Feb 062017
 
 February 6, 2017  Posted by at 10:04 am Finance Tagged with: , , , , , , , ,
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Steve Schapiro Robert Kennedy US Presidential Campaign 1968

 

Trump Travel Ban- What Happens Now (BBC)
Trump Faces Uphill Battle To Overcome Court’s Hold On Travel Ban (R.)
President Trump’s Major Asian Breakthrough (CNBC)
Believe It Or Not, Deluded Republicans Have Got It Right On Tax Reform (Chu)
Is America in a Bubble & Will America Ever Return to “Normal” (CH)
Trump Is No Fascist. He Is A Champion For The Forgotten Millions (G.)
India Weighs Up The Return On Basic Income For The Poorest (G.)
Scotland Needs Publicly Funded Bank, Says Thinktank (G.)
Greek Debt Crisis: An Existentialist Drama With No Good End In Sight (G.)
Testing Europe’s Values (NYT)
EU Leaders Back Libyans To Curb New Migrant Wave (R.)
Hunger Strikers At Greek Refugee Camp Keep Minister, Police Out (K.)

 

 

It’ll be hard for any court to claim the ban is legal. The fact that is was obviously hastily slapped together doesn’t help Trump’s case. And there are a variety of additional cases pending.

Trump Travel Ban- What Happens Now (BBC)

The next step is for briefs to be filed by both sides for a formal review of Judge Robart’s suspension on Monday. The Justice Department could have appealed directly to the Supreme Court on an emergency basis, but it chose not to since the appeal court is moving fairly quickly. If the appeals court decides the stay is valid – perhaps as early as next week – then a Supreme Court appeal is almost certain. In the meantime, everything is on hold. US immigration processes continue as they did before Mr Trump issued his executive order. If it looks like this is bogging down, the president might eventually decide to modify the order rather than try to defend its legality. That’s probably the most prudent course, but he’s a stubborn man.

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“I think the court’s going to feel every reason to stay on the sidelines as long as possible..” If there is no swift decision, and it doesn’t look that way, the order will have to be significantly changed, perhaps so much it largely becomes moot.

Trump Faces Uphill Battle To Overcome Court’s Hold On Travel Ban (R.)

U.S. President Donald Trump faces an uphill battle to overcome a federal judge’s temporary hold on his travel ban on seven mainly Muslim countries, but the outcome of a ruling on the executive order’s ultimate legality is less certain. Any appeals of decisions by U.S. District Court Judge James Robart in Seattle face a regional court dominated by liberal-leaning judges who might not be sympathetic to Trump’s rationale for the ban, and a currently shorthanded Supreme Court split 4-4 between liberals and conservatives. The temporary restraining order Robart issued on Friday in Seattle, which applies nationwide, gives him time to consider the case in more detail, but also sends a signal that he is likely to impose a more permanent injunction.

The Trump administration has appealed that order. The San Francisco-based 9th U.S. Circuit Court of Appeals said late on Saturday that it would not decide whether to lift the judge’s ruling, as requested by the U.S. government, until it receives briefs from both sides, with the administration’s filing due on Monday. Appeals courts are generally leery of upending the status quo, which in this case – for now – is the suspension of the ban. The upheaval prompted by the new Republican administration’s initial announcement of the ban on Jan. 27, with travelers detained at airports upon entering the country, would potentially be kickstarted again if Robart’s stay was lifted. The appeals court might also take into account the fact that there are several other cases around the country challenging the ban.

If it were to overturn the district court’s decision, another judge somewhere else in the United States could impose a new order, setting off a new cascade of court filings. If the appeals court upholds the order, the administration could immediately ask the U.S. Supreme Court to intervene. But the high court is generally reluctant to get involved in cases at a preliminary stage, legal experts said. The high court is short one justice, as it has been for a year, leaving it split between liberals and conservatives. Any emergency request by the administration would need five votes to be granted, meaning at least one of the liberals would have to vote in favor. “I think the court’s going to feel every reason to stay on the sidelines as long as possible,” said Steve Vladeck, a professor at the University of Texas School of Law.

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Interesting take on power politics.

President Trump’s Major Asian Breakthrough (CNBC)

On a visit to Tokyo and Seoul last week, the U.S. Defense Secretary James Mattis (a) reaffirmed security guarantees to Japan and South Korea, (b) set the stage for an integrated American, Japanese and South Korean political, economic and military alliance, (c) opened the way for President Trump to knock heads together in Tokyo and Seoul to set aside their divisive historical grievances if they wanted Washington’s umbrella and (d) told Pyongyang that our nuke operators knew the return address for a swift and devastating response if they ever saw a wrong move on their X-band radar. That is a major breakthrough because no previous administration succeeded in binding these three countries in such a strong and integrated alliance. Japan was repeatedly blamed for scuttling these efforts by its allegedly defiant attitude toward Korean grievances.

Japan also wanted to make money in China while leveraging American protection in its territorial disputes with Beijing. As recently as 2014, a quarter of Japan’s exports and a third of its foreign direct investments were going to the Middle Kingdom. But Tokyo would run for cover in Washington whenever the Chinese navy and air force would challenge Japan’s presence on the Senkaku/Diaoyu islands in the East China Sea. At the same time, Japan was enjoying annual trade surpluses with the U.S. of $67-$70 billion. And just a week ago, the Japanese were telling Washington that they could not buy American cars because the steering wheel was on the wrong side. [..] That has to stop. And it, apparently, will stop. Japan’s Prime Minister Shinzo Abe is coming to Washington next Friday (Feb. 10) with trade and investment initiatives.

But, true to form, whatever that is will probably fall far short of a trade deal Washington needs to address its excessive and structural trade imbalances with Japan. We have an even worse trade record with South Korea. Since the free-trade agreement became effective in early 2012, our trade deficit with Seoul has nearly doubled to an estimated $30 billion in 2016. Maybe we have to take a look at that, too. Building on last week’s accords, Washington has an opportunity to conclude an appropriate trade arrangement with Japan and South Korea. That would cover nearly 25% of the global economy and would represent by far the world’s largest free-trade area. Such an agreement would attract other Asia-Pacific countries to permanently anchor a decisive American political, economic and security presence in that part of the world. Washington’s bargaining power with China would be greatly strengthened by these events in a negotiating process that is apparently already under way.

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“..the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks..”

Believe It Or Not, Deluded Republicans Have Got It Right On Tax Reform (Chu)

[..] we find ourselves in the paradoxical situation where a reform being presented by deluded right-wing American politicians as a way of sticking it to cheating foreigners actually represents the world’s best chance for lancing the boil of rampant tax evasion by multinational companies. It is the right thing being pushed for the wrong reasons. To understand why, we need to look at the plan in more detail. The Republican plan would replace the US corporation tax, an annual levy on a firm’s reported profits, with a new levy on a company’s domestic cash flow. It means taxing a company’s domestic sales at a certain rate, probably 20%, after it has subtracted its domestic costs such as workers’ wages and the amount the firm has spent on investment in new factories and equipment.

The objective would be to tax a company’s economic activity in America, which means that it would be able to reduce its tax bill by the value of its exports, while imports would be part of its taxable liability via a “border adjustment tax”. That probably sounds mind-numbingly complicated, but the principle is actually quite simple: it means taxing the firm’s value-adding and substantive economic activity in the country where that activity actually takes place. This is most people’s idea of what a tax on corporate income is supposed to do. Many have objected that US firms that import heavily will be placed at a major tax disadvantage. Yet this impact would be entirely offset by a rise in value of the US dollar, which would follow the implementation of the reform, and which would increase the purchasing power of importers proportionately.

And for all Brady’s rhetoric and the protectionist-sounding border tax, the effect of the reform would actually be neutral on America’s terms of trade with the rest of the world. But the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks, such as registering profits at subsidiaries abroad and relocating their corporate headquarters to tax havens. No matter where they based their headquarters, multinationals would be liable for a hefty US tax bill if they sold plenty of products and services in America. And if America, the world’s largest economy, were to institute this reform, there would be a powerful incentive for other countries – including Britain – to implement a similar reform.

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Bubbles everywhere.

Is America in a Bubble & Will America Ever Return to “Normal” (CH)

Analysts and talking heads have an awful lot of opinions. Are we in a bubble or aren’t we? Rather than offer another opinion, I’ll offer the relationship of US economic activity (GDP) against the Wilshire 5000 (representing US equities) and the Federal Reserves gauge of American wealth, Z1 Household Net Worth series. These are the preferred establishment gauges, so take a look and then you decide. GDP is a monetary measure of the market value of all final goods and services produced annually in the US. The chart below shows the annual real GDP growth decelerating since 1950.

GDP vs. US Household Net Worth Given the sharp rise in asset values, I thought it worthwhile to view the total increase, as shown by the Fed’s US Household Net Worth data, versus the growth in GDP. The chart below shows US household net worth (all inclusive with real estate, equities, and all asset classes) is fast approaching $92 trillion against US GDP of $18.6 trillion. A simple division of GDP as a % of HHNW (maroon line in the chart below) shows household net worth (asset values) is growing significantly faster than economic activity supporting those valuations.

[..] from 1950–>2000, the average GDP to HHNW ratio was somewhat consistent around 28%…if the HHNW and GDP ratio are to come back to their 50 year norm (before they were warped by long periods of near Zero Interest Rate Policy and actual ZIRP)…there are two basic options: Either, GDP rapidly rises $7 trillion (a 38% increase)… Or, the other option is a 28% decline in HHNW, or a contraction of $25 trillion. A $25 trillion decline in HHNW would equate to an average $200,000 decline in net worth for every household in America.

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Provocative headline for a useful reminder.

Trump Is No Fascist. He Is A Champion For The Forgotten Millions (G.)

For many Americans, Hillary Clinton personified the corruption and self-dealing of the elites. But Trump’s election wasn’t just a rejection of Clinton, it was a rejection of politics as usual. If the media and political establishment see Trump’s first couple of weeks in office as a whirlwind of chaos and incompetence, his supporters see an outsider taking on a sclerotic system that needs to be dismantled. That’s precisely what many Americans thought they were doing eight years ago, when they put a freshman senator from Illinois in the White House. Obama promised a new way of governing – he would be a “post-partisan” president, he would “fundamentally transform” the country, he would look out for the middle class. In the throes of the great recession, that resonated.

Something was clearly wrong with our political system and the American people wanted someone to fix it. After all, the Tea Party didn’t begin as a reaction against Obama’s presidency but that of George W Bush. As far as most Americans were concerned, the financial crisis was brought on by the excesses of Wall Street bankers and the incompetency of our political leaders. Before the Tea Party coalesced into a political movement, the protesters weren’t just traditional conservatives who cared about limited government and the constitution. They were, for the most part, ordinary Americans who felt the system was rigged against them and they wanted change.

But change didn’t come. What they got was more of the same. Obama offered a series of massive government programmes, from an $830bn financial stimulus, to the Affordable Care Act, to Dodd-Frank, none of which did much to assuage the economic anxieties of the middle class. Americans watched as the federal government bailed out the banks, then the auto industry and then passed healthcare reform that transferred billions of taxpayer dollars to major health insurance companies. Meanwhile, premiums went up, economic recovery remained sluggish and millions dropped out of the workforce and turned to food stamps and welfare programmes just to get by. Americans asked themselves: “Where’s my bailout?”

At the same time, they saw the world becoming more unstable. Part of Obama’s appeal was that he promised to end the unpopular wars in Iraq and Afghanistan, restore America’s standing in the international community and pursue multilateral agreements that would bring stability. Instead, Americans watched Isis step into the vacuum created by the US withdrawal from Iraq in 2011. They watched the Syrian civil war trigger a migrant crisis in Europe that many Americans now view as a cautionary tale. At home, Isis-inspired terrorist attacks took their toll, as they did in Europe. And all the while Obama’s White House insisted that everything was going well.

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A basic income where dozens of millions have no access to bank accounts. Curious.

India Weighs Up The Return On Basic Income For The Poorest (G.)

[..] the transformative potential championed by UBI advocates has particular appeal in a country such as India, where one in five people lives below the $1.90 (£1.51) poverty line, 1 million join the workforce each month, and a clunky, corrupt bureaucracy oversees nearly 1,000 separate welfare schemes. There have already been Indian trials. Three years ago, in nine villages in Madhya Pradesh state, 6,000 people were each given a monthly payment of up to 300 rupees an adult, and half that much for every child, over a period of 18 months. Every six months, the impact of the payments was assessed against 12 villages that received no income, just the usual government welfare. “What we saw were huge improvements in nutrition, health, schooling and sanitation,” said Guy Standing, a British economist who helped run the trials.

Results published afterwards showed the consumption of lentils, chickpeas and other pulses increased tenfold. Villagers ate six times more meat and the uptake of fresh vegetables grew 888%. That meant residents of the village were healthier, worked harder and attended school more often. Equity between more socially dominant members of the community – traditionally the gatekeepers to resources – and the less powerful also improved, Standing said. “Women benefited more than men, the disabled benefited more, and scheduled [lowest] castes benefited more than others.” India’s government is clearly enamoured by the idea. Subramanian suggested even Gandhi would approve. He praised the basic income’s potential to reduce poverty “in one fell swoop”, to relieve the grinding stress of hunger, and empower Indians to make their own life choices.

Criticisms – such as the idea people would fritter the money on alcohol or drugs, or drop out of the workforce – he dismissed based on past research. On paper, the sums also add up. Subramanian calculates that the annual income required to enable all but the very poorest Indians to escape penury is about 7,620 rupees (£90) a year. If that sum were given to 75% of India’s billion-plus population, it would cost about 5% of GDP. India’s vast welfare schemes and subsidies for food, petrol and fertilisers are notoriously wasteful and poorly targeted. Cutting them entirely would save about 2% of GDP. Reducing “middle class” subsidies on things such as railway tickets and gold would save another 1%. The rest of the savings might be found in scrapping other government schemes, which altogether cost 3.7% of GDP.

It would be even cheaper if the basic income were targeted at women, for example, or if the wealthy – those who own cars or air conditioners – were excluded, or asked to opt out. Giving Indian women a minimal basic income would cost just over 1% of GDP, but have “large multiplier effects” on the entire society, Subramanian said.

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Good topic to discuss. Get big banks out of your lives. It’s a Wonderful Life.

Scotland Needs Publicly Funded Bank, Says Thinktank (G.)

The Scottish government is under growing pressure to replace its private finance programme with a publicly funded bank to build new schools, roads and hospitals. The Common Weal, a pro-independence thinktank, said it should also replace the Scottish Futures Trust (SFT), the government agency that champions private financing projects such as a new Aberdeen bypass contract, which is worth £1.5bn to the private consortium building it. Common Weal said there was an urgent requirement to set up a Scottish national investment bank that would use £1.35bn in public funding for construction projects and another £2bn from investors to replace more expensive private financing.

The SFT would be replaced by a new publicly owned investment company and the two bodies would fund national infrastructure projects, new low-carbon energy schemes and local council programmes, as well as offering low-cost loans to small businesses, it said. The thinktank’s campaign to push for the changes has the backing of the Unison and Unite unions, the thinktank New Economics Foundation and the London-based campaign Debt Resistance UK. It has won support from Labour MSPs as well as Jeremy Corbyn. The Labour leader told an audience in Glasgow last month that his party would set up a national investment bank at UK level and regional banks for Scotland, Wales and Northern Ireland. They would focus on “fast tracking infrastructure spending to building essential transport and digital links to realise our potential”, he said.

Common Weal’s call for a Scottish national investment bank is to be debated at the SNP’s spring conference in March, an indication of growing unease within the the party about the private finance model being used by Nicola Sturgeon’s government. The motion from an SNP branch in Angus near Dundee says leaving economic growth and environmental protection “solely in the hands of our private banking and financial sector will be detrimental to present and future living standards of our citizens”.

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“The euro’s recent weakness has nothing to do with a deliberate attempt by the Germans to reduce its value..” Wrong. All Germany has to do to keep the euro low is to strangle southern Europe.

Greek Debt Crisis: An Existentialist Drama With No Good End In Sight (G.)

Put three people in a room who can’t get on with each other. Condemn them to stay there for all eternity while they torture each other. Sit and watch as the gruesome story plays out. And what do you have? One answer is the 1944 existentialist play by Jean-Paul Sartre, Huis Clos. Another is the story of the neverending Greek debt crisis in which the three main characters are Alexis Tsipras, Wolfgang Schäuble and Christine Lagarde. [..] Tsipras plays one of the three lead parts in the play. Elected as a leftwing firebrand two years ago, Tsipras has had a rapid fall from grace. He caved in when pressure was put on him by the Europeans in the summer of 2015 and having run for office on an anti-austerity programme eventually agreed to even more draconian bailout terms than the previous centrist governments.

For an increasing number of Greeks, Tsipras is no longer an iconoclast; he is just another man in a suit. With public support waning, Tsipras is once again hanging tough. He aroused the ire of the Europeans by giving a Christmas bonus to pensioners and free school meals to poverty-stricken families. Europe responded by suspending the limited debt relief it has previously granted. Tsipras says Greece has already done enough and will suffer no more. Europe is played by Schäuble, the German finance minister. He too is facing political pressures. The German public thinks enough aid has already been given to Greece, a country it considers is not doing enough to help itself. Opposition to further debt relief is strong and a general election is looming. The third cast member is Lagarde, a former French finance minister and now managing director of the IMF. Under its own rules, the IMF is forbidden from putting money into a bailout if it thinks debt is unsustainable.

There have been reports coming out of Washington that the Fund believes Greece’s debt will rise to 275% of national income by 2060, which would undoubtedly put it into the “unsustainable” category. The latest act in this play takes place in Washington this week when the IMF’s governing executive board discusses Greece. One factor complicating the issue is that time is running out to get matters sorted before the first in a series of European elections kicks off in in the Netherlands in March. A second is that the drama has a new character in the form of Donald Trump. There is little evidence that the US president gives a fig about whether Greece gets debt relief but he may have more than a walk-on role because the US is the biggest shareholder at the Fund and has the power to veto any decision it doesn’t like.

Trump has expressed strong – and not exactly positive – views about the European Union in general and Germany in particular. Causing consternation in Brussels, the new American president has said the EU has become a vehicle for German interests. His trade adviser Peter Navarro has accused Germany of being a currency manipulator, using a ”grossly undervalued” euro to run up a massive current account surplus. Navarro’s specific criticism about currency manipulation is wide of the mark. Germany is part of the eurozone and doesn’t always agree with the monetary policy decisions taken by the ECB. The euro’s recent weakness has nothing to do with a deliberate attempt by the Germans to reduce its value and everything to do with the fact that Europe has been loosening monetary policy at a time when the US has started to raise interest rates.

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Europe has long lost whatever -humanitarian- values it had.

Testing Europe’s Values (NYT)

When the European Union and Turkey reached a deal last year to lessen the flow of refugees into Greece, the priority was on defending borders, not the humanitarian crisis. Sadly, that remains Europe’s priority as it turns its attention to halting the flow of people from Libya to Italy. More than 180,000 people crossed the Mediterranean to arrive in Italy last year, and more than 5,000 died on the journey. The European Council met in Malta on Friday with the urgent task of preventing large numbers of people from setting out from Libya for Italy as soon as the weather improves this spring. The problem is twofold: Thousands risk drowning in rickety smugglers’ boats and another wave of migrants risks putting even more pressure on Italy and other European Union members where anti-immigrant populism is on the rise.

While the European Union is assisting in rescuing migrants at sea and in training the Libyan Coast Guard, its priority remains to “ensure effective control of our external border and stem illegal flows into the E.U.” That effectively means leaving people stranded in Libya, where migrants are subject to rape, beatings and torture in overcrowded camps. Europe hopes to enlist the International Organization for Migration and the United Nations’ refugee agency to ensure that migrants in Libya are detained in humane conditions. But these organizations in a joint statement warned that, given the situation in Libya, “it is not appropriate to consider Libya a safe third country, nor to establish extraterritorial processing of asylum seekers in North Africa.” Europe is also investing in improving conditions in Africa that compel people to flee, but that is a long-term solution that does little to address the immediate crisis.

On Wednesday, Libya’s United Nations-backed prime minister, Fayez Serraj, offered to allow NATO or European Union ships to pursue smugglers in Libyan waters. Putting smugglers out of business is important. But if NATO or the European Union sends migrants back to Libya, it “would violate the law, not to mention basic decency, and betray the values on which the E.U. and its member states were built,” said Judith Sunderland, the associate Europe and Central Asia director at Human Rights Watch.

Ahead of the Malta meeting, the European Council president, Donald Tusk, and Malta’s prime minister, Joseph Muscat, warned that, with populism on the rise, the “E.U.’s key values are in danger, if we don’t act now.” But counting on Libya to keep migrants from leaving for Europe also puts those values in danger. The obvious immediate answer to the plight of African migrants is to open more legal channels for people to reach Europe, and to ensure that every member country assumes its fair share of new arrivals so that Italy is not overwhelmed.

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Completely lost.

EU Leaders Back Libyans To Curb New Migrant Wave (R.)

European Union leaders placed a bet on Libya’s fragile government to help them prevent a new wave of African migrants this spring, offering Tripoli more money and other assistance to beef up its frontier controls. Meeting in Malta – in the sea lane to Italy where more than 4,500 people drowned last year – the leaders addressed legal and moral concerns about having Libyan coastguards force people ashore by pledging to improve conditions in migrant camps there. “If the situation stays as is now, in a few weeks we will have a humanitarian crisis and people will start pointing fingers, saying Europe has done nothing,” said Joseph Muscat, the prime minister of Malta, which currently holds the presidency of the bloc. “With this agreement… there is one first decent shot in trying to get a proper management of migration flows across the central Mediterranean.”

Aid groups, however, accused the EU, of abandoning humanitarian values and misrepresenting conditions in Libya, where the U.N.-backed government of Fayez al-Seraj has only a shaky and partial hold on the sprawling desert nation. Medecins Sans Frontieres, which works on the ground, said the summit proved EU leaders were “delusional” about Libya. “Today was not about saving lives; it’s clear that the EU is ready to sacrifice thousands of vulnerable men, women and children in order to stop them reaching European shores.” The chaos in Libya has thwarted any hope of a quick fix in the way that a controversial EU deal with Turkey a year ago led to a virtual halt to a migrant route to Germany via Greece along which more than a million asylum-seekers traveled in 2015.

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How much further must this sink before we call it enough?

Hunger Strikers At Greek Refugee Camp Keep Minister, Police Out (K.)

Migration Minister Yiannis Mouzalas on Monday visited the state-run reception facility for migrants at Elliniko, south of Athens, amid reports that some of the residents have started a hunger strike against substandard conditions but was prevented from entering the site by protests. Dozens of protesting migrants formed a human chain at the entrance to the site, keeping out police and the minister, as child refugees sat on top of a barbed wire fence, shouting at the officers. The minister, who initially arrived at the site alone, was subsequently allowed to enter by migrants keen to discuss their demands. Migrants launched their hunger strike on Monday morning, calling for improved conditions at the site which authorities have pledged to clear soon to allow for a planned real estate project.

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