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“I haven’t met an economist in their heart of hearts that will tell you that Greece will pay back all of that debt.”
It is unrealistic to expect Greece to repay its huge debt in full, the chief economics spokesman for the victorious Syriza party has told the BBC. “Nobody believes that the Greek debt is sustainable,” Euclid Tsakalotos said. The far-left Syriza, which won Sunday’s general election, wants to renegotiate Greece’s €240bn (£179bn; $270bn) bailout by international lenders. EU leaders have warned the new Greek government that it must live up to its commitments to the creditors. Syriza leader Alexis Tsipras – who was sworn in as prime minister on Monday – is expected to unveil his new cabinet later on Tuesday. “I haven’t met an economist in their heart of hearts that will tell you that Greece will pay back all of that debt. It can’t be done,” Mr Tsakalotos said.
He said that EU leaders needed now to show that they were willing to work with Syriza. “It’s going to be a very funny and a very dangerous Europe with very strong centrifugal political forces if they signal that after a democratic vote they’re not interested in talking to a new government. “It will be a final signal that this is a Europe that can’t incorporate democratic change and it can’t incorporate social change.” But Mr Tsakalotos stressed that it would be “my worst nightmare if the eurozone collapses because Greece falls”. “And if Greece falls and is removed from the eurozone – the eurozone will collapse. We said from the beginning the eurozone is in danger, the euro is in danger, but it isn’t in danger from Syriza… it is in danger from the very policies of austerity”.
The Bloomberg ed. staff wants to print.
Amid the populist rhetoric that propelled the far-left Syriza party to victory in Greece’s parliamentary elections, there’s one idea that Germany in particular should take to heart: revive growth in the euro area by giving the hardest-hit countries a break on their debts. Syriza leader Alexis Tsipras, who was sworn in Monday as Greece’s new prime minister, has long been calling for a “European debt conference” — a summit meeting at which the region’s leaders would reduce the debilitating obligations of Greece and other financially troubled euro-area governments. Unlike the rest of the party’s program, this idea makes sense. Greece has already been granted some debt relief, but not enough to make its fiscal position sustainable. Tsipras is calling for a writedown of about one-third.
There’s plenty of historical precedent for relief on this scale. One case in particular ought to resonate with German officials, who are among the most steadfast opponents of debt relief. After World War 2, Germany’s creditors recognized that full payment of the country’s debts would make revival harder and could destabilize the whole of Europe. In 1953, they agreed to forgive about 50% of West Germany’s debts, and made the rest contingent on economic performance. The creditor countries acknowledged at the time that the debt relief was in their own interests. Today, Germany is the most powerful creditor nation in the euro area. A prolonged financial and economic crisis – together with fiscal and regulatory mismanagement on all sides – has left Greece and others in financial distress.
Concerned that further debt relief would encourage profligacy, Germany opposes writedowns and insists on severe fiscal austerity. The results have been disastrous. In Greece, one in four workers is unemployed and – by one estimate – almost half the population is now in poverty. This enforced hardship isn’t improving the countries’ ability to pay their debts or helping the European Union’s economic prospects. Slow growth has eroded the fiscal benefits of austerity. Despite spending cuts and tax increases, Greece, Italy, Portugal, Spain and even France will be unable to get their ratios of debt to gross domestic product down to the euro area’s permitted maximum of 60% in the foreseeable future.
“.. ironically, the real virtue of capitalism is its creative instability—and that necessarily involves waste rather than efficiency.”
About 40 years ago, one of Maggie Thatcher’s chief advisors remarked that he wouldn’t be satisfied when the Conservative Party was in government: he would only be happy when there were two conservative parties vying for office. He got his wish of course. The UK Labour Party of the 1950s that espoused socialism gave way to Tony Blair’s New Labour, and the same shift occurred worldwide, as justified disillusionment about socialism as it was actually practiced—as opposed to the fantasies about socialism dreamed up by 19th century revolutionaries—set in. Parties to the left of the political centre—the Democrats in the USA, Labour in the UK, even the Socialist Party that currently governs France—followed essentially the same economic theories and policies as their conservative rivals.
Differences in economic policy, which were once sharp Left-anti-market/Right-pro-market divides, became shades of grey on the pro-market side.Both sides of politics accepted the empirical fact that market systems worked better than state-run systems. The differences came down to assertions over who was better at conducting a pro-market economic agenda, plus disputes over the extent of the government’s role in the cases where a market failure could be identified. So how do we interpret the success of Syriza in the Greek elections on Sunday, when this avowedly anti-austerity, left-wing party toppled the left-Neoliberal Pasok and right-Neoliberal New Democracy parties that, between them, had ruled Greece for the previous 4 decades? Is it a return to the pro-market/anti-market divides of the 1950s? No—or rather, it doesn’t have to be.
It can instead be a realisation that, though an actual market economy is indeed superior to an actual centrally planned one, the model of the market that both sides of politics accepted was wrong. That model—known as Neoliberalism in political circles, and Neoclassical Economics in the economic ones in which I move—exalts capitalism for a range of characteristics it doesn’t actually have, while ignoring characteristics that it does have which are the real sources of both capitalism’s vitality and its problems. Capitalism’s paramount virtues, as espoused by the Neoliberal model of capitalism, are stability and efficiency. But ironically, the real virtue of capitalism is its creative instability—and that necessarily involves waste rather than efficiency. This creative instability is the real reason it defeated socialism, while simultaneously one of the key reasons socialism failed was because of its emphasis upon stability and efficiency.
“.. Greek democracy resolved to rage against the dying of the light..”
Yanis Varoufakis, 53, is known for his running commentary on the financial crisis in a series of blogposts that have won him thousands of Twitter followers and the respect of Syriza’s leadership. John Maynard Keynes with a hint of Karl Marx is how one analyst described the self-proclaimed “accidental economist” who is now to become Greece’s finance minister and a key negotiator with its international creditors. With a typically literary flourish, he celebrated his party’s victory by paraphrasing Welsh poet Dylan Thomas. “Greek democracy today chose to stop going gently into the night. Greek democracy resolved to rage against the dying of the light,” the Greek-Australian wrote on his blog. One of the first two ministers to be confirmed by prime minister Alexis Tsipras, Varoufakis studied at Essex University and has taught in Australia, Greece and the United States.
In pre-election interviews he vowed to destroy Greek oligarchs, end what he called the humanitarian crisis in Greece and renegotiate the country’s debt mountain. “We are going to destroy the basis upon which they have built for decade after decade a system, a network that viciously sucks the energy and the economic power from everybody else in society,” he told Britain’s Channel 4 television. But the muted market reaction to Syriza’s decisive win was at least in part because investors expect the thoughtful powerbroker to adopt a more emollient style ahead of tough negotiations. Writing before the election, Paolo Pizzoli, senior economist at ING Financial Markets in Milan, highlighted the economics professor’s “constructive attitude” after he talked about the need to “minimise conflict and maximise the chances of a mutually beneficial agreement”. “We believe that, if in power, Syriza could prove more pragmatic than many anticipated,” said Pizzoli.
“Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders, the Greek taxpayer..”
Syriza, a hard left party, that outrightly rejects EU-imposed austerity, has given Greek politics its greatest electoral shake-up in at least 40 years. You might expect the frontrunner for the role of finance minister to be a radical zealot, who could throw Greece into the fire He is not. Yanis Varoufakis, the man tipped to be at the core of whatever coalition Syriza forges, is obviously a man of the left. Yet through his career, he has drawn on some of the most passionate advocates of free markets. While consulting at computer games company Valve, Mr Varoufakis cited nobel-prize winner Friedrich Hayek and classical liberal Adam Smith, in order to bring capitalism to places it had never touched. He clocked that there was an irony to market-based economies.
We have markets for land, sheep, labour and even money itself. But inside companies themselves, exist “market-free zones”. “Firms can be seen as oases of planning and command within the vast expanse of the market,” Mr Varoufakis has written. His work at the tech company helped it in “trying to become a vestige of post-capitalist organisation within capitalism”. Yet while Greece’s future minister is a fan of markets in many contexts, it is apparent that he remains a leftist, and one committed to the euro project. Speaking to the BBC on Monday, he said that it would “take an eight or nine year old” to understand the constraints which had bound Greece up since it “tragically” went bankrupt in 2010. “Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders, the Greek taxpayer,” he said.
“What we’ve been having ever since is a kind of fiscal waterboarding that have turned this nation into a debt colony,” he added. Greece’s public debt to GDP now stands at an eye watering 175pc, largely the result of output having fallen off a cliff in the past few years. Stringent austerity measures have not helped, but instead likely contributed. Despite this, the Greek government faces a €2.3bn revenue shortfall in 2015. It will likely be Mr Varoufakis’ job to make the best of an impossible situation. The first thing he will seek to tackle is Greece’s humanitarian crisis. “It is preposterous that in 2015 we have people that had jobs, and homes, and some of them had shops until a couple of years ago, that are now sleeping rough”, he told Channel 4. The party may now go after multinationals and wealthy individuals that it believes do not pay their way.
I smell a battle.
European finance ministers started work on reviving Greece’s troubled rescue program as new Prime Minister Alexis Tsipras took office promising to end austerity. Finance chiefs from the 19-nation euro area signaled their willingness to do a deal with Tsipras – so long as the new Greek prime minister drops his demand for a debt writedown. At a meeting in Brussels on Monday, ministers agreed quickly to work with the new government to help keep Greece in the euro, Dutch Finance Minister Jeroen Dijsselbloem said. “We stand ready to support them in that ambition,” said Dijsselbloem, who led the meeting. Officials in Brussels and Athens, as well as Berlin, Frankfurt and Washington, must reconcile creditors demands for more reform with voters’ exhaustion with austerity in order to stop Greece running out of money by mid-year.
In a post-election speech, Tsipras, 40, said he aims to give Greeks back their dignity. The new prime minister drew congratulations and an invitation to Brussels from European Commission President Jean-Claude Juncker in a telephone call yesterday, an EU official said, and IMF Managing Director Christine Lagarde also lent her support to the new government. The outreach shows that authorities are anxious to find a way out of the standoff over Greece’s debts and remaining aid funds. Euro-area ministers may “dangle the potential for future debt relief” through maturity extensions and interest rate cuts, while also preparing for hard negotiations as Greece’s cash needs increase, Jacob Funk Kirkegaard at the Peterson Institute for International Economics said. He said at the end of the day, there still needs to be a deal on the current troika program.
“It’s true that the Greek electorate has spoken yesterday,” Kirkegaard said. Still, “Greece owes its debt to other taxpayers in the euro area and guess what, they have a vote too,” he added. Tsipras’s Syriza party and the Independent Greeks announced plans for a coalition in Athens after Syriza won an emphatic election victory by harnessing a public backlash against years of job losses and hardship. While Tsipras promised Greeks he’ll seek a writedown on the country’s debt from the ECB, the IMF and the euro area, most of the finance ministers said that is not up for debate. Monday’s meeting came too early for Greece’s incoming government to send its own finance minister. “Nobody is forcing anything onto Greece but the obligations apply,” German Finance Minister Wolfgang Schaeuble said. “I don’t think it makes any sense now” to talk about a debt writedown, he added.
“.. the Patriarch of Constantinople deplored the Greek uprising of 1821—although the Ottomans still hanged him because of the “disloyalty” of his flock.”
Greece’s new prime minister, Alexis Tsipras, made history within hours of his victory by informing the Archbishop of Athens, very politely, that clerical services would not be required for his swearing-in ceremony. An avowed atheist who has nonetheless made a point of dealing courteously with senior clergy, Mr Tsipras lost no time in making known that his oath of office would be a secular procedure. It was also explained that when the whole cabinet was sworn in, a more junior cleric (but not the archbishop) would be invited to assist those who wished to take a religious oath. It’s hard to overstate what a rupture this marks with the ceremonial culture of Greece. For as long as anybody can remember, every senior office-holder, from socialists to right-wing dictators, has assumed the post with a ritual involving Bibles, crosses and often holy water, sprinkled about with a sprig of basil.
The opening words of the Greek constitution recall the theological formulas of the early church which predate the Hellenic state by more than 1,300 years: “In the name of the holy, consubstantial and indivisible Trinity……” This intertwining of religion and state dates from the earliest years of Greek independence, although the two things (Hellenic statehood and Orthodoxy) were not quite as entangled at the very beginning as you might think. Some of the protagonists of the Greek revolution were francophile secularists, and the Patriarch of Constantinople deplored the Greek uprising of 1821—although the Ottomans still hanged him because of the “disloyalty” of his flock. Syriza is committed to disentangling church and state, but it won’t be done hastily or confrontationally.
“..ven at the zero bound of nominal interest rates, it is argued, central banks still have weapons in their arsenal.”
Predictably, the European Central Bank has joined the world’s other major monetary authorities in the greatest experiment in the history of central banking. By now, the pattern is all too familiar. First, central banks take the conventional policy rate down to the dreaded “zero bound.” Facing continued economic weakness, but having run out of conventional tools, they then embrace the unconventional approach of quantitative easing (QE). The theory behind this strategy is simple: Unable to cut the price of credit further, central banks shift their focus to expanding its quantity. The implicit argument is that this move from price to quantity adjustments is the functional equivalent of additional monetary-policy easing. Thus, even at the zero bound of nominal interest rates, it is argued, central banks still have weapons in their arsenal.
But are those weapons up to the task? For the ECB and the Bank of Japan, both of which are facing formidable downside risks to their economies and aggregate price levels, this is hardly an idle question. For the United States, where the ultimate consequences of QE remain to be seen, the answer is just as consequential. QE’s impact hinges on the “three Ts” of monetary policy: transmission (the channels by which monetary policy affects the real economy); traction (the responsiveness of economies to policy actions); and time consistency (the unwavering credibility of the authorities’ promise to reach specified targets like full employment and price stability). Notwithstanding financial markets’ celebration of QE, not to mention the Federal Reserve’s hearty self-congratulation, an analysis based on the three Ts should give the ECB pause.
In terms of transmission, the Fed has focused on the so-called wealth effect. First, the balance-sheet expansion of some $3.6 trillion since late 2008 — which far exceeded the $2.5 trillion in nominal gross domestic product growth over the QE period — boosted asset markets. It was assumed that the improvement in investors’ portfolio performance — reflected in a more than threefold rise in the S&P 500 from its crisis-induced low in March 2009 — would spur a burst of spending by increasingly wealthy consumers. The BOJ has used a similar justification for its own policy of quantitative and qualitative easing (QQE). The ECB, however, will have a harder time making the case for wealth effects, largely because equity ownership by individuals (either direct or through their pension accounts) is far lower in Europe than in the U.S. or Japan.
“As Schauble said: ‘I don’t believe monetary policy alone can produce growth’.”
I had to laugh. Watching the CNBC panel at the World Economic Forum last Friday in Davos, the German Finance Minister, Wolfgang Schauble, kind of stole the show in his dry, wry way. Having been one of the biggest critics of the European Central Bank’s quantitative easing (QE) program from the start, he walked a delicate line defending the German position a day after the ECB unveiled its full scale, 60 billion euros a month stimulus measures. He spoke about how he respected the independence of the ECB: “I don’t comment on decisions by the ECB. Never ever.” He reiterated that Germany wants to see the euro zone stick together: ‘ We did whatever could be done to support Greece through difficult times, again and again…We had to convince the IMF to come up with very extraordinary conditions, in line with IMF rules, so that we could support Greece.”
And when billionaire legendary investor, George Soros, offered his views on Germany, Schauble stepped in saying that Soros perhaps wasn’t the best person to ask: ‘If I (Schauble) am asked on German fiscal policy, I have to explain, because I know it better than anyone else’. Soros, incidentally, was following a more cautious line. He spoke about how the ECB’s move could have unintended consequences for the market, creating possible asset bubbles. His main concern though was that quantitative easing would make the gap between the rich and the poor that much bigger, as it would benefit the owners of assets. One area where Schauble and Soros agreed is that it isn’t smart only to rely on monetary policy. As Schauble said: ‘I don’t believe monetary policy alone can produce growth’.
“We think the FOMC will be reluctant to make changes to the statement that might influence expectations for Fed action..”
While there are growing doubts among economists that the Federal Reserve will make their first hike in short-term interest rates in June, don’t look for the U.S. central bank to give any hints that it may hold stay a little while longer than expected. The Federal Open Market Committee will meet for two days beginning Tuesday to set monetary policy for the next six weeks and will release a statement at 2 p.m. on Wednesday. There will be no press conference. “We think the FOMC will be reluctant to make changes to the statement that might influence expectations for Fed action, particularly when there is no press conference to explain any ‘meaningful’ additions or deletions to the text,” said Michelle Girard, chief U.S. economist at RBS Securities, in a note to clients. Economists at RBS, Goldman Sachs and Wrightson ICAP have pushed their forecast for the first Fed move from June to September.
“Policymakers don’t seem ready to admit defeat on a mid-year hike just yet,” added Ellen Zentner, economist at Morgan Stanley, in a research note. To be sure, most economists are sticking with forecast of a June rate hike, according to the latest Blue Chip survey, possibly because that’s what many Fed officials have signaled in the past. Skeptics that the Fed will be able to move in June think the outlook for inflation will be the key. They believe that low oil prices and the strong dollar are likely to put downward pressure on inflation for most of the year. The core reading of the Fed’s favorite inflation gauge, the personal consumption expenditure index, edged down to a 1.4% annual rate in November. Although the Fed sets its 2% inflation target on headline inflation, which includes food and energy, the core measure is seen as more important for the timing of the Fed liftoff given that it strips out the low energy prices.
“Industrial profits fell 8% in December from a year earlier..” Want to revise that 7.4% GDP growth perhaps?
Chinese industrial companies’ profits declined the most in at least three years last month, underscoring the challenge facing the nation’s former growth drivers as the economy slows and commodity prices slump. Industrial profits fell 8% in December from a year earlier, the National Bureau of Statistics said in Beijing on Tuesday, the biggest drop since at least October 2011, according to data compiled by Bloomberg. China will strive for 8% growth in industrial output this year, an official said at a briefing according to a transcript on a government website.
China’s old growth drivers are faltering, weighed by overcapacity and a property downturn. Services companies are faring better, bolstering an economy that expanded at the slowest pace in 24 years in 2014. “The upstream industries, from mining to oil exploration, are hurting badly from falling input prices, while some manufacturers are benefiting,” said Ding Shuang, a senior China economist with Citigroup Inc. in Hong Kong. “A deeper fall in industrial profits will damp investment activity to weigh on future growth.” Profits in coal mining plunged 46.2% in 2014, while the oil processing and nuclear fuel industry’s returns shrank 79.2%, the NBS said. Profits in automaking rose 18.1% and in electronics manufacturing they increased 17.1%.
“Everyone thought the movie would never end, and suddenly it ended, so everyone is hurrying to leave..”
Managing the yuan is turning into a different game for China’s policy makers these days. After more than a decade of curbing the currency’s gains to help turn the nation into a manufacturing colossus, there are signs the People’s Bank of China is now propping up the yuan to stem an exodus of capital that’s threatening the economy. A gauge of capital flows on the PBOC’s balance sheet fell by the most since 2003 last month in a sign it’s selling foreign currency, while the yuan’s reference rate set daily by policy makers is at its strongest-ever level compared with the market price. Chinese Premier Li Keqiang said today the nation would implement measures to manage the economy more effectively and boost competition.
“Everyone thought the movie would never end, and suddenly it ended, so everyone is hurrying to leave,” Kevin Lai, an economist at Daiwa Capital Markets in Hong Kong, said by phone on Jan. 22. “The authorities need to think of a way to keep the audience in the theater” as the economy slows, he said. China amassed a world-leading $4 trillion of foreign-exchange reserves by mid-2014 as exports surged and capital flowed in, attracted by a currency that strengthened for four consecutive years. Now that the yuan’s gains are faltering, the PBOC is trying to prevent its declines from turning into a rout that could deter investment just as the economy suffers its slowest growth in 24 years.
China equals casino.
It didn’t take long for the flood of borrowed money to come pouring back into Chinese stocks. After a two-day decline spurred by regulatory efforts on Jan. 16 to curb margin lending by some of China’s biggest brokerages, the value of shares purchased with borrowed cash has rebounded to an all-time high. The outstanding balance of margin debt on the Shanghai Stock Exchange climbed to a record 771.4 billion yuan ($123 billion) yesterday, up from about 751 billion yuan on Jan. 20. China’s suspension of new margin accounts at three of the nation’s biggest brokerages and notice to ban loans to traders with less than 500,000 yuan has done little to damp the enthusiasm of leveraged investors. After tumbling 7.7% on Jan. 19 in the biggest one-day rout since 2008, the Shanghai Composite Index rallied to a five-year high on Monday.
“Margin debt is still growing rapidly and is probably against the will of the regulators,” said Hao Hong, a strategist at Bocom International. “The regulator wants market stability but is also trying to find a way to rein in speculation. It is between a rock and a hard place.” The China Securities Regulatory Commission on Jan. 16 banned Citic Securities, Haitong Securities and Guotai Junan Securities from adding margin-finance and securities lending accounts for three months, following rule violations. It also said securities firms shouldn’t lend to investors with assets below 500,000 yuan, prompting the biggest drop for the margin debt balance in Shanghai in 19 months. The Shanghai Composite declined 0.9% to 3,352.96 today after data showing a slump in industrial companies’ earnings. The gauge is still up 65% during the past 12 months for the biggest gain among global stock indexes.
“We will defeat their lawless attempt to designate ANWR as a wilderness..”
Those are fighting words. President Barack Obama’s decision to ask Congress to designate parts of the Arctic National Wildlife Refuge as a wilderness area, putting the land off-limits for oil drilling, is not going over well with Republicans in the state, to say the least. Obama’s plan, which the administration unveiled on Sunday, would protect 12.28 million acres in addition to the 7 million acres already designated as wilderness, according to the Department of the Interior. It comes amid falling oil prices that have left Alaska’s economy on shaky ground. In a video address, Obama made no mention of the economic impact the move could have on the state, and focused instead on the need to protect what he called a “pristine” environment.
The calming chords of the acoustic guitar in the video’s soundtrack had hardly died out before Republicans raised their voices in opposition to the plan. “It’s clear this administration does not care about us, and sees us as nothing but a territory,” Murkowski said in a statement. “The promises made to us at statehood, and since then, mean absolutely nothing to them.” Murkowski, chair of the Senate Energy and Natural Resources Committee, likened the Obama administration to a geopolitical foe. “I cannot understand why this administration is willing to negotiate with Iran, but not Alaska, she said. “But we will not be run over like this. We will fight back with every resource at our disposal.” The freshman called the move an act of “war on Alaska’s families,” according to Alaska Dispatch News.
“We will defeat their lawless attempt to designate ANWR as a wilderness, as well as their ultimate goal of making Alaska one big national park,” he said. “This decision disregards the rule of law and our constitution and specifically ignores many promises made to Alaska in ANILCA. It is just one more example of President Obama thumbing his nose at the citizens of a sovereign state—and will put Alaska and America’s energy security in serious jeopardy.”
Russia’s foreign-currency credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade, as policy makers struggle to boost growth amid international sanctions and a drop in oil prices. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement released on Monday, the same level as countries including Bulgaria and Indonesia. The ratings firm said the outlook is “negative.” Russian stocks on U.S. exchanges tumbled with the ruble following the announcement, which came after the close of equity trading in Moscow. The world’s biggest energy exporter is on the brink of a recession after oil prices fell to the lowest since 2009 and the U.S. and its allies imposed sanctions over President Vladimir Putin’s actions in Ukraine.
The penalties have locked Russian corporate borrowers out of international debt markets and curbed investor appetite for the ruble, stocks and bonds. “Russia’s monetary-policy flexibility has become more limited and its economic growth prospects have weakened,” S&P said in a statement. “We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy.” The ruble, the world’s second-worst performer last year after a 46% plunge against the dollar, plummeted after the S&P decision and closed 6.6% weaker at 68.7990 versus the U.S. currency on Monday. A Bloomberg index of the most-traded Russian stocks in the U.S. ended a three-day gain, tumbling 5.5%.
“Despite 2014’s around 50% decline in iron ore prices, the big four producers – Vale, Rio Tinto, BHP Billiton and Fortescue – continue to expand production and other companies are also bringing projects on line this year..”
Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day. “The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore prices will continue to drift lower,” said Caroline Bain, an analyst at Capital Economics, in a note Monday. She forecasts iron ore prices at $60 a tonne by year-end, with risks to the downside. Iron ore touched a more than five-year low Monday of around $63.30 a tonne, although some forward contracts are already pricing it under $60. Output has picked up over the past few years, encouraged by expectations China demand would continue to post strong growth and by low production costs in Australia and Brazil, she said. She noted Rio Tinto and BHP Billiton put their average production cost in Pilbara, where most of Australia’s iron-ore production is located, at around $25 a tonne, compared with 2010-13 average market prices at $145 a tonne.
Even at current prices, these producers are still profitable, Bain noted. Australia is the world’s second-largest iron-ore producer after China. Despite 2014’s around 50% decline in iron ore prices, the big four producers – Vale, Rio Tinto, BHP Billiton and Fortescue – continue to expand production and other companies are also bringing projects on line this year, she said, forecasting Australian production will rise 6% this year, although that’s down from 2014’s 20% rise. At the same time, despite China producers’ higher costs and lower ore grades, production there isn’t likely to see much slowdown, especially as many steel plants have “vertically integrated” operations, owning mines nearby, Bain said. Closures on the mainland are likely to focus on less efficient operations, leading to a leaner and meaner industry there, she said.
“Exploration and production spending is expected to drop by more than $116 billion, a 17% decline..”
BP, Europe’s third-largest oil company by market value, will freeze employee pay in the latest example of cost cuts as the world’s top oil companies respond to plunging crude. The company “needs to take a number of measures in response to the harsh trading environment,” Chief Executive Officer Bob Dudley said in a memo to staff Monday. “One of the measures we are taking is a general freeze to base pay for 2015, with only a few exceptions.” BP, which employs more than 80,000 people around the world, is the first global oil company to announce a pay freeze for staff. Oil has slumped to under $50 a barrel, less than half the price six months ago, forcing producers to review spending on new projects, reduce staff and cut costs. More than 30,000 dismissals have been announced across the industry as companies slash budgets, according to a tally by Bloomberg News.
Exploration and production spending is expected to drop by more than $116 billion, a 17% decline, because of falling crude revenues, according to an estimate from Cowen. BP offered 1,000 workers at its Trinidad and Tobago operations a voluntary separation program, regional manager Norman Christie said at a news conference on Monday. Earlier this month BP said it would cut about 300 jobs in the U.K.’s North Sea to cope with slumping prices and aging oilfields. The Standard & Poor’s 500 Oil & Gas Exploration & Production Index has fallen 28% over the last six months as investors anticipated losses. BP, which announces full-year earnings for 2014 next week, will review salaries as normal in 2016, Dudley said in the memo, the contents of which were confirmed by the London-based company’s press office.
Brilliant. Like The Sting.
A rural cooperative posing as a bank cheated 200 million yuan (32 mln U.S. dollars) from unwitting depositors in an eastern Chinese city, local police said. The fake bank ensnared more than 200 customers over the past year with promise of higher interest rates. The scheme was unraveled only after a customer was denied withdraw of his money and reported it to the police, according to police in Nanjing, capital of Jiangsu Province. Police say the cooperative has decorated itself exactly the same as a bank, with LED screens, a queuing machine and uniformed clerks. It also faked documents to prove itself as an authorized financial institute. One legal representative cooperative and four “managers” have been detained on suspicion of illegally absorbing public money. Most victims were businessmen from neighboring Zhejiang Province. Police are still seeking victims of the scam.
“It is unclear if any court oversees or approves the intelligence-gathering.”
The Justice Department has been building a national database to track in real time the movement of vehicles around the U.S., a secret domestic intelligence-gathering program that scans and stores hundreds of millions of records about motorists, according to current and former officials and government documents. The primary goal of the license-plate tracking program, run by the Drug Enforcement Administration, is to seize cars, cash and other assets to combat drug trafficking, according to one government document. But the database’s use has expanded to hunt for vehicles associated with numerous other potential crimes, from kidnappings to killings to rape suspects, say people familiar with the matter. Officials have publicly said that they track vehicles near the border with Mexico to help fight drug cartels. What hasn’t been previously disclosed is that the DEA has spent years working to expand the database “throughout the United States,’’ according to one email reviewed by The Wall Street Journal.
Many state and local law-enforcement agencies are accessing the database for a variety of investigations, according to people familiar with the program, putting a wealth of information in the hands of local officials who can track vehicles in real time on major roadways. The database raises new questions about privacy and the scope of government surveillance. The existence of the program and its expansion were described in interviews with current and former government officials, and in documents obtained by the American Civil Liberties Union through a Freedom of Information Act request and reviewed by The Wall Street Journal. It is unclear if any court oversees or approves the intelligence-gathering. A spokesman for Justice Department, which includes the DEA, said the program complies with federal law. “It is not new that the DEA uses the license-plate reader program to arrest criminals and stop the flow of drugs in areas of high trafficking intensity,’’ the spokesman said.
“The frackers will never again get access to the sort of junk bond financing that allowed them to ramp up their Ponzi demonstration projects in the Bakken and Eagle Ford.”
Do you want to have a personal economic future? Think about what you can do to make yourself useful in a local economy made up of your neighbors. And if you live in one of the thousands of soulless, neighborless suburban wastelands that amount to nothing but big box and big burger plantations, you better get out and find a real town in some other part of the country. Do you believe that computers and robot factories will define the years to come? Maybe you have failed to notice that the US electric grid is decrepit and in need of at least a $1 trillion upgrade-and-rebuild, which, by the way, is not going to happen. What is all that crap going to run on? America’s disappointment with the broken promises of technology will be so epic that we’ll be lucky not to slide back into a world ruled by superstition and ghosts.
Do you think that $50 oil is going to make the world safe for WalMart, Walt Disney World, and Happy Motoring? In fact, $50 oil is going to crush what is left of the US Oil industry, especially fracking for shale oil and deep water drilling. And guess what — everything else is depleting at about 5% a year. The frackers will never again get access to the sort of junk bond financing that allowed them to ramp up their Ponzi demonstration projects in the Bakken and Eagle Ford. And they will never again regain their current level of production — which is the net result of past Ponzi financing, now ending in tears. So, forget “Saudi America” and “energy independence,” unless you mean living in a walkable community near a navigable waterway.
Do you want to be an educated person, that is, someone capable of comprehending reality and functioning within its demands? In the USA, that means you must learn how to speak and write English correctly, especially if you are in a “low performing” ethnic minority group. If you can’t conjugate verbs, you will have a hard time distinguishing the past, the present, and the future in your daily activities. Among other things, you’ll be incapable of showing up on time. And that, of course, is only the beginning. It’s that simple. These abilities used to be the result of an eighth-grade education in the United States. We would be lucky to get back to that high standard, and our knucklehead fantasies about universal access to community college be damned. It’s only a new layer in the current racket that pretends to be education.
“All blond and tanned, perfect hair, perfect bodies, pure and innocent… It suddenly dawned on me! ELOI!”
The massive brain rot that is observable in the US can perhaps be explained by the “fracking fluid in the drinking water” theory; but what about the rest of the English-speaking world? This is a guest post by Gary Flomenhoft that offers some clues. I’ve been in Australia (pronounced “Straya”) for four months now. I live in Brisbane and have traveled to Melbourne, the Sunshine Coast, the Gold Coast, and Stradbroke island. I’ve met my share of Australians around the world over the years. They are all “how’ya going, G-Day mate, no worries,” eternal optimists, and very nice people. They all, every single one of them, say thank you to the bus driver when exiting the public bus. They are happy, they are polite, they are kind. They live thousands of miles from most of the world, and haven’t got a care. Go for a surf, eat some prawns or Moreton Bay bugs, hike in the hills, enjoy life! Obsess about cricket, Australian Football League, National Rugby League, Rugby Union, soccer, any kind of sport.
Their Prime Minister Abbot is a doofus, but entirely harmless, like a Koala. His Putin “shirt-front” turned into a friendly photo-op at the G-20, although his outraged sentiment was entirely understandable after the shoot-down of MH17 with so many Australians on board. But Abbot credulously believed the absurd propaganda spewed out by the US, instantly blaming the Russians, and imposing sanctions as a result, without a shred of evidence. If they had evidence, don’t you think they would parade it all over the press? Duh! All the actual evidence so far, including 30mm bullet holes in the cockpit, point to a Ukrainian Airforce jet shooting it down. Australians remind me of the US in the 1950’s, very naïve and innocent, but no cold war, so truly nothing to worry about. But they reminded me of something else too. I just couldn’t put my finger on it… All blond and tanned, perfect hair, perfect bodies, pure and innocent… It suddenly dawned on me! ELOI!