Tuesday, May 26, 2015

Rocket Fire In Gaza, South China Sea 'Accident' Could Spark War, Derivatives Crash Soon?

After rocket attack, Israeli jets strike Gaza | The Times of Israel

The Israeli Air Force launched airstrikes on the Gaza Strip early Wednesday morning, hours after a projectile fired from the coastal enclave fell in southern Israel for the first time in weeks.

There were no immediate reports of casualties in the bombardments near the cities of Rafah and Khan Yunis in the southern Gaza Strip.
Unconfirmed reports by a Reuters correspondent on the ground in the Gaza Strip said that the IAF targeted Islamic Jihad and Hamas training facilities.
The IDF didn’t immediately have comment about the reports.
Although Hamas did not take credit for the rocket fire, and sources in the Gaza Strip said the rocket was likely fired by members of the Islamic Jihad, Israel had maintained that it holds the governing terror group responsible for all attacks emanating from the Gaza Strip.
At least one rocket fired from the Gaza Strip hit southern Israel on Tuesday night, shortly after 9 p.m. as alarms sounded across the region, the Israeli army said.
There were no immediate reports of injuries or damage from the rocket, which landed near the town of Gan Yavneh, outside Ashdod, according to an IDF statement.
The projectile — a Grad missile — was located minutes after sirens sounded in the Lachish region and Ashdod.
It was unclear how many rockets were shot at Israel from Gaza. According to the IDF, initial signs pointed to one, though other reports put the nubmer as high as five.
Many residents of southern Israel reported hearing multiple blasts.

There was no immediate claim of responsibility from Hamas or other terror groups in the coastal enclave.
However, an Israeli official said Jerusalem holds Hamas responsible for all attacks launched from the enclave, and the group was reportedly evacuating buildings and bases Tuesday night ahead of an expected Israeli retaliation.
According to the Ynet news website, the attack marked the first time a Grad rocket, which can go farther than the smaller Kassams more commonly shot out of Gaza, had been fired at Israel since the summer war.
In response to the rocket fire, Yisrael Beytenu party head Avigdor Liberman said the current government must commit to toppling Hamas rule in the Gaza Strip, or risk appearing “weak.”
Likud’s Miri Regev also maintained Hamas was responsible for the rocket fire.
“It’s too bad Hamas is trying to deteriorate the security situation in the south,” she said. “Israel must respond to every [rocket] attack on the citizens of Israel.”
Israel is wary of Gaza terrorist groups rearming after Operation Protective Edge. The IDF says Hamas has been conducting test launches in recent months, in order to increase its rocket-launching capabilities.

Beijing and Washington are each laying down redlines in the South China Sea, making the upholding of their claims a priority. In this, they are maneuvering themselves into a potential conflict. There are three real-world scenarios under which it could happen

After years of being a focus of interest for specialists, the South China Sea is now getting major attention from the media. The latest is a CNN report that a US Navy P-8 surveillance plane was warned away from some of China’s manmade islands in the Spratly Island chain by the Chinese Navy.
Beijing has not yet declared a formal air defense identification zone (ADIZ) over the South China Sea, unlike the one it established over part of the East China Sea in 2013, nor could it today enforce such a zone effectively with its current fighters.
However, with its reclamation activities continuing, and the Obama Administration apparently having decided to challenge China’s claims, the US and China are now potentially closer to an armed encounter than at any time in the past 20 years.
Here are three ways the US and China could go to war:

1) AccidentThe US Navy is reportedly considering sending ships within 12 miles of the manmade islands, thereby entering into what China claims is now sovereign territory. With Chinese naval and maritime patrol vessels in the waters, intimidation or harassment of US ships could lead to a collision, with each side responding in turn.
This is what China has done to ships of other nations, and an accident could lead to a stand-off. In the air, the Spratlys lie about 800 miles from China’s shores, already within the combat radius of China’s most advanced fighter jet (though Beijing has yet to show that it can effectively oppose US air patrols).
More worrisome, China is building airstrips on its islands, and may soon be able to launch planes from them to patrol the skies. Similarly, once its aircraft carrier is operational with an air wing, it can easily patrol the area. Any of those developments would dramatically increase the chances of a mid-air collision, such as happened in 2001 between a Chinese fighter and a US Navy surveillance plane.
2) Premeditation: Beijing has staked its geopolitical reputation in Southeast Asia on its claims to the South China Sea and now the building of the islands, which already cover more than 2,000 acres. As I wrote in National Review last week, unless they decide to back down, and risk losing influence in Asia, China’s leaders may decide that stopping American incursion into their newly claimed waters early on is the best opportunity to make the risks to Washington seem too high.

Once Chinese airplanes are on the islands, then they may decide to shadow US planes and prevent them from flying in “restricted” skies, for the same reason, leaving the US to decide how far to respond. Thus, they may force a confrontation, to try and get the Obama Administration to back down from getting involved in another military situation while it is dealing with the Middle East and Ukraine.

3) Indirect Conflict: China may well judge that it is too risky to directly challenge US ships and planes, but that it can make the same point by intercepting those of other countries. Already, the Philippines has claimed that China warned off its surveillance planes, and China has had regular maritime run-ins with the Philippines and Vietnam.

It may decide to stop foreign ships from passing by its new islands, or it may soon try to escort less advanced foreign planes out the skies above its islands. A direct conflict between China and any of its neighbors would, at this point, have a good chance of bringing in the US, in order to credibly claim that it is upholding international law (and, in the case of the Philippines, coming to the aid of a treaty ally).

Beijing and Washington are each laying down redlines in the South China Sea, making the upholding of their claims a priority. In this, they are maneuvering themselves into a potential conflict.
With no de-escalation mechanisms, and deep distrust on both sides, the more capable China becomes in defending its claimed territory, the more risks the US will face in challenging those claims.
That is why each is trying to define the boundaries and set the pattern of behavior before the other does. That may not ensure that there will be a military encounter, but it steadily raises the chances of one.

All over the planet, large banks are massively overexposed to derivatives contracts. Interest rate derivatives account for the biggest chunk of these derivatives contracts. According to the Bank for International Settlements, the notional value of all interest rate derivatives contracts outstanding around the globe is a staggering 505 trillion dollars. Considering the fact that the U.S. national debt is only 18 trillion dollars, that is an amount of money that is almost incomprehensible. When this derivatives bubble finally bursts, there won’t be enough money in the entire world to bail everyone out. The key to making sure that all of these interest rate bets do not start going bad is for interest rates to remain stable. 
That is why what is going on in Greece right now is so important. The Greek government has announced that it will default on a loan payment that it owes to the IMF on June 5th. If that default does indeed happen, Greek bond yields will soar into the stratosphere as panicked investors flee for the exits. But it won’t just be Greece. If Greece defaults despite years of intervention by the EU and the IMF, that will be a clear signal to the financial world that no nation in Europe is truly safe. Bond yields will start spiking in Italy, Spain, Portugal, Ireland and all over the rest of the continent. By the end of it, we could be faced with the greatest interest rate derivatives crisis that any of us have ever seen.

The number one thing that bond investors want is to get their money back. If a nation like Greece is actually allowed to default after so much time and so much effort has been expended to prop them up, that is really going to spook those that invest in bonds.

At this point, Greece has not gotten any new cash from the EU or the IMF since last August. The Greek government is essentially flat broke at this point, and once again over the weekend a Greek government official warned that the loan payment that is scheduled to be made to the IMF on June 5th simply will not happen

Greece cannot make debt repayments to the International Monetary Fund next month unless it achieves a deal with creditors, its Interior Minister said on Sunday, the most explicit remarks yet from Athens about the likelihood of default if talks fail.

And it isn’t just the payment on June 5th that won’t happen. There are three other huge payments due later in June, and without a deal the Greek government will not be making any of those payments either.
It isn’t that Greece is holding back any money. As the Greek interior minister recently explained during a television interview, the money for the payments just isn’t there

So what happens if there is no deal by June 5th?

Well, Greece will default and the fun will begin.

In the end, Greece may be forced out of the eurozone entirely and would have to go back to using the drachma. At this point, even Greek government officials are warning that such a development would be “catastrophic” for Greece…

One possible alternative if talks do not progress is that Greece would leave the common currency and return to the drachma. This would be “catastrophic”, Mr Varoufakis warned, and not just for Greece itself.

“It would be a disaster for everyone involved, it would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end for the common currency project in Europe,” he said.

But the bigger story is what it would mean for the rest of Europe.
If Greece is allowed to fail, it would tell bond investors that their money is not truly safe anywhere in Europe and bond yields would start spiking like crazy. The 505 trillion dollar interest rate derivatives scam is based on the assumption that interest rates will remain fairly stable, and so if interest rates begin flying around all over the place that could rapidly create some gigantic problems in the financial world.

In addition, a Greek default would send the value of the euro absolutely plummeting. As I have warned so many times before, the euro is headed for parity with the U.S. dollar, and then it is going to go below parity. And since there are 75 trillion dollars of derivatives that are directly tied to the value of the U.S. dollar, the euro and other major global currencies, that could also create a crisis of unprecedented proportions.

Over the past six years I have written more than 2,000 articles, I have authored two books and I have produced two DVDs. One of the things that I have really tried to get across to people is that our financial system has been transformed into the largest casino in the history of the world. Big banks all over the planet have become exceedingly reckless, and it is only a matter of time until all of this gambling backfires on them in a massive way.

It isn’t going to take much to topple the current financial order. It could be a Greek debt default in June or it may be something else. But when it does collapse, it is going to usher in the greatest economic crisis that any of us have ever seen.
So keep watching Europe.

Things are about to get extremely interesting, and if I am right, this is the start of something big.

Have you heard of the saying “sell in May and go away”?  Traditionally, the period from May through October has been a time of weakness for stocks.  In fact, on average stocks hit their lowest point of the year on October 27th.  And most people don’t remember this, but the Dow Jones Industrial Average actually began plunging right at this time of the year just prior to the financial crisis of 2008.  Most people do remember the huge stock crash that happened in the fall of that year, but the market actually started to slide in May.  
Throughout the first four and a half months of 2008, stocks moved up and down in a fairly narrow range, and the Dow closed at a short-term peak of 13,028.16 on May 19th.  From there it was all downhill for the rest of the year.  So will a similar thing happen in 2015 as we approach the next great financial crisis?  Since March 20th, the Dow Jones Transportation Average has already fallen by almost 800 points.  So will the Dow Jones Industrial Average soon follow?  Well, only time will tell, but the Dow was down 190 points on Tuesday.  Signs of trouble are popping up all over the place, and the “smart money” is getting out while the getting is good.
The chart that I have posted below shows how the Dow Jones Industrial Average performed during 2008.  As you can see, stocks began plummeting long before the financial crisis in the fall.  From May 19th through early July, the Dow fell by about 2,000 points.  Should we expect to see a similar pattern this summer?…

Like I stated earlier in this article, red flags and warning signs are starting to pop up all over the place.  The following are just a few of the trouble signs that we have seen this week…

-On Tuesday, the VIX (a closely watched measure of market volatility) jumped by the highest percentage that we have seen so far in 2015.  As I have explained so often before, markets tend to go up in calm markets and they tend to go down in volatile markets.  So the fact that volatility is on the rise is not a good sign.

-The U.S. dollar index is surging again.  In fact, we just witnessed the largest seven day rise in the U.S. dollar index since the collapse of Lehman Brothers.  This is another indication that big trouble is ahead.  For much more on this, please see my previous article entitled “Guess What Happened The Last Time The U.S. Dollar Skyrocketed In Value Like This?…

-Thanks to the ongoing Greek crisis, the euro is falling again.  It just hit a fresh one-month low, and if I am right it is going to go quite a bit lower as the European financial crisis intensifies.

-After rebounding a little bit, the price of crude oil is falling again.  It just hit a new one-month low, and the number of oil rigs in operation has declined for 24 weeks in a row.  Once again, this is highly reminiscent of what happened back in 2008.
-Unfortunately, it isn’t just oil that is declining.  A whole host of other commodity prices are going down right now as well.  This happened just prior to the financial crisis of 2008, and it is a sign that we are heading into a deflationary economic slowdown.

Looking back, there were so many warning signs leading up to the financial crisis of 2008 but most people totally missed them.  Now, so many of those exact same signs are appearing once again, but they are being ignored.

In the western world, we have extremely short attention spans and we suffer deeply from something called “normalcy bias”.  The following is how “normalcy bias” is defined by Wikipedia

The normalcy bias, or normality bias, is a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster and its possible effects. This may result in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to include the populace in its disaster preparations.
The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It can result in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.
That is such a perfect description of what is happening in the western world today.  But just because things have always been a certain way in our past does not mean that they will continue to be that way in the future.  A great economic storm is rapidly approaching, and the signs of the times are all around us.
Hopefully more people will start listening to the warnings, because we have almost run out of time to prepare.

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