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Square Minus Zero

Square Minus Zero

Gustave Courbet The village maidens  1852

I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.

And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.

But it doesn’t, because the people who pretend they’re in those markets hang on central banks’ every word for their meal tickets. These are the same people we once knew as traders and investors, but who today function only as rich socialists sucking the Fed’s teats for ever more mother’s milk.

Our economic systems have been destroyed by our central bankers. Who pretend they’re saving them. And we all eat it up hook line and sinker. Because the rich bankers and their media have no reasons to counter Fed or ECB actions and word plays, and because anyone who’s not a rich banker or investor is kept by the media from understanding those reasons.

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

Global Negative Yielding Debt Hits Record $12.3 Trillion

Global Negative Yielding Debt Hits Record $12.3 Trillion

Somewhere, SocGen’s permabearish strategist Albert Edwards is dancing a jig, as every day that passes bring us every closer to his trademark “Ice Age.”

One week after the universe of negative yielding debt regained its prior high of $11.7 trillion, overnight – thanks to the dovish capitulations by both the ECB and Fed – the notional value of global sovereign debt with a minus yield sign jumped to $12.3 trillion, a new all time high.Source: Bloomberg

The collapse in yields started on Tuesday morning when Mario Draghi said that the central bank might also trim rates and resume its bond-buying should inflation continue to languish well below its 2% target (recently European 5Y5Y forwards hit an all time low but have since rebounded following Draghi’s comments).

The dovish comments sent another jolt through fixed income markets and pushed another $714bn worth of bonds into sub-zero yield territory on Tuesday. The market value of bonds trading at negative yields — once thought to be economic lunacy — to a fresh record of $12.3TN, according to Bloomberg surpassing the last peak in 2016. The average yield of the global bond market is now just 1.76 per cent, down from 2.51 per cent in November last year.

Meanwhile, in another startling observation, Bank of America recently wrote that “highly-anticipated events in recent years (e.g. Shanghai G20, Brexit, Trump) have typically coincided with big unwinds of crowded positions; and “Japanification” rate theme max consensus.” As a result, the collapse in global inflation breakeven levels have taken global govt bond yields (ex. UST) to a new all-time low of 1.2%.

While the majority of core European and Japanese government bonds have been trading with negative yields since 2016, on Tuesday the Austrian, French and Swedish 10-year yields all slumped below zero for the first time. The 10Y German Bund yield stands at -0.32, an all time record low.

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

Putin Warns Attack On Iran Would Be “Catastrophic” As US Navy Deploys To Drone Crash Site

Putin Warns Attack On Iran Would Be “Catastrophic” As US Navy Deploys To Drone Crash Site

Following China’s warning this week that the United States is poised to open “Pandora’s Box” in the Middle East should it escalate military action against Iran, Russia’s President Vladimir Putin has weighed in, on Thursday saying any American military strike would have “catastrophic” consequences.

Putin warned further that US attack “would trigger a surge in violence and a possible refugee exodus,” according to Reuters. During an annual televised question and answer session hosted by the Russian leader, he reiterated Moscow’s position that Tehran is in full compliance with its nuclear commitments under the 2015 JCPOA. He also slammed the US-imposed sanctions now choking the Iranian economy as “groundless”.

“I want to say at once that this would be a catastrophe for the region” — Putin said.

Meanwhile, President Trump has been briefed on Thursday morning’s dramatic escalation of an already tense stand-off in the Strait of Hormuz which involved Iran’s alleged shoot down of a US drone near entrance to Persian Gulf.

Reports say it was US Navy high-altitude drone taken out by an Iranian surface-to-air missile directly over Strait of Hormuz in what the US says was international airspace, but which Iran claimed was over its sovereign airspace. US Central Command (CENTCOM) identified the drone as one of its RQ-4 Global Hawk aircraft, condemning it as an “unprovoked attack”.

“Iranian reports that the aircraft was over Iran are false. This was an unprovoked attack on a U.S. surveillance asset in international airspace,” CENTCOM spokesman Navy Capt. Bill Urban said following the confirmed drone downing.

And now, in a pattern suggesting significant US military build-up will continue in the Persian Gulf following last week’s tanker attack incident, also blamed on Iran, US naval assets have been dispatched to the “drone debris field in international waters” according to a breaking Reuters report.

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

Oil Prices Spike Most In 5 Months As US-Iran Tensions Soar

Oil Prices Spike Most In 5 Months As US-Iran Tensions Soar

WTI and Brent prices spiked overnight on the headlines about a US drone being shot down by Iran, and just legged higher once again following Trump’s tweet warning that “Iran made a very big mistake.”

“Geopolitics is helping oil bulls to make a spectacular come-back after a few days’ of directionless trading,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.

WTI now trades at its highest since May.

Not Enough Proof to Blame Iran for Oil Tanker Attack: Energy Aspects

It IS Different This Time

It IS Different This Time

They’re right. It IS different this time. It’s worse. Much, much worse. What is? Everything. In terms of preparedness for the next recession that is. Debt is higher than ever, be it corporate debt, government debt, central banks balance sheets, available ammunition to deal with a new recession, wealth inequality, the social divisions and political extremes, and now trillion dollar deficits, everything points to a much more fragile system. Oh yes on paper low rates keep it all afloat, but the context is as ugly as it gets.

Here we are, the great collapse unfolding in front of us. With yesterday’s Fed meeting we witnessed a confirmed breakdown in central bank narratives over last the year, an utter capitulation to market realities that are forcing central banks to commence the new easing cycle. No, this is not a temporary little rate cut event they are promising, it’s a new cycle. The Fed yesterday offered a 3 rate cut outlook, precisely what markets had been pricing in. The Fed bowing before market demands. Give us drugs. Yes, whatever you want, you got it.

The response: An overnight collapse in yields to now below 2% on the 10 year, the lowest reading since the US election in 2016.

It was all bullshit:

The glorious growth stories everybody told, the tax cuts that were supposed to bring greatness, all nonsense. Instead we’re now stuck with trillion dollar deficits, collapsing yields, and a renewed TINA effect as money doesn’t know where to go but stocks, chasing whatever they need to chase.

Or, if you don’t want to chase, you can lend money and pay people to borrow from you. It’s all the rage:

Over $12 trillion of negative yielding debt floating about there. Quite the recovery.

But be clear the bond market is screaming recession is coming, none of this is fundamental based:

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

Iran Shoots Down US Drone, Says “Ready For War”

Iran Shoots Down US Drone, Says “Ready For War” 

Tensions between the US and Iran flared on Thursday when the Iranian Revolutionary Guard shot down an American drone that was said to have flown into Iranian airspace (the US claims the drone flew over international territory). The drone was reportedly flying over the Strait of Hormuz – that critical chokepoint for the global oil trade – not far from where two oil tankerswere recently attacked.

drone

“We will defend Iran’s airspace and maritime boundaries with all our might,” Ali Shamkhani, secretary-general for the Supreme National Security Council was quoted as saying by state-run Islamic Students’ News Agency. “It doesn’t matter which country’s aircraft cross our airspace.

IRGC Commander Hossein Salami said shooting down the drone had sent a clear and strong message for the US: Iran’s borders are ‘red lines’ and though Iran doesn’t seek war, Iran is ready for war. The US, meanwhile, denies that the drone crossed into Iran’s airspace, and says it was in international airspace the whole time.

The drone reportedly was shot down over a village called Kuhmobarak in Iran’s Hormozgan province.

Map

The news sent oil prices surging, with Brent up as much as 3%. President Trump has been briefed on the incident and the White House is “monitoring the situation.” The US military has branded the shooting “an unprovoked attack.”

The shooting follows attacks on six tankers in the region, which Iran has denied responsibility for (including the two from last week). On Wednesday, a news agency operated by Iran-backed Houthi rebels in Yemen said that the rebels had hit a power station in Jazan, Saudi Arabia, with a cruise missile, though these reports weren’t independently verified.

Numerous geopolitical experts warned that Thursday’s incident “significantly raises” the prospects for international conflict.

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

Dear Central Bankers: Prepare to be Swept Away in the Next Wave of Populism

Dear Central Bankers: Prepare to be Swept Away in the Next Wave of Populism

The political moment when the “losers” connect their discontent and decline with central bankers is approaching.

The Ruling Elites’ Chattering Classes still haven’t absorbed the key lesson of the 2016 U.S. presidential election: the percentage of the populace that’s becoming wealthier and more financially secure in the bloated, corrupt, self-serving Imperial status quo is declining and the percentage of the populace that’s increasingly insecure and financially precarious is increasing, and candidates that mouth the usual platitudes in support of the bloated, corrupt, self-serving Imperial status quo lose to those who speak of the failing status quo as a travesty of a mockery of a sham, i.e. a “populist” speaking truth to power.

Donald Trump steered clear of the status quo’s favored platitudes and embraced a bit of populist cant, and so to those who understand that the majority of Americans have been abandoned by America’s hubris-soaked, self-serving managerial / ruling elites, his victory was not entirely surprising.

Just as we’ve reached Peak hubris-soaked, self-serving managerial / ruling Elites, we’ve also reached Peak Central Bank Cargo Cult: from now on the majority that’s been abandoned by the managerial / ruling elites will become increasingly aware that the unprecedented asymmetries of wealth and power that have undermined American social and economic life can be traced directly back to the central bank, the Federal Reserve, which has become the all-powerful Cargo Cult of the global economy.

The same awareness of central bankers’ responsibility for soaring wealth-income inequality and the decline of social mobility is spreading in other nations as well.

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

They Are Calling This A “Bloodbath” For The $800 Billion Trucking Industry As U.S. Economic Activity Dramatically Declines

They Are Calling This A “Bloodbath” For The $800 Billion Trucking Industry As U.S. Economic Activity Dramatically Declines

The U.S. trucking industry has not experienced a downturn of this magnitude since the last financial crisis, and this is one of the clearest signs yet that the U.S. economy is steamrolling into a severe economic downturn.  When economic activity is increasing, the trucking industry sees rising demand for their services and freight rates tend to go up.  That is precisely what we witnessed in 2018, and truckers were hoping for more of the same in 2019.  But when economic activity is on the decline, the trucking industry sees decreasing demand for their services and freight rates tend to go down.  Unfortunately, the numbers that the U.S. trucking industry is reporting right now are absolutely abysmal.  Freight rates have now fallen for six months in a row on a year-over-year basis, and according to Business Insider during the month of May loads on the spot market fell “by a chilling 62.6%” compared to last year…

This year has been rocky for the $800 billion trucking industry.

After a raucous 2018, 2019 has seen retailers and manufacturers moving less, according to the Cass Freight Index. Freight rates have dipped year-over-year for six months straight. Loads on the spot market, in which retailers and manufacturers buy trucking capacity as they need it rather than through a contract, have fallen by a chilling 62.6% in May year-over-year.

The spot market is where we see the marginal changes in demand most clearly, and what this is telling us is that we are already in a transportation recession.

Of course that is almost certainly putting it too nicely.  According to one owner-operator, what we are witnessing right now is nothing short of a “bloodbath”

If demand does not start rebounding really soon, we are going to see many more trucking companies go bankrupt.

“The Dollar Is Becoming Toxic” – Russian Intel Chief Slams “Aggressive, Unpredictable” US Behavior

With the latest TIC data showing China following Russia’s lead and reducing its US Treasury exposure (to two-year lows), as it increases its gold reserves (for six straight months), the unipolar US hegemon faces an ugly trend among the ‘rest of the world’ attempting to de-dollarize, as Sergey Naryshkin,  director of the Russian Foreign Intelligence Service, calls the US dollar is an anachronism of the modern world economy.

Countries across the globe, including Russia, China, India, and others, have been working to diversify their foreign reserves away from the greenback.

Kyle Bass Sees Hong Kong Politics ‘Speeding Up’ Pressure on Dollar Peg

And, as RT reports, the head of the Russian intelligence service has now voiced those concerns clearly – that the use of the dollar presents risks and more nations are looking into finding alternative tools for doing business.

“It seems abnormal that the United States, behaving so aggressively and unpredictably, continues to be the holder of the main reserve currency.”

“Due to the objective strengthening of multipolarity, the monopoly position of the dollar in international economic relations becomes anachronistic. Gradually, the dollar is becoming toxic.

And it’s not just talk, as RT notesRussia has taken concrete steps towards de-dollarizing the economy. So far, Moscow has managed to partially phase out the dollar from its exports, signing currency-swap agreements with a number of countries, including China, India, and Iran. Russia has recently proposed using the euro instead of the US dollar in trade with the European Union.

This comes on the heels of Malaysian Prime Minister Dr. Mahathir Mohamad proposing a gold-backed currency as a unit of account for trade between East Asian nations.

Infinite growth on a finite planet, what could possibly go wrong?

Ronni Stoeferle: In Gold We Trust

Ronni Stoeferle: In Gold We Trust

Why we may soon see prices of $1,500-1,600/oz

Fresh from releasing his exhaustive 340-page annual report titled In Gold We Trust, Ronald Stoerferle joins us to summarize his forecast for the yellow metal.

Stoerferle, an author of several books on Austrian economics and head of strategy and portfolio management at Incrementum AG, concludes that gold is poised to move explosively higher. He sees a new bull market beginning for the precious metal — one likely to quickly build momentum as the impending recession arrives and the world’s central banks revert to extreme easing policy measures.

We are all part of huge monetary experiments being conducted around the world. Right now, trust in the U.S. economy and in the Federal Reserve is still pretty high. We’re seeing the mantra of “deficits don’t matter” at the moment. And everybody thinks that the U.S. dollar is “the least dirty shirt”.

But this trust is crumbling. Recession clouds are getting darker and from my point of view there is no doubt that the Federal Reserve and the other major central banks will step in with very, very aggressive measures.This is actually what we’re seeing at the moment, with very sophisticated papers coming out from the Federal Reserve mentioning that negative rates would be quite favorable and have positive effects, along with comments from Donald Trump that the Fed should cut rates by 1% and do more QE. And other representatives are proposing that additional measures such as controlling the yield curve should be considered.

So from my point of view, we will see that the monetary policy u-turn that began in December will continue. That’s why gold has reacted so positively of late. We’re in the central bank zero interest rate trap — and there is no way out. Gold is a good hedge in this kind of environment.

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

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of the ECB’s monetary policy” – so this wasn’t a press conference after an ECB policy meeting or anything, but a speech on history at an ECB Forum – he suddenly threw out a whole bunch of stuff…

How, “in the absence of improvement” of inflation, “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and how “in the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability,” and that “all these options were raised and discussed at our last meeting.”

Whoa! Wait a minute, said the good folks who were part of the ECB’s June meeting. These options were not discussed, they told Reuters on Tuesday.

Draghi had ventured out there on his own – apparently trying to push his colleagues into a corner single-handedly as his last hurrah.

His vision laid out on Tuesday was quite a change from the June 6 post-meeting announcement, which didn’t mention anything about even discussing rate cuts. It said that the ECB expects its policy rates to “remain at their present levels at least through the first half of 2020,” before the ECB would begin to raise them, with the bias still on raising rates, not cutting rates. That was less than two weeks ago, and there had not been another ECB policy meeting since then.

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

Is Protest Good for Democracy? And Does It Work?

Is Protest Good for Democracy? And Does It Work?

When certain conditions are present, huge change is possible. So get out there.

HomelessnessNotACrime.jpg
‘If concerned citizens did not mobilize to demand their rights, the politically powerful would not grant them.’ Photo by Dexter McMillan for The Tyee.

Do protests constitute a danger to the legitimacy and stability of the political system, or do they foster greater democratic responsiveness? And, most importantly, do protests really create long-term political change? 

To answer these questions, you only need to think of some of the greatest achievements of the last century: civil and political rights for people of colour, women, Indigenous peoples, members of the LGBTQ+ community, alongside workers’ rights and students’ rights. 

If concerned citizens did not mobilize to demand their rights, the politically powerful would not grant them. 

The key to fostering a positive link between protest levels and democratic quality is the openness of political institutions to protesters’ demands and the willingness of protesters to engage with those institutions. 

When these conditions are present, protest movements complement or reinforce conventional political participation by offering a measure of direct representation for those who perceive mainstream politics to be unresponsive to citizen concerns. 

When governments ignore protesters or attempt to repress them, protests tend to become radicalized and directed against the political system. 

We are currently witnessing a global uptick in protest activity, with some of the largest protests in world history. The 2011 global protest cycle, which began with the Arab Spring and expanded to include Europe, Latin America and North America, was the largest and most influential since the classic protest cycle of the 1960s. 

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

Trudeau Declared a Climate Crisis, then Backed Trans Mountain Again

Trudeau Declared a Climate Crisis, then Backed Trans Mountain Again

Opponents slam approval of potentially ‘catastrophic’ pipeline expansion.

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Prime Minister Justin Trudeau announces the second approval of the Trans Mountain Pipeline in Ottawa with fellow cabinet ministers. ‘We listened to community concerns and we are acting on community ideas.’ Photo by Sean Kilpatrick, Canadian Press.

A day after declaring a “climate emergency,” the federal government approved for the second time the expansion of the Trans Mountain Pipeline that it now owns. 

In announcing cabinet’s decision, Prime Minister Justin Trudeau said fighting climate change and growing the economy are complementary.

“We need to create wealth today so we can invest in the future,” he said. “This project has the potential to create thousands of solid middle class jobs for Canadians.”

Opponents, including the B.C. government, slammed the decision and justification, saying the project puts the coast at risk, as well as tens of thousands of jobs that depend on a clean environment. 

The existing pipeline from Edmonton, Alberta to Burnaby, British Columbia has capacity to carry 300,000 barrels of oil and petroleum products a day. The $7.4-billion expansion project would triple that.The Tyee is supported by readers like you Join us and grow independent media in Canada

The federal government approved the pipeline expansion in 2016, but a Federal Court of Appeal ruling overturned the approval, finding that the government failed to adequately consult First Nations and that the National Energy Board’s review of the project should have considered tanker traffic and the threat to southern resident killer whales.

A year ago, the federal government spent $4.5 billion to buy the existing Trans Mountain Pipeline and take over the expansion project from Texas company Kinder Morgan.

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

What About Venezuela’s Hacked Power Grid?

What About Venezuela’s Hacked Power Grid?

Russia and the US are engaging in tit-for-tat hacking of each others’ power grid, the New York Times is reporting, in what is really a kind of cyber “cold war” where the hackers from each country’s military and intelligence services load electronic “explosives” in the computer systems of critical infrastructure of the other, that in a crisis or war could be “detonated” to create chaos or bring down electric grids.

The Times article, the publication of which President Trump decried in a tweet as “close to treason,” was disturbing for a number or reasons. One was that sources told the Times the hacking by the US Cyber Command of Russia’s power grid had been conducted without the president’s knowledge, for fear that he might act to prevent it or might disclose it.

In other words, an action — the hostile hacking of another rival country’s essential infrastructure, which the US government has warned other nations would be viewed as an “act of war,” is being taken by the US military, without the President’s or Congress’s knowledge!

That should be enough to send shivers down the spine of any sane person. In fact, the that could lead to a US “military response.”

If the Times is correct in both its articles, the current US hacking of Russia’s power grid is evidence of a US military establishment run amok.

Congress should be outraged and calling for immediate hearings to determine the chain of command that allowed this to happen. Either Trump is lying, and knows all about the hacking, or some high-ranking military officers who acted without his knowledge should be fired the way President Truman fired an insubordinate Gen. Douglas McArthur during the Korean War.

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

The Ugly View of Western Democracy

The Ugly View of Western Democracy

From flimsy false flags in the Gulf to the signing of Assange’s extradition warrant, Craig Murray reviews the abuses of power made  obvious in the past two weeks. 

Standing back a little and surveying the events of the last couple of weeks, gives a bleak view of the current state of Western democracy.

We have seen what appears to be the most unconvincing of false flags in the Gulf. I pointed out why it was improbable Iran would attack these particular ships. Since then we have had American military sources pointing to video evidence of a packed small Iranian boat allegedly removing a limpet mine from the ship the Iranians helped to rescue, which was somehow supposed to prove it was the Iranians who planted the alleged device. We also have had the Japanese owner specifically contradict the American account and say that the ship was hit by flying objects.

The Iranians certainly have a strange method of bomb disposal if they carry it out using unarmoured personnel, with as many as possible crammed into a small boat in immediate contact with the “mine.” It is also hard to understand why the alleged “limpet mines” would be four feet above the waterline.

Limpet mines are placed below the waterline. There are numerous reasons for this. Firstly, holes above the waterline will not sink a ship. Secondly, the weight of the water helps contain the blast against the ship. Thirdly, it is obviously harder to detect both the diver placing the mine and the mine once placed if it is below the water. In fact it would be very difficult for a diver to place a limpet mine four feet above the waterline, even if they wanted to.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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