Why Despite Threats, Turkey Won’t Impose Sanctions On Kurdistan After The Referendum

Submitted by Elijah Magnier, Middle East based chief international war correspondent for Al Rai Media

High-ranking sources in Kurdistan (Erbil) said that the Kurdish leader Masoud Barzani “expected the sanctions already announced by Baghdad and expects many more sanctions to come in the future”. Nevertheless, “the referendum was an essential step to undertake,” otherwise Barzani would no longer be considered the Kurdish leader.

“We are not afraid of Turkish sanctions because Ankara would lose more than it will gain if the common borders are closed. The Turkish representative promised us (months before the referendum) that harsh political measures will be adopted against Kurdistan but that no economic sanctions would be seriously considered. After all it is up to Turkey to stop sending its oil tankers to recover our oil production at a cheap price if Erdogan considers it a practical move within his own economy,” said the source.

Good morning! We see no disruptions in KRG crude oil exports out of the Turkish port of Ceyhan as today there are two tankers loading. #OOTT pic.twitter.com/BzTj1eGf0W

— TankerTrackers.com???? (@TankerTrackers) September 29, 2017

In past 5 days. 553K barrels of KRG oil departed daily from the Turkish port of Ceyhan for Croatia, Italy & Israel. Normal activity. #OOTT pic.twitter.com/lidVIK6DSg

— TankerTrackers.com???? (@TankerTrackers) September 29, 2017

The Erbil leadership knows that the Kurds lived through hunger and genocide throughout the years, sometimes living in the mountains for decades. Therefore, although any threat to their existence won’t be taken lightly, it cannot affect the process of independence that has been put on their desired track. The Kurdish leaders will agree to allow Baghdad to control airports (Erbil and Suleymaniyeh) as requested by Prime Minister Haidar Abadi, and would like to reestablish good neighbor relationships with all surrounding countries, particularly since the declaration of independence may require two or three years to put into concrete effect.

The 1800 km long borders between Kurdistan and the rest of Iraq will force Erbil to send more Peshmerga troops to reinforce its security all along its borders and especially in disputed areas. However, for many countries the referendum has created embarrassment and reshuffled many of the alliances in the Middle East: the implications of this have yet to be considered. It is Turkey that will be holding the key to the success or failure of a new “state” in the Middle East: Iraqi Kurdistan.

A pipeline network connects Iraq’s northern oil fields to the Turkish port of Ceyhan. Photo: Anadolu News Agency.

A pipeline network connects Iraq’s northern oil fields to the Turkish port of Ceyhan. Image source: Anadolu News Agency.

Turkey, a summary of its role in the recent history of Syria and Iraq:

  • Turkey supported the uprising of Sunni tribes in 2014 when these metamorphosed into the “Islamic State” (ISIS) terror group. Ankara didn’t ask its consulate diplomat to abandon the diplomatic mission, and so the diplomatic staff became prisoners in ISIS’ hands, to be later exchanged with hundreds of mujahideen and their families held by Turkey.
  • Ankara allowed the Iraqi Peshmerga to cross its territory into Syria to help the YPG (the Syrian branch of Turkey’s most sworn enemy: the PKK) and recover Ain al-Arab (Kobane) from ISIS in the north of Syria.
  • Turkey opened its borders to Jihadists from al-Qaeda and ISIS under the excuse of “bringing down the Syrian regime of Bashar al-Assad”.
  • Turkey brought down a Russian jet while bombing jihadists along the Syrian borders, pushing Moscow to heavily engage in the Syrian war and give the upper hand to Assad.
  • Turkey allowed al-Qaeda and the foreign fighters of the Turkistani group to occupy the bordering city of Kessab. The city was later recovered but Ankara created another military balance by expulsing from its territory of thousands of members of al-Qaeda who then occupied the city of Idlib, today the center of al-Qaeda in Syria (also known as Hay’at Tahrir al-Sham).
  • Turkey asked its Syrian proxy to pull out of the city of Aleppo, rendering its liberation easier and less costly for the Syrian Army and its allies, which marked a real turning point in the war in Syria.
  • Turkey joined the de-confliction negotiation in Astana (Kazakhstan) after reconciliation with Moscow and the return to normal relations between both countries.
  • Turkey moved its forces into Syria to stop the creation of a Kurdish “state” known as “Rojava” (from al-Hasaka to Efrin) and disrupted a Kurdish Syrian access to the Mediterranean that could have been also used in the future for the Iraqi Kurds in case of sanctions against Iraqi Kurdistan.
  • Turkey considered Iran a “terrorist state sponsor” but kept its diplomatic relationship with Tehran. It increased economic exchanges and fully collaborated with Iran in Astana as partners and guarantors in Syria.
  • Ankara did not hesitate to support the Iraqi Kurds in order to enjoy economic advantages, and to keep its forces in the north of Iraq. Despite many attempts by Baghdad to remove the Turkish troops, Ankara rejected all demands and hid behind “the Kurdistan request” so as to maintain several hundreds of officers and soldiers in Iraq.
  • Turkey is not expected to implement any economic sanctions against Erbil despite Erdogan screaming, “the Kurds will go hungry”. There is no doubt, however, that Turkish officials will continue launching verbal attacks against Barzani but doubt remains about economic sanctions and the cessation of oil purchases.

To sum it up: President Erdogan declared war on the Syrian Kurds but prevented them from losing Kobane; declared war on Assad but supported him to recover Aleppo; declared war on terrorism but allowed ISIS and al-Qaeda to enjoy all support from Turkey and bought oil from ISIS; threatened the Iraqi Kurds but still bought their oil while keeping its hundreds of trucks queuing up on their borders; promised to keep al-Qaeda under control in Idlib during the last Astana meeting, but allowed it to launch military offensives afterwards.

It is obvious that the Iraqi Kurds are aware of Ankara’s unstable and continuously changing of policy, very confident that any other measures by surrounding countries (Iraq and Iran) can be easily overcome in the future, as long as Erdogan is offering alternatives. The cost is that the Iraqi Kurds fall into Ankara’s hands and control, but it looks like Barzani is happy with this outcome: as long as he has his new state, pushing its place onto the Middle East map, right in the middle.

Iran and Iraq

The Kurdish referendum pushed Iraq into the arms of Iran when the relationship between Iraqi Prime Minister Haidar Abadi and Iranian officials was at its lowest level. Today Abadi (and most Iraqis) sees in Iran the only sincere partner to count on, and can rely on the Iranian Army and Revolutionary Guards Corps (IRGC) in the case of any military escalation against Kurdistan, particularly in the disputed Iraqi cities, with Kirkuk at the top of the list.

Baghdad is confident that Barzani didn’t take this step without a blessing from the Americans, which is expected to become more visible in the coming months, according to Iraqi officials in Baghdad. It seems Washington decided to swap its relationship with Baghdad with that of Erbil because, apparently, it won’t be able to support both at the same time.

Supporting Erbil is more attractive to the US and its regional allies (particularly Saudi Arabia), in the hope that the Kurdish Iraqi move would trigger the appetite of the Kurdish Iranians (and the Syrian Kurds who are already on this same path). If this happens and we observe an uprising in Iran (the Saudis already promised to support any unrest in Iran), the Iranian economy and that of the government of Baghdad will be both under severe pressure.

Iran supported Barzani in 2014 and provided him with weapons (at a time when the US was denying any support to Iraq, during the 6 months after the fall of Mosul in 2014), but it is today in an undeclared war against Erbil, fully behind Baghdad’s measures and supporting future escalation and punitive steps.

No one can wind back the clock to before the Kurdish referendum. However, it is still possible for Barzani to avoid contributing toward a further mess in this increasingly reshuffled Middle East. He could indeed consider all these issues as an unnecessary concern, similar to a "storm in a tea cup". Unfortunately, it seems the Kurdish leader is determined to continue his path, denying any immediate intent for concrete realization of independence, yet without excluding it.

The post Why Despite Threats, Turkey Won’t Impose Sanctions On Kurdistan After The Referendum appeared first on crude-oil.news.

Continue reading »

Why Despite Threats, Turkey Won’t Impose Sanctions On Kurdistan After The Referendum

Submitted by Elijah Magnier, Middle East based chief international war correspondent for Al Rai Media

High-ranking sources in Kurdistan (Erbil) said that the Kurdish leader Masoud Barzani “expected the sanctions already announced by Baghdad and expects many more sanctions to come in the future”. Nevertheless, “the referendum was an essential step to undertake,” otherwise Barzani would no longer be considered the Kurdish leader.

“We are not afraid of Turkish sanctions because Ankara would lose more than it will gain if the common borders are closed. The Turkish representative promised us (months before the referendum) that harsh political measures will be adopted against Kurdistan but that no economic sanctions would be seriously considered. After all it is up to Turkey to stop sending its oil tankers to recover our oil production at a cheap price if Erdogan considers it a practical move within his own economy,” said the source.

Good morning! We see no disruptions in KRG crude oil exports out of the Turkish port of Ceyhan as today there are two tankers loading. #OOTT pic.twitter.com/BzTj1eGf0W

— TankerTrackers.com???? (@TankerTrackers) September 29, 2017

In past 5 days. 553K barrels of KRG oil departed daily from the Turkish port of Ceyhan for Croatia, Italy & Israel. Normal activity. #OOTT pic.twitter.com/lidVIK6DSg

— TankerTrackers.com???? (@TankerTrackers) September 29, 2017

The Erbil leadership knows that the Kurds lived through hunger and genocide throughout the years, sometimes living in the mountains for decades. Therefore, although any threat to their existence won’t be taken lightly, it cannot affect the process of independence that has been put on their desired track. The Kurdish leaders will agree to allow Baghdad to control airports (Erbil and Suleymaniyeh) as requested by Prime Minister Haidar Abadi, and would like to reestablish good neighbor relationships with all surrounding countries, particularly since the declaration of independence may require two or three years to put into concrete effect.

The 1800 km long borders between Kurdistan and the rest of Iraq will force Erbil to send more Peshmerga troops to reinforce its security all along its borders and especially in disputed areas. However, for many countries the referendum has created embarrassment and reshuffled many of the alliances in the Middle East: the implications of this have yet to be considered. It is Turkey that will be holding the key to the success or failure of a new “state” in the Middle East: Iraqi Kurdistan.

A pipeline network connects Iraq’s northern oil fields to the Turkish port of Ceyhan. Photo: Anadolu News Agency.

A pipeline network connects Iraq’s northern oil fields to the Turkish port of Ceyhan. Image source: Anadolu News Agency.

Turkey, a summary of its role in the recent history of Syria and Iraq:

  • Turkey supported the uprising of Sunni tribes in 2014 when these metamorphosed into the “Islamic State” (ISIS) terror group. Ankara didn’t ask its consulate diplomat to abandon the diplomatic mission, and so the diplomatic staff became prisoners in ISIS’ hands, to be later exchanged with hundreds of mujahideen and their families held by Turkey.
  • Ankara allowed the Iraqi Peshmerga to cross its territory into Syria to help the YPG (the Syrian branch of Turkey’s most sworn enemy: the PKK) and recover Ain al-Arab (Kobane) from ISIS in the north of Syria.
  • Turkey opened its borders to Jihadists from al-Qaeda and ISIS under the excuse of “bringing down the Syrian regime of Bashar al-Assad”.
  • Turkey brought down a Russian jet while bombing jihadists along the Syrian borders, pushing Moscow to heavily engage in the Syrian war and give the upper hand to Assad.
  • Turkey allowed al-Qaeda and the foreign fighters of the Turkistani group to occupy the bordering city of Kessab. The city was later recovered but Ankara created another military balance by expulsing from its territory of thousands of members of al-Qaeda who then occupied the city of Idlib, today the center of al-Qaeda in Syria (also known as Hay’at Tahrir al-Sham).
  • Turkey asked its Syrian proxy to pull out of the city of Aleppo, rendering its liberation easier and less costly for the Syrian Army and its allies, which marked a real turning point in the war in Syria.
  • Turkey joined the de-confliction negotiation in Astana (Kazakhstan) after reconciliation with Moscow and the return to normal relations between both countries.
  • Turkey moved its forces into Syria to stop the creation of a Kurdish “state” known as “Rojava” (from al-Hasaka to Efrin) and disrupted a Kurdish Syrian access to the Mediterranean that could have been also used in the future for the Iraqi Kurds in case of sanctions against Iraqi Kurdistan.
  • Turkey considered Iran a “terrorist state sponsor” but kept its diplomatic relationship with Tehran. It increased economic exchanges and fully collaborated with Iran in Astana as partners and guarantors in Syria.
  • Ankara did not hesitate to support the Iraqi Kurds in order to enjoy economic advantages, and to keep its forces in the north of Iraq. Despite many attempts by Baghdad to remove the Turkish troops, Ankara rejected all demands and hid behind “the Kurdistan request” so as to maintain several hundreds of officers and soldiers in Iraq.
  • Turkey is not expected to implement any economic sanctions against Erbil despite Erdogan screaming, “the Kurds will go hungry”. There is no doubt, however, that Turkish officials will continue launching verbal attacks against Barzani but doubt remains about economic sanctions and the cessation of oil purchases.

To sum it up: President Erdogan declared war on the Syrian Kurds but prevented them from losing Kobane; declared war on Assad but supported him to recover Aleppo; declared war on terrorism but allowed ISIS and al-Qaeda to enjoy all support from Turkey and bought oil from ISIS; threatened the Iraqi Kurds but still bought their oil while keeping its hundreds of trucks queuing up on their borders; promised to keep al-Qaeda under control in Idlib during the last Astana meeting, but allowed it to launch military offensives afterwards.

It is obvious that the Iraqi Kurds are aware of Ankara’s unstable and continuously changing of policy, very confident that any other measures by surrounding countries (Iraq and Iran) can be easily overcome in the future, as long as Erdogan is offering alternatives. The cost is that the Iraqi Kurds fall into Ankara’s hands and control, but it looks like Barzani is happy with this outcome: as long as he has his new state, pushing its place onto the Middle East map, right in the middle.

Iran and Iraq

The Kurdish referendum pushed Iraq into the arms of Iran when the relationship between Iraqi Prime Minister Haidar Abadi and Iranian officials was at its lowest level. Today Abadi (and most Iraqis) sees in Iran the only sincere partner to count on, and can rely on the Iranian Army and Revolutionary Guards Corps (IRGC) in the case of any military escalation against Kurdistan, particularly in the disputed Iraqi cities, with Kirkuk at the top of the list.

Baghdad is confident that Barzani didn’t take this step without a blessing from the Americans, which is expected to become more visible in the coming months, according to Iraqi officials in Baghdad. It seems Washington decided to swap its relationship with Baghdad with that of Erbil because, apparently, it won’t be able to support both at the same time.

Supporting Erbil is more attractive to the US and its regional allies (particularly Saudi Arabia), in the hope that the Kurdish Iraqi move would trigger the appetite of the Kurdish Iranians (and the Syrian Kurds who are already on this same path). If this happens and we observe an uprising in Iran (the Saudis already promised to support any unrest in Iran), the Iranian economy and that of the government of Baghdad will be both under severe pressure.

Iran supported Barzani in 2014 and provided him with weapons (at a time when the US was denying any support to Iraq, during the 6 months after the fall of Mosul in 2014), but it is today in an undeclared war against Erbil, fully behind Baghdad’s measures and supporting future escalation and punitive steps.

No one can wind back the clock to before the Kurdish referendum. However, it is still possible for Barzani to avoid contributing toward a further mess in this increasingly reshuffled Middle East. He could indeed consider all these issues as an unnecessary concern, similar to a "storm in a tea cup". Unfortunately, it seems the Kurdish leader is determined to continue his path, denying any immediate intent for concrete realization of independence, yet without excluding it.

The post Why Despite Threats, Turkey Won’t Impose Sanctions On Kurdistan After The Referendum appeared first on crude-oil.news.

Continue reading »

Why Madrid Will Never Let Go – Catalonia Is Closer To The Eurozone Than Spain

As we have detailed previously, the Spanish region of Catalonia in the North-Eastern corner of Spain will attempt to hold an independence referendum tomorrow, against the will of the central government in Madrid.

Apart from the Baleares and the Madrid region itself, Catalonia together with its capital Barcelona is one of the most economically-powerful parts of the country.

Notably, as Statista's infographic below shows that the gross domestic product (GDP) per capita of Catalonia lies closer to that of the Eurozone than of Spain as a whole.

Infographic: Catalonia Closer to the Eurozone Than to Spain | Statista

You will find more statistics at Statista

This in mind, it comes as no surprise that Madrid is by all means opposed to letting go of Catalonia.

As The BBC notes, Catalonia, a wealthy region of 7.5 million people in north-eastern Spain, has its own language and culture. It also has a high degree of autonomy, but is not recognised as a separate nation under the Spanish constitution. Pressure for a vote on self-determination has grown over the past five years as austerity has hit the Spanish economy and people hard.

Why is Madrid so opposed?

Spanish Prime Minister Mariano Rajoy stared down Catalan secessionists when they held a trial referendum in 2014, offering no concessions to their demand for a legal vote.

He has pledged to stop the 2017 vote, saying it goes against the constitution which refers to "the indissoluble unity of the Spanish Nation, the common and indivisible homeland of all Spaniards".

 

Which brings to mind the biggest question, what would happen to Spain in case of Catalonia’s secession?

As GEFIRA explains, in terms of the debt sustainability parameters laid down by the Treaty of Maastricht, it’d be the Eurozone debt crisis 2.0.

As Spain now maintains the second year of 3% GDP growth, an even bigger, immediate fiscal threat is looming. After multiple ineffective referendums in the previous years, this time the Catalan government is likely to finally assert independence. What will it look like against the background of the Maastricht financial requirements?

Debt to GDP ratio

The Treaty of Maastricht says it should be 60%. Spain’s debt to GDP ratio was 39% in 2007, but after the financial crisis it gradually rose to 99.4% today. Should Catalonia leave, there are two possible scenarios:

1. Catalonia agrees to take a share of the Spanish total debt, as a “divorce bill”, because after all it benefited from the government spending in Catalonia itself;

 

or

 

2. Catalonia leaves without taking any share of the total Spanish debt.

In the first case, nothing would change, assuming Catalonia would agree to take the share of Spanish debt equal to its share in Spain’s total GDP. In that case, Catalonia accounts roughly for 20% of the Spanish GDP, which means it would take 20% of the Spanish debt. Given that the Spanish debt is right now almost the same size as the Spanish GDP, calculations are rather simple.

Source: Statista.

The second option is rather dramatic. Without Catalonia, Spanish GDP would automatically shrink by 20%, while having to service the entirety of the debt. The debt to GDP percentage ratio would go from 99.4% to 124% overnight.

Deficit to GDP percentage ratio

The Treaty of Maastricht says it should be 3%. Spain has been way outside it since the financial crisis, with a peak at 11% in 2011. For 2016 it was 4.5%.

Here the problem is understanding how much more tax revenue Spain gets from Catalonia than it gives. Catalonia says 11.1€ billion, Spain says 8.5€.

Either way, as the deficit is calculated as expenditure minus revenue, it would be a hole in the revenue of the Spanish government of 8.5 to 11.1€ billion. Last year the deficit/GDP ratio was 4.5%, corresponding to approximately 21€ billion. With the Catalan secession, assuming a 10€ billion hole for simplicity between the estimates of the Spanish and Catalan governments, Spain’s deficit would go up to 60€ billion, while its GDP would shrink by 20%. Result? The deficit to GDP percentage ratio would be 6.7%, back to 2013.

Conclusion

The doomsday scenario would be Spain waking up with a debt equal to 124% of its GDP and growing, due to the 6.7% deficit, which would take another 4-5 years to be contained. The EU’s response to the possibility of Spanish bankruptcy would be predictable: more austerity. It is important to note that while Spain has been growing for the past two years and unemployment is also decreasing, the recipe chosen by the Spanish government, flexibility of the labour market in the form of temporary jobs, has exacerbated income inequality: as the OECD points out that temporary jobs are low-productivity and thus earn low wages; the precariousness of the job prevents improvements in productivity, thus improvement in wages. The poor remains poor, while the rich gets richer and the gap widens.4)

Boosting GDP and employment statistics with mini-jobs is thus masquerading an issue common to other Western countries: the collapse of the middle class.

Catalan independence could prove to be the last nail in the coffin: either Spain goes bankrupt or is forced to implement even more austerity at the risk of facing a revolution from the economically displaced.

*  *  *

And that's why Madrid doesn't want to lose Catalonia...

Once before, in October 1934, shortly before the Spanish Civil War (1936 to 1939) broke out, Catalonia had announced its independence from the rest of Spain. This prompted Madrid to sent the army to Barcelona.

The post Why Madrid Will Never Let Go – Catalonia Is Closer To The Eurozone Than Spain appeared first on crude-oil.news.

Continue reading »

Why Madrid Will Never Let Go – Catalonia Is Closer To The Eurozone Than Spain

As we have detailed previously, the Spanish region of Catalonia in the North-Eastern corner of Spain will attempt to hold an independence referendum tomorrow, against the will of the central government in Madrid.

Apart from the Baleares and the Madrid region itself, Catalonia together with its capital Barcelona is one of the most economically-powerful parts of the country.

Notably, as Statista's infographic below shows that the gross domestic product (GDP) per capita of Catalonia lies closer to that of the Eurozone than of Spain as a whole.

Infographic: Catalonia Closer to the Eurozone Than to Spain | Statista

You will find more statistics at Statista

This in mind, it comes as no surprise that Madrid is by all means opposed to letting go of Catalonia.

As The BBC notes, Catalonia, a wealthy region of 7.5 million people in north-eastern Spain, has its own language and culture. It also has a high degree of autonomy, but is not recognised as a separate nation under the Spanish constitution. Pressure for a vote on self-determination has grown over the past five years as austerity has hit the Spanish economy and people hard.

Why is Madrid so opposed?

Spanish Prime Minister Mariano Rajoy stared down Catalan secessionists when they held a trial referendum in 2014, offering no concessions to their demand for a legal vote.

He has pledged to stop the 2017 vote, saying it goes against the constitution which refers to "the indissoluble unity of the Spanish Nation, the common and indivisible homeland of all Spaniards".

 

Which brings to mind the biggest question, what would happen to Spain in case of Catalonia’s secession?

As GEFIRA explains, in terms of the debt sustainability parameters laid down by the Treaty of Maastricht, it’d be the Eurozone debt crisis 2.0.

As Spain now maintains the second year of 3% GDP growth, an even bigger, immediate fiscal threat is looming. After multiple ineffective referendums in the previous years, this time the Catalan government is likely to finally assert independence. What will it look like against the background of the Maastricht financial requirements?

Debt to GDP ratio

The Treaty of Maastricht says it should be 60%. Spain’s debt to GDP ratio was 39% in 2007, but after the financial crisis it gradually rose to 99.4% today. Should Catalonia leave, there are two possible scenarios:

1. Catalonia agrees to take a share of the Spanish total debt, as a “divorce bill”, because after all it benefited from the government spending in Catalonia itself;

 

or

 

2. Catalonia leaves without taking any share of the total Spanish debt.

In the first case, nothing would change, assuming Catalonia would agree to take the share of Spanish debt equal to its share in Spain’s total GDP. In that case, Catalonia accounts roughly for 20% of the Spanish GDP, which means it would take 20% of the Spanish debt. Given that the Spanish debt is right now almost the same size as the Spanish GDP, calculations are rather simple.

Source: Statista.

The second option is rather dramatic. Without Catalonia, Spanish GDP would automatically shrink by 20%, while having to service the entirety of the debt. The debt to GDP percentage ratio would go from 99.4% to 124% overnight.

Deficit to GDP percentage ratio

The Treaty of Maastricht says it should be 3%. Spain has been way outside it since the financial crisis, with a peak at 11% in 2011. For 2016 it was 4.5%.

Here the problem is understanding how much more tax revenue Spain gets from Catalonia than it gives. Catalonia says 11.1€ billion, Spain says 8.5€.

Either way, as the deficit is calculated as expenditure minus revenue, it would be a hole in the revenue of the Spanish government of 8.5 to 11.1€ billion. Last year the deficit/GDP ratio was 4.5%, corresponding to approximately 21€ billion. With the Catalan secession, assuming a 10€ billion hole for simplicity between the estimates of the Spanish and Catalan governments, Spain’s deficit would go up to 60€ billion, while its GDP would shrink by 20%. Result? The deficit to GDP percentage ratio would be 6.7%, back to 2013.

Conclusion

The doomsday scenario would be Spain waking up with a debt equal to 124% of its GDP and growing, due to the 6.7% deficit, which would take another 4-5 years to be contained. The EU’s response to the possibility of Spanish bankruptcy would be predictable: more austerity. It is important to note that while Spain has been growing for the past two years and unemployment is also decreasing, the recipe chosen by the Spanish government, flexibility of the labour market in the form of temporary jobs, has exacerbated income inequality: as the OECD points out that temporary jobs are low-productivity and thus earn low wages; the precariousness of the job prevents improvements in productivity, thus improvement in wages. The poor remains poor, while the rich gets richer and the gap widens.4)

Boosting GDP and employment statistics with mini-jobs is thus masquerading an issue common to other Western countries: the collapse of the middle class.

Catalan independence could prove to be the last nail in the coffin: either Spain goes bankrupt or is forced to implement even more austerity at the risk of facing a revolution from the economically displaced.

*  *  *

And that's why Madrid doesn't want to lose Catalonia...

Once before, in October 1934, shortly before the Spanish Civil War (1936 to 1939) broke out, Catalonia had announced its independence from the rest of Spain. This prompted Madrid to sent the army to Barcelona.

The post Why Madrid Will Never Let Go – Catalonia Is Closer To The Eurozone Than Spain appeared first on crude-oil.news.

Continue reading »

The Fed’s ‘Quack Treatments’ Are Causing The Stagnation

Authored by EconomicPrism's MN Gordon via Acting-Man.com,

Bleeding the Patient to Health

There’s something alluring about cure-alls and quick fixes. Who doesn’t want a magic panacea to make every illness or discomfort disappear? Such a yearning once compelled the best and the brightest minds to believe the impossible for over two thousand years.

 

Instantaneous relief! No matter what your affliction is, snake oil cures them all. [PT]

 

For example, from antiquity until the late-19th century, bloodletting was used to treat nearly every disease. Reputable medical references recommended bloodletting as a cure for acne, asthma, cancer, epilepsy, gout, indigestion, insanity, leprosy, pneumonia, scurvy, tuberculosis, and everything in between. Bloodletting was even used to treat hemorrhaging.

The practice was simple enough. A surgeon, often a barber, would open a vein and drain blood from the patient. Somehow, this was supposed to cure them of disease.

The fundamental idea was that a sick person could be bled to health. Induced fainting, via bloodletting, was even considered beneficial. However, the results were often fatal.

On December 13, 1799, George Washington returned from a cold-winters horseback ride across his estate with a raspy throat. So, he requested bloodletting to make his sore throat better. Over a ten-hour period, roughly 126 ounces of blood was drained from his system.

The next day Washington’s treatment culminated in perfect success. Because of the bloodletting, Washington never suffered from a sore throat again. He had received a permanent cure. Namely, he croaked.

Wouldn’t a tablespoon or two of honey and lemon have been a better solution to the sore throat problem? Sure, it would have been less effective. But it would have been a great deal less terminal as well.

 

George Washington: so-so land speculator, successful revolutionary & general, founding father, first president of the US, and reportedly no friend of foreign entanglements. Here seen in those all too brief final hours, enjoying a sore throat for the very last time, orbited by family and assorted quacks. We don’t know who’s who in this picture, but this is obviously a room brimming over with decidedly fatal good intentions. There is a picture of Lincoln’s deathbed (which shows his prostrate body crammed into a tiny room with his wife and 15 politicians and generals, who are trying their best to look solemn and grimly resolved to carry on) that gives off similarly morbid vibes. There is a major difference though: almost no-one is contemplating Lincoln with the thoughtful, calculating looks Washington is at the receiving end of here. Lincoln was probably judged a hopeless case and had been crossed off everybody’s Rolodex already (a hole in the head is rarely conducive to one’s continued life and career). By contrast, Washington still offered the quacks a chance to speed up the healing process by devising ingenious ways of killing him. Admittedly, the cure really is hard to beat in terms of its permanence. It is an apodictic certainty that Washington never complained about a sore throat again. [PT]

 

Curing a Debt Problem with Credit

Certainly, repeated observation of the practice must have shown bloodletting’s cure-all powers to be a dubious proposition at best. You’d think that after several thousand years of failure the practice would have been tabled. But it wasn’t.

In fact, by the 17th century, many doctors knew bloodletting was more harmful than beneficial. But the practice persisted for another 200 years. How come?

From what we gather, doctors didn’t want to acknowledge their limitations. Although they had garnered an astute understanding of how the human anatomy functioned, they had yet to discover cures for practically all diseases. Thus, the common belief was that it was better to give a bloodletting treatment than no treatment at all.

These days, many diseases are still without cures. But progress has been made. Doctors and surgeons no longer imagine bloodletting to be the ultimate cure-all. Only a true medical quack would carry out such a barbarous treatment.

Unfortunately, the same cannot be said for present day monetary policy. We live under a system of outright quackery. What else, but a quack monetary system, would prescribe ever increasing expansions of credit as a cure-all for a debt problem?

 

This chart depicts causes and effects of the snake-oil cure applied by our vaunted central planners. It shows federal debt, corporate debt, the broad true money supply, and lastly, economic output as measured by GDP – all indexed to 100 in 1986, the year bubble blower extraordinaire, Alan Greenspan, took the helm at the Fed. However, we want to direct your attention to the cesura of 2008, when Greenspan’s successor, Ben Bernanke was tasked with bailing out yet another imploding bubble of the fiat money era. According to “experts” of his ilk, these things kin of “just happen”. The boom-bust cycle is seen as akin to a natural catastrophe, like an earthquake or an asteroid strike. No-one is ever responsible for it, least of all the people who directly and indirectly manipulate all the figures charted above, and certainly no-one ever “sees it coming”. The latter assertion involves a rather glaring omission – it requires one to ignore the hundreds, or more likely even thousands, of people who did and do see it coming. Why are they so studiously ignored? The problem is probably that the people with the slightly better functioning crystal balls often have a tendency to assign blame correctly. You see, it is not an earthquake after all, and it certainly isn’t a “market failure”, or a “lack of regulations” that is behind the increasingly dangerous succession of ever larger credit expansions and crashes. Stop and think about this chart for a moment. At the time when the Greenspan/Bernanke housing bubble co-production (implemented in line with the unsolicited advice dispensed by another bunch of “experts”*) blew up in everyone’s face, was there anyone who didn’t understand that a giant debt problem had been discovered? There is of course more to it than that; business cycle theory is a tad more intricate. But credit expansion is at its heart, and there always comes a moment in time when understanding that part of it requires nothing but a smattering of common sense. And now ponder the response of the central planners to the debt crisis. What on earth made them think that expanding money and credit at accelerated rates was the “solution” to a giant debt problem? Common sense is evidently in very short supply at the Eccles building – contrary to money from thin air, which they can never run out of. [PT] – click to enlarge.

 

Nonetheless, perpetual increases of credit underpin today’s wild and zany debt based fiat money system. This, no doubt, is akin to attempting to bleed a patient to health. It also guarantees a slow and painful death.

 

Fed Quack Treatments are Causing the Stagnation

On Tuesday, Fed Chair Janet Yellen, a quack, reeled back her78-month plan for the national monetary policy of the United States. If you recall, this was the grand plan she rolled out last week. Apparently, she’s already having some reservations.

At the National Association for Business Economics in Cleveland, Yellen said:

My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.

 

Although we judge that inflation will most likely stabilize around 2 percent over the next few years, the odds that it could turn out to be noticeably different are considerable.

 

In my view, it strengthens the case for a gradual pace of adjustments. Moving too quickly risks over-adjusting policy to head off projected developments that may not come to pass.”

To be fair, Yellen was speaking about the pace at which the Fed will raise the federal funds rate. Though this is different than her plan to unwinding the Fed’s balance sheet, we suspect that, in time, this same rationale will be used to justify further Fed asset purchases.

The point is, the Fed only knows only one cure-all treatment for the economy’s stagnation. Always wrong, but never in doubt. Credit expansion is the Fed’s perennial solution.

 

This seems a very good opportunity to quote Ludwig von Mises, who pointed out: “However conditions may be, it is certain that no manipulations of the banks can provide the economic system with capital goods. What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The boom is built on the sands of banknotes and deposits. It must collapse.” [PT]

 

Alas, like bloodletting barbers of the 19th century, it’s a quack treatment that has buried the economy under irreconcilable levels of debt. Yet the quacks who deliver it are oblivious to the fact that their treatment is not a cure for the economy’s stagnation, but rather the cause. Perhaps in two thousand years from now they’ll come to grips with this.

Footnote:

* The “money quote” Paul Krugman will never be able to live down follows below; not for a lack of trying, mind – once he expended an entire NYT column in a vain attempt to deny that his words actually meant what they obviously mean:

 

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

 

The post The Fed’s ‘Quack Treatments’ Are Causing The Stagnation appeared first on crude-oil.news.

Continue reading »

California Assemblyman Promises Bill To Ban Gas Cars By 2040

San Francisco Assemblyman Phil Ting would like for you to know that he has every intention of introducing new legislation in 2018 that will (i) make it much more difficult for low-income Californians to buy affordable vehicles and (ii) increase greenhouse gas emissions.  Of course, Ting didn't word it in exactly that way but his proposal to ban combustion-engine vehicles will inevitably result in both of the unintended consequences above.

As the Sacramento Bee points out this morning, Ting has promised to introduce his destructive legislation in January saying at some point you just need to "put a line in the sand."

France and the United Kingdom are doing it. So is India. And now one lawmaker would like California to follow their lead in phasing out gasoline- and diesel-powered vehicles.

 

When the Legislature returns in January, Assemblyman Phil Ting plans to introduce a bill that would ban the sale of new cars fueled by internal-combustion engines after 2040. The San Francisco Democrat said it’s essential to get California drivers into an electric fleet if the state is going to meet its greenhouse gas reduction targets, since the transportation sector accounts for more than a third of all emissions.

 

“The market is moving this way. The entire world is moving this way,” Ting said. “At some point you need to set a goal and put a line in the sand.”

 

“California is used to being first. But we’re trying to catch up to this,” Ting said.

Meanwhile, we suspect that Ting will ignore the fact that California's previous attempt to push electric cars on consumers has been a complete failure...presumably because people would prefer to not spend way more for a car that has half the performance of a gas car and doubles their electricity bill...just a hunch.

California already committed five years ago to putting 1.5 million “zero-emission vehicles,” such as electric cars and plug-in hybrids, on the road by 2025. By that time, the state wants these cleaner models to account for 15 percent of all new car sales.

 

But progress has been modest so far, as consumers wait for prices to drop and battery ranges to improve, or opt for large trucks and SUVs that are not available among electric offerings. Slightly more than 300,000 zero-emission vehicles have now been sold in California, and they accounted for just under 5 percent of new car sales in the state in the first half of the year.

Phil Ting

On the upside, Ting's proposed ban on gas vehicles would come a full 10 years later than the timeline floated by Mary Nichols of the California Air Resources Board last week.  Per Bloomberg:

Governor Jerry Brown has expressed an interest in barring the sale of vehicles powered by internal-combustion engines, Mary Nichols, chairman of the California Air Resources Board, said in an interview Friday at Bloomberg headquarters in New York. Brown, one of the most outspoken elected official in the U.S. about the need for policies to combat climate change, would be replicating similar moves by China, France and the U.K.

 

“I’ve gotten messages from the governor asking, ‘Why haven’t we done something already?’” Nichols said, referring to China’s planned phase-out of fossil-fuel vehicle sales. “The governor has certainly indicated an interest in why China can do this and not California.”

 

California has set a goal to cut carbon dioxide emissions by 80 percent from 1990 levels by 2050. Rising emissions from on-road transportation has undercut the state’s efforts to reduce pollution, a San Francisco-based non-profit said last month.

 

“To reach the ambitious levels of reduction in greenhouse gas emissions, we have to pretty much replace all combustion with some form of renewable energy by 2040 or 2050," Nichols said. “We’re looking at that as a method of moving this discussion forward.”

 

"There are people who believe, including who work for me, that you could stop all sales of new internal-combustion cars by 2030. Some people say 2035, some people say 2040,” she said. “It’s awfully hard to predict any of that with precision, but it doesn’t appear to be out of the question.”

Of course, the irony that seems to be lost on Phil Ting, Jerry Brown and Mary Nichols is that, according to Morgan Stanley, electric cars generate more CO2 than they save.  As a stark reminder to our left-leaning political elites who created companies like Tesla with massive subsidies, Morgan Stanley pointed out that while electric cars don't burn gasoline they do have to be charged using electricity generated by coal and other fossil fuels.

This is where Tesla, along with China’s Guoxuan High-Tech fall short.

 

“Whilst the electric vehicles and lithium batteries manufactured by these two companies do indeed help to reduce direct CO2 emissions from vehicles, electricity is needed to power them,” Morgan Stanley wrote. “And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.”

 

In other words, “the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.”

 

Morgan Stanley calculated that an investment of $1 million in Canadian Solar results in nearly 15,300 metric tons of carbon dioxide being saved every year. For Tesla, such an investment adds nearly one-third of a metric ton of CO2.

Meanwhile, despite Brown's desire for "Hope & Change," even the U.S. Energy Information Administration says that "renewables" will represent less than 20% of electricity generation in the U.S. by 2040.

Energy

Oh well, when Ting succeeds it making it impossible for low-income California families to afford cheap transportation to work, we're sure he'll be all too happy to introduce additional legislation deeming electric cars to be a "right" of all U.S. citizens and mandating that "millionaire, billionaire, private jet owners" pay more in taxes to subsidize that "constitutionally protected right."

The post California Assemblyman Promises Bill To Ban Gas Cars By 2040 appeared first on crude-oil.news.

Continue reading »

“They Won’t Know What Hit Them” Shocking Undercover Footage Exposes Antifa’s “Premeditated” Violence

As if the public needed any more evidence that violence is a central part of Antifa’s mission, conservative comedian Steve Crowder has published footage that he and his producer surreptitiously recorded after infiltrating a local Antifa cell and accompanying it to a protest at the University of Utah.

The shockingly candid footage offers a disturbing glimpse into the innerworkings of Antifa - a loosely organized band of far-left agitators - and the central tenant of violent resistance that encapsulates the group's philosophy. The footage primarily focuses on a transgender woman, the purported leader of a small cell of Antifa protesters, who can be heard telling Crowder's producer that she’s armed with a handgun, and that she expects reinforcements to arrive later with “two AKs”. The organizer can also be heard recommending that Crowder’s producer buy a small blade at a military surplus store and strap it to his ankle “just in case.”

What they show appears to confirm that the group protesters were planning to disrupt a speaking event hosted by conservative commentator and Daily Wire founder Ben Shapiro, whom Antifa has accused of being a nazi despite the fact that he is Jewish. Shapiro's recent appearances at UC Berkeley and other university campuses drew protests, with demonstrators labeling him a “fascist.”

But perhaps the most surprising thing about the footage was the fact that mainstream media reporters AND police essentially told Crowder & Co. to get lost when they shared it with them.

In another shocking excerpt, the Antifa leader – whom Crowder didn’t name because he said he didn’t want to “dox” anybody, though he added that police have confirmed that they have been monitoring her – described a plan to lure right-wing demonstrators to a secluded area where, presumably, they would be attacked by Antifa.

“Plain clothes, hard tactics, I don’t think they’ll know what hit them. Because they’re not prepared for what we’re planning,” the organizer says at one point.

In the video, another unnamed Antifa member who goes by the pseudonym Clark can be heard explaining that the difference between Antifa and other activist groups is a “willingness to respond with violence.”

As we’ve reported time and time again, Antifa protesters have been inciting violence across the country since Trump’s upset victory in November, beginning with protests during Trump’s inauguration that quickly turned violent in destructive.

According to Fox 13 News in Salt Lake City, Crowder published the undercover video Thursday that purports to show far left-wing protesters distributing weapons ahead of the speech. Crowder’s production team presented the video to police moments after it was recorded.

Yet after evaluating the video, the police determined that there was no credible threat.

“Police looked at the video, evaluated other information available to them, and determined the individuals did not pose a credible threat that warranted action,” Nelson told Fox 13 News.

Similarly violent clashes instigated by members of the far-left group erupted on the campus of UC Berkeley in early February, where members of the group hurled Molotov cocktails and attacked “facists” and “nazis” who were attending a speaking event by Milo Yiannopoulos, causing extensive property damage on campus.

While both the mainstream media and more mainstream leftists initially defended the group, public sentiment has soured on the group.

Several media organizations – including the LA Times, Washington Post, the Atlantic, Bloomberg and the Wall Street Journal – have criticized the group’s violent tactics. A month ago, it was reported that the FBI and the Department of Homeland Security classified Antifa as a "domestic terrorist" group in internal communications that described them as "primary instigators of violence at public rallies" going back to at least April 2016 when the reports were first published."

The post “They Won’t Know What Hit Them” Shocking Undercover Footage Exposes Antifa’s “Premeditated” Violence appeared first on crude-oil.news.

Continue reading »

China Catalyst To Send Gold Over $10,000 Per Ounce?

China Catalyst To Send Gold Over $10,000 Per Ounce?


Jim Rickards is on record forecasting $10,000 gold.

But is China about to provide the catalyst to send gold even higher? And by how much?

Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…

China — the world’s largest oil importer — struck lightning through international markets recently.

According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.

Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.

Not only would the plan bypass the dollar entirely… it would restore gold’s role in international commerce for the first time since 1971, when Nixon hammered the last nail through Bretton Woods.

If the rumors hold true, China’s plan could enter effect by the end of this year.

Billionaire business magnate and sound money advocate Hugo Salinas Price ran China’s plan through his calculator.

It turned up a basic math problem that spells drastically higher gold prices — if the plan is to work.

Details to follow.

But first some background on oil and gold… a brief detour down Bretton Woods Lane…

Price:

By 1970, it was evident to those running the U.S. that it would very soon be necessary to import large quantities of oil from Saudi Arabia. Under the Bretton Woods Agreements of 1945, the immense quantities of dollars that would shortly flow to Saudi Arabia in payment of their oil would be claims upon U.S. gold, at the time quoted at $35 an ounce. Those claims would surely deplete the remaining gold held by the U.S. Treasury in short order.

Washington found itself on the sharp hooks of a dilemma…

Dramatically raise the price of gold to limit redemptions — and devalue the dollar in the process — or repudiate its commitments under Bretton Woods.

Dishonor, that is… or dishonor.

It chose dishonor.

Price again:

To continue under the Bretton Woods monetary system would have meant that the U.S. would have been forced to raise the price of gold to an enormous figure in order to reduce the amount of gold payable to the Saudis to a tolerable level. But raising the dollar price of gold in that manner would have constituted a great devaluation of the dollar and collapsed its international prestige; that in turn would have ended the predominance of the U.S. as the No. 1 power in the world. The U.S. was not willing to accept that outcome. So Nixon “closed the gold window” on Aug. 15, 1971.

If China is willing to trade gold for oil under its latest plan, a similar dynamic enters play.

Consider:

China takes aboard some 8 million barrels of oil a day.

That’s 2.92 billion barrels per year — nearly 3 billion in all.

But China holds only a few thousand metric tons of gold (officially about 1,850. Some estimate the true figure much higher).

You see the problem, of course.

China rapidly depletes its gold reserves if too many oil exporters choose to exchange yuan for gold.

If the plan’s to be sustainable at all, gold must rise — drastically — in order to balance the vast amounts of oil it’s supporting.

As Price explains, “To balance the mass of oil received by China against a limited amount of available gold… it will be necessary for gold to skyrocket upward in yuan terms and, necessarily, in dollar terms as well.”

Price crunched the numbers…

One ounce of gold (about $1,300) currently fetches 26 barrels of oil (about $50 per).

One barrel of oil is worth 1.196 grams of gold.

Price calls this ratio “an unsustainably low purchasing power of gold vis-a-vis oil.”

Only a drastically higher gold price would render the plan plausible.

How far would gold have to climb before the relationship was stable in Price’s estimate?

Ten times. Thus, Price arrives at a reasonable gold price:

$13,000 per ounce.

Price:

At $13,000 per gold ounce, one barrel of oil, at $50, will be bought with 0.1196 grams of gold; perhaps we may see $13,000 per oz gold in the not distant future.

Here, a road map to $13,000 gold.

We don’t know if Price’s figure is correct.

But if not $13,000, it seems gold would have to rise dramatically if Price’s thesis is correct — or else China’s plan collapses.

We can only conclude that China knows the implications of the math.

$13,000 gold also means a massive devaluation of the yuan.

China prefers a weak yuan to goose exports. But a worthless yuan?

The plan may prove a mirage in the end for all we know.

But if the plan does proceed… Jim Rickards’ $10,000 gold prediction might be vindicated — fully and then some.

By Brian Maher, Managing editor, The Daily Reckoning

 

Gold Prices (LBMA AM)

28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce

Silver Prices (LBMA)

28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce


Recent Market Updates

- Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
- “Gold prices to reach $1,400 before the end of the year” – GoldCore
- Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
- Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
- Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
- Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
- “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
- Global Debt Bubble Understated By $13 Trillion Warn BIS
- Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
- Gold Up, Markets Fatigued As War Talk Boils Over
- Oil Rich Venezuela Stops Accepting Dollars
- Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
- British People Suddenly Stopped Buying Cars

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

The post China Catalyst To Send Gold Over $10,000 Per Ounce? appeared first on crude-oil.news.

Continue reading »