A Russian Trade Union, a love story with Ukraine

An interesting new political strategy is happening in Eastern Europe and on the north Asian plateau and it all smells too much like strategic economics again. Russia is moving its economic weight, but this time for a new strategic move of geographic proportion, an expansion into the realm of the trade/Customs union.

The EU is not only a unity of policies, with endless bilateral agreements and an entanglement of laws. Its main function at the end, is primarily to liberalise the movement of free trade within the European countries, which we closely now refer to as member states.

The reason to join a customs/trade union are simple, export growth that can lead a much better balanced current account for a country. Germany currently being the most prosperous, and even more so since the European Monetary Union was introduced, has led the way in showing how free trade is a great source for GDP.

Russia is currently focusing on expanding its customs union to the former USSR satellite states and then maybe further onto the Eurasian plate. It wants to take advantage of its natural resource position and the export dependency a lot of the former satellite states still have on it.

Ukraine was poised and ready to become a member state of the European Union, though it all smells now like a large bluff.  At the end of it all, it comes down to your largest trading partner. Ukraine does its trade with Russia a significant amount more than with the EU. Having then a bilateral agreement between the two, would significantly reduce export/import costs. Also most Ukrainians feel more Russian than European in culture, one thing resented by many of the eastern bloc is the European unity and fear of culture loss.

 

 

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Though behind these arguments lies the main reason. Russia has always dominated the energy supply of the eastern European sector, and Ukraine knows this too well. Vladimir Putin has also imposed heavy custom checks on Ukrainian imports creating losses in the billions in theory. Embargoes from chocolate to steel pipes were also imposed upon goods this year and Mr Putin goes further on this, with forwardly stating that the Customs union as a whole may impose high levies in order to protect the Union for EU goods possibly entering their market.

The Payoff for Russia is vast. Not only does it secure a competitive advantage of trade with the Ukraine and cuts off basically its trade relations with the EU. It further tightens its power over the former soviet state and overall makes it ever so more dependent on Russia.

Vladimir Putin is also winning powerful game with the EU over its diplomatic procedure. That in all the EUs democratic ways are rather pointless in competitive arguments, as even if the Ukraine in someways would prefer to be courting itself with the EU commission, it still has to get into bed with Moscow. But this is by far not the first major hit by Russian Bear: slowly but surely it is geographically taking back its land.

It is amazing the unfortunate though inevitable power that strategic reason can have in undemocratic environments, but it is a good example of how maybe technocratic procedures could eliminate these problems for the EU, as it battles several fronts. Banking unity, Soverigen debt restructuring, migrational issues and strategic economics.

Tata for now
G.E.

Central Banking 2014 Upgrades & Arab Uprising Part II

Good evening to all

The month of July has been rather amusing in market volatility and global economic indicators balancing out each other, mixed in with the typical political cocktail of civil unrest.

ECB and Bank of England Harmony

 With the markets losing some of the power and confidence in tactic decision making, today they looked to the words of Mark Carney (Bank of England) and Mario Draghi (ECB). The Outlook of both and interest rate decision remained unchanged, though new weapons such as market guidance are becoming more weighted on market volatility.

A Central bank’s words are one the most secretly kept letters before an announcement, as these words are the recurring power mover of any market. Previously a central bank would never try to give their opinion on forward assumptions of market growth, though the new Bank of England governor changed the norm.  So these words are now a typical aspect for market makers to expect in the medium term.

Liberalisation of the ECB was also in discussion; the idea of releasing the minutes of the ECB, could be seen as a more accurate way of the market valuing the future. Though in the Gothic economist’s opinion this will only produce more wild fire, and take less value of the central bank’s overall decision.

Vertigo Markets

So with the last month being pinned to fallout part 2, of the financial crisis shows that the wounds slowly are healing, for now... The patient is still in intensive care.

The redbull juice of quantitative easing, unfortunately could be working. Grumbles for the Gothic economist, as his positive monetarist views against Keynesian borrowing malarkey as being the devils work could succeed, as the S&P climbed today. However... These growth patterns with an over capitalised market, may bring future worries, to the mix.

Today the US market saw growth patterns that had not been seen since 2011, amongst these positive movements, there has also been frailness at the midpoint, due to fears of reduced growth within in china and liquidity worries for domestic and medium sized businesses.

The Brent crude benchmark has been on rapid brinks of decline and ascension. The Chinese downturn in GDP forecast, and the US growth results have been players on this. Since July continuing into August has seen many Middle Eastern civil problems affect oil output, and with US sanctions on cutting Iranian oil exports have been also implemented this week. Hence this fall going into the winter season for the northern hemisphere could see prices above $112 a barrel.

Positives that can be seen are controlled inflation position within Europe and US, also boosted exports in some of the sovereignly constrained Euro zone countries.

Burn Baby Burn

The Middle East and North African political process is still far from maturing in stability. With Nigerian tensions, the Egyptian political problem and summer maintenance schedules, the fall could haunt the price yet.

Libya has been flooded with protests and shut down of its ports, leaving the OPEC state with no oil and in some cased more than 50% fall in refining, giving August and September contracts a rise.

The markets could possibly become more active in their discontent with the Arab uprising, as foreign direct investment thoughts to Africa becomes less desirable.

The biggest problem is that due to these cuts in production, you cannot stop oil extraction straight away, so all you can do is flare. The burning of fuel in some parts of Africa have forecast to total over $100m a month, and with Flaring already being a major issue within Northern Canada, more investment and maintenance is demanded within the Oil & natural gas sector.

This week saw oil spills in Thailand, Nigeria and evidence of manufacturing faults with an Exxon pipeline in Canada. Enough said on future prices and environmental damage.

Closing Black Words

The energy sector will continue to climb, as middle east tensions are predicted to continue , if  US continues to give out low unemployment data and growth support. Though this highly unlikely, and in the fall, markets will become more volatile, as the deadline for the US borrowing limit comes closer.

Buy while you still can...

Bad US timing in Africa as Resource war is in full swing

As Obama makes his first real appearance in Africa, has he come far too late? As the president touched down in South Africa, he was greeted with more welcoming protests than the warmth he may have encountered on his trip to the G8 summit in Northern Ireland.

Africa itself is the new Jewel in the eye of slowing down major economies in the northern Hemisphere and where strategic economics may now work with African ways of life, which was unheard of back in the 80s-90s. Holding vast realms of natural resources and economies egger to grow, China has been making the most progress out of all nations, though has also been finding out, that Africa is not always easily bought and tapped.

Late jump from the gate

The Current Obama administration did not make an appearance in its last term, and through this the US has been living off the success of the Clinton administration’s duty free policy on African goods and the Bush administration’s poverty donations, though there is still nothing yet from Obama.

As he was escorted through Cape town in his usual armed battalion, including the support of the South African’s catalogue of Gorilla proof Jeeps, the president had come at a time of when millions of the continent’s inhabitants prepared for the mourning of Nelson Mandela, as well the general view of that Barak Obama “Another US President”. This comes from the Geo political position most south Africans see Mr Obama lying in. From the Libya Crisis and toppling of the Gaddafi regime last year, the involvement of more US drone aircraft in Africa and the current interactions and geopolitical moving in Syria.

Contractual ease by China

China has been conducting much more investment, as it saw the emptiness of foreign competition implementing strategy on the continent. China is finding it easy business doing deals in Africa, as a pragmatic position is taken for politics. There are no political improvements linked to any investment deal which may include a more stable government as some nations saw with previous western deals, giving much better political face to china.

Also with weak colonial might at the moment, no one is in the position to lecture China on its resource and foreign investment policies at this current time. Also with the increase of inflation in China, it is only be a matter of time until manufacturing is transferred overseas to Africa in order to reduce production costs.

Though making deals with Zimbabwe and Sudan hasn’t helped other sides of Chinese interests and shows more importance to business relationships than China’s social responsibility.

DIY Africa

The main issues with Africa are usually down to a few big factors where one or more is active:

• Political Corruption
• Civil Unrest
• Inadequate Infrastructure

The oil industry is probably the wisest of the high risks from African operations. Companies such as BP and Exxon Mobil have dealt with losing oil wells due to political tensions, such as in Somalia; workers being captured and ransomed off and the sabotage from local greed and jealousy, which is the most interesting one in my opinion.

In Nigeria a local communities jealousy over another that has a well contract from an oil firm, will usually result in pipes being cut, or well heads being set ablaze. The market for D grade black market oil is then created through tribal gangs stealing the unrefined liquid and in the meantime the environment being damaged. With Nigeria cultures you are taught not to share or help, so other communities do not work together. The only cooperative relationship that usually occurs is when cleaning companies pay gangs to destroy wells in order to get cleaning contracts.

Energy shortages are also a major issue. Known for its mass ownership of electric generators, Africa’s civil infrastructure is in desperate need of being created.

The Future

 

 

There are certain countries such as South Africa and Angola which provide a forward vision for the Continent, with maybe only one of the three issues being faced.

As the US ranks third as trading partner to the continent, it will be rather soon that more foreign direct investment moves swiftly in. This is also contributed to the the reduction in global market liquidity seen in the past weeks, on the basis of changing Central banking monetary policy (mostly from the US) and the predicted slowdown in emerging markets. Africa due to its minerals has not experienced a reduction in investment hunger so much and with still a very large gap in market capacity across the board of sectors from resource extraction to government development projects, whilst the northern boundary has the rope pulled tighter, the centre realms of the equator look promising, just how much for Africa and more so, how will the economic transition process effect Political engineering and efficiency? This issue brought up when Libya was still continuing in conflict.

 

Tata

G.E.

Die Hard Economics vs Bitcoin

Whilst changing to a connecting flight in Zurich, one overheard from the men’s wash basin that “John McLane from Vienna is asked to make his way and board his connecting flight to Miami”, the thoughts of mass panic and chaos swelled into the Gothic Economist’s mind. Gliding out of the bathroom, with the swing of a Black aluminium case and looking like the perfect 21^st century terrorist with some electronic body dance moves thrown in. He thought to himself; where would John McLane be needed soon?

The word Bitcoin very few may of heard up until recently, when it’s price surged from 11$ in 2011 to over 200$ this year. The fundamental laws that govern this virtual currency are beautiful, from freedom, to the potential downfall spike of a financial market.

The Dark Past

No one knows who the creator or creators of this virtual copper really are… Though tales are told in the Far East; and it is said to have originated from a hacking liberal collective known as Satoshi Nakamoto. This possible origin inspires the use of Bitcoin as pure freedom, so in a way this would make sense for its origin. But trusting the algorithmic workings of a hacking community for  what is now by investors seen as a very real object in the currency market, for me does spark concerns. More so are these concerns set ablaze with the value of this virtual coin being at over the $100 apiece.

No Monetary Policy, No Problem

If you are loathing of central banks and the continuous tax avoidance cleansing has rattled you to the puzzlement. The trust of your wealth management intermediary is in question? Then look no further!

The currency, being digital is not guaranteed or controlled by anything up to the heavens other than the free market. Hence for tax avoiders and people looking to acquire new safe havens, Bitcoin could prove to be fruitful. The work which occurs within Bitcoin is supply increase. There is cap currently on the currency until 2050, but until then it is up to you to solve algorithmic puzzles in order to win a few of the coins, by downloading ‘Bit miner’

Taxation & Stealth

Her majesty’s government met with figures from taxation to the online intelligence service (GCHQ), in order to discuss the problems of the new coin.

The central problem which the UK government and many others become sour at, is the notion that Bitcoin is near completely untraceable in transaction origin, and is impossible for any governing body other than the demand & supply of the free market to control. These founding rules have made this meeting turn to the operation of most likely bending these two main principles and eventuallz when they are bent, or with the help of some other countries broken, then taxation will be most likely to occur.

Uses and Commodity problems

Currently the uses of the coin movements are speculative and most likely large untraceable transactions, though rapidly online shops and services that are beginning to accept it. The only current backaches are the fears of Bitcoin becoming a commodity currency. The limiting factors of algorithms prove a big issue in dealing with this.

The coin I believe is a great step into the new way the world now works as more transactions become electronic. The frustrations I believe will come as countries try to file away at these, and then Bitcoin may take a turn for the worse.

So as we see that governments try their best to cling onto the new ounces of digital power, how will they send John McLane in, even if he ends up on the wrong side? Possibly using the powers of Tron, he will visualise into an arcade game and with 8 Bit explosions and Tetris pack punches he will fight the new virtual blanket of crime. At least Sir Mervyn King can now breath easily, that these and the remaining issues of monetary policy are not his problem anymore...Please insert coin here^^

Wealth management stays strong, Shale keeps on fracking and France feels the heat...

Tax Privacy lies no more

The continuing transition of banking secrecy becoming more open, continued last week, as Luxembourg, the British territory of Bermuda and Chiefs of Uni Credit began a mixture of transitioning towards a mixture of openness towards taxation figures, and bank balances.

The Austrian chancellor though is going one step further. He has been given approval to negotiate with the US a tax centred upon foreign bank account holdings. More centered towards account holders in the US, it will most likely be a two part situation for EU member states also. Austria is also signing up with the US to a mutual administrative assistance in regards to tax matters.

The movement is a combination of pressures implemented from the EU and US. Allowing for tracking of financial intermediaries that can involved in a rouge transactions, to increasing the strain on beating tax avoidance. Obviously a growing concern for large investors, though that hasn't put them off too much...

Regardless of this big shake up, wealth management and private banking are still on the rise. The likes of Goldman Sachs and JP Morgan are preferring to have a stickier type of deposit holder, where reserves are less volatile than those entwined within their investment arms.

As all these changes for reform, glide out of the former Habsburg empire, from neighbouring italy Tax evasion scandels for Mr Belesconi as he loses his appeal for a zero four-year jail sentance, for his punishments for tax evasion. FT article

Black Clovers

Ireland has now been recognized for offshore exploits to a once ignored segment of the Eurasian plate. This will hopefully bring a few more receipts into the stagnant Irish economy, though still striving as the only euro-zone member, that is currently able to repay its debts to creditors and the ECB.

Whilst the ocean floor is being discovered off the west coast of Kerry, in the US, commercial competitive rates of liquefied natural gas have raised hopes for the department of Energy, as the mining of shale has unlocked vast amounts of the fuel source. So much that the US is on high prospects to be net exporter by 2020.

The new energy boom is acting as a boost to the US recovery, as will eventually be reflected within the future months whilst the Brent Crude price fluctuates  The oil price staying firm on still low growth forecasts, and possibly more so into the end of 2013, that the US's energy chat moves further away from coal and oil, in the hope to reduce CO2 emissions and increase its strategic dominance, by becoming less energy dependent.

French woes

Last Friday marked 25 years of the Franco-German relationship within the council of financial and economic affairs. Though a Francois Hollande has certainly realized he and his government may have really played with fire, in relation to their bullish comments amongst other EU nations over the previous weeks.

With taking advantage of trade woes with UK & China, and insulting government figures in Germany, it is only obvious for Mr Hollande to possibly expect a more uncooperative relationship, in regards to their views against the Germans and their strong Hayek position. As well he also needs to manage a healthy cabinet reshuffle.

Protectionism and National independence is becoming more an issue, and with the organisations, such as the WTO, being in a crisis, slowly taxes and tarrifs may comeback into being. Though it is more likely that free-trade-areas and economic zones will continue to exist, just with larger import/export costs.

The Euro and Europe , Which will last?

A good day to all.
The debauchery of this week foretells the story of a possible burn up in the re-entering of the euro into uncharted waters. The UK government delvers its budget and Iraq is seen as the place not to do oil business. Also old news, we have new executive pope for the Vatican bank.

The Drop Ultimatum 

Cyprus has now joined the PIIGS (Porturagal, Ireland, Italy, Greece and Spain), to become the sixth country to need emergency funds to support its crumbling financial system. Germany is leaving the terms melt into Cyprus for time being as the emergency funds run low. German pins lay sealed against the collars of the ECB & IMF as no room is left for breathing.

The idea of a leaving of the Euro is more likely than maybe dear readers may imagine... Cyprus is in a few good corners for this to work. Firstly it is a small country and second Russia is a big backer in Cypriot infrastructure, though the last thing the oligarchs want is their back-door into the EU being lost. Still it seems that the church, being the largest landowner in Cyprus has agreed to help out the Cypriot government. At the same time Cyprus losing it's trading advantage from having the increased cost of currency exchange transactions will not be a pleasant move.

Cyprus wants to stay part of the euro, though the only current options at its disposal are to take a percentage of deposit holders reserves, which by far will fuel a bank run. Or try and lipo out any money that is in the economy. This evening from the democratic side of the government, mentioned the ability to raise at least funds from the nationalisation of the state pension scheme, though this is not reassurance to safety. Neither in the same interview conducted on Monday's BBC 'Newsnight' program that they are also looking at a Euro zone exit and going back to the Cyprus pound.

The stickier ends of Black Gold

Ten years after the invasion of Iraq by British and US forces, there have been many rumours that it was not for weapons of mass destruction but for the sweet blood of the world that everyone is desperate for. Well the truth of ten years on Iraq can possibly be one of the worst places to buy a lease to drill.
FT interactive map of Iraq Oil ten years on

Iraq has only seen production levels hit similar sums before the war. a few years ago oil firms were running to buy up leases, but with the low margins and excessive problems with payments by government, bad infrastructure and continuing unrest, many have chosen to pull out.

In the other view it has shown that iraq is unafraid of playing hardball over its resources and despite what many think. Iraq is incharge of its oil and many would rather face other countries beaucreacy than Iraq's.

The Endpoint

So time for the monthly forecast from Mr Gothic Economist...

http://youtu.be/-LSxpxjMQ9c?t=1m5s (a bit of music for the mood)

We may see the first ever exit of a country from the euro-zone. It could be a marvellous move, or spell continuing economic black areas for the euro. My guess is with the tiredness of Germany and it's direct position on Cyprus, the currency exit looks very possible.

Negative growth is forecast for the next two months of the year with a continuing rise in inflation and maybe an increase interest rates soon to combat this, regardless of what Mark Carney (New bank of England head) is known for. It would be a bold move; maybe bold enough to reduce the ongoing increase in the cost of living.

A continued increase in the cost of the barrel of oil. Barak Obama may have visited the middle east to cool tensions, but the only thing that is possible from that is stagnation as the best outcome.

And the new Argentinian pope will keep on watching & Playing from the Vatican Bank.

Good Evening!
http://www.youtube.com/watch?v=F0PLZzi2JJo

February Gothic Viewpoint

The far outcries of a weary Britain’s Triple – A downgrade, and the far reaching wails of a Banshee that stay echoing with a once dominant oil giant could be the marks of February 2013, which Economics nerds remember.

Apart from that the dear lust I have in returning to the desolate sector which I call short-term trading. Research and hunger for a weakened Sterling drives me into vast array that this is 2013 and yes people need to be proactive in objects other than chess, in order to survive the Darwinian rules of life.

Iran goes Keynesian

For me, yes I will remember it for these two things, plus Iran’s new adventurous plans for 20 new uranium rich reactors.

Iran’s strategy of its announcement on the new nuclear reactor plans, may pay off in the long term. The strong decisions that Iran will not back down, regardless of international pressure on its nuclear programme as a known Islamic radical state, could pave the wave for new balance of payments to enter the country. Looking at in terms of the size of Iran, one could easily assume that Iran will have a power production surplus in cheap electricity, which could be provided to an oil dependent power consuming gulf.

As much as its nuclear programme is seen as a major threat to Israel and other nations, it could bring forth a new frontier of gulf power. Iran could enrich nuclear weapons, but instead it is taking positive approach in order to combat economic sanction bestowed upon them.

Wireless momentum

At the moment there are two groups pushing forward for one next big thing in world electronic devices. The ability to charge battery powered devices wirelessly from the handheld mp3s and smartphones, to the 12V battery in your car. The ‘Wireless power consortium’ and ‘Power matters’ alliances are the two big groups pushing this forward and competing. A future billion € industry that will maybe see the combination is well with wireless signals in order to keep the spectrum of signals generic and together, as the invisible spectrum gets more and more stuck together.

Only Fools and horses – The Long view

Well apart from the horse meat scandal. Some other people have silver lined their pockets in an array of marvelous moves within the economy.

As the currency attacks become far greater on central banks, deemed by hedge & Pension fund managers as being the new innocent flesh to be cleaned from bones, a sudden eye takes a glimpse where does it go from here?

Well with dilution in the power of central banks, the multiplier effect of virtual power transfers over to the hedge funds at a smiling rate, as they know after the submission of Bank of England to the new round of QE, they will easily take bets on world recession part II.

The Gothic Viewpoint

The central bank may take an extreme monetarism approach to curb the economy as economic collapse may look inevitable, pressing the political side of the coin in to reduce tax receipts in the short-term, in order to reduce the downturn in a rise in central bank interest rates. The proposal seems more to create a wave of laughing amongst some readers. But think of Europe in particular, what options are left before part II is not prophecy anymore?

So the Banshee has not given up yet haunting the tickers at the world indices and another wave of gothic worthy financial depression I may get to rant about. But one thing is for certain, that humans do become innovative, and are able to find ways to adapt to constraints. Well that’s the nice way to put it… now to listen to Rome!

Tata

Gothic Economist

The beautiful Economy

Friday marked the UK seeing negative growth again, letting flow wonderful politics into a more aching country of why the economy does not work the way people want it to...



















More onto bigger things in the world... Switzerland played host to the world economic forum, where the UK was on the firing line at trying to explain what their position for the future will hold with themselves and the very patient European Union. The UK is currently doing it's utmost to have special privileges given to itself in order that it can remain in the EU without having all the new sanctions put in place that every other member state will have implemented into their infrastructure. Though obviously this is very unlikely to happen, France took a firm root of describing the UK wanting an a la carte menu, where as Germany's foreign minister took a light cherry picking expression instead. Regardless of this the current UK ruling conservative party is leaving this to a referendum of 2017, but what companies in the UK do not need right now is uncertainty. Already financial institutions are seeking possible new bases in Frankfurt for new european operations as the 'City' now looks less of a stronghold for profitable conduction of business.

The US itself produced stress at the beginning of the year with it's comedy styling debt ceiling. The strain of the ceiling's pressure and stress on the markets could be eased if the policy was altered to allow the Federal reserve to borrow above the limit, whilst the US congress decides on which policy implementations to support it. I highly doubt that congress will let the US default on it's debts; it is as likely as me going to sleep in latex after a night out. Possible, but highly uncomfortable as much as I may not want to get out of it!

Onto the future... China and Japan seemed to have announced that they will attempt to build new relations with each other, though in the eye of beholder this will stay continue to remain a brewing cauldron.