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Monthly Archives: March 2014

The G 20 States Inflation Fell Again In January Across the Globe

“The rise in consumer prices slowed across the world’s largest economies for a second straight month in January, driven by falling inflation rates in several large developing economies.

The low level of inflation will worry central bankers in those developed economies that are witnessing a prolonged period of sluggish price rises. In the euro zone, the annual rate of inflation stands at 0.8%, well below the European Central Bank’s target of just below 2.0%.

The ECB’s governing council meets Thursday and faces some pressure to provide further stimulus to boost growth and ensure inflation returns to its target over coming years.

The Organization for Economic Cooperation and Development said Tuesday the annual rate of inflation in its 34 developed-country members rose to 1.7% from 1.6% in December, while in the Group of 20 leading industrial and developing nations it fell to 2.6% from 2.9%.

Weaker global price rises were the result of declines in the annual rate of inflation in India, Indonesia, Russia and Brazil. The annual rate of inflation was steady in China and increased in South Africa.

When inflation is low, companies, households and even governments have a harder time cutting their debt loads, a particular problem for a number of highly indebted nations in the euro zone. Businesses can see their profit margins squeezed, lessening their willingness to invest and hire workers.

When prices start to fall, consumers can postpone purchases in the expectation that they will get better value for their money in the future. That can, in turn, weaken economic activity and create further deflationary pressures. Following the difficulties Japan has experienced in getting out of its long period of deflation, central banks in other countries are anxious to avoid a similar struggle.

Separate figures released by European Union’s statistics agency on Tuesday showed prices of goods leaving the euro zone’s factory gates fell at the fastest annual rate since the end of 2009 in January, adding to concerns that the currency area faces a period of low inflation that may hinder its recovery.

The steepening decline in producer prices suggests the inflation rate is unlikely to pick up significantly in the coming months. Speaking in Bilbao, Spain on Monday, the head of the International Monetary Fund warned that a prolonged period of low inflation in the euro zone may derail the currency area’s fragile economic recovery, and said that the threat must be countered with additional monetary stimulus…..”

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Another #Bitcoin Site Bites the Dust After Being Robbed of Every Coin Held

“Another Bitcoin site disappears.

This time Flexcoin — which called itself a Bitcoin bank — has announced that it’s going out of business after a huge theft that has wiped it clean.

This is the announcement. There’s no sugarcoating it. Somehow all the Bitcoins were just taken.

On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC, dividing them into these two addresses:



As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately….”

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Global Markets Rally as Putin Pulls Back Troops Saying Use of Force is a Last Resort

Vladimir Putin said there’s no immediate need for Russia to invade eastern Ukraineas the Obama administration prepares sanctions to punish him for military action in the southern region of Crimea.

In his first public remarks since protesters overthrew Viktor Yanukovych last month, President Putin reserved the right to use force to protect ethnic Russians, though said there’s “no such necessity” at present. Troops stationed in Crimea, where Russia keeps its Black Sea fleet, have only been securing their bases, according to Putin.

“The use of the military is an extreme case,” he told reporters at his residence near Moscow. “But we have a direct request from a legitimate president, Yanukovych, on military aid to protect Ukrainian citizens.”

Russia is tussling with the West for influence over Ukraine, which claims its former Soviet master seized control of Crimea by deploying troops to block army bases and airports. The U.S. and Europe have threatened sanctions against Russia and are racing to seal billions of dollars of aid to help the new administration in Kiev avoid bankruptcy. Russia says Ukraine owes state-controlled energy giant OAO Gazprom $2 billion.

Kerry Visit

As Secretary of State John Kerry arrived in Kiev for talks with the new government, officials traveling with him said sanctions such as travel and asset bans on Russian individuals and institutions are likely within days if Russia doesn’t de-escalate its actions in Ukraine and return its forces to barracks. They spoke on condition they not be named because the penalties aren’t finalized.

Putin’s comments signal the crisis, the worst between Russia and the West since the Cold War ended, won’t immediately escalate. The standoff roiled markets as Russia held military exercises on Ukraine’s eastern border. The drills ended today….”

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Global markets rebound 

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Sworn Testimony From Ex-CIA Pilot: No Planes Hit the Twin Towers

“A former CIA and civilian pilot has sworn an affidavit, stating that no planes flew into the Twin Towers as it would have been physically impossible.

John Lear, the son of Learjet inventor, Bill Lear, has given his expert evidence that it would have been physically impossible for Boeing 767s, like Flights AA11 and UA175 to have hit the Twin Towers on 9/11, particularly when flown by inexperienced pilots:

‘No Boeing 767 airliners hit the Twin Towers as fraudulently alleged by the government, media, NIST and its contractors’, he stated in the affidavit.

‘Such crashes did not occur because they are physically impossible as depicted, for the following reasons: in the case of UAL 175 going into the south tower, a real Boeing 767 would have begun ‘telescoping’ when the nose hit the 14 inch steel columns which are 39 inches on center.

‘The vertical and horizontal tail would have instantaneously separated from the aircraft, hit the steel box columns and fallen to the ground.

‘The engines when impacting the steel columns would havemaintained their general shape and either fallen to the ground or been recovered in the debris of the collapsed building.

‘No Boeing 767 could attain a speed of 540 mph at 1000 feet above sea level ‘parasite drag doubles with velocity’ and ‘parasite power’ cubes with velocity.

The fan portion of the engine is not designed to accept the volume of dense air at that altitude and speed.

The piece of alleged external fuselage containing 3 or 4 window cutouts is inconsistent with an airplane that hit 14 inch steel box columns, placed at over 500 mph.  It would have crumpled.

No significant part of the Boeing 767 or engine could have penetrated the 14 inch steel columns and 37 feet beyond the massive core of the tower without part of it falling to the ground.

‘The debris of the collapse should have contained massive sections of the Boeing 767, including 3 engine cores weighing approximately 9000 pounds apiece which could not have been hidden. Yet there is no evidence of any of these massive structural components from either 767 at the WTC. Such complete disappearance of 767s is impossible.

The affidavit, dated 28th January 2014 is part of a law suit being pursued byMorgan Reynolds in the United States District Court, Southern District, New York.

In March 2007, Reynolds, a former chief economist under the George W Bush administration filed a Request For Correction with the US National Institute of Science and Technology citing his belief that real commercial jets (Boeings) did not hit the WTC towers.

Although the 9/11 Truth movement initially rejected the ‘no-planes’ theory as too outlandish, after scientific and rational analysis, it has become a widely accepted explanation of the evidence collected.

Unlike any other form of statement, an affidavit becomes truth in law, if it is not rebutted.  It will now be up to critics of the theory to present their evidence and analysis to rebut the statement point by point.  If they do not – or cannot – then the US government will be obliged to admit that the account given by the 9/11 Commission is wrong.

The 65 year old retired airline captain and former CIA pilot – who has over 19,000 hours of flight time — also drew attention to the inexperience of the pilots who allegedly flew the planes….”

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Unsealed court document

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Big Brother Fun

[youtube://http://www.youtube.com/watch?v=u80HdDYs3eE#t=161 450 300]

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Lessons Learned From the Release of the Fed’s Transcripts During the 2008 Financial Crisis

“There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false.


The so called Fed’s transcripts, which were released last week, fall into the latter category. The transcripts (1,865 pages) reveal the details of 14 emergency meetings of the Federal Open Market Committee (FOMC) in 2008, when the financial crisis was at its peak and the Fed braintrust was deliberating on how best to prevent a full-blown meltdown. But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized.

What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time. They take advantage of the fact that people simply forget a lot of what happened during the crisis and, as a result, absolve the Fed of any accountability for what is likely the crime of the century. It’s an accomplishment that PR-pioneer Edward Bernays would have applauded. After all, it was Bernays who argued that the sheeple need to be constantly bamboozled to keep them in line. Here’s a clip from his magnum opus “Propaganda”:

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.”

Sound familiar? My guess is that Bernays’ maxim probably features prominently in editors offices across the country where “manufacturing consent” is Job 1 and where no story so trivial that it can’t be spun in a way that serves the financial interests of the MSM’s constituents. (Should I say “clients”?) The Fed’s transcripts are just a particularly egregious example. Just look at the coverage in the New York Times and judge for yourself. Here’s an excerpt from an article titled “Fed Misread Crisis in 2008, Records Show”:

“The hundreds of pages of transcripts, based on recordings made at the time, reveal the ignorance of Fed officials about economic conditions during the climactic months of the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the crisis.” (“Fed Misread Crisis in 2008, Records Show”, New York Times)

This quote is so misleading on so many levels it’s hard to know where to begin.

First of all, the New York Times is the ideological wellspring of elite propaganda in the US. They set the tone and the others follow. That’s the way the system works. So it always pays to go to the source and try to figure out what really lies behind the words, that is, the motive behind the smokescreen of half-truths, distortions, and lies. How is the Times trying to bend perceptions and steer the public in their corporate-friendly direction, that’s the question. In this case, the Times wants its readers to believe that the Fed members “misread the crisis”; that they were ‘behind the curve’ and stressed-out, but–dad-gum-it–they were trying their level-best to make things work out for everybody.

How believable is that? Not very believable at all.

Keep in mind, the crisis had been going on for a full year before the discussions in these transcripts took place, so it’s not like the members were plopped in a room the day before Lehman blew up and had to decide what to do. No. They had plenty of time to figure out the lay of the land, get their bearings and do what was in the best interests of the country. Here’s more from the Times:

”My initial takeaway from these voluminous transcripts is that they paint a disturbing picture of a central bank that was in the dark about each looming disaster throughout 2008. That meant that the nation’s top bank regulators were unprepared to deal with the consequences of each new event.”

Have you ever read such nonsense in your life? Of course, the Fed knew what was going on. How could they NOT know? Their buddies on Wall Street were taking it in the stern sheets every time their dingy asset pile was downgraded which was every damn day. It was costing them a bundle which means they were probably on the phone 24-7 to (Treasury Secretary) Henry Paulson whining for help. “You gotta give us a hand here, Hank. The whole Street is going toes-up. Please.”

Here’s more from the NYT:

“Some Fed officials have argued that the Fed was blind in 2008 because it relied, like everyone else, on a standard set of economic indicators. As late as August 2008, “there were no clear signs that many financial firms were about to fail catastrophically,” Mr. Bullard said in a November presentation in Arkansas that the St. Louis Fed recirculated on Friday. “There was a reasonable case that the U.S. could continue to ‘muddle through.’ (“Fed Misread Crisis in 2008, Records Show”, New York Times)

There’s that same refrain again, “Blind”, “In the dark”, “Behind the curve”, “Misread the crisis”.

Notice how the Times only invokes terminology that implies the Fed is blameless. But it’s all baloney. Everyone knew what was going on. Check out this excerpt from a post by Nouriel Roubini that was written nearly a full year before Lehman failed:

“The United States has now effectively entered into a serious and painful recession. The debate is not anymore on whether the economy will experience a soft landing or a hard landing; it is rather on how hard the hard landing recession will be. The factors that make the recession inevitable include the nation’s worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets that is getting worse than when it started last summer; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created and the unemployment rate is sharply up; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income. As private consumption in the US is over 70% of GDP the US consumer now retrenching and cutting spending ensures that a recession is now underway.

On top of this recession there are now serious risks of a systemic financial crisis in the US as the financial losses are spreading from subprime to near prime and prime mortgages, consumer debt (credit cards, auto loans, student loans), commercial real estate loans, leveraged loans and postponed/restructured/canceled LBO and, soon enough, sharply rising default rates on corporate bonds that will lead to a second round of large losses in credit default swaps. The total of all of these financial losses could be above $1 trillion thus triggering a massive credit crunch and a systemic financial sector crisis.” ( Nouriel Roubini Global EconoMonitor)

Roubini didn’t have some secret source for data that wasn’t available to the Fed. The financial system was collapsing and it had been collapsing for a full year. Everyone who followed the markets knew it. Hell, the Fed had already opened its Discount Window and the Term Auction Facility (TAF) in 2007 to prop up the ailing banks–something they’d never done before– so they certainly knew the system was cratering. So, why’s the Times prattling this silly fairytale that “the Fed was in the dark” in 2008? ….”

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Amnesty International: Trigger Happy- Israel’s Use of Excessive Force In the West Bank

“Out of nowhere many soldiers jumped out and
ambushed Samir. They shot him first in the leg, yet
he managed to run away towards the village. But
how far can an injured child run? Twenty, maybe
30, metres? They could have easily arrested him,
especially when he was injured, but instead they
shot him in the back with live ammunition… To
me this is premeditated murder.”
Malek Murrar, 16, interviewed on 20 September 2013 at the site where he had witnessed his friend Samir Awad being shot earlier
in the year.
Samir Awad was just 16 years old when Israeli soldiers shot and killed him in January 2013
as he fled from the place where a number of Israeli soldiers ambushed a group of Palestinian
children who were protesting against the construction of Israel’s fence/wall, which cuts across
the village of Bodrus, near Ramallah in the Occupied Palestinian Territories (OPT), where
they lived. Eyewitnesses attested that Samir Awad and the other children were posing no
serious threat to the soldiers who fired at them, or to others. Yet, more than one year later,
the Israeli authorities have failed to ensure any accountability for his death or for their
soldiers’ use of live fire against Samir Awad and the other children.
The circumstances of the killing of Samir Awad were reminiscent of other killings of
Palestinians during demonstrations against Israel’s continued military occupation in the West
Bank that have occurred in recent years. According to Amnesty International’s research, he
was among the first of at least 22 Palestinian civilians to be killed by Israeli forces in the
occupied West Bank in 2013, four of whom were children. Thousands of other Palestinians
were wounded by Israeli forces in the same year….”

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We Are Not All Ukranians Senator McCain

As with all politics it is hard to know what the real truth is, given all the spin doctors in play. Senator McCain was recently quoted as saying “we are all Ukranians.” While the philosophical apects of that statement may be true, we have seen that fighting for democracy and freedom is the biggest bunch of bullshit being put on our plates for at least the recent past if not for the better part of the last century.

Perhaps Russia is the one strong hold the west can not control. Perhaps this pisses the west off more than anything. It is a wonder why Snowden chose Russia to hide out.

Perhaps the west, primarily Europe, is not happy with Russia having a strong grip over oil and gas and would like to have Ukaraine in the EU clutches to further control resources and pipelines.

I’m not done analyzing this scenario yet, but posturing by the west and producing idle threats will not help the situtation.



“After a week of mystery as to his whereabouts, ousted Ukrainian President Viktor Yanukovych surfaced on Friday, February 28 — in Russia. At a press conference in the city of Rostov-on-Don, in southwestern Russia, Yanukovych was defiant and still vainly hoping to be restored to power. The Russian state-run “news” agency, RT (Russia Today)  provided an account of his media appearance, which included these excerpts:

Ousted Ukrainian President Viktor Yanukovich pledges to fight for Ukraine. He addressed a press conference in southern Russia, appearing in public for the first time since he fled Kiev amid bloody riots.

“No one has ousted me,” Yanukovich told reporters. “I had to leave Ukraine because of a direct threat to my life and the lives of my family.”

According to Yanukovich, “nationalist fascist-like fellows representing the absolute minority of Ukrainians” took over power in Ukraine.

He described the situation in Ukraine as “complete lawlessness,” “terror” and “chaos”, saying that the politicians, including MPs [Members of Parliament], have been threatened and are working under threats…. The current Ukrainian parliament is “not legitimate,” and the people in power are spreading the propaganda of violence, Yanukovich asserted.

RT’s Irina Galushko, who was covering the story, tweeted:

#Yanukovich?: I’m an acting president; I haven’t resigned, I haven’t been impeached, and I’m still alive (3ways a pres could be ousted – IG)

Yanukovych vanished from the Ukrainian capital of Kiev on Sunday, February 23, as the protests, riots, and violence that had been building since November, along with mass defections by his former political allies, made it clear that his regime was no longer viable. According to various reports, the 63-year-old Yanukovych left Kiev in a limousine convoy with a handful of bodyguards and his 39-year-old girlfriend Lyubov Polezhay, leaving his wife behind.

The party fled by ground and then by helicopter, with speculation that it was headed either to Ukraine’s southern Crimea region (the Black Sea ports of Sevastopol or Balaklava being most mentioned as destinations) or eastward to the Donetsk region, where Yanukovych was born. Both of these areas have large Russian populations and provided much of his political base. His first language is Russian, and his lack of proficiency in the Ukrainian language did not help to endear him to the Ukrainian people, who have suffered under Russian and Soviet dominance for many generations.

Yanukovych, who was a member of the Communist Party of the Soviet Union when Ukraine was still part of the Soviet Union, is an ally of Russian President Vladimir Putin, and most of the political blocs that supported Yanukovych are composed of “former” communists who simply changed their labels and adopted Ukrainian nationalist rhetoric. Yanukovych got his big break into politics in 2002 when President Leonid Kuchma, a former member of the Central Committee of the Communist Party of Ukraine, appointed him prime minister.

But now Yanukovych is on the run, a hunted man. On Monday, February 24, the new interim government of Ukraine issued an arrest warrant for him and other former top officials, charging them with “mass killing of civilians.” Reportedly, at least 82 people, mostly demonstrators, were killed in clashes during the demonstrations in Kiev’s Maidan Square.

In scenes reminiscent of the fall of Saddam Hussein in Iraq, many of the news stories out of Ukraine have focused on Yanukovych’s luxurious residence, known as the “bling palace,” and his extensive automobile collection. As in Putin’s Russia, the Ukraine under Yanukovych (as well as under his predecessors Kuchma and Kravchuk) has been rife with corruption and crony “capitalism,” with former communist officials transformed into billionaire oligarchs who have “privatized” former state resources and enjoy special privileges and government contracts.

“New” Government, Same Old Oligarchs

One of  Yanukovych’s most important supporters has been Rinat Akhmetov, reputedly a former mafia enforcer, now an energy and metals tycoon whom Forbes, in  2013, listed as #47 among the world’s richest billionaires, with a personal net worth of $15.4 billion. According to the Ukrainian edition of Forbes, the various businesses in Akhmetov’s extensive empire obtained 31 percent of all state contracts in January 2014.

Yanukovych’s son Oleksandr tops even this, says Forbes, having “won” 50 percent of state contracts in the same period. Akhmetov, who was a member of  the Verkhovna Rada, Ukraine’s 450-member unicameral parliament, until stepping down in 2012, reportedly still controls a group of around 50 MPs (Members of Parliament), mostly in Yanukovych’s Party of Regions.

Dmytro Firtash, an energy/chemicals/banking/real estate magnate allegedly controls another 30 MPs. Billionaire Vadim Novinsky, Ukraine’s third richest man, is an MP in the Party of Regions and also swings considerable political weight. Banking oligarch Serhiy Tihipko (alternately spelled Sergei Tigipko), a Party of Regions MP and former governor of Ukraine’s central bank, is one of the players frequently cited as a contender in the upcoming presidential elections, scheduled by Parliament for May 25 of this year.

Another power player who has remained largely under the media radar during the past few months of turmoil is metals and media mogul Victor Pinchuk, Ukraine’s second richest oligarch. He is a former MP and is married to the daughter of “former” communist President Leonid Kuchma. He not only retains influence in parliament, but through his media holdings influences public opinion. His Victor Pinchuk Foundation funds numerous NGOs and works closely with the George Soros-aligned Open Ukraine Foundation and the Arseniy Yatseniuk Foundation…..”

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More insight on the topic

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Forbes’ Contributor Robin Lewis Sounds the Alarms Over Currency War

“A global currency war is raging, and the results may not be pretty, says Forbes contributor Robin Lewis.

In the United States, exports may benefit temporarily, but not for the long term, he writes.

And overall, “what if this time is different from all past deflationary and inflationary cycles? What if the international monetary system destabilizes and collapses, and inflation does not rise sharply?” Lewis says.

“Just as the Fed’s quantitative easing was supposed to juice our economy, but instead, simply juiced the traders, why would anybody believe that the central banks around the world could stop the enormous forces being set in motion in” so many countries.

People around the world may come to view paper money as worthless, Lewis writes.

The result could be “at best, a global Japan-style deflation, at worst, a worldwide depression,” he says. “Then, maybe we’ll go back to bartering, where borrowing, debt and interest rates will not exist. A time when the value of goods and services actually meant something. Hmm.”

Fears of a messy end to global currency wars have been a current hot topic….”

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Traders Place Bets on the VIX After a Releativley Calm 2013

“Options (VIX) tied to gains in the benchmark gauge for American stock volatility reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the last year won’t last.

A series of calls that appreciate in tandem with the Chicago Board Options Exchange Volatility Index climbed to the highest since May 2007 relative to puts, according to data compiled by Bloomberg. The increase reflects bets that swings measured by the VIX will widen this year after the Standard & Poor’s 500 Index rose 30 percent in 2013 without ever suffering a decline of 10 percent or more.

The intensifying standoff between Ukraine and Russia in the Crimea added to concerns facing global stock investors. U.S. equities completed a rebound last week from a selloff spurred by emerging-market turmoil that erased 5.8 percent between Jan. 15 and Feb. 3, the biggest retreat since June.

“Any time geopolitical risks escalate, especially in a major way — and we’d say this is a major escalation and a major increase in risk — you subject global stock markets to increased volatility,”Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, which manages about $1.5 billion in assets, said by phone yesterday. “The impact may end up being modest if the situation de-escalates, but right now there is no sign of that.”

Ukraine Crisis

The crisis in Ukraine deteriorated as Russian President Vladimir Putin won parliamentary backing to send troops into Russia’s southern neighbor. Ukraine, which put its forces on combat readiness, said over the weekend an invasion would be “an act of war,” and U.S. President Barack Obamawarned Russia not to intervene. The conflict follows a month in which global equities, bonds and commodities rose together for the first time since July and the S&P 500 rallied 4.3 percent to an all-time high after a 3.6 percent decline in January.

Futures on the S&P 500 slid 0.8 percent at 9:15 a.m. in London today. The HSI Volatility Index, which measures the cost of options on the Hong Kong equity gauge, jumped 10 percent, while the Nikkei Stock Average Volatility Index climbed 7. Europe’s VStoxx Index surged 17 percent, the most since January, to 19.56.

Calls predicting a 10 percent gain in the VIX cost 18.2 points more than puts betting on a 10 percent decrease as of Feb. 28, according to three-month options data compiled by Bloomberg. That’s the biggest gap since before the start of the financial crisis.

Market Movement….”

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Global Markets Fall While Commodities Shoot Higher on the Developing Ukraine Turmoil

“U.S. stock-index futures fell, tracking a global selloff in equities, as Russia’s threat to invade Ukraine sent investors searching for havens.

Citigroup Inc. and Bank of America Corp. each lost 1.5 percent as financial stocks tumbled. The Market Vectors Russia ETF tracking companies from Gazprom OAO to OAO Lukoil dropped 8.2 percent. Yandex NV, a U.S.-listed online search engine operating in Russia, slumped 8.7 percent.

Futures on the S&P 500 (SPX) expiring this month lost 0.8 percent to 1,843.00 at 8:05 a.m. inNew York. Dow Jones Industrial Average contracts dropped 104 points, or 0.6 percent, to 16,203 today.

“We never know what will happen with Russia and this always makes people nervous,” said Michael Morris, head of equities at Mitsubishi UFJ Asset Management in London. “You have a president that is trying to expand Russia’s global political powers but the country may not have the capacity for this fight. It’s too soon to know what the outcome might be but I’m not at all surprised to see the markets down today.”

The tensions sent stocks tumbling around the world, with the MSCI All-Country World Index sliding 0.9 percent. Russian stocks had their biggest decline in five years and the Europe Stoxx 600 plunged 2 percent, its biggest slide in five weeks. Emerging-market stocks dropped 1.5 percent. Gold soared 1.8 percent and Treasuries rallied.

Ukraine Tension

Ukraine mobilized its army and called for foreign observers after Russian President Vladimir Putingot approval to use military force in Ukraine. Groups of as many as 100 Russian soldiers attacked Ukrainian army units in Crimea, where ethnic Russians comprise the majority, the border guard service said.

U.S. Secretary of State John Kerry is traveling to Kiev today after warning of possible sanctions against Russia. European Union foreign ministers will hold an emergency meeting today, while the Group of Seven nations suspended planning for the Group of Eight summit in Russia in June.

The geopolitical tension comes after the S&P 500 rose 4.3 percent in February, the most since October, to end the month at a record 1,859.45. Investors have been speculating that recent weakness in data from housing to jobs was caused by weather and that the Federal Reserve will continue to support the economy.

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 175 percent from a 12-year low.

Volatility Spike….”

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The Yuan’s Descent Brings on Opposite Reaction

“SHANGHAI—China’s sudden move to engineer a weaker yuan to curb heavy inflows from abroad has led to an unexpected and undesirable upshot: a sharp increase in cash flowing into its financial system.

Investors have been buying up U.S. dollars and selling yuan over the past two weeks, leading to local currency flooding China’s money markets and sending short-term interest rates plummeting. That has concerned economists, however, as it contradicts Beijing’s campaign since June to keep borrowing costs high to rebalance a credit-driven economy and rein in risky financing such as the loosely regulated “shadow-banking” sector.

The policy makers’ dilemma also shows how complex it is to manage the vast state-controlled economy and how interlinked the entire financial system is.

“If you want to deleverage the economy, you have to keep interest rates high and liquidity tight. If you weaken the currency, liquidity will increase. The two objectives are conflicting. So what is it that the central bank wants to achieve?” said Teck Kin Suan, an economist atUnited Overseas Bank U11.SG -0.87% in Singapore.

The problem has arisen as the People’s Bank of China has been guiding the yuan weaker, seeking to discourage speculative foreign funds that profit from high interest rates and gains in the currency. Those flows are a problem as they add excess cash to the economy and contribute to soaring property prices.

The central bank’s moves to guide the yuan appear to have worked. The currency Friday suffered its biggest one-day fall since its revaluation in 2005. The yuan is down 1.7% since reaching a record high in January.

But while it is seeking to block cash from abroad entering China, the increased supply of the Chinese currency in the financial system because of its foreign-exchange intervention is still adding liquidity to the banking system.

As a result, money-market interest rates are falling with the benchmark cost of short-term loans among banks–the weighted average of the seven-day repurchase agreement rate–down to 2.83%, from 3.84% two weeks ago and a high of 8.94% on Dec. 23.

The rate is now at levels seen before an unprecedented cash crunch that Beijing engineered in June to help curb explosive growth of shadow banking activities. Since the summer credit crisis, the Chinese central bank has allowed three more cash squeezes to occur in October, December and January, pushing the benchmark borrowing cost to average around 4%-5%.

Now with easy-money rates back though, worries are resurfacing that banks will feel emboldened again to take on the riskiest forms of lending, economists said.

“To me, deleveraging is still a more critical task for the central bank right now because the risks associated with shadow banking and local government debt are much higher. They will have to make a choice,” said Mr. Suan.

Some economists say managing the world’s second-largest economy, ranging from ensuring growth doesn’t slow too much to tackling rising financial risks and deterring speculative so-called hot money inflows, means the authorities can sometimes adopt short-term measures at the expense of achieving long-term goals….”

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