World View: Investors Go Gaga as France, Germany Vow to Save Euro

This morning's key headlines from
  • Russia considering naval bases in Vietnam, Cuba, Seychelles
  • Turkey's alarm grows over PKK terrorists in northern Syria
  • From China: A piranha hunt turns into a fiasco
  • Investors go gaga as France, Germany vow to save the euro

Russia considering naval bases in Vietnam, Cuba, Seychelles

Vietnam's President Truong Tan Sang announced on Friday that Russia will set up a naval base for ship maintenance at its port of Cam Ranh. I would guess that this puts Russia squarely on the side of Vietnam in the South China Sea dispute. And with American support for the Philippines, there's plenty of room for military conflict. Russia has only one naval base outside of Russia - the one at Tartus, Syria -- so one can see why they're not anxious to lose it. According to Russia's naval chief, Vice Admiral Viktor Chirkov: 

We are indeed continuing work to ensure the stationing of Russian Navy forces outside the Russian Federation. As part of this work at the international level, we are discussing issues related to the creation of [ship] maintenance stations in Cuba, in the Seychelles and in Vietnam.

It was just a few months ago that I reported China was considering a naval base in the Seychelles, off the eastern coast of Africa, though apparently nothing has come of that. As for a Russian base in Cuba: blockade, anyone? Ria Novosti and Voice of Russia and International Business Times

Update: The BBC is reporting that Chirkov is denying that he made this statement.

Turkey's alarm grows over PKK terrorists in northern Syria

Although the issue of the Kurds in Syria is considered a sideshow by people in the West, it's clear that Turkey is becoming increasingly alarmed by the ability of the terrorist Turkistan Workers Party (PKK) to take advantage of the chaos of the Syrian war to build a base in Syria for launching terrorist attacks in Turkey. Turkey has been bombing PKK terrorist camps in northern Iraq for years, and may soon begin bombing PKK camps in northern Syria. Reuters

From China: A piranha hunt turns into a fiasco

A man had his palm bitten by a piranha fish in a river in southern China, alarming officials who realized that the South American flesh-eating fish had somehow reached China. So local officials decided to offer 1,000 yuan ($160) to the public for each piranha caught, in the hope of ridding the river of the fish. China's leading online trading platform, Taobao, began offering piranhas for express delivery at $1.80 per fish. Sooooooo, people began ordering piranhas online and turning them in the collect that $160. Want China Times

Investors go gaga as France, Germany vow to save the euro

Excited investors pushed stocks up again on Friday, after German Chancellor Angela Merkel and French President François Hollande vowed to do "everything" to save the euro, a day after European Central Bank (ECB) president Mario Draghi made the same vow: "Germany and France are deeply committed to the integrity of the euro zone. They are determined to do everything to protect the euro zone."

Investors are interpreting "do everything" as an intention to allow the ECB to "print money" and use it to purchase Spanish and Italian debt, even though that's illegal under existing European Union treaties, and even though much of the German public is opposed to it.

It's now been about five years since Fed chairman Ben Bernanke's Great Historic Experiment was put into operation. "Bernanke's historic experiment takes center stage" It was a truly remarkable time, because Bernanke was going to put his life's theory to the test -- that the Great Depression could have been avoided if only the Fed had lowered interest rates by a small amount. It was a truly historic moment, and five years later we know that the experiment was a total failure. The Fed lowered interest rates pretty much to zero, which is where they are now, and supplemented those steps with massive monetary and fiscal "money printing" policies. Similar actions were taken by the ECB, the Bank of England, the People's Bank of China, and other central banks. And the global economy is still slowing down. Ben Bernanke's Great Historic Experiment has been a failure. 

On Thursday, Britain announced the worst recession in its history. On Friday, the U.S. Commerce Department showed that the U.S. economy is colling quickly, at a time when "experts" and politicians wishfully had hoped that the recovery would be "self-sustaining." Germany is supposed to be the savior of Europe, but German newspapers are reporting an "uncomfortable and bitter truth": profits, sales and earnings of Germany companies are also cooling.

Bernanke's Great Historic Experiment never had a chance because, as I wrote in 2007, it overlooks generational changes in the U.S. and the world population. If you don't believe this, Dear Reader, then ask yourself the following question: Would you go back into debt today the way you did in 2003-2007? Or are you saving your pennies, for fear of losing your job or your savings? Most people would agree to the second option, and that's the point. You can't have a "self-sustaining" recovery when people are cutting back. Friday's report that the economy is cooling is based on evidence that people are spending less than they used to. People have been badly burned, and they will never go back to their old ways for the rest of their lives. That's why it won't be until the 2020s that a "self-sustaining" recovery can begin. Reuters and Bloomberg and Spiegel

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