For just €250,000 you can buy a home in Greece and become an EU resident – Quartz

Non-Europeans seeking a fast-track route to EU residency now have a new option—buying cheap Southern European property. As of this year, Portugal is offering super-speedy residency applications to anyone who buys a property over €500,000 ($658,150). Cyprus is offering the same deal with a €300,000 ($394,890) threshold. Both these countries are being undercut by Greece, however, which is giving speedy residency to buyers of any property from just €250,000 ($329,075) and gave out its first property-tied residency to a Chinese man Aug. 8.

For outsiders, the schemes have clear attractions. Residency permits act as a form of visa to all the Schengen Area’s 26 countries, including all of Western Europe except the UK. The permits require only token residency in the country where the property is located, meaning that buyers can use it as a springboard to live (but not work—that requires another permit) elsewhere in Europe. Portugal, for example, only asks that buyers spend a minimum of seven days per year in the country for the permit’s five-year duration, meaning holiday homes are also valid. Crucially, literature from real estate agents (pdf) suggests that if applicants want to move on to full citizenship, they’ll be able to do so before the minimum time limit set for normal migrants.

For just €250,000 you can buy a home in Greece and become an EU resident – Quartz

Want To Live In Europe? “Buy” A Residency Permit

In Cyprus, the requirement is less: a €300,000 property; in Greece, with its dire economic crisis, €250,000 is enough. That amount can buy property in a tony Athens neighborhood, or a renovated villa on a Greek island. The residency permit is good for five years and may be extended to other family members.

Spain is about to kick off its program, setting the minimum property investment at €500.000 in exchange for a one-year visa, renewable every two years after that. The Bank of Spain reports that foreign investment in the Spanish property market has increased during the economic crisis, mainly due to the sharp fall in prices.The targets for these incentives are primarily investors from Asia, Russia and America. Reportedly, more than 20 Chinese nationals land in Cyprus each day searching for property.

Want To Live In Europe? “Buy” A Residency Permit

North Korea Conducts Ejection Test of Sub-Launched Missile | Washington Free Beacon

U.S. intelligence agencies observed the land-based test of the ejection launcher in late October at a facility known to be a key development center for the communist state’s submarine-launched ballistic missile (SLBM) program, according to two officials with access to intelligence reports.

The launcher also could be used by North Korea to launch ballistic or cruise missiles from the deck of a freighter or other kinds of surface vessels.

A Pentagon spokesman declined to comment on the ejection test, citing a policy of not discussing intelligence matters.

The Washington Free Beacon first reported in August that North Korea had launched a program to develop ballistic missile submarines. The program remains clouded in secrecy. North Korea’s government has not responded to reports of the program.

North Korea Conducts Ejection Test of Sub-Launched Missile | Washington Free Beacon

Looking at the path North Korea is on, it would appear that it is positioning itself to destroy South Korea and threaten the US with EMP weapons.

How the Middle East’s First Nuclear War Started – Mathew Burrows – POLITICO Magazine

The afternoon had been a blur, but it was now clear to him that the Saudis and Israelis were colluding to attack Iran, and that he was helping them coordinate their plans. Who should he tell? And how could he prove what was happening?

He thought about taking the thumb drive right to the American embassy, but he didn’t want to put his family in the states in jeopardy. He was afraid Bill would use them as leverage against him.

That’s when his phone rang. The voice on the other told him where to deliver the Paris package.

Jamil got out of bed and did what he was told. And then he called his assistant and told her to book him a ticket to New York.

It was too late anyway.

The Saudis launched a missile attack against Iran on Christmas Day. Days later the Israelis followed with an air attack on various Iranian military and civilian installations. The attacks devastated Iran. Initial casualties reached 40,000 as a direct result of exposure to chemically toxic substances. This did not include the destruction from the radioactive fallout that contaminated an important supply of water, condemning millions of Iranians to an increased rate of bone cancer as well as a significant rise in birth defects for decades, if not centuries to come.

The Saudis had counted on their missile defense shield, but with the withdrawal of U.S. technicians, who had helped run it, Iran succeeded in overwhelming the system with a nuclear missile—the Iranians actually had an advanced weapons program all along.

Israel’s defense shield largely protected the country against incoming Iranian missiles, although Hezbollah and Hamas succeeded in perpetrating several devastating terrorist attacks in Haifa and Tel Aviv.

Russia accuses West of seeking regime change in Moscow –

With tensions simmering over the deadly crisis in Ukraine, Russia has accused the West of seeking regime change in Moscow, prompting renewed comparisons with the Cold War era.

Foreign Minister Sergei Lavrov of Russia made the comments at an event Saturday as he attacked Western sanctions on Russian interests.

“As for the concept behind the use of coercive measures, the West is making it clear it does not want to try to change the policy of the Russian Federation … they want to change the regime — practically no one denies this,” Lavrov said at a meeting of a foreign and domestic policy council in Moscow.

Russia accuses West of seeking regime change in Moscow –

Russia was already on the path to regime change all by itself. Now the West is just helping it along a little faster. That the foreign minister is openly discussing this threat is serious. It means the regime is very worried (and it should be) about the possibility of revolution – just like in Ukraine. Only in Russia regime change for Putin will mean death.

What does the threat of regime change (and death) really mean?

It means now the regime can afford to be much more aggressive with its handling of foreign policy. If the regime is going to go under anyway, then for the leaders what do they have to lose? Now anything is possible. The impossible becomes the possible.

GLOBAL MARKETS-Asia stocks jump as China, Europe step up stimulus | Reuters

“While U.S. quantitative easing may have ended, it’s being replaced by QE in Japan and Europe and rate cuts in China,” he added. “This in turn augurs well for shares and other growth assets.”

Wasting no time, the Shanghai Composite Index shot up 2.1 percent. The CSI300 Index of the largest companies listed in Shanghai and Shenzhen leapt 2.9 percent, while Hong Kong gained 1.9 percent.

Tokyo’s market was closed for a holiday on Monday, but MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.2 percent – its biggest daily gain in a month. Australia’s main index climbed 1 percent.

GLOBAL MARKETS-Asia stocks jump as China, Europe step up stimulus | Reuters

Legal but Still Poor: The Economic Consequences of Amnesty |

With his questionably Constitutional move to protect America’s vast undocumented population, President Obama has provided at least five million immigrants, and likely many more, with new hope for the future. But at the same time, his economic policies, and those of the progressive wing of the Democratic Party, may guarantee that many of these newly legalized Americans will face huge obstacles trying to move up in a society creating too few opportunities already for its own citizens, much less millions of the largely ill-educated and unskilled newcomers.

Democratic Party operatives, and their media allies, no doubt see in the legalization move a step not only to address legitimate human needs, but their own political future. With the bulk of the country’s white population migrating rapidly to the GOP, arguably the best insurance for the Democrats is to accelerate the racial polarization of the electorate. It might be good politics but we need to ask: what is the fate awaiting these new, and prospective, Americans?

Legal but Still Poor: The Economic Consequences of Amnesty |

Thoughts from the Frontline – On the Verge of Chaos

“There are some geopolitical thinkers I respect who argue that all this could trigger a regime change in Russia. And others who argue that it will make Vladimir Putin even stronger and that he will want to double down on his policy of destabilizing Ukraine sooner rather than later. Putin does not strike me as being willing to step aside in the manner of a Boris Yeltsin. I doubt he will go gently into that good night. He is a wildcard on the geopolitical stage.”

The “this” referred to above is about low oil prices and the fact that China will be devaluing its currency soon. That big energy deal between Russia and China is in yuan. If China is forced to devalue its currency in order to respond to Japan, then that is going increase pain on Russia.

Concerning Russia, there is a threat of regime change, instability plus limited options. Sounds like revolution will soon enough start brewing in Russia unless Putin can somehow redirect everybody’s attention. And truly Putin is not kind of guy (so far) that is likely to go quietly in the night. Things are more likely to get worse before they get better.

Thoughts from the Frontline – On the Verge of Chaos [Excerpt]

Complexity and Collapse

Okay class, for those who want a little extra credit, I’m going to give you some extra reading and viewing. Lacy Hunt encouraged me to listen again to our friend Niall Ferguson’s speech entitled “Empires on the Edge of Chaos” (Note: the introduction is 10 minutes long and can be skipped. You know who Niall is. And there is considerable Q&A at the end, so the speech itself is roughly 40 to 45 minutes. But the Q&A has lots of laughs, which makes it worth it.) Or you can read this article by Niall in Foreign Affairs, which has much of the same content.

I want to repeat the two quoted paragraphs that opened this letter, along with one more from the Foreign Affairs article. (Again, all emphasis mine.)

Great powers and empires are, I would suggest, complex systems, made up of a very large number of interacting components that are asymmetrically organized, which means their construction more resembles a termite hill than an Egyptian pyramid. They operate somewhere between order and disorder – on “the edge of chaos,” in the phrase of the computer scientist Christopher Langton. Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But there comes a moment when complex systems “go critical.” A very small trigger can set off a “phase transition” from a benign equilibrium to a crisis – a single grain of sand causes a whole pile to collapse, or a butterfly flaps its wings in the Amazon and brings about a hurricane in southeastern England.

Not long after such crises happen, historians arrive on the scene. They are the scholars who specialize in the study of “fat tail” events – the low-frequency, high-impact moments that inhabit the tails of probability distributions, such as wars, revolutions, financial crashes, and imperial collapses. But historians often misunderstand complexity in decoding these events. They are trained to explain calamity in terms of long-term causes, often dating back decades. This is what Nassim Taleb rightly condemned in The Black Swan as “the narrative fallacy”: the construction of psychologically satisfying stories on the principle of post hoc, ergo propter hoc.

Defeat in the mountains of the Hindu Kush or on the plains of Mesopotamia has long been a harbinger of imperial fall. It is no coincidence that the Soviet Union withdrew from Afghanistan in the annus mirabilis of 1989. What happened 20 years ago, like the events of the distant fifth century, is a reminder that empires do not in fact appear, rise, reign, decline, and fall according to some recurrent and predictable life cycle. It is historians who retrospectively portray the process of imperial dissolution as slow-acting, with multiple overdetermining causes. Rather, empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.

The single most commented-upon letter that I have written was called “Fingers of Instability.” Longtime readers know it well, and I would suggest new readers take the time. It contains extremely important concepts for understanding why financial markets can advance smoothly for so long, and then all of a sudden there is chaos. The fingers of instability distributed throughout the sand pile of the global economic system end up getting triggered by some event that may in itself be quite minor. Yes, there are many factors contributing to an unstable global sand economic pile (think massive global debt, wanton overleverage, mischievous central banks with immoderate views of their importance, etc., etc.), but it only takes that fateful final grain of sand, dropped on just the right spot in the pile, to bring the whole thing cascading down.

What Niall is talking about is something that goes far deeper than another financial crisis like the one we recently experienced. What he is pointing out is that countries in financial distress are more constrained than normal in their actions. They have less ability to respond to crises. And some countries in crisis react in very unpredictable ways. Let’s talk about a second-order problem stemming from the fact that Japan is doing what it feels is necessary to keep from suffering a deflationary collapse. Understand, I’m not being critical of the Japanese for taking the actions they have, because I simply don’t know what other choice they have. That’s what makes their situation so difficult.

Japan’s major economic competitors – Germany, Korea, and China – will all have to respond, or their businesses will lose competitive advantage. Okay, we have seen large-scale currency movements all our lives. We adjust. That’s what businesses do.

Except, China and Russia have just signed an agreement for Russia to export rather massive amounts of energy to China, and they will take payment in yuan rather than dollars. A yuan that is going to be falling in value against the dollar as China responds to Japan.

In an ideal world for Russia, the Russian central bank would simply take the Chinese currency and add it to their reserves. But that would trigger a rather large “oops” that was not in the equation when they signed that deal. The yuan they are going to get is going to be losing value on the international market, and Russia is going to need hard currency (i.e. dollars) to pay down its large dollar-denominated debt and buy equipment to maintain and increase its ability to produce energy. And that equipment is generally sold in dollars and not in renminbi.

Couple that situation with the real potential for oil to go below $70 and Russia would have significant budgetary problems. And as David Hale pointed out recently in a private letter, if the US and Iran actually settle their differences over nuclear armaments later this month and sanctions are lifted, that could bring another 1–1.5 million barrels of oil a day onto the world energy markets. (He suggests it would have the same effect as a $400 billion global tax cut.) Mexico is committed to increasing its output, as are other countries, including the US. Sub-$70 oil is not out of the question, and in a global recession we could touch $50 easily. And while that would be good for consumers everywhere, it would certainly put a strain on Russia and other oil-producing countries. In fact, the scenario portends a major crisis for Russia.

And while we’re not as worried about Venezuela or other smaller oil producers, Russia is a potential problem, simply because it is so unpredictable. As noted above, the Japanese population is willing to take a great deal of pain. I don’t think we can say the same thing about the Russians at this point.

There are some geopolitical thinkers I respect who argue that all this could trigger a regime change in Russia. And others who argue that it will make Vladimir Putin even stronger and that he will want to double down on his policy of destabilizing Ukraine sooner rather than later. Putin does not strike me as being willing to step aside in the manner of a Boris Yeltsin. I doubt he will go gently into that good night. He is a wildcard on the geopolitical stage.

Russia has been willing to let the ruble fall rather precipitously rather than supporting it with their dollar reserves, which they are saving for other purposes. Even though the Russian economic situation is deteriorating due to sanctions, the Russian people have so far seemed to tolerate the downturn. As noted in last week’s Outside the Box, the West in general and the US in particular are blamed for Russia’s woes multiple times daily in the Russian media. Given the unpredictability of the current Russian leadership, there is simply no way to guess the outcome. That should make you nervous.

The Fragile Eight

The 2008 crisis demonstrated that the global economic system is far more connected than most imagined. There has been no real deleveraging since that time as nations everywhere have doubled down on deficits and debt. European banks are just as leveraged to sovereign debt as they were before the crisis hit.

The recent Geneva Report on global deleveraging highlighted what the authors termed the “fragile eight” countries of Brazil, Chile, Argentina, Turkey, India, Indonesia, Russia, and South Africa as an “important source of concern in terms of future debt trajectories.” China and the “fragile eight” could find themselves in the unwanted role of hosts to the next phase of the global leverage crisis, it warned.

The accumulation of household, corporate, and government debt in both the emerging and developed worlds has been made all the more troubling by stubbornly low and slowing growth rates. The global capacity to take on more debt is rapidly diminishing because of the combination of low growth and low inflation, if not outright deflation, that we are beginning to see in major countries.

There seems to be a stubborn unwillingness on the part of authorities to recognize the problems that come along with swelling sovereign debt. We are coming ever closer to the point at which countries are going to have difficulty raising debt at interest rates that makes sense, absent the ability to create a shock and awe campaign like Japan’s. And few countries (actually, none come to mind) have the ability to monetize their debt to the tune of 200% of GDP, as Japan is setting out to do, without causing a dramatic currency collapse.

I have this argument all the time with fellow analysts. I get that “austerity” in a deflationary or even disinflationary environment is not exactly pro-growth. And if a country’s debt is low and there is growth, then you can get away with increasing debt. But there is a limit to the amount of debt that a country can take on, and we are approaching it in country after country. This trend is not good for global economic growth or stability. The second-order unintended consequences, such as those Niall describes, are very difficult to contemplate.

The world is not going to come to an end. I will be writing this letter and hopefully you will be reading it in 10 years. But economies and markets are going to get more fragile and volatile in the meantime. This is not the time to be a full-throated bull in the equity markets. And given the potential dollar bull market, there is going to be pressure on most commodities. Corporate debt, especially high-yield debt, is priced for perfection. When I look out over the horizon, I simply don’t see perfection. At a minimum, you should not be long high-yield debt. And if you’re running a business, you should get all the debt you can, even if you bank the cash, at today’s low rates for as long a term as you can get it. Take advantage of this unbelievably forgiving debt environment.

Thoughts from the Frontline – On the Verge of Chaos

Iran Supplied Hezbollah New Missiles That Can “Hit Any Place in Israel” | The Tower

Iranian sources have revealed that Iran supplied the terrorist organization Hezbollah with a new missile containing a large warhead that it claims can reach the Dimona nuclear reactor in southern Israel, the Ya-Libnan news site reported at the weekend, citing an Iranian news agency.

The FARS news agency, which is affiliated with the Iranian Revolutionary Guards, reported that the new missile is of the Fatah “conqueror” design, which can hit targets at a range of 350 kilometers. This weapon is fitted with 500 kg warheads and can move at a speed of 1.5 kilometers per second (more than 3,300 miles per hour).

The Iranian news agency quoted Iranian Revolutionary  Guards Brigadier General Sayed Majid Moussavi as saying that the new missiles will allow Hezbollah to hit any place in Israel. FARS added that the most important factor in the Iranian strategy is to supply the resistance movements Hezbollah and Hamas with the right arms to confront “the bloodthirsty Zionist enemy.”

Iran Supplied Hezbollah New Missiles That Can “Hit Any Place in Israel” | The Tower

Exclusive: Cornered but unbound by nuclear pact, Israel reconsiders military action against Iran

Israeli official cites “sunset clause” in proposed comprehensive deal, which guarantees Iran a path into the nuclear club and may corner Israel into war.

Historic negotiations with Iran will reach an inflection point on Monday, as world powers seek to clinch a comprehensive deal that will, to their satisfaction, end concerns over the nature of its vast, decade-old nuclear program.

But reflecting on the deal under discussion with The Jerusalem Post on the eve of the deadline, Israel has issued a stark, public warning to its allies with a clear argument: Current proposals guarantee the perpetuation of a crisis, backing Israel into a corner from which military force against Iran provides the only logical exit.

Exclusive: Cornered but unbound by nuclear pact, Israel reconsiders military action against Iran

H/T – @EktropicEpic at Twitter.

I think Israel may have no choice but to attack Iran’s nuclear program. I would anticipate a prompt and massive retaliation by Iran’s allies.

Israel is not just corner by an unbound nuclear pact. The abandonment by the US means that Israel is pretty much on its own. For Israel, I think that means a change in thinking. It’s time to stop screwing around. Time to pull out the nukes. If Israel doesn’t start using nuclear weapons then its enemies will drain its military resources until there is nothing left. The US is not going to be in the background helping out.

Fired nuke commander now linked to counterfeit poker chips | The Rundown | PBS NewsHour

The admiral fired last year as No. 2 commander of U.S. nuclear forces may have made his own counterfeit $500 poker chips with paint and stickers to feed a gambling habit that eventually saw him banned from an entire network of casinos, according to a criminal investigative report obtained by The Associated Press.

Although Rear Adm. Timothy M. Giardina’s removal as deputy head of U.S. Strategic Command was announced last year, evidence of his possible role in manufacturing the counterfeit chips has not previously been revealed. Investigators said they found his DNA on the underside of an adhesive sticker used to alter genuine $1 poker chips to make them look like $500 chips.

Nor had the Navy disclosed how extensively he gambled.

Fired nuke commander now linked to counterfeit poker chips | The Rundown | PBS NewsHour

This doesn’t exactly give one confidence in the Navy’s ability to run its nuclear forces. Whoever gave him that job (No. 2 commander of US nuclear forces) should be fired too.

Monitoring emerging risks.