Monday, July 2, 2012
In a phone call to the Kremlin Sunday, July 1, Syrian President Bashar Assad said he needed just two months to finish off the revolt against his regime. “My new military tactics are working,” he said in a secret video-conference with Russian intelligence and foreign ministry officials who shape Moscow’s policy on Syria.
Reporting this exclusively, DEBKAfile’s intelligence sources also register the fleeting life span of the new plan for ending the Syrian war which UN envoy Kofi Annan announced had been agreed at a multinational Action Group meeting in Geneva on Saturday, June 30. Within 24 hours, the principle of a national unity transitional government based on “mutual consent” was rejected by the regime and the Turkish-based opposition leaders alike, as the violence went into another month.
On the first day of July, 91 people were reported killed in the escalating Syrian violence after a record 4,000 in June.
The new military tactics to which Assad referred are disclosed here:
1. The sweeping removal of most of the veteran Syrian army commanders who led the 16-month bloody assault on regime opponents and rebels. They were sent home with full pay to make way for a new set of younger commanders, most of them drawn from the brutal Alawite Shabiha militia, which is the ruling family’s primary arm against its enemies.
The regular commanders had shown signs of fatigue and doubts about their ability to win Assad’s war. Their will to fight on was being badly sapped by the mounting numbers officers and men going over to the opposition camp in June.
One of the tasks set the new commanders is to stem the rate of defections.
To keep the veteran commanders from joining the renegades and reduce their susceptibility to hostile penetration, the officers were not sacked but retired on full pension plus all the perks of office, including official cars.
2. But a higher, unthinkable level of violence is the key to Assad’s “new tactics.” He has armed the new military chiefs with extra fire power - additional tank and artillery units, air force bombers and attack helicopters - for smashing pockets of resistance and unlimited permission to use it. Already the level of live fire used against the rebels has risen to an even more unthinkable level which explains the sharp escalation of deaths to an average of 120 per day.
On the Syrian-Turkish border, tensions continue to mount. Monday morning, Turkey was still pumping large-scale strength including tanks, antiaircraft and antitank guns, artillery, surface missiles and combat helicopters to the border region.
Saturday, half a dozen Turkish jets were scrambled to meet Syria helicopters approaching their common border.
In Tehran, Brig. Gen. Amir-Ali Hajizadeh, commander of Iran’s IRGC Aerospace Division, warned Ankara that if its troops ventured onto Syrian soil, their bases of departure would be destroyed. The threat was made during Hajizadeh’s announcement of a three-day missile exercise starting Monday in response to the European oil embargo. He reported that long-, medium- and short-range missiles would target “simulations of foreign bases in the northern Semnan Desert,” without mentioning any specific nation except Turkey.
TEHRAN, Iran (AP) — A semiofficial Iranian news agency says Tehran plans to deploy submarines in the Caspian Sea.
The Saturday report by Fars quotes Adm. Abbas Zamini as saying Iran plans to deploy “light submarines” to the oil-rich sea that adjoins Iran, Russia, Kazakhstan, Turkmenistan and Azerbaijan. He did not elaborate.
Relations between Iran and Azerbaijan have soured in the past year. Iran accuses Azerbaijan of harboring anti-Iranian terrorists linked to Israel’s Mossad spy agency. Azerbaijan in return says Iran supports Islamist dissidents. Both countries deny each other’s charges.
Earlier this month Iran said it has begun the “initial stages” of designing nuclear-powered submarines.
Iran has domestically built several small submarines over the past years. It has recently overhauled one of the three non-nuclear Russian Kilo-class submarines it bought in the 1990s.
Times of Israel
The pressure of the magma detected in El Hierro has caused in the past four days on the island deformation of four to five inches vertically and three to four horizontal, as reported by the Security Directorate of the Canary Islands. The energy released has reached 420,000 million joules, a fact which, together with the ground deformation evidence magmatic process acceleration on the Canary Island, where there is an inflation process is centered in the area which earthquakes occur. The General Directorate of Security, who coordinates the Civil Protection Plan Risk Volcanic Islands, said that since the beginning were found in magmatic process, last Sunday, have occurred in El Hierro over 750 earthquakes. The earthquake with greater magnitude of 4.0 degrees on the Richter scale occurred on Wednesday at 18.55 hours in the Sea of Calm, 2 km from the coast and 20 kilometers deep. The seismic activity began in the Sea of the Gulf (north of El Hierro) and then move to the center of the island, coinciding with the point of intersection of the ridges, to subsequently migrate to the west. From noon on June 25 the seismicity is concentrated in an area that includes the west and the dorsal side of the Julan, and from 1200 hours on June 27 the focus of the earthquake begins to migrate towards the Sea of Calm.
The Extincion Protocol
Has Europe finally been saved this time? Has this latest "breakthrough" solved the European debt crisis? Of course not, and you should know better by now. European leaders have held 18 summits since the beginning of the debt crisis. After most of the preceding summits, global financial markets responded with joy because European leaders had reached "a deal" which would supposedly solve the crisis. But a few weeks after each summit it would become clear that nothing had been solved and that the financial crisis had actually gotten even worse than before. How many times do they expect us to fall for the same sorry routine? Nothing in Europe has been solved. You can't solve a debt problem with more debt. European leaders are just kicking the can down the road. More debt will relieve some of the short-term pressure, but in a few weeks it will be apparent that the underlying problems in Europe continue to grow. Unfortunately, there is not an unlimited amount of EU bailout money, so once all of these "financial bullets" have been fired European leaders are going to find that kicking the can down the road will not be so easy anymore. The truth is that the financial crisis in Europe has not been cancelled - it has just been put off for a few weeks or a few months.
Do you solve the problems of a credit card addict by giving that person another credit card? Of course not. You may delay the short-term financial problems of the credit card addict by giving that person another credit card, but in the process you make the long-term problems even worse.
Well, that is essentially what is happening in Europe. European governments and the European financial system have become ridiculously dependent on debt. By giving European debt junkies another "hit" or two it may relieve a bit of short-term suffering but it doesn't solve anything.
Just think about it.
Did the first bailout package solve the problems in Greece?
Did the second bailout package solve the problems in Greece?
Today, the Greek financial system is a complete and total mess, and Greek politicians are saying that a third bailout package may be necessary.
Many are claiming that Italy and Spain have been "saved" by this new deal, but that is a joke.
Yes, the ability to inject bailout funds directly into troubled banks is going to keep some of them going for a little while. But the deal also calls for a new governing body to be established that will supervise those banks. Will that governing body be established in time to even provide the short-term help that is needed?
Yes, spending bailout funds to buy up Spanish debt and Italian debt will artificially suppress bond yields for a time.
We have seen this before.
But what happened?
After the bond buying program was over, bond yields started spiking again.
So do the Europeans plan to suppress bond yields forever?
Of course not. There is not enough bailout money to do that.
Let's review the equation that I have shared in previous articles....
Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions
Have any of those elements been removed?
Bond yields will be suppressed for a period of time, but that will not last forever, and all of the other underlying issues are still there.
Meanwhile, the rest of Europe continues to follow the Greek economy into economic depression.
The Spanish economy shrunk again in the second quarter of 2012, and austerity in that nation has barely even begun.
As a recent CNBC article detailed, the big spending cuts are still coming....
The conservatives, who inherited from the outgoing Socialists one of the euro zone's highest public deficits, at 8.9 percent of GDP in 2011, have said they will shrink the shortfall to 5.3 percent this year and 3 percent in 2013.
Austerity has absolutely shredded the Greek economy, and we are starting to see that same pattern be repeated all over Europe.
When you spend far more money than you bring in for decades, eventually you have to go through a very painful adjustment. What is going on in Greece should be a lesson for all of us. Debt allows you to live above your means, but the consequences of going into way too much debt can be absolutely horrific.
More debt can delay the consequences of a debt problem but it cannot solve a debt problem. The following is what Jim Rogers told CNBC on Friday....
“Just because now you have a way to get them (the banks) to borrow even more money, this is not solving the problem, this is making the problem worse,” Rogers said on Friday.“People need to stop spending money they don’t have. The solution to too much debt is not more debt. All this little agreement does is give them (banks) a chance to have even more debt for a while longer,” he added.
But if you just went by the headlines in most of the newspapers around the world you would think that European leaders had discovered the cure for cancer or something.
Sadly, the truth is that they are simply choosing to fire off a few of the "financial bullets" that they still have left as a recent Washington Post article described....
The European bailout funds don’t have unlimited resources. If they throw $125 billion at Spain’s banks and another couple hundred billion toward Italy, pretty soon they’ll be running low. The only entity with unlimited euros is the European Central Bank. And right now, there’s no talk of using the ECB to provide bailouts. Which means that this latest move might have just forestalled the crisis, rather than ending it permanently.
So what comes next?
Bruce Krasting believes that the "half-life of this bailout will be measured in weeks". The following is his summary of what he sees coming next in Europe....
If I'm right, after a few weeks things turn south again in the capital markets. Then what?- More LTRO. No – there is no more collateral. All of the swill loans have already been hocked.- Cut ECB % rate. Doesn’t matter. It won't change conditions in Italian or Spanish funding markets one bit.- A spending plan of <1% of GDP. That won’t put a dent in the recession that is building.- Brussels buys more sovereign bonds to avoid a catastrophe of Italian 10-year exceeding 7% (capitulation).Sorry. There are “wise men” in Germany who will simply not allow this to happen in the scale that is required.- The ECB goes Defcon 1 and launches a E2T QE program. No – same answer as above.- Merkel does a 180 and embraces Euro bonds. No chance in hell.-The US or China are going to start buying EU bonds?Lunacy – not happening.-The IMF will come to the rescue? No way – the IMF does not have the resources to solve anyone’s problems.
In other words, kicking the can down the road is going to get quite a bit harder after the current "sugar high" wears off.
Europe is still headed for the greatest financial crisis since the Great Depression (at least) and European leaders seem powerless to stop it.
Of course the United States is also facing a crisis of too much debt and a great day of reckoning is on the way for this country as well.
So yes, the global economy is still heading for collapse and there is still a multitude of reasons to be extremely concerned about the second half of 2012.
What is your opinion about all of this?
Do you think that European leaders will be able to keep kicking the can down the road?
Please feel free to post a comment with your opinion below....
The Economic Collapse
The Russian Armed Forces will conduct over 1,000 command-and-staff and tactical exercises during the summer training period from June to November this year, the Defense Ministry said.
The summer training will focus on improving interoperability of all branches of the Armed Forces and efficient use of automated battlefield management systems, the ministry said in a statement on Thursday.
The training will be carried out on average 2-3 times a week with the emphasis on weapons proficiency and driving skills.
The training period will culminate with the Kavkaz-2012 large-scale strategic exercises in southern Russia and North Caucasus, which would also involve Abkhaz and South Ossetian military units.
In addition, Russia will hold about 50 joint military exercises with foreign countries, including the Slavic Commonwealth – 2012 with Ukraine and Belarus, the INDRA-2012 with India and the Selenga with Mongolia.
The Russian Navy will traditionally take part in RIMPAC, FRUKUS, Northern Eagle and Blackseafor international naval drills.
Eurostat, the EU's statistics office, said that the jobless rate rose to 11.1% in May from 11% the previous month. That is the highest since the euro was launched in 1999.
Unemployment has been edging higher for over a year now as concerns over the debt crisis have weighed on economic activity. The highest unemployment rate was recorded in Spain, where nearly one in four people are out of work, closely followed by Greece.
In total, 17.6 million people were out of work in the eurozone in May, 1.8 million higher than the year before.
What is the second half of 2012 going to bring? Are things going to get even worse than they are right now? Unfortunately, that appears more likely with each passing day. I will admit that I am extremely concerned about the second half of 2012. Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year. Just think about it. The stock market crash of 1929 happened in the fall. "Black Monday" happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. The ingredients for a "perfect storm" are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike. Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.
The following are 17 reasons to be extremely concerned about the second half of 2012....
#1 Historical Trends
A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report....
So what will this September bring?
#2 JP Morgan
Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad? Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure. At some point is JP Morgan going to need a bailout? If so, what is that going to do to the U.S. financial system?
Last week, Moody's downgraded the credit ratings of 15 major global banks. As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures....
Citigroup’s two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the bank’s 10Q regulatory filing at the end of the first quarter.
Morgan Stanley – which Moody’s downgraded from A2 to Baa1 – said a two-notch downgrade from both Moody’s and Standard and Poor’s could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moody’s downgraded the bank below the Single A threshold.
Royal Bank of Scotland estimated it may have to post £9bn of collateral as a result of the one-notch Moody’s downgrade to Baa1 in a statement on June 21, but did not detail how much of this additional requirement was driven by margin for swaps exposures.
The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster.
Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. When this bubble completely bursts it is going to be impossible to fix.
#4 LEAP/E2020 Warning
LEAP/E2020 has issued a red alert for the global financial system for this fall. They are warning that the "second half of 2012" will represent a "major inflection point" for the global economic system....
The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months.
In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical…) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a “crisis weather forecast”, we must therefore give our readers a “Red Alert” because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category.
#5 Increasing Pessimism
One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.
The Spanish financial system is basically a total nightmare at this point. Moody's recently downgraded Spanish debt to one level above junk status, and earlier this week Moody's downgraded the credit ratings of 28 major Spanish banks.
According to CNBC, Spain's short-term borrowing costs are now about three times higher than they were just one month ago....
Spain's short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country's precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.
The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. For six-month paper, it leapt to 3.237 percent from 1.737 percent in May.
Needless to say, this is very, very bad news.
The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall. The following is from a recent Businessweek article....The euro zone’s third-biggest economy is seen as the next domino at risk of toppling after the European Union’s June 9 deal to lend Spain $125 billion in bank bailout funds. Yields on Italy’s 10-year government bonds reached 6.2 percent on June 13, up from just 4.8 percent in March. By pushing up Italy’s borrowing costs out of fear of default, investors are making a default more likely.
A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now....The main glaring risk threats that could propel Italy down the path to become Europe's next domino is the size of country's outstanding debt (at €1.9 trillion or 120% of GDP); the mountain of debt it has to roll over in the next 12 months (nearly €400 billion); and the market's cracking credibility around Prime Minister Mario Monti's ability to reduce the country's fiscal footprint and spur growth.
Further, fear around Italy's creditworthiness, which has recently been expressed by near cycle highs in sovereign CDS spreads and government yields on the 10-year bond, follow some rather glaring negative fundamentals over recent quarters and years: declining GDP over the last three consecutive quarters; a rising unemployment rate (especially among its youth); deterioration in labor market competitiveness; and increased competition for export goods to its key trading partners.
I have written extensively about the financial nightmare that is unfolding in Greece. Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.
The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout. This is yet another sign that the eurozone is rapidly falling apart.
German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing....Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.
“It’s not a bold prediction to say that in Brussels most eyes -- all eyes -- will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”
In fact, Merkel says that there will be no eurobonds "as long as I live". This means that there will be no "quick fix" for the problems that are unfolding in Europe.
#11 Bank Runs
Every single day, hundreds of billions of dollars is being pulled out of banks in southern Europe. Much of that money is being transferred to banks in northern Europe.
In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe....Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a "bank run by wire transfer" that has picked up during May.
Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say.
"It's been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer," said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm.
How long can these bank runs continue before banking systems start to collapse?
#12 Preparations For The Collapse Of The Eurozone
As I have written about previously, the smart money has already written off southern Europe. All over the continent major financial institutions are preparing for the worst. For example, just check outwhat Visa Europe is doing....Visa Europe is holding weekly meetings to discuss scenarios in the event the euro zone collapses, joining other companies that are preparing for a potential breakup of the currency bloc.
Chief Commercial Officer Steve Perry said Tuesday that management at the U.K.-based credit-card company meets weekly to explore various possible outcomes, including a total collapse of the euro zone.
#13 Global Lending Is Slowing Down
All over the globe the flow of credit is beginning to freeze up. In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.
#14 Sophisticated Cyber Attacks On Banks
It is being reported that "very sophisticated" hackers have successfully raided dozens of banks in Europe. So far, it is being estimated that they have stolen 60 million euros....Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world.
According to a joint report by software security firm McAfee and Guardian Analytics, more than 60 firms have suffered from what it has called an "insider level of understanding".
What happens someday if we wake up and all the money in the banks is gone?
#15 U.S. Municipal Bankruptcies
All over the United States there are cities and towns on the verge of financial disaster. This weekStockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis....Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.
“The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection,” Stockton said in a statement released yesterday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection.
#16 The Obamacare Decision
The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it. All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare. It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.
#17 The U.S. Election
It is being reported that Barack Obama is putting together an army of "thousands of lawyers" to deal with any disputes that arise over voting procedures or results. It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court. This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day. The possibility of significant civil unrest is certainly there.
We definitely live in "interesting" times.
Personally, I am deeply concerned about the September, October, November time frame.
The other day, Joe Biden delivered a speech in which he made the following statement....
"It's A Depression For Millions And Millions Of Americans"
And what Biden said was right for once. Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years. If you have lost everything, it does feel like you are living through a depression.
When people lose everything, they tend to get desperate. And desperate people do desperate things - especially when they are angry.
A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels. The ingredients are certainly there for an explosion. Someone just needs to come along and light the fuse. We truly do live in frightening times.
Let us hope for the best, but let us also prepare for the worst.