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The Real China Threat: Credit Chaos | Zero Hedge

January 8, 2014 8:20 pm / Leave a comment

The Real China Threat: Credit Chaos | Zero Hedge.

“There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years.”

The “eerie resemblances” – as Soros previously noted – to the US in 2008 have profound consequences for China and the world – nowhere is that more dangerously exposed (just as in the US) than in the Chinese shadow banking sector as explained below…

Submitted by Minxin Pei via The National Interest,

The spectacle of a game of financial chicken in the world’s second-largest economy is both entertaining and terrifying. Twice in 2013, the People’s Bank of China (PBOC), the country’s central bank, tried to demonstrate its resolve to rein in runaway credit growth. In June, it engineered a sudden credit squeeze that sent the interbank lending rates to more than 20 percent and caused a short-lived panic in the Chinese financial markets. Apparently, the financial turmoil was too much for the Chinese government, which quickly ordered the Chinese central bank to reverse course. As a result, the PBOC lost both face and credibility.

However, as credit growth continued unabated and activities in the most risky segment of China’s financial sector – the so-called shadow banking system – displayed alarming recklessness, the PBOC was left with no choice but try one more time to send a strong message that it could not be counted on to provide unlimited liquidity to the banking system.

It did so in December 2013 with a modified approach that provided liquidity only to the selected large banks but pressured smaller banks (which are the most active participants in the shadow banking system). Although interbank lending rates did not spike to nose-bleeding levels, as they did in June, they doubled quickly. Most Chinese banks held on to their cash and refused to lend to each other. Chinese equity markets fell nearly 10 percent, giving back nearly all the gains since mid-November, when the Chinese Communist Party’s (CCP) reform plan bolstered market sentiments.

Unfortunately for the PBOC, the renewed turbulences in the Chinese banking sector were again viewed as too dangerous by the top leadership of the CCP even though it seemed that the PBOC initially received its support. Consequently, the PBOC had to beat another hasty retreat and inject enough liquidity to force down interbank lending rates. Thus, in the first two rounds of a stand-off between the PBOC and China’s shadow banking system, the latter is widely seen as the winner. The PBOC blinked first each time.

For the moment, the conventional wisdom is that, as long as the PBOC maintains sufficient liquidity (translation: permitting credit growth at roughly the same pace as in previous years), China’s financial sector will remain more or less stable. This observation may be reassuring for the short-term, but overlooks the dangerous underlying dynamics in China’s banking system that prompted the PBOC to act in first place.

Of these dynamics, two deserve special attention.

The first one is the rapid rise in indebtedness (or financial leverage) in the Chinese economy since 2008. In five years, the country’s total debt-to-GDP ratio (including both public and private debt) rose from 130 percent to 210 percent, an unprecedented increase for a major economy. Historically, such expansion of credit hasrarely failed to inflate a credit bubble and cause a financial crisis. In the Chinese case, what makes the credit explosion even more risky is the low creditworthiness of the major borrowers. Only a quarter of the debt is owed by those with relatively high creditworthiness (consumers and the central government). The remaining 75 percent has gone to state-owned enterprises, private real-estate developers, and local governments, all of which are known to have weak loan repayment capacity (most state-owned enterprises generate low cash profits, private real-estate developers are overleveraged, and local governments have a narrow tax base). Staggering under an unsustainable debt burden of roughly 160 percent of GDP (equivalent to $14 trillion), these borrowers are expected to default on a significant portion of their bank debt in the coming years.

The second dynamic, closely related to the first one, is the growth of the shadow-banking sector. Two drivers shape activities in this sector, which operates outside the banking system. To minimize their exposure to risky borrowers, Chinese banks have curtailed their lending. But at the same time, these banks have embraced the shadow banking activities to increase their revenue. Specifically, Chinese banks peddle new “wealth management products” – short-term securities promising high interest rates – to their depositors. The issuers of such securities, which are not protected or insured by the government – are typically high-risk borrowers, such as local governments (and their financing vehicles) and real estate developers.

In the meantime, these borrowers are facing rising pressures for loan repayments in an environment of overcapacity and unprofitable investments. Unable to generate cash to service their loans, they have to turn to the shadow-banking sector for credit and avoid default. The result is an explosive growth of the size of the shadow-banking sector (now conservatively estimated to account for 20-30 percent of GDP).

Understandably, the PBOC does not look upon the shadow banking sector favorably. Since shadow-banking sector gets its short-term liquidity mainly through interbanking loans, the PBOC thought that it could put a painful squeeze on this sector through reducing liquidity. Apparently, the PBOC underestimated the effects of its measure. Largely because Chinese borrowers tend to cross-guarantee each other’s debt, squeezing even a relatively small number of borrowers could produce a cascade of default. The reaction in the credit market was thus almost instant and frightening. Borrowers facing imminent default are willing to borrow at any rate while banks with money are unwilling to loan it out no matter how attractive the terms are.

Should this situation continue, China’s real economy would suffer a nasty shock. Chain default would produce a paralyzing effect on economic activities even though there is no run on the banks. Clearly, this is not a prospect the CCP’s top leadership relishes.

So the task for the PBOC in the coming year will remain as difficult as ever. It will have to navigate between gently disciplining the banks and avoiding a financial panic. Its ability to do so is anything but assured. It has already lost the first two rounds of this game of financial chicken. We can only hope that it can do better in the next round.

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James Howard Kunstler: The Disenchantment of American Politics | Peak Prosperity

January 8, 2014 7:33 pm / Leave a comment

James Howard Kunstler: The Disenchantment of American Politics | Peak Prosperity.

Vepar5/Shutterstock

The Disenchantment of American Politics

And the coming uproar
by James H. Kunstler
Wednesday, January 8, 2014, 11:34 AM

Considering the problems we face as a nation, the torpor and lassitude of current politics in America seems like a kind of offense against history. What other people have allowed circumstances to run over them like so many ‘possums sleeping on the highway?

The financial disturbances of recent years especially have trashed millions of households, yet the fat middle (no pun intended) of the broad public (ditto) seems strangely content with all the tawdry sideshows of the day — Black Thursday, the Kardashians, the NFL playoffs, Twitter, texting, twerking, side boobs — taking little-to-no interest in politics while their prospects for a habitable future swirl around the drain. How might we account for such supernatural passivity?

And, since human affairs don’t remain static indefinitely, in what direction might things go when the political mood finally heaves and shifts? The possibilities are unsettling.

A Failure to Lead

If you care about poll numbers, they tell a simple story of contempt for the current crop of US political leaders. Congress rates a 12 percent approval rating and President Obama, at 35 percent, scores lower than Richard Nixon did in the midst of the Watergate fiasco. I’m surprised that Obama’s numbers aren’t lower (and I voted for him, twice). After all, few American lives were actually touched by the lies and shenanigans that spun off of Watergate, and money was an inconsequential part of it. But a whole lot of people were affected by Obama’s dissimulations around the Affordable Care Act, while his tragic failure to reestablish the rule of law in banking from the get-go in 2009 probably amounts to impeachable malfeasance. Add to this the NSA domestic spying operations revealed by Edward Snowden plus the troops indefinitely garrisoned in Asian countries and you have a portrait of a creeping Orwellian contagion.

The only whiff of rebellion in the air lately has emanated from the so-called conservative end of the political spectrum: the Tea Party. Its complaints mainly range around the offenses of Big Government, though a certain incoherence pervades its agenda as a whole. (I will get to that presently.)  I am sympathetic to gripes against the size and reach of government but I’m convinced that the swerve of US politics in the not-distant future will hinge on the failure of government at this scale to conduct any business competently. Anyway, as a veteran of the hippie uprising of the 1960s, when the Left was insurgent against an obdurate “establishment,” it’s interesting to observe the perverse flip-flop of history that has now put the Tea Party in charge of rebellion central.

The failures of the Left these days are pretty obvious and awful. They got their storybook change-agent elected president and he hasn’t done a darn thing in five years to halt the wholesale racketeering that pervades our national life. Obama’s Department of Justice is home to more zombies than the Grand Cemetery of Port-Au-Prince. The Attorney General’s office essentially signed off on prosecuting bank fraud when Lanny Breuer, chief of the Criminal Division, declared some banks too big to jail. End of story, as Tony Soprano used to say.

Obama promised to brick up the revolving door between Wall Street and the federal agencies and he only added more turnstiles to the gate. Most of the government officials involved in the 2009 TARP program and related crisis management operations are now pulling in six figure salaries at the banks and hedge funds they formerly regulated, while a veteran fixer (Mary Jo White) from the whitest white shoe fixit law shop in the land (Debevoise & Plimpton) was appointed to head the SEC a year ago.

The Left, as represented by President Obama and a majority in the US Senate, did nothing to arrest the ongoing corporate hijacking of the USA. When the Supreme Court ruled in the Citizens United case (2010) that corporations could buy elections via unlimited campaign contributions under the free speech clause of the constitution, Obama had the chance to propose new legislation or a constitutional amendment to redefine the distinction between human persons and corporate “persons.” You’d think that as a constitutional lawyer, he would have been eager to lead on this. But he just ignored the historic opportunity and, anyway, he was on the receiving end of gobs of corporate “free speech” money to run his reelection campaign.

Apart from its pitiful roll-out bugs, the Affordable Care Act has the odor of the biggest insurance scam in history. People joke these days about Obama serving George W. Bush’s fourth term. The internal contradictions of Democratic Party behavior under Obama have only driven political cynicism to new heights. The millennial generation must feel horribly swindled by it.

A Paucity of Good Options

As for the rebellious conservative Tea Party faction, it is hard for me to square their umbrage at Big Government with their avidity for foreign wars (and support for the military-industrial rackets behind them), their failure to oppose the security-state activities of the NSA (while branding whistleblower Snowden “a traitor”), their love of corporate commercial tyranny a la Wal-Mart, their devotion to economically suicidal suburban sprawl, their zeal to control the social and sexual conduct of their fellow citizens, and their efforts to impose religion in civic affairs — all of which is to ask, what do they mean when they shout about “liberty?”

These contradictions probably seem abstruse compared to the gritty plight of ordinary citizens getting monkey-hammered in an economy that can provide neither decent incomes nor dignified, meaningful social roles for classes of people who could be earnest, honest, and enterprising given the chance. This gets to a more general failure across the political spectrum to apprehend the larger changing dynamics of our time — resource scarcity, capital impairment, contraction, environmental collapse, population overshoot — and to frame a coherent response to these developments. In short, the politicians seem to have no idea where history is taking us, and no road-map to prepare for the journey to get there.

There will probably always be some alignment of Left and Right in politics, but from time to time the packages they come in and the ideologies they contain are in desperate need of either rehabilitation or dissolution. I’d bet that we may soon see the demise of both the Democratic and Republican parties as they are currently structured. They’ve been around an awful long time now, and their presence probably provides a certain reassuring familiarity, but that is also the same growth medium as contempt. The useless and tiresome public quarrels they spawn these days, the kabuki theater debt ceiling showdowns, the can-kickings, and other evasions of responsibility, erode basic institutional trust to a dangerous degree; the people lose faith in the courts, the news media, the banks, the value of their money, and eventually all authority. The two major parties function as mere conduits for all the racketeering operations that define life in this nation today. The mature two-party system may prove to have been a transient product of America’s industrial heyday, which is now over despite the euphoria over stock bubbles, shale oil, computers and other new technology. If the two old parties dry up and blow away, will anyone shed a tear for them? When that happens, there may not be enough political vitality left at the federal level to reconstitute them in new packaging.

Trouble Brewing

If party politics are weak, muddled, and contradictory, the divisions between Americans are starkly clear: wealth in America has never been so unevenly distributed — the fabled one percent versus everyone else. Despite the election of a mixed-race president, and the wish-fulfillment fantasies of Hollywood, race relations in the USA remain tense. 2013 was the year of the “knockout” game for black teenagers randomly targeting “woods” (i.e. non-black “peckerwoods”), some of whom died. It was the year of George Zimmerman’s acquittal in the Trayvon Martin case and the echoing recriminations.

Divisions between men and women are tragically compounded by the dangerous dynamics of work in America that leave many men (especially men) in a vacuum of purpose, meaning, and potency. It is almost impossible these days for low-skilled men to support a family. The indignity of this thunders through broken communities and the penitentiary cellblocks. But the anomie is also expressed in the higher ranks of an economy where office work can be done by anybody, and gender confusion lately has been valorized as a compensating mechanism for the marginalization of men and the failure of manhood. The political blowback from this, when it comes, is apt to be fierce. Look no further than Duck Dynasty.

The ongoing national culture war pits the “traditional values” faction against the sexual libertarians; the red states against the blue states; urban against the conflated suburban and rural; the Christian fundamentalists against an array of other positions and belief groups; the entitlement “socialists” against the “free market” conservatives.

Perhaps most divisive of all will be the schism between the young and the old over the table scraps of the dying industrial economy.

These tensions will not remain unresolved indefinitely.

In Part II: Get Ready For Strange Days, we’ll forecast the direction that this resolution may follow. The last time the USA faced a comparable political convulsion was the decade leading into the Civil War, but this time it will be more complex and confusing and it will have a different ending. A dominant theme will be a continued loss of faith in the Federal government to solve our ills, and a re-emergence of reliance on local support networks at the state, municipal, community and family levels.

This devolution will likely play out very differently across the major regions of the US. And most will follow this course unwillingly.

Strange days are coming.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

Climate Chaos is here……. | Damn the Matrix

January 8, 2014 7:06 pm / Leave a comment

Climate Chaos is here……. | Damn the Matrix.

The followers of this blog should be well ahead of the rest of the internet regarding the current extreme weather in America if they read Mark Cochrane’s guest post way back in July last year titled “Weather Whiplash”.

Of course, all the climate deniers are out in force these last few days, letting themselves believe that the snowball http://theaimn.files.wordpress.com/2014/01/the-day-after-tomorrow.jpg?w=199&h=300weather in the US is proof “climate change is crap”…….  when in fact, nothing of the sort is true.  As counterintuitive as it may seem, global warming is causing the polar ice to melt, and that melting is sending the weather haywire by making the jetstream do things it was never meant to do.

The dramatic melt-off of the Arctic sea ice due to climate change, is hitting closer to home for millions of Americans. That’s because melting Arctic sea ice has triggered a domino effect leading to increased odds of severe winter weather events in the Northern Hemisphere’s mid latitudes — think “The Day After Tomorrow”.  Well, metaphorically anyway….. though who knowswhat the future may hold on that front!

Australians may think of Arctic climate change as this remote phenomenon that has little effect on our everyday lives, but what goes on in the Arctic remotely forces weather patterns, even here in Australia…..  What drives the weather is energy.  Heat energy to be precise.  At any one time, there is a precise amount of energy in the Earth’s atmosphere.  It is growing, apparently at the rate of four Hiroshima bombs per second, but even at such a mindboggling rate, over short periods like a week or a month, it may as well be constant, so able is the planet’s capacity to absorb it.

The Earth’s spin sends eddies in both the air and oceans, causing turbulence in the way this energy is distributed or moved about the biosphere.  Heat normally wants to travel towards cold places and equalise the temperature of cold areas and hot areas.  But these eddies don’t allow the heat to travel in a straight line, as it would in, say, a piece of metal heated at one end.  Solar energy creates wind this way, and these eddies cause the wind to move along curved paths, as do ocean currents.

Add energy into the system by trapping heat under the blanket of greenhouse gases, and the eddies become more energetic.  A bit like when you heat a saucepan of water; the water molecules become more and more energised, start convection currents, and eventually the water boils as the molecules can no longer remain in contact with each other and turn into a higher state of energy called a gas, in this case, steam.  it’s Physics 101, really.

Because the amount of heat energy is ‘constant’, when it’s freezing cold in America, it’s stinking hot somewhere else, https://i0.wp.com/www.news.cornell.edu/sites/chronicle.cornell/files/arctic_0.jpgand at this time of the year, that means us in the Southern Hemisphere.  That extra energy is causing more and more extreme weather, both here, and over there.  As this sort of weather becomes more normal, the sum total of all the weather events become the new climate, and presto, we have Climate Change.  And no Tony Abbott, it is NOT CRAP.

Cornell’s Charles H. Greene, professor of Earth and Atmospheric Sciences, and Bruce C. Monger, senior research associate in the same department, have detailed this phenomenon in a paper published in the June issue of the journal Oceanography.

Greene says, “What’s happening now is that we are changing the climate system, especially in the Arctic, and that’s increasing the odds for the negative Arctic Oscillation conditions that favour cold air invasions and severe winter weather outbreaks by diminishing latitudinal pressure gradient which is linked to a weakening of the winds associated with the polar vortex and jet stream. Since the polar vortex normally retains the cold Arctic air masses up above the Arctic Circle, its weakening allows the cold air to invade lower latitudes..”

Here is a good video explanation of what is going on:

Now what I want to know is….  what will happen to the jetstream in the Southern Hemisphere?

Is Barack Obama A Noble King Or A Traitorous Pawn? : Personal Liberty™

January 8, 2014 2:32 pm / Leave a comment

Is Barack Obama A Noble King Or A Traitorous Pawn? : Personal Liberty™.

“Most gods throw dice, but Fate plays chess, and you don’t find out til too late that he’s been playing with two queens all along.” – Terry Pratchett

There has not been a more enigmatic U.S. President than Barack Obama since Abraham Lincoln. We know so little about Obama. It is certainly true that he has divided the Nation further than any President since Lincoln. But the questions I cannot shake as we enter into our sixth year of his Presidency are: What are his ultimate goals, and how in the world did this African-American junior Senator and former community leader become the most powerful man in the free world?

It is easy to jump to the conclusion that Obama could be a Muslim and a Marxist bent on remaking America into a socialist state much like so many European countries. That Obama has driven an even wider divide between America, between left and right, is beyond debate. That Obama has added nearly $7 trillion to America’s Federal debt is a black-and-white fact.

That is a far cry from 2008 when candidate Obama promised to be a breakaway leader for the American people. Instead, President Obama has proven himself to be a President for Wall Street interests, billionaire bankers and the military-industrial establishment. That during his Presidency, Obama has fulfilled none of the promises to the middle class or to the millions of black Americans who saw him as a ray of hope for a better future is certain. That Obama has helped make the world a more divided and dangerous place for all is undoubtable.

The Tale Of Two Obamas

Charles Dickens wrote A Tale of Two Cities150 years ago about the French Revolution: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”

So it has been these past several years with Obama the candidate and as the President.

Beginning in the summer of 2008, it seemed that America could be on the verge of anarchy. It seemed possible that there could be an economic collapse as well as a collapse in confidence in the Federal government and many of the Nation’s institutions. That would lead to a collapse in the New World Order, which the United States underpins. Those forces built up over decades needed somebody transformative, somebody to pull the wool over the eyes of the world. From the shadows stepped Obama, anointed by some as the chosen one and appealing to tens of millions of people at home and hundreds of millions of people abroad.

The real question is by whom was Obama chosen? He had no experience as a leader or a thinker and certainly not as a doer. His past was so checkered it called into question not only his birthplace but his college background, economic beliefs and even his religion. Yet within a year he had become an international sensation, a Nobel Peace Prize winner. That erstwhile kid from Hawaii was a pop star 10 times bigger than Justin Bieber and half as smart.

But rather than change, Obama has doubled down on all the corruption and dysfunction that our Federal government has planted over the past three decades. It was Obama the candidate who attacked George W. Bush’s abuse of executive powers, only to spy upon the Nation with impunity as President. It was Obama the candidate who criticized Bush and the Republicans for the bailouts of big investment banks but then as President provided a no-strings-attached policy after his Administration’s $800 billion bailout, which allowed for record bonuses to top Wall Street executives who scant months before he had vilified.

A Probable Pawn For The NWO

The most startling discrepancy between candidate Obama and President Obama is when it comes to foreign policy. As President, Obama has wielded foreign policy with a broadsword against real or perceived enemies in ways that Dick Cheney must watch with green envy. Consider Obama’s air attacks on Libya.

In December 2007, candidate Obama was asked if a President could bomb Iran without Congressional authorization. Obama’s answer: “The President does not have the power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.”

Yet as commander in chief, Obama did not have a problem breaking such a promise and quickly used massive American airpower and sea power against Libya. In 2011, Obama went so far as to go against his legal advisers, insisting he did not need Congressional approval under the War Powers Resolution to continue attacks against Libya beyond the 60-day limit dictated by the resolution. Obama sounded like Bill Clinton when he said that what he had done was dependent on the definition of “sex.” Obama claimed that U.S. attacks were outside the legal definition of “hostilities.”

Even a military hawk like Speaker of the House John Boehner was outraged, saying, “The White House’s suggestion that there are no ‘hostilities’ taking place in Libya defies rational thought.”

So what is rational when it comes to Obama, both the candidate and the President? The two are very separate men. The first, who offered to change things for the better, no longer exists (if he ever did). The President is the ever faithful company man to the financial and military establishments. Obama has made his mark as the first African-American President. Despite his myriad failures in office and his multitude of lies, I believe his Presidency will be celebrated. Those who determined his election know how to pay off a loyal servant. But thankfully for some, Obama will be remembered as a pawn and not a king. How many feel that way depends on us understanding the truth, fighting for our liberties and protecting the Constitution.

Yours in good times and bad,

–John Myers

Loonie Hits 4-Year Low After Bad Economic News

January 8, 2014 1:12 pm / Leave a comment

Loonie Hits 4-Year Low After Bad Economic News.

The loonie continued its long slide Wednesday, hitting a fresh four-year low against the U.S. dollar.

The Canadian dollar was trading at 92.58 cents after falling more than a cent Tuesday to its lowest close since late 2009.

The slide followed a spate of bad news about Canada’s economy. The Ivey Purchasing Managers Index, a measure of economic activity, came in much lower than expected for last month, at 46.3, compared to 53.7 the month before. A reading below 50 suggests economic contraction.

Canada’s trade deficit numbers also spooked the markets, with Statistics Canada reporting Tuesday that the country’s overall trade deficit with the world grew to $940 million in November as imports rose to $40.7 billion, while exports were unchanged at $39.8 billion.

The deficit came as the results for October were also revised to show a deficit of $908 million compared with an initial report of a surplus of $75 million for the month.

Meanwhile, U.S. economic data has been positive, further pressuring the loonie downwards.

Payroll firm ADP reported the U.S. private sector created 238,000 jobs during December. That data came two days before the release of the U.S. government’s employment report for last month. Economists expect it will show the economy created about 195,000 jobs in total. 

International traders are certainly bearish on the Canadian dollar. The Globe and Mail reports the amount of money being placed in bets against the loonie is nearing extremes, with about US$5.5 billion currently invested against it.

Investment bank Goldman Sachs forecast late last year the Canadian dollar could hit 88 cents U.S. in 2014.

Meanwhile, Bank of Canada governor Stephen Poloz doesn’t appear in any hurry to raise the Bank of Canada’s trend-setting rate. In an interview on CBC on Tuesday, he denied he was under international pressure to raise rates.

Federal Finance Minister Jim Flaherty suggested in a recent interview that there would be such pressure as a result of Fed tapering.

Poloz did say that Fed tapering will inevitably put pressure on Canadian bond yields, likely leading to an increase in long-term fixed mortgage rates even if the Bank of Canada does not increase its benchmark rate.

— With files from The Canadian Press

Soaring Stock Market Fails To Fix Venezuela’s Shortage Of Food (Or Toiler Paper) | Zero Hedge

January 8, 2014 1:06 pm / Leave a comment

Soaring Stock Market Fails To Fix Venezuela’s Shortage Of Food (Or Toiler Paper) | Zero Hedge.

Having just missed out of +500% returns in the Caracas stock market last year, the reality of a hyperinflating world continue to cause chaos in the real world of Venezuela. As Bloomberg reports, the bolivar’s 73% decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue. Smuggling to Colombia has exploded as “professional shoppers” traffic in wheat flour, corn flour and milk leaving more than one in five basic goods out of stock at any given time. Regulated foods are just too cheap to stay on the shelves, “you can’t get anything in the shops here… it is taken to Colombia like a locust plague.”

 

Via Bloomberg,

Venezuelan taxi driver Jose Sotomayor drives four hours through army checkpoints every week from the city of Maracaibo to buy rice in Colombia for his family at 10 times the government-set price back home.

 

“You can’t get anything in the shops here, I don’t even bother going to them for basics anymore,” Sotomayor, 39, said in a phone interview. “All of our food is taken to Colombia, it’s like a locust plague.”

 

Sotomayor hasn’t seen rice for sale in the shops of Venezuela’s second-largest city since July, as smugglers snap up the staple for a maximum of 7.2 bolivars ($1.14) per kilogram, just $0.11 at the black market exchange rate.

 

How hyperinflation works…

The bolivar’s 73 percent decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue…

 

A weaker bolivar reduces Venezuelans’ purchasing power by making imported goods more expensive.

 

…

 

Under a decade-long system of currency controls, the government provides about 95 percent of dollars in the economy to selected companies and individuals at 6.3 bolivars per dollar. The exchange rate on the illegal black market is about 64 per dollar, giving foreigners and Venezuelans with access to dollars about 10 times more bolivars for their currency.

 

…

 

Which means hordes of prefessional shoppers from neighboring (non-hyperinflating) countries are taking advantage…

Price controls introduced by Maduro’s predecessor Hugo Chavez in 2003 to boost nutrition among the poor have fueled demand for staples such as flour, rice and milk as shoppers snap up products whose prices don’t change amid 56 percent annual inflation, the highest in the world.

 

Dozens of people take shifts to line up outside supermarkets in Maracaibo, a city of 2.1 million people located 800 kilometers (500 miles) west of the capital, waiting for the next delivery of regulated goods. The new stock is bought up as soon as it hits the shelves, leaving shops barren of products such as meat, grains and toilet paper.

 

The goods are then loaded onto trucks and taken to Colombia. Many of these professional shoppers are native Guajira Indians dressed in bright floral-print dresses who have double nationality and are exempt from border controls.

 

…

 

More than 300 trucks with everything from rice to car tires made the 130-kilometer drive from Maracaibo to the border through eight army and police checkpoints when a Bloomberg reporter did the journey on Nov. 10. Drivers of cars carrying food pay those staffing the checkpoints anywhere from 20 to 300 bolivars for quick passage, according to Sotomayor.

 

“Regulated goods are just too cheap to stay on the shelves.”

Nationally, the central bank’s scarcity index was 22.4 percent in October. That reading, the highest since January 2008 and up from 16.1 percent a year earlier, means that more than one in five basic goods were out of stock at any given time.

 

…

 

“It’s an endless caravan,” said Sotomayor. “The price difference is so great, no amount of soldiers can stop it.”

Still, things must be going great because the Caracas Stock Index was up 480% last year – think of the confidence-inspiration and wealth effect!!

Met police want water cannon ready to use in Britain by summer | UK news | theguardian.com

January 8, 2014 10:03 am / 2 Comments on Met police want water cannon ready to use in Britain by summer | UK news | theguardian.com

Met police want water cannon ready to use in Britain by summer | UK news | theguardian.com.

Boris Johnson

Boris Johnson wrote to Theresa May about water cannon this week: ‘I am aware you have declined to make funds available.’ Photograph: Lam Yik Fei/Getty Images

Britain’s biggest police force wants water cannon ready to be used on the streets of mainland Britain by this summer, official letters reveal.

They also show that a request for the government to fund the controversial purchase has been rejected by the home secretary,Theresa May.

Public consultations on the deployment of water cannon will begin within weeks and a formal decision made next month.

Water cannon have not previously been available to police on mainland Britain, and their use has been limited to Northern Ireland.

In a letter sent on Monday by Johnson to May, the London mayor explains his reasoning, saying it is a direct result of the 2011 riots that started in London before spreading, becoming the most serious and widespread riots to hit England in decades.

Ultimately the home secretary will have to licence the acquisition of water cannon for use on the capital’s streets. Critics warn it is a step towards the militarisation of the police and could be used to stifle the democratic right to protest.

In his letter, dated 6 January 2014, Johnson writes: “Following the disorder in August 2011, both the Metropolitan police service and Her Majesty’s Inspectorate of Constabulary stated that there are some circumstances where water cannon may be of use in future.

“Following briefing by the [Met] commissioner I am broadly convinced of the value of having water cannon available to the MPS [Metropolitan police service] for those circumstances where its absence would lead to greater disorder or the use of more extreme force.”

The Met commissioner, Sir Bernard Hogan-Howe, has pledged that water cannon would be “rarely used and rarely seen”, the letter says.

His letter to May, his Conservative colleague, then discusses funding: “Finally, I am aware that you have declined to make funds available for purchasing the interim water cannon solution as a national asset.

“Subject to the public engagement process … I am happy to make the necessary funds available to the MPS for the most economical interim solution that allows the commissioner to meet his desire to prevent disorder on the streets. I would expect to do this in February, following the [public] engagement.”

In his letter London’s mayor says there is public support for the deployment of water cannon.

A further letter written on Tuesday by Stephen Greenhalgh, deputy mayor for policing, says a formal decision to go ahead with water cannon will be made next month.

Greenhalgh wants public consultation to begin within weeks, which will involve public meetings and talks with MPs, councillors and what he describes as “stakeholders”.

The mayor’s office says water cannon would only be used in “the most extreme circumstances”.

Greenhalgh’s letter was written to Labour’s Joanne McCartney, chair of the London assembly’s police and crime committee.

The letter says: “In order to ensure that water cannon is available by next summer, something which the commissioner has been calling for, it is important that the process of engagement starts soon.”

The Green party London assembly member Lady Jones said: “Allowing water cannon on the streets of London is a step in the wrong direction towards arming our police like a military force, and it goes against our great tradition of an unarmed police service.

“People have a democratic right to protest and my fear is that once the mayor allows these weapons on to our streets we will see them being used against people exercising their legal right to protest.”

It is believed the Met are in talks with German companies about supplying water cannon in time for this summer.

The Met has approached companies about hiring or buying second-hand water cannons from overseas to have the machines available as soon as possible.

The Met is interested in acquiring around three units.

In a letter to Jones, assistant commissioner Mark Rowley detailed the training required. Rowley wrote in July 2013 that no more than 20 staff would need to be trained in the use of water cannon and another 200 riot officers would need to be trained in how to quell disorder while working alongside water cannons.

Rowley’s letter said the use of water cannon would require authorisation by an officer of the rank of commander.

The home secretary must authorise the acquisition of water cannon for use on the mainland and May has already signalled her sympathy for the controversial tactic.

Some within the Met have privately told the Guardian they are sceptical about the need and effectiveness of water cannon on London’s streets. They say streets here are much narrower than in Europe, where water cannon are already in use, thus making them less effective and potentially vulnerable to capture. They also say water cannon fire jets that could prove indiscriminate and strike innocent members of a crowd.

UK Property boom/bust: Episode 546 — RT Keiser Report

January 8, 2014 9:24 am / Leave a comment

Episode 546 — RT Keiser Report.

January 07, 2014 11:30
Download video (211.07 MB)

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the Ka-Boom! and Ka-Bust! economics of extinction in the UK property market as Thatcher’s slow-motion housing time-bomb ticks away under the British economy, where demand continues to outstrip supply by a factor of 2-to-1 and where one woman being forced out of social housing complains: “I’m sure if they had their way, they would kill us. I really believe that.” In the second half, Max interviews Liam Halligan of the Telegraph about austerity, extinction economics, bitcoin and all those towns up North, of which Max can only name three.

No Truce in Turkey as Erdogan Party Sees Graft Probe as Coup – Bloomberg

January 8, 2014 9:23 am / Leave a comment

No Truce in Turkey as Erdogan Party Sees Graft Probe as Coup – Bloomberg.

Turkey’s ruling party will continue to purge police and judiciary members pursuing corruption charges against government officials and will then seek to prosecute them for attempting a coup, a top party official said.

“My opinion is that they are criminals — the police and the judges and prosecutors,” Osman Can, a member of the central committee of Prime Minister Recep Tayyip Erdogan’s Justice and Development Party, said in a Jan. 6 interview in Istanbul. “If you can destroy this organization, you can save democracy.”

The remarks suggest there’s little scope for easing tensions between the government and followers of the U.S.-based Islamic cleric Fethullah Gulen. Erdogan’s party accuses Gulen supporters in the judiciary and police for pursuing the graft probes in an effort to discredit it before local elections in March.

The government has removed prosecutors and dismissed about 1,800 police officers since news of the 15-month secret investigations broke on Dec. 17, when sons of three cabinet ministers were among dozens detained, according to Hurriyet newspaper. In a new wave of dismissals announced today, the government reassigned Muammer Bucak, a deputy head of the national police force, and recalled chiefs of 15 provinces, including the capital, Ankara, according to a decree in the Official Gazette.

Markets Hit

In Brussels, a spokesman for the European Commission expressed concern that developments in Turkey “could weaken investigations in progress and the capacity of the legal system and the police to conduct independent investigations.” As a candidate to join the European Union, Turkey must respect EU entry criteria, including rule of law, and deal with corruption allegations “in a transparent and impartial manner,” Olivier Bailly told a news conference.

The political turmoil has hit markets. Turkey’s currency and bonds have been the world’s biggest decliners since the arrests began, while the benchmark stock index fell 8 percent. Fitch Ratings said yesterday that the turmoil could lead Turkey to lose its investment-grade rating, should it undermine the government’s ability to maintain economic stability.

Gulen’s movement and Erdogan’s party were allies for most of the past decade. They split over issues including Erdogan’s pursuit of a peace accord with Kurdish militants and the government’s decision to close the university exam prep schools that are a source of influence and income for Gulen followers, according to Can, a former official at the Constitutional Court.

‘To the End’

He said the government would only go after Gulen followers who have sought to topple Erdogan’s elected government, and that sympathizers working in state institutions won’t face retribution. Can said the group’s structure and obedience to one leader mean that its more “militant” members aren’t compatible with democratic systems.

“They have their own agenda, which definitely does not fit with civil democracy,” Can said. “After they are removed, the government should prosecute them to the end.”

Prosecutors in the city of Izmir yesterday widened the graft probe by detaining officials at Turkey’s state railways authority. The government retaliated by removing the police officers in charge of the raids, according to Radikal newspaper.

‘Notable Casualty’

“The rule of law is by far the most notable casualty of the ongoing crisis,” Wolfango Piccoli, an analyst at Teneo Intelligence in London, said in e-mailed comments on Jan. 6. “It is unclear whether the government is committed to this principle, and it is equally questionable whether the judiciary and the police can actually deliver justice.”

Can said that while some of the corruption charges may be true, the way in which the probes were carried out made them part of a coup attempt.

Among those arrested are a son of the interior minister, who was found with several safes at his house filled with cash, and the chief executive officer of a state-run bank, who had $4.5 million stuffed into shoeboxes, which he said had been donated to build Islamic schools.

Erdogan says the detentions aim to block Turkey’s economic progress by targeting businessmen involved in major infrastructure projects.

‘Manipulative Tool’

“In all democracies, there is corruption,” Can said. “But if you don’t have a democratic system, those with bureaucratic power can destroy the political will, destroy political parties, for instance, by using corruption as a manipulative tool. They are very dangerous.”

Flaws in Turkey’s democracy stem from a system inherited by Erdogan’s party in 2002 and a constitution written under military rule in the 1980s, Can said. The government has been unable to redraft the charter due to opposition from parties with vested interests in the status quo, he said.

Gulen supporters dominate “all the control points” of Turkey’s judiciary, even though they account for about only 15 percent of its personnel, Can said. He said the government is “discussing every possible option” to remove that influence.

Late yesterday, the ruling party submitted a proposal to parliament to cut powers of the board that elects judges and prosecutors, which last month criticized the government for damaging the independence of the judiciary. The proposal empowers the justice ministry to appoint most judges.

The party also may consider changing its self-imposed three-term limit for members of parliament, after which they are required to step down from office, Can said. That rule applies to much of the party’s leadership, including Erdogan, whose third term comes to an end next year.

“You have rules, but if you have exceptional situations, you can make exceptions,” Can said. If the crisis persists “they could make an exception, and I would support this exception. This crisis can’t continue.”

To contact the reporters on this story: Benjamin Harvey in Istanbul atbharvey11@bloomberg.net; Selcan Hacaoglu in Ankara at shacaoglu@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

Activist Post: Why Is Radioactive Snow Falling In Missouri?

January 8, 2014 9:23 am / Leave a comment

Activist Post: Why Is Radioactive Snow Falling In Missouri?.

Michael Snyder
Activist Post

If radioactive snow is falling in Missouri, is it safe to assume that much of the snow that is falling on the rest of the country is also radioactive?

What you are about to see is absolutely shocking.  A highly respected YouTube personality known as DutchSinse has released video of himself measuring radiation levels of the snow falling on St. Louis, Missouri.  What he discovered was that he got a reading that was about twice as high as he did on a sunny day when there is no precipitation.

So what in the world could be causing this?  Could Fukushima be to blame?  Is radioactive water originally from Fukushima being picked up in the Pacific and dumped all across the country?  If so, there would seem to be no way to stop this from happening.  Now that highly radioactive water from Fukushima is spreading throughout the entire Pacific Ocean, it is simply impossible to put the “genie back in the bottle” again.  So could this mean that we might have to deal with radioactive rain and snow storms in North America for many years to come?

The YouTube video posted by DutchSinse is getting so much attention that even the Daily Mail is reporting on it…

According to YouTube user, DutchSinse, who posted a video of him taking the Geiger readings in St Louis, the findings mean that ‘small particles of radioactive material are indeed coming down in the precipitation. Past tests show around 30CPM in the same spot on a nice day with no precipitation’.

You can watch the video for yourself below…

Of course this video is very similar to another YouTube video that I discussed just a few days ago.  In that video, a YouTube user measured levels of radiation on California beaches that werefive times higher than normal.

California officials have confirmed that particular radiation spike and say that they are “befuddled” by it, but they insist that we don’t have anything to worry about…

Health officials in California are now telling residents not to worry after a video uploaded to the internet last month seemed to show high levels of radiation at a Pacific Coast beach.

The video, “Fukushima radiation hits San Francisco,” has been viewed nearly half-a-million times since being uploaded to YouTube on Christmas Eve, and its contents have caused concern among residents who fear that nuclear waste from the March 2011 disaster in Japan may be arriving on their side of the Pacific Ocean.

Throughout the course of the seven-minute-long clip, a man tests out his Geiger counter radiation detector while walking through Pacifica State Beach outside of San Francisco. At times, the monitor on the machine seems to show radiation of 150 counts-per-minute, or the equivalent of around five times what is typically found in that type of environment.

So do you believe them?

I don’t.

But authorities in California are sticking to their guns.  The “official story” is that none of this has anything to do with Fukushima…

Officials have dismissed the possibility that it could be linked to Fukushima radiation reaching the west coast, despite forecasts by experts last summer that radioactive particles from Fukushima would reach U.S. coastal waters in 2014.

Last week RT reported that new plumes of radioactive steam were emerging from the crippled reactor number 3 at the plant, but TEPCO representatives refused to explain the cause.

The Department of Health and Human Services has ordered 14 million doses of potassium iodide, the compound that protects the body from radioactive poisoning in the aftermath of severe nuclear accidents, but a DHHS official denied that the purchase was connected to the Fukushima crisis.

Meanwhile, more signs are emerging that something very strange is happening to the Pacific Ocean. For example, the Los Angeles Times is reporting that “the biggest sardine crash in generations” is causing havoc for fishermen along the west coast…

The sardine fishing boat Eileen motored slowly through moonlit waters from San Pedro to Santa Catalina Island, its weary-eyed captain growing more desperate as the night wore on. After 12 hours and $1,000 worth of fuel, Corbin Hanson and his crew returned to port without a single fish.

“Tonight’s pretty reflective of how things have been going,” Hanson said. “Not very well.”

To blame is the biggest sardine crash in generations, which has made schools of the small, silvery fish a rarity on the West Coast. The decline has prompted steep cuts in the amount fishermen are allowed to catch, and scientists say the effects are probably radiating throughout the ecosystem, starving brown pelicans, sea lions and other predators that rely on the oily, energy-rich fish for food.

So what in the world could be causing that to happen?

Could Fukushima be to blame?

When you start putting all of the pieces together, a very disturbing picture begins to emerge.  For much more on all of this, please see my previous article entitled “36 Signs The Media Is Lying To You About How Radiation From Fukushima Is Affecting The West Coast“.

Look, the truth is that there has been a pattern of covering up the reality about Fukushima for more than 2 years.  Just a few months ago, the BBC reported that radiation readings at Fukushima were actually 18 times higher than previously reported, and hundreds of tons of highly radioactive water from Fukushima continues to be released into the Pacific Ocean every single day.

That means that the total amount of radioactive material in the Pacific in constantly increasing, and considering the fact that some of these particles have half-lives of about 30 years, that means that we are going to be dealing with it for a very, very long time.

The health toll from this disaster is going to be much larger than most of us could possibly imagine.  The following is a quote from Helen Caldicott about how this radioactive material moves up the food chain…

Hazardous radioactive elements being released in the sea and air around Fukushima accumulate at each step of various food chains (for example, into algae, crustaceans, small fish, bigger fish, then humans; or soil, grass, cow’s meat and milk, then humans). Entering the body, these elements — called internal emitters — migrate to specific organs such as the thyroid, liver, bone, and brain, continuously irradiating small volumes of cells with high doses of alpha, beta and/or gamma radiation, and over many years often induce cancer.

Ultimately, millions of people could end up getting cancer and other illnesses as a result of all this, and most of them will never have any idea why they got sick.

It has been estimated that the Chernobyl disaster killed about a million people, and the Fukushima disaster is turning out to be far, far worse.

In the end, what price will humanity pay for the foolishness of a few?

About the author: Michael T. Snyder is a former Washington D.C. attorney who now publishes The Truth.  His new thriller entitled “The Beginning Of The End” is now available on Amazon.com.

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