Kurt Loder Reviews The Spy Who Dumped Me: New at Reason

This might have been a stylish little spy movie. Not a lot of expense has been spared in flying cast and crew around the usual photogenic precincts of Europe (Vienna, Berlin, Amsterdam, Prague), and some of the action stuff—especially a frantic shootout in a Viennese café—is clearly the work of top-drawer professionals.

But The Spy Who Dumped Me isn’t a spy movie—not really. There’s no charismatic secret-agentry on display, and no likable lunatic villainy, either. And the plot, involving yet another world threat from yet another hazy terrorist organization, is uninteresting even by genre standards, writes Kurt Loder in his latest review for Reason.

View this article.

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China Nukes Yuan Shorts After PBOC Raises FX Fwd Reserve Requirement To 20%

In the clearest signal yet that the PBOC is drawing a “red line” to further currency devaluation, moments ago the PBOC announced it is raising the reserve requirement for FX forwards to 20%. 

As the PBOC notes, “due to factors such as trade frictions and changes in international exchange markets, there have been some signs of procyclical fluctuations in the foreign exchange market.” As a result, the move is “aimed at preventing macro financial risks” with the central bank adding that it will “take counter cyclical measures to keep FX markets basically stable based on market conditions.” The new forward foreign FX risk reserve requirement will become effective as of Aug. 6th.

Stated much simpler, what the PBOC is doing is trying to force a massive FX market short squeeze.

Full statement below (google translated):

The People’s Bank of China decided to adjust the foreign exchange risk reserve ratio of the forward sales business to 20%.

Since the beginning of this year, the foreign exchange market has been operating steadily. The RMB exchange rate has been based on market supply and demand. There has been a rise in the market, the flexibility has been significantly enhanced, the market expectation has been basically stable, and cross-border capital flows and foreign exchange supply and demand have been generally balanced. Recently, due to factors such as trade frictions and changes in international exchange markets, there have been some signs of procyclical fluctuations in the foreign exchange market. In order to prevent macro financial risks, promote the stable operation of financial institutions, and strengthen macro-prudential management, the People’s Bank of China decided to adjust the foreign exchange risk reserve ratio of forward sales from 0 to 20% from August 6, 2018. In the next step, the People’s Bank of China will continue to strengthen the monitoring of the foreign exchange market. According to the development of the situation, it will take effective measures to carry out countercyclical adjustments, maintain the smooth operation of the foreign exchange market, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

Today’s move is a mirror image of what the PBOC announced on September 8, 2017 when the Yuan tumbled after the PBOC cut its FX reserve requirement from 20% to 0%, sending the Yuan tumbling after the currency had hit its highest level in years. Back then, the offshore Yuan tumbled from 6.45 to below 6.51 in hours…

Obviously the reversal of this move would have just as dramatic a move in the opposite direction, and sure enough, after hitting a one year low of 6.91 against the dollar, the CNH has surged massively, rising as high as 6.825 before finding some support.

And yet, as some traders already noted, there will be a cost to China in terms of the impact of what is effectively policy tightening will have on domestic liquidity.  Specifically, as Citi notes, “the local economy and asset markets will struggle to cope with that and it is not a sustainable policy.”

And while Trump may be content that for now, at least, the PBOC has finally drawn a real line in the sand for further devaluation, he will be double happy that China no longer will permit Yuan devaluation as a currency war response to rising tariffs, effectively handing Trump leverage in the trade war, if only for the time being.

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“More Pain Ahead”: Wilbur Ross Says Trump Will Put More Pressure On China “To Modify Their Behavior”

Chinese stocks slumped overnight as trade war tensions escalated after Wilbur Ross said there’s more pain ahead unless China changes its economic system, as Beijing repeated it will never surrender to U.S. trade threats.

“We have to create a situation where it’s more painful for them to continue their bad practices than it is to reform,” Commerce Secretary Wilbur Ross said in an interview on Fox Business Network late on Thursday. As a result, Trump will keep turning up the pressure on China for as long as the country refuses to level the economic playing field, Ross said.

Pointing out the obvious, Ross said that “the reason for the tariffs to begin with was to try and convince the Chinese to modify their behavior. Instead they have been retaliating. So the president now feels that it’s potentially time to put more pressure on, in order to modify their behavior.

As for the impacts on the US economy, Ross noted that a 25% levy on $200bn is $50bn per year on a $18 trillion economy, so even if the levy was passed, “it’s not something that’s going to be cataclysmic”.

Elsewhere Bloomberg cited unnamed US officials who noted that the US is open to new formal talks with China, but Beijing must agree to open its market to more competition and stop retaliatory measures.

Ross’ comments follow a statement by China’s Ministry of Commerce which noted that “China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries,” China’s Ministry of Commerce said in a statement Thursday on its website. The “carrot-and-stick” tactic won’t work, it said.

Elsewhere, a member of its State Council Wang Yi said “we hope that those directly involved in the US trade policies can calm down…”

Indeed, along with its pledge to fight back, China also left the door open for a resumption of negotiations. “China has consistently advocated resolving differences through dialogue, but only on the condition that we treat each other equally and honor our words,” the ministry said.

Trump said last month that he’s willing to impose tariffs on every good imported from China, which totaled more than $500 billion last year. American companies, industry and consumer groups have pleaded with the administration to avoid tariffs, saying they could raise their costs and eventually lead to price hikes for consumers.

So, as DB’s Jim Reid notes, “lots bubbling along till the end of the public comments period in the US on 5th September.”

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Markets On Edge As Italian Bonds Slide, Yuan Plunge Hits A Record; Payrolls Loom

World stocks traded mixed on Friday, with risk appetite dampened despite Apple crossing a $1 trillion market cap and boosting tech stocks around the globe, after Wilbur Ross warned there’s “more pain ahead” unless China changes its economic system adding to trade war tensions, pushing the Yuan as low as 6.91 after the lowest PBOC fixing since May 2017. And while there were no fireworks in Japanese bonds overnight for the first time in a week, this time it was Italian bonds that tumbled with 10Y BTP yields rising briefly above 3% ahead of a budget meeting between the country’s populist leaders and the finance minister. The MSCI All-Country World Index was down by 0.1% after the start of European trading, and set to break a four-week streak of gains.

S&P 500 and Dow Jones index futures were both flat ahead of the U.S. jobs report, which is expected to show unemployment ticking modestly lower. The Stoxx Europe 600 Index advanced for the first time in three days, powered by a rally in autos, tech and banking stocks after Credit Agricole SA beat earnings estimates while RBS announced its first dividend in 10 years.

Italian bonds slumped for the third day as Italy officials are set to meet on the budget today where populist leaders Di Maio and Salvini have pushed “Tria’s back to the wall” with their budget requests, according to La Stampa. Italin 10 year yields broke above 3 percent for the first time in nearly two months following a report by La Stampa newspaper that the gathering would take place at 11 a.m. Economy Minister Giovanni Tria is under pressure from the government’s populist leaders to raise spending and challenge European Union budget rules. The possibility that he might be forced to resign has investors worried that Italy could go on a spending binge, or even that fresh elections could follow. That in turn could strengthen the hand of the eurosceptic League party and its leader, Matteo Salvini.

“Clearly, this is about the fear that Tria gets kicked out, which could lead to a collapse of the government, new elections, and the League gaining even further,” said Commerzbank strategist Christoph Rieger. “Or it may mean that they agree on a budget that’s at odds with the EU,” which would imply heavier borrowing and greater bond supply.

Yields on 10-year government debt rose as much as 19 basis points to 3.10%, rising above 3% for the first time since June 11 with the spread over those on their German peers rising 20 basis points to 264 basis points. While Italian bank stocks fell 0.8% on the yield rise, set for their worst week since early June, the consequences of the BTP selling – which was compounded by a lack of liquidity – have been largely contained to Italy, with European stocks ignoring the potential fallout from today’s meeting.

Earlier in Asia, despite Wall Street’s tech-led rally, gains were capped by the trade tensions. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.05% though it was down over half a percent on the week. Hardest hit again was China’s stock market, as the Shanghai Composite dropped another 1%, approaching one month lows.

It has been a week for notable inflection points, and one day after Apple surpassed the $1 trillion market cap, China also lost its ranking as the the world’s #2 stock market to Japan.

Meanwhile, the all important Chinese devaluation – which as a reminder if Beijing’s currency war response to Trump’s trade war – continued apace, when the PBOC weakened its daily reference rate by 0.56% to 6.8322, lowest level since May 2017. As a result, the onshore yuan is headed for an eighth week of declines, the longest stretch of weekly losses since the start of China’s modern foreign exchange regime began in 1994, amid speculation policy makers would tolerate currency weakness as China-U.S. trade tensions worsen. The offshore Yuan was also poised for an eighth straight week of losses, longest such streak on record; currency falls 0.10% to 6.8897 per dollar, after sliding as low as 6.9127, and is set for 1.2% weekly loss.

Elsewhere in FX, the dollar hit its highest in over three weeks, holding extending sharp gains made the previous day and holding above 95.000. The pound was set for its longest stretch of weekly losses since 2015 as investors looked past the Bank of England’s rate hike on Thursday and focused on Brexit risks. The euro dipped and Italian bonds slumped for a third day as core European debt gained with Treasuries

Elsewhere, Turkey’s lira, bonds and stocks extended their slide after the U.S. imposed sanctions on two government ministers over the detention of an evangelical pastor.

With the trade tensions encouraging demand for safe haven assets, the 10-year U.S. Treasury note yield pulled back to 2.9729% from a 10-week high above 3% hit midweek. The 10-year Treasury yield had hit the peak partly due to a surge in Japanese government bond yields to 1-1/2-year highs this week as the market tested the Bank of Japan’s rejigged policy framework. However,

Trump’s unpredictability on trade has kept markets on the back foot for the second earnings season in a row, even against the backdrop of a mostly positive earnings season and an upbeat assessment from the Fed earlier this week. Of the 397 S&P 500 companies that have already reported earnings this season so far, about 82% managed to beat analysts’ estimates, higher than the 72% beats seen during the same quarter last year.

Investors were also cautious before the July U.S. jobs report due later in the day. This will give a reading on the health of the world’s largest economy, now in its second longest expansion on record. Consensus expectation is that 190,000 jobs were created in July (see full preview here).

“The stock market trend continues to be characterized by a struggle between trade war distress, growth risks and strong corporate Q2 reports,” SEB analysts wrote in a note to clients. According to Bloomberg, mentions of tariffs in S&P 500 company earnings reports for the second quarter have more than doubled from the first quarter of this year.

In commodities, oil prices eased back slightly after the previous day’s rally, which was driven by an industry report suggesting U.S. crude stockpiles would soon decline again after a surprise rise in the latest week. Brent crude futures were down 0.4 percent at $73.17 a barrel after surging 1.5 percent on Thursday. Copper on the London Metal Exchange slipped half a percent to $6,107 per tonne. With trade tensions hurting demand, the industrial metal was down 2.8 percent for the week.

Expected data include trade balance, non-farm payrolls, and of course unemployment, and PMIs. Berkshire, Dish, Kraft Heinz, and Noble Energy are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures little changed at 2,826.75
  • STOXX Europe 600 up 0.3% to 387.84
  • MXAP down 0.3% to 164.82
  • MXAPJ unchanged at 532.33
  • Nikkei up 0.06% to 22,525.18
  • Topix down 0.5% to 1,742.58
  • Hang Seng Index down 0.1% to 27,676.32
  • Shanghai Composite down 1% to 2,740.44
  • Sensex up 0.9% to 37,495.42
  • Australia S&P/ASX 200 down 0.1% to 6,234.78
  • Kospi up 0.8% to 2,287.68
  • German 10Y yield fell 4.3 bps to 0.417%
  • Euro down 0.1% to $1.1573
  • Brent Futures down 0.3% to $73.20/bbl
  • Italian 10Y yield rose 12.2 bps to 2.643%
  • Spanish 10Y yield fell 0.3 bps to 1.454%
  • Brent futures down 0.4% to $73.13/bbl
  • Gold spot little changed at $1,207.30
  • U.S. Dollar Index little changed at 95.25

Top Overnight News

  • The yuan closed in on the key milestone of 7 per dollar, a level it hasn’t weakened past in more than 10 years. The level is seen as significant as it could be the point where China steps in to arrest the decline for fear further sharp losses could prompt selling and capital outflows, according to analysts
  • Commerce Secretary Wilbur Ross signaled there’s more pain ahead unless China changes its economic system. The Asian nation repeated it will never surrender to U.S. trade threats
  • A U.K. business lobby called on Prime Minister Theresa May’s government to urgently publish its guidance for a no-deal Brexit scenario, as a survey of executives found less than a third have done any contingency planning
  • China’s currency headed for an eighth weekly decline, the longest run since the start of the country’s modern foreign-exchange rate regime in 1994
  • A bipartisan group of senators introduced legislation to impose new sanctions on Russia for interfering in U.S. elections, including penalties affecting Russian sovereign debt and energy projects, and requiring a report on President Vladimir Putin’s assets and net worth
  • The Bank of Japan’s move to allow the 10-year government bond yield to trade higher may mean increased borrowing costs for local companies planning to tap yen debt markets
  • Donald Trump’s anger with Robert Mueller’s alleged conflicts dates to when the U.S. president interviewed him for the job of FBI director in May of last year. The next afternoon, Trump was in another Oval Office meeting when an aide interrupted with news that Mueller had taken a different post: special counsel to investigate his presidential campaign. Trump and Attorney General Jeff Sessions, who attended both meetings, were blindsided, according to a person familiar with the two meetings
  • Turkish inflation quickened less than forecast last month but price pressures are still building, giving policy makers little room to relax

Asian equity markets traded mixed as the momentum from US, where most majors gained and tech outperformed as Apple became the first ever to reach USD 1tln in market cap, was eventually dampened ahead of today’s NFP jobs figures and a further PMI miss from China. ASX 200 (-0.1%) and Nikkei 225 (+0.1%) both opened higher in which tech names in  Australia revelled in the strength of their US peers and Apple’s historical feat, while Tokyo trade remained earnings-oriented. Sentiment then slightly deteriorated as China entered the fray and Caixin Services PMI missed estimates to add to the nation’s streak of disappointing PMI releases for July. The weak data and ongoing trade concerns weighed on Hang Seng (-0.2%) and Shanghai Comp. (+0.1%) from the open, although the latter recovered to trade relatively flat. Finally, 10yr JGBs were flat in the first signs of stability after the BoJ’s more flexible policy approach earlier this week, while the Rinban announcement also failed to spur price action as the BoJ kept purchases of 5yr-10yr JGBs inline with yesterday’s unscheduled announcement. PBoC skipped open market operations for a net weekly drain of CNY 210bln vs. last week’s CNY 370bln net drain. (Newswires) PBoC set CNY mid-point at 6.8322 (Prev. 6.7942)

Top Asian News

  • Turkey’s Slower-Than-Expected Price Gains No Reason to Celebrate
  • Tata Is Said to Get $1.3 Billion India Bill to Close Phone Deal
  • A Massive Losing Bet on Bitcoin Futures Has Investors Buzzing

European equity markets have opened the day higher as the focus remains on earnings. The AEX (+0.5%) is the outperforming bourse buoyed by the news of Heineken’s (+2.3%) USD 3.1bln tie-up with China Resource Beer. The DAX (+0.5%) is also performing well after a positive earnings report from Allianz (+0.7%), but the bourse is finding resistance at its 100DMA of 12,573.54. RBS (+3.0) is up after news within their positive earnings report that they are set to pay their first dividend in over a decade. William Hill are down over 7% after the betting co. reported a pre-tax loss for H1 as  a result of the new laws on betting terminals.

Top European News

  • Italy Yield Tops 3% Before Budget Meeting as Bonds Extend Slump
  • Italian Industrial Output Showed Annual Slowdown in June
  • Eurozone Economy Enters Third Quarter With No Pickup in Sight
  • Investors Doubt Dovish Czech Rate Outlook With Bets on Hikes

In FX, the Dollar remains in the ascendency, albeit off best levels, but NFP will likely determine the next big move, and especially wages after Wednesday’s broadly upbeat assessments of the economy. GBP – The Pound has extended its post-BoE declines as Governor Carney underlined benign if not outright dovish policy guidance during a BBC radio interview and also expressed discomfort about growing risk of a no deal Brexit. Cable dropped below 1.3000 in response and was hardly helped by a relatively big UK services PMI miss, but stopped just short of the 2018 base around 1.2960 at 1.2975. EUR/JPY – The single currency has also relinquished another big figure level vs the Usd and has seriously tested a key 1.1575 Fib after mostly softer than expected Eurozone services PMIs and retail sales. For the record, 1.1510 is the  low so far this year. Usd/Jpy extremely restrained between 111.80-60 and flanked by hefty option expiries at 112.00 (1.8  bn) and 110.90-111.00 (1.3 bn), plus 1 bn from 111.40-50. TRY – The Lira slumped to fresh all time lows vs the Usd yet again (5.1125) before gleaning a degree of comfort from not so inflated CPI readings and reports that a meet between US Secretary of State Pompeo and Turkey’s Foreign Minister was constructive – Usd/Try currently around 5.0800.

In commodities, both WTI and Brent are seeing mild profit taking ahead of the weeks end, with WTI breaking through its 50DMA to the downside in early European trade, currently trading at USD 68.59, with news that China’s Unipec is suspending imports of US crude oil on growing trade tensions between Beijing and Washington failing to offer support. In the metals scope, Gold is essentially flat, with traders holding off ahead of the US employment report later in the day, but is languishing around a 1 year low, with the yellow metal heading for its 4th weekly loss. Silver is also heading for its 8th weekly decline amid trade tensions, and set for its longest consecutive decline since late 2000. OPEC July crude output up 340k BPD at 32.66mln BPD, compliance is at 105%, Saudi Arabian output near an all-time high, Kuwaiti, UAE and Iraqi output at its highest since December 2016, Iran at its lowest since January 2017, as according to Platts.

In terms of the day ahead, the July employment report in the US is due in the afternoon. Elsewhere in Europe the final services and composite PMIs are also due along with June retail sales for the Euro area. In the US, the other data includes the final July services and composite PMI prints along with July ISM non-manufacturing composite. Berkshire Hathaway will report its Q2 earnings. In Southern Europe the temperature will possibly get close to 48 degrees C today and tomorrow in some parts.

US Event Calendar

  • 8:30am: Trade Balance, est. $46.5b deficit, prior $43.1b deficit
  • 8:30am: Change in Nonfarm Payrolls, est. 193,000, prior 213,000
    • Unemployment Rate, est. 3.9%, prior 4.0%
    • Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
    • Average Hourly Earnings YoY, est. 2.7%, prior 2.7%
    • Average Weekly Hours All Employees, est. 34.5, prior 34.5
    • Labor Force Participation Rate, prior 62.9%
  • 9:45am: Markit US Services PMI, est. 56.2, prior 56.2
  • 9:45am: Markit US Composite PMI, prior 55.9; ISM Non-Manf. Composite, est. 58.6, prior 59.1

DB’s Jim Reid concludes the overnight wrap

If Apple could come up with iNanny I think they’d be the first $10 trillion company. For now they have to make do with being the first trillion dollar US company after yesterday’s +2.92% climb. For the record US Steel was the first to hit $1bn in 1901. It then took 54 years for GM to be the first to $10bn in 1955, another 32 years for IBM to reach $100bn in 1987  and now 31 years for the latest landmark. For the record Microsoft was the first $500bn company in 1999.

Apple’s landmark coincided with a tech-led rebound after a soft Asian/European session. The S&P 500 opened -0.60% on the latest overnight trade escalations but then climbed all day and closed +0.49% led by IT (+1.37%). The NYFANG index also closed +2.93%.

A common theme in recent weeks is for Asia and Europe to struggle on trade war headlines but for the US to break the shackles and shrug off any weakness and recover. DB’s Oli Harvey put out a blog highlighting that in the latest S&P market attributes report for June, it was noted that US share buybacks hit $189 billion in Q1, surpassing their previous record in Q3 2007. Buyback and decent earnings are continuing to allow the index to defy trade war gravity although the fact that we’ve been range trading since the end of January suggests that the tug of war (trade vs buyback/earnings) hasn’t necessarily seen a clear structural winner as yet.

In reality the US equity market has struggled to break out on the upside since payroll Friday brought us the vol shock 6 months ago this week. Average hourly earnings haven’t really broken out after the spike that day, but they remain a crucial part of the employment report out today on what could be the hottest day ever in some parts of Europe. Good luck keeping cool if you’re in one of those affected areas. In terms of expectations, market consensus is for a 193k  payrolls print which compares to the above market 213k in June, while the unemployment rate is expected to nudge down one-tenth to 3.9%. The earnings data should be the main focus though with average hourly earnings expected to come in at +0.3% mom. Our US economists are forecasting the same for earnings which would keep the annual rate steady near +2.75% yoy. Our team are slightly below market on payrolls at 180k but that’s still more than indicative of the ongoing tightening in the labour market. So all eyes on that at 1.30pm BST.

Going into payrolls this morning in Asia, markets are trading mixed with the Nikkei (+0.14%) and Kospi (+0.52%) up modestly while the Hang Seng (-0.13%) and China’s CSI300 (-0.49%) are both weaker. Meanwhile 10y JGB yields are slightly lower while the Chinese Yuan is c0.4% weaker and heading for an eighth weekly decline – the longest streak since 1994. As for data, the July composite PMIs for China (Caixin) and Japan (Nikkei) have both eased modestly from June, printing at 52.3 (vs. 53.0 previous) and 51.8 (vs. 52.1 previous) respectively.

The moves this morning follow a fairly turbulent Asian/European session in markets yesterday as markets deliberated the latest US-China tariff threat. Europe initially followed Asia in selling off from the get-go with the likes of the DAX (-1.50%) falling by the most since early July. Europe didn’t rally much into the close as the US recovered well from opening losses.

Bonds were a bit more of a sideshow with Treasuries (10y -2.0bps) edging back below 3.00% while Bunds were -1.7bp lower. It was hard to ignore the move for BTPs however where 2 year yields shot up +20bps for the biggest sell-off since June 21st. General negative risk sentiment appeared to play a part as did the absorption of some Spanish supply, however some uncertainty leading into a Budget meeting between Finance Minister Tria and Deputy PMs Salvini and Di Maio last night also seemed to be a factor.

Now turning to some of the US / China trade headlines. Yesterday China’s Ministry of Commerce noted that “China is fully prepared and will have to retaliate to defend the nation’s dignity….” while a member of its State Council Wang Yi said “we hope that those directly involved in the US trade policies can calm down…” On the other side, the US Commerce Secretary Ross seems to have maintained his stance as he told Fox news that “we’ve to create a situation where it’s more painful for them to continue their bad practices than it is to reform”. As for the impacts on the US economy, Mr Ross noted that a 25% levy on $200bn is $50bn per year on a $18trn economy, so even if the levy was passed, “it’s not something that’s going to be cataclysmic”. Elsewhere Bloomberg cited unnamed US officials who noted that the US is open to new formal talks with China, but Beijing must agree to open its market to more competition and stop retaliatory measures. So lots bubbling along till the end of the public comments period in the US on 5th September.

As for the last central bank meeting of the week, we have to admit the market reaction to the afternoon BoE meeting was a bit of a headscratcher. There was certainly no surprise in the decision itself to raise the Official Bank Rate 25bps to 0.75% and the highest since 2009 although you could argue that the 9-0 unanimous decision by the MPC was more hawkish than what the market expected. The CPI forecasts were similar to the May projections for this year and next despite the softer CPI data recently while the statement also continued to emphasize labour market tightness. The R* was estimated at between 2% and 3% but caveated by de-emphasizing it from the forward guidance and also stating that the near term neutral rate is likely to be lower. Governor Carney’s press conference itself was mostly uneventful also with the Governor reiterating emphasis on a tightening labour market and also mentioning a pickup in unit labour cost  growth.

So in light of the above it was a bit of a surprise to see Sterling drop -0.84% yesterday versus the Greenback, while Gilt yields also headed south with 10y yields in particular down over 5bps from their intraday highs at one stage, before selling-off a bit into the close to finish broadly unchanged. So markets certainly didn’t agree with the upbeat view and part of that view is perhaps based around the BoE’s assumption of a smooth Brexit – clearly still the big elephant in the room. Our UK economists viewed the minutes of the meeting and the latest Inflation Report to be on the hawkish side of expectations. However, they noted that a combination of rising uncertainty due to Brexit and slowing inflation should curb the BoE’s appetite for another move in rates this year. On the former, the Bank will want to get some view of the direction of progress with regards to Brexit talks before pulling the trigger on the next hike. Refer to their note for details.

Away from the BoE, yesterday’s economic data in Europe included a slightly higher than expected PPI reading for the Eurozone, which came in at 0.4% mom (vs. 0.3% expected) and lifted annual inflation to 3.6% yoy. Excluding energy, the increase in the index was a bit more restrained at 0.2% mom and 1.6% yoy. Meanwhile the July UK’s construction PMI rose 2.7pts mom to 55.8 (vs. 52.8 expected) – the highest since May last year. Over in the US, the June factory orders rose 0.3ppt mom to an in line print of 0.7% mom. The final readings on the June core durable goods and capital goods  orders were both revised lower to 0.2% (vs. 0.4% previous) and 0.2% (vs. 0.6% previous) respectively, although growth in capital goods still rose 7.8% yoy. Finally the weekly initial jobless (218k vs. 220k expected) & continuing claims (1,724k vs. 1,750k expected) were slightly lower than expectations and remain at low levels.

In terms of the day ahead, the July employment report in the US is due in the afternoon. Elsewhere in Europe the final services and composite PMIs are also due along with June retail sales for the Euro area. In the US, the other data includes the final July services and composite PMI prints along with July ISM non-manufacturing composite. Berkshire Hathaway will report its Q2 earnings. In Southern Europe the temperature will possibly get close to 48 degrees C today and tomorrow in some parts. All time records could be broken!! And to think here in the UK we have been moaning about temperatures in the low 30s of late!! Good luck.

via RSS https://ift.tt/2LRZDby Tyler Durden

Hey Mr. Juncker, About That Bean Order

Authored by Mike Shedlock via MishTalk,

Trump claims to have worked out a soybean deal with the EU. It was a lie. Let’s now look at kidney beans.

Trump’s tariff battle is shaking Wisconsin’s Chippewa Valley Bean Co., and rippling through to its clients, vendors and customers. The result: Kidney Beans Piled to the Rafters.

MENOMONIE, Wis.—After the U.S. slapped tariffs on European steel and aluminum in June, Europe hit back with a tax that, among other things, made American kidney beans 25% more expensive in Europe.

Now, Cindy Brown is running out of room to store kidney beans. One-ton bags of them cover the floors in her cavernous warehouses. Smaller sacks are piled on wood-pallet shelves. Beans fill tall steel bins that dot the grounds. Chippewa Valley Bean Co. had been on track to ship to Europe 60% of its beans traded internationally this year, worth $25 million. Now, “we’re just sitting on our hands,” said Ms. Brown, president of the family company.

Ms. Brown, Chippewa Valley’s president, said the company last month shipped nearly 40% less than what is typical for this time of year. She said 80 shipping containers’ worth of kidney beans, valued at a total of $2 million, are stuck in its warehouses as orders from Europe dry up.

Chippewa Valley handles one in four dark red kidney beans traded internationally, according to Randy Fairman, an agricultural consultant who specializes in dry beans. “If the tariffs hold, the near-term impact will be devastating to small businesses both in the U.S. and the EU,” Mr. Fairman said. “There is no place in the supply chain where a 25% tariff could be absorbed.”

Mercy Me, a Kidney Bean Glut

What is a Glut?

About that Bean Order

Lighthizer: Regarding Trump’s meeting with Juncker: “Our view is that we are negotiating about agriculture, period,” U.S. Trade Representative Robert Lighthizer told a Senate committee.

JunckerThe U.S. “heavily insisted to insert the whole field of agricultural products. We refused that because I don’t have a mandate and that’s a very sensitive issue in Europe,” Mr. Juncker told reporters right after the meeting.

Lies

There was no deal to do anything but stop the escalation of more tariffs. For discussion, please see Trump’s Lies Won’t Make Farmers Great Again: There Was No Deal on Agriculture.

Meanwhile, a glut of beans, all kinds, is stacking up.

Growing List of Companies Complaining

It’s safe to add the Chippewa Bean Company to the Growing List of Companies and Organizations Complaining About Tariffs

Political Backlash

Things are so bad, five Republican Senators openly complain about Trump’s policies. House Rep Mark Sanford called it “nightmare policy”. For discussion, please see Republican “Nightmare”.

My assessment that a Tariff Backlash Could Cost Republicans the Senate stands. For that to happen, the economy needs to slow and tariff madness continue, but both are possible if not likely.

Republicans losing the House over this is arguably more likely.

Overall Trade Assessment

US Trade Policy: Not Only are We Stupid, We are Hypocrites.

via RSS https://ift.tt/2MfSgXB Tyler Durden

American Women Have Never Been More Miserable Relative To Men

A measure of confidence among American men climbed to an almost 18-year high last week, widening the spread between men and women to the most since records began according to the Bloomberg Consumer Comfort Index.

The last time American women were this miserable relative to American men was December 2006 – which coincided with the release of the Nintendo Wii in America?!

The only other time the male-female comfort divide was this wide was in Nov 1994 – coinciding with former US President Ronald Reagan announcing he had Alzheimer’s disease.

So with female unemployment at record lows, what could women possibly have to complain about? Bloomberg reports that underlying the gender gap are two factors: Women are more likely than men to be Democrats and less likely to have incomes exceeding $100,000. Republican affiliation and higher earnings correlate with higher comfort scores, according to the report.

Here, this might help…

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Lost In A Brexit Maze: Baffled Political Class Dreads The Prospect Of Jeremy Corbyn

Authored by Alexander Mercouris via ConsortiumNews.com,

The British Establishment wants to protect the expanded privileges it inherited from Margaret Thatcher’s neoliberal legacy but appears clueless about how to deal with an increasingly rebellious British public

Donald Trump’s recent trip to Britain – happening against the backdrop of the sweltering heat of an unusually protracted summer heatwave – took place at a time when Britain’s political system is closer to breakdown than at any time in my memory.

The immediate crisis centres on a Brexit plan which British Prime Minister Theresa May unveiled to her top ministers at a closed meeting at Chequers (the British Prime Minister’s official country residence) earlier this month.

It is fair to say this plan ( two years in the making and details still to be worked out), which proposes a relationship between Britain and the EU similar to those agreed by Ukraine and Moldova, satisfies no-one.

The hardline Brexiteers, who account for a significant minority of the elected members of Parliament (MPs) of May’s Conservative Party and an overwhelming majority of the Conservative Party’s membership and supporters in the country, are unhappy because they are not getting the clear break from the EU which they expected and which they believed they had been promised after Leave won the 2016 referendum.

Opponents of Brexit, made up of the overwhelming majority of opposition Labour Party MPs and its membership, as well as a small number of Conservative MPs, the bulk of the civil service, the business community and the labour unions basically don’t want Brexit to happen and want Britain to remain in the EU. They are unhappy because despite the continued connection to the EU Britain would still be leaving the EU.

As for the EU itself, it has remained uncharacteristically quiet since the plan was published, but its senior officials have made clear they will probably reject it because it crosses too many of its red lines.

How did Britain – two years after the question of Britain’s exit from the EU appeared to have been answered in the June 2016 referendum – end up with such a plan, and how does that connect to the broader political crisis which is underway in Britain today?

How It Came to Pass

In order to answer that question a good place to start is to look at the Brexit referendum itself, and how it came to pass, and how contrary to all expectations May became British Prime Minister immediately following it.

The key point to make about the Brexit referendum is that it would never have been called if there had been any genuine belief (or fear) within Britain’s political class that it would result in a vote for Britain to leave the EU.

David Cameron – the British Conservative Prime Minister who called the referendum – did so not to settle what he believed as a burning debate in Britain, but in order to outflank his critics within the Conservative Party and in the country, who were using his supposed loyalty to the EU as a political stick to beat him with.

Cameron himself – along with the rest of the British establishment – assumed however that the greater part of the British public was bored and indifferent to the question of Britain’s EU membership (Cameron once spoke of the need for the Conservative Party “to stop banging on about Europe”). Accordingly he assumed that once the referendum was called his critics would be quickly exposed as obsessive and marginal figures, out of touch with public opinion.

However, Boris Johnson, a former mayor of London had emerged as an important rival to Cameron for the leadership of the Conservative Party, and who after much agonising joined the Leave Europe campaign because he thought that doing so would position him better for a future leadership bid.

These essentially frivolous reasons for Cameron’s and Johnson’s actions before and during the referendum illustrate thechronic amateurism of much of Britain’s political class, especially that part of it which is associated with the Conservative Party—where high political office more often than not depends on wealth and social status than on experience or ability.

Both Cameron and Johnson are in fact typical members of Britain’s political and social elite. Both were born to wealth, and both of them were educated at Eton College and Oxford University, where as it happens both men belonged to the same social club, albeit at different times.

Eton College and Oxford University happen to be the two most famous educational institutions within the inordinately expensive and socially exclusive private educational system which trains Britain’s establishment. Access to both is effectively barred for cost reasons to the overwhelming majority of Britain’s population. However admission to them – especially to Eton College – acts as a passport to high office for those members of the elite who want it.

Complete Misjudgment

In the event, and not for the last time, the referendum result showed that Cameron, Johnson and the rest of the British establishment had completely misjudged the views and attitudes of the British population.

Instead of being bored and indifferent to the subject of Europe, British voters turned out to vote in what are by today’s standards high numbers (turnout was 72.2%, significantly higher than in recent general elections). More to the point, instead of (as expected) voting to stay in the EU they voted – albeit by a small margin of 52-48% – to leave.

Johnson: Unprepared for Brexit victory. (Getty)

The immediate result was the political establishment went through the political equivalent of a nervous breakdown. Cameron – overwhelmed by forces he had unleashed but barely understood, and not knowing what to do next – broke a promise he had given previously to stay irrespective of the referendum and resigned immediately. Johnson, equally unsure what to do in a situation he had never anticipated or prepared for, in turn bungled his own leadership bid, and failed to replace Cameron.

The result was that the post of British Prime Minister passed by default to May, a colourless and unimaginative administrator, whose lack of even the most basic political skills became cruelly exposed during the general election she called completely unnecessarily last year, which she nearly lost.

Since becoming Prime Minister, May – as might be expected of such a person – has approached the question of Brexit as an essentially technical question, to be ironed out in negotiations, with the overarching objective being to cause as little disruption to the British economy as possible so that things can continue to go on as before.

Inevitably that is an approach which favours keeping as much of the status quo as possible, with May looking to achieve a Brexit which retains Britain’s economic and trading links with the EU essentially unaffected.

Rejection of an Intolerable Status Quo

The result is a 98-page proposal for an association agreement between Britain and the EU, directly copied from those agreed with the EU by Moldova and Ukraine, whereby Britain would remain in fact, though not in name, a member of the European Single Market. Its economy would observe the EU’s regulatory structure as administered by the European Court of Justice, whose decisions on regulatory questions would continue to be binding on British companies.

Unsurprisingly this ‘solution’, which would leave Britain indefinitely subject to EU-made laws, in the making of which it would no longer have any say, satisfies nobody, and is being criticised by all sides.

The latest opinion poll shows that only 25% of Britons now think May is managing the negotiations with the EU successfully.

It would be a fundamental error however to see May as the cause of what practically everyone in Britain now agrees is a debacle. If May were the only problem, there would be no problem getting rid of her and replacing her with someone else. The fact that May is still there despite her all too obvious flaws and failures illustrates the underlying point: the problem is not May; it is Britain’s entire political class.

A proper response to the Brexit vote would have recognised that whatever it was, it was a rejection of the status quo, which has obviously become intolerable to much of the British public. Any response to the Brexit vote, which – like May’s plan – seeks to preserve the status quo, is therefore by definition flawed.

May: Out of her depth.

The British political class, once renowned for its sure-footedness and flexibility, would once have had no difficulty recognising this fact, unwelcome though it was. It would accordingly have focused its energy on responding to the Brexit vote in the way desired by the majority of British voters, by considering what part of the status quo has become objectionable and how it can be changed.

The focus would not have been on the negotiations, which by definition can only be a means to an end, but on formulating a plan to take Britain forward once it was outside the EU whilst responding to the concerns of the British public..

That would have required a thorough study of the state of Britain’s society and economy, leading to what might have been a heated but real debate about what was needed to be changed. Eventually, after a period of acrimony and argument, a programme to prepare Britain for life outside the EU would have emerged and a negotiating position could have been formed around it, which could have been presented to the EU in the negotiations.

There is no of course guarantee the EU would have agreed to whatever the British proposed, but at least a proper discussion would have happened followed by a real negotiation between two equal partners, with the British knowing their own minds and having a set of clear goals which they would have been working towards. If the negotiations were unsuccessful the British would then have been free to put their plans into effect by themselves, with steps taken in advance to prepare for that contingency.

No Debate

In the event nothing like that has happened. There has been no debate within the British establishment either about the state of Britain or about what needs to be done to change it. Nor have any serious steps been taken to prepare for the possibility that the negotiations with the EU might be unsuccessful.

The reason for that is that taking a close, hard look at the state of Britain’s society and economy and working out a programme of reform to adjust them to the world after Brexit is something that Britain’s establishment is today both unable and unwilling to do. As beneficiaries of the 1980s Thatcherite settlement they want things to remain as they are, and have no wish or idea of how to change them. Besides, it is doubtful whether they any longer have either the technical skill or the experience, or even the self-confidence to meet such a challenge.

The result is that instead of the genuine debate that needs to happen about what sort of country Britain needs to be, there has been a sterile debate between supporters of ‘soft Brexit’, which it is now clear boils down to May’s proposed association agreement with the EU, and ‘hard Brexit’, with advocates of the latter talking grandly about a clean break with the EU and about trading with the EU on World Trade Organisation terms, but without having much idea of what that means in practice.

In such a situation it becomes easier to understand why despite her failures, May remains Prime Minister. In a vacuum of ideas a Prime Minister without ideas appears to suit the situation.

In reality, outside the establishment, there is no shortage in Britain today of ideas about how to take the country forward.

The individual who has come to crystallise for many people the challenge to the status quo is Jeremy Corbyn, the veteran left wing politician who leads the Labour Party. He not only very visibly bested May in last year’s general election, but most certainly does have a set of ideas for taking Britain forward.

Corbyn is one of the most misrepresented figures in British politics. By the standards of earlier Labour politicians he is by no means radical. His desire for a mixed economy, with significant sections brought back into public ownership and certain elements of planning reintroduced, and his support for strong social services and for high investment in state funded education and health care are all to be paid for through progressive taxation. His longstanding opposition to military adventures overseas, as well, all fall squarely within what was once the British Labour Party’s social democratic mainstream.

At any time up to the 1980s Corbyn’s current policy positions (as opposed to some of the positions he once held in his youth) would not have been considered controversial in Labour terms. On the contrary they represent a return to the policies followed in Britain’s social democratic heyday by the previous Labour governments of Clement Attlee and Harold Wilson.

Even Corbyn’s well known support for extra Parliamentary political activity, which many of his critics profess to see as somehow dangerous and ‘extreme’, is actually in Labour Party terms completely traditional. The Labour Party after all is itself the product of extra Parliamentary political activity, having been formed at the start of the twentieth century by Britain’s labour unions and by various voluntary societies operating outside Parliament. Indeed for most of its history the Labour Party spoke of itself as the “political wing” of a “Labour movement” whose “industrial wing” was the labour unions.

Clinging to Class Interests

The difficulty is that though Corbyn’s social democratic programme does indeed offer an alternative to the Thatcherite settlement, which in Britain represents the status quo, and is a conceivable programme around which to prepare Britain for life outside the EU, it is also one which is completely unacceptable to Britain’s establishment.

Ever since the 1990s the establishment has not only accepted the 1980s Thatcher neoliberal settlement, but has massively benefitted from it to the point where in the public mind it is increasingly associated with it. The idea that it could be successfully challenged was until recently, for the establishment, literally unthinkable since that would have meant acknowledging that the status and power of the establishment itself could be challenged.

That is why until the 2017 election the establishment – which to be clear includes the entire parliamentary faction of the Labour Party and the media – found it impossible to take Corbyn seriously. It is also why Corbyn is the target of such extreme establishment hostility, including from within his own party.

As a result of the outcome of the 2017 election, which showed that Corbyn’s programme is actually popular – especiallyamongst Britons of working age and younger– came as a shock. It was for the establishment at least as great a shock as that of the Brexit referendum of the year before.

Not only was the election outcome horrifying to them in itself, but it also – like the result of the Brexit referendum – further underscored the extent to which the establishment has lost ground with the public.

It is that sense of disconnection which gives the political crisis in Britain its peculiar character. An establishment which senses itself challenged and which is no longer sure of its support in the country is afraid to risk the traditional method in Britain of resolving a political crisis, which is another general election. Indeed it is now so insecure about its position that it is nervous of taking any step at all, such as replacing a Prime Minister who is discredited and unpopular.

Different Than the Nineties

Corbyn: Traditional Labour programme.

The situation differs fundamentally from the one in the early 1990s, when another Conservative government had become unpopular. Though the Conservatives at that time were divided and unpopular, the part of the British establishment associated with the Labour Party was brimming with self-confidence, and was both eager and able to take charge. Since it too was fully committed to preserving the 1980s Thatcher settlement, an election did not threaten fundamental change or challenge the position of the establishment in the way that an election might do now.

The result is an impasse, with the establishment – including sections of the Labour Party – desperate at almost any cost to avoid an election and the attendant risk of a Corbyn government, but incapable of formulating an alternative path forward.

The nature of the crisis is elegantly summed up in the following words of an article in The Guardian, quoting the comments of a senior Conservative MP.

A senior Tory backbencher on the 1922 committee executive said on Thursday that May had the “best chief whip ever” and that he would still save her. “He is called Jeremy Corbyn. Just mention the threat of a Corbyn government and our people come into line.”

The reality is that political logic clearly points to the need for a Corbyn government. Given that Corbyn is the only leader who is offering a way forward, a government led by him is the only way to restore a sense of direction and coherence. Resisting that logic is simply deepening the crisis and creating more drift. One senses that government has all but broken down, with only administrative tasks still being performed, as senior ministers plot and war against each other, without however having any overarching idea of what they want to do.

Whether a Corbyn government, if it were elected, would be able to implement its programme in the face of the immense opposition it would face is another matter. Corbyn has so far repeatedly defied predictions by overcoming every obstacle in his path. Whether as Prime Minister he would be able to go on doing so is a question only the future can tell.

What is beyond doubt however is that a Corbyn government must be tried. The alternative is that the crisis becomes entrenched and deepens, in which case other, altogether more alarming forces might start to emerge. Already what looks like the early signs of this are there.

Gramsci put it best: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

In Britain – as any reader of British newspapers knows – the “morbid symptoms” are currently there in abundance.

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Victor Orban’s 5 Tenets To Rebuild Europe

Excerpted from Prime Minister Viktor Orbán’s speech at the 29th Bálványos Summer Open University and Student Camp:

…I have formulated five tenets for the project of building up Central Europe.

The first is that every European country has the right to defend its Christian culture, and the right to reject the ideology of multiculturalism.

Our second tenet is that every country has the right to defend the traditional family model, and is entitled to assert that every child has the right to a mother and a father.

The third Central European tenet is that every Central European country has the right to defend the nationally strategic economic sectors and markets which are of crucial importance to it.

The fourth tenet is that every country has the right to defend its borders, and it has the right to reject immigration.

And the fifth tenet is that every European country has the right to insist on the principle of one nation, one vote on the most important issues, and that this right must not be denied in the European Union.

In other words, we Central Europeans claim that there is life beyond globalism, which is not the only path. Central Europe’s path is the path of an alliance of free nations.

*  *  *

It’s amazing when you consider that exhibiting common sense now makes you a “right-wing extremist”.

h/t The Burning Platform blog

 

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Spain: New Gateway To Europe For Mass-Migration

Authored by Thomas Paul Wiederholen via The Gatestone Institute,

On July 26, some 800 migrants from sub-Saharan Africa violently stormed the border fence between Morocco, where they were living illegally, and the Spanish enclave of Ceuta. According to Spanish authorities:

“In an attempt to stop the Guardia Civil getting close to the break-in area, the migrants … [pelted] officers with plastic containers of excrement and quicklime, sticks and stones, as well as using aerosols as flame-throwers.”

Many people were wounded in the clash, and 602 migrants succeeded in entering Spanish territory.

Pictured: A section of the border fence between Morocco and the Spanish enclave of Ceuta. (Image source: David Ramos/Getty Images)

Two weeks earlier, the rescue ship Aquarius, operated by the French NGO Sos Méditerranée, picked up 629 Sub-Saharan migrants off the coast of Libya. After both Italy and Malta refused to take in the migrants, with Italian Interior Minister Matteo Salvini declaring, “No to human trafficking, no to the business of illegal immigration,” Spain welcomed the ship, and two other vessels carrying illegal migrants, at the port of Valencia.

Prime Minister Pedro Sánchez, the head of Spain’s newly-formed socialist government — which has promised free healthcare to the migrants and says it will investigate every asylum claim individually — said in mid-June: “It is our duty to help avoid a humanitarian catastrophe and offer a safe port to these people, to comply with our human rights obligations.”

According to a July 27 report about Spain in The Telegraph:

“The country is now the largest gateway for migrants crossing the Mediterranean to Europe, with 20,992 people landing on its shores so far this year… Arrivals to Italy now trail Spain by almost 3000 – a gap that just a week ago was 200.”

This, the report says, has completely “overwhelmed” the Spanish coastguard, which is issuing an urgent call for additional resources to help deal with the massive influx.

Infographic: Spain Overtakes Italy For Migrant Arrivals  | Statista

You will find more infographics at Statista

According to a 2017 report by the European Commission:

“The geographic distribution clearly reveals that a majority of irregular migrants rescued in the Central Mediterranean are most likely not refugees in the sense of the Geneva Convention, given that some 70 % come from countries or regions not suffering from violent conflicts or oppressive regimes.

Absorbing the large numbers of migrants is not the only problem that Spain has to contend with, however. According to a December 2016 report in the Financial Times, based on confidential reports it obtained, the European Border and Coast Guard Agency (Frontex) accused some charitable organizations that support rescues in the Mediterranean of collaborating with human traffickers. This claim was also made by the pan-European think tank, Gefira, which posted a YouTube video listing the NGOs that have been abetting – regardless of their “high-minded intentions” – the criminal practice of smuggling people into Europe for financial gain.

According to The Independent:

“At the last European Council summit in Brussels at the end of June, EU national leaders agreed on the need to set up secure centres to process asylum claims, as well as agreeing a raft of hardline stances on migrants – such as condemning NGO-operated rescue boats operating off the Libyan coast.”

“Leaders also in principle agreed another proposal for “disembarkation platforms” based in North Africa where EU officials could process asylum claims outside EU territory …”

However, despite the agreement between EU members, “no north African country has yet agreed to host migrant screening centres to process refugee claims,” according to Dimitris Avramopoulos, the European commissioner for migration.

The Speaker of Egypt’s House of Representatives, Ali Abdel Aal, told the German newspaper Welt am Sonntag on July 1, “EU reception facilities for migrants in Egypt would violate the laws and constitution of our country.”

Abd al-Aal recalled that a high number of migrants are already living in his country. “We already have about ten million refugees from Syria, Iraq, Yemen, Palestine, Sudan, Somalia and other countries,” said Ab al-Aal. In Egypt, all refugees have a right to health care and education. “This means that our capacities are already exhausted today. It is therefore important that Egypt receives support from Germany and the EU.”

In an interview with the German news outlet Bild on July 19, Libyan Prime Minister Fayez al-Sarraj said:

“We have created refugee shelters for tens of thousands of people, but there are hundreds of thousands of illegal migrants in our country. This has heavily impaired the security situation. They include terrorists, criminals, and human traffickers who do not care about human rights. It’s horrible. In order to improve the situation, we must fight these structures. But we also need more international help for this. It begins with our country’s borders. It is imperative that they be better controlled.”

“We are strictly against Europe officially placing illegal migrants who are no longer wanted in the EU in our country. We also won’t agree on any deals with EU money about taking in more illegal migrants. The EU should rather talk to the countries that people are coming from and should put pressure on these countries instead. There won’t be any deals with us.

“I am very surprised that while nobody in Europe wants to take in migrants anymore they are asking us to take in further hundreds of thousands.”

In an article for Gatestone in March 2018, Uzay Bulut sheds light on why the migrant crisis has become a problem that many European governments are beginning to recognize: “demographic jihad.”

Bulut cites Turkish MP Alparslan Kavaklıoğlu, a member of President Recep Tayyip Erdogan’s ruling Justice and Development Party (AKP), and the head of the parliament’s Security and Intelligence Commission, who stated:

“… Europe is going through a time that is out of the ordinary. Its population is declining and aging… So, people coming from outside get the jobs there. But Europe has this problem. All of the newcomers are Muslim. From Morocco, Tunisia, Algeria, Afghanistan, Pakistan, Iraq, Iran, Syria, and Turkey. Those who come from these places are Muslim. It is now at such a level that the most popular name in Brussels, Belgium is Mohammed… [If this trend continues], the Muslim population will outnumber the Christian population in Europe… Europe will be Muslim. We will be effective there, Allah willing. I am sure of that.”

The Turkish leadership’s assessment echoes a sermon delivered at the Al-Aqsa Mosque in Jerusalem on September 11, 2015 (the 14th anniversary of the 9/11 attacks) by Imam Sheikh Muhammad Ayed, who stated, in part:

“They [Westerners] have lost their fertility… We will give them fertility! We will breed children with them, because we shall conquer their countries. Whether you like it or not, oh Germans, oh Americans, oh French, Oh Italians, and all those like you. Take the refugees! We shall soon collect them in the name of the coming Caliphate… We will say to you: These are our sons. Send them or we will send our armies to you.”

The act of migration has a strong basis in the Qu’ran. For example, Verse 9:20states:

“The ones who have believed, emigrated and striven in the cause of Allah with their wealth and their lives are greater in rank in the sight of Allah. And it is those who are the attainers [of success].”

Verse 22:58 states:

“And those who emigrated for the cause of Allah and then were killed or died – Allah will surely provide for them a good provision. And indeed, it is Allah who is the best of providers.”

None of the above, however, appears to have put a dent in the policies or ideology of the left-wing parties supporting the new Spanish government. On June 29, following the European summit, Sanchez tweeted:

“…The EU is beginning to move in the right direction: to give a European perspective to a European challenge such as migration.”

Sanchez was correct, but for all the wrong reasons. The “European perspective” that he and fellow EU members should be embracing is that of democracy and freedom, not one that allows the unfettered entry of millions of penniless and unskilled illegal migrants, among whom are radical Islamists whose beliefs are antithetical to European values.

In case Sanchez has not been paying attention, the influx of illegal immigrants from the Middle East and Africa has been taking a serious toll on Europe. According to a recent Heritage Foundation report:

“Over the past four years, 16 percent of Islamist plots in Europe featured asylum seekers or refugees… Radicalization of plotters generally occurred abroad although in the most recent plots, more commonly within Europe itself. Europe’s response to migration flows has been inadequate and inadvertently increased the terrorist threat dramatically…”

In the book Europe All Inclusive by former Czech President Václav Klaus, co-authored by the Arabic-speaking economist Jiří Weigl, the authors sum up the role that the Left plays in the migrant crisis:

“Europe, and especially its ‘integrated’ part, is riddled with hypocrisy, pseudo-humanism and other dubious concepts. The most dangerous of them are the currently fashionable, and ultimately suicidal, ideologies of multiculturalism and humanrightism. Such ideologies push millions of people towards resignation when it comes to concepts like home, motherland, nation and state. These ideologies promote the notion that migration is a human right, and that the right to migrate leads to further rights and entitlements including social welfare hand-outs for migrants… Europe is weakened by the leftist utopia of trying to transform a continent that was once proud of its past into an inefficient solidaristic state, turning its inhabitants from citizens into dependent clients.”

As the “largest gateway” for migrants now entering Europe, Spain has a particularly great responsibility to wake up to and deal with reality.

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