Jun 102020
 


Banksy June 2020

 

WHO Walks Back Claim On Asymptomatic Transmission Of Coronavirus (RT)
Coronavirus Patients Most Infectious When They First Feel Unwell: WHO (R.)
WHO Urges Pakistan To Return To Lockdown As Hospitals Struggle (GH.)
California, Southwest Face New Coronavirus Woes As US Economy Reopens (R.)
Mexico’s Coronavirus Peak Still Weeks Off, 600 New Deaths In One Day (R.)
Widespread Mask-Wearing Could Prevent COVID19 Second Waves (R.)
DC National Guard Members Test Positive After Protests Response (McC)
Chicago Professor Removes Post That Appeared To Call For A Military Coup (Turley)
Tory Minister Says Eating Chlorinated Chicken Should Be Up To Consumer (Ind.)
World Faces Worst Food Crisis For At Least 50 Years – UN (G.)
ECB Prepares ‘Bad Bank’ Plan For Wave Of Coronavirus Toxic Debt (R.)
The Illusion of a Rapid US Recovery (Galbraith)
Misfortune vs. Carelessness (Ben Hunt)
Banksy Reveals Plan For Bristol’s Toppled Colston Statue (CB)

 

 

Worldometer has global new cases for June 8 (midnight to midnight GMT+0) at + 121,751.

My count from about 6 am EDT to 6 am EDT is about + 125,033 cases.

The decrease we saw for a few days did not last. New deaths also rose from 2,599 yesterday back up to 5,032.

 

 

 

 

New cases past 24 hours in:

• US + 19,056
• Brazil + 30,197
• Russia + 8,595
• India + 9,548
• Pakistan + 5,385

 

 

Cases 7,344,220 (+ 125,033 from yesterday’s 7,219,187)

Deaths 414,140 (+ 5,032 from yesterday’s 409,108)

 

 

 

From Worldometer yesterday evening -before their day’s close-:

 

 

From Worldometer:

 

 

From COVID19Info.live:

 

 

 

 

 

 

 

 

The WHO keeps on piling on “mistakes”. If it isn’t China, it’s HCQ, and if not that, it’s asymptomatic patients.

WHO Walks Back Claim On Asymptomatic Transmission Of Coronavirus (RT)

The World Health Organization has qualified its bombshell claim that asymptomatic people rarely infect others with Covid-19, scrambling to explain how its earlier statement was misinterpreted and based on a “misunderstanding.” WHO coronavirus lead Maria Van Kerkhove attempted on Tuesday to clear up controversy around her previous claim that asymptomatic transmission was “very rare,” insisting she had been speaking based on the results of just “two or three” studies. To claim asymptomatic transmission is rare globally would be a “misunderstanding,” she explained.

“I was just responding to a question, I wasn’t stating a policy of WHO or anything like that,” she backpedaled, explaining that asymptomatic transmission estimates come from dubiously-accurate models. “That’s a big open question, and that remains an open question.” Some 16 percent of infected people may be asymptomatic, she said, citing studies – while some scientific models claim as much as 40 percent of global transmission may come from asymptomatic individuals. Given that sloppy disease modeling has been responsible for some of the most disastrous overreactions to the pandemic, Van Kerkhove’s reluctance to include these supposedly scientific speculations in the previous day’s briefing could be forgiven, but WHO emergency director Mike Ryan acknowledged his colleague’s words were likely “misinterpreted.”

[..] Harvard Global Health Institute had flat-out refused to accept Van Kerkhove’s claim, declaring “all of the best evidence suggests that people without symptoms can and do readily spread SARS-CoV-2” in a statement on Tuesday. The institute warned that “communicating preliminary data…without much context can have tremendous negative impact” on public and government responses to the pandemic, and indeed, Van Kerkhove’s comments had touched off a chain-reaction of second-guessing, pearl-clutching, and general existential crises among lockdown proponents as the number of confirmed Covid-19 cases continues to climb.

Read more …

A.k.a. the exact moment they should start taking hydroxychloroquine.

Coronavirus Patients Most Infectious When They First Feel Unwell: WHO (R.)

Studies show people with the coronavirus are most infectious just at the point when they first begin to feel unwell, World Health Organization (WHO) experts said on Tuesday. This feature has made it so hard to control spread of the virus that causes COVID-19 disease, but it can be done through rigorous testing and social distancing, they said. “It appears from very limited information we have right now that people have more virus in their body at or around the time that they develop symptoms, so very early on,” Maria van Kerkhove, a WHO epidemiologist and technical lead on the pandemic, told a live session on social media. Preliminary studies from Germany and the United States suggest that people with mild symptoms can be infectious for up to 8-9 days, and “it can be a lot longer for people who are more severely ill”, she said.

Earlier, some disease experts questioned her statement on Monday that transmission of COVID-19 by people with no symptoms is “very rare”, saying this guidance could pose problems for governments as they seek to lift lockdowns. Van Kerkhove, citing disease-modelling studies, clarified on Tuesday that some people do not develop symptoms, but can still infect others. “Some estimates of around 40 percent of transmission may be due to asymptomatic (cases), but those are from models. So I didn’t include that in my answer yesterday but wanted to make sure that I made that clear,” she said.

Dr. Mike Ryan, WHO’s top emergencies expert, said that the novel coronavirus lodges in the upper respiratory tract, making it easier to transmit by droplets than related viruses such as SARS or MERS, which are in the lower tract. “Now as we look at COVID-19, we have an infectious pathogen that is present in the upper airway for which the viral loads are peaking at the time you are just beginning to get sick,” he said. “That means you could be in the restaurant feeling perfectly well and start to get a fever, you are feeling ok, you didn’t think to stay home, but that’s the moment at which your viral load could be actually quite high,” he said.

Read more …

You try getting 212 million people on a second lockdown.

WHO Urges Pakistan To Return To Lockdown As Hospitals Struggle (GH.)

The World Health Organization has taken the unusual step of urging Pakistan to return to lockdown, suggesting the country implement restrictions in a cycle of two weeks on, two weeks off. While Pakistan has relatively low testing rates, one in four people who are tested return a positive result, the WHO said in a letter to Punjab’s provincial health minister, Yasmin Rashid. Prime Minister Imran Khan has resisted a national lockdown, arguing the country cannot afford it, and provinces have instead introduced patchwork lockdowns. Last week Khan said these would be lifted. But, with 108,317 known cases and 2,172 confirmed deaths, hospitals across the south Asian country say they are at or near capacity, with some turning Covid-19 patients away. Globally, the WHO confirmed the biggest ever one-day rise in confirmed cases this week, with 136,000 cases in 24 hours, according to director general Tedros Adhanom Ghebreyesus. Most were from south Asia and the Americas.


[..] Dr Anthony Fauci, the top infectious diseases expert in the US, warned on Tuesday the pandemic was “far from over,” and that he was surprised at how “rapidly it just took over the planet”. Speaking in a videotaped discussion at a Biotechnology Innovation Organization conference, Fauci said: “I mean, Ebola was scary. But Ebola would never be easily transmitted in a global way.” He added: “HIV, as important as it is, was drawn out over an extended period of time.” He warned that the world was still at the start of seeing the coronavirus pandemic’s effects. “Oh my goodness,” Fauci said. “Where is it going to end? We’re still at the beginning of it.” On Tuesday, 21 US states reported weekly increases in new cases. Arizona, Utah and New Mexico all posted rises of 40% or higher for the week ending Sunday, compared with the prior seven days, according to a Reuters analysis.

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“21 U.S. states reported weekly increases [..] Arizona, Utah and New Mexico all posted rises of 40% or higher for the week..”

California, Southwest Face New Coronavirus Woes As US Economy Reopens (R.)

Coronavirus cases and hospitalizations are spiking in parts of California and the U.S. Southwest, prompting Arizona to reactivate its emergency plan for medical facilities and California to place counties where half its population lives on a watch list. The uptick in cases, which could lead authorities to reimpose or tighten public health restrictions aimed at slowing the virus’ spread, complicates efforts to reopen the U.S. economy, which has been devastated by shelter-at-home rules. New Jersey, one of the states hit hardest by the pandemic, with over 12,000 deaths, lifted its stay-at-home order on Tuesday. More than 18 million of California’s 39 million residents live in counties now on the watch list, which includes Los Angeles, Santa Clara and Fresno, a Reuters analysis showed.


“Many of the cases that are showing up in hospitals are linked to gatherings that are taking place in homes – birthday parties and funerals,” said Olivia Kasirye, public health director of Sacramento County, one of the nine counties on the state watch list that may eventually require them to roll back reopening efforts. Arizona was among the first states to reopen in mid-May and its cases have increased 115% since then, leading a former state health chief to warn that a new stay-at-home order or field hospitals may be needed. According to a Reuters tally, there were 1,983,825 coronavirus cases in the United States and 111,747 deaths as of Tuesday. On Tuesday, 21 U.S. states reported weekly increases in new cases of COVID-19.

[..] Arizona, Utah and New Mexico all posted rises of 40% or higher for the week ended Sunday, compared with the prior seven days, according to a Reuters analysis. Some of the new cases are linked to better testing. But many stem from loosened public health restrictions that have allowed people to gather in groups and go inside stores to shop, said public health officers in two California counties. Health officials believe other cases have been passed along by people not following social-distancing recommendations. It is too soon to see whether cases will also spike after protests swept the country [..]

Read more …

“The government previously predicted the pandemic would peak in early May, and under U.S. pressure, has begun reopening its carmaking industry..”

Mexico’s Coronavirus Peak Still Weeks Off, 600 New Deaths In One Day (R.)

New coronavirus cases in Mexico are expected to keep rising, a top health official said on Tuesday, even as the government pushes a gradual reopening of the economy launched at the beginning of this month. “We still haven’t reached the maximum point,” Deputy Health Minister Hugo Lopez-Gatell told a morning news conference. “For several more weeks, we will keep announcing there are more cases today than yesterday.” His assessment was largely echoed by officials from the World Health Organization and its Pan American Health Organization during a webcast news conference later in the day. While Mexico has yet to reach peak infections, they said, officials should boost testing before any wide-scale economic reopening and stick to safety measures, including social distancing.


Government figures released on Tuesday night showed nearly 600 deaths added to the official count as total infections rose to 124,301. Overall, reported deaths stood at 14,649. In recent weeks, Latin America has emerged as the epicenter of the pandemic, with a spike in cases even as the tide of infection recedes elsewhere. Mexican officials have gradually raised the projections of total fatalities and now forecast up to 35,000 deaths through October. A study by the Institute for Health Metrics and Evaluation at the University of Washington last week forecast up to 75,516 deaths by August. The government previously predicted the pandemic would peak in early May, and under U.S. pressure, has begun reopening its carmaking industry, which has since been deemed essential. But plans to further relax social-distancing measures were put on hold as infection rates continued to rise.

Read more …

That this is studied at all tells you how insane the west is. Asians don’t waste money on that, they just wear them.

Widespread Mask-Wearing Could Prevent COVID19 Second Waves (R.)

Population-wide facemask use could push COVID-19 transmission down to controllable levels for national epidemics and could prevent further waves of the pandemic disease when combined with lockdowns, according to a UK study published Wednesday. The research, led by scientists at the Britain’s Cambridge and Greenwich Universities, suggests lockdowns alone will not stop the resurgence of the new SARS-CoV-2 coronavirus, but that even homemade masks can dramatically reduce transmission rates if enough people wear them in public. “Our analyses support the immediate and universal adoption of facemasks by the public,” said Richard Stutt, who co-led the study at Cambridge.

He said the findings showed that if widespread mask use were combined with social distancing and some lockdown measures, this could be “an acceptable way of managing the pandemic and re-opening economic activity” long before the development and public availability of an effective vaccine against COVID-19, the respiratory illness caused by the coronavirus. The study’s findings were published in the “Proceedings of the Royal Society A” scientific journal. The World Health Organization updated its guidance on Friday to recommend that governments ask everyone to wear fabric face masks in public areas where there is a risk to reduce the spread of the disease.

In this study, researchers linked the dynamics of spread between people with population-level models to assess the effect on the disease’s reproduction rate, or R value, of different scenarios of mask adoption combined with periods of lockdown. The R value measures the average number of people that one infected person will pass the disease on to. An R value above 1 can lead to exponential growth. The study found that if people wear masks whenever they are in public it is twice as effective at reducing the R value than if masks are only worn after symptoms appear. In all scenarios the study looked at, routine facemask use by 50% or more of the population reduced COVID-19 spread to an R of less than 1.0, flattening future disease waves and allowing for less stringent lockdowns.

Read more …

But the Dems like the protests! Stopping them would be interfering with the election!

DC National Guard Members Test Positive After Protests Response (McC)

Members of the D.C. National Guard who were responding to protests in the nation’s capital over the death of George Floyd have tested positive for COVID-19, a spokeswoman said on Tuesday. The service members were part of the 1,300 D.C. National Guard members called up to help law enforcement respond initially to rioting on May 31, that was followed by days of peaceful protests. A Guard spokeswoman did not identify how many positive tests the unit has recorded. “We can confirm that we have had COVID-19 positive tests with the DCNG,” said D.C. National Guard spokeswoman Air Force Lt. Col. Brooke Davis. “The safety and security of our personnel is always a concern, especially in light of the COVID-19 era.”


The news follows reports that two members of the Nebraska National Guard who were activated in response to protests in Lincoln, Neb., have also tested positive. The D.C. National Guard was supported by approximately 3,900 additional Guardsmen from Florida, Idaho, Indiana, Maryland, Missouri, Mississippi, New Jersey, Ohio, South Carolina, Tennessee and Utah to protect national monuments and ensure peaceful demonstrations as tens of thousands of protesters took to district streets last week. In the largest protest Saturday, participants squeezed past each other, some with masks, some not, as they chanted and sang near the White House.

Read more …

“Trump is Hitler” died about 3 years ago. The MSM have brought it back.

Chicago Professor Removes Post That Appeared To Call For A Military Coup (Turley)

Figures from Glenn Greenwald to Tucker Carlson have raised the recent posting by University of Chicago Professor Brian Leiter saying that military leaders should “depose” President Donald Trump and jail him. The posting was either a poor attempt at a coup or comedy. The real problem is that in today’s environment it was unclear and, worse yet, unremarkable. On Reddit, readers were directed to “Brian Leiter (UoC professor) calls for a military coup: “Trump should be deposed and jailed” Leiter removed the statement and blamed the lack of a sense of humor on those who objected. He was not calling for a coup d’état, just musing about the possibility of a coup d’état.

On his site, Leiter discussed the criticism of Trump by General Mattis and stated that Mattis now “needs to encourage his military colleagues who share his respect for American democracy and the rule of law to do what he should have done while in office: Trump should be deposed and jailed.” Leiter later removed the statement with an addendum reading: “I’ve removed my little joke about a military coup in favor of VP Pence. I have, it appears, more faith in the U.S. military, and its commitment to the rule of law, than most readers.” The incident however raises a more concerning problem. Many could not tell. It is now routine for academics to make sweeping and irresponsible statements about how to deal with Trump and his Administration.

This is not a reference to the distortion of the criminal code to declare a host of criminal acts that are unsupportable under controlling case law. It is superheated rhetoric of professors denouncing the Trump Administration as a fascist regime and even endorsing violent protests as a form of speech. Harvard Professor Lawrence Tribe retweeted a comparison of Trump to Hitler engaging in similar gestures and calling it “horrifying,” He later took done the tweet and said “I’m not saying Trump is becoming Hitler, so don’t bother tweeting the distinctions.” Many are still making the comparison. Indeed, I have had other professors make the same comparison in conversations.

A professor who said that he teaches a course on fascism insisted that the comparison to fascism is apt and that violence is warranted, including the attack on journalist Andy Ngo: “I don’t have a problem with it. There are children dying of lack of medication in concentration camps in the U.S. If one fascist gets a milkshake thrown at him… And beaten up. I don’t have a problem with it.” This is why people do not get the joke because many academics are not joking. Indeed, we have discussed cases where faculty have been physically attacked and intimidated.

Read more …

Let them eat shit.

Tory Minister Says Eating Chlorinated Chicken Should Be Up To Consumer (Ind.)

A minister has stoked fears that low-welfare American meat could soon be on its way to British supermarkets and cafeterias after suggesting that the government would “trust the consumer” on whether to buy it or not. In the latest exchange in parliament on the issue, Cabinet Office minister Penny Mordaunt refused to say a ban would remain on chlorinated chicken, hormone-fed beef and other US imports after an upcoming trade deal with Donald Trump. The minister said she believed “we should be trusting the consumer” on the issue and suggested some people did not want to “put their faith in government” regulations. Despite the talk of consumer choice, in reality many meat products, such as in restaurants, hospitals, and school cafeterias, do not have a country of origin label, making it impossible for consumers to differentiate.

Where such labelling does currently exist, the US also regards it as an illegitimate barrier to its exports and pushes to have the practice banned as part of trade agreements it signs with other countries. US negotiators have made clear that opening the door to American agricultural exports, which are produced to much lower welfare standards than their European counterparts, is their primary demand in talks with the UK. While the government’s own best-case scenario shows an agreement with the US would lead to a tiny boost to the UK economy of just 0.16 per cent of GDP, failing to sign such a deal would be highly politically embarrassing for Boris Johnson, who has presented such an arrangement as part of the alternative to EU membership.

[..] As recently as January, Theresa Villiers, then environment secretary, reiterated that “we will not be importing chlorinated chicken” – but since then US trade chiefs have put pressure on the UK to change its position, leading the government to change tack. American meat factories use chlorine to wash chickens so that they can operate a less sanitary production environment otherwise, an approach which saves money and allows them to undercut other producers. [..] If US food exports do make it to the UK, British consumers may be denied information about which products are American to help them get a foothold in the market. The US government’s “Foreign Trade Barriers” document for 2019 catalogues policies in countries around the world the US wants ended.

Read more …

We now blame the virus for everything. Next up: corona causes climate change.

World Faces Worst Food Crisis For At Least 50 Years – UN (G.)

The world stands on the brink of a food crisis worse than any seen for at least 50 years, the UN has warned as it urged governments to act swiftly to avoid disaster. Better social protections for poor people are urgently needed as the looming recession following the coronavirus pandemic may put basic nutrition beyond their reach, the UN secretary general, António Guterres, said on Tuesday. “Unless immediate action is taken, it is increasingly clear that there is an impending global food emergency that could have long-term impacts on hundreds of millions of children and adults,” he said. “We need to act now to avoid the worst impacts of our efforts to control the pandemic.”

Although harvests of staple crops are holding up, and the export bans and protectionism that experts feared have so far been largely avoided, the worst of the impacts of the pandemic and ensuing recession are yet to be felt. Guterres warned: “Even in countries with abundant food, we see risks of disruption in the food supply chain.” About 50 million people risk falling into extreme poverty this year owing to the pandemic, but the long-term effects will be even worse, as poor nutrition in childhood causes lifelong suffering. Already, one in five children around the world are stunted in their growth by the age of five, and millions more are likely to suffer the same fate if poverty rates soar.

Guterres laid out a three-point plan to repair the world’s ailing food systems and prevent further harm. These are: to focus aid on the worst-stricken regions to stave off immediate disaster, and for governments to prioritise food supply chains; to strengthen social protections so that young children, pregnant and breastfeeding women and other at-risk groups – including children who are not receiving school meals in lockdown – receive adequate nutrition; and to invest in the future, by building a global recovery from the pandemic that prioritises healthy and environmentally sustainable food systems.

Read more …

The ECB is there ONLY for the banks, not at all for anyone else. The bad bank issues bonds with bad loans as collateral, banks buy those, and hand them to the ECB as … collateral. Circle jerk.

“The bad bank would then issue bonds which commercial banks would buy in exchange for portfolios of unpaid loans, neutralising the virus shock for Europe’s lenders. The banks could then lodge those bonds with the ECB as collateral for central bank funding.. “

ECB Prepares ‘Bad Bank’ Plan For Wave Of Coronavirus Toxic Debt (R.)

European Central Bank officials are drawing up a scheme to cope with potentially hundreds of billions of euros of unpaid loans in the wake of the coronavirus outbreak, two people familiar with the matter told Reuters. The project, which comes as Europe mobilises trillions of euros to bolster the region’s economy, is aimed at shielding commercial banks from any second fallout from the crisis, if rising unemployment chokes off the income needed to repay loans. One of the people familiar with the plan said the ECB had set up a task force to look at the idea of a “bad bank” to warehouse unpaid euro debt and that work on the scheme had accelerated in recent weeks. The amount of debt in the euro zone that is considered unlikely to ever be fully repaid already stands at more than half a trillion euros, including credit cards, car loans and mortgages, according to official statistics.

That is set to rise as the COVID-19 outbreak squeezes borrowers and could even double to one trillion euros, weighing on already fragile banks and hindering new lending, the people familiar with the ECB plans said. While the idea for a euro zone bad bank was discussed and shelved over two years ago, the ECB, under its new President Christine Lagarde, has consulted banks and EU officials about a scheme in recent weeks, one of the people said. As the euro zone’s most powerful institution, ECB backing for the project is critical but it would also require the blessing of Germany, the bloc’s biggest economy. Berlin has long opposed schemes that accept shared responsibility for debts in other countries although it recently had an unexpected change of heart, agreeing to pool EU borrowing for a coronavirus recovery fund.

One blueprint under discussion would involve the European Stability Mechanism, an EU institution which can provide financial assistance to euro zone countries or lenders, standing in as guarantor for the bad bank, the people said. The bad bank would then issue bonds which commercial banks would buy in exchange for portfolios of unpaid loans, neutralising the virus shock for Europe’s lenders. The banks could then lodge those bonds with the ECB as collateral for central bank funding, one of the people said. Major European commercial banks could be called on to join forces to underpin the scheme, the second person said.

Read more …

There are calls for Jay Powell to stop supporting the stock markets, because he’s helping Trump.

The Illusion of a Rapid US Recovery (Galbraith)

Furman, Krugman, and the CBO share a mental model. They regard the pandemic as an economic shock, like an earthquake or the 9/11 terrorist attacks. It is a disruption to a solid structure, a deviation from normal growth. To get America moving again, what is mainly needed is confidence, perhaps aided by stimulus. If consumers channel their pent-up demand into new spending, this “shock-stimulus” model dictates, then businesses will revive investment, and soon enough, all will be well once again.This is how mainstream center-left economists and policymakers have thought about recessions and recoveries since at least the 1960s, when President John F. Kennedy and his successor, Lyndon B. Johnson, pushed through tax cuts. But it ignores three major changes in the US economy since then: globalization, the rise of services in consumption and employment, and the impact of personal and corporate debts.

In the 1960s, the US had a balanced economy that produced goods for both businesses and households, at all levels of technology, with a fairly small (and tightly regulated) financial sector. It produced largely for itself, importing mainly commodities. Today, the US produces for the world, mainly advanced investment goods and services, in sectors such as aerospace, information technology, arms, oilfield services, and finance. And it imports far more consumer goods, such as clothing, electronics, cars, and car parts, than it did a half-century ago. And whereas cars, televisions, and household appliances drove US consumer demand in the 1960s, a much larger share of domestic spending today goes (or went) to restaurants, bars, hotels, resorts, gyms, salons, coffee shops, and tattoo parlors, as well as college tuition and doctor’s visits.

Tens of millions of Americans work in these sectors.Finally, American household spending in the 1960s was powered by rising wages and growing home equity. But wages have been largely stagnant since at least 2000, and spending increases since 2010 were powered by rising personal and corporate debts. House values are now stagnant at best, and will likely fall in the months ahead. Mainstream economics pays little attention to such structural questions. Instead, it assumes that business investment responds mostly to the consumer, whose spending is dictated equally by income and desire. The distinction between “essential” and “superfluous” does not exist. Debt burdens are largely ignored.

But demand for many US-made capital goods now depends on global conditions. Orders for new aircraft will not recover while half of all existing planes are grounded. At current prices, the global oil industry is not drilling new wells. Even at home, though existing construction projects may be completed, plans for new office towers or retail outlets won’t be launched soon. And as people commute less, cars will last longer, so demand for them (and gasoline) will suffer.Faced with radical uncertainty, US consumers will save more and spend less. Even if the government replaces their lost incomes for a time, people know that stimulus is short term. What they do not know is when the next job offer – or layoff – will come along.

Read more …

“To lose one parent, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness.”
-Oscar Wilde, “The Importance of Being Earnest”

Misfortune vs. Carelessness (Ben Hunt)

Back in 2013 – in some of my very first Epsilon Theory notes – I wrote about how unemployment data was chronically misreported during Barack Obama’s first term, with an outrageous bias towards making the employment news flow in the United States look much better in narrative than it was in fact. [..] the skinny is this: for a period of some years in the aftermath of the Great Financial Crisis, initial unemployment claims were systematically undercounted. Amazingly enough, this systematic misreporting in unemployment data stopped after Obama was re-elected for a second term.

Was this an intentional act of malfeasance and corruption by the Obama-era Bureau of Labor Statistics (BLS), who at the time weren’t even responsible for collecting the weekly initial unemployment claims data? Nope. Did the Obama-era BLS recognize the systematic error and direction of bias in the initial unemployment claims data? Absolutely. Could the Obama-era BLS have fixed the systematic error and direction of bias in the initial unemployment claims data if they had wanted to? In a heartbeat.

It’s exactly the same thing with the Trump-era Bureau of Labor Statistics and the reporting of weekly and monthly employment data. The measurement error we’ve seen in the monthly jobs report – and keep in mind that it is exactly the SAME ERROR being made for the past THREE MONTHS – is not an intentional mistake. But the failure to correct these errors – the conscious effort required to allow known and obvious errors to persist and create a market-moving and election-moving cartoon – well, I think that IS intentional.

Accidents happen. Misfortune occurs. Mistakes are made. But when the same accident happens over and over again, in exactly the same way and with exactly the same bias … What’s happening with the Bureau of Labor Statistics – and of course it’s not only the Bureau of Labor Statistics – is an intentional carelessness. It is an intentional, political carelessness that supports status quo cartoons of control, regardless of which political party happens to be championing the status quo today. It’s not a Democrat thing and it’s not a Republican thing. It’s a power thing.

Read more …

I see a global industry emerging.

Banksy Reveals Plan For Bristol’s Toppled Colston Statue (CB)

Protests in support of the Black Lives Matter movement have been taking place across the world over the last few weeks, after the death of George Floyd at the hands of Minneapolis police officers. In one of the most symbolic images from this weekend’s protests, the statue of 18th century slave trader Edward Colston was toppled in Bristol, and pushed into the harbour. As debate rages over whether the statue should be reinstated, left in the harbour, or pulled out and put in the city’s museum, the mysterious Bristol-based street artist Banksy has proposed a solution (below) to keep “everyone happy”. He suggests putting the statue back on its plinth, but with the addition of other life-size statues of the protestors pulling it down.

“What should we do with the empty plinth in the middle of Bristol? Here’s an idea that caters for both those who miss the Colston statue and those who don’t. We drag him out the water, put him back on the plinth, tie cable round his neck and commission some life size bronze statues of protestors in the act of pulling him down. Everyone happy. A famous day commemorated.”

Read more …

 

 

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Jun 172019
 


Pablo Picasso The sculptor and his statue 1933

 

The Bleak Mood Of Pre-Brexit UK (O.)
Boeing May Never Recover From 737 Debacle (Auerback)
Huawei Prepares For 40%-60% Fall In International Smartphone Shipments (R.)
Huawei Moves To Russia-China Operating System (Escobar)
Deutsche Bank To Set Up €50 Billion Bad Bank (R.)
How Wall Street Got Rich Off The Fresh Market Deal (Cohan)
Japan Demands More Proof From US That Iran Attacked Tankers (JT)
The S-400 Is a Formidable Threat to US Arms Industry (Pieraccini)
While Lam Relents, Hong Kong Calls Massively For Her Ouster (AT)
Chinese Activists Seek UN Investigation Into Tiananmen Crackdown (R.)

 

 

Broken. Completely.

The Bleak Mood Of Pre-Brexit UK (O.)

The survey by BritainThinks reveals an astonishing lack of faith in the political system among the British people, with less than 6% believing their politicians understand them. Some 75% say that UK politics is not fit for purpose. As the Conservative party focuses on who its new leader should be, and the Brexit impasse continues with no solution in sight, 86% think the UK needs a strong leader more than ever – but only 21% think the next prime minister, whoever it may be, will be up to the job. Some 52% believe the country is heading for a Boris Johnson premiership.

Pollster Deborah Mattinson said she was shocked by the findings. “I have been listening to people in focus groups since the late 1980s and I cannot recall a time when the national mood was more despairing. ‘Broken’, ‘sad’, ‘worried’, ‘angry’– the negatives tumble out, as does the long list of grievances. I’m hearing anxieties voiced in a way that I haven’t heard since the 1990s: a rundown NHS, job insecurity, teacher shortages.” BritainThinks polled more than 2,000 people and hosted several focus groups in London and Leicester to gauge the national mood.

Almost three-quarters of the British public believe the divisions on Brexit between Leavers and Remainers will deepen and get worse within the next year. Two-thirds feel depressed by rising poverty and homelessness. While people say Brexit has made them more politically engaged – 40% are paying more attention since the 2016 referendum, rising to 50% in those aged between 18 and 24 – the polling suggests the bitter political debate over leaving the EU has shattered public trust in the way the nation is governed. Some 83% feel let down by the political establishment and almost three-quarters (73%) believe the country has become an international laughing stock and that British values are in decline.

Read more …

Ralph Nader says the 737 MAX should never fly again.

Boeing May Never Recover From 737 Debacle (Auerback)

Many of us are familiar with the acronym “FUBAR.” A recent New York Times article on the Boeing 737 fiasco provides a perfect illustration of the concept. We’re now learning that the company “built deadly assumptions” into its newly designed 737 Max aircraft and, specifically, its Maneuvering Characteristics Augmentation System (MCAS). Even worse, the Times account concludes that the recent air crashes that have resulted in a worldwide grounding of the Boeing Max plane “might have been avoided, if employees and regulators had a better understanding of MCAS” and if the US Federal Aviation Authority (FAA) itself was not operating with outdated data on the software changes (which Boeing failed to provide).

The analysis is excellent as far as it goes. But the most damning fact only briefly hinted at in the article is that the problems were evident as early as 2012, some five years before the newest 737 version was marketed and sold across the globe. “At its core, this was a hardware problem, not a software issue. Even when Boeing was using a relatively “safer” version of the early MCAS software (that was later changed to a more dangerous version), the new 737 still had an engine too large to be accommodated in its traditional spot on the plane, which ultimately distorted “the relationship between the engine’s ‘thrust’ and its center of gravity,” as I’ve written before. The resultant aerodynamic problems could not be solved with a software “solution,” no matter how “safe” the original MCAS version (that was ultimately changed to an even more dangerous version) was purported to be.”

Just don’t expect any blowback from Washington. The whole episode provides yet another sick illustration of how the entire system of governance in the US has degenerated into a fully fledged “predator state.” About the only good thing that might emerge from this whole fiasco is that Boeing will provide future Master of Business Administration students with a textbook example of how not to manage a crisis. Likewise, future historians and political scientists will marvel in incredulity at the magnitude of corruption that enveloped the US during this very dark time in the life of the republic. Assuming, of course, that there still anything left worth studying by that point.

[..] Recall that the genesis of this disaster was a problem of hardware, not just MCAS. The extra lift of the far larger-diameter engines of the 737 Max (placed on a different position on the wing) caused the plane to pitch up whenever it approached stall angles of attack at both high and low speeds. This is a problem that should have become glaringly obvious to the greenest of aerodynamics personnel at Boeing the moment the first wind-tunnel model was tested at angles of attack higher than stall (it may have even been obvious on even earlier fluid-dynamics computer-simulation results).

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“.. In order to offset overseas decline, Huawei is aiming to grab up to half of China’s smartphone market in 2019..”

Huawei Prepares For 40%-60% Fall In International Smartphone Shipments (R.)

Huawei Technologies Co Ltd is preparing for a 40% to 60% decline in international smartphone shipments, Bloomberg reported on Sunday. The Chinese technology company is looking at options that include pulling the latest model of its marquee overseas smartphone, the Honor 20, according to the article, which cited people familiar with the matter. The device will begin selling in parts of Europe, including Britain and France, on June 21, the report said. Executives will be monitoring the launch and may cut off shipments if the sales are poor, it said. Marketing and sales managers at the tech giant are internally expecting a drop in volumes of anywhere between 40 million to 60 million smartphones this year, the report said. In order to offset overseas decline, Huawei is aiming to grab up to half of China’s smartphone market in 2019, Bloomberg said.

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Be careful what you wish for. Sanctions made Russia stronger too.

Huawei Moves To Russia-China Operating System (Escobar)

Google cuts Huawei off Android; so Huawei may migrate to Aurora. Call it mobile Eurasia integration; the evolving Russia-China strategic partnership may be on the verge of spawning its own operating system – and that is not a metaphor. Aurora is a mobile operating system currently developed by Russian Open Mobile Platform, based in Moscow. It is based on the Sailfish operating system, designed by Finnish technology company Jolla, which featured a batch of Russians in the development team. Quite a few top coders at Google and Apple also come from the former USSR – exponents of a brilliant scientific academy tradition.

In 2014, Russian entrepreneur Grigory Berezkin started co-owning Jolla, and from 2016 his Mobile Platform company started developing a Russian version of the operating system. In 2018, Rostelecom, a state company, bought a 75% share in Open Mobile Platform. Ahead of the St Petersburg International Economic Forum last week, Huawei chairman Guo Ping discussed the possibility of adopting Aurora with Russian minister of digital development and communications, Konstantin Noskov. According to Guo, “China is already testing devices with the Aurora pre-installed.” In Moscow, before moving to St Petersburg, Presidents Putin and Xi Jinping discussed multiple possible deals; and these include Huawei-Aurora, as well as where to locate some of Huawei’s production lines in Russia.

Aurora could be regarded as part of Huawei’s fast-evolving Plan B. Huawei is now turbo-charging the development and implementation of its own operating system, HongMeng, a process that started no less than seven years ago. Most of the work on an operating system is writing drivers and APIs (application programming interfaces). Huawei would be able to integrate their code to the Russian system in no time. HongMeng, for its part, is a key project of Huawei 2012 Laboratories, the innovation, research and technological development arm of the Shenzhen colossus. No Google? Who cares? Tencent, Xiaomi, Vivo and Oppo are already testing the HongMeng operating system, as part of a batch of one million devices already distributed.

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Mutti is not happy.

Deutsche Bank To Set Up €50 Billion Bad Bank (R.)

Deutsche Bank is planning to overhaul its trading operations by creating a “bad bank” to hold tens of billions of euros of assets and shrinking or shutting its U.S. equity and trading businesses, the Financial Times reported on Sunday. The bad bank would house or sell assets valued at up to 50 billion euros ($56.06 billion)- after adjusting for risk – and comprise mainly long-dated derivatives, the FT reported, citing four people briefed on the plan. With the creation of the bad bank, Chief Executive Officer Christian Sewing is shifting the German lender away from investment banking and focusing on transaction banking and private wealth management, the newspaper said.


As part of the restructuring, the lender’s equity and rates trading units outside continental Europe will be shrunk or closed entirely, the report said. The bank is planning cuts at its U.S. equities business, including prime brokerage and equity derivatives, to win over shareholders unhappy about its performance, four sources familiar with the matter told Reuters in May. “As we said at the AGM on May 23, Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability. We will update all stakeholders if and when required,” Deutsche Bank said in an emailed statement on Sunday in response to the FT report.

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Grand theft auto made legal.

How Wall Street Got Rich Off The Fresh Market Deal (Cohan)

Take the case of the March 2016, $1.36 billion cash buyout of a supermarket chain, Fresh Market, by Apollo Global Management, the firm started by Leon Black nearly 30 years ago that now manages more than $300 billion. In that deal Apollo teamed up with Ray Berry, the company’s founder, and his son, Brett, to buy out the company’s public stockholders. Before the buyout the Berrys owned about 10% of the public Fresh Market. They agreed to roll over that stake into the newly private Fresh Market, giving them about the same ownership in the private company—worth somewhere between $136 million and $930 million, if the alchemy of leveraged buyouts worked out. Apollo would own the remaining 90% of the equity of the private company.

Because the deal was, in effect, a management buyout of the company, Fresh Market set up a special three-member committee of independent directors to evaluate the Apollo proposal, as well as any others that might come in over the transom after the company decided to put itself up for sale shortly after September 1, 2015. As professional referees, the special committee hired JPMorgan Chase as its financial adviser, and Cravath, Swaine & Moore as one of its legal advisers. Their job was to evaluate the various proposals to buy Fresh Market, a collection of 186 stores in 27 states as of March 2016, and to make sure that the one chosen was, in the parlance of Wall Street, “fair” to the public shareholders of the company “from a financial point of view.”

That’s when things got interesting, especially since Apollo was the only final bid the company received. According to a class action shareholder lawsuit that is still wending its way through the Delaware Court of Chancery, Apollo used its long-standing financial ties to JPMorgan Chase and Cravath to co-opt the process for the benefit of itself and the Berrys, allowing them to buy the company on the cheap. In effect, the lawsuit alleges, by teaming up with the Berrys on an exclusive basis, Apollo was able to buy Fresh Market knowing that its competition for the company would be at a severe disadvantage, without being able to count on the Berrys support, and that JPMorgan Chase would likely bless the fairness of the deal.

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Japan, Germany, Corbyn…

Japan Demands More Proof From US That Iran Attacked Tankers (JT)

The Japanese government has been requesting the United States for concrete evidence to back its assertion that Iran is to blame for the attacks on two tankers near the Strait of Hormuz on Thursday, government sources said Sunday. The request came after U.S. Secretary of State Mike Pompeo gave a statement hours after the attacks blaming Iran but without offering proof. The Department of Defense later released a video allegedly showing an Iranian patrol boat removing an unexploded mine attached to the side of the Japanese-operated tanker Kokuka Courageous. But Japanese government officials remain unconvinced, the sources said. “The U.S. explanation has not helped us go beyond speculation,” said one senior government official.


Japan has been seeking more concrete evidence through various channels, including Foreign Minister Taro Kono who is likely to have made the request during a call with his counterpart on Friday, the sources said. Pompeo said in a press conference Thursday that the United States’ assessment was based on their “intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.” A source close to Prime Minister Shinzo Abe said, “These are not definite proof that it’s Iran.” “Even if it’s the United States that makes the assertion, we cannot simply say we believe it,” he said.

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AI at its best.

The S-400 Is a Formidable Threat to US Arms Industry (Pieraccini)

The US finds itself faced with a situation it has not found itself in over the last 50 years, namely, an environment where it does not expect to automatically enjoy air superiority. Whatever semblance of an air defense that may have hitherto been able to pose any conceivable threat to Uncle Sam’s war machine was rudely dismissed by a wave of cruise missiles. To give two prime examples that occurred in Syria in 2018, latest-generation missiles were intercepted and shot down by decades-old Russian and Syrian systems. While the S-400 system has never been employed in Syria, it is noteworthy that the Serbian S-125 systems succeeded in identifying and shooting down an American F-117 stealth aircraft during the war in the Balkans.

There is a more secret aspect of the S-400 that is little disclosed, either within Russia itself or without. It concerns the S-400’s ability to collect data through its radar systems. It is worth noting Department of Defense spokesman Eric Pahon’s alarm over Turkey’s planned purchase of the S-400: “We have been clear that purchasing the S-400 would create an unacceptable risk because its radar system could provide the Russian military sensitive information on the F-35. Those concerns cannot be mitigated. The S-400 is a system built in Russia to try to shoot down aircraft like the F-35, and it is inconceivable to imagine.

Certainly, in the event of an armed conflict, the S-400’s ability to shoot down fifth-generation aircraft is a huge concern for the United States and her allies who have invested so heavily in such aircraft. Similarly, a NATO country preferring Russian to American systems is cause for alarm. This is leaving aside the fact that the S-400 is spreading around the world, from China to Belarus, with dozens of countries waiting in line for the ability to seal their skies from the benevolent bombs of freedom. It is an excellent stick with which to keep a prowling Washington at bay.

[..] The ability of the S-400 to collect data on both the F-35 and F-22 – the crown jewels of the US military-industrial complex – is a cause for sleepless nights for US military planners. What in particular causes them nightmares is that, for the S-400 to function in Turkey, it will have to be integrated into Turkey’s current “identification friend or foe” (IFF) systems, which in turn are part of NATO’s military tactical data-link network, known as Link 16.

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2 million. Beijing has said it stands behind her.

While Lam Relents, Hong Kong Calls Massively For Her Ouster (AT)

Hong Kong’s embattled Chief Executive Carrie Lam issued a public apology Sunday evening (June 16) as hundreds of thousands of protestors dressed in black clogged the city’s streets in another massive protest demanding her resignation and the scrapping of a contentious bill that would allow for the extradition of suspects to mainland China. A day after Lam announced a surprise decision to indefinitely postpone the bill in a press conference on Saturday, the city’s leader vowed to “sincerely and humbly accept all criticism and to improve and serve the public” in a statement released at 8:30 pm as chanting crowds stood outside the gates of her office calling for her to step down.


“Carrie Lam’s press conference yesterday just made Hong Kong people angrier. We don’t think she will step down, but we must force her out,” said 27-year-old Chiew minutes before demonstrators began marching from Victoria Park in the scorching afternoon heat with the aim of forcing the government to rescind, rather than postpone, the controversial bill. Gripped by a surge of mass dissent, the Asian financial hub has been thrust into political crisis amid the largest political demonstrations and some of the worst scenes of violence since Hong Kong’s return to Chinese rule in 1997. Organizers from the Civil Human Rights Front said almost two million people took part in Sunday’s march.


Protest organizers said almost two million people took part in a mammoth June 16 protest march. Photo: Nile Bowie

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Yeah, that’s going to happen.

Chinese Activists Seek UN Investigation Into Tiananmen Crackdown (R.)

More than 20 Chinese activists who took part in the Tiananmen Square pro-democracy movement called on Monday on the United Nations’ top human rights body to investigate Beijing’s deadly crackdown 30 years ago. Wang Dan and 21 others, backed by the group Chinese Human Rights Defenders, said they had submitted the complaint to the U.N. Human Rights Council, a Geneva forum which opens a three-week session on June 24. “We request the HRC investigate the gross violations of human rights and fundamental freedoms committed by the Chinese government during its military assault on peaceful protests,” they said in statement.


They also sought action over “the consistent pattern of human rights violations in persecuting Chinese citizens during the past three decades who broke the silence” about the events of June 3-4, 1989. The anniversary remains taboo in China. Beijing has not held a public inquiry nor permitted an independent investigation, the statement said. Beijing enjoys strong support among developing countries at the Human Rights Council, a 47-member state forum that has never adopted a resolution on China since being set up in 2006.

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Mar 182017
 
 March 18, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , , ,  11 Responses »


Andreas Feininger Production B-17 heavy bomber at Boeing plant, Seattle 1942

 

How Bankers Became The Top Exploiters Of The Economy (Michael Hudson)
World Out Of Whack: What’s Next For Global Real Estate? (CE)
Make Big Banks Put 20% Down—Just Like Home Buyers Do (Kashkari)
Deepening EU Banking Crisis Meets Euro-TARP on Angel Dust (DQ)
The Paranoid Attempts To Tie Trump To Russia (Qz)
Clinton Ally Says Smoke, But No Fire: No Russia-Trump Collusion (NBC)
Justice Dept. Delivers Documents On Wiretap Claim To Congress (R.)
Secret Service Says Laptop Stolen From Agent’s Car In New York (R.)
A Bad Week and Getting Badder Bigly Fast (Jim Kunstler)
Athens Sees Turk Effort To Dispute Greek Sovereignty In Aegean (K.)
Turkey Threatens To Send Europe ‘15,000 Refugees A Month’ (AFP)
Over 10,000 Refugees Relocated, IOM Says (K.)

 

 

Absolutely brilliant interview with Michael Hudson. Read the whole thing. It’ll give you so much insight.

How Bankers Became The Top Exploiters Of The Economy (Michael Hudson)

There are two ways of thinking about the economy. The school textbooks only talk about was producing goods and services for wages and profits. They don’t talk about rent or unearned income. That’s what I mean by “unreal” – not grounded in production. And they don’t talk about interest either, or the framework of debt and property rights. There’s a lot of talk about what seems to be the circular flow between producers and consumers. That circular flow is called Say’s law. For example, Henry Ford said he paid his workers $5 a day so that they could afford to buy the cars that they produced. Workers are depicted as paying their wages to buy what they make. All that seemed to make sense, but the economy of production is different from financial and property wealth. Who owns the assets, and who owes debts to whom?

If you look at the economic framework in terms of assets and debt, you find that the 1% makes its money by holding the 99% in debt. Or at least, you could say that the 5% make its money by holding the 95% in debt. The trick is to get other people in debt. How do you do that? You make them think that they can gain. They’re willing to borrow to buy a home, because they think that since 1945, the way that most American families have gotten rich – indeed, the way the middle class was created throughout most western countries – was by the increasing price of real estate they bought on credit. What they didn’t realize was that the price of real estate was being bid up in two ways. Number 1: By more bank lending, on easier terms. Number 2: By public infrastructure spending. Cities, states and federal governments built parks, museums, roads, railroads, water and sewer systems, and electric utilities. But this began to come to an end with Reagan and Thatcher in 1980.

You have had a privatization of public infrastructure – goods that the public sector provided for free, saving people from having to pay monopoly prices. Instead of financing public investment by progressive taxation, it was financed by borrowing. Banks got more and more aggressive and reckless in creating new credit, because they felt they were guaranteed against loss. That was the essence of financialization. Financial engineering replaced industrial engineering. What people thought was wealth turned out to be a rentier overhead. This confusion between real tangible wealth and financial overhead claims on the economy was recognized already over 100 years ago by somebody who won a Nobel Prize: Frederick Soddy. But he won the Nobel Prize in chemistry. He wrote many books saying what people think of wealth— stocks and bonds, bank loans and property rights —are virtual wealth. They are financial claims on real wealth.

A stock or bond is a claim on the income that real wealth can make. So it’s on the opposite side of the balance sheet from assets. It’s on the liabilities side. Economists used to talk about land as a factor of production. But land rights are really a property claim, like a monopoly claim. It’s as if you’d say Walt Disney’s patents on Mickey Mouse or movies that Walt Disney makes are a factor of production. They’re really a property right to charge a monopoly price. The right to charge a monopoly price for a cable service isn’t really a factor of production. It’s extractive. It’s what economists call a zero-sum activity. So classical economics has a different idea of what national income is from today’s idea. A monopoly right is not an addition to national wealth or income just because monopolists make more. It’s a subtraction from the economy’s circular flow.

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Painful.

World Out Of Whack: What’s Next For Global Real Estate? (CE)

Ever since anyone can remember, global real estate prices have been going up. Pretty much doesn’t matter which country you’re from (unless, of course, it’s Syria, or Iraq… or Fuhggedistan): if you bought something in the last 2 to 3 decades, it’s like the ceilings were insulated with helium. Even when the 2008 crisis hit and we had Captain Clever ensuring the world that things were just peachy: “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.” – Ben Bernanke, March 28, 2007 Even with that setback real estate has marched upward. The US, of course, took a decent breather and is only today back to where it was pre the GFC. But the US isn’t the world, so let’s look at what everyone else has been up to. Take a look at this:

In truth, it hasn’t just been Mr. and Mrs. Smith in their tweed coats buying up UK properties, just as it hasn’t been Sheila and Bruce in Sydney, or even Maple and Hudson in Canada. A significant amount of buying power in these markets has come from offshore buyers, largely frightened Chinese money being parked. It’s pretty extraordinary, really.Prices alone don’t provide us with the entire picture or provide us with context. I mean, real estate prices in Harare went through the roof, too, in the 2008-09 period (in ZWD) but the currency went through the floor and real purchasing power collapsed. Context, therefore, is important.Also, clearly a swanky penthouse in Manhattan overlooking the Hudson river shouldn’t be priced the same as a swanky penthouse in Vientiane overlooking the Mekong. The main difference? Incomes. So let’s take a look at prices relative to incomes for a better understanding.

Buying a house in the US actually makes a lot more sense. Certainly relative to its international peers the US is cheap. In fact, if you factor in the ability to fix debt for a ridiculously long time in a currency that’s ultimately going to get hammered, and if you need to find somewhere to live then you’ve found a way to essentially be synthetically short the bond market (provided you fix your rates). I’m not advocating this as a strategy but merely pointing out the mechanics of the trade. As investors we’re interested in viewing real estate as we would any investment or asset, and as such understanding the cashflows is important. Naturally, incomes relative to asset prices tell us what the owner’s cashflows are relative to the asset they’ve buying… and the same analysis can be conducted against student loans, car loans – any credit instrument, really. Here’s rents (cashflows) relative to asset prices:

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Kashkari makes sense. Lots of it. But will he push it through? Put his career on the line for it?

Make Big Banks Put 20% Down—Just Like Home Buyers Do (Kashkari)

There’s a straightforward way to help prevent the next financial crisis, fix the too-big-to-fail problem, and still relax regulations on community lenders: increase capital requirements for the largest banks. In November, the Federal Reserve Bank of Minneapolis, which I lead, announced a draft proposal to do precisely that. Our plan would increase capital requirements on the biggest banks—those with assets over $250 billion—to at least 23.5%. It would reduce the risk of a taxpayer bailout to less than 10% over the next century. Alarmingly, there has been recent public discussion of moving in the opposite direction. Several large-bank CEOs have suggested that their capital requirements are already too high and are holding back lending.

[..] Bank of America CEO Brian Moynihan recently asked, “Do we have [to hold] an extra $20 billion in capital? Which doesn’t sound like a lot, but that’s $200 billion in loans we could make.” It is true that some regulations implemented after the 2008 financial crisis are imposing undue burdens, especially on small banks, without actually making the financial system safer. But the assertion that capital requirements are holding back lending is demonstrably false. How can I prove it? Simple: Borrowing costs for homeowners and businesses are near record lows. If loans were scarce, borrowers would be competing for them, driving up costs. That isn’t happening. Nor do other indicators suggest a lack of loans. Bank credit has grown 23% over the past three years, about twice as much as nominal GDP.

Only 4% of small businesses surveyed by the National Federation of Independent Business report not having their credit needs met. If capital standards are relaxed, banks will almost certainly use the newly freed money to buy back their stock and increase dividends. The goal for large banks won’t be to increase lending, but to boost their stock prices. Let’s not forget: That’s the job of a bank CEO. It isn’t to protect taxpayers. [..] There is a simple and fair solution to the too-big-to-fail problem. Banks ask us to put 20% down when buying our homes to protect them in case we run into trouble. Similarly, taxpayers should make large banks put 20% down in the form of equity to prevent bailouts in case the financial system runs into trouble. Higher capital for large banks and streamlined regulation for small banks would minimize frustration for borrowers. If 20% down is reasonable to ask of us, it is reasonable to ask of the banks.

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This is why we get the calls for Eurobonds again, and the world’s biggest bad bank.

Deepening EU Banking Crisis Meets Euro-TARP on Angel Dust (DQ)

The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world. On a country-by-country basis, things take look even scarier. Currently 10 (out of 28) EU countries have an NPL ratio above 10% (orders of magnitude higher than what is generally considered safe). And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts: Ireland: 15.8%; Italy: 16.6%; Portugal: 19.2%; Slovenia: 19.7%; Greece: 46.6%; Cyprus: 49%. That bears repeating: in Greece and Cyprus, two of the Eurozone’s most bailed out economies, virtually half of all the bank loans are toxic. Then there’s Italy, whose €350 billion of NPLs account for roughly a third of Europe’s entire bad debt stock.

Italy’s government and financial sector have spent the last year and a half failing spectacularly to come up with a solution to the problem. The two “bad bank” funds they created to help clean up the banks’ toxic balance sheets, Atlante I and Atlante II, are the financial equivalent of bringing a butter knife to a machete fight. So underfunded are they, they even strugggled to hold aloft smaller, regional Italian banks like Veneto Banca and Popolare di Vicenza, which are now pleading for a bailout from Rome, which in turn is pleading for clemency from Brussels. What little funds Atlante I and Atlante II have left are hemorrhaging value as the “assets” they’ve been used to buy up, invariably at prices that were way too high (often at over 40 cents on the euro), continue to deteriorate. The recent decision of Italy’s two biggest banks, Unicredit and Intesa Sao Paolo, to significantly write down their investment in Atlante is almost certain to discourage the private sector from pumping fresh funds into bailing out weaker banks.

Which means someone else must step in, and soon. And that someone is almost certain to be the European taxpayer. In February ECB Vice President Vitor Constancio called for the creation of a whole new class of government-backed “bad banks” to help buy some of the €1 trillion of bad loans putrefying on bank balance sheets. Constancio’s idea bore a striking resemblance to a formal proposal put forward by the European Banking Authority (EBA) for the creation of a massive EU-wide bad bank that, in the words of EBA president Andrea Enria, would “make it much easier to achieve critical mass and to create a well functioning market for (impaired) assets.” Here’s how it would work, according to Enria’s words:

“The banks would sell their non-performing loans to the asset management company at a price reflecting the real economic value of the loans, which is likely to be below the book value, but above the market price currently prevailing in illiquid markets. So the banks will likely have to take additional losses. The asset manager would then have three years to sell those assets to private investors. There would be a guarantee from the member state of each bank transferring assets to the asset management company, underpinned by warrants on each bank’s equity. This would protect the asset management company from future losses if the final sale price is below the initial transfer price.”

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The Democrats are self-imploding over this. They need leadership, fast. And untainted.

The Paranoid Attempts To Tie Trump To Russia (Qz)

In the months following Donald Trump’s surprise victory in the US presidential election, it has become increasingly clear that the Democratic party is unwilling—and perhaps unable—to come to terms with the country’s post-election reality. The party’s inability to accept defeat has since manifested itself through an increasingly hysterical campaign to blame Hillary Clinton’s defeat on alleged Russian interference. The charge that Russia, in the words of respected Russia expert and longtime Clinton associate Strobe Talbott, breached “the firewall of American democracy” has been repeated so often and by so many that it has taken on the patina of fact. It has become an article of faith, among disappointed Clinton partisans, mainstream political commentators, Democrats on Capitol Hill and Republicans like senator Lindsey Graham, that the election was tainted and that Trump’s legitimacy as president is questionable, at best.

The tendency to blame domestic disappointments on foreign bogeymen is not new and is perhaps better understood as a wave that periodically surfaces, then temporarily subsumes American politics. Indeed, this current reliance on conspiracy theories and accusations of unpatriotic disloyalty has been a feature, not a bug, of discourse regarding Russia since the onset of the crisis in Ukraine in early 2014. Yet this paranoia is, so far, little more than a distraction. By blaming Clinton’s loss on Russia, the political establishment is able to largely ignore the way economic, trade, and foreign policies failed large numbers of Americans. And, by elevating Vladimir Putin to supervillain status, this neo-McCarthyism is hindering debate and undermining legitimate attempts to deescalate tensions with our Russian colleagues.

MSNBC’s house intellectual Rachel Maddow has been among the most vociferous and, at times, most incisive critics of president Trump. Yet she also recently questioned whether Trump is actually under the control of the Kremlin. During her broadcast on March 9, Maddow told viewers that what she finds “particularly unsettling” is that “we are also starting to see what may be signs of continuing [Russian] influence in our country. Not just during the campaign but during the administration. Basically, signs of what could be a continuing operation.” That Maddow, a popular and respected liberal voice, would indulge in rhetoric of this sort is a worrying sign given the lack of hard evidence it is based on.

While many have convinced themselves that Russia tipped the scale of the election toward Trump, the more sinister allegations of Putin infiltrating the White House have not been born out. Even the former Director of National Intelligence James Clapper admitted in an interview with NBC’s Chuck Todd in early March that he has “no knowledge” and “no evidence” of “collusion” between Russia and the Trump campaign. Yet Maddow’s charge recalls some of the worst excesses of the early 1950’s, when our political life was marred by the Red Scare and a climate of paranoia prevailed. Unsubstantiated allegations, not dissimilar to the kind Maddow just levied, were characteristic of that era.

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Steele was paying his ‘sources’ through third parties.

Clinton Ally Says Smoke, But No Fire: No Russia-Trump Collusion (NBC)

Former Acting CIA Director Michael Morell, who endorsed Hillary Clinton and called Donald Trump a dupe of Russia, cast doubt Wednesday night on allegations that members of the Trump campaign colluded with Russia. Morell, who was in line to become CIA director if Clinton won, said he had seen no evidence that Trump associates cooperated with Russians. He also raised questions about the dossier written by a former British intelligence officer, which alleged a conspiracy between the Trump campaign and Russia. His comments were in sharp contrast to those of many Clinton partisans — such as former communications director Jennifer Palmieri — who have stated publicly they believe the Trump campaign cooperated with Russia’s efforts to interfere in the election against Clinton. Morell said he had learned that the former officer, Christopher Steele, paid his key Russian sources, and interviewed them through intermediaries.

“On the question of the Trump campaign conspiring with the Russians here, there is smoke, but there is no fire, at all,” Morell said at an event sponsored by the Cipher Brief, an intelligence web site. “There’s no little campfire, there’s no little candle, there’s no spark. And there’s a lot of people looking for it.” Morell pointed out that former Director of National Intelligence James Clapper said on Meet the Press on March 5 that he had seen no evidence of a conspiracy when he left office January 20. “That’s a pretty strong statement by General Clapper,” Morell said. About the dossier, Morell said, “Unless you know the sources, and unless you know how a particular source acquired a particular piece of information, you can’t judge the information — you just can’t.” The dossier “doesn’t take you anywhere, I don’t think,” he said.

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No proof on this side of the fence either. Everybody’s just making stuff up.

Justice Dept. Delivers Documents On Wiretap Claim To Congress (R.)

The U.S. Justice Department on Friday said it delivered documents to congressional committees responding to their request for information that could shed light on President Donald Trump’s claims that former President Barack Obama ordered U.S. agencies to spy on him. The information was sent to the House and Senate intelligence and judiciary committees, said Sarah Isgur Flores, a Justice Department spokeswoman. The chairman of the House Intelligence Committee, Republican Devin Nunes, said in a statement late on Friday that the Justice Department had “fully complied” with the panel’s request.

A government source, who requested anonymity when discussing sensitive information, said an initial examination of the material turned over by the Justice Department indicates that it contains no evidence to confirm Trump’s claims that the Obama administration had wiretapped him or the Trump Tower in New York. The House Intelligence Committee will hold a hearing on Monday on allegations of Russian meddling in the U.S. election. Federal Bureau of Investigation Director James Comey and National Security Agency Director Mike Rogers will testify and are expected to field questions on Trump’s wiretap claim. Leaders of both the House and Senate intelligence committees, including from Trump’s Republican Party, have said they have found no evidence to substantiate Trump’s claims that Obama ordered U.S. agencies to spy on Trump or his entourage. The White House has publicly offered no proof of the allegation.

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What an insane story this is. How did the media get all their info?

Secret Service Says Laptop Stolen From Agent’s Car In New York (R.)

The U.S. Secret Service said on Friday a laptop was stolen from an agent’s car in New York City but that such agency-issued computers contain multiple layers of security and are not permitted to contain classified information. The agency said in a statement that it was withholding additional comment while an investigation continues. ABC News, citing law enforcement sources, said the laptop contained floor plans for Trump Tower, details on the criminal investigation of Hillary Clinton’s use of a private email server and other national security information. The New York Daily News, citing police sources, said authorities had been searching for the laptop since it was stolen on Thursday morning from the agent’s vehicle in the New York City borough of Brooklyn.

Some items stolen with the laptop, including coins and a black bag with the Secret Service insignia on it, were later recovered, the newspaper reported. CBS News, also citing law enforcement sources, said that some of the documents on the computer included important files on Pope Francis. The agent also told investigators that while nothing about the White House or foreign leaders is stored on the laptop, the information there could compromise national security, the Daily News reported. “There’s data on there that’s highly sensitive,” a police source told the newspaper, adding: “They’re scrambling like mad.”

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Jim was interviewed by Tucker Carlson about this, hope the video shows below (embedding Fox doesn’t always work). Really, Jim, Fox? I know, who else is left?

A Bad Week and Getting Badder Bigly Fast (Jim Kunstler)

[..] it also looks a bit as though the Golden Golem of Re-Greatification has wandered into a political minefield so dense with booby traps that he’s already out of moves. First there’s the debt ceiling problem — which has so far received almost no attention from the Kardashianized collective news media. As David Stockman has pointed out on his blog, the US Treasury amassed a “war chest” of nearly half a trillion dollars last fall (via various book-keeping shenanigans) in expectation that President Hillary would need it to ride out some fiscal bad weather early in her reign. Then, the truly inconceivable happened and Hillary won bigly in the wrong states and not bigly enough in the right ones, and, well….

Immediately, with Trump ascendant, the Treasury and its handmaidens at the Federal Reserve engineered a rapid burn-through of the war chest at a rate of about $90-billion a month since November, so that now there remains only about a month’s worth of walking-around money to run the US Government. With the old debt ceiling truce expired, congress would have to resolve to raise it, to legally enable the Treasury to resume its massive borrowing operations, or else the government won’t be able to pay invoices or issue pension checks or meet any obligations. It could even default on its “no risk” bonds. Those dangers are theoretical for the moment, especially since there is always more accounting fraud to resort to when all else fails. But the longer a debt ceiling stalemate goes on in congress, the more trapped President Trump will be.

The cherry on top is the Federal Reserve’s move to raise interest rates the same day the debt ceiling truce expired. That will thunder through the system, making many loans more expensive to repay, dampening the real estate markets (at a time when commercial real estate is already tanking), and draining all kinds of other mojo (however falsely engineered) from the Potemkin economy. As if being trapped in a political minefield isn’t bad enough, the remaining safe patch Trump is stranded on turns out to be the LaBrea Tar Pit of health care reform. At this point, the crusade is doing worse than going nowhere — it’s getting sucked into the primordial bitumen where the mastodons and camelops sleep.

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Watch out, Merkel, Trump, NATO. You’re playing with fire.

Athens Sees Turk Effort To Dispute Greek Sovereignty In Aegean (K.)

In what is seen in Athens as an effort by Ankara to push through its message that Greece has limited sovereignty in the area of the Eastern Mediterranean surrounding the island of Kastelorizo, Turkish forces have in recent days maintained a steady presence in the region, either through military exercises or with the dispatch of research vessels. According to a navigational telex (navtex) issued by Turkey, the Piri Reis oceanographic vessel will remain in the area south of Kastelorizo until Monday. Furthermore, according to another two navigational telexes, Turkey is planning to conduct exercises with live ammunition in areas west and east of Kastelorizo (within Turkish territorial waters).

Moreover, Ankara has already announced that it will conduct hydrocarbon explorations in the Eastern Mediterranean next month. It remains to be seen exactly what part of the Eastern Mediterranean Turkey plans to explore. In Athens, Turkey’s moves are seen to be clearly linked to the decision by Cyprus to move ahead, in spite of Ankara’s objections, with the extraction of natural gas from drilling block 11 in its exclusive economic zone (EEZ). In an interview with CNN Greece, which will be broadcast Friday, Cyprus President Nicos Anastasiades again expressed his concerns over the tensions that may be further fueled in the period stretching “from now until the Turkish referendum (on April 16),” and by the ongoing effort to create “an atmosphere of fanaticism within Turkish society.”

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The Erdogan referendum is one month from now. Much more important to him till then than international relations.

Turkey Threatens To Send Europe ‘15,000 Refugees A Month’ (AFP)

Turkey’s Interior Minister Suleyman Soylu has threatened to “blow the mind” of Europe by sending 15,000 refugees a month to EU territory, in an intensifying dispute with the bloc. Ankara and Brussels almost a year ago on March 18 signed a landmark deal that has substantially lessened the flow of migrants from Turkey to Europe. But the accord is now hanging in the balance due to the diplomatic crisis over the blocking of Turkish ministers from holding rallies in Europe. “If you want, we could open the way for 15,000 refugees that we don’t send each month and blow the mind” of Europe, Soylu said in a speech late Thursday, quoted by the Anadolu news agency. Foreign Minister Mevlut Cavusoglu has already indicated that Turkey could rip up the deal and said Turkey was no longer readmitting migrants who crossed into Greece.

The crisis was sparked when the Netherlands and Germany refused to allow Turkish ministers to campaign in a April 16 referendum on expanding President Recep Tayyip Erdogan’s powers, prompting the Turkish strongman to compare them with Nazi Germany. Soylu, a hardliner considered close to Erdogan, accused The Hague and Berlin of involvement in June 2013 anti-Erdogan protests, October 2014 pro-Kurdish riots and the July 15, 2016 failed coup attempt. “They are trying to complete the work that they did not finish. Who is doing this work? It’s the Netherlands and Germany,” Soylu said. He accused Europe of failing to help Turkey enter the bloc and of not helping with its fight against terror. “Europe, do you have that kind of courage…? Let us remind you that you cannot play games in this region and ignore Turkey,” he added.

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There were supposed to be 160,000. And this is less than one month of what Turkey threatens to send over.

Over 10,000 Refugees Relocated, IOM Says (K.)

More than 10,000 asylum seekers from Syria, Iraq and Eritrea have been relocated from Greece to other European Union states since the launch of the bloc’s relocation program in 2015, according to the International Organization for Migration, which is implementing the scheme. Since the beginning of March, 367 people have left Greece for Belgium, Estonia, Germany, Malta, Portugal, Slovenia and Spain, bringing the total number of people relocated from Greece to 10,004, IOM said on Friday. Over the same period, another 475 people were relocated from Italy. The total number of people relocated from Greece and Italy since the program was launched in October 2015 now stands at 14,439, the organization said.

“We have seen a steady increase of pledges and acceptance from participating EU countries in the past few months. At this rate, there will be a further 15,000 to 18,000 relocations from Greece by the end of the program,” said Eugenio Ambrosi, director of IOM’s Regional Office for the EU, Norway and Switzerland. The numbers are short of the original target as 66,400 places had been allocated for relocation from Greece and 39,600 from Italy. “We cannot rest at ease because the overall numbers are too low given the needs in Greece and the commitments that were made. We continue to encourage EU member-states to follow through fully on their commitments,” Ambrosi said.

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Dec 132016
 
 December 13, 2016  Posted by at 9:36 am Finance Tagged with: , , , , , , , ,  1 Response »


Lewis Wickes Hine Newsies Gus Hodges, 11, and brother Julius, 5, Norfolk VA 1911

Trump-Powered Dollar To Be The Bogeyman Of 2017 For Emerging Markets (MW)
Oil Prices Moderate as Doubts Over OPEC’s Output-Cut Plan Set In (WSJ)
Saudi Arabia Is Playing Defense To Hold On To Its Most Prized Customers (BBG)
UniCredit To Raise €13 Billion In Fresh Capital, Lay Off 14,000 (AFP)
One Bad Deal That Destroyed Four Bad Banks (WSJ)
Indian Banks’ Poisoned Chalice (BBG)
London House Prices Are Having Their Worst December in Years (BBG)
Mrs. O’Leary’s Cow (Thomas)
Trumpxuberance… Until It’s Not (Jim Kunstler)
Greece Faces Permanent Crisis – IMF: Bail-Out Plan ‘Simply Not Credible’ (Tel.)
Greece Heads Toward New Crisis in Debt Saga, Support for Tsipras Slumps (WSJ)
World’s Largest Reindeer Herd Plummets (BBG)

 

 

Prime candidate for biggest 2017 finance story.

Trump-Powered Dollar To Be The Bogeyman Of 2017 For Emerging Markets (MW)

Foretelling the future is a daunting task. But the one thing that strategists are agreed on for 2017 is that Donald Trump’s presidency will usher in a new era of dominance for the U.S. dollar that will have wide-ranging implications. Among the biggest casualties of the buck’s rise will be developing economies, which tend to be more sensitive to external shock. Ethan Harris at BofAML cautioned that emerging markets are vulnerable on two fronts: capital outflows in response to higher rates in the U.S. and trade restrictions that will hurt economies that heavily depend on U.S. markets. The ICE U.S. Dollar index measure of the greenback’s performance against a basket of six rivals, has recently broken out of its narrow range to trade at the highest level since late 2002, FactSet data show.

That spells trouble for Brazil, China and Russia, which statistically have the highest negative correlation to the dollar, according to Mislav Matejka, an equity strategist at J.P. Morgan Cazenove. Even before Trump’s election, Matejka had downgraded emerging markets to neutral from overweight, citing the bullish dollar on the back of a Federal Reserve rate hike in December. Hans Redeker, a strategist at Morgan Stanley, expects the dollar index to gain 6% before topping out in the second quarter of 2018. Apart from the rallying dollar, Redeker warned that the possibility of a global shift toward protectionism will put trade-centric economies at a disadvantage, weigh on economic growth and add to deflationary pressure.

Meanwhile, higher bond yields on expectations of stronger growth and accelerated inflation will widen the yield spread in favor of the dollar against the Chinese yuan, where authorities are projected to maintain easy monetary policy. The yuan has retreated over 6% in 2016 to 6.92, with more room to fall in the coming months. “We expect the Chinese yuan depreciation to continue. The balance of payments position remains in deficit, indicated by declining foreign exchange reserves,” said Redeker in a report. Even though capital outflows from China have not been as large as they had been earlier this year, muted economic growth and limited investment opportunities domestically could lead to more funds fleeing the country, pressuring the yuan, he said.

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Headfake.

Oil Prices Moderate as Doubts Over OPEC’s Output-Cut Plan Set In (WSJ)

Crude-oil prices lost steam in early Asian trade Tuesday as investors turned bearish over oil producers’ commitment to observe a deal aimed at easing supply to the market. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $52.75 a barrel at 0347 GMT, down $0.08 in the Globex electronic session. February Brent crude on London’s ICE Futures exchange rose $0.01 to $55.70 a barrel. The price fall is largely a reflection of investors’ bearishness over a deal that is supposed to lift prices to at least the $60-$70 range per barrel. This shows the market isn’t really buying the OPEC rhetoric and that they recognize the potential risks. Over the weekend, 11 non-OPEC countries, including Russia, agreed to slash their output by 558,000 barrels a day, in concert with OPEC’s own pledge to cut 1.2 million barrels a day.

The total sum represents almost 2% of global supply. The deal will take effect on Jan. 1 but the reduction will be carried out in phases. Participating countries will meet in six months to evaluate progress. Analysts say if producers fully adhere to agreed quotas, the oil market could shift into a deficit. OPEC’s own calculations forecasts world crude demand will hit 95.5 million barrels a day in 2017, an increase of 1.2 million barrels a day. Removing excess barrels will lift prices, possibly into the target range of $60-$70 per barrel, but it would mostly hinge on the compliance of the producers who have been known to cheat, BMI Research said. “We note that the higher the barrel price, the greater the temptation to break allocated quotas,” the firm said. In 17 production cuts since 1982, OPEC members have reduced output by an average of just 60% of their commitments, according to Goldman Sachs.

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OPEC cuts, prices rise, shale expands.

Saudi Arabia Is Playing Defense To Hold On To Its Most Prized Customers (BBG)

As Saudi Arabia goes on a shock and awe attack to curb a global oil glut, it’s also playing defense to hold on to its most prized customers. The kingdom is largely sparing Asia from reductions in crude sales, at least for now. That’s amid the threat of more U.S. and European supply coming to the world’s biggest market, as Saudi-led production cuts have boosted the Middle East oil benchmark relative to other regions. Also, crude’s surge risks reviving shale output while American shipments are already making their way to countries including Thailand, Japan and South Korea. While OPEC’s biggest member could yet curb some volumes to Asia in coming months, it’s unlikely to completely abandon the battle for market share even as it changes tack from its pump-at-will policy of the past two years.

It’s counting on regional refiners’ inability to completely switch over to rival supply, as their plants are geared to process ‘sour’ sulfurous crudes like those produced by Saudi Arabia rather than ‘sweet’ shale or North Sea oil. It can afford to cut sales more significantly in other places that aren’t as valuable as Asia. “Now that Saudi Arabia has committed to such large production cuts, it’s important for them to retain market share in the region where they see the most growth potential,” said Peter Lee at BMI Research. “In Asia, we still have India and China where Saudi Arabia is vying for market share. It makes sense for them to concentrate on the region and try to keep buyers happy.”

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UniCredit’s entire market cap is €14 billion for pete’s sake.

UniCredit To Raise €13 Billion In Fresh Capital, Lay Off 14,000 (AFP)

Italy’s biggest bank, UniCredit, on Tuesday confirmed plans for a capital increase worth €13 billion as it scrambles to raise funds amid market uncertainty. UniCredit also announced plans to shed around 14,000 jobs by the end of 2019, which it said would save it €1.1 billion in staff costs. The bank’s plans to raise fresh funds come at a time when investor confidence in Italy has been shaken by the collapse of former PM Renzi’s government. And the Italian banking sector is in a perilous state, with the world’s oldest bank, Monte dei Paschi di Siena, scrambling to put together a private-sector rescue after losing 80% of its market capitalisation in the past year. UniCredit’s announcement was part of a major strategic review launched under new chairman Jean-Pierre Mustier, that involves selling off assets to strengthen the bank’s capital base. Mustier said it was a “pragmatic plan based on conservative assumptions, with tangible and achievable targets.” The bank is targeting a net profit of €4.7 billion in 2019.

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When Europe’s bankers and politicians alike proved they’re inept.

One Bad Deal That Destroyed Four Bad Banks (WSJ)

The crisis engulfing the world’s oldest bank, Italy’s Banca Monte dei Paschi di Siena, has many causes, but its roots go back nine years to a lunch at a fancy Geneva hotel. It was there, at the Four Seasons Hotel des Bergues, that three of Europe’s top bankers gathered to plot a hostile bid to buy and break up Dutch bank ABN Amro in what became the biggest bank takeover, worth €71 billion (then $101 billion). The deal will go down as one of humankind’s worst business transactions. It led to government rescues of what was then the biggest bank in the world, Royal Bank of Scotland, and the biggest bank in Belgium, Fortis, as well as taking out Dutch bank SNS Reaal. Now its legacy threatens the oldest bank in the world.

With M&A booming again, have investors learned the lessons of ABN? The brief answer is probably that yes, enough of the lessons have sunk in that an equally catastrophic bank takeover is unlikely soon. The longer answer is a resounding no, and investors retain a pigheaded inability to avoid taking excessive risks when the good times beckon—as they do now. The Michelin-starred restaurant in Geneva gave the chief executives of RBS, Fortis and Santander a pleasant start to what became a vicious 2007 bidding battle for ABN. The weak Dutch bank had been an obvious target for years, with a complex string of small businesses spread across retail and investment banking in the Netherlands, U.S., U.K., Italy and Brazil. Each banker saw opportunities, but they had to wrest ABN away from an agreed deal with Barclays.

After succeeding, the canny Santander abandoned its stated aim of expanding in Italy and flipped ABN’s Banca Antonveneta to Monte dei Paschi for €9 billion—before it had even completed the deal. Santander was badly hurt by the crisis, but thanks to its highly profitable Italian switcheroo was the only bank involved not to be critically injured by ABN. Monte dei Paschi, after overpaying wildly, has been short of capital ever since, making it even harder to cope with years of Italian recessions. The biggest lesson is that the good times don’t last forever. RBS, Fortis and Monte dei Paschi took on too much debt to buy parts of ABN, leaving them even weaker than the rest of the overstretched banking system when the bust came.

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Throw in utter corruption and you have a recipe for unrest.

Indian Banks’ Poisoned Chalice (BBG)

What should have been a cornucopia of new deposits from old cash has become a poisoned chalice. Lenders don’t have enough banknotes to meet even the restrictive withdrawal limits the central bank has set for depositors. People have died waiting in ATM queues, and bank staff fear the wrath of crowds. Safety concerns are rising amid pressure from authorities to expand card and online-payment systems that are still rudimentary. Even the ATM networks, running on outdated software, aren’t very secure.To top it all, the taxman is waiting in the wings, ready to confiscate any unusual surge in deposits that people don’t surrender voluntarily. Instead of sympathy for lenders, there’s schadenfreude. Some feel bank employees have colluded with the holders of ill-gotten cash to give their unaccounted wealth safe passage. The poor, and their bank accounts, are suspected to have been used as mules.

The initial premise of demonetization was that a big chunk of cash would be too tainted to dare return to the banking system, and canceling those liabilities would generate a bumper profit for the government. With most old currency deposited into accounts or exchanged into new money, however, that hypothesis has been shredded. Banks – and bankers – are in the crosshairs for robbing the nation of its demonetization rewards. Reporting requirements have gone through the roof: The government wants to know how much of lenders’ fresh deposits are old legal tender, and how much is new. Axis Bank suspended 19 employees for allegedly exchanging old banknotes illegally and asked KPMG to do a forensic audit. That, one suspects, is the genesis of the whisper campaign.

As banking regulator, the Reserve Bank of India ought to be keeping a lid on operational risks, lest they overwhelm the system and scar its reputation. But the monetary authority is too busy shoring up its own sullied credibility to be of any real assistance. The barrage of befuddling rule changes it has unleashed since Nov. 8 – including a temporary but ham-handed confiscation of banks’ excess liquidity with no compensation – have made things worse, and investors have been forced to change their minds about the impact of the cash ban. Amid the chaos, discussions about improving the governance of India’s dominant state-run banks, and selling or shuttering the weakest of them, have come to a standstill.

The more urgent task of cleaning up their compromised balance sheets has also lost the steam it had gathered under previous RBI Governor Raghuram Rajan. If a month ago there was fond but foolish hope that banks would get a big one-time recapitalization boost, now there’s despair about how long they can go on fighting fires without any chance of a revival in credit demand. It’s hard to believe PM Modi didn’t think through these unintended consequences. What’s even scarier is the possibility that he did, and topped up the banking industry’s chalice regardless.

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No, their best.

London House Prices Are Having Their Worst December in Years (BBG)

London home prices are having their worst December in six years, led by weakness in prime areas in the capital that is likely persist into 2017. Rightmove said on Monday that asking prices fell 4.3% from November to 616,160 pounds ($775,500), with inner London dropping 6%. The property website operator said the bubble in prime London “continues to deflate,” and it sees prices there declining 5% next year. “Alongside the seasonal slowdown, the readjustment of prices to match buyers’ greater reticence continues, especially in more expensive inner London,” said Rightmove Director Miles Shipside. “Buyers are being put off the really big-ticket purchases.” In a sign of the disparity within the city, average prices in inner London are down 2.6% over the past year, whereas outer areas are up 2.7%.

That left average prices across the capital little changed. The split partly reflects the luxury end of the market, where an April tax increase on property investors and worries about Brexit are sapping demand. Rightmove’s report also showed demand in London — as measured by sales agreements – was down 7.2% in November from a year earlier. Nationally, asking prices fell 2.1% in December from the previous month, in line with the seasonal average, and were up 3.4% from a year earlier. In contrast to London, Rightmove expects national prices to increase for a seventh consecutive year in 2017, forecasting a 2% advance.

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One spark will do.

Mrs. O’Leary’s Cow (Thomas)

In 1871, a large portion of the city of Chicago burned to the ground. The Chicago Tribune attributed the fire to a cow owned by a Mrs. O’Leary. The Tribune stated that the cow kicked over a lantern as she was being milked, burning the barn and much of Chicago. Whether the story is accurate is of little concern. (Somebody always has to be found to take the blame for catastrophe.) Whatever started the barn fire in Mrs. O’Leary’s neighbourhood, a seemingly minor event resulted in a major conflagration. And so it is with economic events. Bankers are expected to maintain a fractional reserve of 3–10%, depending on the level and type of liabilities, but, not surprisingly, they often drop below the official level, especially in times of economic difficulties. Bank managers assume that they can always increase the reserve when good times return.

The trouble is they’re at their most exposed at a time when a substantial reserve is most critical. But why would bankers take such a risk? Aren’t they fearful that they’ll get caught out if a crisis occurs? Not really. Their assumption is very often that their indiscretion exists in isolation. They assume that if they alone cheat the system a bit, they can always catch up later. For whatever reason, it rarely occurs to them that, in a struggling economy, each of their associates in the industry is also cheating the system. Since each one keeps his activities under wraps, it doesn’t become apparent that the whole system is a house of cards until a black swan jolts the system, which, due to its overall instability, self-destructs. Similarly, in shaky economic times, there’s quite a bit of fiddling that’s done in the stock market.

As the public begins to lose their confidence in the system, they offers their shares for sale. In order to cover up the loss of confidence, these shares may be bought up by central banks, governments, and/or the corporations themselves – buying back their own shares. Of course, this is risky, as crashes are caused by loss of confidence. Papering over that loss of confidence by papering over the cause of the problem only means that when the crash comes, it will be worse than if it had been allowed to collapse earlier. Pensions tend to be heavily invested in the markets, which tends to put them at risk as well. The foremost mutual fund in the US is invested in 507 companies – commodities, energy, financials, industrials, IT, etc. To be sure, these will not suffer equally in a crash, but all will be affected – some severely.

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Trump may have buildings, but he has no room.

Trumpxuberance… Until It’s Not (Jim Kunstler)

When Reagan stepped in the national debt was only (only!) about half a trillion dollars. It will be over $20 trillion when Trump hangs his golden logo on the White House portico. Oh, by the way, consider that a trillion dollars is a thousand billion dollars and a billion dollars is a thousand million dollars. Just so you know. Reagan had room for plenty of government finance monkey business. Trump has no room. Bush One, Clinton, Bush Two and Obama dug the deadfall debt trap for poor Donald and the election shoved him right into it. He thinks he’s on an upper floor of his enchanted tower; he’s actually down in a pit. Trump thinks he’s going to rebuild highways and bridges for another century of Happy Motoring — to make America like it was in 1962 forever. Fuggeddabowdit.

The bond market is poised for collapse as I write, and Trump’s money people (that is, the Goldman Sachs gang he has assembled) are talking about issuing fifty and 100 year “Build America” bonds. Their nostrils must be rimed with the frost of Medellin. They’re certainly not going to accomplish this trick by raising taxes. On who? Corporations? Ha! The 1%? Double-Ha! Everyone else? Pitchforks and torches! American oil companies can no longer make a buck doing their thing. Exxon-Mobil’s U.S. production business lost $477 million in the third quarter, the seventh straight quarter in the red. Why? Because it costs a lot more to get the stuff out of the ground than it did ten years ago, and that high cost is bankrupting oil companies and industrial economies. That is the stealth action of Peak Oil that so many people pretend is not happening. It will ultimately destroy the banking system.

The disappointment issuing from this dire set of circumstances is apt to be epic as Trump flounders and the furious tweets of futility waft out of the hole he’s trapped in. Christmas will be over, and with it the hopes of a retail reprieve. Gasoline may remain cheap, but the little people won’t be able to buy the cars to run it in. Or buy much of anything else. Not even tattoos. We’ll soon discover the temperamental difference between Donald J. Trump and Franklin Delano Roosevelt.

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This will not stop.

Greece Faces Permanent Crisis – IMF: Bail-Out Plan ‘Simply Not Credible’ (Tel.)

The IMF has hit back at claims that it is demanding more austerity in Greece, as the Fund warned that the country’s ambitious budget targets were “simply not credible”. Firing a broadside at Brussels and Athens, Maurice Obstfeld, the IMF’s chief economist, and Poul Thomsen, director of the IMF’s European department, said cuts to investment and discretionary spending had “gone too far” and would prevent the Greek economy from recovering. Just 48 hours after Euclid Tsakalotos, Greece’s finance minister, accused the IMF of “betraying” the country by pushing for more belt tightening, the senior IMF officials insisted that they were “not demanding more austerity”. “We have not changed our view that Greece does not need more austerity at this time. Claiming that it is the IMF who is calling for this turns the truth upside down,” they wrote in a blog post.

They warned that demands by Greece’s creditors for a sustained 3.5pc primary surplus – which excludes debt servicing costs – were unrealistic and unnecessary. The IMF has previously insisted that a primary surplus target of 1.5pc of GDP is more realistic. It has also called for significant debt relief that goes beyond the action taken this month to reduce Greece’s debt share by 20 percentage points. Mr Obstfeld and Mr Thomsen said the IMF was not demanding more cuts either now or in the future to lower the need for debt relief, as they signalled that Greece itself had signed up for tougher budget targets. “To be more direct, if Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF for being the ones insisting on austerity when we ask to see the measures required to make such targets credible,” they said.

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Tsipras is going to call 2017 snap elections with the intent of losing them.

Greece Heads Toward New Crisis in Debt Saga, Support for Tsipras Slumps (WSJ)

Greece’s crisis is approaching a potential breaking point after a year of relative calm, as a government with declining political stamina confronts creditors’ unyielding demands. The ruling left-wing Syriza party, grappling with slumping popularity, is considering the option of calling snap elections in 2017, as it loses hope of winning concessions on debt relief or austerity from the eurozone and IMF. No decision for elections has been made, said Greek officials, who added that they would review the state of negotiations in January, after pressing creditors again to show more flexibility. Elections would allow Syriza—if not Greece—to escape from the pressures of an unpopular bailout program whose strained math has eventually brought down every Greek government since the crisis began in 2009.

Syriza’s leader and Prime Minister Alexis Tsipras, like his predecessors, is struggling to meet strict fiscal targets in a recession-scarred country weary of austerity. A renewed flare-up of the Greek debt crisis in 2017 would create a further test for the cohesion of the EU, whose political establishment is facing challenges from EU-skeptic populists in a string of major elections next year. European governments’ appetite for another bout of Greek drama is low—but so too is willingness to grant Athens concessions to avoid one. The embattled Mr. Tsipras, who is due to hold talks with the leaders of Germany and France in the coming days, surprised Greeks and creditors last week with fiscal gifts that were widely seen as preparing the option of elections.

He promised 1.6 million pensioners a Christmas bonus of between €300 and €800. He also suspended a planned increase in sales tax for Aegean islands that have received large numbers of Middle-East refugees. EU officials said they would study whether Mr. Tsipras’s promises are compatible with Greece’s bailout commitments.

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It all dies baby, that’s a fact. We’re not even trying to stop it from happening. All we got is words.

World’s Largest Reindeer Herd Plummets (BBG)

The world’s largest wild reindeer herd has fallen by 40% since 2000, scientists have warned. They say that the animals, which live in the Taimyr Peninsula in the northernmost tip of Russia, are being affected by rising temperatures and human activity. This is causing the animals to change their annual migration patterns. The research has been presented at the Fall Meeting of the American Geophysical Union (AGU). “There is a substantial decline – and we are also seeing this with other wild reindeer declining rapidly in other parts of the world,” said Andrey Petrov, who runs the Arctic Centre at the University of Northern Iowa, US. The Taimyr herd is one of the most monitored groups of reindeer in the world. The animals have been tracked for nearly 50 years by aerial surveys and more recently by satellite imagery.

The population reached a peak of one million in 2000, but this latest research suggests that there are now only 600,000 reindeer. “Climate change is at least one of the variables,” explained Prof Petrov. “We know in the last two decades that we have had an increase in temperatures of about 1.5C overall. And that definitely impacts migration patterns.” Industrial development is increasing in the region, which is also changing the animals’ distribution. The researchers found that in the summer, the reindeer were moving east to avoid human activity. But they were also shifting north and to higher elevations. The team thinks this is to try to get to cooler ground and also to avoid the mosquitoes that are booming as the region gets warmer and wetter.

“They just move and move and move to escape them,” said Prof Petrov. This is extending the distance that the animals have to migrate between winter and summer. “They now have to travel much longer distances to reach those areas with their newborn calves, and that means there is an increase in calf mortality.”

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Apr 212016
 
 April 21, 2016  Posted by at 9:39 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle April 21 2016


G.G. Bain ‘Casino Theater playing musical ‘The Little Whopper’, NY 1920

America’s Upcoming National Crisis: Pensions (ZH)
The Secret Shame of Middle-Class Americans (Atlantic)
Soros: China Looks Like the US Before the Crisis (BBG)
China’s ‘Zombie’ Steel Mills Fire Up Furnaces, Worsen Global Glut (R.)
China Wants Ships To Use Faster Arctic Route Opened By Global Warming (R.)
Japan, Not Germany, Leads World in Negative-Yield Bonds (BBG)
ECB Slides Down Further Into ZIRP Bizarro World (CNBC)
Brexit Means Blood, Toil, Sweat And Tears (AEP)
Greece ‘Could Leave Eurozone’ On Brexit Vote (Tel.)
VW To Offer To Buy Back Nearly 500,000 US Diesel Cars (Reuters)
Public Support For TTIP Plunges in US and Germany (Reuters)
Italian ‘Bad Bank’ Fund ‘Designed To Stop The Sky Falling In’ (FT)
The Troubled Legacy Of Obama’s Record $60 Billion Saudi Arms Sale (R.)
More Than Half Of Americans Live Amid Dangerous Air Pollution (G.)
EU States Grow Wary As Turkey Presses For Action On Visas Pledge (FT)
Hungary Threatens Rebellion Against Brussels Over Forced Migration (Express)
Refugee Camp Near Athens Poses ‘Huge’ Public Health Risk (AFP)

What NIRP and ZIRP bring to the real economy. This is global.

America’s Upcoming National Crisis: Pensions (ZH)

A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits. As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it “projects” it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark. Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.

Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past). For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years. Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency.

The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year. As a result, Thomas Nyhan, executive director of the Central States Pension Fund said that the fund could become insolvent by 2025 if nothing is done. The fund currently pays out $2.8 billion a year in benefits according to Nyhan, and if the plan becomes insolvent it would overwhelm the Pension Benefit Guaranty Corporation (designed by the government to absorb insolvent plans and continue paying benefits), who at the end of fiscal 2015 only had $1.9 billion in total assets itself. Incidentally as we also pointed out last month, the PBGC projects that they will also be insolvent by 2025 – it appears there is something very foreboding about that particular year.

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“Nearly half of American adults are “financially fragile” and “living very close to the financial edge.”

The Secret Shame of Middle-Class Americans (Atlantic)

Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49% of part-time workers would prefer to work more hours at their current wage; 29% of Americans expect to earn a higher income in the coming year; 43% of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47% of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew? Well, I knew. I knew because I am in that 47%.

I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5—literally—while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.

You wouldn’t know any of that to look at me. I like to think I appear reasonably prosperous. Nor would you know it to look at my résumé. I have had a passably good career as a writer—five books, hundreds of articles published, a number of awards and fellowships, and a small (very small) but respectable reputation. You wouldn’t even know it to look at my tax return. I am nowhere near rich, but I have typically made a solid middle- or even, at times, upper-middle-class income, which is about all a writer can expect, even a writer who also teaches and lectures and writes television scripts, as I do.

And you certainly wouldn’t know it to talk to me, because the last thing I would ever do—until now—is admit to financial insecurity or, as I think of it, “financial impotence,” because it has many of the characteristics of sexual impotence, not least of which is the desperate need to mask it and pretend everything is going swimmingly. In truth, it may be more embarrassing than sexual impotence. “You are more likely to hear from your buddy that he is on Viagra than that he has credit-card problems,” says Brad Klontz, a financial psychologist who teaches at Creighton University in Omaha, Nebraska, and ministers to individuals with financial issues. “Much more likely.”

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“From a credit perspective, we’d be more comfortable with China slowing more than it is. We are getting less confident in the government’s commitment to structural reforms.”

Soros: China Looks Like the US Before the Crisis (BBG)

Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession. China’s March credit-growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt. What’s happening in China “eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth,” Soros said. “Most of money that banks are supplying is needed to keep bad debts and loss-making enterprises alive.”

Soros, who built a $24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government. He said at the World Economic Forum in Davos that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past. China’s economy gathered pace in March as the surge in new credit helped the property sector rebound. Housing values in first-tier cities have soared, with new-home prices in Shenzhen rising 62 percent in a year. While China’s real estate is in a bubble, it may be able to feed itself for some time, similar to the U.S. in 2005 and 2006, Soros said.

China’s economy gathered pace in March as the surge in new credit helped the property sector rebound. Housing values in first-tier cities have soared, with new-home prices in Shenzhen rising 62 percent in a year. While China’s real estate is in a bubble, it may be able to feed itself for some time, similar to the U.S. in 2005 and 2006, Soros said. “Most of the damage occurred in later years,” Soros said. “It’s a parabolic cycle.” Andrew Colquhoun at Fitch Ratings, is also concerned about China’s resurgence in borrowing. Eventually, the very thing that has been driving the economic recovery could end up derailing it, because China is adding to a debt burden that’s already unsustainable, he said.

Fitch rates the nation’s sovereign debt at A+, the fifth-highest grade and a step lower than Standard & Poor’s and Moody’s Investors Service, which both cut their outlooks on China since March. “Whether we call it stabilization or not, I am not sure,” Colquhoun said in an interview in New York. “From a credit perspective, we’d be more comfortable with China slowing more than it is. We are getting less confident in the government’s commitment to structural reforms.”

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Forget Tata.

China’s ‘Zombie’ Steel Mills Fire Up Furnaces, Worsen Global Glut (R.)

The rest of the world’s steel producers may be pressuring Beijing to slash output and help reduce a global glut that is causing losses and costing jobs, but the opposite is happening in the steel towns of China. While the Chinese government points to reductions in steel making capacity it has engineered, a rapid rise in local prices this year has seen mills ramp up output. Even “zombie” mills, which stopped production but were not closed down, have been resurrected. Despite global overproduction, Chinese steel prices have risen by 77% this year from last year’s trough on some very specific local factors, including tighter supplies following plant shutdowns last year, restocking by consumers and a pick-up in seasonal demand following the Chinese New Year break.

Some mills also boosted output ahead of mandated cuts around a major horticultural show later this month in the Tangshan area. Local mills must at least halve their emissions on certain days during the exposition, due to run from April 29 to October. China, which accounts for half the world’s steel output and whose excess capacity is four times U.S. production levels, has said it has done more than enough to tackle overcapacity, and blames the glut on weak demand. But a survey by Chinese consultancy Custeel showed 68 blast furnaces with an estimated 50 million tonnes of capacity have resumed production. The capacity utilization rate among small Chinese mills has increased to 58% from 51% in January.

At large mills, it has risen to 87% from 84%, according to a separate survey by consultancy Mysteel. The rise in prices has thrown a lifeline to ‘zombie’ mills, like Shanxi Wenshui Haiwei Steel, which produces 3 million tonnes a year but which halted nearly all production in August. It now plans to resume production soon, a company official said. Another similar-sized company, Jiangsu Shente Steel, stopped production in December but then resumed in March as prices surged, a company official said. More than 40 million tonnes of capacity out of the 50-60 million tonnes that were shut last year are now back on, said Macquarie analyst Ian Roper. “Capacity cuts are off the cards given the price and margin rebound,” he said.

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The fight over jurisdiction and fees will heat up. Just like the Arctic itself.

China Wants Ships To Use Faster Arctic Route Opened By Global Warming (R.)

China will encourage ships flying its flag to take the Northwest Passage via the Arctic Ocean, a route opened up by global warming, to cut travel times between the Atlantic and Pacific oceans, a state-run newspaper said on Wednesday. China is increasingly active in the polar region, becoming one of the biggest mining investors in Greenland and agreeing to a free trade deal with Iceland. Shorter shipping routes across the Arctic Ocean would save Chinese companies time and money. For example, the journey from Shanghai to Hamburg via the Arctic route is 2,800 nautical miles shorter than going by the Suez Canal. China’s Maritime Safety Administration this month released a guide offering detailed route guidance from the northern coast of North America to the northern Pacific, the China Daily said.

“Once this route is commonly used, it will directly change global maritime transport and have a profound influence on international trade, the world economy, capital flow and resource exploitation,” ministry spokesman Liu Pengfei was quoted as saying. Chinese ships will sail through the Northwest Passage “in the future”, Liu added, without giving a time frame. Most of the Northwest Passage lies in waters that Canada claims as its own. Asked if China considered the passage an international waterway or Canadian waters, Chinese Foreign Ministry spokeswoman Hua Chunying said China noted Canada considered that the route crosses its waters, although some countries believed it was open to international navigation.

In Ottawa, a spokesman for Foreign Minister Stephane Dion said no automatic right of transit passage existed in the waterways of the Northwest Passage. “We welcome navigation that complies with our rules and regulations. Canada has an unfettered right to regulate internal waters,” Joseph Pickerill said by email.

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Talk to the hand.

Japan, Not Germany, Leads World in Negative-Yield Bonds (BBG)

Europe’s central bank took the unorthodox step of cutting interest rates below zero in 2014. Japan followed suit earlier this year, and has become home to more negative-yielding debt than anywhere else, leading Germany, France, the Netherlands and Belgium.

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Crazy free money, no strings: “Banks are encouraged to extend credit to the real economy but are not penalized for not meeting their benchmark lending targets..”

ECB Slides Down Further Into ZIRP Bizarro World (CNBC)

Economists and analysts have been swooning over a new series of ultra-cheap, ultra-long bank loans announced by the ECB last month, which they believe might just kickstart the region’s fragile economy. “It’s massively positive,” Erik Nielsen, global chief economist at UniCredit, told CNBC via email regarding the new breed of “credit-easing” tactics announced by ECB President Mario Draghi. These targeted long-term refinancing operations, or TLTRO IIs, advance on a previous model announced by the central bank in 2011 and effectively give free money to the banks to lend to the real economy. They’re a series of four loans – conducted between June 2016 and March 2017 – and will have a fixed maturity of four years.

The interest rate will start at nothing, but could become as low as the current deposit rate, which is currently -0.40%, if banks meet their loan targets. This means the banks will be receiving cash for borrowing from the central bank. Banks will need to post collateral at the ECB but there’s no penalty if they fail to meet their loan targets. All that will happen is that the loans will be priced at zero for four years. Frederik Ducrozet, a euro zone economist with private Swiss-bank Pictet, called it “unconditional liquidity to banks at 0% cost, against collateral.” He said in a note last month that he expects it to lower bank funding costs, mitigate the adverse consequences of negative rates, strengthen the ECB’s forward guidance and improve the transmission of monetary policy.

Abhishek Singhania, a strategist at Deutsche Bank, added that the new LTROs “reduce the stigma” attached to their use compared to the previous model. “Banks are encouraged to extend credit to the real economy but are not penalized for not meeting their benchmark lending targets,” he said in a note last month.

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Ambrose muses on Europe: “The EU is a strategic relic of a post-War order that no longer exists, and a clutter of vested interests that caused Europe to miss the IT revolution.”

Brexit Means Blood, Toil, Sweat And Tears (AEP)

[..] The Justice Secretary is right to dismiss Project Fear as craven and defeatist. A vote to leave the dysfunctional EU half-way house might well be a “galvanising, liberating, empowering moment of patriotic renewal”. The EU is a strategic relic of a post-War order that no longer exists, and a clutter of vested interests that caused Europe to miss the IT revolution. “We will have rejected the depressing and pessimistic vision that Britain is too small and weak, and the British people too hapless and pathetic, to manage their own affairs,” he said. The special pleading of the City should be viewed with a jaundiced eye. This is the same City that sought to stop the country upholding its treaty obligations to Belgium in 1914, and that funded the Nazi war machine even after Anschluss in 1938, lobbying for appeasement to protect its loans. It is morally disqualified from any opinion on statecraft or higher matters of sovereign self-government.

Mr Gove is right that the European Court has become a law unto itself, asserting a supremacy that does not exist in treaty law, and operating under a Roman jurisprudence at odds with the philosophy and practices of English Common Law. It has seized on the Charter of Fundamental Rights to extend its jurisdiction into anything it pleases. Do I laugh or cry as I think back to the drizzling Biarritz summit of October 2000 when the Europe minister of the day told this newspaper that the charter would have no more legal standing than “the Beano or the Sun”? What Mr Gove cannot claim with authority is that Britain will skip painlessly into a “free trade zone stretching from Iceland to Turkey that all European nations have access to, regardless of whether they are in or out of the euro or the EU”.

Nobody knows exactly how the EU will respond to Brexit, or how long it would take to slot in the Norwegian or Swiss arrangements, or under what terms. Nor do we know how quickly the US, China, India would reply to our pleas for bi-lateral deals. Over 100 trade agreements would have to be negotiated, and the world has other priorities. Brexit might set off an EU earthquake as Mr Gove says – akin to the collapse of the Berlin Wall in the words of France’s Marine Le Pen – but it would not resemble his children’s fairy tale. The more plausible outcome is a 1930s landscape of simmering nationalist movements with hard-nosed reflexes, and a further lurch toward authoritarian polities from Poland to Hungary and arguably Slovakia, and down to Romania where the Securitate never entirely lost its grip and Nicolae Ceausescu is back in fashion.

Pocket Putins will have a field day knowing that they can push the EU around. The real Vladimir Putin will be waiting for his moment of maximum mayhem to try his luck with “little green men” in Estonia or Latvia, calculating that nothing can stop him restoring the western borders of the Tsarist empire if he can test and subvert NATO’s Article 5 – the solidarity clause, one-for-all and all-for-one. A case can be made that the EU has gone so irretrievably wrong that Britain must withdraw to save its legal fabric and parliamentary tradition. If so, let us at least be honest about what we face. One might equally quote another British prime minster, with poetic licence: ‘I have nothing to offer but blood, toil, tears, and sweat’.

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Greece is mor elikely to leave in the wake of a new refugee disaster.

Greece ‘Could Leave Eurozone’ On Brexit Vote (Tel.)

Greece could crash out of the eurozone as early as this summer if Britons vote to leave the European Union in the upcoming referendum, economists have predicted. The uncertainty following a ‘yes’ vote to Britain leaving the EU would put unsustainable pressure on Greece’s cash-strapped economy at a time when it is also struggling to cope with an influx of migrants escaping turmoil in the Middle East and Africa, according to a report from the Economist Intelligence Unit. The authors of the report say it is highly likely that Greece will be forced to leave the eurozone at some point within the next five years, but that if the UK votes to leave the EU in June, it could happen much sooner. Greece is already under a huge amount of pressure and a so-called Brexit could tip it over the edge.

The country has large debt payments due in mid-2016, while structural reforms recommended in Greece’s bail-out programme are “slow burners” and unlikely to deliver any significant growth in the short term. Greece’s true GDP contracted by 0.3pc last year, while unemployment stands at 24pc. The country’s overall debt-to-GDP ratio has hit 171pc. “While the region could probably handle a Brexit, Grexit or an escalation of the migrant crisis individually, it would be unlikely to navigate successfully a situation in which several of those crises came to a head simultaneously,” the report, entitled ‘Europe stretched to the limit’, said. “It is not impossible that this could happen as early as mid-2016, when the UK votes on whether or not to remain in the EU.”

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If they have to offer a similar deal in Europe, that’s curtains.

VW To Offer To Buy Back Nearly 500,000 US Diesel Cars (Reuters)

Volkswagen and U.S. officials have reached a framework deal under which the automaker would offer to buy back almost 500,000 diesel cars that used sophisticated software to evade U.S. emission rules, two people briefed on the matter said on Wednesday. The German automaker is expected to tell a federal judge in San Francisco Thursday that it has agreed to offer to buy back up to 500,000 2.0-liter diesel vehicles sold in the United States that exceeded legally allowable emission levels, the people said. That would include versions of the Jetta sedan, the Golf compact and the Audi A3 sold since 2009. The buyback offer does not apply to the bigger, 80,000 3.0-liter diesel vehicles also found to have exceeded U.S. pollution limits, including Audi and Porsche SUV models, the people said.

U.S.-listed shares of Volkswagen rose nearly 6% to $30.95 following the news. VW in September admitted cheating on emissions tests for 11 million vehicles worldwide since 2009, damaging the automaker’s global image. As part of the settlement with U.S. authorities including the Environmental Protection Agency, Volkswagen has also agreed to a compensation fund for owners, a third person briefed on the terms said. The compensation fund is expected to represent more than $1 billion on top of the cost of buying back the vehicles, but it is not clear how much each owner might receive, the person said. Volkswagen may also offer to repair polluting diesel vehicles if U.S. regulators approve the proposed fix, the sources said.

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It’ll be increasingly hard to push through in Europe. And in America too unless Hillary’s elected.

Public Support For TTIP Plunges in US and Germany (Reuters)

Support for the transatlantic trade deal known as TTIP has fallen sharply in Germany and the United States, a survey showed on Thursday, days before Chancellor Angela Merkel and President Barack Obama meet to try to breathe new life into the pact. The survey, conducted by YouGov for the Bertelsmann Foundation, showed that only 17% of Germans believe the Transatlantic Trade and Investment Partnership is a good thing, down from 55% two years ago. In the United States, only 18% support the deal compared to 53% in 2014. Nearly half of U.S. respondents said they did not know enough about the agreement to voice an opinion. TTIP is expected to be at the top of the agenda when Merkel hosts Obama at a trade show in Hanover on Sunday and Monday.

Ahead of that meeting, German officials said they remained optimistic that a broad “political agreement” between Brussels and Washington could be clinched before Obama leaves office in January. The hope is that TTIP could then be finalised with Obama’s successor. But there have been abundant signs in recent weeks that European countries are growing impatient with the slow pace of the talks, which are due to resume in New York next week. On Wednesday, German Economy Minister Sigmar Gabriel described the negotiations as “frozen up” and questioned whether Washington really wanted a deal.

The day before, France’s trade minister threatened to halt the talks, citing a lack of progress. Deep public scepticism in Germany, Europe’s largest economy, has clouded the negotiations from the start. The Bertelsmann survey showed that many Germans fear the deal will lower standards for products, consumer protection and the labor market. It also pointed to a dramatic shift in how Germans view free trade in general. Only 56% see it positively, compared to 88% two years ago. “Support for trade agreements is fading in a country that views itself as the global export champion,” said Aart de Geus, chairman and chief executive of the Bertelsmann Foundation.

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Bottom line: “..non-performing debt [..] stands at €360bn, according to the Bank of Italy. So is Atlante — with about €5bn of equity — really enough to keep the heavens in place?”

Italian ‘Bad Bank’ Fund ‘Designed To Stop The Sky Falling In’ (FT)

Atlante, a new private initiative backed by the Italian government, is designed to stop the sky falling in. The fund, which takes its name from the mythological titan who held up the heavens, will buy shares in Italian lenders in a bid to edge the sector away from a fully-fledged crisis. Last week’s announcement of the fund, which can also buy non-performing loans, led to a welcome boost for Italian banks. An index for the sector gained 10% over the week — its best performance since the summer of 2012, though it remains heavily down on the year. But Italian banks have made €200bn of loans to borrowers now deemed insolvent, of which €85bn has not been written down on their balance sheets. A broader measure of non-performing debt, which includes loans unlikely to be repaid in full, stands at €360bn, according to the Bank of Italy.

So is Atlante — with about €5bn of equity — really enough to keep the heavens in place? The Italian government has been placed in a highly unusual position. It has become much harder to directly bail out its financial institutions, as other European countries did during the crisis. Meanwhile, a new European-wide approach to bank failure, which involves imposing losses on bondholders, is politically fraught in Italy, where large numbers of bonds have been sold to retail customers. The new fund also comes in the context of an extremely weak start to the year for global markets. “In this market it is impossible for anyone to raise any capital,” says Sebastiano Pirro, an analyst at Algebris, adding that, since November last year, “the markets have been shut for Italian banks”.

The government has been forced into an array of subtle interventions to provide support. Earlier this year, details emerged of a scheme for non-performing loans to be securitised — a process where assets are packaged together and sold as bond-like products of different levels, or tranches, of risk. The government planned to offer a guarantee on the most senior tranches — those with a triple B, or “investment grade” rating.

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Support for dying empires will come at a price. The Nobel Peace Prize came free of charge.

The Troubled Legacy Of Obama’s Record $60 Billion Saudi Arms Sale (R.)

Six years ago, Saudi and American officials agreed on a record $60 billion arms deal. The United States would sell scores of F-15 fighters, Apache attack helicopters and other advanced weaponry to the oil-rich kingdom. The arms, both sides hoped, would fortify the Saudis against their aggressive arch-rival in the region, Iran. But as President Barack Obama makes his final visit to Riyadh this week, Saudi Arabia’s military capabilities remain a work in progress – and the gap in perceptions between Washington and Riyadh has widened dramatically. The biggest stumble has come in Yemen. Frustrated by Obama’s nuclear deal with Iran and the U.S. pullback from the region, Riyadh launched an Arab military intervention last year to confront perceived Iranian expansionism in its southern neighbour.

The conflict pits a coalition of Arab and Muslim nations led by the Saudis against Houthi rebels allied to Iran and forces loyal to a former Yemeni president. A tentative ceasefire is holding as the United Nations prepares for peace talks in Kuwait, proof, the Saudis say, of the intervention’s success. But while Saudi Arabia has the third-largest defence budget in the world behind the United States and China, its military performance in Yemen has been mixed, current and former U.S. officials said. The kingdom’s armed forces have often appeared unprepared and prone to mistakes. U.N. investigators say that air strikes by the Saudi-led coalition are responsible for two thirds of the 3,200 civilians who have died in Yemen, or approximately 2,000 deaths. They said that Saudi forces have killed twice as many civilians as other forces in Yemen.

On the ground, Saudi-led forces have often struggled to achieve their goals, making slow headway in areas where support for Iran-allied Houthi rebels runs strong. And along the Saudi border, the Houthis and allied forces loyal to former Yemeni president Ali Abdullah Saleh have attacked almost daily since July, killing hundreds of Saudi troops. Instead of being the centrepiece of a more assertive Saudi regional strategy, the Yemen intervention has called into question Riyadh’s military influence, said one former senior Obama administration official. “There’s a long way to go. Efforts to create an effective pan-Arab military force have been disappointing.”

Behind the scenes, the West has been enmeshed in the conflict. Between 50 and 60 U.S. military personnel have provided coordination and support to the Saudi-led coalition, a U.S. official told Reuters. And six to 10 Americans have worked directly inside the Saudi air operations centre in Riyadh. Britain and France, Riyadh’s other main defence suppliers, have also provided military assistance. Last year, the Obama administration had the U.S. military send precision-guided munitions from its own stocks to replenish dwindling Saudi-led coalition supplies, a source close to the Saudi government said. Administration officials argued that even more Yemeni civilians would die if the Saudis had to use bombs with less precise guidance systems.

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Half of Europe too, no doubt. And China. And larger cities everywhere.

More Than Half Of Americans Live Amid Dangerous Air Pollution (G.)

More than half of the US population lives amid potentially dangerous air pollution, with national efforts to improve air quality at risk of being reversed, a new report has warned. A total of 166 million Americans live in areas that have unhealthy levels of of either ozone or particle pollution, according to the American Lung Association, raising their risk of lung cancer, asthma attacks, heart disease, reproductive problems and other ailments. The association’s 17th annual “state of the air” report found that there has been a gradual improvement in air quality in recent years but warned progress has been too slow and could even be reversed by efforts in Congress to water down the Clean Air Act. Climate change is also a looming air pollution challenge, with the report charting an increase in short-term spikes in particle pollution.

Many of these day-long jumps in soot and smoke have come from a worsening wildfire situation across the US, especially in areas experiencing prolonged dry conditions. Six of the 10 worst US cities for short-term pollution are in California, which has been in the grip of an historic drought. Bakersfield, California, was named the most polluted city for both short-term and year-round particle pollution, while Los Angeles-Long Beach was the worst for ozone pollution. Small particles that escape from the burning of coal and from vehicle tail pipes can bury themselves deep in people’s lungs, causing various health problems. Ozone and other harmful gases can also be expelled from these sources, triggering asthma attacks and even premature death.

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Can Brussels survive such failure? More urgently, can Greece survive the fallout? Because it’s Greece that will suffer first, and most, if the EU pact with the devil falls through.

EU States Grow Wary As Turkey Presses For Action On Visas Pledge (FT)

European diplomats are agonising over their politically perilous promise to grant visa-free travel to 80m Turks, amid strong warnings from Ankara that the EU migration deal will fold without a positive visa decision by June. The EU’s month-old deal to return migrants from Greece to Turkey has dramatically cut flows across the Aegean, easing what had been an acute migration crisis. But the pact rests on sweeteners for Ankara that the EU is struggling to deliver – above all, giving Turkish citizens short-term travel rights to Europe’s Schengen area. Germany, France and other countries nervous of a political backlash over Muslim migration have started exploring options to make the concession more politically palatable, including through safeguard clauses, extra conditions or watered-down terms.

The political calculations are further complicated by looming EU visa decisions for Ukraine, Georgia and Kosovo. Several senior European diplomats say ideas considered include a broad emergency brake, allowing the EU to suspend the visa deal under certain circumstances; limiting the visa privileges to Turkish executives and students; or opting for an unconventional visa-waiver treaty with Turkey, which would allow more rigorous, US-style checks on visitors. Selim Yenel, Turkey’s ambassador to the EU, called the efforts to water down the terms “totally unacceptable”, saying: “They cannot and should not change the rules of the game.” One senior EU official said the search for alternatives reflected “growing panic” in Berlin and Paris over the looming need to deliver the pledge.

The various options, the official added, were “a political smokescreen” to muster support in the Bundestag and European Parliament, which must also vote on the measures. The Turkish visa issue has even flared in Britain’s EU referendum campaign, forcing David Cameron, the prime minister, to clarify on Wednesday that Turks could not automatically come to the UK if they were granted visa rights to the 26-member Schengen area. The matter could come to a head within weeks. Brussels says Turkey is making good progress in fulfilling 72 required “benchmarks” to win the visa concessions and will issue a report on May 4. This is expected to say that Turkey is on course to meet the criteria by early June, passing the political dilemma to the EU member states and European Parliament.

One ambassador in Brussels said it looked ever more likely that several states would try to block visas for Turkey – a possibility that Mr Yenel also appears to anticipate. “They are probably getting cold feet since we are fulfilling the benchmarks,” he told the Financial Times. “We expect them to stick to what was agreed, otherwise how can we continue to trust the EU? We delivered on our side of the bargain. Now it is their turn.” Signs of Brussels backtracking have already prompted angry Turkish responses. “The EU needs Turkey more than Turkey needs the EU,” President Recep Tayyip Erdogan said recently. Meanwhile, Ahmet Davutoglu, Turkey’s prime minister, has warned that “no one can expect Turkey to adhere to its commitments” if the June deadline was not respected.

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How is this any different from Europe’s long lamented bloody past?

Hungary Threatens Rebellion Against Brussels Over Forced Migration (Express)

The much-derided Schengen Area is on the brink of collapse after furious Hungary launched a rebellion against open borders. The country’s prime minister Viktor Orban is also angry at mandatory migrant quotas enforced by the European Union. He is now touring Europe’s capital cities, where he is rallying support for a new plan with greater protection for individual states, dubbed “Schengen 2.0.” Currently, EU countries are forced to comply with orders from Brussels to accept and settle a specified number of migrants. Orban has described these quotas as “wrong-headed” and is now leading a group of other countries determined to re-take control of their borders. “The EU cannot create a system in which it lets in migrants and then prescribes mandatory resettlement quotas for every member state.”

Orban also promised a referendum in Hungary on whether the country should accept these orders, warning that some of the settled migrants were unlikely to integrate, leading to social friction. He said: “If we do not stop Brussels with a referendum, they will indeed impose on us masses of people, with whom we do not wish to live together.” Other countries may follow suit in opposing these plans and hold their own referendums, taking the power from Brussels and putting it back in the hands of their residents. Slovakia and the Czech Republic have both threatened to take legal action against the EU’s orders to take in migrants. Czech Prime Minister Bohuslav Sobotka said on Sunday: “I expect the line of opposition will be wider. Let us talk about legal action against the proposal when it is necessary.”

The action plan, which will be shared with the Czech Republic, Slovakia and Poland as well as the prime ministers of several other unspecified countries, is just the latest nail in the Schengen coffin. Last week, 2,000 soldiers in Switzerland’s tank battalion were told to postpone their summer holidays in order to be ready to rush to the border with Italy to block migrants making their way from Sicily. Austria has also begun sealing off its southern border, introducing checks on the vital Brenner Cross motorway and pledging the implementation of €1m worth of border patrols and security improvements. Brussel’s most senior bureaucrat admitted yesterday that confidence in the EU was dropping rapidly across the continent. In an astonishing confession of failure, European Commission President Jean-Claude Juncker said: “We are no longer respected in our countries when we emphasise the need to give priority to the EU.”

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A team of our Automatic Earth-sponsored friends at the Social Kitchen prepares 1000s of meals for refugees daily at Elliniko. Your contributions are still as welcome as they are necessary.

Refugee Camp Near Athens Poses ‘Enormous’ Public Health Risk (AFP)

Five mayors of Athens’s coastal suburbs warned Wednesday of the “enormous” health risks posed by a nearby camp housing over 4,000 migrants and refugees. “The conditions are out of control and present enormous risks to the public health,” the mayors complained in a letter to Prime Minister Alexis Tsipras, in reference to the camp at Elliniko, the site of Athens’s old airport. A total of 4,153 people, including many families, have been held there for the last month in miserable conditions. “The number of people is much higher than the capacity of the place and there are serious hygiene problems,” local mayor Dionyssis Hatzidakis told AFP.

He and his four fellow mayors from the area cited a document from Greece’s disease prevention center KEELPNO warning of the “the danger of disease contagion due to unacceptable housing conditions” at the site which they say has no more than 40 chemical toilets. Since the migrants’ favored route through the Balkans to the rest of Europe was shut down in February, numbers have been building up in Greece, with 46,000 Syrians and other nationalities now stuck in the country. Thousands of these have been transferred from the islands they arrived at to temporary centers such as the one at Elliniko, until more suitable reception centers can be set up.

The five mayors also voiced their disquiet at the “tensions and daily violent incidents between the refugees or migrants,” calling on the interior minister to boost police numbers in the area. “We are launching an appeal for help to protect the public health and security of both the refugees and the local population,” they said in their letter. Their intervention came the day after 17-year-old Afghan woman living in Elliniko with her parents died after six days in an Athens hospital. Her death was linked to a pre-existing heart condition exacerbated by the difficult journey to Greece, the doctor who treated her was quoted as saying in the Ethnos daily. Greek island officials on Tuesday began letting migrants leave detention centers where they have been held, as Human Rights Watch heaped criticism on a wave of EU-sanctioned expulsions to ease the crisis.

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