ND DEC 8 19
SIT EC y POL
ND denounce Global-neoliberal
debacle y propone State-Social + Capit-compet in Eco
ZERO
HEDGE ECONOMICS
Neoliberal globalization is
over. Financiers know it, they documented with graphics
The dangers of WW3… make
obsolete & non sense any Geo Polit & Economic Plan
For all of
2019, December has been a magnet... A number of major geopolitical issues come to head this month and
many of them have everything to do with
energy...
For all of 2019, December has been a magnet. A number of major
geopolitical issues come to head this month and many of
them have everything to do with energy. This is the month
that Russian gas giant Gazprom was due to finish production on three major
pipeline projects – Nordstream 2, Turkstream and Power of Siberia.
Power of Siberia is here. It’s finished. Russian
President Vladimir Putin and Chinese Premier Xi Jinping christened the pipeline
to begin the month.
Next month Putin will travel to Turkey to join President
Recep Tayyip Erdogan to open the first of four potential trains of the Turkstream pipeline.
See Chart:
Power
of Siberia, Sakhalin Vladibostok pipeline & Heige Shanghai p[peline
It is only Nordstream 2 that continues to lag behind because of insane levels of pressure from
the United States that is dead set against this pipeline coming online.
And the reason for that is the last of the major
energy issues surrounding Gazprom needing resolution this month, the gas
transit contract between it and Ukraine’s Naftogaz.
The two gas companies have been
locked in legal disputes for years, some of which
center on Crimea’s decision to break away from Ukraine and rejoin Russia in
2014. Most of them, however, involve disputes
over costs incurred during the previous and expiring gas transit contract.
The particulars today are
ultimately irrelevant as these lawsuits have been used as nothing more than
blackmail to keep a new contract from getting signed. Ukraine has sued Gazprom
in courts, like in Sweden, that rule not by the tenets of contract law but
rather through the lens of social justice.
These have been political
decisions that allowed Naftogaz to seize Gazprom’s European assets, further
complicating any resolution to the conflict. These
policies were pursued aggressively by former Ukrainian President and
long-time US State Department asset Petro Poroshenko and they have done nothing
to help Ukraine.
All they have done is strip-mine the country of its
assets while keeping a war to prevent the secession of the Donbass alive.
Opposition to Nordstream 2 in the US is all about
leveraging influence in Ukraine and turn it into a client state hostile to
Russia sharing a border with Russia. If there’s no gas
transit contract and there’s no Nordstream 2 then US LNG suppliers can sell gas
there and deprive Russia of the revenues and the business.
Because the end of 2019 was
always coming. And Ukraine would eventually have to
decide as to which direction it wanted to go. Moreover, that same choice
was put in front of the EU who have clearly, in the end, realized
that the US under President Trump is not a long-term reliable partner, but
rather a bully which seeks its goals through threat and intimidation.
STAY WITH THE US OR GREEN LIGHT NORDSTREAM 2. The
choice in Europe was clear. Nordstream 2 gets finished, as Denmark finally
granted the final environmental permit for its construction in October.
That delay moves the completion date out into 2020. And that now gives the US
Senate one last chance to stop the completion of the pipeline because
everything else to this point has failed, including the EU changing the
rules on its gas pipeline rules to force Gazprom to ‘unbundle’ the pipeline
from the gas flowing through it.
Germany
amended that directive to allow Nordstream 2 to be regulated at the German
federal level and not at the EU level. This was as much of a win as
could have been hoped for.
This prompted the response from
the US
Senate Foreign Relations Committee head Jim Risch who wants to
sanction anyone assisting Gazprom building the pipeline to be sanctioned and
forced out of business.
“The reason for the push is that this window is closing. A lot of Nord Stream
is done already. … It will cost them dearly. I think if those sanctions pass
[the companies] will shut down, and I think the Russians will have to look for
another way to do this if they can do this,” Risch said.
IN REALITY THE WINDOW HAS
CLOSED.
The German government wants this pipeline, therefore
the German government will put up the funds to ensure the contractors are paid
and the pipeline completed.
There is a limit to the extent
which sanctions can block commerce and once completed the US will have no
ability to sanction the gas flowing through the pipeline. It’s a sad and
pathetic state of affairs that so much time, manpower and capital was wasted to
stop a pipeline that is necessary for Germany’s future.
It also highlights the hypocrisy of US policy since
there isn’t a peep out of the US on Turkstream, which will stitch NATO ally
Turkey to Russia via 15.75 cm of natural gas every year. Eventually it will
replace the lost South Stream pipeline as the other trains are built and
contracted for.
And all of these countries that currently get their gas from Ukraine are
at risk if nothing gets resolved between it and Russia. This is why the meeting between Putin and Ukrainian President Zelensky is
so important. It has the opportunity to begin reversing the damage done
to the basic fabric of Ukraine and Europe by agreeing to a path to ending the
war in the Donbass and coming to an agreement on gas transit.
There are more than $12 billion
in lawsuits outstanding that Naftogaz has pending against Gazprom. With
Nordstream 2 a fait accompli that is all the leverage Zelensky has at that
meeting.
This game is a microcosm of the way the US foreign
policy establishment uses Europe as the battleground in the war against Russia.
And given the way the political winds are shifting, Europeans are getting very
tired of it.
This is why gas storage
facilities in Europe are full, there is real fear that Gazprom will walk away
from the talks with Ukraine and will wait out the completion of Nordstream 2.
Gazprom offered an extension of the current contract on the condition that
Ukraine drop the lawsuits.
Naftogaz said no. We’ll see if Zelensky is smart
enough to say yes.
….
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----
"High demand for secured (repo)
funding from non-financial institutions, such as hedge funds heavily engaged in
leveraging up relative value trades."
About a month
ago, we first laid out how the sequence of
liquidity-shrinking events that started about a year ago, and which starred the
largest US commercial bank, JPMorgan, ultimately culminated with the
mid-September repo explosion. Specifically we showed
how JPM's drain of liquidity via Money Markets and reserves parked at the Fed
may have prompted the September repo crisis and subsequent launch of "Not
QE" by the Fed in order to reduce its at risk capital and potentially
lower its G-SIB charge - currently the highest of all major US banks.
See Chart:
Line in
red color: JPM Gvt-Only Money. In white:
DTCC GCF –FED Effective (bps)
Shortly
thereafter, the FT
was kind enough to provide confirmation that
the biggest US bank had been quietly rotating out of cash, while repositioning
its balance sheet in a major way, pushing more than $130bn of excess
cash away from reserves in the process significantly tightening
overall liquidity in the interbank market. We learned that the bulk of this
money was allocated to long-dated bonds while cutting the amount of loans it
holds, in what the FT dubbed was a "major shift in how the largest US bank by assets manages its enormous
balance sheet."
The
moves saw the bank’s bond
portfolio soar by 50%, and were prompted by capital rules
that treated loans as riskier than bonds. And since JPM has been aggressively
returning billions of dollars to shareholders in dividends and share buybacks
each year, JPMorgan had far less room than most rivals to hold riskier assets,
explaining its substantially higher G-SIB surcharge, which
indicated that the Fed currently perceives JPM as the riskiest US bank for a
variety of reasons.
See Table:
GSIB
surcharge by quarted
An executive at a large
institutional investor told the
FT that what JPM did "is
incredible", adding that "the scale of what JPMorgan is doing is mind-boggling . . .
migrating out of cash into securities while loans are flat."
See Chart:
JPMorgan
sheds loans, buy bonds
https://www.zerohedge.com/s3/files/inline-images/jpm%20loans%20vs%20bonds_0.jpg?itok=ib74SJCl
The dramatic change, which
occurred gradually over the year, and which may have catalyzed the spike in
repo rates in September, was first flagged by JPMorgan at an investor event
back in February. Then CFO Marianne Lake said that, after years of
industry-leading loan growth, “we have to recognize the
reality of the capital regime that we live in”.
However, in a novel twist, the BIS also found
that hedge funds exacerbated the turmoil in the repo market with their thirst
for borrowing cash to juice up returns on their trades.
Here is what the BIS said:
US repo markets
currently rely heavily on four banks as marginal lenders. As the composition of their liquid
assets became more skewed towards US Treasuries, their ability to supply
funding at short notice in repo markets was diminished. At the same time,increased
demand for funding from leveraged financial institutions (eg hedge funds) via
Treasury repos appears to have compounded the strains of the temporary factors.
Finally,
the stress may have been amplified in part by hysteresis effects brought about
by a long period of abundant reserves, owing to the Federal Reserve's
large-scale asset purchases.
ENTER HEDGE FUNDS.
As the BIS writes, "Repo markets redistribute liquidity between financial
institutions: not only banks (as is the case with the federal funds
market), but also insurance companies, asset managers, money market funds and
other institutional investors. In so doing, they help other financial markets
to function smoothly. Thus, any sustained disruption in this market, with daily
turnover in the US market of about $1 trillion, could quickly ripple through
the financial system. The freezing-up of repo markets in late 2008 was one of
the most damaging aspects of the Great Financial Crisis (GFC)."
Ok, but all of the above was
known before. What's new about the BIS' paper?
Well,
in the aftermath of Sept 17, attention focused on the role played by
banks, which had become reluctant to lend cash into the
market despite the higher interest rates on offer. And while the BIS
acknowledged that the pullback by banks, especially the
"Big Four", was a significant factor in the shake-up,
See Charts:
Reserves
& Treasury Holdings of Banks vs Net lend vs Squsre of Treasy fundings
The big
four US Banks turned into key lenders in the repo market
... it
also said that cash-hungry hedge funds had amplified the dislocation.
"High demand for secured (repo) funding from non-financial
institutions, such as hedge funds heavily engaged in
leveraging up relative value trades," was a key factor
behind the chaos, said Claudio Borio, head of the monetary and economic
department at the BIS.
The BIS's finding is novel, and
surprising, as they highlight the "growing clout
of hedge funds in the repo market" according to the FT, which notes
something we pointed
out one year ago: hedge funds such as Millennium,
Citadel and Point 72 are not only active in the repo market, they are also the
most heavily leveraged multi-strat funds in the world, taking something like
$20-$30 billion in net AUM and levering it up to $200 billion. They achieve said leverage using repo.
See Chart:
Millenuim,
Citadel & Point 72 Regulatory vs NET AUM (SBN)
This also explains why the Fed
panicked in response to the GC repo rate blowing out to 10% on Sept 17, and
instantly implemented repos as well as rushed to launch QE 4: not only was Fed Chair Powell facing an LTCM like situation,
but because the repo-funded arb was (ab)used by most multi-strat funds, the
Federal Reserve was suddenly facing a constellation of multiple LTCM blow-ups
that could have started an avalanche that would have resulted in trillions of
assets being forcefully liquidated as a tsunami of margin calls hit the hedge
funds world.
Here it is the Big Four banks
that were once again instrumental in allowing this arb to emerge in the first
place. As the BIS notes, "concurrent with the
growing role of the largest four banks in the repo market, their liquid asset
holdings have become increasingly skewed towards US Treasuries, much more so than
for the other, smaller banks. (chart below, right-hand panel). As of the second quarter of 2019, the big four banks alone
accounted for more than 50% of the total Treasury securities held by banks in
the United States - the largest 30 banks held about 90% (chart below,
left-hand panel). At the same time, the four largest banks held only about 25%
of reserves (ie funding that they could supply at short notice in repo
markets).
See
Charts:
The Big Four Banks hold more
Treasuries . while the Treasury hold more cash
Ironically, for years this "arb" strategy was once popular
among the dealer banks themselves, but higher capital charges since the
financial crisis led to their displacement by hedge funds, which have more
ability to take on risk.
We have covered all these
"mitigating events", and the problem is that even though the Fed has now injected $208BN in liquidity via overnight
and term repos, and $114BN via permanent T-Bill
purchases, or POMO (i.e. "Not QE"), expanding
the Fed's balance sheet by $322 billion, the repo market still remains
broken...
See Chart:
Repocalypse
But don't take our word: here
again is the top financial expert at the BIS, Claudio Borio, warning that that
September’s dislocation suggests that such repo "events" are only
just starting and the repo markets "may again find themselves in the eye of the storm should financial stress
arise at some point", a point which
as the Fed recently revealed in its October FOMC Minutes could
take place as soon as year-end.
….
----
----
Gold is a
particularly good diversifier for
investors with long term investment horizon... especially if conversations around MMT become more
widespread...
----
----
US DOMESTIC POLITICS
Seudo democ duopolico in US is
obsolete; it’s full of frauds & corruption. Urge cambio
...this is where all the money
went!
See MAP:
See
also a Graph: Billionaires Playground
….
----
----
Most wars
America has fought in have required
lies to get the American people’s approval...
====
Xenophobic stupidity:
...by introducing a gold-backed
cryptocurrency, it has the ability
to “kill the US dollar deader
than a door nail... a
new Pearl Harbor-type event and it’s coming in the next six to nine
months.”
====
Each of his 7 major predictions has
come true. But his 8th prediction could be his most controversial, by far.
====
Pro-Trump propaganda:
Do the Democrats really believe that
their voters will not notice this?
====
The new reality raises the
possibility that large global firms may turn their ecosystems into their own
spheres of influence, a dynamic that could matter for the FAANMGs and BATs of
the world.
See Chart:
FAANGMG
capex and R&D spending. Spend is
approaching US limits of defense exp
Environmental, social, and governance (ESG): The ESG theme is also hardly new, but this year saw a
sharpening of focus.
….
SOURCE:
https://www.zerohedge.com/markets/faanmg-capex-and-rd-budget-rapidly-us-government-defense-spending
----
----
If
Illinois can’t help get single,
childless, able-bodied Illinoisans back into meaningful work AND OFF OF FOOD
STAMPS NOW, THEN WHEN?
See Chart:
Indexed
growth-drop in SNAP enrollment since Aug 2009
….
----
----
US-WORLD ISSUES (Geo Econ, Geo Pol & global Wars)
Global depression is on…China,
RU, Iran search for State socialis+K-, D rest in limbo
What makes a person healthy, wealthy, and wise?
====
The order is said to have come
directly from the Chinese Communist party’s Central Office earlier this year.
====
AS
TECH WAR UNFOLDS, AI ARMS-RACE ERUPTS, CHINA COULD OVERTAKE US BY NEXT DECADE [ I guess
BEFORE next decade ]
The trade war between the US and
China has morphed into a tech
war...
====
The American people, including tourists, business people, trade groups, and cultural
groups, are our nation’s best
diplomats. Pentagon, CIA, and State Department people are our nation’s worst diplomats...
….
For our Nation RU is
a friend: they foster Peace and we do the opposite. Ruso-phobia in the media is
daily bread for our people. But lights are clearg d contex
====
RELATED:
Poll:
"Nearly half of armed services households questioned, 46%, said they viewed Russia as ally."
….
Trump war-mongerism
is detested. IF they vote, they will be Agst Trump
====
We are exporting democracy
–American way – in our periphery
After
being caught, the active-duty Marine admitted he knew it was illegal but still did it anyway...
….
Is the effect of
Trump policies.. Shame of him and his PENTA: farsantes!
====
====
SPUTNIK
and RT SHOWS
GEO-POL n GEO-ECO ..Focus on neoliberal expansion via wars
& danger of WW3
-Who
is the 2019 Miss Universe From South Africa? Zozibini is very
beautiful
----
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GLOBAL
RESEARCH
Geopolitics & Econ-Pol
crisis that leads to more business-wars from US-NATO allies
----
===
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