Nov 022015
 
 November 2, 2015  Posted by at 12:27 pm Finance Tagged with: , , , , , , , , , ,


Just another 6-year old dead boy washed up on Lesbos Nov 2 2015

Industrial-Scale Misery As Soaked Refugees Pour Onto Greece’s Lesbos (CBC)
Record 218,000 Migrants Crossed Mediterranean In October, Says UN (AFP)
Total Of 19 Dead Recovered From Aegean Sea On Sunday (AP)
Plastic Boat Sinks Off Greece, Killing 11 Refugees (NY Times)
Refugee Crisis Was Not Unexpected, Top UN Official Says (Kath.)
Merkel’s Refugee Troubles Mount as Allies Clash on Border Plans (Bloomberg)
Bonds Send Same Ominous Signs No Matter Where in the World (Bloomberg)
Apocalypse Now: Has The Next Giant Financial Crash Already Begun? (Paul Mason)
Down $4 Trillion, China Faithful Buy Stocks That Hurt Them Most (Bloomberg)
Enlargement And The Euro Are Two Big Mistakes That Ruined Europe (Münchau)
Eurozone Banks Still Swamped With Bad Loans (Telegraph)
Europe Prolongs Its Diesel Problem (Bloomberg Ed.)
Puerto Rico Doesn’t Need Bankruptcy (WSJ)
Brexit Is A Life Or Death Matter For Britain’s Farmers (AEP)
Greece Sets Terms for Aiding $15.9 Billion Bank Recapitalization (Bloomberg)
IMF Pushes Europe For Formal Restructuring Accord On Greek Debt (Bloomberg)
Things Can Get Even Worse For Renewable Energy Companies (Dizard)

“We lost a baby and until now the sea didn’t give it us back.”

Industrial-Scale Misery As Soaked Refugees Pour Onto Greece’s Lesbos (CBC)

A young man just plucked from the sea between Turkey and the island of Lesbos sits wet and shivering on the deck of the coast guard ship that has just brought him and a dozen or so other survivors to the port of Mytilene. Their boat had just capsized. He was draped in the crackling gold of an emergency blanket, huddled amongst the others, and wanted to stand up. But the sailors told them all to stay seated until a gangplank was put in place. “Are you okay?,” I asked him from the dock. “Yeah, we are okay.” “Did everybody survive?” “We think so,” he said. And then he added: “Thank you very much for asking.” The polite afterthought in the moments following what must have been a terrifying ordeal stayed with me.

It was a kind of ordinary courtesy delivered in the midst of the most un-ordinary situation imaginable, and was as if to say “please forgive me if my desperate journey inconveniences in any way, that’s not my intention.” But here on this island of some 80,000 people in the Aegean Sea off the coast of Turkey, the extraordinary, the distressing and the nearly unbelievable are happening so constantly that they are in danger of becoming ordinary. That is, until the next boat full of asylum seekers sinks and startles everyone out of their torpor. And even then the rescue efforts have begun to take on a terrible sameness when it comes to the drownings, of children more often than not.

“It’s hard because I’m human,” a Palestinian doctor volunteering with an Israeli aid organization tells me as we stand next to the shore and as yet another boat disgorges its tattered passengers earlier this week. “It was crazy. We lost a baby and until now the sea didn’t give it us back.” Here in Lesbos, the daily arrivals of waterlogged boats tossing up their human cargo have reached a near industrial scale. One morning last week we watched dozens of boats docking here in a matter of hours. By nightfall, an estimated 10,000 people had crossed from Turkey to this Greek enclave. The view from the hills down on to the shoreline looks like nothing so much as a major travel terminus. It is a hive of activity. People tumble out of boats, helped to shore by a steady supply of volunteers, including a band of dashing lifeguards from Spain.

Dressed in wet suits in the orange and yellow of the Spanish flag, they plunge into the sea to steady boats and wade to shore with babies held high over their heads, the infants’ tiny arms spread out wide to the skies, as if in supplication, by the too-big life jackets they’re packed into by their parents. Some parents have tied ropes around their waists and those of their children so they don’t become separated in the event of a capsize. Once ashore people pray, collapse, cheer, hug. They’re offered blankets and bananas and a doctor’s care if needed. They take off their wet clothes and untie the plastic bags they’ve secured around their shoes. Or they look for new shoes from volunteers handing them out because they’ve lost their own or they’re too wet.

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Times twelve is 2,620,728 million.

Record 218,000 Migrants Crossed Mediterranean In October, Says UN (AFP)

More than 218,000 migrants and refugees crossed the Mediterranean to Europe in October -a monthly record and nearly the same number of crossings for all of 2014, the United Nations said Monday. “Last month was a record month for arrivals,” UN refugee agency spokesman Adrian Edwards told AFP, pointing out that “arrivals in October parallelled the entire 2014.” In October, 218,394 people made the perilous crossing — all but 8,000 of them landing in Greece – compared to 219,000 arrivals during all of last year, UN figures showed.]

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These are just the ones that are counted.

Total Of 19 Dead Recovered From Aegean Sea On Sunday (AP)

Greek authorities confirm that the bodies of four more migrants, all men, have been recovered north of the island of Farmakonissi in the eastern Aegean Sea. Four others were rescued and seven are missing. This brings the total number of dead recovered Sunday in the Aegean Sea to 19, in three separate incidents. The number of smuggling boats crossing over to Greece from the nearby Turkish coast fell Sunday as strong winds raked the eastern Aegean Sea, but some still attempted the dangerous crossing.

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Even the NYT wakes up.

Plastic Boat Sinks Off Greece, Killing 11 Refugees (NY Times)

A week of drownings in the Aegean Sea was capped on Sunday by more tragedy when a plastic boat carrying migrants from Turkey capsized and sank off the Greek island of Samos in high winds, killing 11 people including six children, according to Greek officials. Another two bodies were pulled out of the sea off the small island of Farmakonisi, south of Samos, a few hours later, and seven migrants were found dead off the island of Lesbos, according to a Greek Shipping Ministry official. The seven bodies could be from a large wreck on Wednesday in which more than 20 people died, according to the official who spoke on the customary condition of anonymity. “We had several rescue operations today, in several parts of the Aegean,” the official said.

The first instance on Sunday occurred at around 9 a.m., when a plastic boat flipped over in near-gale force winds just 20 meters from the coastline of Samos. Rescuers recovered the body of a woman from nearby rocks and divers found another 10 people trapped in the cabin of the sunken boat, the official said. “There were four women in there, as well as two children and four babies,” she said, adding that 15 people were rescued. Winds were still strong at around noon when the two bodies were found near Farmakonisi. With such strong winds, the Greek Coast Guard ordered vessels to remain anchored in many ports across the country on Sunday. The bad weather has not discouraged migrants from risking the short but dangerous sea crossing from Turkey to Greece. More than 60 have died over the last week after their boats sank in choppy waters, nearly half of them children.

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“The leaders of Europe were told it was going to happen at least two years ago.” “We are going to have more of these things and a lot worse.”

Refugee Crisis Was Not Unexpected, Top UN Official Says (Kath.)

Director-General of the United Nations office in Geneva, Denmark’s Michael Moller, expresses optimism that the agency’s sustainable development goals (SDGs) will help toward ending extreme poverty but he has no illusions about the refugee crisis, stressing that such phenomena will continue. On a recent visit to Athens to celebrated the UN’s 70th anniversary, he recommended that we remember the 1980s.

Does the UN Refugee Agency (UNHCR) have adequate funding? Over 60 million people depend on the UNHCR getting the right funding. But it doesn’t. The needs have grown exponentially over the past several years. There’s donor fatigue, the humanitarian system is now dealing with four or five top-level crises, what we call Level 3, which is testing the system to its limits. The lack of funding has to do with the decreasing quality of our leadership, the fact that we see more and more inwardness, and it has to do with the fact that our approach hasn’t evolved in synch with reality. A very, very deep rethink about the relationship between development aid and humanitarian aid is needed. A lot of the stuff happening now in humanitarian aid really ought to be in development aid, in the prevention side of development aid, long-term stuff. The average time a refugee is in a camp is ridiculous, it’s between 14 and 17 years.

The collective thinking about migration, refugees, doesn’t have a locus, there’s no one place where somebody is sitting thinking about new policies. The UNHCR is a technical organization, the International Organization for Migration (IOM) also. Except for Sir Peter Sutherland, the secretary-general’s special representative for migration and development, but he’s a one-man show, he’s not even supported financially, he hasn’t got a secretary, he pays for his own tickets. It’s at that level of ridiculousness. The crisis we have today, we knew it was going to happen. The leaders of Europe were told it was going to happen at least two years ago. So a little prevention and a little preparation in terms of the narrative to their voters would have gone a long way.

[..] looking at this crisis as an isolated incident doesn’t make any sense whatsoever. We are going to have more of these things and a lot worse. The moment climate refugee problems kick in we are going to be in real trouble, unless we sit down globally and figure out structures and ways to deal with this in the future. Not to reinvent the wheel every damn time that happens, but to rethink completely the humanitarian system, because I guarantee you that it will happen again.

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“..there can be neither caps on asylum seekers nor can the German border be closed to migrants.”.

Merkel’s Refugee Troubles Mount as Allies Clash on Border Plans (Bloomberg)

German Chancellor Angela Merkel faces further coalition discord over the refugee crisis after weekend talks with fellow party leaders failed to identify a common government stance on tackling the biggest influx of migrants since World War II. The continued coalition disagreement threatens another stormy week for the beleaguered chancellor as lawmakers prepare to return to Berlin for a parliamentary session that will again be dominated by the projected arrival of as many as a million asylum seekers in Germany this year. With public concern mounting and party support on the slide, Merkel and Horst Seehofer, the Bavarian state premier and Christian Social Union chief who has demanded she stem the flow of migrants, will address their joint parliamentary caucus Tuesday on efforts to tackle the crisis.

“It worries people that well over 10,000 people come every day across the German-Austrian border without us being able to control this in any way,” Jens Spahn, deputy finance minister and a member of Merkel’s Christian Democratic Union, said late Sunday on ARD television. “We must send a signal that we can’t help everyone in this world who is somehow in need, as hard as it is.” Merkel met for a total of some 10 hours on Saturday evening and throughout Sunday with Seehofer, who heads the CDU’s Bavarian sister party and is her chief coalition critic. Bavaria is the main gateway to Germany for the refugees pouring over the border from Austria, and Seehofer had said the Bavarian state government would take unspecified action if Merkel didn’t meet his demands to curb the number of migrants.

The two leaders agreed on the main goals of controlling immigration and combating the root causes of the crisis “so as to reduce the number of refugees,” and to help integrate those in need, according to a joint position paper e-mailed after the talks. The “most urgent” measure was to pursue the setting up of so-called transit zones along the border with the aim of filtering out economic migrants from those such as Syrian refugees with a genuine claim to asylum. Those arriving from “safe” countries, such as Kosovo or Albania, would be subject to an accelerated asylum process to send them home. A decision on transit zones should be made this week before a Nov. 5 meeting of Germany’s 16 state prime ministers and the three coalition leaders, according to the joint CDU/CSU paper.

That suggests coalition strife ahead. Social Democratic Party chief Sigmar Gabriel, who attended the Chancellery talks on Sunday morning, dismissed the concept of transit zones as “inappropriate” and legally doubtful. “Rather than huge and uncontrollable prison zones on the country’s borders, we need lots of registration and immigration centers inside Germany,” Gabriel told a party meeting on Saturday, according to the SPD website. Steffen Seibert, Merkel’s chief spokesman, said that experts from the federal government and the states will work on the topic of transit zones in preparation for the three party heads’ meeting on Thursday. While the coalition tone on refugees appears to be hardening, Merkel held to her core principles that there can be neither caps on asylum seekers nor can the German border be closed to migrants.

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“Where are the animal spirits to turn us around?” said Charles Diebel at Aviva Investors. “What you see in the bond market is “a lack of confidence in the future.”

Bonds Send Same Ominous Signs No Matter Where in the World (Bloomberg)

Ask any bond trader in Tokyo, London or New York what their view on the global economy is, and you’re likely to get a similar, decidedly downbeat answer. That’s not just because fixed-income types are a dour bunch at the best of times. A quick scan across government debt markets suggests that investors are pricing in the likelihood that growth and inflation around the world will remain tepid for years to come. In Europe, bonds yielding less than zero have ballooned to $1.9 trillion, with the average yield on an index of euro-area sovereign notes due within five years turning negative for the first time. Worldwide, the bond market’s outlook for inflation is now close to levels last seen during the global recession. And even in the U.S., the bright spot in the global economy, 10-year Treasury yields are pinned near 2% – well below what most on Wall Street expected by now.

“Where are the animal spirits to turn us around?” said Charles Diebel at Aviva Investors. “What you see in the bond market is “a lack of confidence in the future.” Diebel says his firm favors sovereign bonds issued by countries that are loosening monetary policy and betting against debt from nations that produce commodities. With the risk of deflation lingering in Europe, China slashing interest rates to combat flagging growth and a raft of indicators fueling concern the U.S. economy is losing steam, it’s not hard to understand why many investors are pessimistic. And the persistent demand for the safety of government bonds also raises thorny questions about whether the Federal Reserve should be raising interest rates when central banks in Europe, Asia and many emerging markets are struggling to revive their own economies.

Appetite for safe assets is so strong in Europe that about 30% of the $6.3 trillion of sovereign bonds in the euro area have negative yields, index data compiled by Bloomberg show. That means buyers who hold to maturity are willing to accept small losses in return for the promise that most of their money will be returned. In the past week alone, yields on about $500 billion of the bonds fell below zero, pushing the average yield for the region’s bonds due within five years to minus 0.025%, the lowest on record, data compiled by Bloomberg show.

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Mason sees the signs but doesn’t understand them.

Apocalypse Now: Has The Next Giant Financial Crash Already Begun? (Paul Mason)

The 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun. Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn. That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world.

John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present. This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.

The underlying cause of this debt glut is the $12tn of free or cheap money created by central banks since 2009, combined with near-zero interest rates. When the real price of money is close to zero, people borrow and worry about the consequences later. Next, let’s look at the price of real things. Oil collapsed first, in mid 2014, falling from $110 a barrel to $49 now, despite a slight rebound in the interim. Next came commodities. Copper cost $4.50 a pound in 2011, but was half that in September. Inflation across the entire G7 is barely above zero, and deflation stalks the southern eurozone. World trade volumes have contracted tangibly since December 2014, according to the Dutch government index, while the value of global trade in primary commodities, which scored 150 on the same index a year ago, now stands at 114.

In these circumstances, the only way in which the expanding credit mountain can be an accurate signal about the future is if we are about to go through a spectacular productivity boom. The technology is there to do that, but the social arrangements are not. The market rewards companies that create labour exchanges for minicab drivers with multibillion-dollar valuations. Hot money chases after computing graduates with good ideas, but that is – at this phase of the cycle – as much an indicator of the stupidity of the money as the brightness of the ideas.

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“I lost most of my money investing in ChiNext stocks, but they are still worth buying..”

Down $4 Trillion, China Faithful Buy Stocks That Hurt Them Most (Bloomberg)

Wu Xin says she’s got a sure-fire plan to recoup losses from the $4 trillion selloff in China’s stock market: pile into equities that hurt her the most. The 28-year-old from Hangzhou has been snapping up shares in China’s small-cap ChiNext Index, undeterred by a tumble earlier this year that erased half the measure’s value in three months. “I lost most of my money investing in ChiNext stocks, but they are still worth buying,” said Wu, an ad saleswoman in the media industry. “I can make the most money from them in a rally, too.” Doubling down on the most volatile equities has become a go-to strategy for China’s 96 million individual investors as the stock market shows early signs of recovery. The ChiNext has rallied 38% from this year’s low in September – three times as much as the benchmark Shanghai Composite Index – and volumes on the small-cap bourse surged to an all-time high last month.

The rush back into the bear market’s biggest losers shows Chinese investors are still embracing risk, even as the economy heads for its weakest annual expansion since 1990. The danger is that another market downturn could saddle individuals with even deeper losses – a double whammy that Bocom International Holdings Co. says could do lasting damage to investors’ appetite for stocks. “If the ChiNext plunges again, it’s going to hurt,’’ said Hao Hong, the chief China strategist at Bocom in Hong Kong, who predicted the stock-market rout in June. When small-cap shares are rising this fast, buying is hard to resist. Zhu Zujuan, a 60-year-old retiree, says she purchased shares of Dingli Communications, a maker of wireless network testing gear, last Tuesday at 27.2 yuan apiece.

After a tea date with friends, she came back home to find the stock had rallied to 30 yuan – a 10% gain in a few hours, without any obvious news. “The market cap of ChiNext stocks is usually small, so it’s easy for them to rise,” Zhu said from Hangzhou. “I know the risk is high, but so is the return.” The ChiNext’s rally from its September low has extended this year’s gain to 68%, despite a tumble of as much as 55% from its June peak. Investors are increasingly trying to lock in quick gains. Average daily turnover in ChiNext shares surged 64% in October from the previous month, with about 3.5% of the entire market capitalization changing hands on Oct. 23. That was a record proportion relative to Shanghai, where turnover amounted to 1.5% of bourse’s market value.

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No, the structure of the EU is the one big mistake that outdoes them all.

Enlargement And The Euro Are Two Big Mistakes That Ruined Europe (Münchau)

There has hardly been a year when the EU has not been on the brink of some crisis: banking, sovereign debt, Russia’s annexation of Crimea and now refugees. You can always point fingers at individual politicians and assign blame. But it is highly implausible that the EU’s serial failures can always be explained as the product of accident and malice. I put it down to two catastrophic errors committed during the 1990s and at the beginning of this millennium. The first was the introduction of the euro; the second, the EU’s enlargement to 28 members from 15 a couple of decades ago. You might agree with one or other of these statements, or with neither of them. But few people will agree with both. I was among those who supported monetary union at the time of its introduction.

Advocates of the euro at the time came from two different groups, who struck a Faustian Pact. Members of the first group believed the euro as constructed would fail, and hoped it would somehow be fixed. The others thought the system would stay rigid, and bend the economies of its members into a new shape. This latter group knew that, to withstand the rigours of a fixed-exchange system that resembles nothing so much as the gold standard, countries would have to adjust to economic shocks through shifts in wages and prices — a course, they believed, that the euro’s members would be forced to take. The admission that the euro was a mistake should not be confused with a desire to dissolve it. That would be even more catastrophic. It is merely a recognition that we are trapped in a dysfunctional monetary system.

But how does enlargement play into this? This is not an argument about any particular member state with whose actions one happens to disagree. Nor is it an argument about the principle of enlargement, which is fundamental to the EU. My quarrel is with the speed of accession, and the criteria that aspiring members have to meet. Just as countries have maximum absorption capacities for migrants, the EU has a maximum absorption capacity for new members. I have no idea what that number is in any given time period, but it surely is not 13 members in a single decade. Enlargement affected Europe’s ability to respond to the shocks of subsequent years in two ways. First, it forced the EU to take its eye off the ball at a critical time when it should have focused on building the institutions needed to make the euro work.

Second, enlargement meant that EU countries that were not in the eurozone suddenly found themselves in the majority. That shift naturally shaped the EU’s own agenda. I recall the obsession during those years with competitiveness, a typical small-country economic issue. Debates on the reform of Europe’s treaties during those years focused on voting rights and the protection of minorities. It was the overwhelming view of European officials and members of the European Parliament that the eurozone itself did not need to be fixed. At that time it would have been comparatively easy to set up a banking union. But once the crisis set in, and banks suffered huge losses, countries could no longer share their deposit insurance schemes, let alone to create a single one for everybody.

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“It is a sick sector, having to nurse their own capital positions.”

Eurozone Banks Still Swamped With Bad Loans (Telegraph)

European banks are failing to cut their exposures to bad loans, according to a study from law firm Linklaters, leaving the sector weak and barely able to support economic growth. Banks had scrambled to cut bad loan levels and improve their capital buffers in the run up to tough stress tests in 2014, but have failed to make progress since then. The eurozone lenders are sitting on bad loans totalling €826bn, down just €15bn from €841bn in November of last year. The banks have tried to sell off portfolios of non-performing loans to investors who want to take on the assets. Funds have raised €40bn to buy up those assets but banks are still racking up more bad loans themselves, meaning the overall level is falling only very slowly. So far banks have “barely touched the tip of the iceberg,” said Linklaters’ Edward Chan. “It still means you don’t have the banks as a credible engine for growth. It is a sick sector, having to nurse their own capital positions.”

“You don’t have any source of funding for growth, which if you look at wider eurozone picture is a bit depressing.” Banks in Greece and Italy have the highest proportions of bad loans on their books, Linklaters found. A total of 3.92pc of all European bank assets are non-performing loans. By contrast the American banking system is in much better health – only 2pc of its assets are non-performing loans, just half as bad as the eurozone’s rate. The ECB has taken over much of the regulation of the biggest eurozone banks, which had led to expectations of more rapid action on banks’ balance sheets. Linklaters’ Andreas Steck believes the authority will soon get tougher on weak banks. “The ECB is clearly working hard to deal with non-performing loans resolution and with a working group now in place to tackle these loans, we will see them engaging in a much stronger fashion with national competent authorities and banks to ensure that further action is taken ahead of next year’s stress test,” he said.

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Brussels is truly an insane city.

Europe Prolongs Its Diesel Problem (Bloomberg Ed.)

Responding to public outrage over the Volkswagen diesel emissions scandal, the European Union rightly pledged to toughen emissions testing and enforce limits on nitrogen oxides (NOx), a hazardous type of diesel pollutant. But those moves amount to very little, now that the EU is giving the auto industry until 2020 to comply, and then only partially. The delay will just prolong the shift away from diesel. While it will be useful to have on-road testing, starting in 2017, EU regulators decided Wednesday to allow new car models to exceed legal levels of NOx by 110% until the beginning of 2020. Even after that, they can go over the limit by 50%. The adjustment period for existing car models is still longer. The concessions might make sense if the technology to meet the limit had yet to be developed. But selective catalytic reduction and other NOx-limiting mechanisms have been available for years.

Carmakers argue that they impose an added hassle and expense on consumers. But it is precisely the kind of burden that consumers must consider in deciding whether to buy a diesel car rather than an electric or a hybrid. Delaying the emissions limits compounds the market-distorting effects of the Europe’s initial decision, in the mid-1990s, to promote diesel engines with lower excise taxes and relatively lax environmental standards. These benefits explain why 35% of cars in the EU are diesel. American carmakers may be quietly cheering Europe’s folly, as it could prompt China to drop European car emissions standards in favor of stricter U.S. ones. What’s worse for Europe is that the delay on diesel rules undermines its credibility on limiting emissions. With key environmental talks coming up in Paris in just over a month, Europe has promised ambitious greenhouse gas reductions by 2030. But can it be trusted to follow through?

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Puerto Rico needs debt restructuring.

Puerto Rico Doesn’t Need Bankruptcy (WSJ)

Debt service will consume less than 17% of Puerto Rico’s consolidated budget this fiscal year. In the general-fund budget, which does not include government-owned corporations and agencies, debt service is below 16%. Neither number sounds like grounds for declaring bankruptcy. Factor in all the fat in government spending that could be cut, and the case for walking away from obligations to creditors is even weaker. But the U.S. is entering a presidential-election year and pollsters say voters tend to choose the candidate who “cares about people like me.” Puerto Ricans living on the island don’t vote, but those on the mainland do. What could say “caring” to these Hispanic voters in places like Florida, Ohio and Pennsylvania more than federal permission to write-down Puerto Rico’s $73 billion in debt?

Right on cue, Treasury wants Congress to approve legislation that would allow Puerto Rico to declare bankruptcy. In an analysis posted on its website, Treasury finds debt service as a%age of the general-fund budget is actually 38%, which is to say that it believes the way Puerto Rico has been calculating its debt-service burden for the last 40 years is wrong. It would be interesting to know how that got by all the credit-rating firms, lawyers and bond underwriters. It is also worth noting that Puerto Rico’s debt burden includes $18.5 billion in debt that under the island’s constitution must be serviced before any other payments come out of the general fund.

In a July 28 letter to Senate Finance Committee Chairman Orrin Hatch, Treasury Secretary Jacob Lew wrote, “I am deeply concerned that a protracted and disorderly restructuring process will cause long-term damage to the health, safety, and financial well-being of the families living and working in Puerto Rico.” Treasury counselor Antonio Weiss ratcheted up the alarm in Oct. 22 Senate testimony. “Puerto Rico’s fiscal crisis is escalating,“ he said, adding “that without federal action it could easily become a humanitarian crisis as well.” Such hyperbole is designed to rush Congress into approving the bankruptcy law.

Yet there is little evidence that Puerto Rico faces a humanitarian crisis any more than the heavily indebted states of California or Illinois. And as to the deteriorating fiscal environment, it seems to be largely the work of Gov. Alejandro García Padilla, who has been signaling markets that default is a policy goal. As Carlos Colón de Armas, a professor of finance at the Graduate School of Business at the University of Puerto Rico, told me last week, “If, instead of doing everything it can do in order not to pay, the government of Puerto Rico were doing everything it could do in order to pay, things would be very different.”

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Farmers are addicted to cheap handouts. Not even their fault.

Brexit Is A Life Or Death Matter For Britain’s Farmers (AEP)

Land prices will crash. British agriculture will face a traumatic shock, and 90pc of the country’s farmers will be ruined. There will be a wave of debt foreclosures by banks, akin to the America Dustbowl and the Grapes of Wrath. A fresh seed of discord will be sown between England, Scotland, and Wales, imperilling the UK. This is what is likely to happen if Britain votes to leave the EU next year, according to a confidential 70-page report issued to clients by the specialist consultants Agra Europe. It is not a propaganda document. It is a detailed text, carefully researched, written for industry insiders. It is not to be dismissed lightly. British farmers currently receive 60pc of their income from EU subsidies and environmental subsidies. They would lose most of this at a stroke unless the British government guaranteed compensating support of one kind or another, and so far it has clarified nothing.

Yet like all Brexit and counter-Brexit assertions, the Devil is in the assumption. Agra Europe takes it as a given that David Cameron or any other British prime minister will do little to prevent such a bloodbath running its course if the British people vote to withdraw from Europe, and say goodbye to the Common Agricultural Policy (CAP). “What is certain is that no UK government would subsidise agriculture on the scale operated under the CAP,” it states. This is conjecture. Few Brexit advocates – including ardent free-traders – suggest that subsidies should be slashed. They accept that agriculture is strategic, even iconic, and that society has a special duty of care to farmers. Let us call it ‘une certaine idée de l’Anglettere’, to borrow from Charles de Gaulle.

“Our view is that no farmer in the UK should left out of pocket as a result of Brexit. Preserving our farms and countryside is a very high priority,” says Ian Milne from Global Britain. “Farmers and fishermen should receive exactly what they received before, for at least five years. We should recruit the excellent agricultural colleges of Cirencester, Reading, and Manchester, and those in Scotland, to invent a new model of subsidies. We paid £12.3bn into the EU budget in 2014, which we would no longer have to pay, so there would be more than enough money.” Agra Europe’s report is worth reading. It is part of the “political discovery” that forces us to confront the hard realities the Brexit. We are all weary of rhetoric at this point. Direct CAP payments to Britain will average £2.88bn a year from 2014-2020.

This is a trivial sum for those who live and breath the world of global finance, almost a rounding error for Apple, Exxon, or JP Morgan. In 2013, these subsidies were worth €200 a hectare (£58 an acre) and made up 35-50pc of total gross income. “Only the super-efficient, top 10pc could survive without them,” it said. Most farmers have thin margins, if they have any at all. DEFRA figures for 2013-2014 show that a fifth of cereal and grazing livestock farms failed to make a profit, and this was before the latest leg down in global commodity prices. Average cereal farms earn around £100,000, and £55,000 of this comes from the EU single farm payment. The European Commission estimates that land prices would fall 30pc across the EU if CAP subsidies were abolished. “For farmers who have taken out debt against the value of their land, a loss of value could be fatal. 18pc of farms have current liabilities that exceed current assets,” says the Agra Europe report.

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This looks far too easy given that over half of loans are non-performing and austerity bakes more into the cake each passing day.

Greece Sets Terms for Aiding $15.9 Billion Bank Recapitalization (Bloomberg)

Greece’s government detailed how it will help banks plug the €14.4 billion hole in their books identified by the ECB, paving the way for the lenders to seek cash from investors for the second time in 18 months. The ECB expects the banks to raise at least €4.4 billion from shareholders and bondholders, sufficient to meet the shortfall identified under baseline macroeconomic assumptions in its Asset Quality Review, the central bank said Saturday. The state-owned Hellenic Financial Stability Fund is ready to inject the €10 billion identified in the ECB’s adverse scenario, offering 25% through common shares with full voting rights in the lenders, and the rest via contingent convertible securities, according to a government statement released late on Sunday night, in Athens.

The mix between shares and CoCos for the state’s participation in the capital raising plans will largely determine the ownership structure of battered lenders, and therefore investors’ appetite to chip in. U.S. billionaire Wilbur Ross, who holds a stake in Eurobank Ergasias, said Saturday Greece should only inject funds through CoCos to prevent the dilution of the stakes held by existing shareholders, which have already dropped more than 70% this year. “Investors will not be comfortable with committing new equity capital to banks that are effectively nationalized,” Ross said in a statement. “Since it was the actions of government that caused the imposition of capital controls and since these in turn have led to the need for equity, it would be nonsensical for the government now to dilute shareholders.”

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Starting to sound like a he said she said story.

IMF Pushes Europe For Formal Restructuring Accord On Greek Debt (Bloomberg)

Eurozone countries must commit to a formal restructuring of Greece’s debt before the IMF will lend new money to the country, according to one of the IMF’s top officials. Pledges to review Greece’s debt servicing won’t be enough unless they’re accompanied by specific terms for paring back the borrowing burden, David Lipton, the IMF’s first deputy managing director, said in an interview in Washington. Greece received an €86 billion bailout in August from the 19-nation currency bloc, which now wants the IMF to provide further support. “We want a debt operation agreed between Greece and its creditors,” Lipton said. “For us to go forward, we want more than a general assurance that the matter will be handled, with enough specific details on how it will be handled to assure the fund that Greece’s debt service will be on a sustainable path.”

Greek Prime Minister Alexis Tsipras has requested a new IMF program, which would replace a dormant one that’s on track to expire in March. Any new IMF program would have to be approved by an executive board representing the fund’s 188 member nations. Lipton said the amount of new IMF funding hasn’t been decided. Germany and other creditor nations say the Washington-based IMF, which lends to countries with balance-of-payments troubles, should play a financial and technical role in shoring up Greece’s economy and restoring the nation’s access to financial markets. As a result, fund participation is a central goal in the euro area’s bid to make Greece’s third bailout its last. The bailout loans Greece has amassed over its three rescues are the focus in the debt relief talks, since Greece’s private sector debt was already restructured in early 2012.

Many euro- area nations have said writing down the principal of the loans would be a “red line,” while indicating they might agree to better servicing terms like lower rates and longer loan maturities that would reduce how much Greece has to pay back over time. A technical group in Brussels is studying details. Greece in June became the first advanced country to miss a debt payment to the IMF. The country cleared its arrears to the fund in July. In 2010, worried that a Greek default might trigger a European banking crisis, the fund’s board agreed to waive a condition of IMF bailouts that required Greece’s debt to be sustainable. But member countries outside the euro zone are unlikely to give Greece special treatment this time. Lipton said the IMF has four priorities for a new program: implementation of policy pledges, fiscal structural policies needed for medium-term sustainability, fixing the banking sector, and addressing the debt.

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You bet.

Things Can Get Even Worse For Renewable Energy Companies (Dizard)

Perhaps the most immediate threat to renewables is developing at the state level, where elected legislators and appointed regulators are beginning to chip away at the biggest source of support for the US solar industry: “net metering”. These are schemes, most prominently in California, but also in Arizona, New Jersey and Hawaii, under which you could be paid at the retail power rate if your solar panels were sending back more power to the electric company than you were using. Net metering sounds virtuous, but in its simple formulation it leaves the cost of maintaining back-up power, i.e. that runs at night and on windless days, including all those fossil fuel generators, substations and transmission and distribution lines, spread over the other ratepayers.

In Arizona, a public power authority that serves Phoenix has already started charging solar panel users about $50 per month for the fixed costs of maintaining the traditional grid. Even in California, hearings are under way on whether to change the net-metering law to impose fixed charges on solar panel owners or renters who rely on the grid for back-up. Along with the social equity case being made against renewables net metering, there is a small but influential group of transmission engineers who are worried about prospective decreases in the reliability of the grid caused by the increased penetration of intermittent renewables. One such problem is “overgeneration”, which is created when the grid operator must balance incoming energy that it is in effect required to purchase, against insufficient demand.

This occurs frequently in California during sunny days, when rooftop solar panels, large solar farms and wind turbines push energy to consumers who do not need all of it. Also, the grid operators are finding that getting a renewables-intensive grid to recover from a blackout, never mind a massive cascading one, will be much more challenging than it has been with a fossil-fuel dependent grid. So a massive, weeks-long shutdown is another potential risk for renewables investors. Un-air conditioned Americans would shed their green covering very quickly.

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Home Forums Debt Rattle November 2 2015

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    Just another 6-year old dead boy washed up on Lesbos Nov 2 2015 • Industrial-Scale Misery As Soaked Refugees Pour Onto Greece’s Lesbos (CBC) • Record
    [See the full post at: Debt Rattle November 2 2015]

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    V. Arnold
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    The pictures are heart-breaking.
    This is the world we live in; change it if you can…
    But in the end; this is the world we live in.

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