(No) Conundrum 2.0
May 9, 2014
Could things possibly be any more fascinating?
Representative Kevin Brady: “I’ll conclude with this. My main concern, having served on the committee in the early to mid-2000s, your able and very highly respected predecessor sat where you sat and assured the committee that maintaining low interest rates for an extended period wouldn’t cause general price inflation or inflate an unsustainable asset bubble - which didn’t prove to be the case. After the credit-fueled housing bubble burst in 2007, your predecessor assured the committee that the resulting weakness would be confined to the subprime segment of the housing market and the damage would be limited to about $150 billion, roughly the cost of the S&L crisis. Following the financial crisis in the fall of 2008, we were repeatedly assured the Fed had the strategy to exit from the large expansion of its balance sheet to normalize monetary policy, including the federal funds target. Yet, the goalposts have been moved time and time again - and now removed. And today, you’ve assured the committee once again - and I so appreciate your testimony - that the Fed is confident it can exit without sparking high inflation; but that we can’t know the details or the time-table; but that the Fed and the FOMC have it essentially handled. I don’t expect the Fed to be perfect. Yours is a tough job. Theirs is a tough job. But it just strikes me this over time “don't worry be happy” monetary message isn’t working - at least, in my view, for the committee and certainly not for the economy at this point. I know my colleagues will ask about today’s Wall Street Journal where noted economist, Federal Reserve historian Dr. Alan Meltzer, makes the point never in history has a country financed big budget deficits with large amounts of central bank money and avoided inflation. My worry is that the track record of central banks, including the Fed, in identifying these economic turning points and acting quickly to prevent inflation, that track record is not as good as we would like. So, forgive me for being skeptical. I believe we need more specifics and a clear timetable on the comprehensive exit strategy.”
Good luck with that, Congressman. There will be neither specifics nor a timetable. The Fed has pretty much painted itself into a corner. QE3, in particular, fueled dangerous Bubbles in equities and corporate Credit. Meanwhile, it ensured another two years of global (largely Asian) over- and mal-investment. Today and going forward, the Fed will have little clarity as to the soundness of the financial markets or real economy. It will have minimal grasp on prospective inflation rates. So long as the financial Bubble inflates, economic output will appear OK. Yet market Bubbles guarantee intractable financial and economic fragility. Market tumult would, in short order, darken economic prospects. Very few appreciate today’s dilemma.
May 8 – Bloomberg (Simon Kennedy and Ilan Kolet): “The global economy is rebooting for ‘Great Moderation 2.0.’ Barely five years after the worst financial turmoil and recession since the Great Depression, the U.S. and fellow advanced nations are showing a stability in output growth and hiring last witnessed in the two decades prior to the crisis, in an era dubbed the ‘Great Moderation.’ The lull points to a worldwide economic expansion that will endure longer than most. Volatility in growth among the main industrial countries is the lowest since 2007 and half that of the 20 years starting in 1987… Investors also are becalmed, with a risk measure that uses options to forecast fluctuations in equities, currencies, commodities and bonds around the weakest level in almost seven years… Such calm finally is providing a support for equities over bonds and giving companies and consumers long-sought clarity to spend.”
What an incredibly fascinating time to be a “top down” analyst – of economics, global markets and geopolitics. And as an analyst of Bubbles, these days it’s too often “Déjà vu all over again.” “Tech Bubble 2.0” resonates. “Great Moderation 2.0” analysis, well, it suffers from the same misconception as the original: complete disregard for the impacts and future consequences of flawed policies and resulting Credit and asset Bubbles. With going on six years of unprecedented growth in Federal Reserve Credit and global central bank holdings, analysts should be especially cautious when it comes to extrapolating the deceptive appearance of financial and economic stability.
From an analytical perspective, I’ll dismiss “Great Moderation” chatter and focus instead on the reemergence of “Conundrum.” Recall that chairman Greenspan introduced “Conundrum” into market lexicon back in 2005. Confounding the Federal Reserve (officials and models), long-term yields trended lower in the face of Fed rate increases.
From my perspective, there was No Conundrum in 2005. I addressed this topic in a May 2005 CBB, “Conundrums,” and again in June 2006 with “No Conundrum, Again.” The Fed had increased short-term rates from 2% to 4% between December 2004 and November 2005 with minimal impact on long-term Treasury yields or mortgage rates. I saw no mystery. Committing another major policy blunder, the Fed had held rates too low for too long. And in the midst of an increasingly speculative Mortgage Finance Bubble backdrop, timid Fed rate increases completely failed to restrain leveraged speculation. Financial conditions were remaining extraordinarily – dangerously - loose.
I want to bring in some data. Mortgage Credit growth averaged about $270 billion annually during the decade of the nineties (no slouch period for Credit growth!). Total Mortgage debt began growing at doubled-digit rates in 2002 as the Fed aggressively reflated (post-“tech” Bubble). Surging annual mortgage debt growth surpassed $1.0 Trillion for the first time in 2003. It then inflated to $1.27 Trillion in 2004 and hit an all-time record $1.45 Trillion in 2005.
It was my view at the time that long-term Treasuries, agency debt and MBS were beneficiaries (downward pressure on yields) of an increasingly unstable Bubble backdrop. Essentially, the marketplace was discounting the unsustainability of both rapid system Credit growth and an unsound economic expansion. Indeed, I argued at the time that this dynamic was dysfunctional. In a key “Terminal Phase” Bubble Dynamic, liquidity and general speculative excess sustained the mispricing (and gross over-issuance) of mortgage Credit and prolonged the general Bubble period.
At the end of the day, one could say bond prices had it “right” and stocks had it “wrong.” It’s so good to be a bond. During the Bubble period, low bond yields spurred destructive excess that came back to crash stocks – while the inevitable bust proved absolutely delightful for Treasuries and agency securities.
So I am monitoring the 2014 decline in Treasury and global sovereign yields with keen interest. Of late, there’s been some concern that declining long-term yields might be signaling issues thus far ignored by bullish equities investors (with the S&P500 a smidgen below record levels). From my experience, the bond market tends to be a much more effective discounter of fundamental prospects (and macro inflection points!) than equities. For sure, equities tend to turn wild late in the speculative cycle. It’s worth noting that 10-year Treasury yields traded to almost 5.30% in June 2007 and then sank almost 150 basis points in five months – while the S&P 500 defied a faltering Bubble to trade to record highs in October 2007.
After ending 2013 at 3.03%, 10-year Treasury yields have declined 41 bps y-t-d. Sovereign yields have collapsed throughout Europe and have generally retreated around the globe. What’s behind the decline? Are there potential ramifications for stocks and the global economy? These are critical questions, especially considering the bullish consensus view of accelerating U.S. and global growth.
Some thoughts. First of all, I’m rather convinced that we’re in the “Terminal Phase” of the global government finance Bubble that began inflating more than five years ago. Credit and speculative excesses have exacerbated global distortions – including problematic wealth distribution and economic maladjustment (certainly including mounting over-capacity for too many things). For now, there are some disinflationary tailwinds exerting modest downward pressure on consumer price aggregates. Bond prices are supported by meager CPI gains throughout the developed world. I believe “safe haven” government debt markets are further supported by the unsustainability of various Bubbles, certainly including U.S. stocks, corporate debt and global risk assets more generally.
It’s also my view that a rapidly deteriorating (faltering global Bubble-induced) geopolitical backdrop has begun to bolster safe haven demand for Treasuries and sovereign debt. I fear the “Ukraine” crisis marks an unfortunate end to an era of general global cooperation and integration – and the troublesome return of “Cold War” tensions and risks. Myriad risks encompass economic, financial and military. And it is difficult for me to envisage rapidly escalating tensions in the South China Sea and East China Sea as mere coincidence. Russian and Chinese governments appear determined. Both seem to be implementing plans – replete with belligerent war-time propaganda and disinformation. The U.S. is portrayed as the villain – and things seem headed in the direction of an acrimonious bipolar world. There are major potential economic ramifications that go neglected in the midst of bull market exuberance.
I will not claim to be an expert in geopolitics. My macro expertise is more in the realm of Credit, financial flows, Bubbles and associated financial and economic fragility. But these days I discern an extraordinary interplay between geopolitical and the markets. If I’m on the right track with the geopolitical, the world is quickly becoming a more dangerous place. Geopolitical risks compound the vulnerabilities associated with mounting “Terminal Phase” Bubble excesses.
Egregious Fed and central bank monetary inflation has ensured mispricing for tens of Trillions of dollars of financial assets. In particular, I fear central bank policies have incentivized enormous amounts of speculative leverage (certainly including myriad “carry trades”). This means the leveraged speculator community is once again a source of major instability. And I fear the ETF complex – having doubled in size in four years – is another avenue of potential fragility. As I’ve posited previously, a strong case can be made that the scope of trend-following and performance-chasing finance currently fueling market Bubbles is unprecedented. The consensus view dismisses the notions of speculative excess, Bubbles and fragility.
And here’s where things get really interesting. Whether things blow up soon or not (in Ukraine or the China Seas), newfound geopolitical uncertainties have unexpectedly elevated market risk. I believe the more sophisticated market operators have likely begun to take some risk off the table. De-risking/de-leveraging wasn’t much of an issue when the Fed was adding $85bn of monthly market liquidity. But with the Fed now in the waning months of its QE operations, the markets are increasingly susceptible to a bout of “risk off.” If the hedge funds are turning more risk averse, this would likely mark an impending inflection point in terms of overall marketplace liquidity.
I suspect the markets have already entered a period of unusually high risk. What the bulls see as “healthy rotation,” I view as confirmation of incipient risk aversion, greed transforming to fear, and the overall “inflection point” thesis. With QE winding down, there is impetus for the leveraged speculators to push forward with de-risking while Fed liquidity remains available. Bullishness is so entrenched that any serious market retreat would catch most by surprise. A scenario where the hedge funds bound for the exits as a spooked public clicks the sell button on ETF holdings doesn’t these days seem like such a longshot.
Yet I over-simplify things. The geopolitical backdrop has surely turned incredibly complex and nuanced. I believe Russia and China have increasingly serious issues with U.S. dominance over global finance. Both have serious domestic problems that might incentivize them to act out – and perhaps even act out as partners.
At the same time, the U.S. and the West are hoping financial and economic sanctions (as opposed to military confrontation) will alter Putin’s behavior. A weak ruble and faltering Russian stocks and bonds are seen as pressuring Putin and his inner circle. As things unfold, I would expect officials from Russia and China to demonstrate resolve of steel against Western pressure (financial and otherwise). And it would seem reasonable that the performance of Western stock and bond markets now also plays into the new Cold War calculus. It would appear an especially inopportune time for a bout of serious market tumult. From a game theory perspective, perhaps this even reduces the odds of a near-term market blowup. Personally, I wouldn’t want to bet on stability.
It was another interesting week in the markets. In the category “careful what you wish for,” Mr. Draghi finally seemed to get some traction with a weaker euro. The euro declined 1.1% against the yen this week to the lowest level in two months. It is worth recalling that euro weakness versus the yen back in late January corresponded with a fleeting bout of market “risk off.” How big is the yen carry trade – borrowing in cheap yen to speculate in higher-yielding European stocks and bonds? Might this be an important trade that risks pushing the leveraged players into a more urgent de-risking/de-leveraging mode?
The end of a monopoly
And no end of new ways to pay your bills
Purses or wallets do not come into it.
In several countries customers at Starbucks do not need to reach for cards or cash either. Coffee in hand, they can open the firm’s app on their mobile phones, hold up a barcode for the cashier to scan and the job is done. Rewards for frequent custom are automatically tallied up in their online account.
An even more hands-off payment option in many shops in America involves a firm called Square.
Among other things, it offers a “virtual” wallet that stores details of a user’s credit cards and loyalty-scheme memberships and can be accessed via a mobile phone. To buy things with it, a customer does not even need to touch the phone—just have it with him. Square’s app can be instructed to turn itself on and “check in” when the user enters a store in the firm’s network; when he wants to pay, all he has to do is to tell the cashier his name and that he is using Square. Signatures, PIN numbers, cards and barcodes are all done away with. Instead, the cashier’s system brings up a picture of the account-holder, to make sure he is who he claims to be, and Square sends him a text message confirming his purchase to make sure the charges are correct.
The world of payments is changing: people are buying ever more things online and increasingly with their phones. Whizz-bang technology can make transactions effortless or embed them seamlessly into other activities, such as booking a cab or searching for a nearby coffee shop. The numbers are becoming significant: PayPal has 143m active accounts and handled $180 billion in payments last year. And new services to make spending money easier are springing up all the time.
They are not confined to the rich world: in Kenya roughly 60% of adults—about the same number as have a bank account—use a mobile-phone payment service called M-PESA (see chart 4) And increasingly they cater to business customers too: services that integrate electronic invoicing and payments into a firm’s procurement and accounting system, or that help manage and raise working capital, are becoming commonplace.
Not surprisingly, the titans of the internet have started to eye up the payments business. Google offers a virtual wallet; Amazon recently set up a service to allow its customers to transfer money; Facebook and Apple have expressed interest in the field. There is much speculation that the latest iPhone’s ability to read fingerprints may be heralding a world-changing payment service. Telecoms companies (such as Safaricom, the firm behind M-PESA) and bricks-and-mortar merchants (Starbucks) are also dabbling in the field.
Yet banks are largely absent from this technological and commercial battleground. Payments are a huge business for them, bringing in $1.3 trillion in 2012, or 34% of their global profits, according to McKinsey, a consultancy. And these revenues have been growing steadily: by 3% a year in 2008-12, compared with just 1% a year for other income. As in their lending businesses, however, banks are finding that new regulations eat into their revenue from payments. The main target has been interchange fees, as banks’ charges for processing credit- and debit-card payments are known. The European Parliament recently adopted a law that would cap these at 0.2% of the value of a transaction for debit cards and 0.3% for credit cards. In America the Dodd-Frank act of 2010 curbed interchange fees for debit cards.
The American authorities have also extracted big settlements from several card issuers for inveigling customers into buying expensive and unnecessary ancillary services, such as insurance against missed card payments. A similar scandal has cost banks dear in Britain. In many jurisdictions the credit-card networks have been investigated by competition authorities.
All this is a worry for banks because credit cards account for a big share of their revenue from payments—41% in North America, according to McKinsey, although less elsewhere. And their use is growing fast, especially in booming emerging markets. In China McKinsey expects it to increase by 42% a year between 2012 and 2017. Brazil is already the world’s second-biggest market for card transactions after the United States, according to Capgemini, another consultancy.
At the same time the wealth of new services is threatening to disrupt the payments business. A few upstarts—most notably Bitcoin, a troubled virtual currency—are seeking to bypass the existing payments infrastructure altogether. Bitcoin has proved a volatile store of value (see chart 5), but as a cheap, reliable and transparent way to make a transfer it is a notable success.
For the most part, however, the challenge is not head-on. In fact, by making it easier to buy things, most new payments services are pushing extra business to the existing channels, dominated by banks. When a consumer buys something using PayPal, he must still find a way to settle his PayPal account. That typically involves either a card payment or a direct transfer from a bank account. Equally, customers at Starbucks top up their loyalty-card balances or online accounts by conventional methods. Square is perhaps the best example of this symbiosis: its clever mobile wallet is merely an offshoot of its main business, which makes it easier and cheaper for small merchants to accept credit cards. It has been so successful that it has spawned a host of imitators, including a European service called iZettle and an offering from PayPal called PayPal Here, all of which are now pushing millions of payments though the credit-card networks.
Square makes it easier and cheaper for small merchants to accept credit cards
Nonetheless, such services can nibble away at banks’ revenues. In some countries PayPal steers users towards bank transfers rather than card transactions by charging lower fees for them. Such transfers are much cheaper for PayPal (and thus not nearly so lucrative for banks); they cost only a small fixed amount rather than a percentage of the payment. Moreover, when users add funds to their PayPal account in one go to cover more than one purchase, they cut down on the number of bank-mediated transactions.
Perhaps more important, banks are losing out on the information that comes with handling customers’ purchases directly and can then be used to steer advertising or provide other services. An American mobile-payments start-up called LevelUp, for instance, considers that opportunity so valuable that it offers merchants a discount on the interchange fees that it pays to banks on their behalf. In exchange, the merchants give LevelUp a share of the money customers spend using promotions delivered through LevelUp’s platform.
Consultants like to speak of “purchasing journeys” in which settling the bill is only the final step. Other waystations include advertising, internet search, participation in loyalty schemes and so on. Innovators, the thinking goes, could afford to undercut market prices for payments in anticipation of greater rewards at some other stage in the journey. “I could see Google running the payments business,” says Lee Kyriacou of Novantas, a consultancy. “Advertising could pay for the whole network.”
Tech firms are not the only potential usurpers. Retailers, too, are understandably eager to increase their leverage in the world of payments. In America an alliance of household names, including Walmart, CVS and ExxonMobil, is in the process of setting up a mobile-payments scheme called Merchant Customer Exchange. Such firms may well use their clout to get the banks to reduce their charges on card transactions.
Many telecoms firms, too, see the growth of mobile payments as their chance to break into a lucrative new business. AT&T, T-Mobile and Verizon, three of America’s four biggest mobile providers, have formed a consortium called Isis to develop their own mobile-payments system and virtual wallet. Similar outfits have sprung up in many other countries.
In the long run, banks risk becoming the providers of a cheap, commoditised service, with most of the money in the payments business going to firms that make customers’ lives easier or provide new services. As Capgemini put it in a recent report: “The payments-acquisition value chain is splitting—with transactional components becoming commoditised and customer-engagement components becoming differentiators.”
A good example of this sort of thing is a firm called Simple. It blends online and mobile banking with tools to help customers organise their finances through an elegant website and app. Customers can easily check not only their balance but also the amount that it is safe to spend, taking into account pending bills and recurring payments. They can set goals for savings and budgets for different categories of expenditure each month. Simple tracks their progress and can answer questions like “How much did I spend on clothes last year?”
Cherchez la banque
The most striking thing about Simple is that it is not a bank. As its website notes, “the funds in your Simple account are held by our partner bank, The Bancorp Bank, Member FDIC.” These accounts generate revenue in the normal way: from the spread between the interest they earn when lent out and the interest Simple pays on them, and from interchange fees from cards tied to the account. Simple provides the interface and in return splits the revenue with Bancorp. But customers learn the name of the bank where their money is held only if they read the fine print.
Even worse for banks would be a future in which people begin to store more of their money outside the banking sector and make payments that are not tied to a formal bank account. In a small way that is already happening in the rich world. Customers of firms such as Starbucks and Shell keep billions in the firms’ prepaid cards. “Open-loop” prepaid cards, which can be used at any retailer that accepts card payments, are also becoming more popular. Transaction volumes have been growing by 20% a year, according to Capgemini. Mercator Advisory Group, yet another consultancy, expects funds loaded onto such cards in America alone to reach $80 billion this year.
The issuers of the vast majority of prepaid cards are not banks; indeed the cards are often explicitly promoted as alternatives to a bank account. They usually allow holders to deposit cheques, make and receive electronic payments and use cash machines. Big American retailers, including Walmart and Walgreens, are getting involved in the business, promoting prepaid cards through their shops and allowing customers to deposit money at their tills and withdraw it from cash machines on the premises. In addition to this marketing clout, prepaid cards hold a regulatory advantage in America: they are not subject to the interchange-fee restrictions that apply to debit cards.
The threat to banks from novel payments systems is even clearer in poorer countries, since a smaller share of the population is using a bank in the first place. MasterCard, for instance, is co-operating with the Nigerian government to issue national identity cards that can double as prepaid cards, in a deliberate effort to provide financial services to those without bank accounts. Visa is helping to develop a mobile-payments system in Rwanda.
When such schemes take off, they can quickly supplant banks as the main local conduit for money. Some 43% of Kenya’s GDP is channelled through M-PESA each year, according to Safaricom. M-PESA itself cannot offer interest-bearing accounts, loans or insurance but provides them through tie-ups with several local banks. The products concerned are available only to M-PESA customers and can be accessed only via a mobile phone. As with Simple, the banks seem to play a secondary role.
One of M-PESA’s advertisements shows a herdsman in traditional dress, surrounded by milling cows and goats, smiling as he reads a text message with an update on the credit in his account. Then a Sikh overseer on a building site realises he can make his life much simpler by paying his workers via M-PESA instead of in cash. Next, a businessman on a plane reaches for his phone to pay his son’s school fees. The idea being rammed home is that M-PESA caters to all Kenyans, irrespective of their income.
Tomorrow the world
Vodafone, Safaricom’s parent, has rolled out M-PESA in several other African countries as well as in Afghanistan and India. In March it announced it would offer the service in Romania, where more than one-third of the population does not have a bank account. It says other countries in Europe will follow.
Banks are not ignoring these developments. They are sprucing up their websites and mobile apps and trying to develop catchy products of their own. Barclays, a big British bank, signed up 2.5m users for its mobile money-transfer service, PingIt, in its first 18 months. Erste Group of Austria has developed a system called Erste Confirming that allows businesses to haggle over invoices, securing discounts for buyers and cheap loans against unpaid bills for suppliers.
If necessary, banks can always buy the technology they need or the companies that create it. BBVA, a Spanish bank, recently bought Simple for $117m—a heady amount for a service with just 100,000 customers, but a trifle for a buyer with a market capitalisation of €50 billion. And an American subsidiary of RBS has teamed up with Bottomline Technologies, a firm that helps businesses pay each other electronically, to beef up its corporate offering. But acquiring such businesses from the people who invented them will not turn the banks into bold innovators.
THE ROVING EYE
Putin displays Ukraine chess mastery
By Pepe Escobar
Russia's celebrations of the 69th anniversary of the defeat of fascism in World War II come just days after Ukrainian neo-fascists enacted an appalling Odessa massacre. For those who know their history, the graphic symbolism speaks for itself.
And then a geopolitical chess gambit added outright puzzlement to the trademark hypocrisy displayed by the self-proclaimed representatives of "Western civilization".
The gambit comes from - who else - Russian President Vladimir Putin, who is now actively mixing chess moves with Sun Tzu's Art of War and Lao Tzu's Tao Te Ching. No wonder all those
American PR shills, helpless State Department spokespersons and NATOstan generals are clueless.
Unlike the Obama administration's juvenile delinquent school of diplomacy - which wants to "isolate" Putin and Russia - a truce and possible deal in the ongoing Ukrainian tragedy has been negotiated between adults on speaking terms, Putin and German Chancellor Angela Merkel, then discussed and finally announced in a press conference by the president of the Organization for Security and Cooperation in Europe, Didier Burghalter.
The deal will hold as long as the regime changers in Kiev - which should be described as the NATO neo-liberal, neo-fascist junta - abandon their ongoing "anti-terrorist operation" and are ready to negotiate with the federalists in Eastern and Southern Ukraine. 
Putin's gambit has been to sacrifice not one but two pieces; he'd rather have the referendums this Sunday in Eastern Ukraine be postponed. At the same time, changing the Kremlin's position, he said the presidential elections on May 25 might be a step in the right direction.
Moscow knows the referendums will be erroneously interpreted by the misinformed NATOstan combo as an argument for Eastern Ukraine to join Russia, as in Crimea. They could be used as pretext for more sanctions. And most of all Moscow is keen to prevent any possible false flags. 
Yet Moscow has not abandoned its firm position from the start; before a presidential election there should be constitutional changes towards federalization and more power for largely autonomous provinces. It's not happening anytime soon - if at all.
With the Kiev NATO junta making an absolute mess of "governing"; the International Monetary Fund already running the disaster capitalism show, Russia cutting off trade and energy subsidies, and the federalist movement growing by the minute after the Odessa massacre, Ukraine is so absolutely toxic that Moscow has all the time in the world on its side. Putin's strategy is indeed Tao Te Ching meets Art of War: watch the river flow while giving enough rope for your enemy to hang himself.
You're with us or against us
Putin asking the people in the Donbass region to postpone the referendum - which will take place anyway  - unleashed a fierce debate, in eastern Ukraine and across Russia, over a possible Russian betrayal of Russian speakers in Ukraine.
After all, the NATO neo-liberal, neo-fascist junta has unleashed an "anti-terrorist operation" against average Ukrainians where even the terminology comes straight from the "you're with us or against us" Cheney regime.
And once again the Disinformer-in-Chief is - who else - US Secretary of State John Kerry, who is "very concerned about efforts of pro-Russian separatists in Donetsk, in Lugansk to organize, frankly, a contrived, bogus independence referendum on May 11". It's "the Crimea playbook all over again and no civilized nation is going to recognize the results of such a bogus effort".
It's hopeless to expect Kerry to know what he's talking about, but still: the people in Donbass are not separatists. These are average Ukrainians - factory workers, miners, store clerks, farmers - who are pro-democracy, anti-NATO junta and - oh, the capital crime - Russian speakers.
And by the way, you don't need to be Thomas Piketty to identify this as classic class struggle; workers and peasants against oligarchs - the oligarchs currently aligned with the NATO junta, some deployed as regional governors, and all planning to remain in charge after the May 25 elections.
The people in Donbass want federalism, and strong autonomy in their provinces. They don't want to split from Ukraine. Against the US-prescribed, Kiev-enforced "anti-terrorism" onslaught, they have their popular defense committees, local associations and yes, militias, to defend themselves. And most of all "bogus" referendums to make it absolutely clear they won't submit to a centralized, oligarch-infested junta.
So the referendums will go ahead - and will be duly ignored by the NATOstan combo. The May 25 presidential election will go ahead - right in the middle of an "anti-terrorist operation" against almost half of the population - and will be recognized as "legitimate" by the NATOstan combo.
Way beyond this cosmically shameful behavior of the "civilized" West, what next?
Nothing will make the ironclad hatred the NATO neo-liberal neo-fascist junta with its Western Ukraine neo-nazi Banderastan supporters feel against the eastern Donbass go away. But then, in a few months, all Ukrainians will feel in their skins what the IMF has in store for them, irrespective of location. And wait if the new president - be it chocolate billionaire Petro Porashenko or holy corrupt "Saint Yulia" Timoschenko - doesn't pay Gazprom's US$2.7 billion energy bill.
Once again, Putin does not need to "invade" anything. He knows this is not the way to "rescue" eastern and southern Ukraine. He knows the people in the Donbass will make life miserable for the NATO junta and its May 25 offspring. He knows when Kiev needs real cash - not the current IMF self-serving Mob-style loans - nobody in his right mind in the political midget EU will be forthcoming. Nobody will want to rescue a failed state. And Kiev will have to beg, once again, for Moscow's help, the lender of first and last resort.
Lao Tzu Putin is far from going to checkmate. He may - and will - wait. The exceptionalist empire will keep doing what it does best - foment chaos - even as sensible Europeans, Merkel included, try somewhat for appeasement. Well, at least Washington's prayers have been answered. It took a while, but they finally found the new bogeyman: Osama Bin Putin.
1. Putin-Burkhalter talks: an elusive chance for Ukraine, Oriental Review, May 8, 2014.
2. Ukrainian forces prepare provocation against Russia in Donetsk, Voice of America, May 6, 2014.
3. 2 southeast Ukrainian regions to hold referendum May 11 as planned, RT, May 8, 2014.
Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).
He may be reached at email@example.com.
(Copyright 2014 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
Crazy Climate Economics
MAY 11, 2014
Everywhere you look these days, you see Marxism on the rise. Well, O.K., maybe you don’t — but conservatives do. If you so much as mention income inequality, you’ll be denounced as the second coming of Joseph Stalin; Rick Santorum has declared that any use of the word “class” is “Marxism talk.” In the right’s eyes, sinister motives lurk everywhere — for example, George Will says the only reason progressives favor trains is their goal of “diminishing Americans’ individualism in order to make them more amenable to collectivism.”
So it goes without saying that Obamacare, based on ideas originally developed at the Heritage Foundation, is a Marxist scheme — why, requiring that people purchase insurance is practically the same as sending them to gulags.
And just wait until the Environmental Protection Agency announces rules intended to slow the pace of climate change.
Until now, the right’s climate craziness has mainly been focused on attacking the science. And it has been quite a spectacle: At this point almost all card-carrying conservatives endorse the view that climate change is a gigantic hoax, that thousands of research papers showing a warming planet — 97 percent of the literature — are the product of a vast international conspiracy. But as the Obama administration moves toward actually doing something based on that science, crazy climate economics will come into its own.
You can already get a taste of what’s coming in the dissenting opinions from a recent Supreme Court ruling on power-plant pollution. A majority of the justices agreed that the E.P.A. has the right to regulate smog from coal-fired power plants, which drifts across state lines. But Justice Scalia didn’t just dissent; he suggested that the E.P.A.’s proposed rule — which would tie the size of required smog reductions to cost — reflected the Marxist concept of “from each according to his ability.” Taking cost into consideration is Marxist? Who knew?
And you can just imagine what will happen when the E.P.A., buoyed by the smog ruling, moves on to regulation of greenhouse gas emissions.
What do I mean by crazy climate economics?
First, we’ll see any effort to limit pollution denounced as a tyrannical act. Pollution wasn’t always a deeply partisan issue: Economists in the George W. Bush administration wrote paeans to “market based” pollution controls, and in 2008 John McCain made proposals for cap-and-trade limits on greenhouse gases part of his presidential campaign. But when House Democrats actually passed a cap-and-trade bill in 2009, it was attacked as, you guessed it, Marxist. And these days Republicans come out in force to oppose even the most obviously needed regulations, like the plan to reduce the pollution that’s killing Chesapeake Bay.
Second, we’ll see claims that any effort to limit emissions will have what Senator Marco Rubio is already calling “a devastating impact on our economy.”
Why is this crazy? Normally, conservatives extol the magic of markets and the adaptability of the private sector, which is supposedly able to transcend with ease any constraints posed by, say, limited supplies of natural resources. But as soon as anyone proposes adding a few limits to reflect environmental issues — such as a cap on carbon emissions — those all-capable corporations supposedly lose any ability to cope
Now, the rules the E.P.A. is likely to impose won’t give the private sector as much flexibility as it would have had in dealing with an economywide carbon cap or emissions tax. But Republicans have only themselves to blame: Their scorched-earth opposition to any kind of climate policy has left executive action by the White House as the only route forward.
Furthermore, it turns out that focusing climate policy on coal-fired power plants isn’t bad as a first step. Such plants aren’t the only source of greenhouse gas emissions, but they’re a large part of the problem — and the best estimates we have of the path forward suggest that reducing power-plant emissions will be a large part of any solution.
What about the argument that unilateral U.S. action won’t work, because China is the real problem? It’s true that we’re no longer No. 1 in greenhouse gases — but we’re still a strong No. 2. Furthermore, U.S. action on climate is a necessary first step toward a broader international agreement, which will surely include sanctions on countries that don’t participate.
So the coming firestorm over new power-plant regulations won’t be a genuine debate — just as there isn’t a genuine debate about climate science. Instead, the airwaves will be filled with conspiracy theories and wild claims about costs, all of which should be ignored. Climate policy may finally be getting somewhere; let’s not let crazy climate economics get in the way.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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