Roberto Abraham Scaruffi

Monday 24 August 2015

The European Union Times



Posted: 23 Aug 2015 03:38 PM PDT

Beijing’s depreciation of the yuan in mid-August has triggered a wave of copycat moves from other countries and falling values of currencies. Is this a new currency clash, or is each case specific?
What happened in China?
In three consecutive days last week, the People’s Bank of China devalued the national currency, with a 4.4 percent overall depreciation. The step was intended to revive exports, but caused a domino effect leading to panic and fluctuations in equity markets around the globe.
As a result, several countries followed China’s lead and devalued national currencies to keep pace with Beijing and support their exports; others are victims of falling commodity prices, while smaller countries are affected by their bigger neighbors.
Kazakh tenge
The worst case is the Kazakh tenge that saw a 23 percent loss on Thursday after President Nursultan Nazarbayev decided to allow a freely floating exchange rate. The government of Central Asia’s biggest crude exporter is trying to manage the falling crude prices, and the economic weakness of its top trading partners – China and Russia.
Vietnamese dong
Hanoi devalued the dong for the third time this year by 1 percent on Wednesday to 21,890 dong a dollar, which is another mark that the Asian exchange rates are now under extreme pressure.
“The dong will have enough room to fluctuate more flexibly to cope with negative impacts from international and domestic markets, not only from now until the rest of the year but also in the early months of 2016,” said a statement from the central bank.
Malaysian ringgit
The currency dropped to a 17-year low on Thursday and foreign exchange reserves sank below the $100 billion point for the first time in five years.
Turkish lira
The Turkish currency is one of the world’s worst-performers since the Chinese devaluation. The Turkish lira has lost more than five percent against the dollar after Beijing’s move, almost nine percent in a month and more than 25 percent in a year.
Turkey’s ruling Justice and Development Party (AKP) won elections on June 7 but for the first time since 2002, lost the parliamentary majority, and will not be able to form a government alone. Leading parties in Turkey have not yet been able to agree on forming a coalition, which weakens the lira.
Saudi Arabia’s riyal
Saudi Arabia has already spent $65 billion from its reserves since the oil price decline began, down from a maximum $737 billion in August 2014. However, the remaining $672 billion is still enough to keep the riyal stable. At the same time, according to Bloomberg, the forward contracts used by traders to bet on or hedge against future price moves – are at the lowest level since 2003, which implies about a one percent fall in the national currency over the next year.
Who else?
Among the other potential victims of the current market situation are Kyrgyzstan’s som, Tajikistan’s somoni and Turkmenistan’s manat. All of these Asian former-Soviet countries have close economic relations with Russia, China and Kazakhstan which makes it highly probable they will be damaged as well.
Another country from the Russia-led Eurasian Economic Union, Armenia is also hit by the ruble’s depreciation. Armenia’s dram has lost 15 percent in the past 12 months and it’s not the end.
Belarus, one Russia’s closest allies, has also seen its national currency plummet. The Belarusian ruble lost some 27 percent in a year and it may still not have reached rock bottom.
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Posted: 23 Aug 2015 03:22 PM PDT

As much as the financiers on Wall Street and the officials at the Fed would like the party to keep going, it looks it’s finally about to stop.
Years of bailouts and monetary expansion have created one of the most inflated and artificial economic booms in history, and now it appears that this global economic bubble is deflating.
Markets across the board are melting down as we speak, and the financial crash that supposedly “fringe” analysts have been predicting since 2008, is finally upon us. Take a look at what’s going down right now.
  • The Dow has fallen 1300 points from its peak. On Friday alone, it fell by 530 points, making it the 9th worst stock market crash in US history.
  • The Shanghai composite fell by more than 11% this week. All told, China’s stock market has lost a third of its value since its previous peak, and the only thing holding it up is their government’s intervention. It lost 4% of its value on Friday after it was revealed that their manufacturing activity had reached a 77 month low.
  • 400 of the world’s richest people lost a total of $182 billion this week, amounting to 6.3% of their collective wealth. When the people who benefit the most from inflated markets are getting hurt, you know that the bubble is bursting.
  • The dollar’s rally may be finally nearing its end. Its value has fallen slightly, but consistently for the past 2 weeks.
  • Commodities have fallen to a 13 year low. The price of copper has reached a 6 year low while oil has suffered its longest decline since 1986.
That last one is very telling. You can always tell when the global economy is in bad shape based on the value of various commodities. It’s one of the strongest indicators for an economy, since it reveals how many real, tangible goods are being produced. Curiously, many of these commodities have been falling in value throughout the supposed recovery that we’ve been in since 2009.
The only commodity that is doing well right now is gold, which has reached a six week high, and just had its best week since last January. Given the safe haven status that gold holds, it’s clear now that confidence in the US dollar and the global economy, is slowly slipping.
With all of this information at hand, it would be hard to deny that we may be finally witnessing the same kind of crash that we endured in 2008. Anyone who thought that we’ve been in a genuine recovery for the past 6 years, was foolish. But anyone who thinks that global markets will simply bounce back from what has occurred over the past few weeks, is downright crazy.
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Posted: 23 Aug 2015 03:09 PM PDT

As Donald Trump appears to have achieved dominance among candidates in the election for the US Presidency, experts are probing the reasons for the real-estate mogul’s popularity.
“Traditionally Americans try not to choose politicians with extreme views – those, who are expressing some extraordinary opinions but nowadays the situation is rapidly changing,” Nikita Zagladin, professor of Center for Comparative Socio-Economic and Socio-Political Studies, told Radio Sputnik.
“Trump is on the rise and becoming more popular among the electorate because he is saying things aloud that many Americans keep in mind, but don’t dare to speak out openly because of political correctness.”
Donald Trump’s soaring ratings among presidential candidates has put to shame sceptics who believed that the billionaire’s participation in the 2016 elections is a phenomenon similar to some kind of a TV reality show. Zagladin believes that the key reason for Trump’s success is that the real-estate mogul managed to draw broad masses of US voters.
“He speaks from the position of ordinary Americans and people love it,” Zagladin said.
US publicist Matt Purple pointed out that despite his racist claims, Trump has come up with the most “comprehensive” immigration reform plan among all presidential candidates ever. For instance, Trump is reacting to many Americans’ concern over rising numbers of illegal immigrants leading to reductions in wages for native-born US residents, a problem that has yet to be solved.
Moreover, Trump has stepped out with criticism of controversial initiatives such as the creation of free trade zones and government policy of supporting big businesses rather than taking care of ordinary Americans, according to Purple.
The tycoon has also distinguished himself by proposing better relations with Russia, reflecting the views of many Americans, RT columnist Danielle Ryan believes.
“Indeed, it should be seen as a welcome and positive thing if a candidate for the US presidency wants to restore good relations with Moscow rather than exacerbate tensions,” Ryan wrote.
“Ask Donald Trump about any problem on the face of the earth and he’ll tell you he could fix it without too much bother.”
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Posted: 23 Aug 2015 03:02 PM PDT

Fresh clashes have erupted between police and anti-refugee demonstrators in eastern Germany a day after similar scuffles left dozens injured there.
On Saturday, anti-immigration protesters took to the streets in the eastern town of Heidenau, to express their anger at the use of a former DIY superstore to house a group of illegal immigrants.
The protest turned violent as police tried to disperse the demonstrators who were wielding fire extinguishers and hurling stones.
The rally was held on the same day that some 93 refugees arrived in buses at the new temporary accommodation in Heidenau.
Security forces, however, managed to bring the situation under control, escorting the asylum seekers’ buses to the temporary accommodation.
This is while more buses are expected to drop off up to 250 asylum seekers at the place.
A similar Friday protest in Heidenau called by the far-right National Democratic Party of Germany also ended in clashes, leaving at least 31 police officers injured.
In a statement issued on Saturday, German Justice Minister Heiko Maas condemned the violence that broke out at Friday’s anti-refugee demonstration, saying the country “must not tolerate” those with such racist views.
“We must pursue this with the full force of the rule of law,” said Maas, who also posted a similar tweet reading, “There can be no tolerance for xenophobia or racism.”
In recent years, Germany has witnessed a rise in violent attacks targeting refugee shelters.
This is while, according to German Interior Minister Thomas de Maiziere, the European country is bracing for up to 800,000 asylum seekers this year.
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Posted: 23 Aug 2015 02:47 PM PDT

At least 5,000 illegal immigrants arrived in Serbia on Sunday on a journey further west, after neighboring Macedonia’s attempts to forcefully prevent the refugee flow failed. Concerned European leaders have made calls to “radically change” migrant policies, before the EU “loses its soul.”
Thousands of refugees – mainly from war-torn Syria, as well as from Africa and Asia – traveled towards Serbia this weekend, after having broken through the Greek-Macedonian border in a bid to make it further into the EU. While Macedonian police initially resisted the flow, with stun grenades and tear gas having been used against desperate migrants, the country has then decided to transfer migrants to Serbia.
On Sunday, border and riot police in the Macedonian city of Gevgelija helped the refugees onto trains and buses. Extra transport was ordered to take migrants to Serbia, with huge queues of people waiting for their documents to get processed.
“It’s been madness throughout the night with people everywhere, buses coming and going and taxis arriving from other towns,” a taxi driver told AFP.
With the flow continuing at a steady pace in Greece, which is setting up boat transits from its islands to the mainland for dozens of thousands of people, and Macedonia having cleared the backlog, thousands arrived in Serbia overnight.
“The Macedonian police told us ‘Welcome to Macedonia; trains and buses are waiting for you’,” the surprised Abdullah Bilal from Syria’s Aleppo told Reuters.
More than 5,000 have entered the country to transit north before they cross by foot into Hungary and Europe’s borderless Schengen zone, according to Serbian Defense Minister Bratislav Gasic. “We expect the wave in the next day or two to be of a similar intensity,” the official said, as cited by Reuters. Another Serbian government official who declined to be named said it was “the biggest number in one day so far.”
Over 100,000 migrants have crossed into the EU over the past month, with the record influx and the latest developments on the borders near western Europe having left EU officials even more frustrated.
The refugee crisis has been named Germany’s “biggest challenge since reunification” by its Vice Chancellor Sigmar Gabriel on Sunday, Germany’s branch of The Local reported. European law-makers should “do much more” and “radically change its policies,” Gabriel said in an interview with Germany’s ARD public broadcaster.
The Italian Foreign Minister went along the same line on Sunday, having said the “soul” of the EU with the free movement of people across the bloc is under threat following the situation at the Greece-Macedonia border.
“On immigration, Europe is in danger of displaying the worst of itself: selfishness, haphazard decision-making and rows between member states,” minister Paolo Gentiloni told Il Messaggero newspaper, as quoted by The Local. “Today it is on this issue that Europe will either rediscover its soul or lose it for good,” the official added, saying that the free circulation of people in the EU was “at risk.”
Greece and Macedonia are just some of the countries that lie on the refugees’ path after fleeing war, hunger and poverty in their native lands. Macedonia has been asking the EU to step up its own efforts and criticized its neighbor Greece for dealing with the refugee crisis in a way that made the migration pace over to its borders completely incompatible with processing abilities.
Serbia is already struggling with the unprecedented inflow – its own economy not facing the best of times, and it has hastily set up refugee centers which have quickly reached full capacity . Meanwhile, Slovakia has said it would prefer to accept Christian refugees as part of a European plan to resettle people, and Hungary has decided to build a barbed wire fence encircling its border to prevent any unauthorized migration.
The migrant crisis has been eclipsing all other topics on the Brussels agenda for months. While migrants continue to arrive, EU leaders have admitted that the crisis is a real elephant in the room, testing the bloc’s unity.
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