Raúl Ilargi Meijer

Mar 302017
 
 March 30, 2017  Posted by at 9:05 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Carole Lombard 1926

 


Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)
Retailing in America: Game Theory in Reverse (DiMartinoBooth)
‘Deep Subprime’ Auto Loans Are Surging (BBG)
Margin Debt Hit All-Time High in February (WSJ)
US Oil Export Surge Steals More OPEC Share (CNBC)
Australia World’s Worst Money Laundering Property Market (TI)
Sydney, Melbourne House Price Gains Accelerate (AFR)
Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)
House Panel Passes Bill To Audit The Fed (MW)
Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)
Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)
Democrats Against Single Payer (Jacobin)
American Empire Crumbling (Quinn)
The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)
Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)
‘That Was Some Weird Shit’ (NYMag)
146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

 

 

Today’s main theme just has to be W’s ‘That Was Some Weird Shit’. Here’s the graph to go with it.

Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)

A recent slowdown in bank lending has some observers concerned that the post-election pops in optimism are sending a false signal about the strength of the U.S. economy. To San Francisco Fed president John Williams, however, this decline is out of step with everything else credit markets are saying about the economy. “The big picture is: I don’t see any signs of a slowing either on the demand side or on the credit supply side,” Williams told Yahoo Finance on Wednesday. “Overall, the other indicators, everything we see, [says] economic conditions are good,” Williams added. “Confidence is good, and we’re not seeing any signs of bank lending standards changing fundamentally. So it’s hard to see anything, from my viewpoint, that [says] credit is less available.”

In recent months, the growth rate of commercial and industrial loans, as tracked by the Federal Reserve’s weekly H.8 report on assets and liability of U.S. banks, has been on the decline. This is viewed by many as a negative development in an economy where lending and borrowing activity serve as proxies for the economy’s overall health. But Williams also cautioned that lending data can reveal economic developments on a lag. For example, he noted to Yahoo Finance that in 2008 bank lending increased, which contradicted the notion that the financial markets were seizing up. Indeed, companies were unable to borrow by tapping the bond markets. However, the lending did increase because companies drew from existing lines of credit.

Right now, Williams noted that one story behind the drop in C&I loan growth going around is that oil and gas companies last year drew on lines of credit, boosting loan growth at the time. And thus the current decline in lending, which appears out of step with broader economic conditions, is occurring largely because of difficult year-over-year comparisons.

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Retail demise exposes banks.

Retailing in America: Game Theory in Reverse (DiMartinoBooth)

On March 21st, Sears Holding Corporation submitted a filing with its regulators that it has “substantial doubt” it can continue as a “going concern.” Don’t recall companies being charged with making their own death throes’ announcements from your Accounting coursework? You are correct. Meet the new and improved U.S. accounting rules that have just come into effect for public companies reporting annual periods that ended after December 15, 2016, Sears included. The change shifted the onus to disclose from a given company’s auditors to its management. It was telling that the Sears news fell on the very same day discount retailer Payless announced it could soon file for bankruptcy protection. That same day, the less ubiquitous Bebe female fashion chain said it too was ‘exploring strategic options,’ typically code for that same ill-fated Chapter in the court system.

[..] At the opposite end of the denial spectrum sits Boston Fed President Eric Rosengren, who is and has been publicly worried about an entirely different sort of challenge facing the real estate market. It’s no secret that apartment prices are soaring. Over the past year, prices have risen 11%, leading the broad market. While that increase may seem benign in and of itself, consider how the sector has fared over the course of the recovery: prices have recouped an eye-watering 240% of their peak-to-trough losses. In sharp contrast, retail has performed the worst; it’s only recovered 96% of its losses. Rosengren is rightly worried that the “sharp” increase in apartment prices could catalyze financial instability. He went on to say that, “Because real estate holdings are widespread, and the monetary and macro-prudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

If you would indulge a translation: The bubble in commercial real estate (CRE) could trigger systemic risk, which of course, no central bank can contain. The ‘macro-prudential’ tools to which Rosengren refers include rules and caps on banks’ exposure to CRE. Odds are, however, that the horse has already fled the barn. Over the past five years, CRE lending has been running at roughly double economic growth, a dangerous dynamic. The result: banks’ exposure to CRE has reached record levels. Last year alone, bank holdings of CRE and multifamily mortgages rose nine and 12%, respectively. More worrisome yet is that the most concentrated cohort – those with more than 300% of their risk-based capital at risk – is banks with less than $50 billion in assets; most have assets south of $10 billion. How exactly will small banks confront a systemic risk conflagration? That pesky potential presumably is what’s robbing Rosengren of sleep at night. He might just remember that small German lenders called Landesbanks were where subprime bombs detonated unexpectedly way back when.

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Anyone who can fog a mirror is back

‘Deep Subprime’ Auto Loans Are Surging (BBG)

About a third of the risky car loans that are bundled into bonds are considered “deep subprime,” a level that has surged since 2010 and is translating to higher delinquencies on the loans, according to Morgan Stanley. Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jeen Ng said in a report dated March 24. “The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” the strategists wrote. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5% from 5.1% since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550. The scale from Fair Isaac Corp. ranges from 300 to 850 and while there’s no firm definition of subprime, borrower scores below 600 are in general considered high credit risks. As Wall Street banks have found it tougher to profit under new regulatory regimes born out of the last subprime crisis, they’ve become more willing to underwrite riskier auto-loan asset-backed security sales. Investors, starved for returns with about $8 trillion of debt globally carrying negative yields, have in turn proven to be insatiable, further facilitating higher levels of risk in the market for the securities.

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The casino’s open for business.

Margin Debt Hit All-Time High in February (WSJ)

Margin debt climbed to a record high in February, a fresh sign of bullishness for flummoxed investors trying to navigate the political and economic crosscurrents driving markets. The amount investors borrowed against their brokerage accounts climbed to $528.2 billion in February, according to the most recent data available from the New York Stock Exchange, released Wednesday. That is up 2.9% from $513.3 billion in January, which had been the first margin debt record in nearly two years. With margin debt, investors pledge securities, typically stocks or bonds, to obtain a loan from their brokerage firms. The money doesn’t have to be used to buy more investments, though it often is. The gauge tends to climb—and pull back—along with broader stock market gauges, which have been rising to fresh records in the wake of November’s presidential election.

Rising levels of margin debt are generally considered to be a measure of investor confidence. Investors are more willing to take out debt against investments when shares are rising and they have more value in their portfolios to borrow against. But experts say a steep rise can indicate that investors are losing sight of market risks and betting that stocks can only go up. Margin debt has a history of peaking right before financial collapses like the ones in 2000 and 2008. When stocks move lower, investors who are buying with borrowed money often must pull out of the market, exacerbating the decline. Before January, the previous record high for margin debt was $505 billion in the spring of 2015. Margin debt then started falling, months ahead of a summer swoon that sent major indexes down more than 10%.

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As demand falls.

US Oil Export Surge Steals More OPEC Share (CNBC)

As OPEC tries to keep oil off the world market, U.S. oil producers are pouring more onto it. The U.S. last week sent more than 1 million barrels a day of crude out of the country, the third biggest export week ever, and double the average amount exported in 2016. It is also the third time this year that U.S. exports exceeded a million barrels a day, an industry record. “It should be somewhat supportive of [U.S. oil prices] in the short run, particularly if the exports keep up. But it obviously is a challenge for the global market and a renewed threat to OPEC and their designs of keeping prices up,” said John Kilduff of Again Capital While the U.S. exported oil, it also exported fuel last week — a steadily growing business. The U.S. sold 1.1 million barrels of diesel fuel, in line with the recent average, but 608,000 barrels a day of gasoline, up from less than 400,000 barrels a day a year ago.

Analyst say the jump in exports means U.S. producers are grabbing more share at the expense of OPEC and its partners, at a time when the cartel and other producers are considering whether to extend their deal to hold 1.8 million barrels of oil off the market. But the U.S. may also be seeing the early signs of a potential rebalancing of its own supply picture, and that could ultimately help clear a logjam of domestic oil barrels. “What we’re now seeing in the U.S. is refinery utilization increasing, as the maintenance season draws to a close. At the same time, there’s good demand for gasoline and diesel which is helping get inventories under control. Those product inventories are less than they were this time last year,” said Andrew Lipow, president of Lipow Oil Associates. U.S. refineries supplied 9.5 million barrels a day of gasoline last week, up from 9.2 million the week earlier. Refinery runs increased by 425,000 barrels a day.

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Transparency International reports.

Australia World’s Worst Money Laundering Property Market (TI)

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds… According to the Financial Action Task Force (FATF), real estate accounted for up to 30% of criminal assets confiscated worldwide between 2011 and 2013… In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal. The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets… This assessment identifies the following 10 main problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia, Canada, the UK and the US:

• Inadequate coverage of anti-money laundering provision
• Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
• Foreign companies have access to the real estate market with few requirements or checks
• Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
• Insufficient rules on suspicious transaction reports and weak implementation
• Weak or no checks on politically exposed persons and their associates
• Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
• Limited understanding of and action on money laundering risks in the sector
• Inconsistent supervision
• Lack of sanctions

Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums. In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates…

In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions. In Australia, 70% of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

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How this does not scare very single person out of their socks, I can’t imagine.

Sydney, Melbourne House Price Gains Accelerate (AFR)

House price growth accelerated further in March, with gains in Sydney and Melbourne pushing higher than previous cyclical peaks, preliminary CoreLogic figures show. Data for the first 28 days of the month shows Sydney prices have risen 19% over the past year while Melbourne has posted a 16% gain, the company said on Thursday. The combined capital city average of 1.4% – the same pace of growth as February – suggests that the strengthening in the two largest cities offsets further weakness in other markets. “The early results come after a strong rebound in housing market conditions through the latter half of 2016 and into 2017,” CoreLogic head of research Asia Pacific Tim Lawless said. “The strong capital gain results are further evidenced by a continuation in low stock levels, high auction clearance rates and strong investment demand.”

In other data that will underpin property prices, official figures released on Thursday show Sydney’s population hit five million, and Melbourne is the country’s fastest-growing capital. Some caution is needed. A methodology change by CoreLogic last year exaggerated price growth in Sydney and Melbourne while also exacerbating the declines in the falling Perth market. CoreLogic has not yet revised the figures to account for the methodology and distortions will only drop out of the year-on-year comparison in June. It’s clear the market is buoyant, however. Even with lenders tightening loan conditions to investor borrowers, they are increasing discounts to owner owner occupiers to protect market share, Deloitte’s annual Australian mortgage report said on Thursday.

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Nice bubble you got there. Wouldn’t want anything to happen to it, would you?

Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)

The Auckland housing market is on the verge of having all of the capital gains it made in the last 12 months wiped out. Prices of Auckland properties have fallen so much in the last few months that median prices are within a hair’s breadth of going into negative territory on an annual basis. They may already be there. In February the average price of Auckland homes sold by Harcourts, the country’s largest real estate agency, was $934,428, down 1.1% compared to where it was in February last year. While Harcourts’ average prices can be a bit choppy on a month by month basis, the figures do not appear to be an aberration. According to the Real Estate Institute of New Zealand, Auckland’s median selling price peaked at $868,000 in October last year and has declined every month since. In February it hit $800,000, down 7.8% from October’s peak.

But just as significantly, Auckland’s median price in March last year was $820,000. So even if the median price for March this year doesn’t fall any further from where it was in February, or if it increases by anything less than $20,000, Auckland’s median price will have declined to the point where it will be below where it was 12 months previously. Then it’s goodbye capital gains. The interesting thing about those numbers is that the downward trend they show is occurring at a time when Auckland’s migration-driven population growth is increasing at record levels and construction of new housing continues to fall miserably below the numbers that are required, exacerbating the region’s growing housing shortage. How can this be? As you might expect, the market is being influenced by forces converging from several different directions.

One of the biggest changes to affect the Auckland market over the last few months has been the relative absence of local ethnic Chinese buyers. It would be hard to underestimate the impact they were having on Auckland’s residential property market up until about the end of the third quarter of last year. They dominated some of what are often called the “big room” auctions where several dozen properties could be auctioned in a single day, and it wasn’t uncommon for them to account for around 70% of sales. Often they were competing amongst themselves for properties and their bidding could be fierce. Sometimes it seemed as if the prices they were prepared to pay knew no limits. Then late last year, just as the market geared up for the summer selling season, the Chinese tide went out.

Auckland now has a significant population of Chinese people, so there will always be some who are actively buying or selling properties. But the numbers are well down on where they were a year ago. Auctions that were packed with Chinese buyers this time last year are now much quieter and Chinese faces are often more notable by their absence rather than their presence. When they are buying, they are more likely to be buying a home for themselves or perhaps their children than a pure investment property, and their bidding has been far more cautious than it was just a few months ago. Often they will bid on a property only to let it be passed in, figuring that they may not face much competition from other buyers in post-auction negotiations. With the odd exception, the days of the bidding frenzy are over.

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All for it.

House Panel Passes Bill To Audit The Fed (MW)

A House panel on Tuesday approved legislation that would let a government watchdog audit the Federal Reserve’s monetary policy decisions, a move bitterly opposed by the central bank. The House Committee on oversight and government reform passed the measure by voice vote after roughly 30 minutes of debate. The bill was the brainchild of Ron Paul, the former House Republican and libertarian presidential candidate and sharp critic of the U.S. monetary policy. Versions of the bill have twice passed the House by wide margins but then stalled due to lack of support from Democrats in the Senate and the Obama administration. Analysts said the measure has a better chance to become law now that Republicans control both houses of Congress and the White House. Paul’s son, Rand, the Republican senator from Kentucky, has introduced a similar measure in the Senate.

Democrats in the committee were firmly against the bill. “This bill would open the floodgates to political interference in monetary-policy making,” said Del. Eleanor Holmes Norton, a Democrat from the District of Columbia. Rep. Carolyn Maloney, a Democrat from New York, said the measure would lead to higher interest rates because it would undermine the market’s confidence in the independence of the central bank. Republicans said the measure was needed to rein in the Fed. “It is ironic that the arsonists that caused the financial collapse are now being given credit…for putting out the fire. Almost every macroeconomist concedes in retrospect that [the Fed’s] extended period of easy money led to the financial crisis,” said Rep. Thomas Massie, a Republican from Kentucky.

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What good could it do to go to the Ninth Circuit Court at this point?

Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)

A US federal judge in Hawaii has indefinitely extended the suspension of President Trump’s new travel ban. Judge Derrick Watson’s ruling means Mr Trump will be barred from enforcing the ban on six mostly Muslim nations while it is contested in court. In a lawsuit, the US state says the ban would harm tourism and the ability to recruit foreign students and workers. President Trump says his revised travel ban seeks to prevent terrorists from entering the United States. Judge Watson made the ruling late on Wednesday after hearing arguments from attorneys for the state of Hawaii and the US Department of Justice. The judge turned his earlier temporary restraining order into a preliminary injunction that would have a more lasting effect.

President Trump’s executive order on 6 March would have placed a 90-day ban on people from Iran, Libya, Somalia, Sudan and Yemen and a 120-day ban on refugees. An earlier version of the order, issued in late January, sparked confusion and protests, and was blocked by a judge in Seattle. Other courts across the US have issued different rulings on Mr Trump’s revised ban, with a judge in Maryland halting a part of the ban earlier this month. Mr Trump has complained of “unprecedented judicial overreach”, pledging to take the case “as far as it needs to go”. An appeal against the Hawaii decision would be expected to go next to the Ninth Circuit Court of Appeals – the same court which in February said it would not block a ruling by a Seattle court to halt the original travel ban.

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Because working together is so last century?!

Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)

U.S. House of Representatives Speaker Paul Ryan, the top Republican in Congress, said he does not want President Donald Trump to work with Democrats on new legislation for revamping the country’s health insurance system, commonly called Obamacare. In an interview with “CBS This Morning” that will air on Thursday, Ryan said he fears the Republican Party, which failed last week to come together and agree on a healthcare overhaul, is pushing the president to the other side of the aisle so he can make good on campaign promises to redo Obamacare. “I don’t want that to happen,” Ryan said, referring to Trump’s offer to work with Democrats. Carrying out those reforms with Democrats is “hardly a conservative thing,” Ryan said, according to interview excerpts released on Wednesday.

“I don’t want government running health care. The government shouldn’t tell you what you must do with your life, with your healthcare,” he said. On Tuesday, Trump told senators attending a White House reception that he expected lawmakers to reach a deal “very quickly” on healthcare, but he did not offer specifics. “I think it’s going to happen because we’ve all been promising – Democrat, Republican – we’ve all been promising that to the American people,” he said. Trump said after the failure of the Republican plan last week that Democrats, none of whom supported the bill, would be willing to negotiate new healthcare legislation because Obamacare is destined to “explode.”

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Who’s left to represent actual Americans?

Democrats Against Single Payer (Jacobin)

Virginia Democratic senator Chuck Robb, one of the DLC’s founders, warned in 1989 that “policies forged in the economic crisis of the 1930s and the social and cultural schisms of the 1960s” were irrelevant to most Americans. Two years later, Bill Clinton’s issue director Bruce Reed, who doubled as policy director for the DLC, made sure to distance Clinton from single payer. The issue flared up again during the 2008 Democratic primary fight, where both Obama and Hillary Clinton tried hedging their bets. Clinton put forward a plan that was basically Obamacare while insisting that “Medicare for All” could still be on the cards under the right circumstances. Meanwhile Obama repeatedly flip-flopped, at one point telling an audience that “the Canadian model won’t work in the United States” and that “we’ve got to develop a uniquely American approach,” and nine days later hinting to a different audience that over time single payer may be on the table.

DLC leaders felt reassured however, telling the New York Times they were “pleased that none of the Democratic candidates supports a single-payer health-care system.” So Democrats’ attempts to quell their base’s clamoring for a comprehensive, public health-care system isn’t new. What is new is the open, public disparagement of such a goal — not just by Democratic leaders, but by leading liberal commentators, too. Ironically, this appears largely to have been due to the Sanders campaign — or rather, the challenge it posed to Hillary Clinton’s previously wide-open road to the White House. Needing to differentiate herself from Sanders’s unabashed progressivism, and to dampen popular enthusiasm for his message, Clinton began attacking his policies, despite her historic sympathy toward single payer.

Sanders’s proposals were “ideas that sound good on paper but will never make it in real life,” she told crowds; for good measure, she insisted that single-payer health care “will never, ever come to pass.” Two years earlier, she explained her opposition to the policy on the basis that “we don’t have a one size fits all; our country is quite diverse.” In January 2016, she warned breathlessly that Sanders’s plan would “end all the kinds of health care we know” and claimed it would “send health insurance to the states,” while her daughter warned that it would “dismantle Obamacare” and “strip millions and millions and millions of people off their health insurance.”

As late as October, Clinton’s team was still trying to distance herself from Trump’s accusation that she — heaven forbid! — “wants to go to a single-payer plan,” with her spokesman directing Politifact to an earlier fact-check confirming her lack of support for the policy. (Lest we mistake this for mere expediency, we can rest assured that at least some of the Clinton camp really felt this way: campaign manager John Podesta declared in an email to ThinkProgress editor-in-chief Judd Legum that Sanders’s “actual proposal sucks, but we live in a leftie alternative universe.”)

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Jim Quinn’s series on the similarities between Isaac Asimov’s Foundation Trilogy and Strauss & Howe’s Fourth Turning.

American Empire Crumbling (Quinn)

You can hear the creaking as the winds of this Fourth Turning winter howl through the branches of this dying empire. Trump may have forced the Deep State Second Foundation to reveal itself as they seek to destroy him, but the relentless decline of the American Empire continues unabated. Tinkering around the edges of a healthcare system designed to benefit mega-corporations and the Deep State will do nothing to reverse or even delay the decline. Slowing the growth of government when the national debt is already $20 trillion and headed to $30 trillion within the next decade won’t cure the rot in our tree trunk. Completely ignoring the $200 trillion of unfunded welfare state liabilities helps accelerate the inevitable collapse of this empire. Cutting taxes while expanding the war making machine known as the military industrial complex does nothing to reverse what is already in motion.

In addition to the absolutely quantifiable reasons why the American Empire will collapse, there are demographic, cultural, and societal trends which will contribute dramatically to the fall. The rapidly aging populace, with 10,000 Americans per day turning 65 years old, is the driving force towards national bankruptcy, as this inexorable demographic tsunami sweeps over the fraying fabric of welfare state promises. The onslaught of illegal immigrants and purposeful execution of a plan by the effete liberal elite to weaken our common American culture through the insertion of Muslim refugees into our communities, is undermining the shared values which built the country. The immigrants who built this country assimilated, learned the language, worked hard, and adopted our common culture. The hordes invading America at this time hate our values and refuse to assimilate. This Soros funded effort to create diversity havoc throughout the world is part of the globalization one world order plan.

As Europe disintegrates under the unrelenting wave of violent refugees creating upheaval, chaos, and spreading religious zealotry through viciousness, the next target is the mighty American Empire. Fighting in the streets between the normal law abiding Trump supporters and the Soros funded, draped in black, flag burning, social justice warrior criminals has begun. Widespread societal strife is just around the corner. When the next financial crisis, created by the Deep State to further their plans, destroys the remaining wealth of the barely surviving middle class, all hell will break loose in the streets. The 86% of the country occupied by red state, gun owning, Trump supporters will openly go to war against the condescending, left wing, violence provoking blue state liberals. Blood will be spilled in copious amounts. It always does during Fourth Turnings.

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It cannot survive, period.

The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)

Angela Merkel, the German Chancellor, had for years opposed the idea of a Europe that proceeds at different speeds – allowing some countries to be less integrated than others, due to their domestic political situation. But now – after the colossal economic mismanagement of the euro crisis has weakened the EU’s legitimacy, given Eurosceptics a major impetus, and caused the EU to shift to an advanced stage of disintegration – Mrs Merkel and her fellow EU leaders seem to think that a multi-speed Europe is essential to keeping the bloc together. At the weekend, as EU leaders gathered to celebrate the 60th anniversary of the Treaty of Rome, leaders of the remaining 27 member states signed the Rome Declaration, which says that they will “act together, at different paces and intensity where necessary, while moving in the same direction, as we have done in the past.”

The failure to keep the EU together along a single path toward common values, a common market and a common currency will come to be embraced and rebranded as a new start, leading to a Europe in which a coalition of the willing will proceed with the original ambition while the rest form outer circles, connected to the inner core by unspecified bonds. In principle, such a manifold EU will allow for the East’s self-proclaimed illiberal democracies to remain in the single market, refusing to relocate a single refugee or to adhere to standards of press freedom and judicial independence that other European countries consider essential. Countries like Austria will be able to put up electrified fences around their borders. It could even leave the door open for the UK to return as part of one of Europe’s outer circles. Whether one approves of this vision or not, the fact is that its chances depend on a major prerequisite: a consolidated, stable eurozone.

One only needs to state this to recognize the second paradox of our post-Brexit reality: In its current state, the eurozone cannot provide the stability that the EU – and Europe more broadly – needs to survive. The refusal to deal rationally with the bankruptcy of the Greek state is a useful litmus test for the European establishment’s capacity to stabilize the eurozone. As it stands, the prospects for a stabilized eurozone do not look good. Business as usual – the establishment’s favored option – could soon produce a major Italian crisis that the eurozone cannot survive. The only alternative under discussion is a eurozone federation-light, with a tiny common budget that Berlin will agree to in exchange for direct control of French, Italian and Spanish national budgets. Even if this were to happen, which is doubtful given the political climate, it will be too little, too late to stabilize the eurozone.

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“Professor Jeremy Baumberg, director of the NanoPhotonic Centres at Cambridge University, was distinctly unimpressed. “It seems to me an extremely poorly written paper, conflating many ideas in a rather unrigorous mishmash,” he said.”

Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)

Capitalism is inherently unfair and will produce a world full of ‘sad’ and disgusting inequalities, but Communism is also “doomed to fail”, a leading scientist claims to have proved using the laws of physics. Professor Adrian Bejan told The Independent he was so excited by the “huge” implications of his theory that he kept having to pinch himself. A former member of the Romanian national basketball team, he is now an expert in thermodynamics and fluid mechanics at Duke University in the US, having written 30 books and more than 600 scientific papers. He now claims to have shown that physics can essentially explain economics. Inequality has been seen as a factor in the election of Donald Trump as US President and in the UK referendum vote in favour of Brexit.According to Oxfam, the richest eight men own the same wealth as the poorest 50% of the world’s population.

Professor Bejan said it was possible to explain how such inequality can develop by demonstrating that wealth moves around in a society like water in a river basin using the laws of physics. In a natural environment, water flows from small tributaries into larger and larger streams. And, according to Professor Bejan’s theory, the same is true of money. So, in a free market system, wealth will naturally flow from the poorest in the small tributaries to the richest in the wide rivers. Using this analogy, Communism is comparable to an attempt to restrict the flow of water to a network of equally sized concrete channels, which Professor Bejan said would inevitably be overcome by the forces of nature. But, just as humans do sometimes harness rivers to produce energy or divert them around cities, it is possible to alter the flow of money in society, he added.

And this is exactly what is being done by liberal democracies around the world with measures such as free education and healthcare, anti-trust regulations designed to prevent large corporations abusing their power, and the rule of law. “I want to see less inequality in the distribution of wealth. I get not just sad, but disgusted by it,” Professor Bejan said.

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Getting more popular by the day.

‘That Was Some Weird Shit’ (NYMag)

The inauguration of Donald Trump was a surreal experience for pretty much everyone who witnessed it, whether or not they were at the event and regardless of who they supported in the election. On the dais, the stoic presence of Hillary Clinton – whom candidate Trump had said he would send to prison if he took office – underlined the strangeness of the moment. George W. Bush, also savaged by Trump during the campaign, was there too. He gave the same reason for attending that Bill and Hillary Clinton did: to honor the peaceful transfer of power. Bush’s endearing struggle with his poncho at the event quickly became a meme, prompting many Democrats on social media to admit that they already pined for the relative normalcy of his administration. Following Trump’s short and dire speech, Bush departed the scene and never offered public comment on the ceremony. But, according to three people who were present, Bush gave a brief assessment of Trump’s inaugural after leaving the dais: “That was some weird shit.” All three heard him say it.

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On and on and on.

146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

Dozens of people are feared to have drowned after a rubber boat carrying migrants and refugees from Libya sank in the Mediterranean. The sole survivor – a 16-year-old Gambian boy – told rescuers that 146 other people were on board when the boat sank. A Spanish frigate, the Canarias, found the boy hanging on to a piece of debris in the sea on Tuesday. He was transferred to an Italian Coast Guard ship and brought to the Sicilian island of Lampedusa early on Wednesday. “He was very tired when they found him. He’s resting now, so we’ll have more details later,” said the International Organisation for Migration (IOM) spokesman Flavio Di Giacomo in Rome, after speaking to staff in Lampedusa.

“The boy said they left Sabratha, Libya, a couple of days ago on a rubber boat with 147 sub-Saharan Africans on board, including five children and some pregnant women,” Di Giacomo said. In the past two days, rescuers have picked up more than 1,100 migrants at sea and recovered one body, Italy’s Coast Guard said. The Coast Guard did not comment on the latest shipwreck. So far this year nearly 600 migrants have died trying to reach Italy from North Africa, IOM estimates, after 4,600 deaths last year. Migrant arrivals to Italy are up more than 50% this year on the same period of last year. Early on Wednesday the Golfo Azzurro, a humanitarian vessel, rescued about 400 migrants – mainly from Morocco, Algeria, Libya, Gambia and Bangladesh – including 16 women and two children.

Read more …

Mar 292017
 
 March 29, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Dismantling clock outside Daily Telegraph building, Fleet Street, London, 1930

 


Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)
Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)
Scottish Parliament Votes For Second Independence Referendum (G.)
Why Brexit Is Best for Britain: The Left-Wing Case (NYT)
ECB Needs Democratic Oversight If The Euro Is To Survive (TI)
12 People, Things That Ruined The EU (Pol.)
Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)
China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)
Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)
Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)
A World Without Retirement (G.)
Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)
Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

 

 

Just so you know. Motorcycle Boy.

Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)

Jim Rogers, chairman at Rogers Holdings, explains what the Federal Reserve did wrong in response to the financial crisis and how their mistakes spread to global central banks. Jane Foley, senior FX strategist at Rabobank, joins the conversation with Bloomberg’s Francine Lacqua on “Bloomberg Surveillance.”

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Nothing to fear but…

Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)

Theresa May has signed the letter that will formally begin the UK’s departure from the European Union. Giving official notice under Article 50 of the Lisbon Treaty, it will be delivered to European Council president Donald Tusk later. In a statement in the Commons, the prime minister will then tell MPs this marks “the moment for the country to come together”. It follows June’s referendum which resulted in a vote to leave the EU. Mrs May’s letter will be delivered at 12:30 BST on Wednesday by the British ambassador to the EU, Sir Tim Barrow. The prime minister, who will chair a cabinet meeting in the morning, will then make a statement to MPs confirming the countdown to the UK’s departure from the EU is under way.

She will promise to “represent every person in the whole United Kingdom” during the negotiations – including EU nationals, whose status after Brexit has yet to be settled. “It is my fierce determination to get the right deal for every single person in this country,” she will say. “For, as we face the opportunities ahead of us on this momentous journey, our shared values, interests and ambitions can – and must – bring us together.” Attempting to move on from the divisions of June’s referendum, Mrs May will add: “We are one great union of people and nations with a proud history and a bright future. “And, now that the decision has been made to leave the EU, it is time to come together.”


Guardian front page today. Got to wonder why they left off Greece.

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How many referendums will it take in the end?

Scottish Parliament Votes For Second Independence Referendum (G.)

Nicola Sturgeon has won a key Holyrood vote on her plans for a second independence referendum, triggering accusations from UK ministers that her demands are premature. Sturgeon won by a 10-vote majority after the Scottish Greens backed her proposals to formally request from the UK government the powers to stage a fresh independence vote at around the time Britain leaves the EU, in spring 2019. She is due to write to Theresa May later this week, asking for Westminster to hand Holyrood the temporary powers to stage the referendum under a section 30 order. She said she would avoid writing until the prime minister had invoked article 50 to trigger the Brexit process, which she is expected to do on Wednesday. “It is not my intention to do so confrontationally, instead I only seek sensible discussion,” Sturgeon told MSPs.

The vote, which split the Scottish parliament cleanly between pro- and anti-independence parties, deepened the dispute between the two governments over both the need for and the timing of the vote. David Mundell, the Scottish secretary, told the BBC the answer to Sturgeon’s request would be no. “We won’t be entering any negotiations at all until the Brexit process is complete,” he said. “Now is the time for the Scottish government to come together with the UK government, work together to get the best possible deal for the UK, and that means Scotland, as we leave the EU.” Mundell rejected Sturgeon’s claims that May had told her the terms of the UK’s departure from the EU and its new trade deal would be clear in about 18 months. Sturgeon said that timeframe matched her preference for a referendum just as the UK quits the EU in March 2019. He said it was too early to say how quickly a Brexit deal could be concluded or whether transitional arrangements were needed.

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“We don’t change our position according to elections..”

Why Brexit Is Best for Britain: The Left-Wing Case (NYT)

Ms. Watkins is a “Lexiteer,” as left-wing supporters of ‘Brexit’ like me are known. We were hardly a significant force among the 52% of Britons who voted to leave in the referendum of June 23. But we were an influence. A counterweight to the anti-immigrant fear mongering of the former leader of the right-wing U.K. Independence Party, Nigel Farage, Lexiteers argued a left-wing, democratic and internationalist case for Brexit. The position was expressed crisply by Perry Anderson, the former longtime editor of New Left Review: “The E.U. is now widely seen for what it has become: an oligarchic structure, riddled with corruption, built on a denial of any sort of popular sovereignty, enforcing a bitter economic regime of privilege for the few and duress for the many.”

Although Lexiteers have little patience for the national nihilism of “Davos Man,” the globalist elite, we are no xenophobes. We voted Leave because we believe it is essential to preserve the two things we value most: a democratic political system and a social-democratic society. We fear that the European Union’s authoritarian project of neoliberal integration is a breeding ground for the far right. By sealing off so much policy, including the imposition of long-term austerity measures and mass immigration, from the democratic process, the union has broken the contract between mainstream national politicians and their voters. This has opened the door to right-wing populists who claim to represent “the people,” already angry at austerity, against the immigrant.

It was the free-market economist Friedrich Hayek, the intellectual architect of neoliberalism, who called in 1939 for “interstate federalism” in Europe to prevent voters from using democracy to interfere with the operation of the free market. Simply put, as Jean-Claude Juncker, the president of the European Commission (the union’s executive body), did: “There can be no democratic choice against the European treaties.” The union’s structures and treaties are designed accordingly. The European Commission is appointed, not elected, and it is proudly unaccountable to any electorate. “We don’t change our position according to elections” was how the commission’s vice president Jyrki Katainen greeted the victory of the anti-austerity party Syriza in Greece in 2015.

The European Parliament is not a real parliament. It is not a legislature; its deputies neither offer manifestoes nor carry out the ideas they propose to voters. Elections in improbably large constituencies, with pitifully low turnouts, change nothing. As a Parliament staff member said at the European Research Seminar at the London School of Economics, “The only people who listen to M.E.P.s are the interpreters,” referring to the members of the Parliament. The European Council, an intergovernmental body where decisive legislative power actually lies, especially for Chancellor Angela Merkel of Germany, comprises member countries’ heads of state, who generally meet just four times a year. They are not directly elected by the inhabitants of the nations whose fate they decide. As for the union principle of “subsidiarity,” a supposed preference for decentralized governance, it is ignored in all practical matters.


Oh, those days of innocence …

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Fine, but who’s going to do it? The ECB is independent?!

ECB Needs Democratic Oversight If The Euro Is To Survive (TI)

The ECB urgently needs to increase democratic oversight and accountability if the euro is to survive the next crisis, according to a new report on the Bank’s governance by Transparency International EU entitled “Two sides of the same coin? Independence and accountability at the ECB”. The report finds that a lack of political leadership and decisive reform has led the ECB to stray into the area of political decision-making, without appropriate democratic scrutiny. This has been accompanied by a marked decline in public trust at a time when the ECB has been granted extensive new powers to supervise major European banks.

“While the ECB has saved the single currency more than once, the absence of a Eurozone finance ministry as counterpart to the ECB means that the Bank has had to stretch its mandate to breaking point,” said Leo Hoffmann-Axthelm, Research and Advocacy Coordinator at Transparency International EU. “If the euro is to survive the next crisis, then EU Member States need to stop hiding behind the technocrats at the ECB, overcome political inertia and get serious about reforming the Eurozone”, continued Hoffmann-Axthelm. The report finds that preserving the ECB’s independence limits its accountability to citizens, and recommends that the Bank should compensate this by increasing its transparency. The ECB should take immediate steps, such as automatically publishing its decisions and opinions and being more open about the political choices it faces, rather than insisting its decisions are purely technical.

For example, at the height of the Greece crisis in 2015 the ECB repeatedly limited the ceiling on Emergency Liquidity Assistance for the country’s banks without publicly announcing it. The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors. Similar dynamics could play out in the upcoming negotiations with Greece, and with the current recapitalisation of Italian lender Monte dei Paschi di Siena, which threaten the Eurozone’s current fragile stability, according to the group. “Clearly decisions which affect the fate of whole economies should have some kind of democratic oversight. The ECB should not be in a position to pull the plug on a country’s euro membership, a decision ultimately down to democratically elected politicians”, said Hoffmann-Axthelm.

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An entertaining and educational list.

12 People, Things That Ruined The EU (Pol.)

Last weekend, European leaders gathered in Rome for the 60th anniversary of the Treaty of Rome. They discussed, not for the first time, how to get the EU back on track. And they told each other they are still committed to the Union and believe in its future. (We’ve heard that one before, too.) But let’s just suppose that, when the European leaders sat down for lunch at the Quirinal Palace, some of them had a little too much of the pinot grigio and waxed nostalgic about the days when the idea of a united Europe was still young and promising and beautiful. And then they talked about this week and how British Prime Minister Theresa May would send her goodbye letter and they started slurring their words, saying Grexit, Brexit, Frexit, and they finally admitted to each other that something has gone horribly wrong. When they stood up and got ready to leave, they were devastated, saying to each other: “Good God, how did it come this and, more importantly, who is to blame?” We’ve gathered a dozen suggestions.

1. Zeus Whenever Europe is in trouble, its advocates claim the EU lacks a proper narrative. The whole idea of an “ever-closer union” is still a fine one, they argue, and the only thing that’s needed for people to understand it is a memorable story. The most memorable story about Europe, of course, is the one about Zeus. The Greek God disguised himself as a white bull in order to approach a beautiful girl called Europa. When Europa, perhaps naively, climbed on his back, the God-turned-bull abducted and ravished her. No need to take the story too literally when analyzing the EU’s current malaise (no white bulls there). But it is good to keep in mind that Europe’s founding myth doesn’t exactly bode well for its future. If negative narratives about the EU seem to resonate far more than positive ones, maybe it’s because the Greek gods loaded the dice.

2. Edith Cresson Going straight from Zeus, ruler of Mount Olympus, to good old Edith Cresson may seem a bit of a stretch. But as a strong contender for the title of worst European commissioner ever, the Frenchwoman does have a claim to fame, too. In the early 1990s, Cresson was a French prime minister who quickly fell out of favor and was forced to resign after less than a year in office. That apparently qualified her for a high-powered job in Brussels. As commissioner for science, research and development, Cresson famously paid her dentist to be a scientific adviser. In 1999, allegations of fraud intended to target Cresson ended up bringing down the entire Commission. To put it crudely: Cresson did to the EU what Zeus did to Europa.

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Le Pen won’t ruin the EU. That’s already been done.

Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)

Europe could be on track to encounter a shock wave up to five times as turbulent as the start of the euro zone debt crisis if French presidential candidate Marine Le Pen was able to secure victory in May, according to a team of UBS analysts. Strategists at the Swiss banking giant stressed the prominence of the anti-immigration and anti-European Union National Front leader meant France’s fast approaching general election would be the most serious political risk event in the region this year. Le Pen, who leads in the latest opinion polls, has vowed to renegotiate the terms of France’s membership of the EU and ditch the single currency if elected as the country’s new premier in just over two months’ time.

“The systemic importance of France for the European project is such that the margin for damage limitation may well be a lot thinner than has been the case in Greece in the past or could be the case for Spain or Italy even,” UBS analysts said in a note. The bank predicted the shock of a Le Pen victory on sovereign spreads could be as dramatic as when Spain and Italy appeared to be on the brink of financial collapse in 2012. UBS forecast a move of up to 500 basis points in sovereign spreads if Le Pen entered the Élysée Palace in early May. In comparison to a peripheral economy such as Greece, when Athens was on the brink of financial collapse in 2010, sovereign spreads widened by around 100 basis points. “It is certainly arguable that risks to the euro zone’s cohesion emanating from the core are by definition more severe and harder to diffuse than those emanating from the periphery,” UBS analysts added.

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A curious case. Shares fell 85% (indefinite trading halt) and nobody seems to know why.

China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)

A mysterious collapse in a Chinese dairy maker’s shares last week has renewed fears that China’s financial system is so shaky that authorities can do nothing but to muddle through a credit crunch. Shares of China Huishan Dairy Holdings plunged 85% in an hour on March 24, wiping more than $4 billion from its market value. The crash, the biggest-ever intraday fall in Hong Kong, prompted an indefinite trading halt. It also caused collateral damage to firms linked to the Liaoning-based company, which has more than 11,600 employees and operates the largest number of dairy farms in China. Market observers are still trying to figure out what exactly triggered the sudden sell-off. A company statement filed to the Hong Kong stock exchange March 28 unearthed at least part of the mystery.

In its first public comments since the stock crash, Huishan confirmed media reports that it had missed interest payments to its creditors, and that on March 23 the Liaoning provincial government held a meeting with the company and its 20-plus creditor banks to discuss remedies. According to the statement, the Liaoning government proposed an “action plan” to solve any overdue interest payments within two weeks and to help improve Huishan’s liquidity position within a month. Some creditors—including Bank of China and Jilin Jiutai Rural Commercial Bank—pledged in the meeting that they “would continue to have confidence in the Group [Huishan] which has over 60 years of operating history,” said the statement. The company also dismissed previous reports that it had issued fake invoices, and that chairman and controlling shareholder Yang Kai had misappropriated funds to invest in real estate in Shenyang, Liaoning’s capital.

The statement confirmed that Yang’s wife Ge Kun, who is also an executive director in charge of relationships with the company’s principal bankers, has been out of contact since March 21, the same day that Yang learned of the late payments. Financial news outlet Caixin revealed more details (link in Chinese) about the bailout package, based on an interview with creditor Hongling Capital head Zhou Shiping, who was at the March 23 meeting. The Liaoning government will pay over 90 million yuan ($13 million) for land owned by Huishan to inject cash into the company. It also ordered financial institutions involved not to downgrade the company’s credit rating or file lawsuits against it.

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Huishan is a bunch of highly leveraged shadow cows.

Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)

Turmoil at a small Chinese dairy company is shedding rare light on the final destination for some of the country’s estimated $8 trillion of shadow banking loans. Jilin Jiutai Rural Commercial Bank, a major creditor to embattled China Huishan Dairy., said late Tuesday it has extended a total of 1.35 billion yuan ($196 million) in credit to the dairy producer, including 750 million yuan through the purchase of investment receivables from a finance lease company. Investment receivables – a category that can include using wealth-management products, asset-management plans and trust-beneficiary rights to disguise what are in effect loans – allow banks to reduce the amount of cash they need to set aside for capital and provisions for loan losses.

The practice of recording loan-type exposures on balance sheets under categories including investment receivables has allowed hundreds of smaller Chinese banks to boost assets and profits. At the same time, it has created opaque risks that could lead to failures, bailouts or liquidity shocks with the potential to jolt national and global markets. The external public relations agency for Jiutai didn’t immediately reply to an email seeking comment. The bank doesn’t appear to have broken any disclosure rules on its receivables. China’s shadow banking system could lead to losses of $375 billion, CLSA estimated in September. The brokerage said such financing expanded at an annual 30% pace from 2011 through 2015 to reach 54 trillion yuan, or 79% of the nation’s GDP. But details have rarely surfaced on the specifics of individual shadow banking arrangements.

“Chinese banks are lending more and more money to companies in recent years through investment receivables, partly to circumvent regulatory or internal rules,” said Yulia Wan, a Shanghai-based banking analyst at Moody’s Investors Service. Lenders don’t disclose enough information about where the money goes, according to Wan. In addition, the banks usually don’t provision enough for such exposures, and they fund the transactions through short-term borrowing from other financial institutions, Wan said. “This practice poses risks to both investors and banks themselves.”

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People will find a way. And then so will the money.

Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)

Business is good, but Dickson Chan is worried. The Hong Kong money changer saw remittances from mainland China increase by 10% to 20% last month from the end of 2016, yet he is not sure how long the operation can last. The company he works for, Professional Foreign Currency Exchange, helps clients move cash between China and Hong Kong with a bank account in each place by squaring opposing transactions. “Now people feel that the Chinese government may tighten capital controls further and it wants more yuan depreciation, so many clients want to transfer money to Hong Kong more quickly,” Chan said from his store, located in the basement of a drab mall in Causeway Bay, the world’s second-priciest retail district. “We’re worried the Chinese government will introduce some regulations to ban this business, so now although we’re still doing it, we’re trying to raise revenues from other currencies.”

The fate of Hong Kong’s money changers shows both the reach of Chinese authorities, and the limits to their power. While a determined crackdown could kill the industry, such a response would risk spooking China’s citizens and exacerbating outflow pressures. The exodus of funds from Asia’s largest economy has spurred three years of yuan depreciation that at times roiled global markets and influenced monetary policies worldwide, and pushed up asset prices in cities from Hong Kong to Vancouver. An estimated $1.8 trillion has left Asia’s largest economy from the start of 2015 through January 2017, as the yuan lost almost 10% and returns on onshore assets dropped amid slowing economic growth. To stem the flows, the authorities have tightened capital curbs, stepping up scrutiny of residents’ foreign-currency purchases and limiting insurance buying in Hong Kong.Money changers in Hong Kong provide ways to sidestep such restrictions.

Once the cash reaches the semi-autonomous Chinese city, which has no capital controls, it can go almost anywhere. Hong Kong’s shopping districts are dotted with money changers advertising their remittance services and yuan conversion rates in simplified Chinese characters typically used on the mainland. There are 1,891 licensed money operators in the city, Hong Kong customs data show. Money changers or remittance firms need to obtain a license from the government, which requires the companies to conduct customer due diligence and keep records. As part of a sweeping effort to contain outflows, just before the new year, Chinese regulators boosted disclosure requirements for citizens converting yuan into foreign exchange — while retaining the $50,000 annual quota. Authorities busted at least 380 cases of major underground banking involving more than 900 billion yuan ($131 billion) of funds last year.

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A bit shaky in predictions etc., but this is very much is where we’re going. Retirement was an anomaly.

A World Without Retirement (G.)

We are entering the age of no retirement. The journey into that chilling reality is not a long one: the first generation who will experience it are now in their 40s and 50s. They grew up assuming they could expect the kind of retirement their parents enjoyed – stopping work in their mid-60s on a generous income, with time and good health enough to fulfil long-held dreams. For them, it may already be too late to make the changes necessary to retire at all. In 2010, British women got their state pension at 60 and men got theirs at 65. By October 2020, both sexes will have to wait until they are 66. By 2028, the age will rise again, to 67. And the creep will continue. By the early 2060s, people will still be working in their 70s, but according to research, we will all need to keep working into our 80s if we want to enjoy the same standard of retirement as our parents.

This is what a world without retirement looks like. Workers will be unable to down tools, even when they can barely hold them with hands gnarled by age-related arthritis. The raising of the state retirement age will create a new social inequality. Those living in areas in which the average life expectancy is lower than the state retirement age (south-east England has the highest average life expectancy, Scotland the lowest) will subsidise those better off by dying before they can claim the pension they have contributed to throughout their lives. In other words, wealthier people become beneficiaries of what remains of the welfare state. Retirement is likely to be sustained in recognisable form in the short and medium term. Looming on the horizon, however, is a complete dismantling of this safety net.

For those of pensionable age who cannot afford to retire, but cannot continue working – because of poor health, or ageing parents who need care, or because potential employers would rather hire younger workers – the great progress Britain has made in tackling poverty among the elderly over the last two decades will be reversed. This group is liable to suffer the sort of widespread poverty not seen in Britain for 30 to 40 years. Many now in their 20s will be unable to save throughout their youth and middle age because of increasingly casualised employment, student debt and rising property prices. By the time they are old, members of this new generation of poor pensioners are liable to be, on average, far worse off than the average poor pensioner today.

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The strongest wording I’ve seen to date.

Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)

German Interior Minister Thomas De Maiziere has said Turkey will not be allowed to spy on Turks living in Germany. Reports say the head of Turkey’s intelligence service handed a list of people suspected of opposition sympathies to his German counterpart. The list is said to include surveillance photos and personal data. Germany and other EU states have banned local rallies in support of Turkish President Recep Tayyip Erdogan. Turkish ministers have been seeking to campaign among ethnic Turks in a referendum on 16 April on increasing his powers. Some 41,000 people have been arrested in Turkey since a coup was defeated in July of last year.

According to Germany’s Sueddeutsche Zeitung newspaper and several public broadcasters, the head of Turkey’s intelligence service MIT, Hakan Fidan, handed Bruno Kahl a list of 300 individuals and 200 organisations thought to be linked to the Gulen movement at a security conference in Munich in February The apparent aim was to persuade Germany’s authorities to help their Turkish counterparts but the result was that the individuals were warned not to travel to Turkey or visit Turkish diplomatic addresses within Germany, home to 1.4 million voters eligible to vote in the referendum. Mr De Maiziere said the reports were unsurprising.

“We have repeatedly told Turkey that something like this is unacceptable,” he said. “No matter what position someone may have on the Gulen movement, here German jurisdiction applies and citizens will not be spied on by foreign countries.” [..] “Outside Turkey I don’t think anyone believes that the Gulen movement was behind the attempted putsch,” said German spy chief Hans-Georg Maassen. “At any rate I don’t know anyone outside Turkey who has been convinced by the Turkish government.” And Lower Saxony Interior Minister Boris Pistorius went further, saying, “We have to say very clearly that it involves a fear of conspiracy you can class as paranoid.”

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And Brussels is toothless. But it will all come down on Greece anyway, so why bother?

Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

Leaders from Central Europe said Tuesday they reject a European Union policy that calls for all member states to receive migrants, protesting suggestions that the level of their compliance could be linked to the availability of EU funds to them. A meeting in Warsaw of the so-called Visegrad Group brought together Poland’s Prime Minister Beata Szydlo and her counterparts from Hungary, Slovakia and the Czech Republic for talks including EUs migrant policies and a plan of sharing some 160,000 migrants among member states to ease the migrant wave pressure on Greece and Italy.

The EU recently warned of financial consequences to those who do not comply. Central European leaders said they reject the relocation plan and will not yield under the financial pressure, which they called an attempt at blackmail. Hungary’s Prime Minister Viktor Orban said his country was further sealing its borders and tightening regulations to block access to any more migrants. The Visegrad Group aspires to have a greater role in EU policies while at the same time makes a point of criticizing the bloc’s decisions. [AP]

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Mar 282017
 
 March 28, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Dorothea Lange Abandoned cafe in Carey, Texas 1937

 


A Nation of Landowners – But For How Long? (M.)
Middle-Class, Even Wealthy Americans Sliding Inexorably Into The Red (MW)
Italy’s Monte Paschi Bailout Has Some ECB Supervisors Grumbling
NY Fed: “Oil Prices Fell Due To Weakening Demand” (ZH)
Why Did Preet Bharara Refuse to Drain the Wall Street Swamp? (Bill Black)
A Detailed “Roadmap” For Meeting The Paris Climate Goals (Vox)
In UK Access To Justice Is No Longer A Right, But A Luxury (G.)
The Curse of the Thinking Class (Jim Kunstler)
Tensions Flare As Greece Tells Turkey It Is Ready To Answer Any Provocation (G.)
Erdogan Races Against the Dollar in Campaign for Unrivaled Power (BBG)
Tillerson Will Not Meet Turkey Opposition In Ankara Visit This Week (R.)
Troika Pushes Greece To Sell Up To 40% Of State-Controlled Power Utility (R.)
Fraport Greece Signs Funding Deal With 5 Lenders (K.)
Contraction Of Credit Continues Unabated In Greece (K.)
Mikis Theodorakis: ‘In Tough Times, Greeks Become Heroes or Slaves’ (GR)
Nearly 1,200 Migrants Picked Up Off Libya, Heading To Italy (R.)
Italy Calls For Investigation Of NGO Supported Migrant Fleet (Dm.)

 

 

“To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

A Nation of Landowners – But For How Long? (M.)

Land occupies a unique position in the economy because it is essential for any activity and, given its fixed supply, an increase in demand for it can only increase its price. Meanwhile finance, which facilitates that demand, has been available in ever-greater abundance since the deregulation of mortgage lending in the 1970s and 1980s. The interaction between the inelastic supply of land and the highly elastic supply of mortgage lending lies at the heart of the house price boom over the past few decades. But while the finance part of the story is relatively new (before the 1970s mortgages were harder to get and lending restricted by the conservative practices of the building societies), the land question has been around for centuries.

Ever since Henry VIII seized the monastery lands in the early 16th century a market has been evolving in land as a privately-owned tradable commodity. What is crucial to the contemporary housing debate, and what this book illustrates brilliantly, is how the control of land is, or has at least been allowed to become, fundamental to economic and political power relations. Because land is permanent and immovable, those who own the exclusive rights to its use are able to siphon off the value of any economic output that is dependent on it. The value of a piece of land therefore reflects the level of activity conducted on or around it, as well as any speculation arising from expectations about its potential future use. This price does not reflect the efforts or ingenuity of its owner, and so it does not reward productive activity but rather penalises it in the form of rent.

This ability of landowners to extract economic rent from productive activity, or the unearned increment, was once at the centre of political discourse. It was an issue that troubled classical economists ranging from Adam Smith to Karl Marx. As the industrial revolution advanced in the 18th and 19th centuries, productivity levels improved, and so the owners of land began to enjoy the fruits of the community’s labour. A land reform movement gathered momentum towards the late 19th century and the writings of the American economist Henry George advocating a land value tax attracted a following. In 1909, a young Winston Churchill (then 35, and a Liberal) decried the land monopolist’s free ride in what remains one of the best descriptions of the dilemma:

“Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

Churchill was careful to stress that it was the system he was attacking not the landowner himself (‘We do not want to punish the landlord. We want to alter the law’). But the law was as it was because landowners controlled parliament and indeed the Liberals’ plan for a land value tax in the People’s Budget, in support of which Churchill had been speaking, was thrown out by the House of Lords.

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How to kill a city part 832.

Middle-Class, Even Wealthy Americans Sliding Inexorably Into The Red (MW)

Not even a high six-figure salary is enough to keep New York City families out of the red. But spare a thought for the average American family, whose costs easily outpace the average income. A recent analysis from Sam Dogen at his personal finance website Financial Samurai showed how difficult it is for high earners to escape the rat race in New York City, one of the priciest places to live in the world. He analyzed a mock budget for an imaginary family of four in which the two 35-year-old breadwinners each make $250,000 a year. After factoring in taxes, 401(k)contributions, home and child care costs, the family was left with just $7,300 for the year — as if they were living “paycheck to paycheck.”

Perhaps nobody is crying for lawyers making $500,000 a year or even $250,000, but the analysis shows just how easy it is for spending habits to take a high salary and turn it into table scraps. Dogen said pressure from peers to spend more is a big contributing factor, adding “everywhere I go, and I’ve been all over the world, high income earners are secretly feeling the same squeeze.” “They are unhappy, getting divorces, and always comparing themselves to wealthier and wealthier people,” he said. “Heck, even a friend who is worth over $200 million after founding and taking public a company feels like he needs to continue working because he has to ‘keep up with the Zuckerbergs.’”

So how would the average American family fare by the same lifestyle? MarketWatch crunched the numbers and found they would be racking up approximately $27,000 in debt a year if they spent the average of what Americans spend on the same activities. This vast difference in economic stability comes even after adjusting for cheaper housing costs and lowering the number of vacations to one a year — the average in the U.S.

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Beware of any central bank announcements made the day after Christmas.

Italy’s Monte Paschi Bailout Has Some ECB Supervisors Grumbling

When the European Central Bank declared Banca Monte dei Paschi di Siena solvent last December, the first step toward a state-funded rescue, some members of the 19-nation Supervisory Board weren’t fully on board. Confronted with what they saw as a political agreement to bail out the world’s oldest lender, dissenters went along with the consensus despite their concerns about the bank’s health…[..] To make sense of the Monte Paschi debate, you have to start with a 2014 law known as the Bank Recovery and Resolution Directive, which sets out the EU’s bank-failure rules. The law assumes that if a firm needs “extraordinary public financial support,” this indicates that it’s failing and should be wound down. In that process, investors including senior bondholders can be forced to take losses.

An exception, known as a precautionary recapitalization, is allowed for solvent banks if a long list of conditions is met. As the name suggests, this tool isn’t intended to clear up a bank’s existing problems, such as Monte Paschi’s mountain of soured loans. This temporary aid is allowed to address a capital shortfall identified in a stress test. Daniele Nouy, head of the ECB Supervisory Board, reiterated in an interview on Monday that Monte Paschi and other Italian banks in line for a bailout are “not insolvent, otherwise we would not be talking about precautionary recapitalization.” Not everyone is convinced the bank, whose woes date back many years, qualifies for this special treatment.

“It is unclear if Monte Paschi meets the BRRD’s exemption criteria, and their use has the appearance of promoting national political concerns over a stricter reading of the newly established European rules,” said Simon Ainsworth at Moody’s. “The plan could risk damaging the credibility of the resolution framework, especially given that it would mark its first major test case.” The ECB’s decision on Monte Paschi’s solvency and capital gap was announced by the lender the day after Christmas. The ECB published an explanation of the precautionary recapitalization process a day later, but said little else publicly. On Dec. 29, the Bank of Italy issued a statement that broke down the €8.8 billion rescue into its parts. Solvency in the case of a precautionary recapitalization is determined based on two criteria, the ECB said: the bank meets its legal minimum capital requirements, and it has no shortfall in the baseline scenario of the relevant stress test.

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I’ve been talking about falling oil demand for so long that when other bring it up now it seems all new again.

NY Fed: “Oil Prices Fell Due To Weakening Demand” (ZH)

[..] one aspect of price formation that is rarely mentioned is demand, which is generally assumed to be unwavering and trending higher with barely a hiccup. The reason for this somewhat myopic take is that while OPEC has control over supply, demand is a function of global economic growth and trade (or lack thereof) over which oil producers have little, if any control. And yet, according to the latest oil price dynamics report issued by the Fed, it was declining global demand that pushed prices lower in the most recent, volatile period. As the New York Fed report in its March 27 report, “Oil prices fell owing to weakening demand” and explains as follows: “A decline in demand expectations together with a decreasing residual drove oil prices down over the past week.”

While there was some good news, namely that “in 2016:Q4, oil prices increased on net as a consequence of steadily contracting supply and strengthening, albeit volatile, global demand” offsetting the “modest decline in oil prices during 2016:Q3 caused by weakening global demand expectations and loosening supply conditions,” the Fed’s troubling finding is that the big move lower since 2014 has been a function of rising supply as well as declining demand: Overall, since the end of 2014:Q2, both lower global demand expectations and looser supply have held oil prices down. And while this trend appeared to have reversed in 2016:Q2 and 2016:Q4, recent indications suggest that demand may once again be slowing, which in turn has pressured oil prices back to levels last seen shortly after OPEC’s Vienna deal.

It is curious that according to the NY Fed, at a time when OPEC vows it is cutting production, the Fed has instead found “loose” supply to be among the biggest contributors to the latest decline in oil prices. But what may be concering to oil bulls is that as the decomposition chart below shows, while oil demand was solidly in the green ever since Trump’s election victory, in recent weeks it appears to have also tapered off along with the supply contribution to declining oil prices. This seems to suggest that along with most other “animal spirits” that were ignited following the Trump victory, only to gradually fade, oil demand, and thus price, may be the next to take another leg lower unless of course Trump manages to reignite the Trumpflation trade which, however, over the past month appears to have completely faded.

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“Indeed, Bharara never mustered the courtesy to respond to Bowen’s offers to aid his office.”

Why Did Preet Bharara Refuse to Drain the Wall Street Swamp? (Bill Black)

The New York Times’ editorial board published an editorial on March 12, 2017, praising Preet Bharara as the “Prosecutor Who Knew How to Drain a Swamp.” I agree with the title. At all times when he was the U.S. Attorney for the Southern District of New York (which includes Wall Street) Bharara knew how to drain the swamp. Further, he had the authority, the jurisdiction, the resources, and the testimony from whistleblowers like Richard Bowen (a co-founder of Bank Whistleblowers United (BWU)) to drain the Wall Street swamp. Bowen personally contacted Bharara beginning in 2005.

“You were quoted in The Nation magazine as saying that if a whistleblower comes forward with evidence of wrongdoing, then you would be the first to prosecute [elite bankers]. I am writing this email to inform you that there is a body of evidence concerning wrongdoing, which the Department of Justice has refused to act on in order to determine whether criminal charges should be pursued.” Bowen explained that he was a whistleblower about Citigroup’s senior managers and that he was (again) coming forward to aid Bharara to prosecute. Bowen tried repeatedly to interest Bharara in draining the Citigroup swamp. Bharara refused to respond to Bowen’s blowing of the whistle on the massive frauds led by Citigroup’s senior officers.

Bharara knew how to drain the Wall Street swamp and was positioned to do so because he had federal prosecutorial jurisdiction over Wall Street crimes. Whistleblowers like Bowen, who lacked any meaningful power, sacrificed their careers and repeatedly demonstrated courage to ensure that Bharara would have the testimony and documents essential to prosecute successfully some of Wall Street’s most elite felons. Bharara never mustered the courage to prosecute those elites. Indeed, Bharara never mustered the courtesy to respond to Bowen’s offers to aid his office. [..] Bharara knew how to drain the Wall Street swamp. He had the facts, the staff, and the jurisdiction to drain the Wall Street swamp. Bharara refused to do so.

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We all realize that this is never ever going to happen, right?!

A Detailed “Roadmap” For Meeting The Paris Climate Goals (Vox)

To hit the Paris climate goals without geoengineering, the world has to do three broad (and incredibly ambitious) things: 1) Global CO2 emissions from energy and industry have to fall in half each decade. That is, in the 2020s, the world cuts emissions in half. Then we do it again in the 2030s. Then we do it again in the 2040s. They dub this a “carbon law.” Lead author Johan Rockström told me they were thinking of an analogy to Moore’s law for transistors; we’ll see why. 2) Net emissions from land use — i.e., from agriculture and deforestation – have to fall steadily to zero by 2050. This would need to happen even as the world population grows and we’re feeding ever more people. 3) Technologies to suck carbon dioxide out of the atmosphere have to start scaling up massively, until we’re artificially pulling 5 gigatons of CO2 per year out of the atmosphere by 2050 — nearly double what all the world’s trees and soils already do.

“It’s way more than adding solar or wind,” says Rockström. “It’s rapid decarbonization, plus a revolution in food production, plus a sustainability revolution, plus a massive engineering scale-up [for carbon removal].” So, uh, how do we cut CO2 emissions in half, then half again, then half again? Here, the authors lay out a sample “roadmap” of what specific actions the world would have to take each decade, based on current research. This isn’t the only path for making big CO2 cuts, but it gives a sense of the sheer scale and speed required:

2017-2020: All countries would prepare for the herculean task ahead by laying vital policy groundwork. Like: scrapping the $500 billion per year in global fossil fuel subsidies. Zeroing out investments in any new coal plants, even in countries like India and Indonesia. All major nations commit to going carbon-neutral by 2050 and put in place policies — like carbon pricing or clean electricity standards — that point down that path. “By 2020,” the paper adds, “all cities and major corporations in the industrialized world should have decarbonization strategies in place.”

2020-2030: Now the hard stuff begins! In this decade, carbon pricing would expand to cover most aspects of the global economy, averaging around $50 per ton (far higher than seen almost anywhere today) and rising. Aggressive energy efficiency programs ramp up. Coal power is phased out in rich countries by the end of the decade and is declining sharply elsewhere. Leading cities like Copenhagen are going totally fossil fuel free. Wealthy countries no longer sell new combustion engine cars by 2030, and transportation gets widely electrified, with many short-haul flights replaced by rail.

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Brexit hardly seems Britain’s biggest problem. It’s the gutting of an entire society that is.

In UK Access To Justice Is No Longer A Right, But A Luxury (G.)

Laws that cost too much to enforce are phoney laws. A civil right that people can’t afford to use is no right at all. And a society that turns justice into a luxury good is one no longer ruled by law, but by money and power. This week the highest court in the land will decide whether Britain will become such a society. There are plenty of signs that we have already gone too far. Listen to the country’s top judge, Lord Thomas of Cwmgiedd, who admits that “our justice system has become unaffordable to most”. Look at our legal-aid system, slashed so heavily by David Cameron and Theresa May that the poor must act as their own trial lawyers, ready to be skittled by barristers in the pay of their moneyed opponents. The latest case will be heard by seven supreme court judges and will pit the government against the trade union Unison. It will be the climax of a four-year legal battle over one of the most fundamental rights of all: the right of workers to stand up against their bosses.

In 2013, Cameron stripped workers of the right to access the employment tribunal system. Whether a pregnant woman forced out of her job, a Bangladeshi-origin guy battling racism at work, or a young graduate with disabilities getting aggro from a boss, all would now have to pay £1,200 for a chance of redress. The number of cases taken to tribunal promptly fell off a cliff – down by 70% within a year. Citizens Advice, employment lawyers and academics practically queued up to warn that workers – especially poor workers – were getting priced out of justice. But for Conservative ministers, all was fine. Loyal flacks such as Matthew Hancock (then employment minister) claimed those deterred by the fees were merely “unscrupulous” try-ons, intent on “bullying bosses”. Follow Hancock’s logic, and with all those time-wasters weeded out, you’d expect the number of successful tribunal claims to jump. They’ve actually dropped.

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“Do they covet our Chick-fil-A chains and Waffle Houses? Our tattoo artists? Would they like to induce the Kardashians to live in Moscow? Is it Nascar they’re really after?”

The Curse of the Thinking Class (Jim Kunstler)

Let’s suppose there really is such a thing as The Thinking Class in this country, if it’s not too politically incorrect to say so — since it implies that there is another class, perhaps larger, that operates only on some limbic lizard-brain level of impulse and emotion. Personally, I believe there is such a Thinking Class, or at least I have dim memories of something like it. The farfetched phenomenon of Trumpism has sent that bunch on a journey to a strange land of the intellect, a place like the lost island of Kong, where one monster after another rises out of the swampy murk to threaten the frail human adventurers. No one back home would believe the things they’re tangling with: giant spiders, reptiles the size of front-end loaders, malevolent aborigines! Will any of the delicate humans survive or make it back home?

This is the feeling I get listening to arguments in the public arena these days, but especially from the quarters formerly identified as left-of-center, especially the faction organized around the Democratic Party, which I aligned with long ago (alas, no more). The main question seems to be: who is responsible for all the unrest in this land. Their answer since halfway back in 2016: the Russians. I’m not comfortable with this hypothesis. Russia has a GDP smaller than Texas. If they are able to project so much influence over what happens in the USA, they must have some supernatural mojo-of-the-mind — and perhaps they do — but it raises the question of motive. What might Russia realistically get from the USA if Vladimir Putin was the master hypnotist that Democrats make him out to be?

Do we suppose Putin wants more living space for Russia’s people? Hmmmm. Russia’s population these days, around 145 million, is less than half the USA’s and it’s rattling around in the geographically largest nation in the world. Do they want our oil? Maybe, but Russia being the world’s top oil producer suggests they’ve already got their hands full with their own operations? Do they want Hollywood? The video game industry? The US porn empire? Do they covet our Chick-fil-A chains and Waffle Houses? Our tattoo artists? Would they like to induce the Kardashians to live in Moscow? Is it Nascar they’re really after?

My hypothesis is that Russia would most of all like to be left alone. Watching NATO move tanks and German troops into Lithuania in January probably makes the Russians nervous, and no doubt that is the very objective of the NATO move — but let’s not forget that most of all NATO is an arm of American foreign policy. If there are any remnants of the American Thinking Class left at the State Department, they might recall that Russia lost 20 million people in the dust-up known as the Second World War against whom…? Oh, Germany.

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“The Turkish nationalist opposition leader, Devlet Bahçeli, has gone even further, claiming that several Greek islands are under occupation and reacting furiously when Kammenos visited the far-flung isle of Oinousses. “Someone must explain to this spoiled brat not to try our patience,” he railed. “If they [the Greeks] want to fall into the sea again, if they want to be hunted down, they are welcome, the Turkish army is ready. Someone must explain to the Greek government what happened in 1922. If there is no one to explain it to them, we can come like a bullet across the Aegean and teach them history all over again.”

Tensions Flare As Greece Tells Turkey It Is Ready To Answer Any Provocation (G.)

Fears of tensions mounting in the Aegean and eastern Mediterranean Seas reignited after the Turkish president raised the prospect of a referendum on accession talks with the EU and the Greek defence minister said the country was ready for any provocation. Relations between Ankara and European capitals have worsened before the highly charged vote on 16 April on expanding the powers of the Turkish president, Recep Tayyip Erdogan. Western allies have argued that a vote endorsing the proposed constitutional change would invest him with unparalleled authority and limit checks and balances at a time when they fear the Turkish leader is exhibiting worrying signs of authoritarianism. Erdogan has been enraged by recent bans on visiting Turkish officials rallying “yes” supporters in Germany and the Netherlands.

Highlighting growing friction between Ankara and the bloc, he raised the spectre of a public vote on EU membership at the weekend. “We have a referendum on 16 April. After that we may hold a Brexit-like referendum on the [EU] negotiations,” he told a Turkish-UK forum attended by the British foreign secretary, Boris Johnson. “No matter what our nation decides we will obey it. It should be known that our patience, tested in the face of attitudes displayed by some European countries, has limits.” The animus – reinforced last week when the leader said he would continue labelling European politicians “Nazis” if they continued calling him a dictator – has also animated tensions between Greece and Turkey, and Erdogan’s comments came hours after the Greek defence minister said armed forces were ready to respond in the event of the country’s sovereignty and territorial integrity being threatened.

“The Greek armed forces are ready to answer any provocation,” Panos Kammenos declared at a military parade marking the 196th anniversary of Greece’s war of liberation against Ottoman Turkish rule. “We are ready because that is how we defend peace.” Although Nato allies, the two neighbours clashed over Cyprus in 1974 and almost came to war over an uninhabited Aegean isle in 1996. Hostility has been rising in both areas, with the Greek Cypriot leader Nicos Anastasiades recently voicing fears of Turkey sparking a “hot incident” in the run-up to the referendum. “I fear the period from now until the referendum in Turkey, as well as the effort to create a climate of fanaticism within Turkish society,” he told CNN Greece. Turkey’s EU negotiations have long been hindered by Cyprus, and talks aimed at reuniting its estranged Greek and Turkish communities are at a critical juncture but have stalled and are unlikely to move until after the referendum.

But it is in the Aegean where tensions, matched by an increasingly ugly war of words, have been at their worst. After a tense standoff over eight military officers who escaped to Greece after the abortive coup against Erdogan last July – an impasse exacerbated when the Greek supreme court rejected a request for their extradition – hostility has been measured in almost daily dogfights between armed jets and naval incursions of Greek waters by Turkish research vessels. Both have prompted diplomats and defence experts to express fears of an accident at a time when experienced staff officers and pilots have been sidelined in the purges that have taken place since the attempted coup. The shaky migration deal signed between the EU and Turkey to thwart the flow of refugees into the continent has only added to the pressure.

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The falling dollar is setting up Turkey for dictatorship. The world will come to regret this.

Erdogan Races Against the Dollar in Campaign for Unrivaled Power (BBG)

Turkish President Recep Tayyip Erdogan has lambasted friend and foe alike in a campaign for vast new powers, but his political fate may hang on the one thing he’s stopped carping about: the price of money. With the April 16 vote on strengthening the presidency too close for pollsters to call, Erdogan is no longer berating the central bank and commercial lenders over borrowing costs they’ve pushed to a five-year high. He’s betting any measures taken to arrest the lira’s plunge will pay off at the ballot box. The lira’s value versus the dollar is more than just a pocketbook issue in Turkey, where millions of voters still remember the abrupt devaluations that ravaged their livelihoods in past decades and view the exchange rate as the most important indicator of the nation’s economic health.

Turkey’s trade deficit is the biggest of all top 50 economies relative to output and most of its imports and foreign debt are priced in dollars, so sharp declines in the lira can be ruinous for legions of entrepreneurs like Ramazan Saglam, who owns a print shop in a working-class neighborhood of Ankara. “I bitterly recall when the dollar jumped in 1994 and 2001 – my business collapsed both times,” Saglam said. “I’m supporting the new presidential system wholeheartedly because I don’t want to go bankrupt again.” Saglam nodded at the big red banner billowing from his second-story window to illustrate his point. The Chinese cloth and South Korean ink he used to make it were all bought with dollars, as was the American printer that produced Erdogan’s image and the slogan, “Yes. For my country and my future.”

Given the choice between paying more for credit to buy supplies and keeping the lira in check, he said he’d choose sound money every time. Supporters of the proposed constitutional changes say handing Erdogan sweeping new authority is the only way to achieve the stability that society craves and businesses need to thrive. But opponents say approving the referendum is an invitation to dictatorship, particularly since Erdogan, already the most dominant leader in eight decades, jailed or fired more than 100,000 perceived enemies after rogue army officers attempted a coup in July. “Everybody on the street tracks the exchange rate on a daily basis and Erdogan wins support as long as Turkey can keep the lira stable,” said Wolfango Piccoli, the London-based co-president of Teneo Intelligence, a political risk advisory firm. “But the challenge here is the external backdrop. They can’t really predict what’s coming.”

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The US must cease labeling the PKK a terrorist organization. Or stop backing the Kurds in Syria. Can’t have both.

Tillerson Will Not Meet Turkey Opposition In Ankara Visit This Week (R.)

U.S. Secretary of State Rex Tillerson will not meet members of Turkish opposition groups during a one-day visit to Ankara this week where talks with President Tayyip Erdogan will focus on the war in Syria, senior U.S. officials said on Monday. Thursday’s visit comes at a politically sensitive time in Turkey as the country prepares for a referendum on April 16 that proposes to change the constitution to give Erdogan new powers. A senior State Department official said Tillerson will meet with Erdogan and government ministers involved in the fight against Islamic State in Syria. “It is certainly something we are very acutely aware of and the secretary will be mindful of while he is there,” one State Department official told a conference call with reporters, referring to political sensitivities ahead of the referendum.

American officials expect Erdogan and others to raise the case of U.S.-based cleric Fethullah Gulen, whom the government accuses of orchestrating a failed coup last July. The focus of the Ankara talks is the U.S.-led offensive to retake Raqqa from Islamic State and to stabilize areas in which militants have been forced out, allowing refugees to return home, officials said. A major sticking point between the United States and Turkey is U.S. backing for the Syrian Kurdish YPG militia, which Turkey considers part of the Kurdistan Workers’ Party that has been fighting an insurgency for three decades in Turkey. But the United States has long viewed Kurdish fighters as key to retaking Raqqa alongside Arab fighters in the U.S.-backed Syrian Democratic Forces (SDF). “We are very mindful of Turkey’s concerns and it is something that will continue to be a topic of conversation,” a second U.S. official said.

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Fire sale. The minister actually called these practices ‘cannibalistic’, and rightly so. And that’s not even the best of it. A Greek paper details how a Greek bank, Alpha Bank, lends the money to German investors to buy up Greece’s Public Power Corp. That is about as close to cannibalism as you can get. Economic warfare 101.

Troika Pushes Greece To Sell Up To 40% Of State-Controlled Power Utility (R.)

A Greek minister on Monday accused international lenders of reneging on a 2015 bailout deal by trying to force a fire-sale of its main electricity utility PPC to serve “domestic and foreign business interests.” Under terms of a 2015 bailout deal for Greece worth up to €86 billion, Public Power Corp. (PPC) is obliged to cut its dominance in the Greek market to below 50% by 2020. Although it is not clearly specified in the deal, lenders want Greece to sell some of PPC’s assets. PPC, which is 51% owned by the state, now controls about 90% of the country’s retail electricity market and 60% of its wholesale market. Greece last year launched power auctions to private operators as a temporary mechanism and has proposed that PPC team up with private companies to help achieve this target. But lenders doubt the effectiveness of the measure.

“What they want is that power production infrastructure of up to 40% – PPC’s coal-fired production- is sold. This is what they want right know, which is beyond the (2015) deal,” Interior Minister Panos Skourletis, a former energy minister, told Greek state television. Skourletis on Monday accused the lenders pressing the country to sell-off PPC units at a very low price to serve European and domestic competitors. “It is an assault which has set its sights on PPC’s assets to pass it on to specific European and domestic business interests at a humiliating price,” Skourletis said in an Op-Ed penned for the Efimerida Ton Syntakton daily.

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More warfare, more cannibalism. Airports also ‘privatized’, ‘reformed’. Alpha Bank is also the largest lender in this case. Nice partners too: “..the International Finance Corporation (€154.1 million), a member of the World Bank Group [..] is also the sole provider of euro interest rate hedging swaps..”

Fraport Greece Signs Funding Deal With 5 Lenders (K.)

Five leading financial institutions have signed a long-term financing agreement with German-Greek consortium Fraport Greece, which will soon be managing, operating, upgrading and maintaining 14 regional Greek airports under a 40-year concession contract. The agreement is for total financing of 968.4 million euros. The lenders are Alpha Bank (participating with €284.7 million), the Black Sea Trade & Development Bank (€62.5 million), the European Bank for Reconstruction & Development (€186.7 million), the European Investment Bank (€280.4 million), and the International Finance Corporation (€154.1 million), a member of the World Bank Group.

IFC is also the sole provider of euro interest rate hedging swaps to help Fraport Greece hedge potential fluctuations in interest rates through the term of the loan. Over two-thirds of the total amount (€688 million) will be used to cover the upfront payment (of €1.234 billion) due to state sell-off fund TAIPED upon the airports’ delivery, while €280.4 million will be used to finance upgrading work at the 14 airports. Meanwhile, Fraport Greece recently announced a capital increase raising the company’s total capital to €650 million, most of which will go toward the upfront payment.

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But domestic credit is still collapsing. And so is the economy, of course.

Contraction Of Credit Continues Unabated In Greece (K.)

Bank of Greece figures revealed on Monday a further contraction in the financing of the Greek economy last month, a result of the general uncertainty hanging over the economy and the drop deposits at the country’s banks. The total funding of the economy was down 2% YOY in February, from -1.5% in January, while the monthly net flow of total financing was negative by €801 million, against a negative flow of €1.261 billion in January. The main factor in that decline was the drop in funding to the state, as the annual rate concerning the general government sector posted a 3.7% contraction in February against a 0.1% increase in January. In the private sector it was negative by 1.6% as funding shrank by a net €101 million. The image was somewhat different for enterprises as there was an €82 million monthly increase in the net flow of funding last month, compared with a €643 million decline in January. However, the flow of credit to private clients and nonprofit organizations dipped by €153 million or 2.7% in February.

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Wise old genius. “As soon as three Greeks get together, they start talking of who’s going to be the leader..”

Mikis Theodorakis: ‘In Tough Times, Greeks Become Heroes or Slaves’ (GR)

“During tough times, a Greek can become a hero or a slave,” said legendary Greek composer Mikis Theodorakis in an interview published in Proto Thema Sunday newspaper. The 92-year-old musician, who is also an emblematic figure of the Greek Left, spoke about Greece’s current state, the leftist government, the main opposition party and the bailout agreements. Theodorakis said that he is not shocked about the current condition Greece is in because, historically, the country has been through turmoil several times. He said the Greek spirit, like a light, shines through at the end because Greeks have an inner harmony that prevails. However, Theodorakis said, this is a hard period for Greece and this time he is afraid for the future of the country: “When the Greek is with his back against the wall, he becomes a hero or a slave.”

When asked to compare the current state of the nation with the times of the German Occupation, Theodorakis said that what Greece is going through now is worse: “I don’t remember people going through the trash to find food. I don’t remember elderly people waiting in line to get a cabbage.” Theodorakis spoke in length about the time (2012) opposition leader Alexis Tsipras and leftist legend Manolis Glezos approached him and asked him to join SYRIZA and win the upcoming elections. He said he refused to join because the young candidate did not have a plan on how to get Greece going without supervision and financial aid from the EU and the IMF. He described Greece as a train rolling on tracks laid by the EU and the IMF.

“I told him ‘if you’re planning to come to power without having a plan to change the tracks and provide Greek people with what they need, then you are opportunists and you will only succeed in destroying the country and humiliating the Greek Left’,” the composer said about Tsipras. “With great sadness, I believe that the current plight of the country confirms exactly what I said to Alexis Tsipras, here in my house, in the meeting that I mentioned earlier,” Theodorakis said. The composer said that Greeks have a lust for power: “As soon as three Greeks get together, they start talking of who’s going to be the leader,” he said characteristically.

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A new issue has come to light: where are the NGOs picking up the refugees?

Nearly 1,200 Migrants Picked Up Off Libya, Heading To Italy (R.)

Humanitarian ships rescued almost 1,200 migrants who were crossing the Mediterranean Sea at the weekend on an array of small, tightly packed boats, Doctors Without Borders said on Sunday. A young woman was found unconscious on one of the vessels and later died, the group said. Some 412 people were crammed onto a single wooden boat, while the others were picked up from huge inflatable dinghies, which had set sail from the coast of Libya. The weekend rescues mean that about 22,000 mainly African migrants have been picked up heading to Italy so far this year, while around 520 have died trying to make the crossing.

An Italian prosecutor said last week that humanitarian ships operating off Libya were undermining the fight against people smugglers and opening a corridor that is ultimately leading to more migrant deaths. The chief prosecutor of the Sicilian port city of Catania, Carmelo Zuccaro, said he also suspected that there may be direct communication between Libya-based smugglers and members of charity-operated rescue vessels. NGOs deny any wrongdoing, saying they are simply looking to save lives, but they are facing criticism in Italy, which has taken in about half a million migrants since the start of 2014.

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Italy thinks George Soros is sponsoring this.

Italy Calls For Investigation Of NGO Supported Migrant Fleet (Dm.)

Italian authorities are calling for monitoring of the funding of an NGO fleet bussing migrants into the EU from the North African coast after a report released the European Border and Coast Guard Agency has determined that the members of the fleet are acting as accomplices to people smugglers and directly contributing to the risk of death migrants face when attempting to enter the EU. The report from regulatory agency Frontex suggests that NGOs sponsoring ships in the fleet are now acting as veritable accomplices to people smugglers due to their service which, in effect, provides a reliable shuttle service for migrants from North Africa to Italy. The fleet lowers smugglers’ costs, as it all but eliminates the need to procure seaworthy vessels capable making a full voyage across the Mediterranean to the European coastline.

Traffickers are also able to operate with much less risk of arrest by European law enforcement officers. Frontex specifically noted that traffickers have intentionally sought to alter their strategy, sending their vessels to ships run by the NGO fleet rather than the Italian and EU military. On March 25th, 2017, Italian news source Il Giornale carried remarks from Carmelo Zuccaro, the chief prosecutor of Catania (Sicily) calling for monitoring of the funding behind the NGO groups engaged in operating the migrant fleet. He stated that “the facilitation of illegal immigration is a punishable offense regardless of the intention.” While it is not a crime to enter the waters of a foreign country and pick them migrants, NGOs are supposed to land them at the nearest port of call, which would have been somewhere along the North African coast instead of in Italy.

The chief prosecutor also noted that Italy is investigating Islamic radicalization occurring in prisons and camps where immigrants are hired off the books. Italy has for some months been reeling under the pressure of massive numbers of migrants who have been moving from North Africa into the southern states of the European Union. In December 2016, The Express cited comments made by Virginia Raggi, the mayor of Vatican City, stating that Rome was on the verge of a “war” between migrants and poor Italians. The wave of migrants has also caused issues in southern Italy, where the Sicilian Cosa Nostra has declared a “war on migrants” last year amid reports that the Italian mafia had begun fighting with North African crime gangs who entered the EU among migrant populations.

Read more …

Mar 272017
 
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Ray K. Metzker Chicago 1958

 


Sharpest Credit Plunge Since 2008 Could Spell Disaster For US Economy (AEP)
Paper Wealth In US Stocks Reaches $32 Trillion (Fed)
Rich Chinese Race to Apply for a US Golden Visa (BBG)
Russia’s Banking System Has SWIFT Alternative Ready (RT)
Erdogan Setting Back Integration In Germany By Years: Schaeuble (R.)
France’s Le Pen Says The EU ‘Will Die’, Globalists To Be Defeated (R.)
Populism Is The Result Of Global Economic Failure (G.)
The West is Becoming Irrelevant (Vltchek)
The US Will Lose Control Of The Global Internet (Morozov)
Circular Runways Proposed For Airport Efficiency (Curbed)
Trump Presidency “Opens Door” To Planet-Hacking Geoengineer Experiments (G.)
UN’s Famine Appeal Is Billions Shy of Goal (NYT)
‘We Reached Our Limits’: Greece To Stop Taking Back Refugees (RT)
Greek-US Ties Set To Strengthen Significantly (K.)
Greece Considers Capital Control Tightening (K.)

 

 

The Telegraph changed the title of this Ambrose article overnight to “Fading Trump Rally Threatened By Rare Contraction Of US Credit”.

Sharpest Credit Plunge Since 2008 Could Spell Disaster For US Economy (AEP)

Credit strategists are increasingly disturbed by a sudden and rare contraction of US bank lending, fearing a synchronised slowdown in the US and China this year that could catch euphoric markets badly off guard. One key measure of US corporate borrowing is falling at the fastest rate since the onset of the Lehman Brothers crisis. Money supply growth in the US has also slowed markedly. These monetary and credit signals tend to be leading indicators for the real economy. Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.

The deterioration in the broader $9 trillion market for loans and leases has been less dramatic but it too is shrinking, falling at a 1.6pc rate on a three-month basis. “Corporate lending has ground to a halt and I am staggered that the Fed is raising rates. They have made a very big mistake,” said Patrick Perret-Green from AD Macro. Credit experts at several big US banks have issued warnings over recent days, albeit sotto voce. “We’ve been surprised how little attention the slowdown in US bank lending has garnered,” said Matt King, global credit strategist at Citigroup.

While they are not yet alarmed, their concerns are worth heeding. Credit has tended to pick up signs of trouble several weeks before equity markets in recent episodes of financial stress. “Without another big dose of momentum, the cracks in the global reflationary consensus are liable to grow bigger. All around, existing trends are being called into question,” he said. Net corporate bond issuance has also stalled, indicating that borrowing by US firms as a whole is in decline. “So much for a Trump-driven expansion. Beneath the surface, we think a seismic battle is taking place,” he said.

Elga Bartsch and Chetan Ahya from Morgan Stanley said the credit squeeze is a warning sign and needs watching closely. “On our estimates, the credit impulse turned negative at the end of 2016. We have not seen such a sharp deceleration in bank lending to US corporates since the Great Financial Crisis,” they said. “Historically, credit downturns have led recessions. The plunge could reignite concerns that a highly leveraged US corporate sector may react strongly to even limited interest rates increases,” they said.

[..] Money and credit are certainly not flashing warnings of an imminent crisis, but they are hard to square with the exuberant view of investors that the world is on the cusp of an accelerating economic boom. That boom may already have peaked. The massive stimulus injected by the global authorities last year to counter the Chinese currency scare and any fall-out from Brexit is by now fading, and it is too early to tell whether business will pick up the baton. Any soft patch could all too easily combine with a slowdown in China as the country taps the brakes after an extreme episode of fiscal prime-pumping in 2016. Regulators are clamping down on property speculation and trying to rein in forms of pyramid lending, causing a sharp rise in Shibor lending rates. The worry in China is a maturity mismatch. Huge sums have been borrowed on the short-term markets. These debts have to be rolled over constantly to cover long-term liabilities. It was this sort of mismatch that brought down Northern Rock and Lehman Brothers.

[..] Weak US indicators are clearly at odds with the Trump rally on Wall Street, which has pushed equity valuations to nose-bleed levels. Kevin Gaynor from Nomura says his model of asset pricing suggests markets are in effect assuming global growth of 5pc and earnings increases of 30pc a year. These are heroic. “There is a time decay on this new temporary equilibrium,” he notes acidly. What is so disturbing is that each extra dollar of new debt now generates just $0.17 of extra GDP in the US, down from around $0.75 in the 1960s. Much of the corporate debt built up in this cycle has been to buy back stock or pay dividends.

Read more …

“Half could be erased and still exceed historical valuation norms.” Fall 50% and still be overvalued. But not a bubble?!

Paper Wealth In US Stocks Reaches $32 Trillion (Fed)

John Hussman comments: “Paper wealth in U.S. stocks reaches $32 trillion. Half could be erased and still exceed historical valuation norms.”

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They can take out $50,000 per year but need ten times that for a golden visa.

Rich Chinese Race to Apply for a US Golden Visa (BBG)

As members of Congress in Washington debate raising the minimum required to obtain a U.S. immigrant investor visa from $500,000 to $1.35 million, concern about the hike has set off a scramble among wealthy would-be participants in China. “Some clients are demanding that we make sure their applications are submitted before April 28,” the date the program expires unless extended or amended by Congress, said Judy Gao, director of the U.S. program at Can-Reach (Pacific), a Beijing-based agency that facilitates so-called EB-5 Immigrant Investor visas. “We’re working overtime to do that.” China’s wealthy, using not-always-legal means to skirt capital controls to get their money out and at the same time gain residency in the U.S., are continuing to dwarf all others as the largest participants in the EB-5 program, despite heightened measures by the Chinese government.

[..] Because Chinese individuals are limited to exchanging $50,000 worth of yuan a year, a 10th of what the EB-5 program requires, some agents are advising clients who don’t already have assets offshore to use a means nicknamed “smurfing” to move their money. “Our suggestion to the client is to open three to four personal accounts in the U.S. or line up three to four friends’ accounts, so they can split the money and wire it to different personal accounts without being put on a blacklist by the Chinese authorities,” said a Shanghai-based real estate agent who gave the surname Dong. “It may require a trip to the States to do so to facilitate the process.” [..] While the government in Beijing spent much of 2016 working to stop its citizens sending money abroad in order to stabilize its declining currency and foreign reserves, Chinese investors’ use of EB-5 continued anyway, totaling $3.8 billion in the fiscal year that ended Sept. 30.

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The sanctions and hysteria allow and force Russia to break the chains and be creative.

Russia’s Banking System Has SWIFT Alternative Ready (RT)

If the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is shut down in Russia, the country’s banking system will not crash, according to Central Bank Governor Elvira Nabiullina. Russia has a substitute. “There were threats that we can be disconnected from SWIFT. We have finished working on our own payment system, and if something happens, all operations in SWIFT format will work inside the country. We have created an alternative,” Nabiullina said at a meeting with President Vladimir Putin on Wednesday. She also added that 90% of ATMs in Russia are ready to accept the Mir payment system, a domestic version of Visa and MasterCard. Izvestia daily reported that as of January 2016, 330 Russian banks had been connected to the SWIFT alternative, the system for transfer of financial messages (SPFS).

In 2014 and 2015, when the crisis in relations between Russia and the West were at their peak over Crimea and eastern Ukraine, some Western politicians urged disconnecting Russia from SWIFT. In November 2015, Nabiullina said the SPFS was close to being completed. The central bank’s website says the system was established “as an alternative channel for interbank cooperation with the aim of ensuring the guaranteed and uninterrupted provision of services for the transmission of electronic messages on financial transactions.” At present, the system has some drawbacks. It doesn’t work from 9pm to 5am Moscow time and costs up to five cents per wire transfer, which is regarded expensive.

Read more …

Schäuble is not all stupidity.

Erdogan Setting Back Integration In Germany By Years: Schaeuble (R.)

Turkish President Tayyip Erdogan, who accuses Chancellor Angela Merkel of using “Nazi methods” against Turks in Germany, is setting back their integration by years, Finance Minister Wolfgang Schaeuble has said. Berlin is growing increasingly frustrated about Erdogan repeatedly accusing it of applying “Nazi methods” by banning rallies aimed at drumming up support among Turks in Germany for a referendum that would strengthen the power of his presidency. Turks workers began moving to Germany in the 1960s and the country now has about 3 million people of Turkish background. Some are fully integrated while others live in ethnic communities with less contact with the majority population.

“Erdogan’s rhetoric makes me stunned,” Schaeuble, a veteran member of Merkel’s Christian Democratic (CDU) party, told the Welt am Sonntag weekly newspaper. “In a short time, it wilfully destroys the integration that has grown over years in Germany. The repair of the damage will take years,” he said. Erdogan said in a speech in Istanbul on Sunday: “You call the president of the Turkish Republic a dictator. When we call them fascists, they get annoyed. When we call them Nazis, they get annoyed.” “You are fascists, you are. Be annoyed as much as you want with Nazi practices. If you draw swastikas on the walls of our mosques and don’t hold anyone accountable, you cannot take off this stain,” Erdogan said.

Read more …

According to Le Monde, one third of French (43% under 35) doesn’t know if they’re going to vote at all. And half still don’t know who to vote for. Beware the polls.

France’s Le Pen Says The EU ‘Will Die’, Globalists To Be Defeated (R.)

The European Union will disappear, French presidential candidate Marine Le Pen told a rally on Sunday, aiming to re-enthuse core supporters in the final four weeks before voting gets underway. Buoyed by the unexpected election of Donald Trump in the United States and by Britain’s vote to leave the EU, the leader of the anti-EU and anti-immigrant National Front (FN) party, told the rally in Lille that the French election would be the next step in what she called a global rebellion of the people. “The European Union will die because the people do not want it anymore,” Le Pen said to loud cheers and applause. “The time has come to defeat globalists,” she said, adding: “My message is one of emancipation, of liberation … a call for all the patriots to gather behind our flag.”

Opinion polls forecast that Le Pen will do well in the April 23 first round of the presidential election only to lose the May 7 run-off to centrist Emmanuel Macron. Its anti-EU, anti-euro stance is one of the FN’s standard-bearing policies, both a mark of its anti-establishment stance that pleases grass-roots supporters and attracts voters angry with globalization, and a likely obstacle to its quest for power in a country where a majority oppose a return to the franc. Le Pen has over the past few months tried to accommodate this opposition to leaving the euro by continuing to criticize the unpopular EU while telling voters she would not abruptly pull France out of the bloc or the euro but instead hold a referendum after six months of renegotiating the terms of France’s EU membership.

On Sunday she told the rally she would seek to replace the EU by “another Europe,” which she called “the Europe of the people,” based on a loose cooperative of nations. “It must be done in a rational, well-prepared way,” she told Le Parisien in an interview published earlier on Sunday. “I don’t want chaos. Within the negotiation calendar I want to carry out … the euro would be the last step because I want to wait for the outcome of elections in Germany in the fall before renegotiating it.”

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But is the economic failure caused only by wrong policies?

Populism Is The Result Of Global Economic Failure (G.)

The rise of populism has rattled the global political establishment. Brexit came as a shock, as did the victory of Donald Trump. Much head-scratching has resulted as leaders seek to work out why large chunks of their electorates are so cross. The answer seems pretty simple. Populism is the result of economic failure. The 10 years since the financial crisis have shown that the system of economic governance which has held sway for the past four decades is broken. Some call this approach neoliberalism. Perhaps a better description would be unpopulism. Unpopulism meant tilting the balance of power in the workplace in favour of management and treating people like wage slaves. Unpopulism was rigged to ensure that the fruits of growth went to the few not to the many.

Unpopulism decreed that those responsible for the global financial crisis got away with it while those who were innocent bore the brunt of austerity. Anybody seeking to understand why Trump won the US presidential election should take a look at what has been happening to the division of the economic spoils. The share of national income that went to the bottom 90% of the population held steady at around 66% from 1950 to 1980. It then began a steep decline, falling to just over 50% when the financial crisis broke in 2007. Similarly, it is no longer the case that everybody benefits when the US economy is doing well. During the business cycle upswing between 1961 and 1969, the bottom 90% of Americans took 67% of the income gains. During the Reagan expansion two decades later they took 20%.

During the Greenspan housing bubble of 2001 to 2007, they got just two cents in every extra dollar of national income generated while the richest 10% took the rest. The US economist Thomas Palley* says that up until the late 1970s countries operated a virtuous circle growth model in which wages were the engine of demand growth. “Productivity growth drove wage growth which fueled demand growth. That promoted full employment, which provided the incentive to invest, which drove further productivity growth,” he says.

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China doesn’t want war. Neither does Russia.

The West is Becoming Irrelevant (Vltchek)

China, one of the oldest and greatest civilizations on Earth, went through the terrible period of ‘humiliation’. Divided, occupied and plundered by the West, it has never forgotten nor forgiven. Now the Chinese Communist state and its mixed economy are helping countries in virtually all parts of the world, from Oceania and Latin America, to the Middle East and especially Africa, to survive and to finally stand on their own feet. Despite all the vitriolic propaganda regurgitated by the West (those people in Europe or North America who know close to zero about Africa or China,habitually passing ‘confident’ and highly cynical ‘judgments’ about China’s involvement in the poor world; judgments based exclusively on the lies and fabrications produced by the Western media), China has been gaining great respect and trust in virtually all corners of the globe.

The Chinese people and their government are now standing firmly against Western imperialism. They will not allow any recurrence of the disgraceful and dreary past. The West is provoking this mighty and optimistic nation, pushing it into a terrible confrontation. China doesn’t want any military conflict. It is the most peaceful, the most non-confrontational large nation on Earth. But it is becoming clear that if pushed against the wall, this time it will not compromise: it will fight. In the last years I have spoken to many Chinese people, as I traveled to all corners of the country, and I’m convinced that by now the nation is ready to meet strength with strength. Such determination gives hope to many other countries on our Planet. The message is clear: the West cannot do whatever it wants, anymore. If it tries, it will be stopped. By reason or by force!

Russia is ready again, too. It is standing next to China, enormous and indignant. Go to Novosibirsk or Tomsk, to Khabarovsk, Vladivostok or Petropavlovsk in Kamchatka. Talk to Russian people and you will soon understand: almost nobody there believes or respects the West, anymore. Throughout history, Russia was attacked and ransacked from the West. Millions, tens of millions of its people were murdered, literally exterminated. And now, the nation is facing what some consider to be yet another imminent attack. Like the Chinese people, Russians are unwilling to compromise, anymore. The old Russian forecast is once again alive, that very one professed by Alexander Nevsky: Go tell all in foreign lands that Russia lives! Those who come to us in peace will be welcome as a guest. But those who come to us sword in hand will die by the sword! On that Russia stands and forever will we stand!

Read more …

By dismantling domestic privacy laws, ….

The US Will Lose Control Of The Global Internet (Morozov)

The numerous paradoxes that will haunt Donald Trump in the coming months were on full display during the recent Senate vote to undo privacy legislation that was passed in the last few years of the Obama administration. As part of a broader effort to treat internet service providers and telecoms operators as utility companies, Obama imposed restrictions on what these companies could do with all the user data from browsers and apps. Emboldened by Trump, the Republicans have just allowed these businesses to collect, sell and manipulate such data without user permission. From the short-sighted domestic perspective, it seems like a boon to the likes of Verizon and AT&T, especially as they increasingly find themselves confronting their data-rich counterparts in Silicon Valley.

Telecoms companies have been complaining (not entirely without reason) that the Obama administration favoured the interests of Google and Facebook which, invoking the lofty rhetoric of “keeping the internet free” only to defend their own business agenda, have traditionally faced somewhat lighter regulation. The Democrats, always happy to attack Trump, have jumped on the issue, warning that the Senate vote would foster ubiquitous and extensive surveillance by the telecoms industry – and Silicon Valley, of course, would never commit such sins. Under the new rules, complained Bill Nelson, a senator from Florida, “your broadband provider may know more about your health – and your reaction to illness – than you are willing to share with your doctor”.

Never mind that Google and Facebook already know all this – and much more – and generate little outrage from the Democrats. The Democrats, of course, only have themselves to blame for such ineptitude. From the early 1980s onwards, centre-left movements on both sides of the Atlantic no longer discussed technology policy in terms of justice, fairness or inequality. Instead, they preferred to emulate their neoliberal opponents and frame choices – about technology policy, but also about many other domains – in terms of just one goal that rules supreme above all other: innovation. The problem with building a political programme on such flimsy economistic foundations is that it immediately opens the door to competing narratives of just what kind of policy produces more innovation.

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I watch the increase in global aviation with a very heavy heart. But this is smart.

Circular Runways Proposed For Airport Efficiency (Curbed)

While airport terminal architecture has a solid history of style and innovation, rarely is a proposal put forth to utterly redesign the runway. But that’s precisely the aim of Henk Hesselink, a Dutch scientist working with the Netherlands Aerospace Centre. Dubbed the “endless runway”, Hesselink’s brainchild is a 360-degree landing strip measuring more than two miles in diameter. Since airplanes would be able to approach and take off from any direction around the proposed circle, they wouldn’t have to fight against crosswinds.

And three planes would be able to take off or land at the same time. Hesselink’s team uses flight simulators and computerized calculations to test the unconventional design, and have determined that round airports would be more efficient than existing layouts. With a central terminal, the airport would only use about a third of the land of the typical airport with the same airplane capacity. And there’s an added benefit to those living near airports: Flight paths could be more distributed, and thereby making plane noise more tolerable. So far, there have been no plans to actually build a circular runway, but Hesselink’s research continues on.

 

Read more …

The Better Than God crowd is not done with you just yet.

Trump Presidency “Opens Door” To Planet-Hacking Geoengineer Experiments (G.)

Harvard engineers who launched the world’s biggest solar geoengineering research program may get a dangerous boost from Donald Trump, environmental organizations are warning. Under the Trump administration, enthusiasm appears to be growing for the controversial technology of solar geo-engineering, which aims to spray sulphate particles into the atmosphere to reflect the sun’s radiation back to space and decrease the temperature of Earth. Sometime in 2018, Harvard engineers David Keith and Frank Keutsch hope to test spraying from a high-altitude balloon over Arizona, in order to assess the risks and benefits of deployment on a larger scale. Keith cancelled a similar planned experiment in New Mexico in 2012, but announced he was ready for field testing at a geoengineering forum in Washington on Friday.

“The context for discussing solar geoengineering research has changed substantially since we planned and funded this forum nearly one year ago,” a forum briefing paper noted. While geoengineering received little favour under Obama, high-level officials within the Trump administration have been long-time advocates for planetary-scale manipulation of Earth systems. David Schnare, an architect of Trump’s Environmental Protection Agency transition, has lobbied the US government and testified to Senate in favour of federal support for geoengineering. He has called for a multi-phase plan to fund research and conduct real-world testing within 18 months, deploy massive stratospheric spraying three years after, and continue spraying for a century, a duration geoengineers believe would be necessary to dial back the planet’s temperature.

“Clearly parts of the Trump administration are very willing to open the door to reckless schemes like David Keith’s, and may well have quietly given the nod to open-air experiments,” said Silvia Riberio, with technology watchdog ETC Group. “Worryingly, geoengineering may emerge as this administration’s preferred approach to global warming. In their view, building a big beautiful wall of sulphate in the sky could be a perfect excuse to allow uncontrolled fossil fuel extraction. We need to be focussing on radical emissions cuts, not dangerous and unjust technofixes.” [.] “Geoengineering holds forth the promise of addressing global warming concerns for just a few billion dollars a year,” he said in 2008, before helping launch a geoengineering unit while he ran the right-wing think tank American Economic Enterprise. “We would have an option to address global warming by rewarding scientific innovation. Bring on American ingenuity. Stop the green pig.”

Read more …

We need to do Bob Geldof all over again? We are a disgrace.

UN’s Famine Appeal Is Billions Shy of Goal (NYT)

A month ago, the secretary general of the United Nations, António Guterres, warned that 20 million people would fall into famine if his aid agencies could not corral $4.4 billion by the end of March. It is almost the end of March, and so far, the United Nations has received less than a tenth of the money – $423 million, according to its Office for the Coordination of Humanitarian Affairs. The funding appeal, and the paltry response, comes as the Trump administration is poised to make sharp cuts to its foreign aid budget, including for the United Nations. Historically, the United States has been the agency’s largest single donor for humanitarian aid. For all four countries at risk — Nigeria, Somalia, South Sudan and Yemen – the United States has given $277 million so far this year, not all of it for famine relief.

The conditions for famine are specific and not easy to meet, which is why the last time a famine was declared was in Somalia in July 2011, after 260,000 had died of hunger and related complications. The three criteria for declaring a famine are when one in five households in a certain area face extreme food shortages; more than 30% of the population is acutely malnourished; and at least two people for every 10,000 die each day. A famine has already been declared in a swath of South Sudan. A similar risk looms over Somalia, still reeling from years of conflict, and Yemen, where Houthi insurgents are battling a Saudi-led coalition supported by the United States and Britain. In northern Nigeria, a famine could already be underway, according to an early warning system funded by the United States Agency for International Development.

But the security situation is so bad there that aid workers have been unable to assess levels of hunger. On Thursday, Somalia’s newly elected president, Mohamed Abdullahi Mohamed, told the Security Council by videolink from Mogadishu that half the population faces acute food shortages. The United Nations says it needs the $4.4 billion to deliver food, clean water and basic medicine like oral rehydration salts to avert diarrhea deaths among children. Only 8% of the money the agency needs for Yemen has been funded; for Nigeria, 9%; for South Sudan, 18%; and for Somalia, 32%. Of the 20 million who are at risk of famine are 1.4 million children, who are most vulnerable. To put the $4.4 billion appeal in perspective, Britain has made slightly less, $4.1 billion, from weapons sales to Saudi Arabia in the two years since the war began in Yemen.

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The most insane idea to come out of the EU yet. And there’s a lot of competition for that.

‘We Reached Our Limits’: Greece To Stop Taking Back Refugees (RT)

Greece will cease taking back refugees under the controversial Dublin Regulation, as the country’s limited capacities to host people are already on the brink of collapse, the Greek migration minister announced in an interview. As the European Commission pressures Athens to re-implement the Dublin Regulation – stipulating that refugees can be returned to the first EU state they arrived in – the Greek migration minister told Spiegel his country is not in a position to do so. The agreement was put on hold for Greece back in 2011 over problems in the country’s asylum system. “Greece is already shouldering a heavy burden,” Ioannis Mouzalas, the migration minister, said. “We accommodate 60,000 refugees… and it would be a mistake to make Greece’s burden heavier by the revival of the Dublin agreement,” he said, also adding that Germany, the primary destination for most refugees, “wants countries where refugees arrive first to bear a large portion of the burden.”

Under the Dublin Regulation, the European state where the asylum-seeker first arrives in the EU is responsible for examining an asylum claim. Refugees are fingerprinted in their first country of arrival to ensure irrefutable evidence of their entry. However, rights groups warn that imminent transfers from other EU countries back to Greece in line with the regulations are likely to cause more refugees than ever to go underground in western European countries, as many are desperate to stay there because of family links or successful attempts to start a new life. The scheme also adds even greater pressure to existing refugee facilities in Greece and beyond. Asked if Athens is ruling out implementation of the Dublin Regulation, Mouzalas answered in the affirmative, adding, “I want the Germans to understand that this is not because of political or ideological reasons, or failure to appreciate Germany’s assistance.” “Greece simply has no capacities to cope with additional arrival of refugees,” he said.

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Erdogan will not like this. And the US must realize that the EU squeezing Greece bone dry does not help such proposals. For good cooperation, you need strong and stable partners.

Greek-US Ties Set To Strengthen Significantly (K.)

Greece is examining US proposals for military cooperation which would widen ties to an extent not seen in the last three decades, Kathimerini understands. According to sources, Washington’s desire for stronger ties stems from its view that Greece has a significant geopolitical role to play as a pillar of stability in a volatile region. More specifically, Washington has proposed the participation of a Greek military vessel in a carrier battle group (CVBG), which consists of an aircraft carrier and a large number of escort vessels. According to the US proposals, the participation of a Greek vessel in the CVBG will be accompanied by the renewal of the Mutual Defense Cooperation Agreement (MDCA) between the two countries.

The MDCA is of utmost significance as it is through this pact that American military forces are permitted to use the Souda naval base on Crete. During a meeting last week US Secretary of Defense James Mattis and Defense Minister Panos Kammenos discussed the option of renewing the agreement for five to 10 years instead of each year, as has been the case to date. The Americans reportedly want to renew the deal every five years, as they want to expand the scope of their activities at the base. Sources have told Kathimerini that the only possible obstacle to the deal’s renewal on a five-year basis is that it must receive approval in Parliament, and the leftist-led coalition fears the possibility of dissent emanating from lawmakers of ruling SYRIZA.

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And why not: recovery is not possible anyway.

Greece Considers Capital Control Tightening (K.)

The capital controls were originally supposed to be a one-off measure that would be removed in a matter of months, with Prime Minister Alexis Tsipras stating in September 2015 that they would be lifted in early 2017. Today, 21 months since they were imposed, the capital controls are still here, and with the drop in bank deposits, it appears more likely they will be tightened than relaxed or lifted. The truth is that a full Greek recovery will not be possible as long as the capital controls remain, but the economy remains mired in uncertainty and the banks have not seen their CCC+ credit rating improve.

Bank officials note it will be a long time before the restrictions are removed, and this will require the consolidation of a basic sense of confidence among citizens that the worst is over. This is particularly difficult today given that few bailout reviews have been completed according to schedule in the last seven years – and the ongoing second review of the third bailout program was supposed to have finished 13 months ago, in February 2016. Banks therefore fear that if deposit outflow continues as it has done in the first quarter of the year, further controls are quite likely.

Read more …

Mar 262017
 
 March 26, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Marion Post Wolcott “Center of town. Woodstock, Vermont. Snowy night” 1940

 


Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)
Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)
What Global Central Bank Normalization Would Look Like (ZH)
Populism: The Phenomenon (Dalio et al)
The Peak Of – Dirty – Cash? (ZH)
Explaining Why White Middle Aged America Is Killing Itself (Worstall)
Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)
Drink and Women – It’s A Culture Thang (DA)
Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)
Trump Marks Greek Independence Day With Ominous Message (AP)
Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)
Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

 

 

Long analysis by Hudson. Trump as Obama’s legacy. And ousting Bernie has left America without a Democratic party, like some self-fulfilling prophecy. (Graph is from another source, but a very good fit)

Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)

Trump is sufficiently intuitive to proclaim the euro a disaster, and he recommends that Greece leave it. He supports the rising nationalist parties in Britain, France, Italy, Greece and the Netherlands, all of which urge withdrawal from the eurozone – and reconciliation with Russia instead of sanctions. In place of the ill-fated TPP and TTIP, Trump advocates country-by-country trade deals favoring the United States. Toward this end, his designated ambassador to the European Union, Ted Malloch, urges the EU’s breakup. The EU is refusing to accept him as ambassador. At the time this volume is going to press, there is no way of knowing how successful these international reversals will be. What is more clear is what Trump’s political impact will have at home. His victory – or more accurately, Hillary’s resounding loss and the way she lost – has encouraged enormous pressure for a realignment of both parties.

Regardless of what President Trump may achieve vis-à-vis Europe, his actions as celebrity chaos agent may break up U.S. politics across the political spectrum. The Democratic Party has lost its ability to pose as the party of labor and the middle class. Firmly controlled by Wall Street and California billionaires, the Democratic National Committee (DNC) strategy of identity politics encourages any identity except that of wage earners. The candidates backed by the Donor Class have been Blue Dogs pledged to promote Wall Street and neocons urging a New Cold War with Russia. They preferred to lose with Hillary than to win behind Bernie Sanders. So Trump’s electoral victory is their legacy as well as Obama’s. Instead of Trump’s victory dispelling that strategy, the Democrats are doubling down. It is as if identity politics is all they have.

Trying to ride on Barack Obama’s coattails didn’t work. Promising “hope and change,” he won by posing as a transformational president, leading the Democrats to control of the White House, Senate and Congress in 2008. Swept into office by a national reaction against the George Bush’s Oil War in Iraq and the junk-mortgage crisis that left the economy debt-ridden, they had free rein to pass whatever new laws they chose – even a Public Option in health care if they had wanted, or make Wall Street banks absorb the losses from their bad and often fraudulent loans. But it turned out that Obama’s role was to prevent the changes that voters hoped to see, and indeed that the economy needed to recover: financial reform, debt writedowns to bring junk mortgages in line with fair market prices, and throwing crooked bankers in jail.

Obama rescued the banks, not the economy, and turned over the Justice Department and regulatory agencies to his Wall Street campaign contributors. He did not even pull back from war in the Near East, but extended it to Libya and Syria, blundering into the Ukrainian coup as well. Having dashed the hopes of his followers, Obama then praised his chosen successor Hillary Clinton as his “Third Term.” Enjoying this kiss of death, Hillary promised to keep up Obama’s policies. The straw that pushed voters over the edge was when she asked voters, “Aren’t you better off today than you were eight years ago?” Who were they going to believe: their eyes, or Hillary? National income statistics showed that only the top 5% of the population were better off. All the growth in GDP during Obama’s tenure went to them – the Donor Class that had gained control of the Democratic Party leadership. Real incomes have fallen for the remaining 95%.

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Rates still no low enough?

Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)

Miami-Dade’s spectacular condo flipping mania is in turmoil, with sales plunging, inventory-for-sale soaring, and new supply flooding the market. It’s not like Miami hasn’t been through this before. In February, existing home sales of all types fell 10% year-over-year, to 1,835 homes. These sales “do not include Miami’s multi-billion dollar new construction condo market,” the Miami Association of Realtors clarified in its report on March 23. And this new construction market that is not included has become distressed. Sales of single-family homes fell 10% in February, to 881 houses. The report blamed the shortage of properties “in popular price points.” Prices have been rising sharply, and at the price points where people could actually buy a house – below $250,000 – few sellers were playing ball.

Hence a stalling market. Sales of high-priced units rose, but they weren’t enough to pull out the totals. Condo sales fell 10% as well, to 954 units. This time, the report didn’t blame the lack of supply. Instead: “Existing condo sales are competing with a robust new construction market.” At the same time, inventory of existing condos for sale, not including new units, rose 10% to 15,289. At the current sales rate, supply soared 29% to 14 months. This chart by StatFunding shows the plunge in sales and the surge in condos listed for sale. I circled the last five Februaries on the sales line (red). From February 2014 to February 2017, condo sales have plunged 25%. Andrew Stearns, StatFunding’s founder and CEO, calls the resale inventory – the dark green line that has soared 90% since early 2013 – “scary”:

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When ‘normalization’ becomes the scariest idea around.

What Global Central Bank Normalization Would Look Like (ZH)

As a result of countless failures by central banks to normalize monetary policy over the past 7 years, the market – especially bonds and rates – has become openly cynical and outright skeptical regarding the possibility of a successful renormalization of policy by global central banks. After all, Japan has been trying to do that for over 30 years and has yet to succeed; the ECB hiked in 2011 resulting in near collapse of the Eurozone. Ironically, the recent Trumpflation trade – which few expected as a result of the “shocking” Trump election victory – has emerged as the most credible catalyst to prompt inflation not only in the US but around the globe, resulting in two Fed rate hikes in rapid succession.

Still, now that Obamacare repeal has failed, and questions are rising whether Trump will be able to implement his proposed Tax reform, the market has aggressively faded not only the broader Trumpflation trade, but also all of the recent dollar strength since the US election: in short, bets on a “bening” global reflation are rapidly fading, suggesting that the latest push to normalize monetary policy will once again result in failure. And yet, “what if it goes according to plan” this time? That’s the question posed by Barclays’ Christian Keller who notes that, at least for the time being, “The synchronized upswing in the global economy continues, supporting sentiment, which thus far has ignored elevated policy uncertainties. Headline inflation is increasing due to stable oil prices, while core inflation rates are mixed.”

And, assuming nothing changes, this sets the backdrop for monetary policy normalization, albeit at different speeds and modes. Taking this thought experiment one step further, what would happen if indeed this time central banks are successful to renormalize monetary policy without leading to a market crash. In that case, Barclays expects three Fed hikes in 2017 and 2018, respectively. The ECB is likely to taper further in 2018 and to start increasing depo rates in parallel (in 2018). Conveniently, Barclays has created the following chart which lays out what “coordinated global renormalization” would look like. It can serve as a benchmark to those keeping tabs on where various central banks are in the current attempt to restore monetary normalcy.

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Franklin D. Roosevelt, populist.

Populism: The Phenomenon (Dalio et al)

Populism is a political and social phenomenon that arises from the common man, typically not well- educated, being fed up with 1) wealth and opportunity gaps, 2) perceived cultural threats from those with different values in the country and from outsiders, 3) the “establishment elites” in positions of power, and 4) government not working effectively for them. These sentiments lead that constituency to put strong leaders in power. Populist leaders are typically confrontational rather than collaborative and exclusive rather than inclusive. As a result, conflicts typically occur between opposing factions (usually the economic and socially left versus the right), both within the country and between countries. These conflicts typically become progressively more forceful in self- reinforcing ways.

Within countries, conflicts often lead to disorder (e.g., strikes and protests) that prompt stronger reactions and the growing pressure to more forcefully regain order by suppressing the other side. Influencing and, in some cases, controlling the media typically becomes an important aspect of engaging in the conflicts. In some cases, these conflicts have led to civil wars. Such conflicts have led a number of democracies to become dictatorships to bring order to the disorder that results from these conflicts. Between countries, conflicts typically occur because populist leaders’ natures are more confrontational than cooperative and because conflicts with other countries help to unify support for the leadership within their countries.

In other words, populism is a rebellion of the common man against the elites and, to some extent, against the system. The rebellion and the conflict that comes with it occur in varying degrees. Sometimes the system bends with it and sometimes the system breaks. Whether it bends or breaks in response to this rebellion and conflict depends on how flexible and well established the system is. It also seems to depend on how reasonable and respectful of the system the populists who gain power are.

[..] In the period between the two great wars (i.e., the 1920s-30s), most major countries were swept away by populism, and it drove world history more than any other force. The previously mentioned sentiments by the common man put into power populist leaders in all major countries except the United States and the UK (though we’d consider Franklin D. Roosevelt to be a quasi-populist, for reasons described below). Disorder and conflict between the left and the right (e.g., strikes that shut down operations, policies meant to undermine the opposition and the press, etc.) prompted democracies in Italy, Germany, Spain, and Japan to choose dictatorships because collective/inclusive decision making was perceived as tolerance for behaviors that undermined order, so autocratic leaders were given dictatorial powers to gain control.

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The differences are huge. In lots of countries going cashless is not going to fly.

The Peak Of – Dirty – Cash? (ZH)

In several major economies it’s crunch time for the future of cash. Goldman Sachs notes that this is largely policy-driven: tangible steps are being taken to wean economies off cash (e.g. India, Europe); but adds that, at the same time consumer expectations around convenience are rising and enabling technologies have proliferated in the shape of contactless cards, mobile wallets, cryptocurrencies and more. So, they ask, does the decline in cash payments imply the demise of cash? Not necessarily. Technology has been an important catalyst for shrinking cash usage, but it is by no means a new phenomenon. As we wrote in 2012, the first technological step-change in the payments arena was the shift from cash to plastic money, i.e. credit and debit cards, which happened in the 1960s.

There are many parallels to be drawn between that period and the ongoing shift to digital money: an initial period of an increasing number of providers was followed by a consolidation stage that established a few players (Visa and MasterCard primarily) as the industry standards, eventually accelerating the adoption of plastic money. However, the availability of technology alone has not ensured the demise of cash. As the following chart shows, there are several advanced economies in which it is still the dominant mode of payment in volume terms (surprisingly quite a few European countries are in the bottom left quadrant).

Japan is a striking example of this; lots of tech and lots of cash. The US also stands out, and this could at least partly be attributed to the fact that regulators in the US have explicitly stated that the market should manage the shift to digital payments by itself. On the other hand, Scandinavian countries are on the cusp of becoming some of the first cashless societies, as a result of industry-co-ordinated steps and government initiatives. Swish, a payment app developed jointly by the major Swedish banks, has been adopted by nearly half the Swedish population, and is now used to make over nine million payments a month. About 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits and many, especially in rural areas, no longer have ATMs.

In conjunction with that, cash transactions were just c.2% of the value and 20% of the volume of all payments made last year (down from 40% five years ago). Denmark’s move to a cashless society is a deliberate result of policy, with the government removing the obligation for some retailers to accept payment in cash. Without this legislative push, we believe cash is very difficult to disrupt and substitute. After all, it is a free and convenient mode of transacting. So far, the selling point of the most broadly used alternatives to cash (cheques and cards) is greater convenience. But that hasn’t been sufficient to meaningfully reduce the market share of cash in countries outside Scandinavia and Canada.

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Plenty of theories.

Explaining Why White Middle Aged America Is Killing Itself (Worstall)

Back 18 months the team of Anne Case and Angus Deaton (who has since gained the economics Nobel) released a famous paper pointing out that white rural Americans were killing themselves. So much so that expected lifespans were in fact falling such was the rise in middle aged morbidity. That original paper found that the effect was geographically concentrated. And as I remarked at the time that’s a bit of a problem for the causality of that rise in morbidity. For we’ve got rather a lot of migration out of those rural areas. And it’s the better educated doing the leaving. Thus it is possible (no, no one has studied this in enough detail as yet for anyone to know) that the effect found is entirely down to those migration effects.

We know very well that poorer and less educated people are more likely to die in middle age than richer and better educated. So, if all the better educated and thus, in our current society, higher income people move away we will observe a rise in the death rate among the remnant population. Case and Deaton have returned to this subject with a new paper. And they agree that there is some of this compositional effect in their earlier findings: “It is important not to focus on those with less than a high school degree, a group that has grown markedly smaller over time, and is likely to be increasingly negatively selected on health.” And: “.. we note that for age-groups younger than 45, there has been a decline in the fraction of WNHs with only a high school degree, so that selection may be playing some role for the younger groups.”

Excellent, so that intuition of mine about those compositional effects was indeed correct at least in part. However, this new paper then drives a steamroller through my explanation by showing that this rise in morbidity is country-wide among that class and age group, middle aged and less educated whites. Except, well, I’m not quite sure it does. Fortunately, as I said last time, this is such an important result coming from such a well known name that it will be fully investigated. It’s not just going to be either ignored nor accepted at face value either. People will keep picking away at this until the definitive answer is understood.

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Yeah, the idea behind the EU was good. The execution has been terrible though. Celebrate while holding your breath.

Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)

Britain’s decision to leave the EU has been described by the Italian prime minister as “closed nationalism” that belongs in the past during a summit in Rome to celebrate the bloc’s 60th anniversary. In an address at the Orazi and Curiazi Hall of the Capitol in the Piazza del Campidoglio, where the EU was founded six decades ago, Paolo Gentiloni expressed his discomfort with the motives behind the referendum result. He blamed the EU for not responding adequately to the economic crisis of 2008, but said: “That triggered in part of public opinion, unfortunately the majority of public opinion in the United Kingdom, it triggered a crisis of rejection. It brought forward the closed nationalism that we thought has been closed down in the archives.”

The leaders of the 27 member states that will make up the EU after the UK’s departure assembled on Saturday to mark the day on which six nations signed what was to become the Treaty of Rome. They signed a Rome declaration, which offered ringing phrases about peace and unity, and the importance of maintaining the union. “We, the leaders of 27 member states and of EU institutions, take pride in the achievements of the European Union: the construction of European unity is a bold, far-sighted endeavour,” it says. “Sixty years ago, recovering from the tragedy of two world wars, we decided to bond together and rebuild our continent from its ashes.

“We have built a unique union with common institutions and strong values, a community of peace, freedom, democracy, human rights and the rule of law, a major economic power with unparalleled levels of social protection and welfare. “European unity started as the dream of a few, it became the hope of the many. Then Europe became one again. Today, we are united and stronger: hundreds of millions of people across Europe benefit from living in an enlarged union that has overcome the old divides.” The document stipulates that the EU will make progress on a social dimension, building on its citizens’ rights, and that some member states will enhance their cooperation, particularly in the field of defence. The text concludes: “We have united for the better. Europe is our common future.”

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Grains vs grapes. Why Southern Europeans are not big drinkers.

Drink and Women – It’s A Culture Thang (DA)

When it comes to consumables, though, blowing it on drink is not such a southern European thing. On old professor of mine, an expert in the history of booze (among other substances) often observed that Europe is divided into north and south by distinct cultures of intoxication rooted in our prehistory – the grape in the south, the grain in the north, originally the function of geography and climate which in turn determined access to different sources of plant sugar.

It is the grain-fermenting northerners who have traditionally drunk themselves to oblivion, and it is them that felt the teetotal backlash of the protestant reformation, whereas the Mediterranean world used their fermented grape juice more sparingly and even made it “taboo” by ghoulishly turning it into blood in the Christian sacrament. It is said that you can still observe this divide by walking down the main street of any Mediterranean town hosting a Club 18-30 resort in high tourist season. Some might say, therefore, that Jeroen is merely projecting his own cultural inclinations. They don’t call it Dutch courage for nothing.

No, when it comes to consumables, another famous one-line aetiology of the Greek crisis comes to mind: “We ate it together” (”Mazí ta fágame”), is what PASOK grandee Theodoros Pangalos poffered in 2010 in response to the question “where did the money go?”. A succinct description of the workings of clientelism, delivered by a true master of the art. The saying survives and thrives, in large part because it had a grotesque, evocative appeal in light of the speaker’s own well-fed physique, an apparent embodiment of gluttony openly admitting to the sin and beckoning us to join him at the trough. In the popular imagination it conjured up images of the Greek political class, bloated with greed both physical and metaphorical, sharing a well-furnished table with their clients, the ordinary voters.

And although we, too, like to accuse our elites of eating Marie Antoinette’s cake and caviar (or perhaps the Greek pre-crisis equivalent, lobster spaghetti), the most appropriate fare loading down the table would be a cholesterol feast, most likely at Baïraktaris, the legendary Athens kebab house and political hangout. Not the starched white tablecloths of Washington’s Palm Grill, London’s private clubs, or the Michelin-starred chateaux of Gallic political intrigue, but oilcloth and stacks of paper napkins, the great equaliser, where we do indeed tuck in together in large, boisterous groups. You may recall Baïraktaris as the scene of another famous apophthegm, by another regular, former Prime Minister Costas Karamanlis, to the effect that “five pimps run this country”. And that is as far as I will go with the “women” element.

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Bartender, stop serving this man.

Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)

Portugal’s Economy Minister Manuel Caldeira Cabral said Jeroen Dijsselbloem, whose Dutch party lost elections this month, should quit as chairman of the European finance ministers’ group after his comments about the duties of nations getting aid were deemed offensive. “It would be the best thing for Europe and the best thing he could do,” Cabral said in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “He just lost an election and I think he should not be trying to blame others for his own failures.” Dijsselbloem is under pressure to resign as leader of the euro area’s finance ministers after a German newspaper cited him saying, “I can’t spend all my money on women and drink and then at the end ask for your help.”

That remark inflamed tensions between stronger economies in the north and weaker nations including Greece, Ireland and Portugal. The Eurogroup chief has said he regrets causing offense, but doesn’t intend to resign. “I don’t think we can let the Eurogroup be divided in that way, and for that reason that person should be out,” Cabral said. “One of the worst things that some European responsibles have done in the past is not being leaders and trying to surpass their own difficulties at home by accusing other countries. This is a way of destroying Europe.”

On the U.K.’s withdrawal from the European Union, Cabral said the bloc must focus on getting good results from negotiations in the next two to five years and then moving on to other issues. He said broader trade pacts should be the goal rather than making Brexit the only thing on the agenda for Europe and the U.K. The EU should focus on trade talks that give serious results and make a priority “of opening to the world, of negotiating with Asia, of being part of this intuitive of One Belt-One Road with China and establishing links with Asia,” he said in the interview.

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Large military parade yesterday in Athens. Fighter jets flying so low car alarms were going off all the time.

Trump Marks Greek Independence Day With Ominous Message (AP)

President Donald Trump has marked Greek Independence Day with a rather ominous message. At a White House reception, Trump said that in the years to come “we don’t know what will be required to defend our freedom.” But he said it will take “great courage, and we will show it.” Greek Independence Day commemorates the start of the 1821 war that led to Greece’s independence after nearly 400 years as part of the Ottoman Empire. It’s celebrated annually on March 25. Trump told the crowd, “I love the Greeks.” He also introduced Greek-American members of the White House staff, including chief of staff Reince Priebus. Trump said Priebus is “really terrific and hard-working,” along with being “one of the top Greeks in the country.”

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“..they were often too scared to pick up their allowance for fear of being detained.”

Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)

Hundreds of Syrian asylum seekers are struggling to survive in the UK, with some facing destitution and others forced into exploitative work because they are afraid of being detained and deported. The Observer has found Syrian asylum seekers working in warehouses, construction sites and garages for as little as £10 a day. Many had stopped signing in with the Home Office after being held in detention centres for months. Hundreds more are living in destitution, reliant on charities for food parcels and clothes. Mike Adamson, chief executive of the British Red Cross, said: “A two-tier system, where Syrian nationals who arrive in the UK as asylum seekers are left vulnerable to exploitation, seems completely at odds with the spirit behind the government’s commitment to offer a safe home to 20,000 Syrian refugees under its resettlement programme.

The Observer interviewed 10 Syrians, all living in limbo because of the Dublin regulation, which means asylum seekers can be sent back to the first EU country they reach. The men were fighting removal to countries including Bulgaria, where Human Rights Watch found asylum seekers being shot at, beaten with weapons by uniformed officials and sent back to Turkey. Several of the men we spoke to were being threatened with removal to Hungary, despite the fact that the Home Office told the Observer that it is not currently returning asylum seekers there. At least 50 Syrians have been removed under the regulation since the start of 2015, prompting some to drop off the radar. Eight of the men interviewed said that they had stopped signing in with immigration authorities because they were afraid of detention and removal. Most had family in the UK and were supporting themselves by working illegally.

[..] The Red Cross said it had seen 1,341 destitute Syrian asylum seekers in Britain last year, up from 1,159 the year before. In South Yorkshire, a quarter of all destitute asylum seekers seen, of all nationalities, said they experienced hunger every day. In nearly half of all the cases seen by the Red Cross, asylum seekers were facing destitution, despite receiving the full £36 a week afforded to them under government rules. The Syrians the Observer interviewed said they were often too scared to pick up their allowance for fear of being detained.

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Return to the desert. It’ll take centuries to refill the aquifer.

Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

For the past 60 years, the Ogallala has been pumped out faster than raindrops and snowmelt can seep back into the ground to replenish it, thanks largely to irrigation machinery like the one sleeping nearby. As a result, in parts of western Kansas, the aquifer has declined by more than 60% during that period. In some parts, it is already exhausted. The decline is steady now, dry years or wet. In 2015 rain was exceptionally heavy—50 to 100% above normal. Even so, water levels in the wells dropped again. Wilson’s field report will put the best face on it, noting it was the slowest decline in five years.

Tagging along with Wilson, I am nearing the end of a 5,000-mile journey along the back roads of Ogallala territory, from South Dakota to Texas. My drive has taken me through some of the most productive farmland anywhere, home to at least a $20-billion-a-year industry that grows nearly one-fifth of the United States’ wheat, corn, and beef cattle. It’s also a place facing hard choices: Farmers can reduce consumption of water to further extend the life of the aquifer. Or they can continue on their path toward an end that is already in sight. Some don’t like to frame the dilemma quite so starkly. But if they don’t reduce pumping and the aquifer is drained, food markets will be profoundly affected around the world. In the coming decades this slow-speed crisis will unfold just as the world needs to increase food production by 60%, according to the United Nations, to feed more than nine billion people by mid-century.

The draining of North America’s largest aquifer is playing out in similar ways across the world, as large groundwater basins in Asia, Africa, and the Middle East decline rapidly. Many of these aquifers, including the southern Ogallala, have little ability to recharge. Once their water is gone, they could take thousands of years to refill. “The consequences will be huge,” says Jay Famiglietti, senior water scientist at NASA Jet Propulsion Laboratory and lead researcher on a study using satellites to record changes in the world’s 37 largest aquifers. “We need to sustain groundwater to sustain food production, and we’re not doing it. Is draining the Ogallala the smartest thing for food production in the U.S. and globally? This is the question we need to answer.”

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Mar 252017
 
 March 25, 2017  Posted by at 9:07 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Dorothea Lange Drought hit OK farm family on way to CA 1936

 


With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)
The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)
Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)
The Swamp Drains Trump (Jim Kunstler)
It Was A Very Bad Earnings Season (Snider)
Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)
A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)
New Canadian Budget Drops Obsession With Balanced Budgets (Star)
US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)
The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)
Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)
Greece to Break Off Face-to-Face Talks With Creditors (BBG)
Where Next For Greece? (Makropolis)

 

 

Big defeat. But not a knock-out. Trump needs better advisers.

With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)

In a spectacular turn of events, a shortage of support prompted Republican leadership to pull their health-care plan from a House of Representatives vote on Friday. The move means that the Affordable Care Act, also know as Obamacare, will remain in place “for the foreseeable future,” according to House Speaker Paul Ryan. Democrats, ACA supporters and opponents of the Republican American Health Care Act quickly hailed the development as a victory. But what was a legislative battle now is likely to move into the executive realm and the Department of Health and Human Services, led by longtime ACA opponent Dr. Tom Price. Experts say there is plenty that President Donald Trump’s administration can do to undermine the ACA. And any poor deterioration in the performance of the ACA could give Republicans a new opening: Trump indicated Friday that he might re-visit health care after Obamacare “explodes.”

“It’s going to be interesting to see how they balance the responsibility for ensuring the government functions with their hatred for the law,” said Spencer Perlman, director of health-care research at Veda Partners. “If they want to completely sabotage it they probably could, and call it a self-fulfilling prophecy.” The latter is all the more likely because the ACA works best with the help of administrative support and resources. Think of the ACA as a plant, one that requires light and tending-to, that gets inherited by a downright hostile owner. The best example of this occurred during enrollment for 2017 exchange plans. The months-long enrollment period began under former President Barack Obama’s administration, which passed the ACA, and ended under President Trump’s administration.

Enrollment, which had looked like it was on track to surpass previous years, dropped off following the transition, which many attributed to a dearth of marketing and promotional activity under Trump. Plus, the ACA’s problems — which may have helped elect Trump — still exist. Many insurers, including UnitedHealth, Humana and Aetna have exited the exchanges on which many participants purchase health insurance, contributing to a 25% on average increase in premiums. “The biggest thing that needs to be done is figuring out some way to attract young, healthy people” to exchange plans, Perlman said. But HHS, under Price’s leadership, seems unlikely to try to improve the law. And “purposefully sabotaging the exchanges and the ACA probably isn’t difficult,” said Perlman. And for that matter, HHS is “probably the only game in town right now” that can do it.

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“..55% of mortgages in active foreclosure were originated between 2004 and 2008..”

The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)

According to ATTOM Data Solutions, the new parent company of RealtyTrac, default notices, scheduled auctions and bank repossessions slid to 933,045 last year, the lowest tally since the 717,522 reported in 2006. Is the final chapter written? Not if you live in judicial foreclosure states such as New York, New Jersey and Florida where ‘legacy’ foreclosures take years to clear. At the end of last year, 55% of mortgages in active foreclosure were originated between 2004 and 2008. Factor in what’s still in the pipeline and one in ten circa 2006 homeowners will have lost their homes before it is all said and done. That helps explain one part of the chart below which was generously shared with me by one Dr. Gates. Longtime readers of these missives will recognize the nom de plume of my inside-industry economic sleuth. His first take on this sad visual, was that, “The heart of the American Dream has stopped beating.” Did that stop your heart as it did my own?

As you can see, after a steady 40-year build, owner-occupied housing has stagnated and sits at the lowest level since 2004. This has sent the homeownership rate crashing to 63.4%, the lowest since 1967. It would be nice to think that things were looking up for would-be homeowners. But it’s difficult to be overly optimistic when the local newspaper reports that house flipping in the Dallas-Ft. Worth area rose 21% in 2016, seven times the national rate. In all, 193,000 properties nationwide were flipped for a quick inside-12-months profit last year, a 3.1 increase to a nine-year high. Moreover, the median age of a flipped home rose to a two-decade high of 37 years, about double the median age of homes flipped before the crisis hit. That translated into a median gross profit of $69,624 on a median selling price of $189,900 in 2016, a neat 49.2% margin, the highest on record. Awesome!

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Very good -and scary- from Danielle DiMartino Booth. I’ve often asked: what happened to pension funds investing in AAA paper? But there’s more: without accounting tricks dominoes would already be falling. This is not some coincidence, it’s actual policy as conducted by The American Academy of Actuaries.

Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)

The question is why haven’t the headlines presaged pension implosions? As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007. Credit rating firms have begun downgrading states and municipalities whose pensions risk overwhelming their budgets. New Jersey and the cities of Chicago, Houston and Dallas are some of the issuers in the crosshairs.

Morgan Stanley says municipal bond issuance is down this year in part because of borrowers are wary of running up new debts to effectively service pensions. Federal Reserve data show that in 1952, the average public pension had 96% of its portfolio invested in bonds and cash equivalents. Assets matched future liabilities. But a loosening of state laws in the 1980s opened the door to riskier investments. In 1992, fixed income and cash had fallen to an average of 47% of holdings. By 2016, these safe investments had declined to 27%. It’s no coincidence that pensions’ flight from safety has coincided with the drop in interest rates. That said, unlike their private peers, public pensions discount their liabilities using the rate of returns they assume their overall portfolio will generate.

In fiscal 2016, which ended June 30th, the average return for public pensions was somewhere in the neighborhood of 1.5%. Corporations’ accounting rules dictate the use of more realistic bond yields to discount their pensions’ future liabilities. Put differently, companies have been forced to set aside something closer to what it will really cost to service their obligations as opposed to the fantasy figures allowed among public pensions. So why not just flip the switch and require truth and honesty in public pension math? Too many cities and potentially states would buckle under the weight of more realistic assumed rates of return. By some estimates, unfunded liabilities would triple to upwards of $6 trillion if the prevailing yields on Treasuries were used.

That would translate into much steeper funding requirements at a time when budgets are already severely constrained. Pockets of the country would face essential public service budgets being slashed to dangerous levels. What’s a pension to do? Increasingly, the answer is swing for the fences. Forget the fact that just under half of pension assets are in the second-most overvalued stock market in history. Even as Fed officials publicly fret about commercial real estate valuations, pensions have socked away 8% of their portfolios into this less than liquid asset class. Even further out on the risk and liquidity spectrum is the 10% that pensions have allocated to private equity and limited partnerships.

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“While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete.”

The Swamp Drains Trump (Jim Kunstler)

One can’t help marveling at the way the “Russian interference” motif has shifted the spotlight off the substance of what Wikileaks revealed about Clinton Foundation and DNC misdeeds onto Trump campaign officials “colluding” with Russians, supposedly to support their interference in the election. It’s true that the election is way over and the public is no longer concerned with Hillary or her foundation (which is closing shop anyway). But the switcheroo is impressive, and quite confusing, considering recently retired NSA James Clapper just two weeks ago said on NBC’s Meet the Press that there was “no evidence” of collusion Between Trump and Russia. Okay… uh, say what? On Monday, FBI Director James Comey revealed that his agency had been investigating the Trump Campaign since at least last August. Is that so…? Investigating how? Some sort of electronic surveillance?

Well, what else would they do nowadays? Send a gumshoe to a hotel room where he could press his ear on a drinking glass against the wall to eavesdrop on Paul Manafort? I don’t think so. Of course they were sifting through emails, phone calls, and every other sort of electronic communication. Trump’s big blunder was to tweet that he’d been “wiretapped.” Like the FBI patched into a bunch of cables with alligator clips in the basement of Trump Tower … or planted a “bug” in the earpiece of his bedside phone. How quaint. We also don’t have ice boxes anymore, though plenty of struggling weight-watchers across the land speak guiltily of “raiding the icebox.” But if it’s true, as Mr. Comey said, that the FBI had been investigating Trump’s campaign, the people around him, and Trump himself, since August, how could they not have captured some of Trump’s conversations?

[..] So, the long and the short of it is that the RussiaGate story is spinning out of control, and Trump’s adversaries — who go well beyond Congress into the Deep State — might be getting enough leverage to dump Trump. Either they will maneuver him and his people into some kind of perjury rap, or they will tie up the government in such a web of investigative procedural rigmarole that all the country lawyers who ever snapped their galluses will never be able to unravel it. While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete. Abandoned by the Republican Party, isolated and crazed in the White House, tweeting out mad appeals to heaven, he’ll either voluntarily pass the baton to Mike Pence or he will be declared unfit to serve and removed under the 25th amendment.

The after-effects of that will be something to behold: a “lose-lose” for both old-line political parties. The Trumpists will never forgive the Republican Party, and the Democrats will have gained nothing. Don’t let the door bang you on the butt on your way out.

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What a surprise.

It Was A Very Bad Earnings Season (Snider)

With nearly all of the S&P 500 companies having reported their Q4 numbers, we can safely claim that it was a very bad earnings season. It may seem incredulous to categorize the quarter that way given that EPS growth (as reported) was +29%, but even that rate tells us something significant about how there is, actually, a relationship between economy and at least corporate profits. Keynes famously said that we should never worry about the long run for there we will all be dead, but EPS has arrived at the long run and there is still quite a lot of living to do. As late as October, analysts were projecting $29 in earnings for the S&P 500 in Q4 2016. As of the middle of the earnings reports last month, that estimate suddenly dropped to just $26.37. In the month since that time, with the almost all of the rest having now reported, the current figure is just $24.15 – a decline of over $2 in four weeks. Therefore, 29% growth is hugely disappointing because it wasn’t 55% growth as was projected when the quarter began.

It is also the timing of the downgrades that is important as it relates to both “reflation” and the economy meant to support it. All throughout last year, in the aftermath of the near-recession to start 2016, EPS estimates for Q4 (and beyond) were very stable, unusually so given the recent past. That shows us how analysts, at least, were expecting the economy to go once it got past “global turmoil.” It was the “V” shaped rebound typical for past cyclical behavior. But it wasn’t until companies actually started reporting earnings that the belief was tested and then found severely lacking. With just $24.15 for Q4, total EPS was for the calendar year less than $95, the ninth straight quarter below the $100 level. More importantly, on a trailing-twelve month basis, EPS don’t appear to be in any hurry (except in future estimates) to revisit the prior peak of $106 all the way back in Q3 2014.

 

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Like a cheap crime novel: Flynn gets paid $530,000 “on behalf of an Israeli company seeking to export natural gas to Turkey”, and ends up discussing kidnapping Erdogan’s enemy. Oh, and Biden knew about this conversation. So Obama knew too.

Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)

Retired Army Lt. Gen. Mike Flynn, while serving as an adviser to the Trump campaign, met with top Turkish government ministers and discussed removing a Muslim cleric from the U.S. and taking him to Turkey, according to former Central Intelligence Agency Director James Woolsey, who attended, and others who were briefed on the meeting. The discussion late last summer involved ideas about how to get Fethullah Gulen, a cleric whom Turkey has accused of orchestrating last summer’s failed military coup, to Turkey without going through the U.S. extradition legal process, according to Mr. Woolsey and those who were briefed. Mr. Woolsey told The Wall Street Journal he arrived at the meeting in New York on Sept. 19 in the middle of the discussion and found the topic startling and the actions being discussed possibly illegal.

The Turkish ministers were interested in open-ended thinking on the subject, and the ideas were raised hypothetically, said the people who were briefed. The ministers in attendance included the son-in-law of Turkish President Recep Tayyip Erdogan and the country’s foreign minister, foreign-lobbying disclosure documents show. Mr. Woolsey said the idea was “a covert step in the dead of night to whisk this guy away.” The discussion, he said, didn’t include actual tactics for removing Mr. Gulen from his U.S. home. If specific plans had been discussed, Mr. Woolsey said, he would have spoken up and questioned their legality. It isn’t known who raised the idea or what Mr. Flynn concluded about it. Price Floyd, a spokesman for Mr. Flynn, who was advising the Trump campaign on national security at the time of the meeting, disputed the account, saying “at no time did Gen. Flynn discuss any illegal actions, nonjudicial physical removal or any other such activities.”

[..] On March 2, weeks after Mr. Flynn’s departure from the Trump administration, the Flynn Intel Group, his consulting firm, filed with the Justice Department as a foreign agent for the government of Turkey. Mr. Trump was unaware Mr. Flynn had been consulting on behalf of the Turkish government when he named him national security adviser, White House press secretary Sean Spicer said this month. In its filing, Mr. Flynn’s firm said its work from August to November “could be construed to have principally benefited the Republic of Turkey.” The filing said his firm’s fee, $530,000, wasn’t paid by the government but by Inovo BV, a Dutch firm owned by a Turkish businessman, Ekim Alptekin.

[..] Mr. Woolsey said he didn’t say anything during the discussion, but later cautioned some attendees that trying to remove Mr. Gulen was a bad idea that might violate U.S. law. Mr. Woolsey said he also informed the U.S. government by notifying Vice President Joe Biden through a mutual friend. [..] Inovo hired Mr. Flynn on behalf of an Israeli company seeking to export natural gas to Turkey, the filing said, and Mr. Alptekin wanted information on the U.S.-Turkey political climate to advise the gas company about its Turkish investments.

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“.. he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe.”

A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)

[..] this isn’t the first time that social change has caused self-destructiveness on a mass scale. Indeed, 19th-century French sociologist Emile Durkheim wrote about similar problems in his time, and might refer to the plague of white middle-class mortality we see today as “a state of upheaval.” Of course, the lesson of the 2016 presidential election was that working- and middle-class whites are suffering. What Durkheim offers, though, is the argument for why the newly elected government in Washington — voted in by this very constituency — is getting the solution all wrong. The way to fix this problem is not through less government — but through more. Durkheim’s seminal work, the 1897 book “Suicide,” remains one of the most in-depth examinations of why these situations occur in society, and it is as relevant as ever. Its lessons are an indication that as a country, we are moving swiftly, carelessly in the wrong direction.

The Americans we are talking about are white and middle class. They are aged 45-55. They are losing the battle against heart disease and cancer, and they are succumbing to drugs, alcohol and suicide at rates unseen in modern history or in other developed countries. “The combined effect means that mortality rates of whites with no more than a high school degree, which were around 30% lower than mortality rates of blacks in 1999, grew to be 30% higher than blacks by 2015,” Case and Deaton wrote. The easy thing to say is that these people are suffering from economic and social anxiety and leave it at that. What’s harder to pinpoint is what exactly that means and how to fix it. Economic conditions for minorities in the same social class and in the same communities are as hard, if not harder, than they are for middle class whites. But death rates aren’t increasing for them.

This is where Durkheim comes in. He wrote his work in the midst of another state of upheaval, as industrialization was taking over the world and old economic patterns were falling away. This was the beginning of modern life as we now know it. And it was killing people. Durkheim found that the degree to which a person is integrated in society is inversely correlated to their likelihood to engage in life-threatening behaviors and suicide. In his work, he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe. [..] One of the big factors, then, in the increase in substance abuse and suicide among the white middle class could be a decline in the social framework as a result of the rapid economic changes seen over the last few decades.

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We’re getting into Steve Keen territory. At last.

New Canadian Budget Drops Obsession With Balanced Budgets (Star)

I’m intrigued by Modern Monetary Theory, which maintains governments can create (or ‘print’) money to fill public needs and can’t go into debt to themselves, though they should keep an eye on inflation.

Sorry, but I’m afraid I don’t agree that Wednesday’s federal budget was a non-event: “cynical,” a “placeholder,” “bafflegab and buzzwords” — as others wrote. I think this budget rocked, in one sense: it did a 180 on the stifling monomania of the last 30 years. I’m referring to the obsession with deficits. As recently as last election, the Liberals promised a balanced budget by the end of their first term. Now their projected deficits are even higher but that promise is gone and the thought process, transformed. Finance minister Bill Morneau blandly says, they’ll “be responsible every step along the way” and “show a decline in net debt to GDP,” which totally shifts the metric. He might as well have trilled, “Tra-la-la, we really don’t care.” It’s a damn earthquake.

For proof, look not at the opposition – Rona Ambrose predictably called it “spending out of control”- but at the journalists, who were left sputtering. It’s so radical they struggled for words. Peter Mansbridge began interviewing Morneau with: “How does it feel to know you’ll likely never have a balanced budget?” I wish Morneau had said, “I’m fine, but is there anything I can do to help you through this?” Mansbridge couldn’t stop, turning plaintively to his panel: “I tried to get him on the deficit … Is there a right and wrong any more?” Jennifer Ditchburn tried to soothe him with, “Deficit is a word they just don’t use any more.”

If I’m hyperventilating, it’s because I’ve led a cramped existence all these years, bowed under the weight of deficitism since I first heard the phrase, “Yeah, but how ya gonna pay for that?” during the 1988 election. No one knew where it came from or how it usurped all other political concerns, like a missive from heaven, or the Fraser Institute. Paul Martin adopted it, using it to sink the Canada we knew, and his own career. Yet, there’s apparently an ebb and flow to these things: a Nanos poll says Canadians now want Ottawa to run deficits as long as overall debt declines relative to GDP. That’s a pretty sophisticated alteration for ordinary folks to make intuitively; it makes you wonder if someone isn’t pulling strings somewhere and decided to drop a new backdrop (to public discourse) over the previous one.

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Nicely done. Like the music.

US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)

Showing stacks of physical cash in following sequence: $100, $10,000, $1 Million, $2 Billion, $1 Trillion, $20 Trillion The faith and value of the US Dollar rests on the Government’s ability to repay its debt. “The money in the video has already been spent”

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Sounds reasonable.

The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)

When it comes to the pound, currency analysts at Deutsche Bank have for months proved to be some of the most bearish across the City, but they’ve just turned even more pessimistic in their outlook for the battered currency. In its latest special report on Brexit released this week, the German lender said the pound could fall as a low as $1.06 against the dollar by the end of 2017, or another 15%. “We do not see sterling (currently) fully pricing a hard Brexit outcome,” the bank wrote. “Combined with limited adjustment in the UK’s current account deficit and slowing growth, we see further downside, and forecast $1.06 in by year-end,” it added.

In an interview with Bloomberg in February, George Saravelos, the German lender’s global co-head of foreign exchange, hinted that the bank could cut its official forecast. He said at the time that sterling could still slip by 16% against the dollar to $1.05 cent as the “incredibly complicated” nature of Brexit becomes ever more clear. Most economists’ forecasts are still more optimistic than Deutsche Bank’s, but few expect the currency to recover from its post-referendum lows any time soon. According to poll of more than 60 banks and research institutions conducted by Reuters that was released earlier this month, forecasters on average expect the currency to trade at $1.23 against the dollar by the end of June, and drop to $1.21 in the subsequent three to six months.

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Praet is a true believer.

Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)

The chief economist of the ECB has warned Italy and France that their economic problems would not be solved by breaking up the single currency. In an interview with Italy’s Il Sole 24 Ore newspaper, Peter Praet, an executive board member of the ECB, said the idea that the euro was the root cause of high unemployment and low growth in certain European countries was a populist “deception”. “What I do worry about is the populist narrative that things were better before the euro,” he said. “This is a deception. We arrived at monetary union after disastrous experiences with floating exchange rates and some unsuccessful attempts of orderly floating. “The devaluations that populists claim is a free lunch and allows to regain competitiveness by miracle proved extremely expensive.”

With specific reference to Italy, he said: “The nostalgic alternative that everything will be all right just by returning to the lira amounts to fooling the people. The cost of a regime change would be huge and the poor would be the ones that suffer the most.” Mr Praet acknowledged that the euro had lost popularity in many European countries, but said that it had been made a “scapegoat” for other economic policy failures by politicians. However, many credible economists argue that in the absence of fiscal stimulus by core countries in Europe that run current account surpluses, the monetary restrictions of the single currency are indeed driving the economic distress of the likes of France, Italy, Portugal and Greece.

Italy’s Five Star movement, currently leading in national opinion polls, has proposed a referendum on Italy’s membership of the single currency. Marine Le Pen’s Front National in France has previously called for the reinstatement of the franc, although she did not reiterate this in the national debate among presidential candidates earlier this week ahead of April’s national elections. The level of Italy’s GDP is barely higher than when the single currency was formed in 2000 and its working age unemployment rate currently stands at 12 per cent. The French unemployment rate is just below 10% and for young people it is double that.

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An outright lie: “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.”

Greece to Break Off Face-to-Face Talks With Creditors (BBG)

Greece and the institutions managing its bailout review will break off negotiations in Brussels without having cleared a path to conclude the deliberations that would release needed rescue funds. Finance Minister Euclid Tsakalotos, who was meeting with officials from the euro area and the IMF will return to Athens by Saturday. The two sides still have issues to work out, said the official, who asked not to be named in line with policy. Some progress was made and discussions will continue from their respective headquarters, according to a spokesman from the European Stability Mechanism, the euro-area’s bailout monitor. Greece is edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted state to the edge of economic collapse, as the government in Athens and its creditors disagree over reforms to the pension system and the labor and energy markets.

Greece needs to complete the review in order to get the next portion of its aid payment before it has more than €7 billion of bonds come due in July. German Finance Minister Wolfgang Schaeuble increased the pressure on Prime Minister Alexis Tsipras to accede to creditor demands. “Greece has said it wants to stay in the euro,” Schaeuble said in an interview on Deutschlandfunk radio on Friday. “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.” [..] European Commission President Jean-Claude Juncker urged Greece and its creditors in an emailed statement to reach a deal that respects commitments made on all sides. In response to Tsipras’s letter, Juncker called on the Greeks not to reverse reforms and creditors “to give Greece the desired and necessary room for maneuver to build its own future.”

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Reasonable overview, but any talk of agreements that could lead Greece back to growth is nonsense. The EU would never sign such an agreement. Theie attitude to date has made that abundantly clear.

Where Next For Greece? (Makropolis)

In September last year, when Alexis Tsipras visited New York to speak at the UN Assembly, he held a meeting with some heavyweights of the international investment community. The Greek prime minister was reportedly advised by the participants that if he wanted to build trust in Greece as an attractive investment destination, he should shift focus from his main objective of debt relief towards ensuring Greece’s participation in the ECB’s QE programme. The investors apparently pointed out to the SYRIZA leader that such a development would have a wide range of benefits for Greece and provide the steadiest path towards regaining market access and the successful completion of the current programme, without the need to follow it up with a fourth memorandum of understanding (MoU).

Tsipras seemingly heeded the advice and, just as the second review was about to start, he charted a path out of the crisis. He set out his intention to close the review by December 2016, secure QE at the start of 2017 and dip his toe back into the markets with a small issue or two early this summer when Greece has to roll over the bond that it issued in 2014, when Antonis Samaras was prime minister. However, the timetable Tsipras identified last autumn has gone up in smoke.

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Mar 242017
 
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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DPC “Broad Street and curb market, New York” 1906

 


Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

 

 

This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

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And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

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A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

Read more …

Wow.

China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

Read more …

“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

Read more …

He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

Read more …

Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

Read more …

“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

Read more …

Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

Read more …

Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

Read more …

We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

Read more …

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 March 23, 2017  Posted by at 5:38 pm Finance Tagged with: , , , , , , , , ,  3 Responses »
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Live cooking in Monastiraki Square, Athens

 

Every time I write about my ‘adventures’ in Greece for the Automatic Earth for Athens Fund, which I initiated in June 2015, I think it’s been way too long, but also every time I realize that I’ve already written so much about it (which makes every new article harder to write as well). Still, it’s been three months since the last one, and as always lots has happened; we’re not sitting still. As always, there’s a full list of previous articles at the bottom of this one.

To start with the latest development, I gave Konstantinos Polychronopoulos of O Allos Anthropos another €1,000 (the last funds I had) on March 15, which he needed to go to Lesbos, where he’s been asked to help set up a ‘Multi-Center’, to be jointly built by Greeks and refugees. It’s an initiative of a privately funded organization named Swisscross, to be located outside of the horrible Moria camp.

The center, which will have no sleeping facilities, is designed to make life more bearable for the refugees stuck inside Moria. It will provide shower rooms, laundry facilities, a kindergarten, a school (remedial teaching), a cinema, cafeteria and a restaurant.

O Allos Anthropos will be in charge of the restaurant, which will also be very much geared towards providing space, equipment, food and resources for the refugees themselves to cook. An often overlooked part of the refugee tragedy here in Greece is that preparing food is an important aspect of family- and community life, a source of dignity and pride, that has been taken away from them and replaced by real bad catering.

 


Thank you to the Texan girls who donated their Santa hat to me for Konstantinos on December 25. Perfect fit!

 

We’ve had the fifth anniversary of O Allos Anthropos in December, and of course Christmas. Then we had New Year’s, and on January 8 Greek New Year. February 16 was Tsikno Pempti (aka Charcoal Thursday or Greek Cholesterol Day), when everyone eats roasted meat – there’s a connection with carnival there-, and the Monday after that was Clean Monday, the end of carnival and the start of what is probably best compared to Lent, what once upon a time was a 40-day period of ‘fasting’ all the way to Easter. No Fat Tuesday or Ash Wednesday, as far as I could find.

Konstantinos and his people made sure that everyone, homeless and refugees, had a Christmas and New Year’s party like ‘normal’ people. Someone had donated a whole lot of turkey for Christmas, there was some meat to eat, and on Cholesterol Day there was even over 1000 kilos of meat to be spread to the Social Kitchens all over the country. It’s the kind of thing that makes people feel they do count, and they do belong, despite the misery they find themselves in.

Just as important, if not more, was the fact that all children who were present in the Big House in Athens, many of whom are homeless, received presents on Greek New Year. That means so much to them. Holidays without presents is cruel to children. I’ll sprinkle some pictures through this article.

 


Nobody gets left out at Christmas

 

Through all these events one thing that kept popping into my head was how close they brought joy and misery together. It’s pretty much priceless to see the happiness in people’s faces when they are served a real Christmas meal, a sign that they belong to the ‘human tribe’, that they ARE important, and there ARE people who care about them. Being able to do that for people is a very precious thing. As I said to someone also involved in refugee work a while ago: I’m sure that when we look back on this years from now, we’re going to say this is the best thing we’ve done in our lives, or right up there.

But at the same time, you can’t look at the joy without realizing where it comes from, why a simple meal or a Christmas present means so much; it comes from the every day misery so many people live in, in Greece these days. Looking at people knowing they’ll have no place to sleep that night, while it’s pretty cold outside too (colder than I thought Athens would be), it will never be easy. The misery is always close to the surface.

So I want to thank you once again, Automatic Earth readers, for having made much of this possible through your donations. You help make a lot of people feel better, help them eat, shower, give them a sense of dignity. In the process, you make me feel better too. Thank you. (Update: Saw a video the other day of a girl tattoo artist who set up a program to change self-mutilated arms into beautiful works of body art. Her reason to do this: “You don’t know what happiness is within yourself until you do something for another person.” That. You rock.

 


Happiness is a little girl’s face

 

That €1000 I gave Konstantinos was again the last money I had to donate to him, so I will call on you once more, and shamelessly so (which I allow myself to do because it’s for others, and it really helps). The Automatic Earth for Athens Fund has so far generated over $50,000(!) -one wonderful soul sent me a check for $10,000…-, and it’s a bit of a victim of its own success. The more there is, the more gets spent; we don’t want to not help people. And already the number of meals O Allos Anthropos can prepare and serve is dropping again, for monetary reasons; the number should be going up instead. We’re rowing against a strong current, which is awfully ironic, as you can see in the rest of this article.

 

I was reading an article earlier this week from AFP about an Italian program for refugees that shows everything that is wrong about how the crisis is being dealt with in Europe. Italy has started flying in Syrian refugees from Beirut, so they don’t have to spent a fortune on a risky sea voyage only to be locked up for months in camps. There are other ways. Kudos to Italy, and may many other countries follow their example:

Avoiding Risky Sea Journey, Syrian Refugees Head To Italy ‘Pronto’

Just before midnight in a sleepy district of Beirut, dozens of Syrian refugees huddle in small groups around bulging suitcases, clutching their pinging cellphones and one-way tickets to Italy. “Torino! Pronto! Cappuccino!” They practise random Italian words in a schoolyard in the Lebanese capital’s eastern Geitawi neighbourhood, waiting for the buses that will take them to the airport, and onwards to their new lives in Italy. Under an initiative introduced last year by the Italian government, nearly 700 Syrian refugees have been granted one-year humanitarian visas to begin their asylum process in Italy. The programme is the first of its kind in Europe: a speedy third way that both avoids the United Nations lengthy resettlement process and provides refugees with a safe alternative to crammed dinghies and perilous sea crossings.

[..] A country of just four million people, Lebanon hosts more than one million Syrian refugees. For members of Mediterranean Hope, the four-person team coordinating Italy’s resettlement efforts from Lebanon, “humanitarian corridors” are the future of resettlement. The group interviews refugees many times before recommending them to the Italian embassy, which issues humanitarian visas for a one-year stay during which they begin the asylum process for permanent resettlement. “It’s safe and legal. Safe for them, legal for us, says Mediterranean Hope officer Sara Manisera. “After people cross the Mediterranean on the journey of death, they are put into centres for months while they wait. But with this programme, there are no massive centres, it costs less, and refugees can keep their dignity,” she tells AFP.

Since March 20 was the 1st anniversary of the EU-Turkey refugee deal, many articles were published about what happened during the past year. And I haven’t seen one that was positive, which makes a lot of sense. There may be fewer refugees arriving in Greece now, but the situation of those who are in the country has gotten much worse. They are now prisoners, ‘housed’ in squalid conditions and with very little idea what will happen to them, how long their asylum applications will take to be heard, if they can or will be sent back to Turkey.

And now, with Erdogan getting ever more desperate in his quest to become the over-powerful president of Turkey, with just 4 weeks left till the referendum that should make him so, and with polls showing he’s behind, the EU-Turkey deal may well fall victim to petty politics. As it always looked to do. Who will suffer if that happens? The usual suspects, Greece and the refugees. The walls to fortress Europe are still shut tight. And it’s always election time somewhere.

 


Live cooking in Monastiraki Square, Athens

 

A friend recently translated something for me that Konstantinos had written on the O Allos Anthropos Facebook page. He said that every refugee who, before the EU-Turkey deal, passed through Greece on his/her way to Europe, cost the EU €800. For a family of 5 that adds up to €4,000, which would have been more than enough to pay for transport, stay at decent hotels and eat in normal restaurants for the duration of their trip (7-10 days). Suffice it to say, that was not what they got.

After the EU-Turkey deal made it impossible for refugees to leave Greece, €15,000 has been spent per capita. That is €75,000 per family of 5, more than enough to rent a villa on the beach, hire a butler and eat gourmet food for 8 months. Instead, the refugees are stuck in old abandoned factories with no facilities, in old tents in the freezing cold and in the rain, and forced to eat a dirt poor version of rice with chickpeas and lentil soup.

Then over the weekend I saw this confirmed in a graph issued by Refugees Deeply (with slightly lower numbers, but those are just margin errors). Note: March 16 2015 in the graph should of course read March 16 2016:

 

 

Refugees Deeply are a bit of a new kid on the block, they’re a year old, and I have no doubt they do care and have the best intentions. But since they operate throughout the world, not just in Greece, they run the same risk many international NGOs do, of spreading their resources too thin. Moreover, one thing that’s become obvious is that if you approach and treat Greece the same way as Somalia, for instance, you’re certain of making some major mistakes. Greece was a modern and prosperous country until Europe tried to turn it into Somalia.

I first heard of Refugees Deeply 2 weeks ago when they published a report called The Refugee Archipelago – The Inside Story Of What Went Wrong In Greece. A good piece, for sure, and I recommend it, but it comes up far short of naming everything that went -and is still going- wrong.

What’s good is that it focuses on the failures of the Greek government in the never-ending refugee tragedy, because that was a part that had largely been missing. But what’s not so good is that it focuses almost exclusively on that. And that’s far from the whole story.

 

You see, there are three separate parties involved in the saga that have access to serious funding, and all three have their own reasons NOT to solve the problems to the best of their abilities. There’s the EU, there’s Greece, and there are dozens of NGOs, many of whom are large and operate internationally (iNGOs).

The EU wants to use Greece as a deterrent. It aims to create an image to the world of Greece as a sordid inhumane place that no potential refugee should ever wish to flee to. Because it doesn’t want any more refugees. 1 million refugees is too much for a continent, and a political union, of 500 million people. Rich Europe is overwhelmed by 0.2% more people. (Note: I’m not advocation open borders or anything, I’m just saying we need to take care of people in need, which is basically what the Geneva Convention says. Until we decide to stop bombing countries like Syria, and start rebuilding them, people will come to our territory to seek help.)

The EU also wants to put Greece in an even harder predicament, for politico-economic reasons. Brussels hands out a lot of money, but it doesn’t- from what I’ve been reading- seem to keep proper tabs of where that money is going, or how it’s spent. That way its hands are always clean: we gave all this money, you can’t blame us! And their hands will remain clean until someone calls them on their lack of oversight of what happens to taxpayers’ money. But taxpayers don’t even know who to call on, Europe is faceless.

 

The Greek government, too, likes the deterrent idea, albeit for slightly different reasons. While the EU has money to burn, Greece has none. The country doesn’t have the means to handle the refugee influx; it doesn’t even have the means to deal with its own domestic austerity-driven misery. The last thing it wants to do is give the impression that it is able to deal with the whole thing.

That might give refugees the idea that Greece is a good place to go to, and it might give Brussels the idea that Greece can handle this, so it must be doing fine. Also, there are (party-) political issues, there is rampant corruption, and there are egos. Greece is a country that politically, socially and economically has been robbed of any and all certainties and confidence. Where the poor take care of each other and the rich only have eye for themselves. But it’s hardly a functioning society anymore, it’s a bankruptcy fire sale.

The only thing surprising about the letter bombs (parcels) for Dijsselbloem, the IMF and Schäuble sent from Greece is that it took so long. Punishing a country into paying more than they could possibly afford is Versailles redux. But sure, the Greek part in the refugee crisis needs serious scrutiny as well: how Mouzalas can still be migration minister after the Refugees Deeply piece is hard to see. Then again, sources on the ground tell me it’s not -only- him, it’s the overall chaos and infighting.

 


And there are protests

 

The third party, the NGOs, is a bit tricky to talk about. For one, because there are so many of them, and in many lots of people work with the best possible intentions. That coming to a country where you don’t know the language or culture is not a perfect plan may often get lost in translation, certainly for unpaid bright-eyed young volunteers looking for a holiday but with a meaning.

It’s tricky also because NGOs, as I’ve written before, have become an industry in their own right, institutionalized even. As someone phrased it: we now have a humanitarian-industrial complex. Which in Greece has received hundreds of millions of euros and somehow can’t manage to take proper care of 60,000 desolate souls with that.

I’ve even been warned that if I speak out too clearly about this, they may come after Konstantinos and his people and make their work hard and/or impossible. This is after all an industry that is worth a lot of money. Aid is big business. And big business protects itself.

Still, if we’re genuinely interested in finding out how and why it is possible that hundreds of millions of taxpayer euros change hands, and people still die in the cold and live in subhuman conditions, we’re going to have to break through some of the barriers that the EU, Greece and the iNGOs have built around themselves.

If only because European -and also American- taxpayers have a right to know what has made this ongoing epic failure possible. And of course the first concern should be that the refugees have the right, encapsulated in international law, to decent and humane treatment, and are not getting anything even remotely resembling it.

Refugees Deeply quotes ‘a senior aid official’ (they don’t say from what) anonymously saying that €70 out of every €100 in aid is wasted. I see little reason to question that; if anything, it could be worse. But on the sunny side that means it need not take much to improve things. If ‘only’ one third of the aid were wasted, the portion that actually helps could potentially be doubled.

 

Most importantly: how do you waste at least €560 million (7/10 of €800 million) when that was intended for people in misery, in peril, in desperate need? I find it hard to wrap my mind around this, can’t seem to understand how actual people in Brussels can allow that to happen, when it’s about taxpayers’ money supposed to help people in grave distress. And I can’t figure out how Greece can allow that people freeze to death on its territory, when that could obviously have been easily prevented.

Nor can I fathom how iNGOs, who together have received hundreds of millions, can fail to build a number of decent winter camps, having been warned and funded months in advance. A lot of money goes to contractors, to the caterers who provide the awful meals at ten times the cost that O Allos Anthropos does, to the builders who don’t build, to the ubiquitous wheeler-dealers who can smell a cheap profit from miles away. And NGO executives want their often hefty salaries to be paid in time.

But even then I keep on thinking: where has all the money gone? They could have built or rented great facilities for all 60,000 refugees, and fed them, and schooled their children, and still have plenty of profit left. Why must greed be so unbridled?

 

In view of all this wasted money, we, Konstantinos and his people, can do so much more and so much better. But then again, of course, we can’t, because we don’t have that kind of funding, not even to spend wisely. And we won‘t either since we don’t want to comply with rules that would force O Allos Anthropos to refuse a meal to a hungry person, Greek or refugee, who doesn’t have ‘the proper ID’.

That ID thing fits ‘wonderfully’ into the EU model that has turned so many refugees into de facto prisoners, and has made so many Greeks destitute. In the end, aid must come from the heart, not from a wallet. Once humanitarian aid becomes a profit-based industry, as it so clearly has here, situations like the ones I describe here become inevitable. It all must come from the desire to help fellow human beings, and that should never be something that someone gets rich off of.

And compromising that in order to let the same machine fund you that has created so much mayhem feels like a road to some place between hell and nowhere. It’s sort of the opposite of Sartre’s “L’enfer c’est les autres” (Hell is other people). O Allos Anthropos means ‘The Other Human’. In other words, heaven is other people too. I could make a good case arguing that this is the very meaning of life, that we are here to help others. But that of course is just me. And thankfully and hopefully, bless you, many of our readers.

I don’t want to spend too much time being angry over the whole thing. The best we can all do is be positive, work with we have, and help as many people as we can. Of course Konstantinos and I, and many others, talk about becoming an NGO. But in his view, that would mean becoming a part of the machine, the industry, that does so much harm, wastes so much money and precious resources, and hurts so many needy people in the process.

Konstantinos is very much opposed to that, and I agree with him (not everyone always does). For him, it’s about never forgetting the reason why you do what you do, and certainly not forgetting it for money. But at the same time, yes, with more money we could do so much more. The number of projects that don’t get done, the people who don’t get fed, because the money is simply not there, is for lack of a better term, embarrassing. Especially, obviously, because that same money does get wasted somewhere else.

So we ask you once again for your help:

 

 

For donations to Konstantinos and O Allos Anthropos, the Automatic Earth has a Paypal widget on our front page, top left hand corner. On our Sales and Donations page, there is an address to send money orders and checks if you don’t like Paypal. Our Bitcoin address is 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT. For other forms of payment, drop us a line at Contact • at • TheAutomaticEarth • com.

To tell donations for Kostantinos apart from those for the Automatic Earth (which badly needs them too!), any amounts that come in ending in either $0.99 or $0.37, will go to O Allos Anthropos. Every penny goes where it belongs, no overhead. Guaranteed. It’s a matter of honor.

 

Please give generously.

 

 

A list of the articles I wrote so far about Konstantinos and Athens.

June 16 2015

The Automatic Earth Moves To Athens

June 19 2015

Update: Automatic Earth for Athens Fund

June 25 2015

Off to Greece, and an Update on our Athens Fund

July 8 2015

Automatic Earth Fund for Athens Makes First Donation

July 11 2015

AE for Athens Fund 2nd Donation: The Man Who Cooks In The Street

July 22 2015

AE Fund for Athens: Update no. 3: Peristeri

Nov 24 2015

The Automatic Earth -Finally- Returns To Athens

Dec 25 2015

Help the Automatic Earth Help the Poorest Greeks and Refugees

Feb 1 2016

The Automatic Earth is Back in Athens, Again

Mar 2 2016

The Automatic Earth for Athens Fund Feeds Refugees (Too)

Aug 9 2016

Meanwhile in Greece..

Nov 28 2016

The Other Human Needs Your Help This Christmas

Dec 21 2016

The Automatic Earth in Greece: Big Dreams for 2017

 

 


Konstantinos and a happy refugee

 

 

Mar 232017
 
 March 23, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Unknown GMC truck Associated Oil fuel tanker, San Francisco 1935

 


I Don’t Think The US Should Remain As One Political Entity – Casey (IM)
Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)
The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)
US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)
Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)
China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)
Zombie Companies are China’s Real Problem (BBG)
China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)
A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC
Elite Economists: Often Wrong, Never In Doubt (720G)
Trump the Destroyer (Matt Taibbi)
Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)
Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)
Greek Consumption Slumps Further In 2017 (K.)
Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)
In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

 

 

So there.

I Don’t Think The US Should Remain As One Political Entity – Casey (IM)

What’s going on in the US now is a culture clash. The people that live in the so-called “red counties” that voted for Trump—which is the vast majority of the geographical area of the US, flyover country—are aligned against the people that live in the blue counties, the coasts and big cities. They don’t just dislike each other and disagree on politics; they can no longer even have a conversation. They hate each other on a visceral gut level. They have totally different world views. It’s a culture clash. I’ve never seen anything like this in my lifetime.

There hasn’t been anything like this since the War Between the States, which shouldn’t be called “The Civil War,” because it wasn’t a civil war. A civil war is where two groups try to take over the same government. It was a war of secession, where one group simply tries to leave. We might have something like that again, hopefully nonviolent this time. I don’t think the US should any longer remain as one political entity. It should break up so that people with one cultural view can join that group and the others join other groups. National unity is an anachronism.

Read more …

Credibility.

Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth. Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell. “If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital. U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump’s healthcare proposal scheduled in the House of Representatives. On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill. Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it. Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners. “The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP,” Wien said. “Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable.”

Read more …

“This is particularly interesting because student loans essentially have no collateral.”

The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)

In 1988, a bank called Guardian Savings and Loan made financial history by issuing the first ever “subprime” mortgage bond. The idea was revolutionary. The bank essentially took all the mortgages they had loaned to borrowers with bad credit, and pooled everything together into a giant bond that they could then sell to other banks and investors. The idea caught on, and pretty soon, everyone was doing it. As Bethany McLean and Joe Nocera describe in their excellent history of the financial crisis (All the Devils are Here), the first subprime bubble hit in the 1990s. Early subprime lenders like First Alliance Mortgage Company (FAMCO) had spent years making aggressive loans to people with bad credit, and eventually the consequences caught up with them. FAMCO declared bankruptcy in 2000, and many of its competitors went bust as well.

Wall Street claimed that it had learned its lesson, and the government gave them all a slap on the wrist. But it didn’t take very long for the madness to start again. By 2002, banks were already loaning money to high-risk borrowers. And by 2005, all conservative lending standards had been abandoned. Borrowers with pitiful credit and no job could borrow vast sums of money to buy a house without putting down a single penny. It was madness. By 2007, the total value of these subprime loans hit a whopping $1.3 trillion. Remember that number. And of course, we know what happened the next year: the entire financial system came crashing down. Duh. It turned out that making $1.3 trillion worth of idiotic loans wasn’t such a good idea. By 2009, 50% of those subprime mortgages were “underwater”, meaning that borrowers owed more money on the mortgage than the home was worth.

In fact, delinquency rates for ALL mortgages across the country peaked at 11.5% in 2010, which only extended the crisis. But hey, at least that’s never going to happen again. Except… I was looking at some data the other day in a slightly different market: student loans. Over the last decade or so, there’s been an absolute explosion in student loans, growing from $260 billion in 2004 to $1.31 trillion last year. So, the total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble. And just like the subprime mortgages, many student loans are in default. According to the Fed’s most recent Household Debt and Credit Report, the student loan default rate is 11.2%, almost the same as the peak mortgage default rate in 2010. This is particularly interesting because student loans essentially have no collateral. Lenders make loans to students… but it’s not like the students have to pony up their iPhones as security.

Read more …

You have to wonder what exactly is keeping the US economy afloat.

US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)

Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday. “Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency. Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said. According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.

“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report. Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category. “The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano. Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.

Read more …

Might as well call off the theater.

Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)

The oil price has fallen back below the key $50 a barrel mark for the first time since November after surging US oil supplies dealt a blow to OPEC’s plan to erode the global oversupply of crude. The flagging oil price bounded above $50 a barrel late last year after a historic co-operation deal between OPEC and the world’s largest oil producers outside of the cartel to limit output for the first half of this year. The November deal was the first action taken by the group to limit supply for over eight years but since then the quicker than expected return of fracking rigs across the US has punctured the buoyant market sentiment of recent months. Brent crude prices peaked at $56 a barrel earlier this year and were still above $52 this week.

But by Wednesday the price fell to just above $50 a barrel and briefly broke below the important psychological level to $49.86 on Wednesday afternoon. Market analysts fear that a more sustained period below $50 could trigger a sell-off from hedge funds which would drive even greater losses in the market. The price plunge was sparked by the latest weekly US stockpile data which revealed a bigger than expected increase of 5 million barrels a day compared to a forecast rise of 1.8 million barrels. The flood of US shale emerged a day after Libya announced that would increase its output to take advantage of higher revenues from its oil exports. “The market is increasingly worried that the continued overhang of supply is not being brought down fast enough,” said Ole Hansen, a commodities analyst with SaxoBank.

Read more …

Beijing forced to save the shadows.

China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)

During the so-called Chinese Banking Liquidity Crisis of 2013, the relative cost of funds for non-bank institutions spiked to 100bps. So, the fact that the ‘shadow banking’ liquidity premium has exploded to almost 250 points – by far a record – in the last few days should indicate just how stressed Chinese money markets are. While interbank borrowing rates have climbed across the board, the surge has been unusually steep for non-bank institutions, including securities companies and investment firms. They’re now paying what amounts to a record premium for short-term funds relative to large Chinese banks, according to data compiled by Bloomberg.

The premium is reflected in the gap between China’s seven-day repurchase rate fixing and the weighted average rate, which, by Bloomberg notes, widened to as much as 2.47 percentage points on Wednesday after some small lenders were said to miss payments in the interbank market. Non-bank borrowers tend to have a greater influence on the fixing, while large banks have more sway over the weighted average. “It’s more expensive and difficult for non-bank financial institutions to get funding in the market,” said Becky Liu at Standard Chartered. “Bigger lenders who have access to regulatory funding are not lending much of the money out.” Without access to deposits or central bank liquidity facilities, many of China’s non-bank institutions must rely on volatile money markets. As Bloomberg points out, The People’s Bank of China has been guiding those rates higher in recent months to encourage a reduction of leverage, while also stepping in at times to prevent a liquidity crunch.

Read more …

State owned zombies.

Zombie Companies are China’s Real Problem (BBG)

China needs to take on its state-owned “zombie companies,” which keep borrowing even though they aren’t earning enough to repay loans or interest, says Nicholas Lardy of the Peterson Institute for International Economics. “That’s where the real problem is,” Lardy said Thursday in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “It’s a component of the run-up in debt that they really have to focus on.” While flagging this concern, Lardy, a senior fellow at Peterson in Washington and author of “Markets Over Mao: The Rise of Private Business in China,” said anxiety over China’s debt growth is overstated. Household deposits will continue to underpin the banking and financial system, which means the situation with zombie firms is unlikely to reach a critical point.

Household savings are “very sticky, they’re not going anywhere, and the central bank can come in to the rescue if there are problems,” he said. Chinese corporate profits will probably continue to recover this year and after-tax earnings needed to service the debt load is improving, Lardy said. Another positive sign is a slowdown in the buildup of debt outstanding to non-financial companies. The combination of that slackening and companies’ increasing earning power “is improving the overall situation,” he said. When it comes to U.S. President Donald Trump’s negative rhetoric on China, the country’s leaders deserve “very high marks so far” for their cool reaction. “They’ve been waiting to see what Mr. Trump is actually going to do as opposed to what he’s talked about, so they haven’t overreacted,” he said. “They’ve made very careful preparations for the worst case if Trump does move in a very strong protectionist direction.”

Read more …

Zombies and junk.

China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)

China’s riskiest corporate borrowers are raising an unprecedented amount of debt overseas, leaving global investors to shoulder more credit risks after onshore defaults quadrupled in 2016. Junk-rated firms, most of which are property developers, have sold $6.1 billion of dollar bonds since Dec. 31, a record quarter, data compiled by Bloomberg show. In contrast, such borrowers have slashed fundraising at home as the central bank pushes up borrowing costs and regulators curb real estate financing. Onshore yuan note offerings by companies with local ratings of AA, considered junk in China, fell this quarter to the least since 2011 at 31.3 billion yuan ($4.54 billion). Global investors desperate for yield have lapped up offerings from China. Rates on dollar junk notes from the nation have dropped 81 basis points this year to 6.11%, near a record low, according to a Bank of America Merrill Lynch index.

Some investors have warned of froth. Goldman Sachs Group Inc. said last month that it sees little value in the country’s high-yield property bonds. Hedge fund Double Haven Capital (Hong Kong) has said it is betting against Chinese junk securities. “Today’s market valuations are tight and investors are focusing on yields without taking into account credit risks,” said Raja Mukherji at PIMCO. “That’s where I see a lot of risk, where investors are not differentiating on credit quality on a risk-adjusted basis.” Lower-rated issuers turning to dollar debt after scrapping financing at home include Shandong Yuhuang Chemical on China’s east coast. The chemical firm canceled a 500 million yuan local bond sale in January citing “insufficient demand.” It then issued $300 million of three-year bonds at 6.625% this week. Some developers have grown desperate for cash as regulators tighten housing curbs and restrict their domestic fundraising. That’s raising concern among international investors in China’s real estate sector who have been burned before.

Read more …

Priceless humor: “Congress has already raised the alarm.” After three decades, that is.

A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man. The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Bill Gates, Warren Buffett and Jeff Bezos – combined. Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database – the foundation of hundreds of billions of dollars in financial transactions each day. For more than three decades, the SEC has accepted online submissions of regulatory filings – basically, no questions asked.

As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams. “The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system. So, caveat lector – let the reader beware.” Congress has already raised the alarm. For its part, the SEC, which declined to comment, has said those who make filings are responsible for their truthfulness and that only a handful have been reported as bogus. Submitting false information exposes the culprit to SEC civil-fraud charges, or even federal criminal prosecution.

On May 14, 2015, Nedko Nedev, a dual citizen of the United States and Bulgaria, filed an SEC form indicating he was making a tender offer – an outright purchase – for Avon, the cosmetics company. Avon’s shares jumped 20% before trading was halted, and the company denied the news. (A federal grand jury later indicted Nedev on market manipulation and other charges.) After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards. “This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency. In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying whether its authentication process could be strengthened without delaying disclosure of key information to investors.

Read more …

Only a major reset will do.

Elite Economists: Often Wrong, Never In Doubt (720G)

Since the U.S. economic recovery from the 2008 financial crisis, institutional economists began each subsequent year outlining their well-paid view of how things will transpire over the course of the coming 12-months. Like a broken record, they have continually over-estimated expectations for growth, inflation, consumer spending and capital expenditures. Their optimistic biases were based on the eventual success of the Federal Reserve’s (Fed) plan to restart the economy by encouraging the assumption of more debt by consumers and corporations alike. But in 2017, something important changed. For the first time since the financial crisis, there will be a new administration in power directing public policy, and the new regime could not be more different from the one that just departed. This is important because of the ubiquitous influence of politics.

The anxiety and uncertainties of those first few years following the worst recession since the Great Depression gradually gave way to an uncomfortable stability. The anxieties of losing jobs and homes subsided but yielded to the frustration of always remaining a step or two behind prosperity. While job prospects slowly improved, wages did not. Business did not boom as is normally the case within a few quarters of a recovery, and the cost of education and health care stole what little ground most Americans thought they were making. Politics was at work in ways with which many were pleased, but many more were not. If that were not the case, then Donald Trump probably would not be the 45th President of the United States. Within hours of Donald Trump’s victory, U.S. markets began to anticipate, for the first time since the financial crisis, an escape hatch out of financial repression and regulatory oppression.

As shown below, an element of economic and financial optimism that had been missing since at least 2008 began to re-emerge. What the Fed struggled to manufacture in eight years of extraordinary monetary policy actions, the election of Donald Trump accomplished quite literally overnight. Expectations for a dramatic change in public policy under a new administration radically improved sentiment. Whether or not these changes are durable will depend upon the economy’s ability to match expectations.

Read more …

I find the Trump bashing parade very tiresome, but Matt’s funny.

Trump the Destroyer (Matt Taibbi)

There is no other story in the world, no other show to watch. The first and most notable consequence of Trump’s administration is that his ability to generate celebrity has massively increased, his persona now turbocharged by the vast powers of the presidency. Trump has always been a reality star without peer, but now the most powerful man on Earth is prisoner to his talents as an attention-generation machine. Worse, he is leader of a society incapable of discouraging him. The numbers bear out that we are living through a severely amplified déjà vu of last year’s media-Trump codependent lunacies. TV-news viewership traditionally plummets after a presidential election, but under Trump, it’s soaring. Ratings since November for the major cable news networks are up an astonishing 50% in some cases, with CNN expecting to improve on its record 2016 to make a billion dollars – that’s billion with a “b” – in profits this year.

Even the long-suffering newspaper business is crawling off its deathbed, with The New York Times adding 132,000 subscribers in the first 18 days after the election. If Trump really hates the press, being the first person in decades to reverse the industry’s seemingly inexorable financial decline sure is a funny way of showing it. On the campaign trail, ballooning celebrity equaled victory. But as the country is finding out, fame and governance have nothing to do with one another. Trump! is bigger than ever. But the Trump presidency is fast withering on the vine in a bizarre, Dorian Gray-style inverse correlation. Which would be a problem for Trump, if he cared. But does he? During the election, Trump exploded every idea we ever had about how politics is supposed to work. The easiest marks in his con-artist conquest of the system were the people who kept trying to measure him according to conventional standards of candidate behavior.

You remember the Beltway priests who said no one could ever win the White House by insulting women, the disabled, veterans, Hispanics, “the blacks,” by using a Charlie Chan voice to talk about Asians, etc. Now he’s in office and we’re again facing the trap of conventional assumptions. Surely Trump wants to rule? It couldn’t be that the presidency is just a puppy Trump never intended to care for, could it? Toward the end of his CPAC speech, following a fusillade of anti-media tirades that will dominate the headlines for days, Trump, in an offhand voice, casually mentions what a chore the presidency can be. “I still don’t have my Cabinet approved,” he sighs. In truth, Trump does have much of his team approved. In the early days of his administration, while his Democratic opposition was still reeling from November’s defeat, Trump managed to stuff the top of his Cabinet with a jaw-dropping collection of perverts, tyrants and imbeciles, the likes of which Washington has never seen.

En route to taking this crucial first beachhead in his invasion of the capital, Trump did what he always does: stoked chaos, created hurricanes of misdirection, ignored rules and dared the system of checks and balances to stop him. By conventional standards, the system held up fairly well. But this is not a conventional president. He was a new kind of candidate and now is a new kind of leader: one who stumbles like a drunk up Capitol Hill, but manages even in defeat to continually pull the country in his direction, transforming not our laws but our consciousness, one shriveling brain cell at a time.

Read more …

Tourism is a very big source of income for Turkey. Erdogan’s killing it off with a vengeance.

Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)

President Tayyip Erdogan said on Wednesday that Europeans would not be able to walk safely on the streets if they kept up their current attitude toward Turkey, his latest salvo in a row over campaigning by Turkish politicians in Europe. Turkey has been embroiled in a dispute with Germany and the Netherlands over campaign appearances by Turkish officials seeking to drum up support for an April 16 referendum that could boost Erdogan’s powers. Ankara has accused its European allies of using “Nazi methods” by banning Turkish ministers from addressing rallies in Europe over security concerns. The comments have led to a sharp deterioration in ties with the European Union, which Turkey still aspires to join.

“Turkey is not a country you can pull and push around, not a country whose citizens you can drag on the ground,” Erdogan said at an event for Turkish journalists in Ankara, in comments broadcast live on national television. “If Europe continues this way, no European in any part of the world can walk safely on the streets. Europe will be damaged by this. We, as Turkey, call on Europe to respect human rights and democracy,” he said. Germany’s Frank-Walter Steinmeier used his first speech as president on Wednesday to warn Erdogan that he risked destroying everything his country had achieved in recent years, and that he risked damaging diplomatic ties. “The way we look (at Turkey) is characterized by worry, that everything that has been built up over years and decades is collapsing,” Steinmeier said in his inaugural speech in the largely ceremonial role. He called for an end to the “unspeakable Nazi comparisons.”

Read more …

Can’t let a little crisis get in the way of your champagne and caviar.

Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)

As leaders celebrate the European Union’s 60th birthday in Rome this weekend, the host nation may be hoping that a pomp-filled ceremony distracts from any probing questions. Overshadowed by the sting of Brexit and elections in the Netherlands, France and Germany, Italy’s lingering problems have left it as the weak link among Europe’s powerhouse economies. It’s stumbling through a stop-start slow recovery from a record-long recession, unemployment is twice that of Germany’s, and voters, weary of EU institutions, are flirting with the same kind of populism grabbing attention elsewhere. The gathering on Saturday on the city’s Capitol hill is to celebrate the Treaty of Rome, the bedrock agreement signed on March 25, 1957 for what is now the EU.

From its beginnings as the European Economic Community – with Italy among the six founding members – it has since grown to a union of 28 nations stretching 4,000 kilometers from Ireland in the northwest to Cyprus in the southeast. The U.K. is heading toward a lengthy exit from the EU known as Brexit, raising questions among the remaining 27 about the bloc’s long-term future. “Italy was until very recently at the forefront of the European integration process,” Luigi Zingales, professor of finance at University of Chicago Booth School of Business, said in an interview. “Today it’s undoubtedly Europe’s weakest link.” The economy grew just 0.9% last year, below the euro area’s 1.7%, and unemployment is at 11.9%. A recent EU poll put Italy as the monetary union’s second-most euro-skeptic state after Cyprus with only 41% saying the single currency is “a good thing.” The average in the 19-member euro area is 56%.

That widespread disenchantment may be felt at elections due in about one year. A poll published on Tuesday by Corriere della Sera put support for the Five Star Movement, which calls for a referendum to ditch the euro, at a record 32.3%, well ahead of the ruling Democratic Party. Summit host Prime Minister Paolo Gentiloni has only been in power since December, when Matteo Renzi resigned after losing a constitutional reform referendum. For Zingales, Italy has problems that European policy makers “would rather not talk about now as they don’t want to scare people.” That’s because across the bloc, politicians are still fighting voter resentment over the loss of wealth since the financial crisis, bitterness about bailouts and anger over a perceived increase in inequality. “Sixty years after the signing of the Treaties of Rome, the risk of political paralysis in Europe has never been greater,” Bank of Italy Governor Ignazio Visco told a conference in Rome this month.

Read more …

The EU can celebrate only because it’s murdering one of its members. Greece needs stimulus but gets the opposite.

Greek Consumption Slumps Further In 2017 (K.)

The year has started with some alarm bells regarding the course of consumer spending, generating concern not only about the impact on the supermarket sector and industry, but also on the economy in general. In the first week of March the year-on-year drop in supermarket turnover amounted to 15%, while in January the decline had come to 10%. Shrinking consumption is a sure sign that the economic contraction will be extended into another year, given its important role in the economy. The new indirect taxes on a number of commodities, the increased social security contributions, the persistently high unemployment and the ongoing uncertainty over the bailout review talks have hurt consumer confidence and eroded disposable incomes.

In this context, it will be exceptionally difficult to achieve the fiscal targets, especially if the uncertainty goes on or is ended with the imposition of additional austerity measures that would only see incomes shrink further. According to projections by IRI market researchers, supermarket sales in 2017 are expected to decline 3.6% from last year, with the worst-case scenario pointing to a 4.4% drop. Supermarket sales turnover dropped at the steepest rate seen in the crisis years in 2016, down 6.5%, after falling 2.1% in 2015, 1.4% in 2014, 3.5% in 2013 and 3.4% in 2012.

Read more …

“For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever.”

Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)

Greece has had nine different governments since 2009. At least thirteen austerity measures. Multiple bailouts. Severe capital controls. And a full-out debt restructuring in which creditors accepted a 50% loss. Yet despite all these measures GREECE IS STILL IN A DEBT CRISIS. Right now, in fact, Greece is careening towards another major chapter in its never-ending debt drama. Just like the United States, the Greek government is set to run out of money (yet again) in a few months and is in need of a fresh bailout from the IMF and EU. (The EU is code for “Germany”…) Without another bailout, Greece will go bust in July– this is basic arithmetic, not some wild theory. And this matters. If Greece defaults, everyone dumb enough to have loaned them money will take a BIG hit. This includes a multitude of banks across Germany, Austria, France, and the rest of Europe.

Many of those banks already have extremely low levels of capital and simply cannot afford a major loss. (Last year, for example, the IMF specifically singled out Germany’s Deutsche Bank as being the top contributor to systemic risk in the global financial system.) So a Greek default poses as major risk to a number of those banks. More importantly, due to the interconnectedness of the financial system, a Greek default poses a major risk to anyone with exposure to those banks. Think about it like this: if Greece defaults and Bank A goes down, then Bank A will no longer be able to meet its obligations to Bank B. Bank B will suffer a loss as well. A single event can set off a chain reaction, what’s called ‘contagion’ in finance. And it’s possible that Greece could be that event. This is what European officials have been so desperate to prevent for the last nine years, and why they’ve always come to the rescue with a bailout.

It has nothing to do with community or generosity. They’re hopelessly trying to prevent another 2008-style meltdown of the financial system. But their measures have limits. How much longer do Greek citizens accept being vassals of Germany, suffering through debilitating capital controls and austerity measures? How much longer do German taxpayers continue forking over their hard-earned wages to bail out Greek retirees? After all, they’ve spent nine years trying to ‘fix’ Greece, and the situation has only become worse. For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever. And whether it’s this July or some date in the future, Greece could end up being the catalyst which sets off a chain reaction on both sides of the Atlantic.

Read more …

It’s time for lawyers to step in.

In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

EU leaders are celebrating a year since they carved out the agreement with Turkey that stemmed the flood of refugees seeking to escape war and strife on Europe’s doorstep. But the importance of the agreement goes far beyond the fact that it has contributed to deterring refugees from coming to Greece. At the Norwegian Refugee Council, we fear that the system Europe is putting in place in Greece is slowly stripping people of their right to seek international protection. Greece took the positive step to enshrine in law some key checks and balances to protect the vulnerable – a victim of torture, a disabled person, an unaccompanied child – so they could have their asylum case heard on the Greek mainland rather than remaining on the islands.

But a European Commission action plan is putting Greece under pressure to change safeguards enshrined in Greek law. NRC, along with other human rights and humanitarian organizations, wrote an open letter to the Greek Parliament this month urging lawmakers to keep that protection for those most in need. Importantly, this is just another quiet example of how what is happening in Greece is setting precedents that may irrevocably change the 1951 Refugee Convention. Europe is testing things out in Greece. [..] It was Europe and its postwar crisis that led to the 1951 convention that protects those displaced by war. Now that convention risks expiring on the doorstep of the same continent that gave birth to it – Europe is in danger of becoming, as NRC’s Secretary-General Jan Egeland has said, the convention’s “burial agent.”

Read more …

Mar 222017
 
 March 22, 2017  Posted by at 1:34 pm Finance Tagged with: , , , , , , , ,  3 Responses »
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Salvador Dali Girl At The Window 1925

 

If Southern Europeans were a race, say there were something like a Mediterranean race, Jeroen Dijsselbloem would definitely be a racist. Since there is not, the -demissionary- Dutch Finance Minister and -still- president of the Eurogroup of eurozone finance ministers, escapes the label, albeit narrowly.

He will still enter history as a misogynist, though. It’s hard to tell if the man is simply really ‘thick’, or there’s something else going on, but his latest remarks have disqualified him for any position, at any time in the future, in European politics. Or they should have; in Europe these days it’s hard to tell.

It’s not as if his actions as Eurogroup head should not have already disqualified him, but nobody seemed interested or smart enough to understand why, except for the Greeks. But unfortunately for Brussels, Dijsselbloem is not even the actual problem, he’s a mere symptom. First, here’s what he said to German daily Frankfurter Allgemeine Zeitung on Monday. Let’s start with the Telegraph’s version:

Dijsselbloem Says Southern Europe Blew Cash On ‘Drinks And Women’

The head of the eurozone’s finance ministers has been criticised for stating that southern European countries blew their money on “drinks and women”. Jeroen Dijsselbloem, the Dutch finance minister who leads the group, made the comments in an interview on Monday with German newspaper Frankfurter Allgemeine Zeitung (FAZ). “During the crisis of the euro, the countries of the north have shown solidarity with countries affected by the crisis,” he said.

“As a Social Democrat, I attribute exceptional importance to solidarity. “But you also have obligations. “You cannot spend all the money on drinks and women and then ask for help.” Inside the European parliament, MEPs turned on Mr Dijsselbloem on Tuesday, calling his remarks “insulting” and “vulgar”. Gabriel Mato, a Spanish MEP, said the remarks were “absolutely unacceptable” and an “insult” to southern member states – claiming he had lost his neutrality as finance chief.

What the remarks make clear is that he never had “neutrality as finance chief”. And it gets better: he accuses Greece, Italy, Portugal, Cyprus, Spain, even Ireland (?!) of not ‘showing the same solidarity as northern eurozone states’. Boy, that’s rich. The Greeks should show more solidarity while being dragged down to a 3rd world country level by the ‘northern eurozone states’. That reeks of Stockholm Syndrome; Greece should be grateful for being beaten into submission.

Because there are -slightly- different translations of the remarks (the interview might have been done in Dutch or English or German originally, I don’t know, and can’t find the original), and therefore also different interpretations, here’s another version, from Politico.eu :

Dijsselbloem Not Fit To Be Eurogroup President, Says Socialist MEP Leader

Without naming names, Dijsselbloem told the Frankfurter Allgemeine on Monday that “countries in crisis” should stick to the deficit targets set by the European Commission and show the same solidarity as northern eurozone states during the financial crisis. “As a social democrat, for me solidarity is extremely important,” Dijsselbloem said. “But those who call for it (solidarity) also have duties. I cannot spend all my money on liquor and women and plead for your support afterwards. This principle applies on the personal, local, national and also European level.”

On Tuesday, Pittella described these comments as “shameful and shocking.” “Dijsselbloem went far beyond by using discriminatory arguments against the countries of southern Europe,” he said. “There is no excuse or reason for using such language, especially from someone who is supposed to be a progressive.”

[..] Pittella said it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.” “I truly wonder whether a person who has these beliefs can still be considered fit to be president of the Eurogroup,” he added.

In between different translations and interpretations, what is clear is that this is how Dijsselbloem sees the world. “Pittella said it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.”

For Dijsselbloem, Greeks -and Italians etc.- are lazy people who drink too much and frequent prostitutes a lot. That is the only possible conclusion to draw from his words. And that is painfully close to the picture Europeans and Americans alike have long held of not only the peoples of southern Europe, but also of those with ancestors in Africa. And you can throw in South America for good measure.

Dijsselbloem, in just a few words, sets back the advances made in western culture in the 20th century towards ‘other people’, and in his case that includes all women, by many years. But he doesn’t seem to get it. Indeed, he refuses to apologize, but seeks to merely walk his comments back ‘a tad’. As the Telegraph continues:

He continued: “It is not about one country, but about all our countries.” He then attempted to dig himself out of the hole by saying all countries had failed to uphold the financial rules set by the EU. “The Netherlands also failed a number of years ago to comply with what was agreed,” he said. “I don’t see a conflict between regions of the eurogroup.”

Also nice, from EU Observer :

Asked on Tuesday in a European Parliament hearing whether he apologised for his comment, Dijsselbloem answered: “No, certainly not. That’s not what I said.” But when Ernest Urtasun, an MEP from the Catalonian radical left, read his comment, Dijsselbloem said: “I know my statement, it came from this mouth.”

This is the man who, alongside Germany’s FinMin Schäuble, has already brought much of Greece to a state of absolute desperation, for no other reason than to save their own banks from having to write down their gambling losses, and to make the country an example to scare off any others who might harbor any thoughts at all of leaving the very ‘Union’ that does this to one of its member states.

This is a classical case of a man who has inadvertently, whatever he says from now on in, exposed himself as a major league bigot. You can’t walk back from that kind of goof. This is also the man who is supposed to chair the next meeting of the Eurogroup, where more decisions regarding the further descent of Greece into servitude will be taken.

All Europeans should hope that Spain and Italy will, alongside Greece, finally grow a pair, or Dijsselbloem might, as inconceivable as it may look -and should be-, be able to continue in his destructive role as Eurogroup head. And that goes to the core of the real problem that he is merely a symptom of. EU Observer again:

“Dutch voters didn’t elect me as Eurogroup president, it was the other ministers,” he argued, suggesting that losing his portfolio at home should not mean the end of his term in Brussels. Dijsselbloem stated that “It’s an important responsibility from which I don’t want to walk away.”

That real problem is that people don’t get to vote for who controls Brussels. Or let’s take it a step further: that there is no way to allow people to vote for that. 10 million Greeks can vote for whomever they want, but in the end they won’t have anything to say. When real decisions are taken, it’s all Germany all the time. 80 million people ultimately control a Union that has at present some 510 million inhabitants. It’s actually much less, of course, because not nearly all Germans have voted Merkel.

So even if Dijsselbloem is ousted, the powers that be, Germany, Holland, Finland, Austria, will simply appoint another one of their pawns in his place. Not even France is sure of its place at the top of the heap anymore, and Marine Le Pen, for all of her many flaws, is right about pointing that out. because

 

The fatal flaw in the EU structure is that voters in Germany or Holland or France choose their own domestic leadership, political parties, who subsequently become Europe’s leaders. But when important decisions must be made, in which what’s best for Germany may conflict with what’s best for the continent, these leaders of rich countries are bound first and foremost to the people at home who voted for them, not to Greeks or Italians.

There’s no possibility that model can survive for long; it will only work in times of plenty but fall apart when times get tougher. Germans will vote their own selfish interests, even if it means hammering others, and their politicians will follow. This is a very essential problem, and there is no way to solve it from within the present model. Because the only participants with the power to reform the EU would have to do so against their own interests.

Also, remember: Europe doesn’t have the ‘transfer payments’ system that the US has, where rich states pay to keep poor states from collapsing, a system designed to keep the country from being torn to bits. Without it, the USA would have long ceased existing, either through peaceful secessions(s) or through battles. Everyone understands that. So why expect the EU be able to survive without such a system? There is no way.

 

The EU in its present form cannot continue, and any options that would have allowed reforming it have been closed off due to its very structure. To preserve the EU, Germany would have to convince its own people to take quite a few steps back. That is never going to happen.

But hey, in the meantime we had us some fun, right, Jeroen? Now if you’ll excuse me, I have to get back to minimizing the suffering of the herd here in Hellas. Boy, I can’t believe I haven’t seen any female European voices telling Dijsselbloem to go stuff it where the sun don’t shine after his comments. Don’t you girls realize what he said?