I’m an owner operator looking for a full time driver to put in a truck. Experience preferred but I’m willing to train the right individual. Must have minimum …
PDVSA Produces 250,000 Barrels of Oil Daily … confirmed that his country produces more than 250,000 barrels of crude oil daily with a commercial …The post PDVSA Produces 250000 Barrels of <b>Oil</b> Daily appeared first on crude-oi…
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STOCKHOLM: Police in Greenland warned people to stay away from western areas of the island as wildfires scorched swathes of scrubland.
In a statement, the police said it “still discourages all traffic — including hiking and hunting — in two areas around Nassuttooq and Amitsorsuaq.”
“The fires are not expected to end within the next few days,” the statement added.
Some of the blazes have been burning since July 31.
Denmark’s meteorological service BMI said the island registered its hottest-ever temperature of 24.8 degrees (77 Fahrenheit) on August 10.
— Stef Lhermitte (@StefLhermitte) August 14, 2017
Last year was Greenland’s hottest on record.
The Danish territory has lost about 4,000 gigatons of ice since 1995, British researchers said in June, making ice melt on the huge island the biggest single contributor to rising sea levels.
JAKARTA, Indonesia: Indonesia has accused the Malaysian organizers of the Southeast Asian Games of negligence after the Indonesian flag was printed upside down in a souvenir guidebook.
The mistake, which makes the red-and-white Indonesian flag resemble Poland’s, has caused anger in Indonesia where “shameonyoumalaysia” has become the most popular hashtag on Twitter.
Indonesia’s Olympic Committee chairman Erick Thohir said the mistake “shows negligence” and demanded the guidebook be withdrawn and a new version printed.
“Friendship is the greatest legacy in sports, but a mistake in presenting a national identity is not justified,” he said.
Indonesia appears to have taken particular offense because the guidebook was distributed to VIPs at Saturday’s opening ceremony in Kuala Lumpur for the 29th Southeast Asian Games and only its flag was shown incorrectly.
Youth and Sports Minister Imam Nahrawi said the error was “very painful.”
The Malaysian Organizing Committee said its chairman and Malaysia’s sports minister would meet with Nahrawi to apologize.
“We very much regret the mistake,” it said in a statement.
Malaysia and Indonesia are both Muslim majority nations and share a similar language but often trade accusations of stealing the other’s food and culture.
The creation of Malaysia when the British empire was dismantled after World War II was bitterly opposed by Indonesia, itself then a new nation emerging from Dutch colonial rule and a short-lived Japanese occupation.
On Twitter, Indonesians said their flag represents the sacrifices of independence heroes and accused Malaysia of either being stupid or deliberately misprinting it.
“You know, this is maybe the reason why our founding father Soekarno wanted to Kick Your Ass,” said one user.
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Submitted by Charles and Louis-Vincent Gave of Gavekal Research
Carthago Est Delenda
“Carthage must be destroyed”. Cato the elder would conclude his speeches in the Roman Senate with the admonition that salt should be spread on the ruins of Rome’s rival. Listening to the US media over these summer holidays from Grand Lake, Oklahoma, it is hard to escape the conclusion that most of the American media, and US congress, feels the same way about Russia. Which is odd given that the Cold War supposedly ended almost 30 years ago.
But then again, a quick study of history shows that clashes between land and sea-based empires have been a fairly steady constant of Western civilization. Think of Athens versus Sparta, Greece versus Persia, Rome versus Carthage, England versus Napoleon, and more recently the US versus Germany and Japan (when World War II saw the US transform itself from a land-based empire to a sea-based empire in order to defeat Germany and Japan), and of course the more recent contest between the US and the Soviet Union.
The maritime advantage
Such fights have been staples of history books, from Plutarch to Toynbee. Victory has mostly belonged to the maritime empires as they tend to depend more on trade and typically promote more de-centralized structures; land-based empires by contrast usually repress individual freedoms and centralize power. Of course the maritime power does not always win; Cato the elder did after all get his wish posthumously.
With this in mind, consider a mental map of the productive land masses in the world today. Very roughly put, the world currently has three important zones of production, with each accounting for about a third of world GDP.
- North and South America: This is a sort of island and is not reachable by land from the rest of the world. It constitutes the heart of what could be called the current “maritime” empire.
- Europe ex-Russia: This is an economic and technological power as large as the US but a military minnow. Its last two wars have been fought between the then dominant maritime power (the US), first against Germany, then the Soviet Union to gain the control of the so called “old continent”.
- A resurgent Asia: Here China is playing the role of the “land-based challenger” to the “maritime hegemon”.
A visiting Martian who knew little about our global geopolitical make-up, except for the above history books, would likely conclude that a new version of the age-old drama is being set up. This time, however the contest would be between a China-dominated “land-based empire” and a US controlled “maritime power”, with Europe (and to a lesser extent Africa) as the likely “prize.”
To have a chance in the fight, the continental empire would have to “keep” a massive land mass under its control. This would require building extensive lines of communication (rail, roads, telecoms, satellites…), linking its own land-mass to the other “productive” land masses, avoiding as much as possible the use of sea links to communicate with other nations. The land empire would need to develop an economy which would not need to trade through the seas.
This is what is happening today and why we gave carte blanche to Tom Miller, leaving him free to roam through Central Asia and Eastern Europe over a couple of years and report on the capital that China was pouring to build such links (readers who have not done so should pick up a copy of Tom’s book, China’s Asian Dream, available at all good bookstores and of course, through our website).
Now for China’s “dream of empire” to work, China would need to convince two important countries, and maybe three, to at least become “neutral”, instead of quasi-hostile, for these new communications lines to work. Those two countries are Russia and Germany. The 3rd is Saudi Arabia, which has an interesting hand to play.
Russia is the main land bridge between China and Europe. So logic says that the US should be very nice to Russia and seek to establish some kind of military alliance, if only to control the movement of people and goods between China and Europe, and from Europe to China. However, in its immense wisdom, the US Senate and the entire US diplomatic corps have decided that America’s interests are best served by imposing sanctions on Russia for crimes—not even proven at the time of writing—that the Central Intelligence Agency routinely commits inside countries that are nominally allies of the US!
It seems that US policymakers have forgotten Lord Palmerston’s dictum that nations don’t have friends, just permanent interests. And instead of following policies to maximize its national interest, the US would rather cut off its nose to spite its face. The end result is that the US seems to be working as hard as possible to make Russia join forces with China. But why would the US so consciously make an enemy out of Russia?
A starting point is that it is a little odd that a country that cannot conceivably be invaded spends more on defense then the next ten nations combined (see chart overleaf). It is also odd that the US has been involved in wars, somewhere around the globe, with very few interruptions, ever since President Dwight Eisenhower warned his countrymen about the growing clout of the “US military industrial complex”.
Of course, we fully realize that even mentioning the “US military industrial complex’ makes one sound like some kind of tin-potted, conspiracy-theorist prone loon. This is not our intention. But we do want to highlight that, in order to justify a budget of US$622bn, soon heading to US$800bn, the US military industrial complex needs a bogey-man.
Now the natural bogey-man should logically be China. After all, China is now sporting the second biggest military budget in the world (US$192bn in 2016), is rapidly expanding its global presence (Belt and Road, Asian Infrastructure Investment Bank, Silk Road Fund) and increasingly treats the South China Sea as a mare nostrum. Still, the past few months of broad US hysteria toward Russia make it fairly clear that US military interests would rather pick on Russia then China. Why so?
The first, and most obvious explanation, is simply institutional inertia. After all, Russia was the main enemy between 1945 and 1991 and entire institutions were built (NATO, OECD, the International Monetary Fund and the World Bank) with either the stated, or unstated, goal of containing Russia’s influence. Such government-led institutions usually turn around as easily as a cruise ship captained by Francesco Schettino.
There are historical precedents for this. Take France as an example: from Cardinal Richelieu onward, the sole purpose of French diplomacy was to destroy the Austro-Hungarian empire. This left successive French rulers blind to the rise of Prussia; at least until 1870 and the pummeling of Paris. Still, even after losing Alsace and Lorraine, France continued its anti-Habsburg crusade until 1919, and the final destruction of the Austrian empire with the 1919 Versailles treaty. This treaty left France vulnerable should the Russians and Germans ever ally (a key policy goal of the Habsburgs was to prevent such an alliance) or the Brits decide that they’d rather head home (which duly occurred in 1940 at Dunkirk and is perhaps happening again today).
The bottom line is that the sheer force of institutional inertia means the “smartest people” are often incapable of adjusting to new realities. It happened in France, and it could easily be happening in the US today.
A second explanation is that there exists tremendous resistance within the broader US community to making China a scapegoat. US corporations have huge interests in China and relatively limited exposure to Russia. Thus attempts to cast China in too bad a light are habitually met with concerted lobbying efforts (Lenin did say that the “Capitalists will sell us the rope with which we will hang them”). As no-one in the US business community cares deeply about Russia, Moscow makes for a good, “compromise bogey man”?
A third explanation is tied to a theme we have discussed in the past (see The Consequences of Trump’s Syrian Strike), namely the unfolding civil war in the Middle-East between Sunnis and Shias. On the Sunni side of the war sits Saudi Arabia. On the Shia side of the war is Iran. And behind Iran stands Russia, who would like nothing more than to see the Saudi regime implode. Indeed, a collapse of the House of Saud would be an immense boon for Russia. The price of oil would likely surge (which would be great for non-Arab producers like Russia) and Europe would find itself wholly dependent on Russia for its energy supplies, thereby giving Moscow more geopolitical clout than it has enjoyed in decades.
At the same time, a collapse of the House of Saud would be terrible news for US, French and British arms suppliers (for whom the Middle-Eastern monarchies are big clients) and for all big oil companies which have huge contracts in Saudi Arabia and across the Middle-East to protect.
This brings us to the current make-up of the US administration which, to say the least, is somewhat skewed towards military officers (military men and the merchants of death tend to get along) and oil-men. Is it too much of a stretch to think that an administration loaded with oil and military men would, almost by default, fight Saudi Arabia’s corner? Now this may be unfair. After all, it’s not as if the first trip of the current US president was to Saudi Arabia, or as if that trip yielded many lucrative deals for US weapons manufacturers, US oil companies, and US financiers, was it?
Russia as a game-changer
Whatever the reason for the current anti-Russia hysteria in the US, it is now clearly in Russia’s interest for it to play a very active role in the coming Chinese efforts to reduce the power of the dominant “maritime empire”. This means that Chinese and European products will be able to travel through Russia for the foreseeable future, so avoiding possible threats created by the US navy should Washington ever act to disrupt trade between the two economic centers.
The reason that the US’s approach to Russia is so short-sighted is that Russia’s role in the coming clash between the two empires may go far beyond it facilitating communication and transport across its territory. Indeed, Russia (along with Qatar and Iran) could already be helping China break the monopoly that the US has on the payment of energy all over the world through the US dollar (see The Most Important Change And Its Natural Hedge).
For the past 100 years, the US dollar has been the world’s major reserve and trading currency. Needless to say, having the ability to settle one’s (rather large) trade and budget deficits in one’s own currency is a competitive advantage of huge proportions. Greater than its edge in finance, tertiary education, technology, biotech, weapons manufacturing and agricultural productivity, this “exorbitant privilege” may be the US’s single biggest comparative advantage.
Now our starting point when looking at China is that the guys who run the show in Beijing are basically control freaks. After all, what else do you expect from career technocrats steeped in Marxist theory? So with that in mind, the question every investor should ask themselves is: why would control freaks yield control of their country’s exchange rate and interest rate structure? Why liberalize the bond and currency markets?
For let’s face it, there are few prices as important to an economy as the exchange rate and the interest rate. So if the politburo is willing to gradually lose control over them, it must be because it hopes to gain something better on the other side. And the something better is to transform the renminbi into Asia’s deutschemark; the “natural” trading (and eventually reserve) currency for Asia and even wider emerging markets. In fact, internationalizing the renminbi is the lynchpin on which the whole “Belt and Road” empire rollout rests. If this part fails, then China’s imperial ambitions will most likely crumble over time (for one cannot have an empire on somebody else’s dime).
The rise of the renminbi
Which brings us to a key change in our global monetary system that has received scant attention, namely, the recent announcement by the Hong Kong exchange that investors will soon be able to buy and settle gold contracts in renminbi (see release). This initiative has the potential to be a game-changer for the architecture of our global monetary system.
Imagine being Russia, Iran, Qatar, Venezuela, Sudan, Uzbekistan or any other country liable to fall foul of US foreign policy, and thus susceptible to having Washington use the dollar as a “soft weapon” (see BNP, Big Brother And The US Dollar). Then China comes along and says: “Rather than trading in dollars, which leaves us both exposed to US sanctions, and US banks’ willingness to fund our trade, let’s deal in renminbi. I can guarantee that ICBC will never pull the rug from under your feet”.
If you are Russia, or Qatar (which have already signed renminbi deals for oil and natural gas), this may be an interesting proposition. However, the question will quickly arise: “What will I do with my renminbi? Sure, I can buy goods in China, but I only need so much cheap clothing, tennis shoes, and plastic junk. What do I do with what is left over?”. And the answer to that question is that the US dollar remains the world’s reserve currency since the US offers the deepest and most liquid asset markets. From real estate (as shown by the Russia-Trump investigation), to equities, to bonds, there is no shortage of US assets that Americans will sell foreigners so that foreigners can park their hard earned dollars back into the US.
This brings us back to China and the main constraint to the renminbi’s rise as a reserve currency. Simply put, foreign investors do not trust the Chinese government enough to park their excess reserves in Chinese assets. This lack of trust was crystallized by the decision in the summer of 2015 to “shut down” the equity markets for a while and stop trading in any stock that looked like it was heading south. That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.
Until now, that is. For by creating a gold contract settled in renminbi, Russia may now sell oil to China for renminbi (already signed), then take whatever excess currency it earns to buy gold in Hong Kong. As a result, Russia does not have to buy Chinese assets or switch the proceeds into dollars (and so potentially fall under the thumb of the US Treasury). This new arrangement is good news for Russia, good news for China, good news for gold and horrible news for Saudi Arabia as it leaves the Middle-Eastern kingdom in between a rock and a hard place.
2. Saudi Arabia
The fact that China wants to buy oil with its own currency will increasingly present Saudi Arabia with a dilemma. It could acknowledge that China is now the world’s largest oil importer, and only major growth market, and accept renminbi payments for its oil. However, this would go down like a lead balloon in Washington where the US Treasury would (rightly) see this as a threat to the dollar’s hegemony. In such a scenario, it is unlikely that the US would continue to approve modern weapon sales to Saudi and the embedded “protection” of the House of Saud that comes with them. And without this US protection, who knows which way the Sunni-Shia civil war may tip (most likely in favor of the Iran-Russia axis).
Unfortunately for Saudi Arabia, the alternative is hardly attractive. Getting boxed out of the Chinese market will increasingly mean having to dump excess oil inventories on the global stage, thereby ensuring a sustained low price for oil. But with its budget deficit stuck at about 16% of GDP, with half its population below 27 and needing jobs, and with reserves shrinking by around US$10bn a month, just maintaining the current status quo is not a long-term viable option.
So which way will Saudi turn? Will Riyadh accept low oil prices forever and the associated costs on Saudi society? Or will it change horse and move to accept renminbi in order to ensure more access to the world’s largest oil importer, even at the risk of triggering Washington’s wrath? Investors who like to bet on form may wish to consider the second option. Indeed, King Ibn Saud (the current King Salman’s father) was once a loyal British client as the Brits had helped suppress the Wahhabi brotherhood, so cementing his power. Yet in 1936, Ibn Saud’s adviser Abdullah Philby (father of British traitor Kim Philby), persuaded the king to switch his allegiance to the US, by offering Saudis exclusive oil concession to Chevron/Texaco rather than BP. This is why the Saudi oil company is called Aramco (the Arab-American oil company) rather than Arbroco.
Could the House of Saud pull off the same stunt again? One indication may be who lines up as cornerstone investors in the coming Aramco IPO. If those end up as China Investment Corporation, Petrochina and the PRC’s State Administration of Foreign Exchange, than perhaps Aramco will be on its way to becoming Archoco. And with that, the pricing of Saudi oil could shift from US dollars to renminbi.
Incidentally, such a move would likely solve Saudi’s biggest macro hurdle; specifically, the defense of the Saudi Riyal peg to the US dollar. Indeed, with reserves shrinking so rapidly, the arrangement looks to be on a slow-moving death watch (admittedly, at the current pace of reserve depletion, Riyadh could hold out three years and possibly five). But should Saudi announce that Aramco (or Archoco!) will now accept renminbi for oil payments, the dollar would likely tank while oil prices would shoot up (as Saudi would have a willing buyer for its oil in China). A lower US dollar/ higher oil combination would, needless to say, make the Saudi peg that much easier to sustain.
Lastly, if you were King Salman and thought that the long-term sustainability of the House of Saud depended on dumping the US and engaging China, what would you be doing right now? Would you be buying as many top-end US weapons as you possibly could, knowing that, in the future, such purchases may no longer be as easy as they are today? But let us now move to the third major player in this many-part drama, namely Germany, where the situation is even more complex.
Unencumbered by its own “heavy” history, Germany— being at heart a “continental” nation—would probably have joined the “continental alliance” and left the maritime alliance (which may explain why the “maritime alliance” tapped Angela Merkel’s phone; arguably a greater intrusion then anything the US has accused Russia of). After all, consider the advantages for Germany of joining the “land-based empire”:
- Politically, Germany could finally develop its own diplomacy and stop taking orders from Washington.
- Economically, German industry would have unlimited access to develop not only Russia but also all the populations north of the Himalayas set to join the modern world through the creation of the “New Silk Road”.
- Geopolitically, let us first state the obvious: a Middle-East ruled by the Sunnis under the control of the US diplomacy has not been a resounding success. Worse yet, the incredible mistakes made by the last two US administrations across the Middle-East have led to a very old religious war (Sunnis vs. Shiites) again erupting. As we write, it seems that the Russians and Iranian allies are gradually succeeding in taking the control of the Middle East. Now the return to some form of peace (under a Russia/Iranian yoke) would offer new markets for German industry, provided Germany immediately allied itself with Russia and broke away from the American sanctions imposed by the US Senate. Failing that, Germany could lose a Middle-Eastern market which has historically been important for its exporters.
- Domestically: A German-Russian alliance would crimp Turkey’s resurgence as Ankara would find itself isolated due to Iran and China being on its eastern borders and Russia on its northern frontiers. As a result, Turkey would most likely stop rattling Europe’s cage, which would be a boon for Merkel as Recep Tayyip Erdo?an has been a significant thorn in her side. In other words, Merkel would outsource her “Turkey problem” to Russia.
- Energetically, a Russian-dominated Middle East would still provide gas from Russia and oil from the Middle-East. The implication is that Germany would no longer need to have its energy imports “protected” by the maritime empire’s fleet (Merkel’s short-sightedness on the energy front, from the end of coal, to the banning of nuclear power, has fitted in the category of being “worse than a crime, it is a mistake”).
Many people in Germany—business people and public servants such as ex -chancellor Gerhard Schroeder—understand the above and have lobbied for such an outcome. The recent trend of US prosecutors trying to export the supremacy of the US legal system over local ones, and imposing egregious fines on all and sundry (Deutsche Bank, Volkswagen) can only push German business leaders further down that path.
Of course, as Frenchmen, we know that nothing good comes of:
- Germany and Russia getting along like a house on fire.
- Britain retreating back to its island.
And we would suggest that President Emmanuel Macron is also keenly aware of this. Which explains he is so far the only Western leader to have gone out of his way to be nice to President Trump; aside from the Polish President of course (more on that later).
Macron has bent over to accommodate Merkel. And let’s face it, his task is not easy. For as good as our president may be with the older ladies, he needs to convince Merkel to walk away from the above win-win and keep Germany committed to the greater European integration exercise, and Germany wedded to its role inside the broader “maritime empire”.
Germany as the sole paymaster
Now, to be fair, the German population has enthusiastically supported the European integration project, partly out of historical guilt (now abating as the share of the population alive in World War II fast shrinks) and partly because it has been a boon to German exporters. However, recent years have highlighted that the low hanging fruit of European integration has been harvested. And to stay afloat, the European project now needs Berlin to transfer 2%-6% of GDP to poorer, less productive, European Union countries (especially as the UK will soon stop paying into EU coffers). This is a hard sell, even for a politician as gifted as Macron. Soon, Germany may be the only meaningful contributor to French agricultural subsidies; and that is unlikely to go down well with the average Bavarian housewife.
Which brings us to the only other Western leader who has publicly embraced the current incumbent of the White House, namely Polish president, Andreszj Duda. After all, History suggests that France should not be the only country worried about a German rapprochement with the new “land-based empire”. Most Eastern European countries, in particular Poland, have similar reactions to such a hook-up. In fact, threat of a German-Russian rapprochement may already be creating the birth of a new, Austro-Hungarian empire, aka the Visegrad Group alliance of the Czech Republic, Hungary, Poland and Slovakia.
Historically, the role of the Austrian empire was to protect Europe from the Turks and also to stop an alliance between Prussia and Russia. For the time being the Visegrad group is negotiating (rather unsuccessfully) with Berlin about how to handle thousands of “Turks” (at least migrants entering Europe through Turkey, whether those migrants come from North Africa, the Middle-East, Afghanistan, Bangladesh or elsewhere is almost irrelevant). This Eastern grouping may have to address, sooner than they think, a German-Russian rapprochement.
Just as importantly, the re-emergence of the Austrian empire is incompatible with the “Europe as a Nation” project. In the world we are describing Poland, followed by Hungary and the Czech Republic, may be the next countries to leave the EU. Although in so doing, the Visegrad Group would almost guarantee the feared rapprochement between Germany and Russia. Of course the Eastern European nations would only make such a move if they were militarily guaranteed by the US. And, by an amazing coincidence, this is exactly the promise that President Trump just delivered in Warsaw!
For the “maritime empire”, a loss of Germany would have to be rapidly compensated by an increased presence in Poland, the Czech Republic, Austria, Lithuania and almost every country East of Berlin and West of Moscow. Of course, this is what France and England (the “maritime empires of the day”) did in the 1930s— with limited success.
History shows that maritime powers almost always have the upper hand in any clash; if only because moving goods by sea is cheaper, more efficient, easier to control, and often faster, than moving them by land. So there is little doubt that the US continues to have the advantage. Simple logic, suggests that goods should continue to be moved from Shanghai to Rotterdam by ship, rather than by rail.
Unless, of course, a rising continental power wants to avoid the sea lanes controlled by its rival. Such a rival would have little choice but developing land routes; which of course is what China is doing. The fact that these land routes may not be as efficient as the US controlled sealanes is almost as irrelevant as the constant cost over-run of any major US defense projects. Both are necessary to achieve imperial status.
As British historian Cyril Northcote Parkinson highlighted in his mustread East And West, empires tend to expand naturally, not out of megalomania, but simple commercial interest: “The true explanation lies in the very nature of the trade route. Having gone to all expenses involved… the rule cannot be expected to leave the far terminus in the hands of another power.” And indeed, the power that controls the end points on the trading road, and the power that controls the road, is the power that makes the money. Clearly, this is what China is trying to achieve, but trying to do so without entering into open conflict with the United States; perhaps because China knows the poor track record of continental empires picking fights with the maritime power.
Still, by focusing almost myopically on Russia, the US risks having its current massive head-start gradually eroded. And obvious signs of this erosion may occur in the coming years if and when the following happens:
- Saudi Arabia adopts the renminbi for oil payments
- Germany changes its stripes and cozies up to Russia and pretty much gives up on the whole European integration charade in order to follow its own naked self-interest.
The latter two events may, of course, not happen. Still, a few years ago, we would have dismissed such talk as not even worthy of the craziest of conspiracy theories. Today, however, we are a lot less sure. And our concern is that either of the above events could end up having a dramatic impact on a number of asset classes and portfolios.
And the possible catalyst for these changes is China’s effort to create a renminbi-based gold market in Hong Kong. For while the key change to our global financial infrastructure (namely oil payments occurring in renminbi) has yet to fully arrive, the ability to transform renminbi into gold, without having to bring the currency back into China (assuming Hong Kong is not “really” part of China as it has its own supreme court and independent justice system… just about!) is a likely game-changer.
Clearly, China is erecting the financial architecture for the above to occur. This does not mean the initiative will be a success. China could easily be sitting on a dud. But still, we should give credit to Beijing’s policymakers for their sense of timing for has there ever been a better time to promote an alternative to the US dollar? If you are sitting in Russia, Qatar, Iran, or Venezuela and listening to the rhetoric coming out of Washington, would you feel that comfortable keeping your assets, and denominating your trade, in dollars? Or would you perhaps be looking for alternatives?
This is what makes today’s US policy hard to understand. Just when China is starting to offer an alternative—an alternative that the US should be trying to bury—the US is moving to “weaponize” the dollar and pound other nations—even those as geo-strategically vital as Russia—for simple domestic political reasons. It all seems so short-sighted.
* * *
And so, if any of the above sounds even remotely plausible, then some investments may be today grotesquely mispriced, including:
- SELL US, British and French defense stocks: we may be reaching peak “military industrial complex”. In the coming years, the main foreign clients of Western weapons, namely Middle-Eastern monarchies may either (i) implode or (ii) take their business to China/ Russia. Meanwhile, Western defense stocks are priced for an ever growing order book.
- SELL French bonds and (non-Russian) Eastern European bonds: There is little value in these bond markets and should Germany ever decide to rotate away from further European integration, they would crash. At this point, these bond markets represent “return-free risk”.
- BUY Russian bonds: Russian bonds may well be among the world’s cheapest, yielding almost 8% for a real yield of above 4%. This for a country with almost no external debt to speak of, huge amounts of (Chinese) capital about to pour in, and a by-now established position as the first supplier into the world’s fastest growing market for oil imports.
- BUY Russian energy stocks: One of two things will happen. If Saudi Arabia continues to refuse renminbi payments, Russian energy companies will end up owning the Chinese market. Alternatively, if Saudi starts to accept renminbi payments for its oil, the US dollar will take another leg-down and energy prices will rebound (ensuring a rebound in oil stocks everywhere).
- BUY Renminbi bonds: As China moves to create both oil and gold contracts denominated in renminbi, and as more Asian and global trade starts to be denominated in renminbi, it is hard to think that total returns on renminbi bonds will not surpass those of most Western currencies. The returns may come from falling interest rates (as a growing number of market participants are forced to keep renminbi deposits to fund trade), or rising exchange rates. Or, most likely, a combination of both. But today, very few investors, and even fewer large institutions own any renminbi bonds. In five years’ time, the situation may be very different and it may make sense to buy renminbi bonds before Saudi Arabia confirms the currency shift as by that point a lot of the gains will likely have been harvested.
- BUY Gold and precious metal miners: In an initial phase, most countries and market participants will likely stay skeptical of China. As such, the demand for gold, as settlement for renminbi trade, will likely pick-up. At the very least, at current valuations, gold miners can be considered an option on market participants doing more in renminbi (to please China), yet exchanging their renminbi for gold (out of a lack of trust for the new continental empire).
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Authored by Paul Craig Roberts,
The liberal/progressive/left are enjoying their drunkfest of denunciation. I can’t say I have ever witnessed anything like it. These are the people who sat on their hands for 16 years while Washington destroyed in …
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HELSINKI/TURKU, Finland: A Moroccan man who was arrested for killing two women in a knife rampage was an asylum seeker who appeared to have targeted women in Finland’s first terrorism-related attack, police and a Red Cross official said on Saturday.
The 18-year-old suspect, arrested in the city of Turku following Friday’s attack in which eight other people — six of them women — were wounded, arrived in Finland last year, police said. Police shot the suspect in the leg before his arrest.
Police also arrested four other Moroccan men over possible links to him and issued an international arrest warrant for a sixth Moroccan, they said.
Finnish broadcaster MTV, citing an unnamed source, said the main suspect had been denied asylum in Finland, although police said only he had been “part of the asylum process.”
The manager of the Red Cross reception center in Turku, where flags flew at half-mast on Saturday, told Reuters the suspect was an asylum seeker. “I cannot comment on the application’s outcome,” Heimo Nurmi said.
He said police visited the center on Friday and had detained several people. “The arrests were non-violent,” he added.
It was not clear if the attack was in any way linked to the suspect’s asylum application.
The case marks the first suspected terror attack in Finland, where violent crime is relatively rare. Police said they were investigating possible links to Thursday’s deadly van attack in the Spanish city of Barcelona.
“The suspect’s profile is similar to that of several other recent radical Islamist terror attacks that have taken place in Europe,” Director Antti Pelttari from the Finnish Security Intelligence Service told a news conference.
Both of those killed in the Turku attack, and six of the eight who were wounded, were women, the police said. The two who died were Finns, and an Italian and two Swedish citizens were among the injured.
“It seems that the suspect chose women as his targets, because the men who were wounded were injured when they tried to help, or prevent the attacks,” said Crista Granroth from the National Bureau of Investigation.
“The act was cowardly … we have been afraid of this and we have prepared for this. We are not an island anymore, the whole of Europe is affected,” Prime Minister Juha Sipila said.
The stabbing spree occurred on Friday afternoon in the main market place in Turku, on the southwest coast of the country, 160 kilometers from Helsinki.
“First thing we heard was a young woman, screaming like crazy. I thought it’s just kids having fun … but then people started to move around and I saw a man with a knife in his hand, stabbing a woman,” said Laura Laine, who was sitting in a cafe.
“Then a person ran toward us shouting ‘He has a knife’, and everybody from the terrace ran inside. Next, a woman came in to the cafe. She was crying hysterically, down on her knees, saying someone’s neck has been slashed open.”
Four of the wounded were still in hospital, three of them in intensive care, while the other injured persons would be sent home on Saturday, the hospital said.
Turku’s Iraqi, Syrian and Islamic community condemned the attacks and organized a rally of solidarity in the city’s main square, but decided to cancel it due to security concerns.
“Finns and immigrants, and people from different religions, have had very good relations in Turku… We are shocked, but I don’t see this changing that,” said Abdirahman Mohamed, Chairman of the Islamic community of Turku.
He said the Moroccan suspects were not familiar to him or to the Islamic community in town, which has around 2,000 members.
An Anti-immigration mood has been on the rise in Finland since it received some 32,500 asylum seekers during the migration crisis in 2015.
Tensions simmered on Saturday Turku as the anti-immigration “Finland First” movement held a rally but it was met by counter-demonstrators brandishing signs saying “No room for racism.”
In Helsinki, about 200 people gathered in the rain to protest against the construction of a mosque and Muslim immigration to Finland in a rally planned by the Finnish far-right group the Finnish Defense League (FDL) before the attack.
Some members of the nationalist Finns party, which was kicked out of the government in June for their new hard-line anti-immigration leadership, blamed the government for what they said was too loose an immigration policy.
“The asylum system is the primary road for illegal immigration, used also by the terrorists. Harmful immigration can be controlled only by reducing Finland’s attractiveness, or by border controls,” said Finns party lawmaker Ville Tavio.
The government has already tightened immigration policies in the past few years, along with other Nordic states.
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MADRAS, Oregon: Authorities say two people died in a small plane crash near a central Oregon airport where people are gathering to view the solar eclipse.
The Central Oregon Emergency Information Network says the pilot and a passenger were killed in the crash about 2 p.m. Saturday about a mile south of Madras Municipal Airport. Authorities did not identify the victims.
The Federal Aviation Administration says the small plane was approaching a central Oregon airport when it crashed near where people are gathering to view the solar eclipse, the Oregonian/Oregonlive reports.
FAA spokesman Ian Gregor says the plane that crashed Saturday was a single-engine, homebuilt Wheeler Express.
The Oregonian/Oregonlive reports that the Federal Aviation Administration and National Transportation Safety Board are investigating.
Campers have been gathering at the airport for Monday’s eclipse.
About 200,000 people are expected in the area that’s considered a prime viewing spot as the moon completely blots out the sun.
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RIPOLL, Spain: A missing imam and a house that exploded days ago became the focus Saturday of the investigation into an extremist cell responsible for two deadly attacks in Barcelona and a nearby resort, as authorities narrowed in on who radicalized a group of young men in northeastern Spain.
Investigators searched the home of Abdelbaki Es Satty, an imam who in June abruptly quit working at a mosque in the town of Ripoll, the home of the Islamic radicals behind the attacks that killed 14 people and wounded over 120 in the last few days. Police were trying to determine whether Es Satty was killed in a botched bomb-making operation on Wednesday, the eve of the Barcelona bloodshed.
His former mosque has denounced the deadly attacks and weeping relatives marched into a Ripoll square on Saturday, tearfully denying any knowledge of the radical plans of their sons and brothers. At least one of the suspects is still on the run, and his younger brother has disappeared, as has the younger brother of one of the five attackers slain Friday by police.
Catalan police said a manhunt was centered on Younes Abouyaaquoub, a 22-year-old Moroccan suspected of driving the van that plowed into a packed Barcelona promenade Thursday, killing 13 people and injuring 120. Another attack early Friday killed one person and wounded five in the resort of Cambrils.
The Daesh group has claimed responsibility for both.
Everyone so far known in the cell grew up in Ripoll, a town in the Catalan foothills near the French border 100 kilometers (62 miles) north of Barcelona. Spanish police searched nine homes in Ripoll, including Es Satty’s, and two buses, and set up a roadblock that checked each car entering the town. Across the Pyrenees, French police carried out extra border checks on people coming in from Spain.
Neighbors, family and even the mayor of Ripoll said they were shocked by news of the alleged involvement of the young men, whom all described as integrated Spanish and Catalan speakers with friends of all backgrounds.
Halima Hychami, the weeping mother of Mohamed Hychami, one of the attackers named by police, said he told her he was leaving on vacation and would return Aug. 25. His younger brother, Omar, slept late Thursday and left mid-afternoon.
Mohamed Hychami is believed among the five attackers shot to death by police in Cambrils. She hasn’t heard from Omar since he left.
“We found out by watching TV, same as all of you. They never talked about the imam. They were normal boys. They took care of me, booked my flight when I went on vacation. They all had jobs. They didn’t steal. Never had a problem with me or anybody else. I can’t understand it,” she said.
Even with Abouyaaquoub at large, Spanish Interior Minister Juan Ignacio Zoido declared the cell “broken” Saturday. In addition to the five killed by police, four were in custody and one or two were killed in a house explosion Wednesday. He said there was no new imminent threat of attack.
Police also conducted a series of controlled explosions Saturday in the town of Alcanar, south of Barcelona, where the attacks were planned in house that was destroyed Wednesday by an explosion. Authorities had initially thought it was a gas accident, but took another look after the attacks.
Initially, only one person was believed killed in the Wednesday blast. But officials said DNA tests were underway to determine if human remains found there Friday were from a second victim. A police official, speaking on condition of anonymity to discuss the ongoing searches, said investigators believed the remains may belong to Es Satty.
The official said investigators also discovered ingredients of the explosive TATP, used by the Daesh group in attacks in Paris and Brussels, as well as multiple butane tanks that the group may have wanted to combine with the homemade explosive and load into their vehicles.
Neighbors on Saturday said they had seen three vehicles coming and going from the home, including an Audi used in the Cambrils attack and the van used in the Barcelona attack.
The president of the mosque where Es Satty preached, Ali Yassine, said he hadn’t seen him since June, when he announced he was returning to Morocco for three months.
“He left the same way he came,” said a bitter Wafa Marsi, a friend to many of the attackers, who appeared Saturday alongside their families to denounce terrorism.
Members of Ripoll’s Muslim community denounced the vehicle attacks and offered their sympathy to the families of the victims.
Authorities said the two attacks were the work of a large terrorist cell that had been plotting for a long time from the house in Alcanar, 200 kilometers (125 miles) down the coast from Barcelona.
The lone named suspect still at large, Abouyaaquoub, figures on a police list of four main suspects sought in the attacks. Also on the list is 17-year-old Moussa Oukabir, whose brother Driss reported to police that his documents stolen. Ripoll’s mayor confirmed that those documents were found in a vehicle used in the attacks. Moussa was one of the five radicals killed, and Driss is in custody, police said.
Catalan regional police said they are mounting major road blocks throughout the northeastern region, warning people they may encounter traffic jams on different roads.
A French police official said authorities were also looking for a Kangoo utility vehicle that was believed to have been rented in Spain by a suspect in the Barcelona attack that might have crossed the border.
Fatima Abouyaaquoub, sister-in-law of the Hychami brothers and the cousin of Younes Abouyaaquoub, said she found it all hard to believe.
“I’m still waiting for all of it to be a lie. I don’t know if they were brainwashed or they gave them some type of medication or what. I can’t explain it,” she said.
Abouyaaquoub’s mother said his younger brother, Hussein, left home Thursday afternoon and hasn’t returned.
The sheer size of the cell and the close family relations among the attackers recalled the November 2015 attacks in Paris, in which Islamic State attackers struck the national stadium, a Paris concert hall and bars and restaurants nearly simultaneously, leaving 130 people dead. Since then, the extremist group has steadily lost ground in its self-declared caliphate in Iraq and Syria.
Islamic extremists have made a point of targeting Europe’s major tourist attractions in recent years — especially in rented or hijacked vehicles.
Yet Spain decided to keep its terrorist threat alert at level 4 — out of five — declaring Saturday that no new attacks were imminent. Zoido said the country would reinforce security for events that draw large crowds as well as at popular tourist sites.
The dead and wounded in the two attacks came from 34 countries. By late Saturday, the Catalan emergency service said 53 people remained hospitalized, 13 of them in critical condition.
The 14 people killed spanned generations — from age 3 to age 80 — and left behind devastated loved ones. They included a grandmother, 74, and her granddaughter, 20, from Portugal who were visiting Barcelona to celebrate a birthday; an Italian father who saved his children’s lives but lost his own; an American man who was celebrating his first wedding anniversary in vibrant Barcelona.
Francisco Lopez Rodriguez, a 57-year-old Spaniard, was killed with his 3-year-old grand-nephew, Javier Martinez, while walking along the Las Ramblas promenade. His widow Roser is recovering from her wounds in a hospital.
“We are a broken family,” niece Raquel Baron Lopez posted on Twitter.
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