Despite the fact that Washington had already sanctioned more than 80% of Iran’s economy, so the notion that Ayatollah Ali Khamenei and other senior Iranian officials still have any exposure to the Western financial system is a little ridiculous, President Trump delivered on his promise to impose new sanctions on the Supreme leader and other senior Iranian officials on Monday, with Treasury Secretary Mnuchin adding that more sanctions against Foreign Minister Javad Zarif would be handed down later this week.
Though we imagine the Iranians vastly prefer the sanctions to a missile strike on Iranian soil (a strike that Trump famously speculated could involve 150 casualties), and although the threat of all-out warfare in the Middle East has been averted (at least for now), Tehran is telegraphing a message of defiance, saying the path to a diplomatic solution is now permanently closed.
President Donald Trump on Monday unveiled sanctions on Ayatollah Ali Khamenei and eight senior military commanders that deny him and his office access to financial resources. Treasury Secretary Steven Mnuchin said financial restrictions would also be introduced against Iran’s Foreign Minister Javad Zarif later this week.
“The futile sanctions against the Iranian leader and the country’s chief diplomat mean the permanent closure of the diplomatic path with the government of the United States,” the Foreign Ministry’s spokesman, Abbas Mousavi, was quoted as saying by semi-official Iranian Students News Agency. “The Trump government is in the process of destroying all the established international mechanisms for maintaining global peace and security.”
Iran’s declaration soured the market’s mood for risk assets, and sparked a bid of safety buying. The Japanese yen rallied while Treasury yields ticked lower. S&P 500 futures declined and most Asian stock markets slipped. Asian emerging-market currencies were mixed, with several trading lower.
Trump refrained from launching a military strike against Iran last week (what would have been retaliation for Iran shooting down an American drone), and has instead chosen to press Iran to come to the table, saying during a weekend interview that he’d be willing to talk with ‘no preconditions.’ The US has accused Iran of orchestrating the bombings of several oil tankers near the Strait of Hormuz oil-trade chokepoint, though Iran has repeatedly denied any involvement.
Trump has coupled his “maximum pressure” campaign of sanctions with invitations to sit down with Iranian leaders. In an interview that aired Sunday on NBC’s “Meet the Press,” the president said that he thinks Iranian leaders want to negotiate and he’s willing to talk with no preconditions except that the outcome must be Iran acquiring no nuclear weapons.
“The supreme leader of Iran is the one who ultimately is responsible for the hostile conduct of the regime,” Trump said on Monday.
Iranian President Hassan Rouhani dismissed Trump’s offer to talk as “a lie.” And Iran’s representative to the UN urged the organization to help set up regional talks, adding that Iran would refuse to meet with the US one-on-one.
“It will have an effect because it will annoy the Iranians and make negotiations hard to pull off if the supreme leader is sanctioned,” said Brian O’Toole, a senior fellow at the Atlantic Council who previously worked in the U.S. Treasury Department’s sanctions unit.
Khamenei, who was elected president of the newly born Republic in 1981 and later went on to become its second Supreme ruler, reportedly has possessions valued at an estimated $200 billion, according to American diplomatic personnel. Though it’s unclear how much of this is exposed to sanctions.
via ZeroHedge News http://bit.ly/2ZMVXKJ Tyler Durden
There are numerous reports that an influx of migrants is overwhelming the already-fragile system in the Balkans. You may think this is not pertinent if you don’t live in Europe. But just like the collapse of Venezuela, the Balkan War, and the collapse of Greece, there are patterns of behavior to which attention should be paid.
Here’s a quick video with a glimpse at the situation occurring right now in Bihac, a city of about 61,000 people in the northwestern corner of Bosnia.
Some have gone so far as to call it a humanitarian crisis, and others have said the number of migrants is increasing rapidly. Although the official number is around 4000 migrants, it’s estimated that the real number may be as many as 30-50,000. When I asked Selco if they outnumbered Bosnians, he replied, “Not yet. But in some parts, there are more capable immigrants then capable locals.” This crisis has caused havoc across the region, yet many locals are unaware of the depth of the issue. (Boy, does that sound familiar. Cognitive dissonance, it seems, is not an American problem.) I asked Selco to share with us what he has witnessed. Here’s what he has to say. ~ Daisy
Of course, there’s the money behind the immigration crisis in the Balkans
The interesting thing ( fascinating thing actually) is that the common citizen here in the Balkans finds out more about the immigrant problem here in our region when reading the world news than the local news. You may not know unless you are out in the field every night, seeing all that.
There are several reasons for that, and the most important one is the fact that local governments are taking money from the EU do “deal” with immigrants HERE. In other words, the EU does not want immigrants, so they are giving local governments outside the EU money to deal with the situation and to keep those folks here.
Of course, the money ends up in the pockets of a few powerful people at the top of the pyramid, definitely not in the system that should take care of immigrants.
So there is not too much news in local media about problems with the immigrants. The ruling structures do not want too much info about how heated the situation is.
And the situation is complicated and getting more complicated.
Everybody has an opinion, but there are two major opinions. One says “we should help people in need” and the other that basically says “f..k them, they need to go where they came from.”
I have my own opinion about it, but here is the truth: nobody cares about my opinion.
Just like nobody cares about your own opinion on this subject.
I strongly believe that events are set in motion, events that are way above our influence, driven by some powerful forces, and that the opinions of common people are irrelevant unless they discuss how to prepare for it and what to do.
Who are these immigrants?
So, who are they?
Several times, I helped people among them, sometimes with food, sometimes with other things… as times go by, and as I emerge myself into discovering more, my wish to help fades away. It does not disappear, but it fades.
So let me put it like this.
The majority of them are young folks, men in their 20s, in pretty good shape, with experience in violence, knowledge about weapons, and experience (quite a number of them) in different armed groups and conflicts from wherever they came from. There is a pretty high percentage of drug abuse among them. When they have absolutely and completely different views on how man (and woman) should live, how society around them should look… you get the idea that we all may end up deep in troubles.
And what about the system?
The system was barely functional even before these waves of immigrants, so you can only imagine what tens of thousands are doing to it.
Here is an interesting fact: Most of the crime that immigrants commit is actually violence between themselves, and it is usually violence that is made with knives.
The reason is probably that there are many different people among them, actually many different groups and nationalities, so they are simply fighting between themselves over what group is going to be in charge.
Guess where they are gonna turn to look when they finish that?
And yes, among them there are people and families with kids who just run away hoping for a better life, who willing to adapt differently, to “blend” in, to integrate and assimilate in a new and better society. They want to live a normal life.
I am sad to say that I think they are the minority.
The majority of them want to change MY world to their vision, not adapt their vision to ours.
The capability of the migrants
You have men who are traveling for months without proper food or resources, men with fighting experience, men with survival experience… you can get a clue as to how capable they are.
They are capable, no matter what we may say because they look poor and dirty. Trust me, they are real survivalists capable of a lot of stuff. (I wrote more about the kind of stuff people can be capable of when they’re desperate in my book.)
The problem is if that capability one day may be turned against me or you. How capable you are?
Those folks sleep here in abandoned houses or simply camping in city parks. You are probably saying “Why does nobody arrest them?” Well, if you have 10,000 of them in an area that has 800 police officers, it is clearly a matter of waiting for what is going to be.
What about the future?
The problem here is very simple. We are neighbors to the EU- where those folks want to get in. Of course, the EU has closed its borders, so those people are simply amassing here in this region that is already very politically fragile. So the future will be probably very interesting: nobody can send them back because there are too many of them, and no country wants them.
A general feeling among locals is still kinda confusing. As you know we have been through a terrible civil war so people here still have fresh memories about wars, refugees, and suffering. I think because of that most of us are pretty friendly if not neutral about them.
But here is the thing and it may be politically incorrect but it is the truth, so bear with it: they are DIFFERENT.
And I do not think here about the color of their skin, or their religion or their nationality. I think about their views on how the world should look.
I do not like that world.
That is gonna start real problems.
And the EU (Europe)
People here have a saying that “Europe (EU) is an old lying wh*re” and lot people find this whole thing is actually backfiring on Europe because of many reasons.
Eventually, it is going to be a matter of numbers, just like many times in history, wave after wave, and they will forcefully come to the EU in numbers that will spark big things. And then it is going to be interesting to see how things going to unfold. Like that old Chinese curse says, “May you live in interesting times.”
We are witnessing events that are changing history and the world.
More details about where the migrants are staying
Many migrants are staying in shelters or local parks if the shelters are filled.
Others are renting rooms from local residents. Currently, the police are searching private homes because locals are illegally renting rooms to migrants.
Translation:
The Bihac police continued its search of private houses owned by the owners, the search action and the transfer of migrants from the city to the Vucjak area. In today’s search, several facilities have found close to a hundred migrants and refugees. Migrants stayed in private homes where the accommodation paid 10 euros per day per person, and criminal charges would be brought against the owner for illegal renting. The action, according to the Bihac police, started yesterday, and will continue in the coming days, and appealed to citizens to stop this practice. (source)
In his online works, he gives an inside view of the reality of survival under the harshest conditions. He reviews what works and what doesn’t, tells you the hard lessons he learned, and shares how he prepares today.
He never stopped learning about survival and preparedness since the war. Regardless of what happens, chances are you will never experience extreme situations as Selco did. But you have the chance to learn from him and how he faced death for months.
Shocking video purporting to show an acid attack in progress went viral after it was uploaded to the internet. Though over the weekend it was unclear exactly what had happened in the dramatic footage showing two men throwing something into a vehicle on a London roadway, after which two victims frantically got out of their car while stripping and shaking violently, London police have now confirmed it was the second ina series of acid attacks which occurred last Friday.
On Monday Scotland confirmed that three men had been injured in separate acid attack incidents within hours of each other in east London. It was the first attack, which was not caught on film, in which the perpetrators had donned face and body concealing burkas. A subsequent attack, however, was caught on film and showed hooded men jump out of a car to throw acid inside another stopped vehicle.
Police are hunting two men “wearing burkas” following the first attack on a market stall worker in Walthamstow High Street on Friday morning.
Two men were also injured in a second incident in Cricketfield Road near Hackney Downs shortly before 7.30pm the same day.
The reported second attack, which was caught on film, did not appear to show the attackers “wearing burkas” at the time but instead a pair of men wearing hoods —however, this is apparently what the attackers had donned during the first incident.
The full events of the second acid attack last Friday were captured in shocking video:
Shocking images of Acid Attack recorded exactly when the guy was throwing it to the two males inside the car in east London. pic.twitter.com/0BhkUlTab1
A single victim from the first, earlier morning attack, had also been treated for “non-life threatening” burn injuries.
A police spokesman said of that prior attack: “It is alleged that the victim had been approached by two suspects, both wearing burkhas, and had the substance thrown at him before they fled in a waiting car.”
Of the subsequent incident caught on film, the UK Mirror describes the graphic video of the assault on the men in the car as follows:
The men are seen stripping off their clothes, writhing and screaming in pain before the video cuts to an end.
Witnesses said that a car chase had taken place just before the attack, with one vehicle being driven off the road into a wall.
One of the victims of the Hackney attack later posted a widely shared Instagram photo and message vowing revenge upon his attackers, saying, “You fucked up, you should’ve killed me.”
Serious burns could be seen on his skin in the aftermath of the acid which was splattered across the man’s face.
The first, prior attack involved burka-wearing individuals approaching a market stall in the early morning hours to attack 45-year old Djamil Mogdad, who was preparing to open his clothing shop at the time.
The Mirror reported the harrowing details of that attack as follows:
Police are hunting two men “dressed in burkhas” who allegedly hurled “acid” in a London market trader’s face.
Djamil Mogdad was setting up his clothes stall at Walthamstow Market at 6.40am on Friday when he was reportedly tapped on the shoulder by two men.
Bystanders said they then threw acid in the dad’s face before running off and escaping in a car parked nearby.
Mr Mogdad, 45, fled into a shop for help, with his face in his hands and screamed: “Someone has poured acid on my face”.
Last year the Metropolitan Police insisted that London “remains one of the safest cities in the world,” which has been a continued theme of knife-banning mayor Sadiq Khan.
Londonistan under little Muslim Mayor Sadiq Khan.
Watch two males throw acid into a car and the occupants run out to try to escape their burns.
However, London has also in the past few years been dubbed by the media the “acid attack capital of the world” given the dramatic rise of this heinous trend.
This latest series of attacks – the first of which included the perpetrators hiding behind burkas – is likely to fuel controversy surrounding a potential UK ban of full Islamic face and body coverings. Both the burqa and niqab are under consideration, with the former obscuring all parts of the face and body, preventing even seeing the person’s eyes.
via ZeroHedge News http://bit.ly/2x9ILTW Tyler Durden
With protests by yellow vests in France approaching their six month anniversary and the European economy showing signs of not a temporary dip, but prolonged weakening, it is a good moment to take a step back and analyze the current situation as well as its implications for the medium to long-term outlook for Europe.
As we see it, European economies have been weakening significantly, and even worse, Germany, the European Union’s largest economy comprising almost 21% of the area’s GDP in 2018, is on the verge of recession. With Germany the economic locomotive of the euro area, there may not be much reason to be optimistic. The country’s economic problems appear to be structural, due to high taxes, excessive government spending, failed energy policies and other regulatory constraints. Thinking about the years ahead, we aren’t optimistic that the policy response from the German government — as well as other European governments such as in France, Italy and Greece — will be strong enough to avoid a prolonged economic malaise for the continent. As a result, we believe that the global economy will suffer from Eurosclerosis in the coming years.
Figure 1: GDP of EU Member States and Share of Total. Source: Statistics Times.
Struggling European Economies
According to the OICA, automobile production in Germany fell 9.3% in 2018, year-over-year. In our view, the prospects for Europe’s leading economy are ominous given that the auto industry is linked to almost 8%% of German GDP. Business sentiment in Germany appears to have recently turned from euphoria to gloom: as of April 2019, IFO business sentiment has declined 2.8% while the Markit/BME purchasing managers index has crashed from 58.1 to 44.5 year-over-year.
Figure 2: German Automotive Car Production. Source: International Organization of Motor Vehicle Manufacturers
Optimists could point to low unemployment in Germany, which hovers near 5%, according to the OECD. But low unemployment data could be misleading because German companies can be reluctant to lay off workers, not only because restrictive labor laws make layoffs difficult and expensive, but also because hiring talent can be a lengthy drawn-out process should the economy recover quickly. Many firms experienced that problem during the last decade of relative economic strength when qualified labor was hard to come by and growth for some firms remained below potential due to labor shortages. While this helps to sustain economic statistics, it can destroy corporate profitability and eventually end up costing investors.
According to Eurostat, real GDP growth in Germany is waning, growing only 0.6% in Q4 2018, from 2.8% in Q4 2017. We are worried about the specter that when Europe’s economic locomotive sneezes, the rest of the continent catches a cold.
Unfortunately, the situation in most of Europe is just as gloomy. According to Eurostat, Italy experienced 0% growth in real GDP year-over-year in Q4 2018 (compared to 1.7% in Q4 2017), while France’s real GDP grew 1.0% in Q 2018 (compared to 2.8% in Q4 2017). While Italy seems hard pressed to enact aggressive pro-growth stimulus due to European Union budgetary rules, there doesn’t seem to be much appetite by President Macron to catalyze the French economy by increasing business-friendly incentives. Furthermore, the ongoing protests by the yellow vests inside France, which underscore the economic frustration among many French people, should hamper the growth picture further. And across the Channel, the UK may or may not struggle with Brexit, and while the eventual outcome could be positive, strains during any transition are likely.
The sluggish GDP data in Europe is supported by poor industrial production, which has been declining in Italy, the UK, France and Germany since late 2017. In sum, the four leading European economies appear to be simultaneously entering a state of economic distress.
Figure 3: European Industrial Production.
We believe that the current downcycle in Europe is a harbinger of something much bigger: a secular economic decline in Europe driven by lackluster performance by Germany due to a series of poor policy decisions and even outright policy failures. Germany is yet again set to become the sick man of Europe. In our view, like 20 years ago when the German economy was a laggard, the problems appear to be self-inflicted: a combination of encrusted labor markets with well-intentioned but costly and failing reforms.
Energy
Energy policy is one of Germany’s most significant policy failures. Following the Fukushima nuclear disaster of 2011, Chancellor Merkel single-handedly flip-flopped on longstanding conservative support for nuclear energy and announced the phasing out of all of Germany’s nuclear reactors by 2022. To some people today, it is understood that this radical shift was less motivated by fears of a nuclear disaster, and more so by fears of political gains by the Green Party, which scored significant regional electoral victories in the immediate aftermath of Fukushima. Merkel’s strategy worked well for her, allowing her to hold on to power. Unfortunately, it worked less well for the users of electric energy and the German economy at large and is an example of well-intentioned government policy gone bad.
Estimated annual subsidies of nearly 15 to 40 billion Euros, according to Clean Energy Wire, may be required to implement this policy failure. While industrial users of electricity have their consumption subsidized, it may not be enough to fully offset the pincreases wrought by the replacement of nuclear power by more expensive alternatives, renewables in particular. BASF’s ex-CEO Kurt Bock, who has been a vocal critic of high energy prices in Germany, curtailed his company’s investments there, despite electricity subsidies available to industrial users.
At the same time, households are bearing the brunt of the burden because retail electricity prices are used to finance the subsidies to industrial users and now pay some of the highest electricity prices in the world. Less affluent households see their power cut off for non-payment of electricity bills at a record rate. And one nuclear power plant that had been completed only recently operated for only 13 months before being dismantled, costing energy company RWE losses of at least five billion Euros.
Policy planners in the German government were hoping that wind and solar energy would replace the production capacity lost from nuclear reactors. A massive buildout of these technologies has dotted the country’s landscape, particularly in the north, with windmills. At a nominal capacity of over 100GWh, equivalent to five Chinese Three Gorges Dams, wind and solar now exceed peak demand. But only on paper.
Because they work only when the wind blows or the sun shines, their contribution to energy production is highly variable. The unreliability of renewables has meant that an equal capacity of conventional coal and gas power plants had to be built, effectively doubling the amount of capital needed to produce a given amount of electricity and boosting electricity costs.
The variability of energy production by renewables poses serious challenges to the operators of the electricity grid. Widespread blackouts can be avoided only by shutting off electricity to power users such as aluminum furnaces or glass manufacturers. 78 such mini-blackouts occurred last year. Unreliable electricity coupled with high costs is something found otherwise in developing countries, and this may be the direction in which the German economy is heading as the energy policy failure is beginning to lead to a slow, and perhaps certain deindustrialization.
Chemical giant BASF is the most vocal and prominent company so far to have announced its intention to reduce investments in plants in Germany – other companies have taken this decision quietly without much fanfare, such as SGL Carbon, which built its latest carbon fiber factory in the United States instead of Germany.
Excessive government spending, high taxes
Although uninhibited government spending is far from being a uniquely German problem, it has become particularly problematic as a result of the relatively strong performance of the German economy during the last decade or so.
Since Merkel’s accession to power in 2005, tax revenue has increased by 78%, yet many core government activities suffer from acute underfunding. The army’s desolate condition has been well documented elsewhere – not a single functioning submarine, pilots who cannot complete their required minimum flight hours due to a large number of aircraft permanently grounded for service, and even the fleet of aircraft shuttling government ministers around the world tends to break down during state visits to remote locations. Even Angela Merkel arrived late to the G20 summit in Argentina late last year after her aircraft experienced technical difficulties. Netjets might go out of business with such a track record. Although infrastructure is still generally in excellent condition, maintenance has been delayed due to lack of funds so that future deterioration has become inevitable.
Where did all the money go? Government debt declined by approximately 5% between 2012 and 2017 but still exceeds pre-crisis levels by almost one third. Spending categories with the largest increases are personnel and material costs. So ever more bureaucrats need ever more offices.
A good example is the Chancellery in Berlin: Angela Merkel’s staff has increased from 400 to 750, so only 18 years after its completion, Berlin’s Chancellery has become too small. An extension with 400 new offices will cost 460 million Euros – more than one million per office. At that cost we can only hope that the offices will be stately and representative, although it is more likely that they will look dull and dreary as government offices typically do. In any case, the decade-long timeline until completion leaves plenty of room for cost overruns. Further spending increases are seemingly guaranteed, as public sector unions have negotiated an 8% raise.
The irony about the increase of tax revenue from less than 20% to over 23% of GDP during Merkel’s term in office is that she campaigned on an increase in value added taxes to be offset by a reduction in income taxes. Once in power, value added taxes went up as promised, as did a host of other taxes, particularly taxes on capital; the promised reduction in income taxes was shelved. Tax cuts were last implemented nearly 20 years ago by former Chancellor Schroeder’s left-leaning government.
Ever more bureaucrats also means that they need ever more areas to regulate. Despite steady population growth, the city administration in Berlin has reduced the number of housing permits issued, and it has lengthened the time it takes to receive a permit. Residential housing in Berlin can now take ten years from concept to completion. To appease an angry public, the local government talks about expropriating residential REITs without explaining how that would increase the stock of housing.
Social spending largesse
Not only in phasing out nuclear energy did Merkel adopt positions that were previously held only by her coalition partner SPD, following the 2017 election, she wholeheartedly allowed Social Democratic ministers to implement numerous expensive programs, the costs of which have saddled taxpayers with enormous unfunded liabilities. For example, the extension of pension benefits to stay-at-home mothers who raise children but make no pension contributions will cost billions, with even higher costs for decades after that. This follows a 2013 decision to offer free childcare to all.
To the chagrin of Social Democrats, none of these new programs have translated into electoral benefits for them. The SPD’s standing in the polls today is the lowest ever. Were elections held tomorrow, they would underperform their lowest election result ever.
In a desperate attempt to stem its decline, the current SPD leadership now tries to do more of what has failed before: more spending. Given Merkel’s record of appeasing her coalition partner, there is a good chance that taxpayers will be saddled with even more liabilities.
Political uncertainty
Merkel’s decision not to run again in the 2021 election has turned her into a lame duck chancellor and introduces significant political uncertainty. It is surprising that Merkel chose this route due to the risk of recreating the atmosphere of inaction that permeated the last years of the Helmut Kohl era during the late 1990s, who was her mentor and whose office ended when he lost an election after voters grew tired of him. Arguably, her decision to retire at the time of the election was driven by a desire to avoid such an embarrassing election loss. However, two years of stalemate will mean that her departure will likely have a negative tone.
Another sobering aspect of Merkel’s departure plan has been the appointment of her successor. Normally, a successor would be expected to break with the Merkel era. However, Annegret Kramp-Karrenbauer (“AKK”) is perceived to be Merkel’s mini-me, who will perpetuate Merkel’s overall policies, including the politically unpopular aspects of energy policy and migration. Friedrich Merz, a free marketeer with a deeper understanding of economic policy, deregulation and taxes, lost narrowly. We believe, however, that there is a chance that he will be involved in a future government and potentially even stage a challenge to AKK, although that may not happen until after the 2021 election. AKK’s economic thinking does not appear growth-friendly, namely her support for an increase in the top individual income tax rate from 42% to 53% and her opposition to inflation-indexing of tax rate thresholds, leading to creeping tax increases.
Malaise set to worsen
After a decade of ultra-low interest rates, the German economy that helped to keep Europe going is not only slowing but may be in a much more precarious position than before the financial crisis. Therefore, the real risk today is not just a cyclical recession, but a prolonged downturn. Overcoming a decade of significant policy errors is not going to be achieved during the normal duration of a recession, much less so if you also need to overcome a decade of misinvestment due to low interest rates and onerous tax policies.
The impact of an emergent economic downturn on employment is likely to be muted at first because companies will be reluctant to fire workers. This is partly the effect of stringent employment laws that make it difficult to adjust the size of the workforce to changes in production, and partly companies’ recent experience of extremely difficult hiring conditions.
While the German economy is flooded with low-skilled and unskilled workers, partly as a result of recent migratory trends, qualified workers with strong technical backgrounds are scarce and companies were unable to fill many such jobs during the recent boom. As a result, many companies will keep workers on the payroll and hope to ride out the recession. This favorable employment picture in the midst of a recession will likely reduce political pressure for much-needed reforms and exacerbate problems in the future.
The most likely response by governments to reduced tax and social security receipts will be tax increases, rather than reductions in spending or aggressive tax cuts on investment capital. If you want less of something, tax it. As such, tax increases will only exacerbate the slowdown in economic activity through a decline in investment. Although the nominal tax rate on capital in Germany is 25%, only five points higher than in the U.S., this rises to almost 30% once various surcharges are included. Moreover, deductibility of losses has been curtailed sharply in the name of tax justice to ensure that companies pay a minimum tax rate, which reduces the attractiveness of investments that are profitable in the long run but are lossmaking early on.
Not surprisingly, investment is limited in many cases to saving projects in established firms. While there has been a mini-boom in internet and technology firms, it is nowhere near a level that you would expect from the fourth largest economy in the world. Germany is lagging far behind technology leaders U.S.A. and China. Nothing illustrates this lag better than the opening of offices in Silicon Valley by the few German technology and internet companies who end up succeeding and want to gain scale. They desire to tap into venture capital and the technology scene in general, which is woefully lacking inside Germany. A study by PwC of the Global 100 Software Leaders lists only five German companies among the top 100 by revenue, and we would question whether Siemens should even be counted as a software company so that the real share is a measly four out of 99.
The Kiel Institute for the World Economy (IfW) sees Germany in a much weaker economic position than prior to the 2008 financial crisis because of deficiencies in infrastructure spending and a lack of corporate tax reform since the government of Chancellor Schröder nearly two decades ago. IfW warns that bureaucracy has increased and with trade partners from Europe to China experiencing an economic slowdown, export growth will not likely bail out the economy this time. We would add that the U.S. is going to be the beneficiary of the corporate tax stalemate thanks to U.S. corporate tax rates that are now in line with Switzerland, the U.K. and Eastern Europe.
Germany’s economy remains rooted in old tech such as chemicals, industrial equipment and automobiles. While these industries have generated substantial trade surpluses over the last decade, this has not led to a corresponding increase in household wealth. Today Germans are, on average, less wealthy than Italians, Spaniards or the French. In our view, an important factor behind this discrepancy is the low rate of homeownership, and also the propensity to invest savings in assets with low volatility, mainly low-yielding savings accounts and life insurance policies, which prevents savers from accumulating wealth. Even worse, negative interest rates have reduced the wealth of citizens while facilitating excessive government consumption.
While it is true that many of the problems faced by the German economy are faced by other economies elsewhere in the world, too, it is the ignorance by the political leadership of the origins of the strong economic performance that is unique. Wealth and growth are taken for granted, capitalism is considered evil and must be contained. The United States also suffers from a terribly inefficient public sector, but a combination of low tax rates, entrepreneurship and readily available capital for new ventures offset many of these problems.
As a consequence, we believe that Europe will return to a state of Eurosclerosis in the decade of 2020, triggered by the inability of Germany to continue to act as the growth engine for the continent. Continued problems in the European periphery from Italy to Greece are likely to add to the downward economic pressure.
Investment Implications of Eurosclerosis
For investors, Euroscelrosis raises the question of portfolio implications. The old dogma of not investing in European companies and instead investing in U.S. firms no longer works due to globalization. For example, Roche had only 24% of its 2018 sales in Europe, while Bristol-Myers Squibb achieved a similar percentage of its sales there. Substituting European pharma Roche with an investment in U.S.-based Bristol-Myers will in no way reduce portfolio exposure to the European economy. This is a practical consequence of globalization: everyone has global exposure. Therefore, traditional large and mega cap investment strategies offer poor prospects for reducing portfolio exposure to Europe by divesting Europe-based stocks.
In our opinion, the impact of Eurosclerosis is more benign, potentially even favorable for event-driven investments. In a weak economy the pressure to optimize corporate structures is likely to increase, in particular when European companies benchmark themselves against U.S. firms that have gone through a decade of mergers and splits. Therefore, opportunities in merger arbitrage and spin-offs should increase, while simultaneously a growing number of distressed opportunities will arise. While Eurosclerosis will be difficult for traditional investment strategies we believe that it will present many opportunities for event-driven investors.
via ZeroHedge News http://bit.ly/2ZQTbnX Tyler Durden
The German government can’t locate over 160 German “Islamic State” sympathizers who left home to fight with the terrorist organization and may have returned to Germany, according to Welt am Sonntag.
The Federal Ministry of the Interior speculates that most of them were likely killed in combat, but that they could have “succeeded in escaping and/or disappearing” back into the country. The ministry added that it’s unlikely that the individuals would pass unnoticed in Germany because of “various measures (including wanted lists or entry bans), which make uncontrolled re-entry much more difficult.”
The request for information was made by the Free Democrats (FDP), whose secretary general Linda Teuteberg told Welt that it was highly disturbing that further steps weren’t taken to prevent potential ISIS fighters from re-entering Germany “in light of the known patchy protection at the EU’s external borders.”
Teuteberg added that the government has “no plan for dealing with foreign fighters from Germany” or prosecuting them for their actions.
“This applies to the Germans detained in the conflict zones, as well as the more than 200 former IS supporters who are now back in Germany,” she said, adding that German authorities should step up measures to strengthen German authorities’ ability to investigate and prosecute war crimes on foreign soil.
In April, German prosecutors charged a 27-year-old German woman was busted by an undercover German security services officer she enlisted to drive her to the Middle East so that she could join up with the Islamic State, which she had been supporting some time. During the drive, she told him all about her time in the organization – which the German recorded.
Identified only as “Jennifer W” due to German privacy laws, she was eventually charged with purchasing a 5-year-old Yazidi girl in Iraq to use as a slave, only to let her die in the scorching heat. American intelligence officials tipped off their German colleagues about the woman, who then set her up with the German driver who she told about “leaving her home in northwestern Germany in August 2014, and making her way through Turkey and Syria to Iraq,” according to the New York Times.
Once in Iraq, she joined the Islamic State and “swiftly rose through the ranks, becoming a member of the Hisbah, the morality police, patrolling the parks of the Iraqi cities of Falluja and Mosul.”
According to the indictment, Jennifer W. and her husband “bought a 5-year-old girl in summer 2015 from a group of prisoners of war and kept her in their home as a slave.”
“After the girl fell ill and wet her mattress, the defendant’s husband punished the girl by chaining her up outside in the searing heat and leaving her in great agony to die of thirst,” prosecutors said. “The defendant let her husband do as he liked, and took no action to save the girl.”
Officials have not identified the husband, but German news media have reported he is an ISIS member, believed to be living in the region where Iraq borders Turkey.
“Her job was to make sure that women were upholding the terror organization’s dress and behavior codes,” said prosecutors. “To intimidate them, she carried an AK-47 machine gun, a pistol and an explosive vest.”
via ZeroHedge News http://bit.ly/2YaBXkU Tyler Durden
Whatever you think of BoJo, we mustn’t normalise smear tactics and tabloid nonsense…
Three days ago the police were called round to the flat shared by perspective Tory leader, and likely future Prime Minister, Boris Johnson and his girlfriend Carrie Symonds.
There had apparently been reports of a loud argument, banging and yelling etc. The police talked to both the people present and then left. No one was detained, charged, cautioned. Legally speaking, there was no incident. It would not warrant a mention most of the time.
However, the same neighbours who called the police also recorded the argument and sent the recording to The Guardian.
The Guardian, who have all the class of the Daily Mail, but none of the honesty, duly published it. Red banner. Shrieking tabloid headline. At least The Sun admits what it is.
And so we have Borisgate, or rather #BorisGate.
Boris refused to answer questions about the incident the next day, and Jeremy Hunt has been piling on the pressure to produce “an explanation”. Apparently “we had a row, it’s none of your business” isn’t enough of an explanation.
Hunt’s obsession with this topic is understandable, he’s massively trailing in the leadership contest and needs all the ammunition he can get his hands on.
However, the media circus around this situation is most unusual. It is all the media want to talk about. Some papers are attacking Johnson and demanding an explanation, some are attacking his neighbours as “leftists”. The Sun is…being The Sun.
There have even been accusations of “domestic violence”, despite the fact there was – as far as we can determine – no indication of any such thing. Not from the police who were there, or from any of the people involved.
We haven’t been able to track down the audio, all we have are reported quotes in the press, and there’s very little to go on there. “Get off me” is the most contentious phrase quoted and, without context, it could mean anything.
Framing that as “domestic violence” is premature, at best.
Factual accuracy matters – even when it contradicts your personal preferences and political loyalties. There is nothing here to suggest domestic violence, and nothing good will come from saying there is.
However that didn’t stop the predictable names on twitter jumping to conclusions and fuelling the controversy:
Even the editor of The Canary (who really should know better) took part:
The establishment press is attacking Boris Johnson’s neighbours for reporting suspected domestic violence to police.
This is an escalation in a near 4yr media assault on the left.
It’s no good whining now Centrists. You got us here by legitimising this whole smear campaign.
— Kerry-Anne Mendoza (@TheMendozaWoman) June 23, 2019
All of this over an “incident” that was totally meaningless. No police detention. No arrests, charges or cautions or even a sign of violence.
This is a fake scandal. Whether it was created, or simply seized upon, by the media and various “liberal” influencers on social media I don’t know. But whatever you think about Boris Johnson, his personality or his politics, this is deeply inappropriate. We’re meant to be better than this.
Is that the politics we want? A system where people are secretly recorded during their private, unflattering moments and then held up to public ridicule and censure?
Leftists who say “yes” to that question need to be careful. What’s good for Boris is good for Corbyn, we already got a taste of that during the “stupid woman” farce.
Accept this with Johnson, and in the run-up to the next General Election Tory supporters, tabloid journalists, and every other anti-Labour force will be crowding around Corbyn’s house with microphones pressed to the walls. Nobody is perfect, Corbyn will probably slip at some point.
…and even if he doesn’t, there’s no reason to assume the forces opposed to Corbyn would be bound by reality, or in any way limited to what actually happened. We already know that’s not the case.
In a world where video editing can make Nancy Pelosi appear to drunkenly slur her words, a muffled audio recording of Corbyn having an argument, saying something vulgar, offensive or (let’s play the odds here) antisemitic could be knocked up in an afternoon.
When we endorse smear tactics and media witchhunts, we make it acceptable that these tools be used against us as well as them. Do unto others…etc.
These “scandals” will create a future where we won’t debate the issues, we’ll just try and out smear each other.
And that’s even assuming that everything here is as it seems.
This scandal breaking just days before Johnson is expected to become Prime Minister is odd timing, especially when it comes hot on the heels of ex-MI6 man (and media favourite) Rory Stewart getting kicked out of the race.
The neighbours calling the police isn’t strange of itself, but recording the row is. And then they sent it to The Guardian, the Deep States mouthpiece and paper of record.
The Guardian ran their “exclusive” within a few hours (not including the recorded audio, only referencing alleged quotes, the actual audio is apparently hard to get hold of).
It’s unquestionably a roll-out, the only uncertainty it’s whether opportunistically seized upon, or cynically created.
The mainstream media don’t report things because they’re true, they don’t talk about them because they’re important and they don’t write articles because “the public need to know”. The MSM only report things that serve an agenda, true or false, real or imaginary. The narrative matters, the facts don’t.
That said, “BorisGate” is an indication that the UK Deep State has some internal rift, and that some powerful interest is very much against Johnson becoming Prime Minister. (That’s been obvious since the sudden emergence of Rory Stewart, a candidate who appeared from nowhere, has an intelligence background, and had all kinds of undeserved praise heaped on him by the BBC and everyone else).
But that is analysis for a different time – In the end, it doesn’t really matter what sits at the root of “BorisGate”. The important question is: shouldn’t we be better than this?
Isn’t the point of civilised political debate to discuss issues on an intellectual level, not hurl smears and dirt at each other? To be calm and collected, rather than emotionally manipulative and sentimental?
Either this is a genuine situation, an establishment mouthpiece paper running an hysterical story supplied to them by prying neighbours – OR it’s a Deep State psy-op hoping to influence politics
Either way, it’s nothing we should tolerate, let alone celebrate.
via ZeroHedge News http://bit.ly/2xduzt8 Tyler Durden
China, having claimed most of the South China Sea for itself, has published a new report that suggests helicopter drones could soon be deployed to its militarized islands.
The AV500W vertical take-off and landing unmanned helicopter manufactured by Aviation Industry Corporation of China (AVIC) has completed its first-night operation under challenging conditions, showing that the new helicopter drone is ready for serious production and future deployment.
Global Times said the AV500W test flight was conducted on June 14 in South China’s Hainan Province. The helicopter drone performed a night-time mission to identify a vessel with its electro-optical sensors.
“During its flight, the AV500 overcame challenging environments including strong winds and high salinity and humidity, AVIC said in the statement, noting the operation proved the drone helicopter’s capability to operate at night.”
During a test several years ago in Northwest China’s Gansu Province, the helicopter climbed to an altitude of 16,400 feet, demonstrating its superior flight capabilities.
A military expert who requested anonymity told the Global Times on Thursday that the new helicopter drone is set to be offered to domestic and international clients.
The expert said the drone could carry out a patrol, reconnaissance, damage evaluation, and attack missions.
The drone successfully conducted a missile firing test in 2018, making it combat ready, and appealing to the People’s Liberation Army (PLA) controlling the militarized islands in the South China Sea, otherwise known as Spratly islands.
The AV500W, AV500 and XM20 drone helicopters complete successful test flights over the Qinghai-Tibet Plateau. pic.twitter.com/9sx1iMg975
The AV500W can carry 385-pound payload and fly a little over 100 mph carrying laser-guided missiles or machine guns, AVIC said.
Since the PLA doesn’t have helicopter drone gunships patrolling the South China Sea, the US Navy who conducts freedom of navigation missions near the Spratly islands might one day be greeted by a helicopter drone from China.
via ZeroHedge News http://bit.ly/2YcHSG3 Tyler Durden
President Trump’s last-minute change of mind over launching US airstrikes against Iran shows that a military conflict of some description in the Gulf is becoming highly probable. His hesitation was most likely less connected with an Iranian surface-to-air missile shooting down a US surveillance drone than with his instinct that militarising the crisis is not in America’s best interests.
If Trump had not pulled back and the strikes against Iranian radars and missile batteries had gone ahead, where exactly would that have got him? This sort of limited military operation is usually more effective as a threat than in actuality. The US is not going to launch an all-out war against Iran in pursuit of a decisive victory and anything less creates more problems than it resolves.
Iran would certainly retain post-strike the ability to launch pin-prick attacks up and down the Gulf and, especially, in and around the 35-mile wide Strait of Hormuz through which passes 30 per cent of the world’s oil trade. Anything affecting this choke point reverberates around the word: news of the shooting down of the drone immediately sent the price of benchmark Brent crude oil rocketing upwards by 4.75 per cent.
Note that the Iranian surface-to-air missile shot down a $130m (£100m) drone, in practice an unmanned aircraft stuffed with electronic equipment that was designed to be invulnerable to such an attack. The inference is that if US aircraft – as opposed to missiles – start operating over or close to Iranian airspace then they are likely to suffer losses.
But the dilemma for Trump is at a deeper level. His sanctions against Iran, reimposed after he withdrew the US from the Iran nuclear deal in 2018, are devastating the Iranian economy. The US Treasury is a more lethal international power than the Pentagon. The EU and other countries have stuck with the deal, but they have in practice come to tolerate the economic blockade of Iran.
Iran was left with no choice but to escalate the conflict. It wants to make sure that the US, the European and Asian powers, and US regional allies Saudi Arabia and United Arab Emirates, feel some pain. Tehran never expected much from the EU states, which are still signed up to the 2015 nuclear deal, and has found its low expectations are being fulfilled.
A fundamental misunderstanding of the US-Iran confrontation is shared by many commentators. It may seem self-evident that the US has an interest in using its vast military superiority over Iran to get what it wants. But after the failure of the US ground forces to win in Iraq and Afghanistan, not to mention Somalia, no US leader can start a land war in the Middle East without endangering their political survival at home.
Trump took this lesson to heart long before he became president. He is a genuine isolationist in the American tradition. The Democrats and much of the US media have portrayed Trump as a warmonger, though he has yet to start a war. His national security adviser John Bolton and secretary of state Mike Pompeo issue bloodcurdling threats against Iran, but Trump evidently views such bellicose rhetoric as simply one more way of ramping up the pressure on Iran.
But if a ground war is ruled out, then Iran is engaged in the sort of limited conflict in which it has long experience. A senior Iraqi official once said to me that the Iranians “have a PhD” in this type of part political, part military warfare. They are tactics that have worked well for Tehran in Lebanon, Iraq and Syria over the past 40 years. The Iranians have many pressure points against the US, and above all against its Saudi and Emirati allies in the Gulf.
The Iranians could overplay their hand: Trump is an isolationist, but he is also a populist national leader who claims in his first campaign rallies for the next presidential election to “have made America great again”. Such boasts make it difficult to not retaliate against Iran, a country he has demonised as the source of all the troubles in the Middle East.
One US military option looks superficially attractive but conceals many pitfalls. This is to try to carry out operations along the lines of the limited military conflict between the US and Iran called the “tanker war”. This was part of the Iran-Iraq war in the 1980s and the US came out the winner.
Saddam Hussein sought to throttle Iran’s oil exports and Iran tried to do the same to Iraq. The US and its allies weighed in openly on Saddam Hussein’s side – an episode swiftly forgotten by them after the Iraqi leader invaded Kuwait in 1990. From 1987 on, re-registered Kuwaiti tankers were being escorted through the Gulf by US warships. There were US airstrikes against Iranian ships and shore facilities, culminating in the accidental but very avoidable shooting down of an Iranian civil airliner with 290 passengers on board by the USS Vincennes in 1988. Iran was forced to sue for peace in its war with Iraq.
Some retired American generals speak about staging a repeat of the tanker war today but circumstances have changed. Iran’s main opponent in 1988 was Saddam Hussein’s Iraq and Iran was well on its way to losing the war, in which there was only one front.
Today Saddam is gone and Iraq is ruled by a Shia-dominated government. Baghdad is trying to stay neutral in the US-Iran crisis, but no Iraqi leader can afford to oppose Iran as the greatest Shia power. The political geography of this part of the Middle East has been transformed since the Iran-Iraq war, with change very much to the advantage of Iran. From the Afghan border to the Mediterranean – in Iran, Iraq, Syria, Lebanon – Shia communities are in control or are the most powerful forces in the state. The US and UK often refer to them as “Iranian proxies” but in practice Iran leads a sectarian coalition with a religious basis.
It is a coalition which has already won its main battles – with Shia parties in Iraq, Bashar al-Assad in Syria, Hezbollah in Lebanon – and this outcome is not going to change. The Houthis in Yemen, who belong to a different Shia variant, have survived a prolonged attempt by Saudi Arabia and UAE to defeat them.
Compared with 28 years ago in the Gulf when the US was last fighting a limited war with Iran, the US is in a weaker position. Israel, Saudi Arabia and UAE may have urged Trump to tear up the nuclear deal and confront Iran, but they show no enthusiasm to join any war that ensues. Supposing that this month’s pin-prick attacks on tankers were indeed carried out by Iran, which seems likely, then the purpose will have been to send message that, if Iran’s oil exports can be cut off, so too can those of the other Gulf producers. Trump thinks he can avoid the quagmire of another Middle East war, but he may already be in too deep.
via ZeroHedge News http://bit.ly/2X1GTqE Tyler Durden
Less than 48 hours after columnist (and soon to be book author) E. Jean Carroll accused (in a New York Magazine article) Donald Trump of raping her in a dressing room in high-end department store, Bergdorf Goodman, in the 1990’s, CNN had gleefully invited the accuser on to discuss the details of this horrific act from her past.
Things did not go according to plan for CNN… and we suspect for Ms. Carroll’s book sales.
While President Trump has vehemently denied the rape took place, a sensitive Anderson Cooper welcomed the woman on to his CNN show… then things went ‘full awkward’.
Cooper asked Carroll, “you don’t feel like a victim?” after she suggested that was the case, and things went downhill fast.
The seemingly unstable Carroll replied, “I was not flung to the floor.”
Cooper retorted, “I think most people think of rape as a violent assault…”
To which Carrol replied, stunning the CNN anchor, “I think most people think of rape as being sexy…”
Cooper stuttered, stumbled, and quickly cut the interview straight to a commercial break, but not before Carroll could add “…think of the fantasies.”
Perhaps next time, CNN will vet the mental health of their Trump-bashing guests a little better? Are we still supposed to believe every accuser or did Carroll just crush the credibility of the last two years of #MeToo-ism accusations in one 30-second breakdown?
via ZeroHedge News http://bit.ly/2XamdlC Tyler Durden
By the summer of 1936, Europe was in a state of perpetual crisis. Hitler’s rise to power, German invasion of the Rhineland, Spanish Civil War, Fascist Coup attempt in France, etc. World War was just a few years away.
25-year old Scotsman with a proper Scottish name – Fitzroy MacLean, who was in the His Majesty’s Foreign Service, was on his way from Paris to his new post in Moscow, where he would spend the next few years of his life traveling around the Soviet Union… and specifically Eurasia.
No Westerner had been to the region for decades.
He wrote his memoirs of the trip in a great book called Eastern Approaches. It’s a must read for any travel lover. To give you a flavor of the book, Maclean describes a night he spent in a dingy basement room at an inn where the floor above him was a restaurant:
At a point which must have been just above my bed a team of six solidly built Armenians were executing, with immense gusto, a Cossack dance, kicking out their legs to the front and sides and springing in the air, to the accompaniment of a full-sized band and of frenzied shouting and hand-clapping from all present. There was no hope of sleep. I ordered a bottle of vodka and decided to make a night of it.
Maclean writes very fondly of Almaty, then the capital city of the Soviet republic of Uzbekistan
Alma Ata must be one of the pleasantest provincial towns in the Soviet Union. . .
In Kazakh its new name means ‘Father of Apples’, an appellation which it fully merits, for the apples grown there are the finest in size and flavour that I have ever eaten. The central part of the town consists of wide avenues of poplars at right angles to one another.
In some respects, very little has changed. Almaty is still very much a provincial town– quiet, picturesque with tree-lined streets and bazaars.
It’s no longer the capital– that distinction is in a city formerly known as Akmolinsk, which became Akmola, and was then renamed Astana in the 1990s, and renamed again to Nursultan a few months ago.
Almaty is more quaint and traditional than Astana/Nursultan. It’s incredibly cheap.
Gasoline is about 40c per liter, less than $1.50 per gallon.
Kazakhstan’s economy is a one-trick pony. But it’s a great trick… one that has created a lot of wealth.
70% of exports are energy. #1 producer of uranium, with roughly 40% of the world’s supply. Top producer of coal, oil, and gas.
Limited population… smaller than metropolitan Paris, but larger than all of Western Europe combined.
So this has had a hugely beneficial impact that has actually trickled down and created a robust middle class.
You can see a lot of wealth. Nice houses, nice apartments, nice cars. Incredible infrastructure– highways better than what I’ve driven on in North America and Europe.
Despite that economic success and robust growth, this is definitely not a place for a casual entrepreneur. Large scale energy or agricultural project, sure.
What’s really compelling is for people who are location-independent… who can take their work with them and roam from place to place. Tens of millions of people, more and more every day.
Kazakhstan ticks the boxes… sufficient Internet speed (minor censoring that’s easy to get around with VPNs), incredibly cheap.
Good lifestyle– plenty of nightlife, plush shopping malls and restaurants.
Remote, but easy to get to. Air Astana flies to plenty of gateway cities like Bangkok, Hong Kong, Beijing, Dubai, Moscow, etc. plus other major airlines fly to/from Frankfurt, Istanbul.
But there are lots of cheap places with decent Internet.
What’s really exceptional about this place is the outdoors… it’s Disneyland for nature lovers.
20 minutes in one direction and you’re in the Tien Shan: Mountains of Heaven. Ski resorts, hiking, cable car rides, pristine alpine lakes.
20 minutes in the other direction and you’re in the vast open plains… the legendary steppe grasslands of central Eurasia that extend all the way to Mongolia.
I spent some time here en route to Uzbekistan for our Total Access trip. Wild horses across the infinite openness. Some of the most scenic vistas I’ve ever seen traveling across 120+ countries on all seven continents.
And no one else around. You feel like you’re on your own planet. No endless nuisance of rules and signs telling you what to do, where to go, etc. Just beauty and freedom.