Is that a BRIC thru the window?

[GRG55]

Re: Is that a BRIC thru the window?

So then why has the Fed been forced to lend money to European banks throughout the EU crisis?

LOL. The answer is fairly obvious. Central Banks are the only entities that can cover the risk of lending to a bunch of poorly managed, near-bankrupt businesses...which pretty well describes the European banks. BTW, it didn't occur to you that the need to give these corporate welfare bums US Dollars is indicative of a high and rising demand for US Dollars worldwide?

Let me slightly re-phrase my closing comment from the last thread: Less "Cool"-aid, more California red.
It'll make the world look a lot better.

now dont go pickin on coolhand, mr juju - he's a very valuable contrast to the 'conventional' POV

and eye personally like to see him and GRG duke it out - so lay off and let them argue the finer points of this stuff. you get plenty of opportunity to get yer .02 in here, and we like your (millenial gen input) too.

We aim to please. Even in the cheap entertainment category. Cool and I should sell tickets. We could probably make more money from that than we have from gold so far this year...

[coolhand]

Re: Is that a BRIC thru the window?

Coolhand, that sounds more like corporate welfare to me. Student loans aren't welfare. People relying on basic subsidies to feed themselves because the economy is so fucked doesn't make it a welfare state.

"The merger of state & corporate power is called Fascism". -Mussolini

I agree that people have to rely on basic subsidies to feed themselves b/c the US economy is so fucked...and it is structural...when you set up the fiat system set up in 1971 when Nixon ditched the gold standard, you were always going to get this outcome.

But purely by definition, when the gov't is providing all of the above, that is a socialist welfare state. I am not opining whether I think it is good or bad. But it is objectively a socialist welfare state. It is what it is.

[coolhand]

Re: Is that a BRIC thru the window?

Watch what China does with US debt, not what it says


By Ambrose Evans-Pritchard Economics Last updated: October 15th, 2013




So much for the hot rhetoric from Beijing questioning the creditworthiness of US debt and consigning the US dollar to the dustbin of history.

The latest data shows that China's foreign reserves soared by $163bn in the third quarter to $3.66 trillion, one of the biggest jumps ever.

Mark Williams and Qinwei Wang from Capital Economic called the rise "astonishing". They estimate that China's central bank must have bought $70bn of foreign bonds last month in a frantic bid to hold down the currency.

We won't know for a while where the money went, but a big chunk must have gone into US Treasuries. So bear that in mind when you read the Xinhua claims that the US debt ceiling fight "has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonised."

Or when it says:

A new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing. To that end, several corner stones should be laid to underpin a de-Americanised world.

Talk, talk, talk.

China's soaring reserves expose the truth. (And no, excess reserves are not a sign of strength, they are a sign of a deformed economy). Beijing is not in fact opening up its capital accounts and preparing to let the market decide the exchange rate.

The good news for China is that is no longer an emerging market in any meaningful sense. It was a safe haven during the great summer squall that hit India, Indonesia, Turkey, Brazil, South Africa, Ukraine, Serbia, et al. China did not suffer capital flight. It suffered a surge of very unwelcome capital inflows.

But there is a darker side to this. For all the talk of reform, China still refuses to give up its mercantilist trade policy. It is holding down the yuan to cling onto global market share and protect the wafer-thin margin of its exporters, not always successfully.

I have grave doubts about the new consensus view that China is roaring back. There is a high chance that this will fizzle out. You can see from Simon Ward's money data at Henderson Global Investors that China's money supply has rolled over:

Click to enlarge


Mr Ward's measure of six-month real M1 growth is an early warning for the economy, roughly six months ahead. So it points to a fresh slowdown over the late winter/early spring. Be prepared.

In any case, the recent burst of growth has been driven almost entirely by reverting to the bad old ways of top-down investment in heavy industry, and excess credit (yet again), as both the IMF and World Bank hinted in their latest reports.

The economic "efficiency" of debt has collapsed. Each extra yuan of loans now yields just 0.18 yuan of GDP growth. The credit cycle is played out. Debt has jumped from $9 trillion to $23 trillion in five years, reaching 200pc of GDP. Keeping it going is playing with fire. The experts in Beijing know exactly what this implies, but they can't easily stop it. Political vested interests are at play.

Zhiwei Zhang from Nomura has published a note, "China: Why the Economic Recovery is Unsustainable", citing seven reasons why the latest expansion is unhealthy and doomed to wilt like a failed souffle.

The one that struck me most was the finding in the IMF's Article IV report that China's full fiscal deficit (including local government) was 7.4pc of GDP last year. It was 9.7pc excluding land sales, which should be exclude because that sort of funding is a Ponzi scheme.

This is actually worse than the US, as you can see from the chart below:



This does not mean that the wheels will fall off the Chinese economy. What it does show is how far the Chinese growth model is living on borrowed time. All the low-hanging fruit has been picked.
It will be a much harder slog from now on.

Isn't foreign reserve growth just a function of trade? And if so, then while reserves clearly rose sharply, let's watch what China does with those reserves in 3Q. They bought 5% of Ukraine (farmland). They are trying to buy African gold mines. They just closed the purchase of the largest pork producer in the world (Smithfield Foods in the US.)

So China is taking in foreign reserves from trade & then redeploying them into farmland, gold & pork. Are they the next featured guests on "Doomsday Preppers?" Or are they playing chess while the rest of the world is playing "checkers"

(ie China understands that with $1 quadrillion+ in debt & derivatives against maybe $70T in global GDP in a world of peak cheap oil, "markers" of financial wealth are not going to hold their purchasing power against the real assets of financial wealth.)

[coolhand]

Re: Is that a BRIC thru the window?

LOL. The answer is fairly obvious. Central Banks are the only entities that can cover the risk of lending to a bunch of poorly managed, near-bankrupt businesses...which pretty well describes the European banks. BTW, it didn't occur to you that the need to give these corporate welfare bums US Dollars is indicative of a high and rising demand for US Dollars worldwide?

Let me slightly re-phrase my closing comment from the last thread: Less "Cool"-aid, more California red.
It'll make the world look a lot better.

[FONT=Verdana]

We aim to please. Even in the cheap entertainment category. Cool and I should sell tickets. We could probably make more money from that than we have from gold so far this year...

I love discussing the world with you GRG! Hopefully no hard feelings on your end, certainly aren't on mine...you help my thought process immensely...echo chambers are useless for intellectual advancement.

I stand by my point - the only central bank that can create dollars is the Fed. That is a factual reality. The reason we had to lend $'s to these "corporate welfare bums" is that we are in a dollar based system & have been for 42 years. It's not a symptom of high & rising future demand...it's a rear-view mirror picture that the world (prior to 2008) was centered on USD's & those loans are continuing to blow up due to ongoing troubles in the global shadow banking system.

That is the rearview mirror - looking out the windshield to the future yields a different reality - China was settling 0% of its own trade in yuan in 2009, that # is 20% in 2013, $335B in the 1H13 alone, up 64% y/y. And I keep reiterating - Chinese UST holdings flat for 3 straight yrs, Chinese gold holdings up 100% y/y & up 300-400% y/y in last 2 yrs.

The end game to all of this is so much more obvious than the housing bubble. Why would China & Russia settle oil trade in dollars so they can help fund their own military encirclement by the US in places like Syria? That requires me to believe that Putin & the Chinese gov't are stupid. That seems like a bad assumption to make.

Don't fret about gold... I will happily buy every ounce of gold you own at $800...the price is going there...the only question is will US exchanges break & be paid out in cash before it gets to $800 or not.

Then after US gold derivative exchanges break after a gold price collapse (which will leave most gold owners despondent), will come nirvana...

[Southernguy]

Re: Is that a BRIC thru the window?

The old definition of an economist: someone who predicted 10 of the last 3 recessions.
The new definition: someone who predicted 5 of the 0 China crashes.

[don]

Re: Is that a BRIC thru the window?

China appears to have all the productive economy growth dynamism the US used to have. (Of course we now lead the world in financial manipulation) Building an economy that creates real-world wealth, including extensive off-shore investment, will and has already been tested by China's inability to project military strength. Will the present and future be a financialized monopoly capital goon squad vs an industrial state capitalism dynamo? Will this movie have a happy ending? From the trailers it looks doubtful, but one never knows . . .

[coolhand]

Re: Is that a BRIC thru the window?

China appears to have all the productive economy growth dynamism the US used to have. (Of course we now lead the world in financial manipulation) Building an economy that creates real-world wealth, including extensive off-shore investment, will and has already been tested by China's inability to project military strength. Will the present and future be a financialized monopoly capital goon squad vs an industrial state capitalism dynamo? Will this movie have a happy ending? From the trailers it looks doubtful, but one never knows . . .

China's inability to project military strength?

You mean like the "anti aircraft carrier nuclear ballistic missile" that has our military guys paying attention?

Or the ability for Chinese sub to surface in the middle of a US carrier battle group undetected, way back in 2007?

And have we ever learned who fired that seaborne missile off the coast of California a few years back?

All of this stuff is (or at least used to be) findable on google.

I'm not saying that the US military isn't still dominant - it is vastly superior to all others, & I tremendously respect our troops.

My point is that China & Russia have nukes & have shown an ability to stand up to us (Syria?)...and if we list the number of countries that the US has directly attacked that have nuclear weapons, we quickly find...ZERO.

I hope we are smart enough as a race to avoid a nuclear holocaust. What gives me comfort about avoiding war is that the US corporations whose lobbying dollars control Washington DC derive most of their revenues & profits from emerging markets. While that gives me comfort about avoiding war, it does not provide comfort about the direction of the US sadly...

[don]

Re: Is that a BRIC thru the window?

There's a war going on now for Africa. Libya was an accelerant.

[don]

Re: Is that a BRIC thru the window?

any updates on Chinese military activity in Africa?

U.S. Prepares to Train African Forces to Fight Terror

By ERIC SCHMITT

FORT RILEY, Kan. — Here on the Kansas plains, thousands of soldiers once bound for Iraq or Afghanistan are now gearing up for missions in Africa as part of a new Pentagon strategy to train and advise indigenous forces to tackle emerging terrorist threats and other security risks so that American forces do not have to.

The first-of-its-kind program is drawing on troops from a 3,500-member brigade in the Army’s storied First Infantry Division, known as the Big Red One, to conduct more than 100 missions in Africa over the next year. The missions range from a two-man sniper team in Burundi to 350 soldiers conducting airborne and humanitarian exercises in South Africa.

The brigade has also sent a 150-member rapid-response force to Djibouti in the Horn of Africa to protect embassies in emergencies, a direct reply to the attack on the United States Mission in Benghazi, Libya, last year that killed four Americans.

“Our goal is to help Africans solve African problems, without having a big American presence,” said Lt. Col. Robert E. Lee Magee, a West Point graduate and third-generation Army officer whose battalion has sent troops to Burundi, Niger and South Africa in the past several months, and whose unit will deploy to Djibouti in December.

The American commando raids this month against terrorist operatives in Libya and Somalia underscore the spreading extremist threat in Africa, and a renewed urgency to choke off insurgent cells before they can grow, according to counterterrorism specialists. Teams from the brigade here have already helped train forces in Kenya and Tanzania, which are battling fighters from the Shabab militant group in Somalia.

“Africa is one of the places,” President Obama said at a news conference three days after the commando raids, “that you’re seeing some of these groups gather. And we’re going to have to continue to go after them.”

For that reason, it is no surprise that the military’s Africa Command is the test case for this new Army program of regionally aligned brigades that will eventually extend to all of the Pentagon’s commands worldwide, including in Europe and Latin America next year. These forces will be told in advance that their deployments will focus on parts of the world that do not have Army troops assigned to them now — creating a system in which officers and enlisted personnel would develop regional expertise.

Gen. Ray Odierno, the Army chief of staff, said in an interview that the goal was to field an Army that could be “engaged regionally in all the combatant commands to help them shape their theaters, set their theaters, in order to sustain and execute our national security strategy.”

Even as soldiers prepare for tasks as far-ranging as combat casualty care in Chad or radio training in Mauritania, in a recent visit here they were also conducting target practice in their M1A2 battle tanks on a sprawling firing range, to keep their skills sharp for a future land war against an unforeseen foe. Chad and Mauritania are both combating Al Qaeda in the Islamic Maghreb, an offshoot of the main terrorist group.

But with the United States military out of Iraq and pulling out of Afghanistan, the Army is looking for new missions around the world. “As we reduce the rotational requirement to combat areas, we can use these forces to great effect in Africa,” Gen. David M. Rodriguez, the head of the Africa Command, told Congress this year.

Missions that were once performed largely by Special Operations Forces, including the Army’s Green Berets, are now falling to regular infantry troops like members of the Second Armored Brigade Combat Team here at Fort Riley, nicknamed the Dagger Brigade.

This summer, nearly two dozen of the brigade’s soldiers deployed to Niger, in West Africa, to help train troops for United Nations peacekeeping duty in neighboring Mali. The Americans set up tents on a government-owned farm two hours north of the capital, Niamey, shooing away the goats, cows and chickens.

For 10 weeks, they weathered sandstorms and temperatures that soared beyond 110 degrees to teach the Nigerien troops marksmanship, patrolling skills and medical care. The troops drilled in the morning, rested from the midday heat, and then resumed classes in the evening. Among the worries in Niger is the threat posed by Boko Haram, an Islamic militant group with ties to Al Qaeda.

“We’re never going to teach them anything about Boko Haram they don’t already know, but we can help them develop their capacity as a military,” said Maj. Bret Hamilton, 38, an Iraq and Afghan war veteran who led the team in Niger.

The Americans’ credibility with their counterparts in Niger was cemented just as the training began. Terrorists using suicide car bombs attacked a Nigerien military compound and a French-operated uranium company in the country’s north, not far from the training site. Some diplomats and training forces from other countries retreated to the safety of the capital, but the Americans stayed put and helped the Nigeriens bolster their defenses.

“We’re trying to build a rapport and a lasting relationship with them,” said Sgt. First Class Christopher Bunnell, 31, a platoon leader from Lake Station, Ind.

Before deploying, the troops in Kansas receive six days of cultural training and instruction from Africa-born graduate students at nearby Kansas State University. “The soldiers trained are able to ask about things not in their books,” said Daryl Youngman, an associate professor at the university who oversees the instruction.

Some Africa specialists say that if the goal is to build a cadre of regional specialists, this training seems lacking. “There needs to be a concentrated effort for these forces to have sustained regional language training and expertise,” said Lesley Anne Warner, an Africa analyst with CNA’s Center for Strategic Studies in Alexandria, Va., who has studied the regional brigade concept. “Not having such training defeats part of the rationale for having regionally aligned forces.”

In a separate three weeks of training in South Africa last summer, 350 brigade soldiers trained with troops there using mock exercises. The soldiers worked together to analyze an enemy and how it would react, and in the end seized a rebel base.

For the South Africans, it was a chance to learn tactics and techniques that American troops refined in Iraq and Afghanistan. For the Americans, it offered an opportunity to gain new insights on African counterinsurgency.
“When the tire meets the tar, that’s when you actually learn the most lessons,” Brig. Gen. Lawrence Reginald Smith, the South Africa force commander there, said in a telephone interview. “What we bring to the table is knowledge of the indigenous people and the rebels who come from those people, including how they act.”

Thom Shanker contributed reporting from Washington.

[don]

Re: Is that a BRIC thru the window?

The unipolar model of the world order has failed.
- Vladimir Putin, St Petersburg, May 22

In more ways than one, last week heralded the birth of aEurasian century. Of course, the US$400 billion Russia-China gas deal was clinched only at the last minute in Shanghai, on Wednesday (a complement to the June 2013, 25-year, $270 billion oil deal between Rosneft and China's CNPC.)

Then, on Thursday, most of the main players were at the St Petersburg International Economic Forum - the Russian answer to Davos. And on Friday, Russian President Vladimir Putin, fresh from his Shanghai triumph, addressed the participants and brought the house down.

It will take time to appraise last week's whirlwind in all its complex implications. Here are some of the St Petersburghighlights, in some detail. Were there fewer Western CEOs in town because the Obama administration pressured them - as part of the "isolate Russia" policy? Not many less; Goldman Sachs and Morgan Stanley may have snubbed it, but Europeans who matter came, saw, talked and pledged to keep doing business.

And most of all, Asians were ubiquitous. Consider this as yet another chapter of China's counterpunch to US President Barack Obama's Asian tour in April, which was widely described as the "China containment tour". [1]

On the first day at the St Petersburg forum I attended this crucial session on Russia-China strategic economic partnership. Pay close attention: the roadmap is all there. As Chinese Vice President Li Yuanchao describes it: "We plan to combine the program for the development of Russia's Far East and the strategy for the development of Northeast China into an integrated concept."

That was just one instance of the fast-emerging Eurasia coalition bound to challenge the "indispensable" exceptionalists to the core. Comparisons to the Sino-Soviet pact are infantile. The putsch in Ukraine - part of Washington's pivot to "contain" Russia - just served to accelerate Russia's pivot to Asia, which sooner or late would become inevitable.

It all starts in Sichuan

In St Petersburg, from session to session and in selected conversations, what I saw were some crucial building blocks of the Chinese New Silk Road(s), whose ultimate aim is to unite, via trade and commerce, no less than China, Russia and Germany.

For Washington, this is beyond anathema. The response has been to peddle a couple of deals which, in thesis, would guarantee American monopoly of two-thirds of global commerce; the Trans-Pacific Partnership (TPP) - which was essentially rebuked by key Asians such as Japan and Malaysia during Obama's trip - and the even more problematic Trans-Atlantic Partnership with the EU, which average Europeans absolutely abhor (see Breaking bad in southern NATOstan, Asia Times Online, April 15, 2014). Both deals are being negotiated in secret and are profitable essentially for US multinational corporations.

For Asia, China instead proposes a Free Trade Area of Asia-Pacific; after all, it is already the largest trading partner of the 10-member Association of Southeast Asian Nations (ASEAN).

And for Europe, Beijing proposes an extension of the railway that in only 12 days links Chengdu, the capital of Sichuan, to Lodz in Poland, crossing Kazakhstan, Russia and Belarus. The total deal is the Chongqing-Xinjiang-Europe network, with a final stop in Duisburg, Germany. No wonder this is bound to become the most important commercial route in the world. [2]

There's more. One day before the clinching of the Russia-China gas deal, President Xi Jinping called for no less than a new Asian security cooperation architecture, including of course Russia and Iran and excluding the US. [3] Somehow echoing Putin, Xi described NATO as a Cold War relic.

And guess who was at the announcement in Shanghai, apart from the Central Asian "stans": Iraqi Prime Minister Nouri al-Maliki, Afghan President Hamid Karzai and crucially, Iranian President Hassan Rouhani.

The facts on the ground speak for themselves. China is buying at least half of Iraq's oil production - and is investing heavily in its energy infrastructure. China has invested heavily in Afghanistan's mining industry - especially lithium and cobalt. And obviously both China and Russia keep doing business in Iran. [4]

So this is what Washington gets for over a decade of wars, incessant bullying, nasty sanctions and trillions of misspent dollars.

No wonder the most fascinating session I attended in St Petersburg was on the commercial and economic possibilities around the expansion of the Shanghai Cooperation Organization (SCO), whose guest of honor was none other than Li Yuanchao. I was arguably the only Westerner in the room, surrounded by a sea of Chinese and Central Asians.

The SCO is gearing up to become something way beyond a sort of counterpart to NATO, focusing mostly on terrorism and fighting drug trafficking. It wants to do major business. Iran, India, Pakistan, Afghanistan and Mongolia are observers, and sooner rather than later will be accepted as full members.

Once again that's Eurasian integration in action. The branching out of the New Silk Road(s) is inevitable; and that spells out, in practice, closer integration with Afghanistan (minerals) and Iran (energy).

The new Crimea boom

St Petersburg also made it clear how China wants to finance an array of projects in Crimea, whose waters, by the way, boasting untold, still unexplored, energy wealth, are now Russian property. Projects include a crucial bridge across the Kerch Strait to connect Crimea to mainland Russia; expansion of Crimean ports; solar power plants; and even manufacturing special economic zones (SEZs). Moscow could not but interpret it as Beijing's endorsement of the annexation of Crimea.

As for Ukraine, it might as well, as Putin remarked in St Petersburg, pay its bills. [5] And as for the European Union, at least outgoing president of the European Commission Jose Manuel Barroso understood the obvious: antagonizing Russia is not exactly a winning strategy.

Dmitry Trenin, director of the Carnegie Moscow Center, has been one of those informed few advising the West about it, to no avail: "Russia and China are likely to cooperate even more closely ... Such an outcome would certainly benefit China, but it will give Russia a chance to withstand US geopolitical pressure, compensate for the EU's coming energy re-orientation, develop Siberia and the Far East, and link itself to the Asia-Pacific region." [6]

On the (silk) road again

The now symbiotic China-Russia strategic alliance - with the possibility of extending towards Iran [7] - is the fundamental fact on the ground in the young 21st century. It will extrapolate across the BRICS, the Shanghai Cooperation Organization, the Collective Security Treaty Organization and the Non-Aligned Movement.

Of course the usual shills will keep peddling that the only possible future is one led by a "benign" empire. [8] As if billions of people across the real world - even informed Atlanticists - would be gullible enough to buy it. Still, unipolarity may be dead, but the world, sadly, is encumbered with its corpse. The corpse, according to the new Obama doctrine, is now "empowering partners".

1. China Thwarts U.S. 'Containment' With Vietnam Oil Rig Standoff, Forbes, May 8, 2014.
2. Le president chinois appelle la Chine et l'Allemagne - construire la ceinture economique de la Route de la Soie (in French), Xinhua, March 30, 2014.
3. China calls for new Asian security structure, Washington Post, May 21, 2014.
4. Russia plans to build up to eight new nuclear reactors in Iran, Reuters, May 22, 2014.
5. Naftogaz Debt to Gazprom Stands at $4 Bln - EU Energy Commissioner, Ria Novosti, May 28, 2014.
6. See here.
7. China, Iran and Russia: Restructuring the global order, Al Jazeera, May 20, 2014.
8. In Defense of Empire, The Atlantic, March 19, 2014.

Pepe Escobar

[Southernguy]

Re: Is that a BRIC thru the window?

China signs yuan accords with France, Luxembourg

17 hours agoChina's central bank has signed agreements for yuan clearing arrangements with France and Luxembourg, with the aim of promoting greater use of its currency overseas (AFP Photo/Peter Parks)










China's central bank said it has signed agreements for yuan clearing arrangements with France and Luxembourg, with the aim of promoting greater use of its currency overseas.
The People's Bank of China (PBoC) said it would designate Chinese banks as the yuan clearing institutions in the two European countries later, according to statements issued on Sunday.
China earlier this month named the Bank of China as the clearing bank for yuan dealings in Frankfurt, Germany, and the China Construction Bank in London. A top Australian official said last week that China will designate a clearing bank in Sydney.
The moves come as China seeks to make the yuan -- also known as the renminbi -- used more internationally in keeping with the country's status as the world's second biggest economy behind the United States.
China keeps a tight grip on the value of its currency and limits capital flows into and out of the country, but officials have pledged to make the exchange rate more flexible.
Yuan clearing in France and Luxembourg would allow companies and financial institutions to use the currency for cross-border transactions, as well as promote liberalisation of trade and investment, the PBoC said.
European countries are competing to become the dominant hub for yuan business in the continent.
Banque de France called the memorandum of understanding with the PBoC the "first step" towards creation of a yuan clearing and settlement system in Paris.
"It aims at enabling the safe and efficient settlement in renminbi in an open system covering transactions in the Eurozone or the neighbouring regions," it said in a statement.