Central Perk

duminică, 23 martie 2014

Mish's Global Economic Trend Analysis

Was Russia's Annexation of Crimea Illegal? Who Has the Right to Decide? Transformation of Mainstream Media

Posted: 23 Mar 2014 06:42 PM PDT

In response to Failure is Truly Success! Reader Tata commented ...

"The key question here is Russia's Crimea annexation legal or illegal, aka criminal. If it is legal, then you are absolutely correct. If it is criminal, then a question of reaction level is not moot."

Actually, there are two separate issues here.

Was Russia's annexation of Crimea illegal?
Was the US response justified?

Even if one presumes Russia's annexation of Crimea was illegal, the US response has to be judged in and of itself. If Paul robs your house, you do not have the right to block Bob's driveway. In fact you have no right to undertake any action against Bob.

If the US Congress declared war on Russia, then and only then could could Obama's response be considered appropriate (assuming of course one thinks declaring war on Russia makes sense).

Let's return to the first question: Was Russia's annexation of Crimea illegal?

What gives Obama the right to be judge and jury? If three bullies vote (US allies) and there are only five votes is that legitimate?

I will answer the question, and not with more questions. But first please consider the following.

Transformation of Mainstream Media

I highly encourage everyone to read Paul Craig Roberts on Crimea, US Foreign Policy and the Transformation of Mainstream Media

The Crimean peninsula was controlled by the Russian Empire from the 18th to 20th centuries until it became part of an independent Ukraine following the breakup of the Soviet Union in 1991.

Even to the most astute observer, the current crisis in the southeastern region of Ukraine is difficult to interpret. The view can be blurred by geographic distance, muddled by inconsistent reporting and blinded by prejudice. Because of treacherously unremitting digital and social media, an understanding of the complex sociopolitical elements is diluted; independent inquiry loses legitimacy and critical voices enter an anarchic fray. How can one make sense of this dilemma?

Paul Craig Roberts is a former assistant secretary of the treasury and associate editor of The Wall Street Journal. He has been following the situation in Ukraine closely and spoke to Truthout about the long history of the crisis, the influence of the mainstream media (in which he worked for decades) and the dangerous provocations of Western leaders. The author of more than ten books, his most recent work is called The Failure of Laissez Faire Capitalism. This interview took place on March 12, 2014.

Truthout: How do you assess the current situation? What power struggle is currently unraveling?

PCR: Well, I think it would be a mistake to represent the events in Crimea as a power standoff between Russia and the United States. What has happened in Ukraine is the United States organized and financed a coup. And the coup occurred in Kiev, the capital. Either from intention or carelessness, the coup elements include ultra-right-wing nationalists whose roots go back to organizations that fought for Hitler in the Second World War against the Soviet Union.

Crimea was added to the Ukraine in 1954 by Khrushchev, the general secretary of the Communist Party. Both of these Russian areas have been part of Russia for longer than the United States has existed. It didn't make a difference at the time because it was all part of the Soviet Union.

The population in Crimea is predominantly Russian, and so is eastern Ukraine. These people said, "We don't want anything to do with this government in Kiev, which is banning our language and destroying our war monuments and threatening us in many ways." They followed the same legal steps; the same UN procedures, the same international court procedures. So everything that has occurred is strictly legal. And when John Kerry and Obama say the opposite, they're lying through their teeth. It's just blatant, shameful, bald-faced lies. This is not debatable or a question of opinion. It's a matter of law.

So the Parliament in Crimea followed these procedures and has now declared Crimea to be independent. The vote that [was] given to the people on [March 16] . ... So there has been no Russian invasion. That's easily provable. The Russian troops in the Ukraine have been there since the 1990s.

It has to do with the lease arrangements it has on its Black Sea naval base [Sevastopol], because when Ukraine was granted independence, Russia certainly wasn't giving up its warm-water port. The terms of the separation state that Russia has a lease there until 2042. Sixteen thousand troops were there, and under the agreement with the Ukraine they can have up to 25,000 along with a certain number of planes, tanks and artillery. All this is specified and well-known, but it is subject to lies from Washington - and they are repeated endlessly in the so-called American media.

The result is that eastern Ukraine returns to Russia, western Ukraine will be captured, subject to an IMF [International Monetary Fund] austerity plan, looted by the Western banks and stuck in NATO while US anti-ballistic missile bases will be put in western Ukraine.

This is intensifying the strategic threat to Russia that Washington has been pursuing since the George H.W. Bush regime when he violated the agreements that Reagan had given not to take NATO into eastern Europe. These same agreements were violated when Washington withdrew from the ABMT [Anti-Ballistic Missile Treaty] in 2002 so it could construct an anti-ballistic missile defense. These are extreme provocations, and they are reckless. It's the same kind of behavior that gave us the First World War.

Truthout: In your latest writings you've discussed the failure of the so called mainstream or American media in reporting about Crimea objectively - that is, without displaying a bias toward one side or the other. Can you discuss the role alternative media has played in relation to the crisis in Ukraine?

PCR: A very important part of it has to do with something that happened toward the end of [Bill] Clinton's second term. He permitted five mega companies to consolidate the formerly independent and dispersed US media. What were once independent networks like ABC, CBS, NBC, CNN, all became cogs in a larger media empire. The value of these big media companies is their federal broadcast licenses: They can't go against the government and expect them to be renewed. Another big change is these media companies are no longer run by journalists. They're run by corporate advertising executives and former government officials. And their only interests are protecting the net worth of the company and the flow of advertising revenues.

I am a former editor of The Wall Street Journal and a columnist at all the major publications as well, and I personally witnessed the change in the media and the people in it. So I already know what they're going to say; I can write the scripts before they go on and mouth them. It's been going on for some time. A similar thing happened with the Iraqi weapons of mass destruction. It was a lie told over and over. And everyone repeated it. The New York Times didn't even go to the weapons inspector we sent to Iraq, Hans Blix! Instead, Judith Miller repeated a lie endlessly in the pages of the newspaper. It reflects a total lack of integrity.

One of the main reasons for this is that many of them know they cannot tell the truth, otherwise they'll be fired. They know it's pointless to take a story that contradicts the president or the secretary of state or the CIA or the NSA to the editor. He or she will look at you and say What are you crazy? Do you want to get us both fired? So they simply don't bother. It's quite a corrupt milieu, and it must be deadening to the soul. But that's what it is to be a mainstream journalist today.

Truthout: Looking back on your time as assistant secretary of the treasury under Ronald Reagan, how have the global politics of brinkmanship changed?

PCR: Oh, yes, it's changed tremendously, in two critical ways. One is the Soviet Union and Communist China existed, and these were huge constraints on American power. The US couldn't go waltzing in blowing up countries throughout the Middle East, for example. Those constraints on American power no longer exist. The Cold War is gone, and the alliances that were part of it have disappeared. When I was in the Reagan administration, the neoconservatives had not emerged as the ideological force that they are today; they had not written their position papers calling for American world hegemony.

The neoconservatives had nowhere near the same power or influence [under Reagan] that they did under Clinton, George W. Bush and now Obama. In fact they caused so much trouble for [Reagan], he fired every one of them. They were behind the Contras in Nicaragua. Some of them were actually prosecuted and convicted - such as Elliot Abrams, who was assistant secretary of state. He and others were later pardoned by George H.W. Bush, but the Reagan administration itself took very strong action against neoconservatives. They were fired, thrown out of the government. Richard Perle was even thrown off of the [President's Intelligence Advisory Board]. The neoconservatives emerged with the American attacks on Serbia - what we call the NATO attacks - and the theft of Kosovo from Serbia and its setup as an American protectorate. Their influence then exploded in the first years of George W. Bush. The entire national security apparatus, the entire Pentagon, the entire State Department were all staffed-up by neoconservatives.

The agenda was there. It had been set out in papers from the Project for the New American Century, and much of the government was run by its representatives. The Obama administration has many of the same people, but now they're able to go further because they have more resources to fund dissent groups like we've seen in Ukraine.

This is a reckless thing to do. The Russians cannot accept strategic threats of this sort; it's just too high.

End Truthout Interview

Looking for Hitler Comparisons?

Ironically, US media portrays the actions of Putin to Hitler. The reality is right-wing Hitleristic goons now occupy key posts in Ukraine.

Even the generally-liberal Huffington Post recognize that fact. Please consider The Neo-Nazi Question in Ukraine.

The Obama administration has vehemently denied charges that Ukraine's nascent regime is stock full of neo-fascists despite clear evidence suggesting otherwise. Such categorical repudiations lend credence to the notion the U.S. facilitated the anti-Russian cabal's rise to power as part of a broader strategy to draw Ukraine into the West's sphere of influence. Even more disturbing are apologists, from the American left and right, who seem willing accomplices in this obfuscation of reality, when just a cursory glance at the profiles of Ukraine's new leaders should give pause to the most zealous of Russophobes.

It isn't too surprising that conservative outlets like FOX News would downplay Russian allegations but the so-called "liberal" press has also contributed to the American disinformation campaign.

For starters, Andriy Parubiy, the new secretary of Ukraine's security council, was a co-founder of the Neo-Nazi Social-National Party of Ukraine (SNPU), otherwise known as Svoboda. And his deputy, Dmytro Yarosh, is the leader of a party called the Right Sector which, according to historian Timothy Stanley, "flies the old flag of the Ukrainian Nazi collaborators at its rallies."

The highest-ranking right-wing extremist is Deputy Prime Minister Oleksandr Sych, also a member of Svoboda, who believes that women should "lead the kind of lifestyle to avoid the risk of rape, including refraining from drinking alcohol and being in controversial company."

The Svoboda party has tapped into Nazi symbolism including the "wolf's angel" rune, which resembles a swastika and was worn by members of the Waffen-SS, a panzer division that was declared a criminal organization at Nuremberg. A report from Tel-Aviv University describes the Svoboda party as "an extremist, right-wing, nationalist organization which emphasizes its identification with the ideology of German National Socialism."

Last week Per Anders Rudling from Lund University in Sweden, an expert on Ukrainian extremists, told Britain's Channel 4 News: "A neo-fascist party like Svoboda getting the deputy prime minister position is news in its own right." Well, except in the U.S.

Even more disconcerting has been the emergence of phone intercepts between high-ranking U.S. and Ukrainian officials which make it look as if the U.S. was basically, in the words of Princeton's Stephen Cohen, "plotting a coup d'état against the elected president of Ukraine." In other words, the U.S., in addition to providing moral support, may have paved the way for extremists to seize power in Kiev.

Be they radical mujahideen or neo-fascists, Washington certainly has a penchant for bolstering shadowy forces, usually labeling them with risible euphemisms like "freedom fighters," in order to satiate short-term geopolitical needs, despite said factions being inimical to America's true long-term interests.

Dark Side of Ukraine Revolt

I also invite you to read the Dark Side of Ukraine Revolt on The Nation.

"You'd never know from most of the reporting that far-right nationalists and fascists have been at the heart of the protests and attacks on government buildings," reports Seumas Milne of the British Guardian. The most prominent of the groups has been the ultra-right-wing Svoboda or "Freedom" Party.

Svoboda—which currently has thirty-six deputies in the 450-member Ukrainian parliament—began life in the mid-1990s as the Social National Party of the Ukraine, but its roots lie in World War II, when Ukrainian nationalists and Nazis found common ground in the ideology of anti-communism and anti-Semitism. In April 1943, Dr. Otto von Wachter, the Nazi commander of Galicia—the name for western Ukraine—turned the First Division of the Ukrainian National Army into the 14 Grenadier Division of the Waffen SS, the so-called "Galicia Division."

The Waffen SS was the armed wing of the Nazi Party, and while serving alongside the regular army, or Wehrmacht, the party controlled the SS's thirty-eight-plus divisions. While all Nazi forces took part in massacres and atrocities, the Waffen SS did so with particular efficiency. The postwar Nuremberg trials designated it a "criminal organization."

Take Your Pick: Story A or Story B

Story A: Crimea has historically been a part of Russia for centuries. Russian troops in Crimea were there by agreement. Thus, Russia did not invade Crimea. The US fomented trouble in Ukraine(and got it, but did not like the result). Crimea voted overwhelmingly to rejoin Russia. There is no legitimate reason to disavow that vote, whether we like the result or not. The US reneged on promises to not let NATO expand into Eastern bloc countries. Obama and US officials lie through their teeth, even to the point of supporting neo-nazis now running Ukraine. The IMF is now poised to wreck what remains of Ukraine.

Story B: Russia invaded Crimea. The vote for independence was illegal. It doesn't matter that the US reneged on promises not to put NATO in Eastern Europe. Any force Obama wants to apply to Russia is valid. Sending US missiles to the Check Republic and Ukraine makes sense. Freedom fighters now run Ukraine.

I Vote for Story A

The US fomented a coup of freely-elected Viktor Yanukovych and now does not like the result. Crimea did not like the result either. Crimea leaders defected and held a vote. Crimea returns to Russia and it never should have been given to Ukraine in the first place.

This is what happens when you meddle in the internal affairs of other countries. S*** happens, and the US is to blame.

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

Failure is Truly Success!

Posted: 23 Mar 2014 12:39 PM PDT

In a political gambit that at best is likely to result in some face-saving statements of support for the president, Obama Heads to Hague Hoping to Strengthen Europe's Resolve.

US President Barack Obama arrives in Europe after Russia's annexation of Crimea grappling with conflicting advice, anxious allies and unsure about Russian President Vladimir Putin's next move in Ukraine.

After the rebalancing of US diplomacy towards Asia, Mr Obama is also facing the challenge of sustained re-engagement with the continent's leaders, who often felt neglected in his first term and, more recently, bruised by allegations of US espionage.

Mr Obama will spend three days in The Hague and Brussels, at a summit of G7 leaders in the Dutch city, followed by a visit to Nato headquarters and a meeting with the EU. The overriding focus will be how to fashion and hold together a tough line against a Russian leader whose lightning incursion into Ukraine has startled the west.

So far, the US has responded with a series of sanctions against some of Mr Putin's closest associates ahead of the meeting at The Hague, taking place alongside an already scheduled nuclear security summit.

But Mr Obama's pushback against Moscow has been too little and too late, according to former administration advisers, and has failed to match the tough rhetoric from the White House about the Crimean takeover.

Too Little Too Late?

It is interesting to see warmongering Financial Times see this as "too little, too late", while the Fiscal Times proclaims, Obama Crippled a Russian Bank with a Stroke of a Pen. (For discussion, please see Criminal Actions by Obama; Two Wrongs Make a Right).

My own view is the Fiscal Times overstated the effects on St. Petersburg-based Bank Rossiya, yet the US has already done too much because no amount of sanctions will force Russia to return Crimea to Ukraine.

The Financial Times continues ...

Economic officials have broadly cautioned against tough sanctions because of the potential blowback against a US economy still struggling to regain solid growth, while Mr Obama's political advisers have pushed for tougher action, because of the diplomatic principles at stake.

Principles or Egos?

Are principles at stake or egos? Perhaps both, but any principles involved in this are misguided at best. For discussion, please see Buffoon Bluffery; What are Sanctions Really About?

The neocons would love to have another war. Indeed, they would be happy to have perpetual war on multiple fronts (which is precisely why we seem to have perpetual war, frequently on multiple fronts).

Everyone Should Hope Obama Fails

All further sanctions can do is provoke military or economic war. There will be no winners in either outcome. Sanctions, war, and economic war are a Negative Sum Game.

Thus, a failure by Obama to secure any additional sanctions is the best possible outcome. The second best result is some face-saving but meaningless statements.

As is typical of misguided politics coupled with bigger than life egos, the bigger the political failure to achieve stated goals, the better off we will all be.

Failure is truly success!

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

Seth's Blog : Compromise, design and the literal edges

Compromise, design and the literal edges

Let's say you wanted to improve the katana, the legendary fighting sword.

You could ask your team to come up with a sword that's lighter, sharper and more durable.

Built into that charge is the requirement to compromise. And just about everyone who has come before you has tried to come up with the same sort of compromise, and your chances of a breakthrough are slim indeed.

Compromise gives us an out, because, with multiple goals, it's easy to play it safe.

But what if you picked just one?

What if you sought to make the sharpest katana ever? Or merely the most durable one? By optimizing for just one attribute, you've eliminated most of the compromise from the design discussion. As a result, you're far more likely to encounter something extraordinary. It might not be practical, but there's plenty of time to compromise later.

It's almost always easier to roll something back a little than it is to push it forward.

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sâmbătă, 22 martie 2014

Mish's Global Economic Trend Analysis

Criminal Actions by Obama; Two Wrongs Make a Right

Posted: 22 Mar 2014 05:40 PM PDT

To President Obama, two wrongs make a right. Also, might makes right.

Suppose a neighbor steals your cat. Would it even be morally just to punch another neighbor (or the neighbor's kid) in the face to retaliate?

If you are president Obama, the answer is yes.

Please consider How Obama Crippled a Russian Bank with a Stroke of a Pen.

On Thursday, President Obama sent a message to Russian president Vladimir Putin about strength. Specifically, economic strength. The message was this: Whenever I decide to, I can pick up a pen, and kill a significant financial institution in your country.

Obama's victim was the St. Petersburg-based Bank Rossiya.

Bank Rossiya is not the largest bank in Russia by a long shot, but its significance lies in its clientele rather than its size. In announcing the sanctions, the Treasury Department noted that Bank Rossiya "is the personal bank for senior officials of the Russian Federation" including members of the Ozero Dacha Cooperative, an exclusive community where members of Putin's inner circle live. In addition, it provides financial services to the single largest segment of the Russian economy – the oil, gas, and energy sector.

Essentially, this is a credit union for oligarchs, with a side business in financing the Russian energy industry. Its customers include many more high-profile Russians than just those named in the Treasury statement. As of Thursday it is, for all intents and purposes, out of business.

"They've got to go to another bank," said Lester M. Joseph, former principal deputy chief of the Department of Justice's Asset Forfeiture and Money Laundering section. "That bank is pretty much a pariah."

Currently the international investigations manager at Wells Fargo Bank, Joseph said when heard about the sanctions on Bank Rossiya, the first thing he did was check to see if it was a customer of his institution. "It is not, thankfully," he said.

The impact doesn't stop there, Joseph explained. His next step, which is ongoing, is to see if any banks that Wells Fargo has relationships with are also doing business with Bank Rossiya, and to make sure that none of those banks are routing transactions from the Russian bank through Wells Fargo's system. "If a transaction from that bank is coming from another bank, we would have to block it," he said.

As one U.S. official told Reuters, Bank Rossiya will be "frozen out of the dollar."

"This is a new thing," said Joseph. "It's not a rogue bank. It's a bank in a country where we do a lot of business. It's not involved in a criminal case." Compared to other actions by past administrations, he said, "It's much more complex."

Criminal Actions by Obama

Bank Rossiya is frozen out of the US dollar even though it is not a rogue bank, is not involved in any criminal investigation, and in fact has not done anything wrong.

I cannot predict the result of this, and also suspect the impact as assessed above is a bit trumped up. After all, how many US dollar transactions does Bank Rossiya conduct?

Regardless, the actions of Obama are disturbing. You do not (rather you should not), punch an innocent party in the face as a means to force a third party to do what you want.

The action by Obama is both criminal and hypocritical. And I bet it does not even work.

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

Calling all young chefs!

Saturday, March 22, 2014

Calling all young chefs!

First Lady Michelle Obama is teaming up with Epicurious, the Department of Education, and the Department of Agriculture to host the third-annual Healthy Lunchtime Challenge recipe contest.

Kids ages 8-12, with the help of their parents, can take part in the challenge by sending in original lunch recipes that are healthy, affordable, and tasty!

Participating young chefs can use USDA's MyPlate as a resource to make sure that their recipes meet healthy standards. Each lunch recipe should represent all of the food groups, including fruits, vegetables, whole grains, lean proteins, and low-fat dairy foods, with fruits and veggies making up about half of the plate or recipe.

The creators of the best recipes will be invited to D.C. this summer, where they will have the opportunity to attend a Kids' "State Dinner," hosted by Mrs. Obama at the White House, where a selection of the winning healthy recipes will be served.

Just last week, the First Lady announced that cooking will be a new focus for Let's Move!, so start honing those skills and enter the Healthy Lunchtime Challenge.

The deadline to submit recipes is April 5 -- only two weeks away -- so if you're looking for something to do with your kids this weekend, get cooking!

Learn more about the challenge here, or visit recipechallenge.epicurious.com.

First Lady Michelle Obama and Epicurious Editor Tanya Steel listen as 12-year-old Haile Thomas, last year's recipe winner from Arizona, introduces Mrs. Obama during the Kids' State Dinner in the East Room of the White House, July 9, 2013. (Official White House Photo by Lawrence Jackson)

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Rewarding Women's Hard Work and Increasing the Minimum Wage

Featured

Weekly Address: Rewarding Women's Hard Work and Increasing the Minimum Wage

In this week's address, President Obama highlights the importance of making sure our economy rewards the hard work of every American -- including America's women.

Click here to watch this week's Weekly Address.

Weekly Wrap Up

POTUS Fills Out His Brackets

For the sixth straight year, the President filled out his brackets for the NCAA men's and women's basketball tournaments. On the men's side, he has Louisville, Michigan State, Florida, and Arizona headed to the Final Four, with the Spartans winning it all.

On Tuesday, President Obama awarded the Medal of Honor to 24 Army veterans for their service in World War II, the Korean War, and the Vietnam War. Nineteen of them were previously overlooked for the Medal of Honor due to their racial or ethnic backgrounds.

"No nation is perfect," the President said at the ceremony. "But here in America, we confront our imperfections and face a sometimes painful past, including the truth that some of these soldiers fought and died for a country that did not always see them as equal."

READ MORE

President Obama's Nowruz Message

As families and friends gathered around the As families and friends gather around the Sofreh-e Haft Sin to celebrate Nowruz, President Obama offered his best wishes for the new spring and new year.

In his message, the President speaks directly to the people and leaders of the Islamic Republic of Iran about the possibility for the first time in many years of a new chapter in the history of Iran and its role in the world -- including a better relationship with the United States and the American people.

The First Lady arrived in Beijing on Thursday, where she met with First Lady Peng Liyuan, visited the Beijing Normal School, and took in historic local sites.

LEARN MORE

As always, to see even more of this week's events, watch this week's episode of West Wing Week:

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Seth's Blog : Bulldozers and bullwhips

Bulldozers and bullwhips

Bulldozers work because they are incredibly heavy. It's fine that they're slow, they're powerful indeed.

Bullwhips work because they are incredibly fast. The superlight bit of leather at the end of the whip travels faster than the speed of sound, hence the crack.

Organizations often thrive because they have huge mass, they are irresistible forces, going where they are pointed. But they don't get there quickly.

On the other hand, it's quite possible to make an impact by being fast, light and quite focused.

Important to not confuse which you're using, though. Trying to make your bulldozer go faster might not work out so well. And you can't build a road with a bullwhip.

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vineri, 21 martie 2014

Mish's Global Economic Trend Analysis

Law of Social Media
Digital Coup: Twitter Use Jumps to New High in Turkey
"Cowardice of the Turkish Republic"; Turkey Blocks Access to Twitter for National Security Reasons
Gold Reserves Top 20 Countries
China Faces "Minsky Moment" on Ponzi Financing

Law of Social Media

Posted: 21 Mar 2014 08:27 PM PDT

Recent events in Turkey, and prior events in Egypt and Libya got me thinking about the amazing power of social media.

On Thursday, Turkey's prime minister Recep Tayyip Erdogan vowed to eradicate twitter, adding "The international community can say this or that – I don't care. They will see the power of the Turkish Republic."

The next day a "digital coup" occurred and Twitter Use in Turkey Jumped to New High.

With the above in mind, I propose ...

The Law of Social Media: Arrogant fools who think they can control social media quickly discover social media controls them.

The overthrow of President Hosni Mubarak in 2011, followed by the 2013 Egyptian coup d'état of president Mohamed Morsi, with an in-between ouster of Libyan president Muammar Gaddafi provides the basis for a number of important corollaries.

Law of Social Media Corollary One: Once sentiment reaches an extreme enough point, it is too late to be controlled. The social media genie cannot be put back in the bottle.

Law of Social Media Corollary Two: Prior to reaching critical mass in sentiment, the best thing for politicians would be to apologize for mistakes, then promise and quickly implement real reforms.

Law of Social Media Corollary three: Arrogant fools never perceive of themselves as arrogant fools. They will not apologize for mistakes or make necessary reforms. Instead they will eventually be voted out, forced out in a coup d'état, or overrun by the forces of social media.

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

Digital Coup: Twitter Use Jumps to New High in Turkey

Posted: 21 Mar 2014 04:54 PM PDT

I am absolutely laughing my head off at the sheer stupidity of bureaucrats who think they can control social media.

Earlier today in response to Turkey Blocks Access to Twitter for National Security Reasons I commented ...

"No one will see the "power" of the Turkish Republic in idea suppression announcements. They will see the arrogance, cowardice, and desperation of prime minister Erdogan."

Twitter Use Breaks New Record

Tonight I am pleased to report Twitter Use Jumps to New High in Turkey

Turkish users of Twitter, including the country's president, have flouted a block on the social media platform by using text messaging services or disguising the location of their computers to continue posting messages on the site.

In what many Twitter users in Turkey called a "digital coup", Telecom regulators enforced four court orders to restrict access to Twitter on Thursday night, just hours after the prime minister, Recep Tayyip Erdogan, vowed to "eradicate" the microblogging platform in an election speech.

The disruption followed previous government threats to clamp down on the social media and caused widespread outrage inside and outside Turkey. In a first reaction to the ban, Neelie Kroes, vice-president of the European commission, tweeted: "The Twitter ban in #Turkey is groundless, pointless, cowardly. Turkish people and intl community will see this as censorship. It is."

Štefan Füle, EU commissioner for Enlargement and European Neighbourhood Policy, said in a statement: "The ban on the social platform Twitter.com in Turkey raises grave concerns and casts doubt on Turkey's stated commitment to European values and standards."

The hashtag #TwitterisblockedinTurkey quickly rose to the top trending term globally. According to social media agency We Are Social the number of tweets sent from Turkey went up 138% following the ban.

On Friday, Turkey woke up to lively birdsong: according to the alternative online news site Zete.com, almost 2.5m tweets – 17,000 tweets a minute – have been posted from Turkey since the Twitter ban went into effect, setting records for Twitter use in the country. "Boss, my bird is still tweeting… @RT_Erdogan," posted @Fakir_Bey. "And yours?"

Meanwhile Twitter is looking into legal action against the ban and has hired a lawyer to discuss the case with the telecommunications authority in Ankara.Industry minister Fikri Işik said that Twitter needed a permanent legal representative in Turkey to facilitate all negotiations with the Turkish authorities.

Turkey's main opposition Republican People's party (CHP) also announced that it would challenge the blocking of Twitter in court, citing a violation of personal freedoms. The local bar association filed a separate criminal complaint against the ban.

Social media played a big role during last summer's anti-government protest, prompting Erdogan to call Twitter "a menace to society".

Several human rights groups strongly condemned Turkey's move, warning that the ban spelled a further worrying move towards increased authoritarianism in the country.

"The decision to block Twitter is an unprecedented attack on internet freedom and freedom of expression in Turkey. The draconian measure, brought under Turkey's restrictive internet law, shows the lengths the government is prepared to go to prevent anti-government criticism," said Andrew Gardner, Amnesty International's Turkey researcher, in a public statement.

Arrogance, Cowardice, Desperation

So much for the extreme arrogance of Prime minister Erdogan who banned Twitter for "national security" reasons.

Erdogan told an election rally in the western city of Bursa "The international community can say this or that – I don't care. They will see the power of the Turkish Republic."

Erdogan is a complete fool who is now officially "burnt toast". He is gone except by military force, and even that won't last.

Please tweet this post in the appropriate places, especially my comment (slightly modified) to fit tweet length ...
No one will see the "Power of the Republic" in Erdogan's announcement. They will see arrogance, cowardice, and desperation.

By the way, if you get the idea things are blowing up all over Europe, it's because they are.

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

"Cowardice of the Turkish Republic"; Turkey Blocks Access to Twitter for National Security Reasons

Posted: 21 Mar 2014 11:17 AM PDT

Turkey Blocks Access to Twitter

Elected politicians, like dictators, will do anything they can to stay in power. In second- and third-tier countries, their first order of business is to control the press, typically by taking state ownership of all television and newspaper interests.

Thanks to blogs and online news reporting, suppression of ideas is more difficult now than in pre-internet days. Countries responded by banning websites and blogs.

Enter social media. If politicians want to suppress thoughts now, they have to forbid "tweets". And that is precisely what Turkey did yesterday.

The Financial Times reports Turkey Blocks Access to Twitter.

Turkey blocked access to Twitter late on Thursday, after Recep Tayyip Erdogan, prime minister, vowed to eradicate the social media site, which has been extensively used to spread corruption allegations against his government.

"Twitter and so on, we will root them out," Mr Erdogan told an election rally in the western city of Bursa, adding that he would take such a step "immediately" for national security reasons. "The international community can say this or that – I don't care. They will see the power of the Turkish Republic."

The moves came as the government endures a continuing series of leaked voice recordings, distributed via Twitter, that critics say highlight corruption in the highest circles of government.

During mass demonstrations against his rule last year, Mr Erdogan described Twitter as a "menace" – 29 people in the city of Izmir are already facing prosecution over using the microblogging site to co-ordinate what the government says were illegal protests.

The prime minister has also indicated he could block access to YouTube and Facebook after the local elections on March 30, although Abdullah Gul, Turkey's president, has said such a move is out of the question.

As the ban on Twitter was announced, Twitter's policy team tweeted to tell Turkish users how they could send tweets via SMS with local mobile carriers. The tweet, in both Turkish and English, encouraged Turkish users to access the platform through its SMS service as Twitter's site was blocked.

"Cowardice of the Turkish Republic"

No one will see the "power" of the Turkish Republic in idea suppression announcements. They will see the arrogance, cowardice, and desperation of prime minister Erdogan.

It's easy to spot politicians in serious trouble by the actions they take. In terms of desperation, banning Twitter, Facebook, and YouTube is about 9 on a scale of 10.

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

Gold Reserves Top 20 Countries

Posted: 21 Mar 2014 09:12 AM PDT

My friend Nick at Sharelynx Gold has an interesting chart on world gold reserves that I would like to share.

World Gold Reserves

click on chart for sharper image

For those who think the US is going to enter hyperinflation with the US dollar becoming completely worthless, I reply that it will not and cannot happen because the US has the world's largest gold reserves.

I am strongly in favor of an audit, but spare me the hype about US gold being titanium-filled bars or the gold has all been removed, etc.

Strong price inflation is possible, albeit highly unlikely at present. Given the possibility of a gold-backed dollar, hyperinflation, with the US dollar becoming worthless as happened in Weimar or Zimbabwe, isn't remotely possible.

Of course there are numerous other reasons to discount hyperinflation hype. For further hyperinflation discussion, please see Hyperinflation Nonsense in Multiple Places.

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

China Faces "Minsky Moment" on Ponzi Financing

Posted: 21 Mar 2014 02:05 AM PDT

Inquiring minds are tuning into a report on the Ponzi finance setup in China. Most assume China can grow at 7% a year, a notion that I have challenged on many occasions. Morgan Stanley agrees.

Please consider Morgan Stanley: China's Minsky Moment is Here.

[Mish Note:] The prelude to the report on MacroBusiness Australia is interesting in and of itself:

"From Morgan Stanley comes the latest must read bearish China report. The outlines here are right but MS underestimates the impact of a Chinese hard landing upon the world. I'm currently working on a members' special report about how and when this business cycle ends but MS nicely describes how that ending begins."

What follows is from Morgan Stanley.

We have described in detail over the past two years how we believe China's twin excesses (excessive investment funded by excessive debt) will inevitably unwind, causing a substantial slowdown in China's economy, significantly below market expectations. In recent weeks, a trip to the region and further research into China's shadow banking system have convinced us that China is approaching its "Minsky Moment," which increases the chances of a disorderly unwind of China's excesses.

Based on our analysis, our baseline case is that China may slow from the current level of 7.7% Gross Domestic Product (GDP) growth to 5.0% over the next two years. A disorderly unwind could take Chinese growth down to 4% in a shorter time frame with potentially disastrous consequences for levered Chinese assets (banks, property) and the entire commodity supply chain (commodity stocks, equipment stocks, commodity-sensitive countries and their currencies).

One of the more controversial conclusions of our analysis is that global economic growth could be impacted severely enough to cause a global earnings recession.

In his 1993 paper entitled "The Financial Instability Hypothesis," Minsky identified three financing regimes that economies can operate under: the first, which he called hedge finance, is a regime in which borrowers have sufficient cash flows to meet "their contractual obligations," i.e. interest payments and principal repayment, usually by having a large equity component in their capital structure; the second, speculative finance, is a regime under which borrowers have cash flows that are sufficient to pay interest but not to repay principal, i.e. they must roll over their debts; the third, Ponzi finance, is a regime in which borrowers have insufficient cash flows to pay either principal or interest and therefore must either borrow or sell assets to make interest payments.

Our analysis indicates that China's economy has arrived at that unstable state where speculative and Ponzi finance appear to dominate. From a macroeconomic perspective, very few economies have ever created as much debt as China has in the past five years. China's private sector debt has increased from 115% of GDP in 2007 to 193% at the end of 2013. That 80% increase over five years compares to the U.S.'s 26% in 2000-2005. In recent years, only Spain and Ireland have achieved debt growth greater than China's.Every year, China is now adding $2.5 trillion of private sector debt to a $9.7 trillion GDP.

There is evidence that this debt growth has become excessive and non-productive. It now takes 4 renminbi (RMB) of debt to create 1 renminbi of GDP growth from a nearly 1:1 ratio in the early and mid-2000s. After the massive stimulus and more than doubling of new bank loans in 2009, the government attempted to stabilize credit growth, but the growth of the shadow banking system exploded instead. Shadow banking now accounts for more than a fifth of total credit in China—or about 40% of GDP from a base of 12% just five years ago. The shadow banking system funnels credit to borrowers who can no longer get loans from the formal banking sector, such as Local Government Funding Vehicles, the property sector, and companies in sectors with massive overcapacity and low or negative profitability such as coal mining, steel, cement, shipbuilding, and solar.

Work by Nomura's Chief China Economist indicates that more than half of Local Government Funding Vehicles, which borrow money on behalf of local governments to invest in infrastructure, have insufficient cash flows to pay interest or principal; the exact manifestation of Minsky's Ponzi finance regime. Total local government debt adds up to RMB17.9 trillion (nearly $3 trillion) according to the latest, likely understated, national audit. In addition, estimates show that up to one third of all new borrowings are currently being used to roll over existing debt, and that interest payments on debt represent nearly 17% of Chinese GDP—a staggeringly large number (which excludes principal repayments) and which is nearly double the level that the U.S. reached in 2007.

The unwind of this credit boom is likely in progress, and we expect it to pick up speed over the coming months and quarters. It will likely involve a steady drip of defaults and near-defaults as insolvent borrowers finally become illiquid. Market rates for all assets except central government bonds and central bank bills will likely continue to rise, reflecting increasing market fears of default by shaky borrowers. Asset values will likely begin to deteriorate as stressed borrowers attempt to sell assets to stay afloat.

We recognize that it is extremely likely that the Chinese government will attempt to stave off the unwind or at least keep it orderly in an effort to achieve the ever-elusive soft landing. One way that the government could attempt this would be by stepping in to bail out borrowers on the verge of default. A version of this occurred in January, when the well-publicized default of a RMB3 billion China Credit Trust product was averted when an unknown entity stepped in to pay the principal due to investors, though not the remaining interest due (worth approximately 7% of principal). The unknown entity is likely to have been either the local government of Shanxi, home of the coal mining company that defaulted on the underlying trust loan, or the Ping An insurance company, parent of China Credit Trust.

The benefit of the government or other entities stepping in to bail out borrowers is that it helps prevent investors from losing money, maintaining their faith in the financial system and ensuring they continue to buy trust products offering rates five times above deposit rates. The drawback is that credit continues to be extended to weak or insolvent borrowers, potentially leading to an even higher level of bad debts in the future. The problem is not eliminated, it is simply postponed.

Interestingly, growth is likely to be negatively impacted whether or not the government steps in frequently to prevent borrowers from defaulting. First, scarce capital is being provided to prevent default by insolvent borrowers ("zombies") rather than being channeled toward productive investments. Second, in order to limit the cumulative size of the bailouts, the government is likely to continue to restrict the growth of shadow banking and lending to these uncreditworthy borrowers. Lastly, market rates are likely to continue to rise, reflecting increasing market unease with the growing number of near-defaults.

There is more text and charts in the report. It's worth a closer look.

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

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