Today’s News 21st March 2016

• Supply and Demand Report, 20 Mar, 2016

  Early on Monday morning (Arizona time), silver began to rise. From its close on Friday of $15.46, it ran up to $15.82. Then it began to slide, eventually dropping to $15.17 by midmorning on Wednesday. Then…

  *BAM*

  The Fed said not a lot. It will go on manipulating the rate of interest rate to the same level as it had been previously. This was not what the market was expecting, as many believed the Fed was on the war rate-hiking path. Lower interest means more quantity of money dollars which means more rising prices which means gold and especially silver should go up.

  And go up, silver did. At least, if you measure it using muggle money. Silver ran up 44 cents on the Fed announcement. Then consolidated before running up over $16. It finally exhausted itself $16.15.

  It ended the week at $15.78, about 30 cents higher than it began. As the muggles would reckon it, gold went up $5.

  As always, we’re interested not so much in the price chart as the fundamentals of supply and demand. We like to know if a move was just leveraged speculators buying or selling futures, or if it was buyers or sellers of actual metal. The latter can tell us if a move will likely be durable or not.

  This is a segue into an interesting question asked by a reader last week. He noted that the speculators are trying to predict the next price move. What if they’re right? Then a speculative move may lead a fundamental move.

  That is true enough—if they’re right. The catch is knowing if they’re right, on a case by case basis. We have lost count of the number of times silver speculators have gotten excited and falsely predicted a breakout. There have been many corrections as the price of silver has dropped over the three years that we have been publishing our analysis, and the period before that when we had a private email letter. And when each of those corrections has exhausted itself, the downward price trend continued.

  Have we seen the price bottom? We think it’s likely. At least, there is no fundamental reason for silver to go back to a 13 handle. On the other hand, if silver speculators became as depressed about their metal as gold speculators are, then that is exactly what would happen.

  On the other, other hand—quick, somebody get me a one-handed economist!—we think it is more likely that bearish gold sentiment will slowly fade than that bearish sentiment will bleed over from gold to silver.

  Price bottom aside, is there any reason to expect a skyrocketing silver price? Read on for the only true picture of the gold and silver supply and demand fundamentals
  (For an introduction and guide to our concepts and theory, click here.)

  But first, here’s the graph of the metals’ prices.

         The Prices of Gold and Silver
  
  

  Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio was down again. 

  The Ratio of the Gold Price to the Silver Price
  

  For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

  Here is the gold graph.

         The Gold Basis and Cobasis and the Dollar Price
  

  The green line is the price of the dollar, measured in gold terms (i.e. the inverse of the price of gold). As it falls (i.e. the gold price rises) gold becomes less scarce. The red line is the gold cobasis, our measure of scarcity of the metal. From last week:

  Gold is becoming less scarce as its price is rising.

  It’s almost eerie how well the gold scarcity tracks the dollar price, as they both descend. Almost as if there was a connection. Or something. 😉

  The uncanny tracking of gold scarcity with the price of the dollar continues.

  Our calculated fundamental price of gold fell a few bucks again, but it’s still well over $1,400.

  Now let’s look at silver.

  The Silver Basis and Cobasis and the Dollar Price
  
  

  Last week, we noted that the silver fundamentals firmed up a bit. That was last week.

  This week, scarcity synced back up with the price of the dollar again. Note the big drop in the cobasis, and big rise in the basis. Silver for May delivery is in a nice contango, though the 38 bps you could earn to carry silver is a bit under LIBOR.

  The silver fundamental dropped over a nickel this week. It’s more than a buck below the market price.

  Will the speculators be right this time? Is silver headed to $20, much less $50? We would not put our money in harms’ way (to borrow a phrase that Kevin O’Leary has used on Shark Tank) to bet on that thesis.

  Monetary Metals will be in Hong for Mines and Money, and in Singapore for Mining Investment Asia. If you will be in town for either conference, and would like to meet, please drop us a line.

   

  © 2016 Monetary Metals

  

  

  

  

• Currency Debasement & The Death Of Roman Emperors

  Correlation does not necessarily imply causation.

  In other words, just because two sets of data may follow a similar pattern, it does not mean there is any direct causal relationship.

  However, as VisualCapitalist's Jeff Desjardins was assembling our previous research on Currency and the Collapse of the Roman Empire, we noticed something that was too uncanny to skip past: during the 113-year stretch of time from 192 to 305 AD, an astonishing amount of Roman emperors (84%) were either brutally murdered or assassinated.

  This, of course, was a particularly troubled period for the Romans. During the Crisis of the Third Century (235 to 284 AD) specifically, the combined pressures of invasion, civil war, plague, and economic depression threatened to bring down the Empire.

  Coincidentally, during this same time frame, the silver denarius went from having 2.7 grams silver to being “silver” in name only. Base metals such as bronze and copper were added to the silver coins to debase the currency, and by the year 300 AD, a silver denarius (or its equivalent) had only a trace of silver left.

   

  

  Courtesy of: The Money Project

   

   

  Notes on the Data

  Data on Roman Emperor deaths is from this resource, and the debasement of silver coinage was previously covered by Armstrong Economics.

  Roman Emperor deaths or abdications included in the visualization are ones that occurred between the birth of the Empire (27 BC) to the fall of the Western Roman Empire (476 AD). It’s also worth noting that, according to the source, there is a significant amount of emperors who had fates that are unclear or died under mysterious circumstances, and therefore the list may not be entirely accurate.

  

  

  

  

  

• Judge Jeanine's Warning To The GOP: "Your Scorn For The Will Of The American People Is Mindboggling; Be Very, Very Careful"

  Two weeks ago, Judge Jeannine Pirro hit it out of the ballpark with her stunningly honest and frank monologue that “there’s an insurrection coming” and that “the American people are sick and tired of crony capitalism.”

  Overnight, she followed it up with another striking rant, this time explaining why the Republican Party’s mantra has suddenly become that “Donald Trump must be stopped. “Why?” she asks rhetorically:”why would Republicans try to sabotage their own front-runner and risk a Democrat winning the White House?” Her answer, which is absolutely accurate: “The Republican establishment, elected officials and party leaders are in bed with the Democrats!”

  She explained:

  “If Hillary wins, nothing is lost for them, it’s business as usual. The lobbyists keep their offices on K Street, the pharmaceutical companies keep paying them, the unions keep adding to their pensions and the lawmakers get their reelection bribes – I mean contributions – while we the underclass work two and three jobs and rack up a debt our children and grandchildren will have to pay for generations!”

  Instead of supporting Trump – “the guy who keeps winning” – party leaders have talked about creating a so-called “‘unity ticket’ of other candidates to make sure he doesn’t win,” said Judge Jeanine. “To scare you into submission, they predict Trump cannot win the general election.”

  It’s because “party elders are petrified of Trump,” Judge Jeanine explained. “The man is beholden to no one. He wins, and it’s game over for the elite.”

  Her latest clip is below:

  * * *

  And the full transcript:

  So, you don’t like Donald Trump. You’re going to create a “unity ticket” of other candidates to make sure he doesn’t win.

  Say again? You want to stop one of the biggest vote-getters in your own party’s Republican Party primary history?

  Yet ‘Donald Trump must be stopped’ is the Republican Party’s mantra! Hey, I didn’t always like my party’s choice for president, but I generally supported him.

  Good that Trump is a white male otherwise they’d be accused of being racist, and lucky Trump’s not gay otherwise the Republican Party would be accused of being homophobic.

  So let me see if I understand this. The guy who keeps winning, despite his being called a misogynist, a racist, and a xenophobe, who has more than 50 percent of the delegates,  with even as many as 17 other Republicans in those primaries and the Republican Party’s mission is to block Trump’s nomination?

  What are you guys smoking?

  Okay, you like Ted Cruz. Good for you. But he needs to win 80% of the remaining Republican delegates. Keep dreaming guys – it ain’t gonna happen.

  John Kasich. Nice guy. Absolutely no path to the nomination.

  So I say to myself, ‘Self, why?’ Why would Republicans try to sabotage their own front-runner and risk a Democrat winning the White House? And I keep coming up with the same answer: the Republican establishment, elected officials and party leaders are in bed with the Democrats!

  So if Hillary wins, nothing is lost for them, it’s business as usual.

  The lobbyists keep their offices on K Street, the pharmaceutical companies keep paying them, the unions keep adding to their pensions and the lawmakers get their reelection bribes – I mean contributions – while we the underclass work two and three jobs and rack up a debt our children and grandchildren will have to pay for generations!

  To scare you into submission, they predict Trump cannot win the general election. If not, pray tell why does he keep winning primaries and drawing crowds like we’ve never seen in American primary history?

  An election note primer: Trump already has 678 delegates. He needs 1237 to win. He’s won 6 closed and 13 open primaries and caucuses – one where Independents and Democrats – or just Independents vote. Why is this important?

  It tells you Trump, besides winning the base, appeals to Independents and Democrats as well. Does that not bode well for the general election, especially against an establishment politician most consider untrustworthy and dishonest.

  They say he’s divisive. Yet the looting and burning and riots in Ferguson happened long before Trump!  Black Lives Matter, Occupy Wall Street, moveon.org – all before trump. The ‘what do we want – dead cops, when do we want them – now’ chant, all before Trump.

  It’s astonishing, Republicans plotting against their own front-runner!

  If the establishment had exercised this energy to get evangelical votes to Romney in 2012 he might have won! But then again, it wasn’t that important because either way, either party the establishment wins – their jobs, their offices, their lifestyles intact – as they continue on their treadmill of DC money and power.

  The party elders are petrified of Trump.  The man is beholden to no one. He wins and it’s game over for the elite. With Hillary, the game goes on.

  Heads up, Washington. We’re not listening to you anymore because we’re fed up. You haven’t fixed a damn thing. We can’t take it anymore: the lies, the corruption, the debt, the taxes, the invasion, the freebies, the lack of accountability, sanctuary cities, religions forced to violate their own faith, by providing birth control and abortifacts at the altar of Obamacare and your saying one thing and doing another.

  The patronage games and the free ride on our backs are over. You’re not listening. For us, it’s not just an election – it’s the selection of Supreme Court justices and the direction our country takes for generations. 

  We don’t want anything more than what our Founding Fathers intended. The slippery slope into socialism doesn’t work for us. We want an America where law enforcement, the military and our allies are not the enemy.

  Boys, your arrogance is astonishing. And your condescension and scorn for the will of the American people is both mind-boggling and reminiscent of another time in our history.

  From the beginning, we knew this would be a political revolution. Be careful boys, be very, very careful.  You don’t want to make this a different kind of revolution.

  

  

  

  

  

• It's Moved Beyond Vancouver: "Downtown Seattle Has Entered The Phase Of Ponzi Financing"

  By Charles Mudede Of The Stranger’s Slog

  Occupancy Rate Becoming Less of a Concern for Downtown’s Real Estate Investors

  I was recently informed by local economist and manager of IDEAeconomics, a website that promotes post-Keynesian views (and post-Keynesian must not be confused with neo-Keynesians), Alan Harvey that a significant shift has occurred in the market for commercial property in Seattle’s downtown area.

  In the past, the value of a commercial property was “the capitalized value of the stream of rents from that property.” In this order of things, occupancy rates (content) mattered. Now, commercial properties are not selling content and value but merely value. Meaning, they are selling a “projected increase in price.” Meaning, downtown Seattle has entered the phase of Ponzi financing.

  “My speculation is that this has been caused by people looking to move their money into the US,” Harvey explained. Where did he get this information? From a source within the CBRE Group, a “commercial real estate company based in Los Angeles.” This source confirmed that global surplus capital is behind this transition. “It’s much more lucrative to build or buy with the hope of selling at an inflated value rather than actual revenue.”

  Again, it’s really hard for many Americans to understand that we actually live in a world not with a scarcity of cash (it looks like that from the bottom) but a huge surplus of the stuff—or a “savings glut,” to use the words of Martin Wolf, whose most recent book The Shifts and the Shocks: What We’ve Learned-and Have Still to Learn-from the Financial Crisis explains this situation in very clear, if not repetitive, terms (I also recommend reading Other People’s Money: The Real Business of Finance by John Kay. These writers, Wolf and Kay, are not at all radical—for a treatment along those lines, read Costas Lapavitsas’ brilliant and meaty Profiting Without Producing: How Finance Exploits Us All).

  Nor does any of this have anything to do with the old and much-admired laws of supply and demand, which is why accelerated development will not weaken the force that’s pushing property values up. Finance operates outside of those laws. For example, what motivated the European Central Bank’s recent decision to expand quantitative easing (buying bonds from investment institutions in the hope that they will then invest in the real economy) from 60 billion euros a month to an astounding 80 billion euros had little to do with events in the real economy but with credit spreads, which when wide, as they have been lately, generate little or no profits for investors.

  Now, what does this decision have to do with recent developments in downtown Seattle? Simply this: It’s not about economics (supply and demand) but politics. The ECB is helping investors because they are the ones with political power (that’s how finance always works). The problem of inflated asset values will not be solved by building more and more but by direct political action and increased construction—in short, by political economy.

  

  

  

  

  

• "Can Trump Win The General Election?" Goldman Answers All Your Election Questions

  It’s probably fair to say that there are more question marks swirling around the 2016 US presidential election than any race for The White House in recent memory.

  Normally, Americans have a choice between two candidates, a Republican and a Democrat, who purport to hold vastly divergent views on everything from the economy to foreign policy to societal values. One is a “liberal” and one is a “conservative” and for a few short months towards the end of every election cycle, the electorate suspends disbelief and pretends as though who they vote for actually matters in the grand scheme of things.

  Four years later little, if anything at all, will have changed and voters resign themselves to the sad reality that their faith has once again been sold down the river, that American politics is only a duopoly on the campaign trail, and that the only time the difference between Republicans and Democrats is evident to everyday Americans is when something important needs to get done and it is always at that exact moment that the partisan divide keeps Congress from doing its job.  

  The takeaway for most voters: inside the Beltway all politicians are the same. They do the bidding of vested interests, lobbyists, and whoever else has the money.

  No one knows that better than Goldman Sachs, a firm which has its fingers (or “tentacles” as it were) in every political pie that matters.

  The firm has given extensively to Hillary Clinton over the years and has been quite generous when it comes to offering the former First Lady and her husband six figure speaking engagements. Employees of the firm donated to the campaigns of Jeb Bush and Marco Rubio before they dropped out of the race while Ted Cruz’s wife Heidi actually used to work for the bank. Cruz has used (sometimes undisclosed) loans from the firm to finance his political career.

  So if there’s anyone who should be able to field questions about the 2016 election, it’s Goldman. And there sure are a lot of questions. Below, find excerpts from a Q&A put together by Jan Hatzius and crew and note that while the bank still thinks their own bought and paid for Democratic frontrunner Hillary Clinton has an advantage over Trump in the national election, Goldman thinks the current head-to-head polls are giving her far too much credit.

  *  *  *

  From Goldman

  Will Trump win the nomination?

  It appears to us to be the most likely outcome but far from guaranteed. To win the nomination, a candidate needs to win votes from a majority of the delegates to the convention. This is distinct from winning a majority of delegates in the individual contests in states and territories, since some delegates could vote for a different candidate than they have been pledged to support, as described in detail below. However, since nearly all of the 2,472 Republican delegates are at least nominally bound to a particular candidate based on the results of primary elections, caucuses, and conventions, the simplest path to the nomination is to win a majority of delegates prior to the convention.

  

  Trump must win about 65% of the remaining pledged delegates. While this seems like a high bar, the delegate allocation methods used in the later contests make it attainable. More than 2/3 of the remaining delegates come from states that award delegates to the winner of the state popular vote or to the winner of the popular vote in each congressional district. To put this in perspective, during the competitive period of the 2008 and 2012 nomination contests, the top-placing candidate in each state won an average of 45% or so of the popular vote—not far from the share of votes Trump won in the March 15 contests—which translated into just over half the delegates awarded in proportional and “winner take more” states, but 85% and 100% of delegates in states that award delegates using winner-take-all by district or statewide.

  

  While the remaining contests include a greater share of closed primaries (where Cruz has generally done better), the remaining schedule also has fewer caucuses and fewer Republican-leaning states, where his support has been stronger (Exhibit 4). So while there is a clear possibility that the dynamic could change again, for now it appears to be a three-way race in which Mr. Trump has the advantage.

  

  What about a contested convention?

  The arcane rules of the Republican nomination process consist of four general stages:

  1. The nomination contests themselves. Many primaries and caucuses held by various states award delegates based on the election results as if they were points on a scoreboard; i.e., they allocate delegates based on the share of votes cast in the state or in a congressional district (often both), rounding up or down to get to whole numbers of delegates awarded. But only about 15% of delegates are elected on the ballot as representing a given candidate. The rest are selected in some other way, creating the potential for slippage between the official primary/caucus results and the actual delegate allocation. In addition, three states (Colorado, North Dakota, and Wyoming) do not bind their delegates to support any particular candidate, nor do three territories (American Samoa, Guam, and the US Virgin Islands).
  2. The delegate selection process. Since many of the delegates awarded over the last six weeks do not yet represent actual individuals, the Republican party in each state must select delegates to travel to Cleveland in July to represent the state at the convention. The process differs by state, but typically involves conventions at the congressional district level and then again at the state level, usually several weeks after the primary or caucus. The goal for the campaigns will be to ensure that the delegates selected to represent them actually support their candidate and are not arbitrarily chosen members of the party who might shift support when given the opportunity. Some states like California allow candidates to file their own slate of delegates who will represent them if they win, but these states represent less than 10% of delegates by our estimates.
  3. Pre-convention strategy and rulemaking. Once the delegates for each state have been selected, the state parties must then choose two delegates per state to represent them on the various committees that will meet prior and during the convention. The “Rules Committee” will meet the week before the convention to decide the rules for the convention. Their starting point will be the current rules (discussed below), but the delegates to the committee are empowered to change the rules as long as they receive majority support from the delegates to the convention as a whole. A second committee deals with challenges to the eligibility of individual delegates, which could be an important tactic if the delegate count is close. Challenges must be filed by mid-June, or roughly one week after the last primaries in California and New Jersey.
  4. Votes on the convention floor. Delegates from most states are bound by state party rules or, in some cases, state law to support that candidate. A few—under 10%—of the delegates arrive to the convention unbound, or not formally associated with a particular candidate. During the Republican convention in July, all delegates will cast their vote for the party’s nominee, and nearly all delegates will be required to vote for the candidate to whom they were pledged. If a candidate wins the majority of delegates on that first vote, the process ends and he wins the nomination. If no candidate wins a majority on the first vote, a second round of voting is held. Around half of the delegates will represent states that bind their delegates to vote as instructed only on the first ballot, but allow them to switch their vote thereafter. Another 20% of delegates may switch after the second ballot, and nearly all delegates become unbound after the third vote. The remaining delegates may not switch until they have been released by their candidate, which could come at any point during the process.

  So who would a contested convention favor?

  It would probably give Sen. Cruz a better chance at the nomination than he currently has, but it seems less likely to result in the nomination of an “establishment” candidate and could still end in Mr. Trump’s nomination.

  Will Clinton win the nomination?

  It seems very likely, but it might take a while. Secretary Clinton currently has 1,606 delegates to Senator Sanders’ 851 but, unlike the Republican nomination process, there are no winner-take-all states so, even with her large lead in “superdelegates,” she will need to win 38% of the delegates through June 7 to win the nomination.

  Can Trump win the general election?

  While Secretary Clinton appears to have an advantage in the general election, it would surprise us if the public (and markets) remained as confident of the election outcome as seems to be the case currently. Prediction markets imply around a 70% probability that the Democratic candidate will win the general election. In the longest-running prediction market still in operation, run by the University of Iowa, such an expectation reflects greater certainty about the general election outcome at this stage in the race than any other election going back to the start of the data in 1992.

  

  While it seems likely that the race will look closer at some point over the next few months than it does today, the Democrats nevertheless have several advantages. Most important is the Electoral College itself, where Democrats start with roughly 250 electoral votes from states that have consistently voted Democratic in the last several elections and have been generally trending more Democratic over that time. This suggests that Democrats would need to win only one large swing state—Ohio (18 electoral votes) or Florida (29)—or a few smaller ones to win the election, whereas the Republican candidate will need to win nearly all of them.

  *  *  *

  And before anyone suggests that Goldman hasn’t contributed to Donald Trump’s run at The White House, don’t forget about Luke Thorburn, the Goldman financial advisor who was put on paid leave last month for selling hats inspired by the billionaire’s “Make America Great Again” campaign slogan on a homemade website…

  

  

  

  

  

• Sweden's Refugee 'Crisis' Has "Gone Past The Breaking Point"

  Sweden is too generous for its own good as the country most beloved by Bernie Sanders is pressured by huge migrant flows. As Bloomberg reports, when it comes to wealth, health and hospitality, Sweden has few rivals. But the same qualities that make the country a beacon of hope for the world’s huddled masses are straining it at the seams.

  To see how close to the limit a record inflow of refugees is pushing Swedish generosity, visit Halmstad, a 14th century gateway to the North Sea known for its pristine beaches and golf courses. With no vacant apartments, the welcome wagon here is a double row of shabby, stifling trailers hauled in to house the overflow from the nearby Arena Hotel. There, almost 400 asylum seekers from Syria, Afghanistan and beyond live four to a room, all but forbidden from working until their claims are adjudicated. The process can take years.

  

  Men with little to do but sleep and smoke crowd the lobby as kids careen down corridors on bikes. The sports bar, once busy with locals, is now a halal dining hall, the outdoor pool fenced-off and abandoned. It’s a scene increasingly common across Sweden, which welcomed 163,000 refugees last year alone, or about 1.6 percent of its population, a ratio equivalent to 5.1 million in the U.S.

  Three years after Sweden and its Nordic neighbors were declared “The Next Supermodel” of fiscal prudence by The Economist, the welfare system pioneered in Stockholm is starting to buckle under the weight of Europe’s biggest migration wave since World War II.

  Even dovish politicians concede the pace of refugee spending, which is on track to surpass that for national defense in Sweden for the first time this year, can’t be sustained without revisions to a social contract based on high taxes, cradle-to-grave entitlements, tight regulation and AAA credit.

  

  Few know the perils and promise of Scandinavian welfare better than Aida Hadzialic. She fled Yugoslavia with her family at the age of five and settled in Halmstad, where she served as deputy mayor before being named Sweden's minister for secondary education in 2014. And what worries her most is the viability of a model that literally saved her life.

  “If we don’t make the changes needed to maintain trust that our tax money goes to the right thing, people may start wondering if it’s worth paying,” said Hadzialic, 29. "Then we’d create a new gap between people. That’s not the Swedish model, that’s not the Sweden we know.”

  It’s a debate raging across the European Union as the human tide of mainly Muslims adds to crises eating away at the bloc’s cohesion and encouraging extremist parties. Even in Sweden, where centrists have ruled for decades, discontent is on the rise. Polls show backing for the governing Social Democrats hovering near the 50-year low of 24 percent it reached in January, while support for the anti-immigrant Sweden Democrats has risen five points since the 2014 election to 18 percent.

  Investors have already registered their alarm.

  As the inflow of refugees peaked late last year, the yield bond-buyers demand to hold Swedish debt over that of Germany, the European benchmark, surged to a nine-month high. Though that spread has narrowed, the government has warned that outlays for migration will further squeeze the $110 billion national budget. Ethnic tensions are adding to the strain, with a rash of fires and threats of mob attacks at refugee centers across the country.

  

  For most Swedish citizens, though, there’s little question their welfare state — as much an anathema for U.S. conservatives such as Donald Trump as an inspiration for left-wingers like Bernie Sanders — is worth protecting.

  Today, Swedes can consider themselves among the luckiest people on Earth. At 82, their life expectancy is two years longer than Americans’ and their net disposable income, $29,185 per household, exceeds the U.K., France and Japan. What they lose with a top income tax rate of about 60 percent, they gain back with free, high-quality hospitals and schools, a vast program of subsidies for childcare and housing, and some of the world’s safest and most modern cities.

  But providers of public services say they can’t keep those standards up if refugees, the vast majority young and male, keep coming.

  Building new housing for immigrants at a time when half a million Swedes are waiting eight years on average for rent-controlled apartments around Stockholm is becoming a flash point, said Joakim Ruist, an economist at Gothenburg University. The only “logical” way to stimulate new construction is to lift price controls so developers have more incentive to build, a move that won’t be popular with voters, he said.

  “No modern welfare state has had an inflow of refugees per capita that’s equivalent to Sweden’s," Ruist said. "We’ve gone past the breaking point for the housing situation.”

  

  Fearing a public backlash over housing and handouts, which can be worth $28,000 a year for a single mother of two, almost what the average American worker earns, Sweden is trying to walk back its open-door policy. Citing an "unsustainable" pace of arrivals, Prime Minister Stefan Loefven has re-imposed border controls and pledged to step up deportations of rejected asylees. Family reunifications are also being drastically curtailed.

  Until recently, there was little question Sweden, with debt far below the European average at less than half of gross domestic product, had the resources to successfully integrate its newcomers. Hadzialic, the schools minister, and Hanif Bali, an IT entrepreneur and member of parliament for the Moderate Party, are living proof of that.

  But like Hadzialic, Bali, who arrived from Iran without parents as a toddler in the 1990s, is starting to think his adopted homeland may just be too generous for its own good.

  “If we don’t act soon we’ll have a large group of refugees who won’t be able to enter the labor market,” said Bali, 28.

  Just the thought of being a burden on society makes Hasan al-Bundok sigh.

  The 45-year-old lawyer fled Syria’s war in search of a better future, first to Turkey, then across the Mediterranean to Greece and eventually Halmstad. The plan was to find a job, establish a home and then send for his wife and four children back home. But that was nine months ago and he’s still languishing in legal limbo at the Arena Hotel.

  "In my country, I’d wake up at six o’clock, have breakfast with my children and go to court,” Bundok said. “But here, I’m like an animal, just eating and sleeping. I don’t want to be a second-class citizen. I want to work.”

  

  

  

  

  

• China Car Sales Suffer Biggest Crash On Record To Start 2016

  The dream of transition to a 'consuming' economy just crashed into the wall of excess debt and leverage. 2016 has started with a 44% collapse in China passenger car sales. This is the biggest sequential crash and is 50% larger than any other plunge in history.

  

  While there is a seasonal effect here obviously, the sheer scale of this 2-month drop – which removes the new year holiday affect – indicates something is terribly wrong in China.

  Coming at a time when vehicle inventories are near record highs relative to sales with a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…

   

  

   

  And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)…

  

   

  Falling used car prices means pressure on new car prices as well, which would be a shock to America's booming auto market.

  Obviously, the scariest part about all of the above is that consumers still have the pedal to the metal (pun fully intended) when it comes to leases, which means there's no end in sight to the off-leases and thus no way to determine, at this juncture, how big the residual writedown wave and deflationary auto industry calamity will ultimately end up being.

  So, you know… "buckle up."

  *  *  *

  Simply put, the world's automakers – all toeing the narrative line that growth will be from China – now face a harsh reality of massive mal-investment deja vu. And furthermore, any pricing power is lost (no matter how long the credit terms are extended) as they are forced to halt production and dump inventories in a vicious deflationary cycle…

  

  

  

  

  

• China's Latest Problem: Half A Trillion Dollars In Unpaid Bills

  It’s no secret by now that China has a rather serious debt problem.

  Although getting a precise read on it is next to impossible, all told the debt pile probably sums to something like $30 trillion. Various reports put the figure at between 250% and 300% of GDP all-in and as we reported back in January, that may have swelled to more than 340% by the end of 2015.

  Corporate debt-to-GDP was around 125% in 2014 and probably sits above 150% now. Depending on what business you’re in, servicing that debt has become all but impossible. As Macquarie discovered last autumn, more than half of all debt for commodities firms was EBIT-uncovered in 2014 and heaven only knows what that figure looks like now.

  

  Things have gotten so bad that in 2015, Chinese firms issued $1.2 trillion in new debt just so they could service their existing loans. In other words, China’s entire corporate sector is quickly becoming one giant ponzi scheme.

  

  “Chinese companies are struggling to generate the cash flow needed to service their obligations,” Bloomberg said last November, summing up the situation in the absolute simplest terms possible.

  And it’s only going to get worse. On Sunday we learn that median days sales outstanding for mainland domiciled companies now sits at 83 days – the highest in nearly 17 years and double the average for EM as a whole.

  

  As you can see from the above, it now takes 50% longer for Chinese firms to get paid than it did just five years ago. As you might imagine, the problem is particularly acute for industrial firms who are waiting 131 days to convert sales into cash. “A reading of more than 100 days is typically a red flag,” Amy Sunderland, a money manager at Grandeur Peak Global Advisors in Salt Lake City told Bloomberg. 

  Yes, Amy it certainly is. Especially considering the median for companies in the MSCI Emerging Markets Index is just 44 days.

  “Accounts receivable at the nation’s public firms have swelled by 23 percent over the past two years to about $590 billion, exceeding the annual economic output of Taiwan,” Bloomberg goes to write before summing up the situation as follows: “With corporate bankruptcies projected to climb 20 percent this year, more Chinese businesses may be forced to choose between two unpleasant options: keep extending credit to potentially insolvent customers, or cut off the taps and watch sales sink.”

  Needless to say, this is just another way of looking at the same problem. That is, if I’m an industrial company and you’re my customer, and you can’t pay me for four months, then I can’t service my debt, and thus my loans end up in the special mention bucket at the bank. If you never pay me and there are enough customers like you included in my accounts receivable, then eventually I’m screwed and assuming the Politburo allows it, my loan moves from special mention at the bank to the NPL line.

  Unless of course I borrow more money to service my existing debt while simultaneously extending you more credit to “buy” what I’m selling, in which case the entire charade continues for another few months while the amount of leverage embedded in the system grows even larger.

  Of course this can only go on for so long. “There is a knock-on effect through the economy,” Fraser Howie, author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise,” tells Bloomberg. “Part of the end game is default and closure.”

  Right. Because what the chart above suggests is that even healthy companies will start to have working capital problems sooner or later and before long, the proverbial can simply will have been kicked as far into the future as possible and when the breaking point finally comes, every weak hand across the entire supply chain will be shaken out, triggering a cascade of defaults, a resultant banking crisis, and finally, a sharp reduction in excess capacity until the market finally clears. Millions of Chinese will lose their jobs in the process and the PBoC will likely be forced to keep the banks from collapsing, but that’s another story.

  Meanwhile, on Sunday, PBoC Governor Zhou Xiaochuan warned that China’s corporate sector is weighed down by far too much debt. “Lending as a share of GDP, especially corporate lending as a share of GDP, is too high,” he said at the China Development Forum in Beijing. Highly leveraged economies are more susceptible to macroeconomic risks, he added, in a fantastic example of stating the obvious. One does wonder however, if the PBoC was so concerned about excessive debt, how Beijing managed to let the country add a half trillion in TSF during the month of January alone:

  

  One thing that would help, Zhou innocently suggested, is if more savings were channeled into equity markets so that companies could reduce their dependency on debt. “[We need] more robust capital markets,” he said. He might have put it another way: “It would be nice if everyone would just pour their savings into equity, that way, companies wouldn’t have to take on more debt.” 

  As FT notes, “about one-third of listed Chinese companies owe at least three times as much in debt as they own in assets, according to figures from Wind.”

  You’d be forgiven if, upon reading all of the above, you come away feeling a bit uneasy about China’s ability to manage this “transition.” But really, you shouldn’t worry because when it’s all said and done, you’ll be thanking China for providing the world with a template for how to do something that’s absolutely impossible: deleverage and re-leverage at the same time. Here’s IMF chief Christine Lagarde: “The world will be watching closely to learn from China as it deftly manages the delicate balance between economic transformation and deeper global integration.”

  We’re not sure about the whole “deftly manages” part, but the world will certainly be “watching closely”, that’s for sure.

  We’ll give the final word to Vice Premier Zhang Gaoli: “There will be no systemic risks — that’s our bottom line.”

  If you say so.

  

  

  

  

  

• Regardless Of Who Wins In November, Freedom & Liberty Both Lose

  Submitted by Richard Ebelong via EpicTimes.com,

  Let us be clear. We are living, right now, in a time of emotional fear, hysterical anger, illogical demands, and dangerous temptations. In other words, liberty and prosperity are at risk. A decent and tolerant society is threatened. Common principles of humanity are being undermined.

  All of this is concentrated and has been brought to a head in the rhetorical clamor and campaign conflagrations of a presidential election year. To try to understand what is going on, a mountain of words have been spoken by serious think tank scholars, by Sunday morning talk show pundits, or by evening television news 15-second “in-depth” interpreters, as well as miles of written commentaries that have been offered in hardcopy or on the online media and blog sites.

  Pandering and Plundering Politicians, Left and Right

  On the Democrat Party side, how can a corrupt, manipulative, lying, life-long power-lusting insider like Hillary Clinton be taken seriously and to be, seemingly, riding high to her party’s presidential candidate? How can a self-proclaimed “democratic” socialist, who has praised and apologized for communist dictatorships in Latin America and who chose to honeymoon with his bride in the former Soviet Union, arouse the mass enthusiasm of millions who see him as the deliverer of a transformative “political revolution” in America?

  On the Republican Party side, how can a bombastic, rude and crude user of government privilege and favoritism for his business interests, like Donald Trump, who speaks most of the time in empty phrases and wrong-headed illogic on numerous economic and social issues, victoriously steamroll through state primaries and garner the support of millions merely because, many of those multitudes say, “he says it like it is”?

  How can we explain the fate of the field of other Republican candidates, heralded in the summer of 2015 as the finest group of minds offered by the GOP for the office of the presidency in several decades? As the autumn began, one of them after another, first in the debates and the public opinion polls, and then in the primaries, failed to inspire or distinguish themselves. Each fell victim to voter indifference and then to Donald Trump’s meat grinder. Until, now, hardly any remain standing.

  And what of the voters? Facing an uncertain employment future, experiencing seeming stagnant or low wage improvements, disoriented by a changing cultural environment; angered by political promises unfulfilled by those elected to high political office, as well as burdensome taxation and heavy-handed regulation; frustrated by crony “insiders” close to politicians and bureaucrats who “rig the game” for the benefit of special interests while leaving the costs and lost opportunities on the shoulders of ordinary citizens Sam and Sally, who have none of the “pull” to influence things their way, now insist: “We’ve had enough and we’re not going to take it any more.”

  

  Broken Constitutions and Noses to Get What You Want

  This is the sentiment and insistence of a sizable number of voters. And if it takes a socialist with utopian dreams dancing in his head, or a boorish billionaire who says he knows how to fix a broken system because he’s been playing it for decades for all its worth, then so be it. Put the “strongman” in charge to shake things up and give the ordinary guy an even break.

  If it takes bending the Constitution or tearing down the wealth and position of some, well, those insiders and fat cats, those “establishment” types, have been rigging the rules for as long as can be remembered. So its time someone stuck it to them with some of the same political power, just in “the people’s” direction for a change.

  And if some people have to be “roughed up,” if their words need to be shouted down or shut up, again, we’ve had enough of what they have had to say. Of course, who the “we” are and who the “they” are all depends upon who the “you” is.

  Are you referring to the radical college professor who calls for some “muscle” to drive away a news reporter covering a campus demonstration against freedom of speech? Or a presidential candidate who gets cheers from his followers when he suggests that a physical altercation against protesters at their meeting is a lot more fun than listening to a boring campaign speech?

  What we are witnessing are the latest episodes in the continuing bankruptcy of the modern American political system. These millions of voters all along the political spectrum wrap their frustrations and demands in rhetoric of either restoring or establishing “real” and “true” American values.

  Long Down the Road of Lost Liberty

  The fact is the original or traditional premises and values of the American system have been eroding away for almost a century, now. Several decades ago, the libertarian social analyst and critic, Garet Garrett, penned an essay with the title, “The Revolution Was.” He pointed out that too many people concerned with the preservation of the American constitutional system of government and a free society failed to appreciate how much of the ideas and institutions for a society of liberty had already been eroded away by forces opposed to its preservation.

  We are a lot further along this path today from when Garet Garrett tried to point out how far away from a free society we had already moved. To appreciate this, we must first remind ourselves what are the premises and institutions upon which a free society ultimately stands or falls.

  The philosophical foundations were expressed, of course, in the Declaration of Independence, when the authors in 1776 insisted that all men are created equal and are endowed with certain unalienable rights, among which are life, liberty and the pursuit of happiness. And that government is formed among men to secure these rights from their violation by private individuals and groups or from government itself.

  To guard against such violations by government, the very political institution meant to secure liberty is formally restrained in how it may use and apply its legitimized use of force in human affairs by constitutional rules. The American Constitution was meant to clearly demarcate the limited and enumerated functions of the federal government, with the additional restraining device of “divided government” between the branches of the federal government and then between the federal government and the duties and responsibilities of the individual state governments.

  The restraining of government was meant to assure that political power remained a servant of the citizenry and their individual rights, and not a threatening master taking away or reducing their liberty. Secondly, federal government in terms of divided responsibility among national, state and local political decision-making was meant to reflect functions needing to be performed at different horizons of importance to the citizens, and to keep government control and decision-making as close to those citizens as those different governmental tasks allowed.

  

  Freedom Needs Habits of the Heart and Mind

  But pieces of paper upon which are written the administrative duties and responsibilities of different levels and branches of government is not sufficient in itself to maintain a society of individuals secure and protected in their rights. As the famous French social philosopher, Alexis de Tocqueville, pointed out in his Democracy in America, written after his extended visit to the United States in the 1830s, the free society is more than elections, and legislative procedures, or a written constitution. It is based upon “habits of the heart” and “character of the mind.”

  That is, it is dependent upon a wide network of “structures of shared meaning” and values among the members of a society. They must believe in human worth, that is, the dignity of each individual, and a respect for and tolerance of the diversity of men’s dreams, wishes, hopes and values. And most importantly, that each and every individual has a “natural” or inviolable right to their own life, to be lived peacefully and honestly in whatever manner and form that the individual considers most likely to bring him meaning, happiness and fulfillment of the goals and purposes that he sets for himself.

  There must be a shared view that human relationships should be based on voluntary consent and mutual agreement. Coercion and physical threat or intimidation in any and all forms should form no part in the patterns of human association and relationship. And that government’s own use of force should be reserved and restricted to its “negative” application, that is, always and only in defensively protecting people’s rights to their life, liberty and honestly acquired property and not any types of violation or weakening of these rights.

  There needs to be at least an implicit agreement among the members of such a free society that what a man has honestly and peacefully earned through his mental and physical labors and his voluntary exchanges with others is rightfully his. Accumulated wealth and income, as long as it has been honesty and peacefully acquired, is not a mark of injustice or unfairness or unethical conduct, but rather an indication of the industry, energy, and successful effort in improving an individual’s own circumstances through mutually beneficial production, trade and association with others.

  And more broadly, there needs to be a spirit and sense that whatever differences may exist among individuals due to accident of birth or social and historical circumstances, the idea and ideal is that each person is looked at, judged and evaluated as an individual in terms of his distinct qualities, characteristics, talents, abilities and achievements as an human being and not as a member of a collective group. Political and economic individualism should be matched with ethical and social individualism as we look at, interact and treat others in the community of mankind.

  These principles and ideals when shared in common, again to use de Tocqueville’s phrases, the “habits of the heart” and “character of the mind,” gives unity to the members of a free society, while at the same time providing the respect, tolerance and “space” for diversities of among men as expressed in their individual and social interactive goals, purposes, ends, values and meanings for life and happiness.

  American History an Incomplete Reflection of Its Own Ideals

  America, of course, has never fully lived up to this conception of man, society and government. Slavery deprived humanity to millions during the first half of the country’s history; this was followed by legally imposed discrimination laws and practices that contemptuously treated those who were equal citizens of the nation as less than fully human as peaceful associative relationships and economic opportunities were closed to them in the name of explicit and implicit racial inequality.

  Government, even in the early days of the nation’s history, never confined itself within the constraint of protecting rights rather than plundering them. Corruption, political special interest pandering, and misuse of the fiscal purse strings resulted in state and federal regulations and favoritism benefiting some at the expense of many others. Tariffs, subsidies, land grants, monopolies, and financial contracts awarding government money to companies undertaking “internal improvements” (public works projects in the more modern language) assured that the peacefully and productively earned income and wealth of many were politically transferred into the hands of those close to and influential over those holding political office.

  However Incomplete, American Practice Gave Liberty to Multitudes

  But however imperfect and hypocritical in practice, it remained nonetheless the fact that the idea and ideal of political, economic and social individualism were more believed in and implemented in the United States in the nineteenth century and into the 20^th century than anywhere else on the face of the globe.

  It generated a spirit of optimism, hope and effort that fostered multitudes to live and experience the fruits of those ideas and ideals to a degree never known before in human history. It gave Americans – even with the contradictions, inconsistencies and corruptions – a higher standard of living and a greater degree of actual individual freedom and opportunity than in any other part of the world.

  The older or “classical” liberalism of the nineteenth century had called for the end of these various political privileges and forms of favoritism, that is, to abolish these remaining governmental inconsistences and exceptions. And it called for the social spirit of individualism and free market competition to overcome those attitudes and actions by people in contradiction with a full respect and tolerance of the dignity of men as individuals.

  

   The Collectivist Counter-Revolution Against Liberty

  But before these forces of liberal individualism could complete the liberation of humanity from plunder and prejudice, a counter-revolution emerged, a counter-revolution of new forms of collectivism, statism, and socialism. They rejected the individualist ideal and insisted that the group and the tribe came before the individual human being; that any person’s sense of identity and position in society was determined by and dependent upon into what “social class,” or racial group, or nation-state the individual was born and lived.

  Any hardship, disappointment and sense of mistreatment or frustration experienced by an individual was the result of the exploitive, or oppressive, or “socially unjust” actions of those in some other social or racial group or nation-state other than the one to which he belonged.

  Individual responsibility was replaced by group status and privilege. Rights were not something unalienable and belonging to individuals; instead, “rights” were “entitlements” belonging to members of a categorized group, and for the provision of which individuals in other groups were obligated to provide and supply.

  The idea of a common humanity among all men as individuals was slowly but surely replaced with the notion of group “identities” based upon which the individual’s sense of self-esteem or social position and belonging was dependent.

  Politics and the political process was not a restrained and limited institutional method for finding the most effective and efficient ways of delineating, protecting and enforcing the individual rights of each citizen to their life, liberty and honestly acquired property. Instead, politics and the political process was conceived as the arena in which the power of the government was captured and used to “redress grievances” by using legal force to redistribute wealth, reorder social and other status positions of privilege and favor for the benefit of “deserving” groups in place of “undeserving” groups.

  Freedoms Curtailed for Controlled Entitlement

  Freedom of speech and the press, the right of peaceful assembly and association were no longer considered the avenues through which each individual’s right to express, share, debate and manifest his ideas and ideals was guaranteed by limiting government’s ability to interfere with such peaceful acts and interactions.

  Instead, freedom of speech and the press and freedom of association came to be considered tools of intellectual and ideological control and exploitation by the “powerful” against the social, racial or gender “under-privileged.” And as such, the spoken and written word and any forms and types of permitted association had to be modified, molded and controlled to assure collective social, racial and gender equity and balanced access and privilege through governmental regulation and planning.

  Collectivist “Rights” Through Political Action

  The individual was, now, portrayed as too weak and inconsequential to find his own way to betterment and happiness in such a setting of social, racial and gender oppression. Personal liberty and free association in the marketplace and other voluntary settings were declared to be “illusionary” notions of freedom.

  “True” freedom and opportunity could only come through the advancement of the social, racial and gender group to which one belonged in a political competition for entitlement “rights.” In this circumstance, each group had to have leaders and leaderships that expressed and represented the “real” and “just” interests of the group for which they claimed the right, duty and responsibility to speak and act.

  This road from political, economic and social individualism to collectivist identity and privilege through group competition for political power is what has brought us to our current political crisis as captured in this year’s presidential campaign.

  Your job security is uncertain? Your income has not increased the way you had wished and desired? Your social status and acceptance by others has not matched your expectations and personal sense of deservedness? The ideas you want accepted by others and the actions and attitudes you want others to follow and express have not materialized?

  Then the task is to use the government to give you what you want, and to force and compel others in society to conform to your vision of the good, right and just. If mouths have to be shut when you consider them to be speaking evil or “hurtful” words, if people must be coerced to act in the way you want them to, if wealth and opportunities of life must be redistributed by government’s police power so you and others in our group may have what you consider that which you rightful deserve, then so be it. That is the means and methods of “true” democracy, since if you and your group do not use government to get what you want, some other groups will do so at your expense.

  This is the new America system: a democratic politics of power, plunder and privilege in a perpetual social conflict of social classes, racial groups and gender identities. It is a system in which the individual seems weak, small and powerless; and needing “leaders” who will use politics to bring them to the social, economic, racial and gender “promised lands” that are laid before the constituent-voters, if only this or that political candidate is elected to set the world right for the benefit of a coalition of collective groups who want certain things and to which they are told they are entitled.

  This the outcome of the journey from liberal individualism to political collectivism that has placed before us Hillary Clinton, Bernie Sanders, Donald Trump and a cast of other remaining candidates who sometimes speak the language of liberty but do so interwoven with inconsistencies and contradictions that leave the message of freedom with no fully principled spokesman in this year’s race to the White House.

  The path back to and forward towards liberty, therefore, will have to be journeyed far beyond the outcome of this November’s election.

  

  

  

  

  

• Is There A US-Russia Grand Bargain In Syria?

  Submitted by Pepe Escobar via SputnikNews.com,

  It’s spy thriller stuff; no one is talking. But there are indications Russia would not announce a partial withdrawal from Syria right before the Geneva negotiations ramp up unless a grand bargain with Washington had been struck.

  Some sort of bargain is in play, of which we still don’t know the details; that's what the CIA itself is basically saying through their multiple US Think Tankland mouthpieces. And that's the real meaning hidden under a carefully timed Barack Obama interview that, although inviting suspension of disbelief, reads like a major policy change document.

  Obama invests in proverbial whitewashing, now admitting US intel did not specifically identify the Bashar al-Assad government as responsible for the Ghouta chemical attack. And then there are nuggets, such as Ukraine seen as not a vital interest of the US – something that clashes head on with the Brzezinski doctrine. Or Saudi Arabia as freeloaders of US foreign policy – something that provoked a fierce response from former Osama bin Laden pal and Saudi intel supremo Prince Turki.

  Tradeoffs seem to be imminent. And that would imply a power shift has taken place above Obama — who is essentially a messenger, a paperboy. Still that does not mean that the bellicose agendas of both the Pentagon and the CIA are now contained.

  

   

  Russian intel cannot possibly trust a US administration infested with warmongering neocon cells. Moreover, the Brzezinski doctrine has failed – but it’s not dead. Part of the Brzezinski plan was to flood oil markets with shut-in capacity in OPEC to destroy Russia.

  That caused damage, but the second part, which was to lure Russia into an war in Ukraine for which Ukrainians were to be the cannon fodder in the name of “democracy”, failed miserably. Then there was the wishful thinking that Syria would suck Russia into a quagmire of Dubya in Iraq proportions – but that also failed miserably with the current Russian time out. 

  The Kurdish factor

  

   

  Convincing explanations for the (partial) Russian withdrawal from Syria are readily available. What matters is that the Khmeimim air base and the naval base in Tartus remain untouched. Key Russian military advisers/trainers remain in place. Air raids, ballistic missile launches from the Caspian or the Mediterranean – everything remains operational. Russian air power continues to protect the forces deployed by Damascus and Tehran.

  As much as Russia may be downsizing, Iran (and Hezbollah) are not. Tehran has trained and weaponized key paramilitary forces – thousands of soldiers from Iraq and Afghanistan fighting side by side with Hezbollah and the Syrian Arab Army (SAA). The SAA will keep advancing and establishing facts on the ground.

  As the Geneva negotiations pick up, those facts are now relatively frozen. Which brings us to the key sticking point in Geneva – which has got to be included in the possible grand bargain.

  The grand bargain is based on the current ceasefire (or "cessation of hostilities") holding, which is far from a given. Assuming all these positions hold, a federal Syria could emerge, what could be dubbed Break Up Light.

  Essentially, we would have three major provinces: a Sunnistan, a Kurdistan and a Cosmopolistan.

  Sunnistan would include Deir ez-Zor and Raqqa, assuming the whole province may be extensively purged of ISIS/ISIL/Daesh.

  Kurdistan would be in place all along the Turkish border – something that would freak out Sultan Erdogan to Kingdom Come.

  And Cosmopolistan would unite the Alawi/ Christian/ Druze/ secular Sunni heart of Syria, or the Syria that works, from Damascus up to Latakia and Aleppo.

  

   

  Ankara’s response, predictably, has been harsh; any Kurdish federal system in northern Syria represents not only a red line but an “existential threat” to Turkey. Ankara may be falling under the illusion that Moscow, with its partial demobilizing, would look the other way if Erdogan orders a military invasion of northern Syria, as long as it does not touch Latakia province.

  And yet, in the shadows, lurks the possibility that Russian intel may be ready to strike a deal with the Turkish military – with the corollary that a possible removal of Sultan Erdogan would pave the way for the reestablishment of the Russia-Turkey friendship, essential for Eurasia integration.

  What the Syrian Kurds are planning has nothing to do with separatism. Syrian Kurds are 2.2 million out of a remaining Syrian population of roughly 18 million. Their cantons across the Syria-Turkey border —Jazeera, Kobani and Afrin – have been established since 2013. The YPG has already linked Jazeera to Kobani, and is on their way to link them to Afrin. This, in a nutshell, is Rojava province. 

  The Kurds across Rojava – heavily influenced by concepts developed by imprisoned PKK leader Abdullah Ocalan — are deep into consultations with Arabs and Christians on how to implement federalism, privileging a horizontal self-ruled model, a sort of anarchist-style confederation. It’s a fascinating political vision that would even include the Kurdish communities in Damascus and Aleppo.

  Moscow – and that is absolutely key – supports the Kurds. So they must be part of the Geneva negotiations. The Russian long game is complex; not be strictly aligned either with Damascus or with the discredited “opposition” supported and weaponized by Turkey and the GCC. Team Obama, as usual, is on the fence. There’s the “NATO ally” angle — but even Washington is losing patience with Erdogan.

  The geopolitical winners and losers

  Only the proverbially clueless Western corporate media was caught off-guard by Russia’s latest diplomatic coup in Syria. Consistency has been the norm.

  Russia has been consistently upgrading the Russia-China strategic partnership. This has run in parallel to the hybrid warfare in Ukraine (asymmetric operations mixed with economic, political, military and technological support to the Donetsk and Lugansk republics); even NATO officials with a decent IQ had to admit that without Russian diplomacy there’s no solution to the war in Donbass.

  In Syria, Moscow accomplished the outstanding feat of making Team Obama see the light beyond the fog of neo-con-instilled war, leading to a solution involving Syria’s chemical arsenal after Obama ensnared himself in his own red line. Obama owes it to Putin and Lavrov, who literally saved him not only from tremendous embarrassment but from yet another massive Middle East quagmire.

  

   

  The Russian objectives in Syria already laid out in September 2015 have been fulfilled. Jihadists of all strands are on the run – including, crucially, the over 2,000 born in southern Caucasus republics. Damascus has been spared from regime change a la Saddam or Gaddafi. Russia’s presence in the Mediterranean is secure.

  Russia will be closely monitoring the current “cessation of hostilities”; and if the War Party decides to ramp up “support” for ISIS/ISIL/Daesh or the “moderate rebel” front via any shadow war move, Russia will be back in a flash. As for Sultan Erdogan, he can brag what he wants about his “no-fly zone” pipe dream; but the fact is the northwestern Syria-Turkish border is now fully protected by the S-400 air defense system.

  Moreover, the close collaboration of the “4+1” coalition – Russia, Syria, Iran, Iraq, plus Hezbollah – has broken more ground than a mere Russia-Shi’te alignment. It prefigures a major geopolitical shift, where NATO is not the only game in town anymore, dictating humanitarian imperialism; this “other” coalition could be seen as a prefiguration of a future, key, global role for the Shanghai Cooperation Organization.

  As we stand, it may seem futile to talk about winners and losers in the five-year-long Syrian tragedy – especially with Syria destroyed by a vicious, imposed proxy war. But facts on the ground point, geopolitically, to a major victory for Russia, Iran and Syrian Kurds, and a major loss for Turkey and the GCC petrodollar gang, especially considering the huge geo-energy interests in play.

  It’s always crucial to stress that Syria is an energy war – with the “prize” being who will be better positioned to supply Europe with natural gas; the proposed Iran-Iraq-Syria pipeline, or the rival Qatar pipeline to Turkey that would imply a pliable Damascus.

  Other serious geopolitical losers include the self-proclaimed humanitarianism of the UN and the EU. And most of all the Pentagon and the CIA and their gaggle of weaponized “moderate rebels”. It ain’t over till the last jihadi sings his Paradise song. Meanwhile, “time out” Russia is watching.

   

  

  

  

  

  

• Florida Man Tries To Buy $60,000 BMW SUV With Food Stamps

  The farcical American welfare-state has a new posterchild. Meet Florida-resident Nicholas Jackson, who tried to purchase a brand new $60,000 BMW X-6 SUV with his Electronic Benefits Transfer (EBT) card…

  

  That's not what Food Stamps are for!!

  But, as New York Daily News' Sasha Goldstein explains, after failing to use his us-taxpayer-funded credit card to buy the high-end German luxury car, he decided to steal it…but was caught when he ran out of gas (according to police).

   

  

  Nicholas Jackson, 36, showed up to a Pompano Beach dealership with little in the way of currency and was sent away, the Martin County Sheriff’s Office said. But the next day, the business was burglarized, and the owner found the $60,000 BMW X-6 and 60 sets of keys missing, police said.

  

  Cops later caught up to Jackson in Palm City, some 70 miles north of Pompano, where authorities say he drove until the car ran out of gas. They also found the BMW with the gas tank on empty.

  Jackson got a ride to the Martin County Jail, where he’s charged with grand theft auto and held on $20,000 bond.

  *  *  *

  Of course, in this new socialist norm in which we live, the Bernie-ites will defend the arrogance and ignorance of Jackson since why should he not 'take' from the rich? It's only fair!

  

  

  

  

  

• Black Cop Exposes Anti-Trump Protesters As "Most Hateful, Evil People Ever"

  Unfortunately for the establishment, the ongoing acts of sponsoreds civil disobedience are not creating the groundswell of anti-Trump terror they had hoped would bring down the anti-establishmentarian. In fact things have gone so far that even Arizona cops questioned their safety among Soros' puppet-protesters. As African-American police officer Brandon Tatum exclaims, the profane-language-using demonstrators "were the most hateful, evil people he has ever seen."

  As EndingTheFed.com reports, Brandon Tatum, an officer in the Tucson Police Department, shared a video Saturday night giving his perspective on Donald Trump’s campaign rally in Tucson, Arizona — and the disruptive protesters who hurled obscenities at the Republican candidate.

  As he explains, Tatum says that as a black man, he did not feel unsafe around Trump’s supporters but was ready to fight protesters in self-defense. He calls them the most hateful, evil people he has ever seen. The demonstrators, who he recalls chanting the phrase “Black lives matter,” used profane language and gestures, leading a mother to cover her child’s ears.

  One protester, he recounts, got beat up, but Tatum says that the man instigated a fight either by spitting on or assaulting a rally attendee. He hopes that his message makes it into the news so that typical CNN coverage of just the retaliation against the agitator doesn’t become the prevailing narrative about the rally.

  As for Trump himself, Tatum says he went to the rally to decide for himself what he thought of the candidate rather than trusting someone else’s word. He states that he gained respect for the businessman and didn’t hear anything bigoted from his stump speech. “His character’s a lot different than what you would perceive it to be in the media,” he says.

  * * *

  Once more the tried and tested efforts of the 'management' to disrupt the democratic process in favor of their wealth-maintaining status quo is suffering unintended consequences are everywhere amid the blowback from these organized protests.

  

  

  

  

  

• Why The True Cost Of Living Is Much Higher Than We're Told (Or Sold)

  Submitted by Adam Taggart via PeakProsperity.com,

  Over the past decade, we've been told that inflation has been tame — actually below the target the Federal Reserve would like to see. But if that's true, then why does the average household find it harder and harder to get by?

  The ugly reality is that the true annual cost of living is far outpacing the government's reported inflation rate. By nearly 10x in many parts of the country.

  This week, we welcome Ed Butowsky, developer of the Chapwood Index, to the program. His index is a 'real world' measure of how prices are increasing much faster than the wages of the 99% can afford:

  In my business, I wanted to make sure that I was building portfolios that weren’t just efficient but got people the rate of return that they needed. I thought: My goodness, what I need to do is give people a list of everything they spend money on and have them track quarter by quarter exactly their increases, so I can do a better job as a financial advisor in determining what return I need to target.

   

  I got a hold of a list of 50 major metropolitan areas and found people in every city and I gave them a job: I asked everybody to send me what items they spend their after-tax dollars on. I got about 4,000 different items. Then I took the 500 that most frequently appeared on the list and we've been tracking specifically these same items in every city since that period of time. I weight this list based on what percentage of a normal income people spend on each item.

   

  The purpose of this index is to let people know that, if you live in California, your cost of living increase goes up somewhere between 12-13.5% a year. And if you're not making 13% more in salary, then you're losing purchasing power; and that's why people fall further and further behind. If you are in New Mexico, it's about 7%.

   

  Basically, over the last five years, the average increase for all 50 major cities is 10% vs the average CPI of 1.5%. So it's easy to see that for people who are in the middle income, lower income or people who are living off of a pension that's adjusted based on the CPI, they've lost 8.5% of their purchasing power if everything was adjusted to the CPI year over year. Do that over five years, over 10 years — now you know why there's such a separation between wages and wealth. 

  Click the play button below to listen to Chris' interview with Ed Butowsky (38m:05s)

   

  

  

  

  

  

• These Flowcharts Show How Trump Could Get Robbed At GOP Convention

  On Saturday, Donald Trump made the rounds in Arizona, rallying supporters with his trademark, off-the-cuff stump speech.

  At this juncture, the billionaire has become something of a master when it comes to feeling out crowds. He shows up, takes the stage, and proceeds to deliver various riffs on the same set of amorphous themes depending on what he thinks any one particular set of supporters wants to hear. There’s the customary mention of protesters (“Bernie people”), the obligatory jabs at GOP rivals (“lyin’, lyin’ Ted”), an insult or three for the media (“crazy Megyn”), a poke at the establishment bear (“Mitt’s a chokin’ dog”), a brief mention of trade (“we make terrible deals”), a promise on immigration (“we’re gonna build a big beautiful wall”), and of course, a thundering reiteration of a promise that, at its heart, has absolutely no meaning whatsoever (“make America great again”).

  And it works. Like a damn charm.

  In fact, it works so well that you wouldn’t know anyone else was even running – Republican or Democrat. If you watched CNN on Saturday there were a couple of brief moments where a Bernie Sanders rally appeared on screen and other than that… nothing. It was a Trumpfest from morning to night.

  But even as it appears increasingly likely that the billionaire will get to 1,237 delegates by July thus obviating the need for a contentious convention in Cleveland, the GOP is holding out hope that the establishment can still steal the nomination from the frontrunner.

  Trump has threatened warned of “riots” if he’s robbed, but the party probably doesn’t care. Keeping Trump from getting the nomination is the only thing that matters at this point. For those interested in more granular detail on how the establishment may still be able to stop the Trump juggernaut, see here and here. For those interested in a simpler, visual explanation, see the following three helpful flowcharts from Reuters and The New York Times, respectively.

  

  

  

  

  

  

  

• Must Watch Video – "The Veneer of Justice in a Kingdom of Crime"

  Submitted by Michael Krieger of Liberty Blitzkgrieg

  

   

  All government, in its essence, is a conspiracy against the superior man: its one permanent object is to oppress him and cripple him…The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.

       – H.L. Mencken

  It does not take a majority to prevail but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.

        – Samuel Adams

   

  Fiat justitia ruat caelum
  “Let justice be done though the heavens fall.”

  I believe it is the duty of every single American citizen to sit down and watch the following mini-documentary. In just 45 minutes, you will learn more about the state of the union and the the world around you than decades of schooling and mainstream media could ever provide. Ignorance is not bliss, and if it weren’t for the blinding levels of ignorance pervasive in modern society, we wouldn’t find ourselves in this current deplorable state we’re in — on a knife’s edge between manageable serfdom and total tyranny.

  No one in American society is supposed to be immune from criminal prosecution, yet the Justice Department in the Obama administration took it upon themselves to grant such immunity to the mega banks and their employees. This is a tale of the traitors operating within the highest levels of the U.S. government, and it is a saga of how the rule of law was openly torched in front of our very eyes.

  Readers often ask me “what can I do to help.” Here’s what you can do. You can watch this video, then send it to every single person you know and plead with them to watch it. If necessary, make it a point to to sit with them and watch it. That’s how important this is.

  Until justice is served, this nation will never heal. Economically, culturally or spiritually.

  Now without further ado.

  

  

  

  

  

• What’s The Frequency Janet?

  Submitted by Mark St. Cyr

  What’s The Frequency Janet?

  Once again, in spectacular fashion, the financial “markets” have miraculously rebounded from the aptly moniker’d “Bullard Bottom” and without pause has traversed in a near vertical assent to recapture the levels where all the uncertainties began. In other words, after all the gyrations over the last 14+ months we are once again only back to the levels (as scored by the U.S. financial markets e.g., Dow, S&P, et al) where the Fed stood confidently in their economic policy acumen.

  Remember those confident proclamations during that time? (paraphrasing) “The economy has recovered quite admirably as to allow the QE (quantitative easing) program to end.” That was a good one, no? Remember what happened next? Nothing, as in the “markets” basically went nowhere up, nor down for months on end.

  Sure there were some great headlines made of this path to nowhere as the market screamed sideways in a pattern much like a cardiac reading with blips and spikes that allowed headlines such as “New Never Before Seen In The History Of Mankind Highs!” on a near weekly basis. Yet, although those headlines were true, all they did was mask the fragile, ever deteriorating economy those “meters” were hooked to.

  The one thing that never changed during that whole period? The implied fortitude of resolve that the Fed would indeed strike the path towards normalization of monetary policy and begin raising interest rates away from the zero bound. After all, it was implied at near infinitum: The economy had shown great signs of improvement. e.g., employment at near “full” status and others.

  So, with that “mission accomplished” narrative as the wind beneath their wings the table was surely set that in September of 2015 the Fed would indeed raise rates. Remember what happened next?

  Ah yes: China. It seemed just like any prudent U.S. investor or market aficionado might infer; a rate hike here means trouble there. After all, did anyone not understand just how interconnected these “markets” are with currency funded carry trades and more? Oh yes, sorry, it seems the Fed either forgot or, never realized the obvious inherent risk and consequences. The result?

  The U.S. financial markets fell is such a spectacular, as well as, cascading manner that for the first time in the history of the markets all three of the prominent futures markets were halted. Only after stick save inspired shenanigans as those delivered by CNBC™ fame Jim Cramer and his now infamous “Is that a pencil in your pocket or a note from Tim Cook?” reveal did the markets seemingly recover and stabilize.

  Then, reality once again set in as the markets collectively held its breath near those lows as it awaited the Fed’s implied: “You’ve been warned we’re going to raise rates.” Then, as the markets reacted to this implied “fortitude” and drifted lower back towards that “bottom.” The Fed with all its proclamations for faith in forward guidance and clarity did the exact opposite and punted. The result?

  Once again in a near vertical assent the markets screamed upwards with barely a respite to recapture the same levels where it all began – again.

  Now nearly a year later the Fed stood poised to do what it said it would. i.e., raise rates. (Talk about mulligans!) So, with data points in hand which the Fed proclaimed proved their well placed guided hand of interventionism monetary policy had worked effectively, they once again reiterated that they indeed were going to raise rates – and this time they did. The result?

  Once again in a near carbon copy of the previous selloff the markets lunged downward in a fashion resembling a luge sled on a one way course. And how and where did the “markets” once again seem to find a stopping point? You guessed it: the “Bullard Bottom.”

  And why this level appears so aptly named is for the fact that once again it was non other than St. Louis Fed president James Bullard who took to the airwaves and threw a Fed narrative over the decline of prices in oil. Result? (Need I say for I think you are seeing the pattern here.) The decline halted precisely at the level that bears his moniker. But the similarities don’t stop there.

  Just like in Aug/Sept of 2015 as the markets began to once again rollover there was an announcement on February 12th. But this time it was not by a Fed official. No, this announcement came from non-other than one of the Fed’s too big to fail recipient’s of the financial crisis J.P. Morgan Chase™ as its CEO Jamie Dimon announced he was buying 500,000 shares or some $26 million in stock of JPM. It seemed the market took that as “with confidence like that – we should be on board also!” and just like the prior the markets were off to the races skyward. After all, if a bank CEO is buying it surely must be a good time to buy also, right? And so they did.

  So, one would garner such a display of “confidence” would give the Fed the necessary backbone as to follow through on what they’ve implied through their rate hike projections via the Dot Plots. After all, the economic measures they state over ,and over, and over again as their “touch stones” of economic health as well as measurement (i.e., jobs, inflation, etc., etc.) are all within the tolerant values that define “success.” Surely they would continue on their path to monetary normalization. Guess what? Hint: Nope.

  Not only did the Fed punt once again. Both the metrics and language of the press release, as well as, the presser itself given by Fed Chair Janet Yellen was so convoluted, obtuse, as well as defensive even many of her staunchest defenders or cheerleaders couldn’t make heads or tails out of what should be easily and readily addressable answers.

  Dot plot projections that implied 4 rate hikes now imply 2, which to even the most casual Fed observer now more likely means – zero. All that great data that was used for a “data dependent” Fed? Sorry, no data for you. Well; data that represents the U.S. that is.

  You should now infer that all “data” is “international.” i.e., what’s happening elsewhere supersedes data the Fed keeps repeating its mandated to oversee and foster. (e.g., U.S. employment and inflation.) Again, even some of the most lenient critics of the Fed were themselves struck by the fact that the once stated goals which the Fed communicates ad nauseam as desired levels for policy normalization once again decided inaction – as action. When in fact these levels have been either hit or, are within meaningful “mission accomplished” parameters. And when it came to answering about the Fed’s credibility issue? Well, see here for yourself.

  All I’ll state for those still confused about Fed policy is the following: When in doubt – just move the goal posts. Problem solved. In theory anyways. However, isn’t that all that all that economics truly is? e.g., Theory.

  However, you know what is no longer theory nor a “data” point that’s fungible? What level the U.S. financial markets are currently trading at.

  To now dismiss Fed policy causation as “correlation theory” is laughable. The markets are now so intertwined and Fed dependent the observation of whether correlation is causality has been rendered moot. Without the Fed – there is no market. That’s now a proven fact. Period.

  Everything, Every market, every stock, every currency, is correlated and dependent of its very existence or viability as former Dallas Fed president Richard Fisher once implied: on a “diminutive woman” to play Atlas.

  And exactly where are these markets once again? Hint: Right where it all began. Where the Fed declared “mission accomplished” twice before when they announced QE was over, and where rate hikes were warranted. So, what happens at this third rendition? Is three times a charm? Who knows. All we can do is wait, see, and hope everyone is on the same wavelength the Fed Chair states it’s on as well.

  It’s also quite possible we now have two new concrete “data” points or metrics far more impervious to movement which have supplanted the once Congressional mandated “data” points current Fed watchers once looked upon as “gospel.” Those data points?

  Policy action or inaction is dependent on either a break of the “Bullard Bottom” (i.e. 1800ish SPX, 15,500ish Dow) or surge back to “fortitude central” (i.e. 2050ish SPX and 17,500ish Dow) where we once again stand, and await what monetary dictate the Fed will deliver next. The only issue now is…

  Is the Fed still on the same page? Reading from the same playbook? Or, even on the same wavelength as the markets? And probably more importantly: with all the missteps and confusing commentary emanating from the Fed – will the “market” continue to respond as it always has? (Look to the EBC and BoJ decisions of late for clues)

  Right now it’s anyone’s guess. And in my opinion, there’s no one guessing more about what to do next – than the Fed itself.

  

  

  

  

  

• JPM: The Short Squeeze Is Largely Over

  Two weeks ago, before first the ECB first and then, the Fed, unleashed two massive dovish surprises, we warned – citing JPMorgan – that the most painful part of the short squeeze “may be yet to come.”

  As a reminder, this is what JPM said on March 5:

  The covering of short equity positions continued over the past week. The short interest in US equity futures declined over the past week.  But its level remains very negative suggesting there is room for further short covering. The short interest on SPY, the biggest equity ETF, at 4.75% stands below its recent peak of 5.43% but it remains elevated vs. its level of 3.54% at the start of the year. Equity ETFs have not yet seen any significant inflows, suggesting that ETF investors have done little in actively reversing the almost $30bn of equity ETFs sold over the previous two months. CTAs, which have been partly responsible for this year’s selloff, are still short equities and they have only covered a third of the short position they opened in January. In contrast, Discretionary Macro hedge funds, Equity L/S, risk parity funds and balanced mutual funds, appear to be modestly long equities, so they are currently benefitting from the equity rally.

  Actually, if one uses the latest Goldman Sachs data, this is not at all true because those long positions which benefited from the market surge were more than offset by pair-trade shorts which soared even more and wiped out all gains.

  

  We won’t cry for hedge funds, however, and instead are much more interested in what current and future flows will look like.

  According to the same JPM team which expected a continuation of the short squeeze half a month ago, as a result of central banks once again pandering to stock markets with the Fed shocking even the “Liesmans” of the world by going full dove even as the Fed has already met its labor and inflation mandates, the move has led to a significant “impact on investors’ sentiment and behavior is evident in flows. ETFs, a universe almost equally shared between retail and institutional investors in terms of ownership, saw another big inflow this week meaning that three quarters of the previous selling of equity ETFs during January and February has been reversed over the past three weeks.”

  

  What is more notable from JPM’s note, is that CTAs – one of the most important marginal price setter on the way down when only CTAs were profitable at the expense of all other hedge funds, continued to cover their loss-making short equity exposures. By JPM’s equity beta measure, CTAs appear to have fully covered their shorts as shown below.

  

  But while CTAs may be out, the short base in US equity futures remained elevated as of last Tuesday, March 15th, a day before the FOMC meeting,  perhaps held by money managers outside CTAs.

  

  JPM also suggests that there was even more short covering in the post-FOMC period not covered by the chart above, which certainly has collapsed the net short exposure but JPM believes that “given the size of the shorts as of last Tuesday, we doubt that the negative net spec position on US equity futures has been fully covered by this week. In total, by looking at Figure 1 and Chart A16 together, we conclude that the short covering phase that started a month ago is very advanced” but, as JPM hedges “it is not yet fully completed.”

  That may be, but a far bigger catalyst for fund flows in the coming days is the end of corporate buybacks for the next 6 weeks as DB warned on Saturday morning:

  

  … a warning which is especially poignant when one considers that BofA’s “smart money” clients have now been selling stocks for 7 consecutive weeks, leading Bank of America to admit the bitter truth that “clients don’t believe the rally, continue to sell US stocks.”

  So why would anyone else, unless pressured by a short squeeze, buy… especially when as the central banks explicitly admitted, absent more liquidity support the market is set to tumble. A short squeeze, which as JPM admits, is almost over.

  Finally, a major driver of market upside this past week was Quad Witching, the S&P rebal and OpEx, which as JPM’s head quant Marko Kolanovic warned last week, may now catalyze near-term weakness: “in the next week, we could see some downward pressure as the impact of option hedging is reversed. Historically, we have found that the market develops positive momentum during the 3rd week of the month (when there is a call imbalance), and this often reverses during the 4th week of the month.”

  But what may ultimately determine the direction of market may also be the most boring one of all: Q1 earnings, which begin in earnest on Momdah, and are expected to be the worst since the financial crisis.
  

  

  

  

  

  

• Brazil Needs A Stronger Currency Like It Needs A Hole In The Head, Goldman Warns

  To say that the last seven days have been tumultuous in Brazil would be a laughable understatement.

  The country – which is on the fast track to “banana republic” status – plunged into chaos this week after a Sao Paulo state judge said a decision on the arrest of former President Luiz Inácio Lula da Silva should fall to federal judge Sergio Moro, the firebrand “rockstar” leading the prolonged car wash probe into corruption tied to Petrobras.

  Sensing that Lula’s detention was imminent, embattled President Dilma Rousseff sought to save her mentor by offering him a ministerial position which would effectively make him immune from prosecution – at least in the near term. Lula still has legions of supporters in the country, but the millions upon millions who want to see the Rousseff government ousted saw through the President’s gambit immediately. And so did Moro, who tapped the President’s phone and subsequently released several dozen recordings, at least one of which appears to prove that she did indeed offer Lula the cabinet position to shield him from legal trouble. Cue the street protests.

  

  Lula was sworn in during a farce of a ceremony which not even the PMDB bothered to attend and meanwhile, a committee was assembled to push forward with impeachment proceedings for Rousseff. A series of legal maneuvers from both sides set off a kind of “will he be minister or will he not” seesaw until finally, on Friday evening, Supreme Court judge Gilmar Mendes blocked Lula’s Lula’s appointment.

  “Tensions also grew between the government and the federal police after Eugênio Aragão, justice minister, threatened to remove federal police teams from investigations, including the task force investigating corruption at Petrobras,” FT wrote on Sunday. “If there is even a hint that information has been leaked from one of our agents, the whole team will be changed and I don’t need proof — the federal police is under our supervision,” Mr Aragão told Folha over the weekend.

  “Justice Gilmar Mendes’s ruling bars Mr. da Silva, who was sworn in Thursday as Ms. Rousseff’s chief of staff, from serving in the cabinet until a panel of Supreme Court justices makes a final ruling following an appeal by the government,” WSJ wrote, adding that “As a private citizen, Mr. da Silva, who is under investigation in the corruption case, can be tried in any court.”

  In other words, Moro is now free to arrest him.

  “Formally, Judge Moro could issue the arrest warrant,” Ivar Hartmann, a law professor at Getúlio Vargas Foundation in Rio de Janeiro told The Journal. “I don’t know if he will, but he could.”

  Yes “he could” and if he does, you’ll likely see more BRL strength. As we’ve documented extensively this month, the BRL is now trading pretty much exclusively on Lula, as his fate is seen as a proxy for whether Rousseff will ultimately be forced from office. The market apparently believes that anything would be better than the current political arrangement when it comes to shoring up the country’s flagging economy which last year plunged into what might as well be a depression. Here’s a look at how the currency is trading Lula news flow:

  

  Of course Brazil’s problems aren’t going to be fixed if Lula and Rousseff are kicked to the curb. On the political front, 26% of Congress faces active criminal investigations. On the economic front, we could rattle off any number of data points but really, this is all you need to know:

  

  So while the market may be forward looking, the BRL rallies that invariably accompany any and all bad news for Lula are not just premature, they’re ludicrous. In fact, in order for the country’s structural problems to dissipate, the currency needs to shoulder some of the burden. Goldman has more on why “the last thing Brazil needs now is to go back to BRL over-valuation.”

  *  *  *

  From Goldman

  Brazilian asset prices repriced significantly since late February on the back of a number of developments in the political and judicial spheres that were perceived as having significantly increased the probability of a near-term political transition.

  Due to a combination of external factors and a number of domestic events the BRL was the best-performing currency across the EM universe in the year through March 17. In the process, the BRL moved back into over-valuation territory, something that in our assessment is at odds with the current extremely debilitated macroeconomic picture and highly uncertain political backdrop.

  Part of the asset price rally observed during the first two weeks of March reversed on March 14-16, with Brazilian asset prices selling off with the appointment of former president Lula da Silva as Chief of Staff of the Rousseff administration (Exhibit 1). This was perceived by the market as having reduced the probability of a near-term political transition, and as having increased the probability of a shift back to heterodox policies. However, new “car-wash” investigation developments, spontaneous mid-week street protests, and a dovish FOMC surprise, were met by rallying markets towards the end of the week (March 17-18).

  

  Due to a combination of external factors and a number of domestic events related to the car-wash judicial probe into corruption, sentiment towards the BRL improved significantly despite still-high implied and realized volatility.

  

  We have long argued that given the very weak domestic macro fundamentals, namely, high domestic inflation, very deep and prolonged recession (Exhibits 7 and 8), and lingering political risk and uncertainty, the economy would benefit from a currency that is noticeably cheap to fair-value for a while.

  

  Hence, we are of the view that the central bank could and should be more assertive in reducing the still very large US$108bn stock of Dollar-swaps, in order to prevent further currency appreciation. That is, leaning against the wind of currency appreciation would be fully justified by the current weak macro fundamentals (2-year-long, deep economic contraction).

  

  In summary, to increase the efficiency of the macro adjustment and lessen the output/employment loss of the required rebalancing, the authorities should restrain BRL/USD appreciation below 3.70, in order not to short-circuit the ongoing expenditure switch, and to cement the current account adjustment.

  

  

  

  

  

• Thousands Of "Elated, Wet" Migrants Land On Lesbos, As Refugee "Deal" Fails To Stem Flow

  On Friday, the EU and Turkey came to an agreement on a set of proposals to stem the flow of Mid-East asylum seekers into Western Europe.

  The focus of the discussions in Brussels was cutting off the sea route to Greece. On the front lines is the Greek island Lesbos where at least half of the 144,000 refugees who have entered Greece in 2016 have landed. More than a million people crossed the Aegean to Greece last year.

  The new deal between the EU and Turkey calls for Ankara to take back all refugees arriving in Greece by sea after their asylum claims are processed. For every refugee that is sent back, Europe will take refugees directly from Turkey in a kind of one-for-one swap. The point is to discourage people smugglers by effectively making the sea trip pointless. “If returns begin migrants won’t want to pay $1,000-2,000 to a smuggler,” Antonis Sofiadelis, head of the coastguard operations on Lesbos explains.

  As part of the deal, Turkey will also get as much as €6 billion in aid and will have its EU membership application fast-tracked. Here are the specifics (on which the deal is notably short) for those who might have missed it:

  • Sending Migrants Back to Turkey From Greece
    • All migrants who travel to Greece from Turkey using irregular means after an agreement is reached will be returned to Turkey, in what the agreement calls “a temporary and extraordinary measure, which is necessary to end the human suffering and restore public order.”
  • A One-for-One Swap of Syrians
    • For each Syrian migrant returned to Turkey, the European Union will directly resettle another Syrian from Turkey, with priority given to Syrians who have not previously entered, or tried to enter, the European Union, up to a total of 72,000.
    • If that number is reached — as it almost certainly will be — a new round of negotiations will be held.
  • Stricter Controls of Turkey’s Borders
    • Turkey will take “all necessary measures” to prevent migrants from opening new sea or land routes to the European Union from Turkey in a measure aimed at assuaging concerns in Bulgaria that migrants will stream into the country.
  • Concessions for Turkey
    • The European Union will speed up the disbursement of the €3 billion it pledged in November, and provide another €3 billion by the end of 2018, once Turkey meets its commitments.
    • The European Union will waive most visa requirements for Turkish citizens by the end of June, provided that Turkey meets certain requirements.

  But while the deal is effectively in place now, sending refugees back to Turkey from Greece won’t be possible until April, the deadline for setting up the administrative infrastructure that will allow for the swift processing of asylum applications.

  In the meantime, the flow continues. “They waved, cheered and smiled, elated to have made it to Europe at dawn on Sunday in a packed blue rubber motor boat,” Reuters writes, recounting the scene on Lesbos as dawn broke on Sunday. Here’s more:

  The 50 or so refugees and migrants were among the first to arrive on the Greek island of Lesbos on day one of an EU deal with Turkey designed to close the route by which a million people crossed the Aegean Sea to Greece in 2015.

   

  Exhausted but relieved, the new arrivals wrapped their wet feet in thermal blankets as volunteers handed out dry clothes and supplies.

   

  Reuters witnesses saw three boats arrive within an hour in darkness in the early hours of Sunday. Two men were pulled out unconscious from one of the boats amid the screams of fellow passengers and were later pronounced dead.

   

  Twelve boats had arrived on the shoreline near the airport by 6 a.m, a police official said. A government account put the number of arrivals across Greece in the past 24 hours at 875 people.

   

  Among the early morning arrivals on the seaweed strewn beach on the south of Lesbos was Syrian Hussein Ali Muhammad, whose studies were interrupted after the war began. He said he wanted to go to Denmark to continue university. Asked if he was aware of the European decision, he said:

   

  “I know that. I hope to cross these borders. I hope I complete my studies here (in Europe), just this. I don’t want money, I just want to complete my studies. This is my message.”

   

  Doubts remain about whether the deal is legal or workable. It was not clear what would happen to the tens of thousands of migrants and refugees already in Greece.

  No, it’s not clear. And as we’ve seen over the past several weeks, there’s now a crisis in Idomeni where more than 15,000 refugees are stranded in makeshift camps now that Macedonia has closed its borders. 

  On Friday, Greek Interior Minister Panagiotis Kouroumplis compared the camps to Dachau. “I wouldn’t hesitate to say that this is a modern Dachau,” he said, lamenting what he called “the awakening of a kind of nationalism against persecuted people.” This should give you an idea of what life is like in Idomeni:

  Those arriving on Lesbos Sunday said they were aware of the deal between Brussels and Ankara, and you can bet they’re also acutely aware that the Macedonian border is closed. But they don’t care. “I know the decision,” a 30-year old computer engineer from Syria told Reuters. “I hope to (meet with) my wife and children [who are in Germany].”

  As we’ve said repeatedly, the scope of the “problem” simply defies any attempt on Europe’s part to cope – especially when Brussels is dependent upon Erdogan to be the first line of defense. Refugees didn’t leave Syria to be blown up or persecuted in Turkey. They left to get to Europe. Threatening them with expulsion if they decide to use the sea route to reach Greece isn’t going to deter anyone. They already know they can be expelled. They likely also know that the new plan will be virtually impossible to implement. 

  And so, as we look on while the Schengen dream dies amid a nationalistic furor not seen in Europe for more than seven decades, we bring you the following images from Reuters which depict the scene just this morning on the Greek island of Lesbos.

  

  

  

  

  

  

  

  

  

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