The Automatic Earth

Russell Lee Store, La Forge, Missouri 1938

Long term, the threat of inflation is non-existent. Money supply can be artificially lifted, but spending can not.

• Bond Crash Across The World As Deflation Trade Goes Horribly Wrong (AEP)

The global deflation trade is unwinding with a vengeance. Yields on 10-year Bunds blew through 1pc today, spearheading a violent repricing of credit across the world. The scale is starting to match the ‘taper tantrum’ of mid-2013 when the US Federal Reserve issued its first gentle warning that quantitative easing would not last forever, and that the long-feared inflexion point was nearing in the international monetary cycle. Paper losses over the last three months have reached $1.2 trillion. Yields have jumped by 175 basis points in Indonesia, 160 in South Africa, 150 in Turkey, 130 in Mexico, and 80 in Australia. The epicentre is in the eurozone as the “QE” bet goes horribly wrong. Bund yields hit 1.05pc this morning before falling back in wild trading, up 100 basis points since March. French, Italian, and Spanish yields have moved in lockstep.

A parallel drama is unfolding in America where the Pimco Total Return Fund has just revealed that it slashed its holdings of US debt to 8.5pc of total assets in May, from 23.4pc a month earlier. This sort of move in the staid fixed income markets is exceedingly rare. The 10-year US Treasury yield – still the global benchmark price of money – has jumped 48 points to 2.47pc in eight trading sessions. “It is capitulation out there, and a lot of pain,” said Marc Ostwald from ADM. The bond crash has been an accident waiting to happen for months. Money supply aggregates have been surging all this year in Europe and the US, setting a trap for a small army of hedge funds and ‘prop desks’ trying to squeeze a few last drops out of a spent deflation trade. “We we’re too dogmatic,” confessed one bond trader at RBS.

Data collected by Gabriel Stein at Oxford Economics shows that ‘narrow’ M1 money in the eurozone has been growing at a rate of 16.2pc (annualized) over the last six months. You do not have to be monetarist expert to see the glaring anomaly. Broader M3 money has been rising at an 8.4pc rate on the same measure, a pace not seen since 2008. Economic historians will one day ask how it was possible for €2 trillion of eurozone bonds – a third of the government bond market – to have been trading at negative yields in the early spring of 2015 even as the reflation hammer was already coming down with crushing force. “It was the greater fool theory. They always thought there would be some other sucker to buy at an even higher price. Now we are returning to sanity,” said Mr Stein.

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But setting up emerging markers for huge losses is something Wall Street can reap huge profits from.

• Janet Yellen Gives Asia the Jitters (William Pesek)

Janet Yellen probably doesn’t think about Bangkok, Jakarta or Manila very often – the Federal Reserve chair has enough to worry about in Washington. But as she continues to ponder hiking interest rates, the frenetic selloffs in stock markets on the other side of the world should give her pause. Stock exchanges in emerging markets are on their longest losing streak since 1990; since a late-April high, the MSCI Southeast Asia Index has lost almost 9%. If Yellen is wondering whether the developing world is ready for a tightening of U.S. monetary policy, the answer from Asia has been a resounding no. Late last year, a tightening of 25 basis-points would probably not have posed any problems.

But, in the interim, China’s slowdown has darkened the global economic outlook (even as its own equity bourses continue to skyrocket). Selloffs in Indonesia, Malaysia, the Philippines, Thailand and elsewhere speak to the growing anxiety about the two biggest actors in the global economy. The most immediate worry is the trade shock emanating from China. Massive share rallies in Shanghai and Shenzhen are papering over a growing number of economic cracks in China, including deflation and weak household spending. Despite government pledges to achieve 7% growth, sliding commodity prices suggests Chinese growth is decelerating.

And MSCI’s decision not to include China in its indices is a reminder that Asia has been hitching its future on an economy that isn’t yet ready for prime time. Asia also worries that China’s problems will be exacerbated by the Fed. Monetary purists will be tempted to dismiss the argument out of hand – the Fed should focus on keeping the U.S. economy stable and healthy, because that’s ultimately in the best interests of everyone from Seoul to Sao Paulo. What this line of thinking misses, though, are the feedback effects created by Fed policy. As the dollar rises, it draws money away from the developing world – often violently so. Consider how a strong dollar helped precipitate Asia’s 1997-1998 crisis and Latin America’s a decade earlier.

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Well, it protects China’s grandmas from even bigger losses.

• MSCI Backs Itself Into Corner On China Share Inclusion (Reuters)

MSCI’s decision to defer including Chinese shares in its emerging market benchmark share indexes for a second time may have trapped the index provider into making promises it can’t keep, both to Beijing and to its investor constituents. While both MSCI and Chinese state media spun the decision as a speed bump on the way to inevitable inclusion, which will allow and in some cases require foreign funds to buy into Chinese stocks, the agendas of Chinese bureaucrats and foreign institutional investors are much further apart than they seem. “With this announcement (MSCI has) further hemmed themselves in, as they’ve outlined exactly what China needs to do. And if China satisfies them, they’ll be within their rights to ask why MSCI hasn’t lived up to its side of the bargain,” said one source familiar with MSCI’s strategy.

MSCI’s says the process requires time. “It wouldn’t be a negative, it would simply be the recognition that this process needs to take its own pace,” said Remy Briand, MSCI managing director and global head of research, when asked whether there could be fallout for the company if it finds itself delaying inclusion again next year. The changes foreign fund managers want are not minor tweaks. MSCI’s clients want Beijing to open its capital accounts so they can reliably move their money in and out of China’s markets, but the economy is facing its slowest growth in decades, which has led to capital flowing out of the country.

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Is it QE? It’s swapping shadow bank debt for central bank debt, with a large difference in duration and interest rates.

• China Approves Another 1 Trillion Yuan Local Debt Swap (WSJ)

China will let its cities and provinces issue another 1 trillion yuan ($161 billion) of bonds as it continues an effort to rev up the economy and help local governments refinance their hefty debt burdens. The move, which doubles the amount Beijing initially authorized, will help local governments refinance 1.86 trillion yuan in debt due this year, according to Xinhua. It said swapping 1 trillion yuan will save local governments about 50 billion yuan in annual interest payments. Like the previous issue, local governments can effectively swap the debt for loans from China’s central bank. But Chinese officials continued to contend that such swaps aren’t the equivalent of a common central-bank tool known as quantitative easing, in which central banks buy bonds as a way to inject money into the financial system.

The move, which was expected, underscores Beijing’s continued worries about slowing economic growth and mounting debt. China’s 7% first-quarter year-over-year growth rate was the slowest in six years, and recent trade and inflation data continue to point to soft domestic demand. China’s local governments had run up 17.9 trillion yuan of debt as of mid-2013, or $2.89 trillion at current exchange rates, according to the most recent official data. That was up sharply from negligible levels six years earlier. Much of the debt was from a massive stimulus push in the wake of the 2008 financial crisis. In recent years, China’s local governments circumvented rules that bar them from borrowing to fund the infrastructure and housing projects that have been essential in maintaining fast economic growth.

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A power game. Not that they want to. They were forced into it.

• Greece is Playing an Ultimatum Game (Bloomberg)

Hence, another classic game – the ultimatum game – might provide a better analogy. In the game, a player receives some money — say, $100 — but can keep it only by convincing a second player to accept part of the sum. If both parties are interested solely in maximizing their financial well-being, the first player should be able to offer as little as $1. After all, for the second player, $1 is better than nothing. When real people play the game, though, that’s not how it works out. The second player tends to reject any offer less than $30, seeing it as insulting. As a result, neither player gets any money. The game reaches inside people and stirs up deep emotions, demonstrating that humans are not dispassionate economic calculators.

You can’t understand it without thinking about human perceptions of fairness, justice and honor. This seems to fit the current situation in Europe. The creditors think Greece, in a position of weakness, should be grateful for the relief they’ve offered and get on with economic reforms. After all, it’s better than nothing. Yet Greece, while recognizing the need for reform, sees that the creditors can afford to do more and feels insulted by the suffering it must endure. If necessary, the Greeks are ready to risk blowing up the euro to preserve their independence and dignity. From this perspective, it’s not really an economic confrontation at all.

The technicalities of funding mechanisms and repayment schedules are merely the instruments through which power is being exerted from one side and resisted from the other. So when Greek Prime Minister Alexis Tsipras called the creditors’ latest proposal “absurd,” it might have been because, from the broad perspective of human decency, it was absurd. And when Jean-Claude Juncker, the chief executive of the EU, reportedly refused to answer a subsequent phone call from Tsipras, he might have done so because he was completely flummoxed by Greece’s irrationality. The ultimatum game teaches us that the Greek standoff can’t be understood through the lens of economic rationality alone. Those who attempt to do so risk making a costly miscalculation.

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A staggered reform program and loan program may yet be a decisive move.

• Markets Surge On Rumours Of German Compromise On Greece (Guardian)

Stock markets surged on Wednesday after reports of a German proposal to allow Greece to receive a drip-feed of loans in return for a staggered reform programme. The softening of the German stance towards Athens cheered investors keen to see a sustainable rescue of the debt-stricken country after more than four months of wrangling. According to the reports, the chancellor Angela Merkel is prepared to accept a much-reduced reform programme, slimmed down to just one or two areas as part of an initial package, to salvage a deal with Greece and prevent it exiting the eurozone. Shares on the FTSE 100 moved ahead 76 points or 1.1%, while the German Dax and French CAC jumped 2.4% and 1.75%, respectively.

The EC, the IMF and the ECB, which have lent Greece €240bn (£175bn) between them, had until recently demanded all-encompassing reforms in return for the last tranche of bailout funds worth €7.6bn. Bloomberg said it spoke to at least two German officials close to the bailout talks who described the compromise deal as a possible way to end the impasse between the radical leftist Greek government and its creditors. The report, later denied by the German government as official policy, followed statements by Merkel and the French president, François Hollande, that they were ready to meet Greece’s embattled prime minister, Alexis Tsipras, at a summit in Brussels. Merkel said a solution was possible as she arrived for a summit of EU and Latin American leaders, just hours after the EC dismissed the latest Athens plan, saying it failed to address the need for deep changes.

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Right wing Germany rears its ugly head once more.

• Germany Against 3rd Greek Bailout Under Any Circumstances: BILD (Reuters)

The German government is against a third aid programme for Greece under any circumstances, even if there was an agreement between Athens and its international lenders on a cash-for-reforms deal, the German mass daily Bild reported on Thursday. Instead, the current second aid programme could be extended and be broadened with funds from other programmes such as the €10.9 billion that were originally designed to rescue Greek banks, but were not needed, the report said. However, this could only happen if Athens was willing to implement substantial reforms, it added. “We don’t want to make our people bleed just because the ones in charge in Greece are not doing their job,” the mass daily quoted a member of the government as saying.

German Chancellor Angela Merkel is facing growing opposition among her ruling conservatives to granting Greece any further bailout funds. Athens’ unwillingness to accept further economic reforms is turning a growing minority of Merkel’s own conservatives against the prospect of unlocking a final tranche of Greece’s second bailout or agreeing to a third aid programme. Greece’s EU/IMF lenders have asked Athens to commit to sell off state assets, enforce pension cuts and press on with labour reforms, two sources familiar with the plan told Reuters last week, demands that would cross the Greek government’s “red lines”. If Greece were to accept the plan, lenders would aim to unlock €10.9 billion in unused bank bailout funds that were returned to the European Financial Stability Fund. This would enable Greece to cover its financial needs through July and August, the sources have said.

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“A 2010 IMF staff position note described default on any debt in advanced economies as “unnecessary, undesirable and unlikely”, yet 18 months later the IMF advocated a 70% “haircut”..”

• IMF’s ‘Never Again’ Experience In Greece May Get Worse (Reuters)

For the IMF, five years of playing junior partner in European bailouts for Greece has been a “never again” experience, and the worst may be yet to come. The global lender has lent far more to Athens than to any other borrower, contributing nearly one-third of the total €240 billion, with the rest coming from euro zone governments and the bloc’s rescue fund. But it has sat uncomfortably in the side-car of the Greek rescue. Called in by EU paymaster Germany to try to keep the European institutions and the Greeks honest, the Washington-based IMF has never had control of the program. Now Greece may be about to become the first European nation to default on the IMF, putting it in exclusive company with Zimbabwe and Argentina.

Athens postponed a €300 million installment due last week and bundled it with others due this month into a single €1.6 billion payment due to the IMF at the end of June. Greece has said it can only pay if it gets new funds from creditors or is allowed to sell more short-term debt to Greek banks, which in turn hinges on a stalled cash-for-reform deal. Critics say the IMF has damaged its credibility by going along with political fudges to keep Greece in the euro zone rather than insisting on write-offs, first by private creditors and now by European governments, to make its debt sustainable. “One of the most important lessons for the IMF from the Greek program should be that a multilateral institution should not institutionalize special interests of a subset of its membership,” said Ousmene Mandeng, a former IMF official who is now an economics adviser.

“The interest of the IMF is not necessarily aligned with the EU/ECB,” he said. In 2013, the IMF published a critical evaluation of its own role in the first Greek bailout in 2010, arguing that it should have insisted on a “haircut” on Greece’s debt to private creditors from the outset. Instead it went along with European governments frightened of a Lehman-style market meltdown and keen to shield their banks from losses. The report, compiled by Fund staff, said IMF officials had doubts about Greece’s ability to repay its loan at the time but agreed to the plan because of fears of contagion from Greece’s predicament affecting other European states.

A 2010 IMF staff position note described default on any debt in advanced economies as “unnecessary, undesirable and unlikely”, yet 18 months later the IMF advocated a 70% “haircut” on Greek government debt as a condition for continued involvement in lending to Athens. Now IMF chief Christine Lagarde is hinting that European governments need to give Greece debt relief to make the numbers add up, but since this is politically unacceptable in Germany, she has had to talk in code in public. “Clearly, if there were to be slippages from those (fiscal) targets, for the whole program to add up, then financing has to be considered,” Lagarde told a news conference last week.

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Tsipras can take this to the troika.

• Ruling On Pension Cuts Will Cost Greek State €1.5 Billion (Kathimerini)

The government will have to find €1 to 1.5 billion to cover the cost of a Council of State decision published on Wednesday, which calls for pensioners in the private sector and at state-owned corporations (DEKOs) to have their retirement pay restored to 2012 levels. In a majority decision (14 vs 11), Greece’s highest administrative court judged the reduction to main and supplementary pensions legislated in late 2012 as being unconstitutional. The ruling affects some 800,000 pensioners who earned more than 1,000 euros a month. It is estimated the decision will lead to pensions between €1,000 and €1,500 rising by 5%, those between 1,500 and 2,000 increasing by 10% and those over 2,000 seeing a rise of 15%.

The court said the government should have carried out a study on the impact these cuts would have had on the pensioners affected. The Council of State, however, decided that pensions should not be restored retroactively apart from some 2,000 individual cases where pensioners appealed the reductions on their own. This means that, apart from the latter cases, the government will have to find a way to increase the pensions in question from this point on rather than find the funds to cover the income the pensioners lost as a results of the cuts over the last 2.5 years.

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And you find this out only now?

• Growth, What Growth? Thatcherism Fails To Produce The Goods (Guardian)

Margaret Thatcher’s policies of privatisation, light-touch regulation and low income tax failed to boost growth, according to a new study that casts doubt on the merits of free market economies. In a wide-ranging analysis of Britain’s performance in the decades before and after 1979, economists at the University of Cambridge say the liberal economic policies pioneered by Thatcher have been accompanied by higher unemployment and inequality. At the same time, contrary to widespread belief, GDP and productivity have grown more slowly since 1979 compared with the previous three decades. Liberal market policies such as lower tariffs and income taxes, free movement of labour, limited legal immunity for trade unions, privatisation and light-touch business regulation “did not produce the goods” in terms of higher growth in GDP and productivity, according to Ken Coutts and Graham Gudgin at the Centre for Business Research at Cambridge Judge Business School.

“Those who believe in the free market economy must be able to show that economic performance after 1979 was better than it would have been under the ‘corporatist’ economic policies of earlier decades. The starting point in doing this should be to show that the actual performance was better than had been the case during the decades prior to 1979,” said Coutts and Gudgin. “The report shows that the most important economic indicators, including growth in GDP per head, were in fact no better in the post-1979 decades.” On the analysis, only one aspect of post-1979 policies actually boosted growth, but that came with grave consequences a few decades on in the shape of the financial crisis. “Financial liberalisation was the sole aspect of the liberal market reforms introduced into the UK, initially in 1971-73 and more consistently from 1979, which materially increased the rate of economic growth,” the paper said.

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High time for others to do the same.

• Iceland’s Economy Recovered After It Jailed Bankers And Let Banks Go Bust (Ind.)

Iceland’s finance minister has announced a 39% tax on investors looking to take their money overseas. The country has imposed the tax to prevent it hemorrhaging money as it loosens bank laws imposed six years ago, when Iceland made the shocking decision to let its banks go bust. Iceland also allowed bankers to be prosecuted as criminals – in contrast to the US and Europe, where banks were fined, but chief executives escaped punishment. The chief executive, chairman, Luxembourg ceo and second largest shareholder of Kaupthing, an Icelandic bank that collapsed, were sentenced in February to between four and five years in prison for market manipulation. “Why should we have a part of our society that is not being policed or without responsibility?” said special prosecutor Olafur Hauksson at the time. “It is dangerous that someone is too big to investigate – it gives a sense there is a safe haven.”

While the UK government nationalised Lloyds and RBS with tax-payers’ money and the US government bought stakes in its key banks, Iceland adopted a different approach. It said it would shore up domestic bank accounts. Everyone else was left to fight over the remaining cash. It also imposed capital controls restricting what ordinary people could do with their money– a measure some saw as a violation of free market economics. The plan worked. Iceland took a huge financial hit, just like every other country caught in the crisis. This year the IMF declared that Iceland had achieved economic recovery ‘without compromising its welfare model’ of universal healthcare and education. Other measures of progress like the country’s unemployment rate, compare just as well with countries like the US.

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Sensible policies.

• Iceland: The Economy That Came In From The Cold? (Independent)

There are dangers in opening up. The country’s central bank says the book value of the assets of the failed banks that are denominated in Icelandic krona is about 500 billion krona (£2.47bn), roughly equal to a quarter of the country’s GDP. “The danger is capital flight and a consequent fall of the value of the krona,” said Thorolfur Matthiasson, economics professor at the University of Iceland. “That would be tantamount to October 2008, bringing back bad memories for ordinary people and possibly making most businesses unsustainable due to balance-sheet problems.” New legislation will impose a one-off 39% financial levy on the total assets of failed banks, raising $5.1bn, in order to help the country weather the blow of withdrawals. As an alternative, the foreign creditors can do a deal with the failed banks’ boards by the end of the year to surrender an equivalent portion of their claims.

Yet it is impossible to be sure whether this will be enough. Iceland’s Prime Minister, Sigmundur David Gunnlaugsson, sounded nervous yesterday as he advised foreign hedge funds that had snapped up distressed Icelandic banking assets after the bust not to sue over the tax. The unspoken fear is that aggressive foreign hedge funds will drag Iceland through the courts, as they did with Argentina, inflicting further economic damage in the process. Yet there are also reasons to believe things could turn out better than this for Iceland. Along with the creditors, the country itself suffered grievously in the crisis. The economy was sent spinning into depression and living standards collapsed. Many Icelanders – who had borrowed from their banks in foreign currencies such as Swiss francs to take advantage of lower interest rates – were forced into bankruptcy.

GDP contracted by 12% and Reykjavik was forced to call in the IMF for assistance. But the Icelandic economy has recovered surprisingly strongly since 2010. The massive devaluation of the krona against the dollar and the euro helped. There has been a big boost from tourism. Fishing has also boomed. An estimated one in 84 fish caught worldwide is now scooped out of the water by Icelandic trawlers. Unemployment, which spiked to 9% at the worst of the crisis, is now back down to 5%. In domestic currency terms the economy has recovered roughly to its pre-crisis peak. GDP is projected by the IMF to grow by a reasonable 3.5% this year. The current account, which was in deficit to the tune of a whopping 25% of GDP in 2009, is now in surplus.

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The glimmer is gone.

• The New Currency Trade: Short The Kiwi (CNBC)

Currency analysts are betting on continued declines for the New Zealand dollar as officials fight to boost growth in a country that was heralded 2014’s rockstar economy. The Kiwi sank over 2% to a near five-year low of 70 U.S. cents Thursday after the Reserve Bank of New Zealand (RBNZ) lowered the benchmark cash rate by 25 basis points for the first time in four years. “Today’s announcement is significant for NZD because it marks the beginning of what could turn into a more prolonged easing cycle. Desynchronization of monetary policy should not only drive NZD/USD below 70 cents but take it lower against many other major currencies,” said Kathy Lien at BK Asset Management. Indeed, chances for parity with the Australian dollar, a popular call this year, are now over, noted Evan Lucas at IG.

RBNZ Governor Graeme Wheeler also left the door open to future cuts should economic data weaken further, adding that the currency remains overvalued despite a 17% fall against the greenback over the past year. The move surprised many economists who expected the bank to hold fire following consecutive hikes throughout 2014; the RBNZ was the first central bank in the developed world to increase rates after the global financial crisis. It’s likely to hit 68 U.S. cents over the next one to two months, warned Jonathan Cavenagh, senior FX strategist for Asia at Westpac Institutional Bank. “Given the RBNZ signaled it wasn’t done with one cut, the market will get quite aggressive with its rate outlook, leaving the Kiwi vulnerable to more downside.”

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Big shift. But conventional players will seek to invade.

• Trends Show Crowdfunding To Surpass Venture Capital in 2016 (Forbes)

By 2016 the crowdfunding industry is on track to account for more funding than venture capital, according to a recent report by Massolution*. Just 5 years ago there was a relatively small market of early adopters crowdfunding online to the tune of a reported $880M in 2010. Fast forward to today and we saw $16 Billion crowdfunded in 2014, with 2015 estimated to grow to over $34 Billion. In comparison, the VC industry invests an average of $30 Billion each year. Meanwhile, the crowdfunding industry is doubling or more, every year, and is spread across several types of funding models including rewards, donation, equity, and debt/lending.

And now under new laws enacted in 2013, equity crowdfunding has sprung forth as the newest category of crowdfunding and is further accelerating this growth and disruption. If we look at what is driving this growth and change… we see that the collaborative economy has brought new disruptive models to giant existing industries like real estate and transportation, leveraging automation and the internet to create massively scalable businesses. he World Bank estimated that crowdfunding would reach $90 Billion by 2020. If the trend of doubling year over year continues, we’ll see $90 Billion by 2017. To put that in perspective, venture capital averages roughly $30 Billion per year and in 2014 accounted for roughly $45 Billion in investment, whereas angel capital averages roughly $20 Billion per year invested.

Equity crowdfunding, the newest category of crowdfunding, opened up publicly in September of 2013 under Title II of the JOBS Act and, while restricted to accredited investors only, has grown to an estimated $1 Billion invested online. In 2015 the estimate is for over $2.5 Billion to be invested through equity crowdfunding. If equity crowdfunding doubles every year like the rest of crowdfunding has, then it could reach $36 Billion by 2020 and surpass venture capital as the leading source of startup funding.

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“Microfinance has become a socially acceptable mechanism for extracting wealth and resources from poor people.”

• The Microfinance Delusion: Who Really Wins? (Hickel)

What’s so fascinating about the microfinance craze is that it persists in the face of one unfortunate fact: microfinance doesn’t work. Of course, there are some lovely anecdotes out there about the transformative power of micro-loans, but as David Roodman from the Center for Global Development put it in his recent book, “The best estimate of the average impact of microcredit on the poverty of clients is zero.” This is not a fringe opinion. A comprehensive DFID-funded review of extant data comes to the same conclusion: the microfinance craze has been built on “foundations of sand” because “no clear evidence yet exists that microfinance programmes have positive impacts.” In fact, it turns out that microfinance usually ends up making poverty worse.

The reasons for this are fairly simple. Most microfinance loans are used to fund consumption – to help people buy the basic necessities they need to survive. In South Africa, for example, consumption accounts for 94% of microfinance use. As a result, borrowers don’t generate any new income that they can use to repay their loans so they end up taking out new loans to repay the old ones, wrapping themselves in layers of debt. When micro-loans are used to fund new businesses, budding entrepreneurs tend to encounter a lack of consumer demand. After all, their potential customers are poor and low on cash, and what little money they do have gets spent on basic goods that tend already to be available. In this context, new businesses end up displacing already-existing ones, yielding no net increase in employment and incomes.

And that’s the best of the likely outcomes. The worst – and much more likely – is that the new businesses fail, which then leads, once again, to vicious cycles of over-indebtedness that drive borrowers even further into poverty. This demand-side problem can be stated quite simply: poor people don’t have enough money. Apparently we need expensive research studies to point this out. The only consistent winners in the microfinance game are the lenders, many of whom charge exorbitant interest rates that sometimes reach up to 200% per annum. In the past we would have called such people loan sharks, but today they’re called microfinance providers, and they crown themselves with the moral halo that this term carries. Microfinance has become a socially acceptable mechanism for extracting wealth and resources from poor people.

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The New York Times works with Wikileaks?!

• US Shifts Stance on Big Pharma in TPP Talks (NY Times)

Facing resistance from Pacific trading partners, the Obama administration is no longer demanding protection for pharmaceutical prices under the 12-nation Trans-Pacific Partnership, according to a newly leaked section of the proposed trade accord. But American negotiators are still pressing participating governments to open the process that sets reimbursement rates for drugs and medical devices. Public health professionals, generic-drug makers and activists opposed to the trade deal, which is still being negotiated, contend that it will empower big pharmaceutical firms to command higher reimbursement rates in the United States and abroad, at the expense of consumers.

“It was very clear to everyone except the U.S. that the initial proposal wasn’t about transparency. It was about getting market access for the pharmaceutical industry by giving them greater access to and influence over decision-making processes around pricing and reimbursement,” said Deborah Gleeson, a lecturer at the School of Psychology and Public Health at La Trobe University in Australia. And even though the section, known as the transparency annex, has been toned down, she said, “I think it’s a shame that the annex is still being considered at all for the TPP”.

The annex, which covers pharmaceutical and medical devices, is the latest document obtained by The New York Times in collaboration with the watchdog group WikiLeaks, and it was released before the House vote on whether to give President Obama expanded powers to complete the Trans-Pacific Partnership. The Senate has already approved legislation giving the president trade promotion authority, or fast-track power that would allow him to complete trade deals without the threat of amendments or a filibuster in Congress. A House vote on final passage of the bill, now expected on Friday, appears extremely close. [..]

Jay Taylor, vice president for international affairs for Pharmaceutical Research and Manufacturers of America, said penetrating the opaque process for getting a drug considered for a national health system, then listed as available and properly priced, is central to free trade for drug makers. “It is market access,” he said. That is particularly true for the Pacific accord, he said, because one of the countries, New Zealand, has a powerful system for holding down drug costs — and keeping drug makers in the dark. New Zealand’s health system has been held up as a model for the Pacific region, a prospect the pharmaceutical industry does not relish.

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“..the vote had to be delayed because there were too many proposed amendments.”

• TTIP Vote Postponed As European Parliament Descends Into Panic (Independent)

An historic vote on the biggest trade deal ever negotiated between the EU and the US has had to be postponed after the European Parliament descended into chaos. European MPs were due to vote on the Transatlantic Trade and Investment Partnership on Wednesday. But the vote had to be delayed because there were too many proposed amendments. “It’s panic in parliament,” Yannick Jadot, a Green MEP from France, told AFP. Ministers have disagreed over a controversial dispute mechanism that some fear would allow big companies to bypass national courts to resolve disputes with investors. Socialist groups in the European Parliament reportedly blocked the dispute mechanism on Tuesday, which resulted in the vote being postponed.

Brussels had suggested a separate investment court to resolve disputes but lawmakers in the US have insisted that this is unnecessary. David Cameron has claimed that signing the deal would add £2 billion to the UK economy every year. But the plan has been violently opposed by campaign groups across Europe that fear it would be at the expense of national services and social and environmental welfare. On Wednesday Ukip MEPs led a protest against TTIP in the European Parliament, but their efforts were ignored because the session had already closed. TTIP negotiations were initiated by Europe to speed economic recovery. Commentators have said the US is growing tired of constant delays to an agreement. “It’s now very much up to EU to decide if they want this agreement. The patience of the US is running out,” Hosuk Lee-Makiyama, director of European Centre for International Political Economy, told The Independent.

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” It would be worse than anything ever known — and it could happen in and to our generation.”

• Maybe WWIII Won’t Occur, But The Damages Are Already Horrible (Zuesse)

Why is there not, in Europe, a huge movement to abandon NATO, and to kick out the U.S. military? Whom is the U.S. ‘defending’ Europeans from, after the Warsaw Pact ended in 1991? Why did not Gorbachev demand that NATO disband when the Warsaw Pact did — simultaneous (instead of one-sided) disbanding of the Cold War, so that there would not become the foundation for international fascism to arise to conquer Russia (first, to surround it by an expanding NATO — and ultimately via TPP & TTIP), in the aftermath? Why is there not considerable public debate about these crucial historical, cultural, and economic, matters? Why is there such deceit, which requires these massive questions to be ignored so long by ‘historians’?

How is it even possible for the world to move constructively forward, in this environment, of severe censorship, in the media, in academia, and throughout ‘the free world’? Why is there no outrage that the Saudi and other Arabic royals fund islamic jihad (so long as it’s not in their own countries) but America instead demonizes Russia’s leaders, who consistently oppose jihadists and jihadism? Why are America’s rulers allied with the top financiers of jihad? Why is that being kept so secret? Why are these injustices tolerated by the public? Who will change this, and how? When will that desperately needed change even start? Will it start soon enough? Maybe WW III won’t occur, but the damages are already horrible, and they’re getting worse. This can go on until the end; and, if it does, that end will make horrible look like heaven, by comparison. It would be worse than anything ever known — and it could happen in and to our generation.

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How true.

• US Draws EU Into Russia Crusade, Against Our Interests – Ex-French PM (RT)

The US is drawing European states into a “crusade” against Russia, which goes against Europe’s interests, former French Prime Minister Francois Fillon has said. Speaking to French media, he stressed that Europe now is dependent on Washington. “Today, Europe is not independent… The US is drawing us [the EU] into a crusade against Russia, which contradicts the interests of Europe,” Fillon told the BFMTV channel. The ex-French prime minister, who served in Nicolas Sarkozy’s government from 2007 till 2012, lashed out at Washington and its policies. Washington, Fillon said, pursues “extremely dangerous” policies in the Middle East that the EU and European states have to agree with. He accused German intelligence of spying on France “not in the interests of Germany but in the interests of the United States.”

Fillon pointed out that Washington is pressurizing Germany to concede to Greece and find a compromise. He noted the “American justice system” often interferes with the work of “European justice systems.” “Europe is not independent,” the ex-PM said, calling for “a broad debate on how Europe can regain its independence.” This, however, would not be possible if Europe goes ahead and signs the TTIP, a proposed EU-US treaty, which has drawn much criticism for its secretiveness and lack of accountability. “I am definitely against signing this agreement [TTIP] in the form in which it is now,” he added.

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In the next step of its campaign to look ridiculous (after yesterday’s ignorant Francesco Giavazzi rant on Greece), the FT has a poll on something it simply made up.

• Poll Highlights Divisions Among Public On Tackling Ukraine Crisis (RT)

Barely half of voters in Nato states would support a military response to an attack on an alliance member, according to a 10-country survey that highlights divisions on how to respond to Russia and the Ukraine crisis. The outbreak of war in Ukraine last year has brought mistrust between Russia and the west to cold-war levels, with the public in Nato countries blaming Moscow for the violence and the Russian public rallying behind Vladimir Putin, their president. Yet the poll, based on more than 11,000 interviews in 10 countries and conducted by the Pew Research Centre, showed the limits of European public tolerance for an escalation in military support for Ukraine, or indeed for standing by the Nato commitment to mutual defence.

Fewer than half of respondents in the UK, Poland, Spain, France, Italy and Germany would back using force to help defend a Nato ally that was under military threat from Russia. But in most countries more than two-thirds thought the US would use military force in such an event, although in Poland just 49% thought Washington would intervene. The findings highlight political vulnerabilities that Nato officials fear Russia seeks to exploit, aiming to aggravate divisions on European measures against Russia such as sanctions while instilling doubts about the Nato alliance. Some of the starkest differences of opinion within the alliance are between the US and Germany. Almost two-thirds of Americans support Ukrainian membership of Nato compared with about a third of Germans. While 46% of Americans back sending arms to Ukraine, just 19% of Germans do.

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Short term.

• Why Our Brains Don’t Process The Gravest Threats To Humanity (Brian Merchant)

Our brains are incredible little mushboxes; they are unfathomably complex, powerful organs that grant us motor skills, logic, and abstract thought. Brains have bequeathed unto we humans just about every cognitive advantage, it seems, except for one little omission: the ability to adequately process the concept of long-term, civilization-threatening phenomena. They’ve proven miracle workers for the short-term survival of individuals, but the human brain sort of malfunctions when it comes to navigating wide-lens, slowly-unfurling crises like climate change. Humans have, historically, proven absolutely awful, even incapable, of comprehending the large, looming—dare I say apocalyptic?—slowburn threats facing their societies.

“Our brain is essentially a get-out-of-the-way machine,” Daniel Gilbert, a professor of psychology at Harvard says in his university’s (decidedly less flashy) version of a TED talk. “That’s why we can duck a baseball in milliseconds.” That is, our brain seems to be programmed to react best to hard, certain information—threats that unfold over generations fail to trigger our reactionary instincts. “Many environmentalists say climate change is happening too fast,” Gilbert says. “No, it’s happening too slowly. It’s not happening nearly quickly enough to get our attention.” It’s an unfortunate quirk of human psychology; it’s allowed us to outwit and outplay most other species around the globe—we’re smarter, more resourceful, more conniving—but it might also come to mean we won’t outlast them.

There are currently a host of very real, very pressing, and very long-simmering crises on our plates; climate change, sure, but also biggies like mass extinction and biodiversity loss and ocean acidification, which will take up to many decades before they become full-blown, civilization-threatening calamities. That’s why I’ve always bristled a bit at the post-colon header of Jared Diamond’s great book, Collapse: How Societies Choose to Fail or Succeed. What society, comprised of humans capable of abstract thought, with fully developed brains, would actively choose to fail? “It’s been a good run, but seeing as how I am exhausted from all this rapaciousness and decadence, I hereby opt to Fall” -the Roman Empire. .

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