May 042015
 


Alfred Palmer Conversion. Beverage containers to aviation oxygen cylinders 1942

When What Comes Down Doesn’t Go Up (Economist)
When Will Apple Stop Screwing the US Economy? (Zatlin)
America’s Trailer Parks: Residents Are Poor, Owners Are Getting Rich (Guardian)
China Gets Backed Into A Corner By The ‘Impossible Trinity’ (MarketWatch)
China’s Long Bull Run (Barron’s)
Share Trading Frenzy Grows As China’s Economy Slows (SMH)
China’s Factory Activity Shows Continued Contraction (CNBC)
100 Days Of Solitude: Syriza Struggles As Greeks Stare Into The Abyss (Guardian)
Greece’s Firebrand Finance Minister Deserves to Be Heard (El-Erian)
Athens Cheers German President’s Stance On WWII Reparations To Greece (RT)
Merkel Says Germany Can’t Cut Off Nazi Past, Cites Greece (Bloomberg)
Trading in Greek Government Bonds Slows to a Trickle (WSJ)
Greek Medical Ass’n: Clinic For The Poor ‘Illegal’, ‘Unfair Competition’ (KPG)
Bernanke’s Rebuttal (WSJ)
Schäuble Spied For The Americans And Told Lie After Lie About ClubMed (Slog)
Saudi Arabia Uses US-Supplied Cluster Bombs In Yemen (Human Rights Watch)
Who Is Bombing Whom In The Middle East? (Robert Fisk)
Tax The Rich, Save The Budget $19.5 Billion A Year: Australia Institute (SMH)

Wages.

When What Comes Down Doesn’t Go Up (Economist)

According to the rich world’s politicians, economics has a new villain. The modish scoundrel of the past seven years—the immoral banker outwitting inept regulators—has been edged out by a returning blackguard: the tight-fisted boss crushing the hopes of honest workers with miserly pay. In America workers have been demonstrating for higher pay and stronger union rights in the profitable but poorly paying food industry. Hillary Clinton has blasted CEOs who earn 300 times what the average worker does, pledging that her run for the presidency will champion the “everyday Americans” who have the “deck stacked” against them.

In Britain Ed Miliband, leader of the opposition Labour Party, has told the electorate that he plans to punish “predatory” capitalists that exploit the low-paid; his electoral rival David Cameron retorts that his Conservatives are the “party of working people”. In Japan Shinzo Abe has sworn to lift salaries, and cajoles and threatens Japanese bosses to deliver on his promise. The facts give such rhetoric resonance. In most places the recession that followed the financial crisis had dire effects on wages. Despite five years of growth American real wages are still 1.2% below what they were at the beginning of 2009. In Britain, real wages fell every year between 2009 and 2014, the longest decline since the mid-1800s. In 2014 median pay was 10% below its 2008 high.

Germany, a haven during the euro-zone crisis, has done better, but wages are still 2.4% below their 2008 level. While there are exceptions—median pay has risen since 2008 in Canada and France—these have generally been bad years for wages. Flat and falling pay does not just matter to the people afflicted and to those who worry generally about growing inequality (a linked problem, but not quite the same one). Workers are also shoppers. Across the G7 group of rich countries household consumption ranges from 55% (France) to 68% (America) of GDP. While it makes sense for an individual boss to hold down pay, low pay across the economy as a whole threatens to put a lid on the growth that one would otherwise expect after a recession.

If it does not there’s a chance it will be because households are again borrowing to spend in an unsustainable way. But if there is good reason to be worried about wages, the political heat also has a concerning side. To design sound policies it is vital to understand why wages have stopped rising, what the implications of a flat-wage world would be, and the likely impact of pay-propelling policies. But economics is still only just getting to grips with these questions.

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“..Apple could have assembled phones and tablets in the US, but that would mean spending an extra $5 per phone; the extra labor cost to build that $700 phone here instead of in Vietnam or China..”

When Will Apple Stop Screwing the US Economy? (Zatlin)

Nine years, a trillion dollars in sales, and almost no taxes paid. That’s just the starting point for wondering about Apple’s actual contribution to the US economy. Apple’s success drags down the US GDP. The behemoth that is Apple sold almost 200M phones last year, none of which were made in the US or used components made here. Instead of exporting $100B in iPhones, the US imported $50B. That $150B swing matters in terms of balance of trade, GDP and jobs. If you wanted to improve the US economy, there’s no better place to start than with Apple and smartphones. Apple undermines the US manufacturing base. Assembly matters and manufacturing matters more.

There was a time when Apple could have assembled phones and tablets in the US, but that would mean spending an extra $5 per phone since that’s approximately the extra labor cost to build that $700 phone here instead of in Vietnam or China. Assembly may not be a competitive, value-add step but it does employ a lot of people. Unfortunately, it would also cut Apple’s profits by $1B, shrinking the company’s annual net income from $45B to $44B. Apple wouldn’t notice a drop in profits of $1B because it’s not putting its cash to use: Apple has $200B in cash conveniently parked outside of the US, not doing anything. On the other hand, assembling in the US would employ tens of thousands of people. A bit more productive use of capital, I believe.

Semiconductor manufacturing is more important in the grand scheme of things. It’s a fact that higher-skilled high-tech jobs create more wealth for an economy because they lead to innovation and new product development. Again, Apple could have its chips made in the US, by Intel for example. Instead, Apple turned to Samsung (Korea) and TSMC (Taiwan), going offshore to save another few dollars. With a healthy dose of Schadenfreude, one notes Apple’s struggles to compete with Samsung, its past and present chip manufacturer. When Apple turned to Samsung to manufacture chips, the company also transferred vital intellectual property. Samsung learned everything it needed to know to design its own chips and phones. Apple saved ~$2B per year. In return, Samsung gained $100B a year in smartphone market share.

But while Apple’s greed makes it penny wise and pound foolish, it’s the US that pays the price. Shifting manufacturing of the most cutting-edge chips has permanently eroded our manufacturing base and high-tech competitive edge. Should the US offer a $1B annual manufacturing subsidy to Apple? Well, it actually already does, except the amount is closer to $15B. As part of Apple’s ‘Zen and the Art of Freeloading,’ Apple has found arcane tax rules that funnel sales through Ireland and dodge US taxes. The Senate found that in 2011 Apple paid the IRS just $2.5B in taxes on $128B in sales. Before someone points out that Apple’s success boosts US employment by a few thousand workers, the US economy would get much more of a boost if Apple didn’t work so hard to dodge its fair share of taxes.

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In America, it’s alright to prey on the poor.

America’s Trailer Parks: Residents Are Poor, Owners Are Getting Rich (Guardian)

The number one rule is stated twice, once in the classroom and once on the bus: “Don’t make fun of the residents.” Welcome to Mobile Home University, a three-day, $2,000 “boot camp” that teaches people from across the US how to make a fortune by buying up trailer parks. Trailer parks are big and profitable business – particularly after hundreds of thousands of Americans who lost their homes in the financial crisis created a huge demand for affordable housing. According to US Census figures, more than 20 million people, or 6% of the population, live in trailer parks. It is a market that has not been lost on some of the country’s richest and most high-profile investors. Sam Zell’s Equity LifeStyle Properties (ELS) is the largest mobile home park owner in America, with controlling interests in nearly 140,000 parks.

In 2014, ELS made $777m in revenue, helping boost Zell’s near-$5bn fortune. Warren Buffett, the nation’s second-richest man with a $72bn fortune, owns the biggest mobile home manufacturer in the US, Clayton Homes, and the two biggest mobile home lenders, 21st Mortgage Corporation and Vanderbilt Mortgage and Finance Company. Buffett’s trailer park investments will feature heavily at his annual meeting this weekend, which will be attended by more than 40,000 shareholders in Omaha. Such success is prompting ordinary people with little or no experience to try to follow in their footsteps. On a bright Saturday morning, under the Floridian sun, Frank Rolfe, the multimillionaire co-founder of Mobile Home University who is the nation’s 10th-biggest trailer park owner, conducts a tour of parks around Orlando, Florida. [..]

“[The rents] do not go down, that’s one thing that’s a safe bet in the trailer park world. Our rents do not go down. “We traditionally raise our rents by an average of 10% a year or something like that, and it’s pretty much true for the industry. Our world record [rent increase] went from $125 to $275 in one month.” Rolfe, who bought a pistol for personal security when he bought his first park, 20 years ago, says he sent a letter to every tenant at that park in Grapevine, Texas, telling them the rent was going to more than double but was still below the market rate of $325. “If you don’t like this or you think you can do better, here’s a list of all the other parks in Grapevine and a list of the owners,” he said in the letter. “Go ahead, call them if you want to move. How many customers do you think we lost? Zero. Where were they going to go?”

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“..if a government has exchange-rate and interest-rate targets as well as free capital flows, it can only control two..”

China Gets Backed Into A Corner By The ‘Impossible Trinity’ (MarketWatch)

Investors continue to overlook China’s weakening economy in the belief that Beijing will “do what it takes” to restore growth. But the Chinese economy is stubbornly refusing to react to stimulus efforts, and an increasingly overvalued currency may be to blame. Last week, Beijing inadvertently put the yuan in the spotlight after speculation that the People’s Bank of China might become the latest central bank to resort to taking out the big bazooka of quantitative easing. This was hurriedly denied, yet it crystallizes Beijing’s dilemma as it seeks to loosen monetary policy to rescue the economy from a looming debt crisis and deflating property bubble. Analysts are flagging the dilemma policy makers face as they increasingly bump up against the “Impossible Trinity.”

This is a key economic theory that states that if a government has exchange-rate and interest-rate targets as well as free capital flows, it can only control two — but not all three — factors at the same time. This rule might comes as surprise for a one-party state where authorities are used to exercising sweeping control across the economy and financial system. Bank of America Merrill Lynch says that China is struggling with two conflicting policy objectives, on the one hand seeking to ease monetary conditions to support growth, but on the other seeking to have the yuan shadow the U.S. dollar which is strengthening as America’s economy recovers.

The result is that monetary conditions have recently tightened because of the yuan’s appreciation, which has more than offset the cuts to interest rates. Likewise, Merrill Lynch questions whether China can lower interest rates without allowing the currency to fall. The same would surely follow with quantitative easing, as experience elsewhere has shown such a policy is typically accompanied by sharp currency deprecation.

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Casino.

China’s Long Bull Run (Barron’s)

China’s President Xi Jinping was born in the Year of the Snake, but at heart he is China’s biggest bull. Already, China’s paramount leader has orchestrated the planet’s hottest recent bull market: Over the past year, Chinese stocks available to mainland investors have surged a staggering 119% in Shanghai and 121% in Shenzhen, with the biggest gains coming since November. The offshore stock market in Hong Kong – open to foreigners and laden with Chinese listings as well as global companies from Prada to Samsonite – has lagged but is starting to catch up, jumping 13% in April alone. The scary part: Chinese stocks are braving seven-year highs just as economic growth slows to 7% from 12% five years ago.

You’d think a monster rally egged on by great expectations of monetary easing and market reform would attract a lot of attention, and it has – starting with the locals. With real estate stagnant and stern restrictions on investing overseas, mainlanders seem only too happy to cheer on a homegrown bull. Local investors recently opened new stock market accounts at a rate of 4.1 million a week, up from about 70,000 a year ago. Many are borrowing to swell the herd, and margin balances have surpassed 1.6 trillion yuan ($258 billion), up from 300 billion yuan 16 months ago. By mid-April, BNP Paribas estimated, more than 70% of mainland-listed stocks were commanding prices exceeding 50 times earnings, while 40% fetched more than 100 times earnings.

Clearly, Red China’s bull run can give you a high like you’d get from guzzling too much Red Bull. “Mainland investors’ optimism toward the stock market is now far out of line with fundamentals,” warns Mizuho Securities’ Kengo Yoshida. The size and speed of this levitation, and pressure on the economy to live up to rising expectations, increase the likelihood of corrections of 10% or more, which could accelerate as margin traders liquidate their positions. Now here’s the scariest part: Economists and strategists suggest that this bull market has just begun, as China begins to open its stock markets to global investors. At 4442, the Shanghai Composite Index still is 27% below its 2007 peak of 6092. This means long-term investors with horizons of more than three years may need to hold their noses and look to pullbacks to build their Chinese portfolios.

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“The amount borrowed by investors to purchase stocks has quadrupled from a year earlier..”

Share Trading Frenzy Grows As China’s Economy Slows (SMH)

In China, a sharemarket ticker board bathed in red is a good thing. The colour, considered auspicious in these parts, is used to signify share price gains; not losses, as is the convention elsewhere. It’s not all that seems topsy-turvy in the world of Chinese equity markets, at least for the uninitiated. Despite years of world-leading economic growth, Chinese shares had remained in the doldrums. Now, just as the economy is coming off the boil – prompting solemn warnings from the country’s top leaders – China’s sharemarkets are on a tear, more than doubling in value in the past year and adding more than $5 trillion to market capitalisation. The Shanghai Stock Exchange’s daily turnover exceeded that of Wall Street’s New York Stock Exchange for the first time in its history last month.

Price-earnings ratios (a valuation method for shares), particularly for riskier small-cap stocks, are looking stretched by conventional measures, prompting concerns over whether prices are entering bubble territory, or at the very least, whether the market’s stellar bull run is sustainable. The amount borrowed by investors to purchase stocks has quadrupled from a year earlier, fuelled by a recent surge in margin trading, which, in turn, is often funded by China’s infamous shadow lending sector. Investors continue to pile in at an increasing rate. Five million new trading accounts were opened in March. And, just last week, another 3.3 million new share accounts were created; 10 times more than normal.

Many economists and demographers point to the lack of a comprehensive social welfare net in China as a key reason for its people’s stereotypical streak of conservatism and a high savings rate. However, the inverse is also true, and many, especially younger Chinese, are entrepreneurial, willing to take risks, particularly when there is fast money to be made. Anecdotes run rife of ordinary Chinese investors selling their homes (as the housing market cools) or quitting their jobs to speculate in – or, as it’s known colloquially in Mandarin, to “stir-fry” – stocks.

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Makes GDP numbers hard to believe.

China’s Factory Activity Shows Continued Contraction (CNBC)

The latest gauge of China’s manufacturing activity showed the country’s vast factory sector remained in contraction for the month of April. The HSBC final Purchasing Managers’ Index (PMI) fell to 48.9, its fastest drop in a year, down from the preliminary reading of 49.2 and weakening from the 49.6 print in March. A reading below 50 indicates contraction. The figures follow Friday’s official print which showed PMI in April unchanged at 50.1 from the previous month. The official PMI tends to track the bigger manufacturers while the HSBC gauge surveys the small and medium-sized firms. “I think it’s the weakest number in a while and it shows continual sequential contraction,” said Julia Wang, greater China economist with HSBC. “I definitely think that after the above 50 official reading last week, some people might have hoped that we see some signs of stabilization today.”

The overall new orders sub-index dipped to 48.7 in April, the sharpest contraction in a year, although new export orders showed tentative signs of improvement. Both input and output prices declined for a ninth month in April, while manufacturing employment contracted for an 18th month. “Data suggested that relatively weak domestic demand was the main driver of reduced new business, as new export work picked up in April (albeit marginally),” according to a note from Markit, who compiled the PMI data. “Consequently, employment in the sector continued to decline, while purchasing activity fell at the quickest rate in 13 months.” China’s economy has been battling a weak external environment, sluggish domestic demand and a slowing property sector for a while. The economy expanded 7.4% last year, its slowest full-year pace since 1990 and undershooting the government’s targets for the first time since 1998.

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“I have come round to accepting that my daughter’s generation is a lost generation..”

100 Days Of Solitude: Syriza Struggles As Greeks Stare Into The Abyss (Guardian)

In the countdown to Syriza marking 100 days in office, Greece got its first crisis monument. Arms outstretched, mouth wide open, his face locked in despair, the sculpture depicts a man dangling from a financial index in free fall. Below, his world of concrete and stone lies broken and smashed. Officially known as the “crisis work”, the art piece has attracted a steady flow of spectators to the place where it has been erected, in the shadow of a bridge on the boulevard that connects Athens to the sea. Flowers lie next to it as if in mourning for all that has passed. For Tasos Nyfadopoulos, the young sculptor behind the work, it is the first public tribute to the thousands of suicides the crisis has left in its wake. And an expression of everything Greeks have come to feel. “People want art to express them,” he said.

“And with this work I tried to express my own feelings and let society at large speak.” On the rollercoaster ride that is the debt-stricken country’s epic battle to stay afloat, many had hoped that Syriza would also provide solace. But five years after Athens was forced to be bailed out by the EU and IMF – accepting the biggest rescue package in global financial history – Greeks are not sure what to think. What they do know is that after five years of dancing to the tune of austerity – of making the sacrifices necessary to keep bankruptcy at bay – they are, like Nyfadopoulos’s dangling man, once again staring in to the abyss. The great wave of hope that had brought the radical leftists to power – on a promise to cancel austerity – has crashed on the rocks of renewed uncertainty over whether the country can stay the course of eurozone membership at all.

More than ever, Greece seems headed for the exit door. [..] “We are not at the point of outright panic yet but people are clearly very worried,” said Mouriki, a sociologist. “Close to €30bn has been withdrawn by depositors and firms from bank accounts since December which is more that at the height of the crisis in mid 2012.” But shades of panic have arrived and, indelibly, have begun to reveal themselves in other ways: from the government sequestering the funds of public bodies to help pay bills; to Greek borrowing costs soaring on fears of insolvency; to savers stuffing their freezers with cash and ever more parents encouraging their children to move abroad. “I have come round to accepting that my daughter’s generation is a lost generation,” lamented Panaghiota Mourtidou, sitting in the food pantry she helps run in central Athens.

“At 30 there is no chance that she will have any of the certainties that we enjoyed but maybe my grandchildren will. That, now, is my great hope.” It is testimony to the Greeks’ enduring faith in hope that Syriza is still leading in the polls even if support for its negotiating strategy has plummeted and diehards speak of crushing concessions being made. The party, on the margins of politics barely three years ago, was shown in a poll released by polling agency Marc three days ago to be 14.8 points ahead of the conservative main opposition New Democracy. Backing for Yanis Varoufakis, the controversial finance minister most associated with the reckless brinkmanship that has alienated Athens from its euro-area partners, is also high. Reports of his being rounded on by eurozone counterparts decrying his “amateurish” ways at a summit meeting on 24 April, appear only to have rallied support.

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“Varoufakis is impatient, and understandably so.”

Greece’s Firebrand Finance Minister Deserves to Be Heard (El-Erian)

I have never met or spoken to Yanis Varoufakis, Greece’s finance minister. Yet I feel I have gotten to know him through his writing and interviews, and by reading about his interactions with both the official and private sectors in Europe. That’s why – though I understand the rationale for the decision – I was saddened last week when Prime Minister Alexis Tsipras sidelined Varoufakis from Greece’s complicated and consequential negotiations with its European creditors and the IMF. Varoufakis was a breath of fresh air in this protracted and exhausting Greek economic drama, which involves alarming human costs in terms of unemployment, poverty and lost opportunities. Backed by considerable economic logic and a desire to do better, he pressed for more realism in the policy conditions demanded by Greece’s creditors.

And he never tired of reminding people that Greece’s recovery wasn’t that country’s responsibility alone. His approach to substance came with an unusual negotiating style – one that attracted quite a bit of attention but understandably proved unpalatable to his European partners. Having spent the bulk of his career in academia, Varoufakis erred toward open public discussion and discourse. Diplomatic niceties were set aside in favor of candid debates. Flowery introductions gave way to laser-like focus on areas of disagreements. Having also been part of a government that was elected on the promise to restoring Greece’s dignity, he had no hesitation about speaking to other European finance ministers as an equal.

And because his meetings were closely covered by the media – in particular those with his German counterparts – the world was often treated to a level of drama that hardly ever emerges from European negotiations: accusations and counter-accusations, rebukes and unusual physical postures. Varoufakis is impatient, and understandably so. Having observed the suffering of his people for so many years because of what he believes were unguided policies, he was ready to shake things up. Yet in his keenness to deliver a big bang solution, he neglected the small confidence-building steps that were required. [..]

Varoufakis’s move to the background will increase the probability that a chilly stalemate will give way to another Band-Aid arrangement that allows Greece to muddle along for a little longer. But unless this time is used by the country’s creditors to accept a truth that Varoufakis consistently tried to impose – that Greek economic reforms, no matter how bold, won’t succeed unless the budget austerity conditions are relaxed and there is further debt relief – the finance minister could return to the front line. This time, he would have a different mission: that of seeking to restore order after a “Graccident,” a big economic and financial accident that makes the country’s continued membership of the euro zone almost impossible.

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“”We are not only people who are living in this day and age, but we’re also the descendants of those who left behind a trail of destruction in Europe..”

Athens Cheers German President’s Stance On WWII Reparations To Greece (RT)

Greek authorities have welcomed the recent statement of German President Joachim Gauck, who said that Germany should consider paying WWII reparations to Greece. “These things that the German President Joachim Gauck said are a contribution to the effort we make to heal the wounds of the past, Greek Deputy Defense Minister Kostas Isihos said in a statement. “It is an answer to those who argue that our claims to Germany after World War II are directed against Germany. This is wrong, he added. The German president yesterday made a historic declaration, which stresses the need to investigate the German perspective payment of reparations to Greece. It is the first time the German side opens the issue of German debt.

Earlier, President Joachim Gauck declared he understands Athens calls for WWII reparations, saying that Berlin should examine its historical responsibility to Greece. “We are not only people who are living in this day and age, but we re also the descendants of those who left behind a trail of destruction in Europe during World War II in Greece, among other places, where we shamefully knew little about it for so long”, Gauck told daily Suddeutsche Zeitung. According to the German president, “it’s the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations.”

Many Greeks blame Germany, Athens biggest creditor, for the tough austerity measures and record high unemployment they have faced after getting two international bailouts total worth €240 billion. In April, Greece calculated that Germany owes it no less than €278.7 billion in World War II reparations. “According to our calculations, the debt linked to German reparations is €278.7 billion euros, including €10.3 billion for the so-called forced loan. All the other amounts are related to allowances for individuals or infrastructure, said the country’s deputy finance minister, Dimitris Mardas.

Germany had repeatedly denied that it owes Greece any more money, saying it had already paid Athens war damages of $25 million in the 1950s, equivalent to $220 million today, and also paid out 115 million Deutschmarks (a sum worth around $230 million today), to victims of Nazi crimes in the early 1960s. After Nazi forces took control of Greece in 1941, the stage was set for one of the bloodiest confrontations of World War II as Greek resistance fighters put up a fierce struggle to end the occupation. They were powerless, however, to prevent the Third Reich from extracting an interest-free 476 million Reichsmarks loan from the Greek central bank, which devastated the Greek economy.

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“..she said “it’s important” for her to visit Moscow on May 10 to join President Vladimir Putin in honoring soldiers who died in World War II.”

Merkel Says Germany Can’t Cut Off Nazi Past, Cites Greece (Bloomberg)

Germany has a duty to deal sensitively with the Nazi era, Chancellor Angela Merkel said, citing a debate in Greece about German responsibility for the country’s occupation during World War II. “One can’t draw the line on history,” Merkel said in her weekly podcast Saturday before the 70th anniversary of the war’s end next week. “We see this in the discussion in Greece and also in other European countries. We Germans do have a special responsibility to deal in an aware, sensitive and knowledgeable way with what we perpetrated under Nazism.” While voicing understanding for the “long-lasting wounds” caused by the Nazis across Europe, the chancellor declined to address Greek demands for war reparations and said the task facing European governments now is to halt the rise in public debt.

Merkel’s comments reflect her leading role in holding together the 19-nation euro and confronting Russia in the conflict over Ukraine. While there are “deep differences of opinion” with Russia, she said “it’s important” for her to visit Moscow on May 10 to join President Vladimir Putin in honoring soldiers who died in World War II. Merkel’s government is ruling out further war reparations for Greece, saying the matter was closed by Europe’s acceptance of the treaty that reunified East and West Germany in 1990 at the end of the Cold War. Germany should nonetheless explore compensation for war crimes committed by German soldiers during World War II, German President Joachim Gauck, whose post is mostly ceremonial, was quoted as saying by Sueddeutsche Zeitung.

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“..18 global banks that are approved primary dealers—appointed by the Greek government and Bank of Greece last December—aren’t participating in Greek Treasury-bill auctions this year..”

Trading in Greek Government Bonds Slows to a Trickle (WSJ)

Greece’s standoff with creditors has investors speculating once again about the impact of a default on its debt or the country’s exit from the euro. What it hasn’t done is spark much trading in Greek government bonds. Only €2 million ($2.24 million) of Greek government bonds changed hands on the country’s HDAT electronic-trading platform in April, according to the latest data from the Bank of Greece. Last year, monthly volumes averaged €866 million. Not since the run-up to Greece’s 2012 default have volumes been so low. Meanwhile, 18 global banks that are approved primary dealers—appointed by the Greek government and Bank of Greece last December—aren’t participating in Greek Treasury-bill auctions this year, according to several people familiar with the situation.

Primary dealers are expected to support a country’s public debt markets by participating in bond auctions and quoting prices on secondary debt markets. With trading so thin, the price of Greece’s debt has swung wildly in recent weeks. Bonds maturing in July 2017 fell from 87 cents on the euro in January to as low as 61 European cents in April, only to rebound to 74 cents Friday. “Greece is too binary” to get involved in, since bonds will either rally sharply if an agreement with creditors is reached or plunge if Greece defaults, said Ariel Bezalel at Jupiter Asset Management. “It’s toss-a-coin stuff.”

This marks quite a turnaround from a year ago. Greece looked to have left its troubles behind when it returned to public bond markets in April last year for the first time since it was bailed out by international creditors in 2012. Investors snapped up the new bond, and Greece duly issued another one in July. Trading volumes began to rise. But Greek bond prices began to fall toward year-end as popular support lifted the left-wing Syriza party, which opposes austerity measures imposed by the country’s creditors. Investors got jittery at the prospect of Syriza—which won power in late January—attempting to renegotiate the bailout package.

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“..offering health services free of charge to vulnerable members of society was creating unfair competition.”

Greek Medical Ass’n: Clinic For The Poor ‘Illegal’, ‘Unfair Competition’ (KPG)

Greece is a country always good for surprises! And here comes a painful injection to the hundreds of volunteers offering their services to the poor of the IMF-austerity hit country. After a couple of years of social practice and solidarity in the field of health care and 51 units across the country providing the basics free of charge to the millions of uninsured and zero-income citizens, a local medical association came out to denounce social clinics and pharmacies as illegal due to unfair competition. In an announcement the Board of the Medical Association of Arta, Western Greece, denounced as illegal the operation of a Social Clinic and Pharmacy stressing at the same time that the operation of a clinic offering health services free of charge to vulnerable members of the society was creating unfair competition.

“It is not known in what working relations the doctors provide their services, whether they are employed or work as freelancers or they offer voluntary work. The legitimate interests of the physicians members of the Medical Association of Arta should be particularly been taken care of in the context of the unfair competition these polyclinics create,” the statement notes adding that according to the Law of 2014 Greeks and foreigners with social security number have access free of charge to public health care. Of course, things are not as simple as stated by the Law. In a country where one in four Greeks is unemployed and consequently uninsured, public hospitals treat only ‘emergencies’ of uninsured and then again only if they fulfill certain conditions.

KTG personally was eye-witness to a incident where the doctors told a man with a broken arm that he had to have certain insurance stamps before he lost his job in order to be treated free of charge, otherwise he had to cover all expenses. Exactly this situation of “treatment free of charge …but” was stressed by the Arta Social Clinic and Pharmacy in a statement adding that after the many austerity cuts in health care and pensions and the skyrocketing of the unemployment, many citizens were even unable to pay their participation in order to buy their prescription medicine. Therefore the social clinics and pharmacies are a necessity, “creating a protection shield and cohesion in the society through social solidarity networks so that the society resists and imposes alternative solutions in the crisis.”

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Why bother? He’s a lying SOB no matter what you do or say.

Bernanke’s Rebuttal (WSJ)

It’s nice to know we’re being read, and Thursday’s editorial on “The Slow-Growth Fed” sure got a rise out of Ben Bernanke. The former Federal Reserve Chairman turned blogger turned Pimco adviser wrote to defend the central bank and by implication his policies as innocent of responsibility for subpar economic growth. This is fun, so let’s parse the Revered One’s arguments. First, Mr. Bernanke accuses us of “forecasting a breakout in inflation” at least since 2006. The central banker is getting into the polemical swing, but he’s wild with that one. We’re not always right. But we’ve been careful not to join some of our friends in predicting inflation from the Fed’s post-crisis policies. We’ve written that we are in uncharted monetary territory with risks and outcomes we lack the foresight to predict.

Our view has been that the Fed’s first round of quantitative easing was necessary to stem the financial panic—and that it worked. We were skeptical of the later bouts of QE, and in our view these have been notably less successful in helping the economy return to robust health. Asset prices are up and the wealthy are better off, but the working stiff is still waiting for the economic payoff. Mr. Bernanke defends the Fed’s over-optimistic economic growth forecasts by saying the central bank has been overly pessimistic about unemployment. “The relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met,” Mr. Bernanke writes. Now, that’s over-optimism. One reason the jobless rate has fallen to 5.5% is because so many people have left the workforce.

The labor participation rate has plunged to 1978 levels during this supposedly splendid expansion. Most economists acknowledge that if the participation rate had stayed constant, the jobless rate would still be close to 8%. The failure to attract the long-term unemployed into the job market is one reason the Fed continues to hold interest rates so low. Mr. Bernanke’s other defense is the counterfactual that it could have been worse: “It seems clear that the Fed’s aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin.” That’s conveniently unprovable, not least because it doesn’t correct for non-monetary variables. The structural policy impediments to growth in Europe and Japan are far worse than in the U.S., yet Mr. Bernanke implies that the main policy difference is that they waited too long to try QE.

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Schäuble used to head the German secret service.

Schäuble Spied For The Americans And Told Lie After Lie About ClubMed (Slog)

The BND secret service once run by the delightfully tonto Wolfgang Schäuble has been routinely spying on its EU ‘partners’ working directly for the US National Security Agency (NSA). The NSA regularly – ie, daily – supplies German agents and BND technical centres with updated lists of names, mobile numbers and IP addresses to monitor. Used under the cover of the usual “combating the war against terrorism” bollocks, it transpires now that the Chancellery has known the full strength of this deception for seven years…since 2008. Equally disturbing is that there are so many EU-based companies on the lists, the espionage has involved the commercial as well as political sectors. Schäuble was Federal Minister of the Interior in the First Merkel cabinet from 2005 to 2009.

This was his second term as Head Spook of the Bundesrepublik, and over the years he built an unparalleled reputation for using the media as propaganda weapons. In October 2013, Schäuble was accused by the former Portuguese Prime Minister, José Sócrates, of regularly salting the European media with ‘stories’ against the government prior to the Portuguese bailout. In August 2007 Wheelchair Wolfie told the media and the Bundestag a blatant pack of lies about the use of Trojan malware in ‘suspected’ computers. The man now bidding to run the eurozone Fiskalunion told Spiegel that “such cyber spying will only be carried out in a handful of exceptional cases, and only target those suspected of planning terror attacks”.

At the time, Federal Commissioner for Data Protection Peter Schaar wondered in an interview with the Frankfurter Rundschau “how the high-court mandated “core privacy” can be maintained in light of such a strategy”.The answer is of course that it couldn’t be….and hasn’t been. But the true extent of Schäuble’s perfidious hypocrisy can only be appreciated in the context of his feigned outrage just ten months ago at the ‘revelation’ that America had been spying on Germany. The current top spymaster Thomas de Maiziere said there was “disproportionate and serious political damage” compared to the scant advantage gained by the spying. Not just people in Greece but also other EU members should pay close attention to this latest in a long line of revelations about Herr Schäuble.

He is a scheming, machiavellian deceiver with the ethics of a scorpion, and a trust factor of -82. He lied in 2007 about surveillance, he persuaded Papandreou to lie about the size of Greek debts in 2010, he has persistently lied about “the cost” to Germany of Greek default, he lied about the Spanish ‘recovery earlier this week, he lied about the situation in Portugal during 2012, he lied to the Cypriots in 2013, and he orchestrated a foul FinMin attack on Yanis Varoufakis last week. [..] ..the eurozone is about to get an amoral secret policeman as its head of eurozone fiscal matters….a man happy to let the US ride roughshod over EU citizens’ privacy, happy to work with an ECB Chairman at the same game, ever-ready to depict the Greeks as cardboard Untermenschen, and willing to pull any stunt – however despicable – in order to “win”.

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Nice going, Uncle Sam.

Saudi Arabia Uses US-Supplied Cluster Bombs In Yemen (Human Rights Watch)

Credible evidence indicates that the Saudi-led coalition used banned cluster munitions supplied by the United States in airstrikes against Houthi forces in Yemen, Human Rights Watch said today. Cluster munitions pose long-term dangers to civilians and are prohibited by a 2008 treaty adopted by 116 countries, though not Saudi Arabia, Yemen, or the United States. Photographs, video, and other evidence have emerged since mid-April 2015 indicating that cluster munitions have been used during recent weeks in coalition airstrikes in Yemen’s northern Saada governorate, the traditional Houthi stronghold bordering Saudi Arabia.

Human Rights Watch has established through analysis of satellite imagery that the weapons appeared to land on a cultivated plateau, within 600 meters of several dozen buildings in four to six village clusters. “Saudi-led cluster munition airstrikes have been hitting areas near villages, putting local people in danger,” said Steve Goose, arms director at Human Rights Watch. “These weapons should never be used under any circumstances. Saudi Arabia and other coalition members – and the supplier, the US – are flouting the global standard that rejects cluster munitions because of their long-term threat to civilians.”

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Fisk is confused. “It amazes me that all these warriors of the air don’t regularly crash into each other as they go on bombing and bombing.”

Who Is Bombing Whom In The Middle East? (Robert Fisk)

Let me try to get this right. The Saudis are bombing Yemen because they fear the Shia Houthis are working for the Iranians. The Saudis are also bombing Isis in Iraq and the Isis in Syria. So are the United Arab Emirates. The Syrian government is bombing its enemies in Syria and the Iraqi government is also bombing its enemies in Iraq. America, France, Britain, Denmark, Holland, Australia and – believe it or not – Canada are bombing Isis in Syria and Isis in Iraq, partly on behalf of the Iraqi government (for which read Shia militias) but absolutely not on behalf of the Syrian government. The Jordanians and Saudis and Bahrainis are also bombing Isis in Syria and Iraq because they don’t like them, but the Jordanians are bombing Isis even more than the Saudis after their pilot-prisoner was burned to death in a cage.

The Egyptians are bombing parts of Libya because a group of Christian Egyptians had their heads chopped off by what might – notionally – be the same so-called Islamic State, as Isis refers to itself. The Iranians have acknowledged bombing Isis in Iraq – of which the Americans (but not the Iraqi government) take a rather dim view. And of course the Israelis have several times bombed Syrian government forces in Syria but not Isis (an interesting choice, we’d all agree). Chocks away! It amazes me that all these warriors of the air don’t regularly crash into each other as they go on bombing and bombing. And since Lebanon’s Middle East Airlines is the only international carrier still flying over Syria – but not, thank heavens, over Isis’s Syrian capital of Raqqa – I’m even more amazed that my flights from Beirut to the Gulf have gone untouched by the blitz boys of so many Arab and Western states as they career around the skies of Mesopotamia and the Levant.

The sectarian and theological nature of this war seems perfectly clear to all who live in the Middle East – albeit not to our American chums. The Sunni Saudis are bombing the Shia Yemenis and the Shia Iranians are bombing the Sunni Iraqis. The Sunni Egyptians are bombing Sunni Libyans, it’s true, and the Jordanian Sunnis are bombing Iraqi Sunnis. But the Shia-supported Syrian government forces are bombing their Sunni Syrian enemies and the Lebanese Hezbollah – Shia to a man – are fighting the Syrian President Bashar al-Assad’s Sunni enemies, along with Iranian Revolutionary Guards and an ever-larger number of Afghan Shia men in Syrian uniforms.

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“..if the Abbott government chooses to collect additional revenue from a higher goods and services tax, rather than closing loopholes benefiting the rich, it “will likely pay a high political price”.

Tax The Rich, Save The Budget $19.5 Billion A Year: Australia Institute (SMH)

If Prime Minister Tony Abbott stopped giving superannuation tax breaks to the rich, restricted negative gearing, scrapped the capital gains tax discount and slapped a minimum tax rate on high-income earners, he could raise up to $19.5 billion in annual revenue, The Australia Institute showed. New economic modelling by the institute, ahead of next week’s federal budget, found the majority of the savings from such changes would come from high-income households. The report took aim at the Abbott government for dishing out budget cuts that hurt the nation’s poorest. It also criticises Labor’s superannuation policy. The institute said restricting negative gearing to new residential property investment and scrapping the tax discount would save the budget $7.4 billion per year.

The institute said restricting negative gearing to new residential property investment and scrapping the tax discount would save the budget $7.4 billion per year. The institute’s latest modelling on superannuation tax concessions showed that the benefits of super tax concessions are mainly accruing to the top 10% of households, who claim 41% of the tax concessions, worth $12.2 billion. It said the top 20% of households receive 60% of tax concessions, worth $17.8 billion. This is compared to the bottom 50% of households who only get 11% of the tax concessions, worth $3.35 billion. By making changes to super and these other tax breaks the government could save up to $19.5 billion a year, it said. Almost three quarters of the savings ($14.1 billion) would come from the top 10% of households by income.

Although the full $19.5 billion may not be reached, as some of the rich will always try and look for other tax shelters, the government could still raise substantial amounts of revenue and use it to assist disadvantaged communities. “If the government wishes to ensure everyone is enlisted to do the budget’s ‘heavy lifting’, then identifying progressive revenue-raising opportunities is the most efficient means to do so,” the report said. The institute also proposed a series of other taxes including a super profits tax on banks, a financial transactions tax, an estate tax and restricting fossil-fuel subsidies.The Australia Institute executive director Richard Denniss said if the Abbott government chooses to collect additional revenue from a higher goods and services tax, rather than closing loopholes benefiting the rich, it “will likely pay a high political price”.

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Home Forums Debt Rattle May 4 2015

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    Alfred Palmer Conversion. Beverage containers to aviation oxygen cylinders 1942 • When What Comes Down Doesn’t Go Up (Economist) • When Will Apple Sto
    [See the full post at: Debt Rattle May 4 2015]

    #20858

    John Day
    Participant

    Hi Ilargi,
    Recall the story from January, where a female Greek physician was working secretly as a prostitute to make ends meet?
    It got a lot of attention, and I think you put it up, too.
    https://www.bbc.com/news/world-europe-30914039
    The Greek medical system is breaking. Nobody is paying doctors and nobody is getting taken care of unless they get shot in the liver or something.
    This medical society couldn’t afford a decent public relations firm, and presented their case in such a way as to fall on their own swords, where they now squirm, impaled…
    Sad.
    I have worked very hard for very little in 1992 -1994, as a small town country doctor, sometimes the only doctor at the only hospital in Caldwell County Texas, doing ER, OB, inpatient and outpatient 24:7. It was the hardest I ever worked, and the least I ever earned, but I think it’s worse in Greece. I just fulfilled my contract and learned an important lesson, and went and did a Family Practice OB fellowship, which paid more and was less work.
    Since then I have still worked in public health, but gotten paid pretty good money to take care of poor people. I don’t expect it to last, but I’m grateful.

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