Tag: finance

WASHINGTON (The Borowitz Report) – In what was described as a major ramping up of sanctions, Secretary of State John Kerry announced on Tuesday that the United States had frozen Russian President Vladimir Putin’s Netflix account, effective immediately.

“Unless and until Mr. Putin calls off the annexation of Crimea, no more ‘House of Cards’ or ‘Orange Is the New Black’ for him,” Mr. Kerry said. “The United States will not stand by and reward the annexation of another sovereign nation with a policy of streaming as usual.”

While all of the sanctions Mr. Kerry announced on Tuesday were Netflix-related, he warned Mr. Putin that “nothing is off the table.”

“I’m sure I don’t need to remind the Russian President that ‘Game of Thrones’ is about to come back for another season,” he said. “As I have said, this thing could get very ugly, very fast.”

 

Source: The New Yorker

via Zero Hedge http://ift.tt/OzTK0h Tyler Durden

When you think of polluted cities, the Chinese capital probably springs to mind above all others – as we have noted, given the record-breaking levels of lung-killing smog. But in the past few days, another city is competing with Beijing when it comes to air pollution: Paris. On Friday, the city’s air quality index rating rose to 185, which puts it firmly in the 'unhealthy' bracket with people suffering adverse health effects as a result of breathing the smog. In reaction to this, as France24 reports, for the first time in 17 years, France is limiting vehicle use.

Time-lapse video of Paris pollution:

Via France24,

France is limiting vehicle use in the capital Paris amid a spike in pollution to health-threatening levels, only the second time the drastic measure has been introduced in nearly two decades.

 

 

A system of "alternating traffic", whereby vehicle use is restricted to alternate days depending on licence plate numbers, came into effect in Paris and its 22 surrounding suburbs at 5.30 am (04.30 GMT) on Monday, as the city tries to curb dangerous pollution levels.

 

The radical move has seen around 700 police officers deployed to 60 checkpoints around the French capital to ensure that only cars with number plates ending in odd numbers are out on the streets.

 

…

 

A decision will then be taken as to whether to extend the measure into Tuesday "depending on how the situation evolves", a statement from the office of French Prime Minister Jean-Marc Ayrault said, with odd numbers potentially banned on Tuesday if an extension is deemed necessary.

 

Electric and hybrid cars will be exempted from the ban as well as any vehicle carrying three people or more.

 

It is the first time since 1997 that the French authorities have resorted to such a drastic measure.

 

…

 

Paris and much of northern France have been suffering under high pollution levels for several days after an extended period of cool, dry nights with much warmer daytime temperatures – climactic conditions that do not allow pollutant particles to disperse.

 

…

 

Friday saw pollution levels in the Ile-de-France region, which includes Paris, hit peaks of 185 micrograms of particulate matter per cubic metre of air, far beyond the maximum alert level of 80 micrograms.

So, it seems the Chinese tourists will be right at home in Europe…

via Zero Hedge http://ift.tt/1g8xM0c Tyler Durden

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Computer programs are obsolete before they even get put on the market and it’s been that way for years now. There’s also the added bonus of actually making sure that the buyers keep buying and always want the latest. Obsolescence has been part of our lives ever since we went digital, hasn’t it? Perhaps even before then. But, back then, things lasted longer than they do today. Or is that just the old folk that reminisce about the past and how good it actually was? Well maybe we will all be harking back to a better time in the next few weeks when Microsoft pulls the plug on the updates to banks’ ATMs around the world.

Most bank machines (95% of ATMs I the world) use Microsoft XP (OS) in their cash machines, wherever you are in the world. On April 8th 2014, Microsoft will no longer be providing those updates, leaving your and my ATM at the bank far more vulnerable than it was in the past. The software was originally installed in 2001.

But, that was when the banks had a lot of money to waste. Since the financial crisis, those updates have been thrown to the wayside. The banks are poor, so we are told. Although, it can’t be true when only in February it was announced that the USA’s six biggest banks ((JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) had all made more profit in 2013 than compared to prior to the financial crisis. Net income for the six rose by 21% and reached $74.1 billion. That was all thanks to the rise in the stock market, due to false hopes from the Federal Reserve and virtual booming of the economy. In 2006, when the housing bubble was raking in more money than ever before (right at the peak before it burst), those six earned $84.6 billion and that’s the last time those six earned more profits than for 2013. JPMorgan Chase, for example, is expected to make $23 billion in profit alone this year. Wells Fargo is expected to see an increase in profit for the fifth year in a row, hitting $21 billion in 2014.

But, ok, let’s surmise that the banks don’t have enough money to pay for the update in the software. Or they have had enough of being just another cash cow to Microsoft and they don’t want tugging on their udders and getting milked for a new software program.

There’s only one problem with that and that’s the fact that the software is like a firewall to your computer and will stop cyber-attacks (or at least, slow them down).

Apparently, the banks in the world have agreed to update to a different operating system at some undefined time in the future. Apparently, the banks may not be aware that in the meantime, while the old operating system is no longer being updated and when the brand spanking new (and thus very expensive) software program comes into operation, there will be an open door for cyber-attacks on ATMs.

Two thirds of banks in the world will not be upgrading to a newer operating system by the deadline of April 8th. Why would the two thirds worry? Simply because that means that customers’ bank details and accounts will be accessible.

You can bet your bottom dollar that you will be taking from that ATM down the block that it will be costing the account holder more and more. If banks upgrade or request support from Microsoft, it has been suggested that it will cost millions (passed on to the account holder).

20% of ATMs in the world are in the USA. There are some 2.2 million worldwide with most running on the Microsoft XP OS. Plus, as anyone knows, change the software and the hardware will stop running and that means banks will also be replacing them in coming months and years. More money that the banking sector will have to find in its apparent poverty-stricken state and that it will be more than likely to pass on to the account holder again.

ATM? Another Trick by Microsoft (…along with the banks).

Originally posted: ATMs Open to Hacking

 

via Zero Hedge http://ift.tt/1iAPysv Pivotfarm

Submitted by Tim Staermose of Sovereign Man blog,

Forget tapering. Forget Ukraine. The largest single risk to the world economy and financial markets right now is China.

What’s going on in China reminds me a lot of what I witnessed firsthand when I lived in South Korea in the 1990s, before that economy’s crash in 1998.

Just as China now, South Korea was an immature, state-controlled financial system funneling cheap money to well-connected and politically favored large enterprises.

Fuelled by a steady diet of cheap money, these companies kept adding capacity with no regard to profitability or return on capital. They simply focused on producing more stuff and expanding their size. They employed more people, and everyone was happy.

But, all the while, they were borrowing more and more money, until eventually they collapsed under the debt load when liquidity dried up.

Before Korea, the exact same thing happened in Japan, and a giant, unsustainable debt binge brought the “miracle economy” to its knees.

But the Korean and Japanese debt bubbles are nothing compared to what we see in China today.

Consider this: in the last five years, the Chinese created $16 TRILLION in credit that is now circulating in the economy… financing ghost cities and useless infrastructure projects.

Floor space per capita in China is now 30 square meters (about 320 sq. ft.) per person. Japan was at that level in 1988. And the economy burst the following year.

More astounding, this $16 trillion in credit is DOUBLE the $8 trillion in credit that China created in the previous 5,000+ years of its existence.

The Chinese government recognizes it has a problem. It realizes it can no longer keep the dam from breaking. And in the past week, it bit the bullet.

In the last two weeks, Chaori Solar and Haixin Steel were allowed to default, i.e. they weren’t bailed out.

This is the first time in China’s modern history they’ve had a default, let alone two. They can no longer keep the game up, and the dominoes are beginning to topple.

I cannot stress this enough. What we’re witnessing is a major paradigm shift.

Of course, the Chinese government claims they can control the impact of these “relatively minor” corporate defaults.

But as we saw during the sub-prime crisis in the Unites States, the complex web of inter-linkages in the financial system means they are playing with fire.

I expect many more defaults in China in the coming weeks and months. I expect some important Chinese financial institutions to get into trouble.

And I expect the Chinese government will completely lose control over the situation.

My recommendations are 2-fold:

1. If you have any exposure to Chinese stocks, or the Chinese Yuan, I strongly suggest you reconsider.

2. If you have investments in iron ore or copper producers, get out.

But it’s not all doom and gloom. It’s going to take time for China to suffer through this crisis. But, if the Chinese government lets the dominoes fall where they may, the country will be better off in the long term.

The lessons from markets such as South Korea and Indonesia, in aftermath of the 1997-1999 Asian economic crisis, are clear.

If China frees up and liberalizes its financial markets in the face of a crisis, writes off bad loans, and closes down insolvent banks, it will emerge in a much stronger position once the crisis blows over.

And there will be lots of money to be made buying good-quality Chinese shares during the crisis. But, for now, it’s time to brace for the downturn.

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

With The White House proclaiming Russian stocks a "sell" today (and in the meantime Russian stocks and the Ruble strengthening), it is clear, as Citi's Steven Englander notes, that the Russia/Ukraine crisis may be the first major political conflict that is played out in international financial markets. The difference, Englander points out, between this and standard imposition of sanctions is that both sides have some options that can inflict damage on the other side.

International finance as a continuation of war by other means (via Citi's Steven Englander)

Normally sanctions involve a big group of countries on one side and a vulnerable target on the other so the vulnerability is very asymmetric. Small countries can occasionally expropriate big country assets but in most cases that ostracizes the small country from the international financial community.

The US/EU are hoping that they can make the crisis sufficiently painful to Russia that it backs off from the Ukraine. The Russians may suspect that the willingness in the West to pay a financial/economic price is limited and that public opinion will swing quickly if volatility emerges.

So far we have:

1. Formal sanctions by the US and Europe on a small set of Russian/Crimean officials, plus the threat that the sanctions will be extended

 

2. Possible release of oil from the Strategic Petroleum Reserve (denied by the White House as an effort to push oil prices down)

 

3. Pressures on Russian asset markets

 

4. Probable move of Russian reserves out of Fed to non-US custodians

 

5. Russia destabilizing Ukrainian gas and debt markets

There are even reports that  there were efforts by Russia in 2008 to exacerbate the US financial crisis, although the reports do not have firsthand documentation. Other countries may be watching this as a template for how events would play out in case Asian political issues over conflicting territorial claims or other issues escalate.

These developments may give a different meaning to the term ‘currency wars’ that became so popular in recent years.

One advantage using finance as a weapon is that it can be scaled up or down as needed, and is much more reversible than military actions. It is also quicker than traditional trade sanctions to have an impact, and arguably is more likely to hit decision-makers and those who have access to them  than trade sanctions, which often hit the poor and almost always create profit-making opportunities for the well-connected in sanctions-running. 

How far can this go and what are the implications?

So far the steps taken are baby steps – sanctions applied to a handful of Russians and Crimeans by the US and EU, but no real screws being applied (Russian President Putin not named, for example).  Probably there are huge holes through which transactions can continue to occur and the sanctions can be evaded. However, if the crisis intensifies, the US/EU may be tempted to apply broader sanctions on Russian assets on the view that this is the quickest way to apply pressure and that Russians will be unable or unwilling to move their assets into friendly jurisdictions quickly enough.

For the Russians, the temptation may be to try and sell USD assets in order to disrupt US asset markets, but the leverage may be temporary.  Their reserves are almost USD470bn but they have been actively diversifying away from USD for years. Relative to the size of any market they might be tempted to disrupt, the USD holdings are small. Moreover the sense that the price was being driven down by politically-motivated selling would likely attract buyers on the view that the effects would be limited. Were they do convince other countries to join them, the impact would be more longer lasting and more disruptive, but it is a little bit like letting your own home run down because it will lower the property value of a neighbor you dislike. The damage you do to yourself is more than you can expect to do to your neighbor.

The Russian holdings of USD are probably enough to give the USD a big whack, were they to go into the market selling, especially as since there may be selling pressures already from other reserve managers, and given the trend-loving nature of currency investors. Once you get past hurt feelings, it is not clear that  USD weakness would be a US economic or financial market negative.  A strong dollar is hardly a US policy priority, to the extent that USD weakness would crowd in both exports and imported inflation, it would probably be viewed as going in the direction preferred by Fed policymakers. Were it not for the unfriendly motivation, it is unlikely that US policymakers would object. 

Long-term implications

If the use of financial market warfare intensifies, the risks are:

1) More home bias in investing,

 

2) Official investors gravitating to jurisdictions and custody arrangements that insulate their assets from seizure

 

3) Premium on gold, physical commodities and other unattachable assets

This would unwind many years of international capital market liberalization. Moreover, it would have the greatest impact in discouraging long-term, illiquid investments, as these would be most vulnerable to seizure. It is much easier to cut positions in short term liquid assets if there is trouble brewing.

External deficit EM economies would probably suffer the most since creditors would see an extra force majeure risk premium added. Apolitical safe havens would probably benefit the most.  Where there is an interaction with the traditional currency war discussion is that the damage to EM borrowers would probably be greater than to G10 borrowers.  When EM countries depreciate, they often get hit by higher bond yields as well.  G10 countries, even when they depreciate sharply, often do not face big pressures on their bond markets.  Moreover, higher food prices from depreciation are not nearly the same social issue in G10 that they are in EM.

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

Submitted by Stratfor,

 

via Zero Hedge http://ift.tt/1gM8lwt Tyler Durden

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via Zero Hedge http://ift.tt/1qRw7iX williambanzai7

The Washington Post reports – based upon documents leaked by Edward Snowden – that the NSA is recording “every single” phone call in one foreign country (at the request of the NSA, the Post is withholding the name of the country. However, the Post notes that the NSA is also planning on expanding the program to other nations).

The Post also reports that the NSA has the ability to “reach into the past” and retroactively go back and listen to the calls later.

Sadly, this is also occurring in America.

Specifically, there is substantial evidence from top NSA and FBI whistleblowers that the government is recording the content of our calls … word-for-word.

NSA whistleblower Russel Tice – a key source in the 2005 New York Times report that blew the lid off the Bush administration’s use of warrantless wiretapping – says that the content and metadata of all digital communications are being tapped by the NSA.

Tice notes:

They’re collecting content … word-for-word.

 

***

 

You can’t trust these people. They lie, and they lie a lot.

Documents leaked by Edward Snowden to Glenn Greenwald show:

But what we’re really talking about here is a localized system that prevents any form of electronic communication from taking place without its being stored and monitored by the National Security Agency.

It doesn’t mean that they’re listening to every call, it means they’re storing every call and have the capability to listen to them at any time, and it does mean that they’re collecting millions upon millions upon millions of our phone and email records.

CNET reported last year:

Earlier reports have indicated that the NSA has the ability to record nearly all domestic and international phone calls — in case an analyst needed to access the recordings in the future. A Wired magazine article last year disclosed that the NSA has established “listening posts” that allow the agency to collect and sift through billions of phone calls through a massive new data center in Utah, “whether they originate within the country or overseas.” That includes not just metadata, but also the contents of the communications.

 

***

 

Sen. Dianne Feinstein (D-Calif.), the head of the Senate Intelligence committee, separately acknowledged this week that the agency’s analysts have the ability to access the “content of a call.”

NBC News reported last year:

NBC News has learned that under the post-9/11 Patriot Act, the government has been collecting records on every phone call made in the U.S.

Former FBI counter-terrorism agent Tim Clemente told CNN:

There’s a way to look at digital communications in the past.

In other words, if an analyst wants to spy on you, he can pull up your past communications (Remember, the private Internet Archive has been archiving web pages since the  1990s. So the NSA has undoubtedly been doing the same thing with digital communications).

Tice and top NSA whistleblower William Binney confirmed to PBS that the NSA is recording every word of every phone call made within the United States:

[PBS INTERVIEWER] JUDY WOODRUFF: Both Binney and Tice suspect that today, the NSA is doing more than just collecting metadata on calls made in the U.S. They both point to this CNN interview by former FBI counterterrorism agent Tim Clemente days after the Boston Marathon bombing. Clemente was asked if the government had a way to get the recordings of the calls between Tamerlan Tsarnaev and his wife.

 

TIM CLEMENTE, former FBI counterterrorism agent: On the national security side of the house, in the federal government, you know, we have assets. There are lots of assets at our disposal throughout the intelligence community and also not just domestically, but overseas. Those assets allow us to gain information, intelligence on things that we can’t use ordinarily in a criminal investigation.

 

All digital communications are — there’s a way to look at digital communications in the past. And I can’t go into detail of how that’s done or what’s done. But I can tell you that no digital communication is secure.

 

JUDY WOODRUFF: Tice says after he saw this interview on television, he called some former workmates at the NSA.

 

RUSSELL TICE: Well, two months ago, I contacted some colleagues at NSA. We had a little meeting, and the question came up, was NSA collecting everything now? Because we kind of figured that was the goal all along. And the answer came back. It was, yes, they are collecting everything, contents word for word, everything of every domestic communication in this country.

 

JUDY WOODRUFF: Both of you know what the government says is that we’re collecting this — we’re collecting the number of phone calls that are made, the e-mails, but we’re not listening to them.

 

WILLIAM BINNEY: Well, I don’t believe that for a minute. OK?

 

I mean, that’s why they had to build Bluffdale, that facility in Utah with that massive amount of storage that could store all these recordings and all the data being passed along the fiberoptic networks of the world. I mean, you could store 100 years of the world’s communications here. That’s for content storage. That’s not for metadata.

 

Metadata if you were doing it and putting it into the systems we built, you could do it in a 12-by-20-foot room for the world. That’s all the space you need. You don’t need 100,000 square feet of space that they have at Bluffdale to do that. You need that kind of storage for content.

 

JUDY WOODRUFF: So, what does that say, Russell Tice, about what the government — you’re saying — your understanding is of what the government does once these conversations take place, is it your understanding they’re recorded and kept?

 

RUSSELL TICE: Yes, digitized and recorded and archived in a facility that is now online. And they’re kind of fibbing about that as well, because Bluffdale is online right now.

 

And that’s where the information is going. Now, as far as being able to have an analyst look at all that, that’s impossible, of course. And I think, semantically, they’re trying to say that their definition of collection is having literally a physical analyst look or listen, which would be disingenuous.

 

Binney told Washington’s Blog:

The Washington Post reports – based upon documents leaked by Edward Snowden – that the NSA is recording “every single” phone call in one foreign country (at the request of the NSA, the Post is withholding the name of the country. However, the Post notes that the NSA is also planning on expanding the program to other nations).

The Post also reports that the NSA has the ability to “reach into the past” and retroactively go back and listen to the calls later.

Sadly, this is also occurring in America.

Specifically, there is substantial evidence from top NSA and FBI whistleblowers that the government is recording the content of our calls … word-for-word.

NSA whistleblower Russel Tice – a key source in the 2005 New York Times report that blew the lid off the Bush administration’s use of warrantless wiretapping – says that the content and metadata of all digital communications are being tapped by the NSA.

Tice notes:

They’re collecting content … word-for-word.

***

You can’t trust these people. They lie, and they lie a lot.

Documents leaked by Edward Snowden to Glenn Greenwald show:

But what we’re really talking about here is a localized system that prevents any form of electronic communication from taking place without its being stored and monitored by the National Security Agency.

It doesn’t mean that they’re listening to every call, it means they’re storing every call and have the capability to listen to them at any time, and it does mean that they’re collecting millions upon millions upon millions of our phone and email records.

CNET reported last year:

Earlier reports have indicated that the NSA has the ability to record nearly all domestic and international phone calls — in case an analyst needed to access the recordings in the future. A Wired magazine article last year disclosed that the NSA has established “listening posts” that allow the agency to collect and sift through billions of phone calls through a massive new data center in Utah, “whether they originate within the country or overseas.” That includes not just metadata, but also the contents of the communications.***

Sen. Dianne Feinstein (D-Calif.), the head of the Senate Intelligence committee, separately acknowledged this week that the agency’s analysts have the ability to access the “content of a call.”

NBC News reported last year:

NBC News has learned that under the post-9/11 Patriot Act, the government has been collecting records on every phone call made in the U.S.

Former FBI counter-terrorism agent Tim Clemente told CNN:

There’s a way to look at digital communications in the past.

In other words, if an analyst wants to spy on you, he can pull up your past communications (Remember, the private Internet Archive has been archiving web pages since the  1990s. So the NSA has undoubtedly been doing the same thing with digital communications).

Tice and top NSA whistleblower William Binney confirmed to PBS that the NSA is recording every word of every phone call made within the United States:

[PBS INTERVIEWER] JUDY WOODRUFF: Both Binney and Tice suspect that today, the NSA is doing more than just collecting metadata on calls made in the U.S. They both point to this CNN interview by former FBI counterterrorism agent Tim Clemente days after the Boston Marathon bombing. Clemente was asked if the government had a way to get the recordings of the calls between Tamerlan Tsarnaev and his wife.

TIM CLEMENTE, former FBI counterterrorism agent: On the national security side of the house, in the federal government, you know, we have assets. There are lots of assets at our disposal throughout the intelligence community and also not just domestically, but overseas. Those assets allow us to gain information, intelligence on things that we can’t use ordinarily in a criminal investigation.

All digital communications are — there’s a way to look at digital communications in the past. And I can’t go into detail of how that’s done or what’s done. But I can tell you that no digital communication is secure.

JUDY WOODRUFF: Tice says after he saw this interview on television, he called some former workmates at the NSA.

RUSSELL TICE: Well, two months ago, I contacted some colleagues at NSA. We had a little meeting, and the question came up, was NSA collecting everything now? Because we kind of figured that was the goal all along. And the answer came back. It was, yes, they are collecting everything, contents word for word, everything of every domestic communication in this country.

JUDY WOODRUFF: Both of you know what the government says is that we’re collecting this — we’re collecting the number of phone calls that are made, the e-mails, but we’re not listening to them.

WILLIAM BINNEY: Well, I don’t believe that for a minute. OK?

I mean, that’s why they had to build Bluffdale, that facility in Utah with that massive amount of storage that could store all these recordings and all the data being passed along the fiberoptic networks of the world. I mean, you could store 100 years of the world’s communications here. That’s for content storage. That’s not for metadata.

Metadata if you were doing it and putting it into the systems we built, you could do it in a 12-by-20-foot room for the world. That’s all the space you need. You don’t need 100,000 square feet of space that they have at Bluffdale to do that. You need that kind of storage for content.

JUDY WOODRUFF: So, what does that say, Russell Tice, about what the government — you’re saying — your understanding is of what the government does once these conversations take place, is it your understanding they’re recorded and kept?

RUSSELL TICE: Yes, digitized and recorded and archived in a facility that is now online. And they’re kind of fibbing about that as well, because Bluffdale is online right now.

And that’s where the information is going. Now, as far as being able to have an analyst look at all that, that’s impossible, of course. And I think, semantically, they’re trying to say that their definition of collection is having literally a physical analyst look or listen, which would be disingenuous.

 

Binney tells Washington’s Blog:

It would have to come from the upstream collection/recording “Fairview etc” [background here and here] with – probably – telcom cooperation. That’s how the former FBI agent Tim Clemente could say on CNN that they had ways of getting back to the content of the phone call from one of the bombers to his wife prior to the bombing. Now we are starting to see some of the monitoring of US citizens on the Public Switched Telephone Network (PSTN) [back

Bonus:

Snowden: “Is It Really Terrorism That We’re Stopping? I Say No. The Bottom Line Is That Terrorism … Has Always Been a Cover For Actions”

via Zero Hedge http://ift.tt/1qRr9CB George Washington

Submitted by Frank Shostak via the Ludwig von Mises Institute,

After settling at 3.9 percent in July 2011 the yearly rate of growth of the consumer price index (CPI) fell to 1.6 percent by January this year. Also, the yearly rate of growth of the consumer price index less food and energy displays a visible downtrend falling from 2.3 percent in April 2012 to 1.6 percent in January.

On account of a visible decline in the growth momentum of the consumer price index (CPI) many economists have concluded that this provides scope for the US central bank to maintain its aggressive monetary stance.

Some other economists, such as the president of the Chicago Federal Reserve Bank’s Charles Evans are even arguing that the declining trend in the growth momentum of the CPI makes it possible for the Fed to further strengthen monetary pumping. This, Evans holds, will reverse the declining trend in price inflation and will bring the economy onto a path of healthy economic growth. Evans also asserts that the Fed should be willing to let inflation temporarily run above its target level of 2 percent. He also said that an unemployment rate of about 5.5 percent and an inflation rate of about 2 percent are indicative of a healthy economy.

But how is it possible that higher price inflation will make the economy stronger? If price inflation slightly above 2 percent is good for the economy, why not aim at a much higher rate of inflation, which will make the economy much healthier?

Contrary to Evans a strengthening in monetary pumping to lift the rate of price inflation will only deepen economic impoverishment by allowing the emergence of new bubble activities and by the strengthening of existing bubble activities.

It will increase the pace of the wealth diversion from wealth generators to various non-productive activities, thereby weakening the process of wealth generation.

Evans and other economists are of the view that a strengthening in monetary pumping will strengthen the flow of monetary spending, which in turn will keep the economy stronger.

In this way of thinking, an increase in the monetary spending of one individual lifts the income of another individual whose increase in spending boosts the incomes of more individuals, which in turn boosts their spending and lifts the incomes of more individuals, etc.

If, for whatever reasons, people curtail their spending this disrupts the monetary flow and undermines the economy. To revive the monetary flow it is recommended that the central bank should lift monetary pumping. Once the monetary flow is re-established this sets in motion self-sustaining economic growth. So it is held.

Again we suggest that monetary pumping cannot set in motion self-sustaining economic growth. It can only set in motion an exchange of something for nothing (i.e., economic impoverishment).

As long as the pool of real wealth is still growing, monetary pumping can create the illusion that it can grow the economy. Once however, the pool is declining the illusion that the Fed’s loose policies can set in motion economic growth is shattered.

If, on account of the deterioration of the infrastructure, a baker’s production of bread per unit of time is now 8 loaves instead of 10 loaves, and the shoemaker’s production per unit of time is now 4 pairs of shoes instead of 8 pairs of shoes, then no amount of money printing can lift the production of real wealth per unit of time (i.e., of bread and shoes). Monetary pumping cannot replace non-existent tools and machinery.

On the contrary, the holders of newly-printed money who don’t produce any real wealth will weaken the ability of wealth generators to produce wealth by diverting to themselves bread and shoes, thereby leaving less real wealth to fund the maintenance and the expansion of the infrastructure.

Now, Fed officials give the impression that once they put the economy onto the so-called self-sustained growth path the removal of the monetary stimulus will not generate major side effects. But in reality a loose monetary policy sets in motion bubble activities. The existence of these activities is supported by monetary pumping, which diverts to bubble activities real wealth from wealth generating activities.

Once monetary pumping is aborted, bubble activities are forced to go under since they cannot fund themselves without the support of loose monetary policy. An economic bust ensues. The illusion that the Fed can bring the economy onto a self-sustaining growth path is shattered.

 

Conclusion

On account of a visible decline in the growth momentum of the US price index, many economists have concluded that this provides scope for the Fed to maintain its aggressive monetary stance. Some economists such as the president of the Chicago Federal Reserve Bank, Charles Evans, even argue that the declining trend in the growth momentum of the CPI makes it possible for the Fed to further strengthen monetary pumping. This, it is held, will reverse the declining trend in price inflation and will bring the US economy onto a path of healthy economic growth. We suggest that contrary to Evans, a strengthening in monetary pumping will only deepen economic impoverishment by allowing the emergence of new bubble activities and by the strengthening of existing bubble activities.

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

China, having abstained from voting against Russia in the UN, has been relatively quiet during this crisis… until now… As ITAR-TASS reports, spokesperson for China’s Ministry of Commerce Shen Danyang said that while “the situation in Ukraine remains tense,” and they are watching developments, “we are ready for cooperation with Crimea after the situation there gets back to normal.” This appears to implicitly recognize Crimea as its own region – as opposed to part of Ukraine – even after this morning’s “very strict anti-secessio One China policy” comments.

 

Via ITAR-TASS,

China will develop cooperation with Crimea after the situation in the republic stabilizes, spokesperson for China’s Ministry of Commerce Shen Danyang told a news conference on Tuesday.

 

Commenting on the results of Crimea’s referendum and the future of China’s investment projects, the spokesman said: “The situation in Ukraine remains tense. We are closely following the latest developments.”

 

“Trade cooperation between China and Ukraine continues to develop as usual,” he said. “However, devaluation of Ukraine’s currency will have a certain impact on Ukrainian-Chinese trade relations.”

 

Shen stressed that the current situation was “temporary”.

 

“China will continue developing mutually-beneficial cooperation,” he said. “We hope that the situation in Ukraine will stabilize very soon. As for Crimea, we are ready for cooperation after the situation there gets back to normal.”

Is China stirring? By specifiying trade deals with Ukraine and Crimea separately?

This follows earlier comments that appeared to be anti-Russia to some extent:

“China always respects the sovereignty and territorial integrity of all states. The Crimean crisis should be resolved politically under the frameworks of law and order. We call on all sides to remain calm and exercise restraint to avoid further escalation of the tension,” said Chinese Foreign Ministry Spokesman Hong Lei.

 

“China has a very strict anti-secession One-China policy.”

via Zero Hedge http://ift.tt/1g7Z8Ua Tyler Durden