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Talk Cold Turkey

Henri Matisse View of Nôtre Dame 1914

Recep Tayyip Erdogan became Prime Minister of Turkey in 2003. His AKP party had won a major election victory in 2002, but Erdogan was banned from political office until his predecessor Gül annulled the ban. Which he had gotten in 1997 for reciting an old poem to which he had added the lines “The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers….”

The Turkish courts of the time saw this as “an incitement to violence and religious or racial hatred..” and sentenced him to ten months in prison (of which he served four in 1999). The courts saw Erdogan as a threat to the secular Turkish state as defined by Kemal Ataturk, the founder of modern Turkey in the 1920’s. Erdogan is trying to both turn the nation towards Islam and at the same time not appearing to insult Ataturk.

The reality is that many Turks today lean towards a religion-based society, and no longer understand why Ataturk insisted on a secular(ist) state. Which he did after many years of wars and conflicts as a result of religious -and other- struggles. Seeing how Turkey lies in the middle between Christian Europe and the Muslim world, it is not difficult to fathom why the ‘father’ of the country saw secularism as the best if not only option. But that was 90 years ago.

And it doesn’t serve Erdogan’s purposes. If he can appeal to the ‘silent’ religious crowd and gather their support, he has the power. To wit. In 2003, one of his first acts as prime minister was to have Turkey enter George W.’s coalition of the willing to invade Saddam Hussein’s Iraq. As a reward for that, negotiations for Turkey to join the EU started. These are officially still happening, but unofficially they’re dead.

…click on the above link to read the rest of the article…

Oil Prices At Risk Of Economic Downturn

Oil Prices At Risk Of Economic Downturn

Oil

Oil prices have retreated as disrupted supply from Libya has started to come back online, threatening the recent gains in oil prices. But a bigger threat to crude over the second half of 2018 and into 2019 is a slowdown in the global economy.

The International Monetary Fund warned in its latest World Economic Outlook that a series of threats to economic growth are brewing. The Fund maintained its projection for solid global GDP growth of 3.9 percent for both 2018 and 2019 – rather robust figures – but said that “the expansion is becoming less even, and risks to the outlook are mounting.”

“Growth generally remains strong in advanced economies, but it has slowed in many of them, including countries in the euro area, Japan, and the United Kingdom,” the IMF said.

As John Kemp of Reuters points out, these are signs that the U.S. economy is in a late stage of an economic growth cycle, with growth topping out, inflation picking up, rising interest rates and an inversion in the yield curve for U.S. treasuries, which tends to precede recessions.

As has happened in the past, the last phase of an economic expansion has often coincided with a surge in oil prices, which is then followed by both a dip in oil prices and an economic contraction. The recessions following the price spikes in 1973 and 2008 are the most obvious, but not the only examples.

Others take a different tack, arguing that rising oil prices need not be a drag on the economy. “[T]he rise in oil and commodity prices today is leading to a recovery in pricing power for commodity companies and an improvement in terms of trade for commodity-exporting nations, thus providing support to capex in these segments,” Morgan Stanley’s chief economist and global head of economics Chetan Ahya wrote in May.’

…click on the above link to read the rest of the article…

Argentina Blew A Billion Dollars To Rescue The Peso On Friday… And Failed

Even Eva Peron would be crying…

The last 24 hours have not been great for Argentina.

First – despite endless jawboning about The IMF bailout and how it will secure the nation’s future and enable reforms, the currency collapsed to a new record low on Friday…

Second – the central bank decided to step in with their newly minted IMF funds and blew over a billion dollars to buy pesos, managing a very modest bounce (but ARS still closed down 3% on the day)

Third – IMF officials spoke with Argentina’s union leaders, warning of the social impact of the ongoing disruptions.

IMF spokesman Raphael Anspach confirmed Werner and Cardarelli’s participation in the call, which “reiterated the main elements of the IMF support to the government’s economic plans, including the measures aimed at supporting the most vulnerable in Argentine society.”

And union officials told the media that The IMF was not worried about the ongoing collapse:

“They are betting on a virtuous behavior by private investors, with the economy falling in the third and fourth quarters of 2018, but rebounding 1.5% in the first quarter of 2019”

“They were not worried about the flight of capital”

Fourth, and finally, and perhaps worst of all – Argentina is now out of The World Cup

A nation mourns.


Currently Argentina fans crying 😂😂

Greece Economic Crisis Declared Over: It Isn’t

Mainstream media is all aglow over the alleged end of the Greek economic crisis. Mainstream media is wrong.

Can-Kicking Deal

This was another can-kicking announcement according to Eurointelligence.

Here it is. Finally, a deal on debt relief for Greece. It is a fudge of sorts, but a deal that ends the eight-year-long Greek debt crisis – for now. These are the main components of the deal:

  • A €15bn loan disbursement at the end of the programme, of which €3.3bn can be used to buy back IMF loans;
  • A 10-year extension of the EFSF loans, and a ten-year deferral of interest payments and amortization starting from 2033; and
  • A return of profits from Greek bonds (SMP and ANFA) held by Eurozone central banks, a total of €4bn, with semi-annual payments and subject to reform targets.

There is no growth clause, no interest-rate cuts, no major buyback programme. This is not debt relief in the way the IMF defines it, but debt relief of the kicking-the-can-the-road variety.

It also leaves Greece with a significant exposure to IMF loans. Even if Greece were to use the €3.3bn to buy back IMF loans, that still leaves €7.1bn to be repaid by 2024.

The IMF abstained almost entirely from the debate as it is now officially leaving the programme and will only participate in the post-memorandum oversight, writes Kathimerini. Christine Lagarde refused to make any statements about Greece. What this means for the IMF role after the programme ends is yet to be seen.

So this is it, after eight years, three bailout programmes and endless eurogroup meetings. And with debt nearly at 180% of GDP, there is still the potential for things to turn wrong. But for now, everyone seems happy.

…click on the above link to read the rest of the article…

Argentina Peso Plunges To New Record Low

Last night, Argentina got 50 billion pieces of good news, when the IMF agreed to provide the troubled Latin American nation with a $50BN standby loan, the largest even in IMF history. It also got some bad news, when the central bank announced it would remove the 25/USD barrier it had imposed in early May to prevent an escalating currency crisis.

Well, this morning, contrary to expectations that the Argentina Peso would rise on the IMF loan, ARS resumed its selloff, and promptly breached the central bank’s 25/USD barrier, and plunging 2.3% to 25.55 .

The breach of the barrier shows that confused traders are seeking to find the “fair value” of the ARS after almost a month of living with a virtual cap. The move is also surprising as it contrasts with the positive impact from the IMF deal seen in sovereign bonds market, with Argentina’s century bond’s due 2117 dropping modestly by 18bps, to 8.02%

Meanwhile, there is the political blowback to consider: as Bloomberg notes, after the kneejerk reaction and market stabilization at a new level – assuming there is one – traders will start watching the steps govt will make to achieve the new fiscal targets as Argentina is well known for protests, and the latest round of IMF austerity in the form of cuts in jobs and government spending is unlikely to be achieved peacefully.

Meanwhile, as Bloomberg’s Sebastian Boyd writes, “given the pace of inflation, the peso needs to weaken just to maintain the real exchange rate, and arguably it should fall more than that. But today is going to be interesting. It looks as if the market wants to test the bank’s resolve again.”

As we reported yesterday, Argentina will seek a fiscal deficit/GDP of 2.7% this year and 1.3% in 2019; below the previous targets were 3.2% and 2.2%, respectively; the country is expected to balance its budget in 2020.

…click on the above link to read the rest of the article…

Argentina Bailed Out With Biggest Ever Loan In IMF History

Just a few weeks after Argentina became ground zero for the coming Emerging Market crisis, when its currency suddenly collapsed at the end of April amid soaring inflation, exploding capital outflows and a central bank that was far behind the curve (as in “13% of rate hikes in a week” behind)…

… the IMF has officially bailed out the country – again – this time with a $50 billion, 36-month stand-by loan, and coming in about $10 billion more than rumored earlier in the week, it was the largest ever bailout loan in IMF history, meant to help restore investor confidence in a nation that, between its soaring external debt and current account deficit, prompted JPMorgan to suggest that along with Turkey, Argentina is in effect, doomed.

As the JPM chart below shows, the country’s total budget deficit, which includes interest payments on debt, was 6.5% of GDP last year, much of reflecting a debt binge of about $100 billion over the last two and a half years. The primary fiscal deficit in 2017 was 3.9%.

The loan will have a minimum interest rate of 1.96% rising as high as 4.96%.

“We are convinced that we’re on the right path, that we’ve avoided a crisis,” Finance Minister Nicolás Dujovne said at a press conference in Buenos Aires. “This is aimed at building a normal economy.”

Dujovne said that about $15 billion from the credit line would be immediately available to Argentina after the package is approved by the IMF’s board, which is expected on June 20. The rest would be dispersed as needed as Argentina meets its targets.

Shortly after the news the loan was finalized, Dujovne made some additional, more bizarre comments, saying that “the amount we received is 11 times Argentina’s quota, which reflects the international community´s support of Argentina,” almost as if he was proud at just how insolvent his country “suddenly” become.

…click on the above link to read the rest of the article…

Banking System Has Huge Problem – Peter Schiff

Banking System Has Huge Problem – Peter Schiff

Money manager Peter Schiff says even though Deutsche Bank is the most systemically dangerous bank in the world (according to the IMF), that is just the tip of severe global financial problems. Schiff explains, “I think it’s a problem, and it’s not just Deutsche Bank. Deutsche Bank could be the weak link of a chain. If you remember back to when we had the financial crisis (2008). First, you had the sub-prime mortgages blowing up, and everybody was like don’t worry about it. It’s contained. I said it’s not contained, it’s just showing up first in the sub-prime market because these are the weakest mortgages. The entire mortgage market has a problem.  I think the banking system has a huge problem because it’s lived off of the life support of artificially low interest rates. As that is removed, it’s like pulling the plug off of someone who has lived off life support. The irony is you have so many analysts that think higher rates are good for the banks. . . . Low interest rates saved the banks. You can’t have it both ways. It can’t be low interest rates helped the banks, and high interest rates will help the banks. It’s one or the other. I think higher interest rates are going to crush the banks. I think it’s going to destroy the value of their loans and their collateral. It’s going to lead to defaults . . . All those banks that we’re too big to fail in 2008 are much bigger now, and it’s going to be a lot more difficult to bail them out.”

Schiff issues a stark warning, “This is not going to end well, and I don’t think the Fed is going to be able to save us again. If you get it wrong this time, you’re done. You are down for the count. You just can’t hold and hope.

…click on the above link to read the rest of the article…

Turkey Repatriates All Gold From The US In Attempt To Ditch The Dollar

After Venezuela, Germany, Austria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, one month ago Turkey announced that it too has decided to repatriate its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange, according to reports in Turkey’s Yeni Safak. As we reported at the time, it wouldn’t be the first time Turkey has asked the NY Fed to ship the country’s gold back: in recent years, Turkey repatriated 220 tons of gold from abroad, of which 28.7 tons was brought back from the US last year.

And now, according to a report by the Swiss Schweiz am Wochenende, the repatriation is complete with the Turkish central bank withdrawing all of its gold reserves from the U.S. due to the “tense political situation.” However, in a strange twist, instead of moving the physical gold to Istanbul as the Turkish press reported in April, the Swiss newspaper notes that around 19 tons of Turkish gold is now stored at the Basel-based Bank for International Settlements.

It was not immediately clear why Turkey would shift its gold from the NY Fed to the BIS, whose historical “gold rehypothecation” tendencies have been well documented over the years.

According to the latest IMF data, Turkey’s total gold reserves are estimated at 596 tons in May, up 5 tons since April, and worth just under $23 billion, rising 40% over the past year. This makes Ankara the 11th largest gold holder, behind the Netherlands and ahead of India.

…click on the above link to read the rest of the article…

Argentina Seeks IMF Financing Following Yesterday’s Hike in Rates to 40%.

Argentina once again seeks help from the IMF following yesterday’s 40% interest rate hike.

Last year, Argentina was a favorite destination for investors. This year, Argentina is facing yet another currency crisis.

A run on the Peso started last month as investors soured on the country. To combat the run, the Argentine central bank hiked rates to 40%.

“The market has been in total panic mode the last few days,” said Brendan Murphy, head of global and multisector fixed income at BNY Mellon Asset Management North America.

The declines are the latest sign that rising U.S. interest rates and a strengthening dollar are prompting investors to pull money out of some of the world’s riskiest markets, especially those with the largest trade and budget deficits.

Other higher-risk markets like Indonesia and Turkey also have suffered big declines in recent days. Standard & Poor’s Global Ratings on Tuesday cut Turkey’s sovereign-debt rating further into junk, citing the country’s debt, rising inflation and volatile currency. Turkey’s main stock market has fallen 4.7% last week, while its currency has declined 4.4%. Indonesia’s JSX Composite Index slumped 6.6% the week ending April 27—the most of any major index globally, according to FactSet—when foreigners fled the market.

Argentina Calls IMF

Once again, Argentina finds itself in a currency crisis. Reuters reports Argentina president says seeking financing from IMF.

“Just a few minutes ago I spoke with Director Christine Lagarde, and she confirmed we would start working on an agreement today,” Argentina’s President Mauricio Macri said in an address to the nation.

…click on the above link to read the rest of the article…

What Could Dethrone the Dollar as Top Reserve Currency?

What Could Dethrone the Dollar as Top Reserve Currency?

Central banks seem leery about the Chinese yuan.

What will finally pull the rug out from under the dollar’s hegemony? The euro? The Chinese yuan? Cryptocurrencies? The Greek drachma? Whatever it will be, and however fervently the death-of-the-dollar folks might wish for it, it’s not happening at the moment, according to the most recent data.

The IMF just released its report, Currency Composition of Official Foreign Exchange Reserves (COFER) for the fourth quarter 2017. It should be said that the IMF is very economical with what it discloses. The COFER data for the individual countries – the total level of their reserve currencies and what currencies they hold – is “strictly confidential.” But we get to look at the global allocation by currency.

In Q4 2017, total global foreign exchange reserves, including all currencies, rose 6.6% year-over-year, or by $709 billion, to $11.42 trillion, right in the range of the past three years (from $10.7 trillion in Q4 2016 to $11.8 trillion in Q3, 2014). For reporting purposes, the IMF converts all currency balances into dollars.

Dollar-denominated assets among foreign exchange reserves rose 14% year-over-year in Q4 to $6.28 trillion, and are up 42% from Q4 2014. There is no indication that global central banks have lost interest in the dollar; on the contrary:

Over the decades, there have been some efforts to topple the dollar’s hegemony as a global reserve currency, which it has maintained since World War II. The creation of the euro was the most successful such effort. Back in the day, the euro was supposed to reach “parity” with the dollar on the hegemony scale. And it edged up for a while until the euro debt crisis derailed those dreams.

And now there’s the ballyhooed Chinese yuan. Effective October 1, 2016, the IMF added it to its currency basket, the Special Drawing Rights (SDR). This anointed the yuan as a global reserve currency.

…click on the above link to read the rest of the article…

Central Bank Money Rules the World

Central Bank Money Rules the World

Central bank credit that supports markets — is not just creation of the Fed, but by central banks and institutions around the world colluding together. Global markets are too deeply connected these days to consider the Fed in isolation.

Since last month’s correction, the world has been watching the Fed because its policies have global implications. And worldwide sell-offs sent a clear sign to Fed Chair Powell to relax with the rate hikes.

When fears arise that central bank QE will recede on one side of the world, we see more volatility and rumors of hawkishness. To counter those fears, there will be a move toward dovish policy on the other side of the world.

Central banks operate in collusion. When the Fed signals it is raising rates, or markets over-react negatively to the threat, another central bank steps in. By colluding, other central banks offer even more dark money-QE to keep the party going.

The net result is a propensity toward the status quo in global monetary policy: a bullish, asset bubble-inflating bias in the stock markets and caution in the bond markets.

Here’s what’s going on with some of the most powerful central bankers right now, starting with Japan…

While U.S. markets were correcting earlier this month, Japan’s financial benchmark, the Nikkei 225 index fell more than 1,200 points. At the same time, the rumors of Japan’s central bank curbing its dark money-QE programs are just that.

While investors have speculated that the BoJ could be moving towards an exit from dark money policy (despite the BOJ denying this), we know that central banks are too scared of the outcomes.

In an economic pinch, the Bank of Japan (BoJ), will keep dark money flowing.

Confirming my premise, when Japanese Government Bond prices were dipping too fast, the BoJ announced “unlimited” buying of long-term Japanese government bonds. This is simply the continuation of the policy the BoJ already has in place.

…click on the above link to read the rest of the article…

 

 

Then They Came for the Globalists

Then They Came for the Globalists

Photo by Francisco Osorio | CC BY 2.0

Thank God for the corporate media. If it wasn’t for them, and the ADL, I’d have probably never discovered that I’m a Nazi. Apparently, I’ve been one for quite some time … which is weird, as I had no idea. Here I was, naively believing that I’d been writing about global capitalism and the realignment of political power and ideology in the post-Cold War world, when all along I had really just been persecuting the Jews. I didn’t think I was persecuting the Jews. But such is the insidious nature of thoughtcrime. When you’re a Nazi thought criminal (as I apparently am), it doesn’t matter what you think you’re thinking. What matters is what the global capitalist ruling classes tell you you’re thinking, which it turns out is often a lot more complicated and horrible than what you thought you were thinking.

For example, I’ve been thinking and writing about globalism, which most dictionaries define as “a national policy of treating the whole world as a proper sphere for political influence,” or “the development of socioeconomic networks that transcend national boundaries,” or something like that … which was more or less my understanding of the term. Little did I know that these fake “definitions” had been infiltrated into these dictionaries by discord-sowing Strasserist agents to dupe political satirists like myself into unknowingly spreading anti-Semitism as part of Putin’s Master Plan to destroy the United States of America and establish worldwide Nazi domination.

Fortunately, the lexicography experts in the corporate media and the Anti-Defamation League cleared that up for me earlier this month. According to these experts, words like “globalist” and “globalism” don’t really mean anything. They are simply Nazi code words for “the Jews.” There is actually no such thing as “globalism,” or “global capitalism,” or “transnational capitalism,” or “supranational quasi-governmental entities” like the International Monetary Fund, the World Trade Organization, the European Commission, and the European Central Bank … or, OK, sure, there are such entities, but there is no legitimate reason to discuss them, or write about them, or even casually mention them, and anyone who does is definitely a Nazi.

Now, imagine my horror when I took that in, especially given my repeated references to “the corporatocracy,” “global capitalism,” and “the global capitalist ruling classes” in the essays I’ve been publishing recently. I didn’t want to accept it at first, but the more “authoritative sources” I consulted, the more glaringly obvious my thoughtcrimes became.

…click on the above link to read the rest of the article…

 

Consumers In Surprising Places Are Borrowing Like Crazy

Consumers In Surprising Places Are Borrowing Like Crazy

The Money Bubble is inflating at different speeds in different places. But apparently no culture is immune:

Household Debt Sees Quiet Boom Across the Globe

(Wall Street Journal) – A decade after the global financial crisis, household debts are considered by many to be a problem of the past after having come down in the U.S., U.K. and many parts of the euro area.But in some corners of the globe—including Switzerland, Australia, Norway and Canada—large and rising household debt is percolating as an economic problem. Each of those four nations has more household debt—including mortgages, credit cards and car loans—today than the U.S. did at the height of last decade’s housing bubble.

At the top of the heap is Switzerland, where household debt has climbed to 127.5% of gross domestic product, according to data from Oxford Economics and the Bank for International Settlements. The International Monetary Fund has identified a 65% household debt-to-GDP ratio as a warning sign.

In all, 10 economies have debts above that threshold and rising fast, with the others including New Zealand, South Korea, Sweden, Thailand, Hong Kong and Finland.

In Switzerland, Australia, New Zealand and Canada, the household debt-to-GDP ratio has risen between five and 10 percentage points over the past three years, paces comparable to the U.S. in the run-up to the housing bubble. In Norway and South Korea they’re rising even faster.

The IMF says a five percentage-point increase in household debt over a three-year period is associated with a hit to GDP growth of 1.25 percentage points three years down the road. The historical record suggests that large debts lead to a short-term economic boost but long-term struggles, as a greater share of the economy’s resources go to servicing the spending binge associated with high debts. The IMF also finds rising household debts are associated with greater risks of banking crashes and financial crisis.

…click on the above link to read the rest of the article…

Global Growth? Retail Sales Flop in US, UK, Canada, Germany, Australia

Consumers unexpectedly threw in the towel in 5 countries but the central banks and the IMF insist everything is fine.

On February 14, I noted US Retail Sales Dive, Negative Revisions Too. This will impact both 4th quarter and first quarter GDP estimates.

On February 22, Bloomberg reported Canadian Retail Sales Drop Unexpectedly.

“Receipts fell 0.8 percent to C$49.6 billion in the last month of 2017, Statistics Canada reported Thursday. It was the biggest monthly decline since March 2016. Economists were expecting no change during the month.”

On February 16, the Financial Times reported UK retail sales figures disappoint. The results were positive but barely.

“The volume of retail sales grew by 0.1 per cent month-on-month, far below analysts’ expectations of 0.5 per cent growth in January, according to a poll from Thomson Reuters. On the year, sales were up by 1.6 per cent, from 1.4 per cent, far below expectations for a 2.6 per cent rise.”

On January 31, Reuters reported German Retail Sales Unexpectedly Fall in December.

Given the Fed’s outlook and increasing expectations of four rate hikes plus tapering in the US, tapering in the EU, and rate hikes in the UK, such reports must be meaningless.

Also note the IMF made a “Brighter Forecast” for the global economy in January. When has the IMF ever been wrong?

The Irresponsible ECB

Daniel Roland/AFP/Getty Images

The Irresponsible ECB

Ultra-loose monetary policy stopped being appropriate long ago, and is especially inadvisable now, with the global economy – especially the developed world – experiencing an increasingly strong recovery. As recent stock-market turbulence shows, refusal to normalize policy faster is drastically increasing the risks to financial stability.

FRANKFURT – The Dow Jones Industrial Average’s recent “flash crash,” in which it plunged by nearly 1,600 points, revealed just how addicted to expansionary monetary policy financial markets and economic actors have become. Prolonged low interest rates and quantitative easing have created incentives for investors to take inadequately priced risks. The longer those policies are maintained, the bigger the threat to global financial stability.

The fact is that ultra-loose monetary policy stopped being appropriate long ago. The global economy – especially the developed world – has been experiencing an increasingly strong recovery. According to the International Monetary Fund’s latest update of its World Economic Outlook, economic growth will continue in the next few quarters, especially in the United States and the eurozone.

Yet international institutions, including the IMF, fear the sudden market corrections that naturally arise from changes in inflation or interest-rate expectations, and continue to argue that monetary policy must be tightened very slowly. So central banks continue to postpone monetary-policy normalization, with the result that asset prices rise, producing dramatic market distortions that make those very corrections inevitable.

To be sure, the US Federal Reserve has moved away from monetary expansion since late 2013, when it began progressively reducing and ultimately halting bond purchases and shrinking its balance sheet. Since the end of 2015, the benchmark federal funds rate has been raised to 1.5%.

But the Fed’s policy is still far from normal. Considering the advanced stage of the economic cycle, forecasts for nominal growth of more than 4%, and low unemployment – not to mention the risk of overheating – the Fed is behind the curve.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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