Tag: finance

With Scotland moving ever closer, Crimea having chosen their own path, and Venice overwhelmingly voting for secession from Italy, the Spanish government has put its foot down on the Catalonia’s planned independence referendum. As Time reports, In a Tuesday ruling, Spanish judges found Catalonia’s planned independence referendum to be unconstitutional. Of course, just as in Crimea, this is being ignored by the Catalan government – a region seen as the powerhouse of the Italian economy – who exclaimed “this will have no effect on the process.”

Via Time,

…

 

In a Tuesday ruling, Spanish judges found Catalonia’s planned independence referendum to be unconstitutional, but secessionists in the Spanish autonomous region (called a “community” in Spain) have vowed to proceed regardless.

 

“This will have no effect on the process,” said the Catalan government’s spokesman Francesc Homs on local television.

 

Although stifled under the yoke of the Franco dictatorship, Catalonia has long felt cultural and linguistic disctinction from the rest of Spain. In recent years, it developed into a powerhouse of the nation’s economy. However, amid the country’s financial crisis, Madrid has been urging national unity.

 

“No one can unilaterally deprive the entire Spanish people of the right to decide on their future,” Spain’s conservative Prime Minister Mariano Rajoy told the parliament, which is due to debate the referendum on April 8.

 

…

 

Last September 11, Catalonia’s national day, hundreds of thousands of Catalans formed a vast human chain across the region to call for independence. The referendum, if it goes ahead, is planned for Nov. 9.

As Pater Tenebrarum noted, nation states are starting to splinter

One of these days, one of the secessionist movements in Europe is likely to succeed and then a domino effect may be let loose. The Crimea’s recent change of allegiance has probably energized these movements further.

 

And it is about time, too. The concept of the centralized, large-scale nation state is anachronistic and should be abandoned. The increasing centralization of the EU is going in the wrong direction. Once again it must be stressed that for the individual citizen, it matters not one whit whether self-important EU politicians and bureaucrats can ‘throw around their weight on the international stage’.

 

What matters far more is that they would likely be treated a lot better and become more prosperous if everything fell apart into tiny independent territories. That would definitely not mean that there could be no free trade zone, or that every region would necessarily use a different currency. The main goals of the founders of the EU, namely free trade and free movement of capital and people need not be abandoned – on the contrary, they would likely be adopted without hesitation. When a great many small territories compete with each other for citizens, then they are all going to be forced to make a good offer that makes people want to stay. Large declines in taxes would be an immediate effect, but not the only effect that could be expected.

via Zero Hedge http://ift.tt/Qkc6E7 Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

That any schoolkid could predict eliminating feedback and consequences will lead to a series of disastrously poor choices by speculators and imprudent borrowers doesn't register with the Keynesian Cargo Cult.

The Keynesian Cargo Cult's ability to print and squander money is insignificant next to the power of Diminishing Returns. By now we all know two things about the Keynesian Cargo Cult's religion:

1. It has failed to conjure up the recovery its sadly devoted believers insist is "just around the corner if we only borrow and squander more money" because…

2. Its main tenet–that the problem is "lack of aggregate demand," i.e. people will buy more stuff made in China and corporations will open more stores to sell the stuff made in China–if only it was dirt-cheap to borrow more money–is completely, utterly, painfully false.

The central premise of the Keynesian Cargo Cult is that this mechanism of making it cheap and easy to borrow money will work a kind of magic that can only be manifested by dancing around a fire at night waving dead chickens and chanting "humba-humba." The Keynesian cargo Cult calls this magic "animal spirits."

Unfortunately, waving dead chickens while dancing around a fire doesn't do anything in the real world, and neither does making it cheap and easy to borrow more money. It turns out that prudent people have no interest in borrowing more money, even at low rates of interest, and imprudent people are happy to do so but will stop paying the loan as soon as something untoward occurs in their finances. The cheap, easy-to-get loans default and either the banks who made the loans collapse or the taxpayers have to bail out the banks who foolishly lent money to imprudent borrowers at super-low rates of interest.

Corporations, meanwhile, look at the real risks of expanding business in a debt-saturated economy distorted by Keynesian Cargo Cult policies and realize that gambling capital on the possibility that waving dead chickens and chanting "humba-humba" will actually increase profits is a truly stupid bet, so they borrow the nearly-free money and invest it in various carry trades overseas that return a virtually risk-free return, thanks to the nearly-free cost of borrowing mountains of money from the Cargo Cult.

The Keynesian Cargo Cult is stubbornly blind to the two key dynamics of the real-world economy: diminishing returns and the S-Curve. Diminishing returns result when a system's ability to produce an economically valuable output declines.

Higher education is a good example: tuition has soared $1,100% while the output (value of a college degree) has declined precipitously. A recent major study, Academically Adrift: Limited Learning on College Campuses, concluded that "American higher education is characterized by limited or no learning for a large proportion of students."

'Academically Adrift': The News Gets Worse and Worse (The Chronicle of Higher Education)

Meanwhile, student loans exceed $1 trillion, only 37% of freshmen at four-year colleges graduate in four years (58% finally graduate in six years), and 53% of recent college graduates under the age of 25 are unemployed or doing work they could have done without going to college–retail clerks, waiting tables, etc.

The Keynesian Cargo Cult solution to the diminishing returns is to provide more debt to students, making them into debt-serfs for life. The cruel stupidity and immorality of the Keynesian Cargo Cult knows no bounds because they refuse to accept the reality that diminishing returns cannot be fixed by more debt and more squandering of good money after bad.

The truth is the failed cartel of higher education has to be leapfrogged and left in the dustbin of history: here's a model that lowers costs by 90% and aligns the output with the real economy: The Nearly Free University and The Emerging Economy.

The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013)

The Keynesian Cargo Cult's solution allows no feedback from the real world, and allows no mechanism to discipline the imprudent borrower/speculator. If imprudent borrowers take on too much debt, the Keynesian Cargo Cult's solution is to offer them more credit at rates they can afford–near-0% if necessary.

If a speculator borrows money and loses it in a high-risk gamble, the Keynesian Cargo Cult's solution is to force the taxpayer to make good the gambler's losses and then give the speculator more nearly-free money to continue gambling.

This "solution" works the first time around, less well the second time around, and triggers a collapse the third time around. This lifecycle is called the S-Curve:

The Keynesian Cargo Cult inflated one credit bubble in the 1990s, another in the 2000s, and by an extraordinary expansion of credit and lowering interest rates to near-zero has managed to Beat the Devil and inflate a third credit bubble in the 2010s.

That any schoolkid could predict waving dead chickens and eliminating feedback and consequences will lead to a series of disastrously poor choices by speculators and imprudent borrowers doesn't register with the Keynesian Cargo Cult. But since the Keynesian Cargo Cult is headed by a Nobel Prize academic economist, the Cargo Cult members effusively praise the Emperor's fine (and nonexistent) robe.

You poor, dumb, deluded fools. You've destroyed our economy, our values and our ability to deal with reality. Your faith is as boundless and disconnected from the real world as your policies.

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The US Senate is more than happy to hand over a few billion and confirm sanctions:

• *SENATE PASSES UKRAINIAN AID BILL WITH RUSSIAN SANCTIONS

But, it seems the IMF’s requirements for Ukraine’s bailout are too much for the locals to bear:

• UKRAINE PARLIAMENT FAILS TO SUPPORT FIRST BID TO PASS ANTI-CRISIS LAW REQUIRED FOR IMF DEAL

Lawmakers will continue to work on the bill as it seems they approve the top-line budget but not the taxes required to get there… beggars can be choosers again maybe?

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Yesterday we reported that in an attempt to unclog Europe’s broken credit and monetary piping, European regulators are preparing to get their hands dirty by easing rules on, and unleashing, an asset class once labelled toxic sludge, i.e., all the worst of the worst debt that was the reason why Europe is in a 6 year-old depression, and hope and pray it somehow fixes itself. Today, the ECB reported the latest data on European credit creation in the private sector. Or rather lack thereof. Because at -2.2%, this was essentially an all time low private sector loan “growth” (rather, credit destruction). Which means Europe will have to throw all the toxic sludge it can find in its desperation to reignite yet another credit bubble, something Bernanke’s cronies appear to have done far more admirably.

Here is the detailed data breakdown via GS:

1. Lending to non-financial corporations, on a seasonally-adjusted basis, declined by €12.6bn in February, following a €9.3bn decline in January (revised down from -€5.8bn). The decline was similar when adjusted for securitisations and sales. This fall signals some renewed weakness in lending after the rate of contraction in loans to NFCs had moderated over the past few months (Chart 1).
2. Loans to households rose by €5.6bn in February, having fallen by €1bn in January. Unlike corporate lending, loan growth to households remained broadly unchanged between early 2012 and early 2013, although it has fallen modestly since then (Chart 1).
3. By country, the largest decline in lending to NFCs occurred in Italy, where bank lending dynamics continue to be weak with a further fall of €3.7bn (on our own seasonal-adjustment). Credit flows also fell in Spain (-€1.7bn) and slightly in Germany (-€0.6bn). Lending to NFCs rose further in France (+€3.7bn), where data have been more positive in recent months (Chart 2). The stock of loans outstanding has contracted by 30% in Spain and by almost 8% in Italy since July 2011.
4. Broad money (M3) growth remains weak, while diverging from overall credit growth to the private sector. M3 growth rose from +1.2%yoy in January to +1.3%yoy in February, as overall lending growth to the private sector edged up from -2.3%yoy to -2.2%yoy. In normal times, money and loan growth move together (given that advancing loans involves the creation of deposits); since the end of 2011, however, the series have moved in opposite directions

Lending to households vs non-fin corporations:

And while M3 did grow once again modestly, rising 1.3% fr0m a year ago, compared to the 1.2% growth in January, it is the all important private sector loan creation (red line), that continues to defy every attempt by Draghi to boost this all important inflationary stimulus, without which Europe will continue to sink into ever more “evil” deflation.

This is just how incompetent the ECB really is in Reuters’ words:

The ECB has cut interest rates close to zero, pumped extra liquidity into the banking system and announced a fresh government bond purchase programme, but the measures have so far not managed to unclog lending to the real economy. The ECB’s health check of the euro zone’s largest banks’ balance sheets before it takes over banking supervision in November is exacerbating the situation, with lenders reluctant to take on more risk and trying to slim their loan books instead.

As we have been saying for about a year now, things will only get worse, the longer the failed ZIRP program continues, which instead of allocating credit into the economy, forces speculators to rush for returns by dumping it all into capital markets (for a confirmation look nowhere further than the epic disconnect between Europe’s stock bourses and its crashing economies).

Bank balance sheets declined by around 20 percentage points of gross domestic product last year, partly in anticipation of the health check, ECB President Mario Draghi said on Tuesday.

And more is to come this year.

UniCredit, for example, posted a record 14 billion-euro loss this month due to huge writedowns on bad loans and past acquisitions as it moved to clean up its balance sheet.

The ECB welcomed the move and encouraged other banks to not to wait with any corrective measures until the review’s results are released in October.

“The fall in bank lending to businesses has clearly reflected an ongoing combination of limited supply and muted demand,” said Howard Archer, economist at IHS Global Insight.

Whether it is a supply or demand issue is unknown, and irrelevant: what is clear is that corporate borrowing in the euro zone overall declined by 2.9 percent compared with a 3.0 percent decline on the year in the previous month. Until this number posts an increase one can’t even talk of a recovery.

Finally, the break down by nation:

The biggest decline was in Slovenia, where lending to companies fell 15.8 percent, the sharpest decline on record.

Bank lending to Spanish firms fell at an annual pace of 9.5 percent in February, improving from a decline of 10.7 percent a month earlier.

Bank lending to Irish firms fell at an annual pace of 6.5 percent in February, the strongest decline since October 2011.

Only five euro zone countries saw corporate lending grow in February, with France the only large economy among them. Finland showed the biggest rate of increase, at 6.1 percent.

And in chart format:

And now, we look forward to Mario Draghi once again repeating the same old song and dance about being ready to do “whatever it takes” to defeat deflation, and sending the EUR plunging, while doing once again nothing.

via Zero Hedge http://ift.tt/P6HnZU Tyler Durden

via Zero Hedge http://ift.tt/1jRiew2 williambanzai7

As we noted here, Turkish Prime Minister Erdogan had blocked Twitter access to his nation ahead of what was rumored to be a “spectacular” leak before this weekend’s elections. Then this morning, amid a mad scramble, he reportedly (despite the nation’s court ruling the bans illegal) blocked YouTube access. However, by the magic of the interwebs, we have the ‘leaked’ clip and it is clear why he wanted it blocked/banned. As the rough translation explains, it purports to be a conversation between key Turkish military and political leaders discussing what appears to be a false flag attack to launch war with Syria.

Among the most damning sections:

Ahmet Davutolu: “Prime Minister said that in current conjuncture, this attack (on Suleiman Shah Tomb) must be seen as an opportunity for us.”

 

Hakan Fidan: “I’ll send 4 men from Syria, if that’s what it takes. I’ll make up a cause of war by ordering a missile attack on Turkey; we can also prepare an attack on Suleiman Shah Tomb if necessary.”

 

Feridun Sinirliolu: “Our national security has become a common, cheap domestic policy outfit.”

 

Ya?ar Güler: “It’s a direct cause of war. I mean, what’re going to do is a direct cause of war.”

 

…

 

Feridun Sinirolu: There are some serious shifts in global and regional geopolitics. It now can spread to other places. You said it yourself today, and others agreed… We’re headed to a different game now. We should be able to see those. That ISIL and all that jazz, all those organizations are extremely open to manipulation. Having a region made up of organizations of similar nature will constitute a vital security risk for us. And when we first went into Northern Iraq, there was always the risk of PKK blowing up the place. If we thoroughly consider the risks and substantiate… As the general just said…

 

Yaar Güler: Sir, when you were inside a moment ago, we were discussing just that. Openly. I mean, armed forces are a “tool” necessary for you in every turn.

 

Ahmet Davutolu: Of course. I always tell the Prime Minister, in your absence, the same thing in academic jargon, you can’t stay in those lands without hard power. Without hard power, there can be no soft power.

A full translation can be found here

And just in case you had faith that this was all made up and Erdogan is right to ban it… he just admitted it was true!

#Turkey‘s PM Erdogan live in Diyarbakir calls leaking of meeintg at Foreign Mins. “immoral.”

— Emre Peker (@wsjemre) March 27, 2014

To summarize: a recording confirming a NATO-member country planned a false-flag war with Syria (where have we seen that before?) and all the Prime Minister has to say is the leak was “immoral.”

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Making friends and mending fences and reinforcing his ‘promise’ noto to spy on friends and to have NATO’s back… in Rome with Italy’s newest Prime Minister Renzi…

• *RENZI SAYS OBAMA’S MESSAGE TO EUROPE SOUND, CLEAR
• *RENZI SAYS EU, U.S. SHARE VIEW ON UKRAINE
• *RENZI SAYS OBAMA’S CHALLENGE TO EU IS ‘FASCINATING’

Fascinating indeed?

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

The more the West attempts to “isolate” Russia and pushes it away from its “core values” and of course the US Dollar, the more Russia will seek the safety of a non-dollar based system. We have previously described how Putin has been scrambling to enmesh Russia in tight bilateral commodity-based trade with both China and India, and now it is Russia’s turn to announce it would seek its own “national payment settlement system” following last week’s surprising and unmandated service halts by both Visa and MasterCard, which as Vladimir Putin said earlier today, will be a “bid to reduce economic dependence on the West.”

Putin observed, cited by AFP, that Russia is aggressively looking to trim its dependence on the west for payment settlement: “In countries such as Japan and China these systems work, and work very well,” Putin told lawmakers in televised remarks.

“Initially, they started out solely as national systems limited to their own markets, their own territory, their own population but they are becoming more popular right now… Why should we not do it? We should definitely do it and we will do it,” he said, noting that Russia’s Central Bank and the government have been looking into the matter.

And as everybody knows, while the biggest trump card over the West Russia has are its energy exports, one can retort that Western leverage over Russia is in the form of SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, aka the umbrella framework for all interbank transactions taking place in a petrodollar world. If and when the day comes when Russia and/or China and/or India and/or any other BRICs and other nations who are tired of the hegemony of the fading US superpower, decide to create their own version of Swift, all bets on the reserve currency for the past century are off.

In the meantime, we will settle with Russia making its own electronic payment settlement system. More from AFP:

Last week the United States hit more than 20 Russian officials, including some of Putin’s closest allies, with sanctions over Moscow’s takeover of Ukraine’s peninsula of Crimea. A lender described as a “crony bank” for the Russian elites, Bank Rossiya, was also blacklisted.

 

As a result of punitive measures, several banks last week saw their customers barred from using Visa (NYSE: V – news) and MasterCard credit cards prompting talk among officials and lawmakers that Russia should create its own operational network.

 

“It’s a great shame that some companies have taken a decision on certain restrictions,” Putin said. “I think it will simply lead to a loss of certain segments of the market for them, and a rather profitable market at that.”

Unlike Obama, whose repeated iteration of “costs” to Russia should it annex Crimea, which it did, is now the laughing stock around the world, Putin’s threats are not to be trifled with. To wit: “We should protect our interests and we will do it.”

But not yet:

Finance Minister Anton Siluanov said on Wednesday that the government had no plans so far to ditch Visa and MasterCard. “But at the same time we are beginning to pay more attention to the creation of our own payment settlement system.”

 

US President Barack Obama has threatened to target the broader Russian economy if Moscow moves into east Ukraine after its takeover of Crimea.

 

This week, Washington and its partners in the G8 club of leading industrialised countries cancelled an upcoming summit in the Black Sea resort of Sochi in a bid to punish Russia further.

 

Putin has shrugged off the sanctions, insisting Moscow will conduct an independent foreign policy and would not take orders from the West.

 

Ratings agencies Standard and Poor’s and Fitch last week revised Russia’s outlook to negative from stable, citing the direct and anticipated impact from the sanctions and the country’s increasing isolation. Some Russia officials dismissed the revision, claiming the move was politically motivated.

 

Economy Minister Alexei Ulyukayev warned earlier Thursday that the country risked growth of just 0.6 percent this year with capital flight expected to reach $100 billion.

The problem is that should Russia enter into a recession, it will simply drag the economies of all those other countries who are reliant on bilateral trade with it. Such as Germany. Then again, this could be precisely the annual scapegoat the broken global Keynesian model will need to explain why – for yet another year – the global economy will fail to generate a self-sustaining growth pattern despite trillions in central bank liquidity injections, and $16 trillion in hot money emanating from China.

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A week ago, we wrote that “Turkey Set To Block YouTube Momentarily, After Google Refuses To Yank Clips Exposing Prime Minister.” As of minutes ago this too prediction appears to have come true based on reports from inside the country that Google’s popular video service is now also blocked.

Courtesy of @ozziewashere

A dark day in #Turkey:
– Audio leak indicating AKP efforts for war in #Syria
– YouTube is blocked.
– Kadir ?nan was shot in #Van by police.

— Ozzie (@ozziewashere) March 27, 2014

And this second confirmation:

#Flash:
#Confirmed:
After today’s leaks, @Youtube is also banned following @Twitter in Turkey v @SoL_Ses http://ift.tt/P6fzF5

— ilhan tanir (@WashingtonPoint) March 27, 2014

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