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Why Mark Carney Thinks The Dollar Can No Longer Be The World’s Reserve Currency

Why Mark Carney Thinks The Dollar Can No Longer Be The World’s Reserve Currency

While Jerome Powell’s highly anticipated Jackson Hole speech was, in the words of Brean Capital’s Russ Certo “underwhelming and anti-climatic”, one couldn’t say the same for the shocking luncheon speech by Bank of England’s outgoing governor, Mark Carney, titled “The Growing Challenges for Monetary Policy in the current International Monetary and Financial System“, where he dedicated no less than 23 pages to a stunning – for a central banker – cause: to describe why the dollar’s  “destabilizing” reserve status role in the world economy has to end, and why central banks need to join together to create their own replacement reserve currency, one potentially tied to Facebook’s new “stablecoin” Libra, although in reality any “Synthetic Hegemonic Currency” as Carney defined it would do.

But first, a quick tangent: the reason we say Carney’s speech was shocking is not for what it proposes – after all, we have long argued that a world in which the dollar’s reserve currency status would be stripped away by the establishment and granted to some alternative – whether gold, or a basket of currencies like the IMF’s SDR, or a cryptocurrency like bitcoin – is coming in posts such as:

 The argument behind all these articles is simple and two-fold: i) in a fiat world, one can only devalue relative to some other currency, yet we have now reached a point where (as Pimco suggested two years ago when it said the Fed should buy gold to devalue the dollar against it) every currency needs to devalue relative to some hard index outside of the monetary system…

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

How Negative Interest Rates Screw Up the Economy

How Negative Interest Rates Screw Up the Economy

Now they’re clamoring for this NIRP absurdity in the US. How will this end?

Now there is talk everywhere that the United States too will descend into negative interest rates. And there are people on Wall Street and in the media that are hyping this absurd condition where government bonds and perhaps even corporate bonds, and eventually even junk bonds have negative yields. All of that NIRP absurdity is already the case in Europe and Japan.

There is now about $17 trillion – trillion with a T – in negative yielding debt in the world, government and corporate debt combined.

This started out as a short-term emergency experiment. And now this short-term emergency experiment has become the new normal. And now more short-term emergency experiments need to be added to it, because, you know, the first batches weren’t big enough and haven’t worked, or have stopped working, or more realistically, have screwed things up so badly that nothing works anymore.

So how will this end?

The ECB rumor mill over the past two weeks hyped the possibility of a shock-and-awe stimulus package, on top of the shock-and-awe stimulus packages the ECB has already implemented, namely negative interest rates, liquidity facilities, and QE.

The entire German government bond market, even 30-year bonds have negative yields. And the German economy shrank in the last quarter. That gives Germany two out of the last four quarters where its economy shrank – despite negative interest rates from the ECB and despite the negative yields on its government bonds, and despite the negative yields among many corporate bonds.

In other words, the German economy, the fourth largest in the world, is hitting the skids despite or because of negative yields. And now the ECB wants to flex its muscles to get yields to become even more negative.

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

Iranian Tanker Showdown Heads To Turkey

Iranian Tanker Showdown Heads To Turkey

The Iranian tanker which had been detained for the past five weeks in Gilbraltar has suddenly switched its ship data to show it is headed to a Turkish port, instead of arriving at waters off southern Greece, as previously planned. 

Reuters has cited real-time ship tracking website MarineTraffic to show the change in the Adrian Darya’s (formerly called Grace 1) destination. This after the US State Department threatened that should Greece provide any aid or facilities to the vessel carrying 2.1 million barrels of Iranian oil, it would be tantamount to “material support to terrorism”. 

The Unites States says the tanker is controlled by the Iranian Revolutionary Guards and thus deems any state’s interaction with it support of a formally designated terrorist group. There’s still an active US seizure warrant for the vessel. 

The Adrian Darya (formerly called Grace 1) supertanker’s destination is now southern Turkey. File image.

While the vessel never planned to actually enter a Greek port, listed as the port of Kalamata — especially given the overladen supertanker sits too low in the water — it’s been widely reported that a ship-to-ship transfer of the oil was to occur off its southern coast. 

A US Statement Department statement issued Monday had warned Greece’s help could be considered “providing material support to a US-designated foreign terrorist organization” — this according to a State Department official who spoke to Reuters.

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

US Slams China’s Escalating Oil & Gas ‘Interference’ In Vietnam Recognized Waters

US Slams China’s Escalating Oil & Gas ‘Interference’ In Vietnam Recognized Waters

Late this week, the US State Department accused China of escalating its coercive actions against Vietnam in the South China Sea. 

A spokesman said the US is “deeply concerned” China is continuing its interference with Vietnam’s longstanding oil and gas activities in the Vietnamese Exclusive Economic Zone (EEZ) claim.

“This calls into serious question China’s commitment, including in the ASEAN-China Declaration on the Conduct of Parties in the South China Sea, to the peaceful resolution of maritime disputes,” the statement said

Military officers of the Vietnamese Navy’s Second Regional Command signalling territorial claims. Source: Viet Nam News

This week the National Interest described in detail the worsening situation in a piece aptly titled South China Sea Showdown: China vs. Vietnam (Round 2).

The report described a Chinese survey vessel dispatched inside the Vietnam claimed EEZ accompanied by Chinese Coast Guard military vessels:

The Haiyang Dizhi 8, a survey vessel belonging to a Chinese government-run corporation, began surveying a large swath of seabed on 3 July northeast of Vanguard Bank, which falls within Vietnam’s exclusive economic zone. The ship has been escorted by other vessels, including from the China Coast Guard and maritime militia. At the same time, China Coast Guard ships have been harassing Vietnamese drilling operations to the south.

Western analysts see Beijing’s expansion in regional waters as part of a broader campaign of natural resource exploitation, with the ultimate goal of forcing rival countries into ‘joint exploration’ partnerships, even in undisputed waters. 

According to the report, the current crisis is the most serious tensions have been between China and US ally Vietnam in years

Chinese incursions into Vietnam’s EEZ are by no means a new phenomenon. The most serious recent incident occurred in 2014, when China deployed an oil rig into Vietnam’s EEZ, sparking a diplomatic crisis between the two neighbors. The current situation near Vanguard Bank, however, represents a more serious challenge on several levels.

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

The Ice Age Arrives: Average Sovereign Yield Outside The US Turns Negative For The First Time Ever

The Ice Age Arrives: Average Sovereign Yield Outside The US Turns Negative For The First Time Ever

Last Friday afternoon, when what few traders were not on vacation were planning the venue of their evening alcohol consumption, we showed a remarkable analysis by Bank of America, which found that yields on the $27.8 trillion non-USD global investment grade bond market had declined to just 16bps and that the US share of global investment grade yields has climbed to 94%. But the punchline is that, as we said, “non-USD sovereign yields had dropped to just 2bps, meaning that any day now foreign sovereign debt may have no yield at all on average.”

Fast forward to Monday, when following another surge in global bond prices, Bank of America refreshed its analysis, and foudn that the striking trends noted last week had become even more fascinating, to wit yields on the $27.8tn non-USD global IG fixed income market had declined to just 11bps (down from 16bps just one day earlier)…

… and the US share of global IG yields climbed to 95%…

Negative Yielding Arrives in Europe Credit

… meaning that any foreign investor who is desperate for even the smallest trace of positive yield has no choice but to come to the US, something Kyle Bass echoed earlier on CNBC: “US rates are going to zero because they are the only DM yields with an integer in front of them.”

.@Jkylebass on CNBC: “US rates are going to zero because they are the only DM yields with an integer in front of them”

– btw this echoes Pimco comment from earlier. In a race to negative/ zero what do you own?https://twitter.com/cnbcjou/status/1163698049597759488?s=21 …

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

11 Reasons Why So Many Experts Believe That A U.S. Economic Crisis Is Imminent

11 Reasons Why So Many Experts Believe That A U.S. Economic Crisis Is Imminent

The numbers are telling us that we have never been closer to the next recession than we are right now.  The storm clouds that were gathering on the horizon are now directly above us, and suddenly the mainstream media is filled with storiesabout when the next recession will begin and the effect that this may have on President Trump’s chances of winning in 2020.  In fact, there has been so much chatter about this that even President Trump is talking about it.  All over television, experts are breathlessly speculating about when the coming recession will begin, and they are dispensing lots of advice about how people should be preparing for it.

So what evidence has led so many of these talking heads to come to such a conclusion?

Well, the following are 11 reasons why so many experts now believe that a U.S. economic crisis is imminent…

#1 Last week, the “spread between the U.S. 2-year and 10-year yields” turned negative for the very first time in 12 years.  An inversion of the yield curve has occurred prior to every single U.S. recession since the 1950s, and this is one of the most important economic signals that we have seen yet.

#2 U.S. consumer sentiment just fell to the lowest level that we have seen in all of 2019.

#3 74 percent of the economists surveyed by the National Association for Business Economics believe that a recession will begin in the United States by the end of 2021.

#4 U.S. industrial production just slipped back into contraction territory.

#5 The IHS Markit Manufacturing Purchasing Managers’ Index just fell to the lowest level that we have seen since September 2009.

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

Iran Warns US: Don’t Interfere With Tanker’s Passage, Mulls Naval Escort

Iran Warns US: Don’t Interfere With Tanker’s Passage, Mulls Naval Escort

With the Grace 1 now released after two failed attempts of Washington to bring the Iranian tanker under US custody, since renamed the Adrian Darya and flying the Iranian flag, Tehran officials are still refusing to confirm its ultimate destination where it will offload its 2.1 million barrels of oil.

On Monday Iran’s foreign ministry issued new warnings to the United States not to mount any new attempt to seize the tanker. “If this is done or even stated, it is a threat to free shipping,” a spokesman said. “Through its official channels, and especially the Swiss embassy, Iran has warned U.S. officials not to make the mistake of doing so, as they face bad consequences.”

….and there she goes! After 46 days in Gibraltar Waters sparking an international incident with Iran, the Adrian Darya, formerly the Grace 1, is leaving…

Embedded video

Per a breaking Bloomberg report, Iran issued a formal warning to the US via Switzerland to not interfere with the ship’s passage through international waters. 

Furthermore, Iranian Foreign Minister Javad Zarif said at a press conference in Helsinki while attending diplomatic meetings in Finland that Iran cannot be “very transparent” about the tanker’s destination due to US sanctions

He said the US is trying “bully others from purchasing our oil” but expressed hope the Gibraltar court’s release of the tanker would serve to deescalate tensions, according to Bloomberg

The Adrian Darya’s shipping tracking data shows it intends to head to Kalamata, Greece, with an arrival date of Aug. 25, according to reports, where it’s likely to change crew and get fresh supplies. 

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

America’s Chernobyl, Three Mile Island, Set To Finally Close Its Doors

America’s Chernobyl, Three Mile Island, Set To Finally Close Its Doors

Few people know that sitting across from the reactor that suffered a partial meltdown on Three Mile Island in 1979 – is another unit that still remains one of the region’s largest power sources. In fact, the second unit has provided power for 45 years without incident. Now, according to Bloomberg, that unit is finally slated to shut down. 

Plant owner Exelon says that it will shutter the entire Three Mile Island facility 15 years before its license expires. While the first reactor was brought down by human error, the second is being brought down by the economics of the utility industry.

The original meltdown that occurred in 1979 was a result of steam generators that were unable to draw heat out of a reactor and a stuck valve that let coolant escape from the reactor core. 

The unit that melted down originally has stood dormant and quiet since the incident. 

Compared to Chernobyl, which resulted in 4,000 deaths, Three Mile Island is considered minor. It was determined that about 2 million people in the surrounding area “were exposed to less radiation than they would have received from a chest X-ray.”

But naturally, the immediate reaction to the event was fear and confusion. Schools closed, people stayed indoors and officials told children and pregnant women to evacuate the area. Public support for nuclear power predictably waned after the incident. 

The U.S. is now the world’s largest producer of natural gas, thanks to the “shale revolution”. This has caused a glut of the fossil fuel, dragging down its price and making it the largest source of the country’s electricity. Wind and solar have also been contributing to the nation’s energy glut. As a result, seven U.S. nuclear plants have shut down since 2013, with additional plants slated to close, despite states like New York and Pennsylvania offering subsidies for nuclear power. 

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

Writing on the Wall

Writing on the Wall

Not Adding Up

One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.

Coming down from the mountain with the latest data tablet… [PT]

The Bureau of Labor Statistics (BLS) reports an unemployment rate of just 3.7 percent.  The BLS also reports price inflation, as measured by the consumer price index (CPI), of 1.8 percent.  Yet big city streets are lined with tents and panhandlers grumble “that’s all” when you spare them a dollar.

In addition, good people of sound mind and honest intentions are racking up debt like never before.  Mortgage debt recently topped $9.4 trillion. If you didn’t know, this eclipses the 2008 high of $9.3 trillion that was notched at the precise moment the credit market melted down.

Total American household debt, which includes mortgages and student loans, is about $14 trillion – roughly $1 trillion higher than in 2008.  Credit card debt, which is over $1 trillion, is also above the 2008 peak.  To be clear, these debt levels are not signs of economic strength; rather, they are signs of impending disaster.  Moreover, they’re signs that American workers have been given a raw deal.

US CPI, “core” CPI and total consumer credit outstanding. 

How is it that the economy has been growing for a full decade straight, but the average worker has seen no meaningful increase in his income?  Have workers really been sprinting in place this entire time?  How did they end up in this ridiculous situation?

US mortgage debt outstanding and real household wages (real hourly earnings of production and non-supervisory employees) [PT]

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

Here Are Five Lies About Iran That We Need to Refute to Stop Another Illegal War

Here Are Five Lies About Iran That We Need to Refute to Stop Another Illegal War

GettyImages-1160473348-Trump-in-shadow-1565806919
President Donald Trump speaks to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., on Aug. 9, 2019.
Photo: Andrew Harrer/Bloomberg/Getty Images

FORGET URANIUM ENRICHMENT: Has Iran mastered time travel?

Last month, the Trump White House put out a typically Orwellian statement, chock-filled with lies, distortions, and half-truths about Iran and the 2015 nuclear deal. One line in particular stood out from the rest: “There is little doubt that even before the deal’s existence, Iran was violating its terms.”

strange wording in this new White House statement on Iran. “There is little doubt that even before the deal’s existence, Iran was violating its terms.”

View image on Twitter

Huh? The Iranians were violating an agreement — before it even existed?

Is it any surprise that even the foreign minister of Iran took to Twitter to join the online ridiculing of the White House?

Seriously?

View image on Twitter

The Trump administration’s lies on the topic of Iran are now beyond parody. There is, however, nothing funny about them. U.S. government lies can have deadly consequences: Never forget that hundreds of thousandsof innocent Iraqi men, women, and children, not to mention more than 4,400 U.S. military personnel, are dead today because of the sheer volume of falsehoods told by the George W. Bush administration.

So it is incumbent upon journalists to do in 2019 what we collectively did not do in 2003: Check the facts, challenge the lies, debunk the myths.

Here’s my contribution: a refutation of five of the most dishonest and inaccurate claims from the hawks — claims that brought the United States and Iran to the brink of conflict only a few weeks ago.

Lie #1: Iran Is Building a Nuclear Weapon

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

US Unveils Seizure Warrant For Iran’s Grace 1 Tanker

US Unveils Seizure Warrant For Iran’s Grace 1 Tanker

Apparently the month long saga of the Grace-1 is not at all over, and may now seriously escalate even after it was set free from custody. Just as the Iranian supertanker was released from custody off Gibraltar and is preparing to make its way into the Mediterranean, a seizure warrant filed by the US Department of Justice was unsealed in a US district court late Friday. 

Documents allege “a scheme to unlawfully access the U.S. financial system to support illicit shipments to Syria from Iran by the Islamic Revolutionary Guard Corps,” the DoJ said in a statement.

The seizure warrant and forfeiture complaint alleges the now Iranian-flagged tanker along with its over two million barrels of oil aboard it and $995,000 “are subject to forfeiture,” citing terrorism forfeiture statutes, and bank fraud and money laundering. 

The Grace-1, now renamed by Iran the Adrian Darya. Image source: Reuters

“The scheme involves multiple parties affiliated with the IRGC and furthered by the deceptive voyages of the Grace 1,” US Attorney for the District of Columbia Jessie Liu said in a press release. “A network of front companies allegedly laundered millions of dollars in support of such shipments.”

The warrant is addressed to “the United States Marshal’s Service and/or any other duly authorized law enforcement officer.”

According to Reuters, the Grace 1 – now renamed the Adrian Darya after Iran began flying its flag over the previously Panamanian-flagged tanker – may not have made it far though it was filmed moving on Friday. “The tanker shifted its position on Friday, but its anchor was still down off Gibraltar and it was unclear if it was ready to set sail soon,” the report said.

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

ExxonMobil Looks To Exit UK North Sea Oil & Gas

ExxonMobil Looks To Exit UK North Sea Oil & Gas

ExxonMobil

ExxonMobil has recently discussed with operators selling part or all of its assets in the UK North Sea in a move that could raise up to US$2 billion for Exxon and mark another major U.S. exit from the area, Reuters reported on Tuesday, quoting three industry sources familiar with the matter.

Exxon has been a major investor in the UK North Sea since 1964, when the first exploration drilling in the area began. The U.S. major holds interests in 40 producing oil and gas fields and produces around five percent of UK oil and gas production, with an average 80,000 barrels of oil and 441 million cubic feet of gas a day. Exxon’s investment in the North Sea is managed through a 50/50 joint operation with Shell.

If Exxon sells some or part of its assets in the UK North Sea, it will be yet another major U.S. oil and gas firm to divest interests in this mature area to focus on their current key growth areas, which for Exxon right now are the Permian in Texas and conventional oil production offshore Guyana.

While European supermajors Shell, BP, and Total continue to view the North Sea as one of their core assets, U.S. majors have been selling North Sea stakes as many of them are now focused on U.S. shale.

Marathon Oil said in February that it would be exiting the UK North Sea as it continues to focus on high-return U.S. shale oil operations.

In April, ConocoPhillips sold its UK oil and gas business to Chrysaor Holdings for US$2.675 billion in a deal which Wood Mackenzie described as “another story of the changing corporate landscape in the North Sea – for the first time, a non major is the number one producer in the UK.”

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

Guess Who China Is Blaming For The Riots In Hong Kong?

Guess Who China Is Blaming For The Riots In Hong Kong?

This is not going to end well.  As a result of our ongoing trade war, U.S. relations with China were already rapidly deteriorating, but now the chaos in Hong Kong threatens to completely wreck them.  Violence between political protesters and riot police is making headlines all over the globe, and as you will see below, the Chinese are squarely blaming the United States for what is happening.  On Tuesday, flights at Hong Kong International Airport were canceled for a second day in a row, and riot police stormed the airport in an attempt to evict the thousands of protesters that were occupying it.  This resulted in extremely violent clashes, and you can see raw video of one of these confrontations right here.  Needless to say, the Chinese government is extremely alarmed by these developments.  According to ABC News, one top official told the press that these protests in Hong Kong “have begun to show signs of terrorism”…

The clashes appeared to represent an escalation 10 weeks after the protest’s massive, peaceful beginnings in early June, when hundreds of thousands marched in the semi-autonomous city against a now-suspended extradition bill. A Chinese official said Tuesday that protesters “have begun to show signs of terrorism,” and China appeared to be weighing a crackdown on the democratic movement.

Bolstered by anger over the crackdown by Hong Kong police, the protests has grown more confrontational in recent weeks and reached new levels last Monday with a city-wide strike that disrupting traffic and hundreds of flights.

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

Economic Storm Trump Will be Blamed For Because of Bad Advisers

Economic Storm Trump Will be Blamed For Because of Bad Advisers 

There is a very Dark Cloud hovering over the world economy and at the center of this cloud lies not just Europe, but Germany – the strongest economy holding up all of Europe. The German manufacturing sector is in freefall. Trump will be blamed calling this the result of his Trade War. It is probably too late to get him to even understand that his advisers are old-school and completely wrong with respect to trade. Their obsession with currency movements is what they taught back in school during the 1930s. My advice to China, let the yuan float and Trump will quickly see that China has been supporting its currency, not suppressing it.

Manufacturing indicators have deteriorated globally, yet in a very disproportionate manner. Trump will be blamed for this and his badgering the Fed to lower interest rates is also a fool’s game. Nobody looks at the elderly who were told to save for retirement and you will live off the interest. Their house values were undermined in the 2007-2009 New York Banker’s Mortgage-Backed scam that blew up the world economy from which we have been unable to fully recover. The younger generation cannot afford to buy a house as they are saddled with student loans thanks to the Clintons for degrees that are worthless as 65% cannot find jobs in what they have degrees for these days.

The insanity of those in power knows no boundary when it comes to stupidity around the world. All they have is interest rates and after more than 10 years of excessively low to negative interest rates failing to stimulate the economy in Europe, what do they do? They argue that all physical money must be eliminated because people are hoarding cash and thus defeat their lower interest rates policy.

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

U.S. Customs Continues To “Modernize” Its System To Include Biometrics For All Passengers

U.S. Customs Continues To “Modernize” Its System To Include Biometrics For All Passengers

One aspect often lost in the immigration debate is the rollout of government solutions that are set to restrict the freedom of the perfectly innocent.  A key component of this is the increased collection of passenger biometrics.

As I’ve discussed before, U.S. Customs and Border Protection has a mandate that’s been 15 years in the making to integrate government databases for ID verification. Private companies have been enlisted to ensure that there is a “quick and easy roll out across U.S. airports,” according to Jim Peters, chief technology officer for SITA, one of the information technology companies working with airlines.

This is predictably moving from isolated and elective collection into mandatory compliance for all inbound and outbound international travelers. This, too, has always been part of the program as shown in this 2017 document from DHS:

As Nextgov reports, this increased data collection will begin before passenger arrival, and is now coupled with transferring everything to centralized cloud storage:

In addition to expanding its biometric capabilities, the agency is also working to migrate all of its traveler processing tech to the cloud, create more self-service tools for the public and let officers use mobile devices to verify people entering the country, officials said in a solicitation published Thursday.

[…]

“The paradigm will evolve from biographic data focused to biometric data centric,” officials said in the solicitation. “A biometric-based approach allows threats to be pushed-out further beyond our borders before travelers arrive to the U.S.”

“Integration of facial recognition technologies is intended throughout all passenger applications,” they added.

[…]

Officials aim to have all of the agency’s traveler processing and vetting applications housed in the cloud by 2024, the solicitation said, and they also want to allow “officers to admit or refer travelers using mobile technology.”

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

Olduvai IV: Courage
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