets of Barcelona. How on earth can the European Union unite that which history forced asunder?
The Folly of the EU
The European Union, French President Emmanuel Macron has recently declared to almost universal acclaim, needs more unity, including the creation of “a eurozone budget managed by a eurozone parliament and a eurozone finance minister”.
Therein lies the conundrum of European unification.
The need for the centralization of power in Brussels is, apparently, the lesson that the EU establishment has learned from the outcome of the British referendum on EU membership. Meanwhile, in Catalonia, millions of people have set their sights on independence from Spain. Foremost among their complaints is that the Catalan budget is influenced by Madrid.
Independence, the Catalans feel, will rectify a grave injustice occasioned by the French capture of Barcelona in 1714. The conqueror, Duke of Anjou, became the first Bourbon king of Spain under the name of Philip V. His descendant, Philip VI, is on the throne today. In Europe, ancient lineages last as long as ancient resentments.
…click on the above link to read the rest of the article…
October 11, 2017
Threat Of Devastating ‘Supervolcano’ Eruption At Yellowstone Is Greater Than Previously Thought
Scientists from the US Geological Survey who breezily informed the public that there’s “nothing to worry about” with regards to the Yellowstone caldera, a supervolcano that should it erupt could cause potentially hundreds of thousands of deaths, should be eating their words.
Since about mid-July, the earth beneath the volcano has been shifting in a sign that magma could be rushing into the caldera’s main chamber. Since then, there have been roughly 2,500 small-scale earthquakesrecorded near the volcano, the largest stretch on record. Previous estimates had assumed that the process that led to the eruption took millenniums to occur.
The same estimates that USGS based their warning on.
As the New York Times explains, the Yellowstone caldera is a behemoth far more powerful than your average volcano. It has the ability to expel more than 1,000 cubic kilometers of rock and ash at once, 2,500 times more material than erupted from Mount St. Helens in 1980, which killed 57 people. That could blanket most of the United States in a thick layer of ash and even plunge the Earth into a volcanic winter.
As the Times points out, scientists expect a supervolcano eruption to scar the planet once every 100,000 years.
To reach their conclusion, the team of scientists spent weeks at Yellowstone’s Lava Creek Tuff – a fossilized ash deposit from the volcano’s last supereruption, where they gathered samples and analyzed the volcanic leftovers. The analysis allowed the scientists to pin down changes in the lava flow before the last eruption. The crystalline structures of the rocks recorded changes in temperature, pressure and water content beneath the volcano just like tree rings do.
…click on the above link to read the rest of the article…
Catalonia Crisis Far From Over Despite Market Surge
Hopes that Catalonia’s woes could be contained are fading.
On Tuesday night, for the briefest of moments, Catalonia’s government severed its ties with Spain. The region’s president, Carles Puigdemont, declared independence from Spain at around 7.40 p.m., Spanish time. Then, roughly ten seconds later, he put it all on hold, to the visible dismay of many of his fellow travelers.
The markets were pleased, interpreting the suspended declaration of independence as a retreat from the brink. The Spanish stock index IBEX 35 surged 1.5% on Wednesday, and is up 3.4% in five trading days, making up a big part of what it had lost over the prior four trading days. It remains 7% below its year-to-date high at the end of April.
For many other aspiring nation states, the key to independence lay in getting enough votes on the UN security council. But if Catalonia’s bid for self-determination ever made it to the UN, it probably wouldn’t garner enough support from the Security Council, for the simple reason that an independent Catalonia could encourage other separatist regions in the EU to launch similar bids.
So why did Puigdemont change the script at the very last minute? According to the Catalan government’s chief spokesperson, Jordi Turull, he did so in response to pressure from key international mediators that are insisting on dialogue between Barcelona and Madrid. “[They] said that if we did this they would be willing to act,” said Turull, who refused to reveal the identity of said mediators.
The problem is that Madrid has shown absolutely no interest in dialogue, for two main reasons:
…click on the above link to read the rest of the article…
De-dollarization Not Now
USD-denominated debt outside the US hits record – even junk bonds.
China announced today that it would sell $2 billion in government bonds denominated in US dollars. The offering will be China’s largest dollar-bond sale ever. The last time China sold dollar-bonds was in 2004.
Investors around the globe are eager to hand China their US dollars, in exchange for a somewhat higher yield. The 10-year US Treasury yield is currently 2.34%. The 10-year yield on similar Chinese sovereign debt is 3.67%.
Credit downgrade, no problem. In September, Standard & Poor’s downgraded China’s debt (to A+) for the first time in 19 years, on worries that the borrowing binge in China will continue, and that this growing mountain of debt will make it harder for China to handle a financial shock, such as a banking crisis.
Moody’s had already downgraded China in May (to A1) for the first time in 30 years. “The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,” it said.
These downgrades put Standard & Poor’s and Moody’s on the same page with Fitch, which had downgraded China in 2013.
But the Chinese Government doesn’t exactly need dollars. On October 9th, it reported that foreign exchange reserves – including $1.15 trillion in US Treasuries, according the US Treasury Department – rose to $3.11 trillion at the end of September, an 11-month high, as its crackdown on capital flight is bearing fruit (via Trading Economics):
So why does China want these $2 billion in US dollars? For one, they’re still cheap, given the low yield, which is expected to rise as the Fed has started to unwind QE. And two, China might be interested in creating a benchmark for dollar-bond trading in China that could help set prices for Chinese corporate debt denominated in dollars. And there’s a lot of it.
…click on the above link to read the rest of the article…
Number Of Puerto Rico Residents Without Clean Water And Electricity Keeps Rising
A lone car provides the only source of light in the devastated Puerto Rico city of Utuado.
In the wake of Hurricane Maria’s wrath, Puerto Rico remains devastated. Newest reports from the island territory now show that the number of residents without clean drinking water and electricity continues to rise, despite humanitarian efforts.
Puerto Rico’s government has reported that roughly 10 percent of the islands 3.4 million United States citizens are without electricity Tuesday morning, an increase of about six percent from Monday.
The island’s electrical grid was all but completely destroyed during Hurricane Maria, and many are still struggling without the most basic of necessities. This news comes just one day after Puerto Rico’s Governor Ricardo Rossello asked the federal government for an additional $4.6 billion in funding beyond the Trump administration’s request last week for $29 billion from Congress for relief efforts.
“Puerto Rico has experienced a natural disaster of a magnitude not seen in over a century, and we are doing everything possible to address the needs of the American citizens of Puerto Rico during this time of crisis,” Rosselló wrote. “However, the unprecedented level of destruction, coupled with the almost complete shut-down of business in Puerto Rico, have made it impossible for us to meet the considerable human needs without the measures proposed above,” he added.
The White House also announced Monday that it would allow a 10-day waiver temporarily blocking the Jones Act to expire. This is devastating news for those living in Puerto Rico, as foreign ships can no longer bring aid to the hurricane-ravaged island from U.S. ports.
Officials still expect it to be six more months before electricity can be fully restored to Puerto Rico. As the days have become weeks, the weeks will become months, and survival will get more difficult.
…click on the above link to read the rest of the article…
