Monthly Archives: September 2015

It’s Here – Global Markets Down $13 Trillion From Peak Already

The US stock market has been inflating continuously since Black Monday in October 1987 when the new Fed Chairman, Alan Greenspan, panicked and opened up the financial sluice gates.

Between 1987 and 2015’s May peak, the S&P 500 had risen by nearly 1000%. This had nothing to do with the real  economy. Real median household income in 1989 was $53,000 in constant 2013 dollars, exactly where it is today.

Now the tide is receding. The global commodity crash and collapse in capital expenditure driven by the corporate focus on stock buy-backs will be driving corporate profits down increasingly over the coming year

Central banks are in trouble. In the emerging markets banks they have to shrink their money supply in order to prevent massive capital flight, like the $800 billion outflow from China in the past 5 quarters.

Developed market Central Banks have held interest rates at the zero level for seven years and gobbled up much of the public debt via quantitative easing. But while drastically inflating financial asset prices,  this hasn’t helped the real economy. Central bank credibility is evaporating quickly, with confusion, indecision and incoherence in policy becoming more apparent.

This loss of confidence in the Central Banks and the belief that they can always stand by the stock markets, will cause valuation multiples to contract. At the same time, the accelerating global commodity crash, the collapse in capital expenditure and declining trade will soon bring on worldwide recession——one which the central banks will be powerless to reverse via monetary stimulus.

Stock prices will be under pressure from lower multiples and lower earnings for a considerable time. It is likely that we are in for an unravelling of the rises of the last 20 years.



For the ‘New York Times,’ #PalestinianLivesDoNotMatter

Let’s do a thought experiment. Let’s say a young Jewish woman dressed in Orthodox clothing was shot dead by uniformed Palestinian policemen somewhere in the West Bank. Let’s say that several eyewitnesses said the woman — we’ll call her Anna Agustovsky — had done nothing wrong except to possibly misunderstand orders that the Palestinian police had barked in Arabic. There were photos of one policeman leveling his automatic weapon at Anna, and more photos as she lay on the ground after they shot her. A few days later, Amnesty International, citing the many witnesses, called the killing “an extrajudicial execution.”

Would the New York Times continue to ignore the story? Or would there be wall-to-wall coverage?

But 18-year-old Hadeel al-Hashlamoun was Palestinian. And five days after Israeli soldiers murdered her at an occupation checkpoint in Hebron, the New York Times continues to ignore her death.

The Times’s coverage started out to be somewhat promising. On September 22, reporter Diaa Hadid did transcribe the official Israeli justification for killing Ms. al-Hashlamoun, but also quoted two witnesses who challenged the Israeli account, including a “European activist” who “provided photographs of the episode.”

But none of these photographs appeared with that article, or in the Times at any time since — even though they are all over the internet.

And five days later, the Times has not followed up the story in any way. No reporting of the Amnesty International indictment. No effort to write about the reaction among Ms. al-Hashlamoun’s family, or to tell us who she was. The Times has at least 3 reporters in Israel/Palestine, but none of them has apparently tried to independently investigate the Israeli version of the killing. And let us repeat; the newspaper of record has still not published a single photograph of Ms. al-Hashlamoun as she lay dying.

Our hypothetical Anna Agustovsky would matter to the New York Times. Hadeel al-Hashlamoun, being a Palestinian in an occupied land, does not matter.

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Can Corbyn succeed in British politics in the long term?

Or even in the short term? Corbyn is attracting the derision of Britain Inc because of his unwillingness have a PR campaign at all, and continuing his politics of rebellion in a new position of influence. Refusing to sing the national anthem at a public function is understandable, but not politics. If he can shape up just a little, what lays in store for us in the longer term?

Anthony Barnett has some words of wisdom for us on on this matter:

On Iraq and against austerity Corbyn has the public with him. He is not a just figure from the past. Or even if he is, he is also England’s Nicola Sturgeon. But he is a collectivist in a way that may be less popular south of Hadrian’s Wall than in Scotland. How he articulates his socialism may decide whether he is accepted and perceived by voters as a democrat in the English sense of being for peoples’ freedom and liberty. England has a highly individualist culture, including across the working classes, and if Corbyn is positioned as seeking a top-down, dictatorial state he will be drummed out of relevance. This is what the Tories will seek to do. At the same time English individualism is not as permissive of rampant greed as America’s (if I may be excused a rough and ready stereotyping). Here Corbyn’s philosophy may not be so discordant with opinion as the Tories think.

On the politics of greed he has the advantage:

It should never be forgotten that the Prime Minister charged taxpayers £680 for tidying up his wisteria, as if this was a parliamentary expense that should be borne by the public purse. He and George Osborne call for austerity but they and their families are dripping in money and you can tell from their smiles that they delight in dosh. Corbyn by contrast calls himself parsimonious. The media will try and project him as power-crazed but he is evidently selfless not greedy. It is less a matter of being “authentic” whatever that means, than of having the integrity to live the values he espouses. This too could prove very popular. It is a paradox, but Corbyn is the candidate with the most austerity in the age of austerity and this ensures that he can denounce it with complete credibility.

On Labour Party tribalism there is a weakness:

Neal Ascherson once observed that you could no more get democratic socialism from the British state than milk from a vulture, a remark that helped inspire Charter 88’s campaign for a new constitution. Should Corbyn attempt to command the state in the name of his socialism he will be broken, despite his legitimate claims to popularity sketched above. He might with a great deal of luck and another financial crash be able to win an election outright by driving over 100 Tory MP’s from the seats. Yet even were he to climb such an incredible mountain, the vulture will not be milked.

The alternative is to build a wide alliance of all the forces celebrating his astounding breakthrough, the trade unions, the Greens, Plaid Cymru, the SNP, local governments and local mayors. Caroline Lucas offered an electoral pact (a not ungenerous proposal from her own party’s point of view, and with Labour needing every vote it can get) motivated by a similar analysis in a speech directed to him and his supporters. It deserves quoting at length:

The beauty of this moment, and what scares the political establishment most, is that the power of your campaign is coming from thousands of grassroots voices – not a diktat from above. It hardly seems a coincidence that the first truly democratic leadership election in your party’s recent history is producing such a powerful resurgence in optimism. People do indeed vote differently when they know their vote counts…. an anti-establishment mood is manifesting itself into a real political force.


For that reason, one of my few disappointments about your campaign is that it hasn’t focused more on reforming our ailing democracy. A truly progressive politics fit for the 21st century requires a voting system which trusts people to cast a ballot for the party they believe in. If you do win this contest I believe you should take this opportunity – and the huge amount of momentum behind you – to call a constitutional convention to allow people across the country to have a say in remodelling Britain for the future. A convention has the potential to energise even more people than your leadership campaign, or the Green surge, and to inspire the kind of feeling across the UK that swept Scotland in 2014.


However, to fully embrace this moment – and if Labour is to truly become part of a movement rather than remain just a machine – it’s crucial to recognise the multi-party nature of modern British politics. No one party has a monopoly on wisdom, or is capable of making the transformation alone: a diversity of progressive voices is essential for our democracy.

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words of wisdom

The China credit bubble

We discussed China’s credit bubble on February 7, 2015 in a piece called ‘Capitalism died a long time ago’ ( see:

It was pointed out just before the crisis in 2007, that China’s GDP has doubled, expanding by $5 trillion in 7 years, but that it took a $21 trillion expansion of debt to accomplish this. Thus China’s Ponzi scheme actually created $4 of debt for every $1 of additional GDP.

Now we begin to see some results. As Doug Noland points out (in: we have had a revelatory stock market melt-down in China, and goes on:

Never have so many Chinese owned (over-priced and poorly constructed) apartments. Never have Chinese citizens, governments, financial institutions and corporations accumulated so much debt. Never have the Chinese had so much invested in securities markets. China has zero experience with a multi-trillion (yuan or dollars) “shadow banking system.” Never have so many invested so much in “wealth management” vehicles and other sophisticated financial products, without a clue as to where their “money” was directed. And when it comes to corruption, I seriously doubt history offers a like comparison.

The Chinese – apartment owners, bankers, Internet financiers and policymakers – have never experienced the downside of a massive Credit Bubble. Never has China experienced Trillions of “money” that retains “moneyness” chiefly on the perception that the all-knowing central government will safeguard its value. Never have Chinese finance and spending had such major impacts around the world. China does, however, have a long history of financial panics.

A week after blaming short sellers and foreigners and employing unprecedented market intervention, officials this week espouse a preference for market forces to play a prominent role in setting the value of the Chinese currency. Credibility – so vital in markets and as the bedrock of money and Credit – can dissolve so quickly. Clearly, the Chinese will rely on market forces only so long as the markets are operating consistent with their policy aims.

Chinese officials hold grand ambitions for global economic, financial and military supremacy – a vision brought into keen focus during this protracted Bubble period. In the near-term, however, their fixation has shifted to ensuring that everything doesn’t come crashing down. Collapse would see the focus shift to villainizing foreigners, maintaining social order and retaining power.


The Egypt ENI gas find

We know that gas politics was behind the coup in Egypt. This just confirms it. ENI said in a statement that a gas discovery could hold a potential 30 trillion cubic feet of gas in an area of about 100 square kilometers. It is said this could be one of the world’s largest natural gas reserves. That this has just been announced should not deflect us from the considered assumption that it was known about before the coup, at the time of Morsi’s government.

First national trade union in the US votes to endorse BDS

United Electrical, Radio & Machine Workers of America 28, August –

Delegates upheld the UE tradition of taking courageous stands on foreign policy issues when
they adopted the resolution on Palestine and Israel. It points to Israel’s long history of violating the human rights of the Palestinians, starting with the ethnic cleansing of 750,000 Palestinians in 1947-48 that turned most of Palestine into the State of Israel. It cites a statement issued by UE’s officers in 2014 condemning Israel’s war on Gaza last summer that killed more than 2,000, mostly civilians, including 500 children. It calls for cutting off U.S. aid to Israel, U.S. support for a peace settlement on the basis of self-determination for Palestinians and the right to return. The resolution also endorses the worldwide BDS movement – Boycott, Divestment, Sanctions – to pressure Israel to end its apartheid over the Palestinians just as similar tactics helped to end South African apartheid in the 1980s. UE is now the first U.S. national union to endorse BDS.
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