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Apparently China did not get the memo that the Fed’s apologists are furiously scrambling to packpedal on Yellen’s “6 month” guidance in virtually all media outlets. The is the only way to explain why Vice Minister of Finance Zhu Guangyao said overnight that “the U.S. Federal Reserve will begin boosting interest rates within six months after exiting “unconventional” monetary policy, and that will have a “significant impact” on the U.S. and world economy, as Market News International reported earlier. Zhu told China Development Forum this weekend “we believe a the Fed meeting this October, the exit of their quantiative easing will complete.” In other words while the spin for public and algo consumption is that the Fed will continue placating those long the stock market until everyone’s price target on the S&P 500 is hit and everyone can comfortably sell into an ever-present bid, China is already looking for the exits.

Understandably, Zhu Guangyao also indicated that China is uneasy about the impact of such a move. He should speak to the army of vacuum tubes which has no idea how to exist in a world in which the Fed isn’t injecting at least a few billions in reserves every month.

From Market News:

“The basic judgement, if there is no big accident, is that within six months after the Fed fully exits from its unconventional monetary policies, the Federal Reserve Bank will launch the process of raising interest rates and that will have a significant impact on the United States and the world economy as well,” he said.

“Based on the current progress, we believe at the Fed meeting this October, the exit of their quantitative easing will complete,” Zhu said at the China Development Forum at the weekend.

But Zhu’s comments — the most detailed from the top of the Chinese government since Yellen took over from Ben Bernanke last month — suggest that the authorities here are beginning to brace for an end to the extraordinary monetary accommodation of recent years. They come even as the Chinese government presses on with a sweeping reform program which has already plunged domestic financial markets into uncertainty.

The yuan fell sharply last week following the widening of the currency’s trading band to the U.S. dollar to 2% from 1% around the central parity. That was part of an ongoing move to deregulate the currency and interest rate regimes in order to better prepare the economy to handle swings in capital flows. The government also appears more willing to tolerate defaults as part of a long-delayed clean-up of the financial system.

But while the end of QE appears a given, at least until the market realizes there is no handover to an economy that is a moribund as it has ever been in the past five years, and the Fed has no choice but to  untaper and return with an “even more QE” vengeance (it certainly won’t be the first time – just recall the “end” of QE1, QE2, Op Twist, etc), a bigger question surrounds whether China, already sliding in credit contraction and suffering a plunging stock market with its housing sector also on the edge of a bubble bust, is about to take over from the Fed and proceed with its own stimulus program. The answer is no.

Bloomberg reports: “China used big fiscal stimulus in 2008 during the global financial crisis and this made the economy heat up quickly, Finance Minister Lou Jiwei says at a forum in Beijing, according to a transcript of his comments posted on’s website.”

This year, however, China will focus on quality of growth this year according to Lou, which means no shotgun stimulus program. He added that China will pay more attention to the environment and won’t use  large-scale fiscal stimulus to spur investment in order to reduce overcapacity.

So with China caught in a deleveraging vortex, with the world used to Chinese “asset creation” in the range of $3.5 trillion each year, and with no endogenous credit creation to offset the phasing out of Fed QE, one wonders: will the next big surge in outside money come from the ECB, where outright QE is against the charter, or from the BOJ, where Abenomics has failed so miserably so far, that any additional surge in import food and energy prices may just lead to an outright recession. And it is in this context that we expect the stock “market” will surge to new all time highs again this coming week.

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Having complained for years of China’s electronic espiohange, it is perhaps only fitting that, thanks to documents provided by Edward Snowden, the NY Times reports, the NSA pried its way into the servers in Huawei’s sealed headquarters in Shenzhen (Huawei connects a third of the world’s population). The NSA monitored communications of the company’s top executives in an operation called “ShotGiant” looking for links between Huawei and the People’s liberation Army. Furthermore, the NSA documents confirm, “we want to make sure that we know how to exploit these products,” it added, to “gain access to networks of interest” around the world. We await the repurcussions…

Via NYTimes,

While President Obama and China’s president, Xi Jinping, have begun talks about limiting the cyber conflict, it appears to be intensifying.

The N.S.A., for example, is tracking more than 20 Chinese hacking groups — more than half of them Chinese Army and Navy units — as they break into the networks of the United States government, companies including Google, and drone and nuclear-weapon part makers, according to a half-dozen current and former American officials.

If anything, they said, the pace has increased since the revelation last year that some of the most aggressive Chinese hacking originated at a People’s Liberation Army facility, Unit 61398, in Shanghai.

The Obama administration distinguishes between the hacking and corporate theft that the Chinese conduct against American companies to buttress their own state-run businesses, and the intelligence operations that the United States conducts against Chinese and other targets.

American officials have repeatedly said that the N.S.A. breaks into foreign networks only for legitimate national security purposes.

But even as the United States made a public case about the dangers of buying from Huawei, classified documents show that the National Security Agency was creating its own back doors — directly into Huawei’s networks.

One of the goals of the operation, code-named “Shotgiant,” was to find any links between Huawei and the People’s Liberation Army, one 2010 document made clear. But the plans went further: to exploit Huawei’s technology so that when the company sold equipment to other countries — including both allies and nations that avoid buying American products — the N.S.A. could roam through their computer and telephone networks to conduct surveillance and, if ordered by the president, offensive cyberoperations.

“Many of our targets communicate over Huawei-produced products,” the N.S.A. document said. “We want to make sure that we know how to exploit these products,” it added, to “gain access to networks of interest” around the world.

“If we can determine the company’s plans and intentions,” an analyst wrote, “we hope that this will lead us back to the plans and intentions of the PRC,” referring to the People’s Republic of China. The N.S.A. saw an additional opportunity: As Huawei invested in new technology and laid undersea cables to connect its $40 billion-a-year networking empire, the agency was interested in tunneling into key Chinese customers, including “high priority targets — Iran, Afghanistan, Pakistan, Kenya, Cuba.”

The N.S.A.’s operations against China do not stop at Huawei. Last year, the agency cracked two of China’s biggest cellphone networks, allowing it to track strategically important Chinese military units, according to an April 2013 document leaked by Mr. Snowden. Other major targets, the document said, are the locations where the Chinese leadership works. 

Read more here

Huawei’s view…

William Plummer, a senior Huawei executive in the United States, said the company had no idea it was an N.S.A. target, adding that in his personal opinion, “The irony is that exactly what they are doing to us is what they have always charged that the Chinese are doing through us.”

The US view…

China does more in terms of cyberespionage than all other countries put together,” said James A. Lewis, a computer security expert at the Center for Strategic and International Studies in Washington.

“The question is no longer which industries China is hacking into,” he added. “It’s which industries they aren’t hacking into.”

Read more here

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MontgomeryScott's picture

Listen, Barry…

We’ve got a planned photo-op today. All you have to do is get in one of those carts, and drive it ten feet, to that nice man in the white pants. Do you think you can handle that?

I don’t get it, Valerie, um, I mean, Ms. Jarrett. How’s that gonna help my image?

It’ll make the world see that you’re not concerned, because you’re the King of the Universe. Besides, we don’t let you drive one of these very often… It’ll be a lot of FUN!

Gee, I don’t know. I’m kind of scared… that guy over there has a camera…

Now, now. The Wookie will be home soon, and everything will be better…

Submitted by Ben Hunt of Epsilon Theory

The secret of life is honesty and fair dealing. If you can fake that you’ve got it made.

These are my principles, and if you don’t like them … well, I’ve got others.

I’m not crazy about reality, but it’s still the only place to get a decent meal.

A child of five could understand this. Send someone to fetch a child of five.

Room service? Send up a larger room

“Surely You Can’t Be Serious”

In periods of great global stress, like after a World War or a Great Depression, it’s not only our politics and economics that are thrown for a loop, but also our art and entertainment. New art, and comedy in particular, that rejects or makes fun of the ancien regime after some enormous crisis is as old as Aristophanes. This art is subversive, often masking its contempt with “low comedy” like puns and slapstick, and no one in the past century was better at this than Groucho Marx. I’ve lately found myself thinking of Fed communications as a form of performance art … some sort of Dada-ist comedy routine where Groucho might stick his head out from behind a curtain and photobomb the press conference … and never more so than on Thursday . If only it were so.

Yellen’s press conference was a disaster. Why? Because she said too much. Because on the one hand she took away the insane linkage between monetary policy and the unemployment rate – an ill-conceived and counter-productive misreading of market game-playing that I wrote about ad nauseam last summer, here and here – but on the other hand she gave a specific timing target for raising rates after QE is all tapered out. Combine this with the three-times-in-a-row pattern of cutting monthly QE purchases by $10 billion per meeting, and now even Jon Hilsenrath is projecting specific calendar dates for raising rates.

I mean, you really can’t make this stuff up. Did the Fed learn nothing from last summer? This isn’t an academic exercise, where statements are qualified and softened by exhaustive footnotes and asides so that no one is ever wrong. The market is a beast, not the review committee for the Quarterly Journal of Economics. Of course the market is going to leap at and devour a statement like Yellen’s 6 months comment, and you’d think that the Fed Chair would know that.

All together now, one more time with feeling: ambiguity is good; transparency is bad. You might think that transparency would be helpful in “shaping market expectations” the way you like, but you would be wrong. That’s not how the game is played. Can I nominate Bill Belichick for the Fed, at least as far as press conferences are concerned?

And I’m very sympathetic to Kocherlakota’s dissent … if you ARE going to take a stand with an explicit linkage to unemployment rates, then you can’t just say “oh, never mind that” less than a year later and expect that whatever new standards you set out for rate-setting are going to be particularly effective in molding expectations. It’s not a matter of credibility, per se. That’s a very specific word with a very specific meaning in game theory, and the simple truth is that the Fed will always be credible enough to be an effective game player. The problem is actually that the Fed is too credible, and that Yellen’s remark about raising rates within 6 months of stopping QE3 takes on far more import than was intended.

Sigh. Look, maybe I’m over-reacting here. Maybe we are all so freaking exhausted by the constant use of communication as policy, by the unceasing effort of the Fed and its media intermediaries to play the market, by the Orwellian nature of a monetary policy apparatus where everything is spoken for effect, that we will all just go about our business and slog along. And I’m sure we will see lots of back-tracking over the next few weeks, lots of data-dependence talk, lots of “Yellen really didn’t say anything new”, yada yada yada. But my fear is that we’ve set the stage for, if not an inflection point in the path of the stock market, then another rate shock similar to but smaller than last summer’s … an aftershock, in geological terms.

What am I looking for to see how this plays out? I think we are now even more strongly in a good-news-is-bad-news (and vice-versa) world. If we start seeing some strong economic data come out over the next few weeks and months, then I think the market – particularly the bond market and emerging markets – could get pretty squirrelly. Not that US stocks would be immune from this. Remember, the modern day Goldilocks environment for stocks has nothing to do with a happy medium between growth and inflation, but everything to do with growth being weak enough to  keep an accommodative Fed in play. Strong growth data would augment a Common Knowledge structure that the Fed is on track to raise rates sooner and more rather than later and less, and that’s no fun for anyone. Then again, if global growth data remains weak – and you really can’t look at what’s coming out of China, Europe, or Japan and think that the global growth story is anything but weak – that creates enough uncertainty about the Fed’s path (not to mention the cover for political and economic Powers That Be to wage a full-scale media war to keep monetary policy in QE la-la land forever) to support the markets. Sounds a lot like Freedonia to me. Rufus T. Firefly for President?

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Well, my fellow Slope-a-Dopes, the time has finally come. The Idiot Savant has had more than enough.  BDI has unequivocally decided to prick Big Bad Ben Bernanke’s Bloviated Bubble Butt.  I have outlined below seven fine needles and six sharp scalpels that I shall use to slice and slay his sorry sagging ass:

1)  The extensive capital fight outflows, steaming out of the cratering Emerging Market economies, frightfully seeking a safe haven, have most certainly found their way into the U.S. equity markets, pumping the final bit of hot air into an already overly bullish bursting balloon.  Taper blow back begins.

2)  The Fed has finally begun tapering in earnest, fearfully curtailing QE because they know that the extreme asset valuations it engenders are dangerous weapons of mass misallocated monetary destruction.  The teetering global economy is now facing the unintended consequences of economic disequilibrium that the Fed has unwittingly unleashed on the world, which is now disintegrating before us.

2014-03-22_20473)  As a consequence of the announced and scheduled diminishing QE, the 10 year yield has most certainly based. Moreover, after a monumental 30 year down trend, is now clearly working its way higher.  Each marginal increase off of these extremely low levels is huge in terms of a percentage move, and thus, the total costs of servicing the outstanding debt loads held both privately and publicly will quickly become a backbreaking burden on the U.S. economy.

4)  The outstanding U.S. public and private debt has never been larger in terms of overall USD exposure, the debilitating cost of carry on that tremendous debt has only been temporarily held at bay by a shortsighted FED which synthetically suppressed treasury rates in order to bail out its desperate TBTF private member mega banks.  That dubious degenerate policy has completely distorted the treasury bond yields and therefore the natural market cost of money has been eviscerated.  Clearly, this can no longer be sustained due to the gross misallocation of capital it has induced, which flows primarily into fixed non producing assets of all kinds in the FIRE economy, as well as the precious metals, gem stones, fine arts and collectibles markets, at the expense of genuine productive growth on the ground in the real economy..

5)  The the polyannish assumption that the FED will be able to continue blissfully containing the ever building rate pressures by simply jawboning the debt markets is laughable. The Fed is about to lose control of the United States bond market, by far the largest capital market in the world.  Don’t be fooled, they are not and never have been an absolute omnipotent force with complete control of a private economy that generates an annual GDP of $16 trillion.  To believe that seven ace academic anal asses sitting in on an FOMC meeting, tweaking financial levers on a whim, can exert absolute control over the massive forces which drive the globe economy is preposterous.

China Corporate Debt to GDP6)  China, the acknowledged engine of economic growth for the world, over the past two decades, is apparently in serious trouble. The misallocation of overly cheap finance capital has created such tremendous economic imbalances on the ground, in terms of monumentally excessive development, productive over capacity with massive stock piles of raw materials ( all non cash producing assets), has now morphed into a full blown credit crisis spawned by the perilous parasitic shadow lending phenomenon which rapciously over leveraged the final ferocious funding feeding frenzy.

7)  Japan’s economy grew at a slower pace than initially thought in the last quarter of 2013, raising concerns about the pace of recovery under Prime Minister Shinzo Abe’s crazed crafty kamikaze monetary policies.  With Japanese data weaker than expected and their April consumption tax hike imminent, the state of the Japanese economy is cause for significant concern. Tora, Tora, Tora!

8)  Despite brash statements and confident claims to the contrary, the EU & ECB have yet to solve the crippling monetary and fiscal structural problems that currently afflict their unfinished and imperfect union, which are distinctly intractable in its current form.  The Southern periphery nation states, now joined by La belle France are firmly entrenched in permanent recessions.  The latest unemployment data out of Paris is the worst since WW II.

Brics summit leaders9) The BRICS, which remain heavily dependent on commodity trade are now struggling.  Dr. Copper has demonstrably diagnosed their incapacitating illness. Additionally, an increasing number of bi-lateral trade agreements are now being established between the commodity producing nations, completely outside of the USD world reserve currency monetary hegemony, putting added pressure on the Petro-Dollar. The current natural gas impasse in Ukraine and probable retaliatory sanctions against Russia will undoubtedly serve to push Beijing and Moscow even further along those lines.  The Arab Spring has morphed into MENA mayhem, Syria is bleeding, Lybia is imploding, Iraq is self destructing, Egypt is a basket case, Saudi Arabia is afraid of Iran fomenting further Sunni Shia anarchy along its borders.  All of which could undermine the Petro-Dollar.

10)  The USD Index has been trending lower, barely holding onto the all important 80 level.  A clear breach of that critical level will put undue pressure on an economy which is 70% based on consumer consumption.  Consuming cluttering crap created by countless countries will become considerably costlier.

11)  The developed world is in the midst of a substantial consumer slow down.  This is particularly true in the middle and low end mass market sectors, which are the meat and potatoes of the largest consumer economy on the planet. The recent results at Walmart & Target highlight this unwelcome development.  It’s not the weather stupid!

Goldman-Sachs-Twitter-IPO-prices-looks-promising112)  The freakish stock market sentiment boldly postulating that the wall street bull can never stumble again, because the global central bank reflation trade will always prop him up, is astoundingly foolhardy, you simply can not print your way to prosperity, same as it ever was.

13)  The fantastic social media gorilla glass gigabyte bubble will surely get the WhatsApp Snapchat Tweeter twits’ party started.  Please “Like” me, I’m a LinkedIn Pinterest head party animal!  In fact, the unsuspected unenlightened user-base unravelling may have already begun.  Friday’s bewitched Nasdaq action may be just the opening super social salvo.



The Joker red cards the Fed and its fantastically foolish frenetic faux market.

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This is the last full week of what has been a surprising quarter. Among the largest surprises in the foreign exchange market has been the strength of the Japanese yen.  It begins the week up above 3% from the end of last year.  That the Canadian dollar is the weakest of the majors, off 5.3%, is somewhat surprising, but understandable given the shift in the central bank’s bias (forward guidance?) from neutral to dovish.  On the other hand, sterling is the second weakest.  Many did not expect that sterling would slip0.5%, despite the likelihood that the BOE is the first of the major central banks to hike rates (next year, likely before the UK election).

In the equity market, Japan also surprises, with the Nikkei off 12.7%.  This is among the worst Q1 equity performances among global stock markets. There are two markets that are down around the same magnitude, the Hong Kong Enterprise Index, which tracks Chinese companies listing on the Hang Seng, is off 12.8% while Russia’s MICEX is off 13.1%.

In the bond market, the rally in US Treasuries was unexpected. Under the weight of reduced Federal Reserve demand, Treasury yields were expected to have risen to find new clearing prices. Instead, going into the last week of the quarter, the US 10-year yield is off  about 15 bp.  This goes a long way toward explaining the decline in global yields.  Perhaps, though the magnitude of the decline in the peripheral bond yields is also surprising.  Yields in Italy and Spain continued to fall, with 10-year yields off 70-80 bp, while similar yields in Portugal and Greece fell 173 and 158 bp respectively.

We see ten events this week that investors will have to navigate.

1.  There has been no attempt (yet) by Fed officials to guide the market away from the implication of Yellen’s definition of “considerable period” that the first rate hike is possible in Q2 15. Like Yellen herself, there has been some attempt to downplay the “dot plot” of forecasts, but the Fed cannot have it both ways.  Either the “dot plot” is part of the Fed’s forward guidance/transparency or it is not.  Investors may be particularly sensitive to Fed officials comments on these issues in the days ahead.

2.  The longer the Fed waits, the more difficult its task.  The spring thaw is likely to produce somewhat better economic data, even though it was not the only headwind the economy faced. This will likely be evident with the bounce in durable goods orders for February, helped by Boeing orders and a rebound in the auto sector.   February personal consumption expenditures will be reported later in the week.  The remarkable thing is how steady US consumption has growth, and largely without credit cards.  The 3, 6, and 12-month averages converge at 0.3%, which is the February expectation, as well.  Economists may solidify Q1 GDP forecasts, which looks to be tracking around 1.6%-1.8%

3.  The Fed also draws attention at mid-week with the second part of the stress tests, which are essentially a review of the banks’ capital plans.  Between dividend payments and stock buyback programs, large US banks want to return $77 bln to shareholders this year. Embarrassingly, the Fed had to revise the results of the first part of the stress tests within 24 hours of the initial release, and the adjustment was mostly minor covering half of the thirty financial institutions it reviewed.   Nevertheless, the revisions underscore the focus on Bank of America. The revisions show its Tier 1 capital would fall below 6% under conditions of  a deep recession, which is still above the regulatory requirement, but the second lowest behind Zions Bancorp, the only institution to have failed the first round.

4.  This week’s flash PMI and money supply data from the euro area will shape expectations for the early April ECB meeting.  After the ECB let the March meeting go by without taking fresh action, many participants gave up on the idea entirely, and this helped the euro rise to approach $1.40 for the first time since July 2011.  What is expected to be the second consecutive decline in the manufacturing PMI is likely to underscore Draghi’s pointed remarks that the strength of the euro weighing on growth.  The service sector, which is less sensitive to the euro’s fluctuation, is expected to continue to hold up better.   Separately, money supply growth is expected to stabilize, but at 1.3% expected February print (up from 1.0% in December), it is hardly sufficient fuel for a stronger economic recovery.  Lending to households and businesses likely to continue to fall, though the pace may lessen a little, an outright improvement still seems some time off.  

5.  The economic highlight from the UK will be CPI and retail sales.    Headline CPI is expected to have slowed to 1.7% in February from 1.9% in January.  This would the lowest print since October 2009.  Few investors seem to appreciate the magnitude of the decline in UK inflation.  It was at 2.9% last June.  Retail sales in February, on the other hand, likely picked up after the out-sized 1.5% decline in January.  Sales are expected to have risen by 0.5%, including auto sales, and 0.3% without.  Nevertheless, the year-over-year pace is expected to moderate sharply to 2.4% from 4.3% including auto sales (2.9% from 4.8% without).  

6.  As Japan’s fiscal year winds down, Japanese inflation has stabilized; much as BOJ’s Kuroda had warned investors.  The February national CPI report is expected to show core inflation, which in Japan, excludes fresh food, unchanged at 1.3%.  Tokyo’s core inflation measure for March is expected to be unchanged at 0.9%.  The impression one is left with is that the bulk of the rise in Japanese inflation is due to the yen’s weakness, which, as we noted above, stabilized in Q1. The economic environment, arguably, will change again with the retail sales tax hike on April 1. The key policy issue now is how long will it take officials to determine the impact of the tax hike and respond if necessary. 

7.  HSBC’s flash manufacturing PMI for China will be released early in Beijing on March 24.  The consensus calls for a slight improvement to 48.7 from 48.5.  The real point is that it remains below the 50 boom/bust level.   The fact of the matter is that the Chinese economy has been slowing since 2011 (and the peak in the MSCI Emerging Market Equity Index around the same time is not simply coincidental).  It may slow more as the government tries to manage a squeezing out of some excess.  Officials we speak with seem cognizant of the risks.  Consider what China announced last week that may mitigate some of those risks.  It indicated it would expedite some already planned infrastructure projects.  This is seen to help support the economy.  It will allow some banks to issue preferred shares.  This permits another source of funding that can help ease bank’s reliance on short-term funding and loosen the reliance on shadow banking activity. Chinese officials also indicated easing some funding restrictions for property developers.  

8.  Pressure on the yuan may continue.   With the CNY6.20 level convincingly breached last week, which some reports had played up as a key level of speculative positioning, the next important chart point is seen in the CNY6.25-CNY6.26 area, which corresponds to the highs seen in December 2012 and February 2013.  Above there and the dollar could have potential toward CNY6.30-CNY6.35.   The yuan has weakened about 3.2%.  It is far too early to take some pundits claims of a new currency war seriously.  Moreover, the relatively low amount of value-added incurred in yuan related costs suggest such a small move will not impact trade flows.  The purpose of the squeeze is not meant to address China’s international competitiveness, but rather the moral hazard and excessive speculation, primarily by domestic economic agents.   That said; the yuan’s weakness must be included in any list of the surprises that have befuddled investors in Q1.  

9.  The threat by Kiev politicians to cut Crimea’s water and/or electricity off (Ukraine supplies Crimea with estimated 90% of its water and 80% of its electricity), is a dangerous provocation. Russia is amassing troops on the Ukrainian border.  No US president, going back to General Eisenhower directly used military force to try to repel Soviet or Russian forces.  It was not done in Hungary, Czechoslovakia, or more recently, Georgia.   The sanctions being implemented now are the strongest since the end of the Cold War.  There is scope for additional escalation, and there is little doubt that the “Russian issue” will dominate Obama’s trip to Europe and the G7 meeting. There may be a multiplier effect of sorts in terms of the sanctions as businesses may choose to refrain from dealing with Russian enterprises, especially state-owned or directed, as the case may be, for fear of additional sanctions.  We quickly suspected that lion’s share of the $105 bln drop Treasury holdings in the Federal Reserve’s custody holdings in the week ending March 12 was likely due to Russia shifting its reserve holdings out of the US for fear that the Crimean referendum and annexation could result in the US freezing those assets.  However, the $32 bln rise in custody holdings the following week, even with the settlement of US Treasury auctions is more mysterious. There is some suggestion that the reserves that were transferred out went to another central bank, who then used the Federal Reserve as a sub-custodian with a part of its new mandate. That said, the Federal Reserve and the US Treasury Department know who is doing what.  

10.  While politics may always be local, this weekend’s French municipal elections (run-offs next weekend) may be looked upon for insight into the May EU parliamentary elections.  In this light, the success of a rejuvenated National Front will be watched very closely.  It is little wonder that the euro zone finance ministers pushed hard to reach an agreement on the Single Resolution Mechanism (at least three months late) with the current EU parliament is that an agreement with the next parliament may be more difficult.  If France is unwilling or unable to articulate and defend the interests of the debtors, the new EU parliament (and resulting new EU Commission) might be the check on Germany and the interests of the creditors.  From a local lens, this will be the first voter response to the Hollande government.  Even though the Socialists may manage to hold on to Paris, in a campaign that seemed to lack any meaningful substance, it is likely to get solidly trounced.  Hollande will likely respond with a cabinet reshuffle.   As Hollande tacks right, it will be interesting to watch what happens to Montebourg, the controversial industry minister:  keep him close as a bone to the left-base or replace him as an olive-branch to industry, which he has alienated.  

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Concurrently with out post on what the odds are of a war between the US and Russia over Ukraine, the House Intelligence Committee Chairman Mike Rogers, and war hawk, appeared on TV this morning saying that the United States ought to provide weapons to the Ukrainian army “so it could defend the country from a Russian invasion.” This is the same Mike Rogers who last August did everything in his power to perpetuate the lie that Syrians had used chemical weapons against “rebels” (who subsequently turned out to be mostly Qatari-funded Al Qaeda mercenaries and other Islamic extremists) “There are things that we can do that I think we’re not doing. I don’t think the rhetoric (from Obama administration officials) matches the reality on the ground,” he said.

Seemingly oblivious that all Russia desperately wants is further escalation in the conflict, which can then immediately be seen as a provocation for further incursions into either the Ukraine and/or other former Soviet counteries, Rogers said that, while ruling out the deployment of U.S. military forces in Ukraine, he called for sending small arms and radio equipment that the Ukrainian military could use to “protect and defend themselves. And I think that sends a very clear message.”

Absolutely it does: the message it sends is that US foreign policy has just hit rock bottom in terms of game theoretical escalation cluelessness. At least in Syria someone put some effort in fabricating YouTube videos and at least putting together a media campaign demonizing Assad. And still failed.

More from NBC:

Speaking from Tblisi, the capital of Georgia, a country that Russian forces invaded in 2008, Rogers said on NBC’s Meet the Press that the Ukrainians “passionately believe” that Russian President Vladimir Putin “will be on the move again in Ukraine, especially in the east.”

He said both Ukrainian and U.S. intelligence officials “believe that Putin is not done in Ukraine. It is very troubling. He has put all the military units he would need to move into Ukraine on its eastern border and is doing exercises.”

If Putin orders Russian forces into the Baltic nations of Estonia, Latvia and Lithuania – which are NATO member states and which the United States is obligated by the NATO treaty to defend — then “we (will) have allowed people who want to be free, who want to be independent, who want to have self-determination, and we’ve turned our back and walked away from them.”

In an apparent allusion to the seizure of Czechoslovakia which was a prelude to Hitler’s invasion of Poland in 1939, Rogers added, “The world did that once – and it was a major catastrophe.”

The full clip:

And while US neocons are warmongering, Ukraine is all too happy to raise the tension level just a bit more, hoping that NATO will finally intervene and present Putin with at least some hurdle to overrunning all of East Ukraine, using exactly the same template as already show in Crimea. From WSJ:

Ukraine’s top diplomat warned Sunday that the chances of war with Russia “are growing” due to the buildup of Moscow’s forces along his country’s eastern border. In an interview with ABC’s “This Week,” acting Ukrainian Foreign Minister Andrii Deshchytsia said Kiev “is ready to respond” should Russia–which has already seized the Crimea–move further in Ukrainian territory.

The situation is becoming even more explosive than it was a week ago,” Mr. Deshchytsia said.

He said Ukraine’s first approach to the Russian threat on the frontier would be diplomatic. But, he said, “people are also ready to defend their homeland.”

Meanwhile, Putin is sitting back in his chair and smiling, since everything so far continues to unwind precisely according to his plan.

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By James Robins Of The National Interest

Would America Go To War With Russia?

Vice President Biden was in Warsaw last week to reassure our eastern NATO allies that they have the support of a “steadfast ally.” But if Russia moved against Poland or the Baltic States, would the United States really go to war? Or would we do nothing and effectively destroy the NATO alliance?

President Obama has ruled out a “military excursion” in Ukraine. America is not obligated legally to take action against Russia for annexing Crimea. We would not go to war if Russia mounted a large-scale invasion of Ukraine to restore the ousted, pro-Moscow government of Viktor Yanukovych, currently under U.S. sanctions. And we would not even send troops if Ukraine was partitioned, or absorbed by Russia. Americans have no interest in such a conflict, and no stomach for it.

NATO allies are a different matter. The North Atlantic Treaty is a mutual-defense pact, and Article 5 says that an armed attack against one member state “shall be considered an attack against them all.” This is a clear red line. The only time Article 5 has been invoked was in the wake of the September 11, 2001 terrorist attacks, and most NATO allies sent troops to support the efforts in Afghanistan and Iraq.

Could the current crisis expand to touch NATO? The developing situation in Ukraine has been compared to Germany’s absorption of Austria in 1938, or the subsequent partition and dismemberment of Czechoslovakia. Hillary Clinton compared Russian president Vladimir Putin to Adolf Hitler, which by extension puts President Obama in the role of British prime minister Neville Chamberlain, who famously failed to achieve “peace in our time” at Munich.

Push the analogy further. The Second World War was sparked by Warsaw’s resistance to Berlin’s demand to annex the Polish Corridor, a small stretch of land—smaller than Crimea—separating the German provinces of Pomerania and East Prussia. Hitler responded by invading Poland and partitioning it with the Soviet Union. Britain and France had pledged to defend Polish independence, and two days after Germany invaded, they declared war. In his war message, Chamberlain explained that Hitler’s actions showed “there is no chance of expecting that this man will ever give up his practice of using force to gain his will. He can only be stopped by force.”

This may or may not describe Mr. Putin, as Mrs. Clinton alleged. But if similar circumstances arise in the near future, will the United States honor security guarantees made to Poland and the Baltic States when the Russian threat was only a theory?

Mr. Biden stood with Estonian president Toomas Ilves Tuesday to “reconfirm and reaffirm our shared commitment to collective self-defense, to Article 5.” He wanted to make it “absolutely clear what it means to the Estonian people” and that “President Obama and I view Article 5 of the NATO Treaty as an absolutely solemn commitment which we will honor—we will honor.” Shortly thereafter, Moscow “expressed concern” about the treatment of ethnic Russians in Estonia. Mr. Putin justified his actions in Crimea as “restoring unity” to Russian people. Estonia’s population is 25 percent ethnic Russian, compared to 17 percent in Ukraine, mostly in the north and east part of the country. Suppose anti-Russian riots “spontaneously” broke out in Estonia. What would the United States do if Moscow invoked a “responsibility to protect” these people and bring them “back” to the Motherland? Would President Obama take military action against Russia over a small, secluded piece of a tiny, distant country? Would it be like the Polish Corridor in 1939? This is highly doubtful—highly doubtful.

Aren’t we obligated by treaty to intervene? Mr. Biden mentioned the “absolutely solemn commitment which we will honor.” It was so important he said it twice. However, Article 5 says that NATO members pledge to come to the assistance of the attacked state using “such action as it deems necessary, including the use of armed force.” It doesn’t take a White House lawyer to see the gaping loophole—President Obama can simply deem that the use of U.S. force isn’t necessary. He can walk back the red line, as he did with Syria. Stern talk and minimal sanctions would follow, but Estonia would lose some, if not all of its territory. And in practical terms it would mean the end of NATO, which is one of Moscow’s longstanding strategic objectives. Mr. Putin’s chess game does not end in Crimea.

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Remember this country, the place which about a year ago was supposed to be “Ukraine” in terms of geopolitical escalations:

Syria map

Well, in the aftermath of what appears a tenuous detente over the Crimea while Putin plans his next step of how to “merge” with east Ukraine as he sets off to rebuild the USSR, Syria just may be set to regain its place at the top of the global geopolitical risk pyramid. Case in point, early this morning, the fragile ceasefire between Syria and Turkey was shatered after a Turkish F- 16 shot down a Syrian plane on Sunday after it crossed into Turkish air space in a border region where Syrian rebels have been battling President Bashar al-Assad’s forces.

A photo of the falling plane was caught by twitter:

Reuters reports:

“A Syrian plane violated our airspace,” Prime Minister Tayyip Erdogan told an election rally of his supporters in northwest Turkey. “Our F-16s took off and hit this plane. Why? Because if you violate my airspace, our slap after this will be hard,”

The rebels have been fighting for control of the Kasab crossing, the border region, since Friday, when they launched an offensive which Syrian authorities say was backed by Turkey’s military.

Syria said Turkish air defenses shot down the jet while it was attacking rebel forces inside Syrian territory, calling the move a “blatant aggression”.

State television quoted a military source as saying the pilot managed to eject from the plane. The Syrian Observatory for Human Rights monitoring group said initial reports from the area said the plane came down on the Syrian side of the border.

Al Manar, the television station of Assad’s Lebanese ally Hezbollah, said two rockets had been fired from Turkish territory at the Syrian jet.

Amazingly, here is a clip of a live broadcast by HaberTurk which appears to have caught the moment of the plane’s crash live on video.

Why did Turkey really engage? Simple: to distract from PM Erdogan’s relentless political collapse when one after another political scandal is hitting the embattled premier who last week shut down access to Twitter, and it likely set to block YouTube as well, where a phone recording of his admitting graft and embezzlement can still be found. Naturally, it struck at the one country it knows will hardly fight back against the NATO member, although now that Russian foreign policy sentiment is once again shifting dramatically, and may call for far greater support for Syria, not to mention that suddenly Turkey is hardly in “democratic” Europe’s good graces in the aftermath of the Twitter censorship scandal, Erdogan may just have miscalculated.

As for the next steps in Turkey, we repeat what we said on Friday: “We eagerly look forward to see which particular pro-Western agent is groomed to take Erdogan’s place. After all remember: those Qatari gas pipelines that in a parallel universe, one without Putin, would have already been transporting nat gas under Syria, would enter Europe under Turkey.”

Surely following yet another “chess” victory by Putin in the foreign relations arena, the urgency to find that Qatari natgas outlet to Europe is that much greater…

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For the answer of which firm is responsible, and has the largest number of current and former tenants occupying the building located at 15 CPW which we profiled before, and which Bloomberg TV defines as the “world’s most powerful address” – a location whose residents control nearly half a trillion in assets under management – fast forward to 3:20 in the clip below. Hint: listen for the “dog whistle.” 

(click here if the video does not appear)

For those curious, here are some additional facts about 15 CPW courtesy of Curbed.

1) Which investment legend bad-mouthed 15CPW after the developers refused to give him a discount? He wanted half off the price of a $45 million penthouse. Then an upstart swooped in and paid full ask. For a bonus point, name the upstart, too. Carl Icahn. The upstart was Daniel Loeb.

2) Which movie star got a discount for letting the developers reveal he’d bought a 14th-floor apartment in the front “house” section of the building for just over $13 million? Denzel Washington.

3) How many convicted felons live at 15 Central Park West? One. Adam Weitsman was convicted of check-kiting and did time in federal prison.

4) Which reality TV personality found out her actor husband was cheating on her when a building staff member told her his wife was already upstairs… when it was really the other woman? Spoiler alert: She promptly divorced him. Camille Grammer.

 5) 15 CPW’s private lobby restaurant hosts special meals all year round, including “women’s lunches” every two weeks with speakers on such subjects as yoga, art collecting, and surgery-free “facial rejuvenation.” How much is the Mother’s Day lunch there? $55 a head for adults, $25 for kids, and Mom gets a special drink gratis.

6) How many Goldman Sachs executives and alumni live at 15? Nine, including Lloyd Blankfein, who runs the legendary, vampire squid-likened investment bank.

7) Who are Sting’s duplex-owning next-door neighbors on the 16th and 17th floors of 15CPW’s house building? Speak of the devil, there’s Lloyd Blankfein of Goldman Sachs in apartment 16A, and Omid Kordestani of Google in apartment 16C.

8) Which real estate mogul was barred from bidding for the 15CPW site while an old building, the Mayflower Hotel, still stood there? It so happens that the banned prospective bidder told the sellers, representatives of the Goulandris family, that their price—which had to be in excess of $300 million —was crazy. Donald Trump.

9) What price did the sellers end up getting from the Zeckendorfs $401,050,000.

10) How much money did the Zeckedorfs pay the last holdout tenant to vacate his apartment in the building that previously occupied the site and was razed to make way for 15? $17 million, plus a free condo for life at the Essex House.

11) What building did Russian oligarch Dmitry Rybolovlev spurn to buy an $88 million penthouse, said to be for his daughter, at 15CPW? (UPDATE: A rep for Rybolovlev has reached out to say that in fact his daughter, Ekaterina, purchased the apartment through a trust.) That purchase, by the way, still holds the record for most expensive single-family residential property in New York City. Jean Nouvel’s 100 Eleventh Avenue. The entity that owns Rybolovlev’s 15 penthouse is, wittily, called Property NY 100–11 LLC.

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And some more:


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