It became necessary to destroy the town to save it.” - Unnamed US officer at Ben Tre, Vietnam, 1968

We’re back after 2 weeks holidays. Some of the links below date back to mid July but they are still relevant. The main issues are of course the Greek crisis and the Chinese financial market debacle, and both situations can be summarized in today’s quote from Patrick Chovanec’s Foreign Policy article.

Science, General Knowledge & Environment

The Mixed-Up Brothers of Bogotá – (Hat tip Lao Ho) – “It is rare to grow up as a twin at all, part of a primal pair; now each young man had a second, rare pairing, a second chance at an unusual kind of closeness. What did that kind of entanglement — a double-­doubling — mean for whom they would each become or what they might achieve?

Our deadliest problem? Not terrorism – (Hat tip Lao Ho) – “Terrorists killed nearly 18,000 people in 2013. That’s 1.5 per cent of the number killed by traffic.

History & Geopolitics

To Each Age Its Inequality – (Hat tip Lao Ho) – “If the twists and turns of economic history over the last 15,000 years and popular will are any guide, the “right” level of post-tax income inequality seems to lie between about 0.25 and 0.35.

The end of an affair for France and Germany – (Hat tip Lao Ho) – “Now it has acquired the formal status of plan B, Grexit is likely to come back. France would then be faced with an impossible choice: to flow with the German-led tide of Grexit, clearly as a subordinate, or to fight a losing battle to prevent a country from being forced out of the European family.

An Empire Strikes Back: Germany and the Greek Crisis – “The Germans made an example of Cyprus and now Greece. The leading power of Europe will not underwrite defaulting debtors. It will demand political submission for what help is given. This is not a message that will be lost in Europe, whatever the anti-Greek feeling is now.

L’Europe ne peut plus se contenter du fétichisme des équilibres financiers – “Angela Merkel et François Hollande doivent arrêter de faire comme s’ils étaient d’accord sur tout. Ils devraient au contraire tenir des conférences de presse communes pour exprimer et assumer leurs différends, ce qui susciterait ainsi un véritable débat politique dans l’opinion.

U.S., Russia: The Case for Bilateral Talks – “But holding such talks does not necessarily indicate that a resolution or even a de-escalation of the conflict is imminent. Issues still divide the two sides, particularly what kind of autonomy Ukraine’s central government should give the rebel regions.

The Turkish Enigma – “The potential interaction of Turkey in the Middle East is an immediate question. The mid-term involvement with Russia is a longer question. Its relation to Europe is the longest question. And its relationship with the United States is the single question that intersects all of these.

Conversation: Turkey’s Complicated Maneuvers – [Video] – “Stratfor Editor-in-Chief David Judson, Vice President of Global Analysis Reva Bhalla and Vice President of Tactical Analysis Scott Stewart discuss the implications of an Islamic State attack in Turkey.

In Mexico, Crime Is Bigger Than a Crime Boss – “Since 2012, Mexican organized crime has become increasingly balkanized amid government efforts to revamp public security institutions, and nationwide levels of organized crime-related violence have gradually diminished.

Finance & Economics

Greece’s brutal creditors have demolished the eurozone project – (Hat tip Lao Ho) – “Once you strip the eurozone of any ambitions for a political and economic union, it changes into a utilitarian project in which member states will coldly weigh the benefits and costs, just as Britain is currently assessing the relative advantages or disadvantages of EU membership.

Greece brought a latte to a gunfight – “And so, by burning its political capital with Brussels over five months of polished debate, convincing the Greek people of the righteousness of their cause of staying in the Euro but paying no German price for doing so, and then flipping to outright panic as their banking system collapsed, Greece has destroyed itself so that Germany can rule the zone.

Interpreting information in China’s stock markets – Michael Pettis “The historical precedents suggest that Beijing will be overly confident about its ability to manage rising financial instability, but this creates the risk that at some point it will not be able to do so.

It’s fine, there’s plenty of China bubble fear for everyoneMust read – “We believe the time to be worried about bubbles bursting is when (i) excess investment leads to deflation (China has close to record deflation), (ii) house prices fall (they are currently down by a record amount), (iii) we see FX outflows (which are now close to record highs), (iv) deposit growth slows down sharply (they are close to a record low), and (v) the labour market shows signs of full capacity (the job offer to application ratio is at an all-time time high).

China Destroyed Its Stock Market in Order to Save It – “Two years ago, China’s leaders adopted “market forces will be decisive” as the guiding principle behind a much-lauded push for reforms needed to reinvigorate China’s slowing economy. That principle now lies in ashes.

Picture of the day:

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About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi