Central Perk: 9 nov. 2014

duminică, 9 noiembrie 2014

Mish's Global Economic Trend Analysis

Ukraine Split in Two; Expect Major Rebel Advance

Posted: 09 Nov 2014 02:58 PM PST

Writing is on the wall. It says, Ukraine is increasingly likely to split in two. Recent events appear to have sealed that fate.

October 28: Russia Backs Plan by Ukraine Separatists for an Early Election
October 31: Ukraine, France, Germany Urge Putin Not to Recognize Rebel Polls
November 2: In Hope and Defiance, Voters in East Ukraine Go to Polls in Rebel Elections
November 2: Pro-Russian rebels vote for leaders in eastern Ukraine
November 2: Pro-Russian Rebel Alexander Zakharchenko Gets 81% of Vote
November 2: Tass: Moscow Considers Elections in Eastern Ukraine Valid
November 3: Ukraine Calls Emergency Meeting to Dael with Election Vote
November 4: US, Ukraine Condemn "Sham Vote"
November 4: Ukraine President Calls for Disputed Poll to be Annulled
November 4: White House Slams Separatist Elections in Southeastern Ukraine.
November 4: Ukraine Tension Rises as Poroshenko to End Autonomy Law "Ukrainian President Petro Poroshenko will ask parliament to revoke a law giving more autonomy to regions occupied by pro-Russian separatists after the rebels held elections condemned by the U.S. and the European Union."
November 4: Ukrainian President Sends More Troops to the East
November 5: Ukraine Rebels Say Annulment of Autonomy 'Cancels' Truce
November 5: Ukraine Truce Teeters as Kerry, Merkel Warn on Sanctions
November 6: Ukraine Begins "Large-Scale" Offensive In Donetsk; "War Has Resumed" Rebel Leader Warns
November 8: Ukraine rebels seen moving large military convoys

Headline Summation

Ukraine rebels held polls.
In heavy turnout, vote was strongly pro-Russia.
Russia recognized the vote but Ukraine, the US, Germany didn't
The West threatens more sanctions.
Ukraine annuls cease-fire autonomy agreement.
Rebels cancel truce.
War resumes.

Reflections from Reader Jacob Dreizin

Hi Mish,

Allow me to chime in on another election. On November 2nd, the Donetsk and Lugansk Peoples' Republics held elections to basically validate the existing, Moscow-backed rebel leadership that has come to the fore since roughly July-August of this year. The turnout was incredible, considering that many residents of battered frontline towns braved potential artillery fire to get to the polling stations.

On a symbolic note, the elections were held exactly six months after the May 2nd massacre of 40-some pro-Russian demonstrators in Odessa, for which, incredibly, no one has yet been indicted. (Several "investigations" were quietly abandoned months ago, as they were likely pointing to prominent nationalist groups in Kiev.)

Naturally, the EU and U.S. State Department are not happy with these elections, although they were quite happy with the Ukrainian parliamentary elections of October 26th, in which turnout was as low as 30% in some areas as parties more popular in the south and east were too intimidated to campaign or were simply banned.

In other news, Ukraine's Prime Minister Yatseniuk recently stated that Ukraine is open to buying coal from the rebel areas. This is a sign of desperation, which shows that buying coal from overseas (chiefly from South Africa) has not saved the day as there is simply not enough infrastructure to keep Ukrainian power plants continuously supplied with foreign coal. Also, some Ukrainian plants are specifically designed to burn certain grades of Donbass coal.

Already there have been many rolling blackouts and hot water cut-offs, and things will only get worse. Keep in mind that water flowing to apartment buildings (for both washing/cooking and central heating) in the former USSR is typically heated by coal. So you can expect Ukraine to have a very rough winter.

Yatseniuk also said that while Ukraine will continue selling electricity to the rebel areas, it will no longer be paying out pensions or any other benefits to residents of rebel-held areas until such time as these areas return to Ukrainian control.

Although Kiev had already minimized these disbursements since summer, Yatseniuk's statement is the most formal and and extreme announcement to that effect. This is a clear abdication of responsibility for the rebel areas as well as a de facto recognition that those people are no longer Ukrainians.

Note that Russia continued to pay benefits in Chechnya during its periods of de facto independence in the early 1990s and again in the late 1990s. Thus, there is precedent for continuing to treat people as your own citizens as you seek to return them to the fold. In this context, Kiev has just severed the last link that people in Donetsk and Lugansk may have had with the Ukrainian state. It is a scorched-earth policy as well as an admission of failure.

Reader Jacob Dreizin is a US citizen who speaks Russian and reads Ukrainian.

Here's an interesting video about who is responsible for shelling that kills school children. The video is from last summer, but translations have been added so the video is now understandable to those who speak English.

Prepare for Major Rebel Advance

Finally, I have one more email from Jacob Dreizin to share. He believes another major rebel advance is in the cards this year.

Hello Mish,

Based on a long, detailed, and seemingly very authoritative (and conspicuously anonymous) contribution on Strelkov's social media page, which is sort of a mouthpiece for various elements of the rebel movement (much more so than even Colonel Cassad), I am thinking that there will be one more major rebel advance before winter.

[Mish note: "Strelkov" is the nickname for Igor Girkin, a Russian nationalist and former rebel commander.]

The piece does not go into specific geography, but the most likely target is the semi-encircled Ukrainian force in the Debaltsevo salient [Mish note: Debaltsevo is a city in the Donetsk Oblast (province) of Ukraine.] Cutting it off completely and then reducing it as was done with other "cauldrons" last summer would even-out the rebel front line and remove the initiative from the Ukrainian side once and for all, not to mention destroying Kiev's most combat-capable army group.

Another possibility is the capture of Mariupol. Strelkov's page has also strongly hinted at that recently. However, I should mention that misleading, speculative, or seemingly contradictory information on Strelkov's page has been used to spread fear and uncertainty on the Ukrainian side, helping keep them off-balance in advance of major rebel moves.

So, this is just speculation, but I am pretty sure there will be one more major rebel advance (and major Ukrainian defeat) before winter starts in earnest. The rebels simply cannot afford to have their largest cities still within range of Kiev's heavy artillery when the temperatures are consistently below freezing. They can't continue to have their people being made homeless all through the long Russian winter. If for no other reason, they will have to strike hard to push the Ukrainians further back.

Jacob

Realistically Speaking

Realistically speaking, Ukraine is already split in two.

How long it takes for the West to recognize that fact, and how many get killed in the process remains to be seen. Right now, there is no sign either side will back down.

Hypocrites in Washington DC and other misguided souls insist such a result "cannot be allowed to stand" even though the US has no legitimate business in the region.

More importantly, and even if you think the US does have a vested interest in the region, those in Eastern and Southern Ukraine are culturally and politically more aligned with Russia than Kiev.

Russian Language Usage

Map from Online Russian Do Ukrainians Speak Russian or Ukrainian?

Crucial Facts

Wars happen when politicians draw borders to the disagreement of a huge portion of a region's citizens.
Politically and culturally speaking there was never one united Ukraine in the first place!

Iraq is another perfect example of the failure that happens when outsiders set borders without taking cultural differences into consideration.

It is the height of arrogance and foolishness for the US to be involved in this mess. Similar arrogance and foolish nation building in Iraq gave rise to ISIS.

Simple Proposal

Ukraine and the US don't like the vote. OK, how about another one?

I propose a vote in which the citizens in Ukraine's Eastern and Southern regions get to pick the questions as opposed to Kiev forcing questions down the throats of citizens in those regions.

Think the vote would be much different than the one that just took place in Donetsk?

I don't. That's why Kiev won't allow it.

Pro-Democracy Stance

By the way, I will be inaccurately accused (yet again) of taking a pro-Putin stance. The fact of the matter is that I am taking a pro-democracy stance.

I really don't care what the questions are, or how Ukrainians in those regions vote.

This is internal business of Russia and Ukraine, especially those who live in sections of Ukraine that arguably should never have been part of Ukraine in the first place!

Why should anyone else care what the voters choose? Shouldn't people in the region get to decide their own fate?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Catalan Leaders Defy Madrid, Hold Independence Referendum

Posted: 09 Nov 2014 11:11 AM PST

On Tuesday, Spain's highest court suspended the Catalan independence vote in response to a legal challenge filed by prime minister Mariano Rajoy's government in Madrid.

In defiance of that constitutional ruling and vows from Madrid the vote would not take place, it did. Millions voted and the results will likely be for independence.

The Financial Times reports Catalan Leaders Hope Poll Turnout Will Send Independence Signal.

Millions of Catalans took part in a symbolic vote on the political future of the northern Spanish region on Sunday, in the biggest show of strength yet for Catalonia's increasingly vocal independence campaign.

The poll was held in the face of fierce opposition from the Spanish government, and despite a constitutional court ruling last week to suspend the exercise. Results due to be published on Monday are expected to show an overwhelming majority in favour of independence. Most anti-independence parties were opposed to the poll.

Voter turn-out by 6pm, with voting stations set to remain open for another two hours, was thought to be high – significantly more than have attended even the largest independence rallies to date. Catalonia has a population of 7.5m, of whom 5.4m are eligible to vote.

"We have been waiting for this opportunity for many years," said Pau Domingo, a 22-year old pro-independence voter outside a polling station in central Barcelona. "This is an important step towards taking our destiny in our hands, and towards no longer depending on a state that doesn't accept us the way we are."

Despite a series of last-minute legal appeals and a warning from the state prosecution service, the voting process across the region was orderly and peaceful, Catalan officials said. In many cities, voters formed long queues before polling stations opened at 9am, generating what participants described as a "festive atmosphere".

Mariano Rajoy, the Spanish prime minister, told a party conference on Saturday that the Catalan vote "is not a referendum, it is not a consultation, or anything like that." He added: "It will have no effect."

Voters were asked for their response to two questions. The first was: "Do you want Catalonia to be a state?" If answered affirmatively, the ballot paper posed a second question: "Do you want that state to be independent?"

No Effect?

Rajoy said the vote would have "no effect".

Of course it did. His government pledged to stop the vote. Millions of Catalans effectively gave Rajoy the finger. Voter turnout was higher than expected in defiance of the court.

Rajoy's government has been weakened. Is that not an effect? Expect tensions to increase. If so, is that not an effect?

Prior to the vote, Catalans faced a Cyber-Attack on the Catalan National Congress (ANC) Website, effectively shutting it down.

In addition, "75 mobile phones used in the last few days to campaign in favor of the referendum were blocked by a massive reception of calls from an unknown origin."

What's next is unclear, but you cannot disenfranchise 7.5 million people to the point of open defiance of a court ruling and claim there is "no effect".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Seth's Blog : Wall Street gets what it wants

Wall Street gets what it wants

In the magical abundancy-based, post-industrial world, it's tempting to look at the massive web companies that connect us as benevolent overlords, institutions that want what we want.

But then they go public.

Here's a Wall Street analyst with Needham & Company speaking her truth, about Facebook:

“Wall Street cares about the business model. We care less about changing the world.”

The reality of being a senior executive at a fast-growing public internet company is that you're surrounded by thousands (or tens of thousands) of people who make millions of dollars every single time the stock price goes up a dollar.

And that's where the seeds of demise are sown.

Say whatever you want to say, the people around you are all paying attention to the stock price, and Wall Street is driving you to mediocrity, to breaking your promises, to interrupting, shaving corners, and most of all, getting stuck.

Wall Street thinks it wants industrial-style reliable incremental growth, the stuff they got accustomed to getting from General Electric, General Mills and General Dynamic. But in fact, what they invested in this time is changing the world.

The world is going to change with or without this public company. It's bumpy for us along the way, though, because we trusted the companies that are now owned by people who want something else.