Piling On To The “Surreal” Response To Turkish Turmoil: Here Comes The Central Bank

Update: Turkey’s central bank indeed cut, and by 25 bps, in line with expectations:

  • Turkey central bank cuts top end of its rates corridor 25bps to 8.75%, as expected
  • Holds benchmark repo rate at 7.5%, as expected
  • Holds overnight borrowing rate at 7.25%, as expected

* * *

In less than half an hour, the Turkish central bank will steal the public spotlight, if only very briefly, from Erdogan when it announces whether it will cut rates by 50 bps, 25 bps, (or – less likely – it won’t cut at all). But in light of the recent stunning transformation in the country’s political landscape, does this decision really matter? According to the market yes; according to Bloomberg’s Richard Breslow, it is simply one more indication of how surreal the response to the Turkish turmoil has become.

Here is his full note.

Turkey Shouldn’t Be Confused With a Penny Stock

Much of the response to the turmoil in Turkey has been surreal, to say the least. While President Erdogan was rounding up thousands of alleged plotters, shuttering media, closing down a bank and accusing the U.S. of harboring the ringleader there has been a lively debate whether this means the central bank should cut 50bps today or only 25.

Do we possibly think it will make a difference? Apparently a lot of people do. In this age of monetary policy uber alles, every setback somehow gets sold as a buying opportunity. There are no long-term ramifications ascribed to anything.

“Valuations look cheap. Yields look attractive.” Forget that the tourist industry will be toast. That business and consumer sentiment are likely to tank. The news cycle will pass. After all there’s great sports on the television.

There was no shortage of assurances that the impact was localized and no reason this couldn’t be a “risk-on” day for the rest of us. No reason to worry about the European banks that have been betting heavily on Turkey. And just wait until Europe gets a freshly topped-up bill for the Syrian refugee deal.

Moody’s and Fitch immediately warned on the country’s ratings, citing instability. Can’t have that. IMF Managing Director Lagarde countered that “quick action” by the CBRT has calmed markets. Move along, nothing to see here.

So what if the war on terror just got more difficult, they’re a member of NATO. Oh wait, didn’t U.S. Secretary of State Kerry warn that Turkey’s behavior may make it unsuitable to be part of that organization? Tough words. But when this stress test is evaluated they’ll be deemed systemically important and too big to fail. Erdogan is counting on it. Someone had better tell ISIS.

Monetary policy can cure many ills. Sort of. But to think it can eliminate all geopolitical risk and societal failings is a dip too far to buy.

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US Futures Dip, European Stocks Slide After EU Court Slams Italian Bank Bailout Plans

After a head-scratching S&P500 rally – which not even Goldman has been able to justify – pushed stocks to new all time highs with seemingly daily record highs regardless of fundamentals or geopolitical troubles, overnight US equity futures dipped modestly, tracking weak European stocks as demand for safe haven assets including U.S. Treasuries and gold rises. Asian stocks outside Japan fall. Crude oil trades near $45 a barrel. 

Europe’s Stoxx 600 Index slid 0.9% following equity declines in Hong Kong and Singapore. The Aussie tumbled 1 percent as the Reserve Bank of Australia said the jobs market was losing momentum amid weak inflation. The kiwi lost ground against all 31 major peers after policy makers moved to rein in the nation’s housing boom, clearing an obstacle to lowering borrowing costs. Treasuries gained as Morgan Stanley predicted the yield on 10-year debt will sink to 1 percent in the first quarter of 2017.

Some of the European weakness was due to a ruling by the European Union’s top court which backed EU guidelines designed to prevent taxpayers from footing the bill for bailing out stricken lenders, strengthening the hand of Brussels regulators as Italy fights to shield some bondholders caught up in the nation’s banking crisis. As Bloomberg reports, Tuesday’s decision is a show of support for the European Commission, which updated its crisis rules for banks in 2013 as part of a shift from taxpayer-funded bailouts to bail-in, the practice of imposing losses on investors before public money can flow.

“Burden-sharing by shareholders and subordinated creditors as a prerequisite for the authorization, by the commission, of state aid to a bank with a shortfall is not contrary to EU law,” according to the EU Court of Justice. The Luxembourg-based court’s decision is binding and can’t be appealed. The European Commission, which checks whether state aid violates EU rules, welcomed the ruling, which it said “confirms the commission’s current case practice and application of EU state aid rules to the banking sector.” The ruling also made the case for a bailout as opposed to a bail in more difficult and Italian banks dropped after the decision with Banca Monte dei Paschi declining as much as 7.1%. UniCredit SpA slipped 3.2% in early trading, while Intesa Sanpaolo SpA decreased 2.5%. 

In addition to Italy’s banking slump, European mining companies led losses with Rio Tinto Group sliding 2.1% in London after reporting that second-quarter iron-ore production rose a weaker-than-expected 7 percent. Worse-than-estimated quarterly results from Akzo Nobel and Trelleborg dragged European stocks lower.

European weakness dragged down US equities, with futures on the S&P 500 Index dropping 0.4% after another all time high close yesterday.

As a result, some wondered if the hopium inspired rally is finally coming to an end: “The market is taking a pause,” said Tony Farnham, a strategist at Paterson Securities in Sydney. “There isn’t much of a catalyst out there. People are starting to question if there’s still value in the market following the post-Brexit rally.”

Others chime in: “There is a lot of hope built into U.K. share prices currently – hope on economic growth and hope on the political side,” said Robert Parkes, HSBC’s head of European equity strategy. “There is an unprecedented level of uncertainty on both of those issues. U.K. shares, including the FTSE 100, are in for a bumpy ride over the course of the next few months – in a downward direction.”

Some expressed outright skepticism: “On current sentiment it seems likely that any pullbacks will be shallow and a buying opportunity,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “We will need to see good earnings, or the market is at risk of rolling over.“

Still, for now the prevailing sentiment is that all dips are to be bought until proven otherwise by algos. This won’t happen, however, if central banks finally unleash the much-jawboned additional stimulus, especially now that the IMF is also in the fray. As Bloomberg adds, policy makers are under pressure to unleash stimulus as the global economic outlook shows signs of worsening. The IMF is set to update its projections for world growth on Tuesday and Managing Director Christine Lagarde warned last week that estimates may be cut. Nonetheless, global equities have recovered to above where they were at the time of the U.K.’s vote to leave the European Union and the U.S. earnings season has so far delivered more positive surprises than negative ones.

 

Elsewhere, the MSCI Asia Pacific excluding Japan Index fell 0.4%, with benchmark gauges in Hong Kong and Singapore losing at least 0.5%. Japan’s Topix index rose 1.1% from Friday’s close, buoyed by Monday’s slide in the yen. SoftBank Group Corp. tumbled 10%, its biggest loss since 2012, after agreeing to pay $32 billion for ARM Holdings Plc. The U.K-listed chipmaker was little changed after soaring 41% on Monday.

The modest unwind in risk-on positions, meant that 10Y U.S. Treasuries gained for the first time in four days, pushing their yield down by three basis points to 1.56 percent. The yield reached 1.60 percent in the last session, the highest it’s been since June 24, when the Brexit vote count was announced.

Market Snapshot

  • S&P 500 futures down 0.4% to 2153
  • Stoxx 600 down 0.9% to 335
  • MSCI Asia Pacific up less than 0.1% to 134
  • US 10-yr yield down 4bps to 1.54%
  • Dollar Index up 0.16% to 96.71
  • WTI Crude futures down 0.3% to $45.12
  • Brent Futures down 0.4% to $46.79
  • Gold spot up 0.4% to $1,334
  • Silver spot down 0.4% to $19.97

Top Global News

  • Turkey’s central bank will likely slow the pace of interest rate cuts after the failed coup attempt triggered a selloff in TRY and sovereign debt
  • Turkey Baa3 Ratings May Be Cut to Junk by Moody’s
  • U.K. inflation accelerated more than economists forecast in June boosted by airfares on trips to continental Europe
  • German ZEW investor sentiment deteriorates in Brexit aftermath
  • New Zealand’s central bank is moving to quell the country’s housing boom by restricting the amount of money property investors can borrow, paving the way for another cut in interest rates
  • Honda Audit Finds Takata Engineers Manipulated Air-Bag Data: Takata engineers gave ‘prettier shortened version’ to Honda
  • Oil Trades Near $45 Amid Speculation U.S. Output May Climb: Nationwide supplies to decline by 2.1 million barrels: survey
  • U.K. Inflation Rate Rises More Than Forecast on Airfare Surge: Rate rose to 0.5 percent from 0.3 percent in May, partly due to Euro 2016 football championship in France
  • Investor Challenges Baidu on Sale of Video Service to CEO: Hedge fund urges Chairman Robin Li to withdraw iQiyi bid
  • Morgan Stanley Says Year of the Bull Will Push U.S. Yield to 1%: Hornbach says yield will fall to 1% in 1Q 2017, more bullish than any of 61 economists surveyed
  • Netflix Stumbles on Path to World Domination With Price Hike: Results show subscribers more sensitive to costs than thought
  • Murray Energy Working to Renegotiate Credit Terms: Reuters
  • Thrive Capital Said to Have Raised $700m for Fifth Fund: NYT
  • Lufthansa Said to Join Airbus, Honeywell on Runway System: WSJ

Looking at regional markets, Asian stocks outside Japan fell from their highest levels in almost nine months as commodity producers led losses.  4 out of 10 sectors fall with industrials, energy underperforming and telcos, financials outperforming.  The MSCI Asia Pacific was up less than 0.1% to 134, unmoved by the latest Nikkei 225 jump 1.4% higher to 16723. Elsehwere the Hang Seng down 0.6% to 21673, while the Shanghai Composite was down modestly by 0.2% to 3037 and the S&P/ASX 200 down 0.1% to 5451

Top Asian News

  • Son Invokes Yoda of Star Wars on SoftBank Debt as Bonds Fall: SoftBank 5.375% bond yield jumped most since issuance Monday
  • Asia Embraces Bullet Trains as Singapore, Malaysia Sign Deal: Singapore-KL link will follow projects in Indonesia, India
  • Vietnam Faults as ‘Untruthful’ China Media Reports on Sea Ruling: China claims nations support its stance on South China Sea
  • India to Inject $3.4 Billion to Boost Capital of 13 State Banks: State Bank of India, Indian Overseas Bank among lenders
  • Bank of East Asia Shares Fall After Elliott’s Legal Action: action escalates battle against BEA management
  • China Said to Create Immigration Office to Lure Overseas Talent: First-of-its-kind agency could be set up before year’s end

Over in Europe, the Stoxx Europe 600 Index retreated 0.4 percent as of 8:12 a.m. in London, following equity declines in Hong Kong and Singapore. The Aussie tumbled 1 percent as the Reserve Bank of Australia said the jobs market was losing momentum amid weak inflation. The kiwi lost ground against all 31 major peers after policy makers moved to rein in the nation’s housing boom, clearing an obstacle to lowering borrowing costs. Treasuries gained as Morgan Stanley predicted the yield on 10-year debt will sink to 1 percent in the first quarter of 2017, lower than any of the 61 estimates in a Bloomberg survey.

Top European News

  • Airbus Said to Cut in Half A400M Deliveries for 2016 to Germany: Planemaker grappling with gearbox, engine, fuselage faults
  • EU State-Aid Rules for Banks in Crisis Backed by Top Court: Decision comes as Italy and EU seek solution on investor burden-sharing
  • Ericsson Plans More Cost Cuts as Revenue Trails Estimates: Network maker to reduce research on Internet products as demand for wireless gear falling in Europe, Russia, Brazil
  • Volvo Cuts North American Market Outlook as Orders Slump: Truck orders in North America fell 29% in second quarter
  • Akzo Signals Europe Paint Demand Slowed, Marring Profit Run: Slowdown in U.K. paint sales has yet to recover, customers are reporting increased volatility in order patterns

In FX, the Aussie slipped 1 percent to 75.16 U.S. cents, after strengthening in each of the last seven weeks. Minutes published Tuesday from the RBA’s July 5 policy meeting showed that the central bank estimated the economy to have slowed last quarter and policy makers were concerned about currency appreciation. The likelihood of an August rate cut has increased to 56 percent from 45 percent over the past week, derivatives indicate.  New Zealand’s dollar dropped 1.3 percent. The central bank said it will require property investors buying housing in the nation to have a deposit of at least 40 percent from Sept. 1, compared with an existing requirement that such buyers in Auckland have at least a 30 percent deposit. Swaps traders are pricing in a 77 percent chance of an RBNZ rate cut on Aug. 11, compared with 39 percent a week ago. The yen strengthened 0.1 percent to 106.10 versus the greenback, after sliding 1.2 percent in the last session. It was trading at about 106 prior before the outcome of the Brexit vote. The currency tumbled 4.1 percent last week as Japanese Prime Minister Shinzo Abe outlined plans for a “bold”stimulus package in the wake of an election victory. Poland’s zloty led losses among emerging-market currencies, weakening by 0.4 percent. Malaysia’s ringgit fell 0.3 percent. China’s yuan was among the best performers with a 0.1 percent gain.

In commodities, crude oil fluctuated around $45 a barrel. It slid 1.6 percent on Monday after a failed coup attempt in Turkey failed to disrupt shipments through the country, a vital conduit for moving from Russia and Iraq to the Mediterranean Sea. Gold rose from a two-week low, while copper declined 0.1 percent in London.

On to the US calendar today where the only data due out comes in the housing market with the June housing starts and building permits data. Away from the macro there will be the usual focus on corporate earnings. In the US we’re due to get quarterly numbers from 18 S&P 500 companies including Goldman Sachs, Johnson & Johnson and Microsoft. In Europe we’ll get reports from 13 Stoxx 600 companies.

* * *

US Event Calendar

  • 8:30am Housing Starts, June, est. 1.17m (prior 1.164m)
    • Housing Starts m/m, June, est. 0.2% (prior -0.3%)
    • Building Permits, June, est. 1.15m (prior 1.138m, revised 1.136m)
    • Building Permits m/m, June, est. 1.2% (prior 0.7%, revised 0.5%)

DB’s Jim Reid concludes the overnight wrap

The hot weather seemed to make for bit of a lethargic session in markets yesterday, although some M&A activity in the tech space and also another better than expected earnings report in the bank sector – this time from BofA – helped stocks eke out modest gains. The S&P 500 finished +0.24% by the time the closing bell came around with the Nasdaq (+0.52%) up a little more. The intraday high-to-low range for the former has not exceeded 0.65% in the last four sessions, a sign perhaps that we’re finally starting to see a little bit of consolidation in markets ahead of the summer lull. Treasury yields also inched a few basis points higher although rate hike expectations actually dipped ever so slightly. The European session was a little more mixed, although again moves were fairly modest for the most part. The Stoxx 600 ended +0.23%, while the DAX (-0.04%) nudged slightly into the red. Turkish equities plummeted over 7% following the failed coup late on Friday although that was about the extent of the fallout with markets elsewhere fairly resilient.

That M&A activity we mention came in the form of Japanese telecom group Softbank’s takeover of the UK’s semiconductor designer ARM Holdings in a bumper £24.3bn deal. The deal would be one of the largest European technology deals and SoftBank’s largest acquisition to date. Much of the chatter is that this would likely be seen as a bit of post-Brexit confidence for deal activity in the UK although it’s worth noting that ARM derives the vast majority of its revenues outside the UK (mainly Asia and North America) and would likely have been relatively immune from Brexit. On the face of it the roughly 11% fall for Sterling (vs. the Yen) would also make the deal more attractive although this has been more than offset by the c.16% move higher for ARM’s shares since the vote to Friday’s close. Yesterday ARM’s share price rallied 41% following the news.

Meanwhile, on the earnings front Bank of America continued what’s been a fairly decent start for US bank earnings after reporting Q2 results ahead of both earnings and revenue expectations, with better than expected fixed income trading revenues again being a big driver of that as we saw with JPM and Citi. It’s worth noting however that while BofA’s Q2 EPS of 0.36c was above the 0.32c expected, that Bloomberg consensus forecast was at 0.36c just two week ago, so another good example of how last minute analyst revisions can help to boost the initial headline numbers.

Away from this the tech sector also kicked off with a few earnings reports of its own. Coming after the closing bell, the slide in IBM’s revenue was not quite as bad as feared, although another quarter of negative revenue growth made it 17 consecutive quarters that revenue has fallen in YoY terms. Meanwhile Yahoo’s results were a bit more mixed, while Netflix disappointed on subscriber numbers, sending shares down some 17% in extended trading at one stage.

Switching over to Asia this morning, Japan aside the bulk of bourses are trading with a weaker tone as we go to print. The Hang Seng (-0.59%), Shanghai Comp (-0.60%), Kospi (-0.41%) and ASX (-0.21%) are all in the red, with a second consecutive daily decline for Oil weighing slightly. In Japan the Nikkei (+0.47%) is up although is playing catch up somewhat having just reopened from a public holiday. That performance is more impressive given the 10% slide in SoftBank shares this morning. Elsewhere US equity index futures are also slightly in the red following those earnings last night after the bell. In FX the Aussie Dollar is -0.85% after the RBA meeting minutes came across as slightly dovish, while the Kiwi Dollar is -1.08% after the RBNZ announced its intention to tighten existing LVR restrictions on residential mortgage lending from September.

Moving on. Over in credit markets yesterday one headline which caught our eye came from the Canadian Imperial Bank of Commerce (CIBC) which became the first non-German and non-CBPP3 eligible EUR benchmark to issue a covered bond with a negative yield. Indeed the €1.25bn 6y bond was issued at -0.009% according to Bloomberg. Another incredible statistic from the current era of negative rates.
Staying with credit, yesterday the ECB released its holdings from its CSPP program for the first time. There didn’t appear to be any surprises on the list but there was confirmation that they’ve purchased split IG rated names like Telecom Italia and Lufthansa which shows they’re happy to buy what are effectively HY names in index terms. By also buying Glencore they’ve shown that they’re not afraid to buy names that have been under pressure and are not sticking strictly to Eurozone only entities. So it’s confirmation that we expect them to take a rules based approach over a credit selection process.

In terms of run rate, their holdings as of 15 July 2016 were €10.427bn. This implies net purchases settled last week of €1.953bn with an average daily run rate of €391m. This compares favourably with an average daily run of €401m since the program started. So there has been no real sign of let up in their buying in July in spite of holiday season starting. August might be trickier and then the run rate in the autumn might depend on the volume of new issuance as secondary will get increasingly more challenging as the easy looser bonds are purchased.

In data terms the calendar was relatively quiet yesterday with a 1pt fall in the NAHB housing market index in the US to 59 (vs. 60 expected) the only data of note. There was a bit of chatter over at the BoE however where we heard from the MPC’s Martin Weale. The committee member said with regards to the uncertainty stemming from Brexit, that ‘this uncertainty points to the argument that we should wait for firmer evidence before making any policy change and least in the absence of any strong arguments for an immediate change’. It’s worth highlighting that the post-Brexit data flow is limited still although this Friday we will get the flash July PMI’s in the UK where expectations are for a decent leg lower.

Looking at the day ahead, here in Europe this morning the early focus will be on the ECB Bank Lending Survey for Q2. It’s worth noting though that the BLS survey period was probably wholly or mostly pre-referendum, so if the report is unchanged or stronger, the market might be right to dismiss it since it won’t have captured the Brexit impact. On the other hand should the report be weaker, even before the Brexit shock, then the market will likely be more concerned about bank lending going forward. Also due out this morning will be the latest CPI/PPI/RPI docket in the UK, before we then get the ZEW survey in Germany for July which is expected to weaken likely reflecting Brexit. Over in the US this afternoon the only data due out comes in the housing market with the June housing starts and building permits data. Away from the macro there will be the usual focus on corporate earnings. In the US we’re due to get quarterly numbers from 18 S&P 500 companies including Goldman Sachs, Johnson & Johnson and Microsoft. In Europe we’ll get reports from 13 Stoxx 600 companies.

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Hans-Hermann Hoppe: “Put Your Hope In Radical Decentralization”

Via The Mises Institute,

[An interview with Hans-Herman Hoppe in the Polish weekly Najwy?szy Czas!]

What is your assessment of contemporary Western Europe, and in particular the EU?

All major political parties in Western Europe, regardless of their different names and party programs, are nowadays committed to the same fundamental idea of democratic socialism. They use democratic elections to legitimize the taxing of productive people for the benefit of unproductive people. They tax people, who have earned their income and accumulated their wealth by producing goods or services purchased voluntarily by consumers (and of course especially the “rich” among those), and they then re-distribute the confiscated loot to themselves, i.e., the democratic State that they control or hope to control, and their various political friends, supporters, and potential voters.

 

They do not call this policy by its right name: punishing the productive and rewarding the unproductive, of course. That doesn’t sound particularly attractive. Instead, they tap into the always popular sentiment of envy and claim to tax the few “rich” to support the many “poor.” In truth, however, with their policy they make more and more productive people poor and a steadily increasing number of unproductive people rich.

But what about the EU?

Looking at the EU, the picture becomes even worse. The EU is the first step on the way toward the creation of a European Super-State, and ultimately of a one-world government, dominated by the USA and its central bank, the FED. From its very beginnings, and despite all high-sounding political proclamations to the contrary, the EU was never about free trade and free competition. For that, you don’t need tens of thousands of pages of rules and regulations! Rather, the central purpose of the EU, supported all-along by the USA, was always the weakening in particular of Germany as Europe’s economic powerhouse. To facilitate this, Germany was sent on a seemingly never-ending “guilt trip” and thus pressured to transfer increasingly larger parts of its already limited (vis-à-vis the USA) sovereignty to the EU in Brussels. Especially noteworthy in this regard: Germany’s giving up its monetary sovereignty and abandoning its traditionally “strong” currency, the DM, in favor of a “weak” Euro, issued by a European Central Bank (ECB) composed overwhelmingly of politically connected central bankers from traditionally “weak” currency countries.

 

The EU, then, is characterized by three main features:

  • First: The harmonization of the tax and regulation structure across all member states, so as to reduce economic competition and especially tax-competition between different countries and make all countries equally uncompetitive.
  • Second: On top of the economic and moral perversity within each country of punishing the productive and subsidizing the unproductive, another layer of international income- and wealth-redistribution is added: of punishing economically better performing countries like Germany and the countries of northern Europe and rewarding economically worse performing countries (mostly of southern Europe) and thus successively rendering the economic performance of all countries equally worse.
  • And third, of increasing importance especially during the last decade: In order to overcome the rising resistance, in many countries, against the steadily increasing transfer of national sovereignty to Brussels, the EU is on a crusade to erode, and ultimately destroy, all national identities and all social and cultural cohesion. The idea of a nation and of different national and regional identities is ridiculed, and multiculturalism is hailed instead as an unquestionable “good.” As well, in promoting the award of legal privileges and of “special protection” to everyone, except white, heterosexual men, and especially married family men (who are portrayed as historic “oppressors” owing compensation to everyone else as their historic “victims”) — euphemistically called “anti-discrimination” or “affirmative action” policy — the natural social order is systematically undermined. Normality is punished, and abnormity and deviance is rewarded.

Can one say, then, that the politicians running the EU are even worse than the politicians running national affairs?

No, and yes. On the one hand, all democratic politicians, with almost no exception, are morally uninhibited demagogues. One of my German books is titled The Competition of Crooks, which captures what democracy and democratic party politics are really all about. There is in this regard little if any difference between the political elites of Berlin, Paris, Rome, etc., and those running the show in Brussels. In fact, the EU elites are typically political has-beens, with the same mentality as their domestic counterparts, on the lookout for the super-lavish salaries, benefits, and pensions doled out by the EU.

 

On the other hand, the EU elites are worse than their political cronies at home, of course, in that their decisions and rulings always affect a far larger number of people.

What do you predict, then, will be the future of the EU?

The EU and the ECB are a moral and economic monstrosity, in violation of natural law and the laws of economics. You cannot continuously punish productivity and success and reward idleness and failure without bringing about the disaster. The EU will slide from one economic crisis to the next and ultimately break apart. The Brexit, that we have just experienced, is only the first step in this inevitable process of devolution and political decentralization.

Is there anything that an ordinary citizen can do in this situation?

For one, instead of swallowing the high-sounding blabber of politicians about “freedom,” “prosperity,” “social justice,” etc., people must learn to recognize the EU for what it really is: a gang of power-lusty crooks empowering and enriching themselves at other, productive people’s expense. And secondly, people must develop a clear vision of the alternative to the present morass: not a European Super-State or even a federation of nation States, but the vision of a Europe made up of thousands of Liechtensteins and Swiss cantons, united through free trade, and in competition with one another in the attempt of offering the most attractive conditions for productive people to stay or move.

Can you give a comparative assessment of the USA and the situation in Europe?

The difference between the situation in the US and Western Europe is much smaller than is generally surmised on either side of the Atlantic. For one, the developments in Europe since the end of World War II have been closely watched, steered and manipulated, whether through threats or bribes, by the political elites in Washington DC. In fact, Europe has essentially become a dependency, a satellite or vassal of the US. This is indicated on the one hand by the fact that US troops are stationed all across Europe, by now all the way right up to the Russian border. And on the other hand, this is indicated by the steady pilgrimage, performed more regularly and dutifully than any Muslim’s pilgrimage to Mecca, of the European political elites and their intellectual bodyguards to Washington DC, in order to receive their masters’ blessings. Especially the German political elite, whose guilt complex has meanwhile assumed the status of some sort of mental illness, stands out in this regard by its cowardice, submissiveness, and servility.

 

As for US domestic affairs, both Europeans and Americans have it typically wrong. Europeans still frequently view the US as the “land of the free,” of rugged individualism, and of unhampered capitalism. Whereas Americans, insofar as they know or claim to know anything about the world outside the US at all, frequently view Europe as a place of unhinged socialism and collectivism, entirely alien to their own “American way.” In fact, there exists no principal difference between the so-called “democratic capitalism” of the US and Europe’s “democratic socialism.”

 

To be sure, America has always had more and more vocal proponents of free-market capitalism, it still manages to attract many of the world’s best and brightest, and indeed, the US tax-take as a percentage of GDP lags behind that of most European countries — but not by very much, and it is actually higher than in non-EU-member Switzerland, for instance. And as for US government debt as a percentage of GDP, this is actually higher than in most European countries and places the US is in the same league as an economic basket case such as Greece, for instance. True enough also: In the US you may still pretty much say whatever you want without having to fear criminal persecution, whereas taking the same liberty in most of Europe may well land you in jail. However, the disease of “political correctness,” of “non-discrimination” and “affirmative action” that is currently sweeping the Western world like an epidemic actually originated in the US, with the so-called “civil rights” legislation of the 1960s, and it is the US, where it has been carried to the greatest excesses and the height of absurdity. And so, while saying the politically “wrong” thing may not land you in jail in the US, you will have your career destroyed there just as certainly, if not more so, than in any European country.

 

And as for US foreign policy: All the while the political elites of the US started to “invite” the (third) world to come to the US, long before the same disastrous “multicultural” policies were also adopted in Europe, the very same elites have pursued an aggressive policy of “invade the world” and attacked, just in the most recent decades, Afghanistan, Pakistan, Iraq, Libya, Syria, Sudan, Somalia and Yemen, causing the deaths of hundreds of thousands of innocent civilians and spawning a wave of Islamist terrorism, mostly funded by Saudi Arabia, with whose political elites one entertains a most cordial relationship.

Finally, how do you evaluate the economic success of formerly communist countries such as China, that combine one-party dictatorships with partly free markets?

The economic success of a country depends on three interrelated factors: the security of private property and property rights, the freedom of contract and trade, and the freedom of association and disassociation — and, of course, the diligence, intelligence, and ingenuity of its people. Each and every State, insofar as it relies on taxation for its own funding, acts in violation of these requirements. But these violations can be less extensive and far-reaching, or more so, explaining the relative success of some countries and the failure of others. The internal organization of the State, whether it is a one-party dictatorship or a multi-party democracy, is essentially irrelevant in this. Indeed, as the present example of Venezuela vividly demonstrates, democracy and democratic elections can well lead to the almost complete abolition of private property rights and the freedom of contract and trade, and result in spectacular economic collapse.

 

As well, the comparison of the economic performance of India vs. China is instructive in this regard. While modern India, for almost seven decades now, has been ruled by democratic governments, modern China has been ruled throughout by a communist party dictatorship, roughly half of the time, during the Mao-era, by an orthodox all-out-communist party leadership, and the second half by a regime of “liberal” reform-communists. The result? Both countries are still desperately poor as measured by Western standards, indicating that both governments showed little if any respect for private property rights. But: While the economic situation was about equally desperate in both countries until the early 1980s, since then, with the onset of the “reform communism” in China, the Chinese GDP per capita has well surpassed and risen significantly above that of India, indicating a comparatively greater scope of economic freedom in China and/or an on average brighter and more diligent Chinese population.

In conclusion, then: Don’t put your trust in democracy, but neither should you trust in a dictatorship. Rather, put your hope into radical political decentralization, not just in India and China, but everywhere.

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Iron Ore Rally “Getting Carried Away Again” As China Inventories Soar To 20-Month Highs

Following the crash after March/April's 'mania', Iron ore prices have resurged to 2-month highs on the heels of stimulus-hype and rampant speculation. However, this echo-bubble appears to be bursting as Macquarie sounds the alarm that prices are "getting carried away again" with fundamental support entirely lacking as China inventories soar 30% year-over-year to 20-month highs.

As Bloomberg reports, iron ore was caught up in a speculative rally in China earlier this year as prices soared in April, prompting a host of banks to warn that the surge wouldn’t last, after which rates cratered. Last week, Australia cut its price outlook for 2017 by 20 percent, citing prospects for increased supply just as steel output in China shrinks further. Goldman said recent stimulus in China hadn’t brought a meaningful increase in steel demand, according to a report received on Wednesday.

While speculation about stimulus in China has helped to lift prices, Macquarie said it’s skeptical about fundamental support for the recent move higher, analysts including Ian Roper wrote in a report received on Wednesday. The note asked whether iron ore was "getting carried away again?"

Iron ore holdings at China’s ports just posted the longest run of gains this year, expanding for five straight weeks to 105.4 million metric tons, according to Shanghai Steelhome Information Technology Co. The swelling pile signals robust supplies, and banks including Macquarie warned this month that prices may be set to weaken after rallying 34 percent in 2016.

“The rising port inventory is definitely a dark cloud looming over prices,” said Zhao Chaoyue, an analyst at China Merchants Futures Co.

Furthermore, steel demand in China is shrinking for the first time in a generation as growth slows and the government steers a transition away from a metal-intensive economy reliant on investment to one where services play a bigger role. That’s resulted in the declining sensitivity of steel consumption to credit flows in China, according to Goldman.

“We would need to see ever-accelerating credit growth just to maintain the same level of steel consumption, which is unsustainable and unlikely,” the New York-based bank said in the July 12 report, referring to the country that makes half the world’s steel. "This is at the core of why we expect Chinese steel demand to fall in coming years."

Still as long as the dream of stimulus is still alive, then why question the recent resurgence.

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Europe’s Impossible Refugee Math: Brexit Was Mathematical Certainty Eventually

Submitted by Michael Shedlock via MishTalk.com,

In a recent GMO commentary on Immigration and Brexit, founder Jeremy Grantham laid out precise reasons why Brexit was a mathematical certainty eventually.

Curiously, Grantham thinks Brexit was a bad idea.

On the second sentence, I disagree strongly.

The following snips, including bullet points are from Grantham. Subtitles are mine, not his.

Europe’s Impossible Refugee Math

  • The truth about immigration to the EU, in my view, is bitter. As covered in earlier quarterlies, I believe Africa and parts of the Near East are beginning to fail as civilized states.
  • They are failing under the pressure of populations that have multiplied by 5 to 10 times since I was born; climate for growing food that is deteriorating at an accelerating rate; degraded soils; insufficient unpolluted water; bad governance; and lack of infrastructure. Country after country is tilting into rolling failure.
  • This is producing in these failing states increasing numbers of desperate people, mainly young men, willing to risk money and their lives to attempt an entry into the EU.
  • For the best example of the non-compute intractability of this problem, consider Nigeria. It had 21 million people when I was born and now has 187 million. In a recent poll, 40% of Nigerians (75 million) said they would like to emigrate, mostly to the UK (population 64 million). Difficult. But the official UN estimate for Nigeria’s population in 2100 is over 800 million! (They still have a fertility rate of six children per woman.) Without discussing the likelihood of ever reaching 800 million, I suspect you will understand the problem at hand. Impossible.
  • I wrote two years ago that this immigration pressure would stress Europe and that the first victim would be Western Europe’s liberal traditions. Well, this is happening in real time as they say, far faster than I expected. It will only get worse as hundreds of thousands of refugees become millions.
  • The EU and Europe may support a few years of increasing numbers of these failing state refugees, but that is all. They will fairly quickly have to refuse to take even legitimately distressed refugees. The alternative – to take all comers – would likely be not just a failed EU, but a failing Europe.

Brexit Unnecessary?

  • Calling for an utterly unnecessary referendum by the Prime Minister for superficial and short-term political gain. He could have muddled through anyway. Referenda are dangerous. They allow for the true will of the people to be voiced, informed or ill-informed, manipulated or not. Dangerous. As Churchill said (now much quoted), “The best argument against democracy is a five-minute conversation with the average voter.” He might also have commented about the willful laziness of the one-third who never vote.
  • The UK press, the most egregiously editorialized in the developed world. The broad circulation papers goaded and badgered their readers toward Brexit.
  • As for the politicians, forget it. Whimsical theories, back-stabbing disloyalties, a glaring lack of planning and foresight. Above all, completely ignoring the precautionary principle, playing with fire like children. Now those Brexiters that haven’t run away can reap what they have sown, as unfortunately will the whole UK. If you will, the pack of dogs can now try to work out what to do with that darned car.

Mish Comments

In absence of prior knowledge, I would suspect few would think the same person wrote both snips.

Given the math laid out in the first snip, and given the total stubbornness of chancellor Merkel, it was both a mathematical necessity and pragmatic result for the UK to leave the EU.

Politicians are Dangerous

Grantham’s statement that “Referenda are dangerous” is no different that saying “elections are dangerous“.

Since when are politicians guaranteed to be saviors?

A few dangerous leaders come to mind. George Bush and his ludicrous war in Iraq is a prime example. Lyndon B. Johnson and his idiotic war in Vietnam is another.

Questions for Grantham

  1. Given a referendum on the idea of a war in Iraq, and a genuine estimate of its true cost, would US citizens have voted for war in Iraq?
  2. Would the UK have voted to follow Bush in a “coalition of the willing”?
  3. Would US citizens have voted to carpet bomb Vietnam?
  4. Would European voters approved a pact with Erdogan to allow visa-free access to the rest of Europe to 80 million Turks?

Politicians are and their pet goals are far more dangerous than referendums. Chancellor Merkel and her inane, mathematically impossible, open arms welcome of refugees was the #1 Reason UK Voted Leave the EU.

Let’s not blame the voters or the referendum itself.

For more on this subject, please see Dear chancellor Merkel: When does Turkey join the EU? When do 80 million Turks have visa-free travel?

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There Will Be No Second American Revolution: The Futility Of An Armed Revolt

Submitted by John Whitehead via The Rutherford Institute,

“A standing military force, with an overgrown Executive will not long be safe companions to liberty.” – James Madison

America is a ticking time bomb.

All that remains to be seen is who – or what – will set fire to the fuse.

We are poised at what seems to be the pinnacle of a manufactured breakdown, with police shooting unarmed citizens, snipers shooting police, global and domestic violence rising, and a political showdown between two presidential candidates equally matched in unpopularity.

The preparations for the Republican and Democratic national conventions taking place in Cleveland and Philadelphia—augmented by a $50 million federal security grant for each city—provide a foretaste of how the government plans to deal with any individual or group that steps out of line: they will be censored, silenced, spied on, caged, intimidated, interrogated, investigated, recorded, tracked, labeled, held at gunpoint, detained, restrained, arrested, tried and found guilty.

For instance, anticipating civil unrest and mass demonstrations in connection with the Republican Party convention, Cleveland officials set up makeshift prisons, extra courtrooms to handle protesters, and shut down a local university in order to house 1,700 riot police and their weapons. The city’s courts are preparing to process up to 1,000 people a day. Additionally, the FBI has also been conducting “interviews” with activists in advance of the conventions to discourage them from engaging in protests.

Make no mistake, the government is ready for a civil uprising.

Indeed, the government has been preparing for this moment for years.

A 2008 Army War College report revealed that “widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.” The 44-page report goes on to warn that potential causes for such civil unrest could include another terrorist attack, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters.”

Subsequent reports by the Department of Homeland Security to identify, monitor and label right-wing and left-wing activists and military veterans as extremists (a.k.a. terrorists) have manifested into full-fledged pre-crime surveillance programs. Almost a decade later, after locking down the nation and spending billions to fight terrorism, the DHS has concluded that the greater threat is not ISIS but domestic right-wing extremism.

Meanwhile, the government has been amassing an arsenal of military weapons for use domestically and equipping and training their “troops” for war. Even government agencies with largely administrative functions such as the Food and Drug Administration, Department of Veterans Affairs, and the Smithsonian have been acquiring body armor, riot helmets and shields, cannon launchers and police firearms and ammunition. In fact, there are now at least 120,000 armed federal agents carrying such weapons who possess the power to arrest.

Rounding out this profit-driven campaign to turn American citizens into enemy combatants (and America into a battlefield) is a technology sector that is colluding with the government to create a Big Brother that is all-knowing, all-seeing and inescapable. It’s not just the drones, fusion centers, license plate readers, stingray devices and the NSA that you have to worry about. You’re also being tracked by the black boxes in your cars, your cell phone, smart devices in your home, grocery loyalty cards, social media accounts, credit cards, streaming services such as Netflix, Amazon, and e-book reader accounts.

All of this has taken place right under our noses, funded with our taxpayer dollars and carried out in broad daylight without so much as a general outcry from the citizenry.

It’s astounding how convenient we’ve made it for the government to lock down the nation.

We’ve even allowed ourselves to be acclimated to the occasional lockdown of government buildings, Jade Helm military drills in small towns so that special operations forces can get “realistic military training” in “hostile” territory, and  Live Active Shooter Drill training exercises, carried out at schools, in shopping malls, and on public transit, which can and do fool law enforcement officials, students, teachers and bystanders into thinking it’s a real crisis.

The events of recent years—the invasive surveillance, the extremism reports, the civil unrest, the protests, the shootings, the bombings, the military exercises and active shooter drills, the color-coded alerts and threat assessments, the fusion centers, the transformation of local police into extensions of the military, the distribution of military equipment and weapons to local police forces, the government databases containing the names of dissidents and potential troublemakers—have all conjoined to create an environment in which “we the people” are more distrustful and fearful of each other and more reliant on the government to keep us safe.

Of course, that’s the point.

The powers-that-be want us to feel vulnerable.

They want us to fear each other and trust the government’s hired gunmen to keep us safe from terrorists, extremists, jihadists, psychopaths, etc.

Most of all, the powers-that-be want us to feel powerless to protect ourselves and reliant on and grateful for the dubious protection provided by the American police state.

Their strategy is working.

The tree of liberty is dying.

There will be no second American Revolution.

There is no place in our nation for the kind of armed revolution our forefathers mounted against a tyrannical Great Britain. Such an act would be futile and tragic. We are no longer dealing with a distant, imperial king but with a tyrant of our own making: a militarized, technologized, heavily-financed bureaucratic machine that operates beyond the reach of the law.

The message being sent to the citizenry is clear: there will be no revolution, armed or otherwise.

Anyone who believes that they can wage—and win—an armed revolt against the American police state has not been paying attention. Those who wage violence against the government and their fellow citizens are playing right into the government’s hands. Violence cannot and will not be the answer to what ails America.

Whether instigated by the government or the citizenry, violence will only lead to more violence. It does not matter how much firepower you have. The government has more firepower.

It does not matter how long you think you can hold out by relying on survivalist skills, guerilla tactics and sheer grit. The government has the resources to outwait, out-starve, outman, outgun and generally overpower you.

This government of wolves will not be overtaken by force.

Unfortunately, we waited too long to wake up to the government’s schemes.

We did not anticipate that “we the people” would become the enemy. For years, the government has been warning against the dangers of domestic terrorism, erecting surveillance systems to monitor its own citizens, creating classification systems to label any viewpoints that challenge the status quo as extremist, and training law enforcement agencies to equate anyone possessing anti-government views as a domestic terrorist.

What the government failed to explain was that the domestic terrorists would be of the government’s own making, whether intentional or not.

By waging endless wars abroad, by bringing the instruments of war home, by transforming police into extensions of the military, by turning a free society into a suspect society, by treating American citizens like enemy combatants, by discouraging and criminalizing a free exchange of ideas, by making violence its calling card through SWAT team raids and militarized police, by fomenting division and strife among the citizenry, by acclimating the citizenry to the sights and sounds of war, and by generally making peaceful revolution all but impossible, the government has engineered an environment in which domestic violence has become inevitable.

What we are now experiencing is a civil war, devised and instigated in part by the U.S. government.

The outcome for this particular conflict is already foregone: the police state wins.

The objective: compliance and control.

The strategy: destabilize the economy through endless wars, escalate racial tensions, polarize the populace, heighten tensions through a show of force, intensify the use of violence, and then, when all hell breaks loose, clamp down on the nation for the good of the people and the security of the nation.

So where does that leave us?

Despite the fact that communities across the country are, for all intents and purposes, being held hostage by a government that is armed to the teeth and more than willing to use force in order to “maintain order,” most Americans seem relatively unconcerned. Worse, we have become so fragmented as a nation, so hostile to those with whom we might disagree, so distrustful of those who are different from us, that we are easily divided and conquered.

We have been desensitized to violence, acclimated to a military presence in our communities and persuaded that there is nothing we can do to alter the seemingly hopeless trajectory of the nation. In this way, the floundering economy, the blowback arising from military occupations abroad, police shootings, the nation’s deteriorating infrastructure and all of the other mounting concerns have become non-issues to a populace that is easily entertained, distracted, manipulated and controlled.

The sight of police clad in body armor and gas masks, wielding semiautomatic rifles and escorting an armored vehicle through a crowded street, a scene likened to “a military patrol through a hostile city,” no longer causes alarm among the general populace.

We are fast becoming an anemic, weak, pathetically diluted offspring of our revolutionary forebears incapable of mounting a national uprising against a tyrannical regime.

If there is to be any hope of reclaiming our government and restoring our freedoms, it will require a different kind of coup: nonviolent, strategic and grassroots, starting locally and trickling upwards. Such revolutions are slow and painstaking. They are political, in part, but not through any established parties or politicians.

Most of all, as I make clear in my book Battlefield America: The War on the American People, for any chance of success, such a revolution will require more than a change of politics: it will require a change of heart among the American people, a reawakening of the American spirit, and a citizenry that cares more about their freedoms than their fantasy games.

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Did “China” Just Buy The Most Important Company In The World?

In the aftermath of last night stunning announcement that Japan’s Internet giant SoftBank would acquire UK-based ARM Holdings, a company which makes chips present in virtually every mobile and “connected” device, for $32 billion, sending the semiconductor sector surging, questions emerged why the company is doing this.

On one hand, even the founder of ARM Holdings himself, Hermann Hauser said, told the BBC he believes its imminent sale to Japanese technology giant Softbank is “a sad day for technology in Britain”. Hauser said the result of the Softbank deal meant the “determination of what comes next for technology will not be decided in Britain any more, but in Japan”.

On the other, the stock of SoftBank has tumbled now that the Japanese market has reopened after a one-day holiday.

Bloomberg gave the trivial answer first thing this morning in a piece titled ‘Why SoftBank Is Spending $32 Billion on U.K. Chip Designer ARM“, which concluded the following: “Softbank Chairman Masayoshi Son sees ARM’s future in being inside the legion of products that are becoming internet-connected, from street lamps to air conditioners, washing machines to drones — so-called “internet of things” devices.”

Perhaps. However, a more provocative explanation has emerged courtesy of SouthBay Research, which when looking at the same deal, asks if China (yes China) “just acquired the most important company in the world? “

Here is SouthBay‘s explanation why:

ARM Holdings (ARMH) holds the keys to the future of electronics  That’s not hyberbole.

Not only does ARMH dominate the world of mobile devices, it is rapidly penetrating all electronics: from consumer electronics to the computer network.

ARMH designs and licenses semiconductors.  Their designs are the core of the critical components of consumer electronics: smartphones, tablets, TVs, and so on.  For example, most of today’s tablets and phones run on Qualcomm chips: they did $26B in sales last year.  These chips re-package ARMH designs.

As electronics continue to penetrate everything from cars to refrigerators, they use ARM designs.  The Internet of Things (IOT) uses ARMH technology.

Like a spider in the web, ARMH sits firmly at the heart of the future of all electronics.

I have reviewed ARMH two different times.

First, as the life preserver to save Intel.  Intel is unable to survive in the post-PC world and ARMH was a way to buy their way back in.  Unfortunately, anti-trust was probably a factor in preventing the buy.

Another time I mentioned ARMH was when discussing the future of China’s semiconductor efforts.

After airplanes, semiconductors are a major capital outflow.  The South Korean and Taiwanese economies are driven by semiconductors.  Beyond economics, semiconductor strength enables national security strength (super computers).   For this and other reasons, the Chinese government has made a domestic semiconductor industry a major strategic goal.  Even going so far as to earmark $10B for intellectual property development.

The fastest path is acquisition, and ARMH embodies the future.  For China that presents two problems: price (ARMH was $19B last week) and politics (China buying the crown jewels of the internet touches some nerves in the Western world).

Today Softbank announced an offer to buy ARM Holdings.

Softbank = China

Softbank is a Japanese company best known for owning Yahoo Japan and Sprint.
With their background in telecommunications and the internet, why would they want to buy a major semiconductor company?  And why, with $89B in debt, is Softbank adding another $31B?

The answer: Softbank is not what they appear.  What isn’t as well known is that Softbank is actually a major player in China’s internet economy.
For starters, they bankrolled Alibaba.  They control 32% of Alibaba, and through Alibaba, they dominate the Chinese internet economy because Alibaba has invested in the top internet companies in China: Weibo, for example.

Although based in Japan, Softbank is very much a Chinese company.

The fact remains that, despite the $10B budget, China has yet to land any major companies.

Perhaps Softbank on its own is front-running a bigger China budget.

Or perhaps Softbank was tapped to be the buyer, but not the ultimate buyer.  After all, who is lending them to $31B to close the deal?  And Softbank will earn a lot of political credits for doing a favor for the

Chinese government effort to ramp-up a semiconductor company.

Don’t be surprised if we see an announcement in a year or two that ARMH is up for sale and the buyer is a major Chinese company.

This was a brilliant move.

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Top Turkish Official In Charge Of Campaign Against ISIS Found Dead, Shot In The Neck

By now only the most naive believe the official narrative behind Turkey’s Friday coup. We say that for two reasons: first, as even the EU commissioner dealing with Turkey’s membership bid, Johannes Hahn, said when discussing the unprecedented arrest purge in Turkey, “it looks at least as if something has been prepared. The lists are available, which indicates it was prepared and to be used at a certain stage. I’m very concerned. It is exactly what we feared.”  He did not exlaborate what exactly he had feared, but one can infer. Second, as we caught Turkey’s press changing the narrative during the day, Erdogan was not even able to figure out who to blame for the “coup attempt” until this afternoon, first accusing the US, then the former Turkish air force chief, before finally deciding on accusing the 77-year-old Pennsylvania resident, Fethullah Gulen, of being the frail mastermind behind it all.

To be sure, the western media was happy to glance over these “changeovers” and to spoonfeed a false story to the masses just to maintain the illusion of the official Turkish narrative.

An example of this is when Erdogan told CNN earlier today that “he escaped death by only a few minutes before coup plotters stormed the resort in southwest Turkey where he was vacationing last weekend. Erdogan’s interview was broadcast late Monday. He told CNN that soldiers supporting the coup killed two of his bodyguards when they stormed the resort early Saturday. “Had I stayed 10, 15 additional minutes, I would have been killed or I would have been taken,” he told CNN through a translator provided by the presidency.”

And yet, less than a day earlier we wrote that even though “Coup Pilots Had Erdogan’s Plane In Their Sights” they did nothing, prompting a former military officer “with knowledge of the events” to ask “why they didn’t fire is a mystery.” So just hours before two F-16 had radar lock on Erdogan and decided not to kill the dictator, troops from the same alleged “coup” were scrambling to get to Erdogan – many hours after the so-called coup had already started – in his resort hotel, and where they would have killed him… had he stayed “10, 15 additional minutes.”

We can see why not even the Europeans believe this any more.

Then another example of the media forced – and false – narrative came from the Guardian which earlier today published a piece titled “Military coup was well planned and very nearly succeeded, say Turkish officials” which contains pearls, such as the following:

It was midnight in the Turkish capital, just two and a half hours into the attempted coup, and the group of nine senior ministers who were gathered in a conference room at the prime ministry were convinced that they were all about to meet their end. “They probably will be successful and we will die tonight,” said one of the ministers, according to an official who was present at the meeting. “Let us be ready to die. We will all be martyred in this fight.”

Such drama… makes you feel like you were almost there.

Not surprisingly, the bulk of the piece by Kareem Shaheen is poor on facts but heavy on florid descriptions, interpretations, hearsay and all those other literary techniques that make for a good piece of fiction. Some more examples:

But as Turkey picks up the pieces after the failed coup, new details are emerging of how it unfolded, and just how close the military intervention came to succeeding. Many observers have labelled the attempt amateurish, but accounts by officials contradict this characterisation, describing it as well organised and very nearly successful.

 

In Ankara on Friday, the day of the coup, the interior minister had been invited, along with other top officials, to a high-level security meeting in military headquarters that was supposed to take place after 5pm, a ploy that turned out to be intended as a pretext to detain him. He did not go because he was too busy, and later when the coup unfolded he was stuck in Ankara’s Esenbo?a airport, setting up a crisis cell there to manage the fallout, protected by crowds that had gathered to oppose the coup.

Again, zero actual facts. Not surprisingly, the author himself catches this tangent of his “story:

Stories emerged of those crucial hours, between the president’s address and the successful quelling of the coup by 4am, that are sure to pass into the official mythology of the events. At 1am, officials say the police chief the city of Bursa arrested the local army commander, who possessed a 6-page list that included the names of designated judges and military officials who were to be appointed to various positions in the bureaucracy in the aftermath of the coup. Other pro-coup soldiers possessed lists of secure telephone lines to receive orders.

Why he would give himself up knowing he would most likely face death if i) the coup was real and ii) Erdogan remained in power… well, let’s not worry about that.

But then, painfully, we finally stumbled on something which could be factually disproven, i.e. a precious fact. And it may shine a far different light on what happened during the chaos of the staged coup. It was the following:

The top counter-terrorism official responsible for Turkey’s campaign against Islamic State did go to a “meeting” at the presidential palace in Ankara. He was later found with his hands tied behind his back, shot in the neck, according to a senior official.

And suddenly so many pieces of the Turkish “puzzle” fall into place, because while the rest of the narrative about the coup is so glaringly fabricated and literally made up on the spot, the death of Turkey’s chief anti-ISIS counter-terrorism official being quietly killed, makes so much sense sense for a country where as we first presented back in November, “The Man Who Funds ISIS is Bilal Erdogan, The Son Of Turkey’s President” followed by “ISIS Oil Trade Full Frontal: “Raqqa’s Rockefellers”, Bilal Erdogan, KRG Crude, And The Israel Connection“, and of course, “Erdogan Says Will Resign If Oil Purchases From ISIS Proven After Putin Says Has “More Proof.”

Having arrested 20,000 people already, Erdogan’s witch hunts are just starting. However, it appears he had some very loose ends he had to take care of already on Friday night. One such loose end was the man who fought ISIS on behalf of Turkey, the same Turkey which – incidentally – funded and armed ISIS.

We eagerly look forward to finding out what else will emerge as the fascinating story of Erdogan’s getting rid of all loose ends, is finally revealed.

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How Aristocracies Benefit Both From Racism And From Anti-Racism

Submitted by Eric Zuesse via Strategic-Culture.org,

A good example of the way in which aristocracies benefit both from racism and from anti-racism, is Hillary Clinton’s campaign for the US Presidency, which is heavily backed by America’s aristocracy, and which is fueled not only by their money but also by the widespread racism in American culture, and especially by the equally widespread repudiation by many Americans against racism.

Her opponent in the Democratic Party primaries, Bernie Sanders, was loathed by America’s aristocracy, because he was accusing them of destroying the country and was proposing policies to restore democracy to America, by means of various governmental interventions to reverse the existing undemocratic government’s wealth-transfers «from the masses to the classes». Sanders was publicly acknowledging that any government is a societal-prioritizing instrument, and that it therefore transfers wealth from some to others, via taxes and other essential policies, and so the wealth-distribution needs to be an independent focus of governmental policies – not simply ignored by government and subsumed within the «economic growth» concern.

Here is how Hillary Clinton won the Democratic nomination in the primaries: She won 84% of the Black vote in the crucial South Carolina primary, where 61% of the voters, in that Democratic primary, were Blacks. Sanders won 58% of Whites voting there. Clinton won, of the total SC primary vote, 73% to Sanders’s 26%, a crushing 47% margin of victory. And then in the later southern primaries, her margins of victory among the overwhelmingly high proportion of Blacks in the Democratic Parties those states, were similar, which fact (her numerous primaries crushing him, especially on Super Tuesday) cemented Sanders’s loss, and her win, of the Democratic nomination.

Whereas both of the primaries that preceded South Carolina (the caucus in Iowa, and the election in New Hampshire) were in overwhelmingly White northern states, which had been little shaped by the legacy of slavery, the racial situation was much more tense in SC, and also in the other southern states, where the culture of slavery still persists, more than a century after the Civil War that was fought over slavery.

Sanders’s message, that economic inequality is the linchpin of America’s increasing inequality of economic opportunity, was a colossal flop among southern Blacks, for whom the pervasive anti-Black racism amongst their local non-Blacks, seemed to be far more the cause of Blacks’ suppressed economic opportunities than did the existing economic inequality itself. To them, Sanders’s argument (that economic inequality is self-perpetuating, and thus needs specific governmental policies to address) seemed false (because the racism there is so intense). They couldn’t understand rich-versus-poor, because what they saw around them every day was Black-versus-White. As Hillary and Bill Clinton’s, and Barack Obama’s, friend and chief economic advisor, Lawrence Summers, taught to his students at Harvard, «I think we can accept, I think we should accept inequality of results, recognizing that those who earn more are in a better position to contribute more to support society».

 It’s standard aristocratic propaganda, that economic inequality doesn’t result from economic inequality. The aristocracy want the public to believe the lie that inequality of the wealth-distribution isn’t self-perpetuating and thus doesn’t need governmental policy-changes in order to be reduced – wealth-redistribution by means of conscious targeted governmental policy in order to redistribute it. The aristocracy, and their agents, at Harvard and elsewhere, hide from the public (and from students) the fact that wealth-redistribution doesn’t occur on its own and can’t be addressed by policies that also help aristocrats (such as «more spending on infrastructure» etc. – the standard liberal growth-oriented policies, which don’t also really affect the wealth-distribution, which the aristocracy want to remain tilted in their favor). This lie – that economic inequality doesn’t itself stunt the economic opportunity for the public in the future – also caused Sanders’s support to be less among people who had PhD’s and other post-college degrees, than among mere college-graduates. Clinton won biggest among people with no education beyond high school, and with PhD’s and other post-college degrees. Upper-level education is strongly dependent upon funding from the aristocracy, so the more of it one had, the less progressive and more authoritarian one tended to be, and this showed in the vote. Clinton’s high support also among the low-educated mass of Democrats (ones with no exposure to college) resulted from the primacy there of two other stanchions of conservatism: religion and family (including ancestry, which brings in also clan and tribe). Furthermore, those voters are usually working so hard just to stay alive; they haven’t the time to be able to see politics beyond the mass-media, which of course are owned by the aristocrats and thus slanted toward Clinton, against Sanders.

Clinton also benefited (though only to a lesser extent) from the fact that most of the voters in the South Carolina Democratic primary were women, to whom she was likewise targeting an anti-bigotry pitch: in that case, anti-sexist.

By «racism» in the title here, is meant also any discrimination against a racial, ethnic, gender, religious, or any other non-economically-defined segment of the population; so, it includes also gender-discrimination and other forms of discrimination. In other words: all forms of bigotry, and of opposition to bigotry, distract from the oppression of the public by the aristocrats (the billionaires and centi-millionaires and their agents), and focus the attention instead against bigotry (or in favor of a particular type of bigotry, against a particular group); and, thus, bigotry and anti-bigotry benefit the aristocracy.

Clinton’s basic message is that America’s inequality of economic opportunity isn’t a class-phenomenon, but a bigotry-phenomenon, such as discrimination against Blacks, against women, against gays, etc. This message won among the Democratic Party’s many minority-groups (Blacks, Hispanics, etc.), even though the economic inequality that her financial backers foster (and which here policies advance) has produced these people’s rotten education, inability to get out of debt, high assessed interest-rates, high rates of illness, etc. These conceptual connections as blockages against economic opportunity are abstract, whereas the incidences of bigotry against these people are concrete, blatant blockages.

Clinton’s contest against the other Party’s nominee, the Republican Party’s Donald Trump, is against an aristocratic candidate who has largely been pitching to bigots for his votes – especially to bigots against Muslims, and against Hispanics. He now is faced with two contradictory demands: he can either focus more on the economic-class divide (hoping to draw off some of the Sanders voters), and thereby antagonize America’s aristocracy even more than he already has (by his opposition against Clinton’s record as a war-monger, and against her blatant lying and corruption, things that are mainstays in any aristocracy and thus insult aristocrats including himself), or else he can continue to focus on bigots; but, if he does the latter, then the contest will largely become one between bigots (voting for him) and anti-bigots (voting for Clinton), in which case there will continue to be many aristocrats who (unlike the aristocrat Trump himself) flee from any public association with any form of bigotry (almost all aristocrats pretend to be opposed to it, just as the Clintons and Obama so prominently do) and so (in addition to Hillary’s being an ideal nominee for aristocrats) they’ll starve Trump’s campaign of cash, and he’ll then almost certainly lose – or, at least, that’s the scenario.

This is not a prediction that he will lose. The current US Presidential contest has no clear historical precedent, although the strategic realities in it are the standard ones in political contests. Trump is an extremely formidable campaigner, who has beaten all of his opponents so far and also every one of the ‘experts’ or pundits. (I’m actually expecting him to win; but that’s neither here nor there.)

The irony is that what the current contest displays with especially stark clarity is the historically well-established reality, that aristocracies benefit both from racism and from anti-racism. It has hardly been clearer than it is here, despite the other, highly unusual, aspects of the current US Presidential contest.

One thing that rather directly displays the undemocratic reality of today’s American politics is that both Trump and Clinton have (and throughout the contest did have) exceptionally high net-disapproval ratings from the American public, and that the only two candidates, of either Party, who had net-positive approval-ratings, were Bernie Sanders, and (the Republican candidate) John Kasich. If this country had been a democracy, then those were clearly the most-preferred candidates, and so the final contest would have been between those two, but neither of them even made it to the final round. This fact is yet another example showing that, at the present stage in American history, the US is a dictatorship by its aristocracy (who disliked both of the nation’s most-preferred candidates).

In theocratic Iran, the clergy determine what final choices the public will have; in aristocratic-dictatorial US, the aristocracy do. Bigotry, and its natural response – anti-bigotry – both advance the cause of the aristocracy, anywhere. It’s not just divide-and-conquer. It’s also redirect-and-distract.

via http://ift.tt/2a7hTsp Tyler Durden

The Hamptons Housing Market Has Crashed: Luxury Home Sales Drop By Half As Prices Plunge

It is not looking good for the US housing market.

One week ago, when we reported that “On Manhattan’s “Billionaire’s Row”, A Death Knell Just Tolled For Luxury Real Estate“, we documented the sudden trapdoor that opened beneath the ultra-luxury segment in the Manhattan housing market. Then several days later, we observed that it is not just the luxury NYC market that is in trouble, but the broader market across all of the US, when we noted three “Red Flags” that the broader US housing market was starting to roll over, among which i) a surge in inexperienced, third-party “mom and pop” auction buyers who were arriving just as institutional investors are starting to flee the auction market, ii) a collapse in retail purchases for home goods and furniture – traditionally a coincident or slightly lagging indicator of home purchasing activity, and iii) a plunge in housing buyer traffic according to the Credit Suisse real-estate agent survey.

Then this afternoon, another flashing red flag emerged when we learned that overall sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the toniest enclaves of the Hamptons, New York’s weekend haunt for the wealthy. Reuters blamed this on “stock market jitters earlier in the year” which  damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses. In short: a sudden loss of confidence that a greater fool may emerge just around the corner, which in turn has frozen buyer interest.

And frozen it has.

According to realtor Town & Country Real Estate, total sales volume in East Hampton fell 53% from a year ago to $44.7 million as the median sale price fell 54% to $2.38 million. In fact, a drop this steep has not been observed since the financial crisis. 

A beachfront residence is seen in East Hampton, New York, March 16, 2016.

In Southampton, total sales fell 48% from the second quarter of 2015 to $45.3 million, with the median sale price falling 21 percent to $1.65 million, data showed.

In East Hampton, only 12 homes were sold and 17 in larger Southampton, due to a lack of inventory and because sales typically lag when the stock market underperforms, said Judi Desiderio, chief executive at Town & Country.

“This is just a shift of the needle that I expected because 2014 was a high cycle for the high end,” said Desiderio, who says luxury home sales in the Hamptons run in seven-year cycles. The stock market surged 30 percent in 2013, with record sales in excess of $100 million set the following year.

In the 12 submarkets that make up the Hamptons, sales volume slipped 18 percent from a year ago, with the median price falling to $999,000 from $1.1 million, Town & Country data showed.

Sales in the Hampton submarkets of Shelter Island and Sag Harbor surged after several years of poor performance. The median sale price in Sag Harbor jumped 37 percent to $1.43 million, and 27 percent to $950,000 in Shelter Island.

Despite the clear crash, local tealtors remain hopeful: third-quarter sales should pick up, in part because Wall Street touched record highs the past week and because the summer months are usually better, Desiderio said.  Then again, if they don’t, what is merely a trickle of selling now will become an all out liquidation as the greater fool bid is now officially dead.

via http://ift.tt/2a6c6Xd Tyler Durden