May 262016
 
 May 26, 2016  Posted by at 8:42 am Finance Tagged with: , , , , , , , , , , ,


NPC Graf Zeppelin over Capitol 1928

Britain’s Property Market Is Going To Implode (BI)
Trillions in Debt—but for Now, No Reason to Worry (WSJ)
IMF: No Cash Now for Greece Because Europe Hasn’t Promised Debt Relief (WSJ)
China’s ‘Feud’ Over Economic Reform Reveals Depth Of Xi’s Secret State (G.)
Chinese Officials To Ask US Counterparts When Fed Will Raise Rates (BBG)
Fear Of UK Steel Sector’s ‘Death By 1,000 Cuts’ (Tel.)
Varoufakis: Australia Lives In A Ponzi Scheme (G.)
Venezuela Sells Gold Reserves As Economy Worsens (FT)
Wall Street Crime: 7 Years, 156 Cases and Few Convictions (WSJ)
Quantitative Easing and the Corruption of Corporate America (DMB)
Brexit, And The Return Of Political Lying (Oborne)
We Have Entered The Looting Stage Of Capitalism (PCR)
France Digs In to Endure Oil Strike With Release of Fuel Reserve (BBG)
Union Revolt Puts Both Hollande’s Future And France’s Image On The Line (G.)
Bayer Could Get ECB Financing For Monsanto Bid (R.)
Putin Closes The Door To Monsanto (DDP)

No doubt here. Ditto for all bubbles.

Britain’s Property Market Is Going To Implode (BI)

Property prices in Britain may be surging due to a horrendous imbalance of supply and demand — but the market is poised to implode. Why? Because Britons are not earning enough money to either get on the housing ladder or are spending such a large portion of their wages on mortgages that may not be sustainable. Well, not unless everyone suddenly gets a huge pay rise over the next year or so. That’s the assumption in the latest figures from think tank Resolution Foundation, which show that lower- and middle-income households are spending 26% of their salaries on housing, compared to 18% back in 1995. In London, households spend 28% of their income on housing. The think tank said this is the equivalent to adding 10 percentage points onto income tax.

Only the rich are not feeling the pressure of rising house prices. Higher-income households spend 18% of their income on housing, compared to 14% in 1995. The average price to buy a house in Britain now stands at £291,504, according to the Office for National Statistics. Meanwhile, the average London property price is at a huge £551,000. To put this into perspective, Resolution Foundation estimated that median income, at £24,300, is only around 3% higher than it was when the credit crunch hit in 2007/2008. [..] the house price-to-earnings ratio is near the pre-crisis peak. Considering the average deposit to secure a home is around 10% of the total property price, this means Britons are taking on huge amounts of debt and eating into the little savings they have to buy a home.

[..] the market is poised on a knife edge between interest rates and wages. If interest rates were to rise — and they will eventually — it could prove a major problem for the Britons who already spend 25-28% of their salaries on housing. Similarly, if another downturn depresses wages, mortgage payments will become an increasing portion of their income even without an interest rate increase. That situation is pricing out low- and middle-income people from the market, as the chart shows. Ownership rates in this group have sunk from nearly 60% in 1997 to just 25% today. That’s how fragile the housing market is: With those buyers unable to afford to buy, the market is dependent on a thinner slice of owners, whose incomes are increasingly stretched by housing costs, who can’t afford a decrease in wages, and who may not be able to afford any increase in interest.

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“Global debt—including households, businesses and governments—has risen from 221% of GDP at the end of 2008 to 242% at the end of the first quarter.”

Trillions in Debt—but for Now, No Reason to Worry (WSJ)

If current trends persist through the end of the year, U.S. households will owe as much as they did at the peak of borrowing in 2008. Global debt has already topped 2008 levels and keeps rising. That’s pretty astonishing so soon after debt-driven crises in the U.S. and Europe and endless worries about too much borrowing in Japan, China and emerging markets. But for all the hand-wringing, a near-term debt crisis is unlikely. Lower interest rates mean debt payments are far lower than they were before the crisis. In the U.S., household debt compared with the overall economy is way down. And overseas, loans can easily be rolled over. Yet even with low rates, the cycle of borrowing and rolling over loans has a cost. People, governments and businesses spend now instead of later, likely reducing future growth.

The cycle also allows borrowing to go on for years, which can be good—allowing reform to take hold—or not, allowing bad policies to go on almost indefinitely. U.S. households owed $12.25 trillion at the end of the first quarter, up 1.1% from the end of 2015, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, released Tuesday. If the first quarter repeats itself through the end of the year, U.S. household debt will approach its peak of $12.68 trillion, which it hit in the third quarter of 2008. Many people remember that quarter because it’s when the global financial system went off a cliff. This time is different because short-term interest rates have been stuck near zero since then. For U.S. consumers, that means household debt-service payments as a percent of disposable personal income are at their lowest level since at least 1980, despite a much higher debt load. In addition, more loans are going to higher-quality borrowers.

[..] Low rates have had an even more dramatic impact overseas, where economies are weaker or less stable. Global debt—including households, businesses and governments—has risen from 221% of GDP at the end of 2008 to 242% at the end of the first quarter. But the cost of interest payments, as a share of GDP, has fallen to 7% from a peak of 11%, according to J.P. Morgan. Japan is the prime example of how low interest rates can change the rules of the game. At 400% of GDP, Japan’s debt level is by far the highest in the world. One of the great mysteries of finance is why investors lend the government money for negligible or negative yields when it seems impossible for Japan to pay off its debt.

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“..no one does what’s in Greece’s best interests..”

IMF: No Cash Now for Greece Because Europe Hasn’t Promised Debt Relief (WSJ)

A senior IMF official Wednesday said it can’t help Europe with fresh emergency financing for Greece because Athens’s creditors haven’t yet committed to detailed debt relief. The comments show that the agreement touted by European finance ministers last night to release fresh bailout cash for Greece hasn’t nailed down the key elements the IMF says are critical to finally return the debt-laden country to health. Rather, the IMF’s reserved support for the deal has paved the way for Germany to approve new funds and sets the stage for more tough negotiations later this year. “Fundamentally, we need to be assured that the universe of measures that Europe will to commit to…is consistent with what we think is needed to reduce debt,” the senior official told reporters on a conference call. “We do not yet have that.”

But the official said Europe’s acknowledgment that debt relief is needed and would be detailed later this year was enough to win the fund’s conditional backing. “All the stakeholders now recognize that Greek debt is…highly unsustainable,” the official said. “They accept that debt relief is needed, they accept the methodology that is needed to calibrate the necessary debt relief. They accept the objectives of gross financing needs in the near term and in the long run. They even accept the time tables.” Many outside economists see the deal as papering over the differences and once again prolonging the crisis. “Summary of Eurogroup: Germany always wins, IMF caves under pressure from Germany and U.S., no one does what’s in Greece’s best interests,” said Megan Greene at Manulife and John Hancock Asset Management. Marc Chandler at investment bank Brown Brothers Harriman called the deal a “paper charade” that saves Europe more than it does Greece.

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Li wants more debt, Xi at least sees the danger in that.

China’s ‘Feud’ Over Economic Reform Reveals Depth Of Xi’s Secret State (G.)

It was hardly a headline to set the pulse racing. “Analysing economic trends according to the situation in the first quarter: authoritative insider talks about the state of China’s economy,” read the front page of the Communist party’s official mouthpiece on the morning of Monday 9 May. Yet this headline – and the accompanying 6,000-word article attacking debt-fuelled growth – has sparked weeks of speculation over an alleged political feud at the pinnacle of Chinese politics between the president, Xi Jinping, and the prime minister, Li Keqiang, the supposed steward of the Chinese economy.

“The recent People’s Daily interview not only exposes a deep rift between [Xi and Li], it also shows the power struggle has got so bitter that the president had to resort to the media to push his agenda,” one commentator said in the South China Morning Post. “Clear divisions have emerged within the Chinese leadership,” wrote Nikkei’s Harada Issaku, claiming the two camps were “locking horns” over whether to prioritise economic stability or structural reforms. The 9 May article – penned by an unnamed yet supposedly “authoritative” scribe – warned excessive credit growth could plunge China into financial turmoil, even wiping out the savings of the ordinary citizens.

As if to hammer that point home, a second, even longer article followed 24 hours later – this time a speech by Xi Jinping – in which the president laid out his vision for the Chinese economy and what he called supply-side structural reform. “Taken together, the articles signal that Xi has decided to take the driver’s seat to steer China’s economy at a time when there are intense internal debates among officials over its overall direction,” Wang Xiangwei argued in the South China Morning Post. Like many observers, he described the front page interview as a “repudiation” of Li Keqiang-backed efforts to prop up economic growth by turning on the credit taps.

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“A less aggressive Fed stance is in China’s interest.” Look, the dollar will rise no matter what the Fed does. China must devalue.

Chinese Officials To Ask US Counterparts When Fed Will Raise Rates (BBG)

Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Fed interest-rate increase in June, according to people familiar with the matter. The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as their nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private. In China’s view, if the Fed does lift borrowing costs, a July move would be preferable, the people said. China’s exchange rate has already been weakening as expectations rise for the U.S. central bank to boost its benchmark rate for the first time since it ended its near-zero policy in December with a quarter%age point increase.

It’s not unusual for senior officials to press each other on their policies, and any inquiries by the Chinese about the Fed would follow repeated expressions of concern from the U.S. about China’s intentions with its exchange rate. The Treasury Department put China on a new currency watch list last month to monitor for unfair trade advantages. “The Chinese side will argue that the U.S. should tread cautiously as it tightens monetary policy and avoid any surprises,” said Mark Williams, chief Asia economist at Capital Economics in London, who participated in U.K.-China meetings when working at Britain’s Treasury. “The Federal Reserve will make its decision solely on what it deems best for the U.S. economy, but it is clear that concerns about China have influenced its thinking about the balance of risks facing the U.S.”

[..] “Chinese officials are pretty anxious about the Fed as a June rate hike – which is not fully discounted in the market – may boost the dollar,” said Shen Jianguang, chief Asia economist at Mizuho in Hong Kong. “This could pose a threat or make it difficult for the PBOC to keep a stable RMB exchange rate,” he said, referring to the People’s Bank of China’s management of the renminbi, another term for the yuan. “A less aggressive Fed stance is in China’s interest.”

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Trying to rewrite UK pensions laws just to sell one company. Wow.

Fear Of UK Steel Sector’s ‘Death By 1,000 Cuts’ (Tel.)

Tata has refused to rule out holding on to its crisis-hit British steel division, raising fears that the business could suffer “a death by a thousand cuts”. Delivering annual results for the Tata’s global steel business, Koushik Chatterjee, executive director, declined to give details on the board’s thoughts on the seven bids the company has received for the loss-making UK plants. But pressed on whether Tata could do a U-turn and hold on to the business – which the Government has said it is willing to take a 25pc stake in and offer financial support to if this will keep it alive – he refused to deny this was an option “I don’t think we have a case as yet,” said Mr Chatterjee. “There is lots of focus only on a sale.” The results announcement – which showed Tata Steel’s revenues down 6pc to £11.9bn and an annual loss of £309m – echoed Mr Chatterjee, saying: “The board… is actively reviewing all options for the Tata Steel UK business, including a potential sale.”

Sajid Javid, the Business Secretary, met with Tata’s directors on Monday night for several hours ahead of their monthly meeting, which considered the bids. It is thought Mr Javid sees Tata keeping the UK business as a way of retaining a viable steel industry in the Britain, after bidders signalled their reluctance to take on the Tata pension scheme, which has a £500m deficit. Ministers are this week expected to start consultations on controversial proposals to restructure the pension scheme [..] The changes would alter the way pension payments are calculated by swapping from RPI inflation to the lower CPI, potentially shaving billions from the scheme’s liabilities. However, such a move would require a change off law and could set what some pensions experts have described as a dangerous precedent.

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Like Britain, like New Zealand, like Canada.

Varoufakis: Australia Lives In A Ponzi Scheme (G.)

Varoufakis’s answers are quick, sharp and eloquent – and ready. He barely needs a pause when asked what he’d do if suddenly installed as Australia’s treasurer, before he’s firing off a prescription for the economy. “The first thing that has to happen in this country is to recognise two truths that are escaping this electorate, and especially the elites. “Firstly, Australia does not have a debt problem. The idea that Australia is on the verge of becoming a new Greece would be touchingly funny if it were not so catastrophic in its ineptitude. Australia does not have a public debt problem, it has a private debt problem. “Truth number two: the Australian social economy is not sustainable as it is. At the moment, if you look at the current account deficit, Australia lives beyond its means – and when I say Australia, I mean upper-middle-class people. The luxurious lifestyle is not supported by the Australian economy.

It’s supported by a bubble, and it is never a good idea to rely on the proposition that a bubble will always be there to support you. “So private debt is the problem. And secondly, because of this private debt, you have a bubble, which is constantly inflated through money coming into this country for speculative purposes.” Varoufakis is unequivocal in his conviction that current growth – which he likens to a Ponzi scheme – needs to be replaced with growth that comes from producing goods. “Australia is switching away from producing stuff. Even good companies like Cochlear, who have been very innovative in the past, have been financialised. They’re moving away from doing stuff to shuffling paper around. That would be my first priority [if I were Australian treasurer]: how to go back to actually doing things.”

Varoufakis wouldn’t be the first to compare the Australian economy to a Ponzi scheme. Economist Lindsay David has made a similar criticism of the housing market, and has also heavily criticised Australia’s reliance on Chinese investment. David and fellow economist Philip Soos have predicted the economy is heading for a crash, and Varoufakis thinks they might be right. He is quick to point out that crashes can never be predicted, but he is in little doubt that it will happen if Australia doesn’t change direction soon. “There is no doubt, if you look at the pace of house prices over the past 20 years in Australia and the pace of value creation; they’re so out of kilter that something has to give.”

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US revenge on Chavez is nearing completion.

Venezuela Sells Gold Reserves As Economy Worsens (FT)

Venezuela’s gold reserves have plunged to their lowest level on record after it sold $1.7 billion of the precious metal in the first quarter of the year to repay debts. The country is grappling with an economic crisis that has left it struggling to feed its population. The OPEC member’s gold reserves have dropped almost a third over the past year and it sold over 40 tonnes in February and March, according to IMF data. Gold now makes up almost 70% of the country’s total reserves, which fell to a low of $12.1 billion last week. Venezuela has larger crude reserves than Saudi Arabia but has been hard hit by years of mismanagement and, more recently, depressed prices for oil. Oil accounts for 95% of its export earnings. Despite the recent price rebound, declining oil output is likely to take a further toll on the economy. The IMF forecasts the economy will shrink 8% this year, and 4.5% in 2017, after a 5.7% contraction in 2015.

Inflation is forecast to exceed 1,642% next year, fueled by printing money to fund a fiscal deficit estimated at about 20% of GDP. Venezuela began selling its gold reserves in March 2015, according to IMF data. At roughly 367 tonnes, Venezuela has the world’s 16th-biggest gold reserves, according to the World Gold Council. In contrast, China and Russia both added to their gold holdings this year, the data show. Gold prices have risen 15% this year. Last year Venezuela’s central bank swapped part of its gold reserves for $1 billion in cash through a complex agreement with Citi. The late president Hugo Chávez had said he would free Venezuela from the “dictatorship of the dollar” and directed the central bank to ditch the US dollar and start amassing gold instead. In 2011, as a safeguard against market instability, Chávez brought most of the gold stored overseas back to Caracas.

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What an incredible charade this has turned into.

Wall Street Crime: 7 Years, 156 Cases and Few Convictions (WSJ)

The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found. The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring. Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000.

Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. They include Mr. Heinz, the former UBS employee. One of the few successful government cases was overturned Monday. A federal appeals court tossed civil mortgage-fraud charges and a $1 million penalty against Rebecca Mairone, a former executive at Countrywide Financial Corp., now part of Bank of America Corp. The court also threw out a related $1.27 billion penalty against Bank of America. Representatives of Ms. Mairone and the bank this week welcomed the verdict, while the Justice Department, which brought the cases, declined to comment.

There are plenty of possible explanations for the small number of successful cases. For starters, much of the institutional conduct during and after the financial crisis didn’t break the law, said law-enforcement officials. Even when the government has been able to prove illegal activity, it has rarely been traced to the upper echelons of big banks. “The typical scenario is not that the bank has this plan for world domination being cooked up by the chairman and CEO,” said Adam Pritchard, a law professor at the University of Michigan. “It’s some midlevel employee trying to keep his job or his bonus, and as result the bank gets into trouble.”

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“The Fed might want to imitate the ECB but may be restricted from doing so by its charter..” “We wouldn’t discount the possibility it will try to amend, or get around, any prohibitions, however.”

Quantitative Easing and the Corruption of Corporate America (DMB)

[..] corporate leverage is hovering near a 12-year high and domestic capital expenditures have plunged. In the interim, reams of commentary have been devoted to share buybacks and with good reason. Companies reducing their share count have, at least in recent years, been where the hottest action is, courtyard-seat level action. But now, it looks as if the trend is finally cresting. A fresh report by TrimTabs found that companies have announced 35% less in buybacks through May 19th compared with the same period last year. And while $261.5 billion is still respectable (for the purpose of placating shareholders), it is nevertheless a steep decline from 2015’s $399.4 billion. Even this tempered number is deceiving – only half the number of firms have announced buybacks vs last year.

Have U.S. executives and their Boards of Directors finally found religion? We can only hope. The devastation wrought by the multi-trillion-dollar buyback frenzy is what many of us learned in Econ 101 as the ‘opportunity cost,’ or the value of what’s been foregone. As yet, the value of lost investment opportunities remains a huge unknown. In the event doing right by future generations does not suffice, executives might be motivated to renounce their errant ways because shareholders appear to have stopped rewarding buybacks. According to Marketwatch, an exchange traded fund that affords investors access to the most aggressive companies in the buyback arena is off 0.8% for the year and down 9.8% over the last 12 months.

The hope is that Corporate America is at the precipice of an investment binge that sparks economic activity that richly rewards those with patience over those with the burning need for instant gratification. The risk? That central bankers whisper sweet nothings the likes of which no Board or CFO can resist. Mario Draghi may already have done so. In announcing its latest iteration of QE, the ECB added investment grade corporate bonds to the list of eligible securities that can satisfy its purchase commitment. Critically, U.S. multinationals with European operations are included among qualifying issuers. As Evergreen Gavekal’s David Hay recently pointed out, McDonald’s has jumped right into the pool, issuing five-year Euro-denominated paper at an interest rate of a barely discernible 0.45%.

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Yeah, like it was ever gone.

Brexit, And The Return Of Political Lying (Oborne)

During the run-up to the Iraq invasion, intelligence officers would hand ministers an estimate, an allegation, a straw in the wind, in certain cases (the 45-minute claim being the most notorious example) an outright fabrication. Tony Blair’s office would then bless it with the imprimatur of a government assessment, usually employing vague wording — in the hope that the media would repeat and then amplify the message. Cameron and Osborne have become masters of this kind of politics. ‘We’re paying down Britain’s debts,’ said David Cameron in 2013. This was a straight lie: the national debt was soaring as he spoke. ‘When I became Chancellor,’ observed Osborne last year, ‘debt was piling up.’ True – and he has been piling it up ever since, even now rising by £135 million a day.

This kind of deception works: polls show that only a minority of voters realise that the national debt is still rising. George Osborne has now converted the Treasury into a partisan tool to sell the referendum, exactly as Tony Blair used the Joint Intelligence Committee to make the case for war against Iraq. Before becoming Chancellor, Osborne was critical of Gordon Brown’s Treasury, and rightly so, because it had been so heavily politicised. He rightly stripped the Treasury of its forecasting function and created an independent Office for Budget Responsibility — an encouraging sign that he was determined to avoid the culture of deceit which was such a notable feature of the Brown/Blair era. It is therefore very troubling that the Office for Budget Responsibility has not come anywhere near the two Treasury dossiers that make the case for the EU.

It’s easy to see why – they would point out straight away that the Chancellor has been engaged in fabrication. For example, let’s take a hard look at how he induced Treasury officials to endorse his central claim that families would be £4,300 ‘worse off’ if Britain left the EU. The main technique that Osborne used was his conflating GDP with household income – and referring to ‘GDP per household’, a phrase that has never been used in any Budget. As the Chancellor used to argue, GDP is a misleading indicator which can be artificially inflated by immigration. Immigration of 5% may well raise GDP by the same amount, but nobody would be any better off. ‘GDP per capita is a much better indicator,’ said Osborne when newly in office. He made no mention at all of GDP per capita when launching the Brexit documents published by the Treasury.

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“We have entered the looting stage of capitalism. Desolation will be the result.” Paul Craig Roberts doesn’t hold back.

We Have Entered The Looting Stage Of Capitalism (PCR)

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion . The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks. The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. Neoliberalism intends to reestablish feudalism—a few robber barons and many serfs: the 1% and the 99%. The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF. As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principallly the banks themselves or their major clients.

So far the so-called “creditors” have only pledged to some form of debt relief, not yet decided, beginning in 2 years. By then the younger part of the Greek population will have emigrated and will have been replaced by immigrants fleeing Washington’s Middle Eastern and African wars who will have loaded up Greece’s unfunded welfare system. In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine. The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt.

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Euro Cup starts in a few weeks, but “The French government said it was prepared to endure weeks of strikes at refineries..” Oh, sure.

France Digs In to Endure Oil Strike With Release of Fuel Reserve (BBG)

The French government said it was prepared to endure weeks of strikes at refineries and began releasing strategic oil reserves to help ease nationwide fuel shortages. While panic-buying by motorists drove demand to three times the normal level Tuesday, France has enough stocks even if the strikes persist for weeks, Transport Minister Alain Vidalies said. The problem isn’t about supply but about delivery, he said. Oil companies have mobilized hundreds of trucks to ship diesel and gasoline around the country since the start of the week as filling stations ran dry after all the nation’s refineries experienced disruptions or outright shutdowns. By Wednesday Exxon Mobil reported that its Gravenchon plant was operating normally and able to transport fuel while elsewhere strikers have blocked refineries to try to bring shipments to a halt.

Workers are protesting against President Francois Hollande’s plans to change labor laws to reduce overtime pay and make it easier to fire staff in some cases. While the government has watered down its proposals since first floating them in February, unions are calling for them to be scrapped altogether. The new law will not be withdrawn and police will continue to ensure access to fuel depots, Prime Minister Manuel Valls told Parliament Wednesday. Total’s Feyzin refinery near Lyon and its Normandy plant have stopped production. La Mede was working at a lower rate Wednesday, while the facilities at Grandpuits near Paris and Donges close to Nantes will come to a complete halt later this week, according to a company statement.

Total may reconsider a plan to spend €500 million to upgrade the Donges facility as workers take the plant “hostage,” CEO Patrick Pouyanne said Tuesday. He urged motorists not to rush to gas stations and create an “artificial” shortage. Some 348 of Total’s 2,200 gas stations ran out of fuel and 452 faced partial shortages as of Wednesday morning, the company said. The figures are little changed from Tuesday. About one in five of the country’s 12,200 stations were facing shortages Tuesday afternoon, the government said.

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All Marine Le Pen has to do is to sit back and watch.

Union Revolt Puts Both Hollande’s Future And France’s Image On The Line (G.)

As smoke rises from burning tyres on French oil refinery picket-lines, motorists queue for miles to panic-buy rationed petrol, and train drivers and nuclear staff prepare to go on strike. With the 2017 French presidential election nearing, the Socialist president François Hollande is facing his toughest and most explosive crisis yet. It is not just Hollande’s political survival at stake, though, but the image of France itself. The country is preparing to host two million visitors at the showpiece Euro 2016 football tournament in two weeks, and the back-drop is not ideal: strikes and feared fuel shortages, potential transport paralysis, a terrorist threat, a state of emergency and a mood of heightened tension and violence between street protesters and police.

Hollande, the least popular leader in modern French history whose approval ratings are festering, according to various polls, at between 13% and 20%, might not seem as though he has further to fall. But in fact he is clinging, white-knuckled, to the edge of a cliff. The Socialist was supposed to be spending May and June testing the waters for a possible re-election bid by repeating his new mantra “things are getting better” – even if more than 70% of French people don’t believe that that is true. Instead, France has been hit by an explosive trade union revolt over Hollande’s contested labour reforms. The beleaguered president has framed these reforms as a crucial loosening of France’s famously rigid labour protections, cutting red-tape and slightly tweaking some of the more cumbersome rules that deter employers from hiring.

This would, he has argued, make France more competitive and tackle stubborn mass employment that tops 10% of the workforce. But after more than two months of street demonstrations against the labour changes, the hardline leftist CGT union radically upped its strategy and is now trying to choke-off the nation’s fuel supply to force Hollande to abandon the reforms.

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Win win win squared. That’s why you feel so happy right now; look in the mirror. You get to finance a winning proposition!

Bayer Could Get ECB Financing For Monsanto Bid (R.)

Bayer could receive financing from the European Central Bank that would help to fund a takeover of Monsanto, according to the terms of the ECB’s bond-buying program. U.S.-based Monsanto, the world’s largest seed company, turned down Bayer’s $62 billion bid on Tuesday, but said it was open to further negotiations. The ECB can buy bonds issued by companies that are based in the euro area, have an investment-grade rating and are not banks, provided that they are denominated in euros and meet certain technical requirements. The purpose for which the bonds are issued is not among the criteria set by the ECB, which will start buying corporate bonds on the market and directly from issuers next month.

This means that, in theory, the ECB could buy debt issued by Bayer, which said on Monday it would finance its cash bid for Monsanto with a combination of debt and equity. “It will be interesting to observe how much of such a deal would be absorbed by the central bank,” credit analysts at UniCredit wrote in a note. The ECB is buying €80 billion worth of assets every month in an effort to revive economic growth in the euro zone by lowering borrowing costs. Central bank sources told Reuters that it would not be the ECB’s first choice if the money it spent ended up financing acquisitions. But even this would have a silver lining if consolidation made an industry or sector more efficient and if it gave fresh impetus to the stock market, the source added. And if issuers ended up exchanging the euros raised through bond sales for dollars, that would also help the euro zone by weakening the euro against the greenback, the sources said.

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“Russia is able to become the largest world supplier of healthy, ecologically clean and high-quality food which the Western producers have long lost..”

Putin Closes The Door To Monsanto (DDP)

Russia’s Vladimir Putin is taking a bold step against biotech giant Monsanto and genetically modified seeds at large. In a new address to the Russian Parliament Thursday, Putin proudly outlined his plan to make Russia the world’s ‘leading exporter’ of non-GMO foods that are based on ‘ecologically clean’ production. Perhaps even more importantly, Putin also went on to harshly criticize food production in the United States, declaring that Western food producers are no longer offering high quality, healthy, and ecologically clean food. “We are not only able to feed ourselves taking into account our lands, water resources – Russia is able to become the largest world supplier of healthy, ecologically clean and high-quality food which the Western producers have long lost, especially given the fact that demand for such products in the world market is steadily growing,” Putin said in his address to the Russian Parliament.

And this announcement comes just months after the Kremlin decided to put a stop to the production of GMO-containing foods, which was seen as a huge step forward in the international fight to fight back against companies like Monsanto. Using the decision as a launch platform, it’s clear that Russia is now positioning itself as a dominant force in the realm of organic farming. It even seems that Putin may use the country’s affinity for organic and sustainable farming as a centerpiece in his economic strategy. “Ten years ago, we imported almost half of the food from abroad, and were dependent on imports. Now Russia is among the exporters. Last year, Russian exports of agricultural products amounted to almost $20 billion – a quarter more than the revenue from the sale of arms, or one-third the revenue coming from gas exports,” he added.

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Home Forums Debt Rattle May 26 2016

This topic contains 7 replies, has 6 voices, and was last updated by  V. Arnold 3 years ago.

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  • #28359

    NPC Graf Zeppelin over Capitol 1928 • Britain’s Property Market Is Going To Implode (BI) • Trillions in Debt—but for Now, No Reason to Worry (WSJ) • I
    [See the full post at: Debt Rattle May 26 2016]

    #28363

    Dr. Diablo
    Participant

    May have missed this recent release by the St. Louis Fed:

    “As stock prices rise, the gains are disproportionately distributed to the wealthy. Lower- and middle-income families who are also wealth-poor are less likely to expose their savings to the higher risks of equity markets…. gains in the stock market tend to benefit those in the wealthiest portion of the income distribution, who have better access to and higher participation in these asset markets.”

    So you’re saying that the Fed causes income disparity? Thank you very much. Our lawyers will be in touch.

    #28365

    Dr. Diablo
    Participant

    May also be interested in Armstrong’s quote today:

    “so many are chiming in to keep Britain in the EU. All their reasoning is nonsense. This is a very sad day for Britain. It will see its independence slip away into thin air. You cannot save the EU. This is like someone falls off the cliff so you jump as well to hold their hand on the way down.

    The EU is a total failure. This federalization of Europe is a deliberate utopia for politicians with high paying jobs, tax exemptions, and the people have no possible ability to ever vote for a policy change.

    **This is the most anti-democratic structure ever thought of in Western culture**.”

    Should make that TAE’s new tag line.

    #28366

    Ken Barrows
    Participant

    In the modern world, total debt always rises faster than GDP. Although our betters never address this issue, they implicitly assume it will remain so forever. Have you ever heard anyone (even Steve Keen) grapple with the problem?

    #28369

    rapier
    Participant

    RE, more QE

    More QE is absolutely certain and buying corporate debt is certain as well, and then probably equities.

    We may be only in the second inning, or mid first half for the soccer world, of central bank money printing and the next act is going to be to monetize corporate debt and even assets. I predicted this 14 years ago, in so many words, before I really knew what it meant. Not that I couldn’t be wrong but at least consider that the general trend of monetizing corporations and thus keep the system intact could stretch out for a very very long time, a decade or even two.

    That isn’t to say the end won’t come a lot sooner for many humans, of which there is a huge supply. Or as has been said when disaster strikes because of war and other human folly’s, it won’t be the end of everything, just the end of you (them). This is especially true of America where isolation from histories vagaries and violence are the norm, and in fact this is obviously ingrained in Americas strategic thinking. For the less strategic thinking Americans, a large plurality, chaos and destruction and death in the rest of the world will vindicate the belief that American is favored by God.

    As always you will know when the game is up, when rates rise on US Treasury and AA corporate paper.

    #28370

    Dr., I’ve been ranting against the EU for years, no need to use someone else’s tagline.

    Ken, once you take out speculation and leverage – i.e. modern investing- I think you could be halfway there. As long as people keep buying homes with the idea that they’re cash machines and/or retirement vehicles, however, debt is king.

    #28371

    VisionHawk
    Participant

    What’s the difference between an ostrich and an Aussie?

    One has a bar-b-que.

    <sigh>

    #28372

    V. Arnold
    Participant

    Pres. Putin’s stand against GMO seeds/foods is stellar. Russia has vast land holdings across many climate zones for growing literally any food crops they want.
    Adherence to organic growing practices will ensure sustainable agriculture.
    The U.S. is out to destroy human habitation with NAFTA, GAT, TPP, TTIP, and national sovereignty of the nations of the planet.
    Tally ho; we’re well on the way…

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