Monthly Archives: January 2015

Eye-witnesses to Junta murder of Egyptian activist arrested


Sundus Abu Bakr and Shaimaa al-Sabbagh were killed with live ammunition during peaceful demonstrations against the Egyptian Junta on 25th January 2015.
Five eye-witnesses to the murder of Shaimaa al-Sabbagh, among them Azza Soliman, a lawyer and founder of the Center for Egyptian Women’s Legal Assistance offering to give evidence to a public prosecutor yesterday were arrested on bogus charges.

Human Rights Watch coming of age? The 2015 report.

Among other things the new 2015 Human Rights Watch (HRW) report available on:

… says that the sectarian and abusive policies of the Iraqi and Syrian governments, international indifference to them, have been important factors in fueling the rise of ISIS. Philip Roth’s well-known and justified aversion to Assad’s use of barrel-bombs and the UNSC’s failure to censure this comes through loud and clear.

The US government comes under attack for refusing to investigate, let alone prosecute, those who ordered the torture detailed in the Senate report on CIA torture. Meanwhile, the report notes the counter-productive nature of French government policy, where there is a danger that the government’s response to the Charlie Hebdo attacks – using counterterrorism legislation to prosecute speech that does not incite violence – will have a chilling effect on free expression.

The report welcomes the new role for the ICC in the Israeli-Palestinian conflict.

The Egyptian government’s crushing of the Muslim Brotherhood is blamed for sending the utterly counterproductive message that if political Islamists pursue power through the polls, they will be repressed, which encourages violent approaches. The report writes: “Secretary
of State John Kerry repeatedly spoke of a transition to democracy that was supposedly under way in Egypt despite the lack of supporting evidence. Now that Congress has added a new national security exception to the military aid conditions in place, the US government seems likely to restore most, if not all, of its military support for Cairo without any letup in its repression. This rush to turn the aid spigot back on is driven by a prioritization of enlisting the Egyptian military to curtail an insurgency in the Sinai, back Israel’s fight against Hamas in Gaza, and support the anti-ISIS war in Syria and Iraq over supporting the rights of the Egyptian people. The UK, France, and other European governments have also done little to reverse Sisi’s unprecedented crackdown.

“Après moi le déluge”: the Fed build up of liabilities portends a coming tsunami

We continue to think about the world’s biggest ever story – indeed one could call it a civilisational one: the financial state of the West.

After 73 months of ZIRP yet another meeting at the US Fed has decided to extend the monetary largesse. The threat of interest rate rises was just that an empty threat: the biggest loser from such a policy would be the US (and all the other Western governments). Not only would their debts cost more, but they would undermine the “carousel” with the banks that has been set up to fund them. The moral of the tale is that you cannot taper a Ponzi scheme.

In a previous post [See;], we examined Peter Warburton’s structural analysis of the post-1985 Western economic model: channel inflation through financial and related assets in order to fund Western government profligacy, rather than bring it to account through the operations of free markets that would see a flight to real assets as fiat currencies are devalued.

Part of this post-1985 stategy was that large bond buyers were allowed to borrow vast quantities of newly created money from the Fed at a fixed price, avoiding interest rate rises as increasing quantities of lending take place. The point is that it is all channeled back into the financial markets, and in particular into government bonds, making bankers rich and keeping Western government afloat. The only chink in the West’s armour was Europe. Southern Europe was going to take Germany down if the ECB didn’t join the party: now it has.

The whole point of this financial-economic strategy is that tickle down actually doesn’t work – must not work. This however, continues to be the justification for everything that is happening – the philosophy of our times as David Stockman says in his latest post – The Wreck of the Monetary Hesperus: “At the end of the day, there is nothing behind the curtain at the Eccles Building except for the specious doctrine of wealth effects.”

Stockman explains the role of the bankers we describe above, when he says: ” The reason that ZIRP is of exclusive benefit to financial gamblers is straight forward. No businessman in his right mind would fund equipment, inventories or even receivables with borrowings under a one-day or even one-week tenor. The risk of fatal business disruption resulting from the need to precipitously liquidate working assets if funding can not be rolled-over at or near the existing interest rates is self-evident… Likewise, no sane householder would buy a home, automobile or even toaster on overnight borrowings, either.”

Only monstrous portentous titles like the ones for this post, or Stockman’s post, will do when described what is going on, and what might happen. The only apparent limit to this Ponzi scheme is the ability of the US dollar, on which it is based, to continue to dominate world trade. It will take a little time for that to change, although this is in fact happening, not least because (astonishingly) the US government sees fit to undermine its own currency through liberal use of sanctions, for political reasons. There is another time bomb there, however, and that is the political one: how long can Western governments continue crushing their real economies under the weight of financial repression, and distorting them through the unprecedented manipulation of prices?

The Soviet Union fell for lesser crimes against economic logic.

Following on a note by Etyen Mahçupyan on the Islamic reaction to Western ideational imperialism

It isn’t so much that there is a clash of civilisations, if there ever was one. It is more that as the   world adapted to globalization and accommodated Western normative values, the Middle East was not assimilated into the West in the end. Mahçupyan writes “Quite the contrary, as the Middle Eastern world drew close to universal values, it suffered separation and fragmentation within itself, and the moral ground of claiming rights in opposition to the West was formed. Radical Islamic movements were born, grew and found social support in such an environment [See rest at:].”

I would add to this that the Arab spring is part of a general reaction against Western ideational imperialism, some of which reaction is extreme, some of which isn’t. The counter-revolution led by the Arab Gulf monarchies is bizarrely supported by the liberal West, as a tool to quell this ideational rebellion. This is more than the “official West” pursuing realpolitik. The now dead and extremely illiberal King Abdulla, the Bahraini régime, and the bloodthirsty Egyptian Junta are astonishingly spun as “moderate allies”, on the basis imputed by liberal observers into the facts, but absolutely absent in actual fact in the minds of those regressive rulers, that they represent some kind of nascent “road to democracy” leading to a non-rebellious nirvana mirroring Western liberal values, as expressed in the West by the secular majority.


The European Central Bank now competes in the roller-coaster stakes, building a “death ride” to rival Kubota’s “doom ride”

If Kubota is Abe’s Shaman, then Supermario Draghi is Angela’s witchdoctor, come to save her from the inability of the German (democratic) political system to understand the needs of the German Empire; to bail out the hedge funds full to the brim of Southern European debt at nice prices to create “inflation” there and presumably revive “demand” for German exports.

Russian sanctions and the death of the Russian market, which Angela Merkel seems to view with equanimity despite the fury of German industrial giants, makes this necessary. The Russian business is entirely about claiming Eastern Europe for Germany. Not that the angry little Poles and Lithuanians are ever going to become friends with the Russians anytime soon, but the pull of the East with China rising was changing the centre of gravity, and the Czechs and Hungarians were definitely having second thoughts, not to mention the Serbs. US and German (Imperial) interests coincided nicely here, although German democratic society grumbled, and a new  “curtain” was erected in the financial Swiftosphere.

Now the problem (especially with Syriza’s win in Greece) is Southern Europe’s depression. So the European Central Bank (ECB)’s Draghi decided to purchase a staggering $1.24 trillion of existing sovereign bonds and other debt securities in Europe during the next 18 months. Draghi says ” Today’s monetary policy decision on additional asset purchases was taken…..(because) the prevailing degree of monetary accommodation was insufficient to adequately address heightened risks of too prolonged a period of low inflation.” So we are seeing a repeat of Kubota’s inflation fantasies, with potential long term disastrous consequences.

As we wrote earlier in “The fundamental significance of the Chicago Mercantile Exchange’s 10-K filing with the Security and Exchange Commission”, since 1985 the world economic system has been rigged not to show inflation in the real economy, but to channel it continuously and entirely into financial assets [see on:].

The disclosures by the Chicago Mercantile Exchange (CME) that it has central banks as major clients and gives them volume discounts for the trading of futures means that Western Central Banks are leading the investment banking community on Wall St and the City of London into massive intervention in futures markets across the board on a continuous basis. We are no longer, since the 1986 “Big Bang” in London, the 1999 Gramm-Leach-Bliley Act, which removed Depression-era laws separating banking, insurance and brokerage activities (repealing Glass-Steagall), and the 2000 Commodity Futures Liberalization Act, in a free market. On one side of the market there will always by a concerted group of central banks, who unlike ordinary mortals can magic money out of thin air.

The central banks are particularly keen to bet against a rise in the prices of gold, oil, base metals, soft commodities, and anything else that might be deemed an indicator of inherent value, in order to eliminate any reliable benchmark against which to measure the eroding value  of fiat currencies.

The whole purpose of this policy since 1985 has been to allow profligate Western governments to switch from funding themselves through methods that increased high powered money and therefore lending in the real economy, to funding themselves through bond issues which, through manipulation of inflation statistics and now through manipulation of commodity prices, kept yields (interest rates) low and bond prices high. Driving the banking system to become a system for speculation in the securities markets, rather than a system for lending to normal business, by ensuring an unbeatable lucrative carry-trade through ZIRP (zero interest-rate policy), meant that a carousel was formed where government bonds were always funded and bankers became rich.

But this ZIRP, otherwise known as financial repression, has had massive costs in ripping off savers in the real economy, only partially offset by the benefits borrowers have had, which benefits anyway have involved driving up house prices to the cost of upcoming generations (the youth that have to pay the taxes which fund the retirees), and which are conveniently left out of the inflation numbers.

So the question is: if the system is rigged to keep statistical inflation down, and channel it uniquely into securities markets, how can the likes of Draghi and Kubota think that inflation can be stoked up by intervening in government bond markets? Note that not only is the real economy being crushed by the increasing weight of the financial sector on top of it, but the private sector element (the stock market) of this is getting smaller and smaller due to share buybacks encouraged by ZIRP. The financial sector has truly lifted off into the stratosphere, not just price-wise but substantively.

So we are back ironically to the 1970’s problem of public sector “crowding out”.

EU- Israel association agreement questioned

A group of 63 influential MEPs have called on EU foreign policy chief Federica Mogherini to suspend the EU-Israel Association Agreement, the main treaty between the EU and Israel.

They cited, among other for Israeli War crimes the Amnesty International report “Nothing is Immune” last reported on December 9, 2014: Open link

Amnesty report available on:



Abe’s shaman on the ropes

We wrote on Sept 9, 2014 how Japan’s post-war miracle was an aggressive mercantilist policy which depended on protection and exchange rate manipulation [see]. That the US could put an end to that with the Plaza Accords of 1985 was due to Japan’s status as a conquered nation, something which was made very clear by recent events, when the reformist government of Yukio Hatoyama was scuttled by the US in 2010 [See report on Karel Van Wolferen’s spectacular article on the subject by opening link].

Where China has pursued a similar policy, the US administration has constantly tried to force a revaluation of the Renmimbi. However, the US has been unsuccessful in such efforts. China, unlike Japan, was not a conquered nation, and thus follows its own agenda.

Japan has not reformed since 1985, draining the savings of its people to sustain and unsustainable economic structure, deficit funding a system that is addicted to corporate and social welfare, subsidies, and bailouts that no one ever wants to pay for.

All this represents the background to the accession of Haruhiko Kuroda as Governor of the Bank of Japan, and as “Abe’s shaman”, as we have previously called him, pace Izuru Kato, pursuing US Fed inspired ZIRP and market manipulation to keep mushrooming Japanese debt yields in low single-digits. Kuroda’s helter-skelter QE programme was supposed to boost growth, by boosting inflation. On November 2, 2014 we wrote about Izuru Kato’s commentary that this appeal directly to inflationary psychology to boost consumption expenditure, would fail [See].

As indeed it has. Admittedly declining oil prices haven’t helped. But surely this and Kuroda’s QE programmes hammering the Yen should have helped exports?

Not even crushing the Yen has helped to boost exports, however. The Japanese trade balance is firmly in the red. Seeking growth in a moribund world market of competitive devaluation, where your technology has started to lag behind anyway, isn’t easy.