Emerging markets crushed by double squeeze in China and America

The Shibor overnight lending rate in Shanghai spiked violently to 29pc, with wild moves in seven-day and one-month money. The central bank refused to intervene to calm markets, apparently determined to purge excess from the credit system.

China Securities Journal, a voice of the regulators, said: “We cannot use a fast money supply growth as in the past, or even faster, to promote economic growth.”

“I am extremely concerned about China,” said Lars Christensen from Danske Bank. “They are overdoing it and are on the verge of making the same mistake as the Fed and the European Central Bank before the Lehman crisis in 2008, when they failed to see how much the economy was slowing.”

Mr Christensen said the world now risks a “perfect storm” as the Fed prepares to taper its bond purchases (QE) at the same time as tightening the spigot of worldwide dollar liquidity.

The twin effects are cascading through emerging markets, pummelling commodity exporters such as Brazil, South Africa and Russia that sell to China, but also tripping up Turkey, Ukraine, Hungary and others that rely on external funding. “Everything is being hit indiscriminately,” said Neil Shearing from Capital Economics.

The Telegraph

Million anti-govt protests sweep Brazil, 1 killed

The Art of Camouflage

Federal nullification efforts mounting in states

JEFFERSON CITY, Mo. (AP) — Imagine the scenario: A federal agent attempts to arrest someone for illegally selling a machine gun. Instead, the federal agent is arrested — charged in a state court with the crime of enforcing federal gun laws.

Farfetched? Not as much as you might think.

The scenario would become conceivable if legislation passed by Missouri's Republican-led Legislature is signed into law by Democratic Gov. Jay Nixon.

The Missouri legislation is perhaps the most extreme example of a states' rights movement that has been spreading across the nation. States are increasingly adopting laws that purport to nullify federal laws — setting up intentional legal conflicts, directing local police not to enforce federal laws and, in rare cases, even threatening criminal charges for federal agents who dare to do their jobs.

An Associated Press analysis found that about four-fifths of the states now have enacted local laws that directly reject or ignore federal laws on marijuana use, gun control, health insurance requirements and identification standards for driver's licenses. The recent trend began in Democratic leaning California with a 1996 medical marijuana law and has proliferated lately in Republican strongholds like Kansas, where Gov. Sam Brownback this spring became the first to sign a measure threatening felony charges against federal agents who enforce certain firearms laws in his state.

Some states, such as Montana and Arizona, have said "no" to the feds again and again — passing states' rights measures on all four subjects examined by the AP — despite questions about whether their "no" carries any legal significance.

"It seems that there has been an uptick in nullification efforts from both the left and the right," said Adam Winkler, a professor at the University of California at Los Angeles who specializes in constitutional law.

Yet "the law is clear — the supremacy clause (of the U.S. Constitution) says specifically that the federal laws are supreme over contrary state laws, even if the state doesn't like those laws," Winkler added.

The fact that U.S. courts have repeatedly upheld federal laws over conflicting state ones hasn't stopped some states from flouting those federal laws — sometimes successfully.

About 20 states now have medical marijuana laws allowing people to use pot to treat chronic pain and other ailments — despite a federal law that still criminalizes marijuana distribution and possession. Ceding ground to the states, President Barack Obama's administration has made it known to federal prosecutors that it wasn't worth their time to target those people.

Federal authorities have repeatedly delayed implementation of the 2005 Real ID Act, an anti-terrorism law that set stringent requirements for photo identification cards to be used to board commercial flights or enter federal buildings. The law has been stymied, in part, because about half the state legislatures have opposed its implementation, according to the National Conference of State Legislatures.

About 20 states have enacted measures challenging Obama's 2010 health care laws, many of which specifically reject the provision mandating that most people have health insurance or face tax penalties beginning in 2014.

After Montana passed a 2009 law declaring that federal firearms regulations don't apply to guns made and kept in that state, eight other states have enacted similar laws. Gun activist Gary Marbut said he crafted the Montana measure as a foundation for a legal challenge to the federal power to regulate interstate commerce under the U.S. Constitution. His lawsuit was dismissed by a trial judge but is now pending before the 9th U.S. Circuit Court of Appeals.

"The states created this federal monster, and so it's time for the states to get their monster on a leash," said Marbut, president of the Montana Shooting Sports Association.

SFGate

Fed Is Trying to Reflate a Phony Economy

Unique Sukhoi Su-35 'UFO' fighter rocks Paris Air Show

Stocks Plunge As IMF Tells Greece To Plug Holes Or It Pulls The Plug

As we warned earlier in the week, Greece is notably missing its Troika goals and the issue just became a lot more critical. As The FT reports, the IMF is preparing to suspend aid payments to Greece over what it claims is a EUR 3-4 billion shortfall that has opened up. Between healthcare budget shortfalls, central banks refusing to roll-over Greek bonds, and amid signs that even the scaled-back privatization plans that Athens had agreed to being behind schedule, the IMF - following its own admissions of mistakes in the Greek bailout, has warned EU officials the shortfall will require it to stop aid payments by the end of July. Theequity market is already reacting (as is EURJPY - EUR weakness against the big carry pair) to this re-awakening of EU event risk (and the awkward timing with Merkel's election so close) - with the Fed's comfort blanket somewhat removed.

Zero Hedge

Via The FT,

The International Monetary Fund is preparing to suspend aid payments to Greece by the end of next month unless eurozone leaders plug a €3bn-€4bn shortfall that has opened up in Greece’s €172bn rescue programme, according to officials involved in management of the bailout.

The gap emerged after eurozone central banks refused to roll over Greek bonds they hold, and comes amid signs that even the scaled-back privatisation plan Athens agreed to last year is falling behind schedule.

...

The shortfall will force eurozone finance ministers to discuss “alternate sources” of funding

...

But the timing is particularly awkward as Germany is holding parliamentary elections on September 22. In the run-up to polling day Chancellor Angela Merkel will be loath to submit any further aid request to the Bundestag where it would likely be highly controversial.

...

the IMF has warned EU officials the gap will require it to stop aid payments at the end of July, said a person involved in the discussions.

Under its rules, governments must have at least 12 months of financing in place to receive IMF disbursements under a bailout programme. This latest shortfall of €3bn-€4bn means that Greece’s financing needs are only covered up to the end of July 2014.