Future historians of war...

...will find this current epoch a curious one with respect to declarations and the communication of intentions...

Two days after he made the Obama administration’s definitive case for attacking Syria, Secretary of State John Kerry will make the case for asking for congressional permission on the Sunday talk shows, a State Department aide said Saturday.

Syria, Russia, and the U.S.

Let us not forget that the Queen on the board for Russia is Georgia and the pipeline.  This Syrian conflict and resultant clash of weapons systems between Russia and the U.S. is a sideshow.

The E.U. is taking orders from Washington as well it seems.

A showdown with Gazprom risks inflaming relations with Russia just as Putin prepares to host a meeting of leaders from the Group of 20 nations next month in St. Petersburg. Russian Foreign Minister Sergei Lavrov warned this month that if the European Union imposes antitrust sanctions against Gazprom, “it will be difficult for the company to operate in markets where it faces open discrimination.”

The “case has the potential to seriously disturb EU-Russia relations,” said Thijs Van de Graaf, a researcher at the Ghent Institute for International Studies in Belgium. “Gazprom is not a normal company in Russia. It does not only give account to its shareholders but also serves political goals.”

Propaganda

One of the beautiful things about propaganda is enacting policies that would, by use of its original appellation, be anathema.

One of the current examples of this is the usage of "macroprudential policies" that would ostensibly smooth out economic downturns and offer a general panacea to market distortions.  These policies would be carried out by responsible and learned technocrats who understand the massively complex system that is the Global Economy.

But of course these "macroprudential measures are simply re-worded polices for tried and true protectionism in the form of capital controls, currency management, control and Executive Power of Foreign Subsidiaries, and a myriad other policies that States have used since complex societies formed.  The word "macroprudential" itself elicits an atmosphere of control, wisdom, and patience.  Quite brilliant.

I have stated many times on this blog that the Economics profession has devolved into a sort of apologetic faction for the state.  The State declares its intentions, then receives arguments from members of its court.  It performs this role extremely well, and provides propaganda for the State that is well-reasoned and compelling.

And so This Paper making the rounds is having the desired effect.  And of course, would not be presented if it had not been selected to further the current Agenda:  That is, by centralizing more control of global GDP among the G8 states.

A quick question for my readers:  what % of G20 GDP is controlled directly or indirectly by their respective States?  Is the rate of change in that number increasing or decreasing?

The Paper Dragon

I have written extensively on this blog regarding global investment preferences and the risk/return matrix specifically between the U.S. and China.  Specifically here, here, here, and here.

So it will be no surprise to readers here that the preferred zone of asset placement is the U.S., and China is becoming more marginalized.  The totality of all the literature anointing China as the new world hyperpower can now be safely confined to the dustbin of history.

U.S. GDP will continue to stagnate unless additional deficit spending is injected into the system.  Where will all those export from China go?  What will the accounting treatment for the warehouses full of inventory and high-rises with no-one living in them be?  These are all things we have discussed here before.  And there is a very high and rising probability it will not end well.

But hey...they were useful, were they not?

The Shanghai Composite Index (SHCOMP), which doubled in 10 months through August 2009 as the government poured $652 billion of stimulus into building roads, railways and housing, has tumbled 43 percent from its high, destroying $748 billion in market value. Only Greece’s ASE Index (ASE) has fallen more in percentage terms. The Standard & Poor’s 500 Index, the benchmark gauge of American equity, erased all of the losses from the worst recession since the Great Depression and has gained 68 percent since the China peak, reaching a record this month.

When pigs fly.

This "study" of opinion does what exactly?  It certainly has no effect on reality.  No mention of the member countries of this survey...or what six countries believed the U.S. would "remain on top".

I have no idea what this study is supposed to accomplish.

A new Pew Research Center survey of 38,000 people in 39 countries found the widespread belief that China is well on its way.

Overall, a majority or plurality of respondents in only six of the countries surveyed believe the U.S. will remain on top.

"Publics around the world believe the global balance of power is shifting," Pew wrote. "China's economic power is on the rise, and many think it will eventually supplant the United States as the world's dominant superpower."

In both the United States and China, an increasing number of respondents agree with this thesis.

It is truly fitting...

...that the country most responsible for the Euro project (when it suited their interests) should now speak of the first country to secede (when it suites their interests) from this silly experiment.

Mrs Le Pen said her first order of business on setting foot in the Elysee Palace will be to announce a referendum on EU membership, "rendez vous" one year later. "I will negotiate over the points on which there can be no compromise. If the result is inadequate, I will call for withdrawal," she said.

The real news...

...regarding the below snippet is not so much the financial fall-out.  The real news here is WHERE the bonds were issued and under what LAW they are governed.  Bonds issued in the U.S. and subject to U.S. jurisdiction are good substitutes for Aid packages (that are subject to various political tendrils).  Bonds issued in London and subject to U.K. law are also good substitutes for direct Aid packages given the similarities of U.K. and U.S. default, liquidation, and Bankruptcy law.

The point being that Western powers have wrestled a massive portion of control away from China and other waning interests in Sub-Saharan Africa...once again outmaneuvered by its more nimble, open, and adaptable opponents.

In purely financial terms, these Bonds are extremely risky...but the The West (primarily the U.S.) is the House, and The House always wins.

Full article here.  And its once again notable that Economists always see events like these in purely economic terms.

IN RECENT years, a growing number of African governments have issued eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment.

Taking the lead in October 2007, Ghana earned the distinction of being the first sub-Saharan country other than South Africa to issue bonds in 30 years. This sparked a sovereign borrowing spree in the region. Nine other countries followed suit. By February, these 10 African economies had collectively raised $8.1bn from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. These countries’ existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.

Sovereign bonds carry higher borrowing costs than concessional debt does. So why are developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable? One explanation is that this is just another manifestation of investors’ search for yield. Moreover, recent analyses have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs. Moreover, the conditionality and monitoring associated with the multilateral institutions make them less attractive sources of financing.