This morning's key headlines from GenerationalDynamics.com:

• European investors cheer when ECB hints at a new 'big bazooka'
• Raul Castro accuses U.S. of attempting Libya-like overthrow
• Conflicting reports about fleet of Russian warships in Mediterranean
• Turkey threatens military retaliation against Syrian Kurds
• Russia reconsidering ban on sale of S-300 missiles to Iran
• Debka: Iran's Supreme Leader expects the Mahdi to come soon

European investors cheer when ECB hints at a new 'big bazooka'

It was another one of those Alice in Wonderland days. Investors were popping champagne corks again on Thursday, when stock share values surged, thanks to the following statement by Mario Draghi, the head of the European Central Bank: 

To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate. Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. Believe me, it will be enough.

Readers will recall that Spain's 10-year bond yields (interest rates) spiked as high as 7.5% on Monday, indicating a full-fledge bond panic in progress. So Draghi's remarks were intended to stop the panic. He was saying -- actually, he was hinting -- that the ECB would "print money" and use it to purchase massive amounts of Spanish bonds, increasing demand and prices, and pushing down yields (interest rates). 

The statement was an act of desperation, for two reasons. First, as we've already seen with Greece, big bailouts only make things worse when the fundamentals are unchanged, and they certainly would be in this case, since Spain would then be able to just keep borrowing more and more and spending more and more without ever solving the problem. And second, the Germans are opposed to these massive bailouts, because they end up affecting the German taxpayer. The Germans also like to point out that it's illegal, according to the EU treaty, for the ECB to bail out any individual country. But let's face it, being illegal hasn't stopped any politician in Washington, Brussels or London from doing anything. At any rate, Draghi's announcement lowered Spain's 10-year bond yields to 6.93% on Thursday, still a crisis level. Bloomberg

Raul Castro accuses U.S. of attempting Libya-like overthrow

Cuban President Raul Castro accused the United States on Thursday of seeking an overthrow of the Cuban government similar to Arab Spring countries. He charged that government opponents on Cuba, supported by the United States and other western countries, "were creating the conditions and aspiring to one day have happen here, what happened in Libya and what they want to happen in Syria." Castro was attending celebrations in Guantánamo, Cuba, to commemorate National Rebellion Day, which recalls the assault in 1953 on the Moncada and Carlos Manuel de Cespedes garrisons. On July 26, 1953, on the 100th birthday of national hero Jose Marti, the youth of the generation of the centenary, including Raul and Fidel Castro, attacked the barracks, and launched the Cuban revolution that brought Fidel Castro to power in 1961. Reuters and Prensa Latina (Cuba)

Turkey threatens military retaliation against Syrian Kurds

Syrian president Bashar al-Assad, fighting a growing rebel presence in the two largest cities, Damascus and Aleppo, has turned control of parts of northern Syria over to militant Kurds affiliated with the terrorist Kurdistan Workers' Party (PKK). Turkey's prime minister Recep Tayyip Erdogan reacted on Thursday: 

We will not let the terrorist group to set up camps [in northern Syria] and pose a threat to us. No one should attempt to provoke us. We will not bow to provocation but rather take whatever steps are necessary against terrorism.

Syrian Kurds have taken control of several towns near Turkey's border and raised PKK flags, apparently after Syrian forces were withdrawn to fight the rebel forces. McClatchy and Zaman (Istanbul)

Russia reconsidering ban on sale of S-300 missiles to Iran

Iran is suing Russia for $4 billion in the Court of Arbitration in Geneva for canceling a 2007 contract to sell five divisions of S-300 long-range anti-aircraft missile system worth an estimated $800 million to $1 billion. Russia canceled the contract after the UN Security Council approved sanctions on Iran on June 9, 2010. By threatening to win a $4 billion fine, Iran hopes to blackmail Russia into fulfilling the contract. It was President Dmitry Medvedev who imposed the ban in 2010, but President Vladimir Putin has been reversing some of Medvedev's policies and taking a harder line against the West. The missiles, which have both defensive and offensive capabilities, including the ability to carry a nuclear weapon, would definitely be a violation of the UN sanctions that Russia agreed to. Jamestown

Conflicting reports about fleet of Russian warships in Mediterranean

A fleet of 10 Russian warships, plus escort vessels, has entered the Mediterranean Sea, carrying large numbers of Russian marines, raising concerns that the Russians are planning to intervene militarily in Syria, to protect their ally, Syria's president Bashar al-Assad. Russia's only Mediterranean port is Tartus, in Syria. However, Russia's naval chief, Vice Admiral Viktor Chirkov, said, "The joint fleet flotilla will not enter the port of Tartus. It is carrying out military drills in the Mediterranean."

However Debka, which gets some things wrong, is quoting its intelligence sources as saying that the Russian fleet is standing ready to intervene if things start to go badly for al-Assad. The fleet could also serve as a bargaining chip in a deal to replace al-Assad with a new government that would remain pro-Russian. Monday's threats by the al-Assad regime to use its chemical weapons against "foreign adversaries" has substantially heightened tensions throughout the region, and it would not take much provocation at this point for someone to attack someone, possibly even by miscalculation. Ria Novosti (Moscow) and Debka

Debka: Iran's Supreme Leader expects the Mahdi to come soon

As I've been reporting for years, Iran's top leadership, led by Supreme Leader Ayatollah Ali Khamenei, are fervent believers in the Mahdaviat -- the Shia Muslim belief that the Mahdi (or "the 12th Imam" or "the Hidden Imam") is coming to save mankind. This belief is roughly equivalent to the Christian belief in the second coming of Christ, or the Buddhist belief in the Maitreya -- that a new Buddha is to appear on earth, and will achieve complete enlightenment (See my 2009 report, "Theological split in Iran widens as opposition protests continue" for details).

Now Debka is reporting that its intelligence sources are saying that Khamenei is predicting that the coming of the Mahdi is imminent, and that it's tied to the "divine achievement" of developing nuclear weapons capabilities: 

However, the inner circle of Supreme Leader Ayatollah Ali Khamenei and the Revolutionary Guard Corp’s top command refuse to bow to fear and urge diplomatic assertiveness as the only way to get Iran where it wants to go.

In recent weeks, our sources report, Khamenei’s messengers have been going around parliament and quietly assuring lawmakers that “divine achievement” was very close and only a little more patience was required for enduring world sanctions.

Personnel at the Revolutionary Guards nuclear and missile units received the same assurance, and pep talks were given to raise morale in the army. The “Coming of the Mahdi” was at hand, they were told, a euphemism for completion of the nuclear fuel cycle, and soon “Islamic civilization would rule the world."

Apparently Khamenei isn't playing with a full deck. I don't know whether this makes him less dangerous or more dangerous. Debka

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