tech bubble Archives - The Automatic Earth

Though most people look at record VC spending as a sign of a strong, healthy economy, my research has found that the current VC boom is the result of another tech bubble that inflated due to the Federal Reserves ultra-stimulative monetary policies of the past decade. Unfortunately, this tech bubble is going to end just like the late-1990s dotcom bubble did – in another disastrous bust. The chart below shows the monthly count of global VC deals that raised $100 million or more since 2007. According to this chart, a new “unicorn” startup was born every four days in 2018.

The chart below shows the Nasdaq Composite Index and the two bubbles that formed in it in the past two decades. Lofty tech stock prices and valuations encourage the tech startup bubble because publicly traded tech companies have more buying power with which to acquire tech startups and because they allow startups to IPO at very high valuations.

In the chart below, I compared the monthly global VC deals chart to the Nasdaq Composite Index and they line up perfectly. Surges in the Nasdaq lead to surges in VC deals, while lulls or declines in the Nasdaq lead to lulls or declines in VC deals.

The FBI has to be investigated over this (why was the probe launched?). But no-one has the power to do so.

• Trump Vents Fury Over Russia Stories (G.)

Donald Trump has strongly denied the stunning claim that he was secretly working on behalf of Russia and again threatened to declare a national emergency to fund a border wall. In 20-minute live phone interview with Fox News on Saturday night, he described as an “insult” the New York Times story that alleged the FBI launched an investigation into whether the he was acting as a Russian asset, against his own country’s interests. Trump said the story, which claimed the investigation opened after Trump fired the FBI director James Comey in May 2017, was “the most insulting article ever written”. “If you read the article you’ll see that they found absolutely nothing,” he said during the Fox News interview. “I think [the story] was a great insult and the New York Times is a disaster of a paper. It’s a very horrible thing they said.”

Citing anonymous sources, the Times said the investigation was part counterintelligence, to determine whether Trump was knowingly or unknowingly working for Moscow and posed a threat to national security. It was also part criminal, to ascertain whether Trump’s dismissal of Comey constituted obstruction of justice. The FBI effort was soon absorbed into the special counsel Robert Mueller’s investigation of Russian interference in the 2016 election and alleged collusion between Trump’s campaign and Moscow, the Times reported, adding that it was unclear if the counterintelligence aspect is still being pursued. The president again called Comey a “liar” and claimed the entire Russia investigation was a “terrible hoax”. “Everybody knows it. It’s really a shame because it takes time; it takes effort. Everybody knows there’s no collusion,” he said.

[..] Trump’s warm relationship with the Russian president, Vladimir Putin, has long set alarm bells ringing. The day after firing Comey, he hosted Russia’s foreign minister, Sergey Lavrov, in the Oval Office – and disclosed intelligence from an Israeli counterterrorism operation. At a summit in Helsinki last summer, Trump appeared to side with Putin over his own intelligence agencies on the question of election interference. On Saturday, the Washington Post reported that Trump took the notes from of a 2017 meeting with Putin in Hamburg from his own interpreter. Citing current and former US officials, the paper also said Trump instructed the linguist not to discuss what had transpired with other administration officials. Asked why he would not release the conversations, Trump said: “I would. I don’t care … I’m not keeping anything under wraps. I couldn’t care less.”

Sometimes you think they actually believe their Putin as bogeymen tales. But that can’t be true. They know as well as we do that there’s never been any proof, and you can’t base policy on innuendo alone. That would be dangerous.

• House Democrats Eye Reported FBI Probe Of Trump (R.)

A U.S. House of Representatives committee will look into a newspaper report that the FBI investigated whether President Donald Trump has been working on behalf of Russia, against U.S. interests, the panel’s Democratic chairman said on Saturday. The New York Times reported that the probe began in the days after Trump fired James Comey as director of the Federal Bureau of Investigation in May 2017 and said the agency’s counterintelligence investigators had to consider whether Trump’s actions constituted a possible threat to national security. Trump rejected the Times piece in a late Saturday night interview on Fox News as “the most insulting article I’ve ever had written” and lashed out at Comey and the FBI in half a dozen tweets.

House Judiciary Committee Chairman Jerrold Nadler said his panel “will take steps to better understand both the president’s actions and the FBI’s response to that behavior” in coming weeks. He also said lawmakers would seek to protect investigators from the president’s “increasingly unhinged attacks.” “There is no reason to doubt the seriousness or professionalism of the FBI, as the president did in reaction to this story,” Nadler, a New York Democrat, said in a statement. “We have learned from this reporting that, even in the earliest days of the Trump administration, the president’s behavior was so erratic and so concerning that the FBI felt compelled to do the unprecedented – open a counterintelligence investigation into a sitting president,” Nadler said.

House Intelligence Committee Chairman Adam Schiff said he could not comment on the specifics of the report, but said his committee would press ahead with its probe of Trump’s contacts with Russia. “Counterintelligence concerns about those associated with the Trump campaign, including the president himself, have been at the heart of our investigation since the beginning,” said Schiff, a California Democrat. Schiff said meetings, contacts and communications between Trump associates and Russians, as well as “the web of lies about those interactions, and the president’s own statements and actions,” have heightened the need to follow the evidence where it leads.

Schumer here moves on the basis of a collusion-themed link between Manafort and Deripaska.

But the article after this one says: “The Virginia judge who presided over Manafort’s first trial said the charges against him “manifestly don’t have anything to do with the [2016] campaign or with Russian collusion.” The collusion probe, the DC judge in Manafort’s second trial concurred, was “wholly irrelevant” to these charges.”

• Schumer To Force Vote On US Decision To Lift Sanctions On Russia Firms (R.)

U.S. Senate Democratic Leader Chuck Schumer said on Saturday he will force a vote soon on a resolution to disapprove the Trump administration’s decision to relax sanctions on three Russian companies connected to oligarch Oleg Deripaska. “I have concluded that the Treasury Department’s proposal is flawed and fails to sufficiently limit Oleg Deripaska’s control and influence of these companies and the Senate should move to block this misguided effort by the Trump Administration and keep these sanctions in place,” Schumer said in a news release.

The U.S. Treasury announced on Dec. 20 that it would lift sanctions imposed in April on the core businesses of Deripaska, including aluminum giant Rusal its parent En+ and power firm EuroSibEnergo, watering down the toughest penalties imposed since Moscow’s 2014 annexation of Crimea. After lobbying by European governments that followed the imposition of sanctions, Washington postponed enforcement of the sanctions and started talks with Deripaska’s team on removing Rusal and En+ from the blacklist if he ceded control of Rusal. The businessman, who has close ties to the Kremlin, also had ties with Paul Manafort, Trump’s former campaign manager, documents have showed.

An FBI agent said in an affidavit attached to a 2017 search warrant unsealed earlier this year that he had reviewed tax returns for a company controlled by Manafort and his wife that showed a $10 million loan from a Russian lender identified as Deripaska. On Thursday, U.S. Treasury Secretary Steven Mnuchin insisted that the Trump administration would keep tight control on companies linked to Deripaska, despite the decision to ease restrictions. Mnuchin said the firms would face consequences including the reimposition of sanctions if they failed to comply with the terms. Schumer said given Deripaska’s potential involvement with Manafort, and since special counsel Robert Mueller’s investigation into Trump’s ties with Russia has not yet concluded, “It’s all the more reason these sanctions must remain in place.”

It’s a shame I don’t have more speace for Aaron Maté’s piece. Click the link and read.

@yashalevine on Twitter about Kilimnik: “Yep, the supposed Russian intelligence asset linking Trump through Manafort to the Kremlin spent a decade on the payroll of a CIA cutout meddling in Russian politics. “

• The Manafort Revelation Is Not a Smoking Gun (Maté)

Partisans of the theory that Donald Trump conspired with the Kremlin to win the 2016 election believe that they have found their smoking gun. On Tuesday, defense attorneys inadvertently revealed that special counsel Robert Mueller has claimed that former Trump-campaign chairman Paul Manafort lied to prosecutors about sharing polling data with a Russian associate. Now we’re being told that the revelation “is the closest thing we have seen to collusion,” (former FBI agent Clint Watts), “makes the no-collusion scenario even more remote,” (New York magazine’s Jonathan Chait), and, “effectively end[s] the debate about whether there was ‘collusion.’” (Talking Points Memo’s Josh Marshall). But like prior developments in the Mueller probe that sparked similar declarations, the latest information about Manafort is hardly proof of collusion.

According to an accidentally unredacted passage, Mueller believes that Manafort “lied about sharing polling data…related to the 2016 presidential campaign,” with Konstantin Kilimnik, a Russian national who worked as Manafort’s fixer and translator in Ukraine. Manafort’s employment of Kilimnik has fueled speculation because Mueller has stated that Kilimnik has “ties to a Russian intelligence service and had such ties in 2016.”Yet Mueller’s only references that Kilmnik has Kremlin “ties” came in two court filings in 2017 and 2018, and it’s not clear what Mueller meant in either case. In April 2018, Manafort’s attorneys told a Virginia judge that they have made “multiple discovery requests” seeking any contacts between Manafort and “Russian intelligence officials,” but that the special counsel informed them that “there are no materials responsive to [those] requests.”

Kilimnik insists that he has “no relation to the Russian or any other intelligence service.” According to a lengthy profile in The Atlantic, “insinuations” that Kilimnik has worked for Russian intelligence during his years in Ukraine “were never backed by more than a smattering of circumstantial evidence.” All of this has been lost on US media outlets, who routinely portray Kilimnik as a “Russian operative” or an “alleged Russian spy.” [..] Rather than imagining it as part of some grand Trump-Russia conspiracy, there’s a more plausible explanation for why Manafort wanted public polling data to be forwarded to Ukrainian oligarchs. Manafort was heavily in debt when he joined Trump’s team. Being able to show former Ukrainian clients “that he was managing a winning candidate,” the Times noted, “would help [Manafort] collect money he claimed to be owed for his work on behalf of the Ukrainian parties.”

All of this highlights another inconvenient fact about Mueller’s case against Manafort: It is not about Russia, but about tax, bank, and lobbying violations stemming from his time in Ukraine. The Virginia judge who presided over Manafort’s first trial said the charges against him “manifestly don’t have anything to do with the [2016] campaign or with Russian collusion.” The collusion probe, the DC judge in Manafort’s second trial concurred, was “wholly irrelevant” to these charges.

And what goes for Aaron Maté’s piece is also valid for Stephen Cohen. Worth reading the whole thing.

• What Trump’s Syrian Withdrawal Really Reveals (Stephen Cohen)

First, no foreign-policy initiative undertaken by President Trump, however wise it may be in regard to US national interests, will be accepted by that establishment. Any prominent political figure who does so will promptly and falsely be branded, in the malign spirit of Russiagate, as “pro-Putin,” or, as was Senator Rand Paul, arguably the only foreign-policy statesman in the senate today, “an isolationist.” This is unprecedented in modern American history. Not even Richard Nixon was subject to such establishment constraints on his ability to conduct national-security policy during the Watergate scandals.

Second, not surprisingly, the condemnations of Trump’s decision are infused with escalating, but still unproven, Russiagate allegations of the president’s “collusion” with the Kremlin. Thus, equally predictably, the Times finds a Moscow source to say, of the withdrawals, “Trump is God’s gift that keeps on giving” to Putin. (In fact, it is not clear that the Kremlin is eager to see the United States withdraw from either Syria or Afghanistan, as this would leave Russia alone with what it regards as common terrorist enemies.)

Closer to home, there is the newly reelected Speaker of the House, Nancy Pelosi, who, when asked about Trump’s policies and Russian President Putin, told MSNBC’s Joy Reid: “I think that the president’s relationship with thugs all over the world is appalling. Vladimir Putin, really? Really? I think it’s dangerous.” By this “leadership” reasoning, Trump should be the first US president since FDR to have no “relationship” whatsoever with a Kremlin leader. And to the extent that Pelosi speaks for the Democratic Party, it can no longer be considered a party of American national security.

But, third, something larger than even anti-Trumpism plays a major role in condemnations of the president’s withdrawal decisions: imperial thinking about America’s rightful role in the world. Euphemisms abound, but, if not an entreaty to American empire, what else could the New York Times’ David Sanger mean when he writes of a “world order that the United States has led for the 73 years since World War II,” and complains that Trump is reducing “the global footprint needed to keep that order together”? Or when President Obama’s national-security adviser Susan Rice bemoans Trump’s failures in “preserving American global leadership,” which a Times lead editorial insists is an “imperative”?

The news about fake news has itself become fake news.

• Republican Baby Boomers More Likely To Share Fake News On Facebook (MW)

Social media doesn’t help people differentiate what is real from what is fake, but the phrase “fake news” has been used by social scientists to describe fictional articles online and perhaps more famously by President Donald Trump, who uses it as a cudgel against mainstream media outlets. Facebook, meanwhile, struggles to stem the flow of fake news and erroneous memes, though Chief Executive Mark Zuckerberg has said the world’s biggest social-media site is making progress in dealing with the problem. Trump’s relationship with the media has been acrimonious from the moment he embarked on his campaign for president.

Since then he has not only labeled as “fake” news outlets that have reported critically on his administration but described CNN, NBC, ABC, CBS and the New York Times as “the enemy of the American people.” The good news: Most Facebook users did not share any fake news articles during the 2016 U.S. presidential campaign, according to a study released Wednesday, but the small number who did were mostly Republican Americans over the age of 65. The findings suggest the need for “renewed attention” to educate “particular vulnerable individuals,” such as aging baby boomers, about fake news or misleading information that appears to resemble a fact-checked news article published by a legitimate and fact-based media outlet, researchers said.

[..] To shed light on the issue in the latest study of which users were more likely to share misleading facts on Facebook during the 2016 presidential election, Andrew Guess, an associate professor at Princeton University, and his colleagues disseminated an online survey to 3,500 people in three waves throughout the 2016 campaign. Of the respondents, 1,331 in the initial wave agreed to share their Facebook profile data, which allowed researchers to analyze the age and political affiliations of those people who were more likely to spread fake news.

The results showed that 90% of these users actually did not share misleading or fake articles and only 8.5% shared one or more fake news articles. A plurality, 18%, of the Facebook users who shared the fake stories were both self-identified Republicans and over the age of 65, the authors concluded, and these individuals shared nearly seven times as many fake news articles as respondents in the youngest age group, ranging in age from 18 to 29.

Catastrophe is inevitable for May.

• May Warns Of Catastrophe If Lawmakers Don’t Back Brexit Deal (R.)

British Prime Minister Theresa May has warned lawmakers that failure to back her plan to leave the European Union would be catastrophic for Britain, in a plea for support two days ahead of a vote in parliament that she is expected to lose. Lawmakers are set to vote on May’s Brexit deal on Tuesday, after she shelved plans for a vote in December when it became clear that not enough lawmakers from her own party or others would back the deal she agreed with Brussels. May looks little closer to securing the support she needs, but writing in the Sunday Express she said lawmakers must not let down the people who voted for Brexit.

“Doing so would be a catastrophic and unforgivable breach of trust in our democracy,” May said. “So my message to Parliament this weekend is simple: it is time to forget the games and do what is right for our country.” On Friday, her foreign minister Jeremy Hunt said Brexit might not happen at all if May’s deal was defeated. Britain, the world’s fifth largest economy, is scheduled to quit the European Union on March 29. The Sunday Times reported that rebel lawmakers were planning to wrest control of the legislative agenda away from May next week with a view to suspending or delaying Brexit, citing a senior government source.

Way too late.

• Labour Set To Call Vote To Topple Theresa May’s Government (G.)

Labour MPs have been told to prepare for Jeremy Corbyn to table a dramatic and immediate vote of no confidence in Theresa May’s government as early as Tuesday evening in an attempt to force a general election if – as expected – she suffers a heavy defeat this week on her Brexit deal. Messages have been sent to Labour MPs, even those who are unwell, to ensure their presence both for the “meaningful vote” on the prime minister’s Brexit blueprint on Tuesday and the following day. Labour whips have told MPs the no-confidence vote is likely to be tabled within hours of a government loss, with the actual vote taking place on Wednesday.

The news comes before what promises to be one of the most tumultuous 24 hours in recent parliamentary history in which, barring another delay, May will put her Brexit deal to parliament despite deep and widespread opposition across the Commons, including from many MPs inside her own party. A senior shadow cabinet member said: “There is now recognition that we cannot wait any longer. If May goes down to defeat and she does not resign and call an election, this is the moment we have to act.” Senior Tories said on Saturday that they could not see how the prime minister could win the meaningful vote “in any circumstances” and that a defeat by less than 100 would now be regarded as the best she could hope for.

But even if she suffered a loss of closer to 200, which many Tories fear could be the case, Conservative MPs and ministers still expect her to stagger on and seek to bring an improved offer back to the Commons for a further vote within weeks.

The number of protesters is increasing rapidly again.

• Police Use Water Cannon And Teargas On Paris Protesters (G.)

Gilets jaunes protesters engaged in a ninth weekend of protests all over France on Saturday as the president, Emmanuel Macron, prepared to stake his political future on an open letter to the French people and a national debate. Officials said that at least 84,000 demonstrators turned out across France, thousands more than last weekend, with about 8,000 of those in Paris where protests passed “without serious incident”. Gilets jaunes – named after the hi-vis yellow vests French motorists must carry in their vehicles – said the number was higher but did not give a figure. After the violence of previous weeks, the government put on a show of strength, deploying 80,000 police officers nationwide and about 7,000 in Paris.

[..] Macron has attempted to take the sting out of the protests by announcing a “great national debate” to sound out the public on four themes: taxation, state institutions, democracy and citizenship, but just days before the consultation is due to begin on Tuesday, there is still confusion over how it will be carried out. The president will publish an open letter to the French people on Monday to “explain what I intend to do”. He said the debate was “a vital and very useful moment for our country”. “It’s a great opportunity and everyone must take it … I want a real debate,” he said.

When are we going to stop producing the stuff that needs recycling?

• The Era Of Easy Recycling May Be Coming To An End (538)

On average, about 25 percent of the stuff we try to recycle is too contaminated to go anywhere but the landfill, according to the National Waste and Recycling Association, a trade group. Just a decade ago, the contamination rate was closer to 7 percent, according to the association. And that problem has only compounded in the last year, as China stopped importing “dirty” recyclable material that, in many cases, has found no other buyer. Americans love convenient recycling, but convenient recycling increasingly does not love us. Waste experts call the system of dumping all the recyclables into one bin “single-stream recycling.” It’s popular.

But the cost-benefit math of it has changed. The benefit — more participation and thus more material put forward for recycling — may have been overtaken by the cost — unrecyclable recyclables. On average, about 25 percent of the stuff we try to recycle is too contaminated to go anywhere but the landfill, according to the National Waste and Recycling Association, a trade group. Just a decade ago, the contamination rate was closer to 7 percent, according to the association. And that problem has only compounded in the last year, as China stopped importing “dirty” recyclable material that, in many cases, has found no other buyer.

Most recycling programs in the United States are now single stream. Between 2005 and 2014, these programs went from covering 29 percent of American communities to 80 percent, according to a survey conducted by the American Forest and Paper Association. The popularity makes sense given that single-stream is convenient and a full 66 percent of people surveyed by Harris Poll last October said that they wouldn’t recycle at all if it wasn’t easy to do. Some experts have credited single stream with large increases in the amount of material recycled. Studies have shown that people choose to put more stuff out on the curb for recycling when they have a single-sort system. And the growth of single-stream recycling tracks with the growth of recycling overall in this country. But it also pretty closely tracks with skyrocketing contamination rates.

Debt Rattle May 23 2018

May 232018

May 23, 2018 Posted by Raúl Ilargi Meijer at 8:35 am Finance Tagged with: endangered, hypersonic, informant, Irish border, Italy, Monsanto, NIRP, Roundup, tech bubble, Turkey, unemployment, unicorn 14 Responses »

Brassaï Couple on a bench, Paris 1932

• The End Is Nigh For The Biggest Tech Bubble Ever (CNBC)

• ECB’s Negative Interest Rate Policy The Funniest Monetary Joke Ever (WS)

• The Italian Crisis Is Far From Over (ZH)

• Turkish Lira Hits Record Low, Down 20% Against Dollar This Year (R.)

• American Women’s $1 Trillion Burden (MW)

• 22% Of Americans Can’t Pay Bills; 41% Have Less Than $400 In Cash (ZH)

• French Unemployment Rises To 9.2% In First Quarter (MW)

• EU Rejects May’s Plan For Northern Ireland Border (Ind.)

• Nationwide’s UK Mortgage Lending Slumps By A Third (G.)

• House Votes To Ease Bank Rules And Send Bill To Trump’s Desk (CNBC)

• How Russia and China Gained a Strategic Advantage in Hypersonic Technology

• Former Trump Adviser Makes Claim About A Second Informant (DC)

• Illegal Online Sales Of Endangered Wildlife Rife In Europe (G.)

• Landmark Lawsuit Claims Monsanto Hid Roundup Cancer Danger For Decades (G.)

Unicorns as defined by venture capitalist Aileen Lee back in 2013: Privately-held startups valued at $1 billion or more.

• The End Is Nigh For The Biggest Tech Bubble Ever (CNBC)

In case you missed it, the peak in the tech unicorn bubble already has been reached. And it’s going to be all downhill from here. Massive losses are coming in venture capital-funded start-ups that are, in some cases, as much as 50% overvalued. The age of the unicorn likely peaked a few years ago. In 2014 there were 42 new unicorns in the United States; in 2015 there were 43. The unicorn market hasn’t reached that number again. In 2017, 33 new U.S. companies achieved unicorn status from a total of 53 globally. This year there have been 11 new unicorns, according to PitchBook data as of May 15, but these numbers tend to move around, and I believe the 279 unicorns recorded globally in late February by TechCrunch was the peak, where the start-up bubble was stretched to its limit.

A recent study by the National Bureau of Economic Research concludes that, on average, unicorns are roughly 50% overvalued. The research, conducted by Will Gornall at the University of British Columbia and Ilya Strebulaev of Stanford, examined 135 unicorns. Of those 135, the researchers estimate that nearly half, or 65, should be more fairly valued at less than $1 billion. In 1999 the average life of a tech company before it went public was four years. Today it is 11 years. The new dynamic is the increased amount of private capital available to unicorns. Investors new to the VC game, including hedge funds and mutual funds, came in when the Jobs Act started to get rid of investor protections in 2012, because there were fewer IPOs occurring.

The US Treasury two-year yield is 2.57% over 10 times higher than the Italian. Go Draghi!

• ECB’s Negative Interest Rate Policy The Funniest Monetary Joke Ever (WS)

The distortions in the European bond markets are actually quite hilarious, when you think about them, and it’s hard to keep a straight face. “Italian assets were pummeled again on mounting concern over the populist coalition’s fiscal plans, with the moves rippling across European debt markets,” Bloomberg wrote this morning, also trying hard to keep a straight face. As Italian bonds took a hit, “bond yields climbed to the highest levels in almost three years, while the premium to cover a default in the nation’s debt was the stiffest since October,” it said. “Investors fret the anti-establishment parties’ proposal to issue short-term credit notes – so-called ‘mini-BOTs’ – will lead to increased borrowing in what is already one of Europe’s most indebted economies.”

This comes on top of a proposal by the new coalition last week that the ECB should forgive and forget €250 billion in Italian bonds that it had foolishly bought. The proposals by a government for a debt write-off, and the issuance of short-term credit notes as a sort of alternate currency are hallmarks of a looming default and should cause Italian yields to spike into the stratosphere, or at least into the double digits. And so Italian government bonds fell, and the yield spiked today, adding to the prior four days of spiking. But wait…Five trading days ago, the Italian two-year yield was still negative -0.12%. In other words, investors were still paying the Italian government – whose new players are contemplating a form of default – for the privilege of lending it money.

And now, the two-year yield has spiked to a positive but still minuscule 0.247% at the moment. By comparison, the US Treasury two-year yield is 2.57% over 10 times higher! [..] This is an over-indebted government that doesn’t control its own currency and cannot print itself out of trouble and whose new leadership – made up of the coalition of the Five Star Movement on the left and the League on the right – is proposing a haircut for its creditors to make the debt burden easier, and is also proposing the issuance of an alternate currency to give it more money to spend, even as it also promises to crank up government deficit spending and cut taxes too.

“As parallel currencies and debt-cancellation become serious discussion points for an Italian government, so European break-up risk is resurging.”

• The Italian Crisis Is Far From Over (ZH)

The Italian crisis is far from over and the concept of their ‘mini-BoT’ parallel currency is throwing up some very red flags about the future of the European Union… You just have to know where to look. As Bloomberg’s Tasos Vossos notes, a gauge of euro re-denomination risk (based on the so-called ‘ISDA Basis’ in Italy’s credit default swaps) blew out. What’s more, redenomination risks are spreading as the measure widened in Portugal, Spain, and in France to a lesser extent, according to CMAN data. As parallel currencies and debt-cancellation become serious discussion points for an Italian government, so European break-up risk is resurging.

Simply put, the higher this chart goes, the lower the market ‘values’ an Italian Euro relative to say a German Euro… and thus it is measuring the risk that the European Union – so long defended by Draghi et al. as indestructible – will break up. As Marcello Minenna, head of Quantitative Analysis and Financial Innovation at Consob – the Italian securities regulator, previously noted, “markets do not lie… Italy must avoid remaining with short end of the stick. I wonder if our leadership will rise to the challenge.”

Erdogan wants lower rates, but if this goes on, he’ll end up with the opposite.

• Turkish Lira Hits Record Low, Down 20% Against Dollar This Year (R.)

The Turkish lira weakened sharply against the dollar on Wednesday, bringing its losses to some 20% this year, as investors pushed it to fresh record lows on growing concern about President Tayyip Erdogan’s influence on monetary policy. At 0724 GMT, the lira stood at 4.7642 against the U.S. currency, paring its losses after touching an all-time low of 4.8450 in Asian trade overnight. It has lost as much as 21% of its value since the start of the year. The lira also fell sharply against the Japanese yen, amid talk of Japanese retail investors selling the lira as stop-loss levels were hit.

“The lira fall is now on the agenda of world markets and some are saying there is an increased risk of contagion in other emerging markets from the Turkey risk,” said GCM Securities analyst Enver Erkan. “The necessity of the Turkish central bank taking a significant step is increasing,” he said. A self-described “enemy of interest rates”, Erdogan wants borrowing costs lowered to spur credit growth and construction and said last week he would seek greater control over monetary policy after elections set for June 24.

Almost twice as much as men. And then they get paid less at the jobs they find.

• American Women’s $1 Trillion Burden (MW)

Student debt is on its way to becoming a universally American problem, but there’s more evidence to indicate that it’s a particularly acute challenge for women. The gap between the amount of debt shouldered by male and female graduates has nearly doubled in the past four years, according to a report released Monday by the American Association for University Women. On average, female bachelor’s degree recipients graduated with $2,700 more in debt in 2016 than their male counterparts. That’s up from about a $1,400 gap in 2012. If trends continue on their current trajectory, Kevin Miller, a senior researcher at AAUW and the author of the report, estimates that the outstanding student debt held by women alone could reach $1 trillion over the next year.

If the ratio of debt owed by women versus men stays the same, then men hold about $550 billion at that time. “We’ll be keeping a watch on it,” he said. The data adds to the growing body of evidence — much of which has been published by AAUW — that student debt is a women’s issue. Although they make up just 56% of American college students, women hold nearly two-thirds of America’s outstanding student debt, or about $890 billion, and take longer to pay it off. There are a variety of reasons why this is the case, according to Miller.

For one, women typically have to rely more on loans to finance college because they earn less from their work before they enter college (if they have a job before they start) and while they’re in school. And once women graduate college, the gender pay gap continues to play a role. Women working full-time with college degrees earn 26% less than their male colleagues, according to AAUW, delaying their efforts to repay their loans.

Small part of a large survey.

• 22% Of Americans Can’t Pay Bills; 41% Have Less Than $400 In Cash (ZH)

Almost nine years into an economic recovery, 41% of adults in 2017 are unable to afford an unexpected $400 expense without borrowing money or selling something, down from 44% last year. When faced with a hypothetical expense of only $400, 59% of adults in 2017 say they could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). Even without an unexpected expense, the report reveals, 22% of adults expected to forgo payment on some of their bills in the month of the survey. “One-third of those who are not able to pay all their bills say that their rent, mortgage, or utility bills will be left at least partially unpaid.” Altogether, one-third of adults are either unable to pay their bills or are one modest financial setback away from financial hardship, slightly less than in 2016 (35%).

Protests against Macron are becoming massive.

• French Unemployment Rises To 9.2% In First Quarter (MW)

French unemployment rose in the first quarter of the year, the latest indication that the surging eurozone recovery of 2017 is losing momentum in 2018. The unemployment rate in France–the eurozone’s second-largest economy–rose to 9.2% in the first quarter from 9% at the end of 2017, national statistics agency Insee said Wednesday. The deterioration in French unemployment comes as economic growth slowed abruptly in the first quarter of the year after a sharp acceleration at the end of 2017.

The soft economic data and lower business confidence are adding to uncertainty over whether the eurozone is on the cusp of a broad slowdown or just catching its breath before resuming stronger growth. The French government has said unemployment remains in a downward trend despite fluctuations from one quarter to another. In the first quarter of 2017, unemployment stood at 9.6%. France’s statistics agency said Wednesday that increases in unemployment were particularly strong at the start of 2018 and youth unemployment remained above 20%. Long-term unemployment was unchanged in the first quarter from the end of 2017.

Everybody knew this would happen. But May has nothing else.

• EU Rejects May’s Plan For Northern Ireland Border (Ind.)

Brussels has rejected Theresa May’s new customs proposal less than 24 hours after the prime minister set it out in a bid to placate Brexiteers in her cabinet. European Commission officials told The Independent Ms May’s plan would be unacceptable and would go back on previous commitments made by British negotiators. A day earlier the prime minister had said the “backstop” plan to avoid a hard border in Northern Ireland – which keeps Britain in alignment with the single market and customs union if no other agreement is reached – would be time limited. The move was an attempt to assuage Brexiteers such as Boris Johnson, who fear that it would become a backdoor way to keep Britain tied indefinitely to the EU through the customs union and single market.

The controversial fallback arrangements look increasingly likely to come into play, with no other plan for the Northern Ireland border in sight and Ms May’s cabinet deadlocked on what Britain’s future customs relationship with the EU should be. European Commission officials close to the talks told The Independent that British negotiators had already made written commitments for the backstop to apply “unless and until” another solution was found in Northern Ireland, and that there was no way it could be time limited. Facing a backlash over the plan from her pro-Brexit ministers, the prime minister sought to calm their fears, telling reporters on Monday: “If it is necessary, it will be in a very limited set of circumstances for a limited time.”

They blame it on competition.

• Nationwide’s UK Mortgage Lending Slumps By A Third (G.)

Nationwide has reported declining profits for the second year in a row, as net mortgage lending slumped by a third amid intense competition. The UK’s largest building society reported a 7.3% drop in statutory profits to £977m for the year to 4 April, down from £1.05bn the previous year. Profits include the £116m cost of buying back debt. Net mortgage lending fell from £8.8bn to £5.8bn, and Nationwide’s share of the market nearly halved, from 25.4% to 13.0%. Even so, it said it remained the UK’s second-biggest mortgage lender, behind Halifax. The Swindon-based mutual blamed fierce competition that forced it to lower mortgage rates, hurting profit margins, and said there was no sign of a let-up.

Mark Rennison, the Nationwide chief financial officer, said: “Our view is price competition will continue, which is good news for customers.” Nationwide has been hit by the end of the Bank of England’s term funding scheme, which was launched after the Brexit vote to provide cheap finance to enable banks to lend at lower interest rates. Rennison said competition had increased because the big five banks had returned to the market after ringfencing their high street banking operations from the riskier parts of their businesses.

Two words: Glass-Steagall.

• House Votes To Ease Bank Rules And Send Bill To Trump’s Desk (CNBC)

The House voted Tuesday to pass the biggest rollback of financial regulations since the global financial crisis. The margin was 258-159, with 33 Democrats supporting the legislation. The bill will now go to President Donald Trump’s desk. He is expected to sign it into law. The Senate already passed the legislation with bipartisan support. The bill makes good on Republican promises to cut red tape they say hurts businesses, but does not go nearly as far as some GOP lawmakers had hoped. It also appeases some Democrats who argue financial rules passed following the financial meltdown unnecessarily hamstrung small and mid-sized lenders.

The measure eases restrictions on all but the largest banks. It raises the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to plan for financial disaster. It eases mortgage loan data reporting requirements for the overwhelming majority of banks. It would add some safeguards for student loan borrowers and also require credit reporting companies to provide free credit monitoring services.

Republicans have argued the post-crisis regulations held down lending and economic growth. On Tuesday ahead of the vote, House Speaker Paul Ryan promoted the bill as a boon for community banks — though it boosts medium-sized and regional institutions, as well. “This is a bill for the small banks that are the financial anchors of our communities. … It addresses some of Dodd Frank’s biggest burdens to ease the regulatory costs on these small banks — costs which are ultimately transferred on to consumers,” the Wisconsin Republican said.

It makes wars useless.

• How Russia and China Gained a Strategic Advantage in Hypersonic Technology

The development of hypersonic weapons has been part of the military doctrine that China and Russia have been developing for quite some time, driven by various motivations. For one thing, it is a means of achieving strategic parity with the United States without having to match Washington’s unparallelled spending power. The amount of military hardware possessed by the United States cannot be matched by any other armed force, an obvious result of decades of military expenditure estimated to be in the range of five to 15 times that of its nearest competitors. For these reasons, the US Navy is able to deploy ten carrier groups, hundreds of aircraft, and engage in thousands of weapon-development programs.

Over a number of decades, the US war machine has seen its direct adversaries literally vanish, firstly following the Second World War, and then following the collapse of the Soviet Union. This led in the 1990s to shift in focus from one opposing peer competitors to one dealing with smaller and less sophisticated opponents (Yugoslavia, Syria, Iraq, Afghanistan, international terrorism). Accordingly, less funds were devoted to research in cutting-edge technology for new weapons systems in light of these changed circumstances. This strategic decision obliged the US military-industrial complex to slow down advanced research and to concentrate more on large-scale sales of new versions of aircraft, tanks, submarines and ships.

With exorbitant costs and projects lasting up to two decades, this led to systems that were already outdated by the time they rolled off the production lines. All these problems had little visibility until 2014, when the concept of great-power competition returned with a vengeance, and with it the need for the US to compare its level of firepower with that of its peer competitors. Forced by circumstances to pursue a different path, China and Russia begun a rationalization of their armed forces from the end of the 1990s, focusing on those areas that would best allow them the ability to defend against the United States’ overwhelming military power.

[..] After sealing the skies and achieving a robust nuclear-strategic parity with the United States, Moscow and Beijing begun to focus their attention on the US anti-ballistic-missile (ABM) systems placed along their borders, which also consist of the AEGIS system operated by US naval ships. As Putin warned, this posed an existential threat that compromised Russia and China’s second-strike capability in response to any American nuclear first strike, thereby disrupting the strategic balance inherent in the doctrine of mutually assured destruction (MAD).

This story will be getting bigger fast.

• Former Trump Adviser Makes Claim About A Second Informant (DC)

Former Trump campaign adviser Michael Caputo had much to tell on Monday night when he claimed on Fox News he was approached by a second government informant during his stint on President Donald Trump’s team. “Let me tell you something that I know for a fact,” Caputo said on “The Ingraham Angle” with host Laura Ingraham. “This informant, this person [who] they tried to plant into the campaign … he’s not the only person who came at the campaign. And the FBI is not the only Obama agency who came at the campaign.” “I know because they came at me. And I’m looking for clearance from my attorney to reveal this to the public. This is just the beginning.”

Stefan Halper, a Cambridge professor, has been identified as one FBI informant who approached campaign advisers Carter Page, George Papadopoulos and Sam Clovis. Halper, a veteran of three Republican administrations, approached Page in July 2016 and maintained a relationship through September 2017. Halper approached Papadopoulos on Sept. 2, 2016, with an offer to fly him to London and pay $3,000 for a policy paper on energy issues. Papadopoulos accepted the offer and met Halper several times in London. Halper asked Papadopoulos whether he knew about Russian hacks of Democrats’ emails.

Caputo did not say why he believes he was contacted by a second government informant; he declined to offer additional details, saying he needed clearance from his attorney. He did say the encounter occurred prior to Halper’s outreach to Page. “When we finally find out the truth about this, Director Clapper and the rest of them will be wearing some orange suits,” Caputo said on, referring to former Director of National Intelligence James Clapper.

The horror. The horror.

• Illegal Online Sales Of Endangered Wildlife Rife In Europe (G.)

The online sale of endangered and threatened wildlife is rife across Europe, a new investigation has revealed, ranging from live cheetahs, orangutans and bears to ivory, polar bear skins and many live reptiles and birds. Researchers from the International Fund for Animal Welfare (Ifaw) spent six weeks tracking adverts on 100 online marketplaces in four countries, the UK, Germany, France and Russia. They found more than 5,000 adverts offering to sell almost 12,000 items, worth $4m (£3m) in total. All the specimens were species in which trade is restricted or banned by the global Convention on the International Trade in Endangered Species.

Wildlife groups have worked with online marketplaces including eBay, Gumtree and Preloved to cut the trade and the results of the survey are an improvement compared to a previous Ifaw report in 2014. In March, 21 technology giants including Google, eBay, Etsy, Facebook and Instagram became part of the Global Coalition to End Wildlife Trafficking Online, and committed to bring the online illegal trade in threatened species down by 80% by 2020. “It is great to see we are making really significant inroads into disrupting and dismantling the trade,” said Tania McCrea-Steele at Ifaw. “But the scale of the trade is still enormous.”

Almost 20% of the adverts were for ivory and while the number had dropped significantly in the UK and France, a surge was seen in Germany, where traders developed new code words to mask their sales. “It is a war of attrition and we can never let our guard down,” said McCrea-Steele. The UK is implementing a stricter ban on ivory sales and the EU is under pressure from African nations to follow suit.

Internal Monsanto communications indicate they knew all along.

• Landmark Lawsuit Claims Monsanto Hid Roundup Cancer Danger For Decades (G.)

At the age of 46, DeWayne Johnson is not ready to die. But with cancer spread through most of his body, doctors say he probably has just months to live. Now Johnson, a husband and father of three in California, hopes to survive long enough to make Monsanto take the blame for his fate. On 18 June, Johnson will become the first person to take the globa; seed and chemical company to trial on allegations that it has spent decades hiding the cancer-causing dangers of its popular Roundup herbicide products – and his case has just received a major boost.

Last week Judge Curtis Karnow issued an order clearing the way for jurors to consider not just scientific evidence related to what caused Johnson’s cancer, but allegations that Monsanto suppressed evidence of the risks of its weed killing products. Karnow ruled that the trial will proceed and a jury would be allowed to consider possible punitive damages. “The internal correspondence noted by Johnson could support a jury finding that Monsanto has long been aware of the risk that its glyphosate-based herbicides are carcinogenic … but has continuously sought to influence the scientific literature to prevent its internal concerns from reaching the public sphere and to bolster its defenses in products liability actions,” Karnow wrote.

“Thus there are triable issues of material fact.” Johnson’s case, filed in San Francisco county superior court in California, is at the forefront of a legal fight against Monsanto. Some 4,000 plaintiffs have sued Monsanto alleging exposure to Roundup caused them, or their loved ones, to develop non-Hodgkin lymphoma (NHL). Another case is scheduled for trial in October, in Monsanto’s home town of St Louis, Missouri.

Debt Rattle February 8 2016

Feb 082016

February 8, 2016 Posted by Raúl Ilargi Meijer at 9:41 am Finance Tagged with: Australia, Deutsche, Dotcom2.0, EM, oil, selloff, shorts, tech bubble, VW 3 Responses »

DPC City Hall subway station, New York 1904

• Deutsche Bank Is Shaking To Its Foundations (SI)

• Why A Selloff In European Banks Is So Ominous (MW)

• Lending To Emerging Markets Comes To A Halt (FT)

• What the Heck is Going On in the Stock Market? (WS)

• Dot Com 2.0 – The Sequel Unfolds (St.Cyr)

• CEOs, Venture Backers Lose Big As Linkedin, Tableau Shares Tumble (Reuters)

• Record Numbers Of Longs And Shorts Are Piling Into Oil (BBG)

• Prolonged Slump Sparks 2nd Wave Of Cuts To 2016 Oil Company Budgets (Reuters)

• World’s Largest Energy Trader Sees a Decade of Low Oil Prices (BBG)

• 150 North Sea Oil Rigs Could Be Scrapped In 10 Years (Scotsman)

• Iran Wants Euro Payment For New And Outstanding Oil Sales (Reuters)

• Fining Bankers, Not Shareholders, for Banks’ Misconduct (Morgenson)

• Volkswagen’s Emissions Lies Are Coming Back To Haunt It (BBG)

• Moody’s Cuts Rating On Western Australia Iron Ore (WSJ)

• British Expat Workers Flood Home As Australia Mining Boom Turns To Dust (Tel.)

• Ukraine: A USA-Installed Nazi-Infested Failed State (Lendman)

• Through The Past, Darkly, For Europe’s Central Bankers (Münchau)

• German, French Central Bankers Call For Eurozone Finance Ministry (Reuters)

Arguably world’s biggest bank. “Deutsche Bank is now trading at less than 50% of the share price it was trading at in July last year. And no, the market isn’t wrong about this one. ..” The market will be going after Deutsche. Which is too vulnerable to save.

• Deutsche Bank Is Shaking To Its Foundations (SI)

The earnings season has started, and several major banks in the Eurozone have already reported on how they performed in the fourth quarter of 2015, and the entire financial year. Most results were quite boring, but unfortunately Deutsche Bank once again had some bad news. Just one week before it wanted to release its financial results, it already issued a profit warning to the markets, and the company’s market capitalization has lost in excess of 5B EUR since the profit warning, on top of seeing an additional 18B EUR evaporate since last summer. Deutsche Bank is now trading at less than 50% of the share price it was trading at in July last year. And no, the market isn’t wrong about this one.

The shit is now really hitting the fan at Deutsche Bank after having to confess another multi-billion euro loss in 2015 on the back of some hefty litigation charges (which are expected to persist in the future). And to add to all the gloom and doom, even Deutsche Bank’s CEO said he didn’t really want to be there . Talk about being pessimistic! Right after Germany’s largest bank (and one of the banks that are deemed too big to fail in the Eurozone system) surprised the market with these huge write-downs and high losses, the CDS spread started to increase quite sharply. Back in July of last year, when Deutsche Bank’s share price reached quite a high level, the cost to insure yourself reached a level of approximately 100, but the CDS spread started to increase sharply since the beginning of this year.

It reached a level of approximately 200 in just the past three weeks, indicating the market is becoming increasingly nervous about Deutsche’s chances to weather the current storm. Let’s now take a step back and explain why the problems at Deutsche Bank could have a huge negative impact on the world economy. Deutsche has a huge exposure to the derivatives market, and it’s impossible, and then we mean LITERALLY impossible for any government to bail out Deutsche Bank should things go terribly wrong. Keep in mind the exposure of Deutsche Bank to its derivatives portfolio is a stunning 55T EUR, which is almost 20 times (yes, twenty times) the GDP of Germany and roughly 5 times the GDP of the entire Eurozone! And to put things in perspective, the TOTAL government debt of the US government is less than 1/3rd of Deutsche Bank’s exposure.

Because it will pop the European finance bubble.

• Why A Selloff In European Banks Is So Ominous (MW)

European banks have been caught in a perfect storm of market turmoil, lately. Lackluster profits and negative interest rates, have prompted investors to dump shares in the sector that was touted as one of the best investment ideas just a few months ago. The region’s banking gauge, the Stoxx Europe 600, has logged six straight weeks of declines, its longest weekly losing stretch since 2008, when banks booked 10 weeks of losses, beginning in May, according to FactSet data. “The current environment for European banks is very, very bad. Over a full business cycle, I think it’s very questionable whether banks on average are able to cover their cost of equity. And as a result that makes it an unattractive investment for long-term investors,” warned Peter Garnry at Saxo Bank. The doom-and-gloom outlook for banks comes as the stock market has had an ominous start to the year.

East or west, investors ran for the exit in a market marred by panic over tumbling oil prices and signs of sluggishness in China. But for Europe’s banking sector, the new year has started even worse, sending the bank index down 20% year-to-date, compared with 11% for the broader Stoxx Europe 600 index. So what happened? At the end of last year, banks were singled out as one of the most popular sectors for 2016 because of expected benefits from higher bond yields, rising inflation expectations and improved economic growth. That outlook, however, was before the one-two punch of plunging oil and a slowdown in China sapped investor confidence world-wide. Garnry said the slump in bank shares is “a little bit odd” given the recent growth in the European economy and aggressive easing from the ECB.

Normally, banks benefit from measures such as quantitative easing, but it’s just not doing the trick in Europe. “And its worrisome, because banks are much more important for the credit mechanism in the economy here in Europe than it is in the U.S. There, you have a capital market where it’s easier to issue corporate bonds and get funding outside the commercial banking system. We don’t have that to the same extent in Europe, and therefore [the current weakness] is a little bit scary,” he said. Some of the sector’s collective underperformance comes down to exceptionally bad performances for a number of the bigger banks. Deutsche Bank, for example, has tumbled 32% year to date, amid a painful restructuring. And Credit Suisse is down 31% for the year as it posted a massive fourth-quarter loss.

Has long since reversed.

• Lending To Emerging Markets Comes To A Halt (FT)

The surge in lending to emerging markets that helped fuel their own — and much of the world’s — growth over the past 15 years has come to a halt, and may now give way to a “vicious circle” of deleveraging, financial market turmoil and a global economic downturn, the Bank for International Settlements has warned. “In the risk-on phase [of the global economic cycle], lending sets off a virtuous circle in financial conditions in which things can look better than they really are,” said Hyun Song Shin, head of research at the BIS, known as the central bank of central banks. “But flows can quickly go into reverse and then it becomes a vicious circle, especially if there is leverage,” he told the FT. That reversal has already taken place, according to BIS data released on Friday.

The total stock of dollar-denominated credit in bonds and bank loans to emerging markets — including that to governments, companies and households but excluding that to banks — was $3.33tn at the end of September 2015, down from $3.36tn at the end of June. It marks the first decline in such lending since the first quarter of 2009, during the global financial crisis, according to the BIS. The BIS data add to a growing pile of evidence pointing to tightening credit conditions in emerging markets and a sharp reversal of international capital flows. On Thursday, The IMF’s Christine Lagarde warned of the threat to global growth of an impending crisis in emerging markets. The Institute of International Finance, an industry body, said last month that emerging markets had seen net capital outflows of an estimated $735bn during 2015, the first year of net outflows since 1988.

In November, the IIF warned of an approaching credit crunch in EMs as bank lending conditions deteriorated sharply. This month, it said a contraction over the past year in the liquidity made available to the world’s financial system by central banks, primarily those in developed markets, now presented more of a threat to global growth than the slowdown in China and falling oil prices. Jaime Caruana, general manager of the BIS, said that recent turmoil on equity markets, disappointing economic growth, large movements in exchange rates and falling commodity prices were not unconnected, exogenous shocks but indicative of maturing financial cycles, particularly in emerging economies, and of shifts in global financial conditions. He noted that, while some advanced economies had reduced leverage after the crisis, debt had continued to build up in many emerging economies.

“Recent events are manifestations of maturing financial cycles in some emerging economies,” he said. The problem was aggravated, Mr Shin added, by the deteriorating quality of the assets financed by the lending boom. He noted that the indebtedness of companies in emerging markets as a%age of GDP had overtaken that of those in developed markets in 2013, just as the profitability of EM companies had fallen below that of DM ones for the first time. Since then, leverage in emerging economies had increased further as profitability had decreased, with exchange rates playing an important role. “Stronger EM currencies fed into more debt and more risk taking. Now that the dollar is strengthening, we have turned into a deleveraging cycle in EMs. So there is a sudden surge in measurable risk; all the weaknesses are suddenly being uncovered.”

Wolf has another nice list of plunging stocks. Tech bubble.

• What the Heck is Going On in the Stock Market? (WS)

Even Moody’s which is always late to the party with its warnings – but when it does warn, it’s a good idea to pay attention – finally warned: “Don’t fall into the trap of believing all is well outside of oil & gas.” What happened on Friday was the culmination of another dreary week in the stock markets, with the Dow down 1.3% for the day and 1.6% for the week, the S&P 500 down 1.8% and 3.1% respectively, and the Nasdaq down 3.2% and 5.4%. The S&P 500 is now nearly 12% off its record close in May, 2015; the Nasdaq nearly 17%. So on the surface, given that the Nasdaq likes to plunge over 70% before crying uncle, not much has happened yet. But beneath the surface, there have been some spectacular fireworks.

Not too long ago, during the bull market many folks still fondly remember and some think is still with us, a company could announce an earnings or revenue debacle but throw in a big share-buyback announcement, and its shares might not drop that much as dip buyers would jump in along with the company that was buying back its own shares, and they’d pump up the price again. Those were the good times, the times of “consensual hallucination,” as we’ve come to call it, because all players tried so hard to be deluded. It was the big strategy that worked. But not anymore. And that’s the sea change. Reality is returning, often suddenly, and in the most painful manner.

“Don’t wait too long on that “right price.” For if the current value of Alibaba™ is any indication – “right” is becoming more inline with “any” much faster than anyone dared think just a year prior..”

• Dot Com 2.0 – The Sequel Unfolds (St.Cyr)

Once high flyers such as the aforementioned Twitter and others are crashing to Earth like the proverbial canary. Companies like Square™, Box™, GoPro™, Pandora™, and now far too many others have watched their stock prices hammered ever lower. Yes, hammered, as in representing one selling round after another with almost no respite. Some have lost 90% of their once lofty high share prices. What’s further disheartening to those still clinging (or praying) to the “meme-dream” is the ever-increasing reputation of the old “Great companies on sale!” chortles from many a next in rotation fund manager on TV, radio, or print. For it seems every round of selling is being met with ever more selling – no buying. And the lower they go with an ever intensifying pressure, so too does the value of the debutantes in waiting: The yet to be IPO’d unicorns.

Valuation after unicorn valuation are getting marked down in one fell swoops such as that from Fidelity™ and others. However, there probably wasn’t a better representation on how little was left to the unicorn myth (and yes I believed/believe all these valuation metrics were myth and fairy-tales) than the very public meme shattering experienced in both the IPO, as well as the subsequent price action of Square. Here it was touted the IPO price was less than the unicorn implied valuation. This was supposedly done as to show “value” for those coming in to be next in line to pin their tails on the newest unicorn of riches. The problem? It sold, and sold, and is still selling – and not in a good way. It seems much like the other company Mr. Dorsey is CEO of (and how anyone with any business acumen argued that was a good idea is still beyond me. But I digress.) this unicorn also can’t fly. And; is in a perilous downward spiral of meeting the ground of reality.

It seems the only interest in buying these once high flyers can garner is wrapped up into any rumor (usually via a Tweet!) that they are to be sold – as in acquired by someone else who might be able to make money with them. Well, at least that would free up the ole CEO dilemma, no? And speaking of CEO dilemma and acquiring – how’s Yahoo!™ doing? Remember when the strategy for success for Yahoo as posited by the very public adoration styled magazine cover girl articles of its current CEO Marisa Mayer was an acquisition spree? This was all but unquestionable (and much digital ink spilled) in its brilliance and vision inspired forward thinking. Well, it seems all that “brilliance” has been eviscerated much like how the workforce still employed there is yet to be.

Let me be blunt: All you needed to know things were amiss both at Yahoo as well as “the Valley” itself was to look at the most recent decision of Ms. Mayer to throw a lavish multi-million dollar costumed theme party mere months ago. As unquestionably foolish as this was – the rationale given by many a Silicon Valley aficionado that it was nothing, after all, “it’s common in the Valley” was ever the more stupefying! Now it seems Yahoo is “cutting its workforce by double-digit%ages.” And: open to the possibility of selling off core assets of its business. Of course – at the right price. However, I’d just offer this advice: Don’t wait too long on that “right price.” For if the current value of Alibaba™ is any indication – “right” is becoming more inline with “any” much faster than anyone dared think just a year prior.

DotCom 2.0 revisited.

• CEOs, Venture Backers Lose Big As Linkedin, Tableau Shares Tumble (Reuters)

LinkedIn Executive Chairman Reid Hoffman lost almost half his $2.8 billion fortune on paper Friday as shares of his social media company suffered their largest drop on record. He was not alone in taking heavy losses. Other executives at LinkedIn, some at business analytics company Tableau Software, and a number of the companies’ venture capital backers also took losses running into tens of millions of dollars as both stocks tumbled on dismal financial outlooks. It was a humbling moment highlighting the personal exposure many technology leaders and venture capitalists face as Wall Street reassesses their value at an uncertain time for the sector. Silicon Valley-based LinkedIn’s shares closed down 43.6% at $108.38 on Friday, after hitting a three-year low, following a sales forecast well short of analysts’ expectations. Shares of Seattle-based Tableau Software, a business analytics tools company, fell 49.4% to $41.33 after cutting its full-year profit outlook.

As a result, LinkedIn’s Hoffman lost $1.2 billion from his value on paper on Friday, slashing his stake to $1.6 billion, based on his holdings detailed in a filing with securities regulators from March, which the company said was the most up-to-date. LinkedIn’s Chief Executive Jeff Weiner saw the value of his stake fall by $70.9 million to $91.5 million. At Tableau, the value of CEO Christian Chabot’s stake was slashed nearly in half to $268 million, based on his holdings in a filing with securities regulators in March. Besides Hoffman and Weiner, several venture capitalists who sit on LinkedIn’s board and own stakes in the company suffered substantial losses. Michael Moritz, the chairman of Sequoia Capital who owns more shares than any individual investor besides Hoffman and Weiner, lost $56 million as his stake’s value shrank to $72.8 million. David Sze at Greylock Partners saw the value of his stake slide to $5 million after losing $3.9 million on Friday.

“Any commodity market where inventories are at the highest level in more than 85 years is going to be bearish.”

• Record Numbers Of Longs And Shorts Are Piling Into Oil (BBG)

Money managers may not agree where oil prices are headed, but they are increasingly eager to place their bets. Total wagers on the price of crude climbed to the highest since the U.S. Commodity Futures Trading Commission began tracking the data in 2006. Speculators’ combined short and long positions in West Texas Intermediate crude, the U.S. benchmark, rose to 497,280 futures and options contracts in the week ended Feb. 2. WTI moved more than 1% each day in the past three weeks. U.S. crude stockpiles climbed to the highest level in more than 85 years and Venezuela called for cooperation between OPEC and other oil-exporting countries to stem the drop in prices. The slump has slashed earnings from Royal Dutch Shell to Chevron, while Exxon Mobil reduced its drilling budget to a 10-year low.

“This is a reflection of a lot of conviction on both sides,” said John Kilduff at Again Capital, a hedge fund that focuses on energy. “We’re seeing a battle royal between those who think a bottom has been put in and those who think we have lower to go.” WTI slumped 5% to $29.88 a barrel in the report week on the New York Mercantile Exchange. The March contract added 10 cents, or 0.3%, to $30.99 at 12:18 p.m. Singapore time on Monday. [..] “There’s a difference of opinion about the direction of the market,” said Tim Evans at Citi Futures Perspective in New York. “It looks like some of the high price levels offered an opening for shorts to get back into the market. The shorts were the winners on a net basis.”

In other markets, net bearish wagers on U.S. ultra low sulfur diesel increased 11% to 23,765 contracts. Diesel futures advanced 4.5% in the period. Net bullish bets on Nymex gasoline slipped 18% to 14,328 contracts as futures dropped 4.4%. The risks are weighted to the downside because of the global glut, Citi’s Evans said. U.S. crude stockpiles climbed 7.79 million barrels to 502.7 million in the week ended Jan. 29, the highest since 1930, according to Energy Information Administration. Gasoline supplies climbed 5.94 million barrels to 254.4 million, the highest in weekly records going back to 1990. “The rise in U.S. inventories is confirmation of a larger physical supply surplus,” Evans said. “Any commodity market where inventories are at the highest level in more than 85 years is going to be bearish.”

Time for the big margin calls?!

• Prolonged Slump Sparks 2nd Wave Of Cuts To 2016 Oil Company Budgets (Reuters)

Less than two months into the year, the top U.S. shale oil companies have already cut their budget for 2016 a second time as the relentless drop in oil prices continues to erode their cash flow. With oil prices firmly wedged in the low $30-per-barrel range, oil producers are deferring spending on new wells and projects. “Companies’ language has shifted towards preserving balance sheets and cash, and keeping expenditure within cash-flows, which means that budgets are going to fall further,” said Topeka Capital Markets analyst Gabriele Sorbara. 18 of the top 30 U.S. oil companies by output have so far outlined their spending plans for 2016. They have reduced their budget by 40% on average, steeper than most analysts’ expectations, according to a Reuters analysis. These 30 companies had, on average, lowered their spending plans for 2016 by more than 70% last year.

Some such as Hess Corp and ConocoPhillips, who had already planned to spend less this year than in 2015, have now further cut their capital expenditure targets. Others are expected to follow suit. But, is there room for further cuts? While reduced prices for oilfield services and increased efficiencies have helped companies scale back spending, many industry experts say there may not be room for further cuts. “It’s almost like a 80/20 rule – 80% of the cost reduction has already occurred, another 20% remains,” said Rob Thummel at Tortoise Capital Advisors. Although the reduced spending has not yet impacted shale output, production is expected to start falling by the end of the year. “The capital cuts that the industry is making should result in … a supply shock to the downside,” ConocoPhillips’ chief executive, Ryan Lance, said on Thursday.

Looking 10 years ahead? Sure.

• World’s Largest Energy Trader Sees a Decade of Low Oil Prices (BBG)

Oil prices will stay low for as long as 10 years as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to the world’s largest independent oil-trading house. “It’s hard to see a dramatic price increase,” Vitol CEO Ian Taylor told Bloomberg in an interview, saying prices were likely to bounce around a band with a mid-point of $50 a barrel for the next decade. “We really do imagine a band, and that band would probably naturally see a $40 to $60 type of band,” he said. “I can see that band lasting for five to ten years. I think it’s fundamentally different.” The lower boundary would imply little price recovery from where Brent crude, the global price benchmark, trades at about $35 a barrel.

The upper limit would put prices back to the level of July 2015, when the oil industry was already taking measures to weather the crisis. The forecast, made as the oil trading community’s annual IP Week gathering starts in London on Monday, would mean oil-rich countries and the energy industry would face the longest stretch of low prices since the the 1986-1999 period, when crude mostly traded between $10 and $20 a barrel. Vitol trades more than five million barrels a day of crude and refined products – enough to cover the needs of Germany, France and Spain together – and its views are closely followed in the oil industry.

Taylor, a 59-year-old trader-cum-executive who started his career at Royal Dutch Shell in the late 1970s, said he was unsure whether prices have already bottomed out, as supply continued to out-pace demand, leading to ever higher global stockpiles. However, he said that prices were likely to recover somewhat in the second half of the year, toward $45 to $50 a barrel. For the foreseeable future, Taylor doubts the oil market would ever see the triple-digit prices that fattened the sovereign wealth funds of Middle East countries and propelled the valuations of companies such as Exxon Mobil and BP. “You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever,” he said.

How many will be capped in for good?

• 150 North Sea Oil Rigs Could Be Scrapped In 10 Years (Scotsman)

Almost 150 oil rigs in UK waters could be scrapped within the next 10 years, according to industry analysts Douglas Westwood, which carries out market research and consultancy work for the energy industry worldwide, said it anticipated that “146 platforms will be removed from the UK during 2019-2026”. The North Sea has been hit hard by plummeting oil prices, with the industry body Oil and Gas UK estimating 65,000 jobs have been lost in the sector since 2014. But Douglas Westwood said that decommissioning could provide an opportunity for the specialist firms involved in the work. Later this month it will publish its decommissioning market forecast for the North Sea – covering Denmark, Germany, Norway and the UK – over the period 2016 to 2040.

Ahead of that a paper on its website predicted that the “UK will dominate decommissioning expenditure”. This is down to the “high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields”. Douglas Westwood said: “The oil price collapse has been bad news for nearly every company involved in the industry, but one group that could actually benefit from it are specialist decommissioning companies. “For these companies there is an opportunity to be part of removing the huge tonnage of infrastructure that exists in the North Sea. With oil prices forecast to remain low, life extension work that has kept many North Sea platforms producing long past their design life no longer makes commercial sense.”

Some people will try and make a big deal out of this.

• Iran Wants Euro Payment For New And Outstanding Oil Sales (Reuters)

Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month’s sanctions relief. A source at state-owned National Iranian Oil told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco, the trading arm of Russia’s Lukoil. “In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery,” the NIOC source said. Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars.

Iran was allowed to recover some of the funds frozen under U.S.-led sanctions in currencies other than dollars, such as the Omani rial and UAE dhiram. Switching oil sales to euros makes sense as Europe is now one of Iran’s biggest trading partners. “Many European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros,” said Robin Mills, CEO of Dubai-based Qamar Energy. Iran has pushed for years to have the euro replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to switch away from the dollar, which its then President Mahmoud Ahmadinejad called a “worthless piece of paper”.

What are the odds? If not done retroactively, how would it work out?

• Fining Bankers, Not Shareholders, for Banks’ Misconduct (Morgenson)

Ho-hum, another week, another multimillion-dollar settlement between regulators and a behemoth bank acting badly. The most recent version involves two such financial institutions, Barclays and Credit Suisse. They agreed last Sunday to pay $154.3 million after regulators contended that their stock trading platforms, advertised as places where investors would not be preyed on by high-frequency traders, were actually precisely the opposite. On both banks’ systems, investors trying to execute their transactions fairly were harmed. As has become all too common in these cases, not one individual was identified as being responsible for the activities. Once again, shareholders are shouldering the costs of unethical behavior they had nothing to do with.

It could not be clearer: Years of tighter rules from legislators and bank regulators have done nothing to fix the toxic, me-first cultures that afflict big financial firms. Regulators are at last awakening to this reality. On Jan. 5, for example, the Financial Industry Regulatory Authority, a top Wall Street cop, announced its regulatory priorities for 2016. Among the main issues in its sights, the regulator said, was the culture at these companies. “Nearly a decade after the financial crisis, some firms continue to experience systemic breakdowns manifested through significant violations due to poor cultures of compliance,” said Richard Ketchum, Finra’s chairman.

“Firms with a strong ethical culture and senior leaders who set the right tone, lead by example and impose consequences on anyone who violates the firm’s cultural norms are essential to restoring investor confidence and trust in the securities industry.” But changing behavior — as opposed, say, to imposing higher capital requirements — is a complex task. And regulators must do more than talk about what banks have to do to address their deficiencies. Andreas Dombret is a member of the executive board of the Deutsche Bundesbank, Germany’s central bank, and head of its department of banking and financial supervision. In an interview late last year, he said he was determined to tackle the problem of ethically challenged bankers.

“If behavior doesn’t change, banks will not be trusted and they won’t be efficient in their financing of the real economy,” he said. “A functioning banking system must be based on trust.” Mr. Dombret is a regulator who knows banking from the inside, having held executive positions at J.P. Morgan and Bank of America. Most companies have codes of ethics, Mr. Dombret said, but they often exist only on paper. Regulators could help encourage a more ethical approach by routinely monitoring how a bank cooperates with its overseers, Mr. Dombret said. “How often is the bank the whistle-blower?” he asked. “Not only to get a lesser penalty but also to show that it won’t accept that kind of behavior. We are seeing more of that.”

What VW didn’t get: the key player is the California Air Resources Board. You don’t want to piss them off. “Use of defeat devices is a civil violation” of the Clean Air Act, Uhlmann said. “Lying about CAA compliance is a criminal violation.”

• Volkswagen’s Emissions Lies Are Coming Back To Haunt It (BBG)

No one has died from the emissions-cheating software Volkswagen has admitted it installed in some of its cars, yet the U.S. Justice Department may treat it more harshly than two automakers whose vehicles have killed people. General Motors vehicles were fitted with faulty ignition switches linked to at least 124 deaths. Toyota cars were involved in unintended acceleration responsible for at least four deaths. Neither had to plead guilty in settling criminal allegations, but Volkswagen may be forced to if it’s charged with criminal conduct and also wants to settle, according to attorneys who specialize in environmental law. The German automaker lied to the Environmental Protection Agency and California regulators for almost a year before admitting it created a device to fool emissions tests, Mary D. Nichols, chair of the California Air Resources Board, said in September.

Now the company faces a Justice Department that’s become more willing to push businesses across industries into guilty pleas tied to multibillion-dollar penalties. The U.S. attorney general also made it a priority last year to pursue criminal convictions against corporate executives. “We’ve had difficulty in controlling the automobile industry,” said Daniel Riesel at Sive, Paget & Riesel, a law firm that isn’t involved in the case. “Clearly the government regards this as a very serious environmental dereliction and is making a big deal of it.” [..] The U.S. civil complaint against Volkswagen alleges four violations of the Clean Air Act and cites potential civil fines that could be in the billions of dollars, according to Justice Department officials. If the BP case is a guide, criminal penalties could be less costly.

A criminal claim probably would be based on allegations that Volkswagen lied to government officials, said David Uhlmann, a law professor at the University of Michigan in Ann Arbor and former head of the environmental-crimes section of the Justice Department’s Environment and Natural Resources Division. When confronted about excess emissions by EPA and California regulators in meetings over several months, Volkswagen engineers cited technical issues rather than admitting the engines contained the defeat devices, according to the Justice Department. The company also initially denied in November that it installed software in larger engines to alter emissions, the department said. “Use of defeat devices is a civil violation” of the Clean Air Act, Uhlmann said. “Lying about CAA compliance is a criminal violation.”

Just getting started.

• Moody’s Cuts Rating On Western Australia Iron Ore (WSJ)

Moody’s Investors Service cut its rating on Western Australia, one of the world’s major iron-ore hubs, as a sharp downturn in prices for the steelmaking commodity puts increasing strain on the state’s finances. The ratings agency said on Monday it had downgraded the long-term issuer and senior unsecured debt ratings of the Western Australian Treasury, which issues debt on behalf of the state of Western Australia and state-owned corporations, to Aa2 from Aa1, citing “the ongoing deterioration in Western Australia’s financial and debt metrics and an increasing risk that the state’s debt burden will be higher than indicated.”

Ratings agencies have put many resources-focused companies and countries on watch amid a deep fall in world commodity prices. Last week, Standard & Poor’s Ratings Services said it has lowered BHP Billiton credit rating and cautioned it could cut again as early as this month. It also downgraded Glencore’s rating to just one notch above junk status. Moody’s said Western Australia’s reliance on royalty income from miners meant sharp falls in commodity prices, particularly iron-ore prices, was creating considerable pressure on its budget.

Gives ‘down under’ a new meaning. Watch Perth housing market.

• British Expat Workers Flood Home As Australia Mining Boom Turns To Dust (Tel.)

Mining has been the driving force of Australia’s economic growth for longer than anyone cares to remember – helping GDP growth average 3.6pc a year for most of this century – but the global collapse in commodity prices has led to a painful readjustment Australians have heard the warnings before – but this time, it seems, the boom is truly over. The country is repointing its economy for a new reality, and renegotiating its trading partnership with China and the wider Asia-Pacific. Australia’s mining titans – the likes of BHP Billiton and Rio Tinto, whose shares have led the FTSE 100 lower in the recent market turmoil – have a huge fight on their hands. Meanwhile the migrants who answered their call for workers are considering their options. Will the mining downturn see Britons packing their bags for home?

“There is no doubt that current operating conditions in the mining sector are tough and companies are taking steps to ensure their long-term survival,” says Dr Gavin Lind, of the Minerals Council of Australia. Slowing demand in China – the world’s largest consumer of raw materials, and the buyer of 54pc of Australia’s resources exports in 2015 – has led to dizzying price falls in coal, iron ore, zinc, nickel, copper and bauxite, all minerals mined Down Under. Instead of cutting production and shoring up the price of their product, miners are taking a counter-intuitive tack, and boosting their output. Closing down mines is an expensive business and companies would rather cling on to their market share than cede ground to their rivals. Yet “the increase in volumes is unlikely to be sufficient to offset the effect of lower commodity prices”, Mark Cully, chief economist at the Department of Industry, Innovation and Science, warned in December.

He calculates that Australia’s earnings from mining and energy exports will fall by 4pc to A$166bn (£81bn) this year as lower prices bite. Giant miners such as Rio and BHP believe their low-cost models will enable them to survive while higher-cost competitors go to the wall. However, in common with their peers in the FTSE 100, they have been punished by investors, with their shares tumbling 44pc and 52pc respectively in the last year. While Rio’s balance sheet is regarded as the stronger of the two, both are under pressure to cut their dividends. Analysts expect Rio to unveil a 37pc slump in operating profits when it reports its full-year results this week. BHP, which announces its half-year results on February 23, is facing a 56pc tumble in profits for the year.

Call a spade a spade.

• Ukraine: A USA-Installed Nazi-Infested Failed State (Lendman)

In February 2014, Washington replaced Ukrainian democracy with fascism in Europe’s heartland – illegitimately installed officials waging war on their own people. Fundamental human and civil rights were abolished. Police state viciousness replaced them. Regime critics risk prosecution, sentencing, imprisonment or assassination. Two years after fascists seized power, conditions for ordinary Ukrainians are deplorable. According to Germany’s daily broadsheet Junge Welt, they’re “staggering.” “Since the end of the Yanukovych era, the average income has decreased by 50%,” it reported – on top of 2015’s 44% inflation, nearly reducing purchasing power by half, making it impossible for most Ukrainians to get by. They’re suffering hugely, deeply impoverished, denied fundamental social services, abolished or greatly reduced en route to eliminating them altogether.

Ukraine’s economy is bankrupt, teetering on collapse, sustained by US-controlled IMF loans, violating its longstanding rules, a special dispensation for Ukraine. It loaned billions of dollars to a deadbeat borrower unable to repay them, an unprecedented act, funding its war machine, turning a blind eye to a hugely corrupt regime persecuting its own people. Ukraine’s GDP is in near free-fall, contracting by 12% last year, projected to continue declining sharply this year and beyond. The average pension was cut to €80 monthly, an impossible amount to live on, forcing pensioners to try getting by any way they can, including growing some of their own food in season. US anointed illegitimate oligarch president Petro Poroshenko is widely despised. So are other key regime officials.

They blame dismal economic conditions mainly on ongoing civil war – US-orchestrated and backed naked aggression against Donbass freedom fighters, rejecting fascist rule, wanting fundamental democratic rights, deserving universal praise and support. According to Junge Welt, regime critics call Kiev claims lame excuses. “What matters is (it’s) done little or nothing to prevent corruption and insider trading,” elite interests benefitting at the expense of everyone else, stealing the country blind, grabbing all they can. Complicit regime-connected oligarchs profit hugely in Ukraine, benefitting from grand theft, super-rich Dmitry Firtash apparently not one of them, calling Kiev “politically bankrupt.”

Days earlier, Ukrainian Economy Minister Aivaras Abromavicius resigned, followed the next day by his first deputy, Yulia Kovaliv, his remaining team, two deputy ministers and Kiev’s trade representative. Parliament speaker Volodymyr Groysman warned of Ukraine “entering a serious political crisis.” Resignations followed nothing done to address vital reforms needed. In his resignation letter, Abromavicius said corrupt officials blocked them, wanting control over state enterprises for their own self-interest, including natural gas company NAK Naftogaz. “Neither I nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for” regime officials “trying to exercise control over the flow of public funds,” he explained.

Not a bad thought experiment. But having ‘populist’ Beppe Grillo as an example shows how clueless Münchau is about reality. That sort of talk itself is populist. David Cameron in a much more valid example, for one.

• Through The Past, Darkly, For Europe’s Central Bankers (Münchau)

Re-reading John Weitz’s biography of Hjalmar Schacht, Hitler’s Banker , I noted some interesting parallels between the 1930s and now that I had not considered before. It is well known that Hitler relied on Schacht, his central banker, to help fund his rearmament plans. But Weitz also pointed out — and this is potentially relevant to the situation in the eurozone today – that Schacht was only able to pursue his unorthodox policies at the Reichsbank because he had the backing of a dictator. If an extremist leader came to power in a large eurozone country – France or Italy, say – what would happen if they were to appoint a central banker with the acumen of Schacht? And what would be the chances that such a team could succeed in increasing economic growth in the short term? Let me say straightaway that I am not comparing anyone to Hitler – or indeed to Schacht.

My point concerns what an unorthodox central banker can do if he or she has the political support to break with the prevailing orthodoxy. Schacht had two stints as president of the Reichsbank — in the 1920s, when he brought an end to the hyperinflation then crippling Germany, and again from 1933 to 1939. It is hard to identify him with a single economic outlook: in the 1920s he was in favour of the gold standard but then, in the early 1930s, he opposed the consensus that promoted the policies of austerity and deflation. Schacht argued, rightly, that Germany was unable to meet the reparation payments specified in the Young Plan, which was adopted in 1929. On returning to the Reichsbank, Schacht organised a unilateral restructuring of private debt owed by German companies to foreigners.

The German economy had already benefited from withdrawal from the gold standard in 1931, and Schacht piled stimulus upon stimulus. One reason for Hitler’s initial popularity in Germany was the speedy recovery from the depression, which was no doubt helped by a loose fiscal and monetary policy mix. The current policy orthodoxy in Brussels and Frankfurt, which is shared across northern Europe, has some parallels to the deflationary mindset that prevailed in the 1930s. Today’s politicians and central bankers are fixated with fiscal targets and debt reduction. As in the early 1930s, policy orthodoxy has pathological qualities. Whenever they run out of things to say, today’s central bankers refer to “structural reforms”, although they never say what precisely such reforms would achieve.

In principle, the eurozone’s economic problems are not hard to solve: the ECB could hand each citizen a cheque for €10,000. The inflation problem would be solved within days. Or the ECB could issue its own IOUs — which is what Schacht did. Or else the EU could issue debt and the ECB would buy it up. There are lots of ways to print money. They are all magnificent — and illegal.

“..communal solidarity..” That says it all. More Europe! Not. Going. To. Happen.

• German, French Central Bankers Call For Eurozone Finance Ministry (Reuters)

The euro zone needs to press ahead with structural reforms and closer integration, including an euro zone finance ministry, to deliver sustainable growth, the heads of the French and German central banks wrote in a German newspaper on Monday. In a guest article for the Sueddeutsche Zeitung entitled “Europe at a crossroads”, they said the European Central Bank (ECB) was not in a position to create sustainable long-term growth for the 19-country single currency bloc. The ECB has undershot its 2% inflation target for three straight years and is unlikely to return to it to for years to come given low oil prices, lackluster economic growth, weak lending and only modest wage rises in the euro zone.

“Although monetary policy has done a lot for the euro zone economy, it can’t create sustainable economic growth,” Bundesbank President Jens Weidmann and Bank of France Chief Francois Villeroy de Galhau wrote. Instead the euro zone needs a decisive program for structural reforms, an ambitious financing and investment union as well as better economic policy framework, Weidmann and Villeroy de Galhau said. The idea of such a ministry was floated in 2011 to tighten coordination of national policy after the economic crisis had forced the European Union to fund bailouts worth hundreds of billions of euros for Greece, Ireland and Portugal. “The current asymmetry between national sovereignty and communal solidarity is posing a danger for the stability of our currency union,” they wrote.

“Stronger integration appears to be the obvious way to restore trust in the euro zone, for this would favor the development of joint strategies for state finances and reforms so as to promote growth,” they said. Specifically, they called for the creation of a common finance ministry in connection with an independent fiscal council as well as the formation of a stronger political body that can take decisions.