Russia Accuses US Of Fabricating Satellite Images, Creating “Wall Of Propaganda” To Incite Other Countries

It was ten days ago when on the heels of Russia’s 30-minute detailed presentation of what it believes happened to MH-17, the US government released a satellite trajectory map of what it says was the flight’s path and the site from which the missile was shot as well as various other satellite images “proving” the missile that took down the Boeing 777 was fired by the pro-Russian separatists.  Yesterday the Russian defense ministry finally responded to the US release stating that the “satellite images Kiev published as ‘proof’ it didn’t deploy anti-aircraft batteries around the MH17 crash site carry altered time-stamps and are from days after the MH17 tragedy.” In other words, the evidence the US has present to form public opinion was in the form of “altered images carrying wrong time-stamps.”

The satellite image on the left was provided by the Russian Defense Ministry on 14 July, 2014. On the right is the image that Kiev claims were taken by its satellites on July 16, 2014. Image from mil.ru

RT reports that the images, which Kiev claims were taken by its satellites at the same time as those taken by Russian satellites, are neither Ukrainian nor authentic, according to Moscow’s statement. The Defense Ministry said the images were apparently made by an American KeyHole reconnaissance satellite, because the two Ukrainian satellites currently in orbit, Sich-1 and Sich-2, were not positioned over the part of Ukraine’s Donetsk Region shown in the pictures. The Defense ministry further alleges weather and lighting conditions in the images were not possible at the dates and times Ukraine claims they were made, the Russian ministry said.

More:

At least one of the images published by Ukraine shows signs of being altered by an image editor, the statement added.

 

“It’s the latest ‘masterpiece’ in the Ukrainian exercise in conspiracy theories, an attempt to divert responsibility,” the ministry said.

 

“It can take a deserved place next to other allegations against Russia voiced by Kiev that claimed that Russia was responsible for masterminding the Maidan protest and the tragedy in Odessa.”

 

“Apparently that’s why the real owners of those photos are hesitating to publish them under their own name, since it would derail the myth of the omniscience of their space reconnaissance,” the Russian ministry said.

 

The ministry also criticized images published by Kiev to back its allegations that Russia smuggled heavy weapons over the border and shelled Ukrainian army positions.

 

The images lack proper time stamps and coordinates, while Kiev didn’t bother to explain why it believes that whatever vehicles are shown in them are Russian, the statement said.

* * *

Among the photos released is the following comparison of satellite images published by Russia and Ukraine as presented by Kiev in an attempt to dispute the authenticity of Moscow’s photos. The shadows are cast in different directions in the two images, proving that they could not have been almost at the same time two days apart, as indicated by the time stamps.

The weather is also clearly different, with the Russian image showing a cloudy day, while the image presented by Kiev shows a clear day – showing that the images could not have been taken less than an hour apart, as claimed by the time stamps. The Russian military say the actual weather conditions at the time can be easily double-checked by independent sources.

In another comparison with the images used by Ukraine, it was purposely degraded in quality in order to point out some irregularities. No such irregularities are present in the original image, the Russian military said.

The complete photo series released by the Russian Ministry of Defense can be found at this link.

Furthermore, as we reported last week, the propaganda war is not only about “who shot MH17?” but just how far the US is portraying Russia as escalating in order to frame its own escalation as an appropriate and measured response. It is here that ?Moscow again retaliated to Washington after releasing an incendiary statement, accusing the US of spinning and distorting facts to allege that Russia is testing a new cruise missile, banned by a landmark Cold War treaty. RT reports on the statement by the Russian foreign ministry:

Once again the US is trying (and again rather clumsily) to act as a mentor, for some reason pretending to possesses the truth in the last instance and have the right to judge others. Claims are made with little to no evidence and based on warped logic, in other words presented not with further experts’ analyses in mind.

The purpose seems to be to create a wall of information noise to incite other countries, and to boil up a propagandist brew for the media. Or does the US administration still sincerely deceive itself that the world can take Washington’s word?”

The US report never specified how exactly Russia violated the treaty, instead offering a vague finding that: “The United States has determined that the Russian Federation is in violation of its obligations under the INF Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.”

This would be a direct violation of the Intermediate-Range Nuclear Forces Treaty (INF) signed by Ronald Reagan and Mikhail Gorbachev in 1987, which banned missiles that could carry nuclear warheads in the range of 500-5,500 km. The White House described the supposed transgression as a “very serious matter” of which it has been aware since 2008, again not naming the suspect.

The media in the meantime were quick to allege the missile in question was the R-500 cruise missile with an officially stated range of 500km, which some believe can be easily modified for greater ranges.

Russia previously issued a brief response to the allegations that was dismissive, but called for further dialogue. The latest diatribe, however, makes no attempt to seek common ground, and takes pot shots at the entirety of the US approach to international treaties – repeatedly accusing Washington of duplicity and bad faith.

“American officials cite classified intelligence, when questioned about their findings. The value of such intelligence has been amply proven by the ‘Iraqi weapons of mass destruction’ myth. Such undercover research becomes even less trustworthy, with regular leaks of obviously untrue and provocative pieces of information about the conflict in eastern Ukraine, while data coming from sources beyond US control gets ignored. Years pass, but the Americans have learned nothing.”

Of course, it wouldn’t be tried and true game theory retaliation without re-escalation which is precisely what Russia did when it said it exposed US hypocrisy, who themselves are developing “target practice missiles” similar to missiles in question, as well as drones, which violate the spirit of the INF Treaty.

The American report claims that “all US activities during the reporting period were consistent with the obligations set forth in the INF Treaty. Russia did not raise any new INF Treaty compliance issues during the reporting period.”

The full statement can be read here.

And while at this point Russia is correct that the “wall of information noise” has hit a level that will make any factual findings over either the events surrounding the downing of MH17 impossible, what is also quite clear is that as we forecast two weeks ago, the propaganda war between Russia and the US, up until now largely contained by the “Cold” adjective, has now escalated well into lukewarm status, and is resulting in both financial and trade victims, both on the Russian side as well as in the “West”. One can hope that the ongoing escalation, which is a miniature, very concentrated replica of what happened with the arms build up during the cold war, does not also lead to a conventional or, worse, nuclear standoff, because in the new normal, the war is no longer over ideology (one would certainly have trouble identifying which is the more socialist country) but over reserve currency status. It is here that the US has the most to lose.




via Zero Hedge http://ift.tt/UT49ag Tyler Durden

The "Do-Over" – Groupthink, Mass Delusion, And "Hell To Pay"

Authored by Paul Singer, excerpted from Elliott Management’s latest letter to investors,

As this letter is written, stock markets around the world are at or near all-time nominal highs, while global interest rates hover near record lows. A flood of newly-printed money has combined with zero percent interest rates to keep all the balls suspended in the air. Nonetheless, growth in the developed world (U.S., Europe and Japan) has been significantly subpar for the 5-1/2 years following the financial crisis. Businesses have been reluctant to invest and hire. The consumer is still “tapped out,” and there are significant suppressive forces from poor policy, including taxes and increased regulation. Governments (which are actually responsible for the feeble growth) are blaming the shortfall on “secular stagnation,” purportedly a long-term trend, which enables them to deny responsibility. As long as the politicians who encouraged and enabled consumers to take on too much debt before 2008 think they can ascribe the failure of bad government policies to the market system or exogenous factors, there will be an ample supply of such theories, which in all likelihood will lead to more bad government policies.

The orchestra conductors for this remarkable epoch are the central bankers in the U.S., U.K., Europe and Japan. The cost of debt of all maturities issued by every country, corporation and individual in the world (except outliers like Argentina) is in the process of converging at remarkably low rates. In Greece (for goodness sake), long-term government debt is trading with a yield just north of 5%. In France, 10-year bonds are trading at a yield of 1.67%.

Are these (and other) financial asset prices the result of the final and conclusive achievement of knowledge by world leaders about how to achieve strong, sustainable economic growth with uniformly low inflation and continued unshaken confidence in paper money into the long mists of the future? Wouldn’t that scenario be wonderful, and wouldn’t it be a perfectly justified extrapolation of the miraculous modern scientific wizardry that has given us tiny devices that fit in the palms of our hands and can tell us the history of the Spanish Civil War, make movie reservations and hail a cab while showing us on our little screen as it approaches?

Sadly, financial market conditions are not the result of the advancement of human knowledge in these matters. Rather, they are the result of policymakers engaging in groupthink and suffering from a mass delusion. By reducing interest rates to zero and having central banks purchase most of the debt issued by their respective governments, they think that inflation can be encouraged (but without any danger that it spins out of control) and that economic activity can thereby be supported and enhanced. We are 5-1/2 years into this global experiment, the kind that has never been tried in its current breadth and scope at any other time in history. Excuses by government leaders for the meager growth are easy to make (and some even contain nuggets of truth), but the bald fact is that the entire developed world is growing at a sluggish pace, if at all. But governments, media, academics politicians and central bankers refuse to state the obvious conclusion that their policies have failed and need to be revised. Instead, they all state, with the kind of confidence only present among the truly clueless, that in the absence of their current policies, things would be much worse.

This is ridiculous, but this is the state of affairs in this enlightened internet age when about a billion people around the planet are never more than ten seconds away from access to all the books ever written. The voices arrayed against the fetid mix of developed world policies are few, and they are drowned out by the loud roars of approval. After all, who does not like rising stock and bond prices and a recovery in real estate markets? And when the government tells you that this excess is all necessary and “working,” and central banks with their impenetrable and obscure verbiage lend an academic gloss to the tale, there is a hypnotic and tranquilizing effect that results from the seeming stability of it all. To be sure, the current comatose volatility in global markets all but whispers, “What are you worrying about?” to anyone who thinks something is deeply wrong with the combination of growth-suppressive policies, open-spigot money-printing and zero percent interest rates.

But it is worth worrying about the economy and the global financial system. The apparent stability of the world financial system is superficial – financial asset prices are not real, the equilibrium is temporary, the lack of volatility is a trap, and when the whole thing goes haywire, there will truly be hell to pay. Investors are “seeking yield” now in assets of lower and lower quality, with more and more leverage, and with less and less yield to compensate for risk. At the moment, investors engaging in this endeavor do not see any clouds on the horizon, and there is no major currency that has (yet) lost the confidence of investors, no major country which has (yet) lost the confidence of its people, and (despite the fact that some marginally-radical groups have gained a little bit of traction) nothing that would qualify as major social unrest in the developed world.

The policies that could generate much stronger growth are not unknown, nor are they complicated or arcane. Attractive tax regimes, understandable and efficient regulatory designs, the rule of law, solid infrastructure, low corruption and crime, a population of educated and willing workers, reasonable employment rules, low tort litigation risk, good educational systems, intelligent approaches to energy and the displacement caused by technological advancement, and policies that foster entrepreneurship, create attractive places to live, work and form or expand businesses. Progress in these areas creates virtuous cycles, attracting people who can reinforce and amplify the positive results.

None – we repeat, none – of the leaders of the developed world are pursuing the policies described in the preceding paragraph. The explanation for this failure involves plenty of blockheadedness and myopia, but there are two additional poisonous elements at work here: arrogance and ideology.

As for arrogance, the notion that their countries may be coasting on the glories of the past while heading for dim futures does not seem to occur to these policymakers. They point to the structures and forms built stone by stone in the construction phase of their civilizations as if those elements do not need protecting and refurbishing – and as if other people, countries and cultures were not breathing down their necks, wanting the same standard of living and competing in the same global markets for the growth that can generate those standards of living. All of the developed countries (either now or soon) need to compete in the global marketplace and not just rely upon cloistered internal markets for growth and prosperity. Furthermore, every country should provide the conditions for giving its citizenry the best chance possible of generating growth through the miracle of human creativity – the growth that comes from nothing more than a spark of invention or entrepreneurship.

The lack of sensible pro-growth policies would be bad enough for the developed world, but the more important reality is that things are a lot worse than we have illustrated above. For some time now, in a trend that has rapidly accelerated in the last few years, the developed world has granted (and keeps granting) a set of promises for payments in the future that cannot
possibly be fulfilled regardless of future GDP growth or income tax rate hikes. Candidates for public office have had such success buying votes with these promises (in conjunction with short-term pledges to public-sector employees for pay, benefits and working conditions which are more generous than that of their private-sector counterparts) that these strategies generate value for such politicians ostensibly “gratis.” “Ostensibly” is the operative word here, of course, since there is nothing gratis about it. Indeed, the cost will be more than any citizen would voluntarily choose to pay, but it is hidden at the moment. In the near-to-medium term, the cost will take the form of higher inflation and lower growth than would be the case if good policies were pursued. Longer term, the impact will be far more insidious.

As for ideology, many of the current leaders of the developed world appear to be motivated by ideologies according to which wealth is not created by effort, entrepreneurism or creativity. Rather, they believe that wealth held by private individuals is either ill-gotten or should be redistributed, as a matter of “social justice,” to groups that do not have it.

Let us skip over the moral piece of this equation, in which effort and achievement exist on the same moral plane as dependency, and in which wealth is deemed undeserved whether it was stolen, acquired by birth or stolen. Instead, we will move right to the practical aspects of this governing philosophy, which prescribes a government fiat solution to the problem of inequality. This so-called solution always seems to leave government cronies swimming in wealth. Practically speaking, countries that welcome investors and workers with supportive policies (tax, quality of life, rule of law, labor, education, regulatory and others), will attract people who work, achieve and build. The corollary is that those governments that think their citizens have no choice other than to “stay and pay” are being really shortsighted as well as venal. As and when some of this latter group’s most productive citizens move themselves, their families and their capital offshore, those remaining will likely simply say “good riddance.” In fact, as the real standard of living suffers, the blame for the failure to grow and for the shortfall of good jobs will probably be ascribed to everything except the counterproductive policies that drove out those who created both jobs and demand for goods and services. By contrast, the places where capital and ambitious people are welcomed will be doing better and will be providing brighter prospects for their people.

Of course, all of these observations are relative, not absolute. There is no place that is purely “free” in the developed world. There are taxes and rules everywhere, and there is no “pure” modern developed society where all income is retained and where those who cannot (or do not want to) provide for themselves are left to fend for themselves. Nor should there be. The “relative” aspects of the “attractiveness” scale is why apartment and house prices in London, New York, Miami, Aspen and the Hamptons have leaped to the moon and beyond, despite their poor policy landscapes. Why do Latin American, Russian and Middle Eastern investors pay top dollar to buy properties in those places? Because they are afraid of the rule of law (or lack thereof) in their own countries. But American politicians do not draw sensible conclusions from this phenomenon. Instead, they act as if no amount of hostility toward capital will cause businesspeople and/or investors to take their capital elsewhere. The reality is that this current “safe haven” status for the U.S. (and U.K.) is not permanent, and politicians who think it is may be in for a rude awakening.

Groupthink in the current coalescence of views as to which places are safe and which are not is a complicating factor. An important corollary is that the conclusions of groupthink are unanimous, and when they shift, they shift abruptly and uniformly. In the era of modern communications, this phenomenon has broad implications for financial markets. If and when the prices of highend assets (stocks and bonds, homes in Aspen, “contemporary” art created by unknowns and costing millions) change direction, they will likely all change direction at the same time, like the Rockettes – except rather than pirouetting gracefully around the stage, they will be tumbling in unison into the orchestra pit.

*  *  *

We will now pull together the elements described above and hold them to the light to see what they may mean.

The leaders of the developed world have eschewed policies that would make their economies grow at acceptable/historical rates, resorting instead to encouraging their “independent” central banks to reduce interest rates to zero and print money. The money printed by the central banks is used to buy up bonds, public and private, and recently also to purchase stocks. At the same time, politicians in these countries, far from getting a grip on the unsustainable promises of benefit payments that have been made to their citizens, have allowed those promises to accelerate dangerously. Such promises are a powerful form of debt that is growing exponentially, adding to collective government balance sheets that are already severely overleveraged. Simultaneously, the ability of the developed world (particularly America, the Power Formerly Known As “Super”) to impose order on the global geopolitical and military matrix has meaningfully declined, and is in the process of diminishing further.

In America, people who own financial assets are spending stock market gains on high-end goods, while many middle- and lower-income people are either borrowing to maintain current spending or becoming/remaining dependent on the government. This pattern is unsustainable from both a moral and practical standpoint. And the country’s long-term entitlement obligations are utterly unpayable as currently structured.

Your guess is as good as ours as to how this fantastic mix of elements and policies comes undone, but it is not rational to think that the current apparent stability and low volatility will go on forever. Nobody can predict when things will unravel, how the unraveling will take place, or what the world will look like after the next crisis. But the numbers (debt, derivatives, and promises) are extraordinarily large, the dysfunction very powerful, and the leadership throughout the developed world very weak.

We state this case not to be provocative or colorful. We are trying to figure it out, because we think that what happens next has the potential to challenge the historical episodes of the most transformational vector changes in modern times. Investors need to try to understand how to survive the evolution of these factors into financial, economic or societal changes. After all, the reason that nobody has been able to compound money over the last 300 years or so at even a mere 3% return through generations and generations is quite simple: There is always some war, invasion, collapse, confiscation, tyranny, revolution or inflation to reshuffle the deck and require a “do-over.” We may be close to such a transformational period.

Freedom, technology, entrepreneurship and the human brain and spirit are forces that could bring human societies to more widespread and powerful growth and prosperity.




via Zero Hedge http://ift.tt/1uU4sSP Tyler Durden

The “Do-Over” – Groupthink, Mass Delusion, And “Hell To Pay”

Authored by Paul Singer, excerpted from Elliott Management’s latest letter to investors,

As this letter is written, stock markets around the world are at or near all-time nominal highs, while global interest rates hover near record lows. A flood of newly-printed money has combined with zero percent interest rates to keep all the balls suspended in the air. Nonetheless, growth in the developed world (U.S., Europe and Japan) has been significantly subpar for the 5-1/2 years following the financial crisis. Businesses have been reluctant to invest and hire. The consumer is still “tapped out,” and there are significant suppressive forces from poor policy, including taxes and increased regulation. Governments (which are actually responsible for the feeble growth) are blaming the shortfall on “secular stagnation,” purportedly a long-term trend, which enables them to deny responsibility. As long as the politicians who encouraged and enabled consumers to take on too much debt before 2008 think they can ascribe the failure of bad government policies to the market system or exogenous factors, there will be an ample supply of such theories, which in all likelihood will lead to more bad government policies.

The orchestra conductors for this remarkable epoch are the central bankers in the U.S., U.K., Europe and Japan. The cost of debt of all maturities issued by every country, corporation and individual in the world (except outliers like Argentina) is in the process of converging at remarkably low rates. In Greece (for goodness sake), long-term government debt is trading with a yield just north of 5%. In France, 10-year bonds are trading at a yield of 1.67%.

Are these (and other) financial asset prices the result of the final and conclusive achievement of knowledge by world leaders about how to achieve strong, sustainable economic growth with uniformly low inflation and continued unshaken confidence in paper money into the long mists of the future? Wouldn’t that scenario be wonderful, and wouldn’t it be a perfectly justified extrapolation of the miraculous modern scientific wizardry that has given us tiny devices that fit in the palms of our hands and can tell us the history of the Spanish Civil War, make movie reservations and hail a cab while showing us on our little screen as it approaches?

Sadly, financial market conditions are not the result of the advancement of human knowledge in these matters. Rather, they are the result of policymakers engaging in groupthink and suffering from a mass delusion. By reducing interest rates to zero and having central banks purchase most of the debt issued by their respective governments, they think that inflation can be encouraged (but without any danger that it spins out of control) and that economic activity can thereby be supported and enhanced. We are 5-1/2 years into this global experiment, the kind that has never been tried in its current breadth and scope at any other time in history. Excuses by government leaders for the meager growth are easy to make (and some even contain nuggets of truth), but the bald fact is that the entire developed world is growing at a sluggish pace, if at all. But governments, media, academics politicians and central bankers refuse to state the obvious conclusion that their policies have failed and need to be revised. Instead, they all state, with the kind of confidence only present among the truly clueless, that in the absence of their current policies, things would be much worse.

This is ridiculous, but this is the state of affairs in this enlightened internet age when about a billion people around the planet are never more than ten seconds away from access to all the books ever written. The voices arrayed against the fetid mix of developed world policies are few, and they are drowned out by the loud roars of approval. After all, who does not like rising stock and bond prices and a recovery in real estate markets? And when the government tells you that this excess is all necessary and “working,” and central banks with their impenetrable and obscure verbiage lend an academic gloss to the tale, there is a hypnotic and tranquilizing effect that results from the seeming stability of it all. To be sure, the current comatose volatility in global markets all but whispers, “What are you worrying about?” to anyone who thinks something is deeply wrong with the combination of growth-suppressive policies, open-spigot money-printing and zero percent interest rates.

But it is worth worrying about the economy and the global financial system. The apparent stability of the world financial system is superficial – financial asset prices are not real, the equilibrium is temporary, the lack of volatility is a trap, and when the whole thing goes haywire, there will truly be hell to pay. Investors are “seeking yield” now in assets of lower and lower quality, with more and more leverage, and with less and less yield to compensate for risk. At the moment, investors engaging in this endeavor do not see any clouds on the horizon, and there is no major currency that has (yet) lost the confidence of investors, no major country which has (yet) lost the confidence of its people, and (despite the fact that some marginally-radical groups have gained a little bit of traction) nothing that would qualify as major social unrest in the developed world.

The policies that could generate much stronger growth are not unknown, nor are they complicated or arcane. Attractive tax regimes, understandable and efficient regulatory designs, the rule of law, solid infrastructure, low corruption and crime, a population of educated and willing workers, reasonable employment rules, low tort litigation risk, good educational systems, intelligent approaches to energy and the displacement caused by technological advancement, and policies that foster entrepreneurship, create attractive places to live, work and form or expand businesses. Progress in these areas creates virtuous cycles, attracting people who can reinforce and amplify the positive results.

None – we repeat, none – of the leaders of the developed world are pursuing the policies described in the preceding paragraph. The explanation for this failure involves plenty of blockheadedness and myopia, but there are two additional poisonous elements at work here: arrogance and ideology.

As for arrogance, the notion that their countries may be coasting on the glories of the past while heading for dim futures does not seem to occur to these policymakers. They point to the structures and forms built stone by stone in the construction phase of their civilizations as if those elements do not need protecting and refurbishing – and as if other people, countries and cultures were not breathing down their necks, wanting the same standard of living and competing in the same global markets for the growth that can generate those standards of living. All of the developed countries (either now or soon) need to compete in the global marketplace and not just rely upon cloistered internal markets for growth and prosperity. Furthermore, every country should provide the conditions for giving its citizenry the best chance possible of generating growth through the miracle of human creativity – the growth that comes from nothing more than a spark of invention or entrepreneurship.

The lack of sensible pro-growth policies would be bad enough for the developed world, but the more important reality is that things are a lot worse than we have illustrated above. For some time now, in a trend that has rapidly accelerated in the last few years, the developed world has granted (and keeps granting) a set of promises for payments in the future that cannot possibly be fulfilled regardless of future GDP growth or income tax rate hikes. Candidates for public office have had such success buying votes with these promises (in conjunction with short-term pledges to public-sector employees for pay, benefits and working conditions which are more generous than that of their private-sector counterparts) that these strategies generate value for such politicians ostensibly “gratis.” “Ostensibly” is the operative word here, of course, since there is nothing gratis about it. Indeed, the cost will be more than any citizen would voluntarily choose to pay, but it is hidden at the moment. In the near-to-medium term, the cost will take the form of higher inflation and lower growth than would be the case if good policies were pursued. Longer term, the impact will be far more insidious.

As for ideology, many of the current leaders of the developed world appear to be motivated by ideologies according to which wealth is not created by effort, entrepreneurism or creativity. Rather, they believe that wealth held by private individuals is either ill-gotten or should be redistributed, as a matter of “social justice,” to groups that do not have it.

Let us skip over the moral piece of this equation, in which effort and achievement exist on the same moral plane as dependency, and in which wealth is deemed undeserved whether it was stolen, acquired by birth or stolen. Instead, we will move right to the practical aspects of this governing philosophy, which prescribes a government fiat solution to the problem of inequality. This so-called solution always seems to leave government cronies swimming in wealth. Practically speaking, countries that welcome investors and workers with supportive policies (tax, quality of life, rule of law, labor, education, regulatory and others), will attract people who work, achieve and build. The corollary is that those governments that think their citizens have no choice other than to “stay and pay” are being really shortsighted as well as venal. As and when some of this latter group’s most productive citizens move themselves, their families and their capital offshore, those remaining will likely simply say “good riddance.” In fact, as the real standard of living suffers, the blame for the failure to grow and for the shortfall of good jobs will probably be ascribed to everything except the counterproductive policies that drove out those who created both jobs and demand for goods and services. By contrast, the places where capital and ambitious people are welcomed will be doing better and will be providing brighter prospects for their people.

Of course, all of these observations are relative, not absolute. There is no place that is purely “free” in the developed world. There are taxes and rules everywhere, and there is no “pure” modern developed society where all income is retained and where those who cannot (or do not want to) provide for themselves are left to fend for themselves. Nor should there be. The “relative” aspects of the “attractiveness” scale is why apartment and house prices in London, New York, Miami, Aspen and the Hamptons have leaped to the moon and beyond, despite their poor policy landscapes. Why do Latin American, Russian and Middle Eastern investors pay top dollar to buy properties in those places? Because they are afraid of the rule of law (or lack thereof) in their own countries. But American politicians do not draw sensible conclusions from this phenomenon. Instead, they act as if no amount of hostility toward capital will cause businesspeople and/or investors to take their capital elsewhere. The reality is that this current “safe haven” status for the U.S. (and U.K.) is not permanent, and politicians who think it is may be in for a rude awakening.

Groupthink in the current coalescence of views as to which places are safe and which are not is a complicating factor. An important corollary is that the conclusions of groupthink are unanimous, and when they shift, they shift abruptly and uniformly. In the era of modern communications, this phenomenon has broad implications for financial markets. If and when the prices of highend assets (stocks and bonds, homes in Aspen, “contemporary” art created by unknowns and costing millions) change direction, they will likely all change direction at the same time, like the Rockettes – except rather than pirouetting gracefully around the stage, they will be tumbling in unison into the orchestra pit.

*  *  *

We will now pull together the elements described above and hold them to the light to see what they may mean.

The leaders of the developed world have eschewed policies that would make their economies grow at acceptable/historical rates, resorting instead to encouraging their “independent” central banks to reduce interest rates to zero and print money. The money printed by the central banks is used to buy up bonds, public and private, and recently also to purchase stocks. At the same time, politicians in these countries, far from getting a grip on the unsustainable promises of benefit payments that have been made to their citizens, have allowed those promises to accelerate dangerously. Such promises are a powerful form of debt that is growing exponentially, adding to collective government balance sheets that are already severely overleveraged. Simultaneously, the ability of the developed world (particularly America, the Power Formerly Known As “Super”) to impose order on the global geopolitical and military matrix has meaningfully declined, and is in the process of diminishing further.

In America, people who own financial assets are spending stock market gains on high-end goods, while many middle- and lower-income people are either borrowing to maintain current spending or becoming/remaining dependent on the government. This pattern is unsustainable from both a moral and practical standpoint. And the country’s long-term entitlement obligations are utterly unpayable as currently structured.

Your guess is as good as ours as to how this fantastic mix of elements and policies comes undone, but it is not rational to think that the current apparent stability and low volatility will go on forever. Nobody can predict when things will unravel, how the unraveling will take place, or what the world will look like after the next crisis. But the numbers (debt, derivatives, and promises) are extraordinarily large, the dysfunction very powerful, and the leadership throughout the developed world very weak.

We state this case not to be provocative or colorful. We are trying to figure it out, because we think that what happens next has the potential to challenge the historical episodes of the most transformational vector changes in modern times. Investors need to try to understand how to survive the evolution of these factors into financial, economic or societal changes. After all, the reason that nobody has been able to compound money over the last 300 years or so at even a mere 3% return through generations and generations is quite simple: There is always some war, invasion, collapse, confiscation, tyranny, revolution or inflation to reshuffle the deck and require a “do-over.” We may be close to such a transformational period.

Freedom, technology, entrepreneurship and the human brain and spirit are forces that could bring human societies to more widespread and powerful growth and prosperity.




via Zero Hedge http://ift.tt/1uU4sSP Tyler Durden

The Drug War, the Fourth Amendment, and Anal Cavity Searches in New Mexico

“The Drug War, the Fourth Amendment, and Anal Cavity
Searches in New Mexico,” produced by Paul Feine and Alex
Manning
. 8 minutes.

Original release date was July 29, 2014. Original writeup is
below.

On July 28, 2014, Reason TV released “Do You Have It Up
Your Ass?”: Drug Warriors in New Mexico Go Too Far
.
Incorporating footage from cameras on the dashboards and lapels of
New Mexico law enforcement officers, the program tells the story of
Timothy Young, a man who was pulled over in Lordsburg, New Mexico,
for a traffic violation in October 2012.

Hidalgo County
deputies looking for drugs searched Young’s truck for more than two
hours. After a K9 deputy claimed that his dog Leo alerted on the
driver’s seat of Young’s truck, deputies obtained a search warrant
to search Young’s body. Deputies then drove Young to the Gila Regional Medical Center, located an
hour north in Silver City, New Mexico. Young was X-rayed and, while
still in handcuffs, subjected to a digital search of his anal
cavity. No drugs were found.

There is more to the story, however. Just three months after the
Young incident, David Eckert was pulled over in front of a Walmart
for failing to come to a complete stop at a stop sign in
Deming
, a small town about an hour east of Lordsburg. Eckert
was about to begin a 14-hour ordeal. Once again, law enforcement
officers called in the dog, Leo, and once again his trainer claimed
that the dog alerted on the driver’s seat.

Deputies obtained a warrant and brought Eckert to the hospital
in Deming, New Mexico, where a doctor refused to conduct an anal
cavity search, calling it unethical. Undeterred, deputies drove
Eckert an hour north to another hospital, where doctors had agreed
to search Young’s anal cavity. While at the Gila Regional Medical
Center, Eckert was X-rayed, digitally probed, forced to endure
several enemas, and ultimately put under and given a colonoscopy
without his consent. Once again, no drugs were found.

Young and Eckert sued all the parties involved. So far, Young
has been awarded $925,000 from Hidalgo County, and Eckert has been
awarded $1.6 million from Hidalgo County and the city of
Deming.

Approximately 8 minutes. Produced by Paul Feine and Alex
Manning.

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"Good" And "Bad" Economics In One Lesson

Via Henry Hazlitt’s Economics In One Lesson,

Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine-the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.

The distinction may seem obvious. The precaution of looking for all the consequences of a given policy to everyone may seem elementary. Doesn’t everybody know, in his personal life, that there are all sorts of indulgences delightful at the moment but disastrous in the end? Doesn’t every little boy know that if he eats enough candy he will get sick? Doesn’t the fellow who gets drunk know that he will wake up next morning with a ghastly stomach and a horrible head? Doesn’t the dipsomaniac know that he is ruining his liver and shortening his life? Doesn’t the Don Juan know that he is letting himself in for every sort of risk, from blackmail to disease? Finally, to bring it to the economic though still personal realm, do not the idler and the spendthrift know, even in the midst of their glorious fling, that they are heading for a future of debt and poverty?

Yet when we enter the field of public economics, these elementary truths are ignored. There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

h/t @noalpha_allbeta




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“Good” And “Bad” Economics In One Lesson

Via Henry Hazlitt’s Economics In One Lesson,

Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine-the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.

The distinction may seem obvious. The precaution of looking for all the consequences of a given policy to everyone may seem elementary. Doesn’t everybody know, in his personal life, that there are all sorts of indulgences delightful at the moment but disastrous in the end? Doesn’t every little boy know that if he eats enough candy he will get sick? Doesn’t the fellow who gets drunk know that he will wake up next morning with a ghastly stomach and a horrible head? Doesn’t the dipsomaniac know that he is ruining his liver and shortening his life? Doesn’t the Don Juan know that he is letting himself in for every sort of risk, from blackmail to disease? Finally, to bring it to the economic though still personal realm, do not the idler and the spendthrift know, even in the midst of their glorious fling, that they are heading for a future of debt and poverty?

Yet when we enter the field of public economics, these elementary truths are ignored. There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

h/t @noalpha_allbeta




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Alarm Bells Ringing: Behind The Smoke And Mirrors Of The European Banking System

Submitted by Erico Matias Tavares of Sinclair & Co.

Alarm Bells Ringing – Behind the Smoke and Mirrors of the European Banking System

Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud.

But we have been keeping track of a few things.

Private sector lending is dropping sharply in the Eurozone. The latest figures have just been released and the picture is not at all encouraging. Total private sector credit by Eurozone monetary financial institutions has accentuated its negative trajectory last June, with lending to households seeing the largest monthly decline since the height of the great financial crisis in late 2008. Uh-oh.

Periphery back in play? Very recently the second largest private bank in Portugal was caught in the bankruptcy of the Espirito Santo conglomerate, reporting the largest ever corporate loss in the country’s history just last Wednesday, and raising the specter that all might not be well in the Eurozone’s periphery. Now the Portuguese government may be forced to intervene, possibly using a very large chunk of the financial sector stabilization funds set aside during the country’s recent bailout.

BIS issues a(nother) warning. This should not be a surprise. In its 2014 annual report, released at the end of June, the Bank of International Settlements (“BIS”) warned that “banks that have failed to adjust post-crisis face lingering balance sheet weaknesses from direct exposure to overindebted borrowers and the drag of debt overhang on economic recovery”, with this situation being the most acute in Europe. It also stated that increases in government debt ratios in several cases appear to be on an unsustainable path. It appears that debt levels matter for (some) economists after all.

Bad loans rising. Before we had Fitch, the ratings agency, stating last May that in a sample of 124 Eurozone banks which participated in the latest stress test impaired loans increased by an average of 8% in 2013, with no less than 30 banks seeing an increase of 20%. This could have certainly contributed to the massive contraction in private sector credit that we are now seeing on its own. But there’s more.

Emerging dangers. Trillions more in fact. In February Reuters reported that European banks have loaned in excess of $3 trillion to emerging markets – a little less than the entire GDP of Germany, and more than four times the exposure of US lenders to those countries. Fitch chimed in saying that “a handful of large EU banks are materially exposed to more fragile emerging markets.” While direct risks might be manageable for these banks, any contagion might be another story. Is an Argentinean default truly contained? Are Turkey’s problems solved? What happens if the latest EU/US sanctions hit Russian banks or companies hard?

Where’s the capital? Another eye-opener came over a year ago. In April 2013, Jakob Vestergaard and María Retana at the Danish Institute for International Studies published “Smoke and Mirrors: On the Alleged Recapitalization of European Banks”, a report partially funded by the World Bank. The title says it all. According to the authors, by using broad capital measures based on risk-weighted assets European banking regulators have overstated the banks’ soundness and resilience in their stress assessments. Accordingly, “recent increases in risk weighted capital ratios have been little more than a smokescreen.”

By focusing on leverage ratios instead, the authors reached some interesting conclusions. The least well-capitalized banking sector among the larger Eurozone countries is not the Spanish or Italian… but the German, closely followed by the French! According to their estimates, a five-fold increase in equity capital is needed in order to reach “adequate” levels of soundness. It is well worth reading the entire report, including the discussion on why regulators seem to be consistently behind the ball on bank recapitalization.

Figure 1: Eurozone Government Debt-to-GDP (Maastricht Definition)
Source: European Central Bank

Sovereign debt jumps. But alarm bells should have been ringing even before that. In the third quarter of 2012, the overall government debt-to-GDP in the Eurozone surpassed 90% for the first time ever, as shown in the graph above. Why is this number important? In “Growth in a Time of Debt”, after analyzing 3,700 annual country data points going back centuries under the most varied macroeconomic conditions (and the occasional spreadsheet error ;), Carmen Reinhart and Kenneth Rogoff found that in countries which are above that 90% threshold GDP growth is generally weak. In other words, from that point on the odds are firmly stacked against us seeing the growth rates necessary to smoothly reduce debt loads that even the BIS agrees are problematic. And several Eurozone countries are way past that level now.

And who were the buyers of bonds in some of the most indebted periphery countries? In April 2012 Bloomberg reported that Spanish, Italian and Portuguese banks increased their holdings of domestic sovereign debt by very significant double digits, mostly financed by the ECB. Much to the chagrin of bond vigilantes, the ensuing decline in the bond yields of these countries virtually up until today might not be a sign of strength and stability – but rather an impressive feat of financial engineering.

That Minsky moment. Over two decades ago, Hyman Minsky described in his “Financial Instability Hypothesis” the interplay between the financial markets and the wider economy, which according to him is at the heart of the business cycle in a capitalist economy with a sophisticated financial system. During the good times increases in asset values often lead to investment and speculative excesses financed through debt. At some point the resulting cash flows can no longer cover those debts, impairing loans and prompting banks to tighten credit availability, even to companies with good credit ratings. This in turn leads to a contraction in asset values and economic activity in general.

And where are we now in the Eurozone? We have already seen the general increase in asset values, so check. And now we can also check bad debts rising and private sector credit contracting. If Minsky was right, what follows is not pretty.

Whether governments and central banks have the power to push back or avoid that fateful moment remains to be seen. But equity markets in Europe are already smelling a rat.

Figure 2: Ratio of Developed Europe Financial Services Stocks to FTSE Developed Europe Stock Index (Monthly)

The share prices of financial services companies in developed European countries have been lagging the general index for developed Europe for some months now, with the ratio dipping below its 10-month (simple) moving average last May – typically a bad omen for the sector and the markets in general.

With so many concerning signs developing since the last financial flare-up in the Eurozone, we can make the case that European banks should have been taking much more proactive steps in recapitalizing their balance sheets, especially with such robust equity markets. But it seems nobody likes to spoil a good party.

Alarm bells should not be dismissed so easily. They are there for a reason. Regulators, politicians, bank managers and investors should all be paying attention.




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Jackson Hole Will Signal Hawkish Tone for Financial Markets

By EconMatters  

 

Jackson Hole Agenda

 

The annual Jackson Hole economic symposium, a three-day conference in Wyoming begins on Aug. 21 with the official topic of “Re-evaluating Labor Market Dynamics.” Sure, there will be debates from the Bullard camp who views that there isn`t near as much labor slack in the economy versus  the Yellen camp who believes that the long-term unemployed will eventually come back to the economy once the job market tightens further. There will be interesting thoughts regarding the structural changes in the economy and how this effects full employment, and the mismatch between job requirements and candidate skillsets. There will be talk about wage inflation in the context of the largest addition of jobs since 1997 to the economy where even a bad employment number these days lands over the 200k a month level. 

 

2nd QTR GDP 4%

 

But make no mistake the data this week finally has pushed the Fed`s hand, and they are going to have to raise rates by the first quarter of 2015. Even the employment bears, you know those Wall Street types who want more free money from their favorite central bank so they can continue this charade that is borrow everything you can and invest with anything that has a yield pulse, can no longer play the GDP and Inflation card. I know we are producing record jobs this year, but we had a negative 2.9% GDP in the first quarter and it was more than bad weather and an inventory overhang issue from robust 3rd and 4th quarters of 2013.

 

Well this week we finally put that argument to rest as the first look at second quarter GDP came in at a robust 4%, with the first quarter being revised up from a negative 2.9% to 2.1%, so the economy basically grew at a 2% rate for the first half of the year with one of the worst winters on record, and the working off of 2013 inventories. This bodes well since the US economy, being a highly consumer driven economy, really kicks into high gear the second half of the year. A lot of this is based upon the Fall Back to School Spending cycle, companies needing to spend budgeted money or lose it, Tax Spending, the Holiday Shopping Season, the ramp up of college and pro sports football season, and milder weather conditions in the bulk of the country. In short, 2014 will grow at a faster pace than 2013 when all is said and done!

 

Employment Cost Index 0.7% 

 

The other interesting note this week in terms of data was on inflation where on Thursday The employment cost index (ECI) came out and showed a surge of 0.7 percent in the second quarter where pressure is evident in both the wages & salaries component, which jumped 0.6 percent in the quarter, and the benefits component which surged 1.0 percent. Furthermore, year-on-year rates all show significant acceleration and are near or above the general 2.0 percent policy threshold cited by the Federal Reserve. The total employment cost index is up 2.0 percent year-on-year vs 1.8 percent in the first quarter with wages & salaries at 1.8 percent, vs the first quarter’s 1.6 percent, and benefits at 2.5 percent vs 2.1 percent. 

 

So the CPI, PPI, and other inflation metrics in the various manufacturing and services reports are all signaling higher inflation it should be no surprise given a Fed Funds Rate between zero and 25 basis points since 2008, and now that the economy is actually producing jobs, and the labor market is tightening fast, that wage inflation is starting to perk up, and this is the next shoe to drop in the economic cycle.

 

The Fed is Behind the Curve

 

The Federal Reserve is already behind the curve, this is obvious as at no time in our history has the economy performed on this level with rates basically being held at ‘end of the world’ total meltdown levels! Sure Wall Street wants free money from Central Banks, this has been the easiest money making era of their lifetimes; now that rates will rise, they actually have to learn to differentiate between asset classes, companies, and investment strategies. This was what changed this week, these two important data points on GDP and Inflation put the nail in the ‘Free Money for Life’ coffin, and this sent shivers up the spine of financial markets! 


Market Turmoil 

 

The musical chairs game has already started in the high yield credit markets, the primary dealers are already signaling to the bond market that they don`t want to hold this paper, expect bond funds to finally get the message like the stampeding elephants that they are, and equity markets to start modeling valuations with a normalized borrowing cost for capital as interest rates rise early in 2015.

 

Hawkish Speech Outlining Turn in Monetary Policy

 

Look for a speech on Friday August 22nd by Janet Yellen where she officially signals the end of the ‘recession era’ ultra-dovish monetary malaise of the last 7 years with a more hawkish tone to signal to financial markets that they better start finding their respective chairs before the low interest rate music stops playing entirely. 

 

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Dollar Rally Set to Pause

The US dollar had looked like it was finally finding traction.  The euro was at its lowest level since last November.  Sterling, which had been a market darling, was pushed through its 100-day moving average for the first time since last August, falling about 2.25% since mid-July.  The dollar pushed through JPY103 to trade at its best level since April.  The Australian and Canadian dollars retreated to their lows from early June. 

 

A critical consideration behind the dollar’s advance was that the Fed’s mandate of full employment and price stability were being approached more rapidly than many, including Fed officials had anticipated.  The recent data prompted spurred speculation of a more hawkish Yellen at the Jackson Hole confab late this month and increased risk that that the first rate hike is delivered earlier (~Q1 15) rather than H2 15.  

 

However, the July employment data did not confirm an acceleration of the economy.   While overall job growth was in excess of 200k for the sixth month, it was flattered by government jobs.  The private sector added the least amount of jobs since January.  More telling for the Federal Reserve than the tick up in the unemployment rate was the fact that hourly earnings were flat.   In the FOMC statement, the Fed recognized the downside risks to inflation had been reduced, but still highlighted the “significant” slack in the labor market.  There seemed little in July employment report to change their minds.  

 

The July jobs data stopped the dollar’s rally in its tracks.  It now appears poised to consolidate its recent gains, and that consolidation phase will translate into a somewhat weaker greenback.  The Dollar Index rallied from 79.74 to 81.57 in July.  The RSI and Stochastics have turned down, though the MACDs haven’t.  The downside target is 80.60-80.95.  

 

The speculative market has amassed a large short euro position.  The euro fell from $1.37 at the start of July to just below $1.3370 on July 30.   The RSI has turned up, and the MACDs look poised to cross over the next couple of sessions.   The slow Stochastics are also about to turn higher.  Although the initial retracement objective comes in near $1.3470, we suspect the bottom of the old $1.35-$1.37 range is more significant.  A break of the $1.3365 area would signal a new leg down, with the initial target near $1.3230. 

 

In the second half of last week, the dollar traded a little above JPY103, which is the upper end of the greenback’s  three-month trading range.  It failed to close above that threshold and appears likely to consolidate, with initial support near JPY102.35 and then JPY102.00.  The yen did not appear to respond much to the equity market swoon, but does still seem to be responsive to US yields.  

 

The jump in the 10-year yield from 2.45% to above 2.60% supported the US dollar, but the dramatic loss on July 31, followed by the disappointing employment report saw US yields pullback to 2.50%.  The dollar-yen exchange rate followed suit.  Yields are likely to consolidate in the week ahead.  

 

Whereas the euro’s decline was characterized by the accumulation of shorts, sterling’s fall has been driven by long liquidation.  Short-covering of the euro against sterling prevented cable from finding much traction in the otherwise softer US dollar environment post-jobs and pre-weekend.  While the technical indicators show risk of additional losses, the  sterling finished the week below the lower Bollinger Band (~$1.6860, which corresponds to the 100-day moving average), warning the short-term market may be over-extended.   The $1.6910-30 area may cap upticks.  Given that the economic data appears to be moderating, and the approaching Scottish referendum, new buyers may be deterred.  A break of $1.68 could spur another cent decline initially.  

 

The dollar-bloc currencies stabilized before the weekend, but both the Australian and Canadian dollars were the poorest performers of the week, losing almost 1% against the US dollar.  The Reserve Bank of Australia meets in the week ahead, and while no change in policy is widely anticipated, given the weakness in building approvals and terms of trade (import/export prices), the risk is the RBA tries talking down the currency, which even is about the 100-day moving average on a trade-weighted basis.  

 

The RBA will have two such opportunities next week: The central bank meeting (Aug 5) and the monetary policy statement (Aug 7).  That said, it is an important week for Australian economic data.  The calendar includes retail sales, trade and employment.  Initial resistance is seen near $0.9350.   The bottom of the four-month trading range is $0.9200, which is just above the 200-day moving average (~$0.9185).  

 

There is no compelling technical sign that the US dollar has topped out against the Canadian dollar, though by trading through the upper Bollinger Band, it appears stretched.   The greenback approach the June highs near CAD1.0960.  A break of its signals CAD1.1030-50.    Initial support is pegged near CAD1.0870.  

 

The Mexican peso was the weakest currency last week, losing 2% against the US dollar.  The dollar though MXN12.26 briefly, which is the highest it has been since March.  Many had expected that the peso would have been more resilient given the number and depth of economic linkages.  The catalyst may have been market positioning.  

 

The dollar appears stretched against the peso as it traded roughly 3-standard deviations above the 20-day moving average (Bollinger Band is +/- 2 standard deviations).  Although this takes place more than normal distribution would imply, it is still a fairly rare event.  It is the second or third time this year.    Consolidation usually follows.  Initial dollar support is seen  near MXN13.15 and then MXN13.10. 

 

Last week we noted that after making record highs on July 23 (almost 1985), the S&P 500 gapped lower on July 24.  We identified this as an important gap.  The attempt to fill it at mid-week failed, sending the index down 2.3% in the final two days of the week.  This is the biggest two-day decline since April. It too traded beyond 3-standard deviations from its 20-day moving average.   The short-term market is over-sold, but the technical condition has deteriorated and the five-day moving average crossing below the 20-day for the first time since May.  Resistance is seen in the 1942-1950 area.  

 

 

Observations  from the speculative positioning in the futures market:

 

1.  As the currencies moved out of familiar ranges, speculative activity in the futures market picked-up.  There were two significant gross position (more than 10k contracts) adjustments in the Commitment of Traders report ending July 29.  The first is that the gross short euro position rose 17.7k contracts to 164.6k.  It grew by around 50% over the course of July to stand at a two-year high.  The second significant position adjustment was the 15k contract increase in the gross short yen position to almost 81k.  The gross short yen position had been trending lower, and before this reporting period, it had fallen to the lowest level since before Abe was elected Prime Minister of Japan.

 

2.  The speculative participants generally added to the short foreign currency futures positions in the most recent week.  There were two exceptions:  the Australian and Canadian dollars.  However, what was really happening there was that participants, both longs and shorts, moved to the sidelines.  Many observers who simply focus on the net figures will see that the net long position in both increased.  They will wrongly conclude the market got longer, but the increase in the net long position was a function of shorts being covered more than longs were liquidated.

 

3.  In a somewhat similar fashion, the net long sterling position fell (to 24.9k contracts from 27.5k), but the gross long position grew by 3.6k contract to 75.4k.  It is still larger than the gross long euro, yen and Swiss franc positions combined.

 

4.  The net short speculative position in the 10-year US Treasury note futures fell to 5.8k contracts from 38.2k.  This was largely a function of short covering.  The gross short position fell 26.5k contracts to a little more than 479k contracts.  The gross longs edged 5.8k higher to 473.3k contracts.




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First Ever Ebola Case On US Soil As Patient Lands In Atlanta; CDC Urges Calm – Live Feed

A plane carrying Dr. Kent Brantly, the American doctor who contracted Ebola while treating patients in West Africa, landed at Dobbins Air Reserve Base in Marietta, Georgia, at around 11am this morning – the first ever case of Ebola on US soil. He is being escorted to Emory Hospital under police escort. His colleague Nancy Writebol will arrive later on a separate flight as the planes are equipped to deal with one quarantined patient at a time. As ABC reports, both are listed in "serious but stable condition." The CDC's director explained the infected patients pose little risk to others, adding "these are American citizens. American citizens have a right of return. I certainly hope people’s fear doesn’t trump their compassion." What is perhaps raising that fear among Americans (and frankly the world after yesterday's WHO warning of "high risks of spread to other countries") is the fact that, as Reuters reports, more than 100 health workers fighting Ebola have contracted it themselves.

Live Feed of arrival…

 

 

 

 

As ABC reports, this is the first time the Emory Hospital unit will house patients who are truly infected with a dangerous disease.

Samaritan's Purse confirmed that Dr. Kent Brantly was the first American patient to be evacuated from Liberia aboard a private air ambulance. The flight landed about 11 a.m. Saturday.

 

 

Brantly and Nancy Writebol, an aid worker, will be treated at a specialized unit at Emory University in Atlanta.

 

Both Brantly and Writebol are listed in "serious but stable condition," according to Samaritan's Purse, the aid group Brantly for which worked. Writebol is expected to arrive in the U.S. early next week.

 

Brantly and Writebol worked at a hospital in Liberia. He's the first patient infected with Ebola to be on U.S. soil.

The NY Times explains the treatment…

“The reason we are bringing these patients back to our facility is because we feel they deserve to have the highest level of care offered for their treatment,” Dr. Bruce S. Ribner, an infectious disease specialist at Emory who will be involved in their care, said at a Friday afternoon news conference.

 

 

“We depend on the body’s defenses to control the virus,” he said. “We just have to keep the patient alive long enough in order for the body to control this infection.”

And precautions…

“From the time the air ambulance arrives in the metropolitan Atlanta area, up to and including being hospitalized at Emory University Hospital, we have taken every precaution that we know and that our colleagues at the C.D.C. know to ensure that there is no spread of this virus pathogen,” he said.

But fear remains…

The director of the disease centers, Dr. Thomas R. Frieden, agreed that the patients posed little risk to others. And he added: “These are American citizens. American citizens have a right of return. I certainly hope people’s fear doesn’t trump their compassion.”

And perhaps rightly so as Reuters reports up to 100 health workers have been infected while treating Ebola patients… As The American Dream's Michael Snyder notes, something is different this time

This is the worst Ebola outbreak in recorded history, and this particular strain appears to be spreading much more easily than others have.  So far, 1,323 people have been infected in the nations of Guinea, Liberia, Nigeria, and Sierra Leone.  Of those 1,323 victims, a whopping 729 of them have died.  But a number that is even more alarming was buried in the middle of a Reuters report on Friday.  According to Reuters, “more than 100 health workers” that have been fighting Ebola in Africa have contracted the virus themselves.  Considering the extraordinary measures that these health workers take to keep from getting the disease, that is quite chilling.  We are not just talking about one or two “accidents”.  We are talking about more than 100 of them getting sick.  If Ebola is spreading this easily among medical professionals in biohazard body suits that keep any air from touching the skin, what chance are the rest of us going to have if this virus gets out into the general population?

In case you are tempted to think that this could not be possible and that I am just exaggerating, here is the relevant part of the Reuters article that I was talking about…

More than 100 health workers have been infected by the viral disease, which has no known cure, including two American medics working for charity Samaritan’s Purse. More than half of those have died, among them Sierra Leone’s leading doctor in the fight against Ebola, Sheik Umar Khan, a national hero.

This has the potential to be the greatest health crisis of our lifetimes.

But don’t just take my word for it.  The following is what the head of the World Health Organization, Dr. Margaret Chan, just told the press about the disease

“If the situation continues to deteriorate, the consequences can be catastrophic in terms of lost lives but also severe socio-economic disruption and a high risk of spread to other countries.”

That certainly doesn’t sound good.

Remember, there is no vaccine for Ebola and there is no cure.

Most of the people that get it end up dying.

And right now even our most extreme containment procedures are failing to keep health workers from contracting the disease.

I put the following quote in an article the other day, but I think that it is worth repeating.  The health professionals that are on the front lines of the Ebola fight in Africa are going to extraordinary lengths to keep from getting the virus…

To minimise the risk of infection they have to wear thick rubber boots that come up to their knees, an impermeable body suit, gloves, a face mask, a hood and goggles to ensure no air at all can touch their skin.

 

Dr Spencer, 27, and her colleagues lose up to five litres of sweat during a shift treating victims and have to spend two hours rehydrating afterwards.

 

They are only allowed to work for between four and six weeks in the field because the conditions are so gruelling.

 

At their camp they go through multiple decontaminations which includes spraying chlorine on their shoes.

But those precautions are not working.

More than 100 of them have already gotten sick.

So why is this happening?

Nobody seems to know.

Like I said, something is different this time.

A top Liberian health official has already stated that this outbreak is “above the control of the national government” and that it could easily develop into a “global pandemic”.

It is absolutely imperative that this disease be contained until experts can figure out why it seems to be spreading so much more easily than before.

But instead, health officials are beginning to ship Ebola patients all over the planet.

In fact, two American health workers that have contracted Ebola are being shipped to a hospital in Atlanta

Two American medical missionaries diagnosed with the deadly Ebola virus in Liberia could be back in the USA next week for treatment at a special medical isolation unit at Atlanta’s Emory University Hospital, the U.S. State Department said Friday.

The State Department did not name the two individuals, saying only that the Centers for Disease Control and Prevention was facilitating their transfer on a non-commercial flight and would “maintain strict isolation upon arrival in the United States.”

 

One is to arrive Monday in a small jet outfitted with a special, portable tent designed for transporting patients with highly infectious diseases. The second is to arrive a few days later, said doctors at Atlanta’s Emory University Hospital, where they will be treated.

Could this potentially spread the virus to our shores?

I am sure that they are taking as many precautions as they can.

However, even if those patients do not spread the disease to this country, the reality of the matter is that it will always be just a plane ride away.  All it takes is for one person carrying the virus to get on one plane.

And if Ebola does start spreading in the United States, it could change life in this nation almost overnight.

We could very easily see forced quarantines and draconian restrictions on travel.  For much more on this, please see my previous article entitled “This Is What Could Happen If Ebola Comes To The United States“.

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Finally, since every crisis and tragedy has an opportunistic silver lining, and "can't be put to waste," those who prefer to see the Ebola epidemic as opening avenues of profitability are encouraged to read the following article on a Canadian company which just may be the next CYNK, especially if the Ebola crisis does indeed spread away from "only" Africa.




via Zero Hedge http://ift.tt/1AL4Y66 Tyler Durden