Jim Sinclair’s Commentary
The latest from John Williams’ www.ShadowStats.com.
- Incomplete and Inadequate, Minimal Revisions to Industrial Production Left Negative Economic Outlook Intact
- Aggregate Net Upside Revision of 0.3% to Series Was in Context of Some Activity Being Shifted from Early-2012 into Late-2012, 2013
- Usual New Information for 2012 Was “Unavailable”
"No. 613: Industrial Production Benchmark Revision"
Mistrust overshadows Obama’s Saudi trip
By Assad ABBOUD
Riyadh (AFP) – US President Barack Obama meets Saudi King Abdullah Friday as mistrust fuelled by differences over Iran and Syria overshadows a decades-long alliance between their countries.
Obama, who is due to arrive in Saudi Arabia late in the afternoon on a flight from Italy, is expected to hold evening talks with the monarch on a royal estate outside Riyadh.
Saudi Arabia has strong reservations about efforts by Washington and other major world powers to negotiate a deal with Iran on its nuclear programme.
It is also disappointed over Obama’s 11th-hour decision last year not to take military action against the Syrian regime over chemical weapons attacks.
Saudi analyst Abdel Aziz al-Sagr, who heads the Gulf Research Centre, said Saudi-US relations are "tense due to Washington’s stances" on the Middle East, especially Iran.
The recent rapprochement between Tehran and Washington "must not take place at the expense of relations with Riyadh," Sagr told AFP.
Jim Sinclair’s Commentary
China discusses Russia with NATO.
Chinese president arrives in Berlin for talks and deals
Berlin (dpa) – Chinese President Xi Jinping arrived Friday in Berlin for a visit that is to include the signing of a 1-billion-euro (1.38-billion-dollar) agreement between Germany‘s Daimler carmaker and its Chinese partner, Beijing Automotive.
Xi and his wife, Peng Liyuan, were greeted with full military honours by German President Joachim Gauck before Xi holds talks with Chancellor Angela Merkel in the afternoon.
Those discussions are expected to focus on international crises and the expansion of business ties. Merkel was also expected to raise China‘s human rights record.
Part of the effort to broaden business relations is to be the agreement between Daimler and Beijing Automotive to increase the car and motor production of their joint venture, Beijing Benz, in the Chinese capital, company sources said in Beijing.
The two companies have cooperated for 10 years, and in November, Daimler bought a 12-per-cent stake in Beijing Automotive‘s passenger car division for 625 million euros. The investment was the first time a foreign carmaker had bought a large stake in a state-run manufacturer in China, the world‘s largest car market.
How The BRICs (Thanks To Russia) Just Kicked The G-7 Out Of The G-20
By Paul Mylchreest of Monument Securities
A critical juncture
Over the course of the last century, the US Congress has been blamed for much that has gone wrong in international relations. The unwillingness of Congressional leaders in 1919 to support US participation in the League of Nations doomed from the outset that quixotic attempt to put global relations on a rational basis. Renewed world war was the eventual outcome. Then in 1930, Congressional passage of the Tariff Act, widely known as Smoot-Hawley, marked the break-out of beggar-thy-neighbour trade practices that no less an authority on that period than Mr Bernanke has maintained contributed to the length and depth of the global depression. It is no matter that some historians argue that Smoot-Hawley merely built on the Fordney-McCumber Tariff Act of 1922; that had been Congress’s doing as well. More recently, the US Congress has resisted presidential demands for ‘fast-track’ authority to tie up international trade deals. The lack of faith of the USA’s counterparties in Washington’s ability to ratify trade agreements was an important factor in the collapse of the Doha Round, which has put a brake on the development of the World Trade Organisation. Now, the US Congress is acting in a way which could have consequences at least as serious as those that followed these past examples of obduracy.
This week the US Congress is considering a bill to provide financial aid to Ukraine. President Obama had appended clauses to this bill to ratify the IMF’s 2010 decision to increase the quotas, and hence voting power, of emerging countries, chiefly at the expense of European members, and to boost the IMF’s capacity to lend. The USA enjoys a blocking minority in IMF decision-making under current quotas, and would continue to do so after the changes; it is essential, therefore, that US ratification be secured if the reform is to go ahead. However, many members of the US Congress, especially on the Republican side, are suspicious of the IMF and its activities. Specifically, that element of the reform package which would convert countries’ temporary lending to the IMF during the global financial crisis into a permanent increase in IMF resources has roused fierce opposition. For more than three years, congressional leaders have thought better of exacerbating party tensions by bringing forward proposals to approve the IMF changes. However, the G20 meeting in February ‘deeply regretted’ that the reform was still held up and urged the USA to ratify ‘before our next meeting in April’. Mr Siluanov, Russia’s finance minister, then suggested that the IMF should move ahead with the reforms without US approval, a suggestion sympathetically received by other BRICS leaders but which would threaten to split the IMF. Mr Obama’s concern to avoid this outcome is understandable and he has argued that, since the IMF will play the lead role in supporting Ukraine’s economy, approval of the new quotas is relevant to the Ukraine legislation. All the same, Mr Reid, the Democrat Majority Leader in the Senate, yesterday stripped the IMF provisions from the text, taking the view that the bill would be given a rough ride through the Senate and no chance of passage through the House of Representatives if it retained them. It now seems unlikely that the USA will complete (or, indeed, begin) legislative action on the IMF reform by the 10 April deadline the BRICS have set. The odds are moving in favour of a showdown at the G20 finance ministers’ and central bank governors’ meeting due in Washington on that date.
International discord over Ukraine does not bode well for the settlement of differences over the IMF’s future. Though the G7 is excluding Russia from its number, in retaliation for its action in Crimea, this does not amount to isolating Russia. There has been no suggestion that Russia be excluded from the G20. The USA and its allies have suspected that several other G20 members would not stand for it. This suspicion was confirmed yesterday when the BRICS foreign ministers, assembled at the international conference in The Hague, issued a statement condemning ‘the escalation of hostile language, sanctions and counter-sanctions’. They affirmed that the custodianship of the G20 belongs to all member-states equally and no one member-state can unilaterally determine its nature and character. In short, their statement read like a manifesto for a pluralist world in which no one nation, bloc or set of values would predominate.
Jim Sinclair’s Commentary
TTIP negotiations are the negotiations concerning the "Transatlantic Trade and Investment Partnership (TTIP)." This was discussed in depth in GEAB #83 and yesterday there was mention on page #4.
If the EU goes for this they are totally bonkers.
Jim Sinclair’s Commentary
It may well become true in the China sea. It is not called the Japan Sea.
China angrily denounces Japan for Russia – Crimea analogy
BEIJING (Reuters) – China denounced Japanese Prime Minister Shinzo Abe on Friday for drawing an analogy between Russia’s behaviour in Crimea and China’s actions in the disputed East and South China Seas, accusing Abe of hypocrisy.
Japan’s Kyodo news agency said Abe raised the issue at a G7 meeting in The Hague this month, warning that China was trying to change the status quo through coercion, and said something similar to Russia’s seizing of Crimea could happen in Asia.
Chinese Foreign Ministry spokesman Hong Lei said those comments were completely out of place, and launched a personal attack on Abe himself, using unusually strong language.
"We’ve long since said that this Japanese leader on the one hand hypocritically proposes improving Sino-Japan ties and on the other says bad things about China wherever he is internationally. These comments again expose his true face," Hong told a daily news briefing.
"He tries in vain on the international stage to mislead the public with prevarication and deliberate falsehoods and blacken China’s name. But this cannot pull the wool over the eyes of the international community."
Jim Sinclair’s Commentary
Japan awakes to the results of Abenomics!
Japanese Prepare For "Abenomics Failure", Scramble To Buy Physical Gold
Submitted by Tyler Durden on 03/28/2014 10:42 -0400
As we reported yesterday, the world’s most clueless prime minister, Japan’s Shinzo Abe, has suddenly found himself in a "no way out" situation, with inflation for most items suddenly soaring (courtesy of exported deflation slamming Europe), without a matched increase in wages as reflected in the "surprising" tumble in household spending, which dropped 2.5% on expectations of a 0.1% increase in the month ahead of Japan’s infamous sales tax hike. How does one explain this unwillingness by the public to buy worthless trinkets and non-durable goods and services ahead of an imminent price surge? Simple – while the government may have no options now, the same can not be said of its citizens who have lived next to China long enough to know precisely what to do when faced with runaway inflation, and enjoying the added benefit of a collapsing curency courtesy of Kuroda’s "wealth effect." That something is to buy gold, of course, lots of it.
According to the FT, "Tanaka Kikinzoku Jewelry, a precious metals specialist, reported that sales of gold ingots across seven of its shops are up more than 500% this month. At the company’s flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about Y2.3m ($22,500). March has been the busiest month in Tanaka’s 120-year history."
Of course, while the Japanese consumers know what is the best defense against runaway inflation and purchasing power destruction, the government also knows that just like in India, where massive gold imports to satisfy local demand so skewed the current account deficit that India spent most of 2013 imposing gold capital controls, it simply needs to make gold purchases impossible in order to redirect spending into more Keynes-approved products and services.
However, for now Japan is happy just to crush its population’s meager disposable income with soaring energy prices. Which also means the locals can allocate their personal capital in the most efficient way: one which discounts a very unpleasant future.
Military Cuts Render NATO Less Formidable as Deterrent to Russia
By HELENE COOPER and STEVEN ERLANGERMARCH 26, 2014
WASHINGTON — President Obama and European leaders pledged Wednesday to bolster the NATO alliance and vowed that Russia would not be allowed to run roughshod over its neighbors. But the military reality on the ground in Europe tells a different story.
The United States, by far the most powerful NATO member, has drastically cut back its European forces from a decade ago. European countries, which have always lagged far behind the United States in military might, have struggled and largely failed to come up with additional military spending at a time of economic anemia and budget cuts.
During the height of the Cold War, United States troops in Europe numbered around 400,000, a combat-ready force designed to quickly deploy and defend Western Europe — particularly what was then West Germany — against a potential Soviet advance.
Today there are about 67,000 American troops in Europe, including 40,000 in Germany, with the rest scattered mostly in Italy and Britain. The Air Force has some 130 fighter jets, 12 refueling planes and 30 cargo aircraft. At the end of the Cold War in the early 1990s, it had 800 aircraft in Europe.
Windfall for hedge funds and Russian banks as IMF rescues Ukraine
Ukraine’s premier said his country was “on the edge of economic and financial bankruptcy”, but will comply with demands for drastic austerity
By Ambrose Evans-Pritchard
7:49PM GMT 27 Mar 2014
Ukraine has secured an emergency bail-out of up to $18bn (£10.9bn) from the International Monetary Fund to stave off imminent default but will see no debt relief and will be forced to slash spending amid dangerous civil conflict.
Critics say the package may be too small to stabilise the country as it spirals into depression with wafer-thin foreign reserves, and braces for a fuel shock as Russia’s Gazprom doubles the cost of energy in a move described by Washington as political harassment.
Arseny Yatseniuk, Ukraine’s premier, said his country was “on the edge of economic and financial bankruptcy”, yet vowed to comply with demands for drastic austerity – including a 50pc rise in fuel prices – even if this proved a “kamikaze” mission.
There will be no haircuts for creditors under the deal, unlike the EU-IMF formula in Greece and Cyprus. This amounts to a bail-out for Russian state banks and Western funds accused of propping up the previous regime and for vulture funds that bought Ukrainian debt cheaply for quick gain.
Tim Ash, from Standard Bank, said: “Ukraine has been the ultimate moral hazard play and it’s cavalier to expect taxpayers to cover this.”
Jim Sinclair’s Commentary
By the time the IMF gets finished making Ukraine into Greece they will be praying to become Russians as well.
Ukraine’s parliament passes anti-crisis law required for IMF bailout
27 March 2014, 22:16
Ukraine’s parliament on Thursday voted in favour of an anti-crisis law accepting austerity measures demanded by the International Monetary Fund as part of a $14-18 billion bailout package.
Earlier, parliament deputies failed to support the draft law despite the entreaties of the government, but later returned after a recess and approved it with a vote of 246 – 20 more than the number required.
The International Monetary Fund (IMF) has reached a working-level agreement with the Ukrainian leadership on opening a two-year credit worth from $14 billion to $18 billion, the IMF said in a press release.
The International Monetary Fund has agreed to grant Ukraine between $14 billion and $18 billion to help the country avoid a default. The package is vital for securing further help from other international lenders like the World Bank and the EU.
The IMF promised to grant Kiev the lifeline over the next two years, after finishing its mission in Ukraine on Wednesday. Overall support from the broader international community will stand at $27 billion over the period, the IMF statement said.
And Now The Real Economic Pain Begins As IMF Unleashes $27BN Bailout In "Near Bankrupt" Ukraine
Submitted by Tyler Durden on 03/27/2014 08:08 -0400
Gazprom must really be demanding payment on overdue Ukraine invoices which is the only way we can explain the unprecedented speed with which the IMF has managed to cobble together a makeshift bailout package of up to $27 billion – the bulk of which will naturally go to Russia – which has just made Ukraine its latest vassal state.
As Bloomberg reports, Kiev reached a staff-level agreement with the Washington-based lender for a two-year loan of $14 billion to $18 billion. The IMF’s board must still sign off on the package, Ukraine’s third since 2008, and the government needs to complete “prior actions” to receive the first installment. Approval is “expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” IMF mission chief Nikolay Gueorguiev said in the statement. Disbursement may start next month, he said at a news conference in Kiev.
There are of course, conditions: "Approval is “expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” IMF mission chief Nikolay Gueorguiev said in the statement. Disbursement may start next month, he said at a news conference in Kiev."
Just like Troika disbursement for Greek aid may come any minute now… as long as Greece allows to extend the definition of fresh milk so European milk exporters can put Greek milk producers out of business. Yup: we know how the IMF works. That, and of course the requirement to hike gas prices by 40% or so.
And then comes the hyperinflation: "Monetary policy will target domestic price stability while maintaining a flexible exchange rate. This will help eliminate external imbalances, improve competitiveness, support exports and growth, and facilitate the gradual rebuilding of international reserves. The NBU plans to introduce an inflation targeting framework over the next twelve months to firmly anchor inflation expectations."
Obama says ‘bigger nations cannot simply bully smaller ones’. Wait… what?
Published time: March 27, 2014 10:03
Edited time: March 28, 2014 11:43
President Obama’s key speech in Brussels on Ukraine and attempts to isolate Russia appears to be an exercise of omission, mutually-exclusive statements and unveiled double standards.
Here’s a quick look at what Obama told an audience of some 2,000 people in his damning 30-minute speech.
“Each of us has the right to live as we choose.”
But it’s true only for those good pro-European protesters in Kiev, who used firebombs and batons to make their point. The bad pro-Russian residents of Crimea are not allowed to, right?
“Together, we’ve condemned Russia’s invasion of Ukraine and rejected the legitimacy of the Crimean referendum.”
That’s right. Referendum = bad. Firebombs = good.
Dimon Gets 74 Percent Raise After Billions in Fines
By Nick Summers January 24, 2014
After agreeing to pay $23 billion in penalties and settlements in 2013, JPMorgan Chase (JPM) Chief Executive Jamie Dimon was rewarded today by the board he chairs, receiving a 74 percent pay raise to $20 million.
Dimon has presided over a series of costly settlements with government investigators, including paying $13 billion for mortgage activity that helped lead to the financial crisis and $2 billion for failing to do anything about signs that client Bernie Madoff was running a Ponzi scheme. But in the amoral logic of the stock market, each payout has been met with gains in the company’s stock price, as investors see one fewer uncertainty looming over future profits.
Here’s a key point: That stock performance matters more to Dimon than headline pay figures. He’s sitting on a third of a billion dollars in JPMorgan shares. The shares he held at the beginning of 2013 increased almost $80 million over the course of the year—four times the official compensation announced today. He made more in one day, Nov. 8, than his entire 2012 salary of $11.5 million—which represented a 50 percent cut from 2011 as a rebuke for his oversight of a reckless multibillion-dollar trading loss at the bank’s London office. Even when the bank loses, Dimon gains.
The raise Dimon is getting, $8.5 million, isn’t meaningless. It’s a lot of money for anyone! (The total includes salary, stock, and the value of stuff like plane use.) But it’s so little compared with his holdings—on three out of four trading days last year, Dimon’s shares swung by more than $1 million—that the award has to be interpreted politically. That is, in terms of the message it sends to the strapped-for-cash regulators he meets with, who know JPMorgan is too big to prosecute; to his CEO peers, who can only look on with envy at the thrall in which he keeps his board; and to his staff, who learn that the consequence of breaking the law and making money at the same time is bigger rewards.
Walmart Just Revealed How Poor U.S. Shoppers Are
Walmart is no stranger to sensational headlines, but there’s at least one story this week that is just begging to be taken apart. Anyone who thinks “Walmart Just Revealed How Poor Its Customers Are” is an accurate reflection of the facts needs to keep reading.
Because the problem isn’t that Walmart revealed how poor its customers really are, it’s that Walmart revealed how poor U.S. shoppers really are.
The hook here, the news peg, is that Walmart released its annual report and in it, there’s a paragraph that states:
Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside our control … These factors include … changes in the amount of payments made under the Supplement[al] Nutrition Assistance Plan and other public assistance plans, changes in the eligibility requirements of public assistance plans, …
The implication is that Walmart preys on the poor, that the retailer has somehow created poor people by paying low wages. That it relies on government assistance in a way that goes beyond accepting payment from shoppers via government programs. According to Business Insider:
Walmart, for the first time in its annual reports, acknowledges that taxpayer-funded social assistance programs are a significant factor in its revenue and profits. This makes sense, considering that Walmart caters to low-income consumers. But what’s news here is that the company now considers the level of social entitlements given to low-income working and unemployed Americans important enough to underscore it in its cautionary statement.
Bundesbank, PBOC Sign Accord to Make Frankfurt Yuan Hub
By Angela Cullen and Weixin Zha Mar 28, 2014 11:59 AM ET
Germany’s Bundesbank and the People’s Bank of China agreed to cooperate in the clearing and settling payments in renminbi, paving the way for Frankfurt to corner a share of the offshore market.
The central banks signed a memorandum of understanding in Berlin today, when Chinese President Xi Jinping met German Chancellor Angela Merkel, the Frankfurt-based Bundesbank said in an e-mailed statement.
Germany’s financial capital prevailed over Paris and Luxembourg in a euro-area race to win trade in renminbi, which overtook the euro to become the second-most used currency in global trade finance in October, according to the Society for Worldwide Interbank Financial Telecommunication. The U.K. Treasury said on March 26 that the Bank of England would sign an initial agreement with the PBOC on March 31 to clear and settle yuan transactions in London.
“Frankfurt is one of Europe’s foremost financial centers and home to two central banks, making it a particularly suitable location,” said Joachim Nagel, a member of the Bundesbank’s executive board. “Renminbi clearing will strengthen the close economic and financial ties between Germany and the People’s Republic of China.”
China is loosening exchange-rate controls in an overhaul of its $9 trillion economy. The accord follows the establishment of a 350 billion-yuan ($56 billion) and 45 billion-euro ($62 billion) bilateral swap line between the PBOC and the ECB in October, bolstering access to trade finance in the euro area.
Saudi anti-US step before Obama lands in Riyadh
DEBKAfile March 27, 2014, 6:17 PM (IST)
Shortly before US President Barack Obama arrived for a visit Friday, Saudi King Abdullah unexpectedly appointed former intelligence chief, Prince Muqrin bin Abdulaziz, as second in the line of succession to the throne, directly after the incumbent Crown Prince Salman. DEBKAfile: The Obama administration has been busy promoting the claim of Interior Minister Prince Mohammad Bin Nayef to this position. Muqrin’s appointment blocks this claim and the US president will be forced to address him in this capacity during his visit to Riyadh.
Turkish government blocks YouTube after Twitter
DEBKAfile March 28, 2014, 5:34 PM (IST)
YouTube was blocked in Turkey Friday three days before local elections and a week after Twitter. The ban was triggered by a leaked recording published anonymously purporting to reveal a conversation between Turkey’s foreign minister, spy chief and a general discussing how to create a pretext for a Turkish attack inside Syria.
A voice identified as that of intelligence chief Hakan Fidan appeared to suggest a missile assault as the pretext for a Turkish invasion. The local elections are seen as a referendum on the future of the Tayyip Erdgoan government which has been beset by protest and scandal.
IMF Deal Will Break Ukraine, Harm Global Stability
Mar. 28, 2014 1:45 AM ET | Includes: ESR, GUR
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)
The IMF-Ukraine deal will lead to Ukrainians paying one fifth of income on heating. There are also other measures which will hurt living standards.
A fragile Ukrainian society is unlikely to withstand this pressure and is likely to tear itself apart.
The result is that the European Union can be left without 1/5 of its gas supplies, leading to economic disaster.
Now that the spectacular part of this crisis is over, with the Crimea situation settled and the new government in Kiev settling in, the spotlight on Ukraine is slowly going to fade. The markets welcomed the news of the IMF deal by lowering the CDS rate for Ukrainian bonds. An economic war between Russia and the West is not likely to materialize. I believe the European Union is partially aware of its vulnerability in the event of economic hostilities breaking out.
It is a shame that people will now stop paying attention, because the dangerous part of this crisis is still ahead and policies towards Ukraine coming from the West will contribute to this danger. An Oxford report released a few weeks ago pointed out that military and economic confrontation between Russia and the West is unlikely to reach a point of mutual economic destruction. The main danger comes from Ukraine being unable to pay its bills, including its gas bills, which after the end of the agreement with Russia will increase by about 50% as of April 1. Russia would have no choice but to shut off the gas just as it did in previous situations when Ukraine was unable to make its payments. The Oxford report fails to account for an additional danger and that is the likelihood of Ukraine simply becoming entirely dysfunctional, ungovernable, unstable and eventually slide into civil war. The current IMF deal just ensured that the likelihood of this happening increased dramatically.
Obama accuses Putin of reverting to the Cold War
DEBKAfile March 28, 2014, 5:00 PM (IST)
US President Barack Obama Friday urged Russian President Vladimir Putin to “drop his grievance over the breakup of the old Soviet Union” and “take the path forward, not revert back to the Cold War. In a CBS interview capping his six-day trip to Europe, Obama said that if Putin is trying to reverse history and “recreate a dominant, influential nation bursting with nationalism” he is ”misreading the West. He is certainly misreading American foreign policy.” He urged Russia to move back its troops on Ukraine’s border, saying it may be an effort to intimidate Ukraine, or “it may be that [Russia has] additional plans.
The UN General Assembly passed Thursday a resolution declaring invalid Crimea’s referendum that led to the region’s reunification with Russia. The non-binding resolution was approved by 100 votes in favor, 11 against, and 58 abstentions.