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How the West Got Hooked On “Humanitarian War”

Anthony Freda:

The “Humanitarian War” In Yugoslavia Set the Stage for Subsequent “Humanitarian” Interventions In Libya, Syria and Other Nations

The first “humanitarian war” in the post-Cold War era was in the Kosovo, Bosnia and Serbia regions of Yugoslavia (Croatia and Slovenia were regions of Yugoslavia which also played into the war).

Wikipedia notes:

Humanitarian bombing is a phrase referring to the 1999 NATO bombing of the Federal Republic of Yugoslavia (24 March – 10 June 1999) during the Kosovo War …. The closely related phrase humanitarian war appeared at the same time.

Indeed, the war in Yugoslavia set the pattern for all subsequent “humanitarian wars” … in Libya, Syira, Nigeria (think Boko Haram), and elsewhere.

Leading anti-war activist David Swanson gives an overview:

What your government told you about the bombing of Kosovo was false. And it matters.



NATO’s breakout war of aggression, its first post-Cold-War war to assert its powerthis was put over on us as an act of philanthropy.


The killing hasn’t stopped. NATO keeps expanding its membership and its mission, notably into places like Afghanistan and

Libya.  It matters how this got started, because it’s going to be up to us to stop it.




The United States worked for the breakup of Yugoslavia, intentionally prevented negotiated agreements among the parties, and engaged in a massive bombing campaign …  This was accomplished through lies, fabrications, and exaggerations about atrocities, and then justified anachronistically as a response to violence that it generated.


After the bombing, the U.S. allowed the Bosnian Muslims to agree to a peace plan very similar to the plan that the U.S. had been blocking prior to the bombing spree.  Here’s U.N. Secretary General Boutros Boutros-Ghali:

“In its first weeks in office, the Clinton administration has administered a death blow to the Vance-Owen plan that would have given the Serbs 43 percent of the territory of a unified state. In 1995 at Dayton, the administration took pride in an agreement that, after nearly three more years of horror and slaughter, gave the Serbs 49 percent in a state partitioned into two entities.”

These many years later it should matter to us that we were told about fake atrocities that researchers were unable to ever find, any more than anyone could ever find the weapons in Iraq, or the evidence of plans to slaughter civilians in Benghazi, or the evidence of Syrian chemical weapons use.




NATO had to bomb Kosovo 15 years ago to prevent a genocide? Really? Why sabotage negotiations? Why pull out all observers?




It is Yugoslavia, not Iraq or Afghanistan, that war proponents will continue pointing to for years to come as a model for future wars — unless we stop them.  This was a war that broke new ground ….

John Pilger is a highly-regarded journalist (the BBC’s world affairs editor John Simpson remarked, “a country that does not have a John Pilger in its journalism is a very feeble place indeed”). Pilger writes this week:

The “humanitarian war” against Libya drew on a model close to western liberal hearts, especially in the media. In 1999, Bill Clinton and Tony Blair sent NATO to bomb Serbia, because, they lied, the Serbs were committing “genocide” against ethnic Albanians in the secessionist province of Kosovo.


David Scheffer, U.S. ambassador-at-large for war crimes [sic], claimed that as many as “225,000 ethnic Albanian men aged between 14 and 59″ might have been murdered. Both Clinton and Blair evoked the Holocaust and “the spirit of the Second World War.”


The West’s heroic allies were the Kosovo Liberation Army (KLA), whose criminal record was set aside. The British Foreign Secretary, Robin Cook, told them to call him any time on his mobile phone.


With the NATO bombing over, and much of Serbia’s infrastructure in ruins, along with schools, hospitals, monasteries and the national TV station, international forensic teams descended upon Kosovo to exhume evidence of the “holocaust.” The FBI failed to find a single mass grave and went home. The Spanish forensic team did the same, its leader angrily denouncing “a semantic pirouette by the war propaganda machines.”


A year later, a United Nations tribunal on Yugoslavia announced the final count of the dead in Kosovo: 2,788. This included combatants on both sides and Serbs and Roma murdered by the KLA. There was no genocide. The “holocaust” was a lie. The NATO attack had been fraudulent.


Expanding Markets


Behind the lie, there was serious purpose. Yugoslavia was a uniquely independent, multi-ethnic federation that had stood as a political and economic bridge in the Cold War. Most of its utilities and major manufacturing was publicly owned. This was not acceptable to the expanding European Community, especially newly united Germany, which had begun a drive east to capture its “natural market” in the Yugoslav provinces of Croatia and Slovenia.


By the time the Europeans met at Maastricht in 1991 to lay their plans for the disastrous eurozone, a secret deal had been struck; Germany would recognize Croatia. Yugoslavia was doomed.


In Washington, the U.S. saw that the struggling Yugoslav economy was denied World Bank loans. NATO, then an almost defunct Cold War relic, was reinvented as imperial enforcer. At a 1999 Kosovo “peace” conference in Rambouillet, in France, the Serbs were subjected to the enforcer’s duplicitous tactics.


The Rambouillet accord included a secret Annex B, which the U.S. delegation inserted on the last day. This demanded the military occupation of the whole of Yugoslavia — a country with bitter memories of the Nazi occupation — and the implementation of a “free-market economy” and the privatization of all government assets. No sovereign state could sign this. Punishment followed swiftly; NATO bombs fell on a defenseless country. It was the precursor to the catastrophes in Afghanistan and Iraq, Syria and Libya, and Ukraine.

And see this.

Jack Cashill writes:

The House’s Benghazi select committee may want to ask how the U.S. got involved in Libya in the first place. What they will discover is that Barack Obama borrowed a page from the Clinton playbook on Kosovo, a lethal exercise in mendacity unparalleled in recent American history.




In 1999, Serbian authorities were attempting to suppress an insurrection by ethnic Albanian Muslims in the Kosovo province of their fracturing nation. Like Obama, President Bill Clinton had not bothered getting congressional approval before unleashing America’s air power.


To bolster public support, Clinton and his people began a drumbeat about mass graves, ethnic cleansing, and genocide. As in Libya, there was no stated reason for this war other than to prevent genocide.




President Clinton compared the work of the Serbs in Kosovo to the German “genocide” of the Jews during the Holocaust and assured America that “tens of thousands of people” had been murdered.


In the war’s wake, however, international teams could find no signs of genocide. The ethnic Albanian dead numbered in the hundreds, not in the hundreds of thousands.




In 2001, a United Nations court ruled, “Serbian troops did not carry out genocide against ethnic Albanians.”

William Blum writes:

Kosovo, overwhelmingly Muslim, was a province of Serbia, the main republic of the former Yugoslavia. In 1998, Kosovo separatists – The Kosovo Liberation Army (KLA) – began an armed conflict with Belgrade to split Kosovo from Serbia. The KLA was considered a terrorist organization by the U.S., the UK and France for years, with numerous reports of the KLA having contact with al-Qaeda, getting arms from them, having its militants trained in al-Qaeda camps in Pakistan, and even having members of al-Qaeda in KLA ranks fighting against the Serbs. [RT TV (Moscow), May 4, 2012]


However, when U.S.-NATO forces began military action against the Serbs the KLA was taken off the U.S. terrorist list, it “received official US-NATO arms and training support” [Wall Street Journal, Nov. 1, 2001], and the 1999 U.S.-NATO bombing campaign eventually focused on driving Serbian forces from Kosovo.


In 2008 Kosovo unilaterally declared independence from Serbia, an independence so illegitimate and artificial that the majority of the world’s nations still have not recognized it. But the United States was the first to do so, the very next day, thus affirming the unilateral declaration of independence of a part of another country’s territory.


The KLA have been known for their trafficking in women, heroin, and human body parts (sic). The United States has naturally been pushing for Kosovo’s membership in NATO and the European Union.


Nota bene: In 1992 the Bosnian Muslims, Croats, and Serbs reached agreement in Lisbon for a unified state. The continuation of a peaceful multi-ethnic Bosnia seemed assured. But the United States sabotaged the agreement. [New York Times, June 17, 1993, buried at the very end of the article on an inside page]

The “Humanitarian War” In Libya

The same thing happened during the “humanitarian” war in Libya.

Pilger explains:

The public sodomizing of the Libyan president Muammar Gaddafi with a “rebel” bayonet was greeted by the then U.S. Secretary of State, Hillary Clinton, with the words: “We came, we saw, he died.” His murder, like the destruction of his country, was justified with a familiar big lie; he was planning “genocide” against his own people.


“We knew … that if we waited one more day,” said President Barack Obama, “Benghazi, a city the size of Charlotte, could suffer a massacre that would have reverberated across the region and stained the conscience of the world.”


This was the fabrication of Islamist militias facing defeat by Libyan government forces. They told Reuters there would be “a real bloodbath, a massacre like we saw in Rwanda.” Reported on March 14, 2011, the lie provided the first spark for NATO’s inferno, described by David Cameron as a “humanitarian intervention.”




For Obama, Cameron and Hollande, Gaddafi’s true crime was Libya’s economic independence and his declared intention to stop selling Africa’s greatest oil reserves in U.S. dollars. The petrodollar is a pillar of American imperial power.

Gaddafi audaciously planned to underwrite a common African currency backed by gold, establish an all-Africa bank and promote economic union among poor countries with prized resources. Whether or not this would happen, the very notion was intolerable to the U.S. as it prepared to “enter” Africa and bribe African governments with military “partnerships.”


Following NATO’s attack under cover of a Security Council resolution, Obama, wrote Garikai Chengu, “confiscated $30 billion from Libya’s Central Bank, which Gaddafi had earmarked for the establishment of an African Central Bank and the African gold backed dinar currency.”

The reality of what happened in Benghazi is not pretty:

According to a 2007 report by West Point’s Combating Terrorism Center’s center, the Libyan city of Benghazi was one of Al Qaeda’s main headquarters – and bases for sending Al Qaeda fighters into Iraq – prior to the overthrow of Gaddafi:

The Hindustan Times reported in 2011:

“There is no question that al Qaeda’s Libyan franchise, Libyan Islamic Fighting Group, is a part of the opposition,” Bruce Riedel, former CIA officer and a leading expert on terrorism, told Hindustan Times.


It has always been Qaddafi’s biggest enemy and its stronghold is Benghazi.



Gaddafi was on the verge of invading Benghazi in 2011, 4 years after the West Point report cited Benghazi as a hotbed of Al Qaeda terrorists. Gaddafi claimed – rightly it turns out – that Benghazi was an Al Qaeda stronghold and a main source of the Libyan rebellion. But NATO planes stopped him, and protected Benghazi.

In other words, the only real “bloodbath” which would have occurred if Gaddafi had been allowed to take Benghazi was among members of Al Qaeda.

Cashill notes:

For the Libyan conflict, Alan Kuperman, a Democrat and author of The Limits of Humanitarian Intervention, did the calculations that the media refused to do. Just two weeks after the president’s address on Libya, Kuperman made the simple point, “The best evidence that Khadafy did not plan genocide in Benghazi is that he did not perpetrate it in the other cities he had recaptured.” He cited the Human Rights Watch data from Misurata, a city of 400,000 that Qaddafi’s forces had recently seized. There, in nearly two months of war, only 257 people were killed, including combatants. In Rwanda by contrast, more than 800,000 Tutsis were killed in just ninety days.


What did happen in Libya, Kuperman explained, is that rebel forces, fearing imminent defeat, faked a humanitarian crisis. On March 14, a rebel spokesman told Reuters that if Khadafy attacked Benghazi, there would be “a real bloodbath, a massacre like we saw in Rwanda.’’ On March 21, The New York Times David Kirkpatrick reported, “The rebels feel no loyalty to the truth in shaping their propaganda, claiming nonexistent battlefield victories, asserting they were still fighting in a key city days after it fell to Qaddafi forces, and making vastly inflated claims of his barbaric behavior.”


No matter, the U.S. military had already started bombing. A month later, Obama co-signed a letter claiming, “The bloodbath that he had promised to inflict on the citizens of the besieged city of Benghazi has been prevented.” In the retelling, the “he” doing the promising was Qaddafi. In reality, the only people who promised bloodbaths were the rebel spokesmen and the Western leaders. By this time, Obama had to know that the pretext for war was false, but he would continue to pursue it for another six deadly months.


As the insurgency dragged on, the insurgents began spreading the myth that Qaddafi had been using African mercenaries. This falsehood, said the Times, “Rebels repeat as fact over and over.” Fired up by rumors of black mercenaries on Viagra-fueled rape sprees, the rebels did some ethnic cleansing on their own. Patrick Cockburn of the Independent saw the evidence up close. “Any Libyan with a black skin accused of fighting for the old regime may have a poor chance of survival,” he concluded. Obama chose not to notice. These young men may have looked like his son, but they were not being killed in a battleground state during an election year.


On October 20, 2011, militia members took Qaddafi prisoner, indelicately sodomized him with a knife, and captured it all on video. They then threw Qaddafi, still breathing, onto a pickup truck. When the truck pulled away, he promptly fell off. Said a giddy Obama in a Rose Garden speech about this Keystone Cops-meets-Mad Max muddle, “The dark shadow of tyranny has been lifted.” In claiming victory, Obama championed the victors and made Libya his personal success story. This would have consequences not too far down the road.


If the major media were willing to endorse Obama’s narrative, Alan Kuperman was not. Writing for the Harvard Kennedy School’s International Security journal in 2013, Kuperman unspun the web of deception that the Libyan rebels and their NATO enablers had woven. “The biggest misconception about NATO’s intervention,” wrote Kuperman, “is that it saved lives and benefited Libya and its neighbors.”


In fact, Qaddafi did not attack peaceful protesters. The rebels started the violence, and Qaddafi responded. Barely six weeks after the rebellion started, Qaddafi had all but suppressed it at the cost of about one thousand lives. Then Obama authorized NATO intervention. That intervention prolonged the war seven months and cost roughly seven thousand more lives. At war’s end, rebels killed scores of the former enemy in reprisal killings and exiled some 30,000 black Africans.

Humanitarian War Means … Backing Al Qaeda?

Amazingly, in both Yugoslavia and Libya, America and her allies supported Al Qaeda terrorists so that they would bring down the government.

It has been confirmed time and again that the U.S. supported Al Qaeda to topple Libya’s Gaddafi.

And Cashill notes:

Secretly supplied and trained by Britain’s SAS, many of the “rebels” would become ISIS, whose latest video offering shows the beheading of 21 Coptic Christian workers seized in Sirte, the city destroyed on their behalf by NATO bombers.




During the insurrection, the Obama administration had been funneling money to Qatar to help arm Libyans rebels. As the Times reported more than a year after the fact, “The weapons and money from Qatar strengthened militant groups in Libya, allowing them to become a destabilizing force since the fall of the Qaddafi government.”

In Yugoslavia, Naval War College professor of strategy and former NSA intelligence analyst and counterintelligence officer John R. Schindler documents that the U.S. supported Bin Laden and other Al Qaeda terrorists in Bosnia.

Blum notes:

On Nov. 1, 2001, less than two months after the 9/11 attacks, the Wall Street Journal declared:


“It is safe to say that the birth of al-Qaeda as a force on the world stage can be traced directly back to 1992, when the Bosnian Muslim government of Alija Izetbegovic issued a passport in their Vienna embassy to Osama bin Laden. … for the past 10 years, the most senior leaders of al-Qaeda have visited the Balkans, including bin Laden himself on three occasions between 1994 and 1996. The Egyptian surgeon turned terrorist leader Ayman Al-Zawahiri has operated terrorist training camps, weapons of mass destruction factories and money-laundering and drug-trading networks throughout Albania, Kosovo, Macedonia, Bulgaria, Turkey and Bosnia. This has gone on for a decade.”


A few months later, The Guardian reported on “the full story of the secret alliance between the Pentagon and radical Islamist groups from the Middle East designed to assist the Bosnian Muslims – some of the same groups that the Pentagon is now fighting in ‘the war against terrorism’.”


In 1994 and 1995 US/NATO forces carried out bombing campaigns over Bosnia aimed at damaging the military capability of the Serbs and enhancing that of the Bosnian Muslims. In the decade-long civil wars in the Balkans, the Serbs, regarded by Washington as the “the last communist government in Europe,” were always the main enemy.

Humanitarian War … An Old Ruse

The concept of “humanitarian war” has fooled a lot of people for a long time.

In announcing his invasion of Poland, Hitler said:

I ordered the German Air Force to conduct humanitarian warfare [in Poland] ….

Michael Mandel notes:

The notion of a “humanitarian war” would have rang in the ears of the drafters of the UN Charter as nothing short of Hitlerian, because it was precisely the justification used by Hitler himself for the invasion of Poland just six years earlier.”

After all these years, the concept of “humanitarian war” is still fooling progressives and liberals and playing out places like Syria – even though it never turns out well. And see this.


On February 7, 2009 Bernanke Admitted What It Was All About

Back on February 7, 2009, one month before the Fed unveiled its massive (for its time) first episode of Quantitative Easing, the Federal Reserve was flailing. And, as revealed today by the latest annual batch of Fed transcript releases, precisely one month before the Fed commenced monetizing tens of billions in government debt and MBS, Bernanke held perhaps the longest conference call in the Fed's history (the transcript alone is 65 pages) in which he revealed that he was working on something entirely different: an "aggregator bank" concept, which would have been essentially a quasi-nationalization of  the US banks whereby Fed funds is commingled with the bank's capital in order to avert public attention from the trillions of bad assets on the bank books.

It is during the discussion of this plan, which mysteriously disappeared from the Fed's plan of action between February 7 and a month later, when America set off on its path from which 7 years later it is still unable to ween itself (and in fact now everyone else is also pursuing QE), that we learn for a fact precisely what most have suspect if not known for a fact, namely that the resulting "bailout" of the US economy by way of QE was nothing more than a way to keep bank shareholders "thrilled."

From the February 7 transcript:

The purpose of the meeting today is for me to discuss with you the Treasury’s proposed financial stabilization plan and, in particular, the Fed’s proposed role in that overall structure. This is a “close hold.” There have been a number of leaks, as often happens, which is very counterproductive; but I think the Fed has done well, and I would not like those leaks to come from the Fed. So I appreciate your keeping your confidence close.


We have been discussing, and by “we” I mean primarily the Treasury, the Federal Reserve, the FDIC, and the OCC, the last week or so—with a lot of staff work before that—a plan that Secretary Geithner will propose on Monday at 12:30 in a speech at the Treasury. They have been very wide-ranging discussions, and, frankly, there was little in the way of resolution or focus until very recently—only in the last 24 hours or so have we begun to see where Secretary Geithner wants to take the plan; in fact, we got a very substantial revision of the document this morning at 9:15, so you can see this is very much a work in progress.


But given the schedule for Secretary Geithner to announce the plan on Monday, I thought this was an opportune point for us to review the plan and the Fed’s potential role. As you’ll see when I go through the plan with you, the details are fairly lacking. There is an overall structure. That, in part, is on purpose. The political strategy is to provide an overall structure with some detail, but not a great deal of detail, with the idea that the public discussion and the congressional discussion will create some buy-in on the political side. It’s like selling a car: Only when the customer is sold on the leather seats do you actually reveal the price. So the  strategy, again, is to provide the framework to get the Congress involved within certain parameters, and then, only when there is some consensus on how the plan will work and what the key elements will be, to negotiate whether additional funding beyond $350 billion is necessary.


But I think there are some advantages to that from a political point of view. I will say that both I and the staff—Bill Dudley and others—are somewhat concerned, at least given the way things stand now, about the market reaction. First, the lack of details will create some uncertainty and concern, particularly because there’s not a great deal said about the “problem children,” the BAC and Citi. Secondly, I think the markets will be disappointed in the following sense: As I will describe, this is a real truth-telling kind of plan. It’s fundamentalist. It’s not about giving the banks a break. It’s not about using accounting principles  to give them backdoor capital. It’s very much market-oriented and “tough love.” And I think we all will like that. I like that. But the banks’ shareholders aren’t going to be thrilled about it.


For one brief , fleeting instant, the Fed was willing to do what is right, and no only not halt Mark to Market (the Fed itself admits accounting gimmicks boost banks), but force banks to recognize their losses without "giving them backdoor capital" - something else the Fed now admits to doing. But the reason why the Fed's plan would have been applauded is that as Bernanke says it is "market-oriented" and "tough love."

But most importantly, the Fed revealed what the overarching motive behind the entire economic "bailout" has been- in other words what it was all about: the banks’ shareholders.

And.... he was right, even if he "liked it." Because someone else apparently did not.

Precisely one month later, unclear why, the Fed changed course 180 degrees, and instead of dispensing "tough love" and going with a market-oriented means to fixing the economy, one which however would have wiped out all bank shareholders, Bernanke unleashed central-planning unlike anything even seen in the USSR. Not only that, but we also know what QE is by what it isn't:

  • It isn't a "real truth-telling kind of plan
  • It isn't "fundamentalist"
  • It is "about "giving the banks a break"
  • It is about "using accounting principles to give the banks backdoor capital"
  • It is about "non-market oriented and unquestioned love"...  by the Fed.

In short, it is why 6 years later bank shareholders couldn't be more "thrilled" with QE.

As for why it hasn't worked for everyone else, well, one can only imagine the kind of "meticulous attention" to detail the Fed uses if, on its official transcript, it made the most epic, glaring error possible. Because it would appear that in the eye of the Fed, QE is now even distorting the days of the week...

Source: Fed

Some Of The Best Bearish Signals Are Failed Bullish Ones...

And, as NewEdge's Brad Wishak points out, that's exactly what we are seeing play out on the NYSE here. Being the world's largest exchange by market capitalization ($16 trillion), failures like this are typically worth paying attention to...



Chart: Bloomberg

h//t Brad Wishak At NewEdge

Ferguson Cop Cleared Of Civil Rights Violations

"There is no evidence upon which prosecutors can rely to disprove Wilson’s stated subjective belief that he feared for his safety," states a report from The Justice Department, clearing Ferguson, Mo., police officer Darren Wilson of civil rights violations in the shooting of Michael Brown last year. Although this was somewhat expected, as we noted previously, the DoJ's report points specifically to "some prosecution witness accounts cannot be relied on because their accounts cannot be reconciled with the DNA bloodstain evidence and other credible witness accounts."


As The NY Times reports,

The Justice Department has cleared a Ferguson, Mo., police officer of civil rights violations in the shooting of Michael Brown, a black teenager whose death set off racially charged and sometimes violent protests last year.


The decision, which was announced on Wednesday, ends a lengthy investigation into the shooting last August, in which Officer Darren Wilson shot and killed Mr. Brown in the street. Many witnesses said Mr. Brown had his hands up in surrender when he died, leading to nationwide protest chants of “Hands up, don’t shoot.”


But federal agents and civil rights prosecutors rejected that story, just as a state grand jury did in November. The Justice Department said forensic evidence and other witnesses backed up the account of Officer Wilson, who said Mr. Brown fought with him, reached for his gun, then charged at him. He told investigators that he feared for his life.

It appears witness accounts were unreliable (and dare we say - biased?)...

“There is no evidence upon which prosecutors can rely to disprove Wilson’s stated subjective belief that he feared for his safety,” the report said.


The report found that witnesses who claimed that Mr. Brown was surrendering were not credible. “Some of those accounts are inaccurate because they are inconsistent with the physical and forensic evidence; some of those accounts are materially inconsistent with that witnesses’ own prior statements with no explanation,” it said.


“Although some witnesses state that Brown held his hands up at shoulder level with his palms facing outward for a brief moment, these same witnesses describe Brown then dropping his hands and ‘charging’ at Wilson,” it added.

*  *  *

For now there is no official response from Michael Brown's family, Al Sharpton or anyone else...

"Patient" - What's In A Word?

Submitted by Sean Corrigan via True Sinews blog,

After yet another masterly performance before Congress – one which was immediately confounded by the usual cacophony of cross-talk from the Pigeons and Doves (no Hawks!) among her colleagues – Madame Yellen has left no-one really the wiser as to what the all-things-to-all-men Federal Reserve thinks it is actually doing with regard to monetary policy.

Is she ‘patient’ or not? And is ‘patient’ a nudge-nudge, wink-wink code for a period stretching beyond the next few FOMC meetings or is it just a tacit admission that the Fed will start checking its parachute harness only after the plane’s engines have at last caught fire?

Given all this prevarication, have you lost patience with the whole weary rigmarole, as have we, Dear Reader? If so, can we suggest you join us in setting aside your frustrations by concentrating on the one abiding truth of current policy: that even if there does exist a door marked ‘EXIT’ in the haunted house in which the world’s central bankers have long confined themselves, it would be one guarded by that most fearsome of all the ghastly bogeymen of economic myth – the Ghost of ’37.

But why not, you ask? Is the Fed not right to hold fire in this world of ‘secular stagnation’ Is it not only prudent to avoid tipping the country headlong into ‘deflation’ by spooking the financial markets and so risking a full-scale reprise of the Lehman moment of six years ago?

Perhaps not. For even as has been belatedly recognised by the ‘professional second-hand dealers in ideas’ who write, for example, for the FT – when not flitting to Davos or popping up to sing for their supper at self-flattering symposia sponsored by billionaire financial St. Augustins (‘O Lord, help me eradicate all inequality, but just not by setting a personal example’) – what the world urgently needs is not any further incentive to take on debt. but a means of expunging some of its gross, existing burden of the stuff.

Yes, without any acknowledgement of the error of their ways and lacking any display of contrition at the long misery to which their pontifications have greatly contributed, the Clerisy are starting to realise that they may as well help Atlas to shrug off his crushing load and that the world must thereafter be ordered to allow the newly liberated Titan to enjoy as much freedom as possible (‘structural’ reforms must be enacted, as they put it) if he is to help rebuild both his and our prosperity.

It is almost mischievous to say so but, in the circumstances, a genuine bout of deflation could actually represent a useful Plan B. After all, few can argue that the authorities’ Plan A has so far been a rather dismal failure; that the Powers-that-Be have not managed to alleviate the real impact of all that debt as they had planned, in an inflation of anything other than the price of prestige property, race-horse yearlings, modernist daubings, and all manner of financial assets. To their mounting frustration, their efforts so far have achieved little more than to ignite a version of inflation which has served only to aggravate the divide between the rest of us poor saps and the same plutocratic 1% which is so vilified by the very bleeding heart Progressives who are to be found at the forefront of the mob noisily advocating the current policy mix.

Without wishing to call the glib ‘liquidationist’ slur down upon our heads, one might point out that the one guaranteed way to cancel debt is to allow a sufficiently rapid deflation that creditors can no longer hold out for the soothing money-illusion balm of a repayment in debased coin but must instead face up to the reality that their debtors are unable to comply with the terms of their mutual contract as originally drawn up.

If you agree with a man that you will feed him and his co-workers for a month in exchange for them delivering a tonne of coal to you at the end of the period and he later finds he and his team cannot possibly comply with his undertaking, it serves no very great purpose to redefine the mass which makes up a tonne to half its former value in place of either accepting the reduced physical repayment your debtor can make for what it is, or of otherwise working out some alternative scheme of mutually-agreed recompense which will at least allow him and his mates the chance to continue to make a living – an activity from which you might yet hope to derive some ancillary benefits.

Inflation is not, therefore, a panacea, especially when the principal means of injecting the poison into the economic circulation is by encouraging people to continue to borrow more than they should.

Deflation in this sense is, of course, unmitigatedly ugly but it is at least a purgative. The soothing inflationary alternative nurtures a more chronic disease in place of that febrile crisis, but this is an illness whose mortality rate may well turn out to be higher, not lower, than its more acute cousin. Arguably, too, it is one which introduces even more inequity into the system for while neither the struggling debtor, nor the prudent, middling sort see any benefit from the asset-heavy, differentiated increase in prices, the members of  the speculative class make out like the state-sponsored bandits they are.

QE may thus prove to be little more in form than an issue of letters of marque to our era’s financial privateers on a truly unimaginable scale. Every new higher close on the stock market and every notch lower in bond yields and credit spreads should therefore be added to the charge sheet of financial larceny, even if the move does not end up inducing a panicky rush for the wheelbarrows.

But, in any case, what do we mean by ‘deflation’? In truth this should imply an increased perception that money has become more scarce, whether because the quantity available has actually shrunk or because money – final-settlement, trust-no-man money – is being demanded in place of the Good-time Charlie credit which was formerly allowed to assume some of its functions.

On that score, we can hardly talk of the United States being at risk of ‘deflation’. To consult but two of the more timely gauges of the financial temper of the times, commerical bank balance sheets – minus the hoard of excess reserves they have been forced to pile up at the Fed – are again growing smartly, rising by 7.8% YOY, close to the best in five years and not too far removed from the 8.4% median of the two decades preceding the collapse of Lehman. Money proper is also not in short supply, rising 10.4% nominal, 8.1% real in the past twelve months and so moving far, far above the long-term trend.

Even if we do succumb to the dubious practice of defining deflation by means of a simple fall in what we imagine to be the general price level, it is not at all clear that any ‘threat’ to any but the most confirmed sufferer of katatimophobia exists either at present.

Take the Cleveland Fed’ s Median CPI index, for example, an index whose primary virtue is that it throws out the outliers, high and low, and so is less affected by either positive or negative ‘shocks’ to small numbers of its constituents.

As it has for some little while now, this is giving a thoroughly, unexceptional, if not impressively stable reading: one which, moreover, manages to meet that cabbalistic ideal of modern central bankerhood of a rise of close to 2% per annum – at which sacred pace, we are constantly assured, the doors to earthly paradise will instantly be thrown open.

And lest this observation give rise to the opposite argument that if the maintenance of this Babylonianly perfect rate requires no countermeasures on the downside, it need call forth no monetary tightening either, just be aware that, as for much of the past four years, this leaves the real Fed Funds rate at highly unsettling 2%-negative. For comparison, the seventeen years of the so-called ‘Great Moderation’ between 1992 and 2008 saw a typical CPI rate not much more elevated than at present – at 2.7% – but also experienced a nominal funds rate of around 4% and an ex-post real one of plus-1.2%.

Given that, with the benefit of hindsight, this supposed golden era was the one in which were actively sowing the seeds of our own ruin, it might give pause for thought about quite how much harm our masters ‘ stubbornly accommodative stance is causing us again today.

The Scariest Spreadheet In Fed Possession Revealed

Yesterday we reported that over the past few weeks, something very disturbing has taken place at the Atlanta Fed Center for Quantitative Economic Research, which keeps a model, called GDPNow, that mimics the methods used by the BEA to estimate real GDP growth.

According to the AtlantaFed, "the GDPNow forecast is constructed by aggregating statistical model forecasts of 13 subcomponents that comprise GDP. Other private forecasters use similar approaches to “nowcast” GDP growth. However, these forecasts are not updated more than once a month or quarter, are not publicly available, or do not have forecasts of the subcomponents of GDP that add “color” to the top-line number. The Atlanta Fed GDPNow model fills these three voids."

In other words, what the AtlantaFed has done is recreate the bean-counting methodology used by the BEA, and all other forecastsers, however instead of using monthly data update cadence, it does so with data in real time.

This is a problem because as we showed yesterday, this most real-time model of GDP estimation, is showing something scary: a 1.2% GDP in Q1 compared to consensus estimates in the mid-2% range, and a tumble of more than 1% to just what this same model predicted Q1 GDP would be one month ago!


What's going on here, and how is it possible that there is such a massive disconnect between the one, arguably most accurate and updated Fed forecasting model and everyone else.

Courtesy of an excel spreadsheet called, logically enough, GDPTrackingModelDataAndForecasts.xlsx (link), we can find the answer.

While we urge readers to play around with the model at their leisure, here is the bottom line: a snapshot of the weekly evolution of the summary tab, which shows precisely which line item is leading to the collapse in Q1 GDP, from 2.3% as of February 13 to half that as of March 2.


For those who are used seeing it on a cumulative basis, here is the other summary table that also lays out how the AtlantaFed reaches its shocking 1.2% GDP number:

What becomes immediately apparent is that while there has been a sharp deterioration across most sources of economic output including government spending, which is now expected to detract -0.8% from growth, Net Exports, and residential investment, it is the collapse in "Structures", aka non-residential investment, best known as the Capital expenditures spending or lack thereof by US shale companies on such items as offices and extraction structures, including oil and gas wells this is about to pummel US economic growth.

Incidentally, we previewed all of this in "The Next Victim Of Crashing Oil Prices: Housing" and "Houston, You Have A Huge Problem: One-Sixth Of US Office Space Under Construction Is In This Texas City."

Digging down into the underlying data, which feeds through the weekly updates of Atlanta Fed staffer Patrick Higgins (the cell comments are his), we have confirmation of what is about to "shock" everyone when the BEA reports its advance GDP report in two months time: it is all non-res structures, and especially petroleum and natural gas wells, which will (or rather already have) unleashed a full-blown investment shock for the US economy.

Of course, none of this should come as news:  after all, just this past October, another Fed, this time the St. Loius Fed, had a must-read post on the correlation between oil pricess and business fixed investment in structures.

Most economists believe lower oil prices are positive for the economy: They lead to lower gasoline and diesel prices, which tend to reduce headline inflation, which increases consumer purchasing power. Lower oil prices also tend to reduce operating expenses for transportation firms, such as airlines, trucking, and delivery services. The sharp drop in crude oil prices since mid-June 2014 is generally expected to produce positive (if temporary) economic effects. Lower oil prices generally don’t benefit energy producers, but the vast majority of households, firms, and organizations are net consumers, not net producers; so, lower prices still tend to bring net benefits.


One way the effects of lower oil prices reveal themselves is through mining activity. (More precisely, “real private nonresidential fixed investment in mining exploration, shafts, and wells.”) In 2013, fixed private investment in mining activity was about 5 percent of total fixed private investment and only 0.8 percent of real GDP. Still, since the third quarter of 2009, mining activity has increased at a 17.1 percent annual rate—much faster than the 5.5 percent rate of gain in total fixed private investment.


As the graph [below], mining activity (which includes drilling) is positively correlated with crude oil prices. When oil prices rise, this activity increases and so does investment in it. When oil prices fall, this activity slows and investment in it falls.


How this graph was created: Search for mining investment to find the first series, then add “Crude oil prices WTI” for the second. Limit the sample to start in 1999.

We took the liberty of recreating the St Louis Fed blog graph which can be found here. It is shown below.


So it looks like indeed the Atlanta Fed's GDPNow model is not only accurate but is predicting precisely what will happen in the coming months.

But wait, there's more.

As was widely reported earlier this morning, oil giant Exxon became the latest major to slash CapEx as a result of plunging oil prices, and it now plans to commit some 12% less to its E&P capital spending budget in 2015, a grand total of $34 billion, compared to the $38.5 billion spent last year. Add up across all the other majors, shale and other E&P companies and suddenly you have a spending collapse in the hundreds of billions.

What this means for GDP is that 1.2% growth in Q1 may just be the beginning as capital spending collapses across the board, especially since the Atlanta Fed model description says "as more monthly source data becomes available, the GDPNow forecast for a particular quarter evolves and generally becomes more accurate."

In the meantime, for everyone else confused by such concepts as spending on non-residential structures, and capex in general, or how various components of the GDP calculation actually add up across to the bottom line number, we urge everyone to open Atlanta Fed' spreadsheet GDPTrackingModelDataAndForecasts.xlsx which may well be the "scariest" spreadsheet in the Fed's possession right now, but it is also the most informative and not burdened by non-GAAP, seasonal and various other propaganda adjustments, in order to understand why consensus is once again off by orders of magnitude from what the final Q1 GDP number will end up being, and why, no, it won't be the "weather's fault" this time.

Source: AtlantaFed and GDPTrackingModelDataAndForecasts.xls

How's That Deflation Working Out For You?

Submitted by Jim Quinn of The Burning Platform blog,

The BLS put out their monthly CPI lie last week. They issued the proclamation that inflation is dead. Did you know your costs are 0.1% lower than they were one year ago. They then used these deflation numbers to proclaim your real wages soared last month. It’s all good. The American consumer is so flush with cash, they decided to spend less money for the second month in a row. The Wall Street shysters are so happy with declining consumer spending, declining corporate profits, and a global recession, they pushed the NASDAQ up to 5,000 for the first time in 15 years. Hey!!! That was the year 2000. Things really got better after that milestone.

So we know gasoline prices have plummeted in the last year (but are up 20% in the last month), but I’m trying to think of other things I use in my everyday life that have declined in price. Maybe going through the BLS detailed list will jog my memory. Here is the link to their data:

Let’s see how much deflation we’ve experienced in the last year for things we need to live our everyday lives.

  • Beef and veal  +22.5%
  • Ground beef  +21.0%
  • Steaks  +14.9%
  • Pork  +7.4%
  • Ham  +11.5%
  • Whole Chicken  +6.1%
  • Fresh Fish  +3.5%
  • Eggs  +8.2%
  • Cheese  +7.8%
  • Fresh Vegetables  +4.3%
  • Lettuce  +12.2%
  • Tomatoes  +9.6%
  • Coffee  +6.7%
  • Butter  +19.5%
  • Restaurant food  +3.1%
  • Housing  +2.9%
  • Hotels  +7.6%
  • Owners Equivalent Rent  +2.6%
  • Homeowners Insurance  +5.6%
  • Electricity  +2.5%
  • Water & Sewer  +5.5%
  • Home Repairs  +4.4%
  • Footwear  +2.6%
  • Car Insurance  +5.0%
  • Parking Fees & Tolls  +2.3%
  • Medicinal Drugs  +4.2%
  • Prescription Drugs  +5.6%
  • Hospital Services  +4.3%
  • Veterinarian Services  +3.2%
  • Sporting Events  +3.6%
  • Newspapers & Magazines  +4.6%
  • College Tuition  +3.6%
  • Educational Books & Supplies  +6.5%
  • Grade School & High School Tuition  +4.0%
  • Childcare & Nursery School  +3.0%
  • Postage  +3.6%
  • Cigarettes  +2.5%
  • Financial Services  +5.7%
  • Tax Return Prep  +9.3%

These figures are directly from the BLS website. These are the annual price increases of things most Americans need to purchase on a regular basis. I know most of them affect me every day. My weekly grocery bill is much higher than it was one year ago, and we don’t buy nearly as much steak or beef as we did last year.

The price of oil and gas has certainly declined by the 30% or so in the BLS figures, but it doesn’t come close to covering the price increase in food and other living expenses. The BLS declares we are experiencing deflation and our wages are expanding in real terms. It’s a bold faced lie. The other items declining in price are mostly discretionary items which might be purchased every few years. Furniture, appliances, computers and TVs are falling in price. I didn’t buy any of those items in the last year, so the lower prices had ZERO impact on me.

Apparel falls in price, but is made so cheaply in Chinese slave labor camps, you only get half the use out of it before you have to replace it. I’m guessing the BLS hasn’t factored that into their little calculation.

And now for the BIGGEST LIE in the entire report. The have the balls to tell you that health insurance only makes up 0.753% of your entire annual budget and it has FALLEN by 0.5% in the last year. This must be some cruel Obamacare joke perpetrated by these government apparatchiks. I haven’t met anyone who has seen their health insurance costs go down in the last year. My premiums went up by 20% and my annual family deductible went from $0 to $2,000. How the BLS can get away with issuing this drivel is beyond my comprehension. It’s pure and utter bullshit.

I wonder if the sheep actually believe what the government peddles. Does anyone with two brain cells think their daily living expenses are declining? Do they really think their wages are going a lot farther? Evidently not, because they have stopped spending money.

"There’s Going To Be Chaos" - What Is The Worst-Case Outcome Of Today's Supreme Court Obamacare Hearing

Today, for the second time since 2012, the fate of Obamacare lies in the hands of the Supreme Court, and like last time, it will likely be all about Justice John Roberts ' decision. Later today, the US Supreme Court will hear oral arguments in the case of King v. Burwell, the latest challenge to Obamacare, and one that could potentially leave it gutted from an unexpected direction. As a result, nearly eight million Americans could lose their health insurance depending on how the Supreme Court interprets four words in the "Affordable" Care Act.

But while the law, or rather "tax", was already found to be constitutional in the Scotus 2012 ruling, the current case centers on whether, as many Republicans argue, one line in the law was intended to restrict subsidies to people who bought insurance through a state exchange or whether, as Democrats contend, that line was a simple oversight in the law’s drafting.

As Bloomberg adds, the new case is narrower, centering on the statute’s language: At issue is whether Obamacare can provide subsidies nationwide to people who buy insurance, or only to those in the states that have set up their own online marketplaces, known as exchanges.

Here are the four words that could make or break Obamacare:

The statute says people qualify for credits when they buy insurance on an exchange “established by the state.” Those four words matter because only about one-third of the states have set up exchanges, with the rest relying on the federal system. The challengers contend that the people who buy on the federal exchange can’t claim the subsidies.


The group behind the suit, the Competitive Enterprise Institute, describes itself as an advocate for limited government and individual liberty. According to the Washington Post, the group’s financial supporters include companies tied to Charles and David Koch, the billionaire brothers who fund conservative causes.


The institute represents four Virginia residents who say they don’t want to buy the insurance required under Obamacare. Should the court block the subsidies, the four say they would fall within an exception to the insurance mandate for people who can’t afford coverage. One lurking issue that may arise during argument is whether any of the four has suffered the type of legal injury that entitles them to sue.

As Bloomberg also notes, a decision against the Obama administration would wipe out the tax credits that make insurance affordable for millions of people under the law. It would also leave hospitals with billions of dollars in unpaid bills and potentially cause insurance markets to collapse.

“If the court rules for the challengers, there’s going to be chaos,” said Abbe Gluck, who teaches at Yale Law School and backs the administration in the case.

That may be a tad dramatic, but as the NYT breaks down, roughly 7.5 million people could lose their subsidies in 34 states (shown on the map below). . The status of people in three other states — Oregon, Nevada and New Mexico — is unclear because those states at one time intended to run their own marketplaces, but now rely on the federal government to manage them.

While it is difficult to handicap what the odds are of an adverse, if mostly for Obama's legacy, ruling, Reuters reports that "a growing number of U.S. patients and their doctors are already devising a Plan B in case they lose medical coverage, as even physicians who think the court will uphold the subsidies are gearing up for the worst. As a result, doctors are "dusting off playbooks they retired when Obamacare slashed the number of uninsured people."

From Reuters:

Interviews with doctors reached through professional groups show that they are lining up free clinics to care for patients with chronic illnesses, asking pharmaceutical companies to provide discounted drugs, and moving up preventive-care appointments and complicated procedures.


"We have to be able to navigate this on behalf of our patients if it comes about," said Dr. Jeff Huebner, a family physician in Madison, Wisconsin, one of the affected states.


Many providers as well as patients are unaware of the looming threat, but some physicians are already preparing for it.

Huebner adds that he "would advise patients in this boat to schedule a visit with their primary care provider as soon as they can" to set up "transition plans." Other doctors, such as pediatrician Marsha Raulerson in Brewton, Alabama has persuaded one drug company to provide an expensive asthma medication to one of her patients if she loses her insurance. "But after a few months you have to re-apply" and show that the patient is still unable to afford medication, Raulerson said. "It's not an easy process, especially if you have to do it for a lot of patients." She is also stockpiling as many free samples as she can.

Dr. Robert Wergin, a primary care physician in Milford, Nebraska, is scrambling to locate labs and imaging centers that offer the lowest prices for blood tests, X-rays and MRIs.

"Around here, people feel responsible for their bills and I'm not sure they would come in if they lost insurance and couldn't pay," Wergin said.

In retrospect, perhaps chaos is not all that dramatic:

Yolanda Diaz, 27, is one of them. A single mother of two, she suffers from occasional blackouts that last several minutes. She cannot afford the full premium on her wages as a pantry manager at Brevard County, Florida, community center so she pays $74.95 a month and the rest is covered by a $205 Obamacare subsidy.


Her coverage began this month, Diaz said, and the first thing she did was make appointments for an MRI and CT scans in hopes of identifying the cause of the blackouts.


"I would hate to have to go to the ER, but if the subsidies get taken away I don't know what I'll do," she said. U.S. law requires hospitals to treat all emergency cases regardless of ability to pay, so many uninsured patients seek care there.


Of those expected to be priced out of insurance in case of unfavorable ruling, the Urban Institute estimated 81 percent are, like Diaz, employed full- or part-time.

To be sure, the Obama administration is confident the worst will not come to pass: it contends that the phrase is a “term of art,” and says that other parts of the law show that there is no distinction between federal and state run exchanges.

“If you look at the law, if you look at the testimony of those who were involved in the law, including some of the opponents of the law, the understanding was that people who joined the federal exchange were going to be able to access tax credits,” President Obama said in an interview with Reuters. “And there’s in our view not a plausible legal basis for striking it down.”

Enter Plan B, or lack thereof (just like the ECB, which as we all know lied to Zero Hedge that it didn't have a Plan B on Greece, when it in fact, only it called it a Plan Z):

The Obama Administration has stated it has no backup plan ready if the Supreme Court rules against it. “If they rule against us, we’ll have to take a look at what our options are,” Obama said recently. “But I’m not going to anticipate that. I’m not going to anticipate bad law.”


Republicans on the other hand, are eager to show they have a Plan B. In the past two days, lawmakers from the House and the Senate have said they’re in the process of working on alternatives to the law, should the Supreme Court rule in favor of the plaintiffs. Reps. Paul Ryan, John Kline and Fred Upton wrote in the Wall Street Journal, they’re proposing an “off-ramp out of Obamacare,” that would allow states to opt-out of insurance mandates and offer options for those who can’t otherwise insurance. Sens. Orrin Hatch, Lamar Alexander and John Barrasso wrote in the Washington Post, they too would help those who can’t afford coverage during a “transitional period” and let states create alternative marketplaces.

So as we head into today's oral argument, much is once again at stake. For those seeking further detail, here is some additional Q&A on the outcome courtesy of Bloomberg:

1. What is the administration’s argument?

The administration says the disputed phrase is a term of art that includes a federally facilitated exchange. U.S. Solicitor General Donald Verrilli urges the court to look beyond the “established by the state” wording to the rest of the act and its broad purpose of providing coverage to tens of millions of uninsured Americans.

Verrilli says Congress designed the law with the goal of offering tax credits nationwide and argues that no member of Congress suggested otherwise during the debate over the measure, which is President Barack Obama’s biggest legislative initiative.

2. What will happen if the court rules for the plaintiffs?

Prepare for falling dominoes. Within a matter of weeks, the system would have to stop providing tax credits for an estimated 7.5 million Americans in the 34 states that never authorized their own exchanges. Many of those people would probably find premiums unaffordable without the subsidies and would drop their coverage, boosting the ranks of the uninsured.

Yet those who are sick and need insurance would probably try to hang onto their coverage, as healthy people dropped out. Insurers call this phenomenon “adverse selection,” and say it inevitably results in premiums spiraling upward. The Urban Institute estimates that premiums would increase by 35 percent, on average.

Doctors and hospitals, faced with more uninsured patients, would be forced to provide more uncompensated care. If they try to make up for the losses by charging commercial insurers higher prices, that would raise health-care costs for everyone.

Finally, the law’s requirement that employers provide insurance to their workers would be gutted in states where subsidies aren’t legal. Penalties on employers for not providing coverage are triggered when their workers receive a subsidy for an Obamacare plan; without subsidies, there’s no penalty.

3. How would the federal government and states respond?

It’s unclear. Representative Paul Ryan of Wisconsin, the Republican chairman of the powerful House Ways and Means Committee, has said his party will design a “bridge out of Obamacare” for people in states affected by the ruling. There’s no agreement among Republicans on how such a policy would work.

States could respond by simply setting up their own exchanges. The Obama administration could make that easier, for example by letting them use to sell insurance online.

However, the U.S. health secretary, Sylvia Mathews Burwell, said in a Feb. 24 letter to Congress that the administration couldn’t do much on its own.
“We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,” she wrote.

4. What is corporate America’s take on the case?

The hospital and health-insurance industries are backing the administration. That includes HCA Holdings Inc., the hospital chain that is the nation’s largest private health-care provider. Trade groups for the hospital and health-insurance industries are also urging the court to back nationwide subsidies.

5. Who holds the pivotal vote?

The most likely candidate is Chief Justice John Roberts. He cast the decisive vote in 2012, joining the court’s four Democratic-appointed justices to uphold the core of the law. The other four Republican appointees voted to invalidate the entire measure, saying Congress exceeded its authority.

Opponents of Obamacare accused Roberts, normally the leader of the court’s conservative wing, of betrayal. Those criticisms escalated after CBS News reported that the chief justice first voted against the administration and then switched sides.

6. Which way is Roberts likely to go?

Both sides can find reasons for hope. Roberts is no stickler for statutory wording. He reads laws against the backdrop of institutional principles that Gluck says might cut in the administration’s favor, including deference to the views of administrative agencies.

In a 2009 case involving the Voting Rights Act, as well as the 2012 health-care decision, Roberts deviated from what he said was the most natural reading of a law to avoid declaring it unconstitutional.

“The chief is an institutionalist,” Gluck said. “He’s not a hyper-literalist.”

Jonathan Adler, a law professor who was one of the first to make the case against nationwide subsidies, says Roberts is more inclined to adhere to a statute’s wording in non-constitutional cases.

“The chief certainly is willing to bend a statute in order to avoid declaring a statute unconstitutional, but that’s not at issue here,” said Adler, who teaches at Case Western Reserve University in Cleveland.

One other factor: As chief justice, Roberts has always kept one eye on the court’s institutional integrity. One theory is that he was driven in 2012 by concern that a ruling striking down the law would be seen as a political decision.

If true, that thinking might suggest another Roberts vote in favor of the administration and another close call for Obamacare.

* * *

Finally, here is some visual detail courtesy of the NYT:

How would insurance coverage change?

The effect of a court decision would not be limited to the people currently receiving subsidies in the federal marketplaces. People who buy their own health insurance in those states, even without subsidies, could be affected, because rates would increase if insurance pools become older and less healthy. Estimates from the Urban Institute prepared for The New York Times show how a post-King world would look compared with the current trajectory for the Affordable Care Act — or if the health law had never passed.

Which groups would be most affected?

The people who would lose their insurance are more likely to be white, high-school graduates, employed and from the South.

What about the rest of the states?

States that run their own insurance marketplaces would be unaffected by a court ruling, meaning a widening gap between insurance coverage in the two groups of states. The Urban Institute estimated the outcome for federal and state-run marketplaces by 2016.

How will the states react?

Under any court ruling, states will have the power to restore their residents’ subsidies if they establish their own exchanges. It would not be easy, but some states face more hurdles than others. Here is a look at the status of the states that could be affected. Some have already begun doing the work of building exchanges. Some have signaled weak interest and taken little action. Others have already set up legal impediments.

Meet Landlord Loans: You Too Can Be A Real Estate Speculator

Just when we thought the news flow around shoddy loan securitizations couldn’t get any better (or worse, depending on how you look at it), we get this headline from the NY Times:  “Equity Firms Are Lending to Landlords, Signaling a Shift.” 

Forget falsifying loan documents  to get underqualified borrowers into new Honda Civics on 84 month payment plans. Forget encouraging unemployed households to borrow $3,500 at 30% to buy a new refrigerator. Those schemes are so two days ago. The smart money is now betting on real estate speculators.

Via NY Times

In the aftermath of the financial crisis, large private equity firms spent tens of billions of dollars buying foreclosed homes across the United States to operate them as rental properties.

Now some of those same firms are providing loans to smaller investors seeking to do much the same.

Three big private equity firms — the Blackstone Group, Colony Capital and Cerberus Capital Management — are betting that so-called landlord loans to small and midsize investors will become the next big opportunity to profit from the rebound in the United States housing market. The private equity firms are providing financing indirectly to hundreds of real estate funds buying single-family homes, something that until recently was not widely available.

Over the last year, subsidiaries and affiliates of all three private equity firms have lent collectively about $1.5 billion to smaller residential real estate investors, enhancing the capability of these firms to gobble up distressed single-family homes, said people briefed on the matter. 

Just to recap, on Monday we got Wells Fargo implicitly admitting that the subprime auto space is beginning to crack when the bank announced a cap on car loans to underqualified borrowers (i.e. the bank is voting with its feet), on Tuesday we got what can only be called a match made in subprime hell when AIG’s subprime unit Springleaf tied the knot with Citi outcast OneMain to form what will eventually amount to a personal loan ABS machine, and today we’re introduced to the “landlord loan”. Of course, this latest development in the world of lending people money to buy things they probably shouldn’t buy wouldn’t be complete if the PE firms involved don’t maximize the riskiness of this endeavor by pooling these “assets” and selling them off to investors. Here’s the Times again: 

All three firms are gearing up to bundle those loans into bonds — with the first securitization of landlord loans expected to come to market in the next few weeks

At least we don’t have to wait long. 

It also comes as absolutely no surprise that the lead underwriter on the first deal is likely to be Deutsche Bank who, as we learned during the Canadian ABCP crisis of 2007 when the bank accidentally ran up around $6 billion in paper losses on the latest leveraged CDO scheme, takes a certain pride in being the first bank to throw its support behind the latest bad idea in structured finance. 

As is the case with ABS backed by pools of auto loans and as is quickly becoming the case with securities based on personal loans (auto deals and non-traditional deals combined to  account for nearly three quarters of U.S. ABS issuance last month), expect demand for landlord loan ABS to be robust thanks to the sinister proliferation of ZIRP and now, increasingly NIRP. Meeting that demand shouldn’t be a problem either as the PE masterminds behind this are seeing quite a bit of interest from borrowers eager to play Flip This House: 

The private equity firms see a rising demand for landlord loans — which can range from as little as $500,000 to $50 million — given that smaller- to midsize real estate investment firms historically have had to rely mainly on cash raised to make purchases.

On a more sobering note, some commentators believe this whole enterprise could be ill-conceived. Here’s what one “housing advocate” (or as we call them, killjoys) had to say: 

Housing advocates, however, are concerned that landlord loans from private equity firms could fuel the purchase of homes by investors ill-equipped to manage rental properties. The advocates are concerned about the due diligence the private equity investors will do to make sure investors are not just good credit risks, but qualified property managers as well.

Time will tell, but one thing is for sure: landlord loan ABS is coming to an investment bank near you. 

Bernanke Wants The US President To Declare "Economic Emergencies" In Future Crises

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Presidents should get the power to declare economic emergencies along the lines to declare war, said former Federal Reserve Chairman Ben Bernanke on Monday.


It might make sense to give “the president some ability to declare emergencies or take extraordinary actions and not put that all on the Fed,” Bernanke said at a conference. “The constitution gives the president significant flexibility to respond to military situations,” in part because they are chaotic, he noted.


“I am sure it is not politically possible, but it would be worth thinking about,” the former Fed chairman said.


– From the MarketWatch article: Presidents Should Be Able to Declare Economic Emergencies: Bernanke

For those of us who remain horrified and disgusted by the 2008-09 Federal Reserve and U.S. government bailout of the kleptocratic oligarchs who created the crisis, the above comments by the mastermind of this historic theft should be extremely concerning.

Although bankers and oligarchs got everything they wanted and more from the post crisis panic, what seems to bother Bernanke is that some of the response measures had to be pursued publicly. By calling for the U.S. President to declare economic emergencies in future crises, he is explicitly saying he doesn’t want Congress involved at all, even if just ceremonially. This man is a dyed in the wool fascist.

MarketWatch reports that:

WASHINGTON (MarketWatch) — Presidents should get the power to declare economic emergencies along the lines to declare war, said former Federal Reserve Chairman Ben Bernanke on Monday.


While the Fed retains the authority it needs to respond to another financial crisis, financial crises “tend to have a certain chaotic element to them,” that no one can predict, Bernanke said during a panel discussion sponsored by The Hutchins Center on Fiscal and Monetary Policy.


In light of this, it might make sense to give “the president some ability to declare emergencies or take extraordinary actions and not put that all on the Fed,” Bernanke said at a conference. “The constitution gives the president significant flexibility to respond to military situations,” in part because they are chaotic, he noted.


“I am sure it is not politically possible, but it would be worth thinking about,” the former Fed chairman said.


After the House initially rejected the proposal and stock markets tumbled, Congress reconsidered and the measure was signed into law and became the $700 billion Troubled Asset Relief Program, or TARP.

After coming across the above, I got to thinking about the process for declaring national emergencies. I performed a quick search and read a little bit about the National Emergencies Act of 1976. It was passed in response to a spate of national emergencies initiated by President Richard Nixon, and was intended to ensure Congress exerted more oversight on such declarations for obvious reasons.

Unsurprisingly, Congress hasn’t been doing its job. As USA Today pointed out in a special report last year:

The 1976 law requires each house of Congress to meet within six months of an emergency to vote it up or down. That’s never happened.

Here are some additional excerpts:

In his six years in office, President Obama has declared nine emergencies, allowed one to expire and extended 22 emergencies enacted by his predecessors.

Since 1976, when Congress passed the National Emergencies Act, presidents have declared at least 53 states of emergency — not counting disaster declarations for events such as tornadoes and floods, according to a USA TODAY review of presidential documents. Most of those emergencies remain in effect.


Even as Congress has delegated emergency powers to the president, it has provided almost no oversight. The 1976 law requires each house of Congress to meet within six months of an emergency to vote it up or down. That’s never happened.


In May, President Obama rescinded a Bush-era executive order that protected Iraqi oil interests and their contractors from legal liability. Even as he did so, he left the state of emergency declared in that executive order intact — because at least two other executive orders rely on it.


Invoking those emergencies can give presidents broad and virtually unchecked powers. In an article published last year in the University of Michigan Journal of Law Reform, attorney Patrick Thronson identified 160 laws giving the president emergency powers, including the authority to:

Reshape the military, putting members of the armed forces under foreign command, conscripting veterans, overturning sentences issued by courts-martial and taking over weather satellites for military use.

• Suspend environmental laws, including a law forbidding the dumping of toxic and infectious medical waste at sea.

• Bypass federal contracting laws, allowing the government to buy and sell property without competitive bidding.

• Allow unlimited secret patents for Army, Navy and Air Force scientists.

All these provisions come from laws passed by Congress, giving the president the power to invoke them with the stroke of a pen. “A lot of laws are passed like that. So if a president is hunting around for additional authority, declaring an emergency is pretty easy,” Scheppele said.


After President Richard Nixon declared two states of emergency in 17 months, Congress became alarmed by four simultaneous states of emergency.


It passed the National Emergencies Act by an overwhelming majority, requiring the president to cite a legal basis for the emergency and say which emergency powers he would exercise. All emergencies would expire after one year if not renewed by the president.


Bush’s Proclamation 7463 provides much of the legal underpinning for the war on terror. Bush cited that state of emergency, for example, in his military order allowing the detention of al-Qaeda combatants at Guantanamo Bay, Cuba, and their trial by military commission.


The post-9/11 emergency declaration is in its 13th year. Eleven emergencies are even older.


The National Emergencies Act allows Congress to overturn an emergency by a resolution passed by both houses — which could then be vetoed by the president. In 38 years, only one resolution has ever been introduced to cancel an emergency.

Congress, useless as usual. Unless of course a corporate giveaway is crafted by lobbyists, in which case it flies through both chambers and becomes law instantaneously.

After Hurricane Katrina in 2005, President Bush declared a state of emergency allowing him to waive federal wage laws. Contractors rebuilding after the hurricane would not have to abide by the Davis-Bacon Act, which requires workers to be paid the local prevailing wage.


“The history here is so clear. The Congress hasn’t done much of anything,” said Harold Relyea, who studied national emergencies during a 37-year career at the Congressional Research Service. “Congress has not been the watchdog. It’s very toothless, and the partisanship hasn’t particularly helped.”


If anything, Congress may be inclined to give the president additional emergency powers. Legislation pending in Congress would allow the president to invoke an emergency to waive liability for health care providers and to sanction banks that do business with Hezbollah.


Scheppele, the Princeton professor, said emergencies have become so routine that they are “declared and undeclared often without a single headline.”

Bernanke may be a kleptocratic oligarch criminal, but stupid he is not. He knows exactly what kind of power an “economic emergency” would grant to the executive, which is exactly why he wants it to happen.

A Republic or Democracy this is not.

Crude Plunges On Biggest Weekly Inventory Build In 14 Years

So much for last night's lower than expected API build, DOE data shows a massive build compared to the 3.95 mm barrels expected:


This is the 8th build in a row and biggest weekly inventory rise in 14 years.



This is the fastest inventory build EVER...


and WTI has broken back below $50...


Unambiguously good still?


Charts: Bloomberg

Swiss Franc Plunges On FinMin "Minimum Exchange Rate" Comment

Just what are the Swiss up to...


A confidential paper signed by Swiss Finance Minister Eveline Widmer-Schlumpf, discussed in government last week, said that new minimum exchange rate should be "considered," Handelszeitung reports in a prerelease of an article to be published Thursday.


As Bloomberg adds,

Paper, also backed by Economy Minister Johann Schneider-Ammann, suggests that Swiss govt should have more influence on SNB decision making via regular and more intensive consultations with the central bank: HZ

And Swissy dumped...


Full Statement pre-release (via Google Translate):

A new minimum exchange rate of the euro compared to the franc should be "considered". And: The state government has to take with regelmaessigeren and intensified debates more gain influence on the decisions of the Swiss National Bank (SNB). Be explicitly "target 'must' to coordinate the money economy and the general economic policy content and communication." These controversial claims, signed by Finance Minister Eveline Widmer-Schlumpf, are in a confidential discussion paper, which has led in the Bundesrat last week to controversial discussions. About it reports the "commercial paper" in its morning edition.


Topic of discussion were proposals for possible policy responses to the Frankenstaerke. While the Federal Council has not yet approved the paper, but the impact and march direction is outlined: the high politics in Bern, dissatisfied with the by surprising cancellation of guaranteed exchange rate of CHF minimal 1.20 to the euro, will publicly demonstrate power and win back power to act. The said committee jointly presented by Widmer-Schlumpf and Economy Minister Johann Schneider-Ammann analysis states clearly that neither fiscal nor economic or organizational measures are likely to influence decisively the new, for the economy as a whole been considered a difficult situation or to overcome all. The central factor for the development of the Swiss economy, concluded the economists of the covenant, is and remains the monetary policy of the SNB.

*  *  *

And The Market Breaks

Update: just three minutes later and the NYSE is "fixed", with BATS revoking self-help.


But the mission was achieved: the selling was halted, if only for the time being.


*   *   *

When in doubt how to send stocks soaring, or at least halt the selling, the solution is simple: break the market.

Moments ago everyone's favorite, venerable exchange, the NYSE, broke as per BATS which just delcared self-help: "BATS Exchange has declared self-help against NYSE Arca per Rule 611 of Regulation NMS. Routing to NYSE Arca has been suspended as of 10:11:59 ET."

Despite Hard Data Collapse, US Services Surveys Point To Modest Bounce In February

US Services PMI rose and beat very modestly from 57.0 to 57.1 in February (this is a flash print). This is the highest Services PMI print since October but Markit warns not to get excited, data "is up only slightly compared to the fourth quarter of last year, meaning growth this year is running at a rate similar to the 2.2% annualised pace seen late last year." ISM Services (survey) confirmed this modest improvement in February (despite all the hard data collapsing) boucing very modestly from 56.7 to 56.9 in Feb despite a drop in BusinessActivity and New Orders.


Services PMI at highest since Oct..


As Markit notes,

“The pace of US economic growth jumped to a fourmonth high in February, according to Markit’s PMI survey data. Business picked up especially towards the end of the month, when the impact of bad weather on the East Coast and port delays on the West Coast began to clear, which suggests this may be a temporary upturn.


“Even with the strong growth recorded in February, the average reading across the manufacturing and services surveys for the first quarter so far is up only slightly compared to the fourth quarter of last year, meaning growth this year is running at a rate similar to the 2.2% annualised pace seen late last year.


“That’s certainly not a pace of expansion that will worry the Fed into hiking interest rates any time soon. However, the ongoing resilience of the US economy, and in particular the sustained robust job creation signalled in February, adds to the sense that policymakers will continue to prepare the ground for a rate rise later this year.”

*  *  *

ISM Services rose modestly also...


With virtually everything except the all important New Orders and Business Activity rebounding...

Unlike everywhere else, the respondents did not have a hard time braving the snow in February:

  • "The lower price of oil is providing a beneficial impact on certain products, specifically plastics." (Agriculture, Forestry, Fishing & Hunting)
  • "Business conditions are seeing less money being spent on capital projects by the major oil companies." (Construction)
  • "Business is on par or slightly up for this time of year. This time of year is considerably slower than peak season." (Arts, Entertainment & Recreation)
  • "West Coast ports are causing shortages." (Health Care & Social Assistance)
  • "Signs of continued, but slowed growth in our sector. Low fuel prices and utility prices helping with costs. International markets remain lagging behind US growth." (Professional, Scientific & Technical Services)
  • "The West Coast port labor union situation is slowing down the products we need to release to our customers. Business is good, but waiting and not shipping on time will cost us big time." (Information)
  • "Sales continue to be solid which is believed to align with lower fuel costs and overall consumer sentiment being positive." (Retail Trade)
  • "Port congestion is causing major delays in the delivery of product. The reduced cost of fuel has increased our sales and we believe it will continue throughout the first quarter." (Wholesale Trade)

And here is the macro reality:


Charts: Bloomberg

VIX Tops 15 As Stocks Slide To 2-Week Low

Just 2 days ago everything was awesome (according to stocks). Nasdaq hit 5000 proving it's different this time, despite the total collapse in macro and earnings data. So perhaps - just perhaps - as buybacks slow, US equity markets are exposed to reality underneath them. VIX has snapped back above 15, its highest in 10 days, and the S&P is back at 2-week lows... retracing all the "Greek Deal" gains.


VIX rapidly snapped from under 13 to over 15...


Stocks are back at pre-Greek-Deal levels...

Oil Prices Rise As ISIS Attack Iraq Oil Pipelines


As oil prices started to slide this morning, following their pop on lower-than-expected API inventory build data, headlines crossed:


As we detailed yesterday, Tikrit is key, and this (unconfirmed for now) headline sent WTI and Brent up 40c per barrel (for now).


As Blkoomberg reports,

Islamic State militants burned pipelines in Tal Hasiba region east of central city of Tikrit, accord. to state-sponsored Iraqiya television, which didn’t say where it got information.

*  *  *

And the immediate reaction...



With ISIS suffering from lower cashflows (thanks to lower oil prices), we suspect their efforts to raise oil prices (by any means possible) will continue.


Charts: Bloomberg

Great Big Fat Greek Expectations

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

From what I read in the press every day, as well as from private communication, a pretty wide divide seems to appear between what many people think the Syriza government in Athens should do, and what they actually can do at this point in time. It should be useful to clarify what this divide consists of, and how it can be breached, if that is at all possible.

In particular, many are of the opinion that Greece cannot escape its suffocating debt issues without leaving the eurozone and going its own way, reintroducing the drachma and defaulting on much of its €240 billion debt. Those who think so may well be right. But right now that is mostly irrelevant. Because Alexis Tsipras and his men and women simply don’t have their voters’ mandate to go down that road. They may at some time in the future, but they don’t today. The expectations are too great, and certainly too immediate.

If Syriza wants to achieve anything, it will need to stick to democratic principals and procedure. Every important decision, and every – even slight – change of course will need to be laid out before either the Syriza fraction in Parliament, the entire parliament, or the Greek population as a whole, to vote on. The government looks to be sticking to this principle as solidly as it seeks to stick to its mandate. None of that grey wiggle room that is so typical in most political systems.

This also makes the task ahead that much harder. Syriza must be seen by its voters as doing what it can to remain in the eurozone, while at the same time negotiating terms with the other members that will allow relief from the relentless -humanitarian – pressures the country has been put under by its previous governments and EU partners.

And while it may well be so that Tsipras and Varoufakis et al have in private long concluded that in the long term attempts to succeed in combining these two goals are doomed to fail, or even that the eurozone as a whole has no future, the fact is that for now some 70% of Greeks reportedly demand that the country remain in the currency union.

There’s a deep underlying historic component to this that needs to be recognized if one is to understand what is happening. Before the EU, and certainly the euro, Greece always felt under threat from the east, a result of centuries of occupations. They had a deep longing to be recognized as a part of Europe, and to feel protected in that sense.

Ambrose Evans-Pritchard summed it up quite nicely in an interview from ‘the lion’s den’ over the weekend:

Humiliated Greece Eyes Byzantine Pivot As Crisis Deepens

“When it comes to the choice, I fear Tsipras will abandon our programme rather than give up the euro,” said one Syriza MP, glancing cautiously around in case anybody was listening as we drank coffee in the “conspiracy” canteen of the Greek parliament.


“The euro is more than just money. It is talismatic for the Greeks. It was only when we joined the euro that we felt truly European. There was always a nagging doubt before,” he said.


“But you can’t fight austerity without confronting the eurozone directly. You have to be willing to leave. It is going to take a long time for the party to accept this bitter reality. I think the euro was a tremendous historic mistake, and the sooner they get rid of it, the better for all the peoples of Europe, but that is not the party view,” he said.

This is what Tsipras faces. There’s an almost schizophrenic attitude even among his own caucus. And there may be plenty voices that say he should at least threaten to leave the eurozone, just to have some leverage in negotiations, but they don’t understand the lay of the land. The European ‘partners’ in the talks know only too well that it would be an empty threat: Greek voters don’t want to leave the eurozone, so threatening to go anyway would only ring hollow.

Tsipras instead must repeat again and again that his goal is to remain in the union, and Greece will do what it can to pay off all its debts. He has no wiggle room on that, not at the moment. If he would want to present his people with the option of leaving the eurozone, it could only be done after very extensive talks in which it becomes ever clearer that the ‘partners’ make it impossible for Greece to achieve that other Syriza commitment, of cutting back austerity measures, within the currency union.

He must at some point be able to turn to his people and say: we’ve done all we could, we’ve even compromised some of your election demands, but Germany etc. just won’t give up. He needs to be able to prove to Greek voters that they can’t have both an end to austerity AND the continued membership of the eurozone.

This will take time, probably lots of it. But it’s the only thing Tsipras, if he means to stick to strict democratic rules – which he’s done thus far -, can do. Claiming today from the outside that he should already have left the eurozone, or at least threatened to do so, is premature at best, and not helpful.

The Syriza MP cited above by Ambrose says it all, really. Some of the MPs are pretty much willing to let go of the euro. But they, too, need to understand that Tsipras can offer that option to the people only after long-drawn-out talks, at the end of which he may be able to say:

“Look, you know what we’ve been discussing with the partners, because we’ve kept you informed every step of the way. It is now clear that if you wish to stay in the eurozone, it will mean austerity, it will mean soupkitchens and no health care and no jobs for your children, for years to come. Do you really want the euro that much? If not, we can go it alone, we have the models ready and we can explain them to you. And it will no doubt be difficult at first, but at least it will be our own difficulties, not those imposed by others.. It’s up to you, the people, to decide.”

For now, those talks haven’t been held. So Tsipras can’t say these things. It will need to be a game of patience. There was never any other way.

Baltic Dry Index Crashes: Calamity or False-Alarm?




Jeff Nielson for Sprott Money




For this commentary to make any sense to most readers, it’s necessary to address the two questions which immediately come to their minds: “what is the Baltic Dry Index?” and “why should I care about it?” Dealing with these questions in order; the Baltic Dry Index measures the prices paid to ship various forms of cargo, in the form of an index.



Answering the second question starts with further elaboration on the first. This price index is seen as a proxy for the demand for shipping, versus the capacity of the existing global fleet, because (in legitimate markets) price is always viewed as a proxy for demand. In turn; the demand for shipping is often viewed as a proxy for global economic activity (all other things being equal). Put bluntly; if economies are growing, then “things” are moving (by ship).



What conclusions, if any, should we then draw from the fact that the Baltic Dry Index has just crashed to a new, all-time low? In this case, analysis definitely starts with a picture.



The chart above does more than merely inform us that the most-recent measurement of 530 is an all-time low, it further enhances our understanding of the BDI, in conceptual terms. We gain this greater understanding by simply looking at the horrific, (downward) vertical line in that index, which coincided with the Crash of ’08.



Undoubtedly all readers have a reasonably vivid recollection of that economic episode. Even if they did not experience any personal, economic pain; they would at the very least recall the general atmosphere of panic – and the acute “economic pain” experienced by others. Thus a vertical line in the BDI (downward) is not statistical indicator which should be taken lightly.



Once again, the BDI is plunging lower, vertically. While the vertical line is not (yet) of the magnitude of the Crash of ’08 (currently about 1/3rd that size); it has already plunged below the trough of that previous crash, as signified by the new, all-time low. Does this then mean that we should now be bracing ourselves for “the Crash of ‘15”?



In short, not necessarily. The key to interpreting the data of the Baltic Dry Index (and the chart above) comes from the qualifier used previously, in discussing the significance of this statistic: “all other things being equal”. With the BDI being a demand-oriented measurement (for shipping capacity); the first variable we must examine, to determine if “all other things” are equal is the supply of shipping capacity. Once again, a chart is highly illustrative of the conceptual factors at work here.



What we see is a dramatic increase in ship-building activity, and thus a sharp increase in the supply of cargo capacity within the global fleet of freighters. Obviously this “increase” is almost totally centered on the ship-building of two nations: China and South Korea. Before attempting to understand precisely what is signified by the two charts, in conjunction; it is necessary to first derive a greater understanding of this spike in ship-building activity.



Were China and South Korea engaged in a deliberate campaign of creating over-capacity in the global fleet, as part of some economic “power play” to squeeze-out other ship-building nations, such as Japan? While this interpretation is possible, it does not seem likely, once we begin to factor in other context.



The starting point is to refer back to the BDI chart. What do we see immediately before the unprecedented collapse which took place in 2008? An unprecedented rise in the BDI. Part of the reason why the collapse in the BDI looks (and was) so horrific was that it began from an all-time peak in the Index.



As noted before, with the BDI (often) being a proxy for global economic activity, what we see reflected in that pre-Crash rise was the strong, healthy, global economic boom which was underway – until deliberately sabotaged by the One Bank, in the form of its (manufactured) Crash of ’08. Thus the most rational/probable explanation for the sudden spike in ship-building activity (which began in 2007) was a reaction to the plunge in excess cargo capacity, signified by the record prices charged/paid to ship goods at that time.



It was old-fashioned supply and demand which motivated China and South Korea to begin their ship-building campaign. But what caused them to continue that pace of ship-building activity, even after the Crash of ’08 had cooled-off demand and prices? Two factors were at work here.



To begin with, the economic boom occurring in (primarily) “BRIC” and “Emerging Market” nations (their industrialization), is still in its early stages. Over the long term, as these economies begin to mature, and industrial activity intensifies further; the level of demand for raw materials (particularly “hard” commodities) must rise dramatically to fuel that activity, and those raw materials require ships to take them from producing nations to consuming nations.


But there is a second, more short-term factor at work here: old-fashioned propaganda. While the East has been manufacturing more goods, the West has been manufacturing more lies – larger/bigger lies, particularly those covering up the economic collapse occurring in our nations.



With Western governments (especially the U.S.) pretending there is much, much more economic activity in our nations than is actually taking place; the goods-producers of Asia (and other Emerging Markets) thought they would need to produce more goods to meet Western demand – and require more ships to transport those goods. In turn, the producers of raw materials thought they would need to produce more, to satisfy the increased demand from the goods-producers – and require more ships to transport those raw materials.



Everyone (except the Alternative Media, and our audience) was fooled by the economic lies of Western governments, which is why we also have gluts in the stockpiles of most categories of hard commodities. Everyone assumed that more cargo capacity was required, thus (in some respects) the current crash in the BDI was an inevitable event. At some point; the difference between shipping supply and expected demand (all based upon huge, Western lies) would collide with reality: a dramatically lower level of actual demand (for everything) centered in the decaying West.



Putting all this data and context together, we arrive at the following conclusion. Even though the current plunge in the BDI is vertical, even though that (modest) plunge has now taken the Index to a new, record low; this does not necessarily mean that we are on the cusp of an immediate, global collapse.



Regular readers know that “the Next Crash” has already been scheduled (by the One Bank) for 2016, to coincide with the next, U.S. election cycle – just as the One Bank did in 2008, just as it did eight years before that, after it burst the “Dot-Com” bubble. At this point; there is no reason to revise that previous thinking, and read-in any more significance to the current level of the BDI.



However, as already noted and for reasons already explained, the BDI is not an economic indicator which we can afford to ignore, even if we think we understand what is reflected in its data. We know that the One Bank wants the Next Crash to occur in 2016. However, as we have seen demonstrated on many previous occasions; it is anything but omnipotent, and anything but omniscient. In short; the banksters make a lot of mistakes.



It is certainly within the realm of probability that the One Bank could (will?) miscalculate, and will not be able to prop-up the frauds, Ponzi-schemes, and bubbles it has inflated (extremely) in Western economies all the way to the next U.S. election. Thus if we continue to see the Baltic Dry Index plunger lower and lower, vertically; it will tell us two things.



First it will conclusively indicate that a general, economic collapse is underway in much of, if not the entire global economy. Secondly, it will indicate that the One Bank “screwed up”, again.



Jeff Nielson for Sprott Money



India Central Bank Cuts Interest Rate "Pre-Emptively" For Second Time In 2 Months

In a surprise move, the RBI just cut its main interest rates for the second time in two months, taking it from 6.75% to 6.50%, in what the central bank calls a “pre-emptive” policy move, but what is in reality merely a confirmation that so far in 2015 at least 20 central banks have lowered their interest rate. 

From the statement: 

The RBI notes that the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses… 

...softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation. 

Via Bloomberg:


...and more from Reuters: 

Both rate cuts this year have took place outside of the central bank's scheduled policy review meetings.

The rate cut marks a vote of faith in the government, which on Saturday pledged to be fiscally responsible but said it would take an additional year to meet a fiscal deficit target of 3 percent of gross domestic product.

Full statement from the RBI

* * *

Here is the full list of the 20 central rate cuts so far in 2015:



Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.

2. Jan. 7/Feb. 4 ROMANIA

Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.


The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT

Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU

Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY

Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA

The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.


The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.

9. Jan. 24 PAKISTAN

Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

10. Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

19. February 23, ISRAEL

The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA

The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s. Then on March 3, it followed through on its promise and indeed cut rates one more time, this time to 7.50%