Basically, there are two levels at which the Ukraine crisis is being fought: 1. the actual fighting on the land and 2. the terms used to envision what is happening.
1. The facts on the ground are not encouraging. In the middle of January, the govt of Ukraine launched an attack on Luhansk and Donetsk. The attack was not successful. In fact the Rebels launched a counteroffensive, pushed Ukrainian troops out of the Donetsk airport and began operations to encircle the Debaltseve 'tongue.' According to reports about 900 Rebel recruits have come beck from Russia where they received training. As I write this, artillery fire and rocket attacks continue along the front as well as government tank action.
2. Much more important is the perception of what is going on.
a. The Ukrainian govt refuses to talk to the Rebels and is willing to talk only to the Russian govt. The govt perceives the Rebs as simply representatives of Russia. The Russian govt wants the Ukrainians to negotiate some kind of federation with the Rebs. Talk is at an impasse.
b. The Ukrainian govt is drafting a 100,000 men to escalate the fighting and is sending military cadets to the front.
c. The Ukrainian govt refuses to allow Russian vehicles to Crimea and has increased troops adjacent to Crimea. In turn, the Russians increased troop numbers in Crimea.
d. In a recent demonstration in the Ukraine, an organization was allowed to openly participate, an organization that is anti-Russain and collaborated with the Nazis during WWII.
e. Ukrainian legislators asked the EU to label Russia as "an aggressor nation," which would be equivalent to declaring war.
f. Poland announced that it has increased the number of its troops on the Russian border.
g. EU ministers are meeting to decide whether to escalate sanctions on Russia.
It is clear, is it not, that the conflict is escalating.
Wednesday, January 28, 2015
Europe's mortgage problem.
Remember the US mortgage crisis? It arose because of subpar loans. A subpar loan was to people who did not have the income to make regular payments. It was done to help racial minorities and cost the Country immense financial pain.
The European crisis has a different genesis. Basically, Swiss banks loaned money at the old (artificial rate) of the Swiss franc. Then the franc increased in value and now the banks demand payment in francs that are worth 30% more in other currencies.
The European crisis has a different genesis. Basically, Swiss banks loaned money at the old (artificial rate) of the Swiss franc. Then the franc increased in value and now the banks demand payment in francs that are worth 30% more in other currencies.
Tuesday, January 27, 2015
The aftermath of the Greek election.
Greece elections: Greek PM Alexis Tsipras takes aim at 'neo-liberal' Europe as country gears up for prolonged austerity battle
1 / 1
Greece’s newly appointed Prime Minister, Alexis Tsipras, at a ceremony in Athens yesterday, marking the execution of Greek resistance members by the Nazis during the Second World War (Reuters)
Reuters
Mr Tsipras was swiftly able to form a government by reaching an agreement with the Independent Greeks, a small party on the right that is adamantly opposed to austerity and the Troika that has overseen the implementation of the EU and IMF’s terms for a bailout. Mr Tsipras’s surprising choice of political partner shows that he expects a prolonged confrontation with the EU and needs an ally that, above all else, is hardline on the main economic issue.
Georgios Katrougkalos, a Syriza MEP, said a deal with the Independent Greeks, who are close to the Orthodox Church and prone to zany conspiracy theories, is “not ideal”, but the two parties were united in their opposition to EU tutelage. Social issues, such as the Independent Greeks’ tough line on immigration, were not a priority at the moment.
Syriza had been expected to look to the centre left To Potami and officially socialist Pasok parties to give it a majority in the new parliament, where it holds 149 out of 300 seats. But Mr Katrougkalos said that both these parties were ruled out because of their commitment “to neo-liberal economic policies, favouring privatisations and the removal of laws protecting labour”.
He added that Syriza intends to curb the powers of the Greek oligarchs to whom To Potami and Pasok were close, saying their ability to evade tax and break state regulations with impunity must be ended. In the short term, the speed with which a government has been formed reduces the sense of uncertainty in Athens.
But confrontation with the eurozone leaders is expected to come soon and Greece could be facing an economic siege as the EU cuts off fresh supplies of credit. Syriza no longer wants to negotiate with the Troika (European Commission, European Central Bank and the IMF) but to talk directly to the governments concerned.
A Syriza spokesman said the new government had no plans for further talks with the Troika. At the same time, Syriza has made clear that it does not want to leave the euro or default on its debts, options that would be devastating to Greece but damaging to the credibility of the EU, which has spent five years trying and failing to solve the crisis.
Syriza may be expecting a battle with the EU but is being careful not to sound too aggressive. Yanis Varoufakis, a Syriza member who is tipped by some to become the next Finance Minister, said yesterday: “We, who happen to be in the eurozone, must be very careful not to toy with loose and fast talk about Grexit or fragmentation. Grexit is not on the cards; we are not going to Brussels and to Frankfurt and to Berlin in confrontational style.”
Even so, Mr Tsipras is going to need all the international sympathy he can get because he faces an unequal contest with Berlin and Brussels whom he must confront but also borrow money from. The Kathimerini newspaper in Athens warns that, on becoming Prime Minister, Mr Tsipras will find “empty coffers, a merciless European leadership and a party [Syriza] as diverse as the Tower of Babel”. It admits that he is “the rock star of the international left”, but wonders what he will do when “he hits the wall at the European Central Bank”. At the same time the paper comments that the upper classes in Greece must adjust themselves to the new situation.
Asked how Syriza planned to raise the billions needed to pay for social action to alleviate the effects of austerity, such as free electricity for those who have been disconnected, Mr Katrougkalos says: “We will find the money from the tax evaders.” Other reforms include the raising of the minimum wage to €750 per month and relief for private debt. The crisis in Greece over the past five years means that four million out of 11 million Greeks live in poverty and youth unemployment is a staggering 57.5 per cent
Inequality has grown, too. Before the crisis 10 per cent of the population owned 40 per cent of the wealth but they now own 50 per cent. A telling sign of poverty is the smog that shrouds Athens when it gets cold. Costas Zachariadis, a biologist and Syriza candidate in the capital, said the smog comes because people are too poor to pay for electricity or gas to heat themselves “so they burn old doors, garbage or anything they can find: the smog is becoming very dangerous because Athens now has an atmosphere like London in 1952 [when smog killed 3,000 people]”.
The victory of Syriza will deepen social divisions, with the poor and the young voting for the radical left and the better-off and older age groups sticking with conservative parties. Mr Katrougkalos says: “The vote for us was largely a class vote. We have 60 per cent of the poorest two-fifths of people with us.”
Panos Kammenos, the leader of the Independent Greeks party, speaks to journalists after leaving the Syriza party headquarters (EPA)
A : Not long. Greece’s bailout programme – which totals €240bn since 2010 – officially ends on 28 February. After that, Greece will no longer have access to cheap credit lines from the European Central Bank (ECB). So the first step is getting the European Commission, International Monetary Fund and the ECB – known collectively as the Troika – to agree to extend that deadline.
Q : Will that happen?
A : Probably. Giving Greece more time is one concession that most parties seem willing to make. Mr Tsipras may be resistant to extending a bailout programme which he has actively campaigned against, but it would give both his new government and Greece’s creditors more breathing room for negotiations over the longer-term restructuring of Greek debt.
Q | Then what?
A | The next hurdle is existing debt repayments. Greece owes around €10bn before the end of August. It will need to raise more funds to pay those debts, and unlocking the final €7bn tranche of bailout cash is crucial. So agreement with the Troika on any new terms needs to be reached by the summer. Any default on its debt could be the first step to a Greek exit from the eurozone.
Q | Does anyone want that?
A | Not very many people. Mr Tsipras wants to remain in the eurozone, and so do the majority of Greeks. For once, the German government agrees with the Greek people, with Chancellor Angela Merkel also saying that a “Grexit” is an outcome they want to avoid.
Q | So what are the potential compromise scenarios?
A | The key sticking point is any outright debt forgiveness for Greece. This is a demand of Mr Tsipras, but so far there has been no appetite for such a concession from other EU nations. They are leaning towards an extension of debt repayments, a possible easing of the conditions attached to the loans, and potentially reductions in interest rate payments. A lot hinges on whether such concessions will be enough after Mr Tsipras promised to make the Troika “a thing of the past” in his victory speech.
Charlotte McDonald-Gibson, in Brussels
Georgios Katrougkalos, a Syriza MEP, said a deal with the Independent Greeks, who are close to the Orthodox Church and prone to zany conspiracy theories, is “not ideal”, but the two parties were united in their opposition to EU tutelage. Social issues, such as the Independent Greeks’ tough line on immigration, were not a priority at the moment.
Syriza had been expected to look to the centre left To Potami and officially socialist Pasok parties to give it a majority in the new parliament, where it holds 149 out of 300 seats. But Mr Katrougkalos said that both these parties were ruled out because of their commitment “to neo-liberal economic policies, favouring privatisations and the removal of laws protecting labour”.
But confrontation with the eurozone leaders is expected to come soon and Greece could be facing an economic siege as the EU cuts off fresh supplies of credit. Syriza no longer wants to negotiate with the Troika (European Commission, European Central Bank and the IMF) but to talk directly to the governments concerned.
A Syriza spokesman said the new government had no plans for further talks with the Troika. At the same time, Syriza has made clear that it does not want to leave the euro or default on its debts, options that would be devastating to Greece but damaging to the credibility of the EU, which has spent five years trying and failing to solve the crisis.
No doubt Syriza sees its victory as part of a Europe-wide campaign against neo-liberal policies that are facing growing opposition, particularly in Spain, Italy and France. It is a measure of the international focus on the Greek elections that out of over a thousand journalists accredited to cover the poll some 500 are foreign correspondents, of whom 101 are Spanish, 94 British, 70 Germans and 33 Japanese. Greece may therefore be less politically isolated than it has been in the years since 2010. There is also a growing acceptance internationally that Greece cannot ever pay back its €317bn (£237bn) debt and needs money to escape from recession that has seen its economy reduced by a quarter.
Syriza may be expecting a battle with the EU but is being careful not to sound too aggressive. Yanis Varoufakis, a Syriza member who is tipped by some to become the next Finance Minister, said yesterday: “We, who happen to be in the eurozone, must be very careful not to toy with loose and fast talk about Grexit or fragmentation. Grexit is not on the cards; we are not going to Brussels and to Frankfurt and to Berlin in confrontational style.”Even so, Mr Tsipras is going to need all the international sympathy he can get because he faces an unequal contest with Berlin and Brussels whom he must confront but also borrow money from. The Kathimerini newspaper in Athens warns that, on becoming Prime Minister, Mr Tsipras will find “empty coffers, a merciless European leadership and a party [Syriza] as diverse as the Tower of Babel”. It admits that he is “the rock star of the international left”, but wonders what he will do when “he hits the wall at the European Central Bank”. At the same time the paper comments that the upper classes in Greece must adjust themselves to the new situation.
Asked how Syriza planned to raise the billions needed to pay for social action to alleviate the effects of austerity, such as free electricity for those who have been disconnected, Mr Katrougkalos says: “We will find the money from the tax evaders.” Other reforms include the raising of the minimum wage to €750 per month and relief for private debt. The crisis in Greece over the past five years means that four million out of 11 million Greeks live in poverty and youth unemployment is a staggering 57.5 per cent
Inequality has grown, too. Before the crisis 10 per cent of the population owned 40 per cent of the wealth but they now own 50 per cent. A telling sign of poverty is the smog that shrouds Athens when it gets cold. Costas Zachariadis, a biologist and Syriza candidate in the capital, said the smog comes because people are too poor to pay for electricity or gas to heat themselves “so they burn old doors, garbage or anything they can find: the smog is becoming very dangerous because Athens now has an atmosphere like London in 1952 [when smog killed 3,000 people]”.
The victory of Syriza will deepen social divisions, with the poor and the young voting for the radical left and the better-off and older age groups sticking with conservative parties. Mr Katrougkalos says: “The vote for us was largely a class vote. We have 60 per cent of the poorest two-fifths of people with us.”
Panos Kammenos, the leader of the Independent Greeks party, speaks to journalists after leaving the Syriza party headquarters (EPA) Q & A: Greece elections
Q : How much time does Greece have to renegotiate its bailout?A : Not long. Greece’s bailout programme – which totals €240bn since 2010 – officially ends on 28 February. After that, Greece will no longer have access to cheap credit lines from the European Central Bank (ECB). So the first step is getting the European Commission, International Monetary Fund and the ECB – known collectively as the Troika – to agree to extend that deadline.
Q : Will that happen?
A : Probably. Giving Greece more time is one concession that most parties seem willing to make. Mr Tsipras may be resistant to extending a bailout programme which he has actively campaigned against, but it would give both his new government and Greece’s creditors more breathing room for negotiations over the longer-term restructuring of Greek debt.
Q | Then what?
A | The next hurdle is existing debt repayments. Greece owes around €10bn before the end of August. It will need to raise more funds to pay those debts, and unlocking the final €7bn tranche of bailout cash is crucial. So agreement with the Troika on any new terms needs to be reached by the summer. Any default on its debt could be the first step to a Greek exit from the eurozone.
Q | Does anyone want that?
A | Not very many people. Mr Tsipras wants to remain in the eurozone, and so do the majority of Greeks. For once, the German government agrees with the Greek people, with Chancellor Angela Merkel also saying that a “Grexit” is an outcome they want to avoid.
Q | So what are the potential compromise scenarios?
A | The key sticking point is any outright debt forgiveness for Greece. This is a demand of Mr Tsipras, but so far there has been no appetite for such a concession from other EU nations. They are leaning towards an extension of debt repayments, a possible easing of the conditions attached to the loans, and potentially reductions in interest rate payments. A lot hinges on whether such concessions will be enough after Mr Tsipras promised to make the Troika “a thing of the past” in his victory speech.
Charlotte McDonald-Gibson, in Brussels
Monday, January 26, 2015
And the biggest black swans
are the West's bumbling of relations with Russia and the monopolistic acts of Saudi Arabia.
1. Russia at an inflection point.
Russia's foreign minister has warned the West about trying to blackmail Russia by sanctions. The head of Russia's second largest bank had warned the West at the meeting in Davos that denying Russia to use the SWIFT system in banking would lead to an official cold war and the end of diplomatic relations between Russia and the West.
There was a basic agreement between the Soviet Union and NATO that if the Russians withdrew from Central Europe those countries would be allowed/encouraged to remain neutral. Instead, NATO had been expanded to the Russian border. The clumsy attempts to incorporate the Ukraine into the West was the genesis of the current war in the Ukraine. The financing of the overthrow of the Ukrainian President Yanukovits by George Soros and the announcement that Russia's lease on the Sebastopol base in the Crimea would be ended forced Russia to defend its only warm water port. That was the genesis of the annexation of the Crimea by Russia.
The line has been drawn in the sand by Russia. Continue with sanctions, with the attacks on the Ruble and deny Russia the use of the SWIFT system and the cold war will be on officially. Russian pilots have already done practice runs against European and American forces and Russian military doctrines have been changed.
2.The war by the Saudis to destroy American oil companies.
American oil companies can extract huge quantities of oil and gas if the price of oil stays above $70/bbl. So, the Saudis dropped the oil price to destroy America's ability to produce its own oil. The idea that there is an oil glut is just as phony as the "peak oil" scam.
And this is where the two black swans are connected. A consortium of American oil companies led by EXXON has the inside track to develop the oil fields in the Black Sea off the Crimea. The derivatives involved in this deal amount to $250 Billion Dollars. The derivatives in the US oil fields amount to $500 Billion. Most of the new jobs created in the US have happened in Texas, N Dakota and Ohio. Continuation of Saudi efforts then pose a real danger to us as well as to Russia. Expect some mischief to block shipping from Saudi Arabia.
1. Russia at an inflection point.
Russia's foreign minister has warned the West about trying to blackmail Russia by sanctions. The head of Russia's second largest bank had warned the West at the meeting in Davos that denying Russia to use the SWIFT system in banking would lead to an official cold war and the end of diplomatic relations between Russia and the West.
There was a basic agreement between the Soviet Union and NATO that if the Russians withdrew from Central Europe those countries would be allowed/encouraged to remain neutral. Instead, NATO had been expanded to the Russian border. The clumsy attempts to incorporate the Ukraine into the West was the genesis of the current war in the Ukraine. The financing of the overthrow of the Ukrainian President Yanukovits by George Soros and the announcement that Russia's lease on the Sebastopol base in the Crimea would be ended forced Russia to defend its only warm water port. That was the genesis of the annexation of the Crimea by Russia.
The line has been drawn in the sand by Russia. Continue with sanctions, with the attacks on the Ruble and deny Russia the use of the SWIFT system and the cold war will be on officially. Russian pilots have already done practice runs against European and American forces and Russian military doctrines have been changed.
2.The war by the Saudis to destroy American oil companies.
American oil companies can extract huge quantities of oil and gas if the price of oil stays above $70/bbl. So, the Saudis dropped the oil price to destroy America's ability to produce its own oil. The idea that there is an oil glut is just as phony as the "peak oil" scam.
And this is where the two black swans are connected. A consortium of American oil companies led by EXXON has the inside track to develop the oil fields in the Black Sea off the Crimea. The derivatives involved in this deal amount to $250 Billion Dollars. The derivatives in the US oil fields amount to $500 Billion. Most of the new jobs created in the US have happened in Texas, N Dakota and Ohio. Continuation of Saudi efforts then pose a real danger to us as well as to Russia. Expect some mischief to block shipping from Saudi Arabia.
Sunday, January 25, 2015
Black swans landing.
1. The ECB announced its QE program of buying up various govt and industrial bonds. The Euro promptly collapsed.
2. Syriza of Greece has won the election and is about to be able to form a government without a coalition. The only thing not clear is the size of the victory. Expect the Market to respond negatively.
3. Ukrainian separatists continue to advance in Donetsk and Luhansk. In addition, they have reopened the front at Mariupol with three rocket barrages. Ukraine's govt is meeting today to consider what to do. They still do not want to reverse their disastrous policies. The rebels see no reason to negotiate.
Further black swans:
4. Boko Haram continues to gobble up Nigerean territory.
5. Yemen is now under extremist control and the President has resigned.
6. The Muslim Preident of the US and his minions have unleashed a hate campaign against the Israeli Prime Minister.
7. The same Muslim President and his minions have published US battle plans fighting ISIS.
2. Syriza of Greece has won the election and is about to be able to form a government without a coalition. The only thing not clear is the size of the victory. Expect the Market to respond negatively.
3. Ukrainian separatists continue to advance in Donetsk and Luhansk. In addition, they have reopened the front at Mariupol with three rocket barrages. Ukraine's govt is meeting today to consider what to do. They still do not want to reverse their disastrous policies. The rebels see no reason to negotiate.
Further black swans:
4. Boko Haram continues to gobble up Nigerean territory.
5. Yemen is now under extremist control and the President has resigned.
6. The Muslim Preident of the US and his minions have unleashed a hate campaign against the Israeli Prime Minister.
7. The same Muslim President and his minions have published US battle plans fighting ISIS.
Friday, January 23, 2015
The next three black swans.
We have already seen the first, at least it was announced: the European Central Bank will increase the amount of Euros (their QE) by 1.2T. The Euro promptly tanked driving the US Dollar pats 94.
The second black swan is the increase of fighting in the Ukraine. You might think that the loss of a ruined airport is not very meaningful, but it means that government forces are once again being pushed by the Rebels. The Ukrainian govt claims that there has been a further influx of Russian troops and that may be, but the equation of strength is changing once again. Western powers are once again are giving aid and encouragement to the Ukraine and even American advisors are on the scene. The danger is increasing. Continued sanctions against Russia, the attacks on the Rubl and further goading of the Ukraine means that Russia may be put in a position where it has little to lose by a full scale invasion.
The third black swan is the coming election this Sunday in Greece. Syriza has solidified its gains in the polls. If it wins, it will take steps to try to force a default of its loans (about $250B) placing European banks under threat of insolvency. Syriza has a problem though. Even though it gets a 50 seat bonus if it wins, it will still have to have a coalition partner unless its victory margin is larger than expected.
What remains doubtful is if Syriza will secure the minimum 151 seats in Greece's 300-member parliament that it needs to govern alone. If not, it must look for a partner from a smaller party.
With the politically untouchable, Nazi-inspired Golden Dawn party, whose leadership is in jail awaiting trial for running a criminal organization, and the Communist Party — which refuses to cooperate with anyone — out of the picture, possible partners include the new, centrist but untried Potami (River) party or the once-formidable PASOK Socialists.
A third option could be governing with the populist right-wing Independent Greeks, who agree with Syriza on need to end the austerity but disagree on about everything else. I think Syriza will team up with PASOK. In any case, if Syriza is successful, about $300B will disappear into smoke.
The second black swan is the increase of fighting in the Ukraine. You might think that the loss of a ruined airport is not very meaningful, but it means that government forces are once again being pushed by the Rebels. The Ukrainian govt claims that there has been a further influx of Russian troops and that may be, but the equation of strength is changing once again. Western powers are once again are giving aid and encouragement to the Ukraine and even American advisors are on the scene. The danger is increasing. Continued sanctions against Russia, the attacks on the Rubl and further goading of the Ukraine means that Russia may be put in a position where it has little to lose by a full scale invasion.
The third black swan is the coming election this Sunday in Greece. Syriza has solidified its gains in the polls. If it wins, it will take steps to try to force a default of its loans (about $250B) placing European banks under threat of insolvency. Syriza has a problem though. Even though it gets a 50 seat bonus if it wins, it will still have to have a coalition partner unless its victory margin is larger than expected.
What remains doubtful is if Syriza will secure the minimum 151 seats in Greece's 300-member parliament that it needs to govern alone. If not, it must look for a partner from a smaller party.
With the politically untouchable, Nazi-inspired Golden Dawn party, whose leadership is in jail awaiting trial for running a criminal organization, and the Communist Party — which refuses to cooperate with anyone — out of the picture, possible partners include the new, centrist but untried Potami (River) party or the once-formidable PASOK Socialists.
A third option could be governing with the populist right-wing Independent Greeks, who agree with Syriza on need to end the austerity but disagree on about everything else. I think Syriza will team up with PASOK. In any case, if Syriza is successful, about $300B will disappear into smoke.
Thursday, January 22, 2015
Gold: Has the bear market ended?
That is the question on the minds of many of us. Here is the latest action in gold. Silver, the miners
and such show similar pattern.
There is little doubt that gold has broken out of its base. But, has it ended the bear market in gold, that is the big question.
Gold had broken past the 1,230 resistance and broke out strongly after a minor hesitation. Then it stormed up to 1,303 and sold back to 1,290. Early today it hit 1,303 again and back off another 10 dollars. So, 1,300 is a strong resistance as it was a strong support.
What does Larry say? He forecast that gold would hit its final low in the middle of this January. Now that we have a breakout he hesitates. His verdict? The bear market will end if gold closes above 1,363. Stay tuned.
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