Category: zerohedge

Not only would SocGen be shocked if the Fed made any significant policy shift this week, they appear to be finding “belief” in a growth renaissance hard to sustain in light of the dismal reality that keeps getting in the way of ‘faith’. Undertaking any policy shifts at this meeting would be akin to driving at night with no headlights, they note, taking the opportunity to slash Q3 and Q4 GDP expectations – pushing off hope for any Taper announcement until late Q1 at its earliest. Of course, they remain “fundamentally bullish” on US growth (or every assumption about the world would implode) but the mid-year inflection point they hoped for appears to be further into the future than they hoped.

 

Via SocGen,

We expect no material changes in the FOMC statement this week, with odds of the Fed either increasing or decreasing the pace of purchases very close to zero. The economy is currently going through a period of uncertainty following the government shutdown, and has yet to digest fully the impact of higher rates. Therefore, we expect the Fed to take this opportunity to take stock of recent events, but opt to wait for more clarity before making any policy adjustments. We are also taking this opportunity to update our own economic forecasts. By our estimates, Q3 GDP is currently tracking at 2.3%, marginally lower than our published forecast of 3.0%. We are also downgrading our Q4 projection from 3.6% to 3.0% to account for the negative effects of the government shutdown. This would put the full- year growth rate at 2.2% on Q4/Q4 basis. We continue to look for a meaningful acceleration next year to 3.2%. We believe that these forecasts are consistent with a tapering announcement in late Q1.

 

Undertaking any policy shifts at this meeting would be akin to driving at night with no headlights. Since the September FOMC meeting, visibility on the outlook has not improved at all and, if anything, has gotten worse. The Fed’s concerns about fiscal policy have materialized, though the impact on growth remains uncertain. And, although financial conditions are easing again (see chart below), the net effect is still one of reduced visibility.

 

In this context, it would be far more prudent to wait for more clarity on the economic outlook. This is precisely what we expect the FOMC to do, not just this week, but also at the December meeting. In the meantime, the Fed will likely use the next two meetings as an opportunity to take stock of recent events and evaluate their impact on the economy.

 

Hitting a reset button on our economic forecasts

 

We also take the opportunity to update our GDP projections to account for recent events. Data available to date suggests that the economy clocked in a 2.3% annualized growth rate in Q3, i.e. marginally lower than our published forecast of 3%. The chart below shows a breakdown of contributions to growth by sector. While nearly every sector of the economy has shown some deceleration vs. Q2, consumer demand is the major reason for our revision, with real consumption now assumed to have grown at just 1.5% (today’s retail sales will be the next key data input into this estimate). We are also revising down our Q4 forecast from 3.6% to 3.0% to account for the effects of the government shutdown and for the slightly weaker momentum coming out of Q3.

 

 

We remain fundamentally bullish on the US growth. Since the start of the year, we have been calling for an inflection point around mid-year as the last of the headwinds began to dissipate. While the government shutdown has prolonged the period of fiscal uncertainty, the reality remains that new austerity – above and beyond what was legislated at the start of this year – is quite unlikely. Policy uncertainty is also on a downtrend, notwithstanding recent spike. And, housing should continue to be supported by declining real mortgage rates.

So in summary, our bullish hope based forecasts missed by a mile, so we are taking a hatchet to them, time-shifting them, and hope that we will be right again at some point in the future…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/lZNEjYsEUx8/story01.htm Tyler Durden

Not only would SocGen be shocked if the Fed made any significant policy shift this week, they appear to be finding “belief” in a growth renaissance hard to sustain in light of the dismal reality that keeps getting in the way of ‘faith’. Undertaking any policy shifts at this meeting would be akin to driving at night with no headlights, they note, taking the opportunity to slash Q3 and Q4 GDP expectations – pushing off hope for any Taper announcement until late Q1 at its earliest. Of course, they remain “fundamentally bullish” on US growth (or every assumption about the world would implode) but the mid-year inflection point they hoped for appears to be further into the future than they hoped.

 

Via SocGen,

We expect no material changes in the FOMC statement this week, with odds of the Fed either increasing or decreasing the pace of purchases very close to zero. The economy is currently going through a period of uncertainty following the government shutdown, and has yet to digest fully the impact of higher rates. Therefore, we expect the Fed to take this opportunity to take stock of recent events, but opt to wait for more clarity before making any policy adjustments. We are also taking this opportunity to update our own economic forecasts. By our estimates, Q3 GDP is currently tracking at 2.3%, marginally lower than our published forecast of 3.0%. We are also downgrading our Q4 projection from 3.6% to 3.0% to account for the negative effects of the government shutdown. This would put the full- year growth rate at 2.2% on Q4/Q4 basis. We continue to look for a meaningful acceleration next year to 3.2%. We believe that these forecasts are consistent with a tapering announcement in late Q1.

 

Undertaking any policy shifts at this meeting would be akin to driving at night with no headlights. Since the September FOMC meeting, visibility on the outlook has not improved at all and, if anything, has gotten worse. The Fed’s concerns about fiscal policy have materialized, though the impact on growth remains uncertain. And, although financial conditions are easing again (see chart below), the net effect is still one of reduced visibility.

 

In this context, it would be far more prudent to wait for more clarity on the economic outlook. This is precisely what we expect the FOMC to do, not just this week, but also at the December meeting. In the meantime, the Fed will likely use the next two meetings as an opportunity to take stock of recent events and evaluate their impact on the economy.

 

Hitting a reset button on our economic forecasts

 

We also take the opportunity to update our GDP projections to account for recent events. Data available to date suggests that the economy clocked in a 2.3% annualized growth rate in Q3, i.e. marginally lower than our published forecast of 3%. The chart below shows a breakdown of contributions to growth by sector. While nearly every sector of the economy has shown some deceleration vs. Q2, consumer demand is the major reason for our revision, with real consumption now assumed to have grown at just 1.5% (today’s retail sales will be the next key data input into this estimate). We are also revising down our Q4 forecast from 3.6% to 3.0% to account for the effects of the government shutdown and for the slightly weaker momentum coming out of Q3.

 

 

We remain fundamentally bullish on the US growth. Since the start of the year, we have been calling for an inflection point around mid-year as the last of the headwinds began to dissipate. While the government shutdown has prolonged the period of fiscal uncertainty, the reality remains that new austerity – above and beyond what was legislated at the start of this year – is quite unlikely. Policy uncertainty is also on a downtrend, notwithstanding recent spike. And, housing should continue to be supported by declining real mortgage rates.

So in summary, our bullish hope based forecasts missed by a mile, so we are taking a hatchet to them, time-shifting them, and hope that we will be right again at some point in the future…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/lZNEjYsEUx8/story01.htm Tyler Durden

Submitted by Alasdair Macleod via GoldMoney.com,

A number of people have asked me to expand on how the rapid expansion of money supply leads to an effect the opposite of that intended: a fall in economic activity. This effect starts early in the recovery phase of the credit cycle, and is particularly marked today because of the aggressive rate of monetary inflation. This article takes the reader through the events that lead to this inevitable outcome.

There are two indisputable economic facts to bear in mind. The first is that GDP is simply a money-total of economic transactions, and a central bank fosters an increase in GDP by making available more money and therefore bank credit to inflate this number. This is not the same as genuine economic progress, which is what consumers desire and entrepreneurs provide in an unfettered market with reliable money. The second fact is that newly issued money is not absorbed into an economy evenly: it has to be handed to someone first, like a bank or government department, who in turn passes it on to someone else through their dealings and so on, step by step until it is finally dispersed.

As new money enters the economy, it naturally drives up the prices of goods bought with it. This means that someone seeking to buy a similar product without the benefit of new money finds it is more expensive, or put more correctly the purchasing power of his wages and savings has fallen relative to that product. Therefore, the new money benefits those that first obtain it at the expense of everyone else. Obviously, if large amounts of new money are being mobilised by a central bank, as is the case today, the transfer of wealth from those who receive the money later to those who get it early will be correspondingly greater.

Now let’s look at today’s monetary environment in the United States. The wealth-transfer effect is not being adequately recorded, because official inflation statistics do not capture the real increase in consumer prices. The difference between official figures and a truer estimate of US inflation is illustrated by John Williams of Shadowstats.com, who estimates it to be 7% higher than the official rate at roughly 9%, using the government’s computation methodology prior to 1980. Simplistically and assuming no wage inflation, this approximates to the current rate of wealth transfer from the majority of people to those that first receive the new money from the central bank.

The Fed is busy financing most of the Government’s borrowing. The newly-issued money in Government’s hands is distributed widely, and maintains prices of most basic goods and services at a higher level than they would otherwise be. However, in providing this funding, the Fed creates excess reserves on its own balance sheet, and it is this money we are considering.

The reserves on the Fed’s balance sheet are actually deposits, the assets of commercial banks and other domestic and foreign depository institutions that use the Fed as a bank, in the same way the rest of us have bank deposits at a commercial bank. So even though these deposits are on the Fed’s balance sheet, they are the property of individual banks.

These banks are free to draw down on their deposits at the Fed, just as you and I can draw down our deposits. However, because US banks have been risk-averse and under regulatory pressure to improve their own financial position, they have tended to leave money on deposit at the Fed, rather than employ it for financial activities. There are signs this is changing.

Rather than earn a quarter of one per cent, some of this deposit money has been employed in financial speculation in derivative markets, or found its way into the stock market, gone into residential property, and some is now going into consumer loans for credit-worthy borrowers.

In addition to the government’s deficit spending, these channels represent ways in which money is entering the economy. Furthermore, anyone working in the main finance centres is being paid well, so prices in New York and London are driven higher than in other cities and in the country as a whole. They spend their bonuses on flashy cars and country houses, benefiting salesmen and property values in fashionable locations. And with stock prices close to their all-time highs, investors with portfolios everywhere feel financially better off, so they can increase their spending as well.

All the extra spending boosts GDP, and to some extent it has a snowball effect. Banks loosen their purse strings a little more, and spending increases further. But the number of people benefiting is only a small minority of the population. The rest, low-paid workers on fixed incomes, pensioners, people living on modest savings in cash at the bank, and part time employed as well as the unemployed find their cost of living has gone up. They all think prices have risen, and don’t understand that their earnings, pensions and savings have been reduced by monetary inflation: they are the ultimate victims of wealth transfer.

While luxury goods are in strong demand in London and New York, general merchants in the country find trading conditions tough. Higher prices are forcing most people to spend less, or to seek cheaper alternatives. Manufacturers of everyday goods have to find ways to reduce costs, including firing staff. After all if you transfer wealth from ordinary folk they will simply spend less and businesses will suffer.

So we have a paradox: growth in GDP remains positive; indeed artificially strong because of the under-recording of inflation, while in truth the economy is in a slump. The increase in GDP, which reflects the money being spent by the fortunate few before it is absorbed into general circulation, conceals a worse economic situation than before. The effect of an expansion of new money into an economy does not make the majority of people better off; instead it makes them worse off because of the wealth transfer effect. No wonder unemployment remains stubbornly high.

It is the commonest fallacy in economics today that monetary inflation stimulates activity. Instead, it benefits the few at the expense of the majority. The experience of all currency inflations is just that, and the worse the inflation the more the majority of the population is impoverished.

The problem for central banks is that the alternative to maintaining an increasing pace of monetary growth is to risk triggering a widespread debt crisis involving both over-indebted governments and also over-extended businesses and home-owners. This was why the concept of tapering, or putting a brake on the rate of money creation, destabilised worldwide markets and was rapidly abandoned. With undercapitalised banks already squeezed between bad debts and depositor liabilities, there is the potential for a cascade of financial failures. And while many central bankers could profit by reading and understanding this article, the truth is they are not appointed to face up to the reality that monetary inflation is economically destructive, and that escalating currency expansion taken to its logical conclusion means the currency itself will eventually become worthless.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8ZxAPyhdcnQ/story01.htm Tyler Durden

By: Chris Tell at http://capitalistexploits.at/

 

 

I’ve never been trapped in a fire before and trust me, I have had plenty of opportunity. Yes, I was THAT kid, the one who played with fire. The trick was, and still is to steer clear of the flames, to anticipate what and where. Fire is however notorious for doing what it wants and once its out of control even the best firefighters don’t stand a chance.

  Each day that passes we come closer to the arrival of a monetary fire that threatens to dwarf anything in our collective living memories. Watching the Australian bush fires in New South Whales recently made me think of our monetary system. Funny that.

The Australian bush has been burning long before the Brits began exporting their best and brightest to the “lucky country.” Right now the fires are raging. It was inevitable. Like the business cycle nature too abhors excess and steps in to correct it, clear the dead wood and prepare for rebirth.

What is often forgotten is that nature has evolved to rely on bush-fires as a means of reproduction and new “birth.” Fires are an integral part of the ecology of the planet’s surface. Humans can try and prevent these inevitable fires by “controlled burnings”, clearing out much of the dead underbrush, but it’s not foolproof.

The fires now raging in New South Whales are in part due to an extensive build up of dry brush which is likely overdue a good burning. The longer the dry bush remains unburned, and the more that accumulates the greater the risk of an inevitable fire. The result will be much greater than that which would have preceded it should a fire have taken place sooner. This is a basic, easy to understand law of nature.

Financial markets are NO different. The dry brush of excessive credit, monetary stimulus, rampant fraud, and government interference, which has caused the largest sovereign bond bubble the world has ever seen, has not been cleared or burned to allow for regeneration. In contrast we’ve actually been ADDING to it, doing the exact opposite of the “controlled burn.”

The market, like nature, has attempted to correct these excesses many times, only to be met with central bankers fire hoses spraying liquidity at ever increasing volumes and velocity. As the outbreaks of financial fires increase so too do the tools and technologies used by the central bankers. This postponement of the inevitable leads to massive mis-allocation of capital.

That’s a lot of dead wood buildup there

The above graph shows all the dead wood build-up. Quite a bonfire awaits us.

It is possible that the fires will continue to be contained, central bankers promise that this is indeed the case. We DO know however that it is not possible to contain it forever. This time is not different…or is it?

Let’s compare what’s different this time around in Australia and the world’s monetary system?

• The bush fires have invaded the suburbs. So too have the monetary bush fires directly impacted most western “suburbs”.
• The “tools” available to the firefighters are more advanced than at any time in human history. The tools that are at the disposal of central bankers are more “advanced” than at any time in human history.

What’s happening in New South Wales right now provides us with an instruction manual for how to proceed forward in a world of monetary madness. We need to BURN THE UNDERBRUSH. Simply hoping that the fires will fail to erupt simply defies history and mathematics. “Hope and Change” be damned.

The likely outcome is that we’re heading deep into asset confiscation mode. Government meddling will fail, it always has and it always will. The playbook from throughout history tells us that governments will steal anything and everything from the most productive before they default.

This happens either overtly (taxation, fines, penalties, asset seizure) or covertly via destruction of currencies (quantitative easing). Everything not nailed down is up for grabs. Don’t say you weren’t warned! If you need an example look at what’s happening in France. Hollande is insane, but he’s not unique.

As such, aside from structuring myself in order to protect what I have, which I hope I’ve done, ensuring that what I invest in going forward is structured properly is just as important. It makes no sense to invest intelligently only to have some thug steal the proceeds because I failed to set myself up to deal with the inevitability just mentioned.

So, how are Mark and I choosing to allocate our capital:

• Investing in private equity. We like businesses where we can get to know and deal directly with CEO’s and management, and where we are not at the whim of black box trading systems, plunge protection teams and assorted other “firefighters”. This is by far our most overweighted asset class. If you want to know more about how we do this, drop us a line.
• Trading the volatility created by these madmen. Our friend and colleague Brad Thomas, the new editor of our Trade Alert service, “The Capex Options Alert” is our guru in this area. You can get to know Brad a bit and sign up for this complimentary service for a limited time HERE.
• Continuing to buy and store physical precious metals. This just seems a long-term no-brainer.
• Investing in agriculture. A guy’s gotta eat, right!
• Select real estate. Maybe some premium scorched earth in New South Wales, Australia. After all, the risk of a devastating fire is now significantly reduced! But seriously, a nice piece of land where you can escape the madness and “grow your own” if need be.

The above is neither a recommendation nor an endorsement of any particular asset class or strategy. Obviously everyone’s situation is different, and we don’t know yours. Some could probably do just fine with a couple hunting rifles, some ammo and a nice piece of land to grow food and run a few livestock. Albeit that’s not going to work for urban dwellers.

The bottom line is that we are just encouraging you to consider how to prepare for a monetary firestorm. Do it your own way, use common sense, but just don’t be the dupe who ignores the obvious.

– Chris

“So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.” – Martin Feldstein

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nm9tXpH-L0I/story01.htm Capitalist Exploits

Today’s AM fix was USD 1,346.75, EUR 978.81 and GBP 837.06 per ounce.
Yesterday’s AM fix was USD 1,351.00, EUR 978.28and GBP 833.69per ounce.

Gold climbed $1.50 or 0.11% yesterday, closing at $1,353.00/oz. Silver slipped $0.05 or 0.22% closing at $22.47. Platinum rose $9.20 or 0.7% to $1,382.00/oz, while palladium climbed $6.50 or 0.9% to $707/oz.

Gold for immediate delivery gained as much as 0.6% to $1,360.76/oz, prior to a sharp bout of  concentrated selling just before European markets opened at 0800 GMT, that saw gold fall to just above $1,340/oz .

Gold had been near the highest level in five weeks after U.S. economic data showed how weak the U.S. economy remains leading to concerns that the Fed will continue with ultra loose monetary policies.

Gold in US Dollars, 10 Days – (Bloomberg)

Gold is currently 1.3% higher in October. Gold fell into the middle of the month (see chart below) and then as U.S. lawmakers wrangled over the nation’s budget and debt ceiling, triggering a 16-day partial government shutdown, gold began to recover and is now nearly $100 above the low seen mid October at $1,252/oz.

U.S. factory output trailed forecasts in September, while pending sales of previously owned homes fell the most in three years, separate reports showed yesterday.
Asian demand remains robust and holdings in the SPDR Gold Trust, the biggest gold  exchange traded product, held steady at 872.02 metric tons yesterday.

Gold in US Dollars, 1 Month – (Bloomberg)

In the Financial Times, veteran financial journalist and gold watcher, John Dizardnoted the increasing strain in the physical gold market and detailed how that should lead to much higher 
gold prices.

“Something is unsettling the animals in the forest of the gold market. Usually there is a chorus of chirrups and squeaks that are significant, momentarily, for one species or another, such as a few cents of arbitrage between Zurich and London, or a dollar-an-ounce rise in India caused by a dealer’s near insolvency. Then the noise settles down to the murmur of wind through the trees

However, the continuing high level of premiums for physical gold over the kinds you can trade on a screen suggests that the next move in the major gold indices or the various exchange traded funds could be discontinuous and dramatic. It would be much better for the financial world if gold were just bumping along, with only enough volatility and liquidity to keep a few dealers’ lights on. That would mean electronic or paper assets have retained their essential credibility with the public …”

“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about ‘fiat currencies’, but we also have ‘fiat gold.’ Volatility is too cheap right now.”

Taken together, this collection of persistent microeconomic signals in gold could flag macro trouble to come. These noises worried me in August. They worry me more now.

Dizard’s article, ‘Strange gofo cry heralds trouble for gold’ in the Financial Times can be read here.

He has previously warned that ETF gold holdings and central bank gold reserves may be being lent to bullion banks, who then re lend that gold into the market.

Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.

The leading gold ETF, GLD has been criticised by many analysts for its extremely complex structure and prospectus. There have also been warnings about the possible conflict of interest and overall lack of transparency.

If as has been suggested, banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market.

Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients. 

 
Gold Prices / Fixes /Rates /Volumes – (Bloomberg)

Already more prudent hedge fund, investment and pension fund managers have liquidated their ETF positions in favour of allocated physical bullion.

We would expect that trend to accelerate as prudent investors rightly seek to avoid the high level of counterparty and systemic risk associated with exchange traded gold and other forms of unallocated gold and paper gold.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LdEbZ7mHGG0/story01.htm GoldCore

Nearly three years ago, before anyone had heard of expert networks, before the SEC had brought any major enforcement action against any hedge fund and long before anyone had to gall to accuse SAC of insider trading, Zero Hedge started a series of posts commencing with “Is The SEC’s Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?” exposing the fraudulent transactions of Steve Cohne’s hedge fund despite fears of violent legal reprisals. We are delighted to inform our readers that this particular chapter is now over: the WSJ has just reported that SAC will plead guilty to securities fraud, pay a final $1.2 billion penalty (still a tiny sum compared to all the ill-gotten gains by Steve Cohen over the years), and most importantly, end the fund’s management of outside money.

From the WSJ:

SAC Capital Advisors LP will plead guilty to securities fraud as part of a landmark criminal insider-trading settlement with federal prosecutors set to be announced by next week, people familiar with the discussions said.

 

The exact timing of the pact isn’t set, and if final details are ironed out quickly, it could still be unveiled by the end of this week, these people said.

 

SAC, run by Wall Street titan Steven A. Cohen, also will agree to stop managing outside money and pay the government criminal penalties of about $1.2 billion, according to these people—which would be the largest-ever insider-trading penalty.

 

…

 

A spokeswoman for the Manhattan U.S. attorney’s office, Jennifer Queliz, declined to comment, as did SAC spokesman Jonathan Gasthalter, Federal Bureau of Investigation spokesman J. Peter Donald and SEC spokeswoman Judy Burns.

 

After any settlement is approved, Mr. Cohen would remain under criminal investigation, though no charges are expected against him barring unexpected developments in the probe, the people said.

And since in the hedge fund world the bulk of “retained earnings” comes not from capital appreciation, manipulated, centrally-planned markets or not, but from charging outside investors the exorbitant privilege of 2 and 20 or, in SAC’s case 3 and 50, the Steve Cohen era is now effectively over.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OaNw3uiGE2I/story01.htm Tyler Durden

SSDD. Collapsing confidence, check. Housing Recovery meme toast, check. Volume at 2013 lows, check. BTFATH and send Trannies up for 13th of last 15 days (+10.4%), Dow near all-time highs again (thank you IBM buybacks), and S&P to new all-time highs… but don't tell Treasuries (which stand +/-1bps on the week). VIX wasn't drinking the kool-aid but the NASDARK session enabled futures to drag us back to higher before limping lower into the closer. The USD oscilatted around Nowotny comments and POMO ending the day up a rather notable 0.5% from Friday's close and that pressured commodities in general lower (gold hovering at $1345). The last 2 minutes saw stocks scream higher on their own as the world was terrified it would miss out on something (but no other market moved) and all the major indices managed new highs.

 

US Equity markets have only one master… JPY carry levered muppetry…

 

But bonds weren't buying the stock exuberance (or was the post-PMO rally in both bonds and stocks just more of the same Un-Taper hope?)….

 

And credit is absolutely ignoring stocks' exuberance…

 

But the straight line rise to infinity and beyond continues as the entire market finds Birinyi's ruler…

 

Homebuilders rejoin Discretionary stocks at the top of the heap post Debt-ceiling lows… (up 8.5%!)…

 

Volume continues to slump as stock prices rise…

 

VIX remains 'relatively' bid as we head into tomorrow's FOMC decision…

 

Intriguingly, shorts have actually not done so badly in the last week or so (but today saw a late day squeeze)…

 

When the Nasdaq cash indices cat is away, the futures mice will play…

 

Charts: Bloomberg

 

Bonus Chart: Let The Kool Aid Flow… (h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/No-1fHwn2mk/story01.htm Tyler Durden

Following the humiliation of having a US ambassador summoned so he would explain the spying conducted by the US government, in liberated Paris of all places (because while the NSA spying on your own citizens is an absolute travesty and trampling of basic human rights and smacks of Stalingrad circa 1960, spying abroad is permitted, accepted and largely forgiven by all the developed nations – after all everyone does it) the US has struck back in the most poetic way imaginable: it said that whatever phone records the NSA acquired were passed on to it by the local spy agencies of none other than France and Spain. The implication is simple: the local people understandably furious at the US and screaming blood, have just been given a far more convenient target at which to fume: their own governments.

The WSJ reports how the spy scandal tables have just turned:

The phone records collected by the Europeans—in war zones and other areas outside their borders—then were shared with the NSA, U.S. officials said, as part of efforts to help protect American and allied troops and civilians.

 

The new disclosure upends the version of events as reported in Europe in recent days, and puts a spotlight on the role of European intelligence services that work closely with the NSA, suggesting a greater level of European involvement in global surveillance.

 

The U.S. has so far been silent about the role of European partners in these collection efforts so as to protect relationships. These efforts are separate, however, from the U.S. spying programs that targeted dozens of foreign leaders, including German Chancellor Angela Merkel, whose phones were tapped for years by the NSA.

 

The NSA declined to comment, as did the Spanish foreign ministry and a spokesman for the French Embassy in Washington. A spokesman for Spain’s intelligence service said: “Spanish law impedes us from talking about our procedures, methods and relationships with other intelligence services.”

Of course, this is a lie too:

After publication of the report in Le Monde last week, the U.S. Director of National Intelligence James Clapper said that it contained “inaccurate and misleading information regarding U.S. foreign intelligence activities.”

 

He said the allegation that the NSA collected more than 70 million “recordings of French citizens’ telephone data” is false, but he provided no further explanation of what the data in the documents showed.

However, that doesn’t matter because in the New Normal globalized world everyone else is lying too, and the only prerogative is to keep the sheep happily grazing and not thinking too hard about what really goes on behind the scenes.

Officials privately have said the disclosures in the European press put the U.S. in a difficult bind.

 

The U.S. wants to correct the record about the extent of NSA spying but doing so in this case would require it to expose its allies’ intelligence operations, the officials say, which could compromise cooperation in the future as well as ongoing intelligence efforts.

And for the “greater good” this can’t possibly happen, as who knows what level of theft and criminality within the governments would be exposed. So the best option is merely to scapegoat, who else, Snowden himself, and to suggest that whatever the documents showed is not accurate and the NSA knows best.

U.S. officials said the Snowden-provided documents had been misinterpreted and actually show phone records that were collected by French and Spanish intelligence agencies, and then shared with the NSA, according to officials briefed on those discussions.

 

U.S. intelligence officials studied the document published by Le Monde earlier this month and have determined that it wasn’t assembled by the NSA.

 

Rather, the document appears to be a slide that was assembled based on NSA data received from French intelligence, a U.S. official said.

Based on an analysis of the document, the U.S. concluded that the phone records the French had collected were actually from outside of France, and then were shared with the U.S. The data don’t show that the French spied on their own people inside France.

 

U.S. intelligence officials haven’t seen the documents cited by El Mundo but the data appear to come from similar information the NSA obtained from Spanish intelligence agencies documenting their collection efforts abroad, officials said.

And because the NSA never lies, everyone must believe them…. must believe them…. must believe them…

In conclusion: “Public disclosure of European complicity in the collection efforts would likely spark domestic outrage in those countries against their own governments, and could threaten cooperation with the U.S.”

Great – more domestic outrage in countries that have 60% youth unemployment is just what the European recovery doctor ordered.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mx6pTkmAg10/story01.htm Tyler Durden

There is a fear stalking the corridors of European politics. It is not the surging unemployment in France, or record delinquencies in Spain, or all-time low credit creation across the region; it is the growing concern that the powers that be have from the rise of Euroskepticism. As UKIP’s Nigel Farage exclaims to Barroso and his brood, “years ago, you were less worried… but now we are “evil”, “populists”, we are “dangerous” and are going to bring down Western Civilization.” As the outspoken Brit implores in this brief clip, there is nothing extreme in his views. “The real European debate is about identity,” he notes, “what we are saying, large numbers of us from every single EU member state is: we don’t want that flag, we don’t want the anthem that you all stood so ram-rod straight for yesterday, we don’t want EU passports, we don’t want political union.” As Greece faces down its 3rd bailout and deflationary threats loom across the region, we suspect top-down and bottom-up angst will bubble back to the surface soon enough.

 

 

 

And here, from El Pais, is a very enlightening graphic showing the considerable growth in “Extreme Right” parties across the entire European region:

 

Whether, as Farage has warned in the past, we remain on the verge of social unrest is unclear but for sure this is not the poltical union that Barroso pitches it to have become…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dW5UBgYLZsI/story01.htm Tyler Durden

There is a fear stalking the corridors of European politics. It is not the surging unemployment in France, or record delinquencies in Spain, or all-time low credit creation across the region; it is the growing concern that the powers that be have from the rise of Euroskepticism. As UKIP’s Nigel Farage exclaims to Barroso and his brood, “years ago, you were less worried… but now we are “evil”, “populists”, we are “dangerous” and are going to bring down Western Civilization.” As the outspoken Brit implores in this brief clip, there is nothing extreme in his views. “The real European debate is about identity,” he notes, “what we are saying, large numbers of us from every single EU member state is: we don’t want that flag, we don’t want the anthem that you all stood so ram-rod straight for yesterday, we don’t want EU passports, we don’t want political union.” As Greece faces down its 3rd bailout and deflationary threats loom across the region, we suspect top-down and bottom-up angst will bubble back to the surface soon enough.

 

 

 

And here, from El Pais, is a very enlightening graphic showing the considerable growth in “Extreme Right” parties across the entire European region:

 

Whether, as Farage has warned in the past, we remain on the verge of social unrest is unclear but for sure this is not the poltical union that Barroso pitches it to have become…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dW5UBgYLZsI/story01.htm Tyler Durden