Rational Capitalist Speculator
Russian Fighter Jet Flies Repeatedly Within 1000 Yards Of US Warship In The Black Sea | Zero Hedge
As we reported last Friday, a second US warship, the destroyer Donald Cook, crossed the Bosphorus last week and entered the Black Sea at precisely the time when NATO was arguing that its encroaching presence around Russia should not spook anyone.
Apparently it spooked someone, namely Russia, which over the weekend decided to give the Americans a warm welcome.
As AP reports, “A U.S. military official says a Russian fighter jet made multiple, close-range passes near an American warship in the Black Sea for more than 90 minutes Saturday amid escalating tensions in the region.”
White House warns Russia of more 'costs' over Ukraine / (RCS): from article..."director of the U.S. Central Intelligence Agency, John Brennan, had been in Kiev over the weekend"
(Reuters) - The White House warned Russia on Monday that it would face further costs over its actions in Ukraine and said U.S. President Barack Obama would speak with Russian President Vladimir Putin soon.
U.S. officials stopped short of announcing a new set of sanctions against Russia but said they were in consultations with European partners about the prospect.
The European Union agreed on Monday to step up sanctions against Moscow by expanding a list of people subjected to asset freezes and visa bans.
"Russia continues to engage in provocative actions in Eastern Ukraine. The mere presence of the troops, in addition to what else they’ve done inside Ukraine, creates a threat of destabilization within Ukraine," White House spokesman Jay Carney told reporters.
"I can assure you that Russia’s provocations - further transgressions and provocations will come with a cost. And I’m not here to specify what cost will come from which specific action, but there have already been costs imposed on Russia; there will be further costs imposed on Russia."
The next round of U.S. sanctions, which would be the fourth imposed since the Ukrainecrisis began, is likely to target Russians close to Putin as well as Russian entities, three sources familiar with the discussions said on Sunday.
U.S. State Department spokeswoman Jen Psaki noted that the United States was prepared to impose sanctions on individuals and entities in the financial services, energy, metals, mining, engineering and defense sectors.
The sanctions have been the most visible sign of U.S. anger at Russia’s annexation of the Crimea region in southern Ukraine last month, reflecting the deepest plunge in U.S.-Russian relations since the Cold War.
Obama spoke to French President Francois Hollande about the crisis on Monday and praised Ukraine’s government for showing “great restraint” and working to unify the country, the White House said.
Carney also confirmed that the director of the U.S. Central Intelligence Agency, John Brennan, had been in Kiev over the weekend and decried what he called “false claims” leveled at the CIA by Russian authorities.
Head of the CIA in Kiev this weekend. Fishy business abounds.
Finance Officials Push for Bold Action to Sustain Economic Growth
WASHINGTON — At the World Bank and International Monetary Fund annual spring meetings, concerns about crisis have given way to concerns about complacency.
The euro zone has re-emerged from recession. Emerging-market jitters have quieted. The fiscal battles in the United States have abated.
But the recovery remains fragile and in many cases, growth remains sluggish, leaving a jobs gap of 62 million.
“The overriding topic for discussion will be the topic of growth, quest for higher growth, better quality growth, more inclusive growth and sustainable growth,” said Christine Lagarde, the managing director of the fund, speaking with reporters on the eve of the weekend conference. “We need to act now.”
“We are monitoring the economic situation in Ukraine, mindful of any risks to economic and financial stability, and welcome the I.M.F.’s recent engagement with Ukraine,” said a communiqué from the Group of 20, which consists of the world’s biggest economies.
The fund is preparing a financial rescue package for Kiev that would come with stringent conditions, including tax increases and cuts in government spending.
Finance ministers and central bankers also discussed the possibility of new penalties for Russia, said Jacob J. Lew, the Treasury secretary. “There is broad and strong unity within the G-7 on increasing the sanctions and costs in response to escalating action from Russia,” he said, referring to the Group of 7, meaning Britain, Canada, France, Germany, Italy, Japan and the United States. “There was no dissent in the room that it was essential that there be unity in taking action if necessary.”
(RCS): On the 2010 reforms:
At the meetings, the United States also took heated criticism for Congress’s failure to agree to a 2010 reform package that would give emerging-market countries more say within the fund. The Obama administration has repeatedly urged leaders on Capitol Hill to ratify the package, which requires no new money from the United States, to no avail. “The end of the year for me is the final limit,” said Guido Mantega, Brazil’s finance minister, according to Reuters. “Four years waiting for me is just too much.”
The Group of 20 gave a year-end deadline for Congress to act — saying that at that point, the monetary fund might move on without the United States’ assent. It gave no further details. “If the 2010 reforms are not ratified by year-end, we will call on the I.M.F. to build on its existing work and develop options for next steps,” a communiqué said.
At a meeting in Sydney at the end of February, members of the Group of 20 major economies — which include rich countries like Canada and developing economies like Brazil and China — agreed to commit to policies to increase growth. The specific target is to lift economic output 2 percent beyond its current trajectory over the coming five years. - (NYT)
Philippine, U.S. Envoys in Draft Defense Pact Amid China Strain
Philippine and U.S. negotiators reached agreement on key points of a pact to boost the American troop presence as the Southeast Asian nation seeks to counter China’s push for control of disputed South China Sea territory.
Representatives of both nations finished the eighth round of “very productive” negotiations in Manila, the Philippine defense and foreign affairs departments said in a joint e-mailed statement today. A draft of the defense cooperation agreement will be submitted to President Benigno Aquino for approval, the departments said.
The pact is part of Aquino’s plan to shore up military ties with allies such as the U.S., which is treaty-bound to defend the country in case of conflict. It also aids the U.S. strategic rebalancing toward Asia pushed by President Barack Obama as China’s leaders seek a greater role for their country in the region. The agreement is likely to be signed before Obama’s visit to the country this month during his Asian tour, Philippine foreign affairs spokesman Charles Jose said by phone.
The draft deal respects Philippine sovereignty and prevents the permanent stationing of U.S. troops and the U.S. having military bases or weapons of mass destruction in the country, according to the statement. U.S. access to and use of Philippine military facilities will be at the invitation of the Philippines and with full adherence to its laws, the defense department said.
China will make “no compromise, no concessions” in disputes over territory and resources with Japan and the Philippines, and is ready to fight and win any battle, General Chang Wanquan said April 8 at a briefing in Beijing alongside his visiting U.S. counterpart, Defense Secretary Chuck Hagel.
Aquino is also seeking to boost military ties with Japan, which is locked in a separate dispute with China over islands in the East China Sea. Two Japanese destroyers and two helicopters visited Manila early this month, and Japan will encourage more joint training with the Philippine military, Captain Hideto Ikeda, commander of the Japan Maritime Self-Defense Force’s 13th Escort Division, said on April 2. - (Bloomberg)
Be glad for Greeks bearing gifts
Investors flocked to buy $4.2 billion of government bonds. The sale marks some hope that Greece will implement new reform laws, especially those aimed at cutting the number of public workers. The government of Prime Minister Antonis Samaras has already improved the pension system and collection of property taxes. It now reports the first budget surplus in a decade. And in 2014, the economy is expected to grow after shrinking in previous years.
Greece’s progress has been enough for the chief architect of the eurozone’s recovery, German Chancellor Angela Merkel, to pay a visit to the country Friday. In a sort of a short victory lap, the leader of Europe’s strongest economy praised Greeks for making it through a difficult first phase. The country, she said, now “harbors boundless possibilities still to be exploited.” She announced $139 million in loans to finance small businesses in Greece.
Ms. Merkel noted the Greeks’ personal sacrifices – 27 percent unemployment – but suggested that every country in the eurozone had to go through belt-tightening. “This path could only have been taken because there was solidarity in Europe,” she said.
Paying off the biggest debts in Europe’s most troubled economies will take years. Much depends on whether voters continue to elect leaders who trim spending and help small businesses grow. - (Christian Science Monitor)
Why South China Sea may be world’s next hot spot: Burman | Toronto Star
Last Monday, on China’s first aircraft carrier, the relationship took an unusual, and perhaps promising, turn. As part of his first visit to China, U.S. Defense Secretary Chuck Hagel was invited to be the first foreign visitor to go aboard the aircraft carrier, which China has spent a decade refurbishing. The Liaoning was originally a rundown Soviet-era carrier purchased from Ukraine, but now it is seen as a central part of the expanded Chinese navy.
The last time the Americans came in contact with the Liaoning was in December, early in its trials in the South China Sea, when it nearly collided with a U.S. navy cruiser. Had that happened, it would have been the most serious confrontation between China and the U.S. in years.
At issue for the Americans is China’s claim over islandscontested by Japan and the Philippines — two allies tied by treaty to the U.S.
But there was no sign from China of any interest in a deal: “On this issue, we will make no compromise, no concession — not even a tiny violation is allowed,” warned Chinese Defence Minister Chang Wanquan.
But many observers were not surprised by the heated rhetoric. After all, that is what military people, defending their national interests, are expected to say. What is more significant and encouraging, according to U.S. journalist and foreign affairs analystRobert D. Kaplan,is that they are meeting in the first place, and at a very high level. - (thestar.com)
Here’s a more sanguine view of the recent Hagel China visit. The author points out that the stage is set over water as opposed to land in Europe during the conflicts in the prior century.
China ships in disputed waters: Japan coastguard
Three Chinese government ships have sailed through disputed waters in the East China Sea on Saturday, the Japanese coastguard said.
US Defence Secretary Chuck Hagel held talks with his Japanese counterpart Itsunori Onodera last week and warned China against unilateral action to resolve a territorial dispute with Japan or other Asian countries.
China’s defence minister, defending his country’s claim, said on Tuesday that Beijing would not act first to “stir up troubles” over island disputes with its neighbours.
Meanwhile, a Japanese cabinet minister has visited a controversial war shrine in Tokyo, in a move likely to cause anger in China and South Korea, which see it as a symbol of Japan’s past militarism.
The Minister for Internal Affairs and Communications, Yoshitaka Shindo, paid homage on Saturday morning at the Yasukuni shrine, Jiji Press and the Yomiuri Shimbun said.
China and South Korea see it as a brutal reminder of Tokyo’s imperialist past and wartime aggression, and its failure to repent for its history.
In December, Japanese Prime Minister Shinzo Abe made his first visit as premier to the shrine, which honours Japan’s war dead including several high-level officials executed for war crimes after World War II.
Mr Abe’s visit prompted angry responses from Beijing and Seoul, while the United States said it was “disappointed” by the prime minster’s decision as it would raise regional tensions. - (Australia Network News)
Fitch switches Portugal outlook from 'negative' to 'positive'
Fitch on Friday switched the outlook on Portugal’s BB+ rating from “negative” to “positive”, a month before the eurozone nation exits its international bailout, raising the prospect it may soon rejoin investment-grade ranks.
Fitch said the upgrade to the ratings outlook is justified by Lisbon’s progress in repairing public finances as well as the overall recovery of the economy three years after its EU-IMF bailout.
"Portugal is making good progress in reducing its budget deficit," the ratings agency said in a statement.
The economy took a big step towards emerging from its debt bailout and regaining investor confidence late last month by beating its budget target by a wide margin.
Portugal, still struggling to overcome its debt crisis, to pull away from recession and overcome public anger at tough austerity measures, turned in a budget overshoot equivalent to 4.9 percent of output last year.
That marked a huge reduction from a public deficit of 6.4 percent in 2012.
But despite this marked progress in reducing the annual deficit, the gap between spending and revenues, the public debt of accumulated past deficits rose to 129.0 percent of output last year from 124.1 percent in 2012.
The debt now amounts to 213.63 billion euros ($297 billion), the statistics office INE said.
Portugal is scheduled to exit next month its three-year 78-billion-euro EU-IMF bailout, under which it has been required to enact deep structural reforms to correct public finances and raise efficiency in the economy.
"The slow response of the ratings agencies could still make Portugal’s bailout exit in May more difficult," said Schulz.
The sub-investment grade rating is a key reason Portugal still pays more to borrow than Italy and Spain, and complicates ECB support measures, he added. - (Bangkok Post)
China's U.S. ambassador plays down tensions after Hagel trip
WASHINGTON (Reuters) - China’s ambassador to the United States on Thursday played down the tense exchange this week in Beijing between Defense Secretary Chuck Hagel and his Chinese counterpart and praised the frank talk between the two countries.
Ambassador Cui Tiankai spoke after Hagel’s meeting on Tuesday with Defense Minister Chang Wanquan, who called on the United States to restrain Japan and chided another U.S. ally, the Philippines.
"He had a very substantive and direct exchange with his Chinese counterpart," Cui said. "I think maybe this is not a bad thing. Maybe this is a good thing."
Hagel’s trip to China exposed tensions over its territorial disputes with regional U.S. allies, including the Philippines and Japan. China is at odds with Japan over uninhabited islets in the East China Sea that are administered by Tokyo. China claims most of the South China Sea. The Philippines, Malaysia, Vietnam, Brunei and Taiwan also claim parts of those waters.
Cui, who was China’s ambassador to Japan in 2007-09, said there was no room for concessions on territorial integrity and urged “mutual respect” from Washington over its interests.
"Our relations with Japan are much longer than your relations with Japan," Cui gently chided moderator Stephen Hadley, national security adviser to former President George W. Bush.
Similarly, the ambassador deflected questions about China’s troubled relations with some of its other neighbors: “We have so many neighbors. You only have two.” - (Reuters via Chicago Tribune)
…”maybe it’s a good thing”? Doesn’t inspire much confidence. Tensions remain. What was interesting was the reiteration from China that there is no room for concessions with regards to territorial disputes with Japan.
Big News on one of my macro thesis fronts
Japan starting up the nuclear reactors despite high public opposition. This makes sense given that without home grown nuclear power, the country’s debt dynamic situation becomes extremely precarious. The leadership knows that without nuclear power, Japan could face a financial bond meltdown at some point in the future.
The last article is rather bearish on whether the atomic industry in Japan can pick itself up.
- “A recent Reuters analysis shows as many as two-thirds of the country’s 48 idled nuclear reactors may have to be left closed because of the high cost of further upgrades, local opposition or seismic risks.” - (Reuters)
Philippine, Vietnamese Navies To Unite Against
Philippine navy will soon return to a South China Sea island it lost to Vietnam 40 years ago to drink beer and play volleyball with Vietnamese sailors, symbolising how once-suspicious neighbours are cooperating in the face of China’s assertiveness in disputed waters.
Diplomats and experts describe the nascent partnership as part of a web of evolving relationships across Asia that are being driven by fear of China as well as doubts among some, especially in Japan, over the U.S. commitment to the region.
When U.S. President Barack Obama visits Asia this month he will see signs that once-disparate nations are strategising for the future, even though he will likely seek to shore-up faith in America’s “pivot” back to the region.
Among the new network of ties: growing cooperation between Japan and India; Vietnam courting India and Russia; and Manila and Hanoi, the two capitals most feeling China’s wrath over claims to the potentially energy-rich South China Sea, working more closely together. The Philippines and Vietnam are also talking to Malaysia about China.
"We are seeing a definite trend here, one that is likely to accelerate," said Rory Medcalf, a regional security specialist at Australia’s independent Lowy Institute for International Policy in Sydney.
"It is quite a creative dance as countries hedge and try to cover themselves for multiple possible futures."
I wrote before how a withdrawal of US support from Asia would not be disastrous. In fact, it seems to have had the opposite effect. Countries that didn’t deal with each other are finding a common reason to do so, I’d venture to say that questionable US support has actually increased cooperation/peace in the region.
Nigeria is Africa's biggest economy
Nigeria has “rebased” its gross domestic product (GDP) data, which has pushed it above South Africa as the continent’s biggest economy.
Nigerian GDP now includes previously uncounted industries like telecoms, information technology, music, online sales, airlines, and film production.
GDP for 2013 totalled 80.3 trillion naira (£307.6bn: $509.9bn), the Nigerian statistics office said.
That compares with South Africa’s GDP of $370.3bn at the end of 2013. - (BBC)
Greece five-year bond to raise EUR3 billion; yield at 4.95%
Greece’s first bond sale since its bailout in 2010 will raise 3 billion euros ($4.15 billion) at a yield of 4.95%, according to media reports Thursday, citing people familiar with the matter. The demand came in at more than EUR20 billion, helping push the yield lower than what was expected by Greek officials ahead of the sale. Reuters said on Wednesday Greece initially priced the sale at a yield between 5% and 5.25% and aimed at raising EUR2.5 billion. With the five-year bond sale, Greece returns to the capital markets for the first time since it was bailed out by international lenders in 2010 and agreed to the biggest sovereign-debt restructuring in history in 2012.
This is another feather in the cap for the Eurozone bulls. This event marks the remarkable change in sentiment that has taken place over the past 1.5 years. Investors see the eurozone crisis as past news.
Euro Czar Dijsselbloem: Low Inflation Is Good News If Kept Quiet - Real Time Economics - WSJ
Low inflation in the euro zone is good news, but not if critics keep sounding the alarm about it. That’s the view of a top euro-zone finance official, Jeroen Dijsselbloem….
“What I’m worried about is that if all of us keep talking about and warning about the risk of deflation, it will become a self-fulfilling prophesy,” Mr. Dijsselbloem said. “Because if you keep telling people and investors and companies that there will be a long-term low inflation or even deflation, that could influence their behavior.”
The German leadership question | Economia
Many in the eurozone’s crisis countries complain that the source of their suffering is a rigid economic-austerity regime – including reductions in wages and pensions, tax increases, and soaring unemployment – imposed on them by Germany. Hostility against Germany has reached a level unseen in Europe since the end of World War II
And yet, despite this antagonism, loud calls for Germany to assume “leadership” in Europe can also be heard.
Complaints about the imposition of a “teutonic regime” and appeals for German leadership seem to contradict each other – a kind of continent-wide cognitive dissonance. In fact, the complaints and calls for leadership are mutually reinforcing. The implementation of austerity policies in the periphery has caused these countries to ask for help and request that Germany take the lead by putting more money on the European table.
Nobody would deny that Germany has an interest in preserving the euro. So why shouldn’t it support its partners with financial help to overcome the crisis?
Such support can already be found via the various rescue mechanisms – above all, the European Stability Mechanism and the implicit guarantees of TARGET 2 – that have been erected since the crisis began. But these mechanisms must be distinguished from a regime of more or less automatic, permanent transfers.
As long as a fully-fledged political union remains a vision for the future, fiscal transfers must be legitimised by national parliaments. For now – and probably for a long time to come – the eurozone will continue to be a union of sovereign states, with each country responsible for its own policies and for their outcome. The no-bailout clause that was included in the monetary union’s founding treaty is an indispensable corollary. Eurobonds, for example, would not only create moral hazard; “taxation without representation” would also violate a fundamental tenet of democracy and undermine support for the European idea.
The creation of a European banking union is another area in which misguided calls for solidarity prevail. Establishing a single supervisory authority and a resolution mechanism are valid proposals. But asking others to pay for the legacy of banks’ past irresponsible practices is hard to justify.
What would be the reaction if, say, Italian or Spanish taxpayers were asked to pay for the reckless behavior of the German IKB or HRE banks? Who would not find such a request inappropriate, to say the least? And yet when the bailout is presented the other way around, with German taxpayers asked to backstop reckless Italian or Spanish banks, somehow it is supposed to be an act of solidarity. Legacy problems in national banking systems should be solved at the national level before the banking union moves forward.
Bailing out governments and banks is not the direction in which Germany should lead. If Germany should lead at all, it should do so by providing a model of good economic policies for others to emulate. It should lead by respecting the commitments enshrined in the European treaties.
Walter Hallstein, the first president of the European Commission, repeatedly stressed that the union is based on the principle of a community of nations under the rule of law (Rechtsgemeinschaft). Today, credibility can only be restored if treaties and rules are respected again.
Those who are concerned about permanent German dominance of the European “club” can rest easy. Having emerged from the position of the sick man of Europe only a decade ago, Germany is now willfully, if thoughtlessly, undoing the reforms that had so strengthened its economy. By reinforcing already-strict labour-market regulation, pursuing a misguided energy policy, and reversing pension reform, Germany is undermining its current economic position and will move in the direction of problem countries.
This regression will take time, but it will happen. Accordingly, calls for German leadership will disappear and its strained public finances will suppress requests for financial transfers. One wonders how the discussion about “leadership” for Europe will look then? - (Project Syndicate via Economia)