Age of Wisdom, Age of Foolishness (39)
Age of Wisdom, Age of Foolishness (18) “Beyond the Pale”[i] suggested that the unfolding events in Ukraine were based on the shared historical legacy of Israel and Russia. It was concluded that Israel would have an active role to play in the future of Ukraine.
It was also predicted that Russia would reciprocate with alacrity; by intermediating between Israel and its Iranian backed enemies in the Middle East. This suggestion was supported by former US Defence Secretary Cohen’s left-field analysis[ii]; that NATO’s failure to secure Ukraine’s sovereignty would somehow justify Iran’s commitment to continue to develop nuclear weapons. A related conflict in the Middle East, involving Israel, was therefore anticipated. Age of Wisdom, Age of Foolishness (24) “The Short Good Friday”[iii] opined that:
“Israel on its present economic and political course is headed for a major conflict.”
Since then, various “red lines” have been crossed; which have gradually linked the crisis in Ukraine to the unfolding crises throughout the Middle East. Age of Wisdom, Age of Foolishness (24) “The Short Good Friday”[iv] also reported that OECD analysts[v] have concluded that Israel is the country with the world’s worst extremes of wealth inequality. History has shown that countries, with large internal inequalities, generally need external threats to overcome the unsustainable internal divisions.
“It is the best of times, it will be the worst of times in 2060.”
Age of Wisdom, Age of Foolishness (36) “By the Rivers of Babylon” followed the OECD’s latest analysis of the main global issues, in the report entitled “Policy Changes for the Next Fifty Years”[vi]. This report focuses on the inequality between the developed and developing nations; and the solution to this problem suggested by the developed nations. The BRICS have recently responded with an economic development solution, to this inequality problem, of their own[vii]; which appears to vitiate against the analysis of the OECD. The OECD therefore serves as an early warning indicator; which identifies the key geopolitical issues facing the policy makers which will become sources of future conflict.
Age of Wisdom, Age of Foolishness (30) “Adullamites”[viii] opined that:
‘Clearly, as 2016 approaches, the “Warmongers” wish to go global. Energy security is not just a European problem anymore. To compound the situation, President Putin has just announced that the American Shale Emperor has no clothes. It looks as if America is going to have another “Enron Moment” with Shale. If history is rhyming again, we will then see a bubble in technology created by loose monetary policy after the “Enron Moment”, followed by a financial crisis when the “irrational exuberance” after the “Enron Moment” expires; and then some large geopolitical event like “9/11” which will lead into the next phase of bubble creation. Along the way there will be a new American President to move things along. Looking at Ukraine, Iran, Syria and now Africa there is no shortage of potential geopolitical events to hand, for one to take one’s pick from. Since all are inter-related, the probabilities of history rhyming again are very high. (our emphasis)’
Age of Wisdom, Age of Foolishness (38) “Rosebud” suggested that the downing of Malaysian Airlines MH17 was an example of such “a large geopolitical event like 9/11”.
“Call me maybe.”
The surprise in the Western media, that Vladimir Putin “of all people”[ix] will be the peace-broker in Gaza is therefore absurd. From the vantage point of the grassy knoll occupied by the Age of Wisdom, Age of Foolishness perspective; there can be no-one other than President Putin to broker such a deal. Age of Wisdom, Age of Foolishness (30) “Adullamites” observed that expectations, in the public domain, had been primed for Putin’s intercession; with the report that Putin and Netanyahu had installed a “Batphone”[x] for urgent dialogue between them.
It was recently reported that, during a “Batphone” call between the two, “a number of pressing issues of the Russian-Israeli agenda” were discussed. The confirmed existence, of the “Russian-Israeli agenda”, suggests that the analysis which began in Age of Wisdom, Age of Foolishness (18) “Beyond the Pale”[xi] is a significant probability rather than just a mere possibility.
The use of the convenient analogy of mobsters, to portray the symbiotic relationship between alleged enemies and allies inherent in this analysis, is more than just artistic licence. It has been observed that the behaviour of the alleged enemies actually supports the behaviour of the alleged allies and vice versa.
President Putin was also once recognised as a member of the “Committee to Save the World”[xii], before his recent apparent fall from grace.
In Like Flynn …. Out Even Quicker.
Age of Wisdom, Age of Foolishness (17) – “‘Putin’ the ‘F’ Back in the CFR””
Putting the ‘F’ in CFR
Age of Wisdom, Age of Foolishness (17) – “‘Putin’ the ‘F’ Back in the CFR”[xiii][xiv], observed a not so subtle change in American strategy; whereby America’s global position shifted towards promoting democracy rather than the current global status quo. John Kerry was the herald of this new “change” in policy; which presumably emanated from the State Department. It was said of America’s new shift that:
‘It should also put President Putin on watch, that cooperation with America does not extend to allowing the democratic cause in Russia to be diminished. “A friend of Democracy is my friend and an enemy of Democracy is my enemy”, becomes the new lexicon of diplomacy in the multipolar world of global relations.’
At that point, Putin’s membership of the “Committee to Save the World” was clearly under question; based upon his performance in the theatre of life playing at Crimean and Ukraine theatres. In Age of Wisdom, Age of Foolishness (26) “Milking It for all It’s Worth”[xv] it was noted that “Team America” had “struck out”, in terms of foreign policy.
“Time to Eat Your Words Mr. Secretary.”
“I did not use the A-word. Never use it.”
Age of Wisdom, Age of Foolishness (26) “Milking It for all It’s Worth”[xvi]
Secretary Kerry’s grasp then overstepped his prodigious reach, when he decided to infuriate Israel by using the “A-Word”; in reference to its treatment of the Palestinians. With hindsight, one can see that Kerry was trying to anticipate the Israeli incursion into Gaza and what is now about to follow; which is all part of the “Russian – Israeli agenda”. Kerry’s speeches on Democracy and the “A-Word”, therefore confirm that America was fully aware of the “Russian – Israeli agenda” at the time; and was trying to set limits upon it. These limits have proved about as effective as has “Team Obama’s” foreign policy.
“Stand By Your Man.”
Further evidence of the success of the “Russian – Israeli agenda” came over the weekend, when National Security Adviser Rice found it necessary to come out in vocal support of Secretary Kerry[xvii]. This was effectively the kiss of the death for Kerry. Since the Benghazi debacle, it has become clear that Rice is the cut-out and fall-guy for the President. When foreign policy fails, she takes the rap in public. As soon as she spoke out in support of Kerry, his career at State ended. Kerry’s failure now allows President Putin to enter stage left, with a deal between Hamas and Israel; which rehabilitates him on the global political stage and disables America even further. Prime Minister Netanyahu has signalled that he will not stop until the whole of Gaza has been demilitarised and Hamas has been totally disarmed[xviii]; in compliance with his strategy for a “Single Jewish State” rather than the “Two State Solution”. Russia, in the meantime, continues to rely on its own version of Hamas to expand its own borders into the Ukraine. With such high stakes being wagered in the “Russian – Israeli agenda” it is hard to see either party achieving success, without igniting major regional crises in their spheres of interest. Having failed at containment thus far, America has decided to inflame matters beyond Russian and Israeli control. America served notice on Russia of this escalation, by informing that Russia had breached a treaty on nuclear missiles[xix]. American pressure is being applied to Israel; via American leverage of the international community’s ability to exert influence through official condemnation and diplomatic pressure.
Age of Wisdom, Age of Foolishness (38) “Rosebud”
German inertia, based on energy insecurity and business interests, towards Russia finally seems to have been overcome over the downing of Malaysian Airlines MH17[xx]. A German consensus on tougher sanctions has now been achieved. This sanction momentum must now persuade other EU partners to adopt tougher sanctions on Russia also. As was highlighted by the case of France and its sale of a warship to Russia[xxi], in Age of Wisdom, Age of Foolishness (38) “Rosebud”, European sanctions momentum is a pecuniary matter. Germany must now accept that sanctions on Russia will be an even greater headwind on a fragile Eurozone economy; which can only be overcome by combined ECB monetary and EU fiscal expansion policies. Presumably data showing a dip in Eurozone economic activity, with an attendant impact on asset prices, will be required to evince this threat; and hence to elicit the monetary and fiscal response.
“A riddle, inside an enigma, wrapped in a mystery.”
Europe has clearly already got the message; as the Permanent Court of Arbitration in the Hague has timed its decision[xxii] to, hold the Russian Government directly responsible for the $50 billion in compensation awarded to the misappropriated Oligarchy of former Yukos and, follow the underlying shift in the geopolitical relations.
This evidence will no doubt also be required to get the “Three Teutonic Tenors”, who have been holding back further monetary and fiscal largesse, singing a different tune. Europe is still only taking baby steps towards the plate that America has set up for it however. The latest round of EU sanctions[xxiii] allow the French to make delivery on the Russian warship; in addition to placing a technology embargo on EU energy investment in Russia. Russian energy supplies to Europe therefore have not been totally choked off by EU sanctions just yet, unless President Putin decides to choke them off in retaliation. The EU understands that once Russian energy supplies are cut-off, that it must then join the chaos in the Middle East to secure its hydrocarbons. In the meantime, German groupthink is determined to push the European Project to the limit of extinction. Age of Wisdom, Age of Foolishness (38) “Rosebud” opined that:
“Germany is now fully committed to engineering another crisis; by the very nature of the cognitive bias which seems to afflict its citizens and policy makers.”
“It can therefore be observed that Germany is simply getting the final price of this final bailout down to the lowest value possible, without triggering revolutions in the PIIGS (and France) which will break the whole Eurozone up.”
Jens Weidmann went on the record opining:
“that the notion of fiscal union is dead; and has been replaced with the concept of individual sovereign responsibility”[xxiv].
Supporting this thesis, on German intentions and capabilities, the European Union has brought forward a project to test each member nation’s commitment to the Single Resolution Mechanism[xxv]. Thus far each member nation’s commitment has been far short of that required to bailout the Eurozone banking system on a country by country basis. Reading between the lines Germany is now shaking the pockets of each nation; and getting the price of a bailout, which ultimately it will have to fund, down to as small a figure as possible. In the meantime, geopolitical events in Ukraine and Middle East are being manipulated to create the scenario which frightens the German taxpayer into finally putting up the cash, once all other sources of revenue have been exhausted and the Eurozone faces a breakdown triggered by said headwinds.
“Level One Completed.”
The EU is not ready to put boots on the ground just yet. It will therefore take another escalation in the Ukrainian conflict, after this current round of sanctions, to push the EU over the edge. The global headwinds, from this European Tsunami should also wash up on the shores of America in time for the Jackson Hole meeting. They will no doubt be joined by the hurricane blowing in from the Middle East.
“No Eyes on Iraq and One Eye on Europe.”
America is currently trying to appear as impartial as possible; by seizing a tanker of Kurdish Crude offshore from Texas[xxvi]. The signal is that America supports a unified Iraq. Should Europe become more motivated to put boots on the ground, in order to secure Kurdish Crude, the position of America will change swiftly. Goldman estimates[xxvii] that the Kurds could be doing a million barrels a day by the end of the decade; which is something that Europe cannot afford to ignore if and when Russian sanctions start to bite back on energy supplies.
“A Tactical Declaration.”
The UK economy and its central bank are proving to be the most accurate weather-vanes; signalling the direction of the geopolitical headwinds and central bank liquidity tailwinds. The new Deputy Governor of the Bank England signalled that the London property market has finally lost its bid; from emerging market kleptocrats and oligarchs, who are either facing global sanctions or the gulags in their own countries[xxviii]. He then elaborated that Sterling strength has been a symptom of global economic weakness; and that it has slowed UK economic growth in addition to domestic inflation. Far from tightening because of UK overheating therefore, the Bank is actually considering looser monetary policy; once the UK economy rolls over in the very near future[xxix]. Age of Wisdom, Age of Foolishness (37) “The Third Man(date)” suggested that:
“A permanent increase of the money supply is now envisaged to come out of Jackson Hole this summer. The Fed and the Bank of England, seem set to land their Helicopters first.”
Deputy Governor Broadbent is now firmly pointing in this direction.
“Sick As a Parrot.”
Shares in Adidas also showed the way the geopolitical and economic headwinds were blowing. Shares in the company slid 14% after it announced that Russian sanctions would be a big problem for sales; not only directly in Russia but also indirectly in Europe as the blowback from sanctions hit consumer sentiment[xxx].
“They’re Off to See the Wizard.”
When the ripple effects from the global headwinds reach the Kansas Fed, it will be time for Janet Yellen to fly over the rainbow; and to land the “Helicopter” at Jackson Hole with her new friends.
“Recidivism Goes Over the Rainbow.”
Residential Mortgage-Backed Securities Are Heading Over a Cliff
The arrival of the “Helicopter” cannot come a moment too soon for the US housing market, despite all the alleged signs of strength in the real economy. The housing market has been shielded from further deterioration by the generous Federal mortgage modification programmes; which were discussed along with their “acronyms” in the Housing Smoke and Mirrors series that preceded Age of Wisdom, Age of Foolishness. The bottom line on housing now; is that the positive impact on delinquencies and foreclosures from these programmes is being overwhelmed, by the underlying rate of mortgage deterioration which has continued since the Credit Crunch[xxxi].
Unadjusted Year-over-Year Change in Existing Home Sales Volumes (blue line), 3 month rolling average (red line)
“There’s No Place Like Home Anymore.”
June 2014 Pending Home Sales Below Expectations and Not Good
The tell-tale deterioration in the 2010 and 2011 mortgage vintages has tracked the decline in pending home sales since mid-2013 very closely. They are now converging higher on the elevated 2009 delinquency rate. Mortgages taken out in 2009, when house prices had crashed and the Fed had cut interest rates dramatically, have got a bigger fundamental cushion. It will be interesting to see if the 2010 and 2011 vintages actually burst through the delinquency plateau of the 2009 vintages; and converge on the elevated “Credit Crunch” vintages of 2007 and 2008. It will also be interesting to see just how stable the 2009 vintages are; and hence how much of a fundamental cushion they really have. In the absence of investors, who are now less aggressive, the bid for housing has gone; just as the distressed fundamentals are starting to erode the market again.
“It Still Ain’t Kansas.”
Freddie Mac: Mortgage Serious Delinquency rate declined in June, Lowest since January 2009
Freddie Mac reported that the serious delinquency rate fell in June[xxxii]. The rate of decline is however painfully slow; and the current level remains at double that which is considered normal. The housing market is therefore a long way from fundamental normality, just as the mortgage delinquency rate fundamentals start to deteriorate.
“US Commercial Banks Buy the Taper….. Hope to Sell the Fact.”
Keep An Eye on Commercial Bank Liquidity Trends
Age of Wisdom, Age of Foolishness (38) “Rosebud”
Age of Wisdom, Age of Foolishness (38) “Rosebud” explained how the commercial banks had effectively positioned themselves for the “Big Short” event; through buying Treasuries into the rising yields during the Fed’s Taper period.
As noted, in Age of Wisdom, Age of Foolishness (38) “Rosebud”, the banks have therefore created the conditions for the “Big Short”; by replacing commercial lending to the real economy with duration lending to the US Treasury. The Special Inspector General of TARP (SIGTARP) has uncovered further evidence[xxxiii] of the banks constructive manipulation of the housing market to support the “Big Short” event that they have positioned in advance for. In its latest audit report, SIGTARP found that mortgage servicing companies including JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Ocwen (OCN) Loan Servicing LLC are processing only a tiny fraction of the applications they receive each month for the Home Affordable Modification Program (HAMP). The actions of the mortgage servicers are therefore causing the rise in delinquency rates observed in the recidivism chart above. It would seem that the servicers have decided to foreclose and hit the higher bid for houses they acquire. Presumably they wish to sell them on to the likes of Blackstone and the investment community; who are now in the buy-to-let game. The banks have therefore called the top in the housing market ahead of time; and positioned for the fallout. The forensic evidence suggests that the banks have also deliberately created the conditions precedent for the fallout, through their lending and mortgage servicing activities; in order to profit from the fallout.
The Census Bureau’s latest homeownership and vacancy data for Q2/2014[xxxiv] suggests that America continues to be a nation of renters; in fact the trend is accelerating. It can now be seen that the mortgage servicers are about to accelerate this trend; by creating the conditions in the real economy, through reduced lending and increased foreclosing, which will force Americans into the hands of the Wall Street landlords in the big funds.
The homeowner vacancy rate has stopped falling; which suggests that a new wave of supply is about to hit the market. This supply looks as though it will come in the form of foreclosures rather than new-builds.
There has been much talk, amongst the value investor community, of a bubble in US Equities. The real bubble is however in US Consumer Confidence; which is the derivative of the bubble in Equity prices. Going into June, the US Consumer Confidence bubble (shown above) was hitting new highs; even as the consumer was rolling over and giving up. Confidence was being driven by the rally in equities.
This conclusion is supported by the latest report on NYSE margin debt[xxxv], which shows that it is returning back to all-time highs. This is a tough call for the longs. They understand that a permanent boost to equities is coming from the Fed and the Treasury; but their dilemma is presented by the fact that the Fed and the Treasury may need a sharp sell-off in equities and the economic headwind this implies in order to unleash the said permanent boost.
Age of Wisdom, Age of Foolishness (35) “Red Lines & Green Lights”[xxxvi]
This dilemma was highlighted in Age of Wisdom, Age of Foolishness (35) “Red Lines & Green Lights”[xxxvii]; which showed that it was resolved by being long NASDAQ and short Dow Industrials. Being long NASDAQ covers the base for the permanent ease and being short Dow Industrials covers the base for the sell-off required to trigger said permanent ease.
More recently, the shorter term measures of consumer sentiment have shown that this bubble has just popped; and the correlation with equities is breaking down. In fact it may now be time for equities to follow and then get ahead of consumer sentiment on the way down. The dip to be bought appears to be just around the corner.
“Bada Boom …. Bada Bust!”
The emerging picture, in the US housing and residential mortgage backed securities markets, looks alarmingly similar to the way it did from 2010 – 2011, when James Bullard was then forced to announce a major QE programme. This picture is not like that of a bubble bursting , as was the case in 2007-2008, but more like a recovery running out of steam again. The Fed as the “Uber Macroprudential Regulator” should be calling the banks out; and locking up the bad guys. It is however in the Fed’s interest for the housing market to collapse again; because it forces the Fed’s balance sheet to remain extended and hastens the permanent increase in the money supply. The Fed will therefore reward the banks for doing its dirty work. The concentration of even greater price risk into a smaller number of banks, has effectively made them Too Big to be Allowed to Fail (TBTBATF); in the same way that the Fed’s expanded balance sheet has allowed it to purloin the same acronym. The banks and the Fed need each other, more than ever before.
The latest FOMC announcement, suggest that Yellen has been successful in decoupling the notion of the growth mandate from the unemployment rate[xxxviii]. The FOMC will now use a “range of indicators”; all of which currently suggest that there is still slack in the labour-force despite the unemployment rate suggesting otherwise. The monthly fun and games surrounding the release of Employment Situation report has therefore lost its importance, for all but the shallowest form of momentum traders. Yellen is therefore making good progress towards Stanley Fischer’s “Third Mandate”; which will allow the Fed to cherry pick the data it needs in order to meet an amorphous “Macroprudential Stability” mandate.
Yellen can thus easily discount the strong rebound in Q2/2014 GDP and get away with not continuing to tighten policy.
There is no hiding from the rebound in inflation though; a subject that her most vociferous critics have been focusing on. The strength in inflation suggests that she is going to have to let interest rates drift higher to choke off further economic activity, before she can hit the easing button again. The landing pad for the “Helicopter” at Jackson Hole has been seriously obscured by this uptick in inflation; so much so that Yellen runs the risk of crashing and burning. Yellen must now rely on a greater deterioration in the geopolitical picture to create a bigger headwind for growth; in order to overcome the demand for higher interest rates from the rise in inflation. The equity markets are thus both vulnerable to geopolitical news and also bad inflation news.
“Garbage In, Cherries Picked Out.”
BIS Working Papers No 453: The FRBNY Staff – Underlying Inflation Gauge: UIG
The New York Fed has however thrown Yellen a line. Using the respectability and inflation fighting credentials of the BIS, as a co-author, for credibility; the New York Fed has created a new inflation index called the Underlying Inflation Gauge (UIG)[xxxix]. The UIG uses more real time inflation price inputs, including capital markets asset prices, over a shorter time frame, which is more practical for policy makers and inflation forecasters. The UIG is therefore a more optimal inflation measure; which is also less volatile and lower in value than the current measures the Fed uses. The UIG therefore shows that inflation remains benign, even though it has picked up slightly of late. The Fed will no doubt migrate to the UIG after a respectable period of evaluation. The real issue however is that the UIG includes asset prices. If one stops and thinks for a moment on where the Fed is going, with its permanently expanded balance sheet and “Macroprudential Third Mandate”, the utility (for the Fed) in the adoption of the UIG becomes clear. The Fed controls asset prices through its QE operations; this means that the Fed is therefore able to control an input into the UIG. The Fed is therefore trying to control inflation through the control of asset prices. It is logical to conclude that the Fed will be able to get inflation to print the value it requires, through skilful manipulation of asset prices. The scope for manipulation of an inflation indicator to justify desired Fed policy, however well intentioned, is insidious; so one should expect UIG to become the go to inflation indicator very soon. Since UIG is lower and less volatile, one can anticipate that the Fed’s balance sheet will therefore be much larger for much longer. Cherry picking data has now evolved into cultivating the cherries to be of the desired size and flavour. If the Fed has already been targeting these cherries, since QE began in 2009, it follows that the garbage-out desired has already been made to fit the garbage-in that the UIG was back-tested against. An index that seemingly correlates strongly with the other inflation measures, yet does not exhibit the same volatility, seems too good to be true. Perhaps suspicions will be raised when the Fed suddenly is able to predict inflation and hit its predictions with unerring regularity; although it’s unlikely. When something appears too good to be true, it usually is. It shouldn’t take long for the public sector and private sector organizations, who benchmark their financial liabilities off inflation measures, to adopt the UIG either. Imagine owning TIPS that suddenly become UIG TIPS? The scope to play with the inflation measures which go into salaries, pensions, social security payments etc. lends itself nicely to the UIG measure of inflation; for those with the liabilities. Inflation and hence the US Budget Deficit, Social Security Deficit and public and private pension deficits could all be significantly cut in a keystroke with the UIG.
The mobster analysis of geopolitics and finance, adopted in the Age of Wisdom, Age of Foolishness thesis, supports the theme that the alleged enemies need each other to justify their own agendas.
“One’s Enemies: Can’t live with ‘em, can’t live without ‘em.”
Geopolitics has therefore become a matter of compromise and complementarity. War and threats of terrorism are catalysts and agents of change. In addition, wars and terrorist threats create a more unified subservient polity; and fertile ground upon which to accept the change being engineered. Said changes are sold to the subservient unified polity, as the alleged conditions which will end all future wars. The continued requirement for change determines the perpetual requirement for war however; but this detail is omitted during the sales-pitch. In the current global arena, with the presence of nuclear weapons which could destroy everything, the stakes are high. This nuclear risk creates the requirement for compromise and complementarity, which are manifested as the “pressing issues” of the day. These “pressing issues” are then skilfully manipulated, in the public domain, to create and manage the public opinion onto which change is projected.
“It’s Milking Time!”
Milking It For All It’s Worth
The latest “pressing issues” involve the need to address perceived wealth inequality at the global, regional and national levels; in addition to the need to make the monetary response to the Credit Crunch a permanent rather than temporary one. Wealth inequality is however not simply a monetary issue; it is also an energy issue. Wealth correlates directly with energy use. In September 2013, China became the world’s largest net energy importer[xl]. China’s economic future is therefore constrained by its energy insecurity. America on the other hand, became the world’s largest oil producer during this period. Europe remains energy insecure; and consequently is China’s greatest challenge in the global arena. China has tried to overcome its energy challenge, by bartering its goods and infrastructure construction in return for oil imports. If China’s energy suppliers asked for US Dollars however, China’s US Dollar currency reserves would set the limits on its economic growth. China has therefore taken a new initiative to create an alternative economic bloc, based on the BRIC economies, to challenge the constraints placed upon it by the US Dollar’s role as the world’s reserve and commodity pricing currency. China’s energy insecurity and the fact that the world’s major commodities are still priced in US Dollars, fundamentally challenge the potential for the success of this alternative trading bloc. The spread of the current wave of geopolitical instability, into regions which China depends upon for its energy inputs, highlights this fundamental challenge. In the past, America has policed these regions at great cost in order to deliver cheap energy to China. America is no longer picking up the tab for this free ride that China has enjoyed during its rapid growth phase. It is now time for the two nations to decide how the costs for global stability will be shared more equitably. China apparently is welching on the original deal; by trying to create a new global stability pricing solution, in the form of the new BRIC development bloc. This solution does not provide a market for American goods and services however; nor does will it use US Dollars as the ultimate medium of exchange. It is therefore unlikely that America will accept this new global stability pricing mechanism, without some negotiation and price discovery of the geopolitical kind. This negotiation and price discovery is currently being discounted by the global capital markets; as they respond to the headlines emerging from the conflict zones. Europe is also under pressure from America to get more involved in the negotiations and price discovery. Traditionally, Europe like China also let America pick up the tab for global stability. Europe now wishes to shirk its global responsibility, whilst it deals with its own internal debt crisis. America however, will not allow Europe to get off the hook so lightly; without a fight somewhere if needed.
All these “pressing issues” of global stability are wrapped up in, the images and language of, conflicts and threats of terror. Failure to address these underlying issues will lead to the kind of anarchy, which has destroyed all the great civilizations of the past. The real risk is that one overzealous mobster pursues his/her own agenda, to the exclusion of his/her other confederates; and takes the whole system down. The emergence of the multi-polar geopolitical world order, in some ways mitigates this unipolar individual threat. In countries which are not democracies however, the unipolar threat looms large. Presumably this is why the West promotes the rules of the game, inherent in democracy, globally. Unfortunately however, in order to promote democracy, the threat from dictatorships must always exist. The acme of political skill is to keep rotating the dictators in and out of office; so that the apparent threat remains without developing into the next Stalin or Hitler. The global media, in particularly the internet, also has a role to play; by allowing all the players involved to regulate the behaviour of each other through media reporting.
“Same Old, Same Old…”
Today’s hero is tomorrow’s villain and vice versa. The latest sequel film goes on global release this summer. As the alliterated strapline from the “Tale of Two Cities” promotion says; it’s “A time of terrorists and tyrants. A time of loss and love.” The new director gushes, that the film will create “Better policies, for better lives”; as he rubs his hands with glee at the prospect of another 50 years of sequels.
“And why not?”(Barry Norman)
And as some cynic, allegedly suffering from paranoid cognitive bias, in the back row shouts “Same *#?!, New Movie” ; in profane deference to what Mark Twain had to say about history rhyming rather than repeating.
Don’t forget to buy popcorn.
- Beyond the Pale
- Iran May Keep Nuclear Program After Ukraine, Cohen Says
- The Short Good Friday
- The Short Good Friday
- Startup Israel Suffering Most OECD Poverty as Poor Surge
- Policy Challenges for the Next 50 Years
- BRICS Ink $50 Billion Lender in World Bank, IMF Challenge
- Vladimir Putin, Of All People, Has Offered To Help Mediate Palestinian Israeli Cease-Fire
- Beyond the Pale
- The Committee to Save the World (II) September 16th 2013
- Putting the ‘F’ in CFR
- Putting the ‘F’ in CFR
- Milking It For All It’s Worth
- Milking It For All It’s Worth
- Rice Stands by Kerry After Israeli Critics Attack Him
- Netanyahu Presses for Disarming of Gaza, Says War Could Drag On
- U.S. Said to Find Russia Violated Nuclear Arms Treaty
- Germany Inc. Says Time’s Finally Up for Putin After Crash
- France Prepared to Cancel Warship Sale to Russia
- Yukos Owners Win $50 Billion in 10-Year Fight With Russia
- EU Aims at Russian Banks, Technology in Widest Sanctions
- ECB Weidmann: Too long period of low inflation could paralyse Eurozone economy
- EU Puzzles Over Emergency Funds for Bank-Crisis Agency
- Kurds Rebut Iraq’s Claim to Crude Oil Cargo Off Texas Coastline
- Kurdish Oil Production Seen Doubling Next Year by Goldman Sachs
- BOE’s Broadbent Says ‘Edge Is Coming Off’ U.K. Housing
- Broadbent Says Pound May Have Protracted Impact on Inflation
- Adidas Shares Crash After Stunning Warning About Russia
- Residential Mortgage-Backed Securities Are Heading Over a Cliff
- Freddie Mac: Mortgage Serious Delinquency rate declined in June, Lowest since January 2009
- Banks’ Slowdown on Mortgage Aid Hurts Borrowers, Audit Says
- HVS: Q2 2014 Homeownership and Vacancy Rates
- NYSE Margin Debt Is Back In The ‘Scary Zone’
- Red Lines and Green Lights
- Red Lines and Green Lights
- Fed Tunes Into Yellen Still Playing Labor-Market Blues
- BIS Working Papers No 453: The FRBNY Staff – Underlying Inflation Gauge: UIG
- Whose Oil Will Quench China’s Thirst?