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Obama Says Surveillance Program Changes Coming in January – Bloomberg

Obama Says Surveillance Program Changes Coming in January – Bloomberg.

President Barack Obama said he will act in January on the recommendations of an advisory panel suggesting changes to government surveillance programs.

“What we’re doing now is evaluating all of the recommendations that have been made,” Obama said at a news conference today. “I’m going to make a pretty definitive statement about all of this in January.”

He’ll decide which recommendations “make sense” and which need further work, Obama said at a White House news conference, his final planned for 2013.

The Review Group on Intelligence and Communications Technology, a five-member panel, offered 46 policy changes this week that would allow U.S. surveillance programs to continue while limiting worldwide collection of communications by the National Security Agency.

The proposals, which Obama isn’t obligated to adopt, aim to alter spy programs in response to a domestic and international backlash over the extent of U.S. surveillance exposed by former NSA contractor Edward Snowden.

Before the report was released, Obama rejected the panel’s recommendation that the NSA be given a civilian leader and separated from the Pentagon’s Cyber Command.

“I have confidence in the fact the NSA is not engaging in domestic surveillance or snooping around”, he said, while “we may have to refine this further to give people more confidence” because of evolving technology.

“Just because we can do something doesn’t mean we necessarily should,” he added.

Possible Legislation

Lawmakers may consider legislation early next year to rein in the NSA.

In its report, made public on Dec. 18 and submitted to the president on Dec. 13, the panel recommended satisfying a demand of Internet companies such as Yahoo! Inc. (YHOO) andFacebook Inc. (FB) Internet companies should be permitted to make public “general information” about government orders compelling them to turn over data, including how many users are affected.

The panel also would put new burdens on telecommunications providers to retain data for future snooping.

It recommended the NSA retain access to bulk phone-calling records, with two changes: Phone companies, not the spy agency, should keep the records, and the NSA should have to obtain court orders for specific customer data.

Surveillance of foreign leaders could continue if more consideration is given on a case-by-case basis to national security, economic and diplomatic implications, the panel said.

The panel also recommended that the U.S. not undermine or weaken encryption standards, and establish international norms to prevent a splintering of the Internet.

The so-called “metadata” bulk collection of phone data “has probably got the most attention,” Obama said today. The NSA, based on its experiences following the terrorist attacks of Sept. 11, 2001, thought that “it was necessary for us to track” calls coming into the U.S. and store the data.

Any changes must be made with the agency’s goal of protecting the U.S. public in mind, he said.

 

Experts Fear Nuclear Famine: “A Disaster So Massive in Scale that No Preparation is Possible”

Experts Fear Nuclear Famine: “A Disaster So Massive in Scale that No Preparation is Possible”.

nuke-famine

At last count, there are eight countries in the world that have officially designed, developed and tested nuclear weapons. Another two (Israel and Iran) deny they have built or are building such weapons, but the probability that Israel has them and that Iran is building them is believed by members of the international community to be extremely high.

That being said, it’s only a matter of time before a madman at the helm in any of these ten nuclear-armed states decides to push the button. With the global economy in shambles, the world’s super powers mobilizing military assets, and hundreds of trillions of dollars in unservicable debt soon to be realized by the financial community, how long before history rhymes with previous large-scale events that culminated in the fall of the Roman empire or the World Wars that  devastated tens of millions of lives in the 20th century?

War, it seems, is inevitable. Not just because of the many problems faced by mankind, but because of the nature of mankind itself.

Whether that war is a widespread nuclear conflict involving the world’s super powers, or a more limited event in the middle east involving Pakistan and India, according to anew report published by the International Physicians for the Prevention of Nuclear War, a nuclear engagement (even a limited one) would lead to widespread destruction across planet earth, with at least 2 billion people at risk of starvation or death.

The kicker? The effects will be so long-lasting, according to the author of the study, that there’s pretty much nothing we can do to survive it:

The threat of nuclear war has been embedded in global consciousness since the invention of the atomic bomb. Most fears are focused on blast radius and radioactive fallout; but the long-term effects of a nuclear conflict could be far more concerning.

According to new research from the International Physicians for the Prevention of Nuclear War and Physicians for Social Responsibility, a phenomenon known as “nuclear famine” is keeping experts up at night. The study estimates that more than 2 billion people are at risk.

Its author, Ira Helfand, says even a limited nuclear war could lead to “the end of civilization.”

Helfand theorizes it could occur in stages. The first is climate change. Existing literature shows that a regional nuclear war between India and Pakistan could drastically affect temperatures throughout the world. A 2007 study published in Atmospheric Chemistry and Physics predicts that the soot created by such an event could reduce temps by 1.25°C per year for at least a half-decade.

This would wreak havoc on global crops.

The final stage of this catastrophe is starvation.

With his best guess, Helfand breaks the at-risk into three groups: (a) 870 million people already facing malnourishment, (b) grain-importing nations, and (c) the entire population of China. The first group gets more than 75% of its nutrition from grain, and a significant portion would not be able to afford higher prices.

Grain-importing nations, like South Korea, Japan, most of North Africa, and the Middle East, would be hard hit by trading partners who suddenly decide to stop exporting. Additionally, China’s 1.3 billion citizens would use up their rice and wheat reserves in a few months, and international hoarding may make open-market purchases impossible.

As Helfand has said: ”This is a disaster so massive in scale that really no preparation is possible. We must prevent this.”

With the vast majority of the world’s nations still unable to build the bomb, a blanket approach could work. ICAN pleads that the “very survival of humanity depends on nuclear weapons never being used.”

Fool.com via IPNNW Study

The nuclear-armed nations of the world didn’t just build these weapons so they can look at them. Sure, our leaders may claim these weapons are merely deterrents designed to prevent war, but the fact is, advanced weaponry has always been used for the purposes of conquering. Our modern era is no different.

We came dangerously close during the Cuban missile crisis in the early 1960′s. Cooler heads prevailed that day.

And even if starting a war is unintentional, it could happen. On at least one occasion, in 1983, the United States and Russia were literally minutes away from a full-scale confrontation under both country’s policies of mutually assured destruction. It turns out that was a false alarm – but the world was almost destroyed as a result. This is one of the incidents we know about, and given the secrecy behind such military operations, it’s quite possible that there have been more.

The bottom line is that we must assume these weapons will be used at some point – that should be a given. What we don’t know is the scale of the nuclear engagement. It could be that Russia, the United States, Israel, China and North Korea just start lobbing intercontinental ballistic missiles by the hundreds, in which case we’re all pretty much toast. Or, it could be a limited war, with the conflict in India and Pakistan finally coming to a head.

Whatever the case, even if those dropped bombs detonate thousands of miles away from you, there is a strong likelihood that you will feel the direct effects in the form of an almost immediate climate change, food scarcity, extreme price rises, and the riots and looting that are sure to follow.

As with any disaster, whether its a nuclear war, global financial collapse, or a natural disaster, we can fully expect the worst of the worst. As the IPPNW report notes:

We would have to expect panic on a far greater scale following a nuclear war, even if it were a “limited” regional war,  especially as it became clear that there would be significant, sustained agricultural shortfalls over an extended period.

It is probable that there would be hoarding on an international scale as food exporting nations suspended exports in order to assure adequate food supplies for their own populations.

Though the report suggests it is impossible to prepare for such an event, one could argue that survival is certainly possible.

Assuming we survive the nuclear impact and fallout because we live in a strategic location (or just got lucky!), your most immediate concerns would be food, water and self defense, all of which must be considered before such an event occurs if you intend to improve your odds of survival.

Surviving a nuclear winter will, of course, not be easy. According to the report, two billion people could die as a result – probably within a matter of months or a year. Asimilar scenario would play out should a disaster like a Super EMP weapon or solar flare take out our national (or global) power grid.

Regardless of the disaster, the aftermath, like any crisis or emergency, is survivable.

From the standpoint of preparedness, this means having long-term food stores and apreparedness plan to go along with them. You’ll first need to survive the initial “die-off” as millions of people search for food and resources. Then, when your own food stores run out, you’ll need to be able to produce your own by way of micro-farming and raising your own livestock.

What it will boil down to is adaptability. We can’t predict what will happen or what we will face. But understanding the potential threats, how to mitigate them when they occur, and the options we have available should our best laid plans fail gives us a much better chance of surviving disasters than just pretending like they can’t ever happen.

 

Canada lifts all restrictions on prostitution – Americas – Al Jazeera English

Canada lifts all restrictions on prostitution – Americas – Al Jazeera English.

Landmark ruling comes 34 years after the Supreme Court last upheld Canada’s anti-prostitution laws [Reuters]
Canada’s top court has overturned all restrictions on prostitution, declaring that existing laws violated sex workers’ right to safety.The Supreme Court of Canada struck down bans on brothels, street solicitation, and living on the earnings of prostitution in a unanimous 9-0 decision on Friday, and gave the Canadian government one year to re-write the country’s prostitution laws.

The impugned laws deprive people engaged in a risky, but legal, activity of the means to protect themselves against those risks.Chief Justice Beverley McLachlin.

While prostitution itself is technically legal in Canada, most prostitution-related activities were previously considered criminal offences.

In the decision, Chief Justice Beverley McLachlin said many prostitutes “have no meaningful choice” but to “engage in the risky economic activity of prostitution,” and that the law should not make such activities more dangerous.

“It makes no difference that the conduct of pimps and johns is the immediate source of the harms suffered by prostitutes,” McLachlin wrote.

“The impugned laws deprive people engaged in a risky, but legal, activity of the means to protect themselves against those risks.”

The legal challenge to Canada’s prostitution laws was brought by a group of sex workers who argued that the now-overturned restrictions put them in danger.

Katrina Pacey, a lawyer for the petitioners, called it “an unbelievably important day for the sex workers but also for human rights.”

“The court recognized that sex workers have the right to protect themselves and their safety,” she said.

Last year, a lower court in the province of Ontario struck down the ban on brothels on the grounds that it exposed sex workers to more danger.

Friday’s ruling comes 34 years after the Supreme Court last upheld Canada’s anti-prostitution laws.

Prostitution is legal in much of Europe and Latin America, and brothels are legal in numerous countries, including the Netherlands, Germany and Switzerland.

 

Canada’s housing market in good shape: federal housing agency | Canada | Reuters

Canada’s housing market in good shape: federal housing agency | Canada | Reuters.

By Andrea Hopkins and Leah Schnurr

(Reuters) – Canadian condominium construction has surged but population growth has kept oversupply in check, the federal housing agency said in a report on Wednesday that also showed declining mortgage arrears and high home-equity levels.

In its annual report on the housing market, the Canada Mortgage and Housing Corp pointed to steady levels of mortgage debt and an increasing number of households as evidence that residential real estate is in good shape, despite warnings from observers that the market is overheated.

Canada’s housing market avoided the crash experienced in the United States five years ago due in part to more conservative lending standards and a stronger economy. While economists have long predicted an eventual correction in Canada, they are divided over whether prices will drop sharply or simply stagnate in a so-called soft landing scenario.

“The main argument here is just that the Canadian housing market still looks fairly normal,” said Eric Lascelles, chief economist at RBC Global Asset Management in Toronto.

The agency’s report showed that as of June 2013, 0.31 percent of residential mortgages were three or more months in arrears, compared with 0.33 percent 12 months earlier, CMHC said. Arrears averaged 0.41 percent in the decades 1990-2010.

About 31 percent of recent buyers made lump-sum payments or increased their regular payments in 2012 to pay off their mortgage sooner, and 44 percent had set their payments above the minimum, the report showed.

The average amount of equity for homeowners with mortgages was 47 percent, and 71 percent had at least 25 percent equity in their homes. Only 7 percent had less than 10 percent equity as of April 2013, suggesting only about 7 percent of homeowners would be “under water” if prices dropped more than 10 percent.

Some 41 percent of homeowners had no mortgage, while the rest typically had solid equity levels, accelerated mortgage payments or declining arrears.

CONDOS DOMINATE HOMEBUILDING

With the once-booming but cooling condominium market widely perceived to be the weak spot in Canada’s urban housing market, the CMHC said condo construction was far outpacing construction of detached homes. Even so, there were no signs of oversupply yet because of an increase in the number of people living alone as well as population growth resulting from a strong influx of immigrants.

While single-detached dwelling starts rose just 1.5 percent to 83,657 in 2012, multiple-dwelling starts – typically condos – rose 17.6 percent to 131,170 units. Condos comprised 61 percent of all construction in 2012, continuing a trend that began in 2002.

The surge was most notable in Canada’s biggest cities, where cranes dot the skylines and tens of thousands of new units come on line every year. The share of condominium starts out of total starts was highest in Vancouver at 64 percent, followed by Toronto at 59 percent and Montréal at 58 percent.

While the number of starts suggests a huge supply in the pipeline that will come to the market in the next year or two, the building boom has begun to slow and CMHC said inventories so far are not above historical levels.

Still, economists remain concerned about the level of condo construction already underway in some major cities.

“There’s still a huge supply of condos, particularly in Toronto, coming on the market in 2014, 2015,” said Diana Petramala, economist at TD Bank in Toronto.

Housing starts began moderating in the last half of 2012 and the first quarter of 2013, with multiple-dwelling starts declining for three straight quarters before rising modestly in the second quarter of 2013.

In 2012, urban inventories averaged 4.7 units per 10,000 people, CHMC said, only slightly above the long-term average of 4.6 from 1992 to 2012. By the second quarter of 2013, however, inventories were at 5.1 units per 10,000 people.

CHMC said population growth and a shift in the way people are living suggests the demand for smaller housing, including condos, will grow.

Condo ownership rates rose in every age group between 1996 and 2011, but condos were particularly popular with seniors and young adults. In 2011, 19 percent of condo owners were under the age of 35, while 29 percent were 65 and older.

“It does show that some of the demand is being driven by demographic fundamentals, particularly for condos,” Petramala said.

“Some of the over-building may not be as excessive as some people might be warning.” (Reporting by Andrea Hopkins and Leah Schnurr; Editing by Leslie Adler and Peter Galloway)

 

Why and How Spain Became the EU’s Top Grower of GMOs – Our World

Why and How Spain Became the EU’s Top Grower of GMOs – Our World.

How and why Spain became the EU's top grower of GMOs

Photo: Scott Sherrill-Mix CC BY-NC 2.0 (cropped).

Genetically Modified Organisms (GMOs) are some of the world’s most controversial technologies. Transatlantic disputes arising from the sharp regulatory differences between the two major frameworks — those of the United States and the European Union — have affected research, investment and planting decisions worldwide.

Global factors enabling the global expansion of GMOs include heavy investment, favourable international prices and the expanding role of transnational companies. These conditions, however, do not appear to apply to Spain, where insufficient information, transparency, independent studies and weak social mobilization have left the field open to constant lobbying by GM companies.

The EU’s legal framework

The GMO situation in Spain cannot be understood without first grasping the EU’s legal framework for their authorization. Considered restrictive by many, the procedure has nonetheless enabled their rapid spread. It is based on Directive 2001/18/CEtransposed into Spanish legislation by Law 9/2003, and two Regulations: 1829/2003 and 1830/03.

Given the diversity of national, regional, and local conditions under which European farmers work, the European Commission considers that coexistence measures to avoid the unintended presence of GMOs in conventional and organic crops should be developed and implemented by the Member States, and Article 26a of Directive 2001/18/EC entitles them to do so.

However, in 2012 the EU Court of Justice ruled (Case C-36/11) that Member States cannot subject the cultivation of GMOs to an additional national authorization procedure if already authorized via relevant EU legislation. The ruling follows previous case law of the Court that sanctioned France for inappropriate transposition of GM EU rules (Cases C-419/03 andC-121/07), thus setting clear limits to Article 26a.

Opt-outs and concerns

Presently, several Member States have called for a clause that would allow them to opt out of GM cultivation. Some of these Member States have already banned the cultivation of GMOs on the basis of a safeguard clause (Article 23 of Directive 2001/18/EC) or emergency measures intended to address new information about risks emerging after an authorization has been granted (Article 34 of Regulation 1829/2003). As a result, the European Food Safety Authority (EFSA) did not consider the bans to be scientifically justified, as initially was the case for France. Other countries like Austria, Poland, Hungary, Greece, Luxembourg and Germany have been successful in their bans.

Interestingly, in 2009, 12 of the 21 members of the EFSA GMO panel had a conflict of interest as defined by the Organisation for Economic Co-operation and Development: their involvement with the biotech industry positioned them to potentially exploit their official capacity for corporate or personal benefit. Since then, only one conflicted member has left the panel.

Despite countering claims, another conflict of interest appears to have driven the retraction of a publication of the scientific independent study by a French research group led by Gilles-Éric Séralini, which described harmful effects on rats fed with Monsanto’s GM maize. This retraction from the journal Food and Chemical Toxicology happened after Richard Goodman, who worked from 1997–2004 for Monsanto, joined the journal’s Editorial Board.

The article was retracted under the argument that the small sample size of rats and the rat strain selected were sufficient reasons to question the finality of the conclusions. However, among other counterarguments made by the European Network of Scientists, inconclusiveness of research results is not contained in the guidelines for retractions in scientific publishing, set out by the Committee on Publication Ethics, of which the journal Food and Chemical Toxicology is amember.

France banned Monsanto’s corn line MON810 based on this study and previous scientific findings, but the ban was initially challenged by the EFSA. This line, like other Bt maize, is considered insect resistant because it is designed to containBacillus thuringiensis, a pathogen toxic to insects in the Lepidoptera order, including the European Corn Borer.  Based on documentation submitted by France, the EFSA affirmed in 2012 that “…there [was] no specific scientific evidence, in terms of risk to human and animal health or the environment, that would support the notification of an emergency measure […] and invalidate its previous risk assessments of maize MON810”. Despite the EFSA’s and the State Council’s rejection of the ban, the French government decided to maintain it.

Understanding the case of Spain

Despite scientific findings and increasing concerns, and in great contrast with France’s position, Spain currently has the highest adoption rate of Bt maize in the EU since it was first introduced in 1998. In 2012, over 120 thousand hectares of Btmaize were cultivated — 19.5 percent more than the previous year — representing 90 percent of GM crops in the EU.

So why do countries that share a common European legal framework, as well as similar climate and soil conditions, have diametrically opposed views on this issue?

A survey was conducted for the European Commission in 2005 in three of Spain’s leading Bt maize-growing provinces. While results do report higher yields, the study shows statistical significance in only one province, and all Bt maize produced was actually sold for feed manufacturing.

The survey also found that 30 percent of farmers still applied insecticides even when the treatment was ineffective. Although the study praises this percentage as an achievement, data must be contrasted with recent findings on the use of pesticides: in the US, the fifteen-year period following the 1996 introduction of Roundup Ready crops saw herbicide use rise by about seven percent. This percentage, however, would be much higher if “insecticides applied” counted theBt produced by transgenic plants, as many entomologists propose.

Interestingly, when asked about their reasons for adopting Bt maize, farmers stated “lowering the risk of maize borer damage”, “obtaining higher yields”, and “better quality of the harvest”, though there is no scientific basis for believing that the technology provides any of those results. Moreover, factors including soil type, irrigation intensity, weather conditions or ecological integrity were not analyzed in the study, all of which have direct impact on the three responses provided.

The roots of Spain’s GM openness

In 1998, the Spanish government authorized two varieties of Bt maize 176 for the first time, entrusting the biomonitoringprocess to the same companies that had created those varieties. The change of government in 2004, from right-wing to more centre oriented, made it possible for the protests coming from civil society to be heard, and a representative from the environmental sector was admitted in the National Commission on Biosafety.

During European Council meetings, the Spanish government shifted from “pro-GMO” responses to “abstention” in most cases. Interestingly, though, Member States’ individual votes are not accessible to the public. Fortunately, votes are recorded by NGOs, uncovering the inconsistency of the country’s neutral EU position and policies at the national level: the same government approved 14 new varieties of maize MON810 in July 2005, bringing the total number to 40 at that time. Although Bt 176 varieties were removed from the country’s list of authorized GMOs in 2005, today the total number of approved GM commercial varieties is 116.

The difference between the GM maize cultivation rates of France and Spain stems, on the one hand, from weak mobilization of social organizations and insufficient public debate in Spain and, on the other, from the Spanish government’s support of GM companies.

A weak social mobilization compared to the French case could originate from the difference in the sociological composition and history of the French and Spanish countrysides. Unlike Spain, France experienced a phenomenon of neo-ruralisation after May 1968, which led to the formation of strong agricultural unions devoted to protecting the rights of small-scale farmers (e.g., Confédération Paysanne).

At the same time, the Spanish rural population is not as receptive to alternatives, such as organic agriculture, as the French. Although a number of regions have declared themselves GMO-free zones, which highlights the disconnect between national government and local populations, the productivist approach still remains unchallenged, and this includes GMOs.

Furthermore, cables released by WikiLeaks revealed that, according to Monsanto, the French government would have contravened WTO regulations by banning MON810, and that the company would seek compensation. The Spanish government possibly saw this as a retaliatory threat.

In addition, these cables showed that US diplomats were working directly for GM companies like Monsanto to help ensure Spain’s adoption. “In response to recent urgent requests by [Spanish rural affairs ministry] Josep Puxeu and Monsanto, post requests renewed US government support of Spain’s science-based agricultural biotechnology position through high-level US government intervention.”

It also emerged that Spain and the US worked closely to persuade the EU not to strengthen biotechnology laws. In one cable, the embassy in Madrid writes: “If Spain falls, the rest of Europe will follow.”

Learning from Spain

Lack of transparent requirements and procedures for GMO adoption and development remains an issue both at national and European levels. While registers of approved GMOs at both levels remain, in principle, open to the public, information appears limited and highly technical.

The lack of information provided to farmers about long-term effects on health and the environment is no coincidence either. Conclusions stated by the above-mentioned survey as positive are based on the implicitly accepted fact that information provided to farmers remains insufficient, at least in the areas of its scope.

There is also an overall lack of independent scientific studies. Instead of being undertaken by the CSIC (Spain’s leading public scientific research institute), they are first carried out by the companies themselves after 90-day tests, clearly insufficient compared to the two-year period required for pharmaceutical products. Governmental or European agencies might conduct further research, but these often pick scientific evidence at their convenience and include members who are in conflict of interest.

Furthermore, weak social mobilization and the shutting-out of NGO and critical civil society voices have played a major role in the rapid spread of GMOs. Additionally, Spain has been made deliberately dependent on European agricultural subsidies, where local communities are rendered particularly vulnerable to supra-national decisions and left with very little or no voice in those fora.

The connivance of political powers with the private sector, already known before the WikiLeaks revelations, was further evidenced by sudden changes of policy by ministers of agriculture before and after their election. The politicization of the issue cannot be avoided, but information, transparency and social participation must be fostered in order to prevent misinformed farmers’ decisions, private benefit-oriented political decisions and the quietening of social sectors key in this process.

 

The case for owning farmland in one simple statistic.

The case for owning farmland in one simple statistic..

While the recent confrontation between Putin’s Russia and Obama’s America has been a masterclass in how to manage one’s foreign interests (where one learns from Putin for those confused) in which Putin largely ignored every attempt at being jawboned by Obama, Kerry and their henchmen, what was left unspoken is that despite the superficial theatrics little would actually escalate since at the end of the day, Russia’s place in a globalized system (not to mention its commodities) is far too important to be jeopardized for political talking points.

Furthermore, as is well-known, when it comes to key players in a global fungible monetary system, a far more important decision-maker than the US government is the FDIC-insured hedge fund that controls all central banks: Goldman Sachs. Which is why it is certainly notable that moments ago none other than Goldman effectively downgraded Russia’s sovereign risk by announcing it is “shifting from constructive to neutral view on Russian sovereign risk.” With the legacy rating agencies now largely moot and irrelevant, what the big banks say suddenly has so much more import. But when the biggest – and most connected – bank of them all, outright lobs a very loud shot across the Gazpromia Russian bow, even Putin listens.

From Goldman’s Clemens Grafe

Shifting from constructive to neutral view on Russian sovereign risk

Bottom line:

Russian CDS spreads have tightened by more than those of peers in recent months, as Russia’s fundamentals remain strong and Russia, in our view, is less exposed to the slower pace of Fed asset purchases and higher global interest rates than many other EMs. However, two recent developments cause us to shift from a constructive to a neutral view on Russian credit in the near term. First, banking sector liquidity conditions have tightened significantly as the regulator has substantially stepped up bank oversight actions by withdrawing licences from 30 banks this year (1.2% of retail deposits in the system). While we currently find little evidence of systemic banking sector stress, we believe the risk of bank stress developing – and of potential sovereign exposure – resulting from the regulator’s actions has nonetheless risen. Second, Russian bank and sovereign exposure to both Belarus and Ukraine – credits that have deteriorated substantially in recent years – is both large (around 2% of GDP) and expected to rise further, especially in light of the recently-announced Russian financial assistance package for Ukraine. In our view, both of these factors could be credit-negative for the Russian sovereign.

Russian credit has outperformed peers recently

CDS spreads of Russia’s peers (as measured by credit rating) have tightened by 25bp since June, while Russia’s spread has tightened by 40bp. Russia has, thus, outperformed peers in the past six months. This was in line with the argument that we made in early September that Russian fundamentals are stronger than those of peers on many of the metrics that are important for credit ratings and, in particular, in external variables (current account) and balance sheet (debt stock) metrics, which have been of high market relevance in recent months in the context of the focus on the Fed’s slowing pace of balance sheet expansion. We continue to think that Russia’s conservative fiscal policy, low debt levels and the central bank’s emphasis on bringing down inflation will cause Russia’s risk premium to decline in the long run.

Rising banking sector concerns potentially discounted by current market pricing

However, as we argued in September and as ratings agencies have also emphasized in the past, it is institutional factors such as the structure of the banking sector and potential sovereign exposure to bank bailouts that are holding back ratings upgrades and that prevent Russian risk premia from decreasing below their post-crisis range. However, in recent months the CBR has stepped up its bank regulation efforts to address this issue. In particular, the CBR has withdrawn licences from 30 banks so far this year. While the number of banks concerned is only slightly higher than in previous years (22 in 2012 and 18 in 2011), the size of the banks affected has been larger, with total retail deposits in banks concerned in 2013 of RUB177bn (1.2% of system retail deposits), up from RUB23bn last year. Deposit losses from these banks have so far been covered entirely by the national deposit insurance fund (Agency for Deposit Insurance), which currently has around US$4-6bn of funds available for this purpose. In the long run, we think that strengthening bank supervision is clearly positive for Russian risk.

However, in the short term, these bank closures have introduced some concerns in the banking sector. Liquidity conditions have tightened, with Ruonia having risen to 6.5%, the upper limit of the CBR’s interest rate corridor, and overnight and 1-month Mosprime rates have risen toward 7% (150bp above the main policy rate). While unsecured interbank funding has not been that important as a source of funding for Russian banks, access to this market for many second- and third-tier banks has recently tightened further. Daily Ruonia volumes have fallen from around RUB100bn mid-year to RUB60bn at present. While some of the tightening in liquidity conditions is likely due to seasonal factors (in particular, strong cash demand in December in anticipation of the holiday season), we believe that this is not the driving force behind the recent dynamics.

While, in our view, there is little evidence of systemic stress in the banking sector at present and while we think that larger banks would be well-insulated from any shocks, we do think the CBR’s recent actions have increased the risk of stress developing in the banking sector. CBR actions have focused on banks below the top 50 and, so far, we have not seen any of the larger banks affected by recent CBR actions. In addition, given that the equity capital in the larger banks is likely significantly higher, it is less probable that there would be a concern with these banks and many of these would also likely be deemed systemically-important. Although we think the likelihood of system-wide banking sector stress has risen, we nonetheless think it remains low. Given the system’s low dependence on interbank funding, a more serious deterioration would require large-scale flows of deposits, for which there is little evidence so far. At the same time, banks appear to have significant liquidity buffers, judging from loan-to-asset ratios for most smaller banks of 0.50-0.55.

That said, to quantify potential exposure, we present below a table of loans/deposits of Russian banks ranked by total bank asset size. What we find is that retail deposits in banks below the top 50 amount in aggregate to around US$100bn. While government deposit insurance is up to RUB700,000 per account and we do not have details on the distribution of retail deposit sizes, we would see US$100bn as an upper bound on potential sovereign exposure in the event of the emergence of real stress in the banking sector. This exposure, in our view, could justify a more cautious stance on Russian sovereign risk than we argued several months ago.

Balance sheet exposure to low-rated sovereigns also a potential concern

Russia has also increased its sovereign, corporate and banking-sector (largely state-owned) exposure to lower-rated CIS credits in recent years. This has happened as a result of financial assistance packages provided to neighbouring Belarus and Ukraine. While aggregated information on this exposure is very difficult to obtain, there are some data to suggest that this exposure is both large and increasing. In addition, credit risk has increased in both Ukraine and Belarus at the same time as Russia’s exposure to these credits has grown, as evidenced by their ratings downgrades and widening CDS spreads

 

Goldman Vs Gazpromia: Russian Sovereign Risk Downgraded By Goldman Sachs | Zero Hedge

Goldman Vs Gazpromia: Russian Sovereign Risk Downgraded By Goldman Sachs | Zero Hedge.

While the recent confrontation between Putin’s Russia and Obama’s America has been a masterclass in how to manage one’s foreign interests (where one learns from Putin for those confused) in which Putin largely ignored every attempt at being jawboned by Obama, Kerry and their henchmen, what was left unspoken is that despite the superficial theatrics little would actually escalate since at the end of the day, Russia’s place in a globalized system (not to mention its commodities) is far too important to be jeopardized for political talking points.

Furthermore, as is well-known, when it comes to key players in a global fungible monetary system, a far more important decision-maker than the US government is the FDIC-insured hedge fund that controls all central banks: Goldman Sachs. Which is why it is certainly notable that moments ago none other than Goldman effectively downgraded Russia’s sovereign risk by announcing it is “shifting from constructive to neutral view on Russian sovereign risk.” With the legacy rating agencies now largely moot and irrelevant, what the big banks say suddenly has so much more import. But when the biggest – and most connected – bank of them all, outright lobs a very loud shot across the Gazpromia Russian bow, even Putin listens.

From Goldman’s Clemens Grafe

Shifting from constructive to neutral view on Russian sovereign risk

Bottom line:

Russian CDS spreads have tightened by more than those of peers in recent months, as Russia’s fundamentals remain strong and Russia, in our view, is less exposed to the slower pace of Fed asset purchases and higher global interest rates than many other EMs. However, two recent developments cause us to shift from a constructive to a neutral view on Russian credit in the near term. First, banking sector liquidity conditions have tightened significantly as the regulator has substantially stepped up bank oversight actions by withdrawing licences from 30 banks this year (1.2% of retail deposits in the system). While we currently find little evidence of systemic banking sector stress, we believe the risk of bank stress developing – and of potential sovereign exposure – resulting from the regulator’s actions has nonetheless risen. Second, Russian bank and sovereign exposure to both Belarus and Ukraine – credits that have deteriorated substantially in recent years – is both large (around 2% of GDP) and expected to rise further, especially in light of the recently-announced Russian financial assistance package for Ukraine. In our view, both of these factors could be credit-negative for the Russian sovereign.

Russian credit has outperformed peers recently

CDS spreads of Russia’s peers (as measured by credit rating) have tightened by 25bp since June, while Russia’s spread has tightened by 40bp. Russia has, thus, outperformed peers in the past six months. This was in line with the argument that we made in early September that Russian fundamentals are stronger than those of peers on many of the metrics that are important for credit ratings and, in particular, in external variables (current account) and balance sheet (debt stock) metrics, which have been of high market relevance in recent months in the context of the focus on the Fed’s slowing pace of balance sheet expansion. We continue to think that Russia’s conservative fiscal policy, low debt levels and the central bank’s emphasis on bringing down inflation will cause Russia’s risk premium to decline in the long run.

Rising banking sector concerns potentially discounted by current market pricing

However, as we argued in September and as ratings agencies have also emphasized in the past, it is institutional factors such as the structure of the banking sector and potential sovereign exposure to bank bailouts that are holding back ratings upgrades and that prevent Russian risk premia from decreasing below their post-crisis range. However, in recent months the CBR has stepped up its bank regulation efforts to address this issue. In particular, the CBR has withdrawn licences from 30 banks so far this year. While the number of banks concerned is only slightly higher than in previous years (22 in 2012 and 18 in 2011), the size of the banks affected has been larger, with total retail deposits in banks concerned in 2013 of RUB177bn (1.2% of system retail deposits), up from RUB23bn last year. Deposit losses from these banks have so far been covered entirely by the national deposit insurance fund (Agency for Deposit Insurance), which currently has around US$4-6bn of funds available for this purpose. In the long run, we think that strengthening bank supervision is clearly positive for Russian risk.

However, in the short term, these bank closures have introduced some concerns in the banking sector. Liquidity conditions have tightened, with Ruonia having risen to 6.5%, the upper limit of the CBR’s interest rate corridor, and overnight and 1-month Mosprime rates have risen toward 7% (150bp above the main policy rate). While unsecured interbank funding has not been that important as a source of funding for Russian banks, access to this market for many second- and third-tier banks has recently tightened further. Daily Ruonia volumes have fallen from around RUB100bn mid-year to RUB60bn at present. While some of the tightening in liquidity conditions is likely due to seasonal factors (in particular, strong cash demand in December in anticipation of the holiday season), we believe that this is not the driving force behind the recent dynamics.

While, in our view, there is little evidence of systemic stress in the banking sector at present and while we think that larger banks would be well-insulated from any shocks, we do think the CBR’s recent actions have increased the risk of stress developing in the banking sector. CBR actions have focused on banks below the top 50 and, so far, we have not seen any of the larger banks affected by recent CBR actions. In addition, given that the equity capital in the larger banks is likely significantly higher, it is less probable that there would be a concern with these banks and many of these would also likely be deemed systemically-important. Although we think the likelihood of system-wide banking sector stress has risen, we nonetheless think it remains low. Given the system’s low dependence on interbank funding, a more serious deterioration would require large-scale flows of deposits, for which there is little evidence so far. At the same time, banks appear to have significant liquidity buffers, judging from loan-to-asset ratios for most smaller banks of 0.50-0.55.

That said, to quantify potential exposure, we present below a table of loans/deposits of Russian banks ranked by total bank asset size. What we find is that retail deposits in banks below the top 50 amount in aggregate to around US$100bn. While government deposit insurance is up to RUB700,000 per account and we do not have details on the distribution of retail deposit sizes, we would see US$100bn as an upper bound on potential sovereign exposure in the event of the emergence of real stress in the banking sector. This exposure, in our view, could justify a more cautious stance on Russian sovereign risk than we argued several months ago.

Balance sheet exposure to low-rated sovereigns also a potential concern

Russia has also increased its sovereign, corporate and banking-sector (largely state-owned) exposure to lower-rated CIS credits in recent years. This has happened as a result of financial assistance packages provided to neighbouring Belarus and Ukraine. While aggregated information on this exposure is very difficult to obtain, there are some data to suggest that this exposure is both large and increasing. In addition, credit risk has increased in both Ukraine and Belarus at the same time as Russia’s exposure to these credits has grown, as evidenced by their ratings downgrades and widening CDS spreads

 

Israeli Generals Preparing For “Short, Sharp” War Against Hezbollah | Zero Hedge

Israeli Generals Preparing For “Short, Sharp” War Against Hezbollah | Zero Hedge.

While a military campaign against Syria (and Iran) on the usual grounds has been postponed indefinitely, two nations in the Middle East have been seething: Saudi Arabia and, of course, Israel. Yet while Saudi Arabia rarely if ever gets its own hands dirty, instead executing its geopolitcal strategy through puppet states in need of its oil, Israel has never had a problem with engaging in offensive wars. And now that the threat of an imminent war, one which would have been largely carried out on the back of the US military, is gone Israel is preparing to do just that.

According to UPI, “Israeli generals are preparing for a decisive — and probably brief — war against Hezbollah, one of Israel’s most implacable foes, with plans to smash the Iranian-backed Lebanese movement’s military power, a study says. The Israelis’ primary objective will be to eradicate Hezbollah’s reputedly massive arsenal of missiles and rockets “for years to come,” the report by the Begin-Sadat Center for Strategic Studies in Tel Aviv said.”

In other words, Syrian script, rinse repeat – spook with stories of massive weapon arsenals, propose a permanent resolution that involves invading – “briefly” although it never really works out that way – and then leak a few false flag videos “proving” just how evil the nation that is about to be invaded is.

Full story from UPI

Israel gets ready for ‘short, sharp war’ against Hezbollah

Israeli military intelligence estimates Hezbollah has 80,000 missiles and rockets of all calibers, ranging from ballistic missiles with warheads packing 700 pounds of high explosives, to short-range rockets, many of them aimed at cities including Tel Aviv. Some estimates go as high as 100,000.

The weapons that give Israelis nightmares are the long-range missiles with which Hezbollah can pound the Jewish state’s population centers and strategic installations without let-up for at least a month.

Israel’s military, which failed to crush Hezbollah in a 34-day war in 2006, “has prepared for a combined air and large-scale ground operation, driven by new intelligence and precision-firepower capabilities, to deliver a knockout blow and eliminate Hezbollah as a fighting force for years to come,” observed the report’s author, Yaakov Lappin, the Jerusalem Post’s military analyst.

Knocking out Hezbollah’s missile storage bunkers and launch sites will be the air force’s main mission, as it was in 2006, when Hezbollah only had about 20,000 missiles, 4,000 of which hit northern Israel.

Lappin said Israel will use “unprecedented capabilities” and a combat fleet that could destroy hundreds of targets a day.

In the last year, Israelis have been bombarded with government warnings to brace themselves for weeks of unprecedented missile bombardment if war comes — although the media have sought to reassure the public the armed forces will protect them with new weapons, tactics and all manner of electronic wizardry.

A key protection system will be the much-vaunted, four-tier missile defense shield known as Homa, The Wall in Hebrew. This includes the long-range Arrow 3 system, designed to destroy Iranian ballistic missiles outside Earth’s atmosphere, down to the Iron Dome, which has by official count shot down 84.6 percent of the short-range Palestinian rockets it has engaged in the last two years.

Even so, whatever the dimensions and capabilities of the generals’ plan, another report poured cold water on Israeli expectations of survival in the next war, which will — for the first time since the state was founded in 1948, a half dozen wars ago — target the home front.

Nathan Faber of the Faculty of Aerospace Engineering at the Technion, Israel’s Institute of Technology, warned in an article on the website of the Magen Laoref, or Homefront Shield, foundation, that the Homa could crumble due to technological, operational and financial reasons in a multifront war with Hezbollah, Iran and others.

Faber, formerly chief scientist in the military’s missile division, said at least one-third of all missiles fired at Israel will in all probability get through.

He calculates Israel could be threatened by 800 Iranian Shehab-3b and more advanced Sejjil-2 ballistic missiles, and 400 Soviet-era Scud ballistic missiles held by Syria, some of which may be used in its 33-month-old civil war.

There will also be 500-1,000 medium-range tactical missiles — like Iran’s Fajr or Fateh weapons, which Hezbollah already has — and more than 100,000 short-range rockets held by Syria, Hezbollah and the Palestinian Hamas group in Gaza.

Faber reckons about one-third of the missiles fired at Israel will be intercepted by the air force, another third will malfunction and one third will get through defensive screens, including about 400 of the 1,200 ballistic systems.

Regarding tactical missiles, Faber noted that “since these are very precise missiles the great majority of them will hit their target” after evading the anti-missile defenses.

He calculates Iron Dome — which he assesses has a kill rate of only 66 percent — will have to deal with 30,000 rockets.

The cost will be awesome — and possibly prohibitive.

By Faber’s tally, Iron Dome operations will cost $6 billion, countering 400 ballistic missiles another $3 billion, while mid-range interceptions will total as much as $2 billion.

 

China Bails Out Money Markets For Second Day In A Row, Following Repo Rate Blow Out | Zero Hedge

China Bails Out Money Markets For Second Day In A Row, Following Repo Rate Blow Out | Zero Hedge.

As reported yesterday, following a surge in various short-term and money market rates in the aftermath of the Fed’s taper announcement, the PBOC admitted after the close that it used Short-term Liquidity Obligations (SLO) to add funding to the market, and in doing so, bailing out money markets – the same product that nearly collapsed the financial system in the aftermath of Lehman.

The bank didn’t specify when it added the funds but, in another direct echo of the June panic, the PBOC said it is prepared to add more. However, it seems the market was less the convinced, and despite an early plunge in the seven day repo rate by over 2%, it suddenly and rapidly reversed direction and instead blew out hitting a whopping 9%, the highest since the June near-crash of the Chinese banking sector.

The outcome: China said it injected another $50 billion to bailout and stabilize its money markets in what is increasingly looking like a replay of this summer’s liquidity lock up. Perhaps the PBOC hinting at tapering at a time when the Fed is actually doing so is not the smart choice…

From the WSJ:

China’s central bank said it had injected over 300 billion yuan ($49.2 billion) into the nation’s money markets over a three-day period as interbank interest rates surged to their highest levels since June.

The People’s Bank of China said on its official Twitter-like weibo account that the banking system had current excess reserves of over CNY1.5 trillion and it called that level “relatively high.”

The central bank said that it had injected the funds through its “short-term liquidity operations” and this was in response to the year-end market factors.

The interest rates banks charge each other for short-term loans jumped to 8.2%, the highest level since the June cash squeeze. 

The stress in the banking system is starting to spread elsewhere, with stocks in Shanghai falling for a ninth straight day to the weakest level in four months while government bonds dropped, pushing the 10-yield up to near the highest in eight years.

The turmoil has been sparked by a scramble for funds by banks as they near the end of the year when they typically need extra cash to meet regulatory requirements as well as the demand for funds from companies.

The central bank also said reminded banks that they need to manage liquidity better.

As to what drove the rapid mood reversal, the Chinese market was hit early on with talk of a missed payment at a local Chinese bank. For now it has not been confirmed, and even if it was the PBOC is expected to never allow any government-backstopped bank to fail. Still, a few more days like the last two and the world may just find out how prepared for a bank failure a credit-stretched China really is.

 

HSBC Receives Slap on the Wrist for Helping to Finance Terrorists | A Lightning War for Liberty

HSBC Receives Slap on the Wrist for Helping to Finance Terrorists | A Lightning War for Liberty.

The “Too Big Too Jail” nonsense that surrounds large U.S. banks and their above the law employees has been glaringly obvious and thoroughly documented for quite some time now. Yet what represents an even larger slap in the face to millions of hard-working, law-abiding citizens, is how relentlessly the “justice” system goes after small time criminals, while merely fining oligarch thieves for far worse crimes. I first covered this theme earlier this year in my piece Some Money Launderers are “More Equal” than Others, which discussed how HSBC was caught laundering billions of dollars for Mexican drug cartels.

Well HSBC is back in the news. This time it relates to their transferring funds on the behalf of financiers for the militant group Hezbollah. If transactions such as these had even the slightest link to Bitcoin, there would be endless uproar, calls for countless Congressional hearings and demands to stop the currency at all costs. But when HSBC is caught doing it, what happens? A $32,400 settlement.

More from The Huffington Post:

A major U.S. bank has agreed to a settlement for transferring funds on the behalf of financiers for the militant group Hezbollah, the Treasury Department announced on Tuesday.

Concluding that HSBC’s actions “were not the result of willful or reckless conduct,” Treasury’s Office of Foreign Assets Control accepted a $32,400 settlement from the bank. Treasury noted, as did HSBC in a statement to HuffPost, that the violations were voluntarily reported.

Everett Stern, a former HSBC compliance officer who complained to his supervisors about the Hezbollah-linked transactions, told HuffPost he was “ecstatic and depressed at the same time.”

“Those are my transactions, I reported them,” he said, satisfied that the government was taking action. But, he added, “Where I am upset was those were a handful of transactions, and I saw hundreds of millions of dollars” being transferred.

Stern said he hopes the government’s enforcement actions against HSBC have not come to an end with the latest settlement. “They admit to financing terrorism and they get fined $32,000. Where if I were to do that, I would go to jail for life,” he said.

And the government watchdog’s claim that HSBC committed no “substantially similar apparent violations” in the past five years is likely to raise some eyebrows. In December 2012, the bank agreed to pay a $1.9 billion settlement for moving money that a 2012 Senate report found had likely helped drug cartels and a Saudi Arabian bank the CIA has linked to al Qaeda.

No one at HSBC was criminally charged for what U.S. Assistant Attorney General Lanny Breuer called at the time ”stunning failures of oversight.”The Senate report faulted the Office of the Comptroller of the Currency, an independent bureau with the Treasury Department, for weak oversight of HSBC.

You know you are a Banana Republic if…

Full article here.

 

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