As a response to reports that Iraqi government soldiers were abandoning their posts along the border with Saudi Arabia, Riyadh has sent 30,000 troops to the border with Iraq. Saudi Arabia is worried that ISIS may spread over the border and into their country, so it wants to present a strong force to guard against the possibility. The border area is along the Anbar province of Iraq, which is now the centre stronghold of the Islamic State. The last major incursion into Saudi Arabia came from Iraq, in 1990, when Saddam Hussein’s soldiers invaded Kuwait. Many in the Middle East accuse Saudi Arabia of fueling the ISIS insurgency by feeding it weapons and funding, a claim that Riyadh denies. Many believe ISIS has no plans to cross into Saudi Arabia, as doing so would engender an international response, particularly from the US.
FINSUM: This is very important news for markets. Should fighting breakout along the Saudi-Iraqi border, which could signal a pan-Middle Eastern war, expect oil prices to soar.
New polls show that concerning September’s referendum vote in Scotland, which will decide if the country separates from the UK, the “no” vote, or those choosing to remain in the UK, holds a 49% to 37% majority, with the rest undecided. The “yes” vote has grown in the last month, but is still below its peak in March, as voters have grown more wary of the economic consequences of separation. Research has shown that support for independence is highest for those in the lowest income groups. This article, run in the Financial Times, examines the failure of London to fully appease Scottish voters, and argues that England has not successfully cultivated a sense of British identity among Scots that might make them more inclined to stay. Instead of trying to build bonds, the article argues that the English have instead reverted to scare tactics in order to threaten the Scots into submission, which has proven unsuccessful.
FINSUM: The chances that Scotland separates in this vote seem small, however, devolution is a growing long-term movement that will continue to plague the UK from all sides as time goes forward.
In what is amounting to the first serious commercial fallout since the NSA spying scandal erupted in Germany earlier this year, Berlin has just announced that it has terminated a contract with major US-based mobile phone provider Verizon. Germany cited Verizon’s complicity in NSA spying as the reason for terminating the contract, saying it was shocked at the company’s willingness to provide information. Revelations of the spying showed that Verizon received a secret court order which both told them to hand over information on a daily basis to US spy agencies and that it would be illegal to publicly disclose the existence of the court order. Germany is in the process of completely reorganising its government’s information and communications systems in order to have an “increased level of security”. Similarly, Brazil has dropped the use of Microsoft Outlook throughout its government and is currently building a domestic alternative.
FINSUM: Now that the initial shock has passed, the long term repercussions are beginning to be felt. The spying by the NSA will do nothing but harm political relations and hurt US industry. Why was it so important to tap Angela Merkel’s mobile phone?
Flying well below the radar of most mainstream news outlets, this article discusses two alarming new bills in the House of Representatives, both of which attack the Financial Stability Oversight Council (FSOC). The FSOC is the super-agency council which is comprised of the leaders of many government departments, including the Fed and Treasury, whose job is to name institutions which are deemed “too big to fail”, and thus in need of heightened regulatory scrutiny. The first bill, put forward anonymously, seeks to undermine the council until November’s elections by placing a six-month moratorium on any new designations. The second bill, put forward by New Jersey Republican Scott Garrett, seeks to undermine the council’s power by watering down its membership. Instead of including the heads of each department which comprise the council, Garrett wants every member of each department to have a say in the council’s decisions, as well as including members from the House of Representatives—tantamount to Congress thrusting itself into executive power. The bill appears deliberately designed to hinder the independent operation of the council.
FINSUM: While these kind of nitty gritty stories get little press coverage, it is important to keep abreast of potentially very important legislative changes that are occurring behind the scenes in Washington.
Just weeks after the Tea Party had all but been declared dead by the mainstream Republican Party, House Majority leader Eric Cantor has suffered a shocking defeat in his primary in Richmond, Virginia, losing to novice Tea Party candidate David Brat. Brat, an economics professor, won by a 56% to 44% margin, earning the first ever victory in a primary over a House Majority leader. Many had thought the Republican Party had “managed to crush” the Tea Party, but this election proves otherwise. The Tea Party lacks formal organization and is a group loosely organised around an anti-incumbent platform that seeks to cut government spending. It has no official leadership or governing principles. Cantor may still be able to run in the general election as a “write-in” candidate, but the damage to his reputation and the signal it has sent to Republicans has already been done.
FINSUM: The disruptive Tea Party, which almost single-handedly caused the default of the United States last year, appears alive and well.