Email From US Special Forces Veteran; 500 US Blackwater Mercenaries in Ukraine? US Backs Ukrainian Neo-Nazis

US Special Forces in Ukraine?

In response to US Special Forces in Mariupol? I received an interesting email from "Dan" a 23-year Army veteran with four years in special services.

Dan writes ...

I was a soldier in the US Army for 23 years including four years in Special forces Stationed in Germany. I would agree that there is a strong likelihood that this is a US Special Forces soldier.

I can tell you that we were issued AK 74s and would use them on a mission such as this. That is about all I would really want to say at this point.

It is obvious to me that our strategy is the Balkanization of the various hot spots in the world, Syria, Ukraine, Iraq and so forth.

You can call me if you want I’d be happy to talk with you. All the Best

I did call Dan. We chatted a bit. He pointed out special fireproof gloves on the soldier.

I asked him about the rifles. Dan had high praise for them. "Exceptional" was the exact word. They  are widely distributed to special forces units in Europe.

Dan was "disgusted" with US operations stirring up trouble in numerous hotspots including Ukraine.

More English Speaking Soldiers in Mariupol

Over the weekend more videos of English speaking soldiers in Mariupol turned up. Around the 14:40 mark, talk is in English. This time it sounds British rather than US.



link if video does not play: Militants Fired On Mariupol

Translation of video title from Ukrainian

24.01 2015 бойовики обстріляли Маріуполь. Не дивитись людям зі слабкими нервами

24.01 2015 Militants fired on Mariupol. Not for the faint of heart.

Jacob Dreizin comments: "There is absolutely no way that any US or European company could send mercenaries to Mariupol without the knowledge and approval (tacitly or explicitly) of its host government.  So whether these are soldiers or "dogs of war" (mercenaries), it is a deliberate Western presence in Mariupol."

$100 Bill

Near the beginning of the video, there’s a $100 dollar bill (or replica) hanging from the rear view mirror. What’s that all about? [See Addendum for Explanation]





Brit Identified

I wrote the above yesterday. My accent detection appears to be correct.

The Daily Lede reports English Speaking Mercenary in Mariupol ID’d as Brit Leon Swampy From London, England.



I stopped the above video right at the 14:33 mark. Seems like a match.



AZOV Battalion Emblem



The preceding video was produced by AZOV. Their insignia is above. You can see it on soldier patches in the video.

Compare AZOV's emblem with the emblem of the Nazi 2nd SS Panzer Division Das Reich



AZOV Commander 

AZOV commander is Andriy Biletsy. Headquarters are in Mariupol.

Wikipedia has this to say about the AZOV Battalion.

Troops of the Azov Battalion use the Social-National Assembly (SNA) logo, an inverted Wolfsangel, a widely used symbol in Nazi Germany, on their banner, and some members are openly white supremacists or anti-Semites

In a 2010 essay, Biletsky set forth the ideology of the Social-National Assembly. "From the mass of individuals must arise the Nation; and from weak modern man, Superman... The historic mission of our Nation in this watershed century is to lead the White Races of the world in the final crusade for their survival: a crusade against semite-led subhumanity... The task of the present generation is to create a Third Empire -- Great Ukraine... If we are strong, we take what is ours by right and even more; we will build a Superpower-Empire..."

Foreign membership

In mid-July 2014, the BBC reported that the battalion had recruited the former Swedish Army and Swedish Home Guard sniper Mikael Skillt. Skillt, a Swedish white supremacist, joined the Azov Battalion for ideological reasons.

Ukrainian political scientist Anton Shekhotsov told the Swedes that four Swedish neo-Nazis were fighting with Azov, while the Swedish national police confirmed "several". Azov's leader, Biletsky, states that he has received recruits from Ireland, Italy, Greece and Scandinavia.

The Russian and Ukrainian security expert at New York University, Mark Galeotti, has described groups like the Azov Battalion as magnets attracting violent, fringe elements from around and outside Ukraine, warning that they will continue to play an outsized role in Ukrainian affairs after the war.

Azov with "SS" and Swastikas on Helmets

A news broadcast by German ZDF station on September 8 showed soldiers of the Ukraine Azov Battalion in Mariupol with Nazi symbols on their helmets.



Link if video does not play: AZOV Helmet Swastikas

"Ukraine’s Neo-Nazis Demand Respect"

Robert Parry, the investigative reporter who broke many of the Iran-Contra stories for the Associated Press and Newsweek in the 1980s writes "Ukraine’s Neo-Nazis Demand Respect".

Historians blame the UIA and other Ukrainian fascist forces for the extermination of thousands of Poles and Jews during World War II as these right-wing Ukrainian paramilitaries sided with the German Nazis in their fight against the Soviet Union’s Red Army. Svoboda and the Right Sektor have elevated UIA leader Stepan Bandera to the level of a Ukrainian national hero.

But Svoboda and Right Sektor activists are not just neo-Nazi street protesters. They were key figures in last February’s violent uprising that overthrew elected President Viktor Yanukovych and established a coup regime that the U.S. State Department quickly recognized as “legitimate.” Many far-right militants have since been incorporated into the Ukrainian military in its fight to crush resistance to the coup regime from ethnic Russians in Ukraine’s east.

Though played down by the Western press, the neo-Nazi affiliations of these militants have occasionally popped up in news stories, including references to displays of Nazi insignias, but usually these citations are mentioned only in passing or are confined to the last few paragraphs of lengthy stories or are dismissed as “Russian propaganda.”

But this neo-Nazi reality continues to be an inconvenient truth about the U.S.-backed coup regime that seized power in Kiev with the overthrow of Yanukovych on Feb. 22. Several government ministries, including national security, were given to these far-right elements in recognition of their key role in the putsch that forced members of Yanukovych’s government to flee for their lives.

German Consultant Says 500 Blackwater US Mercenaries in Ukraine

Please consider this German news story from January 23, 2015: 500 US Blackwater Mercenaries in Ukraine

German political and business consultant Michael Lüders in an interview with the TV channel Phoenix made this allegation: There are 500 mercenaries in Ukraine, all trained experts, requisitioned in cooperation between the United States and Ukraine.

So we not only have Russians who are fighting on the side of the separatists, but also US mercenaries on the part of the government. This is a dangerous trend, and an unhealthy development. For it is quite clear that an escalation is possible. This conflict can spiral out of control when the Russian side or when the Ukrainian side believes there is a certain winner.

The security firm Blackwater, also called Academi, is known for its top-secret orders in war zones. The units are perfectly trained and mostly ex-US military with high-level combat experience. At the same time they are themselves and their corporate boardroom closely intertwined with US military circles and even the presidential administration.

If you can understand German, here is a link to the Michael Lüders Interview on the German Phoenix TV station.

Ukrainian Foreign Legion

Yesterday, the Financial Time reported Nato Accuses Russia Over Worsening Ukrainian Crisis

Russian president Vladimir Putin responded "We often talk about the Ukrainian army . . . In fact this is not an army, it is a foreign legion, in this case a Nato foreign legion which, of course, does not follow the national interests of Ukraine."

Ukrainian Military Transport Loading Tanks



I am told this is a recent (within past few days) image of the Ukrainian "Antonov Airlines" An-225 cargo plane picking up surplus Soviet-era tanks at the Prague airport for transfer to Ukrainian forces.

I cannot verify the date, location, or source of the above image, but certainly the plane is correct. It's the only one ever built. Anyone in Prague care to confirm?

[Some in the Czech Republic did confirm, and flight-tracker also verified, the plane was headed to Africa. See addendum]

From Wikipedia ...

The An-225's name, Mriya (Мрiя) means "Dream" (Inspiration) in Ukrainian. It is powered by six turbofan engines and is the longest and heaviest airplane ever built, with a maximum takeoff weight of 640 tonnes. It also has the largest wingspan of any aircraft in operational service. The first and only built has the Ukrainian civil registration UR-82060. The airlifter holds the absolute world records for an airlifted single item payload of 189,980 kilograms (418,834 pounds).

Disinformation and Outright Lies

Without a doubt, some Russian-made military equipment is in Ukraine in rebel hands. Ukraine also has Russian-made equipment. Some of the rebel equipment was captured from Ukraine, and some came in from Russia.

How much military equipment is directly from Russia since the start of the war? I do not know.

I do know that Ukraine's claim the rebels have 500 Russian tanks is ridiculous. You cannot hide 500 tanks. Claims of 15,000 Russian regular soldiers in Ukraine are also ridiculous.

How many are there? I don't know. Could there be 500 Russian "trainers"? Sure, why not?

The US has "trainers" in Ukraine as well. How many? I don't know that either. Could it be as many as 500? Sure? Why not?

If you wish to change the word "trainers" to sponsored "mercenaries", fine, as long as you do it for both sides.

There are many Russians living in Ukraine. That does not make them "Russian regulars", no matter how many times it is presented that way by Western media.

Blowback

I wrote about blowback recently in Russia Under Attack: Letter from CEO of Genoil to CEO of JPMorgan Chase on US Foreign Policy Blowback.

If you missed it, please take a look.

The Guardian proposes (and I agree) Wrecking Russia’s Economy Could be a Disaster for the West.

"It’s sheer folly to hope that the country is destabilised and Vladimir Putin overthrown. We’ve no idea what the outcome would be" says Guardian author Angus Roxburgh.

An Incomplete History of US Foreign Policy Disasters

• War reparations imposed by the allies gave way to German hyperinflation and the rise of Hitler.
• In 1953 the US and UK orchestrated the Iranian coup d'état in an operation called "Operation Boot" in the UK and the "TPAJAX Project" in the US. This in turn led to the US backed Shah of Iran overthrown in 1979. In August 2013, 60 years after, the American Central Intelligence Agency (CIA) admitted that it was involved in both the planning and the execution of the coup, including the bribing of Iranian politicians, security and army high-ranking officials, as well as pro-coup propaganda. The CIA is quoted acknowledging the coup was carried out "under CIA direction" and "as an act of U.S. foreign policy, conceived and approved at the highest levels of government."
• The War in Vietnam started with an outright lie from president Lyndon B. Johnson regarding the Gulf of Tonkin Incident. A document declassified in 2005 shows the US fired first, on North Vietnam. In a second episode, the US fired on "Tonkin ghosts" (false radar images) and not actual torpedo boats as claimed.
• It's pretty clear the US helped foment the overthrow of Ukraine's president Viktor Yanukovych, but the US will probably will not admit that for another 30 years.
• Bush's lies led us to invade Iraq with disastrous consequences including the evolution of ISIS.
• Finally, Bin Laden's number one reason for the attack on the US was because the US had troops on sacred Arab soil.

Avoiding the Mess

Why are we in Ukraine at all? The answer is we backed a corrupt pack of neo-Nazis that helped overthrow a government the US decided was too friendly to Russia.

When we did not like the blowback, we put sanctions on Russia. And those sanctions harm Europe as much as Russia.

None of this means one has to like Putin. I don't, but I get accused of it, simply because I look at both sides of the story while most believe lies spoon-fed to them by Western media.

All we had to do to avoid this mess was not get involved in the overthrow, then had it happened anyway, encouraged a solution at the ballot box rather than siding with the new corrupt regime.

No Cost to Great

I have a very close friend who thinks this "Russian invasion cannot be allowed to stand at any cost".

Such ideology sounds like the discredited Vietnam War "domino" theory all over again. My friend was against that war, but fails to see this is more of the same "last stand" nonsense.

Note that "any cost" might mean outright war with nuclear-armed Russia over a meaningless patch of land. How asinine is that?

Ironies Abound

The first irony is that Ukraine is not really a single country in the first place. Its boundaries were arbitrarily created with no regard to religion, culture, and language.

A natural split that could have and should have been decided by vote (if only the US went along), is now being decided by war. Supposedly, we need to put "humpty dumpty" back together again at any cost, presumably even nuclear war.

For what?

Putin is not Hitler attempting to conquer the world with a "final solution". Rather Russia has genuine fears and concerns about NATO on its doorstep. Russia has been invaded multiple times by other European countries.

And the second major irony of it all is the US openly supports a bunch of white supremacist neo-Nazis whose leader stated in 2010 "The historic mission of our Nation in this watershed century is to lead the White Races of the world in the final crusade for their survival: a crusade against semite-led subhumanity."

Ukraine Freedom Act

In December, President Obama signed the Ukraine Freedom Support Act giving Ukraine $350 million.

Meet Your US-Backed Neo-Nazis




Here is the source of the above AZOV image.

The site Ukraine at War claims the flag was edited in. I blew the image up 400% looking for artifacts around the flag and the hand holding it. If it was edited in, then it was a professional job.

The image appears on the website of Oleg Pyenya (a person in the picture). Oleg has many pictures giving the Nazi salute (and he is not even the one giving the Nazi salute in the picture!)

Oleg is the guy holding the Nazi flag with his fingers. I believe there is roughly a zero percent likelihood that Oleg or anyone in his group was capable of perfect Photoshop editing. Somehow we are supposed to believe Russia did, gave it to Oleg, then he placed it on his site.

US Hypocrisy

Fake or not, it is 100% clear what AZOV commander, Andriy Biletsy, and his group of thugs stands for. Also it's important to note that Biletsy has been commended and awarded by Ukrainian president Petro Poroshenko.

Thus, it's equally clear that your tax dollars support neo-Nazis and white-supremists in yet another example of US hypocrisy and the idiocy of the policy "the enemy of my enemy is my friend".

Addendum:

We have confirmed via flight tracker and other sources that the Ukrainian "Antonov Airlines" An-225 cargo plane picking up surplus Soviet-era tanks was headed to Africa, not Ukraine. The loading airport was not Prague, but rather Ostrava, also in the Czech Republic. Secondly, I have been informed the $100 bill is simply an air freshener. However, that says something as well. Finally, neither of these corrections subtracts from the overall message. I have a policy of making corrections as warranted.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Swiss Franc Yield Curve Negative for 12 Years; Bond Crash - Austrian Bank Raiffeisen; Another One Bites the Dust

The casualties continue to pile up in the wake of the Swiss National Bank dropping its peg to the euro.

(See Rabbit Hole Intervention Fails: Wild Moves in Swiss Franc as Switzerland Abandons Euro Peg; Morals of the Story).

The first moral of the story was "Don't borrow money in other currencies, especially long-term mortgages."

The same applies to lenders. And banks that lent money in unhedged Swiss francs to customers in Poland, Hungary or elsewhere now find collection difficult.

Austrian bank Raiffeisen is in deep trouble doing just that.

Austrian Bank Raiffeisen's Bonds Crash

Bloomberg reports Raiffeisen Debt Signaling Distress as Currency Woes Mount

Raiffeisen Bank International AG (RBI)’s junior bonds slumped to levels typically viewed as distressed after gains in the Swiss franc added to woes triggered by the tumble in the Russian and Ukrainian currencies.

Subordinated bonds sold by the Vienna-based lender slid as low as 63.4 cents on the euro, with yields of as much as 10 percent, after trading at 91 cents at the start of December, according to data compiled by Bloomberg.

Investors are concerned because European Union rules forcing losses on junior bondholders before banks can get state aid came into force in Austria on Jan. 1. The government has injected about 8.1 billion euros into three banks in the past six years and guarantees on bonds of stricken Hypo Alpe Adria Bank were revoked to avoid a taxpayer-funded bailout.

Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moody’s Investors Service. The largest part of these are in Poland, where the franc has appreciated 17 percent against the zloty since Jan. 14, threatening to push up defaults on the bank’s 2.9 billion euros of mortgages in the Swiss currency.

Ruble Losses

Interestingly, Raiffeisen is also the third-biggest foreign bank in Russia after Societe Generale SA  and UniCredit SpA.

Losses on the Ruble don't exactly help either to say the least.

Swiss Franc Yield Curve



Privelege of Lending

In Switzerland, you can pay the Swiss government for the privilege of lending to it for any time period up to 12 years.

Swiss 3-month bonds yield -1.30%. Two year bonds yield -1% or so. Amazing.

Chart courtesy of Bloomberg and Saxo Bank economist Steen Jakobsen.

Morals of the Story Recap

1. Don't borrow (or lend) money in other currencies, especially long-term mortgages.
2. Don't expect currency interventions to work forever.
3. Don't believe statements made by central bankers. They are not the economic wizards they are made out to be, and they often lie when it suits their purpose.
4. It only takes one wrong macro bet with leverage to make a fortune or wipe you out.
5. When you are speculating with other people's money, especially when you take in a 20% performance fee, there is a huge incentive to make leveraged bets.

Another One Bites the Dust

In honor of all those who were wiped out (or nearly so) in the peg removal, I offer this musical tribute.



Link if video does not play: Queen - Another One Bites the Dust

For further discussion, please see ....

• It Only Takes One: Hedge Fund Manager Who Survived Five Debt Crises Wiped Out Overnight on Swiss Franc
 
• Who Won?: Swiss Peg Removal: Did Anyone Win?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Self-Driving "Fully Automated" Vehicles on German Autobahn; Supply Chain Math; Uber and Khan Academy

Don't worry taxi drivers, this is only a test: Self-driving cars to hit German Autobahn.

A section of the A9 Autobahn in Bavaria will be converted into a test route for self-driving cars, Transport Minister Alexander Dobrindt said on Monday.

"We will set up a test stretch on the A9 Autobahn" Dobrindt told the Frankfurter Allgemeine Zeitung in an interview, adding that the first steps towards the "Digital Testing Ground Autobahn" project would be taken this year.

Under Dobrindt's plan, the upgraded road will offer infrastructure allowing the cars to communicate with the road and with other vehicles around them.

"Cars with assisted driving and later fully-automated cars will be able to drive there", Dobrindt said.

"The German car industry will also be able to be world leaders in digital cars".

He added that "German manufacturers won't rely on Google" - the current leader in the field – to produce their own self-driving vehicles.

Cars, Trucks, Taxis

People will not give up their cars. But who needs truck drivers? And who needs taxi drivers?

I suspect trucking will be the first industry to go mostly driverless.

The Last Mile

Many claim trucks cannot load or unload themselves. Others argue trucks cannot maneuver around cities. Let's assume those objections are true whether they are or not.

Here's the simple solution as I have proposed before: Nothing stops a trucking company from having distribution facilities right off an interstate near major cities where local drivers deliver the goods the last mile.

Why can't all but the last few miles be driverless even if a skilled driver is needed some step of the way for safety reasons?

Supply Chain Math

SupplyChain247 reports Fuel Dip “Savings” Offset By Surge in Costs for Drivers, Equipment, and Healthcare.

Shippers negotiating with carriers over 2015 freight rates ought not be swayed by the dramatic lowering of diesel fuel costs into believing their carriers’ overall cost of doing business are lessening. In fact, they are rising.

A new report by the American Transportation Research Institute (ATRI), an arm of the American Trucking Associations, confirms what most trucking executives have been saying publicly for years: trucking costs are rising, with some components increasing sharply.

“The cost of finding, recruiting, training and keeping drivers is steadily rising,” Shevell says. “Equipment costs are through the roof. A new Class 8 truck costs about $135,000. Tires, insurance, terminal costs have all risen substantially. Plus, we’re hit with rising health care costs for our people.”

The ATRI study, “Analysis of the Operational Costs of Trucking,” has been tracking truckers’ costs annually since 2008. It is derived directly from carriers’ financial and operational data and provides a vital benchmarking tool for both carriers and shippers.

It found the average marginal cost per mile was $1.68 per mile in 2013. That was a 3 percent increase over the previous year. That compared with $1.45 per mile in 2009, the start of the recession for the trucking industry.

The single biggest cost driver was drivers, according to ATRI. Average driver wage per mile was 44 cents in 2013, up from 42 cents the previous year. The average truck driver benefit cost rose a penny to 13 cents per mile, according to the study.

That was largely caused by driver pay and benefit increases necessary to attract and retain drivers in the current tight labor market for truck drivers, the study concluded.

All Commercial Driving Will Soon Be Local

Supply chain reported a shortage of 30,000 drivers.

In a few years, I suggest there is going to be little need for long-haul drivers at all. Nearly all commercial driving will be local.

What About Uber?

The taxi driving company Uber has been banned in many places. I started accumulating all sorts of links many months ago. I collected well over 20. Here are a few of them.

• Germany: Car sharing service Uber banned in Germany
• France: France Bans Uber As Taxi Drivers Stage Protest In Paris
• New York City: Uber faces limited suspension in NYC for noncompliance
• Belgium: Uber prospers in Belgian capital despite ban
• Everywhere: Uber Is Apparently Illegal Almost Everywhere

In spite of the fact Uber is banned nearly everywhere, the company survives!

Why?

Because Uber is what the masses want.

Rise of the Disruption Economy

Here's a dated article (from October 2012), but it's also timeless in its message: Rise of the Disruption Economy.

By now, we’ve gotten pretty used to the disruption that the rise of the social web has created in the media industry, where it has upended traditional business models and allowed creators of content to connect directly with their audience. But that same wave of socially-driven disruption is now moving through the rest of the economy too.

Entrenched industries and regulators are fighting hard.

Coursera, which offers online-education courses, was recently hit with a regulatory freeze in Minnesota, because the rules for education-related businesses in that state require that they jump through a series of hoops, including filing for registration (and paying fees). The state later modified its views on the service after an uproar about these restrictions, but it is unlikely to be the only roadblock the company runs into as it tries to expand.

Airbnb is in a similar position to the hotel industry: the application of social features — which allow owners of apartments, houses, trailers and even treehouses to easily find and connect with potential short-term renters — has changed the balance of power to the point where someone with a spare room has the ability to create a peer-powered business with virtually no overhead. That’s clearly a threat to the hotel business, which is using whatever political and regulatory connections it can to put limits on the company, even as it grows larger.

Uber, the car-scheduling service, has been another prominent participant in this back-and-forth struggle with regulations and an entrenched industry — virtually everywhere the company has set up shop, from San Francisco to New York, it has run into a regulatory morass that is designed to protect the existing taxi and livery industry as much as it is intended to protect consumers.

The service has had problems in San Francisco as well, and is likely to run into similar issues anywhere there is an entrenched taxi industry that is trying to protect its historic market power and profit margins. In New York, for example, taxi “medallions” — which allow an owner to operate a cab business there — sell for $1 million each. That kind of industry isn’t going to appreciate a disruptor like Uber, and in New York in particular the taxi business is a big political player.

Khan Academy

Disruptors are universally despised by bureaucrats and existing businesses.

Sal Khan at the Khan Academy is another one of those disruptors. Public union educators do not like his model of free education.

Click on the preceding link to check out free math classes for any grade you want from "early math" to 3rd grade through 8th grade.

Geometry, trig, calculus, differential equations? Yep, you bet. Science has 41 study topics. The list  goes on and on.

Sal Khan at TED



Please play at least the first couple minutes of the above video. Here's a link if it does not play: Sal Khan at TED.

Progress Cannot Be Stopped

No doubt the Fed (central bankers) are deeply disturbed by all of this price-deflationary progress, as are bureaucrats in general.

• Union teachers do not want to see online courses take hold or get accredited.
• Taxi drivers fight Uber.
• New York City wants to keep selling taxi medallions for $1,000,000.
• Hotels fight Airbnb.

It's the biggest protection racket in the world. But progress cannot be stopped.

Taxi Drivers? Who Need Em?

Interestingly, I think even Uber's model will soon give way for the simple reason all commercial drivers will quickly be obsolete.

Uber's model, if it survives, may look something like this.

• Customer pages a cab on his cell phone.
• Cab locates customer via cell phone GPS.
• Customer receives a code back and approximate wait time.
• Cell phone sends signal to open door when cab arrives.

For hot locations such as airports where cabs are already waiting, a cab pulls up and the cab door opens right up with simple tap of a button. A conductor may be needed to oversee things.

Commercial Drivers? Why?

Communication dispatch with driverless vehicles will eventually handle most needs.

The above may take a few years longer than trucks, just as fiber or wireless to homes (the last mile) was once the telecommunication problem.

The Key

Disruptive technology is advancing so fast, that bureaucrats cannot keep up with it! And that's a good thing. The bad thing is they try.

Additional Reading on Driverless Vehicles

• January 21, 2015: Job Site of the Future: Unmanned Bulldozers and Drones for Routine Construction
• July 31, 2014: Driverless Cars on UK Public Streets Starting January; Transforming Personal Mobility; Taxi and Truck-Drivers Targeted
• June 23, 2014: Robot Truck Convoy Tests in Nevada; Driverless Trucks Before Cars, and Before the End of the Decade.
• May 25, 2014: Driverless Cars Legally Hit Roads as California Issues Licenses; The Last Mile
• August 05, 2013: Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile

Additional Reading on Free Education

• January 24, 2015: Education Moment: The Man with 26 Million Students
• March 29, 2014: Teaching Revolution: Online, Accredited, Free; Start Learning Now!
• January 27, 2014: New York Times - Salman Khan Turned Family Tutoring Into Khan Academy
• September 03, 2013: Future of Education is At Hand: Online, Accredited, Affordable, Useful

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Encircled

Here's a new map of major military operations in Ukraine.

I say "new" but the caption indicates it is a day old. An estimated 7,000 to 8,000 Ukrainian troops are about to be encircled.

Major Military Operations - January 25



Colonel Cassad posted this interesting video of rebel positions over time



link if video does not play: DNR Advance Over Time

DNR stands for "Donetsk People's Republic". Each encirclement (cauldron) has eventually been obliterated.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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US Corporations Take Huge Losses on Venezuelan Currency

When black markets in currencies develop, you can be 100% sure the official exchange rate is overinflated.

In Venezuela, the fixed rate of exchange is 6.3 bolivars to the dollar, the floating rate of exchange is 50 bolivars to the dollar, and the black market rate is 184 bolivars to the dollar. The latter is what the currency is really worth at the moment.

From 6.3 to 184 is a loss of 96.6%

Even at the floating rate of 50 bolivars to the dollar, Venezuela's currency woes an increasing threat to U.S. corporate profits.

• Ford Motor Co on Friday said it was taking a pre-tax charge of $800 million for its Venezuela business. It blamed Venezuelan exchange control regulations that have restricted the ability of its operations in the country to pay dividends and obligations in U.S. dollars. Ford also said that it was unable to maintain normal production in Venezuela with the availability of vehicle parts constrained.
 
• On Friday, diaper and tissue maker Kimberly-Clark Corp said it took a fourth-quarter charge of $462 million for its Venezuelan business.
• At the end of the third quarter, for example, American Airlines Group Inc, had $721 million held in the Venezuelan currency, at a weighted average exchange rate of 6.41 bolivars to the dollar. Theoretically, if the airline tried to repatriate all of that money into dollars at the current black market rate of 184 bolivars per U.S. dollar as quoted by the website dolartoday.com, it would only receive about $25 million.
 
• Overall, foreign companies have an estimated $16 billion in outstanding dividends listed on their balance sheets that they have not been able to return to headquarters, according to Caracas-based research firm Ecoanalitica.
 

Dolar Today Quote

Here's the quote from Dolar Today.



Clorox did the smart thing and exited Venezuela entirely. I can see why Ford would not want to abandon its plant (but it's likely to be nationalized anyway).

Why American Airlines and Kimberly-Clark stick around is a mystery.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Dutch Central Bank President Cites "Financial Bubbles", Voices Strong Opposition to QE in TV Interview; Death by 1,000 Pin Pricks

Mario Draghi has strong opposition to his QE program from two sources: German central bank president Jens Weidmann and Dutch central Bank president Klaas Knot.

In a television interview on Sunday, Dutch Central Bank Head Says He Doesn’t Support ECB Bond Purchases.

Mr. Knot, who sits on the ECB’s Governing Council, said in an interview on Dutch television that he wasn’t convinced of the “necessity and effectiveness” of the program, known as quantitative easing. “Even if you believe it worked [in the U.S.], you cannot project its alleged success onto the eurozone,” he said on the talk show “Buitenhof.”

Email from Bruno de Haas

I got the above story from Bruno de Haas, head of policy & research at a medium-sized Dutch pension fund and author of a book arguing that the Netherlands should leave the euro.

De Hass Writes ...

Hi Mish,

This Sunday morning the president of the Dutch central bank, Klaas Knot, was interviewed on Dutch television. In my view he made some remarkable comments on the main topic, namely the ECB’s decision to embark on QE.

Knot was very candid. He explained that he had not supported the decision because he thinks it is neither necessary nor effective. He doesn’t think it is necessary because there is no deflation in the eurozone once you strip out the effects of the lower oil price.

With regard to effectiveness, he doesn’t expect that buying sovereign bonds from banks will increase credit by banks. He does expect that “using the printing press” (a phrase he literally used) will result in higher stock prices and more expensive real estate, further inflating what he called a “bubble on financial markets”.

According to Knot asset prices already are far detached from the real economy, and although this situation may last a while, there will be a moment when the two will converge again.

In contrast to the US, where a wealth effect could be expected from inflating asset prices, Knot doesn’t find a positive wealth effect likely in the eurozone. The main reason is that most people have their assets in pension funds and insurers, and their solvency ratio decline because the negative impact of a lower interest rate on the mark-to-market value of their liabilities overshadows any gains in the solvency ratio from higher asset prices. This is indeed the case in the Netherlands where the two largest pension funds will have a funding gap at the end of January because of the low yield curve.

The only way that QE might support growth in the eurozone, Knot said, is through a devaluation of the euro, but he expects that to be a temporary effect. With respect to the position of Bundesbank-president Weidman he made it clear that they were in agreement on this. However, not all northern eurozone central bank president had voted against QE, Knot said. The Finnish president voted in favour.

I hope you find this of interest.

Bruno de Haas

Death by 1,000 Pin Pricks

I could not find much in English by de Haas. However, I did find a translation of a news article about him worthy of note.

Please consider "The Euro is Death by a Thousand Pinpricks"

Economist Bruno Haas pulls no punches in a Dutch financial newspaper article. According to Haas, the euro is a speeding train that runs straight into the abyss.

Haas knows whereof he speaks. He was involved in the drafting of the Maastricht Treaty and the department that oversees financial stability for the Dutch Ministry of Finance.

According to Haas, the EU's desperate attempts to pump more money into the rescue of the euro will fail. Moreover, these attempts will be at the expense of both the southern and northern European countries.

Naive Dream

The idea of ​​one large currency union among diverse economies, according to De Haas is an increasingly a naive dream. To break out of the downward spiral in the eurozone, De Haas believes the project needs to be shut down.

"Continuation of the euro project is costing us billions. It's death at the hands of a thousand pinpricks," said the economist.

Rational Arguments

Add Dutch central Bank president Klaas Knot to the list of those saying the right things for the right reasons.

Prince Michael: Prince Michael of Liechtenstein Warns "QE a Sign of Helplessness, Will Not Reach Economy"; Prince Michael vs. Martin Wolf

Mervyn King: More QE will not help the world.

Steen Jakobsen: "Lower Interest Rates May Reduce Consumption". Michael Pettis at China Financial Markets and Lacy Hunt at Hoisington Management both agreed.

Grand Experiment Failure

I wrote about Steen's theory in Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph, a rebuttal to Bloomberg author Barry Ritholtz, also in favor of massive QE.

Note that the rationale of Dutch central Bank president Klaas Knot is nearly the same as that of Steen Jakobsen and Michael Pettis.

The only thing QE can possibly do is create bigger bubbles. When they crash, what then?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Pact With the Devil? Syriza Projection 150 Seats; Coalition Deal Already; "Indisputable Mandate to Leave Austerity"

One Short of Outright Majority

With vote counting nearly over, it appears Syriza captured exactly half of the 300 member Greek parliament with approximately 36.3% of the vote compared to 27.8% for New Democracy.

That was a solid trouncing, nearly double the 4-5% expected margin (see Syriza Trounces New Democracy; Greeks Stop Paying Taxes; Run on Greek Banks Escalates; Get Out!)

Syriza is one vote short of an outright majority. However, Syriza has already secured an alliance with the Independent Greeks, a right-wing party that shares little common ground with Syriza except for its rejection of austerity measures.

The coalition would have at least 162 seats, and that's an allegedly comfortable governing majority.

I do not rule out other alliances. But holding them all may prove difficult. Certainly this was not the alliance most expected.

Can Syriza govern with the Independent Greeks on some issues and another party on others? Or will this all blow up soon? If the latter, before or after Grexit?

For now, it's party time for Syriza, albeit one vote short of an even bigger party. Of course, there is always the chance of a party shift. It only takes one shift.

New Clash for Europe

With that backdrop, please consider Greek Vote Sets Up New Europe Clash.

With nearly all votes counted, opposition party Syriza was on track to win about half the seats in Parliament. In the wee hours of the morning, it clinched a coalition deal with a small right-wing party also opposed to Europe’s economic policy to give the two a clear majority.

“Today the Greek people have written history,” Syriza’s young leader and likely new prime minister, Alexis Tsipras, said in his victory speech late Sunday. “The Greek people have given a clear, indisputable mandate for Greece to leave behind austerity.”

A Syriza victory marks an astonishing upset of Europe’s political order, which decades ago settled into an orthodox centrism while many in Syriza describe themselves as Marxists. It emboldens the challenges of other radical parties, from the right-wing National Front in France to the newly formed left-wing Podemos party in Spain, and it sets Greece on a collision course with Germany and its other eurozone rescuers.



Tsipras will have a mammoth task at home and abroad.

For one thing, Syriza is a broad coalition of the left that includes factions that believe Greece should leave the eurozone. Those factions would pressure Mr. Tsipras if he moves to compromise with Europe.

The pressure to compromise will be intense. Under the bailout program’s rigorous schedule, Greece is required to complete a review of its progress with the so-called troika of bailout inspectors by the end of February. Mr. Tsipras has said he doesn’t recognize the troika’s authority.

Pact With the Devil?

The Wall Street Journal called the coalition of 162 seats a "comfortable majority". I called it an "allegedly comfortable majority".

Time will tell which version is correct. But other alliances are possible as well.

It's interesting this coalition is the one that emerged rather than a coalition with one of the other leftist or centrist parties.

Perhaps there is more in common on the issues than is apparent at first glance. Then again, perhaps so many are so fed up with austerity they would sign a pact with the devil to get rid of it.

Bow to Austerity or Go Bust

The Telegraph reports Greece must bow to austerity or go bust, says EU

Eurozone finance ministers will on Monday threaten an end to negotiations on debt relief for Greece unless its new radical Left government promises to honour all existing austerity agreements.

Eurozone officials are convinced that the EU holds all the trump cards in the coming clash with Greece's leader-in-waiting, Alexis Tsipras, including the nuclear option of letting Greek banks collapse. They believe Mr Tsipras knows his weakness.

The hardline approach will be sugared with offers of flexibility on the detail of austerity measures, and a move to allow Greece more time to meet an end of February deadline for renewal of key EU loans that are keeping the country’s economy afloat.

Mr Tsipras will be reminded that unless he plays the EU game there will be no extension to a 28 February deadline for a review of Greek austerity measures by the hated “troika” of inspectors from the EU, European Central Bank and International Monetary Fund.

Nuclear Chips on Both Sides

The above sounds like a hard bargaining chip, and it is. But Tsipras would have to give up everything he has stood for to accept that stance. Also, his coalition would collapse and he would immediately be out of office. When do politicians voluntarily accept that fate?

Tsipras may easily decide he has nothing to lose.

Moreover, Tsipras has his own nuclear bargaining chip. If Greece exits the eurozone, the rest of the countries immediately become liable for Greek debt.

Revised Grexit Debt Liabilities 

On January 22, with thanks to Dr. Eric Dor, director of IESEG School of Management in Lille, I posted a Revised Greek Default Scenario that showed "Liabilities Shifted to German and French Taxpayers".

Who is bluffing whom with Italian liabilities at 48 billion euros and Spanish liabilities at nearly 33 billion euros. See link for other countries' liabilities.

No Solution?

Saxo Bank chief economist and CIO pinged me with this thought after the election ...

1. The Syriza position is clear: They were given mandate to “ignore austerity”.
2. IMF and ECB stance is also clear: There are room for talks on maturity and terms but no on substance and doubts about repayment.

The EU, being the political animal it is, will look for compromises and short cuts, but end of the day this process is running out of time there are no new “pockets” to move the problem to anymore.

Greece needs a haircut. Anyone can see that. Getting it and executing it is probably the biggest single challenge. Unlike what we are trained to believe often there are no solutions to a lot of the problems we face. That’s the real conclusion on last night election result.

Actually, there is a short-term, can-kicking solution of sorts, but that would require some compromises on both sides.

Longer term, even if some writedown of debt was worked out, all of the eurozone structural problems still remain.

Finally, it's one thing for two or three parties to work out a compromise. It's another thing indeed for 18 parties all to agree, especially when some of them perceive they have to contribute more than everyone else.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot

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