Almost 3 Times As Many People DROPPED OUT of Labor Force As Joined It

The New York Times' Neil Irwin gives a balanced view of the new jobs numbers:

Rarely does a monthly report on the United States job market look so terrific on the surface while being so disappointing underneath.




Employers added a whopping 288,000 jobs, the most in two years.




The number of people in the labor force fell by a whopping 806,000, wiping out the February and March gains and a bit of January as well. The labor force participation rate fell by 0.4 percentage points to 62.8 percent, returning to its December level.


And the number of people reporting they were unemployed fell by 733,000, which sounds good on its surface, but paired with the similar-sized decline in the labor force points to job seekers giving up looking rather than finding new employment.

In other words, 288,000 jobs were created, but 806,000 fell out of the labor force and gave up looking for work altogether.  So 2.8 times as many people dropped out as found jobs.

As CBS notes:

The unemployment rate dropped to 6.3 percent in April from 6.7 percent in March, the lowest it has been since September 2008 when it was 6.1 percent. The sharp drop, though, occurred because the number of people working or seeking work fell. The Bureau of Labor Statistics does not count people not looking for a job as unemployed.




The amount (not seasonally adjusted) of Americans not in the labor force in April rose to 92,594,000, almost 1 million more than the previous month.

The number of women not in the labor force has risen to an all-time high.  there was a loss of jobs in the 25-54 age group,  And – in 20% of American families – no one works.

Despite what you may have heard, the huge numbers of people dropping out of the labor force can't be attributed to retiring baby boomers.

In reality, throwing money at the big banks has led to a  “jobless recovery” – a permanent destruction of jobs – which is a redistribution of wealth from the little guy to the big boys. (And see this.)

And most of the new jobs being created are low-wage or temporary jobs.

Also In the News:

via Zero Hedge George Washington

All “Rules-based” Economists Agree: Fed Policy Is Too Easy

This week's data marked a crucial turning point in US monetary policy. For all those "rules-following" economists out there with their various adaptions of the infamous Taylor Rule (a model that stipulates how much the central bank should change the nominal interest rate in response to changes in inflation, output, or other economic conditions), this week marked the point at which ALL models suggest that Fed interest rate policy is simply too easy. This explains why the Fed has shifted to a qualitative forward guidance (reminding us of porn – we'll know when to tighten when we see it) as Rick Santelli so eloquently the fact that the Fed claims to be data-dependent "is a twilight zone" and as John Taylor himself notes, the Fed's QE policy "has not worked with few if any signs of success," and now, even as they taper, their rate policy is far too easy. Simply put, they're making it up as they go along (and it's never been more obvious).


We leave it to Santelli and Taylor to destroy the myth that the Fed has a clue…


And here are the various "rules-based" approaches all flashing "tighten" signals…

The Classic Taylor Rule Model…


The "aggressive" Taylor Rule Model…


The "Rudebusch" Taylor Model…


The "Mankiw" Taylor Model…


The "Stone & McCarthy" Taylor Rule Model…


The "Deutchse Bank" Taylor Rule Model…



But of course – The Fed knows best – so we leave it to Rick Santelli to slam the Fed apologists…who defend their wavy-hands non-rules-based approach…

Charles Evans made the following statement not long ago: "for me, there is a problem with simplistic approaches. simple tailor rules failed to express policy, intentions clearly"


[ZH: Yeah – because youy fucking nailed this:



Professor, where i come from, kiss is the rule of the day. keep it simple, or stupid, i'll say, keep it simple. what is wrong with simple where every player in the marketplace can tinker with your formula and nowhere fed funds ought to be. isn't that a better way?


Isn't a rule-based fed policy preferable? absolutely.

In other words… "they're making it up as they go along…" (forward to 1:46 for the punchline)


via Zero Hedge Tyler Durden

Switzerland’s Role In The Gold Market

Submitted by Dan Popescu via GoldBroker,

« Switzerland is for gold what Bordeaux is to wine », Gilles Labarthe, Swiss journalist and ethnologist.


When one thinks of Switzerland, banking comes to mind easily but gold doesn’t as much. After all, the relationship between Switzerland and gold is more ancient than the one with paper bank deposits. Certain bankers from Geneva, such as Lombard Odier and Pictet, started in 1800 and have more than 200 years of history. Back then, paper money didn’t exist yet and deposits consisted mainly of gold and silver. Today, still, a full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the International Monetary Fund (IMF) it had to abandon this backing by gold. Today, Swiss citizens have asked for a referendum to be called in order to get back to that backing.

Gold is, along with silver, the oldest money in the world, hence its unbreakable relation with the banking system. Gold is also the most liquid and transportable wealth protection in time and space. In case of war or revolution, it is hard to flee with one’s property or other valuable assets as can be done with gold. In 1685, when the Nantes Edict was revoked by Louis XIV, Protestants were definitely denied their religious rights. This led most of the Huguenots to flee to the European Protestant countries, such as Switzerland.

We all know about Switzerland’s banking secrecy, but a little less about its origins. One might think that it originates in a text of law, like in other banking centers. But banking secrecy is profoundly buried in the Swiss mentality. One can always revoke a law, but it is very hard to change one’s state of mind or tradition. When you ask a question of a Swiss, you have to follow up with ten more questions in order to get a complete response. He will answer bit by bit. If you ask the same question of an Italian, he will tell you about his whole life. Having lived in Switzerland, this is how I can best describe Switzerland’s banking secrecy. Swiss people are discreet by nature. They don’t need laws… laws only reinforce what is de facto.

« It is not the federal banking laws’ article 47 that defines the notion of banking secrecy in Switzerland, but common law; banking secrecy thus falls under the general dispositions of the code of contractual obligations, as well as under articles 27 and 28 of the civil code, which put into law the principle of identity protection. » (1) « Penalties for breaking this principle are covered by the federal banking laws’ article 47, constituting a disposition of administrative penal law. »(2) The civil code protects every personal right worth protecting and, notably, private life secrecy. The Swiss federal Court estimates that, « the inviolability of private life does not only constitute a moral principle, but is also a civil right, a « judicial asset »; it is an attribute of personality, and the law protects it. »(3) And privacy in the economic sphere is also protected.


« What sane man would not put away some money in swiss banks? Switzerland is the vault of the world », Félix Houphouët-Boigny, former President of the Ivory Coast.


For a long time Switzerland has been building infrastructures to safeguard financial assets such as gold. Its political stability, its neutrality, its defense system based on a militia army, and the Alps, that serve as a natural fortress, make Switzerland the ideal safe vault for gold. In addition, we can add to that ultra-qualified personnel, more dedicated to excellence than to volume.

During the crisis of the London Gold Pool in the ‘70s, Zurich has even come close to becoming the main gold trading hub, at the expense of London. The Bank for International Settlements (BIS), the central banks’ banker, is still based in Basel. Almost all of central banks’ gold trades are effected by the BIS in the utmost discretion. The headquarters of the World Gold Council was in Zurich, before moving to London recently. Geneva, where the most important jewelry auctions take place, has also been the global center for jewelry and watchmaking for many years.

The sound management of public finances has the effect of the Swiss franc mimicking the price of gold closely. Recently, in order to protect its exporting businesses, Switzerland decided to peg the Swiss franc to the euro, thus diminishing its attraction as an anti-inflation currency (in favor of gold). Even though Swiss banking secrecy is no longer backed as much by the authorities and the large banks, it still remains strong in the mentality of the Swiss people. True, the Americanization of the Swiss banking system since the ‘80s has weakened banking secrecy and the role of gold in fortune management. However, having talked with Swiss wealth managers, I see that this is starting to change and that, without admitting it publicly, they include more and more gold in their clients’ portfolios. In the last ten years, several companies specialising in gold storage for businesses and individuals, outside the banking system, have appeared.

The Swiss have a reputation for excellence in gold refining. That has let Switzerland become the hub of gold refining, with nearly 70% of the world’s gold transiting through the country. Mining companies and gold recyclers export to Switzerland, where the gold is purified to the highest levels (.9999 or even .99999). It is then exported in the whole world to jewellers, investors or central banks.

The best precious metals storage and safekeeping companies are also based in Switzerland.

Other countries are trying to compete with Switzerland, but they still have a long way to go, especially since Switzerland is not sleeping on its laurels. Two of those countries are City-States like Dubai and Singapore. Singapore is a stable haven in Asia, as is Dubai in the Middle East, but they haven’t reached Switzerland’s level yet. Dubai is trying to develop an expertise in refining and trading gold, whereas Singapore, already with an excellent infrastructure for wealth management, is developing its capacity for gold storage and, also, a gold trading market for Asia.

We live in uncertain times, and no one is safe from unforeseen events. In the actual context, it seems to me that Switzerland is the best place to store gold. However good the infrastructures may be, one must never lose sight of the financial health of the country in which one wants to store gold. A fiscal or financial paradise that has gone into debt loses its independence and will not hesitate to use legal means to confiscate assets and, thus, gold, that are on its territory, as we’ve seen with Cyprus recently. The United States and the European Union have already adjusted their legislation for possible confiscation. Even Switzerland was taking the wrong road with its public finances in the ‘90s but, thanks to direct democracy, a positive radical change has taken place. This is a positive element for Switzerland, even though I remain vigilant. The only caveat I have is that the large Swiss banks, because of high exposure to derivatives and being very present in the United States, have lost a little of their financial stability and, consequently, a little of their independence.


« It is said that the Swiss only love money… this is not true. They also love gold. » Anonymous


Gold Price vs Swiss franc


Largest Gold Refineries by Capacity (tonnes per year)


Switzerland’s Gold Trading (2013)


Gold Trading between Hong Kong and Switzerland

via Zero Hedge Tyler Durden

Voice Recording From Missing Flight MH370 Was Edited

It has been nearly two months since Malaysian Airlines flight MH370 disappeared without a trace on March 8. Since then, despite the endless coverage of CNN, there has been absolutely no progress in uncovering any clues about the fate of the missing Boeing 777. Perhaps the following may provide some clarity on why.

On Thursday, for the first time, 7 minutes of audio recordings of the final conversations between pilots of the missing Malaysian jet and teams of air traffic controllers on the ground were released.

The recording is provided below.

There is one problem: the recordings were “edited” leading many to wonder if the entire conversation wasn’t fabricated on a sound stage, and if so: why? And just what is the Malaysian government (either alone or in conjunction with other countries) hiding.

NBC has more:

Analysts who listened to the recordings for NBC News did not know why they were edited, but discovered at least four clear breaks in the audio that indicated edits.


It’s very strange,” said audio-video forensic expert and registered investigator Ed Primeau of Primeau Forensics, who has analyzed hundreds of audio recordings. He said the beginning and end of the recording are high-quality with a low noise floor, meaning ambient background noise is almost silent, unlike the middle.


“At approximately 1:14 (a minute, 14 seconds into the audio, which can be heard here), the tone of the recording change to where to me, it sounds like someone is holding a digital recorder up to a speaker, so it’s a microphone-to-speaker transfer of that information. That’s a pretty big deal because it raises the first red flag about there possibly being some editing,” he said.


The next part that raises questions is two minutes, six seconds in, through two minutes, nine seconds in, he said.


“I can hear noise in the room, along with the increase in the noise floor. I can hear a file door being closed, I can hear some papers being shuffled. so I’m further convinced that, beginning at 1:14 continuing through 2:06 to 2:15, it’s a digital recorder being held up to a speaker.”


Long gaps in the communication throughout the recording also imply some editing, he said.


“But yet, at 6:17, there’s a huge edit because the conversation is cut off. It’s interrupted. And the tone changes again,” he said. “The noise floor, when you’re authenticating a recording from a forensic perspective, is a very important part of the process. All of a sudden, we go back to the same quality and extremely low noise floor that we had at the beginning of the recording.”


Kent Gibson, a forensic audio examiner with Forensic Audio in Los Angeles, added that there appear to be additional edits at 2:11 and 5:08, and agreed it sounded as though the middle section was recorded with a microphone near a speaker.


“You can hear, at 4:07, pages turning or a person breathing, which is unusual,” he said.


While it’s not uncommon for the background of a recording to change when a cockpit communication turns over from ground control to air controllers — which happened about four minutes into this recording — that doesn’t explain the noises that are heard.


“It’s not unusual that there would be clicks when they push the button on the microphone, but it’s very unusual to have a disturbance. Normally you wouldn’t have any background,” Gibson said.


A cut-off word also isn’t out of the realm of possibility, he said.


“It wouldn’t be unthinkable to have a truncated word because if somebody let go of the trigger on the microphone, it might cut off their word,” he said. “But it would be very unusual to find a background differential at the same time, suggesting that Malaysian authorities or whoever presented this made edits for whatever reason.”

So why did the authorities fabricate the recording? Simple: the pilot said something the government did not want leaked:

Gibson said it’s possible the tapes could have been edited by Malaysian authorities “if the pilot dropped a hint that they didn’t want to get out, if he said something that doesn’t fit with the Malaysian government’s party line.”


But, he said, “It’s more likely to be an inadvertent thing. But it’s not the way to handle evidence.”


The recording also could have come from different sources, he added.


“You can assume that the recording while they’re still on the ground came from the tower and then you could assume that the communication with air controllers was while they’re in the air,” he said. “They may have just mishandled the cobbling of it together.”


This doesn’t necessarily prove anything about the investigation, he added. “Unfortunately, there are no smoking guns, except there are edits. And there are clear edits,” he said.

So no smoking guns, except… there are smoking guns. “There’s things that have to do with timelines and radar that they have available, but they don’t make them available,” said Tom Owen, a consultant for Owen Forensic Services audio analysis and chairman emeritus of the American Board of Recorded Evidence. “They wouldn’t give you anything that would be enlightening for the public to any secretive information. I don’t see that as a problematic issue.”

Considering several hundred people are missing, presumed dead, purposefully covering up critical clues as to what happened is certainly a problematic issue, even if thanks to the government’s botched up handling of the situation, it does impart a significant dose of morbid humor to the following advertisement from Malaysian Airlines.


Finally, for all those who have been inquiring and trying to get to the bottom of this mystery, here is the official cargo manifest of flight MH370 – no doubt “edited” as well.

h/t Ro

via Zero Hedge Tyler Durden

Obama Administration Launches Plan To Make An “Internet ID” A Reality

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

It appears the status quo may be finally making its moves to getting control over the heretofore free and open internet. As I and many others have noted previously, the internet is one of the most powerful tools humanity has ever devised. It frees information in a way that was simply unimaginable decades ago and empowers each of us to be as informed or uninformed as we desire.

Just last week in my post, Say Goodbye to “Net Neutrality” – New FCC Proposal Will Permit Discrimination of Web Content, I mused that in so-called “first world” countries like the U.S. the illusion of freedom must be maintained even as civil liberties are eroded. Thus censorship must be administered surreptitiously and slowly. The following plan to implement an “Internet ID” will initially only be rolled out as a pilot program in two states (Michigan and Pennsylvania), and will only deal with government services. That said, we can see where all of this is ultimately headed, and the program, called the National Strategy for Trusted Identities in Cyberspace, should be monitored closely going forward.

Vice reported on this a few days ago:

A few years back, the White House had a brilliant idea: Why not create a single, secure online ID that Americans could use to verify their identity across multiple websites, starting with local government services. The New York Times described it at the time as a “driver’s license for the internet.”


Sound convenient? It is. Sound scary? It is.


The vision is to use a system that works similarly to how we conduct the most sensitive forms of online transactions, like applying for a mortgage. It will utilize two-step authentication, say, some combination of an encrypted chip in your phone, a biometric ID, and question about the name of your first cat.


But instead of going through a different combination of steps for each agency website, the same process and ID token would work across all government services: from food stamps and welfare to registering for a fishing license.


The original proposal was quick to point out that this isn’t a federally mandated national ID. But if successful, it could pave the way for an interoperable authentication protocol that works for any website, from your Facebook account to your health insurance company.


To start, there’s the privacy issue. Unsurprisingly, the Electronic Frontier Foundation immediately pointed out the red flags, arguing that the right to anonymous speech in the digital realm is protected under the First Amendment. It called the program “radical,” “concerning,” and pointed out that the plan “makes scant mention of the unprecedented threat such a scheme would pose to privacy and free speech online.”


And the keepers of the identity credentials wouldn’t be the government itself, but a third party organization. When the program was introduced in 2011, banks, technology companies or cellphone service providers were suggested for the role, so theoretically Google or Verizon could have access to a comprehensive profile of who you are that’s shared with every site you visit, as mandated by the government.


Then there’s the problem of putting all your security eggs in one vulnerable basket. If a hacker gets their hands on your cyber ID, they have the keys to everything.


For now, this is all just speculation. The program is just entering a test phase with select state government agencies only (there are currently plans to expand the trial out to 10 more organizations.)


But it’s not far-fetched to think we’re moving toward a standardized way to prove our identity in cyberspace the same way we do offline.

Keep a close eye on this.

Full article here.

via Zero Hedge Tyler Durden

Sticky Prices in FX

The major currencies continue to trade in fairly narrow ranges. The persistence of lackluster activity renders our trend identification, momentum, and positioning tools less useful.


The ECB meeting in the week ahead may be a window of opportunity for more activity. Yet, neither the threat of asset purchases and/or a negative deposit rate nor heightened tensions over Ukraine, or a re-acceleration of the US economy have seemingly provided new trading incentives.


Most participants expect the ECB to move in June, but standing pat this week may not be a non-event. Getting past the residual event risk may be important. The event risk includes comments from Draghi, who despite the critics who claim action is necessary, continues to do a fairly good job staying true to the spirit of the G20 “best practices” regarding the foreign exchange market, and checking the euro’s advance. He has not succeeded in pushing it down as remove, or at least greatly reduce, the upside momentum.


Over the last three weeks, the euro has been confined to a $1.3775-$1.3890 range. With a couple minor and brief exceptions the dollar has traded on the JPY102-handle for seven weeks. For the last three week, the Dollar Index has traded between 79.55 and 80.00. The narrow price ranges are both the cause and effect of the lack of participation, which is reflected in the minor position adjustments in the currency futures and what appears to be lower volumes in the spot market.

More light will be shed when several central banks report their estimate of foreign exchange turnover covering this period, later in the year.


Given the narrow ranges and recognition that our technical tools are less effective in such market conditions, we offer this week, only a brief overview of how we see the price action.


Euro: We are more inclined to see an upside than a downside break. There seems to be a reasonable risk of the euro moving above $1.3900, but whether it can break $1.40 now is a different matter. The importance of the $1.37775 area support appears to be growing.


Yen: Buying the dollar against the yen now seems to be a bet, if you will on two things. First, that the downside reversal in US equities seen before the weekend is not the start of a significant pullback. Second, that the US Treasury yields and the premium over Japan are near a bottoming. The US premium dipped below 200 bp last week for the first time since early February, when it was a bit of a one-day fluke. Last week premium stayed below that threshold for two consecutive days, the first time since last October. Japanese markets are closed early in the new week.


Sterling: New four year highs were recorded last week, but the move does not appear to be complete. The strength of the UK economy, and this quarter it will likely surpass its pre-crisis peak is helping to widen interest rate differentials in sterling’s favor. We look for bulls to continue to absorb the offers ahead of $1.70 and eventually drive sterling through there. The referendum in Scotland poses some political risk (that can have serious economic repercussions) but that is not a near-term consideration. The May 25 EU parliamentary elections may be more important, especially if the UKIP turns in a strong performance, perhaps aided by the European Court of Justice decision not to stop the plans for some members to implement a financial transaction tax. The $1.6780-$1.6800 area is forming an important area. It probably requires a break of $1.6760 to suggest a break out.


Dollar-Bloc: The US dollar is supported around CAD1.0940. The upper end of the range, which we favor a test on, is seen in the CAD1.1050-70 area. On a more medium term perspective, we still look for weakness in the Canadian dollar. The Australian dollar staged an impressive recovery before the weekend after testing the $0.9200 area support. A move now above $0.9315-25 would suggest that 1) the pullback from $0.9460 in early April was a correction and 2) that another run toward $0.9500, the measuring objective of an old head and shoulders bottom pattern.


Mexican Peso: The dollar closed lower against the peso every day last week, slipping to its lowest level in almost a month. However, the price action did not persuade us that the a breakout is at hand. The dollar’s resilience and ability to hold the low from early April near MXN12.94 and resurface above MXN13.00 suggests some additional upside in the days ahead.



Observations on speculative positioning in the CME currency futures:  


1. For the second consecutive reporting period, the week to April 29, saw minor position adjustments.  The largest gross position adjustment was short Australian dollar position that rose 6.1k contracts to 39.3k.  Second place went to the 3.8k contract decline in gross long sterling positions, bringing them down to 85.9k contracts.  That is the second largest gross long currency futures position, behind the euro’s 102.3k contracts.  


2.  It was the fourth reporting period that the net euro position has been largely flat.  The net position in the Swiss franc has been essentially flat for six weeks. 


3.  The net short yen position increase to 70.4k contracts from 67.2k.  It is the first increase in four weeks.  It was more a function of gross longs being reduced (2.7k contracts to 13.8k) than new shorts (400 contracts to 84.2k).   


4.  The decline in the next long Australian dollar position from 16.4k to 10.7k contracts in the latest reporting period break a seven week streak in which the net shorts were cut or net longs grew.   The gross long Aussie positions were not cut.  Instead they rose by a slight 500 contracts to 50.0k.


5.  The net short Canadian dollar position slipped to 30.3k from 35.4k contracts.  This is the smallest net short position since last November. 

via Zero Hedge Marc To Market

“We Are Essentially At War” Ukraine Admits, After Dozens Killed

While there may be some confusion about why massive bond buying greeted yesterday’s “better than expected” loss of 209 jobs in the 25-54 age group, dragging stocks down, the answer is actually very simple: there is a war in the Ukraine.

A war which just took a turn for the worst after at least 42 people were killed according to Reuters in street battles between supporters and opponents of Russia in southern Ukraine that ended with dozens of pro-Russian protesters incinerated in a burning building. The riot in the Black Sea port of Odessa, ending in a deadly blaze in a besieged trade union building, was by far the worst incident in Ukraine since a February uprising that ended with a pro-Russian president fleeing the country.

The clip below, not for the faint of heart, shows anti-government protesters jumping from the burning Odessa trade unions house: it appears when Yanukovich was “killing” protesters in February, the west couldn’t get up in arms fast enough screaming for the former president’s overthrow. But now that the acting post-CIA funded coup government is doing the same thing to its own protesters, the radio silence is stunning.

But while yesterday’s tragic events in Odessa were the first time the Ukraine conflict manifested itself in pro and anti-Russian clashes in the Black Sea town, it will hardly be the last: not only does the port city have economic and military significance, it also sits between Crimea and pro-Russian areas in eastern Ukraine and the breakaway Transnistria region of neighboring Moldova.

The admission of the true state of affairs finally came from Kiev itself which said that Ukrainian forces pressed their assault on separatists today, freeing up a regional airport as the head of the country’s anti-terrorist center warned eastern regions are “essentially” at war.

The campaign in the Donetsk region left five dead from the Ukrainian anti-terrorist operation and 12 wounded, said the center’s chief, Vasyl Krutov, at a Kiev briefing, even as military observers were freed by anti-Kiev militants. Government forces have secured the town of Slovyansk as operations in Kramatorsk continue.

“What is happening in the east is not a short-term action, this is essentially a war,” Krutov said today.

War it is:

Open clashes are sweeping Ukraine’s east, from Donetsk near the Russian border to Odessa, about 100 miles from the European Union’s southeastern frontier in Romania, amid signs the industrial and coastal regions are slipping out of the Kiev government’s control. The U.S. and the European Union accuse Russia of being behind the unrest, while Russian President Vladimir Putin is “extremely concerned” and is studying the situation, his spokesman Dmitry Peskov, said today.

There was some good news: military observers from the Organization for Security and Cooperation in Europe who were taken hostage a week ago were freed and will be delivered to the Council of Europe in Slovyansk near Donetsk, the council said today in a statement.

Bloomberg reports further that the U.S. and EU accuse Russia of stirring unrest to undermine Ukraine’s May 25 presidential election. Polish Prime Minister Donald Tusk said at a briefing today in Jezioro, Poland, that officials are “losing hope” about a diplomatic solution to end the crisis.

This is a war of maybe a different kind, it is a war that’s undeclared,” Tusk was quoted as saying by PAP newswire at a media briefing. “But what we’re really dealing with is de-facto a war. You can clearly see that actions taken by the international community haven’t brought results.”

To be sure, Ukraine and NATO is putting all the blame on Russia – not only for instigating the conflict but arming the separatists, seemingly oblivious of factual evidence that it was the US that was doing precisely the same just over three months ago when it was orchestarting the overthrow of the then government.

Ukraine’s Defense Ministry said the use of advanced weapons showed the separatists were “professional saboteur groups” rather than peaceful protesters. In a statement, it called their tactics “characteristic of foreign military or mercenaries.”


Turmoil erupted yesterday in Odessa, where more than 130 people had been detained by police, with 10 criminal cases already started, according to Petro Lutsyuk, the head of the Interior Ministry’s directorate in the city, said on the agency’s website. The Interior Ministry later said on its website that Lutsyuk was fired.


The nearby city of Nikolaev hosts much of the country’s defense and shipbuilding industry, as well as Zorya-Mashproekt, a state enterprise that manufactures gas turbines for OAO Gazprom (GAZP), the Russian natural gas producer and exporter.

Meanwhile, the theater by western leaders hit a new peak yesterday when Obama and Merkel did all they could: threaten more sanctions. At their news conference in Washington, Obama and Merkel said Russia must pull back support for the separatists so Ukraine’s May 25 presidential election can go ahead unimpeded. If the vote can’t be held, “we will not have a choice but to move forward” with more sanctions, Obama said. Merkel called the election “crucial” and said she’s ready to support economic sanctions if needed.

Ironically, it is German commercial interests which as we said back in March, are doing all they can to prevent sanctions of Russia as they know well they would be the biggest losers. Germany is Europe’s largest economy and had $127 billion in trade with Russia in 2013, according to the International Monetary Fund, making Germany is Russia’s second-biggest trading partner. Putin has threatened to escalate economic warfare if further sanctions are imposed.

“When we will reach a particular tipping point is very hard to say in advance,” Merkel said. “But all I can say is that the elections on May 25 are a decisive juncture for me and if there is further destabilization, things will get more and more difficult.”

Expect more furious bluster out of Germany and Obama, hoping that verbal escalation will finally cause Putin to pull back. It won’t. Meanwhile Putin is keeping quiet. Which is the second good news because as we showed yesterday, all Putin has to do is give the command.

via Zero Hedge Tyler Durden

China, Russia Military Ties Deepen With Naval Drill In East China Sea

Submitted by Zachary Zeck via The Diplomat,

On Wednesday, China announced that it plans to hold joint naval drills with Russia in the East China Sea later this month.

“These drills are regular exercises held by China and Russia’s navies, and the purpose is to deepen practical cooperation between the two militaries, to raise the ability to jointly deal with maritime security threats,” China’s Defense Ministry said in a statement published on its website.

Voice of America reports that the joint naval drills will be held in late May off the coast of Shanghai. This is significantly north of the Diaoyu/Senkaku Islands that have been the source of ongoing tensions between Japan and China in recent years. Russia also has an ongoing territorial dispute with Japan over the Kuril Islands located even further north off the far eastern coast of Russia.

Few details have been released about the scope of the naval drills at this time.

Still, the announcement is not surprising, and is not likely aimed at Japan in particular. As China’s Defense Ministry noted, Russia and China have a history of holding joint naval drills, and their military ties have grown stronger in recent years. For example, last July, Moscow and Beijing held a massive naval drill with live firing exercises off the coast of the Russian city of Vladivostok. According to Chinese media reports at the time, the drill was the People’s Liberation Army’s largest ever with a foreign country.

The New York Times reported that China’s Navy sent “seven warships, including a guided-missile destroyer with Aegis-type radars that track and guide weapons to destroy enemy targets, and missile frigates with antisubmarine abilities” to last year’s drill. These vessels were from China’s North Sea Fleet and the South Sea Fleet.  Beijing also deployed three helicopters and a special warfare unit to last year’s drill. The Russian Navy, on the other hand, deployed a kilo-class submarine and the guided-missile cruiser Varyag, which is the flag ship of the Russian Pacific Fleet.

“This shows unprecedented good relations between China and Russia,” Professor Wang Ning, director of the Center for Russian Studies at the Shanghai International Studies University, told the New York Times about last year’s drill. “It shows that the two countries will support each other on the global stage.”

Indeed, the joint naval drills are merely one example (and result) of the stronger bilateral ties Russia and China have enjoyed since President Xi Jinping took over the Chinese Communist Party in November 2012. China began a new charm offensive towards Russia early in Xi’s tenure. This was demonstrated by, among other things, the fact that Xi Jinping chose Russia as the destination for his first official foreign trip as China’s president in March 2013. He returned later in the year for the G-20 summit, and was back again earlier this year to attend the opening ceremony of the Sochi Olympics.

The close relationship between the two leaders has yielded some notable results, as well. Besides the unprecedented naval drills mentioned above, Russia has signaled a greater willingness to sell China advanced defense technology during Xi’s tenure.

Around the time of Xi’s first trip to Russia last March, there were reports that China and Russia were negotiating their largest ever defense agreement. The deal would reportedly include Russia selling China as many as four Lada Class air-independent propulsion submarines as well as 24 Su-35 multirole fighter jets. The Su-35 fighters, in particular, would greatly enhance China’s ability to project air power in the South China Sea. More recently, there have been reports that Vladimir Putin has approved the sale of Russia’s most advanced air and missile defense system, the S-400, to China.

Perhaps of more lasting importance, Russia and China have been significantly boosting their energy ties, which could solidify a more long-term relationship between them. Most notably, in June of last year Rosneft, Russia’s state-owned energy giant, agreed to double its oil exports to China. Under the deal, which was worth an estimated $270 billion, Russia will ship 365 million tons of oil to China over the next 25 years.

Similarly, numerous signs suggest that after a decade of ongoing talks, Russia and China are in the final stages of negotiating a massive 30-year natural gas supply deal. Once the deal is completed, according to Bloomberg News, Russia’s “Gazprom plans to supply as much as 38 billion cubic meters of gas to China, about 24 percent of the company’s deliveries to Europe last year.” Achieving this will require the construction of a massive pipeline to carry the natural gas from eastern Russia into China. Russia will reportedly need to spend about $22 billion to build the pipeline.

The two sides are hoping that the deal will be ready in time for Putin’s trip to China on May 20, which will take place immediately prior to the joint naval drills.

via Zero Hedge Tyler Durden

Things That Make You Go Hmmm… Like Is Japan Totally F##ked?

We have detailed the straitjacket into which the Japanese have been strapped for the past two decades numerous times in the last few years (in great detail here)  but as Grant Williams leaned back in his most comfortable chair after reading an article about proposed changes to the GPIF (Government Pension Investment Fund), Japan’s public pension fund; the thought popped into his mind – "Japan really is totally f##ked." What led him to that well-thought-out and eruditely expressed conclusion? Read on…


In an interview with CNN’s Fareed Zakaria earlier this year, Abe explained the true significance of the third arrow:

“What is important about the third arrow, structural reform, is to convince those who resist the steps I am taking and to make them realize that what I have been doing is correct, and by so doing, to engage in structural reform.”

Read that again.

Yes folks, the important part of structural reform in Japan is to convince people that Abe is correct. If he can convince them he is right, they will have engaged in structural reform.


You should be.

This is how Japan works — or doesn’t.

Immigration reform has been widely recognized as the only answer to Japan’s crippling demographic problem for well over three decades. Nothing has been done about it.

How about the “Wage Surprise” — increasing wages on a national basis — hailed by Abe as the key to lifting Japan out of the doldrums, and a key feature of Abenomics?


Markets will eventually tire of Abe’s continual promises that more is coming, so he desperately needs to somehow break the entrenched deflationary attitude in Japan.

(WSJ): In a survey of 1,000 consumers on March 29-30 by broadcaster Fuji News Network, 69% said they had not made any special purchases ahead of the sales tax rise, and 77.4% said they didn’t feel an economic recovery was under way.

Good luck with that attitude problem, Shinzo.

This week we got a look at how Abe is faring with one of his promises, that of guaranteed 2% inflation.

Core CPI (excluding food and energy) rose 1.3% in March — unchanged from the previous month and lower than analyst forecasts.

Of course, that was taken as a sign that further easing by the BoJ would be forthcoming…

And round and round it goes… until it stops.

The briefcase in Pulp Fiction ONLY works because we DON’T find out what is in it.

Abe’s third arrow can be loaded into the bow, but it can’t be fired once and for all, because if it IS fired, the game is up. There will still be continual promises of more to come, and markets may buy into that for a while; but, like all central bank-induced “boom times,” Abenomics has a shelf life, and that is nearing an end.

The changes at the GPIF are potentially disastrous, and Kuroda’s BoJ and Abe’s government are desperately trying to MacGyver their way out of an impossible situation, armed only with hollow promises and faith, when what they really need is duct tape and a Swiss army knife.

Abenomics is a plan by which to change Japanese behaviour; but as anyone who has spent any time in that wonderful, perplexing country will tell you, the Japanese do NOT change their behaviour — even when facing a demographic disaster.

Sorry, but Abenomics is actually nothing at all.


To understand why it's all smoke and mirrors… here is Grant Williams fill letter:



via Zero Hedge Tyler Durden