Today’s News 27th January 2016

• Nationalism & Its Discontents: A Deep Rumination On The Meaning Of Trump

  Submitted by Justin Raimondo via AntiWar.com,

  At the end of the cold war, a cadre of neoconservative intellectuals surveyed the debris of the fallen Soviet colossus and boldly proclaimed “the end of history.” The West, said Francis Fukuyama, writing in The National Interest, had won not only the cold war but also the war of ideas –   for all time. We were inevitably embarked on a pathway to a “universal homogenous state,” and although the pageant of History (always capitalized!) would continue to “unfold” along a rather bumpy road, in the end it would prove to be a highway to US hegemony over the entire earth. In a symposium commenting on Fukuyama’s thesis, the ever-practical Charles Krauthammer nevertheless insisted that it would be necessary for the United States to hurry History along by force of arms. In a subsequent polemic in Foreign Affairs, he argued that we ought to take advantage of “the unipolar moment” to “integrate” the US, Japan, and Europe into a “super-sovereign” global empire united by a “new universalism” – which, he averred, “is not as outrageous as it sounds.”

  Blinded by hubris, enthralled by the possibilities of unlimited power, the neocons – and their liberal internationalist doppelgangers on the other side of the political spectrum – didn’t see the nationalist backlash coming.

  That rebuke was prefigured by a stinging rebuttal from the pen of Patrick J. Buchanan in the pages of The National Interest, who wrote that Krauthammer’s vision was “un-American,” pure and simple. In Buchanan’s view, this militarized universalism was nothing less than treason. Invoking the Founders, he wrote that this globalist fantasy failed “the fundamental test of any foreign policy: Americans will not die for it.” A nation’s purpose, he added, cannot be ascertained “by consulting ideologies, but by reviewing its history, by searching the hearts of its people.” So what, if not the “benevolent global hegemony” dreamt of by the neocons, would and should Americans fight for? Buchanan’s answer was to quote these stanzas from Lord Macaulay:

  “And how can man die better
  That facing fearful odds,
  For the ashes of his fathers,
  And the temples of his gods?”

  Buchanan’s answer to Krauthammer’s globalism was a foreign policy of “enlightened nationalism”: “total withdrawal of US troops from Europe,” and a rejection of the idea – nowhere authorized in the Constitution – that the President and/or Congress has the power to sacrifice its sons on the altar of some crazed crusade for “global democracy.” Prophesizing the declaration of President George W. Bush some fifteen years later that we would seek to “end evil” in the world, Buchanan raised the banner of non-interventionism in the pre-9/11 world: that is, in a country that was primed to hear his message.

  He took that message to the Republican party, and the country, in three campaigns for the White House, all the while warning that the “unipolar world” dreamed of by Krauthammer and his fellow neocons was a dangerous fantasy, and that the rising tide of nationalism, from Beijing to Biloxi, would make short work of it. A multi-polar world was on the horizon, and the best we could hope for was to adapt to the new reality by tending to our own garden, which had – after a long global struggle with the (alleged) Soviet threat – by this time become choked with weeds and in need of emergency care.

  The same nationalist tides that were sweeping the post-cold war world in Europe and Asia were roiling the waters in America, but they took on a different shape and coloration in the wake of the 9/11 attacks. Whereas Buchananism was inward-looking, anti-interventionist, and anti-globalist, the ultra-nationalism utilized by the neocons to mobilize the American people behind a crusade to transform the Middle East was and is aggressive, militaristic, and explicitly hegemonist – a bid to create the “unipolar world” of Krauthammer’s Napoleonic imagination.

  This interrupted and in effect reversed the natural tendency to return to normalcy after the decades-long cold war struggle, and at a huge price in blood and treasure. And yet eventually the pendulum swung back again, as exhaustion – both emotional and financial – set in. America elected a President who vowed to end the wars, and deal with our festering home front crisis: that promise, however was not kept, and Barack Obama will leave office with the US once again in the middle of at least three wars, and with a hand in several others on their periphery. Yet the nationalist impulse – which is, in part, an “isolationist” impulse – is stronger than ever, laying just beneath the surface of the American political landscape, waiting for someone to pick up its banner.

  That someone turned out to be Donald Trump.

  I have many disagreements with Trump, but unlike his many enemies on the left and especially on the right I understand that his nationalism contains elements that are  useful, instructive, and even admirable. Unlike Buchanan, he is certainly no intellectual, but then again the last intellectual to inhabit the White House – Woodrow Wilson – was an unambiguous disaster for the cause of peace and liberty, and so I don’t hold that against The Donald. There is surely a demagogic element to his astonishing rise, which his opponents – particularly those on the right – make much of. The recent jeremiad against him launched by the neocons over at National Review was filled with comparisons to Mussolini, Juan Peron, Hitler (of course!), and even Andrew Dice Clay, this latter barb a direct appeal to the smug snobbery that characterizes our urban elites. “He’s “vulgar,” he’s “rude,” etc. etc., and those were some of the gentler ways they characterized him personally.

  Yet demagoguery didn’t bother them when it was deployed by George W. Bush as he marched us off to a disastrous war – a war Trump opposed, and continues to denounce today – and implied that his critics were in league with America’s enemies. “You’re either with us or you’re with the terrorists” – remember that one? Do you recall how Bush’s partisans over at National Review tried to tar conservative and libertarian opponents of the Iraq war – including this writer – as having “turned their backs on their country”? Demagoguery in the service of mass murder is fine with them: it’s only when their own methods are turned against them that the War Party starts to get religion.

  Yes, Trump rose to prominence initially on the strength of his anti-immigration and protectionist stance – views he holds in common with his predecessor, Buchanan – but this doesn’t account for the hysterical opposition to his candidacy coming from the neoconservatives. National Review has been a veritable fount of anti-Muslim propaganda, with the writings of Andrew McCarthy, Mark Steyn, Kevin Williamson, and a host of others all polemicizing against the idea that terrorism is primarily due to US actions abroad and holding that the roots of Bin Ladenism lie in the nature of Islam per se. Given the logic of their longstanding position, how can they object to Trump’s proposal to temporarily ban Muslim immigration? Yet there they were, breaking Godwin’s Law and claiming that we’d be facing an American Kristallnacht if Trump gets in the White House. What chutzpah!

  No, the real motive behind the neoconservative holy war against Trump is rooted in his foreign policy positions, which the neocons rightly view as a direct threat to their internationalist project. Chris Matthews is on to their game: please watch his confrontation with a neocon journalist below.

  Discussing the special we-hate-Trump issue of National Review, Matthews cornered poor NR writer Eliana Johnson, who was reduced to stuttering incoherence as he hammered her on what he rightly perceived as the overarching point of unity in “that crowd” on the Trump question: “that’s why they don’t like Trump, because he’s the only guy on the right wing who said [the Iraq war was] a stupid war.” When Johnson denied this, he demanded to know who among the long list of anti-Trump “intellectuals” wasn’t a war-hawk. “Can you answer me?” he persisted. “Who is not a hawk in that group?”

   She couldn’t come up with one (although she might have stopped him by mentioning David Boaz, of the Cato Institute).

  Boaz’s brief polemic, by the way, didn’t mention foreign policy: he confined his critique to references to Mussolini, George Wallace, and other comparisons seemingly ripped from the pages of Salon.com. Yet other contributors made no secret of the source of their animus. Neocon Mona Charen was appalled by Trump’s suggestion that “we let Russia fight ISIS.” Trump is “oblivious” to the “global jihad,” fumed Andrew McCarthy, angered by Trump’s vow to “stay out of the [Syrian] fray (leaving it in Vladimir Putin’s nefarious hands).” Bill Kristol was one of the signers, a man whose key role in ginning up the Iraq war is well-known to my readers.

  A recent piece in Politico was more explicit about the danger Trump poses to the internationalist-interventionist consensus that reigns supreme in the Washington Beltway:

  “One of the most common misconceptions about Donald Trump is that he is opportunistic and makes up his views as he goes along. But a careful reading of some of Trump’s statements over three decades shows that he has a remarkably coherent and consistent worldview, one that is unlikely to change much if he’s elected president. It is also a worldview that makes a great leap backward in history, embracing antiquated notions of power that haven’t been prevalent since prior to World War II.

   

  “It is easy to poke fun at many of Trump’s foreign-policy notions – the promises to “take” Iraq’s oil, to extract a kind of imperial ‘tribute’ from U.S. military allies like South Korea, his eagerness to emulate the Great Wall of China along the border with Mexico, and his embrace of old-style strongmen like Vladimir Putin. But many of these views would have found favor in pre-World War II – and even, in some cases, 19th century – America.

   

  ”In sum, Trump believes that America gets a raw deal from the liberal international order it helped to create and has led since World War II. He has three key arguments that he returns to time and again over the past 30 years. He is deeply unhappy with America’s military alliances and feels the United States is overcommitted around the world. He feels that America is disadvantaged by the global economy. And he is sympathetic to authoritarian strongmen. Trump seeks nothing less than ending the U.S.-led liberal order and freeing America from its international commitments.”

  All this is heresy in the circles in which the author – Thomas Wright, director of the Project on International Order and Strategy at The Brookings Institution – travels. Brookings is in hock to the Gulf emirate of Qatar to the tune of $14.8 million, according to the New York Times. This accounts for Wright’s discomfort with The Donald’s view of America’s expensive and often tragic commitments to defending other nations “that would be wiped off the face of the earth if not for us,” as the former real estate mogul puts it.

  Wright’s characterization of Trump’s attitude toward Putin as an “embrace” is a typical ploy by the War Party, which always portrays a non-belligerent stance as a love affair: what Trump actually said, however, is that “I could get along with Putin” – a definite no-no in Washington, where the new cold war is raging on both sides of the aisle. Contrast this with the position taken by most of the other GOP candidates, such as Christie, Rubio, and Bush, who proudly proclaim they’d confront Russian planes in the skies over Syria, risking World War III.

  Examining Trump’s foreign policy pronouncements over the years – the GOP frontrunner wonders why we are stationing 28,000 troops in South Korea, complains that we’re defending Japan while they slap tariffs on our products, and says we have no business stationing tens of thousands of soldiers in Europe, which can damn well take care of itself – Wright trots out the hate figures interventionists love to excoriate. Trump is like Robert A. Taft, who didn’t want us to join NATO: he’s like Charles Lindbergh, a leader of the anti-interventionist America First Committee, a particular hate-figure of the interventionist-neocon foreign policy Establishment. And, of course, Trump is an “isolationist,” because he’s sick of coddling our shiftless “allies” while they rip us off and laugh at us behind our back, all the while huddling under the protective wingspan of the American eagle.

  All of this is no doubt reassuring to Wright’s Qatari paymasters, who have a lot to lose if Trump should win the White House and present them with a bill for services rendered. But in reading Wright’s list of Trumpist foreign policy heresies, one can’t help but think that the average American would agree with each and every one of The Donald’s complaints about the profligate paternalism involved in maintaining this precious “international order” Wright would have us enforce for free. He maintains that “those alliances also work to America’s benefit by providing it with prepositioned forces and regional stability. It would actually cost more to station troops in the United States and have to deploy them overseas in a crisis.” But his rationale is a classic example of circular reasoning: he assumes it is our sacred duty to intervene everywhere. A “crisis,” for him, is the possibility that the Emir of Qatar will lose his throne, or that the Saudis will one day be confronted with the consequences of their inveterate barbarism. Ordinary Americans – i.e. Trump supporters – would consider that turn of events a comeuppance waiting to happen.

  “Tax these wealthy nations,” says Trump, “not America” – a prospect that no doubt horrifies Wright and his foreign sponsors, but delights Americans to no end. Which is precisely why Trumpian nationalism has such resonance this election season.

  In Wright’s view, Trump is not only unduly rude to our alleged “friends,” he is far too friendly to our alleged enemies, i.e. Russia and China. Wright admits, parenthetically, that these two pose no threat to the American homeland, but rather to “the US-led order,” i.e. the albatross of our global empire, where – as the Old Right writer Garet Garrett put it – “everything goes out and nothing comes in.”

  As is routine for our war propagandists, Wright accuses Trump of having a soft spot for authoritarian leaders. Since Trump doesn’t want to threaten Putin and the Chinese with regime-change, this must mean he admires – and even wants to emulate – their domestic policies. It’s an absurd position to take, and, not coincidentally, the very same illogic that led to the Iraq war. “He’s killing his own people,” went the refrain about Saddam Hussein – and if you didn’t favor regime-change in Iraq, that must mean you approved of Saddam’s dictatorship. We can see where that line “reasoning” led, but Wright and his fellow policy wonks haven’t learned that lesson even if the American people have.

  Wright gleefully cites Putin’s comments on Trump:

  “He says he wants to move on to a new, more substantial relationship, a deeper relationship with Russia, how can we not welcome that? Of course we welcome that.”

  This horrifies Wright, but what is wrong with getting along with the leader of the Russian state – a person who has at his command thousands of nuclear weapons and has often expressed wonderment at Washington’s rebuke of every attempt at rapprochement? With the threat of a new arms race looming large and a new cold war on the horizon, the biggest danger to international peace is our deteriorating relations with Russia. Trump realizes this: Wright, not so much. And the American people are behind Trump in this: asked by pollsters if we should get involved in a dispute with Russia over Ukraine, the overwhelming answer was a resounding “No!”

  “It’s not hard to imagine these two men sitting down to cut a deal,” says Wright, but surely cutting a deal to reduce the nuclear arsenals of both nations and resume cooperation in tracking down “loose nukes” floating around the former Soviet Union is a good thing. Except it isn’t a good thing as far as our new Cold Warriors are concerned. Wright derides Putin and Trump for holding an “antiquated” view of world politics, but what could be more antiquated than launching another cold war with Russia – a quarter century after the fall of the Soviet Union?

  As for China, Wright is at his wit’s end because Trump seems unconcerned with “its attempts to blunt US power projection capabilities or its repression at home.” And yet “power projection” is just another word for military aggression, which is bound to provoke a response from the highly nationalistic Chinese. Are we supposed to go to war over the Spratly Islands and a collection of artificial atolls in the South China Sea – thousands of  miles away from American shores? Seriously? Wright pretends to be concerned about China’s repressive domestic policies, but threatening behavior on our part will only empower the sclerotic leaders of the Chinese Communist Party and strengthen their position domestically. Wright fails to understand the power of rising nationalism abroad, just as he disdains its manifestations here in America.

  It’s almost funny how Wright portrays the threat to his treasured “US-led order”:

  “There will be massive uncertainty around America’s commitments. Would Trump defend the Baltics? Would he defend the Senkaku Islands? Or Saudi Arabia? Some nations will give in to China, Russia and Iran. Others, like Japan, will push back, perhaps by acquiring nuclear weapons. Trump may well see such uncertainty as a positive. Putting everything in play would give him great leverage. But by undoing the work of Truman and his secretary of state, Dean Acheson, it would be the end of the American era.”

  The idea that Putin is raring to gobble up the Baltics is one of the cold warriors’ talking points, but it is absurd on its face: does he really think Putin is dumb enough to replicate the US invasion of Iraq in a European setting? Don’t make me laugh. Crimea wanted union with Russia, and that’s what the Crimeans got: given the way Ukraine is being governed, who can blame them? But it is sheer fiction to imagine that Putin wants to recreate the Warsaw Pact: he is playing defense to NATO’s game of offense.

  As for the Senkaku Islands – what in the name of all that’s holy is the US interest in defending these useless atolls? Are we supposed to go to war with China over these five uninhabited specks – which are also claimed by Taiwan, our ally? Let’s take a national poll over that burning question: I can guarantee you the answer in advance.

  “To understand Trump, in the end, we have to go back to Taft and Lindbergh,” avers Wright, and in this he is absolutely correct. It’s a pity some of my libertarian friends fail to see this, but they are blinded by cultural factors and held captive by political correctness: immigration matters more to them than foreign policy. What they don’t understand is that the question of war and peace is the central issue of modern times. They fail to appreciate the foreign policy paradigm shift represented by Trump’s political success. However, Wright does understand it, along with his neoconservative comrades over at National Review and the Weekly Standard.

  For Wright, Trump is Taft and Lindbergh all rolled up into one:

  “The difference is that, unlike Trump, Taft was not outside the mainstream of his time. Many people believed America was safe and that it did not matter who ran Europe. Also, unlike Trump, Taft was boring and struggled to break through the noise in several nomination battles. The more bombastic and controversial figure was Lindbergh, the man who became a household name as the first person to fly across the Atlantic. Lindbergh led a national movement that was divisive, xenophobic and sympathetic to Nazi Germany.”

  Of course, the America First antiwar movement, which opposed US entry into the European war, reflected the overwhelming majority sentiment of the American people, who opposed intervention before Pearl Harbor. So what Wright is saying is that most Americans in the year 1940 were “sympathetic to Nazi Germany.” This was the line of the Communist Party at the time, which – along with the Party’s liberal-left fellow-travelers – was eager to see us get into the war in order to save Stalin’s bacon. That this nonsense is now gospel among the foreign policy mavens who inhabit the corridors of power in Washington should tell us everything we need to know about what’s wrong in the Imperial City.

  What scares Wright – and the Establishment of both parties – is that Trump is changing what it means to be “mainstream.” When Lindsey Graham, who wants to invade Syria, Iraq, Iran, and Ukraine – for a start – gets less than 1 percent in the polls, and Trump gets 40 percent, the War Party panics. As well they should. I for one take enormous pleasure in imbibing the naked fear Wright and his fellow warmongering wonks exude as the triumph of Trump approaches. Here is Wright, shaking in his boots:

  “The Republican primary of 2016 is shaping up to be the most important party primary since 1940. Lindbergh did not run, of course. But Taft was in with a strong chance. Only the fact that the field was badly divided created an unexpected opening for Wendell Willkie, an internationalist, to emerge as the nominee at the convention. Some of Roosevelt’s advisers were so relieved at Willkie’s nomination that they advised their boss he no longer had to run for an unprecedented – and controversial – third term.”

  Ah, but this time there will be no Wilkie – imposed by the Eastern Establishment after Taft’s delegates were disqualified by party bosses – to save the internationalists from the fate they so richly deserve. And that’s what has Wright in a panic:

  “The reason we must revisit 1940 is that Republicans have struggled to find a new north star after Iraq. Except for Rand Paul – whose own brand of libertarian isolationism, unlike Trump’s, didn’t sit well with voters – the establishment candidates were not sure whether they still supported Bush 43’s strategy or opposed it. Most tried to muddle through with a critique of President Barack Obama. Marco Rubio stuck to the ambitious Bush 43 approach but found a declining market. Some, like Ted Cruz, tried to deal with the shift in sentiment by cozying up to pro-American dictators and abandoning support for democracy promotion. Cruz even used the isolationist term America First to describe his foreign policy. But Cruz seems to have thought little and said even less about America’s global role outside the Middle East. Ironically for someone with the reputation of being exceptionally smart, he lacks Trump’s detail and substance.”

  Poor Wright! The combined poll numbers of the two top candidates for the GOP presidential nomination – one of whom is hated by the neocons, and the other who has openly attacked the neocons – equal over half of Republican primary voters. And the most consistently “isolationist” of the top two is the frontrunner, with his poll numbers rising with every effort to dislodge him. You’ll pardon me if I indulge the temptation to chortle in print: I haven’t had this much fun since Buchanan toppled King George off his pedestal in New Hampshire and declared war on the “New World Order.”

  “It is in this vacuum that the long-dormant Taftian foreign policy has made an unexpected comeback in the hands of Trump,” says Wright, in despair. “What happens next is anybody’s guess.”

  What’s an internationalist to do when the rising tide of American nationalism washes over his foreign-subsidized sandcastle? Cry? Write long articles for Politico? Perhaps both.

  I have to say, however, that Trump is hardly the consistent “isolationist” Wright portrays in his piece. He is flighty, and therefore unpredictable. Although his views on trade limn (somewhat) those of the late Chalmers Johnson, who saw the American empire as a tradeoff between Washington and its overseas clients – we would lift trade barriers if they allowed us to station troops on their soil – Trump lacks Johnson’s intellectual solidity, to say the least. Slapping tariffs on Chinese goods would start a trade war that would be disastrous for us, and the world. In short, I don’t give one iota of political support to Trump because he is simply not to be trusted. If he overcomes the odds and does win the White House, “what happens next is anybody’s guess,” as Wright puts it.

  Yet Trump’s personal shortcomings are beside the point. The lesson to be taken from this episode is the centrality of foreign policy in the political life of our country. The doggedness with which the internationalists are attacking Trump, the nature of their criticisms, and the viciousness of their tactics is an indication of how hard it will be to dislodge them – just as Trump’s popularity shows how eager Americans are to hear someone tell them that we don’t have to continue being the policeman of the world, and that we’re paying through the nose for something that doesn’t benefit us in the least (although it does benefit outfits like the Brookings Institution, which takes in millions from its foreign sponsors). No matter how inconsistent and even obnoxious Trump may be – and his crazy plan to deport millions of undocumented immigrants is certainly a noxious fantasy that will never happen no matter who is elected – it would be a mistake to dismiss him as a random anomaly, or as a “fascist” demagogue as some of the more brainless libertarians have done.

  The meaning of Trumpism is that Americans want to rid themselves of the burden of empire: Wright is right about that. Trump’s rise augurs a seismic shift in the foreign policy debate in this country, marking the end of the interventionist consensus that dominates both parties. And it certainly means the final defeat and humiliation of the neoconservatives, who are busy spewing vitriol at him and his “plebeian” supporters. And that alone is worth whatever price we have to pay for the triumph of Trump. For the neocons are the very core of the War Party: their demise as a politically effective force inside the GOP is an event that every person who wants a more peaceful world has been longing for and should celebrate.

  When the Republican-controlled Congress in the Clinton era threatened to pull the funding from Bill Clinton’s war in the former Yugoslavia, Bill Kristol threatened to walk out of the GOP. Today, as Trump appears to be the likely Republican presidential nominee, Kristol is threatening to start his own party. Which strikes me as a brilliant ploy: let him run Lindsey Graham as the candidate of the aptly-named War Party – and when America’s foremost warmonger does worse than he did in the primaries, let the chickenhawk-in-chief contemplate the majesty of cosmic justice.

  

  

  

  

  

• 25 Years Of Fed Fueled M&A – The Enabling Of A Banking Oligopoly

  The “Big Four” retail banks in the United States collectively hold 45% of all customer bank deposits for a total of $4.6 trillion.

  The fifth biggest retail bank, U.S. Bancorp, is nothing to sneeze at, either. It’s got 3,151 banking offices and employs 65,000 people. However, it still pales in comparison with the Big Four, holding only a mere $271 billion in deposits.

  Today’s visualization from VisualCapitalist.com's Jeff Desjardins, looks at consolidation in the banking industry over the course of two decades. Between 1990 and 2010, eventually 37 banks would become JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup.

   

  

  Courtesy of: Visual Capitalist

   

  Of particular importance to note is the frequency of consolidation during the 2008 Financial Crisis, when the Big Four were able to gobble up weaker competitors that were overexposed to subprime mortgages. Washington Mutual, Bear Stearns, Countrywide Financial, Merrill Lynch, and Wachovia were all acquired during this time under great duress.

  The Big Four is not likely to be challenged anytime soon. In fact, the Federal Reserve has noted in a 2014 paper that the number of new bank charters has basically dropped to zero.

  

  From 2009 to 2013, only seven new banks were formed.

  “This dramatic reduction in new bank charters could be a concern for policymakers, if as some suggest, the decline has been caused by increased regulatory burden imposed in response to the financial crisis,” the authors of the Federal Reserve paper write.

  Competition from small banks has dried up as a result. A study by George Mason University found that over the last 15 years, the amount of small banks in the country has decreased by -28%.

  

  Big banks, on the other hand, are doing relatively quite well. There are now 33% more big banks today than there were in 2000.

  

  

  

  

  

• The Luxury Housing Bubble Pops

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  It appears the music may have finally stopped for one of the world’s largest luxury real estate bubbles: London.

   

  It’s well known that foreign oligarchs love London real estate as a means to launder funds, typically “earned” by soaking their host countries dry via corruption and fraud. This has caused absurd and irrational spikes in high-end residential real estate in the English capital, as well as a flood of new construction.

   

  With emerging markets now completely collapsing, the seemingly endless flood of foreign money is drying up, and with it, London real estate.

   

  So has the London real estate bubble popped? Probably.

   

  – From the September 9, 2015 article: Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?

  The first real signs that the global luxury home price bubble had popped emerged last fall in the world’s capital of oligarch money laundering: London.

  Since then, we have seen weakness in high end Manhattan real estate, but the trend has now spread and is starting to make itself apparent all over the place.

  Yesterday’s Bloomberg article titled,The Surge in U.S. Mansion Prices Is Now Over, is really interesting. Here are a few choice excerpts:

  The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to real estate agent Kanney Zhang.

   

  Not now.

   

  Zhang is shopping it for a discounted $3.68 million, but nobody’s biting. Her clients, a couple from China, are getting anxious. They’re the kind of well-heeled international investors who fueled a four-year luxury real estate boom that helped pull America out of its worst housing slump since the 1930s. Now the couple is reeling from the selloff in the Chinese stock market and looking to raise cash to shore up finances.

   

  Prices for the top 5 percent of U.S. real estate transactions remained flat in 2015 while all other houses gained 4.9 percent, according to data from Redfin Corp., a real estate brokerage and data provider.

  Pretty powerful chart:

  

  In the Los Angeles suburb of Arcadia, where Zhang is struggling to sell the six-bedroom home, dozens of aging ranch houses were demolished to make way for 38 mansions built with Chinese buyers in mind. They have manicured lawns and wok kitchens and are priced as high as $12 million. Many of them sit empty because the prices are out of the range of most domestic buyers, said Re/Max broker Rudy Kusuma, who blames a crackdown by the Chinese on large sums leaving the country.

  Arcadia…where have we heard that before. Oh yeah: Welcome to Arcadia – The California Suburb Where Wealthy Chinese Criminals are Building Mansions to Stash Cash

  The stronger dollar is driving South American buyers away from the 23,000 condos in the pipeline for Miami’s downtown area, said Peter Zalewski, owner of South Florida development tracker CraneSpotters.com. Buyers signed about one-fourth fewer pre-construction contracts last year than in 2014, according to Anthony M. Graziano, senior managing director at Integra Realty Resources Inc., which tracks condo data for the Miami Downtown Development Authority.

   

  In nearby Sunny Isles, Florida, faraway currency fluctuations are endangering the sale of a $3.7 million condominium. A Colombian woman who put down a 50 percent deposit is fretting over how she’ll cover the other half over the next year, said her agent, Mauricio Rojas. The Colombian peso, dragged down by the commodity slump, has lost about 30 percent of its value since she signed the contract in December 2014.

   

  In Houston, the plunge in oil prices to a 12-year low is killing the luxury boom. Sales for homes priced at $500,000 or more dropped 17 percent in December from a year earlier, according to the Houston Association of Realtors.

   

  Manhattan resale prices for the top 20 percent of the market peaked in February and have fallen every month since, according to an analysis through October by listings website StreetEasy.

  I covered the emerging weakness in Manhattan a couple of weeks ago.

  See: Manhattan Luxury Real Estate Peaked Last February – Prices Now Down 8 Months in a Row.

  The economic turmoil, along with new regulations, slowed demand around the world. In London, the market weakened after the government increased a stamp-duty sales tax and Russians and Chinese buyers began pulling back. Luxury prices in London rose only 1 percent last year after jumping 5.1 percent in 2014, according to Knight Frank research.

  Here are three previously published  articles on London:

  Tens of Thousands of Properties to Be “Dumped” on London Real Estate Market by 2017

  Luxury London Real Estate Prices Plunge 11.5% Year-Over-Year

  Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?

  Considering the global luxury real estate market is one of the most inflated asset bubbles on earth, current weakness could pretty quickly turn into a crash.

  

  

  

  

  

  

• US, China Stocks Tumble After Industrial Profits Plunge

  Dow futures are down 100 points and Chinese stocks are pressing new 14-month lows, extending last night’s carnage after Chinese Industrial Profits tumbled. With a dismal 4.7% drop year-over-year, led by a near 60% collapse in the mining industry, early strength (after some jawboning from Abe) gave way to fresh lows and US equity futures are also responding. Offshore Yuan refuses to drop since Xinhua wrote a 3rd hit piece against George Soros and his “speculative snap profits.”

   

  

   

  This year is just getting uglier…

  

   

  Offshore Yuan has been interfered with twice now in the last 24 hours as Xinhua unleahes its 3rd hit piece against George Soros and his speculative ilk…

  So why do speculators make claims that run counter to reality? Analysts said it is because either the short-sellers haven’t done their homework or that they are intentionally trying to create panic to snap profits.   

  However, it seems the selling pressure is persisting no matter how hard they try to hold it…
  

  

  US equity futures are also under pressure as early oil weakness coupled with AAPL’s plunge after hours was not helped by China weakness…

  

  

  

  

  

  

• 36 WTF Quotes From The Davos Bubble Chamber

  As the deaf, dumb, and blind kids of the world's elite gathered in Davos to mutually masturbate over their own success, and generously drop some breadcrumbs of hope for the rest of the world, The World Economic Forum unleashed the followingg 36 quotes to sum it all up…

  Session: The Global Economic Outlook

  

  Session: The Future of Growth: Technology-Driven, Human-Centred

  

  Session: The Transformation of Tomorrow

  

  Session: The Canadian Opportunity

  

  Session: A New Climate For Doing Business

  

  Facebook Live Chat: Questions to John Green From Davos

  

  Session: Press Conference with the Co-Chairs of the Annual Meeting 2016

  

  Session: The Transformation of Tomorrow

  

  Session: The Digital Transformation of Industries

  

  Session: The Digital Transformation of Industries

  

  Session: Press Conference with the Co-Chairs of the Annual Meeting 2016

  

  Session: The Transformation of Finance

  

  Session: The 21st-Century Dream

  

  Session: The Future of Europe

  

  Session: Where is the Chinese Economy Heading?

  

  Session: Reuniting Cyprus

  

  Session: Reuniting Cyprus

  

  Session: The Future of Europe

  

  Session: Britain in the World

  

  Session: Special Conversation with Benjamin Netanyahu

  

  Session: The New Climate and Development Imperative

  

  Session: The New Climate and Development Imperative

  

  Session: How to Reboot the Global Economy?

  

  Session: What If: Robots Go to War?

  

  Session: The New Climate and Development Imperative

  

  Session: Where Is the Chinese Economy Heading?

  

  Session: The Canadian Opportunity

  

  Session: Progress towards Parity

  

   

  

  Session: An Insight, An Idea with Kevin Spacey

  

  Blog: Emma Watson in Davos

  

  Session: Securing the Middle East and North Africa

  

  Session: Europe at a Tipping Point

  

  Session: Special Address with John F. Kerry

  

  Session: What If: Your Brain Confesses?

  

  Session: The Global Security Outlook

  

   

  *  *  *

  So in summary: rose-colored glasses, better times ahead, inequality, women, internet of things, and volatility is good (as is greed).

  

  

  

  

• Capital Controls Are Coming

  Submitted by Nick Giambruno via CaseyResearch.com,

  The carnage always comes by surprise, often on an otherwise ordinary Saturday morning…

  The government declares a surprise bank holiday. It shuts all the banks. It imposes capital controls to stop citizens from taking their money out of the country. Cash-sniffing dogs, which make drug-sniffing dogs look friendly, show up at airports.

  At that point, the government is free to help itself to as much of the country’s wealth as it wants. It’s an all-you-can-steal buffet.

  This story has recently played out in Greece, Cyprus, Argentina, and Iceland. And those are only a few recent examples. It’s happened in scores of other countries throughout history. And I think it’s inevitable in the U.S.

  I believe the U.S. dollar will lose its role as the world’s premier reserve currency. When that happens, capital controls are sure to follow.

  This is why it’s crucial to your financial future to understand what capital controls are, how they are used, and what you can do to protect yourself.

  Why Governments Impose Capital Controls

  Think of the government as a thief trying to steal your wallet as you (understandably) try to run away. With capital controls, the thief is trying to block all the exits so you can’t reach safe ground.

  A government only uses capital controls when it’s desperate…when it can no longer borrow, inflate the currency, tax, or steal money in one of the “normal” ways.

  In most cases, governments use capital controls in severe crises. Think financial and banking collapses, wars, or chronic economic problems. In other cases, they’re just a way to control people. It’s much more difficult to leave a country when you can’t take your money with you.

  Regardless of the initial catalyst, capital controls help a government trap money within its borders. This way, it has more money to confiscate.

  As strange as it sounds, capital controls are often politically popular. For one, they are a way for a government to convince people it’s “doing something.” The average person loves that.

  Two, a government can usually convince people that moving money offshore or investing in foreign assets is only for rich tax evaders or the unpatriotic. If freedom and private property matter to you at all, you know that’s obviously false.

  How It Happens

  For the unprepared, it’s like a mugging…

  To be effective, capital controls have to be a surprise. Alerting people in advance would defeat the purpose. Weekends and holidays are the perfect time to catch people off guard.

  Here are the four most common forms of capital controls:

  1. “Official” Currency Exchange Rates

  The government’s official rate for converting foreign currency to local currency is always less favorable than the black market rate (more accurately called the free market rate).

   

  This applies to official prices for gold, too.

   

  Getting the more favorable black market rate usually involves informal transactions on the street. Of course, this is technically illegal.

   

  However, should you follow the law and exchange money at the official rate, it amounts to a wealth transfer from you to the government. The wealth transfer equals the difference between the free market rate and the official rate. It’s a form of implicit taxation.

   

  2. Explicit Taxation

  A government might impose explicit taxes to discourage you from buying foreign investments, foreign currencies, or gold. India tried this a few years ago by imposing a 10% tax on gold imports.

   

  Another tactic is taxing money transfers out of the country…say 20% on any amount transferred to a foreign account. In this case, you could still move your money, but it would cost you.

  Governments want you to hold your wealth inside the country and in the local currency. Ultimately, this makes it easier for them to tax, confiscate, or devalue with inflation.

   

  3. Restrictions and Regulations

  A government might restrict how much foreign currency or gold you can own, import, or export. It might require you to get permission to take a certain amount of money out of the country. The cap is often only a couple thousand dollars.

   

  4. Outright Prohibition

  This is the most severe form of capital control. Sometimes a government explicitly prohibits the ownership of foreign currencies, foreign bank accounts, foreign assets, or gold, or the moving of any form of wealth outside the country.

  Capital Controls in the U.S.

  The U.S. government has used capital controls before. In 1933, through Executive Order 6102, President Roosevelt forced Americans to exchange their gold for U.S. dollars. It’s no surprise that the official government exchange rate was unfavorable. The U.S. government continued to prohibit private ownership of gold bullion until 1974.

  Today, with no conceivable end to the U.S. government’s runaway spending, sky-high debt, and careless money printing, I think it’s only a matter of time until the government decides capital controls are the “solution.” There’s no doubt statist economists like Paul Krugman would cheer it. All it would take is the stroke of the president’s pen on a new executive order.

  Whatever the catalyst, it’s critical to prepare while there’s still time.

  What Could Happen if You’re Too Late

  Capital controls are almost always a prelude to something worse. It might be a currency devaluation, a so-called “stability levy,” or a bail-in.

  Whatever the government and mainstream media call it, capital controls are a way to trap your money so it is easier to steal. Anything they don’t steal immediately, they box in for future thefts.

  What You Can Do About It

  The solution is simple.

  Place some of your savings outside your home country by setting up a foreign bank account.

  That way, no one can easily confiscate, freeze, or devalue your savings at the drop of a hat. A foreign bank account will help ensure that you have access to your money when you need it the most.

  Despite what you may hear, obtaining a foreign bank account is completely legal. It’s not about tax evasion or other illegal activities. It’s simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions.

  It’s becoming harder and harder to open a foreign bank account. Soon, it could be impossible. It’s important to act sooner rather than later – even if you don’t plan to use the account immediately.

  Even without capital controls, it still makes sense to move some of your savings to a foreign bank where it can be kept safe.

  Be sure to check out our comprehensive video on foreign bank accounts, where we share our favorite banks and jurisdictions. The video includes crucial information on the few jurisdictions that still accept American clients and allow them to open accounts remotely with small minimums.

   

   

  

  

  

  

  

• Something Snapped At The Comex

  There had been an eerie silence at the Comex in recent weeks, where after registered gold tumbled to a record 120K ounces in early December nothing much had changed, an in fact the total amount of physical deliverable aka “registered” gold, had stayed practically unchanged at 275K ounces all throughout January.

  Until today, when in the latest update from the Comex vault, we learn that a whopping 201,345 ounces of Registered gold had been de-warranted at the owner’s request, and shifted into the Eligible category, reducing the total mount of Comex Registered gold by 73%, from 275K to just 74K overnight.

  

   

  This took place as a result of adjustments at vaults belonging to Scotia Mocatta (-95K ounces), HSBC (-85K ounces), and Brink’s (-21K ounces).

  Meanwhile, the aggregate gold open interest remained largely unchanged, at just about 40 million ounces.

  

   

  This means that the ratio which we have been carefully tracking since August 2015 when it first blew out, namely the “coverage ratio” that shows the total number of gold claims relative to the physical gold that “backs” such potential delivery requests, – or simply said  physical-to-paper gold dilution – just exploded.

  As the chart below shows – which is disturbing without any further context – the 40 million ounces of gold open interest and the record low 74 thousand ounces of registered gold imply that as of Monday’s close there was a whopping 542 ounces in potential paper claims to every ounces of physical gold. Call it a 0.2% dilution factor.

  

   

  To be sure, skeptics have suggested that depending on how one reads the delivery contract, the Comex can simply yank from the pool of eligible gold and use it to satisfy delivery requests despite the explicit permission (or lack thereof) of the gold’s owner.

  Still, the reality that there are just two tons of gold to satisfy delivery requsts based on accepted protocols should in itself be troubling, ignoring the latent question why so many owners of physical gold are de-warranting their holdings.

  Considering there are now less than 74,000 ounces of Registered gold at the Comex, or just over 2 tonnes, we may be about to find out how right, or wrong, the skeptics are, because at this rate the combined Registered vault gold could be depleted as soon as the next delivery request is satisfied. Or isn’t. 

  

  

  

  

  

• The Best Performing 'Currency' Of The 21st Century Is…

  Since the beginning of the 21st Century, as people awoke to Y2K that did not end the world, there has been one 'currency' that has outperformed all its peers in terms of preserving wealth and maintaining purchasing power…

  The barbarous relic…

  

   

  

  

  Source: Sharelynx

  

  

  

  

  

• Oil Prices In 2016 Will Be Determined By These 6 Factors

  Submitted by Allen Gilmer via OilPrice.com,

  The one given in this industry is that the analyst community is consistently wrong about where the price of oil is going in the near to mid-term. Just as $100 oil was a sentiment driven price that baked in the risk of every potential negative impact on the supply chain, $28, $30 or $40 dollars is equally sentimental, assuming that any and all incremental barrels are and will be available AND demand will slow or stop.

  

  2013 and 2015 forecasts. (forecasting sentiment is hard) Image Sources: EIA

  So let’s just step away from the current noise and focus on a non-controversial outcome… that oil will be much more valuable in the future than it is today. What, exactly, will that future look like?

  Today’s pricing sentiment is driven by a global economic “Pick 6” today…

  

   

  1. US production rates,

  2. Saudi Arabia’s ability to grow production,

  3. Iran’s latent ability to produce more oil,

  4. Chinese economic slowdown and its impact on consumption,

  5. Russia’s ability to add global production, and

  6. OPEC’s inscrutable strategy.

  *  *  *

  Let’s stipulate a couple of assumptions.

  First, people will produce existing wells at rates that aren’t sustainable to preserve cash flow or compete for market share, because the cost to drill and bring online is already sunk. Second, new wells will not be drilled if there isn’t at least an outlook to breakeven producing them. That means an expectation of a sustained price over 1-3 years or until the well has been paid out.

  U.S. Production Rates

  

  Image Source: Drillinginfo Production Report for Unconventional U.S. Onshore Plays (Combined MBOE 20:1) over last six years. Note the lag in production reporting means Q42015 and even some Q32015 reports are not finalized.

  First, let’s look at the U.S., the simplest and most transparent of the “Pick 6” issues bandied about as a price driver. Certainly the unconventional revolution has been a huge factor in global production increases over the last 6 years. The item NOT generally recognized is that production typically lags drilling by some 5 months, thus the drilling in December 2014 is discernible in production records in April 2015. That analysts were alarmed at increasing production and supply during the 1st half of the year suggested that they did not understand this dynamic, nor did the business press. We predicted in April that monthly production would peak in May and then jump around between -100 mbpd and -350 mbpd for the rest of the year. When looking at additional production month over month, it is important to remember that it is building on a sloping foundation of natural decline.

  For instance, in 2014, as the U.S. added some million barrels of daily production, it had to produce 2.2 million new barrels of production to do so. The slope of that foundation required 1.2 million new barrels to just flatten it out. First year production in the U.S. has had a blended annual decline that has increased from 41 percent in for 2010 era wells to 47 percent for 2013 era wells. Therefore, 2014 era wells were likely to have declined 49 percent and 2015 by 51 percent in their first year. Second year declines show less of a pattern, ranging from 10-20 percent decline from the end of the prior year. In other words, we will see real production declines in 2016 as the full impact of 2015 drilling reductions are cycled through. Depending on the variability of the second year declines, this could range from -400 mbpd to well over -1MM bpd. So, the U.S. isn’t going to be the bringer of oil glut news going forward. In fact, the U.S. oil patch has severely damaged its capacity to rebound from an oil field services point of view, with companies foregoing normal maintenance to just survive. This deferred maintenance will have permanent consequences. Score: NOT a driver.

  Saudi Arabia’s Ability To Grow Production

  Whereas Saudi’s rig count is up, so is its production. They are producing record amounts and most analysts believe that there is little if any behind valve production. SCORE: NOT a driver

  Iran’s Latent Ability To Produce More Oil

  When sanctions hit Iran, they immediately dropped 600 mbpd from their official production levels. That they report the same production to the barrel since cause their official number to be quite suspect. Iran has not been investing in their infrastructure and they require outside dollars to reinvest in existing production, ranging from $30 billion to $500 billion over the next 5 years, depending on the source to maintain what they have. $30 oil is not an environment amenable to outside tender offers. Some claim that there will be no net new production in the near term, that Iran will merely start to recognize the production of oil it has sold in the black market. In any case, 500 mbpd ‘new’ production are baked in as of last week. SCORE: NOT a driver

  Chinese Economic Slowdown And Its Impact On Consumption

  As the year has progressed, the Chinese economy exhibits signs of extreme duress, suggesting that demand growth could weaken materially. Imports of metals and building materials are down substantively. Oil is not. China continues to import crude oil at increasing rates, most likely taking advantage of the low price environment to strengthen strategic reserves. China’s growing “guns vs butter” investment shift isn’t likely a bearish sign for crude oil, either. The IEA and EIA’s production growth estimates both suggest that the market isn’t going to elastically respond to lower crude prices, in essence saying that lower price will not drive higher consumption for the first time ever and despite the surprise increase in consumption in 2015 SCORE: NOT a driver.

  Russia’s Ability To Add Global Production

  Russia found itself in a fun position in 2015 as economic sanctions hammered the ruble down 50%. Essentially, Russia had a half price drilling environment and was effectively hedged by its cratering currency because it pays for new wells in rubles and sells its crude in dollars. This advantage doesn’t exist at commodity prices this low. Russia isn’t likely to spend a buck to get back 20 cents in the first year. SCORE: NOT a driver.

  OPEC’s Inscrutable Strategy

  Forget all the rest of the “Pick 6”. If anyone assumed OPEC wasn’t in charge of global oil prices, they were dead wrong. And by OPEC, let’s be honest and say Saudi Arabia. Only Russia, Saudi Arabia, and the U.S. technically have the production base to unilaterally affect the price of crude without completely undermining their net production rates, and the U.S. regulatory environment is focused on efficiency and safety and not price, because, alone of these three, the U.S. until recently was thought to be a net beneficiary of low priced crude oil.

  Saudi Arabia, tired of being the only player ceding market share in an organization comprised of members that continually and habitually cheat on their production allotments, is flexing their global geopolitical muscle to enforce their control over the organization and to affect the amount of money available to global E&P projects in light of the new beta in crude oil pricing that is recognized today. So, as a result, the U.S. finally sees production declines of the celebrated unconventionals; Iran and Russia are starved of cash, along with the rest of the OPEC members, some to the point of existential crisis. How big a stick does Saudi Arabia wield right now? Very big, I think.

  *  *  *

  So what about the U.S. oil patch? The global price of crude is as ridiculously priced today as it was at $120 per barrel. A 2 percent oversupply in a world where we cannot even measure within 5 percent with any certainty drops the price of crude over 70 percent and has every analyst that claimed just 2 years ago that we would never see crude below $100 again now claiming that we won’t see oil above $40 anytime soon. They were wrong then, and they are wrong now.

  

  Image Source

  What is different is that the cost of capital in the U.S. has gotten much higher. That won’t be changing soon. Banks and other lenders have already started changing the cost of capital. Warrants are being demanded at closings. Even when oil recovers, this will not change rapidly. Watch the industry get a lot better, because their breakeven for cost of capital will have gotten worse. The oilfield service sector has suffered more than a glancing blow. It will not be able to ramp up as quickly as it was laid down. A lot of its equipment is shot for lack of proper maintenance.

  The Fed is reported to be advising banks to push for asset liquidation in lieu of bankruptcy. This is actually a good idea if the point is to preserve value for lenders and equity holders. There is nothing more damaging to producing oil and gas assets as a bankruptcy trustee. Great for the eventual acquirer, bankruptcy trustees know how to make sows ears from silk purses by their reluctance to fund what Texas Independent Producers and Royalty Owners (TIPRO) chairman Raymond Welder calls the “recurring, non-recurring” expenses such as workovers necessary and common in the oilfield.

  

  

  

  

  

• Inside China's Dying, Abandoned Factories

  By now, the China narrative should be familiar to most regular readers. Indeed, anyone who pays attention to global macro should by all rights be able to recount the entire story off the top of their head.

  Massive credit expansion (from just a little over $7 trillion in 2007 to a staggering $28 trillion and climbing today) allowed the country to sidestep the economic malaise that followed the financial crisis. To whatever degree global demand and trade “recovered”, that recovery was underwritten by the Chinese, whose insatiable demand for raw materials buoyed commodity producers from Australia to Brazil.

  Unfortunately for the global economy, China was sowing the seeds for its own (and everyone else’s) economic demise. Beijing built, and built, and built, creating pockets of acute overcapacity throughout the country’s industrial complex and erecting sprawling ghost cities and other monuments to the idea that “if you build it, they will come”.

  When the debt bonanza finally begin to taper off and China stepped back to assess the monster it had created, it was too late. Commodity producers the world over had come to depend on a perpetual bid from China. When demand began to slump as China set off down the long road towards creating a consumption and services-led economy, the world was caught flat footed. A global deflationary supply glut for commodities was born and the more quickly China’s economy decelerated, the larger it became.

  As for China itself, authorities are reluctant to allow the market to purge uneconomic productive capacity for fear of sparking social upheaval. That means perpetually bailing out companies that find themselves in trouble, thus preserving unwanted supply and fueling the disinflationary impulse.

  Or, as we put it back in October: “The cherry on top is that China itself is now trapped: it simply can’t afford to let anyone default, as one bankruptcy would cascade across the entire bond market and wipe out countless corporations leaving millions of angry Chinese workers unemployed, and is therefore forced to keep bailing out insolvent companies over and over. By doing so, it is adding even more deflationary capacity and even more production into the market, which leads to even lower prices, and even greater bailouts!”

  But even as the Politburo struggles to prevent the entire house of cards from collapsing on itself, signs of the country’s deceleration are readily apparent and Beijing’s anti-pollution campaign has only served to put further pressure on the industrial complex. Below, find a series of images which depict forlorn, abandoned brick factories and worker dormitories in Chaomidian on the outskirts of Beijing, shuttered because they belched too much pollution and because, presumably, the country has all the bricks it needs. 

  

  

  

  

  

  

  

  

  

  

  

  

  More here from Reuters

  

  

  

  

• The Rejection Election – A Leap Into The Dark

  Submitted by Patrick Buchanan via Buchanan.org,

  With the Iowa caucuses a week away, the front-runner for the Republican nomination, who leads in all the polls, is Donald Trump.

  The consensus candidate of the Democratic Party elite, Hillary Clinton, has been thrown onto the defensive by a Socialist from Vermont who seems to want to burn down Wall Street.

  Not so long ago, Clinton was pulling down $225,000 a speech from Goldman Sachs. Today, she sounds like William Jennings Bryan.

  Taken together, the candidacies of Trump, Sanders, Ben Carson and Ted Cruz represent a rejection of the establishment. And, imitation being the sincerest form of flattery, other Republican campaigns are now channeling Trump’s.

  This then is a rejection election. Half the nation appears to want the regime overthrown. And if spring brings the defeat of Sanders and the triumph of Trump, the fall will feature the angry outsider against the queen of the liberal establishment. This could be a third seminal election in a century.

  In the depths of the Depression in 1932, a Republican Party that had given us 13 presidents since Lincoln in 1860, and only two Democrats, was crushed by FDR. From ’32 to ’64, Democrats won seven elections, with the GOP prevailing but twice, with Eisenhower. And from 1930 to 1980, Democrats controlled both houses of Congress for 46 of the 50 years.

  The second seminal election was 1968, when the racial, social, cultural and political revolution of the 1960s, and Vietnam War, tore the Democratic Party asunder, bringing Richard Nixon to power. Seizing his opportunity, Nixon created a “New Majority” that would win four of five presidential elections from 1972 through 1988.

  What killed the New Majority?

  First, the counterculture of the 1960s captured the arts, entertainment, education and media to become the dominant culture and convert much of the nation and most of its elite.

  Second, mass immigration from Asia, Africa and especially Latin America, legal and illegal, changed the ethnic composition of the country.

  White Americans, over 90 percent of the electorate in 1968, are down to 70 percent today, and about 60 percent of the population.

  And minorities vote 80 percent Democratic.

  Third, Republicans in power not only failed to roll back the Great Society but also collaborated in its expansion. Half the U.S. population today depends on government benefits.

  Consider Medicare and Social Security, the largest and most expensive federal programs, critical to seniors and the elderly who give Republicans the largest share of their votes.

  If Republicans start curtailing and cutting those programs, they will come to know the fate of Barry Goldwater.

  Still, whether we have a President Clinton, Trump, Sanders or Cruz in 2017, America appears about to move in a radically new direction.

  Foreign policy retrenchment seems at hand. With Trump and Sanders boasting of having opposed the Iraq war, and Cruz joining them in opposing nation-building schemes, Americans will not unite on any new large-scale military intervention. To lead a divided country into a new war is normally a recipe for political upheaval and party suicide.

  Understandably, the interventionists and neocons at National Review, Commentary, and the Weekly Standard are fulminating against Trump. For many are the Beltway rice bowls in danger of being broken today.

  Second, Republicans will either bring an end to mass migration, or the new millions coming in will bring an end to the presidential aspirations of the Republican Party.

  Third, as Sanders has tabled the issue of income equality and wage stagnation, and Trump has identified the principal suspect — trade deals that enrich transnational companies at the cost of American prosperity, sovereignty and independence — we are almost surely at the end of this present era of globalization.

  As in the late 19th century, we may be at the onset of a new nationalism in the United States.

  A vast slice of the electorate in both parties today is angry — over no-win wars, wage stagnation and millions continuing to pour across our bleeding borders from all over the world. And that slice of America holds both parties responsible for the policies that produced this.

  This is what America seems to be saying.

  Thus, given the deepening divisions within, as well as between the parties, either an outsider prevails this year, or Balkanization is coming to America, as it has already come to Europe.

  For the Sanders, Trump, Cruz and Carson voters, the status quo seems not only unacceptable, but intolerable. And if their candidates and causes do not prevail, they are probably not going to accept defeat stoically, and go quietly into that good night, but continue to disrupt the system until it responds.

  Unlike previous elections in our time, save perhaps 1980, this appears to be something of a revolutionary moment.

  We could be on the verge of a real leap into the dark.

  Where are we going? One recalls the observation of one Democrat after the stunning and surprise landslide of 1932:

  “Well, the American people have spoken, and in his own good time, Franklin will tell us what they have said.”

  

  

  

  

  

• This Is What "Stress Levels" Looked Like Two Months Before The Last Three Market Crashes

  Yesterday, courtesy of Bank of America, we showed an extensive catalog of how a trader could, in case the market “were to crash tomorrow”, hedge said crash risk crash using the cheapest derivative instruments.

  But the real question of course is whether a crash is indeed coming?

  As Bank of America notes, a traditional telltale sign of crashes is a surge in correlation among various otherwise uncorrelated assets.

  

  Which is notable because as we showed earlier, the correlation among two key asset classes, namely stocks and oil, have soared to record highs…

  

   

  … while the respective vol correlations is likewise surging, as one would expect, soaring.

  This, to many traders, is the first clear sign that something is seriously wrong and a broad selloff may either be imminent or necessary to short circuit a market in which all correlations are converging.

  And yet, as BofA shows with the chart below, option markets always underestimate the severity of market shocks, and to different degrees. In 2008, currency and equity vols were the most optimistic ahead of the Lehman crisis and the most surprised after. This time around equity vol is modestly elevated, but it is rate vol – the vol which many say is at the core of the entire financial system – that is surprisingly depressed.

  

   

  So for those who are inching closer to the “crash is imminent” camp, we suggest taking a look at the chart below showing the stress levels, or rather lack thereof, 2 months prior to every major crash in the past decade, and extrapolating how far said “stress” may soar to in the coming 8 weeks if, as Citi, JPMorgan and Deutsche Bank today suggest, central banks are on the verge of losing control…

  

  

  

  

  

• "Sweden Could Be At War Within A Few Years", Top General Warns

  On Monday we brought you the latest from the main train station in Stockholm, where “gangs” of Moroccan migrant children have “taken over” the terminal.

  If you believe The Daily Mail, dozens of children, ages nine to 18, are dug in at the station where they wonder about in a drunken stupor attacking security guards, “groping” girls, and “slapping women in the face.”

  This rather surreal development comes as Europeans struggle to cope with what they view as the disintegration of polite, Christian society in the face of a deluge of Arab asylum seekers fleeing the war-torn Mid-East.

  Many Europeans feel as though their countries have been invaded, for lack of a better word.

  Well according to Sweden’s Major General Anders Brännström, being overrun by refugees isn’t the only invasion Swedes need to concern themselves with.

  “The global situation we are experiencing and which is also made clear by the strategic decision leads to the conclusion that we could be at war within a few years,” Brännström is quoted as saying in a brochure for representatives attending an annual Armed Forces conference in Boden next week.

  

  (Brännström)

  “Since the end of the Cold War the Swedish Armed Forces have focused mainly on providing assistance to international missions abroad, but according to Brännström the strategy has now changed to ‘capability of armed battle against a qualified opponent’”, The Local reports, adding that “Sweden has made moves towards stepping up its military capability in the past year, with Defence Minister Peter Hultqvist extending cooperation with other neighbouring countries as well as Nato allies in the face of rising tensions in the Baltic region.”

  Of course by “rising tensions in the Baltic region,” The Local means rising tensions between Russia and the West. “Sweden’s Security Service Säpo said last year that the biggest intelligence threat against Sweden in 2014 came from Russia [and] its stern words are largely credited with sparking increased Nato support in the traditionally non-aligned Nordic country.”

  Defence Committee chairman Allan Widman echoed Brännström’s sentiments. “My take is that the situation is now so serious that even Sweden, with more than 200 years of peace, must prepare themselves mentally that we can get violent conflicts in our neighborhood and conflicts involving us,” he tells Expressen before delivering the following assessment of Vladimir Putin and Russian “aggression”:

  It will come sooner or later a time when Putin becomes pressured politically. The question is what he does in that state – if he apologizes and runs from the Crimea, or if he takes other measures. We’ll have to prepare ourselves for him to take different actions he has shown himself capable of before.

  Earlier this month, a poll in Dagens Nyheter showed nearly three quarters of Swedes support reintroducing compulsory military service. “The Swedish Armed Forces are currently short of around 7,500 soldiers, sailors and officers – around half of the total organization – despite running large recruitment campaigns with television ads and billboards in the past few years,” The Local said.

  If Brännström is to be believed, Sweden may need the soldiers.”One can draw parallels to the 1930s,” he later told Aftonbladet, before adding that although Sweden “managed to stay out” of World War II, “it is not at all certain that the country would succeed this time.”

  

  

  

  

  

• Peter Schiff On The End Of The Illusion Of Recovery

  Submitted by Peter Schiff via Euro Pacific Capital,

  Making their annual pilgrimage to the exclusive Swiss ski sanctuary of Davos last week, the world's political and financial elite once again gathered without having had the slightest idea of what was going on in the outside world. It  appears that few of the attendees, if any, had any advance warning that 2016 would dawn with a global financial meltdown. The Dow Jones Industrials posted the worst 10 day start to a calendar year ever, and as of the market close of January 25, the Index is down almost 9% year-to-date, putting it squarely on track for the worst January ever. But now that the trouble that few of the international power posse had foreseen has descended, the ideas on how to deal with the crisis were harder to find in Davos than an $8.99 all-you-can-eat lunch buffet.

   

  The dominant theme at last year's Davos conference, in fact the widely held belief up to just a few weeks ago, was that thanks to the strength of the American economy the world would finally shed the lingering effects of the 2008 financial crisis. Instead, it looks like we are heading straight back into a recession. While most economists have been fixated on the supposed strength of the U.S. labor market (evidenced by the low headline unemployment rate), the real symptoms of gathering recession are easy to see: plunging stock prices and decreased corporate revenues, bond defaults in the energy sector  and widening spreads across the credit spectrum, rising business inventories, steep falls in industrial production, tepid consumer spending, a deep freeze of business investments and, of course, panic in China. The bigger question is why this is all happening now and what should be done to stop it.

   

  As for the cause of the turmoil, fingers are solidly pointing at China and its slowing economy (with very little explanation as to why the world's second largest economy has just now come off the rails). And since everyone knows that Beijing's policymakers do not take advice from the Western financial establishment, the only solutions that the Davos elite can suggest is more stimulus from those central banks that do listen.

   

  Interviewed on an investment panel in Davos, American multi-billionaire and hedge fund manager, Ray Dalio, perhaps spoke for the elite masses when he said, "…every country in the world needs an easier monetary policy." In other words, despite years (decades in Japan) of monetary stimulus, in the form of low, zero, and, in some cases, negative interest rates, and trillions of dollars in purchases of assets through Quantitative Easing (QE) programs, what the world really needs is more of the same. Lots more. Despite the fact that no country that has pursued these policies has yet achieved a successful outcome (in the form of sustainable growth and a subsequent return to "normal" monetary policy), it is taken as gospel truth that these remedies must be administered, in ever-greater dosages, until the patient improves. No one of any importance in Davos, or elsewhere for that matter, seems willing to question the efficacy of the policies themselves. And since the U.S. Federal Reserve is the only central bank officially considering policy tightening at present, Dalio's comments should be seen as squarely addressing the Fed. But apparently they were not.

   

  While economists are calling for central banks in Brussels, Beijing, and Tokyo to pull out more of the monetary stops, few have called for the Federal Reserve in Washington to do the same. Most on Wall Street are, publicly at least, supporting rate increases from the Fed, albeit at a slower pace than what was envisioned just a few months, or even weeks, ago. As many economists were very public in excoriating the Fed for moving too slowly in 2015, perhaps they are unwilling to admit that their confidence was misplaced. Many also may realize the colossal embarrassment that would await Fed policymakers if they were to reverse policy so quickly. To have waited nearly 10 years to raise interest rates in the U.S., only to cut rates less than three months later would be to admit that the Fed was both clueless AND ineffective. This could cause an even greater panic as investors became aware that there is no one flying the plane.

   

  But perhaps the main reason other central bankers are reluctant to urge the Fed to ease is that the United States is supposedly the poster boy that proves quantitative easing actually works. After all, the rest of the world is being told to emulate the successes that were achieved in the U.S. Ben Bernanke had the courage to act while European central bankers were too timid, and the result was not only full employment and a recovery strong enough to withstand higher rates in the U.S., but a best-selling book and magazine covers for Bernanke. The world's central bankers are not quite ready to consign Bernanke's book to the fiction section where it rightfully belongs, as it would call into question their own commitment to following a failed policy.

   

  But some doubt is starting to creep in publicly. An underlying headline in a January 25 story in the Wall Street Journal finally said what most mainstream pundits have refused to say: "Fed is a key reason markets have plunged and risk of recession is rising." But even in that article, which analyzes why six years of zero percent interest rates created bubble-like conditions that were vulnerable to even the small pin that a 25-basis point increase would provide, the Journal was reluctant to say that the Fed should begin to ease policy. At most, they seemed to urge the Fed to call off any future increases until the market could adjust and digest what has already happened.

   

  However, George Soros, another legendary hedge fund billionaire (with a well-known political agenda), is dipping his toes in that controversial pool, by nearly telling the Fed that the time had come to face the music and eat some humble pie. In an interview with Bloomberg Television's Francine Lacqua on January 17, Soros claimed that the Fed's decision to raise rates in December was "a mistake" and that he "would be surprised" if the Fed were to compound the mistake by raising rates again. (Officially the Fed has forecast that it is likely to boost rates four times in 2016). When pressed on whether the Fed would actually do an about-face and cut rates, Soros would simply say that "mistakes need to be corrected and it [a Fed reversal] could happen." Look for many more investors to join the crowd and call for a reversal, regardless of the loss of credibility it would cause Janet Yellen and her crew.

   

  But when I publicly made similar statements months ago, saying that if the Fed were to raise rates, even by a quarter point, the increase would be sufficient to burst the stock bubble and tip the economy into recession, my opinions were considered completely unhinged. My suggestion that the Fed would have to later reverse policy and cut rates, after having raised them, was looked at as even more outrageous, akin to predicting that the U.S. would be invaded by Canada. Now those pronouncements are creeping into the mainstream.

   

  I was able to see through to this scenario not because I have access to some data that others don't, but because I understood that stimulus in the form of zero percent interest rates and quantitative easing is not a means to jump start an economy and restore health, but a one-way cul-de-sac of addiction and dependency that pushes up asset prices and creates a zombie economy that can't survive without a continued stimulus. In the end, stimulus does not create actual growth, but merely the illusion of it.

   

  This is consistent with what is happening in the global economy. China is in crisis because commodities and oil, which are priced in dollars, have sold off in anticipation of a surging dollar that would result from higher rates. The financial engineering that has been made possible by zero percent interest rates is no longer available to paper over weak corporate results in the U.S. Our economy is addicted to QE and zero rates, and without those supports, I feel strongly we will spiral back into recession. This is the reality that the mainstream tried mightily to ignore the past several years. But the chickens are coming home to roost, and they have a great many eggs to lay.

   

  Investors should take heed. The bust in commodities should only last as long as the Fed pretends that it is on course to continue raising rates. When it finally admits the truth, after its hand is forced by continued market and economic turmoil, look for the dollar to sell off steeply and commodities and foreign currencies to finally move back up after years of declines. The reality is fairly easy to see, and you don't need an invitation to Davos to figure it out.

   

  

  

  

  

  

• France's Highways Descend Into "Chaos & Lawlessness"

  Via GEFIRA,

  While the media attention is directed to the refugee crisis in Germany, France’s highways in Normandy are descending into complete chaos and lawlessness.

  France’s rule of law has ceased to exists in the area around Calais. In Europe highways used to be inaccessible to pedestrian traffic. Nowadays in France immigrants are wandering on the highways, and trucks are being stormed, which has become the “new normal”. As the events are unfolding in France, European mainstream media are ignoring them. Calais has had a migrant problem for more than 10 years, but since last year the situation has been deteriorating rapidly. The governments in Paris, London and Brussels have completely lost control, they are not able to maintain the rule of law and they are miserably failing to protect their citizens.

  European and especially English politicians have tried to solve the problem by punishing the victims. European truckers, already at the bottom of the earning pyramid, can be fined up to half of their annual salary when refugees manage to get aboard their trucks.

  According to the Telegraph:

  “In one case, a lorry driver was issued with a £19,500 fine, despite calling police when he discovered around a dozen people inside his trailer while driving on the M25.

   

  The number of fines issued to hauliers for “clandestine entrants” has more than tripled in just three years, new figures show, with drivers facing on the spot fines of up to £2,000 for each person found inside their vehicles.”

  Thanks to the endless spots on youtube those who live outside France can get an idea of what is going on:

  The situation on the highways in Normandy, France, December 2015 and January 2016.

  December 2015
  

  December 2015

  December 2015

  January 2016

  January 2016

  January 2016
  

  

  

  

  

• Gold Up, Stocks Up, Oil Up, Bonds Up, Fed Up

  Crude is contained…

  But Reuters summed it up nicely…

  

   

  China carnaged overnight…

  

   

  But US Stocks saw an exuberant pre-FOMC rally today as it is clear that Fed policy error admissions are coming…

  

   

  As the divergence grows since the Dec Fed rate hike…

  

   

  But today was all about oil… and bullshit Production Cut rumors…

  Oil ripped higher today, dragging stocks with it once again… and dragging it back down after NYMEX closed…

  SPOT THE DIFFERENCE…

  

   

  On the day, Trannies love higher oil prices!!??

  

   

  Futures show the stick save with production cut comments rescuing stocks from China's pain…

  

   

  Notably – S&P Futs were unable to run yesterday's high stops today…

  

   

  AAPL dropped into the close for the 3rd day ahead of tonight's earnings…

  

   

  But bonds & stocks were bid as we head into tomorrow's praying-for-doves FOMC meeting…

  

   

   

  Treasury yields ended the day lower – despite the equity exuberance…

  

   

  The USD Index slipped lower today on commodity currency strength (despite a big drop in swissy)…

  

   

  Amid the modest weakness in the USD, commodities all gained growund with oil best but gold and silver continued to surge…

  

   

  We overheard someone on CNBC saying how oil had "stabilized" – which we suspect means something different in his world – since the last 3 weeks have seen 4 10-15% swings… but still…How long until we get a denial of oany intent to cut production?

  

   

  Seems like Oil Vol is not buying the bounce….

  

   

  The bottom line – this had the look and feel of a normal pre-Fed ramp day in stocks with the algos juiced off oil for now. Will Janet lose face and admit she screwed up? And is that really what the market wants?

   

  Charts: Bloomberg

  

  

  

  

• AAPL Earnings Beat Despite Missing Sales, iPhone Expectations; US Revenues Decline

  Expectations were hardly sky high for AAPL heading into a quarter in which most of its suppliers had already announced iPhone sales would be disappointing, and moments ago AAPL validated many of these concerns when while beating on the bottom line, with an EPS of $3.28 compared to expectations of a $3.22 print, it missed not only on the top line, with revenue coming shy of the $76.5 billion expected at $75.9 billion, but across every single product line, most notably iPhones, of which AAPL sold 74.78 million in the quarter, below the 75 million expected.

  iPad and Mac sales also came in below expectations, at 16.12mm vs Exp. 17.3mm, and 5.31mm vs 5.8mm expected.

  Also of note: US sales of $29.3 billion were an actual decline of 4% compared to the $30.6 billion in US revenue one year ago.

  The good news, as little as it may be is that AAPL did not post a year over year decline in revenue as some had feared, with the top line printing a little over $1.2 billion higher compared to a year ago, while the margins of 40.1% also beat the 39.9% expected, and reported one year ago.

  There was some more bad news, however, in the company’s guidance which came as follows:

  • revenue between $50 billion and $53 billion, below the consensus estimate of $55.5 billion, and a steep drop compared to $58 billion the quarter prior suggesting a dramatic slowdown in iPhone sales.
  • gross margin between 39 percent and 39.5 percent, below the estimate of 40%
  • tax rate of 25.5 percent

  Worse, as the FT notes, Apple signalled that the iPhone would see its first ever decline in sales in the current quarter, as a slowing smartphone market and wider economic pressures finally began to take their toll after almost a decade of expansion.

  So overall a muted quarter, with perhaps the last saving grace being China’s sales of $18.4 billion, an increase of 14% y/y which at least superficially confirms that China sales are not crashing.

  A breakdown by some of the key charts:

  Revenue:

  

   

  Gross Margin:

  

   

  Sales by product line: each one missed expectations:

  

   

  Sales by geography: China stepped up to compensate for the US sales decline:

  

   

  And finally, AAPL’s cash rose to $215.7 billion in the quarter on a gross basis:

  

   

  While cash net of debt remains virtually unchanged for the past three years:

  

   

  And the result is a lot of sound “but but but” and fury in the stock after hours…

  

  

  

  

  

  

• Crude Plunges After API Reports Biggest Inventory Build Since 1996

  After a day of exuberant hope from rumors of production cuts, WTI crude is plunging back to reality as API reports a stunning 11.4 million barrel inventory build. This is the biggest weekly build since May 1996.

  When moar is not better…

  

   

  Of course – after 3 weeks of massive builds in gasoline inventories, this should be no surprise.

   

  

  And the reaction…

  

   

  Let’s hope that stocks can decouple from oil’s harsh reality or all that dead cat bubble bounce will be gone before Janet gets to unleash her statement.

  

  

  

  

  

• China Warns Soros Against Starting A Currency War: "You Cannot Possibly Succeed, Ha, Ha"

  George Soros may have broken the BOE and may well have been at least partially to blame for the Asian Financial Crisis, but he will not win an FX battle with the PBoC. At least that’s Beijing’s message to the billionaire, as conveyed via a characteristically hilarious “op-ed” in the People’s Daily entitled “Declaring war on China’s currency? Ha ha”

  Yes, “ha, ha.” Although there’s nothing funny about the $1 trillion in capital that fled the country in 2015 on the heels of the PBoC’s bungled effort to “manage” a controlled devaluation of the yuan.

  Although Soros didn’t specifically mention either the RMB or the HKD, he did indicate he is betting against Asian currencies in an interview with Bloomberg TV last week and that, apparently, was cause for Beijing to issue a stern warning.

  “Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” the People’s Daily says, after calling Soros “the financial crocodile,” and blaming the billionaire for “increasing volatility in already unstable financial markets.”

  Perhaps Beijing knows something everyone else doesn’t, or perhaps the PBoC simply assumes that when Soros mentions “hard landing” and betting against Asian currencies in the same breath it probably means he’s short the yuan, but whatever the case, Chinese authorities have ramped up the rhetoric in the past several days.

  “Reckless speculations and vicious shorting will face higher trading costs and possibly severe legal consequences,” Xinhua wrote over the weekend. “And just as proved in the yuan exchange rate case, the Chinese government has sufficient resources and policy tools to keep the overall economic situation under control and cope with any external challenges.”

  The ironic thing about the latter passage there is that Soros actually echoed that sentiment in the interview China appears to be referencing. “China can manage it. It has resources and greater latitude in policies, with $3tn in reserves,” he said.

  Of course China won’t be able to arrest Soros and beat a confession out of him like Beijing is fond of doing to others suspected of launching “malicious” short attacks, but the brash commentary does indicate that Chinese authorities are becoming increasingly sensitive to suggestions that a steeper RMB devaluation is a foregone conclusion.

  As we’ve noted on a number of occasions, capital flight is as much about perception as it is about reality. If people believe there’s a problem, they’ll act first and ask questions later and when a voice as influential as Soros says the “hard landing” is upon us, it has the potential to trigger more outflows at a time when more than a hundred billion per month is exiting the country for the safety of foreign assets like high-end real estate. 

  Also on Tuesday, China said the head of the country’s statistics bureau Wang Baoan is now under investigation for “serious violations of discipline.” The news comes just hours after Wang criticized Soros’ hard landing call. 

  Hours after dismissing George Soros’ bearish views on China, stats bureau chief Wang Baoan arrested for corruption

  — gabriel wildau (@gabewildau) January 26, 2016

  NBS chief says George Soros’s claim of hard landing is only his personal opinion.
  China still has great potential. pic.twitter.com/LdhAG8nejQ

  — Eddie Du (@Edourdoo) January 26, 2016

  Coincidence? Perhaps.

  We anxiously await the word on what exactly Wang is accused of doing wrong considering the NBS is the body responsible for habitually reporting GDP figures that never deviate materially from the Party’s 7% target. 

  *  *  *

  Full People’s Daily piece

  Original title: a declaration of war to the Chinese currency? “Ha ha”

  Source: People’s Daily Overseas Edition

  From last year to this year, the “financial predators,” said Soros, the man of the hour for two consecutive years as one of the World Economic Forum in Davos the most interesting. Last year, he used the platform to announce the “permanent retirement”, no financial investment involved in the political arena and instead focus on its so-called “political charity”; this year, is also on this platform, he was open to China “declaration of war”, claiming that We have generous short Asian currencies. Because of his influence, fluctuations in the international financial markets has intensified already existing Asian currencies obviously feel greater pressure speculative attacks.

  However, Soros challenge for the renminbi and the Hong Kong dollar is unlikely to succeed – this, no doubt.

  Although China’s economic growth downward since last year, stock market volatility, the yuan against the dollar, but in this period of global slowdown in economic growth, China’s economic fundamentals are relatively good among the great powers: economic growth last year, equivalent to the US growth twice; China in 2015, although exports fell 1.8%, but the global trade decreased by 10% over the same period; China continues to upgrade industrial structure, advanced manufacturing and emerging new services is still growing, and has begun more and more field line leading world ……

  These show that China’s macro-economic stability is far better than the other BRIC countries and most developed countries, economic shocks can not simply overturn China, China is still able to maintain a global economic power in relatively good condition. Meanwhile, the ethnic composition and cultural tradition unity and other factors also gives a higher high social stability of China.

  Specific to the RMB exchange rate is concerned, since the middle of last year the RMB against the US dollar depreciated slightly indeed, but market participants will also be seen that the average annual exchange rate of RMB measure, from $ 1 in 1994 against 8.6187 yuan to one US dollar in 2014 against 6.1428 yuan, the appreciation of the RMB against the US dollar has been for nearly 20 years, only a slight repeated in 2000. The continued appreciation of one currency against the US dollar so long time, amplitude so large is rare, a slight pullback now is normal. Moreover, China has become the world’s second largest economy, the yuan pegged to the dollar is not always in fact – in the capital is highly mobile world, in order to achieve the independence of monetary policy, China is willing and able to withstand the temporary exchange rate, slightly volatility, market participants will sooner or later realize that and get used to this, thereby reducing the current over-reaction so.

  Background from a larger perspective, the current strength of the dollar against most other emerging market currencies may continue for a long time, but the renminbi is difficult to do this. Because China’s trade balance surplus remained sustained, and surplus is still expanding; the US economy is already in deep financial “Dutch disease” (a sector booms caused by the decline of other sectors) and escape.Although the United States want to re-consolidate the economic foundation in fact, the body, the “re-industrialization” momentum almost but difficult to continue, resulting in the goods trade balance continued to deteriorate as the economy recovers. This one US dollar against the yuan temporarily strong, will certainly be the aforementioned “Triffin dilemma” (confidence and liquidity dilemma) interrupted, and it can be expected that this time may not be too long.

  From another perspective, Soros to Asian currencies “declaration of war”, but also for China to create a deepening of financial cooperation in East Asia as well as “all the way along the” opportunity of financial cooperation. International monetary cooperation from low to high is divided into international financing cooperation, joint intervention in currency markets, macroeconomic policy coordination, joint exchange rate mechanism, the single currency five levels – direct power of its deepening, usually pressure from speculative currency attacks.

  The current monetary cooperation in East Asia, is still in currency swaps and repurchase network level marked by cooperation in the area of ??financing. Now, emerging market currencies volatility, Soros started speculative attacks on Asian currencies starting gun for the Chinese and other East Asian economies, to achieve cooperation from international financing to carry out joint intervention in currency markets and even upgrade macroeconomic coordination, is not a Opportunities do? 

  

  

  

  

  

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