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Jim Sinclair’s Commentary

The latest from John Williams’

- 22.6% Gain in July Durable Goods Orders Was Just 0.8%, Net of an Irregular 318.0% Surge in Commercial-Aircraft Orders 
- Booked Years in Advance, Commercial-Aircraft Orders Have Negligible Impact on Near-Term Economic Activity 
- July Existing-Home Sales in Ninth Month of Annual Decline 
- July New-Home Sales Held in Pattern of Stagnation, Amidst Ongoing Reporting Instabilities

"No. 652: July 2014 Durable Goods Orders, New- and Existing-Home Sales" 


Jim Sinclair’s Commentary

The Yuan is knocking on the dollar door.

British Columbia, Ontario to cooperate on Yuan trading hub
Christopher Donville, Bloomberg
2:38 PM, E.T. | August 27, 2014

Business leaders in British Columbia and Ontario agreed to cooperate in promoting Canada as a currency trading hub for the yuan.

AdvantageBC International Business Centre-Vancouver and the Toronto Financial Services Alliance, a group representing business and financial representatives, said today in a statement they will work together with the governments of Canada and the provinces to make the country the first trading hub for the Chinese currency in North America.

“While Canada’s financial industry is headquartered in Toronto, much of the country’s Canada-China trade passes through Vancouver, making it critical for both jurisdictions to work collaboratively so that Canadian businesses are able to take full advantage of this initiative,” Colin Hansen, AdvantageBC’s chief executive officer, and Janet Ecker, CEO of the Toronto alliance, said today in the statement.

Financial centers around the globe are vying to establish trading hubs for the yuan. China has already signed agreements to trade the yuan more freely with Singapore, London and Frankfurt as part of an economic restructuring that includes taking steps to loosen exchange controls.

AdvantageBC is a non-profit organization promoting international business in British Columbia, according to the statement.



Russia’s Gazprom Neft to Sell Oil for Rubles, Yuan

MOSCOW, August 27 (RIA Novosti) – The Russian oil company Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers, the Russian business daily Kommersant reported Wednesday.

Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September. According to Kommersant, the payment for these shipments will be received in rubles.

Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.

According to the newspaper, the change in currency was made because of the Western sanctions against Russia.

As a protective measure, Russia decided to avoid making its payments in US dollars, which can be tracked and controlled by the United States government, Kommersant reported.


Merkel Slams US Hegemony? "America Can’t Solve All The World’s Problems Anymore"
Submitted by Tyler Durden on 08/27/2014 18:29 -0400

First Russia and China, then UAE, Egypt, and Turkey… and now it appears Germany (following a phone call with Putin) is pulling the rug out from under US hegemony – just as Obama’s warmongery ramps up…


Which is odd because just yesterday, President Obama (who never lies) stated "The United States is and will remain the one indispensable nation in the world…" adding that "no other nation can do what we do." Perhaps he is wrong?

“Even a superpower can’t solve all of the problems alone anymore,” German Chancellor Angela Merkel says.

Merkel did not stop there…






Seems like she is returning to the offensive from the defensive…


Will There Be a ‘New Gold Rush?’ — Ian Gordon, Longwave Analytics

Ian Gordon created Longwave Analytics, which studies the Longwave principle, by which economies obey long-term cyclical trends of expansion and contraction. Eric Sprott is an avid reader — he suggested I interview Ian Gordon for his take on the role of Kondratiev’s ‘long wave cycle’ in explaining the economic environment we are seeing today.

Ian said ‘winter’ was coming for the world economy, though it has been staved off by the flexibility provided by paper money. As a result, a depression will be very different today than in 1929 or 1873, he believes. But now, as then, we could see a massive push for new gold discoveries.

Mr. Gordon explained how he got to know Eric Sprott over 10 years ago:

“I was writing about long-term economic cycles, referred to as ‘Kondratiev’ cycles. In 1998, I realized that we were close to the top of a bull market; we were somewhere akin to 1928 – immediately preceding the Great Depression. Eric appreciated my work, because it helped explain an imminent bull market for gold, which he saw as well.”

I asked: Do these ‘long wave’ economic patterns explain today’s bear market for gold – and the recent rally in general stocks?

“Well, they didn’t predict this – but they can help explain why it’s happening. Over the course of one entire ‘long wave’ economic cycle, covering a full expansion and subsequent contraction, you have what I call four ‘seasons.’ Winter is the period where debt is wiped out of the economy. It happened after 1929, which caused the US banking system to collapse. During the 1920’s, there had been a big build-up in consumer and corporate debt, as well as sovereign debt.

“During the Great Depression and the previous depression of 1873, we were on a gold standard system, so the ability to create money was limited. This time around, we are in a pure credit-based system, so the ability to create money withstands the ravages of the winter. Effectively, governments have been creating more debt. This will ultimately cause a more horrendous economic decline than in either 1929 or 1873, as debt levels are far greater today – and because the world is much more inter-connected financially.”


The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan
Submitted by Tyler Durden on 08/27/2014 13:57 -0400

Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar’s stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.

This changed in late June when first Gazprom’s CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People’s Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.

And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.

Until now.

According to Russia’s RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers. Meaning Russia will export energy to either Europe or China, and receive payment in either Rubles or Yuan, in effect making the two currencies equivalent as far as the Eurasian axis is conerned, but most importantly, transact completely away from the US dollar thus, finally putin’(sic) in action the move for a Petrodollar-free world.

More on this long awaited first nail in the petrodollar coffin from RIA:



Pentagon warns that Isis has global aspirations as US continues Iraq strikes
US effort to build international coalition against Isis advanced, as UK and six other nations agreed to arm the Kurdish peshmerga
Spencer Ackerman in New York, Tuesday 26 August 2014 16.36 EDT

Obama spoke about Isis before a group of American military veterans on Tuesday.

The Pentagon warned on Tuesday that Islamic State (Isis) militants have global aspirations, ratcheting up already dire US rhetoric against the jihadist army that has overrun much of Iraq and Syria.

“Quite frankly, we’re not turning a blind eye to their global aspirations as well,” said Rear Admiral John Kirby, the Pentagon press secretary.

Isis has not conducted attacks outside of Iraq – its gestation ground – and Syria, where its successes brought it global attention. Its own rhetoric imagines a global Islamic caliphate, obliterating man-made borders, but its capabilities – which include access to oil wealth – fall significantly short.

Yet Isis’s attraction of as many as thousands of western passport holders has convinced US intelligence that Isis fighters will plot attacks against the US and Europe.

“Much has been made about the threat they pose, and how imminent it is, and you don’t need to look any further than the recruitment of foreign fighters and the degree to which not just the United States government but many western governments are concerned about these foreign fighters leaving their shores, going over there, getting radicalized, trained, and then coming back and executing attacks, which is not out of the realm of the possible,” Kirby told reporters.

US warplanes continued to strike Isis targets on Tuesday. US Central Command said that its planes, supporting Kurdish and Iraqi forces, destroyed two Isis armed vehicles near the Iraqi Kurdish capital of Irbil and damaged a third.


Jim Sinclair’s Commentary

Popular equity market delusions may run iron economic reality.

Treasury Curve Collapse Signals Multiple Expansion Exuberance Is Over
Submitted by Tyler Durden on 08/26/2014 18:29 -0400

Thanks to buybacks, multiple expansion has been the driver of equity market strength as non-economic actors know one thing – buying stocks at record highs pays better than ‘investing’ in Capex or growth. However, the Treasury market’s yield curve is sending a message loud and clear that multiple-expansion is due to end. As Wells Fargo’s Gina Martin Adams notes, "Index P/E is likely to fall," as the spread between 10Y and 2Y yields compresses. Historical data shows the P/E ratio contracted in seven out of eight periods when the curve flattened since 1975.


As Bloomberg adds, Martin Adams expects the S&P to close 2014 -7.5% from here at 1850 (tied with Deutsche’s David Bianco for lowest prediction among 20 strategists).


Jim Sinclair’s Commentary

And so on we go.

Ukraine-Russia talks in Minsk fruitless — Yatsenyuk
August 27, 16:51 UTC+4

KIEV, August 27. /ITAR-TASS/. Talks between Ukraine and Russia in Minsk, the capital of Belarus, on Tuesday were fruitless, Ukrainian Prime Minister Arseniy Yatsenyuk told a government meeting on Wednesday.

No results had been expected from the meeting, but the event had to take place, he added.

Ukraine currently faces three challenges — war, exchange rate and energy, the premier said, adding that the first could be settled only by restoring control over the border with Russia.

Ukraine’s cooperation with NATO

Yatsenyuk said the government would debate a plan for developing cooperation with NATO. “The Ukrainian president will attend the NATO summit in Wales on September 4-5,” the prime minister said.

“NATO is our partner. We expect the Western countries and NATO to provide practical assistance. We also expect decisions to be made at the NATO summit,” he said.

Deterioration of Ukrainian currency

Ukraine’s currency breached the psychological barrier in exchange rate trading on Wednesday, with the rate of 14 hryvnia to the US dollar, Ukrainian media reported, as Yatsenyuk warned ministers that the national economy could not withstand more than 12 hryvnia for $1.


Russian Central Bank prepares bill to create SWIFT analog in Russia
August 27, 15:06 UTC+4

MOSCOW, August 27. /ITAR-TASS/. The Russian Central Bank and the government’s financial and economic departments have prepared a bill to create a Russian analog of the SWIFT international financial message system, Deputy Finance Minister Alexei Moiseyev said on Wednesday.

“We have prepared a bill. We have consulted with the banking industry and the Central Bank,” Moiseyev said.

Russia will go ahead with the bill as soon as it becomes clear that the Central Bank is technologically prepared “to transfer all operations to internal processing inside Russia.”

Central Bank First Deputy Chairman Georgy Luntovsky said in July that SWIFT was discussing a possibility with the Russian regulator to establish an operational center in Russia. SWIFT Director for Russia, CIS and Mongolia Matvei Gering confirmed this information at that time.

Moiseyev said in April that the Finance Ministry was going to initiate amendments to the legislation to transfer electronic settlements to Russia to ensure their reliable and uninterrupted nature. The system should be registered in Russia and comply with the requirements of the Russian Central Bank, Moiseyev told Rossiya-24 TV channel at the time.


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Russia’s position to remain unchanged at meeting on gas transit with EU — minister Novak
August 26, 17:02 UTC+4

MINSK, August 26. /ITAR-TASS/. Russia will not change its position on key issues at a meeting on gas transit with the EU scheduled for August 29, Russian Energy Minister Alexander Novak said on Tuesday.

“The situation remained unchanged as compared with June 16 after the switch to a prepayment system for gas deliveries,” Novak told ITAR-TASS.

The minister said the meeting would be held in Moscow. “We will discuss issues concerning our energy cooperation and energy dialogue, including mutual relations on gas transit through Ukraine, reliable gas supplies, the construction of South Stream [gas pipeline] and the expansion of access to the capacity of OPAL pipeline,” he said.

Novak cited experts’ data proving that Ukraine “could not survive without Russian gas”.



Jim Sinclair’s Commentary

Equity markets today are historical "popular delusions and the madness of the crowd."

Housing Price Gains Hit The Brakes In June, S&P/Case-Shiller Says
8/26/2014 @ 9:05AM

In another indicator that the double-digit housing price gains of 2013 appear to be behind us, price increases continued to slow in June, S&P/Case-Shiller home price data released Tuesday shows.

The National Home Price Index gained just 6.2% in the 12 months ending June 2014, while the 10-City and 20-City Composites gained 8.1%. That’s a dramatic shift from the double-digit, year-over-year price increases that had become the norm in the second half of 2013 and the first part of this year. All three indices saw their rates slow significantly from last month, when the year-over-year price changes for 10-City Composite stood at 9.4%, the 20-City at 9.3%, and the National Index at 7.1%.

“Home price gains continue to ease as they have since last fall,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing sector.”

To be clear, home prices are not dropping, simply rising at a slower rate. Economists like to look at year-over-year data for a better picture of the overall market trend than month-to-month data. The S&P/Case-Shiller Indices measure home prices across the nation as well as in 10 and 20 specific cities. While all cities saw home prices increases in June, every city the indices track recorded slower year-over-year price increases than in the prior month.

“In San Francisco, the pace of price increases halved since late last summer,” Blitzer noted. “The Sun Belt cities – Las Vegas, Phoenix, Miami and Tampa – all remain a third or more below their peak prices set almost a decade ago.”


Investor Net Worth Drops To New All Time Low, NYSE Reveals
Tyler Durden on 08/26/2014 15:25 -0400

One can debate whether or not margin debt as reported by the NYSE has any relevance in a world in which the retail investor is long gone, and where the marginal buyer are hedge funds (and primary dealers who use excess reserves as collateral for marginable derivatives and futures) who fund themselves using far more arcane "shadow" repo conduits as we have explained previously, it is indisputable that the leverage statistics disclosed monthly by New York Stock Exchange provide a useful glimpse into how the broader market is obtaining "dry powder" to keep BTFATH.

And while in July margin debt did dip modestly from near all time highs hit back in June when total margin debt was virtually tied with the previous record, at $464 billion, it was that other metric tracked by the NYSE, namely Investor Net Worth, calculated by subtracting margin debt from the notional represented in free credit cash accounts and credit balances in margin accounts, that was the notable highlight in the July report: at a negative $182.1 billion, a decline of $6.3 billion from the prior month, investor Net Worth has never been lower.


Swiss Gold Referendum on November 30
22 August 2014 – Egon von Greyerz

One of the very few remaining proper democracies in the world will vote on bringing the Swiss Gold back to Switzerland on November 30.

This is an initiative that could only happen in Switzerland. An influential member of parliament, Luzi Stamm, representing the biggest Swiss party SVP (Swiss People’s Party) started this initiative with two other parliamentarians.

In order to have a national referendum on an issue in Switzerland, 100,000 supporting signatures are required. The ‘Swiss Gold Initiative’ already achieved this requirement in early 2013.
Not only will the referendum deal with gold repatriation but also seeks to stop all gold sales by the SNB (Swiss National Bank) and to require the SNB to hold 20% of its assets in gold.

The Swiss Parliament and the SNB are against the initiative since it would stop their ability to freely print money. Swiss monetary policy used to be the soundest in the world, but in recent years Switzerland has joined other countries in abandoning a policy of sound money. Switzerland had 2,600 tons of gold in 1999 which was a significant amount in relation to the size of the country. At that time it was decided to sell 50% of the holding. Most of this was sold at the low of the market just like in the UK.

But not only did Switzerland dispose of half of their gold over ten years ago, but a major part of their remaining gold has either been leased out or sold. And some of the gold , if it is still there, is stored in other countries. As most other central banks, the SNB refuses to carry out a proper and official audit of the Swiss gold. Until an audit is done there is no certainty that all of the gold is still there.

Most governments and central banks officially dislike gold because it reveals the decline in the value of paper money. Since 1913 when the Fed in the USA was founded, all major currencies, including the Swiss Franc, have lost between 97% and 99% of their value against gold.



Jim Sinclair’s Commentary

You have to love statistics.

Durable Goods Orders Surge 22.6% in July
Jonathan House and Josh Mitchell
Aug. 26, 2014 8:36 a.m. ET

WASHINGTON—Orders for big-ticket manufactured goods surged in July to a record thanks to a jump in aircraft purchases, though underlying readings showed softening business spending last month.

Purchases of durable goods-products like airplanes, cars, and heavy machinery that are designed to last at least three years-rose a seasonally adjusted 22.6% to $300.1 billion in July from the prior month, the Commerce Department said Tuesday.

That was the sharpest increase and highest level in a data series dating back to 1992.

Surging demand for new aircraft drove most of the increase, likely reflecting stronger sales at Boeing Co. BA +0.68%The aircraft manufacturer had reported taking orders for a record 324 planes last month.

Excluding transportation, orders fell 0.8%, though the prior month’s gain was revised up to 3%.

Economists surveyed by The Wall Street Journal had forecast an overall rise in orders of 7.5% last month.


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Finally at least one major rating company is sounding the wakeup call for the EU to get real on its energy needs.

CIGA Craig

Europe will be Russia’s hostage over gas supplies for at least another decade
Policymakers will have no choice but to continue buying gas from Russia until at least the mid-2020s and "potentially much longer", according to Fitch
By Szu Ping Chan
3:57PM BST 26 Aug 2014

Europe will remain heavily reliant on Russian gas for at least another decade, according to a leading rating agency.

Fitch said a lack of alternative sources meant policymakers would have no choice but to continue buying gas from Russia until at least the mid-2020s and "potentially much longer".

Europe already buys a quarter of its gas from Russia, and analysts expect consumption to increase by a third by 2030as economies recover from the debt crisis and gas-fired electricity generation replaces old coal and nuclear power



If London court rules in favor of Soros, Bass, etc., then the US and USD will be isolated as a jurisdiction for bonds.

CIGA Craig

Soros’s Argentine Bond Bet Revealed in Lawsuit in London
By Katia Porzecanski and Camila Russo Aug 26, 2014 3:18 PM MT

Less than a month after Argentina defaulted for the second time in 13 years, George Soros has suddenly emerged as a key rival of fellow billionaire Paul Singer in the legal fight over the nation’s debt.

According to court documents filed in London last week, Quantum Partners LP, a fund managed by Soros’s family office, has joined a group of investors suing bond trustee Bank of New York Mellon Corp. for failing to distribute 226 million euros ($298 million) of interest payments on Argentine debt. The group, which also includes Kyle Bass’s Hayman Capital Management LP, owns more than 1.3 billion of euro-denominated bonds, court documents obtained by Bloomberg News show

At the crux of the dispute is a U.S. court ruling won by Singer’s Elliott Management Corp., which blocked Argentina from paying its overseas debt until the country compensates him and other holders of debt from its 2001 default. While the ruling prevents BNY Mellon from transferring any money deposited by Argentina until Singer is paid, it shouldn’t apply to bonds governed by jurisdictions outside of the U.S., the group says.


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Jim Sinclair’s Commentary

Attila the Hun is back.

Isis accused of ethnic cleansing as story of Shia prison massacre emerges
As many as 670 prisoners thought killed in Mosul with other abuses reported in Iraq amounting to ‘crimes against humanity’
Luke Harding and Fazel Hawramy in Irbil
The Guardian, Monday 25 August 2014 14.24 EDT

The United Nations said on Sunday it had evidence that fighters fromIslamic State (Isis) had killed as many as 670 prisoners in Mosul and had carried out further abuses in Iraq that amounted to crimes against humanity.

Navi Pillay, the UN high commissioner for human rights, said Islamic State and allied fighters were committing "grave, horrific human rights violations" on a daily basis. These included, including targeted killings, forced conversions, abductions, trafficking, slavery and sexual abuse, Pillay said.

The jihadists, who are consolidating their control of northern and eastern Iraq, have also destroyed religious and cultural monuments and have laid siege to whole communities, Pillay said. "They are systematically targeting men, women and children based on their ethnic, religious or sectarian affiliation and ruthlessly carrying out widespread ethnic and religious cleansing in the areas under their control."

Pillay gave fresh details of an alleged massacre carried out on 10 June by Islamic State extremists. The fighters had just taken control of Mosul, Iraq’s second biggest city, after the Iraqi army fled. About 3,000 inmates were being kept in Mosul’s Badoush prison. During the power vacuum some managed to escape from minimum security areas, but between 1,000 and 1,500 remained after many had escaped during the chaos.

Citing testimony from eyewitnesses and survivors, the UN said Islamic State gunmen arrived at the front gate in a group of pick-up trucks. Several carried machine guns. They took out the prisoners and sorted them into two groups, Sunni and 670 Shias. The fighters grilled the Sunni group, asked them to recite prayers, and interrogated them about family backgrounds. Some Shia prisoners tried to pass themselves off as Sunni. They were discovered and returned to the Shia line-up.



Jim Sinclair’s Commentary

It is not all roses out there.

U.S. new home sales fall, services sector activity cools a bit
By Lucia Mutikani
WASHINGTON Mon Aug 25, 2014 10:46am EDT

(Reuters) – Sales of new U.S. single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and a moderation in price increases should help to stimulate demand in the months ahead.

Other data on Monday showed activity in the vast services sectors slowed again in August. The reports, however, did little to change views the economy is on a strong growth path, against the backdrop of relatively strong job growth and manufacturing activity.

New home sales slipped 2.4 percent to a seasonally adjusted annual rate of 412,000 units, the lowest level since March, the

Commerce Department said. Economists polled by Reuters had forecast new home sales at a 430,000-unit pace last month.

The weak new home sales pace is at odds with other data that have suggested the housing market recovery is back on track. New house sales data, however, is volatile month-to-month because of a small sample.

Data last week showed a jump in new home construction in July. Home resales also rose to a 10-month high in July.

Compared to July last year, new home sales increased 12.3 percent.

In a separate report, financial data firm Markit said its preliminary services Purchasing Managers Index dipped to 58.5 this month from 60.8 in July.


“The Russian Aggression Prevention Act” (RAPA): A Direct Path to Nuclear War with Russia
By Steven Starr
Global Research, August 22, 2014

The Russian Aggression Prevention Act”, introduced to Congress by U.S. Senator Bob Corker (R-Tenn.), will set the US on a path towards direct military conflict with Russia in Ukraine.

Any US-Russian war is likely to quickly escalate into a nuclear war, since neither the US nor Russia would be willing to admit defeat, both have many thousands of nuclear weapons ready for instant use, and both rely upon Counterforce military doctrine that tasks their military, in the event of war, to preemptively destroy the nuclear forces of the enemy.

RAPA provides de facto NATO membership for Ukraine, Georgia, and Moldova via RAPA

The Russian Aggression Prevention Act, or RAPA, “Provides major non-NATO ally status for Ukraine, Georgia, and Moldova for purposes of the transfer or possible transfer of defense articles or defense services.” Major non-NATO ally status would for practical purposes give NATO membership to these nations, as it would allow the US to move large amounts of military equipment and forces to them without the need for approval of other NATO member states. Thus RAPA would effectively bypass long-standing German opposition to the US request to make Ukraine and Georgia part of NATO.

Germans rightly fear placing US/NATO troops and US Ballistic Missile Defense (BMD) in Ukraine, given the profound and long-standing Russian objections against the expansion of NATO (especially to Ukraine and Georgia) along with deployment of European US/NATO BMD. Germany is acutely aware of the distinct possibility that the civil war raging in Ukraine could evolve into a Ukrainian-Russian war. Under such circumstances, deployment of US/NATO forces in Ukraine would make it virtually inevitable they would come into fight with Ukraine against Russia.

RAPA would accelerate the “implementation of phase three of the European Phased Adaptive Approach for Europe-based missile defense . . . by no later than the end of calendar year 2016.” In 2012, Russia’s highest ranking military officer stated that Russia might consider a pre-emptive strike against such BMD deployments “when the situation gets harder.”


France In "Political Turmoil" After Hollande Unexpectedly Dissolves Government
Submitted by Tyler Durden on 08/25/2014 08:02 -0400

Earlier this morning, those expecting an out of control European deflationary tumble got one step closer to their goal when French President Francois Hollande asked his prime minister, who only assumed the post a few short months ago in March, to form a new government, following what Reuters reported was him "looking to impose his will on the cabinet after rebel leftist ministers had called for an economic policy U-turn" spearheaded by economy minister Arnaud Montebourg demanding an end to French "austerity." The Guardian is somewhat more direct and to the point: "France has entered uncharted political waters after the prime minister, Manuel Valls, presented his government’s resignation amid a political crisis triggered by his maverick economy minister who called for an end to austerity policies imposed by Germany."

In short: just days after we reported that trouble was brewing in socialist paradise, when the rating of Venezuela’s Maduro tumbled to all-time lows, socialism is once again in turmoil, this time in France.

The details:

The prime minister, a social democrat who has been compared to Tony Blair, acted with characteristic swiftness in a bid to reassert his authority. His aides had let it be known on Sunday that the economy minister, Arnaud Montebourg, had crossed a "yellow line" for his dual crime of criticising both the president of France and a valued ally.

Montebourg, 51, fired his first broadside in an interview with Le Monde on Saturday and followed up with a speech to a Socialist party rally the following day. In a veiled reference to President François Hollande, he said that conformism was an enemy and "my enemy is governing"."France is a free country which shouldn’t be aligning itself with the obsessions of the German right," he said, urging a "just and sane resistance".

He was joined in his criticism by the education minister Benoit Hamon, who on Monday denied that he had been disloyal. A third minister, Aurélie Filipetti, also appeared in danger of losing her job after wishing a "good day" on Twitter to her two dissident colleagues.

Perhaps in an ironic case of poetic justice, she will also be terminated via Twitter? Meanwhile, nothing changes for France where other people’s money appears to have run out:


Libyan capital under Islamist control after Tripoli airport seized
Operation Dawn captures airport in fierce fighting against pro-government militias after five-week siege in the capital
Chris Stephen, and Anne Penketh
The Guardian, Sunday 24 August 2014 17.07 BST

Libya has lurched ever closer to fragmentation and civil war this weekend after Islamist-led militias seized the airport in the capital, Tripoli, proclaimed their own government, and presented the world with yet another crisis.

Operation Dawn, a coalition of Islamist and Misrata forces, captured the airport on Saturday in fierce fighting against pro-government militias after a five-week siege that battered parts of the capital.

Television images from the scene showed jubilant, bearded, militias dancing on wrecked airliners, firing machine guns in the air and chanting "Allah O Akbar" ("God is great").

On Sunday, they set airport buildings ablaze, apparently intending to destroy rather than hold the site.

The victory, which secures Islamist control over Tripoli, was a culmination of weeks of fighting triggered by elections in July, lost by Islamist parties.

Rather than accept the elections result Islamist leaders in Libya accused the new parliament of being dominated by supporters of the former dictator Muammar Gaddafi, and have sought to restore the old national congress.


Shell’s ex-CEO says sanctions on Russia don’t work
Published time: August 25, 2014 11:25

The former head of Royal Dutch Shell, Jeroen van der Veer, has said sanctions on Russia just “lead to frustration”, as they did not produce their desired effect and led to more sanctions.

“The sanctions do not work. They lead to counter sanctions, which lead to frustration and never solve anything. (Russian President Vladimir) Putin’s popularity in Russia does not wane in the wake of the sanctions. It increases,” Jeroen van der Veer said on Sunday during a Dutch TV program.

He said constructive political dialogue was the first thing Russia and Ukraine needed to establish, though acknowledging it would be difficult.

“Moscow and Kiev should be willing to talk and Russia should respect the Ukrainian borders,” he said.

Van der Veer began working for Shell in 1971 and was its CEO until 2009.

In July the West imposed sectorial economic sanctions on Russia, including a ban on selling it dual–use technology, and access to sensitive oil technology.

However, businesses have so far been demonstrating they don’t care much about the restrictions. On Friday, Russia’s Rosneft agreed to buy a stake in Norway’s North Atlantic Drilling (NADL) in exchange for 150 onshore drilling assets in Russia, and some cash. ExxonMobil and Norway’s Statoil have also confirmed their commitment to cooperating with Rosneft in offshore Arctic drilling. At the end of June Rosneft agreed to supply BP with up to 12 million tons of oil and oil products over the next five years.


Over 500 Killed as IS Gains Control Over Syrian Air Base in Raqqah

MOSCOW, August 25 (RIA Novosti) – Islamic State (IS) militants have seized an air base in the Syrian northern province Raqqa, with over 500 people being killed in the fighting, Agence France-Presse reported Sunday citing a monitoring group.

"One hundred and seventy Syrian soldiers were killed on Sunday in the offensive which led to the IS jihadists seizing Tabqa airport," the Syrian Observatory for Human Rights told AFP.

Also, 346 IS jihadists has also been killed in the fighting at the air base since Tuesday, according to the Observatory.

The IS insurgents have been trying to seize Tabqa since early August, but began the assault in earnest only on Tuesday.

Since March 2011, an armed conflict has been taking place in Syria that has claimed the lives of more than 190,000 people, according to the latest UN report. Government troops are confronted by militias belonging to different armed groups. The most active are Islamic State militants, who led an assault on the northern and western regions of Iraq in early June, and announced the creation of an Islamic caliphate in Iraq and Syria on June 29.


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Germany is leaning towards commerce over war?

Excerpt: "The majority of NATO members, especially Germany, are opposed to the proposal,"…

CIGA Perry

Baltic Fears: NATO Debates Directing Missile Shield against Russia

NATO officials are considering deploying a long-planned missile defense system — aimed at protecting Europe from attacks from the Middle East — against Russia as well, SPIEGEL has learned.

Calls for such an expansion to the system’s remit, which is backed by the United States, are growing in Poland as well as in NATO member states Lithuania, Estonia and Latvia. In the run-up to next week’s NATO summit, the four countries called for the remaining members to agree on language at the summit that would pave the way for the plan. They feel threatened by Russia’s intervention in Ukraine.

But the majority of NATO members, especially Germany, are opposed to the proposal, warning that it could result in an unnecessary provocation of Moscow. Representatives of these countries have warned that NATO has for years pledged to Russia that the missile defense system would not be directed at the country. Further debate on the issue has since been delayed until after the summit.

Hardliners did, however, succeed in pushing through one issue prior to the summit: The so-called reinsurance measures for Poland and the Baltic states — the placement of four companies and an increase in the number of reconnaissance flights on NATO’s eastern border — will not automatically expire after one year as originally planned. German Chancellor Angela Merkel had demanded that the military action be re-approved by all NATO member states after one year. Ultimately, however, Berlin was alone in the position and abandoned its stance.


Posted at 3:59 PM (CST) by & filed under

Greg Hunter’s

Dear CIGAs,

Money manager Axel Merk is worried about financial risk and that it is being downplayed.  Merk says, “I am very concerned.  I am spooked about the equity markets.  The folks that buy stocks buy them because they have to keep up with the markets.  The folks that buy gold buy it because they like gold.  Just recently, you have a down turn, and you don’t have this rush to sell gold right now because the folks holding it are strong hands.  Whereas in the stock market, if you have a wave of sellers, who says everybody is not going to rush for that same exit at the same time.”

Merk elaborates on being “spooked on the equity markets” and explains, “I fear a crash.  The reason I fear a crash is that when you have a market that goes up relentlessly, and volatility goes down and complacency is high, that means folks are buying equities that are not aware of the risks of the stock market.  The moment the fear comes back to the market, for whatever reason, those guys are gone in a heartbeat.  We saw that a little more than a year ago in the emerging market and fixed income market.  Everybody thought they would get a free lunch and (Fed) exit talk comes up, and suddenly everybody is running for the exits and it’s a bloodbath.  You saw that in the tech bubble and the housing bubble.  Complacency is the best bubble indicator out there.  The timing is a little bit difficult, but it is more prudent to take the chips off the table before you have the problem than after the problem.”

Merk, who has $400 million under management, likes gold and explains, “The medium to long term reason why I like gold is I don’t think we can afford real positive interest rates. . . . If you look at real interest rates, they have been negative.  They have gotten more negative of late, and Janet Yellen is promising she is going to be late in raising rates.  So, even as nominal rates go up, real rates are going to continue to be negative.  So, I don’t buy gold because of a crisis flaring up here and there because those things can be short term.  Now, Putin has a long term interest in instability in Ukraine, but I buy gold mostly because if I look 10 years out, and you think we are going back to the historic rate that we’ve paid on financing our deficit, we’ll be paying more than a trillion dollars a year to finance our national debt.  We can’t afford that.  So, that means the Fed is going to keep rates low, and we are not going to be paying a trillion dollars a year.  Something is going to give, and gold is the purest way to play those sorts of scenarios.”

On Isis in the Middle East and crisis in Ukraine, Merk thinks there is a common denominator.  Merk charges, “The Fed is at fault with everything, including ISIS and Ukraine.  We have fostered an environment over the last 15 years where we are eroding the middle class by having these ultra-low monetary policies.  It drives global over production.  What is happening is you have commodity prices high where corporations get squeezed.  You have no pricing power.  You have a flood of goods, and final goods prices are low.  So, what happens are real wages stagnating in that sort of environment.  In the U.S., you have the rise of the Tea Party and Occupy Wall Street, but what you got in the Middle East are revolutions because people can’t feed themselves anymore.  In Ukraine, the problem is they can’t balance their books.  They can’t afford the natural gas.  This is a common problem throughout the globe. . . . We have to get back to sound monetary policy.  That is why the Great Depression ended up in World War II, and these same sorts of forces play out when people get dissatisfied.”


Posted at 4:51 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Just your usual weekend in the "New Normal" of geopolitics.

India, Pakistan Intensify Shooting Across Border; Iran Downs Israel Drone; ISIS Seizes Military Airport
Tyler Durden on 08/24/2014 12:07 -0400

Since in the New Normal no geopolitical events appear to have any adverse impact on risk and asset prices (because the central banks are always there to protect investors should the market "plunge" by say 5%) with general newsflow completely irrelevant on what has been a straight line up in the S&P since the announcement of QE4 in December 2012, one might as well see how much further geopolitical events can be pushed further before it all crashes.

In other words, time for this weekend’s geopolitical update.

Overnight both Pakistan and Iran have done their best to add to the geopolitical instability, which has already englufed Ukraine, and half the middle-east and north Africa, when on one hand Indian and Pakistani troops intensified firing across the border over the weekend killing at least four, an Indian official said on Sunday, straining ties between the arch rivals who recently called off top-level diplomatic talks. On the other moments ago news broke that Iran had shot down an Israeli spy drone heading for Iran’s Natanz nuclear enrichment facility.

Taking these one at a time.

First, Reuters reports that lime last week India said its foreign secretary would not meet with her Pakistani counterpart as scheduled on Monday because of plans by Pakistan to consult separatists from the border state of Jammu and Kashmir ahead of the meeting.

The cancellation dashed any hopes of near-term peace deliberations, chances of which had risen after Pakistani Prime Minister Nawaz Sharif attended the inauguration of Indian Prime Minister Narendra Modi about three months ago.



What if China, Russia Succeed in Going off the Dollar? — Alasdair Macleod
Thursday, August 21, 2014
Henry Bonner

Alasdair Macleod writes the blog FinanceAndEconomics.Org. His research aims to explain the relationship between the dollar and gold, and to warn investors about the biggest threats to their wealth from macro-economic events.

Besides what the Fed is doing by printing money, there is another big threat to the dollar, said Alasdair. Countries in Asia are banding together in order to rid themselves of using the dollar in international trade.

He also warned that credible allegation of misconduct at the London bullion exchange could accelerate the trend of Shanghai becoming the world’s trading hub for gold.

“There is a thing called the Shanghai Cooperation Organization, an agreement principally between China and Russia, whereby they tie up the whole of Asia as their backyard. Other members are the countries north of Tibet, Tajikistan, Kyrgyzstan, Uzbekistan, and so on. In or soon after September, four new members will join – India, Pakistan, Iran, and Mongolia. That’s almost half the world’s population. The objective of the SCO is basically to settle international trades between these countries without using the dollar. I’m not saying they will necessarily achieve that, but that’s what they want to do. They don’t want to see trade settlements reflected in bank accounts in New York.

“It’s not just members of the SCO, either, that could eschew the dollar. The Middle East, for example, now principally sends exports to China and India, so there’s no pressing reason to use the dollar there.


Tripoli bombed as Libya descends further into chaos and Egypt denies involvement
Libya’s capital bombed by warplanes as Egypt denies sending jets into Tripoli
2:33PM BST 24 Aug 2014

War planes attacked targets in Libya’s capital Tripoli on Sunday, hours after forces from the city of Misrata said they had seized the main airport.

Tripoli residents heard jets followed by explosions at dawn, but it was not clear who sent the planes.

Egypt’s president denied on Sunday any military involvement in Libya – a day after Islamist militias accused Cairo and the United Arab Emirates of bombing their posts in Tripoli.

The Libyan air force denied it was behind the attacks, in part because it didn’t have the capabilities or technology to carry out such guided attacks. This has raised suspicions that foreign countries, including European countries, were behind the strikes.


Jim Sinclair’s Commentary

Coming to your bank soon.

G20 edging towards deal on ‘bail-in’ bond cushion for banks
By Huw Jones
LONDON Thu Aug 21, 2014 5:04am EDT

(Reuters) – Government leaders are expected to agree in November that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue, industry and G20 officials said.

The bonds, known as "gone concern loss absorption capacity" or GLAC, are seen by regulators as essential to stopping the world’s 29 biggest lenders from being "too big to fail".

The plans are being drafted by the Financial Stability Board, the regulatory task force of the Group of 20 economies which declined to comment ahead of a G20 summit in November, when G20 leaders will discuss the reform before it is put out to public consultation.

The reform would put in place the final major piece of G20 regulation on banking as the global body turns to a "post-crisis" agenda of fostering economic growth and bedding down the rules it has approved.

There had been unease in Asia and parts of Europe over how big the bond issues need to be to provide this cushion but there is now a new optimism amongst bankers and regulators that the G20 will reach a deal in November.

"The industry is definitely in favor of making resolution, supported by an appropriately flexible concept of GLAC, work. That is the key pending aspect on ending too-big-to-fail," said Andres Portilla, director of regulatory affairs at the Institute of International Finance, a Washington-based banking and insurance lobby.




Inflation Watch: Is The $5 Bill The New $1 Bill?
Submitted by Tyler Durden on 08/23/2014 17:53 -0400

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Events, food purchased away from home and live entertainment are increasingly unaffordable to the bottom 90%.

It’s starting to feel like a $5 bill is the new $1 bill: everything that could be purchased with one or two dollars not that long ago is now $5 or even $10. A few days ago I was enjoying the Butte County Fair in California’s farmbelt (the Central Valley), and it seemed like a rural county fair was a price baseline that was far enough away from the urban artifice of $100 meals at fancy bistros to reflect the statistically elusive real-world inflation.

Everything was $5, or close to it: the carnival rides for kids: $5. The games (ring toss, etc.): $5. Funnel cakes, cotton candy, etc.: $5.

Whatever wasn’t $5 was $10: pulled pork sandwich, etc. There was almost no need for $1 bills, except at the admission booth: adults, $8/day, kids/seniors $4.

So let’s add up the costs for a family of two adults and two kids. Let’s say the kids each get four rides–that’s 4 X $5 = $20 X 2 = $40. Each kid gets two food items: $5 X 2 = $10 X 2 = $20, and gets to play two games: $5 X 2 = $10 X 2 = $20.

That’s $80. The parents get something to eat and maybe play a game or two: that another $40. The admission fee is $16 for adults and $8 for the kids, $24. Parking is $5.


Islamic State militants seize Syrian airbase
Tabqa base almost entirely controlled by Isis, while in Iraq the Shia Turkoman community north of Baghdad remains under siege
Martin Chulov, Middle East correspondent
The Guardian, Sunday 24 August 2014 19.08 BST

Islamic radicals have seized most of an airbase in eastern Syria and are tightening a stranglehold on a minority Turkoman community north of Baghdad, as their pillage of the heartland of the Levant gains further momentum.

Militants from Islamic State (Isis) had breached the borders of the Tabqa base, which was the last base east of Aleppo still held by the Syrian regime, and now appeared certain to seize full control within days in another blow to all sides trying to slow the group’s progress through Iraq and Syria.

About 300 miles to the east, a community of 18,000 Shia Turkomans holed up in the town of Amerli, north of Baghdad, said they were running out of food and hope after a two-month siege by Isis, which is trying to starve them to death or force them to convert to the militants’ hardline brand of Sunni Islam.

In both locations, the bodies of fighters were reportedly defaced and displayed by Isis members, who have become feared and scorned for their unchecked barbarity.

Witnesses at the Tabqa base, not far east of the Isis stronghold of Raqqa, said that several captured Syrian soldiers had been beheaded.


How Isis came to be
Three years ago, Islamic State did not exist – now it controls vast swaths of Syria and Iraq. How did we get here?
Ali Khedery, Friday 22 August 2014 17.44 BST

Three years ago, the Islamic State (Isis) did not exist; now it controls vast swaths of Syria and Iraq. Showing off its handiwork daily via Twitter and YouTube, Isis has repeatedly demonstrated that it is much more than a transnational terrorist organisation – rather, it is an entity with sophisticated command, control, propaganda and logistical capabilities, and one that has proven its ability to take and hold strategically critical territory at the heart of the Middle East.

But as world leaders grapple with how to respond to this unprecedented crisis, they must first understand how Isis came to exist.

Principally, Isis is the product of a genocide that continued unabated as the world stood back and watched. It is the illegitimate child born of pure hate and pure fear – the result of 200,000 murdered Syrians and of millions more displaced and divorced from their hopes and dreams. Isis’s rise is also a reminder of how Bashar al-Assad’s Machiavellian embrace of al-Qaida would come back to haunt him.

Facing Assad’s army and intelligence services, Lebanon’s Hezbollah, Iraq’s Shia Islamist militias and their grand patron, Iran’s Revolutionary Guards, Syria’s initially peaceful protesters quickly became disenchanted, disillusioned and disenfranchised – and then radicalised and violently militant.

The Shia Islamist axis used chemical weapons, artillery and barrel bombs to preserve its crescent of influence. Syria’s Sunni Arab revolutionaries in turn sought international assistance, and when the world refused, they embraced a pact with the devil, al-Qaida.


Posted at 1:17 PM (CST) by & filed under In The News.

To consider the [Supreme Court] as the ultimate arbiters of all constitutional questions is a very dangerous doctrine, placing us under the despotism of an oligarchy. Our judges are as honest as other men…and not more so, with the same passions for party, power, and privilege. Their power is extremely dangerous, as they are in office for life and not responsible, as the other functionaries are, to elective control.
– Thomas Jefferson.



Angela Merkel heads to Kiev as some Russian aid trucks begin to leave Ukraine
First lorries from Moscow’s controversial aid convoy to rebel-held parts of Ukraine begin returning to Russia, reporters and OSCE monitors say
By Agencies
5:34PM BST 23 Aug 2014

A total of 184 vehicles from the Russian aid convoy which crossed into Ukraine on Friday without permission returned to Russia, a Ukrainian military spokesman said.

"According to our information as of 1pm (10.00 GMT), the departure from the territory of Ukraine by 184 Russian vehicles has been confirmed," the spokesman, Andriy Lysenko, told Reuters.

He said they had left through the same crossing point by which they had entered via the Ukrainian border settlement of Izvaryne. No checks by Ukrainian border guards or customs officers had taken place.

Asked how many Russian vehicles still remained in Ukraine, he replied: "I don’t know."

It comes after several countries rebuked Russia in that closed-door emergency meeting at the UN for "what many called an illegal and unilateral action by the Russian federation," British ambassador Mark Lyall Grant, the council president, told reporters.



Isil besieges town of Amerli amid fears of repeat of Sinjar massacre
Hardline Islamists are surrounding the town of Amerli – sparking concern for the safety of the 18,000 Shia Turkmen residents, and fears of a repeat of the Mount Sinjar massacre
By Harriet Alexander, and Ruth Sherlock in Beirut
11:33AM BST 23 Aug 2014

The United Nations has called for a concerted effort to end the siege of Amerli, a town 110 miles north of Baghdad, which is home to 18,000 Shia Turkmen.

The town has been encircled by jihadists from the Islamic State of Iraq and the Levant (Isil) for the past two months. The majority of the residents of Amerli are part of the Turkmen ethnic group, who are descendants of Ottoman Turks and make up roughly four per cent of Iraq’s population. As Shia, they are directly targeted by Isil, who consider them apostates.

Nickolay Mladenov, special representative of the United Nations secretary-general for Iraq, called on the international community to halt “the unspeakable suffering of Amerli’s inhabitants” – who are left with little medicine and dwindling supplies of food, water and electricity.

“The situation of the people in Amerli is desperate and demands immediate action to prevent the possible massacre of its citizens,” he said.

“The town is besieged by Isil and reports confirm that people are surviving in desperate conditions. I urge the Iraqi government to do all it can to relieve the siege and to ensure that the residents receive lifesaving humanitarian assistance or are evacuated in a dignified manner.


Isis gains in Syria put pressure on west to deliver more robust response
US looks at options for action in Iraq as Islamic State ramps up attacks while senior Tories call for UK to join in air strikes
Spencer Ackerman in New York, Andrew Sparrow and Martin Chulov
The Guardian, Friday 22 August 2014 15.48 EDT

Western powers are coming under mounting pressure to do more to confront Islamic State (Isis) in its stronghold in Syria, as the heavily armed militants edged closer to taking an important air base that would cement their domination over a swath of the country’s north.

As US aircraft continued to pound the Islamist militants in northern Iraq, the Obama administration was studying a range of options for pressuring Isis in Syria, primarily through training "moderate" Syrian rebels as a proxy force, with air strikes as a possible backup.

Leaders in Washington and London are adamant they will not collaborate with the regime of Bashar al-Assad in tackling their common enemy, and on Friday the Pentagon insisted that it had yet to decide on whether to expand the US air war into Syria.

But Isis has demonstrated its rampant authority in northern Syria in recent days, with the brazen murder of the US hostage James Foley and a series of attacks on towns and villages in the north, including the vital airbase at Taqba, where it has surrounded a detachment of Syrian army soldiers. It now holds a swath of territory in Syria and Iraq that is larger than the UK and home to at least four million people.

"The Islamic State is now the most capable military power in the Middle East outside Israel," a senior regional diplomat said on Friday.


Jim Sinclair’s Commentary

Rates must in time rise. What a mess that will be.

Has Yellen opened door to rise in interest rates?
US Fed chief appears to raise prospect of a rise in interest rates, despite warning on difficulty of working out whether jobs market has been permanently transformed
By Katherine Rushton
4:06PM BST 22 Aug 2014

Janet Yellen, chairman of the US Federal Reserve, appeared to open the door to an early rise in interest rates on Friday, as she warned that it was almost impossible to determine whether the labour market would ever bounce back to its state before the economic crisis.

In a speech at the annual economic conference at Jackson Hole, Wyoming, she said that the Fed has used monetary policy in order to get as many people back work as possible, but it is becoming hard to tell how long it might take to reach the central bank’s targets.

“A key challenge is to assess just how far the economy now stands from the attainment of its maximum employment goal,” she said.

“Judgments concerning the size of that gap are complicated by ongoing shifts in the structure of the labour market and the possibility that the severe recession caused persistent changes in the labour market’s functioning."

She added: "At the FOMC’s most recent meeting … the Committee reaffirmed its view ‘that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after our current asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2pc longer-run goal, and provided that longer-term inflation expectations remain well anchored’.


Jim Sinclair’s Commentary

Draghi will do anything in words to restrain the euro

ECB’s Draghi open to easing of austerity in eurozone
Mario Draghi suggested that countries in Europe should be encouraged to increase spending within the existing rules
By Andrew Critchlow
8:22PM BST 22 Aug 2014

Mario Draghi, the European Central Bank president, has opened the door for member states to ease back on austerity to reduce unemployment and revive flagging economic growth in the region.

“The long-term cohesion of the euro area depends on each country in the union achieving a sustainably high level of employment,” Mr Draghi said in a speech delivered at the global central bankers meeting in Jackson Hole.

“And given the very high costs if the cohesion of the union is threatened, all countries should have an interest in achieving this.”

Mr Draghi suggested that countries in Europe should be encouraged to increase spending within the existing rules designed to reduce deficits and rein in debt in order to boost economic reform and create more jobs.

His remarks follow a series of worrying figures that show growth in major economies such as Germany and France stalling, while Italy has returned to recession.


Jim Sinclair’s Commentary

Makes some sense in a senseless world.

US and UK should back Assad to defeat ISIS – senior UK MP
Published time: August 22, 2014 11:30
Edited time: August 22, 2014 15:14

The US and UK must work with Bashar Assad’s Syrian regime if they are to defeat the Islamic State of Iraq and Syria (ISIS), the chairman of Britain’s intelligence and security committee warns.

Sir Malcolm Rifkind, one of the UK’s most senior MPs, told the Financial Times (FT) in an exclusive interview that the horrific murder of American journalist, James Foley, highlights the urgent need to take action against the extremist group Islamic State (IS, formerly ISIS/ISIL), whose swift rise to power in the Middle East has remained largely unchecked by Western intervention.

While the militants have annexed vast swathes of territory in northern Iraq, their central power base remains in Syria.

“ISIS need to be eliminated and we should not be squeamish about how we do it,” Rifkind told the FT on Friday.

Although he made it clear he does not support the Assad regime in principle, Rifkind reluctantly emphasized that “sometimes you have to develop relationships with people who are extremely nasty in order to get rid of people who are even nastier.”

Following a brutal civil war that has devastated and divided Syria while providing a breeding ground for the Islamic State, the Assad regime has faced isolation from myriad world powers.

Prior to Rifkind’s interview, Western states expressed no willingness to work with Damascus. On Wednesday, President Obama’s deputy national security adviser, Ben Rhodes, said Assad was “part of the problem.”


Islamic State militants seize four more foreign hostages in Syria
Jihadists flush with arms and relying on shock tactics abduct Europeans and Japanese national as US strikes continue
Martin Chulov, Middle East correspondent
The Guardian, Wednesday 20 August 2014 20.54 BST

Flush with looted weapons, buoyed by sweeping gains in Syria and eager to shock, Islamic State militants have seized four more foreign hostages near Aleppo in recent days, taking to more than 20 the number of foreigners they now hold.

The latest captives, two Italian women, a Dane and a Japanese national, were seized in or near Syria’s largest city. All held are either reporters, photographers or aid workers taken near Aleppo or Idlib. They have been subsequently moved to Raqqa, the Isis stronghold in north Syria.

The abductions have controversially proved good business for Islamic radicals. In the past six months at least 10 hostages, including a Dane, three French nationals and two Spaniards, were freed after lengthy negotiations with captors, who demanded ransoms. Some organisations have insisted on information blackouts about nationals still being held.

One former hostage said the suspected killer who appeared in the recent video, apparently murdering the US journalist James Foley, was one of three Britons who had guarded him in Raqqa. He said the man had been responsible for negotiating hostage releases, dealing with families of captives via email.

Attention will now turn to the captives still in Isis hands. Steven Sotloff, a freelancer who had contributed to Time magazine and Foreign Policy, was kidnapped a year ago near the Syrian-Turkish border. According to the video of Foley’s death, Sotloff’s fate depends on whether the US continues its aerial campaign in north Iraq, which has driven Isis fighters back from the key Mosul dam.


Isis fighters surround Syrian airbase in rapid drive to recapture lost territory
Syrian reinforcements rush to defend Tabqa but there are fears that no regional military can slow group’s momentum
Martin Chulov, Middle East correspondent
The Guardian, Friday 22 August 2014 19.22 BST

Islamic State extremists rampaging through Iraq have now turned their sights back towards Syria, where only a besieged airbase stands between the terror group and a rush for the Mediterranean coast that could split the country in two.

The attack on the Tabqa airbase in eastern Syria comes as Isis continues to move back towards areas it controlled north of Aleppo until February. Using weapons the group looted from abandoned Iraqi military bases, Isis has returned with a vengeance to the area, stunning regional powers with its rapid advances.

Less than three months after taking Iraq’s second and fourth biggest cities, much of Anbar province and the Syrian border, the group is establishing itself with extraordinary speed as a regional power that will determine the fate of both countries. There are growing fears across the Middle East that no regional military can slow the group’s momentum.

Isis now controls a swath of land slightly larger than the UK, from Aleppo to central Iraq, and holds sway over a population of at least four million people. The group’s rapid ability to organise and consolidate continues to splinter a fractured body politic in Iraq and Syria and is fast causing ramifications for the broader Middle East.

"The Islamic State is now the most capable military power in the Middle East outside Israel," a senior regional diplomat said on Friday. "They can determine outcomes in a few days that the Syrian rebels took two years to influence. Their capacity is in sharp contrast to the Syrian regime, which is only able to fight one battle at a time and has to fight hard for every success.


As South Africa Reels From Unexpected Bailout, One Bank Has A Modest Proposal: Give Us Your Gold
Submitted by Tyler Durden on 08/22/2014 13:57 -0400

In a historic first, three days ago, South Africa’s Rand Merchant Bank, a division of FirstRand Bank Limited, announced it would issue the FirstRand Gold Bond, or a bond denominated in South African Krugerrand gold coins. In other words, for the first time "holding" gold will pay a dividend (or in this case, interest). Sound odd? Maybe because it is.

Here is the statement from the Johannesburg Stock Exchange:

The Gold Bond has a term of five years and the first issue amounts to R2 billion. It requires investors to buy Krugerrands, which they then lend to FirstRand when purchasing the bond. At its expiry the value of the bond is determined by the current gold price, the Dollar/Rand exchange rate and the interest earned. This interest is calculated in terms of ounces of gold as represented by Krugerrands. Investors may take physical delivery of the Krugerrands on maturity or opt to get settled in cash.

Or they may end up with nothing if the bank is "suddenly" found to be insolvent. The marketing pitch is clear: have your gold and collect interest on it:

"The notes provide direct exposure to the rand gold price and a positive yield in the form of interest ounces payable on maturity. It offers both inflation and rand/dollar exchange rate protection while avoiding the significant storage and administration costs associated with other direct gold investment options available. Current market conditions are particularly attractive for gold investment because of rand/dollar weakness and expectations of higher inflation," says RMB Debt Capital Markets co-head Dale Wood.


Washington’s Nightmare Comes True: The Russian-Chinese Strategic Partnership Goes Global (II)
Fri, Aug 22, 2014

PART II: Geopolitical Application

It is now time to segue into the geopolitical applications of the RCSP. This section will begin with Northeast Asia and then proceed counterclockwise into exploring the dual approaches towards Central Asia, South Asia, and Southeast Asia. It will then move on to Europe before looking at the Mideast/North Africa (MENA) and Latin America. It is only in Africa where the RCSP has yet to mature, although the possibilities most certainly are there for China to invite Russia’s balancing influence into the continent in the future and to influence regional leaders to expand their trade ties with Moscow. Finally, the conclusion will unify the article and demonstrate that the RCSP is truly the most important relationship of the 21st century and the definitive vehicle for multipolarity.

The reader is recommended to keep the following in mind while perusing this section: Each hand of the RCSP is intended to wash the other and complement its counterpart in regions/states where it may be at a relative disadvantage vis-à-vis its partner, with the end-game intent of establishing true global multipolarity. With that being stated, the geopolitical examination of the RCSP begins.

Northeast Asia

The essence of the RCSP in Northeast Asia is to carefully confront the US’ “unsinkable aircraft carrier” and neutralize its lethality. Both Russia and China had existing territorial disputes with Japan prior to the commencement of the RCSP, but Japan did not begin to aggravate these tensions until the early 2010s. The Japanese problem could more accurately be viewed as an American problem due to its occupation of and mutual security with the country, so via proxy, the RCSP is effectively faced with the hurdle of American obstruction over the process of Northeast Asian pacification. Tokyo always has the ‘opt-out clause’ of a normalization of ties with Moscow (which is in the national interests of both actors), but this does not seem to be on the horizon under Abe’s administration. The US occupation is too strong and influential for the country to break free in the near future, but should a stroke of luck occur breakout and movement towards true foreign policy independence transpire, it would place Moscow in a position to play a positive role in moderating Tokyo’s actions towards Beijing.


Guest post: French, Swiss central banks swell rush to hold renminbi
Aug 20, 2014 3:58pm
By Jukka Pihlman, Standard Chartered

Adopted at pace by central banks around the world, China’s renminbi is now seen by many as a de facto reserve currency – and well on the way to becoming an official one.

Central banks have caught the renminbi fever, and are showing strong interest in investing part of their foreign-currency reserves in the Chinese currency, with more than 50 central banks now actively doing so either onshore or offshore.

Uptake is strongest in Asia, Africa and South America – regions with fast-growing trade and investment links with China – but even in Europe central banks are busy allocating reserves to the renminbi.

Earlier this year, Banque de France announced it is active in the renminbi market, and in July the Swiss National Bank received a Rmb15bn investment quota from the People’s Bank of China (PBOC), the Chinese central bank. The actions of these two large and sophisticated players are likely to reverberate in the European central-bank community, sparking others to follow.

The allocation shift by central banks is all the more remarkable, given that the renminbi does not yet qualify for official reserve-currency status. It is a powerful indicator of the great expectations in the renminbi as the currency continues on its path towards internationalisation.


Fracking Possible Cause of 20 Earthquakes in Oklahoma in One Day

MOSCOW, August 22 (RIA Novosti) – The Oklahoma Geological Survey (OGS) recorded 20 earthquakes in the state in a single day following an increase in hydraulic fracturing, or fracking, Think Progress reports.

OGS noted that 18 of the 20 earthquakes on Tuesday were below magnitudes of 3.0, but the largest registered was a 4.3 near Guthrie, where over 10,000 people live. The fracking practice that Think Progress names as a potential cause of the earthquakes is not the fuel extraction itself, but a process called “wastewater injection,” in which leftover water used to frack wells is injected into the ground, potentially adding stress to existing fault lines.

Five more earthquakes have already occurred in Oklahoma since Tuesday, three of which registered above the 3.0 mark on the Richter scale, Think Progress reported.

Some 2,500 earthquakes have occurred in Oklahoma over the past five years, the United States Geological Survey (USGS) claims.

Prior to 2008, Oklahoma recorded an average of one earthquake per year. Since the expansion of fracking operations, Oklahoma has become the most seismically-active state in the United States, with hundreds of earthquakes registered per year, Ring of Fire Radio said.



Former top general calls on Obama to wipe out Isis in wake of Foley killing
John Allen, who commanded Afghanistan war, writes op-ed amid varying US views on how to respond to journalist’s beheading
Spencer Ackerman in New York and Dan Roberts in Washington
The Guardian, Wednesday 20 August 2014

An influential retired US general has called on Barack Obama to order the destruction the militant group responsible for murdering American journalist James Foley amid conflicting views in the administration on how to respond to the atrocity.

As Obama’s foreign policy team debates expanding its renewed air war in Iraq after the killing of Foley by the Islamic State (Isis), John Allen, a retired marine general who commanded the Afghanistan war from 2011 to 2013, urged Obama to “move quickly to pressure its entire ‘nervous system’, break it up, and destroy its pieces.”

Allen’s argument, presented in an op-ed for the DefenseOne website, echoes remarks by secretary of state John Kerry and comes amid internal dispute in the Obama administration over the future course of its two-week air war in Iraq. Much diplomatic effort is said to be spent broadening and hardening a region-wide effort against Isis, something Allen endorsed, with Turkey and Qatar being a particular near-term focus for Kerry.

The debate is said to be fluid. At present, a US official anticipated more continuity than change in future military operations against Isis, but said: “It may ultimately evolve.”

On Wednesday, six new airstrikes continued to hit Isis positions near the Mosul Dam, three days after Obama declared that it was no longer under Isis control. Nearly two-thirds of the 90 US strikes since 8 August have taken place near the critical dam.


Car Repos Soar 70% As Auto Subprime Bubble Pops; "It’s Contained" Promises Fed
Submitted by Tyler Durden on 08/20/2014 23:00 -0400

While on the surface the US economy has been chugging along from GDP-crashing "snow in the winter" to GDP-cratering "warmer|cooler than expected weather in the spring|summer|fall", with bouts of GDP-boosting inventory accumulation inbetween, in recent months two very disturbing trends about that all important dynamo behind the economy, the US consumer, have emerged.

On one hand we wrote three weeks ago that a "shocking" 77 million, or one third, of Americans face debt collectors: a statistic which crushes any suggestion that US household credit is substantially improving based on trends in 30, 60, or 90-day delinquency, as it means that the real pain is not at the near-end of the default/delinquency timetable, but the far end, which incidentally has just as dire an impact on one’s credit score as a plain vanilla default (and explains why none other than Fair Issac has jumped in to "adjust" its credit methodology to artificially boost FICO scores of these millions of Americans).

On the other hand, we have been closely following the ongoing deterioration of the car subprime loan bubble: something that both Bloomberg and the Fed have both also been paying close attention to recently, yet a bubble which nobody wants to burst, because as we wrote several days ago, it is none other than the subprime car loan bubble that allowed car production to surge the most last month since Obama’s Cash for Clunkers capital misallocation program, in the process lifting overall manufacturing and Industrial Production, and thus GDP.

Earlier today Experian released its latest, Q2, metrics that tie these two very worrying trends together, namely the trend in delinquencies, defaults and repossessions.


Chair Janet Yellen says economy still needs Fed support
Investors had been anticipating any firmer sign regarding an interest rate increase in a speech Friday by Federal Reserve head Janet Yellen; she instead offered further uncertainty.
The Associated Press

JACKSON HOLE, Wyoming — If anyone thought Janet Yellen might clarify her view of the U.S. job market in her speech here Friday, the Federal Reserve chair had a message:

The picture is still hazy.

Though the unemployment rate has steadily dropped, Yellen suggested that other gauges of the job market have become harder to assess and may reflect persistent weakness. These include many people jobless for more than six months, millions working part time who want full-time jobs and weak pay growth.

Yellen offered no clarity on the timing of the first interest-rate increase, which most economists still expect by mid-2015.

Investors had been anticipating any firmer sign from Yellen about whether an improving economy might prompt the Fed to act sooner than expected to start raising rates. She instead offered further uncertainty.

Damage inflicted by the Great Recession had complicated the Fed’s ability to assess the U.S. job market and made it harder to determine when to adjust rates, Yellen said.

“Uncertainty is the key word,” said Ian Shepherdson, chief economist at Pantheon Economics. “Yellen is not about to leap from the fence at the next (Fed) meeting.”

Yellen said that for now, a broad assessment of the job market suggests that the economy still needs Fed support in the form of ultra-low rates and that inflation has yet to become a concern.

“The assessment of labor-market slack is rarely simple and has been especially challenging recently,” Yellen said at the conference, which the Federal Reserve Bank of Kansas City sponsors each year at a lodge beside the Grand Tetons.


Jim Sinclair’s Commentary

There is no practical solution to the corner the Fed has painted itself into.

The Perils of the Federal Reserve’s Dual Mission: The Fed has its hands full with monetary policy, even if it backs off its fruitless efforts to improve the job market
Richard Epstein Contributor
8/22/2014 @ 7:26PM

I have just signed on with Forbes to write a regular column of issues relating to finance and regulation.  The larger area (like so many others) is in turmoil today, and I hope to cast a steely-eyed view on a set of continuing problems that as yet have resisted in rational solution.  It is always good news for a budding columnist to enter the market when the world is in a state of genuine disarray, for the sorry state of public affairs increases the opportunity for constructive criticism. I hope to that my own increasing involvement in the area, coupled with a general background in both law and economics and constitutional law could add a new blood to a troubled field.

The Grim Scene

It is no coincidence, I might add that the financial wizards at the Federal Reserve are meeting right now in Jackson Hole, Wyoming to thrash out a collective response to a lackluster economic scene.  Unfortunately, the only point of agreement among the cognoscenti is that the view outside their window is a lot nicer than their consensus view on the state of the economy.  In her remarks, Chairwoman Janet Yellin kept all her options open on the ever more urgent question of whether, and if so when, the Fed will start to move to raise interest rates.

She has good reason to be cautious, even if her caution reveals how little she knows about what to do, and not how much.  Right now, a prolonged soulless recovery from the recession limps along in states of disarray as overall levels of job growth and economic remain tepid. The constant effort to jump start the economy may not have created any short-term inflation, which is all to the good.  But by the same token, it has not created any economic growth either, which is all to the bad.  The halting nature of the recovery is all too evident in the United States, but the international club of chronic slow growers hardly rates an exclusive membership list.


obama 3 branches

Yellen says job market makes Fed hesitant on interest rate increase
August 22, 2014 at 10:04 pm

Washington — Federal Reserve Chair Janet Yellen said Friday that the Great Recession complicated the Fed’s ability to assess the U.S. job market and made it harder to determine when to adjust interest rates.

Yellen’s remarks to an annual Fed conference offered no signal that she’s altered her view that the economy still needs Fed support from ultra-low interest rates. The timing of a Fed rate increase remains unclear, though many economists foresee an increase by mid-2015.

The Fed chair noted that while the unemployment rate has steadily declined, other gauges of the job market have been harder to evaluate and may reflect continued weakness. These include high levels of people who have been unemployed for more than six months, many people working part time who would like full-time jobs and weak pay growth.

Yellen repeated language the Fed has used at its last meeting that record-low short-term rates will likely remain appropriate for a “considerable time” after the Fed stops buying bonds to keep long-term rates down. The Fed’s bond buying is set to end this fall.

But Yellen said the Fed’s rate decisions will be dictated by how the economy performs.

“Monetary policy is not on a preset course,” she said. The Fed “will be closely monitoring incoming information on the labor market and inflation in determining the appropriate stance of monetary policy.”