Here's my summary of the key news overnight in 90 seconds at 9 am, including news of more evidence the American economy is growing.
The US Fed's Beige Book report out a few minutes ago says the US economy expanded at a "modest to moderate" pace in most of the country between early July and late August, just strong enough to reinforce the prospect of a pullback in monetary stimulus.
With most Fed officials seemingly committed to moving away from controversial asset purchases aimed at keeping long-term rates down, investors are expecting the Fed to begin reducing the pace of its US$85 billion monthly bond buys at their next meeting on September 19.
The IMF however is worried about what tapering will do to emerging economies.
Meanwhile, Americans bought more foreign cars, toys and household appliances in July, confirming a strengthening domestic economy, while slower growth abroad tempered demand for US exports. Their trade deficit widened to US$39 bln, slightly more than was expected.
Gold has slipped back below US$1,400/oz again, and the Dow is up more than ¾% in late trade as the Beige Book and trade data boosted confidence. This has been supported by very good August car sales data; in fact it has been their best month in six years with almost 1.5 million new vehicles sold in the month. US Treasury yields are rising again.
As the Aussie election gets close, the final costings are being released, and the final analysis of the political teams published. It seems the voters there are entrusting their Government to ex-rugby front rowers.
The NZ dollar starts today at 79.2 USc, the Aussie is at 86.3 AUc, and the TWI is up almost 100 bps since this time yesterday at 74.8.
Later today, the Treasury is to auction NZ$300 mln of inflation-indexed bonds. The last one was heavily oversubscribed and had a real yield of 1.96%.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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29 Comments
Understanding the "Exorbitant Privilege" of the U.S. Dollar
Prior to 1971, the dollar was backed by gold, which acted as a supra-national anchor to the dollar's reserve status. The gold standard inhibited both massive trade deficits and money creation, so it was jettisoned.
The Triffin paradox is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit.(emphasis added)
The use of a national currency (i.e. the U.S. dollar) as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States. Net currency inflows and outflows cannot both happen at once.
In other words, the U.S. must "export" U.S. dollars by running a trade deficit to supply the world with dollars to hold as reserves and to use to pay debt denominated in dollars. If the trade deficit shrinks, fewer dollars are available for reserves and to service debt denominated in dollars.
http://www.oftwominds.com/blogsept13/oil-dollar9-13.html
Lets get that US deficit down, 'yeah Right'
"Sooner or later, this movie will come to a theatre near you. Either that, or it will open nationwide, that is for the whole country. Dependence on debt, political paralysis that prevents anything being done while the system and its component parts flounder and decay, an obsolete system of organizing work—isn’t that exactly what Detroit has been through over the last 40? Add in accelerating ecological catastrohpe and you can see that one day we will all be able to say Ich bein ein Detroiter".
Interesting read, in light of a poster's recent comments, and the 'buying cars' comment above.
Yeah, all the "postive news" coming out of the USA is a laugh - around 50 million on foodstamps, 25% of working American men on $10 or less an hour, trillions of free money thrown at the Wall Street criminal syndicates while ordinary Americans forced to get credit from legal loan sharks for "rent to buy" car tyres.
Is Obama walking into a trap? The standard US entry into war goes like this:
1 Bully the regime you don't like by funding and supplying "rebels" who are really irregular soldiers organised through a third country.
2 Train these rebels to operate in civilian areas so that the existing regime will cause civilian casualties. The more civilian casualties, the better, as it gives more "rebel" cannon fodder soldiers and raises the international media attention on the conflict.
3 Get the president to commit to war under certain conditions.
4 Make sure those conditions are fulfilled.
Rinse and repeat with the next regime you don't like.
The objective throughout is to do whatever it takes to get the US president and American people to give the go ahead for war.
well option C was so successful in Lybia, why not do it again?
We all thought Libya had moved on – it has, but into lawlessness and ruin
Libya has plunged unnoticed into its worst political and economic crisis since the defeat of Gaddafi
and Iraq is humming along
Over 1000 Iraqis were killed in July, victims of bombings and shootings marking that country's deadliest month since April of 2008. According to the Washington Times, Iraq is sliding into "chaos" with al Qaeda militants stoking terror. Yet, the three networks provided only scant coverage of the escalating death toll. From July 1 to July 31, the ABC, NBC and CBS evening and morning shows allowed only four minutes and 49 seconds to highlighting the unraveling situation.
Egypt needs more weapons but Uucool sam is stopping for a think
The objective of a "limited strike" is to provoke a reaction - "Show us what you've got." The Assad regime will have it's back against the wall and therefore have nothing to lose by firing whatever it has up it's sleeve. Only they know what that might be, but Sarin missiles on Tel Aviv is possible except that the Saudis are their cheif enemy, so maybe it will be Sarin missiles on a royal palace. Equally, some Syrian missiles might actually hit and destroy a US aircraft carrier. These things are unpredictable. My point is that there are those who are seeking to escalate warfare, both in the US and outside and they are succeeding.
It's a case of an Empire doing what Empires do - extracting resources from their periphery.
And a case of pretender Empires in the wings; we saw it with WW1 AND 2.
playing out in a hornet's nest where there is no chance of a please-all - or even a please-any - solution. Good reads are 'Daughter of the Desert' (about Gertrude Bell) and 'Seven Pillars of Wisdom' (Lawrence) - and, if you can get hold of it, 'In Aleppo Once' (Taqui Altounyan).
Good backgrounders on the places and the peoples.
Nice summarization of the conflict Roger, but its much more nuanced than merely one nation's desire to project its influence in the Middle East and secure control over oil supplys.
To put it into proper perspective one must take into account the wider historical context.
The conflict in the Middle East isn't merely about geo-politics, oil, power, or wealth (though they all have their influence), but also religion.
Its my conjecture that the primary player in these events isn't the United States, Iran, or Russia, but Saudi Arabia who has been quietly working behind the scenes formenting turmoil and accumulating power and influence in the region while it allows willing dupes like Great Britain, the United States, Russia, and Iran to bluster and posture thereby holdng the limelight. The foundation of the House of Saud legitamacy and very survival depends upon the revenues from its State Owned Oil Fields.
Like the rest of the Middle Eastern nations, Saudi Arabia is a culturally divided country, with a Sunni majority and a Shia minority who interestingly enough reside where the majority of Saudi Arabia's oil fields are found. Also the region which has seen the least infrastructural development, is the poorest, and where the population are excluded from access to the State's governing institutions. Sectarian unrest has been a major problem for the regime, to which its responded with brutal crackdowns, coopting accomodating clerics, and media propoganda claiming links between local dissidents and Iran.
http://carnegieendowment.org/2013/06/14/forgotten-uprising-in-eastern-saudi-arabia/ga8o#
The other social group that the Al Sauds have had to deal with and shown itself more wiling to placate are the Salafis or Wahabi sect of Sunni Islam. They known for the ultraorthodox, puritan interpretation of Islam and their animosity to both secular Western culture and other Islamic sects. From 1912 Ibn Saud, who would later become King of the nation of Saudi Arabia, inculcated the Ikhwan, a militant religious brotherhood in its tenets, in an effort to secure them as an elite core of soldiers around which he would build his armies, which he successfully used to unite the Arabian Peninsula under his reign. Later ibn Saud lost control of them and they began to become a security issue in the wider Gulf region, so he was forced with the aid of the British to engage in a series of military campaigns against them, which culminated in the military defeat and execusion of its leaders. The surviving Ikhwan were later absorbed into units of his National Guard.
Though they lost their independance they were still continued to exert a strong influence on the country.
http://www.naqshbandi.org/ottomans/wahhabi/ikhwan.htm
One pivotal event that occured in 1979, which few people know about was the Seizure of the Grand Mosque in Mecca by a group of militant fundamentalists who believed that by toppling the Saudi Royal Family that set up what they hoped to be a pan Islamic Caliphate which would rule the Muslim world and be able to challenge the power of the West. Its likely been overshadowed by Islamic Revolution in Iran and the War in Afghanistan against the Soviet Union, which the Saudis were able to conveniently employ to cement their legitamacy with its radical Wahabi population and redirect their energies against the Soviet threat.
http://intelwire.egoplex.com/siege-on-mecca-preview2.html
Other groups that drew the Saudis ire are avowedly secular Arab nationalists like Egypt's Nasser, Iraq's Saddam Hussein, Libya's Gaddafi and Syria's Assad, hich clhallenged the al Saud's monopoly on power and prestige in the Muslim world and provided fuel to the fire of its own militant fundamentalist population.
The Saudi's were one of the chief supporters of the Muslim Brotherhood, which was established explicitly to reverse the secularism and modernization agenda of Nasser.
The Saudi's support continued long after Nasser's death, until the Saudi's officially withdrew their approval after feeling betrayed by the Muslim Brotherhoods opposition to the West's intervention against Saddam Hussein's invasion of Kuwait.
The Saudi's were also the chief sponsor of the militant terrorists organization, Hamas, which supplanted the PLO, after its establishment in 1988 and its involvement in the First Infitada.
Unlike Arafat, Hamas did not support Saddam Hussein in the first Gulf War, when Iraq invaded Kuwait. Instead they called for both Iraqi and US withdrawal. Consequently, Gulf States shifted their funding from PLO to Hamas, and may have donated as much as $28m per month (from Saudi Arabia primarily). Hamas thus took PLO's welfare role away from it, generating considerable public support due to their greater efficiency. T
http://www.mideastweb.org/hamashistory.htm
Back in the mid 1970s, Saudi Arabia, became involved in a coalition of nations including France then rule by the ultraconservative regime of Charles De Gaulle and various Mid Eastern nations ruled by despotic monarchies called the Safari Club. The Safari Club was established with the explicit purpose of containing the spread of communism and particularly Gaddafi's influence in Africa.
This same source underscored the so-called "Safari Club," the group of countries -- France, Egypt, Saudi Arabia, Morocco, and the Shah's Iran -- which banded together to fight the spread of Soviet communism, particularly in Africa, as well as halting Gaddafi's adventures in neighboring Chad. The group was formed by intelligence heads in the mid-1970s, with de Marenches its catalyst. They were appalled by the United States' unwillingness to no longer stand up to the Soviets, in a post-Vietnam era marked by a liberal Democratic Congress and president.
http://www.americanthinker.com/2011/03/assassinating_gaddafi.html
An interesting read here ... http://www.theatlantic.com/international/archive/2013/09/your-labor-day…
I think that was Money back guarantee if not suffocated,.. . GBH
Historically speaking, the Bwitish are renowned for their both ends against the middle involvement in .......dirty deeds done dirt cheap.
Obama should reconsider, particularly on the strenght of the Britt vote, where Cameron gets to shoot his mouth off and agitate for a calculated strike without assuming any of the consequences for that strike.
On that alone Obama should definately reconsider, and just announce without a mandate to act on a multilateral basis the U.S. alone, would edure the consequences of action .
George Friedman's take on it all:
http://www.stratfor.com/weekly/obamas-tightrope-walk?utm_source=freelis…
That's absolute bollocks.
How can George Friedman describe the United States have been "reluctant warriers with a straigt face when it was leaked emails from the very same publication, which revealed notes from a meeting between Pentagon officials that described Western special operation units working with rebels in Syria way back in 2011?
The 2011 uprisings, it would seem - triggered by a confluence of domestic energy shortages and climate-induced droughts which led to massive food price hikes - came at an opportune moment that was quickly exploited. Leaked emails from the private intelligence firm Stratforincluding notes from a meeting with Pentagon officials confirmed US-UK training of Syrian opposition forces since 2011 aimed at eliciting "collapse" of Assad's regime "from within."
Attacking Syria fully complies with U.S. geopolitical strategy which was frankly and candidly laid out in a Pentagon funded RAND corporation report.
"Divide and Rule focuses on exploiting fault lines between the various Salafi-jihadist groups to turn them against each other and dissipate their energy on internal conflicts. This strategy relies heavily on covert action, information operations (IO), unconventional warfare, and support to indigenous security forces... the United States and its local allies could use the nationalist jihadists to launch proxy IO campaigns to discredit the transnational jihadists in the eyes of the local populace... US leaders could also choose to capitalize on the 'Sustained Shia-Sunni Conflict' trajectory by taking the side of the conservative Sunni regimes against Shiite empowerment movements in the Muslim world.... possibly supporting authoritative Sunni governments against a continuingly hostile Iran."
Thanks Anarkist. Freidman is ex CIA I believe, if there is such a thing as ex. His analysis is interesting but makes the decision process look more rational than it is. My impression is there is a lot of manipulation and a lot of intelligent demented people who enjoy bloodshed.
They also knowingly supplied technology to manufacture chemical weapons to Saddam Hussein in the 1980s. It was okay back then because he was their "friend"
"A chemical plant which the US says is a key component in Iraq's chemical warfare arsenal was secretly built by Britain in 1985 behind the backs of the Americans, the Guardian can disclose.
Documents show British ministers knew at the time that the £14m plant, called Falluja 2, was likely to be used for mustard and nerve gas production.
Senior officials recorded in writing that Saddam Hussein was actively gassing his opponents and that there was a "strong possibility" that the chlorine plant was intended by the Iraqis to make mustard gas. At the time, Saddam was known to be gassing Iranian troops in their thousands in the Iran-Iraq war.
But ministers in the then Thatcher government none the less secretly gave financial backing to the British company involved, Uhde Ltd, through insurance guarantees."
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