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- Following comments from Ukraine’s Defense Minister Valery Geletey of Moscow threatening with a nuclear attack on its neighbor, Moscow said it was shocked by the statement. Russia warned that such rhetoric only deepens the civil stand-off in Ukraine.
- “Geletey’s calls to get ready for ‘tens of thousands’ of new victims in what he called ‘Great Patriotic War’ and what in fact is a new punitive operation in his own country are appalling. He only drags the Ukrainian people into a new round of the bloody civil stand-off,” Russia’s Foreign Ministry said in a statement Monday.
- Earlier Geletey wrote in his Facebook that the operation “to cleanse Ukraine’s east from terrorists” was over. He, however, proceeded to accuse Russia of direct military involvement in the east that followed the rebels’ “defeat.”
- “A big war has come to our home, a war Europe has not seen since WWII,” Geletey wrote alleging that Russia not only attempted to secure its position on the rebel-held territories, but also advance onto other regions.
- He said that Moscow – through “unofficial channels” – has “repeatedly threatened to use tactical nuclear weapons” on Ukraine if Kiev continues to resist.
- “It is hard to believe that such statements can come from a defense minister of a civilized state. Otherwise, it’s just not clear how tens of thousands of Ukrainian families could entrust this official with lives of their children, brothers and husbands, mobilized into the Ukrainian army to wage a fratricidal war in their own country,” Moscow said, adding that this was a “blatant” attempt on Geletey’s behalf to secure his own post.
- Unless they are tilting at windmills, the rhetoric this morning from Ukraine’s defense minister is the strongest and most actionable yet. Via his Facebook page, Valeriy Galetey accused Russia of “open aggression,” and explained that:
- *RUSSIA SHIFTED TO ‘FULL-SCALE’ INVASION OF DONBAS, GELETEY SAYS
- *UKRAINE HALTS ATTEMPTS TO DISLODGE REBELS: DEFENSE MINISTER
- *UKRAINE SHIFTS FOCUS TO HALTING RUSSIAN INVASION, GELETEY SAYS
- Earlier in the morning, US Senator Bob Menendez said he has “no doubt Russia has invaded Ukraine,” and following Ukraine requests for assistance from Europe and US, NATO responded by noting a reaction force or 3-5,000 can be ready in 48 hours.
- First, Barroso claims Putin ‘blackmailed’ Europe…
- Jose Manuel Barroso, who has just heard Putin. He says that when he asked about the military boundless in Ukraine, the Russian leader went to the threats: “The problem is this,” according to Barroso, “if I want to, I can take Kiev in two weeks.” As if to say, do not provoke me to anger with new sanctions.
- Then the US chimes in…
- *U.S. SENATOR ROBERT MENENDEZ SPEAKS IN KIEV
- *UKRAINE NEEDS ASSISTANCE FROM EU, U.S., MENENDEZ SAYS
- *UKRAINE-NATO ASSOCIATION IS A LONG-TERM PROSPECT, MENENDEZ SAYS
- *UKRAINE-NATO PARTNERSHIP PACT WOULD BE A GOOD STEP: MENENDEZ
- *UKRAINE NEEDS WEAPONS TO DEFEND ITSELF, MENENDEZ SAYS
- *MENENDEZ SAYS HE HAS NO DOUBT RUSSIA HAS INVADED UKRAINE
- Then NATO responds…
- *NATO’S REACTION FORCE TO BE DEPLOYABLE IN 48 HOURS: OFFICIAL
- *REACTION FORCE TO BE AGREED BY NATO LEADERS AT SEPT. 4-5 SUMMIT
- Free to read: Nato allies at odds over response to Russian aggression http://t.co/Q54sdlBL1l pic.twitter.com/0l6SmE4xKv
- — Financial Times (@FT) September 1, 2014
- *NATO FORCE SPEARHEAD MAY BE 3,000 TO 5,000 TROOPS: OFFICIAL
- And then Ukraine steps it up…
- *RUSSIA SHIFTED TO `FULL-SCALE’ INVASION OF DONBAS, GELETEY SAYS
- *UKRAINE HALTS ATTEMPTS TO DISLODGE REBELS: DEFENSE MINISTER
- *UKRAINE SHIFTS FOCUS TO HALTING RUSSIAN INVASION, GELETEY SAYS
- *UKRAINE WARNS ON BIGGEST CONFLICT IN EUROPE SINCE WORLD WAR II
- *UKRAINE ARMY SAYS REBELS BEING REPLACED BY PROFESSIONAL TROOPS
- * * *
- Seems like the right time to be buying US stocks..?
- Over the weekend, insolvent, debt-dependent Europe thought long and hard how to best punish Russia and moments ago reached yet another milestone in deep projective thought: as Reuters reports, Europeans could be barred from buying new Russian government bonds “under a package of extra sanctions over Moscow’s military role in Ukraine that European Union ambassadors were to start discussing on Monday, three EU sources said.” This will be in addition to the ban on the debt funding of most Russian corporations. So as Europe’s 7-day ultimatum for the Kremlin to “de-escalate” counts down, Putin has a choice: continue operating under a budget surplus and ignore Europe’s latest and most amusing hollow threat which is merely a projection of Europe’s biggest fears, or spend himself into oblivion as Europe has done over the past decade and become a vassal state of the Frankfurt central bank.. Somehow we doubt Putin will lose too much sleep over this latest “escalation”…
- Some more details on today’s latest threat by Europe, which if nothing else has sent the ruble to a fresh record low against the dollar, leaving Europe green with envy at such currency debasement, and boosting Russian exports even more:
- German Chancellor Angela Merkel, who led the drive for a tougher EU response, said on Monday that Moscow’s behaviour in Ukraine must not go unanswered, even if sanctions hurt the German economy, heavily dependent on imported Russian gas.
- “I have said that (sanctions) can have an impact, also for German companies,” Merkel told a news conference in Berlin. “But I have to say there is also an impact when you are allowed to move borders in Europe and attack other countries with your troops,” she said. “Accepting Russia’s behaviour is not an option. And therefore it was necessary to prepare further sanctions.”
- It remains to be seen just how much more loss-generating populism German companies are willing to take. After all, every now and then even Europe requires a reminder that it is corporations who pull the political strings. And if German corporations want Merkel gone, that just may be what they will get. For now however, all Europe gets is more “draconian” populism.
- The leaders asked the executive European Commission to prepare further measures within a week, building on steps taken at the end of July, which targeted the energy, banking and defense sectors.
- “I’m hearing that a ban on buying Russian government bonds could be in the next package,” an EU official familiar with the preparations said.
- Tighter restrictions on dual use technologies with military as well as civilian applications could also figure, along with some more curbs on advance energy exploration equipment, the official said.
- To be sure, nothing was decided: it is, after all, Europe, and decisions is what well-catered parties in the future are for.
- An EU diplomat said ambassadors of the 28 member states would hold an emergency meeting on Monday at 1300 GMT to start work on a “significant” package of further measures although no immediate decisions were expected. A further meeting is set for Wednesday.
- The leaders said the Commission should include in the sanctions “every person and institution dealing with the separatist groups in the Donbass”, potentially leaving a very broad area that could be targeted.
- And just to add to the European flavor, and humor, the key countries in central Europe have already opined against further Russian sanctions, thus further jamming the wedge discussed previously whereby Russia now succeeded in converting that all-important safehaven, Austria, to its side.
- However several EU countries heavily dependent on Russian gas, including the Czech Republic, Slovakia and Austria, are opposed to new sanctions, which require unanimous agreement.
- “I consider sanctions meaningless and counterproductive,” Slovak Prime Minister Robert Fico said on Sunday.
- “Until we know what is the impact of the already imposed sanctions, it makes no sense to impose new ones,” Fico said. “I reserve a right to veto sanctions harming national interests of Slovakia.”
- But back to the stupidity of Eurocrats, who instead of focusing on fixing their own imploding economies, are hell bent on making Russian life a living hell, in the process accelerating Europe’s mere “triple-dip” into an outright depression:
- EU diplomats said the main thrust of new steps could be financial because that would hit the Russian government rather than citizens. It could be coordinated with the United States, whose measures were also focusing on the financial sector.
- Two diplomats said they did not rule out a ban on the purchases of Russian sovereign bonds to make it more difficult for the Russian government to finance itself on markets. In July, the EU banned Russian state-owned banks from raising capital or from borrowing in EU markets.
- And of course, since Putin knows he hold all the trump, or rather Gazprom, cards from day one, all Europe will achieve with further sanctions is even more retaliation:
- Moscow has retaliated against sanctions by banning most agricultural imports from Europe and the United States. The risk of a ban on buying Russian sovereign bonds is that the Kremlin could hit back by dumping European government bonds, of which Russian state institutions have significant holdings.
- Which bring us to the dumbest idea from last week: the UK’s push to exclude Russia from SWIFT… and in the process accelerate the demise of the dollar as the world’s reserve currency.
- Asked about the idea that Russia could be cut off from the international money transfer system known as SWIFT, one diplomat said the idea had been floated several months ago, but that there was opposition to it among several EU countries.
- “The problem is that while it would probably work well in the short-term, as in the case of Iran, in the long-term it would trigger the creation of an alternative system to SWIFT and the setting up of two alternative world transaciotn systems and nobody wants that,” the diplomat said.
- It appears not everyone in Europe is an idiot.
- But the punchline, and why once again anyone with half a brain knows it is all for show, is that as usual, Russia’s gas sector, which powers European industry and lights its cities, has been spared so far and will continue to be spared.
- By now even 5 year olds realize that if Europe really wanted to hurt Russia, it would cut off the gas imports.
- Only one problem: it can’t, as that would be economic and political suicide for Europe, and for the “infinite” political capital behind its unraveling monetary union. Everything else is noise.
- At talks in the Belarusian capital, the self-proclaimed Donetsk and Lugansk People’s Republics have urged Kiev to acknowledge their autonomy within Ukraine, but said they wish to remain an integral part of the country.
- LNR and DNR representatives urged the Ukrainian government to end their military operation in the country’s east so that parliamentary and local elections can take place freely.
- “The president, government and [parliament] Verkhovna Rada should accept… decrees granting immediate recovery from the humanitarian catastrophe, acknowledging the special status of the territories under the control of the People’s Republics, creating conditions – first of all stopping the ‘anti-terror’ operations – for free elections of local authorities and MPs,” the document with the republics’ position reads.
- The document also calls on Kiev to guarantee “the right to use the Russian language at an official level on the territories of the People’s Republics.”
- After the government of President Viktor Yanukovich was ousted in March, the new authorities immediately started to introduce the legislation curbing the Russian language. Though the law failed to materialize in the end, the initiative was one of the major factors that triggered the conflict in eastern Ukraine.
- The statements come as a contact group on the crisis in eastern Ukraine begins its work in Minsk.
- The self-proclaimed republics are represented by DNR Deputy PM Andrey Purgin and the chairman of the LNR’s Supreme Council, Aleksey Karyakin.
- Before the meeting commenced, Purgin said he had brought to Minsk proposals aimed at curbing the military activity and reducing the number of the victims.
- “I’ve come with the suggestions to find common ground to curb war and casualties,” he said, adding that those are “the initial suggestions for negotiations’ process.”
- The propositions consist of “eight or nine points,” Purgin said and also include a suggestion to create a commission that would look into peaceful resolution of the conflict and the reconstruction of the Donetsk Region.
- He also admitted that he doesn’t expect a breakthrough from the meeting of the so-called contact group aimed at solving the Ukrainian conflict.
- Representatives of Russia, OSCE and Kiev are also part of the talks.
- Ecuador is planning to create the world’s first digital currency issued by the country’s central bank, in what is seen by many as a step to abandon the US dollar, the currency now used by the Central American country.
- The currency is expected to start circulating in December, according to the country’s Central Bank.
- The technical details or the name of the currency have not been revealed, although the officials stated that it would not be a crypto-currency like Bitcoin.
- The new currency is expected to co-exist with the US dollar, the current official money Ecuador uses, and will be channeled for 2.8 million people in the country – 40 per cent of the participants in the economy – who are too poor to afford the usual banking.
- Use of the currency will be voluntary, and it will not be used to pay the state employees.
- It will be possible to make and get payments via cellphones, Central Bank’s deputy director Gustavo Solorzano told AP.
- The software needed for the currency to function is already being used by cellphone companies, according to the official responsible for the currency, Fausto Valencia.
- The country’s President Rafael Correa declared that the only issue with the plan is that it has taken so long, defending it against “pseudo-analysts who have appeared in the media trying to smear (it).” Correa denied any plan to replace the US dollar.
- Last month, other digital currencies like Bitcoin which are not approved by the state were prohibited in Ecuador by the country’s National Assembly.
- The disadvantage of the new currency would be that, unlike Bitcoin, an unlimited amount of it can be minted, creating potential risk of inflation.
- Some specialists also regard the move as a step towards giving up the US dollar funds.
- Nathalie Reinelt, an emerging payments analyst with the US-based Aite Group, told AP that she doesn’t see any other motivation for creating such a currency.
- The US dollar was set as the Ecuadorian currency in 2000, after a massive banking crisis hit the country. Even nowadays, the country is $11 billion in debt, mostly to China.
- The Dawn of Libya, an Islamist militia group, has said that it has secured the US embassy compound in the Libyan capital Tripoli, more than a month after US staff evacuated the building.
- Although windows at the compound have been smashed, most of the equipment that had been left by the Americans remained untouched, according to an AP journalist who was invited by the militants to have a look around.
Islamists in the US embassy in #Tripoli#Libyapic.twitter.com/5sKDTaJZuI
— Zaid Benjamin (@zaidbenjamin) August 31, 2014
- A commander of the militia group said that his forces have been in control of the former embassy since last week.
- A poorly-filmed video has appeared on YouTube showing men, who may or may not be the Islamic militants, fooling around by the swimming pool, while some of them perform reckless dives from an upper balcony into the shallow pool.
- Safira Deborah, the US Ambassador to Libya, said the video appeared to have been filmed in the residential annex of the embassy.
- The US embassy was evacuated in July, as a last-minute ceasefire between warring militias collapsed and the capital fell into complete chaos.
- The US embassy is located near the airport, which marked the frontline between two rebel groups. For weeks the staff sheltered in concrete bunkers while 90 heavily armed US Marines fended off any would-be attackers. However, the embassy did not take any direct hits.
- The evacuation of the embassy in Tripoli was soon followed by EU embassies and brought back memories of the death of Chris Stevens, the last US ambassador to Libya who died along with three of his staff when the US consulate in the eastern Libyan city of Benghazi was overrun by militia two years ago.
- Libya has descended deep into chaos since the overthrow of Muammar Gaddafi in 2011. A student who joined the uprising against Gaddafi in 2011 told The Guardian: “This is not what I fought the revolution for. We fought for peace and instead we get this.”
- Don’t be surprised to lose if you don’t make an effort at being competitive.
- And if you go out of your way to make yourself less competitive, expect to lose.
- If that sounds like simple common sense, that’s because it is.
- But it’s also exactly what the US has been doing for years—enacting tax policies that sabotage its global economic competitiveness.
- It’s like trying to get in shape for a marathon by going on an all-McDonald’s diet. (Speaking of McDonalds, check out this funny video spoof of what their commercials should really look like.)
- Here are two major reasons why the US is lagging in the global economic marathon:
- The US has the highest effective corporate income tax rate in the developed world (see chart below).
- Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US. This has had the effect of US corporations keeping over $1.9 trillion in retained earnings offshore to avoid the crippling US corporate income tax.
- These “worst in the developed world” tax policies are clearly hurting the global competitiveness of American companies.
- Being deemed a “US Person” for tax purposes is like trying to swim with a lifejacket made of lead.
- It should come as no surprise that an increasing number of productive people and companies are seeking to shed this burden so they can keep their heads above water.
- At this point, it’s more than just a trickle—it’s an established trend in motion.
- And I don’t see anything that would reverse it. On the contrary, given the political dynamics—ramped-up spending on welfare and warfare policies, as well as an “eat the rich” mood—taxes have nowhere to go but north. And that means the exodus will continue.
- Three Cheers for Walgreens
- Over the past couple of years, dozens of high-profile US companies have moved abroad (or seriously considered it) to lower their corporate income tax rate and to access their offshore retained earnings without triggering US taxes.
- Among them are Medtronic, Liberty Global, Sara Lee, and Omnicom Group—the largest US advertising firm—to just name a few.
- Earlier this year Pfizer, one of the world’s largest pharmaceutical companies, sought (but was ultimately rebuffed) to move abroad, which would have cut its tax bills by as much as $1 billion a year.
- The strategy these companies are using is known as an inversion. It’s where a US company merges with a foreign company in a jurisdiction with lower taxes and then reincorporates there. Current US law allows for this if the foreign shareholders own at least 20% of the combined company (though some are trying to raise the minimum to 50%).
- Now, despite the howls and shrieks from upset politicians and the mainstream media about these companies being “unpatriotic” and “un-American,” they’re doing absolutely nothing illegal. Inversions are totally acceptable within the current rules of the US Tax Code.
- Chuck Grassley, a Republican senator from Iowa has said, “These expatriations aren’t illegal. But they’re sure immoral.”
- I beg to differ.
- Why would anyone want to give the destructive bureaucrats in DC a penny more than is legally required? As far as I’m concerned, not only is there nothing wrong with going where you’re treated best, there’s also an ethical and moral imperative to starve the Beast.
- And now the latest high-profile company to consider putting the Beast on a diet is Walgreens.
- Walgreens is considering reincorporating in Switzerland as part of a merger with Alliance Boots, a European rival. The net effect for would be to reduce Walgreens’ tax rate to 20%, down from around 31% now. The move is estimated to save around $4 billion over the next five years.
- What really has the politicians scared is that inversions have started to snowball.
- The New York Times quoted an international tax lawyer stating that “it takes one company with enough public recognition to start [a] domino effect.”
- Walgreens could be the company that triggers a domino effect. If Walgreens were to move, it would gain a significant competitive advantage against its rivals. CVS, Walgreens’ main competitor, paid a 34% tax rate in recent years. Can CVS really compete with Walgreens if the latter is paying 20%?
- Probably not. And that will only lead to more inversions.
- Another Way to Starve the Beast
- Remember, US companies are not globally competitive because of these two unique burdens:
- The US has the highest effective corporate tax rate in the developed world.
- Unlike most countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US.
- We have already seen how inversions can reduce #1, but they also offer huge benefits in terms of #2.
- Reincorporating abroad allows companies to permanently avoid paying US taxes on foreign earnings. It also allows companies to access their retained earnings offshore in ways they couldn’t before without triggering punishing US taxes.
- Medtronic, for example, has accumulated $20.5 billion of untaxed earnings in foreign subsidiaries. By reincorporating abroad, Medtronic can access that money without getting slapped with US corporate income taxes, which would save it billions.
- For companies like Medtronic and Walgreens, reincorporating abroad seems like a no-brainer.
- Contrary to the government propaganda, the villains in this story aren’t the companies seeking to diversify abroad to remain globally competitive. The villains are clearly the spendthrift politicians who enact these “worst in the developed world” tax policies, which create very compelling incentives for these companies to leave the US.
- It’s Not Just Companies Saying Sayonara
- While the US should be enacting policies that make it attractive for productive people and companies to come to the US—rather than driving them away—don’t hold your breath for positive change. It’s more likely that nothing but more taxes and regulations are coming.
- But as we have seen with companies like Medtronic and Walgreens, companies have options too.
- And it’s not just multibillion-dollar corporate entities that have options. Individuals operating on a modest scale can also reap enormous benefits by diluting the amount of control the bureaucrats in DC (or any country) wield over them. International diversification is the solution.
- You do this by moving some of your savings abroad with offshore bank and brokerage accounts, physical gold held abroad, owning foreign real estate, and establishing an offshore company or trust.
- Obtaining a second passport is an important part of the mix as well.
- You probably can’t take all of these steps, and that’s fine. Even taking just one will go a long way to reducing your political risk and giving you more options. In many cases, you don’t even have to leave your living room.
- Think of it as your own personal insurance policy against an out-of-control government.
- However, things can change quickly. New options emerge, while others disappear. This is why it’s so important to have the most up-to-date and accurate information possible when formulating your international diversification strategy. That’s where International Man comes in.
- To keep up with the best strategies, you might want to check out our Going Global publication, where they are discussed in great actionable detail.
8.30.14 – Ukraine releases Russian paratroopers
- All Russian paratroopers who were earlier in the week detained in eastern Ukraine have been handed over to the Russian military.
- Kiev’s army announced August 26 that it had captured the Russian paratroopers after their incursion into Ukraine. The military officials claimed the 10 detained servicemen had crossed the border to fight alongside anti-government forces.
- According to the Russian Defense Ministry, the soldiers had been on a routine patrol, which accidentally strayed into foreign territory without any hostile intent.
- President Vladimir Putin reiterated that Friday. “In fact, this is the case, I’m talking seriously. I believe that they had just gotten lost because there are no boundary markers there,” the president said.
- Putin also said that he had negotiated the release of the paratroopers with his Ukrainian counterpart during their meeting in Minsk, Belarus, earlier this week.
- “I believe this is just a technical issue. Petro Poroshenko and I talked about this [in Minsk] and he affirmed that the Russian military servicemen would be handed back over to Russia, just as we continue to return soldiers [to Ukraine] from the Ukrainian Army,” Putin said.
- Moscow has reiterated there have been numerous cases of incursions into Russian territory by Ukrainian soldiers. One incident involved an armored personnel carrier, and the soldiers were armed.
- At the beginning of August, over 400 Ukrainian troops were allowed to cross into Russia after requesting sanctuary.
- Russia has always been quick in handing back Ukrainian soldiers who’ve crossed into its territory, while giving sanctuary to those servicemen who wanted to stay.
- For months Europe had thought that mere verbal (and hollow) threats, populist posturing and propaganda would be enough to force Russia’s Putin to back off and withdraw from the endless Ukraine escalation, into a Kremlin cocoon with his tail between his legs. What they didn’t anticipate was that Putin would in no way back down (as that would be seen as defeat and weakness by his numerous internal foes), nor would have have to: with Russia providing a third of European gas and with winter approaching, Russia had all the trumps cards from day one. Furthermore, as a result of escalating trade wars it is not Russia’s economy that is hurting but Europe, which is on the verge of a historic triple-dip recession, only unlike 2010 and 2012, this time it is Europe’s growth dynamo, Germany, itself which is leading the lemmings into the abyss.
- Now, finally, Europe has realized that its “strategy” (if it ever had one, red: Obama’s ‘strategy’ on dealing with ISIS) was flawed. It is with this mindset that European Union leaders met in Brussels earlier today and while, as usual, the the threat of new and improved sanctions to Russia was present, suddenly Europe’s leaders seem far more “fearful of a new Cold War and self-inflicted harm to their own economies” and instead decided to give Moscow another chance to make peace according to Reuters.
- Confirming Europe’s realization just how serious events are, and how far down the rabbit hole Europe’s bureaucrats have gone, French President Francois Hollande, while stressing that a failure by Russia to reverse a flow of weapons and troops into eastern Ukraine would force the bloc to impose new economic measures i.e., nothing new, it is what he said just after that indicated a dramatic change in rhetoric: “Are we going to let the situation worsen, until it leads to war?” Hollande said at a news conference. “Because that’s the risk today. There is no time to waste.”
- Because when Europe, the cradle of both World War I and II talks war, it is a good idea to listen.
- Of course, the problem of hypocrisy promptly emerges, because it is France whose mistral amphibious assault ship is being delivered to Russia over the objections of both Germany (whose own military export complex has quite a few pending RFPs to the Kremlin) and of course Washington. That, and the fact that it is Europe’s actions that have led the situation to the bring of another world war. Actions such as the expansion of NATO to Russia’s borders which the Kremlin, justifiably, sees as yet another offensive intrusion by the west into purely regional matters, because last time anyone checked, Ukraine was neither a member of NATO nor the European Union.
- The paradoxical hypocrisy continued when none other than British PM, who has been teasing with pulling the UK out of Europe for months over the election of Jean-Claude “You have to lie pretty much all the time in Europe” Juncker, also spoke on behalf of a united Europe. From Reuters:
- British Prime Minister David Cameron said: “We have to address the completely unacceptable situation of having Russian troops on Ukrainian soil. Countries in Europe shouldn’t need to think long before realising just how unacceptable that is. We know that from our history.
- “So consequences must follow if that situation continues.”
- Consequences such as pushing Germany into outright depression, which in turn would lead to a global economic contraction? Sure, go ahead, but keep in mind that once again Putin has done his homework. Unless, of course, the entire premise is to launch another round of global coordinated QEasing, and this time blame the Kremlin as the “scapegoat” for thrusting the world into at least one more year of unprecedented Reverse Robin Hood wealth redistribution by way of central banks.
- Meanwhile, Europe’s hawkish warmongers had free reign today to tell the world how they really feel:
- The president of formerly Soviet Lithuania, an outspoken critic of Vladimir Putin and of EU hesitation to challenge him, called for urgent military supplies to Kiev and a tougher arms embargo on Russia. Dalia Grybauskaite said Moscow, by attacking Ukraine, was effectively “in a state of war against Europe”.
- But large Western countries are wary of damaging their own economies through sanctions. Those include Germany, Britain and France, as well as Italy, which is heavily dependent on Russian gas and expects to secure the post of EU foreign affairs chief. Poroshenko gave short shrift to Moscow’s denials by denouncing the past week’s incursion of thousands of troops with hundreds of armoured vehicles and said he expected the summit to order the European Commission to prepare a new set of sanctions.
- But, like Commission President Jose Manuel Barroso, he used their joint news conference to stress a will to find a political solution to a crisis that President Putin blames on Kiev’s drive to turn the ex-Soviet state away from its former master Moscow and toward a Western alliance with the EU and NATO.
- He said he was not looking for foreign military intervention and expected progress toward peace as early as Monday – because failure could push the conflict to a point of no return: “Let’s not try to spark the new flame of war in Europe,” he said.
- Barroso also warned of the risk of a “point of no return” in stressing that EU leaders wanted to defuse the confrontation with their nuclear-armed neighbour.
- “It makes no sense to have … a new Cold War,” Barroso said. Further conflict would hurt all of Europe, he said, adding that sanctions were meant to push Moscow to talk. His Commission already had prepared a number of options for further measures.
- Europe may be shocked to learn that the Cold War never went away, but simply was on hiatus until the Russian bear and the Chinese dragon felt strong enough they can finally ascend to global superpower status, in the process sweeping away the insolvent west, and its reserve currency status.
- All that said, no pun intended, there was nothing actually decided today in Brussels, nor was any action taken, as is generically the case in Europe. In fact, the only thing that did happen is that as was known in advance, moments ago Polish Prime Minister Donald Tusk replaced Haiku-spewing, unelected Gollum lookalike Herman Van Rompuy, a well-known figurehead from the days when Europe was actively fighting for its survival.
- Elected. The European Council has elected PM Donald Tusk as the next President of the European Council & Euro Summits #EUCO @premiertusk
- — Herman Van Rompuy (@euHvR) August 30, 2014
- With Tusk, a conservative easterner, replacing the Belgian Van Rompuy, Italian Foreign Minister Federica Mogherini from the centre left would take over as the bloc’s foreign policy chief, replacing Briton Catherine Ashton.
- In overall charge of the executive Commission, in succession to Barroso, will be conservative former Luxembourg premier Jean-Claude Juncker, appointed at a stormy summit two months ago.
- Eastern leaders, alarmed by a resurgent Moscow, had resisted the appointment of Mogherini at that time. At 41 and in government only since February, they saw her as lacking the political experience and weight to stand up to the Kremlin and also handicapped by Italy’s dependence on Russian energy.
- In fact, while Europe’s powerlessness to do anything to halt Putin’s advance is well-known, the most interesting aspect of today’s meeting that left Belgian caterers that much richer, was the horsetrading of hollow, bureaucratic figureheads at the top: something Europe also excels at.
- Britain, France, Germany and other countries are competing to see their nominees secure important portfolios in Juncker’s team, such as in economic affairs, trade and energy supply.
- The horse-trading over jobs underlines the power of rival national governments over the supranational institutions of the EU. Proponents of a strong political leadership in Brussels that can inspire and rally an increasingly sceptical European public behind the common project may again be left disappointed.
- Italian Prime Minister Matteo Renzi said on Friday he would propose a meeting to discuss tackling the “really worrying” economic situation across Europe, with growth and jobs elusive and fears of a new crisis for the euro currency.
- The leaders agreed to schedule that summit for Oct. 7, according to the draft statement.
- And so on.
- To summarize: more worthless power moves, more hollow rhetoric and threats, more verbal escalation; nothing else.
- In fact, the most notable comment all day today came from Hungarian Premier Viktor Orban who said that EU sanctions on Russia haven’t worked and it’s “self-delusion” to think they’ll help resolve the crisis in Ukraine.
- Well, if there is anything Europe, and its allegedly unlimited but certainly very limited amount of political capital spent to preserve an unsustainable, artificial union, excels in it is “self-delusion.”
- The sheep have been told their confidence is at a 7 year high by the propaganda peddlers working at the behest of the oligarchy. The sheep are also told that 10 million jobs have been added since the GOTUS played his first round back in 2009. The sheep have been told the record highs in the stock market prove that all is well. If the .1% are doing fantastic, some of the wealth must be trickling down. The sheep are told that QE and ZIRP were really to save Main Street and not the bonuses of Wall Street (at record highs by the way). The sheep are told to fear ISIS, Iran, Assad, Putin, and China. The sheep are told U.S. energy independence is just around the corner and to ignore the fact that gas prices have tripled since in the last ten years. The sheep are told drones will keep them safe and the DHS militarizing the police is just for their safety and security. The sheep are told guns are dangerous in their hands, but not in the hands of the government. The sheep passively eat their iGadgets and barely bleat while being led to the slaughter house.
- The propaganda machine is working at hyper speed as the wheels fall off this out of control bus. But all the messaging, packaging, and lies can’t change the facts. Ignorance about the facts doesn’t change the facts. The oligarchs are getting pissed. You mindless consumers simply won’t consume as much as you used to, even with 7 year 0% interest subprime auto loans, $1 trillion of government loans to generate consumption disguised as student loans, and five credit card offers per week from the Too Big To Trust Wall Street cabal. WTF is wrong with you?
- You’ve ruined the storyline used for months about horrific winter weather being the cause of non-spending in the 1st quarter. Once it stopped being cold you were supposed to spend like drunken sailors again. Just like the old days. How could you spend less in July than you did in June? You’ve only increased your spending by a mere 1.8% so far this year. With real inflation on stuff you need to live running above 5%, you’re actually spending far less than last year. No wonder confidence is skyrocketing.
- A little examination into the facts behind the Commerce Department report might shed a little light on the truth about the good old American consumer:
- 25% of all personal income in the country is either a transfer from the government to someone or from a government job. That is $3.7 trillion taken from producers and given to takers. In 2000 this figure was 21%. The relentless increase in Social Security, Medicare, Medicaid, Veterans Benefits and Other will drive this percentage to 30% by 2020.
- Real personal income (excluding government transfers) has gone up 2.6% over the last year and this is using the false CPI figure of 1.6% to reach that pitiful number. Using a true inflation figure of 5% yields lower real personal income than last year.
- These numbers also fail to recognize the 2.2 million increase in population. On a per capita basis, real personal income is up 1.9% in the last year.
- Senior citizens and conservative savers are earning $120 billion less today than they did seven years ago. All the grandmothers eating cat food thank you Ben and Janet. If interest rates were allowed to adjust to market levels consistent with inflation, savers would be generating $500 billion to $700 billion more interest income that could be used to propel economic growth. Per capita real disposable income was $37,582 in May of 2008. It is currently $37,553. Again, this is using the fake BLS inflation numbers, so it is even far worse.
- Is it really a shocker that Americans are spending less? The MSM is so captured by the organizations providing their advertising revenue that their faux journalists don’t even attempt to examine the facts and reach logical conclusions. Their job is to cheer lead and make excuses for why their storyline of improvement never plays out. The snow storyline is history. The surge in consumer confidence storyline has been proven false by the actual spending data. Now we move onto the surge in jobs storyline that is proven false by the personal income data. I’m sure back to school season will be a resounding success. Just wait until the holidays. The consumer will surely be back this year. And the beat goes on.
- The chart below tells you all you need to know about why this recovery is false. The people who are supposed to be in their peak earnings and spending years have seen their real household incomes decline dramatically since the END of the recession in June 2009. Think about that for a moment. The only people who’ve seen their real incomes rise are those who no longer spend. I wonder if it is a coincidence that government transfers since June 2009 are up 18% and the grey hairs have seen their incomes rise?
- The consumer is not back. They are not coming back. The decades long debt fueled orgy of consumption has long since peaked and we are on the long road to perdition. Confidence can’t cure our disease. More debt to cure a disease caused by too much debt will not save the patient. Our disease is terminal.
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