Raúl Ilargi Meijer

Aug 172017
 
 August 17, 2017  Posted by at 9:02 am Finance Tagged with: , , , , , , ,  1 Response »
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Laura Gilpin The Rio Grande 1947

 

The ‘Wall Of Worry’ That Stocks Have Climbed To Rally 271% Since 2009 (MW)
Global Negative-Yielding Debt Surges To Highest Since October (ZH)
The Fed Is Asking Questions, Not Providing Answers (BBG)
Fed Starts to Wonder If Cornerstone Inflation Model Still Works (BBG)
Goldman Sachs Is Infiltrating The Fed In Ways Most People Haven’t Noticed (BI)
Chinese Takeovers Of US Companies Plummet This Year (CNBC)
The World’s Most Ridiculous Constitutional Crisis (BBG)
Hell Hath No Fury Like An Australian Retiree Scorned (BBG)
Americans Are Rapidly Descending Into Madness (Krieger)
A Primer On Bitcoin: The Ultimate Fiat Currency (Lebowitz)
Spain Rescues 600 Migrants, Refugees In Busiest Day as 120 Drown (BBC)

 

 

Stocks have been disconnected from reality. But that can’t last.

The ‘Wall Of Worry’ That Stocks Have Climbed To Rally 271% Since 2009 (MW)

This may be the most sedated stock-market rally of our times. Even as tensions heightened between the U.S. and North Korea and violence broke out on the streets of Charlottesville, Va., stocks took the alarming news in stride, continuing to scale the “wall of worry” in defiance of doomsday predictions of an imminent selloff. “It seems like every day the headlines outside of the market get more and more frightening,” said Michael Batnick, director of research at Ritholtz Wealth Management, who illustrated the resilience of the market in the chart below. As the graph shows, since stocks bottomed in March 2009, the S&P 500 index has soared 271% to multiple records, meandering higher through the European debt crisis, Brexit, and the U.S. presidential election.

Batnick had originally published the chart in March but updated it Wednesday given the recent developments. “This year has been the perfect reminder that political volatility does not necessarily translate into the stock market, with this being the quietest year since 1965,” he said. The S&P 500’s daily trading range averaged 0.32% in the first half of the year, the narrowest in over half a century, underscoring the gap between market volatility and the political upheaval that has marked Trump’s presidency so far, according to Batnick.

Read more …

We can all figure what could happen if you throw $20 trillion or so into non-functional markets. Can we figure what happens when they start to function again?

Global Negative-Yielding Debt Surges To Highest Since October (ZH)

The market value of bonds yielding less than zero percent has jumped by a quarter over the past month to $8.68 trillion, the highest since October… which is odd given the mainstream narrative that everything is awesome and global growth is heading for escape velocity?

“probably nothing”

As Bloomberg notes, slower-than-forecast inflation data and haven demand on geopolitical risk have revived bond bulls around the world. With global borrowing costs already so low, central banks should be prepared to cut interest rates deep into negative territory in the next economic downturn, warn economists including Harvard professor Kenneth Rogoff.

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Oh well, it’ summer after all.

The Fed Is Asking Questions, Not Providing Answers (BBG)

The Federal Reserve is either lucky or clever. By signaling that it won’t touch interest rates again until December, it’s bought itself time to have a longer – and much needed – conversation about inflation. Good. There are very legitimate doubts that traditional models explain what’s happening or, rather, what’s not happening. Minutes of the Federal Open Market Committee’s July meeting show a growing debate about inflation and why it’s retreating, instead of advancing, in the face of 4.3% unemployment. The central bank is puzzled that prices have been soft for several months. In the absence of any real inflation pressure, the Fed might be reasonably expected to take a break from raising rates while it got a handle on what’s happening. By acting in March and June and hinting that September will be about balance sheet reduction, the Fed gave itself some wiggle room.

Policy makers basically have until December to either see inflation head back toward their 2% target or figure out how to respond if it doesn’t behave. There’s a meeting scheduled for late October, but the Fed’s historical aversion to moving in the absence of new forecasts and a press conference effectively rules out a surprise then. Delaying until December gives officials at least four more months of inflation data. Most still see it returning to its target, in keeping with traditional economic models. And to be fair, as I have written, this isn’t exclusively an American phenomenon. Inflation is weak in Europe and Japan despite a pronounced pickup in growth. (It’s above target in the U.K.; Brexit complicates that particular picture.) But the U.S. is still the world’s largest economy, and the Fed is still the world’s de facto central bank.

The country’s financial markets dwarf others despite frequent predictions of decline. How this inflation mystery ends will matter greatly. What if the book doesn’t have an end? The minutes show some self-doubt starting to creep in alongside the confidence of the majority: Most participants indicated that they expected inflation to pick up over the next couple of years from its current low level and to stabilize around the Committee’s 2% objective over the medium term. Many participants, however, saw some likelihood that inflation might remain below 2% for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside. The account of the July conclave even suggested some heretical questioning of the link between very low unemployment and wages and inflation. The majority are still wedded to the traditional models.

Until we start to see a convincing swing back to the Fed’s target of 2%, we will probably see more of this public questioning of assumptions. Something less contentious was skepticism about the prospects for large-scale fiscal stimulus, the domain of Congress and the White House. A few participants at the Fed meeting doubted it would happen and, if it did, they suspected the boost would be less than might have once been anticipated. That observation went unchallenged. Stay tuned for the last day of August. That’s when the Commerce Department publishes closely watched inflation figures. Enjoy the debate.

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Over 1000 utterly useless PhD economists work for the Fed. The world doesn’t behave like my models do!

Fed Starts to Wonder If Cornerstone Inflation Model Still Works (BBG)

Federal Reserve officials are looking under the hood of their most basic inflation models and starting to ask if something is wrong. Minutes from the July 25-26 Federal Open Market Committee meeting showed a revealing debate over why the economy isn’t producing more inflation in a time of easy financial conditions, tight labor markets and solid economic growth. The central bank has missed its 2% price goal for most of the past five years. Still, a majority of FOMC participants favor further rate increases. The July minutes showed an intensifying debate over whether that is the right policy response. “These minutes to me were troubling,” said Ward McCarthy, chief financial economist at Jefferies in New York. “They don’t have their confidence in their policy decisions; and they don’t have confidence that they can provide the right kind of guidance.”

The FOMC tried hard to avoid that kind of message. In several passages, the minutes asserted that “most” officials were sticking with a forecast that higher inflation would eventually show up. However, the debate over resource slack models and whether standard data sources were telling them the whole story also showed convictions about their forecast are fraying. Price indexes have shown unusual inertia even as the U.S. unemployment rate has fallen, matching a 16-year low of 4.3% in July. The U.S. consumer price index rose 1.7% for the 12 months ending July, while the Fed’s preferred measure, which is tied to consumption, rose 1.4% in June. Another gauge calculated by the Dallas Fed, which trims index outliers to highlight the underlying price trend, rose 1.7% for the 12 months ending June.

That was the same as May, which was down from 1.74% in April. The minutes said “a few” officials described resource slack models as “not particularly useful” while “most” thought the framework was valid. The committee also pondered a number of theories as to why inflation wasn’t responding to tightening labor resources, such as “the possibility that slack may be better measured by labor market indicators other than unemployment.” “It is a battle between data and theory,” said Ethan Harris, head of global economic research at Bank of America in New York.

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A silent coup.

Goldman Sachs Is Infiltrating The Fed In Ways Most People Haven’t Noticed (BI)

Since when do underlings get to chime in on who their next boss should be? That’s just what William Dudley, president of the Federal Reserve Bank of New York, did in an interview with AP this week. His fairly strong recommendation of Gary Cohn, Donald Trump’s economic advisor and apparent favorite, was especially egregious since Cohn is former president at Goldman Sachs, where Dudley essentially spent most of his career as chief economist and partner. The Fed’s chairperson is appointed by the president of the United States. Dudley should stick to monetary policy and regulating big banks. As a matter of central bank independence and integrity, he has no business opining on future candidates.

As Bloomberg’s veteran Fed watcher, Rich Miller, put it: “It’s rare for Fed officials like Dudley to comment publicly on such personnel matters because they usually want to avoid doing anything that might be seen as undermining the central bank’s political independence.” “AP: On a personal level, Gary Cohn has been mentioned as potentially a Fed Chair if Yellen were not to be reappointed or declined. Did you work with Gary Cohn at Goldman Sachs? What is your impression of him as a potential Federal Reserve Chair? DUDLEY: I don’t want to evaluate the various candidates for the Federal Reserve, except to say that I think Gary is a reasonable candidate. He knows a lot about financial markets. He knows lots about the financial system. I don’t think you have to have a PhD in Economics, which I have, to be a Chair of the Fed or Governor or a President of one of the Federal Reserve Banks. I think it’s important to have a committee that has diversity. That has different backgrounds and perspectives. So I think Gary’s a reasonable candidate.

[..] Despite the clear conflict, he apparently sees nothing wrong with recommending Cohn while saying nothing to praise his current boss, Fed Chair Janet Yellen, who is also supposedly in the running for reappointment (but not really, it’s just another Trump reality TV suspense stunt). Dudley then coyly declines to discuss other names being floated for the post. Dudley has crossed a line, although it’s not a new one for his institution. The New York Fed was home to one of the financial crises most blatant conflicts of interest, and it’s all related to how Dudley was hired to head it in the first place.

This is what happened: Stephen Friedman was chairman of the New York Fed at the height of the crisis — but at the same time he was a member of Goldman Sachs’ board of directors. He also held a significant financial stake in the megabank, even as he was involved in the bank bailout negotiations. Yes, really (The New York Fed is supposed to play a pivotal role in regulating Wall Street). And here’s the kicker: The Fed’s board granted Friedman a waiver to buy Goldman stock just as prices had hit bottom and the central bank was stepping in to make all the banks, including Goldman, whole on their misguided bets on housing and related assets. Friedman was eventually pressured to step down, but that’s about it. In his role as NY Fed board chair, Friedman got to pick its next president. Who did he run with? Bill Dudley.

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it’s about foreign reserves.

Chinese Takeovers Of US Companies Plummet This Year (CNBC)

As the Trump administration looks to take a tougher stance against Beijing, Chinese investments in the U.S. have more than halved this year, according to Dealogic. “Amid growing regulatory scrutiny of China outbound M&A targeting the U.S., volume has seen a 65% year-on-year decline in 2017 year-to-date,” Nicholas Farfan and Karl But of Dealogic Research said in an Aug. 8 note. “In comparison, such deals peaked at $65.2 billion last year, with high-profile deals including HNA’s acquisition of 25% of Hilton Worldwide.” “With tightening restrictions, Chinese buyers may look to stop pursuing or shelve potential acquisitions in the U.S.,” the note said. The pressure and uncertainty are coming from both countries. On Beijing’s side, authorities are reportedly targeting some of the largest Chinese dealmakers to try to keep capital from fleeing the country and contributing to yuan weakness.

On the American side, reports indicate the Committee on Foreign Investment in the United States is looking to use national security concerns to prevent more Chinese purchases of U.S. firms, especially in technology. Anecdotally, Gregory Husisian, chair of the export controls and national security group at law firm Foley & Lardner, noted that an increasing number of clients are concerned about working with Chinese buyers due to the potential for regulatory intervention. The dealmaking industry could also suffer some significant business setbacks. The Dealogic analysts estimate about $9.7 billion in pending Chinese deals to buy U.S. firms could fall under regulatory scrutiny, potentially putting $75 million in advisor fees at risk.

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Baffling. They really don’t seem to know their own laws. Which might be a problem if you’re in government?!

The World’s Most Ridiculous Constitutional Crisis (BBG)

Australia’s parliament is in the grip of the world’s most ridiculous constitutional crisis. The situation threatens the country’s democratic process, which is reason enough for politicians and courts to work to unpick it. More importantly, though, it raises questions the rest of the world would do well to ponder. Over the past month, five members of Australia’s 226-member parliament have admitted that they may have unwittingly held dual citizenship – a condition that, under Australia’s 1900 constitution, disqualifies them from political office in Canberra. The latest blow on Monday ensnared Deputy Prime Minister Barnaby Joyce, putting into jeopardy the government’s one-seat majority in the governing House of Representatives. Joyce’s father was born in New Zealand in 1924. As a result, Kiwis officially consider him one of their own.

Journalists and political staffers have launched a hunt to see who will fall next. The country’s justice minister Michael Keenan took to social media Thursday to confirm he renounced his British citizenship 13 years ago, after the Sydney Morning Herald reported that he may have been a dual citizen. In total, 13 senators and 11 House members were born overseas, equivalent to about 17% and 7.3% of the respective chambers. More may be caught, like Joyce, as a result of their parentage. With both chambers finely-balanced between parties – and renouncing foreign citizenship, in many cases, a long and complex process – the crisis could hamstring the government’s ability to pass legislation. Australia has one of highest proportions of foreign-born residents among democratic countries. Nearly half of permanent residents are first- or second-generation migrants, with about 28% born overseas and 21% having at least one foreign-born parent.

About 4.6% were, like me, born in the U.K.; another 2.6% in China, Hong Kong and Macau, plus 2.2% from New Zealand and 1.9% from India. More than 27% of the population speaks a language other than English at home. That’s a vast population whose ability to serve in parliament is potentially restricted. There are so many different regulations around the world that it’s not always obvious to individuals which countries might claim them as citizens. Larissa Waters, a Greens senator who was born in Winnipeg but has lived in Australia since infancy, quit last month after discovering that a Canadian law that entered into force when she was seven days old meant Canada still considered her a citizen. A week later, Australia’s then-Resources Minister Matthew Canavan was caught out after discovering his mother had once sought Italian citizenship for herself and for him. “Until last week I had no suspicion I could be an Italian citizen,” he wrote on Twitter. “I was not born in Italy and have never been to Italy.”

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Your pension has left the building. Those are its foorprints over there.

Hell Hath No Fury Like An Australian Retiree Scorned (BBG)

Hell hath no fury like an Australian retiree scorned.Shares in the country’s giant phone company Telstra fell as much as 12% after it announced annual results Thursday, wiping off some A$6.2 billion ($4.9 billion) of value. The reason for this massive hissy fit was a cut to Telstra’s historically lavish dividend policy. Investors who’ve been scraping by on payouts equivalent to about 100% of underlying earnings will in future have to subsist on a mere 70% to 90%. Why should Telstra shareholders be so sensitive about dividends, especially as net income came in ahead of analyst estimates at A$3.89 billion? The answer lies in the nature of Australia’s equity market, and in particular the 1.1 million retirees managing their own investments via self-managed superannuation funds.

Helped by years of tax breaks and laws mandating that companies fund their employees’ retirement savings, Australia’s gray army has built up a A$648 billion piggy bank. The A$340 billion they have in equities and investment funds is equivalent to a fifth of the benchmark S&P/ASX 200 index, and their might is such that some analysts, such as Credit Suisse’s Hasan Tevfik, argue they’ve distorted the investment priorities of the wider market. Retirees’ love of a household-name stock that provides a steady income without the fuss of buying or selling helps explain the Australian share market’s obsession with dividend yield. There’s certainly something unusual in the water: Of the 42 companies in developed markets with dividend yields above 5% and market capitalizations above $10 billion, 11 are Australian, according to data compiled by Bloomberg.

In some ways, this trend is a favorable one. Australia’s big four retail banks and Macquarie, which all meet the key criteria of familiarity and generous payouts, trade on some of the highest price-book multiples in the world. As a result, when they want to raise equity capital – as they all did in 2015, to the tune of an aggregate A$18.5 billion – it works out rather cheap. Still, Telstra’s experience is a lesson that playing footsie on dividends can be a dance with the devil. Its desire to hold back just a thin slice of earnings alongside a 70% to 90% payout ratio would be considered reasonable in most markets. Chinese companies are notoriously stingy, as Gadfly’s Shuli Ren wrote this week. Among major equity indexes, only the U.K. boasts ratios on a par with Australia’s; the Shanghai Composite rarely turns more than a third of earnings into dividends.

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No kidding. Conversation is impossible just when it’s most needed.

Americans Are Rapidly Descending Into Madness (Krieger)

I don’t live in an echo chamber, partly because there aren’t enough people out there who think like me, but also because I constantly and intentionally attempt to challenge my worldview by reading stuff from all over the political map. I ingest as much as I can from a wide variety of intelligent sources, picking and choosing what makes sense to me, and then synthesizing it the best I can. Though I’m certainly grounded in certain key principles, my perspective on specific issues remains malleable as I take in additional information and perspectives. I try to accept and acknowledge my own ignorance and view life as a journey of constant mental, emotionally and spiritual growth. If I’m not growing my capacity in all of those realms until the day I die, I’m doing it wrong. Life should be seen as a battle against one’s own ignorance, as opposed to an obsession with the ignorance of others.

You can’t legislate morality, nor can you legislate wisdom. The only way the world will improve on a long-term sustainable basis is if more of us get wise. That’s a personal journey and it’s our individual duty to accept it. While I’m only in control of my own behavior, this doesn’t mean that the behavior of others is irrelevant to my life. Unfortunately, what I see happening to the population of America right now seems very troublesome and foreboding. What I’m witnessing across the board is hordes of people increasingly separating themselves into weird, unthinking cults. Something appears to have snapped in our collective consciousness, and many individuals I used to respect (on both sides of the political spectrum) are becoming disturbingly polarized and hysterical. People are rapidly morphing into radicalized mental patients.

What’s worse, this environment is providing a backdrop for the most destructive people of my lifetime – neoconservatives and neo liberals – to preen around on corporate media as “the voices of reason.” This is one of the most perverse and dangerous side-effects of the current political climate. If in your disgust with Trump, you’re willing to run into the cold embrace of these destroyers of the middle class and the Middle East, you’ll get what you deserve. In contrast, if we really want to deal with our very real and very systemic problems, the last thing we need is a population-level mental breakdown that leads to a longing for the criminally destructive political status quo, yet that’s exactly what seems to be happening.

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Every single Bitcoin transaction uses as much energy as 15 UK households do daily. Whatever you think about crypto, that is a problem no matter what.

A Primer On Bitcoin: The Ultimate Fiat Currency (Lebowitz)

Cryptocurrency is an independent, digital currency that uses cryptology to maintain privacy of transactions and control the creation of the respective currency. While not recognized as legal tender, cryptocurrencies are becoming more popular for legal and illegal transactions alike. Bitcoin (BTC), developed in 2009, is the most popular of the cryptocurrencies. It accounts for over half the value of the more than 750 cryptocurrencies outstanding. In this article we refer to cryptocurrencies generally as BTC, but keep in mind there are differences among the many offerings. Also consider that, while BTC may appear to be the currency of choice, Netscape and AOL shareholders can tell you that early market leadership does not always translate into future market dominance.

Before explaining how BTC is created, acquired, stored, used and valued, it is vital to understand blockchain technology, the innovation that spawned BTC. [..] Blockchain is an open database or book of records that can store any kind of data. A blockchain database, unlike all other databases, is stored real time and is accessible for anyone to view its complete history of data. The term block refers to a grouping of transactions, while chain refers to the linkages of the blocks. When a BTC transaction is completed BTC “miners” work to solve the cryptology algorithm that will enable them to link it to the chain of historical transactions. As a reward for being the first to solve the calculation, the miner receives “newly minted” BTC. As the chain grows, the effort needed to solve and verify the algorithms increase in complexity and demand greater computing power. As an aside consider the following statement by Bitcoin Watch (courtesy Goldman Sachs):

“BTC worldwide computational output is currently over 350 exaflops – 350,000 petaflops – or more than 1400 times the combined capacity of the top 500 supercomputers in the world.”

Needless to say, a tremendous amount of computing resources and energy are being used by BTC miners, and it is still in its infancy. Could these resources be better employed in other industries, and if so, how much productivity growth is BTC leeching from the economy? The takeaway is that blockchain is an open, real-time database that provides anonymity to its users. It is not controlled or regulated (yet) by any government. BTC miners, driven by the incentive to earn BTC, and fees at times, verify and authenticate the database. Blockchain technology is incredibly powerful and will likely revolutionize data management regardless of whether cryptocurrencies thrive or disappear.

New Bitcoins are created as payment to BTC miners that solve the aforementioned calculations that verify transaction data and link it to the blockchain. This ingenious reward system incentivizes miners to compete to perform these calculations, enabling the blockchain to exist. Currently there are approximately 16 million bitcoins outstanding out of a proposed limit of 21 million. As the blockchain grows, the calculations required to mine BTC and add to the chain become more complex, making each bitcoin harder and more costly to earn than the prior one.

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The value of life, all life. must trump all else. Or else.

Spain Rescues 600 Migrants, Refugees In Busiest Day as 120 Drown (BBC)

Spain’s coastguard says it has rescued 600 migrants crossing from Morocco in a 24-hour period amid a spike in the number of migrant arrivals. The rescued migrants were in 15 vessels including toy paddleboats and a jet ski and included 35 children and a baby. The UN says more than 9,000 people have arrived in Spain so far this year – three times as many as the previous year. More than 120 people are believed to have drowned attempting the crossing. The increase in crossings means Spain could overtake Greece this year in the number of migrants arriving by sea, the UN’s International Organization for Migration (IOM) said earlier this month.

Most are sailing across the 12km (seven-mile) Strait of Gibraltar and many are choosing cheap, child-sized paddle boats without motors that allow them to bypass people smuggling networks and their fees. Some migrants are using social media to contact the Spanish authorities and inform them of their location once they are in territorial waters, the BBC’s Gavin Lee in the Spanish city of Tarifa says. However, a much larger number – nearly 100,000 – have crossed from Libya to Italy since the start of the year. The IOM says 2,242 people have died on that route. In June, about 5,000 people were rescued in one day in the Mediterranean off Libya, Italian coastguards said.

Read more …

Aug 162017
 
 August 16, 2017  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Fred Stein Hydrant, New York 1947

 

The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)
After 100 Months of Buying The Dips – Peak Crazy (Stockman)
China Has Got To Fix Its Debt Problem, IMF Says (CNBC)
China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)
UK Risks ‘Losing Its Place As Property-Owning Democracy’
The New American Dream: Rent Your Home From A Hedge Fund (Black)
Trump Signs Order to Speed Up Public-Works Permits (BBG)
German Challenge To ECB QE Asset Buys Sent To European Court (R.)
Washington’s Long War on Syria (Ren.)
Fish Confusing Plastic Debris In Ocean For Food (G.)

 

 

Debt leads to war.

The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

Totally irresponsible policies by governments and central banks have created the most dangerous crisis that the world has ever experienced. Risk doesn’t arise quickly as the result of a single action or event. No, risk of the magnitude that the world is experiencing today is the result of many years or decades of economic mismanagement. Cycles are normal in nature and in the world economy. And cycles that are the result of the laws of nature normally play out in an orderly fashion without extreme tops or bottoms. “Just take the seasons. They go from summer to autumn, winter and spring, with soft transitions that seldom involve drama or catastrophe. Economic cycles would be the same if they were allowed to happen naturally without the interference of governments.

But power corrupts and throughout history leaders have always hung on to power by interfering with the normal business cycle. This involves anything from reducing the precious metals content of money from 100% to nothing, printing money, leveraging credit, manipulating interest rates, taking total taxes from at least 50% + today from nothing 100 years ago etc, etc. Governments will always fail when they believe that they are gods. But not only governments believe they perform godly tasks but also hubristic investment bankers like the ex-CEO of Goldman Sachs who proclaimed that the bank was doing God’s work. It must be remembered that Goldman, like most other banks, would have gone under if they and JP Morgan hadn’t instructed the Fed to save them by printing and guaranteeing $25 trillion. Or maybe that was God’s hand too?

We now have unmanageable risks at many levels – politically, geopolitically, economically and financially. This is a RISK ON situation that is extremely dangerous and will have very grave consequences. There are numerous risks that can all cause the collapse of the world economy and they all have equal relevance. However, the political situation in the USA is very dangerous for the world. This the biggest economy in the world, albeit bankrupt with debt growing exponentially and real deficits every year since 1960. Before the dollar has collapsed, the US will still be seen as a powerful nation, although a massive economic decline will soon weaken the country burdened by debt at all levels, government, state, and private.

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“There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day.”

After 100 Months of Buying The Dips – Peak Crazy (Stockman)

Just call it Peak Crazy and move on. There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day. The fact that this is happening is a measure of how impaired capital markets have become as a result of massive central bank intrusion. The robo-machines and day traders keep buying the dips because that has “worked” for the last 100 months. There is nothing more to it than residual momentum. Under a regime of honest money and price discovery, the stock market discounts the future. There is no plausible future from here that’s worth 24 times S&P 500 value or 96 times the Russell 2000. Surely the year-ahead earnings boom that Wall Street’s artists have penciled in is not in the slightest bit plausible. With 84% of the S&P 500 reporting Q2 results, LTM earnings are still 1.3% below where they were in September 2014.

Nothing has happened to corporate earnings in the last three years except deflation in the energy, materials and industrial sectors. After hitting $106 per share in September 2014, the global deflation cycle brought them to a low point of $86.44 per share in March 2016 in response to low $30s oil prices. The latter has since recovered to the $50 dollar zone – bringing S&P 500 earnings back to $104.61 during the current quarter. The question remains: How does an aging business cycle and immense global headwinds justify the expectation of a red hot earnings breakout during the next 18 months? Yet that’s what’s happening on Wall Street. We’ve hit nearly $133 per share of GAAP earnings (and $145 of the ex-items variety) for the LTM period ending in December 2018, meaning a prospective surge of 27%.

[..] In this machine driven market, any of these indices could resume their mad momentum based climb. But negative divergences are breaking out everywhere, and that’s usually a sign that the end is near. Margins on debt has again reached an all-time high of $550 billion. The chart below leaves little doubt as to what comes next. After the 2000 peak, margin debt collapsed by 50% as stocks were violently liquidated to meet margin calls. All this while in 2008 the shrinkage of margin debt was even larger – nearly 60%. This time, however, a similar shrinkage would cause a $325 billion decline in margin balances. That’s a lot of stocks on a fire sale.

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“..outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year..”

China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

China’s economy is looking good enough that the IMF is raising its outlook, but the organization is doing so with a strong warning over growing debt in the world’s second-largest economy. The IMF issued its annual review of China on Tuesday, and has revised its growth forecast to 6.7% for 2017, which was up from 6.2%. The organization also said it expects China to average 6.4% growth between now and 2021, versus its previous estimate of 6%. Still, the organization warned that things were far from peachy. “The growth outlook has been revised up reflecting strong momentum, a commitment to growth targets, and a recovering global economy,” the IMF said. “But this comes at the cost of further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term.”

What Beijing needs to do is to seize its current strong growth momentum “to accelerate needed reforms and focus more on the quality and sustainability of growth,” said the report. At the top of that list is working to tackle the debt issue: Going forward, the IMF sees China’s non-financial sector debt to hit nearly 300% of GDP by 2022, up from around 240% last year. Debt-fueled growth, the IMF warned, is a short-term solution that isn’t sustainable in the long run unless China tackles deeper structural issues. Experts have been sounding the alarm bell over this issue for years, urging China to rein in its old model of opening credit lines to fuel investment and spending and to find a better balance between supporting growth and controlling risks to the economy.

Chinese banks extended 825.5 billion yuan (about $123.44 billion) in new loans in July, down from 1.54 trillion yuan in June. Outstanding total social financing — a broad measure of credit and liquidity — came in at 1.22 trillion yuan last month versus 1.78 trillion yuan in June. Part of the drop is seasonal, and it’s “masking an uptick in underlying credit growth,” wrote China economist Julian Evans-Pritchard at Capital Economics. A better way to look at credit creation is to gauge growth in outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year.

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As long as things look good for the Party Congress, who cares?

China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

Growth in China’s broad money supply slipped to a fresh record low, signaling authorities aren’t letting up in their drive to curb excess borrowing and safeguard the financial system. Aggregate financing stood at 1.22 trillion yuan ($182.7 billion) in July, the People’s Bank of China said on Tuesday, compared with an estimated 1 trillion yuan in a Bloomberg survey. New yuan loans stood at 825.5 billion yuan, versus an projected 800 billion yuan. Broad M2 money supply increased 9.2%, while economists forecast a 9.5% increase . Authorities pushing to cut excess leverage have squeezed the massive shadow bank sector, which shrank for the first time in nine months. Yet with aggregate financing remaining robust and bond issuance rebounding, the central bank is still providing ample support for businesses to avoid derailing growth ahead of a key Communist Party congress this fall.

Slower M2 growth will become a “new normal,” the PBOC said Friday in its quarterly monetary policy report. “The relevance of M2 growth to the economy and its predictability has reduced, and its changes should not be over-interpreted.” “The deleveraging campaign is still focused on the financial sector, which leads to the slowdown in M2 growth,” said Yao Shaohua at ABCI Securities in Hong Kong. “Bank support for the real economy remains solid.” “The easing in credit conditions in July was probably part of the concerted stability play ahead of the Party Congress, thus more likely to be temporary,” said Yao Wei, chief China economist at Societe Generale in Paris. “We’re still looking for more deleveraging measures and tougher regulations afterwards.”

“The divergence between M2 growth and aggregate financing reflects that the PBOC is trying to balance cutting leverage while ensuring enough funds to support the real economy,” said Wen Bin at China Minsheng Banking in Beijing. “Single-digit M2 growth is likely to stretch until year-end. And with ample support from the central bank’s credit supply, the drag effect of financial deleveraging on the economic expansion will be limited.” “Banks are still creating credit, and this credit is important to support economic growth,” said Iris Pang, an analyst at ING in Hong Kong. “If liquidity is too tight, or credit growth shrinks, the whole deleveraging reform will run into the risk that there will be too many defaults and the whole banking system will be shaken up.”

Read more …

“..first-time buyer registrations drop by almost 20% on the year..”

UK Risks ‘Losing Its Place As Property-Owning Democracy’

The UK risks losing its place as a property-owning democracy if house prices continue to rise, according to the boss of the UK’s largest independent estate agent. Paul Smith, chief executive of haart, said that “unaffordability is reaching crisis point” and urged the Government to stop “excessive profiteering” at the expense of aspiring home owners. The call comes as official figures showed that the price of the average house in the UK increased by £10,000 last year to £223,000. Property values increased by 0.8% between May and June according to joint figures from the Office for National Statistics, Land Registry and other bodies. In the year to June average prices were up 4.9%, down marginally from 5% growth in the year to May.

The report released on Tuesday said the annual growth rate had slowed since mid-2016 but has remained steady at about 5% this year so far. “House prices continued to rally with unflinching determination once again in June despite the ongoing economic uncertainty,” Mr Smith said. “However this means that the average UK buyer now has to fork out an extra £10,000 more to own a home than the same time last year. “Along with consumer price hikes and falling wage growth, unaffordability is reaching a crisis point. This is creating real impact on the ground as we see first-time buyer registrations drop by almost 20% on the year across our branches.”

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“..if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.”

The New American Dream: Rent Your Home From A Hedge Fund (Black)

About a month ago I joined the Board of Directors of a publicly-traded company that invests in US real estate. The position brings a lot of insight into what’s happening in the US housing market. And from what I’m seeing, the transformation that’s taking place today is extraordinary. Buying and renting out single-family homes has long been the mainstay investment of small, independent, individual investors. The big banks and hedge funds pretty much monopolize everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland. Single-family homes were one of the last bastions of investment freedom for the little guy. (Real estate is how I got my own start in business and investing so many years ago; I was a 21-year-old Army lieutenant fresh out of the academy when I bought my first rental property.)

But all that’s changing now. Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital). If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion. And this is only the latest merger in an ongoing trend. Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes. And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.

[..] medium-sized funds are buying up all the little guys. And mega-funds like Blackstone are buying up all the medium-sized funds. This means there’s essentially an ‘arms race’ building among the world’s biggest funds to control the market, squeezing small, individual investors out of the housing market. [..] the average guy isn’t making any more money, or able to save anything… all while home prices soar to record levels as major funds gobble up the supply. This means that the new reality in America, especially for young people, is that if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.

Read more …

Prolonging the emergency with America’s own bridges to nowhere.

Trump Signs Order to Speed Up Public-Works Permits (BBG)

President Donald Trump signed an executive order Tuesday that’s designed to streamline the approval process for building roads, bridges and other infrastructure by establishing “one federal decision’’ for major projects and setting an average two-year goal for permitting. “This over-regulated permitting process is a massive self-inflicted wound on our country,” Trump said in a press conference at Trump Tower in New York. “It’s disgraceful.” Among other things, the president’s order will rescind a previous decree signed by former President Barack Obama that required federal agencies to account for flood risk and climate change when paying for roads, bridges or other structures.

It also allows the Office of Management and Budget to establish goals for environmental reviews and permitting of infrastructure projects and then track their progress – with automatic elevation to senior agency officials when deadlines are missed or extended, according to the order. The order calls for tracking the time and costs of conducting environmental reviews and making permitting decisions, and it allows the budget office to consider penalties for agencies that fail to meet established milestones. Critics say there’s danger in streamlining the reviews. “This is yet another outrageous example of Trump’s insistence on putting corporate interests ahead of people’s health and safety,” said Alex Taurel, deputy legislative director with the League of Conservation Voters, a political advocacy group.

Read more …

Way too late.

German Challenge To ECB QE Asset Buys Sent To European Court (R.)

The European Central Bank may be violating laws on monetary financing in its €2.3 trillion ($2.7 trillion) asset purchase programme, Germany’s constitutional court said on Tuesday, and it asked Europe’s top court to make a ruling. In the biggest challenge yet to the ECB’s unprecedented effort to revive growth, the court said bond buys under the scheme may go beyond the bank’s mandate and inhibit euro zone members’ activities. “Significant reasons indicate that the ECB decisions governing the asset purchase programme violate the prohibition of monetary financing and exceed the monetary policy mandate of the European Central Bank, thus encroaching upon the competences of the Member States,” the court said. It said it would ask the European Court of Justice to review the programme.

The ECB acted swiftly to defend the scheme. “The extended asset purchase programme is in our opinion fully within our mandate,” it said in a statement. “That is ultimately for the European Court of Justice to assess.” It said the €60 billion per month asset buys would continue as normal. The European court has already backed the ECB’s more contentious emergency bond purchase scheme known as Outright Monetary Transactions or OMT with only relatively minor limitations, suggesting that the challenge – lodged by several academics and politicians – may face an uphill battle. The decision to pass the issue over to the ECJ means any final ruling will come either after the bond purchases end or near the end of the scheme, which has already been running for over two years and is expected to be wound down next year.

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“The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.”

Washington’s Long War on Syria (Ren.)

From Syria, to Iraq, Iran to Libya, our understandings of the long-wars in the Middle-East as moral, humanitarian interventions designed to democratise and civilise are the result of a carefully crafted propaganda campaign waged by the US and its allies. Each of these uprisings were launched by US proxies, designed to destabilize the regions, justifying regime change that suit the economic interests of its investors, banks and corporations, captured comprehensively in a new book by Canadian author and analyst, Stephen Gowans, Washington’s Long War on Syria. You might be surprised to know that both the Libyan, Syrian and Iraqi government, led by Muammar Gaddafi, Hafez Al Assad, (succeeded by Bashaar Al Assaad) and Sadaam Hussein respectively, were socialist governments. Or Ba’ath Arab Socialist governments, to be precise.

Ba’ath Arab Socialism can be summed up in their constitutions supporting the values of: ‘freedom of the Arab world, freedom from foreign powers and freedom of socialism’. Its doctrine was supported in Libya, as it was in Iraq and Syria. Of course, particularly in Hussein’s case, we cannot claim that these governments were without their problems. Ethnic cleansing is not to be overlooked, but condemned on the strongest grounds. But of course these were not the reasons the US and its allies decided to get into it. In the case of Iraq, it had combined its oil wealth with public ownership of the economy, leading to what is known as ‘The Golden Age’, where, according to a State Department Official: “Schools, universities, hospitals, factories, museums and theatres proliferated employment so universal, a labour shortage developed.”

When the Ba’ath Arab Socialists were driven from power in Iraq, the US installed military dictator, Paul El Briener who set about a ‘de-Ba’athification’ of the government, expelling every member of the Ba’ath Arab Socialist party and imposed a constitution forbidding any secular Arab leader from ever holding office in Iraq again. The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.” Gadaffi would soon be removed by Islamists, backed by NATO forces after Western oil companies agitated for his removal because he was “driving a hard bargain”. Canadian paramilitary forces even quipped that they were “al-Qaeda’s air-force”.

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And then we eat it. Carbon will kill us yet.

Fish Confusing Plastic Debris In Ocean For Food (G.)

Fish may be actively seeking out plastic debris in the oceans as the tiny pieces appear to smell similar to their natural prey, new research suggests. The fish confuse plastic for an edible substance because microplastics in the oceans pick up a covering of biological material, such as algae, that mimics the smell of food, according to the study published on Wednesday in the journal Proceedings of the Royal Society B. Scientists presented schools of wild-caught anchovies with plastic debris taken from the oceans, and with clean pieces of plastic that had never been in the ocean. The anchovies responded to the odours of the ocean debris in the same way as they do to the odours of the food they seek. The scientists said this was the first behavioural evidence that the chemical signature of plastic debris was attractive to a marine organism, and reinforces other work suggesting the odour could be significant.

The finding demonstrates an additional danger of plastic in the oceans, as it suggests that fish are not just ingesting the tiny pieces by accident, but actively seeking them out. Matthew Savoca, of the National Oceanic and Atmospheric Administration and lead author of the study, told the Guardian: “When plastic floats at sea its surface gets colonised by algae within days or weeks, a process known as biofouling. Previous research has shown that this algae produces and emits DMS, an algal based compound that certain marine animals use to find food. [The research shows] plastic may be more deceptive to fish than previously thought. If plastic both looks and smells like food, it is more difficult for animals like fish to distinguish it as not food.”

Read more …

Aug 152017
 
 August 15, 2017  Posted by at 12:53 pm Finance Tagged with: , , , , , , ,  5 Responses »
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Salvador Dali Madrid. Drunk man 1922

 

Harvard professor and chess grandmaster Kenneth Rogoff has said some pretty out there stuff before, in his role as self-appointed crusader against cash, but apparently he’s not done yet. In fact, he might just be getting started. This time around he sounds like a crossover between George Orwell and Franz Kafka, with a serving of ‘theater of the absurd’ on top. Rogoff wants to give central banks total control over your lives. They must decide what you do with your money. First and foremost, they must make it impossible for you to save your money from their disastrous policies, so they are free to create more mayhem.

Prepare For Negative Interest Rates In The Next Recession Says Top Economist

Negative interest rates will be needed in the next major recession or financial crisis, and central banks should do more to prepare the ground for such policies, according to leading economist Kenneth Rogoff. Quantitative easing is not as effective a tonic as cutting rates to below zero, he believes. Central banks around the world turned to money creation in the credit crunch to stimulate the economy when interest rates were already at rock bottom.

Central banks create recessions and crises. Not people, and not economies. Central banks. The next recession, which is inevitable, that’s the one thing Rogoff has right, will come when the bubbles in housing, stocks, bonds, etc., created by central banks’ QE, ZIRP, NIRP, start to pop. And there’s nothing worse than giving central banks even more tools for creating crises. We should take away the tools they have now, not hand them more sledgehammers.

In a new paper published in the Journal of Economic Perspectives the professor of economics at Harvard University argues that central banks should start preparing now to find ways to cut rates to below zero so they are not caught out when the next recession strikes. Traditionally economists have assumed that cutting rates into negative territory would risk pushing savers to take their money out of banks and stuff the cash – metaphorically or possibly literally – under their mattress. As electronic transfers become the standard way of paying for purchases, Mr Rogoff believes this is a diminishing risk.

Risk? What risk? The risk of people doing with their money what they choose to do, doing what they think is best? Of people trying to save their savings from being burned by central bank policies? What kind of mind comes up with this nonsense? Who is Ken Rogoff to think that he knows better what you should do with the money you worked for than you yourself do? You’d be a fool not to protect you hard-earned earnings from negative interest rates. Rogoff therefore seems intent on creating nations full of fools.

“It makes sense not to wait until the next financial crisis to develop plans and, in any event, it is time for economists to stop pretending that implementing effective negative rates is as difficult today as it seemed in Keynes time”, he said. The growth of electronic payment systems and the increasing marginalisation of cash in legal transactions creates a much smoother path to negative rate policy today than even two decades ago. Countries can scrap larger denomination notes to reduce the likelihood of cash being held in substantial quantities, he suggests. This is also a potentially practical idea because cash tends now to be used largely for only small transactions. Law enforcement officials may also back the idea to cut down on money laundering and tax evasion.

What makes sense is to not create crises. What does not make sense is negative interest rates. Ultra low interest rates have already destroyed trillions in savings and pensions, and now Rogoff effectively says central banks should take this a step further, and target whatever it is you have left. This is insane megalomania. It’s communism in its worst possible form. Oh, and it’s outright theft. Of a form that’s far more insidious and harmful than money laundering.

The key consequence from an economic point of view is that forcing savers to keep cash in an electronic format would make it easier to levy a negative interest rate. “With today’s ultra-low policy interest rates – inching up in the United States and still slightly negative in the eurozone and Japan – it is sobering to ask what major central banks will do should another major prolonged global recession come any time soon,” he said, noting that the Fed cut rates by an average of 5.5 percentage points in the nine recessions since the mid-1950s, something which is impossible at the current low rate of interest, unless negative rates become an option. That would be substantially better than trying to use QE or forward guidance as central bankers have attempted in recent years.

Forcing savers to keep cash in an electronic format would make it easier to steal it. Central banks could dictate that you lose 5% of your money every year. Or at least, that’s what they think. They want you to spend your money, and they got just the way to force you to do that. Or so they think. Well, go ask Abe and Kuroda how that’s worked out in Japan lately. What actually happens is that when you start stealing people’s money, savings etc., they become afraid of losing the rest too, so they start looking for ways to save their savings, not spend them.

In that sense, Rogoff’s suggestions amount to terror, to terrorizing people into doing things that go against their very survival instincts. What gets people to spend money is if they don’t feel terror, when they see their money and savings grow by a few percent per year. That is the exact opposite of what Rogoff wants to do. When people ‘sit’ on their savings, they do so for good reasons. What do you think has happened to Japan?

“Alternative monetary policy instruments such as forward guidance and quantitative easing offer some theoretical promise for addressing the zero bound,” he said, in the paper which is titled ‘Dealing with Monetary Paralysis at the Zero Bound’. “But these policies have now been deployed for some years – in the case of Japan, for more than two decades – and at least so far, they have not convincingly shown an ability to decisively overcome the problems posed by the zero bound.”

No wait, Rogoff is right second time: indeed “they have not convincingly shown an ability to decisively overcome the problems”. Because they’re terribly wrong. Theoretical promise? That’s all? But that means you’re just experimenting with people’s lives and wellbeing. Who gave you that right?

It’s high time, even if it’s very late in the game, to take political power away from central banks- and thereby from the banks that own them. There is nothing worse for our societies than letting these people decide what you can and cannot do with our money. Because as long as they have that power, they will seek to expand it. To prop up their member banks at your expense. And there is only one possible end result: you’ll be left with nothing. They want it all.

Until we take that power away from them, please don’t talk to me about democracy. Talk to me about Orwell and Kafka instead.

 

 

 

Aug 152017
 
 August 15, 2017  Posted by at 8:42 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Stanley Kubrick Walking the streets of New York 1946

 

Prepare For Negative Interest Rates In The Next Recession – Rogoff (Tel.)
We’re Still Not Ready for the Next Banking Crisis (BBG)
World’s Biggest Banks Face £264 Billion Bill For Poor Conduct (G.)
US Stock Buybacks Are Plunging (BBG)
Consumer Spending Expectations Down Again (Mish)
Dow 30,000, Not If Demographics Have Anything To Say (SA)
Ten Years After The Crash, There’s Barely Suppressed Civil War In Britain (G.)
Broadening Internal Dispersion (Hussman)
Trump Orders Probe Of China’s Intellectual Property Practices (R.)
China Imposes Ban on Imports From North Korea, Yields to Trump’s Calls (Sp.)
North Korea Leader Holds Off On Guam Plan (R.)
Australia’s Central Bank Renews Alert on Mounting Household Debt (G.)
Australia Says New Zealand Opposition Trying To Bring Down Government (G.)
Greek Population Set To Shrink Up To 18% By 2050 (K.)
Sharp Fall In Number Of Refugees, Migrants Arriving In Italy (AFP)

 

 

Feels like we’re being prepared, or maybe set up is a better way to put it. They’re going to take over everything, criminalize anything they can’t control. All for your own good. Rogoff is one scary dude.

Prepare For Negative Interest Rates In The Next Recession – Rogoff (Tel.)

Negative interest rates will be needed in the next major recession or financial crisis, and central banks should do more to prepare the ground for such policies, according to leading economist Kenneth Rogoff. Quantitative easing is not as effective a tonic as cutting rates to below zero, he believes. Central banks around the world turned to money creation in the credit crunch to stimulate the economy when interest rates were already at rock bottom. In a new paper published in the Journal of Economic Perspectives the professor of economics at Harvard University argues that central banks should start preparing now to find ways to cut rates to below zero so they are not caught out when the next recession strikes. Traditionally economists have assumed that cutting rates into negative territory would risk pushing savers to take their money out of banks and stuff the cash – metaphorically or possibly literally – under their mattress.

As electronic transfers become the standard way of paying for purchases, Mr Rogoff believes this is a diminishing risk. “It makes sense not to wait until the next financial crisis to develop plans and, in any event, it is time for economists to stop pretending that implementing effective negative rates is as difficult today as it seemed in Keynes time”, he said. The growth of electronic payment systems and the increasing marginalisation of cash in legal transactions creates a much smoother path to negative rate policy today than even two decades ago. Countries can scrap larger denomination notes to reduce the likelihood of cash being held in substantial quantities, he suggests. This is also a potentially practical idea because cash tends now to be used largely for only small transactions. Law enforcement officials may also back the idea to cut down on money laundering and tax evasion.

The key consequence from an economic point of view is that forcing savers to keep cash in an electronic format would make it easier to levy a negative interest rate. “With today’s ultra-low policy interest rates – inching up in the United States and still slightly negative in the eurozone and Japan – it is sobering to ask what major central banks will do should another major prolonged global recession come any time soon,” he said, noting that the Fed cut rates by an average of 5.5 percentage points in the nine recessions since the mid-1950s, something which is impossible at the current low rate of interest, unless negative rates become an option. That would be substantially better than trying to use QE or forward guidance as central bankers have attempted in recent years.

Read more …

If we don’t take away political power from banks and central banks, we’re doomed.

We’re Still Not Ready for the Next Banking Crisis (BBG)

The 10th anniversary of the financial crisis has prompted a lot of analysis about what we’ve learned and whether we’re ready for the next one. Pretty much everything you need to know, though, can be found in one chart: the capital ratios of the largest U.S. banks. Capital, also known as equity, is the money that banks get from shareholders and retained earnings. Unlike debt, it has the advantage of absorbing losses, a feature that makes individual banks and the whole system more resilient. Bank executives typically prefer to use less equity and more debt – that is, more leverage – because this magnifies returns in good times. Hence, capital levels can serve as an indicator of the balance of power between bankers and regulators concerned about financial stability. Here’s a chart showing tangible common equity, as a percentage of tangible assets, at the six largest U.S. banks from December 2001 to June 2017:

The downward slope in the first several years demonstrates the extent to which leverage got out of hand before the crisis. As late as 2008, when the financial sector was already in distress, the Federal Reserve was still allowing banks to pay out capital in the form of dividends, even though some had equity of less than 3% of assets. That proved to be a fatal miscalculation: By 2009, forecasts of total losses on loans and securities reached 10% of assets. A crippled banking system tanked the economy and had to be rescued at taxpayer expense. After the crisis, regulators pushed banks to get stronger. The biggest U.S. institutions more than doubled their tangible common equity ratios – to an average of about 8% of assets (or, by international accounting standards, closer to 6% of assets). That’s an achievement, and better than in Europe, but the starting point was so low that they still fall short of what’s needed. Researchers at the Minneapolis Fed, for example, estimate that capital would have to more than double again to bring the risk of bailouts down to an acceptable level.

Read more …

How crime got re-defined. Poor conduct. Orwell.

World’s Biggest Banks Face £264 Billion Bill For Poor Conduct (G.)

Fines, legal bills and the cost of compensating mistreated customers reached £264bn for 20 of the world’s biggest banks over the five years to 2016, according to new research that raises doubts about efforts by the major financial services players to restore trust in the sector. This figure is higher than in the previous five-year period – when the costs amounted to £252bn – and is up 32% on the period 2008-12, the first time the data was collated by the CCP Research Foundation, one of the few bodies that analyses the “conduct costs” of banks. The report said the data showed that 10 years on from the onset of the financial crisis, the consequences of misconduct continue to hang over the banking sector. The latest analysis shows that in 2016 the total amount put aside by the banks surveyed rose to more than £28.6bn – higher than in the previous year when there had been a fall from a peak of £63bn in 2014.

Chris Stears, research director of the foundation, writes in the latest report: “Trust in, and the trustworthiness of, the banks must surely correlate to, and be conditional on, banks’ conduct costs. And persistent level of conduct cost provisioning is worrying. “It remains to be seen whether or not the provisions will crystallise in 2017 [or later] and what effect this will have on the aggregated level of conduct costs.” Two UK high street banks – Royal Bank of Scotland and Lloyds Banking Group – are in the top five of banks with the biggest conduct costs. RBS set aside extra provisions for fines and legal costs largely related to a forthcoming penalty from the US Department of Justice for mis-selling toxic bonds in the run-up to the financial crisis. That residential mortgage bond securitisation mis-selling scandal is responsible for £66bn of the costs incurred during the five-year period and the single largest factor, according to the foundation.

Read more …

The only thing that propped up stocks is vaporizing.

US Stock Buybacks Are Plunging (BBG)

U.S. stocks have been able to hit fresh highs this year despite a dearth of demand from a key source of buying. Share repurchases by American companies this year are down 20% from this time a year ago, according to Societe Generale global head of quantitative strategy Andrew Lapthorne. Ultra-low borrowing costs had encouraged large firms to issue debt to buy back their own stock, thereby providing a tailwind to earnings-per-share growth. “Perhaps over-leveraged U.S. companies have finally reached a limit on being able to borrow simply to support their own shares,” writes Lapthorne. Repurchase programs account for the lion’s share of net inflows into U.S. equities during this bull market. Heading into 2017, equity strategists anticipated that the buyback bonanza would continue in earnest, fueled in part by an expected tax reform plan that would provide companies with repatriated cash to invest.

Read more …

Deflation.

Consumer Spending Expectations Down Again (Mish)

Fed Chair Janet Yellen keeps citing consumer confidence and jobs as reasons consumer spending and inflation will pick up. Curiously, the New York Fed Survey on Consumer Spending Expectations keeps trending lower and lower, despite survey-high expectations for wage growth. The report for July 2017 was released today. I downloaded the survey results and produced the following charts.

Household Spending Projections

 

Household Income Projections

 

Income projections are volatile but at least they are trending higher across the board. Spending projections are less volatile and trending lower at every level. At the 25th%ile level, a group that no doubt spends every cent they make, spending expectations are zero. Those projections were in negative territory in April. Fed Chair Janet Yellen does not believe the Fed’s own reports. Instead, she relies on consumer confidence numbers that tend to track the stock market or gasoline prices more than anything else. Perhaps New York Fed President William Dudley does believe in the report.

Read more …

If you weren’t scared yet…

Dow 30,000, Not If Demographics Have Anything To Say (SA)

Nowadays, it is easy to get caught up in the day to day of markets with main stream media pumping the hot stock or warning of market crashes that rarely come. Focusing on the longer term cycles is how you stay with the trend, reduce portfolio churn and costs. I am not advocating for a purely passive strategy as I think the current state of passive investing is contributing to over-valuation and a lack of pricing discovery, which is another topic I won’t get into in this piece. Longer term cycles are largely influenced by demographics. Boomers were entering the workforce in the 1970s and started having children (Millennials) in the early 1980s. The surge in home purchases, appliances, and the multitude of things you buy for kids helped drive the economy for 30 years. The giant buildup in credit that I have covered in a previous article is another reason for a 35-year bull market.

The potential problem now is Boomers are hitting retirement, and roughly 10,000 Boomers retire each day. The above chart is the age distribution of the U.S. population by age. You can see the cliff of Boomers that are turning 70 this year. There are a couple ramifications of Boomers retiring. First is the moment they quit their job or sell their business, they are on a finite budget from there on out. Second, fewer people will be available for work down the road leaving less tax payers contributing to already stressed government budgets. Lastly, Boomers are incentivized to retire at 70.5 due to social security rules and will also start drawing on pensions. What makes matters worse is the majority of Boomers have less than $200k saved for retirement and a large portion have less than $50k saved per PWC’s Annual survey. This means that Boomers are heavily relying on Social Security or they have to work longer, which is currently evidenced by the following chart from the BLS.

Boomers have essentially garnered the majority of wage gains and now are working longer either out of necessity or preference. You might be thinking the surge in Millennials entering the work force will save the day, but due to the above facts, younger generations have to wait longer to move up the corporate ladder or have to attain levels of higher education to receive an adequate salary. As a result, student debt has risen exponentially in the U.S. jeopardizing the future of many starting their professional lives.

Read more …

“Debt racked up through the greed of financiers being dumped on the poor, the young and people with disabilities in what must rank as the biggest bait and switch in postwar Britain.”

Ten Years After The Crash, There’s Barely Suppressed Civil War In Britain (G.)

All history now, isn’t it? The credit crisis that began in August 2007, the ensuing banking crash and global recession. One bumper episode from the long-ago past, when the iPhone was a newborn and Amy Winehouse still made records. Now done, dusted, reformed and resolved. Or so one assumes, from the official self-congratulation. The European commission marks the 10th anniversary of the credit crisis by trumpeting: “Back to recovery thanks to decisive EU action.” Yes, the same clapped-out European establishment that has spent the last decade kicking a can down the road. The head of the derivatives industry body, ISDA, admits: “We sometimes forget to articulate the social value of what we do.” Indeed so: before the crash, bankers emailed each other about how the derivatives that they were paid so much to flog were “crap” and “vomit”.

Everyone knows history is written by the victors, but this is something else: bullshit recounted by the bullshitters. Even the banks are back to bragging how many billions they generously chip in to Her Majesty’s Exchequer, presumably hoping no one will point out that they took £1.3tn from taxpayers in just a few months in 2008. Let’s get three things straight. First, it was working- and middle-class Britons who paid for the mess, who are still paying for it now and who will keep paying for it decades from now. Second, the crash has prompted almost no fundamental reckoning or reform. And, most importantly, the combination of those first two factors means the crash that began in 2007 cannot be consigned to the past. Today’s politics – from Brexit to Trump and the collapse of centrism – is just one of its products.

For politicians and financiers to treat the crash as history brings to mind Stephen Dedalus in Ulysses: “History is a nightmare from which I am trying to awake.” Here’s the stuff of historical bad dreams: at the height of the banking crisis in 2008, every man, woman and child in Britain handed over £19,721 each to bankers. The economy tanked, Gordon Brown got booted out – and David Cameron pretended a private banking catastrophe was a crisis of a supposedly profligate public sector. You know what happened next: first the kids’ Sure Start centre closed, then the library; your mum waited ages to get her hip replacement; the working poor had their social security stolen, and the local comp began sending begging letters. Debt racked up through the greed of financiers being dumped on the poor, the young and people with disabilities in what must rank as the biggest bait and switch in postwar Britain.

I say that, but we have only had seven years of austerity. If Philip Hammond stays in No 11 and sticks to plan (one must hope he does neither), the cuts will continue until the middle of the next decade. After 2025, who knows what will remain of our councils, our welfare state and our public realm. One truism of this era is that the average British worker earns less after inflation than they did when RBS nearly died. Most of us have seen not a recovery, but a ripping up of our social contract – so that over 7 million Britons are now in precarious employment. But the highest earners are way ahead of where they were in 2008. Finance-sector bonuses are as generous as they were during the boom, while a bad year for the average FTSE boss is one in which he or she pulls in a mere £4.53m.

And so we remain reliant on debt – aptly termed “the raw material for bubbles and crashes” by Daniel Mügge at the University of Amsterdam. According to the Bank for International Settlements, the UK is far deeper in the red now than it was when Northern Rock collapsed. Government debt has shot up under the Conservatives, but so too has household borrowing. Were the UK to crash again, its government no longer has the political capital nor the fiscal headroom to save the financial system.

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“The deterioration and widening dispersion in market internals is no longer subtle.”

Broadening Internal Dispersion (Hussman)

It’s important to observe that if short-term interest rates were still at zero and market internals were favorable, even the most extreme overvalued, overbought, overbullish syndromes we identify would not be enough to push us to a hard-negative market outlook. That, in a nutshell, is the central lesson from quantitative easing, and is one that could alone have dramatically altered our own challenging experience in the recent speculative half-cycle. At present, however, we observe not only the most obscene level of valuation in history aside from the single week of the March 24, 2000 market peak; not only the most extreme median valuations across individual S&P 500 component stocks in history; not only the most extreme overvalued, overbought, overbullish syndromes we define; but also interest rates that are off the zero-bound, and a key feature that has historically been the hinge between overvalued markets that continue higher and overvalued markets that collapse: widening divergences in internal market action across a broad range of stocks and security types, signaling growing risk-aversion among investors, at valuation levels that provide no cushion against severe losses.

[..] Again, the principal lesson of the recent half-cycle was that in the face of zero interest rates, even the most extreme “overvalued, overbought, overbullish” syndromes were not enough to anticipate steep market losses (as they typically were in prior market cycles). Instead, investors were driven to believe that they had no other alternative but to continue their yield-seeking speculation. In the face of zero interest rates, one had to wait for market internals to deteriorate before adopting a hard negative market outlook. At present, we observe neither zero interest rates, nor uniformly favorable market internals. In the current environment, we expect that obscene valuations and severe “overvalued, overbought, overbullish” syndromes are likely to be followed by the same outcomes that have attended similar conditions across history. The chart below shows the percentage of U.S. stocks above their respective 200-day moving averages, along with the S&P 500 Index. The deterioration and widening dispersion in market internals is no longer subtle.

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It’s about Apple and Google.

Trump Orders Probe Of China’s Intellectual Property Practices (R.)

President Donald Trump on Monday authorized an inquiry into China’s alleged theft of intellectual property in the first direct trade measure by his administration against Beijing, but one that is unlikely to prompt near-term change. Trump broke from his 17-day vacation in New Jersey to sign the memo in the White House at a time of heightened tensions between Washington and Beijing over North Korea’s nuclear ambitions. The investigation is likely to cast a shadow over relations with China, the largest U.S. trading partner, just as Trump is asking Beijing to step up pressure against Pyongyang. U.S. Trade Representative Robert Lighthizer will have a year to look into whether to launch a formal investigation of China’s trade policies on intellectual property, which the White House and U.S. industry lobby groups say are harming U.S. businesses and jobs.

Trump called the inquiry “a very big move.” Trump administration officials have estimated that theft of intellectual property by China could be as high as $600 billion. Experts on China trade policy said the long lead time could allow Beijing to discuss some of the issues raised by Washington without being seen to cave to pressure under the threat of reprisals. Although Trump repeatedly criticized China’s trade practices on the campaign trail, his administration has not taken any significant action. Despite threats to do so, it has declined to name China a currency manipulator and delayed broader national security probes into imports of foreign steel and aluminum that could indirectly affect China.

[..] The Information Technology Industry Council, the main trade group for U.S. technology giants, such as Microsoft, Apple and Google, said it hoped China would take the administration’s announcement seriously. “Both the United States and China should use the coming months to address the issues causing friction in the bilateral trade relationship before Presidents Trump and Xi have their anticipated meeting ahead of the November APEC leaders meeting,” ITI President Dean Garfield said in a statement.

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“On August 15, a full ban on imports of coal, iron, iron ore, lead, lead ore, seafood from North Korea is introduced..”

China Imposes Ban on Imports From North Korea, Yields to Trump’s Calls (Sp.)

China is introducing a ban on imports of some goods from North Korea in line with a UN Security Council resolution, the Chinese Commerce Ministry said Monday. US President Donald Trump has repeatedly called on Beijing to increase economic pressure on North Korea as China is Pyongyang’s biggest trade partner. “On August 15, a full ban on imports of coal, iron, iron ore, lead, lead ore, seafood from North Korea is introduced,” the ministry said in a statement. According to the statement, North Korean products arrived at Chinese ports before the ban would be allowed to enter the country. Import applications of products from North Korea will be halted from September 5. Meanwhile, Chinese companies are still allowed to import coal from third countries via the North Korean port of Rason. However, Chinese importers need to apply for approval from a UN committee set up under the UN Security Council resolution 1718.

Interestingly, Beijing’s move came amid media speculations that Trump is mulling a trade crackdown on China. China is by far the largest trading partner of North Korea. In April, the Chinese General Administration of Customs said trade between the two countries in the first quarter increased 37.4% year-over-year, even despite the UN sanctions on North Korean supplies of coal, the country’s top export earner. The tensions around North Korea have been high over the recent months and they have escalated further after the tightening of economic sanctions against North Korea by the United Nations Security Council (UNSC) last week in response to July’s launches of ballistic missiles by Pyongyang. On August 5, new UNSC sanctions against North Korea could cut the nation’s annual export revenue by $1 billion.

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Saving face.

Kim Jong-un Holds Off On Guam Plan (R.)

North Korea’s leader received a report from his army on its plans to fire missiles toward Guam and said he will watch the actions of the United States for a while longer before making a decision, the North’s official news agency said on Tuesday. North Korea said last week it was finalizing plans to launch four missiles into the waters near the U.S. Pacific territory of Guam, and its army would report the strike plan to leader Kim Jong Un and wait for his order. Kim, who inspected the command of the North’s army on Monday, examined the plan for a long time and discussed it with army officers, the official KCNA said in a report. “He said that if the Yankees persist in their extremely dangerous reckless actions on the Korean peninsula and in its vicinity, testing the self-restraint of the DPRK, the latter will make an important decision as it already declared,” the report said.

The DPRK stands for North Korea’s official name, the Democratic People’s Republic of Korea. Pyongyang’s detailed plans for the strike near Guam prompted a surge in tensions in the region last week, with U.S. President Donald Trump warning he would unleash “fire and fury” on North Korea if it threatened the Unite States. South Korean and U.S. officials have since sought to play down the risks of an imminent conflict, helping soothe global concerns somewhat on Monday. Kim said the United States should make the right choice “in order to defuse the tensions and prevent the dangerous military conflict on the Korean peninsula,” the KCNA report said.

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Oh, get real: “..poised to benefit from the tailwind of a much improved global backdrop.”

Australia’s Central Bank Renews Alert on Mounting Household Debt (G.)

Australia’s central bank renewed its focus on mounting household debt, even as the outlook for the nation’s economy improved, according to the minutes of this month’s policy decision where interest rates were left unchanged. RBA noted “need to balance the risks associated with high household debt in a low-inflation environment” in its decision to stand pat on policy. Better hiring this year meant “forecasts for the labor market were starting from a stronger position”. The bank reiterated GDP growth was expected to rise to around 3% in 2018 and 2019, supported by low rates; faster growth in non-mining business investment is expected. The main change is one of emphasis after the Reserve Bank of Australia removed the labor market and added household balance sheets – where debt is currently at a record 190% of income – to its key areas of concern alongside the residential property market.

But the minutes convey rising confidence that Australia’s economy will strengthen and is poised to benefit from the tailwind of a much improved global backdrop. Yet areas of substantial uncertainty remain: how China manages the trade-off between growth and the build-up of leverage; the fact the forecasts for the domestic economy are based on no change in the exchange rate in the period through 2019; and whether better employment would lead to higher household income and increased consumption, or whether ongoing weak wage growth and high household debt would cut into consumption.

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Neither country seems to know how one gets a passport down under. Curious.

Australia Says New Zealand Opposition Trying To Bring Down Government (G.)

Australia and New Zealand have become embroiled in an extraordinary diplomatic spat over claims the New Zealand opposition colluded with the Australian Labor party (ALP) in an attempt “to try and bring down the government”. During a febrile day of politics in both countries, Australia’s foreign affairs minister, Julie Bishop, said New Zealand’s opposition party was threatening the stability of a usually robust partnership between the two nations. She said she would find it “very hard to build trust” if New Zealand’s opposition Labour party were to win the general election in September. Her comments came only 24 hours after it was revealed that Australia’s deputy prime minister, Barnaby Joyce, held New Zealand citizenship and may be ineligible to sit in parliament under the Australian constitution, which disqualifies dual nationals.

Malcolm Turnbull’s government currently commands a majority of one seat in the House of Representatives. But Australia’s ruling coalition has now accused the opposition Labor party of planting a question in the New Zealand parliament in order to extract the information about Joyce’s nationality. Australian government minister Christopher Pyne accused the ALP of being part of a conspiracy to bring down the government. “Clearly the Labor party are involved in a conspiracy using a foreign government, in this case New Zealand, to try and bring down the Australian government,” he said. “How many other foreign governments, or foreign political parties in other countries, has the Labor party been colluding with to try to undermine the Australian government? “Has he been talking to the people in Indonesia, or China, or the Labour party in the UK?”

Joyce made the admission after media inquiries on the subject, but it subsequently also emerged that on 9 August the New Zealand Labour MP Chris Hipkins submitted two written questions to the internal affairs minister, Peter Dunne, in parliament, both of an unusual nature. “Are children born in Australia to parents who are New Zealand citizens automatically citizens of New Zealand; if not, what process do they need to follow in order to become New Zealand citizens?” Hipkins asked. He also asked: “Would a child born in Australia to a New Zealand father automatically have New Zealand citizenship?”

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What austerity also does.

Greek Population Set To Shrink Up To 18% By 2050 (K.)

A new study released by the Berlin Institute for Population and Development suggests that Greece is set to lose up to 18% of its population by the middle of the century. The deep economic crisis – which has hit young people especially hard and is identified as a key reason behind the country now having one of the lowest birth rates in the world – is cited as the primary cause of this decline, which has accelerated in recent years. According to the study, Greece had already lost nearly 3% of its population between 2011 and 2016. In 2016, Greece’s population stood at 10.8 million. That is expected to drop to 9.9 million by 2030 and 8.9 million by 2050. That is a nearly 18% decline in the country’s population over the next 33 years. Greece also has a rapidly aging population, with 21% already over the age of 65 and fewer than 100,000 babies being born each year. This percentage is currently the second highest in Europe, after Italy. Greece will have the highest ratio of pensioners to workers in Europe by 2050.

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They’re stuck in hell.

Sharp Fall In Number Of Refugees, Migrants Arriving In Italy (AFP)

Italy has seen a sharp fall in the number of migrants arriving on its shores, a decline that has left experts scrambling for an explanation. Summer is traditionally the peak season for migrants attempting the hazardous crossing of the Mediterranean from North Africa to Europe. But, to much surprise, only 13,500 have arrived in Italy since July 1, compared to 30,500 over the same period in 2016 – a year-on-year fall of more than 55%. Many migrants are from poor sub-Saharan Africa, fleeing violence in their home country or desperate for a better life in prosperous Europe. “It’s still too early to talk of a real trend,” cautions Barbara Molinario, a spokeswoman for the UN High Commissioner for Refugees (UNHCR).

One mooted reason for the fall is tougher action by the Libyan coastguard. The force which has been strengthened by help from the European Union (EU), which trained about 100 personnel over the winter, while Italy has provided patrol vessels, recently supported by Italian warships in Libyan waters. But according to figures from UN’s International Office of Migration (IOM), the Libyan coastguard have intercepted fewer than 2,000 migrants since early July, compared to more than 4,000 in May. Another reason put forward to explain the decline is tougher action by NGOs who have been accused by critics of colluding with smugglers to pick up migrants at sea to prevent them from drowning. But these organisations have been involved in only a fraction of migrant rescues – and three NGO vessels are still operating in the hope of picking up those in need.

[..] Since 2014, 600,000 migrants have landed in Italy, but more than 14,000 have died. Italian newspapers which, just a few weeks ago, were accusing NGOs of abetting an influx that seemed uncontrollable have now switched to reports on the terrifying conditions faced by migrants in Libya. “Sending them back to Libya right now means sending than back to Hell,” the deputy foreign minister, Mario Giro, said earlier this month.

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Aug 142017
 
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August Strindberg Alpine Landscape I 1894

 

Multiple Contraction : Stock Market Warning Siren is Blaring (WS)
Is The Euro Crisis Really Over? (Lacalle)
US Is The Real Trade Protectionist – China State Media (CNBC)
Fourth Turning: “It’s Going To Be A Rollercoaster Ride” (ZH)
Conspiracy or Chaos? (Jim Quinn)
Forget GDP – There’s More To Britain’s Wealth Than Its Bank Balance (Baggini)
Factory Farming, Antibiotics Use In Asia Creating Global Health Risks (G.)
More NGOs Follow MSF In Suspending Mediterranean Migrant Rescues (R.)
Syrian Refugees Can Return To Aleppo… And Do So In Their 100,000s (RT)
Do Elephants Have Souls? (NA)

 

 

Creative accounting is subject to inherent limits.

Multiple Contraction : Stock Market Warning Siren is Blaring (WS)

“Adjusted” earnings growth is 10.2% year-over-year in the second quarter, according to FactSet, based on the 91% of the companies in the S&P 500 that have reported results. The energy sector was a key driver, with 332% “adjusted” earnings growth from the oil-bust levels of a year ago. The sectors with double-digit earnings growth: information technology (14.7%), utilities (10.8%), and financials (10.3%). The rest were single digit. Earnings in the consumer discretionary sector declined. Revenues grew 5.1%, also led by the energy sector. At the beginning of Q2 last year, the WTI grade of crude oil traded at $35 a barrel. In Q2 this year, WTI ranged from $42 to $53 a barrel.

So the Wall-Street hype machine is cranking at maximum RPM to propagate the great news that earnings are soaring, and that this is the reason why stocks should also be soaring, and forget everything else. The hype machine carefully avoids showing the bigger picture which is dismal for earnings and ludicrous for stock valuations. Aggregate earnings per share (EPS) for the S&P 500 companies on a trailing 12-months basis rose for the second quarter in a row. That’s the foundation of the Wall Street hype. But here’s the thing with these EPS: they’re now back where they had been in… May 2014. Yep. More than three years of earnings stagnation. No growth whatsoever, even for “adjusted” earnings. In fact, on a trailing 12-month basis, aggregate EPS of the S&P 500 companies are down about 5% from their peak in Q4 2014.

And yet, over the same three-plus years of total earnings stagnation, the S&P 500 index has soared 34%. This chart shows those “adjusted” earnings per share for the S&P 500 companies (black line) and the S&P 500 index (blue line). I marked August 2012 as the point five years ago, and May 2014. And these are not earnings under the Generally Accepted Accounting Principles (GAAP). FactSet uses “adjusted” earnings for its analyses. These are the earnings with the bad stuff “adjusted” out of them by management to manipulate earnings into the most favorable light. Not all companies report “adjusted” earnings. Some only report GAAP earnings and live with the consequences. But others put adjusted earnings into the foreground, and that’s what Wall Street dishes up.

[..] This is the peculiar situation of today: On average, these companies have stagnating earnings per share propped up by “adjusting” these earnings and by financial engineering. The price-earnings multiple (P/E ratio) for stagnating companies should be low. In January 2012, the P/E ratio for the companies in the S&P 500 index was 14.9. And that was high. As of Friday, the aggregate P/E ratio is 24.3:

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Brussels keeps Europe from recovering. A continent of zombies.

Is The Euro Crisis Really Over? (Lacalle)

This week we have read that Brussels has certified “the end of the crisis”. In an uncomfortably triumphant statement, the group welcomed the fact that Europe had emerged from the crisis and returned to growth “thanks to the decisive action of the European Union”. Really? Thanks to the “decisive action” of the European Union the “economy is back in shape”? It is true that the communique says that “much remains to be done to overcome the legacy of the crisis years”, but if we can say something about the European crisis is that the “decisive” action of the European Union has not helped to end the crisis, but has perpetuated and silenced it. The European economy is not “in shape”.

According to the Bank of International Settlements and Merrill Lynch, Europe has more zombie companies today than before the crisis, 9% of large listed non-financial corporations are considered walking dead, ie generating operating profits that do not cover their financial costs, in spite of all-time low-interest rates and an unprecedented monetary stimulus. And that is among the big companies, where the business results of the Eurostoxx remain below 2008. If we go to SMEs, the European Union has higher rates of bankruptcies and losses than in 2008, yet the tax burden on companies has increased. In fact, if anything can be said of the European business fabric is that it has been devastated by taxes.

The European Union has continued to hamper the high-productivity sectors to support the so-called national champions and zombies, that large amount of low-value added conglomerates, ridden by high debt and poor margins. While the United States saw the astronomical takeoff of technology giants and corporate profits growing at double digit rates, the EU decided to put obstacles to growth, and today, in the Eurostoxx 100, we have the same collection of dinosaurs that we had a decade ago. European banks, at the end of 2016, had more than €1 trillion in non-performing loans, a figure that represents 5.1% of total loans compared to 1.5% in the US or Japan. Europe has gone from financial crisis to financial crisis, and recently we have had new episodes in Italy, Spain and Portugal.

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Theory: Xi will not put up a real fight if he’s not certain he can win (Deng Xiao Ping’s stance on US).

US Is The Real Trade Protectionist – China State Media (CNBC)

Trump is expected to issue the so-called Section 301 investigation under the 1974 Trade Act later on Monday to investigate Chinese trade practices that force U.S. firms operating in China to turn over intellectual property, multiple outlets reported. China will retaliate in such a case, said the Communist Party-linked Global Times, which is known for its nationalist slant. “The Trump administration should have second thoughts about putting pressure on China on trade and avoid a full-blown trade war,” said the newspaper, adding that the Beijing “should make use of the WTO mechanism to sue the U.S. for trade protectionism.” “The trade policies of the Trump administration have been widely criticized. Although filing a lawsuit with the WTO is time-consuming, it is highly likely that China would win,” it said.

The latest news about a U.S. probe into Chinese trade practices could lead to steep tariffs and comes as Trump is pressing for China’s cooperation in reining in North Korea’s nuclear program. “The U.S. now is walking softly and carrying a huge stick in regards to what it wants. Here, this is tactically nothing more than ‘We need your support with North Korea,’ part and parcel, that’s it. The symbolism of this is just politics and game play,” Frank Troise, managing director at SoHo Capital, told CNBC’s “The Rundown.” China has repeatedly said the two issues were not related, with the Global Times calling the link “illogical” in its Sunday night editorial. Commentaries in state media normally provide insight into government thinking beyond typically thin official statements.

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Neil Howe is an interesting voice, and that’s only partly because Steve Bannon likes his work.

Fourth Turning: “It’s Going To Be A Rollercoaster Ride” (ZH)

[..] .. although 9/11 changed America’s attitude towards the rest of the world, I think that the stock market boom and celebrity circus that’s here in the United States really hadn’t changed very much. And I don’t think you really had a shift, a fundamental shift, in America’s perception of themselves as a people, as their own country, to a fundamental degree until 2008. Also, 2001, as we explained to many people at the time, was simply too early. Every turning starts when each generation is beginning to move into a new phase of life. Back in 2001 boomers were not yet retiring, millennials were still—maybe the first one of them was barely graduating from high school.

So, this was not what we expected. 2008 really did coincide with the generational maturity of the turning, so to speak. And I think that, in terms of the basic shift in our efficacy of the social system, I think 2008 was a bigger change.” The crisis also ushered in an era where central banks exhibit total control of markets, which has created an “artificial quality,” Howe said. “The economic emergency that occurred in 2008-2009 really catapulted us into by far the biggest economic emergency we’ve been in since the early 1930s. And, arguably, we are still living out the consequences of that with complete change in central bank policy, monetary policy, with sustaining these record low interest rates and arguable very high valuations in financial markets—almost anything pushed by that—and people still wondering how we’re going to get out from under that.

The constant discussion is when are central banks going to pull back on their balance sheets and actually go back to the old normal? So, I think there is the sense, even in this the booming markets that we see today, that there is this artificial quality: people think that there’s something wrong about this. We have not re-righted where we were. We are not letting price discovery and actual markets function the way they did before then. So, I do believe that 2008 was the beginning of a whole new regime. And I also believe that the political dysfunction, the sense of political dysfunction—created during the two turns of the Obama presidency and, obviously, also into the Trump presidency—of government completely grinding to a halt is going to have some very powerful repercussions in the years shortly to come.”

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Anarchy in the UK.

Conspiracy or Chaos? (Jim Quinn)

Alan Moore, the renowned graphic novel writer, and author of the dystopian classic V for Vendetta, politically identifies as an anarchist. His view that all political states are an outgrowth of anarchy, with the biggest gang taking control and dictating how things will be run, is manifested in V for Vendetta. As an anarchist, you can understand why he is doubtful of conspiracy theories and an all-powerful entity controlling the world. He believes in a chaotic world competing gangs position themselves to gain power and control.

“We live in a badly developed anarchist situation in which the biggest gang has taken over and have declared that it is not an anarchist situation – that it is a capitalist or a communist situation. But I tend to think that anarchy is the most natural form of politics for a human being to actually practice.”- Alan Moore

The Guy Fawkes mask from V for Vendetta has been adopted by anarchist groups around the world, including: Anonymous, WikiLeaks, and the Occupy protestors. Moore’s positive view of the Occupy movement was based on his belief ordinary people had the right to reclaim what had been taken from them by criminal bankers. The initial impetus for the Occupy protests was the destruction of Main Street USA by Wall Street sociopaths, who not only escaped prosecution for their crimes, but were bailed out by the taxpayers they had pillaged and further enriched as captured politicians enabled them to get even bigger. Millions were evicted from their homes and lost their jobs. Middle class families have seen their real income continue to stagnate, while bankers, corporate executives, and politicians have reaped billions in bonuses, stock gains, and payoffs, provided by central bankers in their back pocket.

“I can’t think of any reason why as a population we should be expected to stand by and see a gross reduction in the living standards of ourselves and our kids, possibly for generations, when the people who have got us into this have been rewarded for it – they’ve certainly not been punished in any way because they’re too big to fail. I think that the Occupy movement is, in one sense, the public saying that they should be the ones to decide who’s too big to fail. As an anarchist, I believe that power should be given to the people whose lives this is actually affecting.” – Alan Moore

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Basic argument: technological growth beats economic growth. But why argue this using social housing and libraries?

Forget GDP – There’s More To Britain’s Wealth Than Its Bank Balance (Baggini)

How is this possible? Because “a lot of improvements in standard of living come not through what we normally consider as growth, but through technological improvements”. This is a concrete example of real growth without what is normally understood by economic growth. If we can grasp this, we can see why the argument about whether indefinite growth is environmentally sustainable is bogus. Orthodox economics says that it is essential if the world’s worst-off are to escape their poverty. Critics argue for zero or even negative growth, claiming that this is the only way to ensure we don’t deplete the planet’s resources. Both are wrong. Real wealth is created not just by exploiting more resources and increasing society’s cash pot but by exploiting the same or fewer resources better.

The whole question of GDP growth is a red herring if we are interested in real wealth. What matters is that we do more with the resources we have. Building a better future depends on seeing this clearly. Take the need to reduce inequality, which many now accept is urgent. To do this it is assumed we need to reduce the income gap between rich and poor. But real equality is increased simply by making it possible for the less well-off to do more with the money they have. Social housing was, and could again be, an example of that. Take two people, one of whom earns £30k a year and the other £15k. To close the real wealth gap between the two does not necessarily require increasing the income of the latter. Providing them with a decent council flat at low rent effectively allows their disposable income to equalise.

The basic principle here is that what matters most is giving people the resources they need to live better, which doesn’t necessarily require giving them more cash. This has in effect been the principle behind all sorts of socially levelling initiatives. Local authorities didn’t give local people free books, they gave them the use of libraries. They didn’t give them cars, they gave them bus passes. We need to relearn the wisdom of these policies, and update them for the modern age. In an era where car ownership is not rare, what about low-cost car clubs? Why shouldn’t more people be able to borrow laptops and tablets from libraries as well as books and DVDs?

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“Half of all antibiotics globally are now consumed in China alone.”

Factory Farming, Antibiotics Use In Asia Creating Global Health Risks (G.)

The use of antibiotics in factory farms in Asia is set to more than double in just over a decade, with potentially damaging effects on antibiotic resistance around the world. Factory farming of poultry in Asia is also increasing the threat of bird flu spreading beyond the region, with more deadly strains taking hold, according to a new report from a network of financial investors. Use of antibiotics in poultry and pig farms will increase by more than 120% in Asiaby 2030, based on current trends. Half of all antibiotics globally are now consumed in China alone. The Chinese meat and animal feed producers New Hope Group and Wen’s Group are now among the 10 biggest animal feed manufacturers in the world. The growth of Asian meat production in intensive units is also producing a rise in greenhouse gas emissions from the food chain, with emissions likely to rise by more than 360m tonnes, the equivalent of running 100 coal-fired power plants for a year.

There are knock-on impacts such as deforestation, as China’s need for animal feed is responsible for more than a third of Brazil’s soybean production. The report, Factory Farming in Asia: Assessing Investment Risks, comes three years after a meat scandal in China, in which suppliers to McDonalds, KFC and others were found to be using dirty meat and products past their sell-by date. It also comes in the midst of a growing food scandal in Europe, which has required the recall of millions of eggs tainted with harmful chemicals, and as concerns have been aired over the impact of Brexit on imports of farm products to the UK. Asian food companies have rapidly expanded their meat production in response to growing populations and the tastes of the rising middle class, but this expansion has come to the detriment of food safety.

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They’re being shot at. And the Italian Foreign Minister calls that “a welcome readjustment” and a “positive process”.

More NGOs Follow MSF In Suspending Mediterranean Migrant Rescues (R.)

Two more aid groups have suspended migrant rescues in the Mediterranean, joining Doctors Without Borders, because they felt threatened by the Libyan coastguard. Save the Children and Germany’s Sea Eye said on Sunday their crews could no longer work safely because of the hostile stance of the Libyan authorities. Doctors Without Borders – or Medecins sans Frontieres – cited the same concern when it said on Saturday it would halt Mediterranean operations. “We leave a deadly gap in the Mediterranean,” Sea Eye’s founder Michael Busch Heuer warned on Facebook, adding that Libya had issued an “explicit threat” against non-government organisations operating in the area around its coast. Libyan coastguard boats have repeatedly clashed with NGO vessels on the edge of Libyan waters, sometimes opening fire.

The coastguard has defended such actions, saying the shooting was to assert control over rescue operations. “In general, we do not reject (NGO) presence, but we demand from them more cooperation with the state of Libya … they should show more respect to the Libyan sovereignty,” coastguard spokesman Ayoub Qassem told Reuters on Sunday. Tension has also been growing for weeks between aid groups and the Italian government, which has suggested some NGOs are facilitating people smuggling, while Italy is trying to enhance the role of the Libyan coastguard in blocking migrant departures. This month, Italy began a naval mission in Libyan waters to provide technical and operational support to its coastguard, despite opposition from factions in eastern Libya that oppose the U.N.-backed government based in Tripoli.

[..] Italian Foreign Minister Angelino Alfano said in a newspaper interview on Sunday that Libya’s growing role in controlling its waters was curbing people trafficking and producing a welcome “readjustment” in the Mediterranean. MSF’s decision to halt its rescue operations was part of this positive process, he told the newspaper La Stampa.

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There’s propaganda and then there’s reality. You decide who you believe.

Syrian Refugees Can Return To Aleppo… And Do So In Their 100,000s (RT)

Aleppo, a city retaken by Damascus from rebels in December last year, has become a major destination for displaced Syrian returning home in 2017 as numbers of returnees to Syria spills over 600,000, according to the UN. Over the first seven months of 2017, over 600,000 displaced Syrians returned home, the International Organization for Migration (IOM) said Friday, citing its own figures as well as those of the UN Migration Agency and partners on the ground. The returnees are overwhelmingly internally-displaced people, but 16% returned to Syria from other nations, primarily Turkey. The number almost matched that recorded in the whole of 2016. An estimated 67% of returnees went to government-controlled Aleppo Governorate, with the provincial capital itself being the primary destination.

Among other places where refugees went in significant numbers, according to ICO, is Al-Hasakah Governorate, the north-eastern province dominated by Kurds. The city of Aleppo – the largest in Syria prior to the conflict – was retaken by the government army last year, aided by Russia, with hostilities ending in mid-December. For years before that, it was divided between two parts, held respectively by government forces and by a disjointed collection of militant groups, including hardcore jihadists. The battle for the city ended with a ceasefire deal, which allowed remaining rebel forces and their families leave Aleppo and go to Idlib governorate, which currently remains a rebel stronghold.

Earlier an increasing number of refugees returning to their homes in Syria was reported by the UN Refugee Agency (UNHCR), which said more than 440,000 internally-displaced persons and 31,000 refugees in other countries had done so over the first six months of 2016. Aleppo and other government-controlled governorates like Hama, Homs and Damascus were mentioned as destinations for the returnees. [..] The situation is far from rosy of course, according to IOM. The number of people forced to leave their homes in 2017 still outweighs that of returnees, with over 808,000 people estimated to be displaced. Around 10% of those who returned in 2016 and 2017 have ended up fleeing their homes again. Almost 20% of the returnees have no secure supply of food and access to water and health services is a problem for some 60%, a testament to the damage the Syrian war has taken on its civilian infrastructure.

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Love it. Absolute must read, the whole article. Very rich.

Do Elephants Have Souls? (NA)

The birth of an elephant is a spectacular occasion. Grandmothers, aunts, sisters, and cousins crowd around the new arrival and its dazed mother, trumpeting and stamping and waving their trunks to welcome the floppy baby who has so recently arrived from out of the void, bursting through the border of existence to take its place in an unbroken line stretching back to the dawn of life. After almost two years in the womb and a few minutes to stretch its legs, the calf can begin to stumble around. But its trunk, an evolutionarily unique inheritance of up to 150,000 muscles with the dexterity to pick up a pin and the strength to uproot a tree, will be a mystery to it at first, with little apparent use except to sometimes suck upon like human babies do their thumbs.

Over time, with practice and guidance, it will find the potential in this appendage flailing off its face to breathe, drink, caress, thwack, probe, lift, haul, wrap, spray, sense, blast, stroke, smell, nudge, collect, bathe, toot, wave, and perform countless other functions that a person would rely on a combination of eyes, nose, hands, and strong machinery to do. Once the calf is weaned from its mother’s milk at five or whenever its next sibling is born, it will spend up to 16 hours a day eating 5% of its entire weight in leaves, grass, brush, bark, and basically any other kind of vegetation. It will only process about 40% of the nutrients in this food, however; the waste it leaves behind helps fertilize plant growth and provide accessible nutrition on the ground to smaller animals, thus making the elephant a keystone species in its habitat. From 250 pounds at birth, it will continue to grow throughout its life, to up to 7 tons for a male of the largest species or 4 tons for a female.

Of the many types of elephants and mammoths that used to roam the earth, one born today will belong to one of three surviving species: Elephas maximus in Asia, Loxodonta africana (savanna elephant) or Loxodonta cyclotis (forest elephant) in Africa. There are about 500,000 African elephants alive now (about a third of them the more reticent, less studied L. cyclotis), and only 40,000 – 50,000 Asian elephants remaining. The Swedish Elephant Encyclopedia database currently lists just under 5,000 (most of them E. maximus) living in captivity worldwide, in half as many locations — meaning that the average number of elephants per holding is less than two; many of them live without a single companion of their kind.

For the freeborn, if it is a cow, the “allomothers” who welcomed her into the world will be with her for life — a matriarchal clan led by the oldest and biggest. She in turn will be an enthusiastic caretaker and playmate to her younger cousins and siblings. When she is twelve or fourteen, she will go into heat (“estrus”) for the first time, a bewildering occurrence during which her mother will stand by and show her what to do and which male to accept. If she conceives, she will have a calf twenty-two months later, crucially aided in birthing and raising it by the more experienced older ladies. She may have another every four to five years into her fifties or sixties, but not all will survive.

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Aug 132017
 
 August 13, 2017  Posted by at 9:20 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Still life with bible 1885

 

China Takes On State-Owned Firms (Balding)
Trump Warns Xi: Trade War With China Begins Monday (ZH)
The Actual Terrorists (PCR)
How Money Launderers Used Commonwealth Bank of Australia (CNBC)
The Euro Area Is Due for a Reboot. Here’s What Is Being Proposed
Italy’s Midsummer Dream: Shaking Off Sick Man of Europe Label (BBG)
Greece Seen Needing Credit Line To Exit Program (K.)
Stop Targeting the Greeks, says Merkel in First Pre-Election Rally (GR)
Canada Orders Ships To Reduce Speed To Prevent Whale Deaths
Scientists Discover 91 Volcanoes Below Antarctic Ice Sheet (G.)

 

 

A very communist style economy still.

China Takes On State-Owned Firms (Balding)

A little-noticed statement last week could portend the next big battle in China’s effort to control its debt. On Aug. 2, the finance ministry issued directives that state-owned companies improve returns, control risks and make sure that “projects are financially viable before decisions are made.” That the government feels the need to spell out such obvious goals tells you the depth of the problem. China’s sprawling array of state-owned enterprises — with millions of employees across all sectors of the economy — may be the biggest obstacle to its broader effort at financial reform. Previous attempts to rein them in have largely failed. But if the government has any hope of real deleveraging, this time will have to be different. SOEs are huge, and so are their liabilities. They’re responsible for non-financial corporate debt equal to 90% of GDP.

Facing limited competitive pressure, they’ve driven the worst of China’s debt-led excess: Return on assets for these firms in 2016 was a paltry 2.9%, compared to 10.2% in the private sector. One reason is that China’s banking industry, which is itself almost exclusively state-owned, channels loans to SOEs in the expectation that they’ll have an implicit government guarantee. SOEs provide only 16% of China’s jobs and less than a third of its output, but they receive an astonishing 30% of all loans. With credit so easily available, they have little incentive to economize. They’re also burdened with conflicts of interest. Despite the new directive to focus on profitability, SOEs are still subject to orders from Party committees that sit above their corporate boards. Some firms have chafed at this arrangement, but in general political objectives – such as maximizing local employment – take priority over profits. Party leaders even refer to privatization as “wrongheaded thinking.”

China’s “Belt and Road” initiative offers a case in point. Even amid a broad crackdown on overseas investment, firms are being prodded to plow hundreds of billions of dollars into the initiative — mostly for unprofitable infrastructure projects — while simultaneously being told to prioritize return on investment. They can be forgiven for being a little confused. Given all these challenges, complying with the new directives will be difficult. Regulators have tried numerous reform strategies in the past. One has been to merge multiple inefficient SOEs, in the unlikely hope that combined they will create one efficient SOE. Another has been to draw distinctions between “commercial” and “public service” SOEs, hoping to give the former some private-sector-like flexibility. But as long as these companies can fall back on favorable bank loans, the impetus to improve efficiency will be limited.

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Xi understands. But the risk is he will use it as a rallying cry at the Communist Party Congress in the fall.

BTW, I don’t want to comment on Charlottesville. Other than: there’s so much underlying hatred in America, built up over so many years, and something other than blame seems necessary.

Trump Warns Xi: Trade War With China Begins Monday (ZH)

As if there weren’t enough geopolitical stress points in the world to fill a lifetime of “sleepy, vacationy” Augusts, late on Friday night President Trump spoke to Chinese President Xi Jinping and told him that he’s preparing to order an investigation into Chinese trade practices next week, according to NBC. Politico confirms that Trump is ready to launch a new trade crackdown on China next week, citing an administration official, a step that Trump delayed two weeks ago under the guidance of his new Chief of Staff Gen. Kelly, but now appears imminent. It is also an escalation which most analysts agree will launch a trade war between Washington and Beijing. As Politico details, Trump on Monday will call for an investigation into China over allegations that the nation violated U.S. intellectual property rights and forced technology transfers, the official said.

While it’s unclear how much detail Trump will get into in the announcement, administration officials expect U.S. Trade Representative Robert Lighthizer to open an investigation against China under Section 301 of the Trade Act of 1974. The ordering of the investigation will not immediately impose sanctions but could lead to steep tariffs on Chinese goods. Trump has expressed frustration in recent months over what he sees as China’s unfair trade policies. As we discussed two weeks ago, Trump had planned to launch the trade investigation more than a week ago, but he delayed the move in favor of securing China’s support for expanded U.N. sanctions against North Korea, the senior administration official said.

The pending announcement also comes amid heightened tension between the United States and China, even after the Trump administration scored a victory in persuading Beijing to sign onto new United Nations sanctions on North Korea. Still, Trump has delayed trade action before, amid pressure from business groups and major trading partners: Two Commerce Department reports examining whether to restrict steel and aluminum imports on national security grounds were expected by the end of June but have been bottled up in an internal review. Trading partners raised threats of retaliation and domestic steel users complained of being hurt by price increases and restricted supply.

The trade investigation will immediately strain relations between the U.S. and China as the two countries wrestle with the unpredictable situation over North Korea. Should Trump follow through, the move will lay the groundwork for Trump to impose tariffs against Chinese imports, which will mark a significant escalation in his efforts to reshape the trade relationship between the world’s two largest economies. In other words, even if there is now conventional war announced with either North Korea or Venezuela, Trump’s next step is to launch a trade war against China.

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Bit confusing at times with reagrds to who said what, but the gist is clear.

The Actual Terrorists (PCR)

This is an article written by an Austrian, Klaus Madersbacher, who, somehow, was able to see through the heavy blanket of Amerian propaganda that suffocates the ability to think and to pereive throughout the entirety of Europe. He correctly undersands the Western destruction of Libya as a war crime. Germans were executed by the Nuremberg Tribunal for less. Madersbacher is correct that Libya was a monstrous war crime committed by the Obama regime and Washington’s NATO puppets. However, Libya is a worse crime than the Nazis committed, as is Afghanistan, Iraq, Yeman, Somalia, and parts of Syria. The Germans never destroyed entire countries and murdered the leaderships. Life in Nazi-occupied France was not as pleasant as in unoccupied France, but it was far more pleasant than life today in Afghanistan, Iraq, Libya, Somalis, Yemem, and part of Syria after America “brought democracy” to the countries.

Under the Nuremberg standard, the country (or countries) that originates war is the country that is responsible for the war crimes. The irony is that World War 2 was the responsibility of the British and French who started the war by declaring war on Germany. So under the Nuremberg standard it is Britian and France who are responsible for the war crimes. Madersbacher believes, as I did prior to reading David Irving’s book, Nuremberg, that Robert Jackson, the chief prosecutor, succeeded in establishing the legal principle that it is a war crime to launch a war of aggression. In actual fact, the principle was not established. Irving points out that no other Tribunal was ever formed until the Clinton regime sent the Serbian president, Milosevic, to a tribunal that cleared Milosevic of the orchestrated charges.

Of course, as Madersbacher understands, for now Washington’s “might makes right” prevails, and no one is going to send the criminal regines of Clinton, George W. Bush, Obama, and Trump if he follows their path, to a War Crimes Tribunal. But if Washington one day is militarily defeated or suffers economic collapse that makes the US dependent on foreign support, Washington’s war criminals, who exceed in number Nazi war criminals, could be finally held accountable. As Madersbacher writes, we await a Stalingrad 2.0 that paves the way to a Nuremberg 2.0.

The actual terrorists – Klaus Madersbacher, www.antikrieg.com

”Sometimes I ask myself about the value of a ‘culture’ which isn´t able to provide people with sufficient mental capacity to enable them to recognize if they are lied to as impudently as it is presently done by the media. It doesn´t need to be said that these are targeting the interests of the overwhelming majority of mankind.” I wrote this in July 2011, when three big European nations of culture and civilization together with some smaller ones under the leadership of the cultural superpower bombed peaceful Libya into ruins and systematically devastated the whole country. This is exactly the kind of crime the Nazi leaders have been hanged for. The crime against peace, which apparently only very few seem to know that it does exist at all. The crime against peace – “To initiate a war of aggression, therefore, is not only an international crime, it is the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole.” – the International Court at Nuremberg declared.

Simply said that means, that the party which initiates a war is responsible for all crimes committed in the context of this war. In the next two paragraphs, Madersbacher is saying, I think, that countries called democracies are excluded as war criminals because a parliament or congress acting for the people fund the war. He disagrees, correctly in my opinion, from this excuse for criminality. It’s not like that, that killing or hurting people in war is no crime, that the destruction of houses etc. is no crime, when carried out by means of high tech war machinery by armies financed by a budget decided by a parliament. Even if such outstanding democratic institutions as the Congress of the United States of America, her Majesties´ Parliament or the German Bundestag authorize such activities, this wouldn´t change a fart of the fact that these are crimes.

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Slap on the wrist. Want to bet?

How Money Launderers Used Commonwealth Bank of Australia (CNBC)

In a run-down mall in one of Sydney’s biggest Chinese neighborhoods in 2015, 29-year-old Jizhang Lu showed up at the top-floor offices of a meat export company carrying a carrier bag stuffed with hundreds of thousands of dollars in cash. According to police documents filed in court and reviewed by Reuters, Lu said he made the trip to the shopfront of CC&B International eight times over three weeks. Each time a CC&B employee would hand him a receipt showing a different company had bought tens of thousands of kilograms of meat. The cash — as much as A$530,200 ($416,840) at a time — was then deposited at a Commonwealth Bank of Australia (CBA) branch, according to the police statement of facts agreed by Lu.

But the apparent purchases were fake, and last year Lu was jailed for two years after pleading guilty to helping launder A$3.2 million of what police allege were proceeds from an unidentified international drug syndicate. The court records reviewed by Reuters did not name Lu’s lawyer. Lu could not immediately be contacted directly because he was in custody. The police case against Lu is now one of several being cited by financial intelligence agency AUSTRAC in its statement of claim against CBA, the largest civil court action of its kind in Australian corporate history.

AUSTRAC has accused CBA of “serious and systemic” breaches of money-laundering and counter-terrorism financing rules, alleging the country’s second biggest mortgage lender failed to detect suspicious transactions nearly 54,000 times. It faces fines potentially amounting to billions of dollars. CBA has said it will fight the AUSTRAC lawsuit, saying it would never deliberately undertake action that enables any form of crime. CBA said a coding error with new automated teller machines was behind most of the breaches but that it recognized there were “other serious allegations” in AUSTRAC’s claim were unrelated to that software problem.

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Europe needs to step back from these ever more Europe plans.

The Euro Area Is Due for a Reboot. Here’s What Is Being Proposed

When France elected Emmanuel Macron in May, the prospects of mending the euro’s inherent flaws suddenly brightened. Adopted in 1999, the common European currency was intended as a political project to foster unity, but the crisis in Greece a decade later exposed the euro’s inability to enforce shared rules, principally on government debt and spending. The French president is pushing for greater fiscal integration among the 19 nations that now use the euro as a way to address at least some of those shortcomings. With Germany indicating an openness to Macron’s calls, the political stars may be aligning to overhaul the euro, and so reboot the European Union.

A common budget Macron has proposed the creation of a euro-area budget, aiming to help fund investments to boost growth, provide emergency financial assistance and streamline the bloc’s response to economic crises. While nations would still have discretion over their own budgets, this common pool of resources could be a boon during periods of financial turmoil and would reduce reliance on the European Central Bank to stimulate the euro-zone economy. Access to this budget would be contingent on states sticking to the bloc’s rules. German Chancellor Angela Merkel has said she’s open to the idea. “I’ve personally always said: it depends on how,” Merkel said during a July 13 press conference in Paris. “I have nothing against a euro-area budget. I have proposed in 2012 a smaller euro-area budget and failed miserably.” “I’m very glad that this idea is being introduced again,” she said.

A single finance minister Macron has also proposed creating the role of a finance chief for the euro area, an idea long supported by German Finance Minister Wolfgang Schaeuble. This person would be responsible for a budget and could operate under the supervision of the European Parliament. Schaeuble has said that such a change would require adjusting EU treaties, which isn’t realistic at the moment.

Debt sharing Perhaps the most controversial proposal is the issuance of debt that would be guaranteed by the euro states, an idea that has been rejected by Schaeuble as putting too much risk on taxpayers. In an effort to quell objections, the commission floated the creation of so-called European Safe Assets, a financial instrument that would bundle sovereign debt from across the currency bloc so it can be sold to investors as one product.

A European Monetary Fund One idea supported by large euro-area members including Germany is to turn the Luxembourg-based European Stability Mechanism – the euro-area bailout fund – into a European Monetary Fund by giving it greater power on fiscal monitoring and more say over future rescue programs. This would allow the fund to monitor the finances of countries that are in trouble and oversee future bailouts, a move that could take some powers away from the European Commission, which is in charge of fiscal surveillance. Giving the ESM a broader remit would also hand more powers to the fund’s board of governors — euro-area finance ministers themselves. Germany is in favor, pushing to strengthen the role of the fund, while the commission would most likely prefer to keep as many of its powers concentrated in Brussels.

Completing the banking union Many officials argue that the most crucial reforms are in the field of financial regulation. This primarily means concluding the so-called third leg of the banking union: a common deposit guarantee framework. Germany has so far resisted, concerned that its taxpayers might end up responsible for problems lurking on bank balance sheets in other countries. Instead, Berlin is seeking risk reduction among member states through limiting lenders’ exposure to government debt. But this idea has few supporters (beyond Germany, only Finland and the Netherlands have been in favor) and has been vehemently opposed by other countries such as Italy. States are also trying to complete the establishment of a common financial backstop to the single resolution fund, an entity designed to foot the bill for winding down failed banks. While the commission and countries including France and Italy have been pushing for the ESM to offer a credit line for that backstop, Germany has been strongly opposed.

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Something tells me it’s much worse than this.

Italy’s Midsummer Dream: Shaking Off Sick Man of Europe Label (BBG)

Italy is working hard to shake off the sick man tag. Through government tensions, bank rescues and a migrant crisis, business sentiment has improved and the economy managed to maintain consistent growth after multiple false dawns. A report on second-quarter economic expansion this week is expected to top off a streak of encouraging numbers ranging from the labor market to exports. Yet, the country still has challenges from a drought that hit farming and – longer term – a less favorable monetary policy and elections next year that may produce a hung parliament. GDP probably rose 0.4% in the three months through June, economists forecast, matching the pace of the previous quarter. That gain would boost expectations that full-year growth could top 1% for first time since 2010, helping the economy regain ground lost in the financial crisis of a decade ago.

Italy’s recovery from a record-long recession is still lagging behind growth in euro-area peers Germany, France and Spain, while the economy faces more uncertainty in the coming months. Elections are due in the first half of next year and about the same time the ECB is expected to start rolling back its stimulus, progressively reducing its purchase of Italy’s government bonds. Finance Minister Pier Carlo Padoan has downplayed the effect of less expansionary monetary conditions, telling SkyTg24 television on Aug. 3 that the economy is strong enough to withstand higher interest rates and bond yields. According to UniCredit economist Loredana Federico, a 0.4% quarterly growth pace would help Italy reduce its debt ratio, which at more than 130% of GDP is the second highest in the euro area. “It would certainly allow it to weather the possible difficulties of higher debt-financing costs” as quantitative easing ends, she said.

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Keep walking in chains.

Greece Seen Needing Credit Line To Exit Program (K.)

Not everyone in the government shares the optimism that Prime Minister Alexis Tsipras expressed recently that Greece will be able to achieve a “clean exit” from the bailout program in August 2018, in other words without the support of a credit line. Finance Ministry officials are preparing for the start of the third review, which involves pushing through a number of prior actions that have to be completed. They are also preparing new legislation and planning for the possibility of Greece needing a credit line after the bailout program ends. This would come with conditions, although they would be less strict than the terms Athens currently has to meet. In its strictest form, the European Stability Mechanism’s credit line, or ECCL, foresees a quarterly review. It is said that finance ministers are always more conservative than their prime ministers and it appears that Euclid Tsakalotos is no exception.

For Greece to make a clean exit from its program, it needs the full confidence of the markets so that it can borrow at a reasonable rate. Sources on the institutions’ side do not believe this will be possible. The credit line would provide some security, helping secure better borrowing terms from the market. Exactly what will happen, though, is still under discussion. The third review is expected to begin after the German elections, which are scheduled for September 24. According to sources, though, the Greek negotiating team will hold preliminary talks with the lenders toward the end of August or beginning of September either via teleconference or in Brussels. The aim of the meeting will be to set a timetable for the negotiations.

[..] The Finance Ministry does not foresee the IMF asking for additional measures in 2018, even though the IMF does not expect Greece to reach its 3.5% of GDP primary surplus target. Athens does not rule out the possibility that the IMF will ask for the reduction to the tax-free threshold to be brought forward by a year and implemented in 2019, along with the planned pension cuts.

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No one has more responsibility for what happened to Greece than Merkel, but: “We should not generalize and say that Greeks cannot work, or that the Germans have a fetish with austerity. Every person has its own dignity..”

Stop Targeting the Greeks, says Merkel in First Pre-Election Rally (GR)

Chancellor Angela Merkel kicked off her re-election campaign on Saturday with a plea to European solidarity and the values that govern the European Union. Speaking in Dortmund, she focused mainly on the economy, but she also highlighted the importance of the EU for Germany. “It should be clear that, despite the difficulties, it is in our own interest, in the interests of peace and prosperity that we remain engaged in Europe,” she said. In this context and referring to the values that govern the EU – “freedom, solidarity, justice, social market economy, protection of human dignity” – the Chancellor asked everyone to refrain from targeting other nations and stop categorizing them.

“We should not generalize and say that Greeks cannot work, or that the Germans have a fetish with austerity. Every person has its own dignity…In Germany, as in any other nation, there are both lazy and hardworking people,” she said. Merkel is far ahead of her rivals in opinion polls but, wary of complacency setting in among her supporters, she plans 50 rallies in towns and cities across Germany in the run-up to the September 24 election, when she will seek a fourth term in office.

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Horses and barns.

Canada Orders Ships To Reduce Speed To Prevent Whale Deaths

Certain ships are being ordered to reduce speed because of the deaths of at least 10 North Atlantic right whales in Canada’s Gulf of St Lawrence during the past two months, the government said on Friday. The deaths have made 2017 the deadliest year for the endangered marine mammal since scientists began tracking their numbers in the 1980s, researchers said. The ministries of transport and fisheries issued a temporary order for vessels 20 meters or longer to slow to a maximum of 10 knots in the western portion of the Gulf, which stretches from Quebec to north of Prince Edward Island. There have been an increase in right whales in the area over the last three to four years, said Tonya Wimmer, director of the Marine Animal Response Society.

Human activity has caused at least some of the deaths. Three whales died from blunt force trauma consistent with being struck by a large vessel and one was entangled in fishing nets. Wimmer said reducing ship speeds can improve the chance of survival for the whales. The whales can weigh up to 96,000 kilograms (105.8 tons). The order will be enforced by Transport Canada inspectors and the Canadian Coast Guard. It is effective immediately and will be lifted once the whales have migrated from the area, usually by the time of the northern winter. Ships violating the order could be fined up to C$25,000 ($19,706.76). There are only 300 to 500 North Atlantic right whales left, and despite conservation efforts since the 1930s, there is no evidence of population growth, according to the World Wide Fund for Nature (WWF).

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“..the densest region of volcanoes in the world..”

Scientists Discover 91 Volcanoes Below Antarctic Ice Sheet (G.)

Scientists have uncovered the largest volcanic region on Earth – two kilometres below the surface of the vast ice sheet that covers west Antarctica. The project, by Edinburgh University researchers, has revealed almost 100 volcanoes – with the highest as tall as the Eiger, which stands at almost 4,000 metres in Switzerland. Geologists say this huge region is likely to dwarf that of east Africa’s volcanic ridge, currently rated the densest concentration of volcanoes in the world. And the activity of this range could have worrying consequences, they have warned. “If one of these volcanoes were to erupt it could further destabilise west Antarctica’s ice sheets,” said glacier expert Robert Bingham, one of the paper’s authors. “Anything that causes the melting of ice – which an eruption certainly would – is likely to speed up the flow of ice into the sea. “The big question is: how active are these volcanoes? That is something we need to determine as quickly as possible.”

The Edinburgh volcano survey, reported in the Geological Society’s special publications series, involved studying the underside of the west Antarctica ice sheet for hidden peaks of basalt rock similar to those produced by the region’s other volcanoes. Their tips actually lie above the ice and have been spotted by polar explorers over the past century. But how many lie below the ice? This question was originally asked by the team’s youngest member, Max Van Wyk de Vries, an undergraduate at the university’s school of geosciences and a self-confessed volcano fanatic. He set up the project with the help of Bingham. Their study involved analysing measurements made by previous surveys, which involved the use of ice-penetrating radar, carried either by planes or land vehicles, to survey strips of the west Antarctic ice.

[..] These newly discovered volcanoes range in height from 100 to 3,850 metres. All are covered in ice, which sometimes lies in layers that are more than 4km thick in the region. These active peaks are concentrated in a region known as the west Antarctic rift system, which stretches 3,500km from Antarctica’s Ross ice shelf to the Antarctic peninsula. “We were amazed,” Bingham said. “We had not expected to find anything like that number. We have almost trebled the number of volcanoes known to exist in west Antarctica. We also suspect there are even more on the bed of the sea that lies under the Ross ice shelf, so that I think it is very likely this region will turn out to be the densest region of volcanoes in the world, greater even than east Africa, where mounts Nyiragongo, Kilimanjaro, Longonot and all the other active volcanoes are concentrated.”

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Aug 122017
 
 August 12, 2017  Posted by at 8:39 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Giorgio de Chirico The Enigma of the Hour 1910

 

The Logic of War (Jim Rickards)
Russia Says Bellicose Rhetoric On North Korea Is ‘Over The Top’ (R.)
US ‘Volatility Index’ Spikes To Highest Level Since Election (G.)
Chinese Foreign Real-Estate Spending Plunges 82% (ZH)
Battle of the Behemoths (Jim Kunstler)
US Poised To Become World’s Largest Public-Private Partnership Market (IBT)
The Fed Has 6,200 Tons of Gold in a Manhattan Basement—Or Does It? (WSJ)
UK Risks International Court Case Over Theresa May’s Brexit Plans (Ind.)
Greenspan’s Legacy Explains Current Conundrums (DDMB)
Social Security Requires Bailout 60x Greater Than 2008 Bank Bailout (Black)
All Is Not As It Seems In Venezuela (Ren.)
Asylum Seekers At Canada Border Tents Unfazed By Delays, Uncertainty (R.)
People Smugglers Pushing Refugees To Their Deaths At Sea Off Yemen (Ind.)

 

 

There are different kinds of logic. I hope for once Rickards is wrong.

The Logic of War (Jim Rickards)

This was the week that the logic of war collided with the illogic of bubbles. So far, the bubble is winning, but that’s about to change. The “logic of war” is an English translation of a French phrase, la logique de la guerre, which refers to the dynamic of how wars begin despite the fact that the war itself will be horrendous, counterproductive, and possibly end in complete defeat. [..] Given these outcomes, “logic” says that war should be prevented. This would not be difficult to do. If North Korea verifiably stopped its weapons testing and engaged in some dialogue, the U.S. would meet the regime more than halfway with sanctions relief and some expanded trade and investment opportunities.

The problem is that the logic of war proceeds differently than the logic of optimization. It relies on imperfect assessments of the intentions and capabilities of an adversary in an existential situation that offers little time to react. North Korea believes that the U.S. is bluffing based in part on the prior failures of the U.S. to back up “red line” declarations in Syria, and based on the horrendous damage that would be inflicted upon America’s key ally, South Korea. North Korea also looks at regimes like Libya and Iraq that gave up nuclear weapons programs and were overthrown. It looks at regimes like Iran that did not give up nuclear weapons programs and were not overthrown.

It concludes that in dealing with the U.S., the best path is not to give up your nuclear weapons programs. That’s not entirely irrational given the history of U.S. foreign policy over the past thirty years. But, the U.S. is not bluffing. Trump is not Obama, he does not use rhetoric for show, he means what he says. Trump’s cabinet officials, generals and admirals also mean what they say. No flag officer wants to lose an American city like Los Angeles on his or her watch. They won’t take even a small chance of letting that happen. The Trump administration will end the North Korean threat now before the stakes are raised to the nuclear level. Despite the logic of diplomacy and negotiation, the war with North Korea is coming. That’s the logic of war.

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It is crucial that Trump communicate with Putin and Lavrov. And Washington does all it can to prevent it. Let’s hope they’ve found a back channel.

Russia Says Bellicose Rhetoric On North Korea Is ‘Over The Top’ (R.)

Russian Foreign Minister Sergei Lavrov said on Friday the risks of a military conflict over North Korea’s nuclear program are very high, and Moscow is deeply worried by the mutual threats being traded by Washington and Pyongyang. “Unfortunately, the rhetoric in Washington and Pyongyang is now starting to go over the top,” Lavrov said. “We still hope and believe that common sense will prevail.” Asked at a forum for Russian students about the risks of the stand-off escalating into armed conflict, he said: “The risks are very high, especially taking into account the rhetoric.” “Direct threats of using force are heard… The talk (in Washington) is that there must be a preventive strike made on North Korea, while Pyongyang is threatening to carry out a missile strike on the U.S. base in Guam. These (threats) continue non-stop, and they worry us a lot.”

“I won’t get into guessing what happens ‘if’. We will do whatever we can to prevent this ‘if’.” “My personal opinion is that when you get close to the point of a fight breaking out, the side that is stronger and cleverer should take the first step away from the threshold of danger,” said Lavrov, in remarks broadcast on state television. He encouraged Pyongyang and Washington to sign up to a joint Russian-Chinese plan, under which North Korea would freeze its missile tests and the United States and South Korea would impose a moratorium on large-scale military exercises. “If this double freezing finally takes place, then we can sit down and start from the very beginning – to sign a paper which will stress respect for the sovereignty of all those parties involved, including North Korea,” Lavrov said.

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And that’s a good thing. Ultra low VIX means no price discovery.

US ‘Volatility Index’ Spikes To Highest Level Since Election (G.)

A US stock market gauge known as the “fear index” has spiked to its highest level since Donald Trump was elected president in a sign that his brinkmanship with North Korea is starting to unnerve investors. The Vix index has been at record lows in recent weeks but has been rattled by the remarks Trump has been making about North Korea. A breakthrough in Pyongyang’s weapons programme prompted Trump to warn on Tuesday that he would unleash “fire and fury like the world has never seen” on North Korea if the regime continued to threaten the US. On Friday the US president tweeted that US military options were “locked and loaded” for use if Pyongyang “acted unwisely”. The Vix index measures expectations of volatility on the S&P 500 index of the US’s largest publicly quoted companies.

Its rise in the early hours of Friday prompted Neil Wilson, a senior market analyst at financial firm ETX Capital, to comment: “Volatility is back.” “The Vix just popped to its highest since the election of Donald Trump as jitters about North Korea roil risk sentiment. It’s about time the market woke up – nothing like the prospect of a nuclear standoff to sharpen mind of investors who had become a tad complacent,” said Wilson. oshua Mahony, a market analyst at IG, said: “For a week that has been largely devoid of major economic releases, Donald Trump’s confrontational stance with North Korea has raised volatility across the board, pushing the Vix from a rock-bottom reading on Tuesday, to the highest level in almost a year. “This has been a week of two halves, with complaints over a lack of volatility giving way to complaints over unpredictable volatility,” he added.

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Does that cover all housing bubbles? Well, not Holland and Scandinavia, probably.

Chinese Foreign Real-Estate Spending Plunges 82% (ZH)

Earlier this month, Morgan Stanley warned that commercial real estate prices in New York City, Sydney and London would likely take a hit over the next two years as Chinese investors pull out of foreign property markets. The pullback, they said, would be driven by China’s latest crackdown on capital outflows and corporate leverage, which they argued would lead to an 84% drop in overseas property investment by Chinese corporations during 2017, and another 18% in 2018. Sure enough, official data released by China’s Ministry of Commerce have proven the first part of Morgan Stanley’s thesis correct. Data showed that outbound investment in real estate was particularly hard hit during the first half of the year, plunging 82%. “According to official data, outbound investment by China’s real estate sector fell 82% year-on-year in the first half, to comprise just 2% of all outbound investment for the period.”

Overall, outbound direct investment to 145 countries declined to $48.19 billion, an annualized drop of 45.8%, according to China Banking News. The decline is a result of a crackdown by Chinese authorities after corporations went on a foreign-acquisition spree that saw them spend nearly $300 billion buying foreign companies and assets, with China’s four most acquisitive firms accounting for $55 billion, or 18%, of the country’s total. The acquisitions aggravated capital outflows, creating a mountain of debt and making regulators uneasy. Late last month, Chinese authorities ordered Anbang Insurance Group to liquidate its overseas holdings. In June, authorities asked local banks to evaluate whether Anbang and three of its peers posed a “systemic risk” to the country’s financial system. As Morgan Stanley noted, these firms were responsible for billions of dollars of commercial real-estate investments in the US, UK, Australia and Hong Kong.

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“..a great deal of American suburbia will have to be abandoned..”

Battle of the Behemoths (Jim Kunstler)

This has been a sensational year for retail failure so far with a record number of brick-and-mortar store closings. But it is hardly due solely to Internet shopping. The nation was vastly over-stored by big chain operations. Their replication was based on a suicidal business model that demanded constant expansion, and was nourished by a regime of ultra-low interest rates promulgated by the Federal Reserve (and its cheerleaders in the academic econ departments). The goal of the business model was to enrich the executives and shareholders as rapidly as possible, not to build sustainable enterprise. As the companies march off the cliff of bankruptcy, these individuals will be left with enormous fortunes — and the American landscape will be left with empty, flat-roofed, throwaway buildings unsuited to adaptive re-use. Eventually, the empty Walmarts will be among them.

Just about everybody yakking in the public arena assumes that commerce will just migrate to the web. Think again. What you’re seeing now is a very short term aberration, the terminal expression of the cheap oil economy that is fumbling to a close. Apart from Amazon’s failure so far to ever show a corporate profit, Internet shopping requires every purchase to make a journey in a truck to the customer. In theory, it might not seem all that different from the Monkey Ward model of a hundred years ago. But things have changed in this land. We made the unfortunate decision to suburbanize the nation, and now we’re stuck with the results: a living arrangement that can’t be serviced or maintained going forward, a living arrangement with no future. This includes the home delivery of every product under sun to every farflung housing subdivision from Rancho Cucamonga to Hackensack.

Of course, the Big Box model, like Walmart, has also recruited every householder in his or her SUV into the company’s distribution network, and that’s going to become a big problem, too, as the beleaguered middle-class finds itself incrementally foreclosed from Happy Motoring and sinking into conditions of overt peonage. The actual destination of retail in America is to be severely downscaled and reorganized locally. Main Street will be the new mall, and it will be a whole lot less glitzy than the failed gallerias of yore, but it will represent a range of activities that will put a lot of people back to work at the community level. It will necessarily entail the rebuilding of local and regional wholesale networks and means of distribution that don’t require trucking.

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But then combine Jim Kunstler’s piece with this:

US Poised To Become World’s Largest Public-Private Partnership Market (IBT)

As the debate over infrastructure policy intensifies, there is no dispute that the Trump administration’s initiative could open up a huge new market for financial firms on Wall Street. The American Society of Civil Engineers estimates that there are $4.6 trillion worth of needed investments to maintain and upgrade infrastructure throughout the U.S. In light of that, recent reports from Moody’s and AIG project a financial jackpot for private investors, with the latter predicting that America “is poised to become the largest public-private partnership market in the world for infrastructure projects.” That market appears to be a ripe profit opportunity for politically connected firms. On top of Pence’s overtures to investors in Australia, a country that has aggressively embraced privatization, Trump recently secured a pledge from Saudi Arabia’s government to invest billions in American infrastructure.

The Saudi money is slated to flow through the private equity firm Blackstone, which has been eyeing opportunities to profit from American infrastructure privatization since its CEO, Stephen Schwarzman, was named by Trump to run a White House economic advisory panel shaping federal infrastructure policy. At the same time, Cohn’s former employer, Goldman Sachs, has said in its financial filings that it too has plans to expand investment in privatized infrastructure. (Neither Schwarzman or Cohn have recused themselves from working on White House infrastructure policy that could benefit the firms, even though both own stakes in the companies.)

In the United States, the recent enthusiasm for public-private partnerships has stemmed from the visible success of several late-1990s toll road projects such as California’s State Route 91, the first fully-automated toll road with electronic transponders in the U.S., and Virginia’s Dulles Greenway, according to Robert Poole, the director of transportation policy at the libertarian Reason Foundation. More recently, he noted, states like Florida have enacted laws streamlining the legislative approval process for public-private partnership transportation projects. Both the GOP and Democratic Party listed infrastructure spending as objectives in their 2016 platforms. The Republican platform explicitly embraced public-private partnerships and “outside investment.” Prominent Democrats from former President Barack Obama to Bill and Hillary Clinton have also warmed to the idea of public-private partnerships — and the party’s officials have led some of America’s earliest precedent-setting privatization projects.

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Do we send in Dan Brown and Tom Hanks?

The Fed Has 6,200 Tons of Gold in a Manhattan Basement—Or Does It? (WSJ)

Eighty feet below the streets of lower Manhattan, a Federal Reserve vault protected by armed guards contains about 6,200 tons of gold. Or doesn’t. The Fed tells visitors its basement vault holds the world’s biggest official gold stash and values it at $240 billion to $260 billion. But “no one at all can be sure the gold is really there except Fed employees with access,” said Ronan Manly, a precious-metals analyst at gold dealer BullionStar in Singapore. If it is all there, he said, the central bank has “never in its history provided any proof.” Mr. Manly is among gold aficionados who wonder if the bank is hiding something about what it’s hiding. Other theorists suspect the gold beneath the New York Fed’s headquarters at 33 Liberty St. may be gold-plated fakes. Some conspiracy-minded investors think the Fed has been secretly leasing out the gold to manipulate prices.

“There has to have been a central bank spewing their gold into the market,” said John Embry, an investment strategist for Sprott Asset Management in Toronto until 2014 who once managed its gold fund. “The gold price didn’t act right” during the time he was watching it and the likely explanation for the movement was Fed action, said Mr. Embry. Fed officials have heard theories about their gold holdings for many years and don’t think much of them. After this article was published, a Fed spokeswoman said the Fed doesn’t own any of the gold housed at the New York Fed, which “does not use it in any way for any purposes including loaning or leasing it out.” The Fed has been selective in giving details about the contents of the vault and in the past has said it can’t comment on individual customer accounts due to confidentiality agreements.

[..] The Fed gives some information about the vault on a website and offers tours. A guide on one tour gave some details: Inside is enough oxygen for a person to survive 72 hours, should someone get trapped; custodians wear magnesium shoe covers to help prevent injuries, should they drop 27-pound bars; the Fed charges $1.75 a bar to move gold but nothing to store it; most of the gold is owned by foreign governments. [..] Visitors on vault tours see only a display sample and can’t verify bars up close. “All you see is the front row of gold bars,” said James Turk, co-founder of Goldmoney, a gold custodian. “There’s no way of knowing how deep the chamber is or how many rows there are.” Mr. Turk, based in London, believes much of the gold has been “hypothecated,” or lent out to other parties, and then rehypothecated, or lent to multiple parties at once. In doing so, he says, “central banks actually own less gold than people believe.”

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A phenomenal mess lies in your future. Wait till various courts get involved, representing entirely different jurisdictions, different laws.

UK Risks International Court Case Over Theresa May’s Brexit Plans (Ind.)

Britain risks a new Brexit fight in international courts if it tries to quit the EU’s single market without giving other countries official notice, The Independent can reveal. Legal experts, including one who advised the Treasury, agree Theresa May will leave the UK open to legal action in The Hague if she pulls out of the European Economic Area (EEA) without formally telling its other members 12 months in advance, to avoid disrupting their trade. The notice is demanded by an international agreement, but ministers do not intend to follow the process because, insiders believe, they want to avoid a Commons vote on staying in the EEA – and, therefore, the single market – that they might lose. As well as the a court battle, experts warn the stigma from breaking the agreement could also make it harder for Britain to secure the trade deals it desperately needs to secure the economy after Brexit.

Pro-EU MPs hope the legal opinion will help persuade the Commons to force and win the vote on staying in the EEA planned for the autumn. The Government has insisted EEA membership will end automatically with EU withdrawal but former Treasury legal adviser Charles Marquand, said: “A failure by the UK to give notice of its intention to leave would, I think, be a breach of the EEA Agreement, which is an international treaty.” The barrister said it was difficult to predict how another EEA states might seek to take action, if it believed its single market rights had been removed wrongly. But he added: “I believe there is a potential for international proceedings. One possibility is the Permanent Court of Arbitration in The Hague.”

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Are we going to lock him up?

Greenspan’s Legacy Explains Current Conundrums (DDMB)

On Aug. 11, 1987, the U.S. Senate confirmed Alan Greenspan as chairman of the Board of Governors of the Federal Reserve System. Thirty years later, the fallout from that occasion is still being felt around the world as the central bank’s focus shifted under Greenspan from economics and the banking system to the financial industry. Greenspan’s first speech as Fed chairman took place less than a month into his tenure when he dedicated the Jacksonville, Florida, branch of the Atlanta Fed. Some 73 miles north of where he stood was Jekyll Island, Georgia, where the foundations of the Fed were first laid in November 1910. Rather than look back at the Fed’s roots, however, Greenspan peered into its future: “We have entered the age of the truly global marketplace. Today the monetary policy decisions of our nation reverberate around the globe.”

Those words resonate today as policy makers worldwide struggle to extricate themselves from extraordinary levels of market intervention. How did we get to the point where central bankers endeavor to resolve structural issues with the power of the printing press? Greenspan’s legacy provides the answers. It is notable that in the days before the Senate vote, President Ronald Reagan cited the “banking system” as one of the Fed’s primary responsibilities. While Greenspan included banking system stability as one of the “instrumentalities” of the government’s designs of the Fed, he emphasized that the Fed was “NOT just another federal agency.” The Fed was also a leader “within the financial industry.” It wouldn’t take long for the financial system to stress test Greenspan’s resolve. On Oct. 19, 1987, the Dow Jones Industrial Average dropped 22.6% in what remains the steepest one-day loss on record. From his first day in office to that October closing low, the Dow was down by 35%.

Few recall that Greenspan was in the air on his way to Dallas during the worst of Black Monday’s selloff, where he was scheduled to address the American Bankers Association convention the next morning. It wasn’t until he landed that he learned of the day’s events. Against his wishes, Greenspan never made it to the podium; he thought the better way to communicate calm was by maintaining his scheduled appearance. Compelled back to Washington due to the gravity of the situation, Greenspan issued the following statement in his name at 8:41 a.m. that Tuesday, less than an hour before stocks opened for trading: “The Federal Reserve, consistent with its responsibilities as the Nation’s central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.”

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Best reason ever for a Universal Basic Income.

Social Security Requires Bailout 60x Greater Than 2008 Bank Bailout (Black)

A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money. Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone. But that didn’t happen. The story was hardly picked up. It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history. That’s not hyperbole either– the numbers are very clear.

The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION. In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout. Fat chance. That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy. Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008. So this is a pretty big deal. More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic. In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future. What will interest rates be in the future? What will the population growth rate be? How high (or low) will inflation be?

These variables can dramatically impact the outcome for Social Security. For example, Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year. This is an important assumption: the higher US productivity growth, the faster the economy will grow. And this ultimately means more tax revenue (and more income) for the program. But -actual- US productivity growth is WAY below their assumption. Over the past ten years productivity growth has been about 25% below their expectations. And in 2016 US productivity growth was actually NEGATIVE.

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Venezuela is dead simple. It has the largest oil reserves on the planet. Chavez kept Exxon and CIA out. Now they’re moving back in.

All Is Not As It Seems In Venezuela (Ren.)

An opposition backed by Exxon Mobil, a failed military coup that killed 40 people, staged photo-propaganda designed to create the perception of a failed state: Foreign powers have conspired to create the perfect conditions for yet another western ‘humanitarian’ intervention, this time in Venezuela. Former US Army solider turned documentary-maker, Mike Prysner, says the reality of Venezuela is very different from what we are being fed by the western press. [..] When I heard that Jeremy Corbyn had condemned violence on both sides in Venezuela, I was angry at first – because 80% or more of the violence is being committed by anti-government protesters. Their violence has far surpassed anything committed against them – and what has been done to them has been deliberately provoked. But then I began to recognise the skill in his statement – forcing everyone to confront the reality of what’s happening on the ground there. The reality bears little resemblance to what’s being presented to people.

The BBC is responsible for some of the most disingenuous portrayals. They’re showing violent protesters as if they’re some kind of defenders of peaceful protesters against a repressive police force, but in reality peaceful protests have been untouched by police. What happens is that the Guarimbas (violent, armed opposition groups) follow the peaceful protests and when they come near police, they insert themselves in between the two. They then push and push and push until there’s a reaction – and they have cameras and journalists on hand to record the reaction, so it looks like the police are being aggressive. We were once filming a protest and a group of Guarimbas challenged us. If we’d said we were with teleSur, at the very least they’d have beaten us and taken our equipment. But we told them we were American freelance journalists – they need Americans to film them and publicise them, so we were accepted.

The battles with police are actually quite small, but they’re planned, co-ordinated to disrupt different area each day to maximise their impact – but in most places life is pretty normal. It’s all about the portrayal. The US media mobilise everything for Guarimbas – there will be maybe 150 people but it’s made to look bigger and tactics are 100% violent – trying to provoke a response. And the level of police restraint is remarkable – the government knows the world is watching. One evening protesters were burning buildings for around two hours, with no intervention by the police. They only react when the protesters start throwing petrol bombs at the police or military, or their bases – but as soon as they do react, the Guarimbas film as if they’re victims of an unprovoked attack.

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Over 200 a day into Québec alone.

Asylum Seekers At Canada Border Tents Unfazed By Delays, Uncertainty (R.)

Asylum seekers, mainly from Haiti, clambering over a gully from upstate New York into Canada on Friday were undeterred by the prospect of days in border tents, months of uncertainty and signs of a right-wing backlash in Quebec. More than 200 people a day are illegally walking across the U.S. border into Quebec to seek asylum, government officials said. Army tents have been erected near the border to house up to 500 people as they undergo security screenings. Over 4,000 asylum seekers have walked into Canada in the first half of this year, with some citing U.S. President Donald Trump’s tougher stance on immigration. The cars carrying the latest asylum seekers begin arriving at dawn in Champlain, New York, across from the Canadian border.

On Friday, the first groups included two young Haitian men, a family of five from Yemen and a Haitian family with young twins. “We have no house. We have no family. If we return we have nowhere to sleep, no money to eat,” said a Haitian mother of a 2-year-old boy, who declined to give her name. Each family pauses a moment when a Royal Canadian Mounted police officer warns them they will be arrested if they cross the border illegally, before walking a well-trodden path across the narrow gully into Canada. Asylum seekers are crossing the border illegally because a loophole in a U.S. pact allows anyone who manages to enter Canada to file an asylum claim and stay in Canada while they await their application outcome.

Because the pact requires refugees to claim asylum in whatever country they first arrive, they would be turned back to the United States at legal border crossings. They Haitian family is arrested immediately and bussed to the makeshift camp. Border agents led a line of about two dozen asylum seekers on Friday into a government building at Saint-Bernard-de-Lacolle to be processed. The Red Cross is providing food, hygiene items and telephone access, spokesman Carl Boisvert said. He estimated the fenced-off camp, which has been separated into sections for families and single migrants, is about half full. Border staff and settlement agencies are straining to accommodate the influx, which has been partly spurred by false rumors of guaranteed residency permits.

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The values of our own lives are set by how we value other people’s lives.

People Smugglers Pushing Refugees To Their Deaths At Sea Off Yemen (Ind.)

At least 19 migrants are presumed to have drowned after 160 people were forced from a boat into rough seas off the coast of Yemen by smugglers in what may be a worrying new trend, the UN migration agency has said. The report from the International Organisation for Migration came less than a day after it said up to 50 migrants from Ethiopia and Somalia were “deliberately drowned” by smugglers who pushed them from a separate boat off the coast of Shabwa province in southern Yemen. “We’re wondering if this is a new trend,” Olivia Headon, an IOM spokesperson, told The Independent. “The smugglers are well aware of what’s happening in Yemen, so it may just be they’re trying to protect their own neck while putting other people’s lives at risk.” Six bodies were found on the beach, while 13 remain missing, presumed dead, Ms Headon said.

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Aug 112017
 
 August 11, 2017  Posted by at 8:36 am Finance Tagged with: , , , , , , , ,  7 Responses »
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Jackson Pollock Reflection of the Big Dipper 1947

 

It’s Hard to Price an ‘Extinction Event’ Like a North Korea War (BBG)
In Debt We Trust for US Consumers With $12.7 Trillion Burden (BBG)
Tesla Cars Aren’t As Carbon (And Taxpayer) Friendly As You Think (FMS)
Uber Gets Run Over by its Own Subprime Auto Leases (WS)
Amazon Online Grocery Boom? Not So Fast… (WS)
Amazon Paid Just £15 Million In Tax On European Revenues Of £19.5 Billion (G.)
Airbnb Faces EU Clampdown For Not Paying ‘Fair Share’ Of Tax (G.)
Trump Will Soon Declare State Of Emergency Over Opioid Crisis (G.)
Why Saudi Arabia And Israel Have United Against Al-Jazeera (FIsk)
‘Subprime Is Contained’ -They Really Don’t Know What They Are Doing (Snider)
What Went Wrong With the 21st Century? (Bonner)
Black Swan At Bavarian Palace Seeks Partner (DW)

 

 

There are many voices saying crazy things in this North Korea thing, and I’m not even watching CNN. But this is the craziest thing of all: how to make money off a nuclear attack. These people are mentally blind.

It’s Hard to Price an ‘Extinction Event’ Like a North Korea War (BBG)

Financial markets haven’t really reacted much to the escalation in tensions between the U.S. and North Korea, and some observers explain that it’s largely because in the worst-case scenario it’s impossible to guess the appropriate price for things like stocks and bonds. “It’s hard to price a potentially extinction event (at least for much of the Korean peninsula),” is how Timothy Ash, a senior strategist at Bluebay Asset Management in London, puts it. It’s a point also made by Mark Mobius, the Templeton Emerging Markets Group executive chairman and apostle for emerging-market investing. He said in a May interview about the prospect of a North Korean nuclear conflict: “there’s nothing you can do about it – if something breaks out, we’re all finished anyway.” Maybe that’s why the worst day this year for the Kospi index of South Korean stocks was July 28, which was all about a global tech-stock retreat and nothing to do with geopolitics.

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“This increase in leverage has sapped our ability to spend,” Roberts said. “I think we’re stuck.”

In Debt We Trust for US Consumers With $12.7 Trillion Burden (BBG)

After deleveraging in the aftermath of the last U.S. recession, Americans have once again taken on record debt loads that risk holding back the world’s largest economy. Household debt outstanding – everything from mortgages to credit cards to car loans – reached $12.7 trillion in the first quarter, surpassing the previous peak in 2008 before the effects of the housing market collapse took its toll, Federal Reserve Bank of New York data show. To put the borrowing in perspective, it’s more than the size of China’s economy or almost four times that of Germany’s. People are borrowing more not necessarily because they’re confident about their financial prospects. They’re doing it for necessities like education or transportation and, in many cases, just to get by.

On the surface, liabilities at an all-time high aren’t alarming when the assets side of ledger is taken into account. Household net worth stands at a record $94.8 trillion, thanks to rebounding home values and soaring stock portfolios. But that increase has primarily benefited the nation’s wealthiest, said Lance Roberts, chief investment strategist at Clarity Financial in Houston and editor of the Real Investment Advice newsletter. “When you look at net worth, it’s heavily skewed by the top 10%,” Roberts said. “The average family of four is living paycheck to paycheck.” For most Americans, whose median household income, adjusted for inflation, is lower than it was at its peak in 1999, borrowing has been the answer to maintaining their standard of living. The increase in debt helps explain why the economy’s main source of fuel is providing less of boost than in the past.

Personal spending growth has averaged 2.4% since the recession ended in 2009, less than the 3% of the previous expansion and 4.3% from 1982-90. A look at worker pay presents a more dire backdrop for discretionary spending for those without a lot of assets. While the difference between income from wages and household debt has improved since the last recession, it’s been leveling off and remains at a depressed level. The improvement also reflects less mortgage debt because of increased home foreclosures, rather than a pickup in earnings. “This increase in leverage has sapped our ability to spend,” Roberts said. “I think we’re stuck.”

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A series of articles on today’s new marvels, Tesla, Uber, Amazon, Airbnb. They all fall to bits, one by one.

Tesla is a highly destructive company. All it takes is a basic understanding of thermodynamics. Strip-mining, cutting down forests, throwing the Congo into even deeper misery, just so you can fool yourself into thinking you’re clean.

Tesla Cars Aren’t As Carbon (And Taxpayer) Friendly As You Think (FMS)

Tesla proponents love to remind people how their vehicles are “carbon free” (in spite of Tesla CEO Elon Musk’s own carbon profligate lifestyle): Fact: the Tesla Model S is an environmentally friendly, zero emissions electric vehicle that won’t pollute the air like gas-powered cars. Carbon emissions from a gas car’s tailpipe has a dangerous impact on global warming…. In addition, Tesla CEO Elon Musk explains that, “combustion cars emit toxic gases. According to an MIT study, there are 53,000 deaths per year in the U.S. alone from auto emissions.” But in reminding people about how they don’t burn fossil fuels, they make sure to omit and/or obfuscate all the other emissions-laden factors that go into production of Tesla automobiles, including the oft-unspoken costs of the vehicles to the taxpayer and to other auto manufacturers.

Start with the power source for the Tesla; their electric power plant uses lithium-ion batteries to store the electricity required to run the car. And while a good amount of lithium is produced at salt lake brines that use chemical processes to extract the requisite lithium… …a large (and growing) amount of lithium is sourced from hard-rock mining, which is also referred to as strip mining: This type of mining involves not just all the carbon used to extract the lithium from mines, it “strips” the land of its forests, which is far more environmentally (and carbon) detrimental. And while it is likely impossible to know exactly where Tesla sources its materials from, a closer examination on Tesla’s impact on the mining industry should paint a crystal clear picture:

Should the concept capture the imagination of Americans who are increasingly conscious of reducing their carbon footprint demand for these crucial elements could skyrocket in addition to the already robust global demand for lithium, nickel and copper. Major mining companies are already “future proofing” their businesses for climate change by focusing more investment into commodities that will be required by the renewable energy industry. You can’t make this stuff up – Tesla and other renewable energy industries are going to save the world by mining its natural resources to excess, without regard for the environmental impact and carbon emissions generated in the process. You shouldn’t be surprised to seldom hear this mentioned by Elon Musk, or the liberal crowd that champions electric vehicles.

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This is too insane to be labelled a ‘business model’.

Uber Gets Run Over by its Own Subprime Auto Leases (WS)

Uber, which has lost $3 billion last year and has gotten itself into a thicket of intractable issues and scandals that cost founder and CEO Travis Kalanick his job, is now facing a subprime auto-leasing crisis. Two years ago when these folks launched the subprime auto leasing program to put their badly paid drivers into new vehicles they couldn’t otherwise afford, they apparently didn’t do the math. In July 2015, when the “Xchange Leasing” program was announced, the company gushed: “We’re excited about how these new solutions meet drivers’ unique needs, and offer more and better choices and greater flexibility than ever before.” The leasing program would be “administered by an Uber subsidiary and designed to fit with the flexibility that drivers value most,” it said. This is how it would work:

Unlike most multi-year leases that have high fees for early termination, drivers who participate in Xchange for at least 30 days will be able to return the car with only two weeks notice, and limited additional costs. The program allows for unlimited mileage and the option to lease a used car, with routine maintenance also included. It wasn’t supposed to be a money maker – nothing at Uber is. But hey. And the company invested $600 million in the business, “people familiar with the matter” told the Wall Street Journal. This type of lease was offered to drivers with subprime credit ratings or no credit ratings who barely earned enough money to get by and make the payments, if they stuck around long enough. It allowed drivers to drive new cars. When it didn’t work out for them, they could return the cars after 30 days with two weeks’ notice.

The only penalty for the early return is that Uber keeps the $250 deposit. And these leases came with “unlimited miles.” No one in the car business would ever conceive of such a thing. But Uber is different. It defies the laws of economics. Or so it thought at the time. Now, the 14-member executive committee that is running the show looked at the math and was horrified. “According to people familiar with the matter,” cited by The Journal, executives had briefed the committee in July: “The Xchange Leasing division had been estimating modest losses of around $500 per auto on average, these people said. But managers recently informed Uber executives that the losses were actually about $9,000 per car — about half the sticker price of a typical leased vehicle.”

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So your ass can shoot roots into your couch. Yeah, that’s a valid business model.

Amazon Online Grocery Boom? Not So Fast… (WS)

Maybe Amazon has figured out that you’re not the only one who isn’t buying groceries online. Maybe it has figured out, despite all the money it has thrown at it, that selling groceries online is a very tough nut to crack. And no one has cracked it yet. Numerous companies have been trying. Safeway started an online store and delivery service during the dotcom bubble and has made practically no headway. A plethora of startups, brick-and-mortar retailers, and online retailers have tried it, including the biggest gorillas of all — Walmart, Amazon, and Google. Google is trying it in conjunction with Costco and others. It just isn’t catching on. And this has baffled many smart minds. Online sales in other products are skyrocketing and wiping out the businesses of brick-and-mortar retailers along the way. But groceries?

That’s one of the reasons Amazon is eager to shell out $14.7 billion to buy Whole Foods, its biggest acquisition ever, dwarfing its prior biggest acquisition, Zappos, an online shoe seller, for $850 million. Amazon cannot figure out either how to sell groceries online though it has tried for years. Now it’s looking for a new model — namely the old model in revised form? This is why everyone who’s online wants to get a piece of the grocery pie: The pie is big. Monthly sales at grocery stores in June seasonally adjusted were $53 billion. For the year 2016, sales amounted to $625 billion: But it’s going to be very tough for online retailers to muscle into this brick-and-mortar space, according to Gallup, based on its annual Consumption Habits survey, conducted in July. Consumers just aren’t doing it:

Only 9% of US households say they order groceries online at least once a month, either for pickup or delivery. Only 4% do so at least once a week. By contrast, someone in nearly all households (98%) goes to brick-and-mortar grocery stores at least once a month, and 83% go at least once a week. Gallup summarizes the quandary: At this point, online grocery shopping appears to be an adjunct to retail shopping rather than a replacement, as most shoppers whose families purchase groceries online once or twice a month or more say they still visit a store to buy groceries at least once a week. But there are some differences by age group – and maybe that’s where Amazon sees some distant hope: Of the 18-29 year olds, 15% shop for groceries on line at least once a month. For 30-49 year olds, this drops to 12%. For 50-64 year olds, it drops to 10%. For those 65 and older, it essentially fades out (2%).

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No profit, just working on a monopoly. Cut it down.

Amazon Paid Just £15 Million In Tax On European Revenues Of £19.5 Billion (G.)

Amazon paid just €16.5m (£15m) in tax on European revenues of €21.6bn (£19.5bn) reported through Luxembourg in 2016. The figures, published in Amazon’s latest annual accounts for its European online retail business, are likely to reignite the debate about US tech companies using complex crossborder arrangements to minimise the tax they pay across the continent. Separately, Amazon UK Services – the company’s warehouse and logistics operation that employs almost two-thirds of its 24,000 UK staff – more than halved its declared UK corporation tax bill from £15.8m to £7.4m year-on-year in 2016. The cut came despite turnover at the UK business, which handles the packing and delivery of parcels and functions such as customer service, rising from £946m to £1.46bn.

Ana Arendar, Oxfam’s head of inequality, said: “Despite some action by ministers and companies, widespread corporate tax avoidance continues to cost both rich and poor countries billions every year that could pay for schools and lifesaving healthcare. “We urgently need comprehensive public country-by-country reporting for multinationals to ensure they pay their fair share of tax – the UK government should implement this by the end of 2019 – unilaterally if necessary.” Amazon Europe, which is based in Luxembourg and aggregates the billions of pounds of sales the retailer makes from individual countries across the continent, reported a pre-tax profit of €59.6m last year. As a result the company, which clocked up €21.6bn in sales across Europe last year, had a tax bill of just €16.5m.

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This seems the easiest thing to contain. 90% of it is advertized online. Take average occupancy in a city, at average prices, and tax them on it.

Airbnb Faces EU Clampdown For Not Paying ‘Fair Share’ Of Tax (G.)

EU finance ministers will discuss how to force home-sharing platforms such as Airbnb to pay their fair share of taxes and in the right tax domains next month after the French minister for the economy described the current situation as “unacceptable”. The European commission announced on Thursday that a joint proposal from France and Germany would be discussed at a meeting in Tallinn, Estonia, on 16 September. Brussels will also advise on how best to deal with the so-called sharing economy, in which Airbnb is a major player. It was revealed this week that Airbnb paid less than €100,000 (£90,336) in French taxes last year, despite the country being the room-booking firm’s second-biggest market after the US.

In response, the French economy minister, Bruno Le Maire, informed the national assembly that the EU’s Franco-German axis would be proposing a pan-European clampdown. “These digital platforms make tens of millions of sales and the French treasury gets a few tens of thousands,” the minister said, adding that the current setup was “unacceptable”. Le Maire further claimed in parliament that an ongoing consultation being led by the commission and the OECD to address the tax question were “taking too much time, it’s all too complicated”. Many digital platforms operating in the EU have a base in Ireland, including Airbnb, where they can exploit a low corporation tax regime. Le Maire said: “Everybody has to pay a fair contribution.”

I[..] Paris city council has already voted to make it mandatory from 1 December to obtain a registration number from the town hall before posting an advertisement for a short-term rental on its website. The ruling potentially makes it harder for property owners using Airbnb to exceed the 120 days a year legal rental limit for a main residence, and easier for the authorities to collect local taxes. In Barcelona, where tensions have been rising for years over the surge in visitors, the impact of sites such as Airbnb on the local housing market has led to anti-tourist protests. In Mallorca and San Sebastián, an anti-tourism march is being planned for 17 August to coincide with Semana Grande, a major festival of Basque culture.

In Ibiza, the authorities are placing a cap on the number of beds for tourists. Owners will also be banned from renting their homes, or rooms within them, via websites such as Airbnb and Homeaway unless they obtain a licence. Owners face fines of up to €400,000 if they break the law. The websites face the same fine for letting people advertise without a valid licence number.

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Cut out the stupid pharma ads and you’re halfway there.

Trump Will Soon Declare State Of Emergency Over Opioid Crisis (G.)

Donald Trump signaled he could soon declare a state of emergency in an attempt to deal with America’s opioid overdose crisis. A commission reporting to the president said recently that declaring a state of emergency was its “first and most urgent recommendation”. But Trump, in his first remarks on the subject, appeared to set his face against treating the epidemic as a health emergency – calling instead for tougher prison sentences and “strong, strong law enforcement”. However, returning to the issue on Thursday, Trump seemed to have changed his tone. “We’re going to draw it up and we’re going to make it a national emergency,” he said, adding the administration is “drawing documents now to so attest”. “It is a serious problem the likes of which we have never had,” Trump said at his Bedminster, New Jersey, golf resort, where he is on a “working vacation”.

The president can declare a state of emergency two legal ways: he could use the Stafford Act, or the Public Health Service Act, which is specific to health emergencies and can be declared by the health secretary. “When I was growing up they had the LSD, and they had certain generations of drugs,” Trump said. “There’s never been anything like what’s happened to this country over the last four or five years. And I have to say this in all fairness, this is a worldwide problem, not just a United States problem. This is happening worldwide.” In fact, while drug overdoses happen all over the world, the US leads by a significant margin. Though the nation has just 4% of the world’s population, the US also has 27% of the world’s drug overdose deaths, according to the UN’s 2017 World Drug Report. For example, for every million Americans between 15 and 64 years old, 245 people per year die of drug overdoses. In Mexico, 4 people per million die of drug overdoses.

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Best friends.

Why Saudi Arabia And Israel Have United Against Al-Jazeera (FIsk)

Being an irrational optimist, there’s an innocent side of my scratched journalistic hide that still believes in education and wisdom and compassion. There are still honourable Israelis who demand a state for the Palestinians; there are well-educated Saudis who object to the crazed Wahhabism upon which their kingdom is founded; there are millions of Americans, from sea to shining sea, who do not believe that Iran is their enemy nor Saudi Arabia their friend. But the problem today in both East and West is that our governments are not our friends. They are our oppressors or masters, suppressors of the truth and allies of the unjust.

Netanyahu wants to close down Al Jazeera’s office in Jerusalem. Crown Prince Mohammad wants to close down Al Jazeera’s office in Qatar. Bush actually did bomb Al Jazeera’s offices in Kabul and Baghdad. Theresa May decided to hide a government report on funding “terrorism”, lest it upset the Saudis – which is precisely the same reason Blair closed down a UK police enquiry into alleged BAE-Saudi bribery 10 years earlier. And we wonder why we go to war in the Middle East. And we wonder why Sunni Isis exists, un-bombed by Israel, funded by Sunni Gulf Arabs, its fellow Sunni Salafists cosseted by our wretched presidents and prime ministers. I guess we better keep an eye on Al Jazeera – while it’s still around.

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And these guys are still seen as authorities. They may be dumb, but they’re not the dumbest.

‘Subprime Is Contained’ -They Really Don’t Know What They Are Doing (Snider)

Ben Bernanke, then Chairman of the Federal Reserve, told Congress in March 2007 that subprime was contained. He will rightfully be remembered in infamy for that, but that wasn’t the most egregious example of being wrong. Even putting it in those terms risks understating the problem and why it stubbornly lingers. Being really wrong is claiming that IOER will establish a floor for money market rates, and then finding out it actually doesn’t. No, what policymakers did especially in the early crisis period was altogether worse; they demonstrated conclusively that though they shared this world with the rest of us, they inhabited and continue to inhabit a totally different planet. Given the anniversary date and our human affinity for round numbers (ten years or a lost decade), there is a desire to revisit some of the worst of the list which happened just before August 9, 2007. My favorite has always been Bill Dudley, as I recounted last at the ninth anniversary of nothing being done:

As far as the issue of material nonpublic information that shows worse problems than are in the newspapers, I’m not sure exactly how to characterize that because I guess I wouldn’t know how to characterize how bad the newspapers think these problems are. [Laughter] We’ve done quite a bit of work trying to identify some of the funding questions surrounding Bear Stearns, Countrywide, and some of the commercial paper programs. There is some strain, but so far it looks as though nothing is really imminent in those areas.” [emphasis added]

He spoke those words, recorded for posterity, on August 7, 2007, at the regular FOMC policy meeting. As noted earlier today, both Countrywide and the whole commercial paper market would be decimated really within hours from his “inspiring” confidence. What really stands out is for Dudley to have been the one who said them, because as head of the Open Market Desk he had to be technically proficient in a way that the others could avoid (and why so often in its history policy discussions especially about these great things would often flow through whomever was the Open Market Desk chief at that moment in time). He proved still to be an empty suit like the rest, but he was always that much less of one. So if the best the Fed had to offer was so thoroughly unaware, is it any wonder what happened then and continues to happen now?

One day after Dudley’s private embarrassment, one Bank of England governor and future chief perhaps joined his level in the Hall of Fame of Famous Last Words. Meryn King remarked on August 8, 2007: “So far what we have seen is not a threat to the financial system. It’s not an international financial crisis.” He said these words at the behest of the ECB in front of the assembled press ostensibly to impart calm. Also noted earlier today, it was the European Central Bank that made the first crisis move the very next day in a record liquidity injection.

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“There’s nothing like it. Get on the wrong side of time, and you are out of luck.”

What Went Wrong With the 21st Century? (Bonner)

And it’s Time Time Time
And it’s Time Time Time
And it’s Time Time Time
That you love
And it’s Time Time Time

To bring readers fully up to speed, the 21st century has been a flaming dud. In practically every way. Despite more new technology than ever… more PhDs… more researchers… more patents… more earnest strivers than ever before sweating to move things ahead… and despite more “stimulus” from the Fed ($3.6 trillion) than ever in history…U.S. GDP growth rates are only half of those of the last century. And household incomes, after you factor in inflation, are flat. In fact, by some calculations – using non-fiddled measures of inflation – growth has been negative for the whole 21st century. Meanwhile, there are more people tending bar or waiting tables… and fewer people with full-time breadwinner jobs. And productivity and personal savings rates have collapsed.

And those are only the measurable trends. Political and social developments have been similarly dud-ish – including the longest, losingest war in U.S. history… the biggest government deficits… the most vulgar public life… the least personal freedom… and, in our hometown, Baltimore, a record murder rate. What went wrong? Herewith, a hypothesis. It suggests three “causes,” all three linked by a single shared element: time.

[..] Fake money causes people to waste time and money. And central bank policies discourage savings by lowering interest rates… even pushing them into negative territory. Instead of saving them for the future… resources are consumed today. These mistakes accumulate as debt… which then forces people to spend more time servicing the mistakes of the past. Meanwhile, the internet gives people a new way to waste time. At home. At work. On the high plains. Or in the lowlife back alleys. People spend their precious time on idle distractions and entertainments. That leaves fewer people doing the real work that progress requires – saving, investing, and working for the future. Time is always the ultimate constraint. You can substitute one resource for another. You can switch from oil to solar… or copper to aluminum. But there’s no swapping out time. There’s nothing like it. Get on the wrong side of time, and you are out of luck.

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Oh please, can I include this? Just so Nassim Taleb knows black swans get lonely?! Like they’re unqiue but they do come in pairs… Philosophical intrigue galore.

Black Swan At Bavarian Palace Seeks Partner (DW)

The Rosenau Palace in southern Germany has published a lonely hearts ad on behalf of its resident black swan. Ground keepers believe the bird’s former companion was eaten by a fox. The department that oversees state-owned palaces, gardens and lakes in the southern state of Bavaria sent out its rather unusual appeal to the public on Thursday. “The sex of the animal isn’t important,” a message on the department’s website read. “Ideally it should be more than three years old, but this isn’t an absolute must.” The department has been on the lookout for a match since May, when one of the two black swans that lived in the palace grounds disappeared. Palace gardeners later found bones and feathers in one of the park’s bushes. “He was probably eaten by a fox,” the department concluded.

Rosenau garden department head Steffen Schubert has been sending out enquiries every day to try and locate a candidate – without success. Finding a replacement isn’t just about sparing the surviving swan from loneliness, he says. “Swans have a special significance in the history of Rosenau Palace and park,” he said. Black swans were reportedly first introduced to the palace grounds by Britain’s Queen Victoria as a symbol of mourning following the premature death of her husband Prince Albert, who was born at Rosenau Palace in 1819. The royals visited the palace together in 1845, five years after they were married. In her memoirs, the queen wrote: “If I were not who I am, this would be my real home.” The palace, near the town of Coburg in northern Bavaria, is home to Swan Lake and Prince’s Pond.

In its statement, the department said the new swan would have a good life, with a 2-hectare lake and a newly built “swan house” at its disposal. In the chillier months, the birds also have winter quarters with water access and are fed every day. The department said it would go itself to pick up the bird if a member of the public was willing to donate a swan to the grounds. “We hope our swan does not have to be alone for too long,” a spokeswoman for the palace management told German news agency DPA.

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Aug 102017
 
 August 10, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , ,  1 Response »
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Dorothea Lange Rooms for Rent, Mission District. Slums of San Francisco, California 1936

 

An Indicator of Peril (Lebowitz)
Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)
US Still Stuck Firmly In The Great Recession (BI)
10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)
This $5 Trillion Time Bomb Will Devastate Americans (IM)
New Report Raises Big Questions About Last Year’s DNC Hack (N.)
Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)
European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)
Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

 

 

“The data point, Real Value Added, is currently in negative territory and may, therefore, be a harbinger of an economic downturn. If it is a false signal, it would be the first in a 70-year history of observations.”

An Indicator of Peril (Lebowitz)

Gross Value Added (GVA) and Real Value Added (RVA). GVA is a measure of economic activity, like GDP, but formulated from the production side of the economy. It measures the dollar value of all goods and services produced less all the costs required to produce those goods or services. For example, if 720Global buys $100 worth of wood, $20 worth of other materials and employs $30 worth of labor to build a chair, we have produced a good for $150. If that good is sold for $200, 720Global has created $50 of economic value. Gross Domestic Product (GDP), the more popular measure of economic activity, calculates the level of commerce based on the dollar value of the final goods and services produced. It may help to think of GDP as economic activity measured from the demand side and GVA as measured from the supply side.

Despite the differences, the levels of economic activity reported are remarkably consistent. Since 1948, nominal GDP has averaged annual growth of 6.55% while GVA has averaged 6.50%. It is important to note that, while they track each other very well over the longer term, they are less correlated quarter to quarter. Economists prefer to measure economic activity without the effect of inflation. If inflation were rampant when making the chair in the example above, some of the incremental value was due to the general trend of rising prices and not value added by 720Global. To strip out the effect of inflation and compute a pure measure of value added, it is commonplace to subtract inflation from GVA. The result is Real Value Added (RVA = GVA less CPI). The graph below plots RVA since 1948. Periods deemed recessionary by the National Bureau of Economic Research (NBER) are denoted in gray.

Currently, three of the last four quarters have produced negative RVA levels. Real GDP is not producing similar results, having averaged 2% growth over the same quarters. As mentioned earlier, RVA and Real GDP may not be well correlated over short time frames. RVA is just one source of data arguing that economic trouble lies ahead, therefore, we would be wise not to read too much into this one indicator. Of concern, however, is that negative RVA readings have an impeccable pattern of signaling recession as a coincident indicator.

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Debt ceiling solution far from done.

Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)

Rudy Penner, the former director of the Congressional Budget Office and the person described by MarketNews international as “one of Washington’s most respected fiscal policy experts”, told MNI Wednesday in an exclusive interview that he expects a “very scary” fall 2017 due to fiscal issues, with market-disrupting battles ahead on both the debt ceiling and fiscal year 2018 spending. Penner directed the CBO under president Reagan, worked at high level posts in the White House budget office, and the Council of Economic Advisers. He is currently a fellow at the Urban Institute and sits on the board of the Committee for a Responsible Federal Budget. “There are so many politically hard issues and so little consensus on budget and tax policy. I assume we’ll somehow get through this, but not without getting frightened on a regular basis,” Penner said.

“Probably the best we can hope for is muddling through the (FY 2018) budget and the debt limit and getting very limited health, tax, and infrastructure legislation. There is not going to be significant stimulus coming out of Washington in the foreseeable future,” he said, echoing what many other pundits have said before. Penner said a “bipartisan negotiation is badly needed” to forge even a limited FY 2018 spending agreement. But he’s not certain this will occur. “Even a very limited spending agreement might be an impossible dream. We may just stumble into a series of short-term CRs,” he said, referring to temporary spending bills to keep the government funded. While the “record polarization” rhetoric is familiar, the clock is starting to tick ever louder: the 2018 fiscal year begins on October 1, 2017 and extends until September 30, 2018. None of the 12 annual spending bills for FY 2018 have yet been approved by Congress.

On to the debt ceiling, the one item on the calendar which Morgan Stanley (and others) have said will be the biggest hurdle for the market in the next two months, Penner said he believes it will be “very challenging” for Congress to pass legislation this fall to increase the statutory debt ceiling. Treasury Secretary Steve Mnuchin has asked Congress to lift the debt ceiling by the end of September. Penner countered that a “plausible path” for dealing with the debt ceiling is to pass legislation in September to suspend the debt ceiling until after the November 2018 mid-term elections. However, such legislation, he said, may have to be negotiated by an unusual coalition assembled by House Speaker Paul Ryan, a Republican, and House Minority Leader Nancy Pelosi, a Democrat. Such an agreement, Penner said, “could put Speaker Ryan’s job in peril” by conservative Republicans who oppose it. He said he believes the debt ceiling is “an incredibly stupid law that makes no logical sense.”

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What happens when you save banks only.

US Still Stuck Firmly In The Great Recession (BI)

Expectations are everything, especially in economics. That’s why a distinct lack of progress in a few basic measures of economic progress, particularly relative to pre-crisis expectations, has left many Americans questioning how much they have personally benefitted from the economic recovery. A new report from the Roosevelt Institute, a liberal think tank in Washington, highlights a number of ways in which “the recovery since 2009 is, in a sense, a statistical illusion.” The study finds the nation’s total economic output, its gross domestic product, “remains about 15% below the pre-recession trend, a larger gap than at the bottom of the recession.” The first chart below shows that lag, while the second offers insights into just how badly the crisis dented expectations about the future.

Strong employment gains in recent months have brought the jobless rate down to a historically-low 4.3%. However, this decline has not been accompanied by rising incomes or consumer prices, generally associated with a sustainable economic boom. Some Federal Reserve policymakers have found this trend puzzling, while many labor economists point to underlying weaknesses in the job market, including high levels of underemployment and long-term joblessness, as drags on income. Stagnant wages amid rising profits have meant that the wage share in US national income has fallen from 63% to 57% in the last 15 years, according to the report. “It is impossible for the wage share to ever rise if the central bank will not allow a period of ‘excessive’ wage growth,” writes J.W. Mason, who authored the report. “A rise in the wage share necessarily requires a period in which wages rise faster than would be consistent with longterm macroeconomic stability.”

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Zombie-to-be economies.

10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)

Speaking to RT, Keen said another financial crisis could be just around the corner unless a fundamentally different approach to debt is adopted. He says we are too focused on government debt, when what actually caused the crisis was “run-away private debt.” “The economy in the UK is not stable. It’s in the aftermath of the biggest financial crisis since the great depression, and there’s still a lack of awareness in the political classes about what actually caused the crisis in the first place,” Keen said. “The Tories were incredibly successful in convincing the electorate that the crisis was caused by government spending, which is absurd. That is technically saying government spending in the UK caused the financial crisis in the United States. Which is just nonsense. “And that gave us austerity for the last 10 years. That austerity has actually further weakened the economy.”

Keen says the level of private debt in the UK peaked at about 195% of GDP post-crisis. While it is now down to about 170% of GDP, it is roughly three times the level of debt England carried before the Margaret Thatcher era, he says. “That’s the stuff that’s being ignored. Nothing is really being done about that. With the amount of debt just sitting there we are still likely to have another crisis – but more likely, we are going to have stagnation.” What is cause for concern, Keen says, is what he calls the “zombie-to-be” economies, such as Australia, Belgium, China, Canada, and South Korea, which avoided the 2008 crisis by borrowing their way through it. Now they have a bigger debt burden to deal with when the next crisis hits, which could be between 2017 and 2020, he says.

“[The ‘zombie-to-be’ economies] are roughly equivalent in size to the American economy. So when they fall, then there will be a crisis that affects the rest of the world, including the UK.” Keen sees China as a terminal case. It has expanded credit at an annualized rate of around 25% for years on end. With private sector debt exceeding 200% of GDP, China resembles the over-indebted economies of Ireland and Spain prior to 2008. He also has little hope for his native Australia, whose credit and housing bubbles failed to burst in 2008. Last year, Australian private sector credit nudged above 200% of GDP, up more than 20 percentage points since the global financial crisis. Australia shows “that you can avoid a debt crisis today only by putting it off until tomorrow,” Keen says.

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Pensions.

This $5 Trillion Time Bomb Will Devastate Americans (IM)

Over 3,000 millionaires have fled Chicago in recent months. This is the largest outflow of wealthy people from any US city right now. It’s also one of the largest outflows of wealthy people in the world. But it’s not just millionaires… Every five minutes someone leaves Illinois. In a recent poll, 47% of people in Illinois said they want to leave the state. Over the last decade, more than half a million people have done just that. This is the largest outflow of people from any state in the country. The people who leave are generally better educated, more skilled, and earn more money than those who stay. Entire towns of affluent Illinois refugees have sprouted up in Florida, Arizona, and other states. Illinois is bleeding productive people. This is a major warning sign. Wealthy people are often the first to leave a bad situation. They have the means to simply get up and go.

And when they do, they take their money and their businesses with them. This hurts the local property market and the rest of the local economy. Many of Illinois’ millionaires own businesses that employ large numbers of people. As they leave, there are fewer people and businesses left to shoulder the state’s enormous and growing financial burdens. Many of these people are leaving for one simple reason: rising taxes. Illinois’ leftist tax-and-spend politicians are continuing to increase all sorts of taxes, which were already high in the first place. The state just passed a 32% income tax hike. Rising taxes are pushing more and more productive people to make the chicken run… and at the worst possible moment for the state’s coffers. Illinois is the most financially distressed state in the US. Every month, it spends $600 million more than it takes in.

It’s now $15 billion behind on its bills and counting. Illinois is about to become America’s first failed state. Even its governor has described it as a “banana republic.” Today, Illinois can’t pay contractors to fix the roads. It doesn’t have enough cash to pay lottery winners. (What happened to the money it collected selling lottery tickets?) The state can’t even afford food for its prisoners. Here are the sad facts. Illinois has: Nearly $15 billion in overdue bills (including $800 million in interest). A $7 billion budget deficit. And an eye-watering $250 billion bottomless pit of unfunded pension obligations. This $250 billion tab is one of the worst public pension crises in the US.

[..] While Illinois has the worst pension situation, it’s not the only state or city in crisis. California’s public pension system is also broken beyond repair. It’s $750 billion underfunded. State pension plans in Connecticut, Pennsylvania, New Jersey, and many other states are taking on water, too. Unfunded public pension liabilities in the US have surpassed $5 trillion. And that’s during an epic stock and bond market bubble.

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A long overview of all the evidence.

New Report Raises Big Questions About Last Year’s DNC Hack (N.)

It is now a year since the Democratic National Committee’s mail system was compromised—a year since events in the spring and early summer of 2016 were identified as remote hacks and, in short order, attributed to Russians acting in behalf of Donald Trump. A great edifice has been erected during this time. President Trump, members of his family, and numerous people around him stand accused of various corruptions and extensive collusion with Russians. Half a dozen simultaneous investigations proceed into these matters. Last week news broke that Special Counsel Robert Mueller had convened a grand jury, which issued its first subpoenas on August 3. Allegations of treason are common; prominent political figures and many media cultivate a case for impeachment.

The president’s ability to conduct foreign policy, notably but not only with regard to Russia, is now crippled. Forced into a corner and having no choice, Trump just signed legislation imposing severe new sanctions on Russia and European companies working with it on pipeline projects vital to Russia’s energy sector. Striking this close to the core of another nation’s economy is customarily considered an act of war, we must not forget. In retaliation, Moscow has announced that the United States must cut its embassy staff by roughly two-thirds. All sides agree that relations between the United States and Russia are now as fragile as they were during some of the Cold War’s worst moments. To suggest that military conflict between two nuclear powers inches ever closer can no longer be dismissed as hyperbole.

All this was set in motion when the DNC’s mail server was first violated in the spring of 2016 and by subsequent assertions that Russians were behind that “hack” and another such operation, also described as a Russian hack, on July 5. These are the foundation stones of the edifice just outlined. The evolution of public discourse in the year since is worthy of scholarly study: Possibilities became allegations, and these became probabilities. Then the probabilities turned into certainties, and these evolved into what are now taken to be established truths. By my reckoning, it required a few days to a few weeks to advance from each of these stages to the next. This was accomplished via the indefensibly corrupt manipulations of language repeated incessantly in our leading media.

Read more …

America still ignores its no. 1 Russia expert.

Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)

Considering all these unprecedented factors, it needs to be emphasized again: President Trump is right about this “all-time low & very dangerous” moment in US-Russian relations. Having recently returned from Russia, Cohen reports that the political situation there is also worsening, primarily because of the Cold War fervor in Washington, including the politics of Russiagate and and new sanctions. Contrary to opinion in the American political-media establishment, Putin has long been a moderate, restraining factor in the new Cold War, but his political space for moderation is rapidly diminishing. His reaction to the congressional sanctions—reducing the number of personnel in US official outposts in Russia to the far lesser number of Russians in American ones—was the least he could have done.

Far harsher political and economic countermeasures are being widely discussed in Moscow, and urged on Putin. For now, he resists, explaining, “I do not want to make things worse,” but he too has a surrounding political elite and it is playing a growing role against any accommodation or restraint in regard to US policy. Meanwhile, the pro-American faction in Russian governmental circles is being decimated by Washington’s actions; and, as always happens in times of escalating Cold War, the space for Russian opposition and other dissident politics is rapidly shrinking.

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Well, if you build yourselves €1 billion offices, who cares?

European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)

Jean-Claude Juncker and his top officials are spending tens of thousands of euros on chartering private planes, according to documents detailing the European commission’s travel expenses. After three years of battling with transparency campaigners fighting for full disclosure, the EU’s executive has released two months of travel costs for 2016, revealing regular use of chartered planes to transport Brussels’ 28 commissioners. The most expensive mission for which details have been released was in the name of Federica Mogherini, the EU’s high representative for foreign affairs. It cost €77,118 for her and aides to travel by “air taxi” to summits in Azerbaijan and Armenia between 29 February and 2 March 2016.

A two-day visit by Juncker, the European commission president, with a delegation of eight people to see Italy’s political leaders in Rome in February 2016 cost €27,000, again due to the chartering of a private plane. Mina Andreeva, a commission spokeswoman, said the use of air taxis was only allowed where commercial flights were either not available or their flight plans did not fit in with a commissioner’s agenda. Security concerns would also allow the chartering of a private plane under commission rules. She said of Juncker’s trip that there had been “no available commercial plane to fit the president’s agenda” in Italy, where he met the Italian president and prime minister, among other dignitaries. The spokeswoman added that the EU’s total spending on such administrative costs was publicly available and that the organisation led the way in being transparent in their work.

The commission was not able to provide details of how many planes are chartered by Brussels every year, although she insisted the number was limited. The travel costs accumulated by the commissioners come out of the general budget, agreed by the member states. [..] According to documents relating to the two months in 2016, total travel and accommodation costs for visits by commissioners to European parliament sessions in Strasbourg, the World Economic Forum in Davos and official missions to countries came to €492.249, an average of €8,790 a month per commissioner.

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That’ll teach them to stay home.

Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

The migrant crisis has increased the risk of slavery and forced labour tainting supply chains in three-quarters of EU countries over the past year, researchers have found. Romania, Italy, Cyprus and Bulgaria – all key entry points into Europe for migrants vulnerable to exploitation – were identified by risk analysts as particularly vulnerable to slavery and forced labour. The annual modern slavery index, produced by Verisk Maplecroft, assessed the conditions that make labour exploitation more likely. Areas covered by the index include national legal frameworks and the severity, and frequency, of violations. Countries outside Europe, such as North Korea and South Sudan, were judged to be at the greatest risk of modern slavery, but the researchers said the EU showed the largest increase in risk of any region over the past year.

“In the past, the slavery story has been in supply chains in countries far away, like Thailand and Bangladesh,” said Dr Alexandra Channer, a human rights analyst at Verisk Maplecroft. “But it is now far closer to home and it something that consumers, governments and businesses in the EU have to look out for. With the arrival of migrants, who are often trapped in modern slavery before they enter the workplace, the vulnerable population is expanding.” The International Labour Organisation estimates that 21 million people worldwide are subject to some form of slavery. The biggest global increase in the risk of slavery was in Romania, which rose 56 places in the indexand is the only EU country classified as “high risk”. Turkey came a close second, moving up 52 places, from medium risk to high risk.

The influx of hundreds of thousands of Syrians fleeing war, combined with Turkey’s restrictive work permit system, has led to thousands of refugees becoming part of an informal workforce, said the study. The government, which is focused on political crackdown, does not prioritise labour violations, further adding to the risk. Over the past year, several large brands from Turkish textile factories have been associated with child labour and slavery. The picture in Romania is more complex, researchers said. The country’s high risk category reflects more severe and frequent instances of modern slavery, but also reflects a greater number of criminal investigations in Romania, usually in collaboration with EU enforcement authorities. Both Romania and Italy, which rose 17 places, have the worst reported violations in the EU, including severe forms of forced labour such as servitude and trafficking, the study said.

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Aug 092017
 
 August 9, 2017  Posted by at 5:20 pm Finance Tagged with: , , , , , , ,  21 Responses »
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Jean-Michel Basquiat Self Portrait 1982

 

A Guardian headline today shouts: “Trump Has Taken Us To The Brink Of Nuclear War. Can He Be Stopped?”. And I’m thinking that is such obvious nonsense, how dare you print it? The North Korea nuke build up has been going on for decades, and neither Bill Clinton nor George W. Bush nor Obama ever took any decisive actions against it. And now it all falls into Trump’s lap. But that doesn’t mean he’s ‘taken us’ anywhere at all. The last thing Trump wants is this.

It’s not the last thing people like John McCain want, however. Who said about Trump’s “fire and fury” threat to Kim Jong-un that you shouldn’t make that threat unless you’re willing to execute it. Yeah, that’s exactly what McCain and Lindsey Graham and their entire entourage of friends and servants on Capitol Hill have been looking for for ages: war. And they see this in the same way that their peers saw Grenada in the Reagan era.

Small country, no challenge, good publicity. But Kim, crazy as he may or may not be, has learned a few lessons on the way. Cheney, W. and Rumsfeld ‘regime-changed’ Saddam Hussein, and Obama/Hillary ‘came saw and he died’ Gaddafi. They got offed before they could develop nukes. Kim knows that’s the dividing line. Sure, as I said, he may be crazy, but then everybody in this movie is.

That “Trump Has Taken Us To The Brink Of Nuclear War” line is based on da Donald’s “fire and fury” comment. But that is just him trying to talk to Kim in his own language. It was my first thought as soon as I heard it. Every other approach has failed, try this. My second thought was it was directed as much against Beijing as it was against Kim: Xi Jinping, once again, you have to stop this.

Xi has taken notice. He has a crucial Communist Party convention looming this fall, and he can’t afford to have a war in his backyard. He just didn’t have a reason to prevent it before. A few hours after Trump’s “fire and fury”, North Korea released a Canadian prisoner sentenced to hard labor for life. Coincidence? That’s not likely.

What Trump, what America, would need right now is open conversation with Putin, who can make or break things in the area. But given the recent sanctions etc., he doesn’t have much incentive. And the White House has few channels left to communicate with the Kremlin, because every single phone line is under investigation from one grand jury or another, and no line can be trusted to be secret anymore.

That hampers Trump and his people, but it even more hampers Putin in expressing his opinions. At the very moment, when there are nuclear threats being openly, publicly, bandied around, and the US Congress has tied its president’s hands in a very questionable fashion, which makes it impossible for him to talk to the one nuclear power in the world that matters.

The strange, and worrisome, thing about the ‘Orwellian’ 99% vote to take Trump’s powers away from him when it comes to communicating with Putin is that Capitol Hill decided to take it away, only to endorse itself with it. While you can discuss into the wee hours and then some what a US president’s powers should be, and what not, for any political ‘entity’ to vote another’s entity only to have it fall upon itself is legally dangerous.

And that’s not just because John McCain has seemed hellbent on ending his life with a big bang, forever. It’s even more because Capitol Hill has proven that it can effectively strangulate any president it doesn’t like, even if the American people have voted him/her in.

The very ironic consequence, at some point we wish will never come, would be that if Da Donald wants to strike Kim with anything at all, he’ll have to ask McCain and Graham for permission. And they will say: of course: when can we do it, can we do a little bit more just to be sure?

But if Trump wants to prevent that war, be it conventional or nuclear, who does he have to turn to? Not McCain and Graham, McDonnell, that set. They’re lost in the pockets of the military-industrial complex. As are Hillary and Obama and whatever is left after the Democrats go through a court-induced DNC fall-cleaning. They are paid by the exact same sources.

So who? The generals he’s surrounded himself with in the West Wing? Come to think of it, they may be the only sane voices left in Washington. But at the same time, does that feel like a real confidence booster?

Look, America, there are a 100,000 things wrong with Trump. But he is your president. And even if the whole Robert Mueller dig ever gets anywhere, it may first of all be too late, second of all lead to absolute mayhem if any impeachment process gets anywhere, and third of all have you end up with something far worse, president Pence, president Hillary, whatever.

What little-big-boy Kim should be telling you is that it’s time to support your president, no matter how flawed and despicable you think he may be. Because, and this is not the first time I’ve said this, he may well be the only thing standing between you and war. And don’t listen to the voices who claim he’s eager to start it. Or at least don’t listen only to them.

There’s a real chance that Trump will start a war somewhere, but it won’t be because he wants one. Other people in Washington do though. Just about all of them, given that 99% vote on Russia sanctions.

It is time to support your president, America. Not because you like him, or because you agree with him. But because your country elected him and because if you don’t, god help you.