Scott Shackford on Farmers Market Marijuana

The West Coast
Collective in East L.A. launched the Los Angeles California
Heritage Market at its dispensary, allowing medical marijuana users
to purchase wares directly from vendors. Customers, all with
medical marijuana cards, lined the block waiting to make their
purchases.

Although an August hearing scheduled to determine the market’s
fate ultimately went against the operation, writes Scott Shackford,
for one lovely Los Angeles weekend—Independence Day weekend to be
exact—legal medical marijuana users shopped for cannabis the way
they might shop for fresh strawberries, avocados, and flowers: at a
local farmers market.

View this article.

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Police Officer Shot In Ferguson

When a member of the black community was shot by a local Ferguson cop on August 9, under circumstances still undetermined, it led to several weeks of angry rioting by the largely impoverished population of this St. Louis suburb, not to mention broad popular outcry against the tactics employed by the Ferguson PD and wholesale punditry taking over primetime TV for hours on end. Fast forward several weeks when last night, Reuters reports, a police officer from the “strife-hit Missouri city of Ferguson was shot and authorities are still searching for the shooter, law enforcement officials said.”

According to Lt. Louis County Police Chief Jon Belmar the shooting did not seem connected to protests occurring elsewhere in Ferguson. “I wouldn’t have any reason to believe right now that it was linked in any way, shape, manner or form with the protests,” he said. Still a question now arises: will this latest mirror image violence in Ferguson merely stoke the already latent hostilities between all members of society? Then again, the situation is not an exact mirror image as the police officer was not killed, but “merely” shot in the arm by an unknown assailant.

The details of what happened from Reuters:

The officer was chasing the suspect outside the Ferguson Community Center on Saturday night when the person turned and shot him in the arm, St. Louis County Police Sergeant Brian Schellman said.

 

The officer, who was treated at a local hospital, returned fire but apparently did not hit the suspect, Schellman said. The shooter disappeared into a nearby wooded area, eluding arrest.

 

Police said earlier that there were two suspects, but detectives later determined there was only one, Schellman said.

 

Several hours later, an off-duty St. Louis City police officer was shot at and suffered a minor arm injury from broken glass while driving on a nearby freeway in a personal car, police said.

 

It was not immediately clear if the two shootings were related.

Meanwhile, a crowd of about 100 people gathered near the scene of the night’s first shooting, with a group breaking off to protest at Ferguson police headquarters, according to Kareem Jackson, 27, a musician who goes by the stage name Tef Poe and is a member of the activist group HandsUp United.

“People are peaceful as a duck, just literally standing on the side of the street watching,” he said in a phone interview from the site where protesters had gathered.

To be sure, if the shooting is found to have been in retaliation for the death of Michael Brown, one can be certain the duck will hardly be peaceful. Although, for the time being, when it comes to global riotwatch, all eyes remain glued to Hong Kong, where the Ferguson baton has so far been quite sucessfully passed on.




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Can Market Forces Prevail: The Eurozone’s Unresolved Situation

Submitted by Erico Tavares of Sinclair & Co.

The Eurozone’s Unresolved Situation

Can market forces prevail in the Eurozone?

With another round of central bank intervention coming four plus years after the start of the Eurozone debt crisis, this is a question worth considering, at a time when the Southern Eurozone members – Italy, Spain, Greece and Portugal, which collectively account for over 30% of the GDP of the early adopters of the Euro as a whole – continue to struggle.

This is a complex topic for sure, but a simple economic indicator can be used to help frame the situation.

The Real Effective Exchange Rate, or “REER”, is a weighted average of a country’s currency relative to an index or basket of other major currencies adjusted for the effects of inflation. A country with higher inflation will seek to devalue its currency to maintain competitiveness in relation to its trading partners (the reverse also applies of course, but these days nobody seems to want a strong currency). The REER therefore provides a gauge of that country’s competitiveness in foreign markets.

Under a fixed foreign exchange regime, policy options are much more limited. A Eurozone member can become much less competitive relative to another member with a lower inflation rate. Stated differently, its REER will increase in that situation. This dynamic provides an insight as to how the Southern European countries got into trouble in the first place, and some of the challenges associated with its resolution.

Historical Context Leading Up to the 2008 Financial Crisis

The oil shocks of the 1970s had very damaging effects in the southern contingent of the Eurozone, with inflation rates skyrocketing. Devaluations were therefore a necessity to regain competitiveness, although these also provided an inflationary feedback loop. In contrast Germany, and to a lesser degree France, more or less kept inflation under control during this turbulent period.

Figure 1: Historical CPI Inflation in Selected Eurozone Countries, 1965-2001

Source: www.inflation.eu.

It is important to understand this context, as these economies evolved out of a system that systematically used currency devaluation as a policy tool for many years.

In the 1980s, Portugal, Greece and Spain formally joined the European Community, having just transitioned to a democratic system in the prior decade. A program to promote economic convergence with the European “core” was then implemented. This included the establishment of trading bands with other European currencies in order to avoid wild swings and competitive devaluations between trading partners, as well as facilitate greater economic integration going forward.

As currency fluctuations narrowed, inflation at home would have to come down, otherwise the REER would increase as a reflection of higher prices for their goods and services abroad. Figure 2 shows this process of “convergence” in the Southern European countries from 1995 up until the last business cycle peak in 2007.

Figure 2: REER Yearly Index in Selected Eurozone Countries (1995 = 100), 1995-2007

Source: Eurostat.

(a) Based on the current 18 countries of the Eurozone.

Portugal’s “currency” (speaking figuratively) had appreciated in real terms by almost 15% over that period. Spain, Greece and Italy were not far behind. At the same time, the REER of their core Eurozone partners went in the other direction, declining by almost 10%, and thus gradually eroding the cost advantage and competitive edge of Southern Europe.

As shown in Figure 3, this loss of competitiveness had a very negative effect on the trade balance (goods and services exported minus imported) down south, with generally expanding deficits recorded over the period.

Figure 3: Trade Balance as % of GDP, 1995-2007

Source: Eurostat.

(a) Remaining founding members of the Euro combined.

Not even Italy, with its dynamic exporting sector in the northern part of the country, was able to buck the trend. On the other hand, the core countries as a whole were able to increase their trade balance throughout the period.

Figure 4 depicts the situation in absolute terms in 2007. Out of 188 countries in the world, our Southern European friends made the top 10 list ranked by current account deficits. Spain made it all the way to #2; Greece, at #6, had net imports of almost $4,000 per person, the highest by far in the ranking.

Figure 4: Top 10 Countries Ranked by Current Account Deficit in 2007 (US$ bn.)

Source: CIA World Factbook.

It should also be noted that China emerged as a trading powerhouse over this period. By 2007 it already boasted the world’s largest current account surplus. Southern Europe’s industries like textiles and light manufacturing, which historically had contributed significantly to their economies, were particularly vulnerable to Chinese imports. This was much less so in the core countries, which stood to gain disproportionately more from trading with Asia. So the composition of the export sector is also an important consideration.

If we rank the Southern European countries in accordance with their trade deficit as % of GDP in 2007, we get the same domino sequence of economies tumbling down during the 2010-11 Eurozone debt crisis: first Greece, then Portugal, followed by Spain, and narrowly missing Italy with the same virulence (Ireland is not shown here, but the crisis there was rooted in a different economic model).

For all the talk about government finances, turns out that trade deficits actually matter – even inside a fixed currency regime like the Euro. Years of heavy borrowing by the private and public sectors led to inflation in the form of relatively higher price levels and burgeoning trade deficits, further undermining the competitiveness of the economy at a time when the international markets were opening up.

At some point those imports become unsustainable and foreign lenders that provide the credit close the tap. And that’s precisely what followed.

After the 2008 Financial Crisis

Figure 5 shows how Southern Europe started to devalue in real terms as financial conditions deteriorated from 2008 onwards. The decline in REER is particularly pronounced in Greece, Spain and Portugal, spurred on by deep austerity measures and a big curtailment of credit to the private sector.

Figure 5: REER Yearly Index in Selected Eurozone Countries (1995 = 100), 2007-2013

Source: Eurostat.

(a) Based on the current 18 countries of the Eurozone.

And once again we see the trade deficits responding in tandem, as shown in Figure 6.

Figure 6: Trade Balance as % of GDP, 2007-2013

Source: Eurostat.

(a) Remaining founding members of the Euro combined.

The decline in trade deficits as % of GDP has been very substantial, after the large chronic deficits of “happier times” [Note: GDP accounting changed in all of these countries over this period to include things like illegal drugs and prostitution, which in some cases added 3% to the final calculation. Hmmm…]

Services Inflation

Under a fixed exchange rates regime, REER changes are fundamentally driven by differen
ces in the inflation rate. We can break this down by: (i) goods inflation, which broadly reflects price changes in items that are easily traded across borders; and (ii) services inflation, for those which are not.

With open borders goods inflation should be fairly aligned across member states. As such, the key driver behind overall changes in competitiveness must be services inflation. This is shown in Figure 7 below.

Figure 7: Services Inflation by Eurozone Area, 1999-2014

Source: Eurostat, Clemente de Lucia (BNP Paribas).

Note: “Periphery” includes Greece, Spain, Portugal, Italy and Ireland; “Core” includes the Netherlands, Austria, Luxemburg, Belgium, Finland, Germany and France.

Going back to 1999, services inflation in the periphery was consistently higher than in the core up until 2009. This is very much in line with the relative performance of the REER over this period, as outlined previously.

However, with fixed exchange rates and open borders, what is driving this significant services inflation differential?

Figure 8: Relative GDP Performance vs Service Inflation Differential, 1998-2013

Source: Eurostat, Clemente de Lucia (BNP Paribas).

(a) Includes only the Eurozone founding members plus Greece.

(b) Difference between “Periphery” and “Core” services inflation rates in percentage points.

Figure 8 shows that faster GDP growth in the periphery was accompanied by relatively higher services inflation. With the onset of the Eurozone debt crisis in 2009, the trend reversed and the periphery started to grow much slower, as shown in the shaded area. Services inflation responded accordingly. This makes economic sense of course: under similar conditions, countries growing faster should experience higher price growth in non-tradable items.

Therefore, the lack of economic vitality in Southern Europe is adding significant deflationary pressure.

The Eurozone’s Unresolved Situation

Can the Southern European economies restructure their economies with the aid of a declining REER, that is, their goods and services becoming relatively cheaper abroad, and reverse the trend that has led to a steady accumulation of massive trade deficits over a decade and a half?

Recent experience suggests that this could be possible. However, sustaining that decline in the real value of the “currency” going forward will be very difficult for the following reasons:

  • Deflation improves competitiveness outright by reducing the cost base of the country (e.g. lower salaries). But this is very problematic for Southern European economies, as the already stratospheric debt levels continue to rise as the income needed to repay them goes down in nominal terms. Which is why the European Central Bank is so concerned with deflation.
  • The core Eurozone partners could conceivably endure relatively higher inflation to reduce their relative competitiveness, but this is also problematic: (i) as we have seen, this differential is largely driven by economic performance, meaning that Southern Europe could be failing to achieve the escape velocity needed to bring down debt ratios; (ii) the inflation rate differential needed to make a difference down south would likely to be too high for the core countries; and (iii) core countries compete against many other countries.
  • Greece has already seen a massive correction in its REER, which is now below the level in 1995. And yet the trade deficit remains stubbornly high compared to its closer peers. It is unclear by how much more prices would need to adjust to correct this. Sanctions against Russia, a major export market for them, could not have come at a worse time.
  • Politically, devaluation is not on the table. In any event, foreign debts resulting from a generational accumulation of trade deficits would explode in value overnight.

The inability of these countries to rebalance their foreign terms of trade highlights a major flaw of the Eurozone construct, which is largely based on conventional international economics thinking.

All the talk about free movement of labor, price adjustments and so forth breaks down once we realize the adverse implications that the required adjustments will have on debt ratios. It looks like we have hit one major economic SNAFU.

Figure 9: Eurozone Government Debt as % of GDP, 2013

Source: Eurostat.

(a) Remaining founding members of the Euro combined.

Figure 9 reminds us of how extreme the debt situation has become in Southern Europe, in this case just by looking at the public sector. In 2013, all the countries added together had a Government Debt as % of GDP ratio of 121.5%, much higher than their core Eurozone partners and more than double Maastricht Treaty levels. The ratio increased by a staggering 40 percentage points in just five years.

At these dizzying heights market forces just can’t be allowed to play out; and the debt situation in the southern Eurozone complex remains unresolved. Debt is the one thing that has steadily grown over the last four years in these countries.

Sure, we can all live in a world where central banks continue to keep interest rates at absurdly low levels (again, the market is not allowed to function) and paper over any sovereign blow-ups. However, the system becomes increasingly unstable. Moreover, the economic fundamentals continue to deteriorate as those countries struggle to regain competitiveness under a massive debt burden. And it is tackling that burden with non-conventional measures that eventually needs to be considered, but that’s a story for another time [Hint: that process starts with an “R”].

But OK, these are very pleasant countries to live in, with friendly people, great food and beautiful weather. For sure this can attract foreign companies and eventually develop such a productive economy that will mitigate any pricing disadvantages and help pay off the debts right?

And that would be excellent, except for the fact that these are pretty difficult countries to do business in. According to the latest “Doing Business Survey” by the World Bank, here’s how they ranked out of 31 OECD countries: Portugal (#19), Spain (#27), Italy (#29) and Greece (#30). Add the strong likelihood of higher taxes and pension costs to pay for all the debts as they come due and you might be better off just visiting.

If more goods and services don’t start leaving these countries more and more young people will, motivated by high unemployment at home and the prospect of a better life elsewhere. At least someone is working towards a real resolution.




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

Gold Not A Safe Haven On Terrorism, Middle East Bombing, Russia, Ebola … Yet

With escalating conflict in the Middle East, an unresolved conflict in the Ukraine, and various other geo-political risks on the horizon such as the contagion risk of Ebola, it would be expected that the longstanding ‘safe haven’ qualities of gold would come into play as they have done in the past.


In September 2008, during the financial crisis, the gold price rose $50 in one day, September 18, as investors sought refuge in the one asset that they perceived to be a safe-haven of high liquidity and high credit quality. This one day move in September 2008 was the largest one day move since February 1980.

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Back in late 1979 and early 1980, some of the key drivers that propelled the gold price higher were the Russian invasion of Afghanistan and the Iranian hostage crisis.


Just looking back at old newspaper gold market commentaries in 1979 and 1980 will highlight that a lot of the key drivers for the rise in the gold price at that time were geo-politically related.


Today, the world appears to be as uncertain if not more uncertain. Indeed, in 1980 there was little risk of terrorism – state sponsored or otherwise.

In the late 1970s and early 1980s, the gold futures markets did not have nearly as large an impact on the world gold price as they does now, and the gold price was primarily driven by physical demand for gold, a lot of which was Middle Eastern and Asian demand.
 

The concept of unallocated gold accounts in the London market was in its infancy and was only being discussed by the five gold fixing bullion banks as a security issue in not having to move gold shipments around London so often. The practice of having unallocated gold not fully backed by allocated gold was not encouraged at that time.
 


Fast forward to today, and the ‘flight to quality’ and ‘financial insurance’ characteristics of gold should in theory be as important now as they were in 1979-1980 given similar invasions and occupations in various countries, not least in the Middle East with ISIS, and the renewed bombing in Syria/Iraq by the US and/or a US coalition.


Coupled with these worsening geopolitical developments, global macro economic risks remain elevated, with official interest rates at historically low levels, continued central bank balance sheet expansion through quantit
ative easing programs, and continued fiat currency debasement in the US dollar, Euro and other reserve currencies.


Inflationary risks therefore remain at the forefront. But at the same time, the gold price barometer is not signalling these inflationary risks either.

 

The key driver of the gold price at the moment is perceived to be the relative strength of the US dollar, yet the US dollar is only stronger compared to the other main currencies because these currencies, such as the Euro, are weak due to their economies remaining weak and their money supplies having been debased.
 



The economic recovery in the US is tentative at best. With the current weakness in the gold price, there is a growing cacophony that the safe haven qualities of gold are no longer relevant. Indeed, some in the financial markets are saying that the current gold bull market is dead.

It would appear to us that the factors that would make gold a safe-haven asset have not gone away.


In fact these factors are strengthening, as described above. The only rational explanation appears to be that gold remains an investment safe-haven as it has always done, but that this is not yet being recognised by the price discovery process in the market.

Adding in the fact that there is a continued disconnect between, on the one hand, the global physical gold market primarily driven out of China and India, and on the other hand, the New York gold futures market and unallocated London bullion market on the other hand, then this disconnect should not be expected to persist over the medium term.


This is especially the case given the heightened geopolitical and macroeconomic risks.

With the gold price not yet signalling the geopolitical and macroeconomic alarm bells that many would have expected it to, the question of gold price manipulation remains a valid question.

Recent gold price manipulation by an investment bank for commercial reasons has been established in the case of the successful prosecution against Barclays by the FCA regulator.


For strategic reasons, central banks do not welcome a disorderly increase in the gold price because it makes their fiat currencies look vulnerable and adds to inflationary expectations.


It is therefore not unrealistic to think that some of the current gold price weakness may be related to nonpublic gold market interventions by some of the world’s central banks such as the Federal Reserve and the ECB, perhaps under the auspices of the Bank for International Settlements (BIS).


There is plenty of documentary evidence to suggest that the G10 central banks have historically discussed the gold price during their regular meetings and they also are very cautious on allowing more recent document releases through freedom of information requests.

For different reasons, the Chinese government welcomes a low gold price since it allows China to continue to accumulate gold in large quantities. Even if this accumulation of gold by China is being done for other reasons, it does act as a way of hedging China’s exposure to its vast holdings of US dollar denominated Treasuries. Time will tell if this has been China’s strategy.    

Most markets these days are being manipulated. Therefore it seems very possibly that the gold and silver markets are too. This could be one of the factors in the precious metals surprisingly poor performance in recent weeks despite significant geopolitical and indeed economic uncertainty.

The Middle East is a powder keg that seems likely to explode. The U.S. and western nations have taken a hard stance against an increasingly powerful Russia. This is effecting an already fragile Eurozone and other economies.

Brinkmanship and a failure of diplomacy has brought the world close to a serious military conflict.


Gold has protected wealth throughout history from financial crises and war. We believe it will continue to do so in the coming years

It is very likely that tensions will lead to safe haven demand for gold and higher prices. An economic war has broken out between major world powers and the historical record shows that sanctions and protectionism tend to lead to military confrontation and war.

Everybody should own some physical gold as a hedge and a safe haven asset to protect against the significant risks challenging us today which include bail-ins, currency wars, terrorism and war.



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The death of safe haven gold has been greatly exaggerated.

Gold is a hedging instrument and a safe haven asset as seen in history and much academic research in recent years. That is not apparent in recent weeks but we believe it will be in the medium and long term.

by Ronan Manly , Edited by Mark O’Byrne

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Sheldon Richman on the Boomerang Theory of Freedom-Destroying Policies

The late
Chalmers Johnson, the great analyst of the American empire, warned
that if Americans didn’t give up the empire, they would come to
live under it. We’ve had many reasons to take his warning
seriously; indeed, several important thinkers have furnished sound
theoretical and empirical evidence for the proposition. Now come
two scholars who advance our understanding of how an
interventionist foreign policy eventually comes home. If
libertarians needed further grounds for acknowledging that a
distinctive libertarian foreign policy exists, writes Sheldon
Richman, Christopher Coyne and Abigail Hall at George Mason
University have provided it.

View this article.

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“Disperse Or We Fire”- Hong Kong Police Fire Tear Gas At Protesting Students: Live Webcast

Yesterday we reported that the biggest riot over the weekend was not in Ferguson (although things there are hardly stable after a local police officer was shot in the violent town overnight) but in Hong Kong, where students and other mostly young people are protesting the recent loss of their democratic vote powers and thus “the loss of their freedom.” Since then things have gotten from bad to worse when late last night Hong Kong declared the start of the Occupy Central disobedience campaign, leading to violent skirmishes with the police, which over the past hour have included the use of tear gas by the police as well as the first outright warning by the cops demanding that the student protesters disperse or risk being fired upon.

From WSJ:

A standoff between police and pro-democracy protesters intensified near where thousands have converged in the past days to demand free elections.

 

Around 6 p.m., police moved to clear the area, using tear gas against protesters near Hong Kong government buildings that had been blocked off. Protesters streamed away trying to wave away clouds of smoke and holding handkerchiefs against their mouths and noses. Many were running; others were raising their hands above their heads in an indication of nonviolent intent.

 

Crowds of thousands had gathered in the area through the afternoon, with protesters attempting to build barricades against police. At one point, a few police cars were surrounded by a sea of protesters. “Hong Kong police, you have been surrounded, please leave,” protesters shouted over a sound system.

 

Police showed red signs urging the activists to stop charging or force would be used. Riot police in helmet shields and face masks were at the site.

 

After the tear-gas spraying, many protesters who had dispersed regrouped in the Tamar waterfront park where a stage and rows of chairs had been erected ahead of celebrations for China’s National Day on Wednesday.

And from AP:

After spending hours holding the protesters at bay, police lobbed canisters of tear gas into the crowd on Sunday evening. The searing fumes sent protesters fleeing down the road, but many came right back to continue their demonstration.

 

Students and activists have been camped out on the streets outside the government complex all weekend. Students started the rally, but by early Sunday leaders of the broader Occupy Central civil disobedience movement said they were joining them to kick-start a long-threatened mass sit-in to demand an election for Hong Kong’s leader without Beijing’s interference.

 

Authorities launched their crackdown after the protest spiraled into an extraordinary scene of chaos as the protesters jammed a busy road and clashed with officers wielding pepper spray.

 

The protesters were trying tried to reach a mass sit-in being held outside government headquarters to demand Beijing grant genuine democratic reforms to the former British colony.

 

The demonstrations – which Beijing called “illegal” – were a rare scene of disorder in the Asian financial hub, and highlighted authorities’ inability to get a grip on the public discontent over Beijing’s tightening grip on the city. The protesters reject Beijing’s recent decision to restrict voting reforms for the first-ever elections to choose Hong Kong’s leader, promised for 2017.

 

Earlier Sunday, thousands of protesters who tried to join the sit-in breached a police cordon, spilling out onto a busy highway and causing traffic to come to a standstill.  Police officers in a buffer zone manned barricades and doused the protesters with pepper spray carried in backpacks. The demonstrators, who tried at one point to rip apart metal barricades, carried umbrellas to deflect the spray by the police, who were wearing helmets and respirators.

 

Police had told those involved in what they also call an illegal gathering to leave the scene as soon as possible, warning that otherwise they would begin to clear the area and make arrests.

 

The use of the tear gas angered the protesters, who chanted “Shame on C.Y. Leung” after it was used, referring to the city’s deeply unpopular Beijing-backed leader, Leung Chun-ying. To many, it also seemed to mark a major shift for Hong Kong, whose residents have long felt their city stood apart from mainland China thanks to its guaranteed civil liberties and separate legal and financial systems.

The following warning from the local police urging protesters to disperse or “they will fire” has attracted a lof attention:

Here id some more commentary from the ground in Hong Kong over the past few hours:

Finally, here is a live stream from the scene of the action:

Broadcast live streaming video on Ustream




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

"Disperse Or We Fire"- Hong Kong Police Fire Tear Gas At Protesting Students: Live Webcast

Yesterday we reported that the biggest riot over the weekend was not in Ferguson (although things there are hardly stable after a local police officer was shot in the violent town overnight) but in Hong Kong, where students and other mostly young people are protesting the recent loss of their democratic vote powers and thus “the loss of their freedom.” Since then things have gotten from bad to worse when late last night Hong Kong declared the start of the Occupy Central disobedience campaign, leading to violent skirmishes with the police, which over the past hour have included the use of tear gas by the police as well as the first outright warning by the cops demanding that the student protesters disperse or risk being fired upon.

From WSJ:

A standoff between police and pro-democracy protesters intensified near where thousands have converged in the past days to demand free elections.

 

Around 6 p.m., police moved to clear the area, using tear gas against protesters near Hong Kong government buildings that had been blocked off. Protesters streamed away trying to wave away clouds of smoke and holding handkerchiefs against their mouths and noses. Many were running; others were raising their hands above their heads in an indication of nonviolent intent.

 

Crowds of thousands had gathered in the area through the afternoon, with protesters attempting to build barricades against police. At one point, a few police cars were surrounded by a sea of protesters. “Hong Kong police, you have been surrounded, please leave,” protesters shouted over a sound system.

 

Police showed red signs urging the activists to stop charging or force would be used. Riot police in helmet shields and face masks were at the site.

 

After the tear-gas spraying, many protesters who had dispersed regrouped in the Tamar waterfront park where a stage and rows of chairs had been erected ahead of celebrations for China’s National Day on Wednesday.

And from AP:

After spending hours holding the protesters at bay, police lobbed canisters of tear gas into the crowd on Sunday evening. The searing fumes sent protesters fleeing down the road, but many came right back to continue their demonstration.

 

Students and activists have been camped out on the streets outside the government complex all weekend. Students started the rally, but by early Sunday leaders of the broader Occupy Central civil disobedience movement said they were joining them to kick-start a long-threatened mass sit-in to demand an election for Hong Kong’s leader without Beijing’s interference.

 

Authorities launched their crackdown after the protest spiraled into an extraordinary scene of chaos as the protesters jammed a busy road and clashed with officers wielding pepper spray.

 

The protesters were trying tried to reach a mass sit-in being held outside government headquarters to demand Beijing grant genuine democratic reforms to the former British colony.

 

The demonstrations – which Beijing called “illegal” – were a rare scene of disorder in the Asian financial hub, and highlighted authorities’ inability to get a grip on the public discontent over Beijing’s tightening grip on the city. The protesters reject Beijing’s recent decision to restrict voting reforms for the first-ever elections to choose Hong Kong’s leader, promised for 2017.

 

Earlier Sunday, thousands of protesters who tried to join the sit-in breached a police cordon, spilling out onto a busy highway and causing traffic to come to a standstill.  Police officers in a buffer zone manned barricades and doused the protesters with pepper spray carried in backpacks. The demonstrators, who tried at one point to rip apart metal barricades, carried umbrellas to deflect the spray by the police, who were wearing helmets and respirators.

 

Police had told those involved in what they also call an illegal gathering to leave the scene as soon as possible, warning that otherwise they would begin to clear the area and make arrests.

 

The use of the tear gas angered the protesters, who chanted “Shame on C.Y. Leung” after it was used, referring to the city’s deeply unpopular Beijing-backed leader, Leung Chun-ying. To many, it also seemed to mark a major shift for Hong Kong, whose residents have long felt their city stood apart from mainland China thanks to its guaranteed civil liberties and separate legal and financial systems.

The following warning from the local police urging protesters to disperse or “they will fire” has attracted a lof attention:

Here id some more commentary from the ground in Hong Kong over the past few hours:

Finally, here is a live stream from the scene of the action:

Broadcast live streaming video on Ustream




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

Ready Or Not… The Unsustainable Status Quo Is Ending

Submitted by Chris Martenson via Peak Prosperity,

~ Walking straight in a hall of mirrors

I have to confess, it's getting more and more difficult to find ways of writing about everything going on in the world. 

Not because there's a shortage of things to write about — wars, propaganda, fraud, Ebola — but because most of the negative news and major world events we see around us are symptoms of the disease, not the disease itself.

There are only so many times you can describe the disease, before it all becomes repetitive for both the writer and the reader. It's far more interesting to get to the root cause, because then real solutions offering real progress can be explored.

Equally troubling, in a world where the central banks have distorted, if not utterly flattened, the all important relationship between prices, risk, and reality, what good does it do to seek some sort of meaning in the new temporary arrangement of things? 

When the price of money itself is distorted, then all prices are merely derivative works of that primary distortion. Some prices will be too high, some far too low, but none accurately determined by the intersection of true demand and supply.

If risk has been taken from where it belongs and instead shuffled onto central bank balance sheets, or allowed to be hidden by new and accommodating accounting tricks, has it really disappeared? In my world, risk is like energy: it can neither be created nor destroyed, only transformed or transferred. 

If reality no longer has a place at the table — such as when policy makers act as if the all-too-temporary shale oil bonanza is now a new permanent constant — then the discussions happening around that table are only accidentally useful, if ever, and always delusional.

Through all of this, the big picture as described in the Crash Course grows ever more obviously clear: we are on an unsustainable course; economically, ecologically, and — most immediately worryingly  — in our use of energy.

So let's start there, with a simple grounding in the facts.

By The Numbers

Humans now number 7.1 billion on the planet and that number is on track to rise to 8 or 9 billion by 2050. Already 'energy per capita' is stagnant across the world and has been for a few decades. If the human population indeed grows by 15-25% over the next three and a half decades, then net energy production will have to grow by the same amount simply to remain constant on a per capita basis.

But can it? Specifically, can the net energy we derive from oil grow by another 15% to 25% from here? 

Consider that, according to the EIA, the US shale oil miracle will be thirty years in the rear-view mirror by 2050 (currently projected to peak in 2020). And beyond just shale, all of the currently-operating conventional oil reservoirs will be far past peak and well into their decline. That means that the energy-rich oil from the giant fields of yesteryear will have to be replaced by an even larger volume of new oil from the energetically weaker unconventional plays just to hold things steady.

To advance oil net energy on a per capita basis between now and 2050, we'll have to fight all of the forces of depletion with one hand, and somehow generate even more energy output from energetically parsimonious unconventional sources such as shale and tar sands with the other hand.

These new finds…they just aren't the same as the old ones. They are deeper, require more effort per well to get oil out, and return far less per well than those of yesteryear. Those are just the facts as we now know them to be.

In 2013, total worldwide oil discoveries were just 20 billion barrels. That's against a backdrop of 32 billion barrels of oil production and consumption. Since 1984, consuming more oil than we're discovering has been a yearly ritual. To use an analogy: it's as if we're spending from a trust fund at a faster rate than the interest and dividends are accruing. Eventually, you eat through the principal balance and then it's game over.

Meanwhile, even as the total net energy we receive from oil slips and our consumption wildly surpasses discoveries, the collective debt of the developed economies has surpassed the $100 trillion mark — which is a colossal bet that the future economy will not only be larger than it is currently, but exponentially larger.

These debts are showing no signs of slowing down. Indeed, the world's central banks are doing everything in their considerable monetary power to goose them higher, even if this means printing money out of thin air and buying the debt themselves.

Along with this, the demographics of most developed economies will be drawing upon badly-underfunded pension and entitlement accounts — most of which are literally nothing more substantial than empty political promises made many years ago.

These trends in oil, debt and demographics are stark facts all on their own. But when we tie these to the obvious ecological strains of meeting the needs of just the world's current 7.1 billion, any adherence to the status quo seems worse than merely delusional. 

Here's just one example from the ecological sphere. All over the globe we see regions in which ancient groundwater, in the form of underground aquifers, is being tapped to meet the local demand.

Many of these reservoirs have natural recharge rates that are measured in thousands, or even tens of thousands, of years.

Virtually all of them are being over-pumped. The ground water is being removed at a far faster rate than it naturally replenishes.

This math is simple. Each time an aquifer is over-pumped, the length of time left for that aquifer to serve human needs diminishes. Easy, simple math. Very direct.

And yet, we see cultures all over the globe continuing to build populations and living centers – very expensive investments, both economically and energetically – that are dependent for their food and water on these same over-pumped aquifers.

In most cases, you can calculate with excellent precision when those aquifers will be entirely gone and how many millions of people will be drastically impacted.

And yet, in virtually every case, the local 'plan' (if that's the correct word to use here) is to use the underground water to foster additional economic/population growth today without any clear idea of what to do later on.

The ‘plan’ such as it is, seems to be to let the people of the future deal with the consequences of today's decisions.

So if human organizations all over the globe seem unable to grasp the urgent significance of drawing down their water supplies to the point that they someday run out, what are the odds we'll successfully address the more complex and less direct impacts like slowly falling net energy from oil, or steadily rising levels of debt? Pretty low, in my estimation.

Conclusion

Look, it's really this simple: Anything that can't go on forever, won't.  We know, financially speaking, that a great number of nations are utterly insolvent no matter how much the accounting is distorted. Said another way: there's really no point in worrying about the combined $100 trillion shortfall in Social Security and Medicare, because it simply won't be paid.

Why? It can't, so it won't. The promised entitlements dwarf our ability to
fund them many times over. There's really not much more to say there.

But the biggest predicament we face is that steadily-eroding net energy from oil, which will someday be married to steadily-falling output as well, can't support billions more people and our steadily growing pile of debt.

Just as there's no plan at all for what to do when the groundwater runs out besides 'Let the folks in the future figure that one out,' there's no plan at all for reconciling the forced continuation of borrowing at a faster rate than the economy can (or likely will be able to) grow.

The phrase that comes to mind is 'winging it.' 

The wonder of it all is that people still turn to the same trusted sources for guidance and as a place to put their trust. For myself, I have absolutely no faith that the mix of DC career politicians and academic wonks in the Fed have any clue at all about such things as energy or ecological realities.  Their lens only concerns itself with money, and the only tradeoff concessions they make are between various forms of economic vs. political power.

If the captains supposed to be guiding this ship are using charts that ignore what lies beneath the waterline, then you can be sure that sooner or later the ship is going to strike something hard and founder.

I'm pretty sure the Fed's (and ECB's and BoJ's and BoE's) charts resemble those of medieval times, with "Here be dragons" scrawled in the margins next to a series of charts of falling stock prices and unwinding consumer debt.

So there we are. The globe is heading from 7.1 billion to 8 or 9 billion souls, during a period of time when literally every known oil find will be well past its peak. Perhaps additional shale finds will come along on other continents to smooth things out for a bit (which is not looking likely), but it's well past time to square up to the notion that cheap oil is gone. And with it, our prospects for the robust and widespread prosperity of times past. 

Because all of this inevitably leads to some sort of time of reckoning, natural questions emerge: What might happen and when? What would that feel like?  How would I know it's started? Given the knowns and unknowns, are there any dominant strategies for mitigating the risks that I should undertake?  What are the challenges and what are the opportunities?

 




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