Begins at the minute 5
Saturday, February 20, 2016
French President Francois Hollande on Friday said Ankara's escalating involvement in the Syrian conflict was creating a risk of war between Turkey and Russia.
"Turkey is involved in Syria... There, there is a risk of war," Hollande told France Inter radio. "That is why the (UN) Security Council is meeting," he added.
Hollande also said "Russia will be unable to cope if it unilaterally supports (Syrian President) Bashar al-Assad" and called for "pressure" to be exerted on Moscow to negotiate on Syria.
"I do not want to exclude Russia from the solution. I went myself to Moscow to tell Vladimir Putin, 'All of us have to work together to make this political transition'... but I cannot accept that at the same time that people are negotiating, they are bombing civilian populations," he said.
Turkey has called for a joint ground operation in Syria with its international allies, insisting it is the only way to stop the country's five-year war.
Saudi Arabia, which along with Turkey is backing rebels fighting Syrian President Bashar al-Assad's forces, has also said it would be ready to take part in an international force to be deployed in Syria.
Russia, which has been carrying out air strikes in support of Assad's forces since the end of September, has called on the Security Council to press Turkey to halt its shelling of Kurdish forces in northern Syria.
France has been one of the most hostile opponents of Assad, and following the jihadist attacks in Paris in November it has stepped up air strikes against the Islamic State group in Syria and Iraq.
Hollande told France Inter the strikes were effective and results could now be seen.
Credit to Yahoo News
Recent media and analysts coverage of the global economy, especially that of the advanced economies has focused on the rising degree of uncertainty surrounding growth prospects for 2016 and 2017. Much of the analysis is shlock, tending to repeat like a metronome the cliches of risk of ’monetary policy errors’ (aka: central banks, read the Fed, raising rates to fast and too high), or ‘emerging markets rot’ (aka: slowing growth in China), or ‘energy sector drag’ (aka: too little new investment into oil).
However, the real four horsemen of the economic apocalypse are simply too big of the themes for the media to grasp. And, unlike ‘would be’ uncertainties that are yet to materialise, these four horsemen have arrived and are loudly banging on the castle of advanced economies gates.
The four horsemen of growth apocalypse are:
- Supply side secular stagnation (technology-driven productivity growth and total factor productivity growth flattening out);
- Demand side secular stagnation (demographically driven slump in global demand for ‘stuff’) (note I covered both extensively, but here is a post summing the two: http://trueeconomics.blogspot.com/2015/10/41015-secular-stagnation-and-promise-of.html)
- Debt overhang (the legacy of boom, bust and post-bust adjustments, again covered extensively on this blog)
- Financial fragility (see http://trueeconomics.blogspot.com/2016/01/19116-after-crisis-is-there-light-at.html)
In this world, sub-zero interest rates don’t work, fiscal policies don’t work and neither supply, nor demand-side economics hold any serious answers. Evidence? Central bankers are now fully impotent to drive growth, despite having swallowed all monetary viagra they can handle. Meanwhile, Government are staring at debt piles so big and bond markets so touchy, any serious upward revision in yields can spell disaster for some of the largest economies in the world. More evidence? See this: http://trueeconomics.blogspot.com/2015/10/101015-imf-honey-weve-japanified-world.html.
To give you a flavour: consider the ‘stronger’ economic fortress of the U.S. where the Congressional Budget Office latest forecast is that the budget deficit will rise from 2.5 percent of GDP in 2015 to 3.7 percent by 2020. None of this deficit expansion will result in any substantive stimulus to the economy or to the U.S. capital stocks. Why? Because most of the projected budget deficit increases will be consumed by increased costs of servicing the U.S. federal debt. Debt servicing costs are expected to rise from 1.3 percent of GDP in 2015 to 2.3 percent in 2020. Key drivers to the upside: increasing debt levels (debt overhang), interest rate hikes (monetary policy), and lower remittances from the Federal Reserve to the U.S. Treasury (lower re-circulation of ‘profits and fees’). Actual discretionary spending that is approved through the U.S. Congress votes, excluding spending on the entitlement programs (Medicaid, Medicare and Social Security) will go down, from 6.5 percent of GDP in 2015 to 5.7 percent of GDP by 2020.
Boom! Debt overhang is a bitch, even if Paul Krugman thinks it is just a cuddly puppy…
Recently, one hedgie described the charade as follows: ”I like to use the analogy that the economic patient is riddled with cancer — central banks are applying a defibrillator, but there's only so much electricity the patient can take before it becomes a burnt-out corpse.” Pretty apt.
My favourite researcher on the matter of financial stability, Claudio Borio of BIS agrees. In a recent speech (http://www.bis.org/speeches/sp160210_slides.pdf) he summed up the “symptoms of the malaise: the “ugly three”” in his parlance:
- Debt too high
- Productivity growth too low
- Policy room for manoeuvre too limited
Source: Borio (2016)
The fabled deleveraging that apparently has achieved so much is not dramatic even in the sector where it was on-going: non-financial economy, for advanced economies, and is actually a leveraging-up in the emerging markets:
Source: Borio (2016)
And these debt dynamics are doing nothing for corporate profitability:
Source: Borio (2016)
Worse, what the above chart does not show is what the effect on corporate profitability will interest rates reversions have (remember: there are two risks sitting here - risk 1 relating to central banks raising rates, risk 2 relating to banks - currently under severe pressure - raising retail margins).
Boris supplies a handy chart of how bad things are with productivity growth too:
Source: Borio (2016)
The above are part-legacy of the Global Financial Crisis. Boris specifies: Financial Crises tend to last much longer than business cycles, and “cause major and long-lasting damage to the real economy”. Loss in output sustained in Financial Crises are not transitory, but permanent and include “long-lasting damage to productivity growth”. Now, remember the idiot squad of politicians who kept droning on about ‘negative equity’ not mattering as long as people don’t move… well, as I kept saying: it does. Asset busts are hugely painful to repair. Boris: “Historically there is only a weak link between deflation and output growth” despite everyone running like headless chickens with ‘deflation’s upon us’ meme. But, there is a “much stronger link with asset price declines (equity and esp property)”, despite the aforementioned exhortations to the contrary amongst many politicos. And worse: there are “damaging interplay of debt with property price declines”. Which is to say that debt by itself is bad enough. Debt written against dodo property values is much worse. Hello, negative equity zombies.
But the whole idea about ‘restarting the economy’ using new credit boost is bonkers:
Source: Borio (2016)
Because, as that hedgie said above, the corpse can’t take much of monetary zapping anymore.
Hence time to wake up and smell the roses. Borio puts that straight into his last bullet point of his last slide:
Source: Borio (2016)
Alas, we have nothing to rely upon to replace that debt fuelled growth model either.
Knock… knock… “Who’s there?” “The four horsemen?” “The four horsemen of what?” “Of debt apocalypse, dumbos!”
Credit to Zero Hedge
Their imminent departure from evening news programmes is not just a loss to their profession; critics say they were forced out as part of a crackdown on media dissent by an increasingly intolerant prime minister, Shinzo Abe, and his supporters.Only last week, the internal affairs minister, Sanae Takaichi, sent a clear message to media organizations. Broadcasters that repeatedly failed to show “fairness” in their political coverage, despite official warnings, could be taken off the air, she told MPs.Momii caused consternation after his appointment when he suggested that NHK would toe the government line on key diplomatic issues, including Japan’s territorial dispute with China. “International broadcasting is different from domestic,” he said. “It would not do for us to say ‘left’ when the government is saying ‘right’.”From the Guardian article: Japanese TV Anchors Lose Their Jobs Amid Claims of Political Pressure
I’ve commented on the spectacular failure of Japan’s “Abenomics” several times in the past, most recently in last summer’s post, Japan’s Economic Disaster – Real Wages Lowest Since 1990, Record Numbers Describe “Hard” Living Conditions. Here’s what we learned:
Prime Minister Shinzo Abe came to power vowing to drag Japan out of deflation and stagnation. His logic was that rising prices would drive higher salaries and increased consumption. More than two years on, prices are rising, but wages adjusted for inflation have sunk to the lowest since at least 1990.A record 62 percent of Japanese households described their livelihoods as “hard” last year in a survey on incomes. A sales-tax increase in 2014 helped drive up living costs faster than wage gains. At the same time, the Bank of Japan’s quantitative easing drove down the currency, boosting the cost of imported energy.
Fast forward a few months and things aren’t getting any better.
Earlier this week, Bloomberg reported:
With Japan’s economy shrinking, the stock market in turmoil, and a stronger yen threatening export earnings, Prime Minister Shinzo Abe’s calculus on whether to call a snap general election this summer has suddenly grown more complicated.Another win in the lower chamber along with an expected victory in the upper house vote set for the summer could allow Abe’s ruling Liberal Democratic Party to stay in power until 2020, making him the longest-serving premier since the 1970s. With ministerial blunders and economic woes eroding his support, Abe risks the opposition Democratic Party of Japan gaining ground in any double vote.Abe has fought and won three straight elections on a vow to revive the economy with his Abenomics plan of loose monetary policy, flexible spending and structural reform. Now with his signature policy in disarray, he may be hard-pressed to reuse his 2014 election pitch of “Economic recovery: this is the only way.” Instead, he may paint himself as an experienced, steady hand in difficult times.
Let’s take stock of what we just read. Shinzo Abe promised the Japanese people a glorious economic recovery, but the economy sucks. Nevertheless, Shinzo Abe wants to stay in power as long as possible and the best way for him to achieve this is to call for snap elections this summer. This presents quite the dilemma. How does Abe prevent his popularity from slipping further in order to give himself a chance of winning early elections?
It seems he found his answer. Crackdown on the media by ensuring anyone who dares criticize him or him idiotic, failed polices is fired.
As the Guardian reports:
Many British politicians would doubtless rejoice at the news that Andrew Marr, Emily Maitlis and Andrew Neil were to leave their jobs almost simultaneously.That is the fate that has befallen what could loosely be described as their counterparts in Japan – Ichiro Furutachi, Hiroko Kuniya and Shigetada Kishii – three respected broadcasters with a reputation for asking tough questions.Their imminent departure from evening news programmes is not just a loss to their profession; critics say they were forced out as part of a crackdown on media dissent by an increasingly intolerant prime minister, Shinzo Abe, and his supporters.Only last week, the internal affairs minister, Sanae Takaichi, sent a clear message to media organizations. Broadcasters that repeatedly failed to show “fairness” in their political coverage, despite official warnings, could be taken off the air, she told MPs.
Americans should heed this warning, so we understand that whenever someone argues for enforced “fairness” in the media, it means only one thing. If you criticize the government, you’ll be fired.
Under broadcast laws, the internal affairs minister has the power to suspend broadcasting that does not maintain political neutrality.What passes for a probing interview in Japan would be unlikely to set political pulses racing in Britain. But the three Japanese anchors have all courted controversy for refusing to follow the anodyne approach many of their colleagues take towards political coverage.As the host of Hodo Station, a popular evening news programme on TV Asahi, Ichiro Furutachi was at the centre of a row last spring over claims by one of the show’s regular pundits, Shigeaki Koga, that he had been forced to quit under pressure from government officials angered by his criticism of the Abe administration.Shigetada Kishii, who appears on News 23 on the TBS network, angered government supporters last year after criticizing security legislation pushed through parliament by Abe’s Liberal Democratic party (LDP).
If you need to get up to speed on the “security legislation,” see:
Perhaps most striking of all is the departure of Kuniya, the veteran presenter of Close-up Gendai, a current affairs programme on public broadcaster NHK.Her “crime” had been to irritate Yoshihide Suga, the chief cabinet secretary and a close Abe ally, with an unscripted follow-up question during a discussion about the security legislation.While the anchors themselves have refused to comment, experts say Abe and his allies had made their feelings known about the broadcasters during secretive dinners with top media executives.“It was not their decision to leave,” said Sanae Fujita of the Human Rights Centre at Essex University. “But their bosses gave in to pressure from their senior colleagues, who are ‘friends’ with Abe.When he called a snap election in late 2014, the LDP wrote to TV networks in Tokyo demanding that they “ensure fairness, neutrality and correctness” in their coverage.Momii caused consternation after his appointment when he suggested that NHK would toe the government line on key diplomatic issues, including Japan’s territorial dispute with China. “International broadcasting is different from domestic,” he said. “It would not do for us to say ‘left’ when the government is saying ‘right’.”
I mean, wow.
Attempts to intimidate the media as well as the passage of a state secrets law in 2013 under which reporters can be imprisoned for up to five years have battered Japan’s international reputation.Last year it came 61st out of 180 countries in Reporters Without Borders’ global press freedom rankings. That compares with 12th place in 2010.
As always, when all else fails, silence the press.
Credit to Zero Hedge