Socionomics Alert: The Domino Falls, Catalonia Declares Independence

After chickening out following the referendum, Catalonia's president turned the issue over to parliament. They have just declared independence.

Catalonian independence may be crushed by Spain, but we are one step closer to the collapse of nation states and A World of 1,000 Nations

Brazil is not in any danger of breaking up anytime soon – while the referendums in the three “separatist” provinces register overwhelming support for independence, turnout is very low, indicating that a majority are either opposed or at the very least don’t care all that much.

However, what is true today may no longer be true the case tomorrow, because the centrifugal forces that break nations apart are gathering strength at the global level.

Historical perspective: One of the strongest and most consistent geopolitical trends of the past 200 years has been an explosion in national entities.

We went from less than 50 polities in 1800 to around 200 today.

But it wasn’t always like this. I don’t know if anybody has quantified this precisely, but the number of states or state-like entities in the world must have constituted many thousands during the medieval and Early Modern periods.

Just the territories of the Holy Roman Empire at times accounted for more than a thousand!

...Consequently, under a liberal globalism that is true to its ideals, that is, one free of authoritarian coercion or Malthusian selection for big strong states, it appears that runaway national fragmentation is inevitable.

And these aren’t even the only trends militating against national consolidation.

1. Clever, high-functioning regions breaking away from stupid, corrupt regions. The classic example of this is, of course, Italy, where the 103 IQ, highly productive north has gotten increasingly fed up with the 93 IQ nepotistic, lackadaisical south.

2. The rediscovery of ancient local identities.

3. The globalist population replacement project.

4. The rise of alternate models of sovereignty.

5. It only takes one domino. New polities tend to emerge in waves – as Lenin pointed out, “There are decades where nothing happens, and weeks where decades happen.” This is unlikely to change in the future.

Buckle your seatbelts. The trend towards secession is driving downhill and Catalonia just stepped on the gas.

Financial markets aren't "buying" Catalonian independence yet, although European financial stocks are slipping. The rally in the U.S. dollar more a result of stronger 3Q GDP and the ECB's open-ended QE policy.

Catalonia Chickens Out

Catalonia gets cold feet at the last moment because the European Union wasn't going to back them. Independence is only possible when it is true independence and the opinions of outsiders are ignored.

Bloomberg: Balance of Power: A Full-Blooded Separatist Retreat in Catalonia

After rowdy demonstrations, a covert referendum (which drew a violent response from Spanish police) and vows to set up a new republic, Catalan President Carles Puigdemont blinked.

Many lawmakers gathered for a special session of the regional legislature were hoping to hear a declaration of independence. Instead, he put the process on hold to make another appeal for talks with the Spanish government. No deadline. No leverage. And Prime Minister Mariano Rajoy’s response was powerful: he started the process that could see Puigdemont’s administration stripped of its powers.

Already last night cracks were opening up in the separatist coalition, suggesting a regional election may be necessary next year.

If Catalonians wan't independence, it won't be with cowards who want to maintain their subservience to the European Union. The first European nation to declare independence will probably be led by a right-wing movement such as in Northern Italy.

Do or Die: 2 Hours to Catalonian Decision

The fulcrum of global politics now sits in Catalonia.

BBC: Spain Catalan crisis: Puigdemont to address region's future

Catalan leader Carles Puigdemont is due to announce his plans for the future of the province amid growing pressure to drop plans to break away from Spain.

There is speculation he may announce a unilateral declaration of independence following a disputed referendum.

His address to the regional parliament is scheduled to take place at 18:00 (16:00 GMT).

Catalan police have been posted outside the parliament in Barcelona, sealing off the grounds to the public.

NYTimes says independence: Catalan Leader Is Expected to Declare Independence

Secession Coming: Banks Move Out of Catalonia

Reuters: Spain to make it easier for firms to move base from Catalonia as business alarm deepens

Spain’s government will issue a decree on Friday making it easier for firms to transfer their legal base out of Catalonia, two sources said, in a move that could deal a serious blow to the region’s finances as it considers declaring independence.

The decree is tailor-made for Spanish lender Caixabank, sources familiar with the matter said, as it would make it possible for the bank to transfer its legal and tax base to another location without having to hold a shareholders’ meeting as stated in its statutes.

“The government is working on changing the law so that it’s no longer need to have a shareholders’ meeting, which would delay a change of the legal base in a case of emergency,” one of the sources said.

The End of the Beginning: Catalonia Says Adios to Spain and EU Austerity

Catalonia marks the end of the beginning. The first phase of negative social mood is over, culminating in an overwhelming vote for independence. The next phase, political breakup, is underway. If Catalonia leaves, it will serve as an example for other nations across Europe. If it is crushed, unity can be imposed by force. Spain will pay a high price either way. Thus far, the EU sounds anti-Spain more than pro-Catalonia.

Daily Mail: Catalans 'vote overwhelmingly for independence' in 'illegal' referendum

Catalan officials claimed 90% of 2.2million voters had called for independence in an 'illegal' referendum blighted by violent scenes which left at least 888 people injured.

World leaders condemned the brutal scenes after officials revealed that hundreds of protesters have been injured so far.

Officers were seen kicking and stamping on protesters as they stormed buildings and seized ballot boxes.

Footage captured in the village of Sarria de Ter in the province of Girona showed authorities using an axe to smash down the doors of a polling station where Catalan president Carles Puigdemont was due to cast his vote.

Sky News: Catalonia independence vote: Spanish foreign minister says police violence 'not extraordinary'

Mr Dastis said: "I don't agree with you that this is an extraordinary level of violence.

"You may think people were peacefully exercising their right to vote but the problem is this so-called referendum had been held to be illegal by the constitutional court."

Catalonia was a prime spot for secession because it has its own language and culture. America has multiple languages and openly celebrates multiculturalism. It is not a question of if America will break apart (or descend into civil war) but when, as long as social mood remains on a negative trajectory.

One factor overlooked in some of the mainstream Catalonia coverage is the economic and political factors. This vote was a direct consequence of the European Central Bank and European Commissions austerity program. Since the West is now in decline, it is fighting over how the pain is distributed. Catalonia is wealthy and supports Spain. Left-wing Catalonia did not like paying for the rule of right-wing Spain (shades of #CalExit).

Across the developed world, the debt crisis has only been delayed. The longer it takes to play out, the longer secessionists will have to build their movements. In the United States, the failure of pensions across private industry and a dozen or more states in on the way. Demographics in Europe and Japan are even worse.

The markets in Spain haven't performed terribly (the chart below is Spanish ETF, so it includes losses caused by the euro's slide since 2008). If the market reflects social mood, Spain is also at a bear-market rally peak in social mood.

Here's the United States' social mood, as represented by the stock market.

Consider the divisions within the country, racial tensions, the recent battles over the national anthem and Confederate statutes. Now imagine what American politics would look like if the S&P 500 Index falls 60 percent and remains 25 percent below its peak a decade later. Multiple pension funds will fail, several states could go bankrupt, social services will be cut, police salaries will be cut (they're already quitting because of rising social tensions). California is already talking of leaving (and Silicon Valley might leave California). Any state with natural resources (most of the West and Alaska) could instantly increase its GDP by kicking the EPA out of its territory. Layer on racial/political tensions. Great tensions lie ahead for those united States.

Finally, the next phase down for the global financial system is as likely to come from politics as economics. Investors are mostly ignoring the result in Catalonia, not making connections to their domestic economies/governments. This is very misguided, in part because politics is more predictable than economics these days. Nationalism, identity politics and sovereignty are ascendant. Where these forces conflict with economic and financial stability, the loser will be stability.

AfD Could Become Largest Opposition Party in Germany; Catalonia Crackdown in Spain

Alternative for Germany (AfD) is currently polling in third place ahead of Sunday's election.

German election 2017: Polls and odds tracker as Merkel seeks fourth term as Chancellor

German social mood is among the strongest in Europe, yet the anti-immigration populists are moving into the pole position for opposition against what could be a "grand coalition" between the center-right and center-left parties. When social mood has its next leg down, the centrist parties will collapse and the leading opposition parties will take power.

Meanwhile in Spain, where social mood is already negative, the secessionist movement in Catalnia is spiraling towards Exit.

ZH: Unintended Consequences & Ugly Repercussions: It's Getting Worse In Catalonia

But, as WolfStreet.com's Don Quijones points out Madrid’s crackdown on Catalonia is already having one major consequence, presumably unintended: many Catalans who were until recently staunchly opposed to the idea of national independence are now reconsidering their options.

A case in point: At last night’s demonstration, spread across multiple locations in Barcelona, were two friends of mine, one who is fanatically apolitical and the other who is a strong Catalan nationalist but who believes that independence would be a political and financial disaster for the region. It was their first ever political demonstration. If there is a vote on Oct-1, they will probably vote to secede.

The middle ground they and hundreds of thousands of others once occupied was obliterated yesterday when a judge in Barcelona ordered Spain’s militarized police force, the Civil Guard, to round up over a dozen Catalan officials in dawn raids. Many of them now face crushing daily fines of up to €12,000.

Spain offered some concessions to Catalonia, similar to those given to the Basque region.

Catalans want a new constitution to replace the one adopted in 1978 following the death of longtime dictator Francisco Franco and a statute like the one in place in the northern Basque Country which collects its own taxes and contributes little to Spain's central coffers, Bartomeus said.

Juan Montades, a political scientist at the University of Granada, said that if the rules are changed, Andalusia, Spain's most populous region which benefits from the redistribution of wealth from Catalonia, has warned that it would "be in the front line to defend its interests."

The battle in Spain is strong because Catalonia is wealthy. It is more leftist than the rest of Spain. It also has a long and unique regional history, including local dialect. The last part is the most important for most secessionist movements.

Meanwhile in America, getting a raw deal (or seeing that the future is set) is enough to propel separatist movements such as the American Revolution and Confederacy in 1861. American secession seems laughable with social mood at a bear market peak, but #CalExit is getting off the ground. Many residents in California are foreigners, recent immigrants from all over the world, but mostly from South and Central America. This doesn't create ethnic unity, but it adds a layer of ethnic separation from the rest of the country on top of political and economic issues.

Furthermore, blue states such as California are the strongest opponents of secession and devolution of powers favored by red states. Both left and right will see themselves as winners if California leaves. Although negative social mood and hateful rhetoric will fuel a separation, it is more likely to be amicable given the political background. The risk is that other blue states such as New York threaten to leave as well because the country will move right, and then blue states such as Washington, Illinois, New York threaten to kick out the blue cities such as New York, Seattle and Chicago, turning the states as red as the Deep South.

Catalonia Votes for Independence on October 1

Guardian: Catalonia calls independence referendum for October

Catalonia’s long-awaited and bitterly controversial referendum on independence from Spain will be finally held on 1 October, the regional government announced on Friday, triggering yet another political and judicial showdown with Madrid.

The Catalan president, Carles Puigdemont, said that voters in the unilateral referendum would be asked the question: “Do you want Catalonia to be an independent country in the form of a republic?”

Puigdemont’s pro-sovereignty administration insists the wealthy north-eastern region has a political, economic and cultural right to self-determination.

...“When they’ve asked us what we Catalans want, we’ve given them proposals - all kinds of proposals,” he said. “But they have all - without exception - been rejected or seriously cut back.”

According to the article, polling from March shows the independence vote will lose. Also, it looks like an inverse head-and-shoulders pattern that points to a rally of 50 percent if it completes. Time may be running out.

Catalonia Threatens Immediate Secession

The European Union is a catalyst for independence movements. Small regions and even cities might struggle as an independent entity. National governments are more powerful and would refuse to allow a region or city to leave. Under the EU, however, the national governments are subordinate. A city-state could function within the EU. The flourishing of independence movements is a direct result of the EU. This complicates the nationalist and identity movements because governments such as Spain are powerless given their large debt. If the EU survives, Catalonia goes free whether Spain is in the EU or out of it. From the perspective of the EU, breaking national governments into small pieces will make it the unchallenged ruler of Europe. Spain and Italy are threats, but 50 city states and regional governments in the former Spain and former Italy aren't. Thinking further down the road, the most unified countries at the moment are in Eastern Europe, Hungary and Poland. Nationalist nation-states that remain united will grow in power as Europe fractures.

El Pais: Catalonia to immediately declare independence if no referendum held

Spain’s Attorney General José Manuel Maza is set to examine the legality of a plan outlined by the regional government of Catalonia to activate immediate secession from Spain if the central government in Madrid stops it from holding a vote on independence – something it is planning on doing in September or October of this year.

The independence mechanism is detailed in a secret draft version of legislation being prepared by the Generalitat, the Catalan regional government, and to which EL PAÍS has had access.

Catalonia Still Moving Towards Secession

Guardian: Separatist movement in Catalonia steps up battle with Madrid

The separatist movement in Catalonia’s parliament has escalated its battle with Madrid after it defied Spain’s constitutional court by debating a controversial pro-independence roadmap, and the region’s president announced a confidence vote to consolidate the move towards sovereignty.

The angry, last-minute debate – in which the pro-independence Together for Yes coalition and the smaller, far-left Popular Unity Candidacy secured approval for the unilateral disconnection plan by 72 votes to 11 – represents another open challenge to the Spanish judiciary and to Spain’s acting prime minister, Mariano Rajoy.

It also provoked a furious reaction in the Catalan parliament from Ciudadanos and Popular party MPs who left the chamber rather than take part in a vote they described as “illegal” and flagrantly undemocratic. One Ciudadanos MP accused the separatist faction of “wanting to take us not only out of Spain and the EU, but out of the 21st century and modern democracy”.

...“The Spanish government uses the question of legality a lot,” he said. “But legality is an instrument; it needs to adapt to reality and to democratic will, and not the other way round. People around the world need to understand that what we’re doing is fundamentally legitimate and is not illegal.

One cannot be pro-democracy and anti-secession and remain consistent. If the will of the voters is sovereign, secession is legitimate. It cannot be stopped by the EU or the United States. If negative mood continues for another couple of decades, a shock break up of the United States would not be out of the question.

Fortune: In Politically Polarized U.S., State Secession Talk Gains Steam

Texas, which was an independent republic before joining the U.S. Texas holds a strong state identity and more conservative ideology than much of the rest of the country. With a higher per capita income than the rest of the nation, Texans can make an economic argument that they’re contributing more to the union than they’re receiving. “The main dampening factor is that Texas has contributed so many presidents that it’s hard to say they’re discriminated against, when they have so much political influence,” Sorens notes.

Vermont’s secessionist movement, the Second Vermont Republic, contributed candidates for governor and state Senate in 2010. The movement was launched when Vermont separated from New York in the 1700s. “The most interesting secessionist movement in the country is Vermont,” says Sanford Levinson, a law and political science professor at the University of Texas, Austin. Levinson notes the state’s history of independence and that one of the movement’s leaders wrote the book Secession: How Vermont and All the Other States Can Save Themselves from the Empire.

Alaska, oil-rich like Texas, has historically contributed more financially to federal coffers than it has received. And it’s the only state that hosts a secessionist movement with its very own political party: the Alaskan Independence Party. In 1990, the party won control of the governor’s mansion but didn’t push for secession from the union.

New Hampshire receives only 70 cents in federal spending for every dollar it sends to D.C. A strong libertarian base is driving the state’s secessionist movement, which is larger than Vermont’s but still small. “There is an economic case for independence because of the fiscal numbers, but there’s not nearly the cultural basis you might have in Vermont or Texas,” Sorens says.

Hawaii boasts a culture distinct from the mainland, which has driven its secession movement in the past. But the state has become more diverse amid rising immigration from Japan. “There’s a little movement in Hawaii,” Sorens says. “Only a small minority of residents has native Hawaiian ethnicity.”

American secession movements aren't as developed as in Catalonia or Quebec. Catalonia is almost guaranteed to secede if social mood remains negative for a few more years. An exit by states such as Scotland, Quebec and others is next highest probability, followed by a breakup of Belgium, and then the various areas with nascent secession talk such as in the United States and Italy.

June 26 Spanish Election Favors Socialists

Mish: Spanish Election June 26: Socialists Set to Oust Rajoy

Bloomberg: Podemos Wants to Talk to Investors About Easing Spain’s Debt

The anti-establishment party Podemos plans to explore ways to lighten the burden of Spain’s 1.1 trillion euros ($1.2 trillion) of public debt in talks with creditors if it can seal a role in government after next month’s vote.

Podemos, an insurgent group that came within 350,000 votes of overtaking the second-placed Socialists in its first general election in December, will try to persuade debtholders that they will benefit from giving Spain more breathing space within the European Union’s debt constraints, the party’s head of political strategy, Inigo Errejon, said in an interview this week.

Social Mood Deteriorating: Malaysia Race Riots; Free Catalonia; Mosques Burn

The Economist: Playing with fire

THE close-packed shops on Petaling Street (pictured), a dim warren in a Chinese quarter of Kuala Lumpur, Malaysia’s capital, often throng with bargain-hunting tourists. This month its mostly ethnic-Chinese stallholders faced crowds of a different kind. Riot police prevented a mob of redshirted protesters—ethnic Malays with a host of grudges—from marching down the street. They eventually dispersed loiterers with water cannon. One protester was filmed calling a journalist a “Chinese pig”.

...Malaysia’s broad ethnic mix, in part the result of British colonial immigration policies, has long coloured its politics. After a murderous race-riot in 1969, in which mobs burned Chinese shops, officials devised a slew of measures aimed at defusing tensions. Their aim was to reduce inequality between Malays and their richer ethnic-Chinese compatriots. Malays were guaranteed a quota of places at universities and the right to own shares in all listed companies, among other benefits. Though billed as temporary, many of the measures are still in force.

Sometimes I wonder if the editors of the Economist read their own magazine as they currently advocate more migration into Europe, and the guaranteed race riots and ethnic tensions that will follow.

Since then Malay incomes have risen rapidly (see chart). But greater equality has come at a cost. Critics say that state-sponsored favouritism has hooked Malays on handouts and government jobs, and helped to enrich the country’s elites—at the same time as enraging ethnic-Chinese citizens, and driving some of the most talented of them abroad. There have been growing demands, among Malays too, for the rules to be scrapped, or at least refocused on the neediest regardless of their race. When he came to power in 2009 Najib Razak, UMNO’s president and Malaysia’s prime minister, sounded as if he agreed.

All that changed after a general election in 2013, when the government retained power despite losing the popular vote. UMNO itself managed to gain seats at the polls. But voters deserted the small ethnic-Chinese and Indian parties with whom it rules in coalition, fleeing to a resurgent and more ethnically balanced opposition. Instead of trying to lure them back, UMNO has focused on refurbishing its reputation as a champion of ethnic Malays and of Islam, their traditional religion.

Which brings to mind this:

One moves swiftly and imperceptibly from a world in which affirmative action can’t be ended because its beneficiaries are too weak to a world in which it can’t be ended because its beneficiaries are too strong.”

Over to Spain. PRO-SECESSION PARTIES IN CATALONIA WIN LANDMARK VOTE

Pro-secession parties pushing for Spain's northeastern Catalonia region to break away and form a new Mediterranean nation won a landmark vote Sunday by capturing a regional parliamentary majority, setting up a possible showdown over independence with the central government in Madrid.

..."I have wanted independence ever since I was young," Perez said after voting in Barcelona. "During three centuries they have robbed us of our culture. We have reached the moment that the Catalan people say `enough is enough.'"

Why settle a 300-year issue now? Negative social mood.

Migration in Europe is still having major impact.

Two teenagers held on suspicion of arson after London mosque fire:

Two teenagers have been arrested on suspicion of arson after a fire engulfed part of a south London mosque said to be the largest in western Europe.

At the other end, Holland now allows child brides as long as it's legal in their home country: Dozens of Syrian child brides en route to Ter Apel ('Tientallen Syrische kindbruiden onderweg naar Ter Apel')

Socionomic Alert: GOP Dumps House Speaker; Brazil on the Brink; Catalonia Votes

Socionomics tells us to expect these types of events when social mood is negative. Brazil is the cleanest signal; the currency and stock market are in free fall, the president on the verge of being removed from office. The developed world is simmering, ready to boil if anything drops into the pot. Say migrants: Finland protesters throw fireworks at buses

Not two weeks ago: Socionomics Alert: Australia Dumps Another Sitting Prime Minister. Prime Minister Tony Abbott was removed as leader of the Liberal Party. In the U.S., conservative House Republicans have been building support for the removal of House Speaker John Boehner over his refusal to allow a vote on funding for Planned Parenthood. Planned Parenthood receives federal funding for providing healthcare services. Opponents say it mainly performs abortions and funding is fungible; supporters say it mainly provides for women's health. Opponents have always wanted to remove funding because they argue federal money pays for abortions. At the center of the current controversy is a series of videos that show Planned Parenthood executives, doctors, or partners, discussing selling/buying fetal tissue for money. There are also claims that some abortions were performed late on purpose, in order to harvest intact brains and other more fully developed organs.

The Speaker opposes a vote on defunding Planned Parenthood tied to a funding bill because if President Obama vetoes it, as expected, it will shut down the government. GOP leadership thinks it will lose a fight in the media since the media will portray them as shutting down the government to defund Planned Parenthood. The conservatives in the party think they can portray President Obama as shutting down the government to protect organ harvesting. Political confrontation in the U.S. is about to step up a notch. There is already fallout: John Boehner Will Resign From Congress

To Brazil.

Bloomberg: Brazil Impeachment Battle Heats Up Before Rousseff Flies to U.S..

Also: Petrobras Default Looms Under $90B Dollar-Denominated Debt

To Spain.

APP: Catalonia to vote in fierce independence row with Spain

Catalonia's nationalist president Artur Mas, tipped by opinion polls to win the vote, called on Catalans to "Give the finger" to their opponents.

His adversaries have branded him a dodgy liar.

Writers, bankers and people on the street have joined in the angry debate.

"It is an unusually tense atmosphere," said Pablo Simon, a political scientist at Carlos III university in Madrid.

Spain Turns Right

Although Spain's left-wing parties advanced in the election this weekend, Podemos gained with a nationalist platform that puts leaving the euro on the table. Both it and the upstart right-wing party picked up seats at the expense of the two main right- and left-wing parties.

BBC: Spanish elections: Podemos and Ciudadanos make gains

With the count almost completed, the governing People's Party (PP) has won the most votes with 27%.

But it may have lost the Madrid city council for the first time in 20 years.
The Spanish economy has been a key concern for voters, and many are enraged over public spending cuts and reports of political corruption.

Prime Minister Mariano Rajoy's administration and the previous Socialist (PSOE) government are both seen as being to blame.

...the two traditional parties fell short of overall majorities in most areas. They both lost a significant number of votes to emerging groups Ciudadanos and Podemos.

In the capital Madrid, the PP won the municipal election but could still lose control of the city council. The ruling party took 21 seats but Ahora Madrid, backed by the leftist anti-corruption party Podemos, took 20. Ahora Madrid could now form a coalition with the Socialists who came third. Analysts say that similar deals could take place in a number of councils such as Valencia, further eroding the local power of the PP.

The ruling party may also need to make pacts of its own with the pro-business Cuidadanos party in places such as Murcia and La Rioja. Spain is unfamiliar with governing coalitions as the PP and the Socialists have dominated for decades.

Reuters: Spain's ruling PP gets worst local election result in 20 years

Social Mood and the Fourth Turning

Generation X is rising in Spain and negative social mood is accelerating the political shift to younger politicians.

Spanish political renegade poses threat to dominant parties

Painful austerity has dented Spanish living standards, generating disillusionment with both Prime Minister Mariano Rajoy's Popular Party and its rival Socialists, which have alternated power since the fall of the Franco dictatorship in the 1970s. Voters are gravitating to renegades such as Rivera's business-friendly Ciudadanos, or Citizens, as well as the hard-left Podemos (We Can) Party, putting them virtually level in opinion polls with the traditional political heavyweights.

Rivera's party entered the national political race only five months ago — having until then been a key voice of Spanish unity in the independence-minded Catalonia region. But in this short time it has captured Spain's imagination with its brash talk that the political elite are a dinosaur-like class ripe for an electoral thrashing. By the end of the year, Rivera looks set to take on the role of political kingmaker.

"It's a new political era in Spain," Rivera told The Associated Press in an interview at the Catalan Parliament in Barcelona, where he serves as a lawmaker in between campaigning around Spain. "The latest opinion polls are giving a technical tie to the four parties and we'll see whether that's true or not. But at the very least, the political map is going to change substantially."

Chinese Home Purchases in Spain Rise 25% in 2014, Double in 5 Years

According to Spain, Europe Sina reported that in 2014, Chinese in Spain throughout the country to buy more than 1,500 units of housing, up more than 25% from last year, especially in Madrid and pais vasco Obviously, the Chinese became the main force in the purchase of residential, became overwhelming all other foreign groups living in Spain. In Spain, the proportion of Chinese buyers is growing, in 2014 the Chinese buy 1530 housing units in Spain, five years ago, in 2010 Chinese only buy 750 homes in Spain, the figure has doubled in just five years period.

Spain has 47 million inhabitants and Chinese living in Spain are about 180,000, but the proportion of Chinese buyers is very large. Every 117 Chinese to buy a house; the Spanish locals every 161 people buy a house.

iFeng: 华人成西班牙强势买家 2014年华人购房数飙升

Weekend Reading: Pettis on the French Indemnity

If I can sum this up into one sentence, it is that massive transfers of wealth from Country A to Country B leads to big problems for Country B.

Within a few years of the beginning of the crisis attitudes towards the French indemnity had shifted dramatically, with economists and politicians throughout Germany and the world blaming it for the country’s economic collapse. In fact so badly was Germany affected by the indemnity inflows that it was widely believed at the time, especially in France, that Berlin was seriously contemplating their full return. The great beneficiary of French “largesse” turned out not to have benefitted any more than Spain had benefitted from German largesse 135 years later.

Pettis:Syriza and the French indemnity of 1871-73

FTAlphaville puts some numbers and charts into it here: Michael Pettis explains the euro crisis (and a lot of other things, too)

Global Social Mood Sinks

In the U.S., an outbreak. CDC warns of 'large outbreak' of measles

"We are very concerned by the growing number of people who are susceptible to measles, and the possibility that we could have a large outbreak in this country as a result," Frieden said on CBS's "Face the Nation."

It isn't only in the U.S. though: Beijing reports measles outbreak

From Jan. 22 to Jan. 26, 23 people in an office building in Chaoyangmen, a busy commercial area in Dongcheng District, were found to have contracted measles, according to a statement the center released on Tuesday night.

Medical personnel have quarantined the patients, disinfected the site and vaccinated 3,462 people in the building, said the statement.

The center warned that the outbreak will peak soon. From Jan. 1 to Jan. 21, the capital city reported 68 measles cases, more than doubling the 28 cases reported in the same period last year.

There's no evidence that the outbreak in China has any connection with the outbreak in the U.S.

The measles outbreak is thought to have come from overseas:
HEALTH OFFICIAL SAYS MEASLES OUTBREAK CAME FROM OVERSEAS

Many have speculated, but now a top federal health official is confirming that the outbreak of measles traced to several Disney theme parks was likely caused by a foreign visitor or an American who had recently returned from a trip outside the country.

But is spreading due to unvaccinated people:
Anti-Vaxxers Fingered in Disney Measles Outbreak

The outbreak of the respiratory disease, which is caused by a highly communicable virus, has increased the focus on parents who choose not to vaccinate their children. Measles was thought to have been eliminated in the United States in 2000, meaning the disease is not native to the U.S. (Nonetheless, 644 measles cases were reported in America in 2014.) But it is not uncommon in the rest of the world, and healthcare officials presume an infected foreigner brought the virus to Disneyland or the accompanying Disneyland Adventure Theme Park in Anaheim, Calif., between Dec. 15 and 20.

Of the 34 California measles victims whose vaccination history could be ascertained, 28 had not received the measles shot.

NY STUDENT WITH MEASLES TAKES STATE-WIDE TRAIN

Social mood in focus: As Measles Cases Spread in U.S., So Does Anxiety

The measles outbreak tied to Disneyland continued to spread anxiety Friday as two new cases emerged overnight in Marin County in California — along with at least one in Nebraska — while Arizona officials warned that at least 1,000 people may have been exposed to the virus through seven others in that state.

To keep things in perspective, the numbers so far are small.

In Europe, the long awaited political breakdown predicted by socionomics may be upon us.

Eurozone alarm grows over Greek bailout brinkmanship

Eurozone officials are increasingly worried that Greece’s brinkmanship over its bailout will plunge the country into financial chaos after its finance minister said on Sunday that it would take up to four months to agree a “new contract” with creditors.

Spain is watching: Spain rally: Podemos holds Madrid mass 'March for Change'

The "March for Change" is one of the party's first outdoor mass rallies, as it looks to build on the recent victory of its close allies Syriza in Greece.

Podemos leader Pablo Iglesias told the crowd a "wind of change" was starting to blow through Europe.

Podemos has surged ahead in opinion polls, and has vowed to write off part of Spain's debt if it comes to power.

The BBC's Tom Burridge in Madrid says that there has been an impressive turnout and a carnival atmosphere at the rally.

Social Mood in Europe Boiling

Next year could be a wild one. Immigration sentiment is turning negative and violence by Muslims is now being answered by violent right-wing riots as the population increasingly gives up on politicians who refuse to address their concerns. Toss in anger at the ruling classes for the state of the economy, movements to reject bailout deals, leave the euro, secede, and leave the EU, and one of these sparks may finally hit the powder keg.

Italy's immigration crisis moves from sea to streets

"Why do they have to be taken care of? It's me that needs taking care of!"

Like many of Italy's poor, 51-year-old Elvio has had enough. And the unemployed construction worker thinks he knows who to blame.

Born and raised in a rundown suburb of Rome where residents last week laid violent siege to a holding centre for asylum seekers, Elvio belongs to a strata of Italian society whose frustration is beginning to boil over after years of falling incomes, employment and hope.

And with the country struggling to cope with an influx of tens of thousands of migrants fleeing conflict and poverty in Africa, the Middle East and South Asia, that anger increasingly has a focus.

The anti-immigration sentiment in Italy is nothing compared to the Clockwork Orange underway in Sweden:

Muslim Gangs Continue To Terrorize 55 Neighborhoods, Police Powerless

Despite being a small country of less than 10 million citizens, a 2012 study showed an average of one school being burned per day in Sweden, costing tax payers upwards of half a billion SEK annually. By comparison, Greece has 11 million citizens and averages only five school fires per year.

Not even the police are safe from attacks. In May 2014, two police officers were cornered by 50 thugs in the no-go zone of Landskrona. They pulled their weapons to hold off the attackers and called for backup, but the police commander refused to send in backup, fearing escalation. One of the officers knew a few locals who intervened and convinced the gang to let the officers escape.

While such brazen aggression is rare, patrol cars are frequently pelted with rocks, and the drivers are targeted with green lasers. Blinding drivers with the powerful, hand-held lasers is a growing “sport,” where the goal is to make the driver crash. Buses, taxis, delivery companies and mailmen are also popular targets.

...Ethnic Swedes are also being attacked. Local celebrity Linda Edenström’s 12-year old son was savagely beaten. In October, he took the subway after school to give a birthday present to a girl in his class. He was unaware she lived in a no-go zone, and when he exited the station he was promptly stopped by seven grown immigrants. They declared that no whites were allowed and proceeded to attack him while hurling anti-white slurs.

Swedish law states that the incident is not a hate crime. The law does not apply to an immigrant targeting a native Swede, even if an immigrant does so while explicitly stating they are doing it for racial reasons. However, the reverse situation with a native Swede saying a slur that could be perceived as racist has severe civil and criminal charges.

How long before Sweden has an Anders Breivik?

UKIP is now getting a challenge from Tories on immigration:

Major to Europe - Cut immigration or the UK may leave
Immigration is changing character of UK schools, claims Iain Duncan Smith

Iain Duncan Smith, the work and pensions secretary, has said that non-English-speaking children are changing the character of British schools, as Ukip looks likely to gain its second MP in the Rochester and Strood byelection.

The senior Conservative said an academic report setting out the billions of pounds that EU migrants had added to the economy was “silly” because it only looks at immigration in terms of the financial benefits to the economy.

Italy's Grillo takes anti-euro campaign to Brussels

The leader of Italy's anti-establishment Five Star Movement, Beppe Grillo, has gone to the European Parliament (EP) to present his programme to get a referendum in Italy on leaving the euro "as soon as possible".

The comedian-turned-politician is aiming to collect 4m signatures by next spring.

He will then go to parliament in Rome, where many of his MPs now sit, and demand a referendum. If millions of Italians sign the petition, Prime Minister Matteo Renzi won't be able to simply brush this off.

Spanish minister warns of violence over Catalonia's secession bid

The Catalan regional government’s insistence on independence from Spain may result in widespread violence in the autonomous region, says the Spanish interior minister.

"A process of these characteristics, by its very nature, generates radicalism,” Jorge Fernández Díaz told Spanish daily, ABC, on Sunday.

“This radicalization, combined with frustration, could degenerate in violence,” Díaz added, noting that the combination is “very dangerous."

Catalonia’s President Artur Mas has pledged to pursue secession efforts following a symbolic independence referendum held on November 9.

Greek bond yield rises above 8% on election fears
Greek opposition leader calls on parties to set early election date

Greek opposition leader Alexis Tsipras on Monday called on party leaders to set a date for an early election, arguing polls must be held before the government signs any binding deals with EU/IMF lenders.

Greece's government is under growing pressure ahead of a presidential vote in February, which could trigger a snap election and bring Tsipras's radical leftist Syriza party to power.

The government is negotiating an early exit from Greece's EU/IMF bailout. Tsipras has suggested a future Syriza government would not respect decisions made without its consent.

'The far-right wants more riots'

Virchow: Right-wing groups celebrate these events as a great success on their Facebook-Pages and blogs. They were in control of the streets in Cologne, and that has not happened in a long time. Most marches had been blocked or had been accompanied by heavy police-presence.


But this time, thousands could march through Cologne without much restriction, some of them went on manhunts and some attacked journalists. In their view, that is a great success.

Not only right-wing bloggers celebrate that. On social networks, many users seemed to be happy that "finally someone is standing up against Salafism in Germany." Have right-wing extremists found a topic that proves popular?

Can Scotland Break the World?

Since Scots invented the modern world, it only seems fair that they can take it down.

With the Yes vote crossing above 50% with less than 10 days to go before the vote, the British pound slumped and shares tumbled as a potential exit by Scotland became more of a possibility. Losses didn't end there though, the euro, yen and Swiss franc remain weak, with the yen slumping to a new 6-year low. The breakdown in the yen now opens the door to a big drop for the yen. China is in an even worse position at it gains against the U.S. dollar amid the strongest U.S. dollar rally in years.

Should Scotland vote to exit, the balance of power in England will tip in favor of the euroskeptics who want to leave the EU. In France, National Front is leading in the polls (though no election is imminent) and leader Le Pen has called for an exit from the euro. Meanwhile, Scotland wants to join the EU as an independent nation, but Spain does not want to allow it to join for fear that this would increase support for the Catalan independence movement. In Germany, Alternative for Deutschland won seats in a regional election last month. The party wants Germany to leave the euro.

One theme here has been social mood drives the events we're seeing in Europe, not economics. The debt problems are details, sideshows to the main events. Indeed, the economists do not really understand what is happening because these events are not at all about economics, but about identity and sovereignty. The fallout from this political debate is economic though, and investors should be prepared for more trouble ahead. As I put it a couple of years ago:

If you understand the origin of the conflict comes from social mood and that mood is expressing itself via politics, the situation makes perfect sense. No need to wonder why Greece, France, Germany, Italy, Hungary, Spain, Ireland, Finland or Portugal make decisions that appear "irrational" when there are workable solutions; no need to question whether the euro can survive, whether any members will leave. There will be conflict, it will be political in nature, and several nations will exit the eurozone. If Prechter's long-term forecast for the markets is correct, a few years from now this will seem like a happy time in Europe.

Prechter has been off so far on his forecast, but the first part remains true.

One politician who understands exactly what is happening is Nigel Farage. No wonder UKIP is going from strength to strength.

At around minute 20 in this interview, Nigel Farage On UKIP's Recent Success, interviewer Laura Ingraham says she gets called a liberal (U.S.) by libertarian friends because of her position on some economic issues. Farage responds by saying that arguments move on. Reagan and Thatcher fought the battles that needed to be fought in their day,

...but the key argument today isn't the battle between free markets and state control, the key battle today is about community and identity, who are we as nations? Who are we as communities? How do we want to live? And this stuff has all been threatened by excessive immigration, and by things like our small businesses being closed down and our communities changing. The politics of the future, the politics of the next decade is about community and identity.

Exactly right. In the comments to the Ricardo Was Wrong, Free Trade Doesn't Work, a commenter responded:

It seems like you are drawing your line in the sand here instead of there. Why define your box of acceptable free trade as within a country's borders as compared to within an alliance of countries, a continent, or the entire world?

This is entirely what the political debate is now about. Where are the lines. How you draw the lines determines the system you end up with. Free trade is good within whatever you define as your borders or larger region, but beyond that there cannot be laws against capital, goods or labor in order for the benefits of free trade to be felt everywhere. And if there are no borders to goods, capital or labor, then there are no nations, or at least their won't be democratic ones. It is telling that the nations with the most open of borders: Hong Kong, Singapore and Arab Gulf States, do not have democracy or severely restrict democracy. They are also very small. None of this is not a coincidence.

A nation, a large aggregate of people united by common descent, history, culture, or language, will always draw borders around itself. The European project will fail because it tried to erase the nations by moving the lines. Don't take my word for it: EU should 'undermine national homogeneity' says UN migration chief

The EU should "do its best to undermine" the "homogeneity" of its member states, the UN's special representative for migration has said.

Peter Sutherland told peers the future prosperity of many EU states depended on them becoming multicultural.

He also suggested the UK government's immigration policy had no basis in international law.

......"The United States, or Australia and New Zealand, are migrant societies and therefore they accommodate more readily those from other backgrounds than we do ourselves, who still nurse a sense of our homogeneity and difference from others.

"And that's precisely what the European Union, in my view, should be doing its best to undermine."

Unfortunately, even in the U.S. lines are being drawn. The Best Map Ever Made of America’s Racial Segregation. Despite the best efforts of the elites, people draw lines and choose to live around people who share their language, religion and culture. Economics is in part an expression of culture, which is why it is now subsumed by the larger issue of sovereignty. EU economic rules, for example, favor large corporations over the small businesses that are favored by Anglo-Saxon culture. The EU rules hurting UK small businesses are a question of sovereignty, not economics.

Has the Die Been Cast in Europe?

Even though Eurozone countries (EZU) are in an uptrend, Ireland (EIRL) and Greece (GREK) slid this year. The rest of the PIIGS: Spain (EWP) has held up as well as EZU, but Italy (EWI) and Portugal (PGAL) did break down in May.

The best explanation is that Greece and Ireland sold off along with momentum stocks because if you plot GREK and EIRL against the Nasdaq, Russell 2000 and biotechnology, a similar chart pattern is clear. Italy and Portugal are tougher to explain.

It looks like a surprise win by the euroskeptics is priced into stocks and the euro. Nevertheless, I've always maintained this is political crisis, not an economic one. The main issue was never the debt levels or the economic imbalances Michael Pettis' cites in his post liked below (though these are very real), but whether the nations of Europe will find a way to solve them together. Social mood is not working in favor of the EU: nations increasingly want to assert sovereignty, best exemplified by secession movements in Scotland, Catalonia, Belgium and Northern Italy, but now most clearly evidenced by political victories for parties such as UKIP.

Most alarmingly for the pro-EU politicians is that nationalistic parties have won in the absence of crisis, during a period of relative calm. In reality, the political crisis has grown during this period of calm as social mood remained negative. Since this is a political crisis driving the markets, another crisis is more likely following the victory of euroskeptic parties. Even if pro-EU politicians want to ignore them, the rise of parties such as UKIP is now an existential threat to the domestic political order because voters have a legitimate option to express their anger. What happens in Brussels no longer stays in Brussels: national elections may turn on votes that parties take in the European parliament.

The odds of another financial crisis are higher if these euroskeptic parties win in this weekend's election, and another crisis will serve to increase the popularity of euroskeptic parties because it will force the pro-euro and pro-EU parties into more unpopular votes. The euroskeptics aren't causing this though, behind them are the voters who in a period of negative social mood, want to express national sovereignty and want to protect their own nation. Ultimately, since social mood swings from positive to negative, is that the European Union and euro are positive social mood projects that do not account for periods of negative mood. The trend is for increased centralization of power, which increases the instability of the entire system heading into a period of negative mood.

This weekend's vote will cast the die for the dissolution of either the eurozone, the EU, or both, and stopping it will require an extraordinary effort by pro-EU politicians because they are now running uphill— even if they don't realize it yet.

Related: here is Michael Pettis thinking about possible implications from the EU elections: Some things to consider if Spain leaves the euro

The May 26 votes might end up reminding us that the euro crisis isn’t over. The longer unemployment and hopelessness drag on, the greater the erosion of support for the establishment and the stronger the support for the radicals who want to abandon the euro.

......How much longer is the rest of Europe willing to maintain high unemployment in order to support the German economy? On May 26 we will discover, I suspect, that at least some parts of the rest of Europe have little interest in continuing to maintain the euro if that simply means that they must suffer unemployment in order to protect Germany from its unwillingness to pay workers more.