Raúl Ilargi Meijer

Jun 272017
 
 June 27, 2017  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Egon Schiele Port of Trieste 1907

 

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)
Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)
US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)
Democrats Help Corporate Donors Block California Single-Payer (IBT)
Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)
Europe’s Inequality Highly Destabilizing – Draghi (R.)
Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)
ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)
Europe’s Gradualist Fallacy (Varoufakis)
Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda
Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)
Brazil Top Prosecutor Charges President With Bribery (AFP)
The Technicolor Swan (Jim Kunstler)
California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

 

 

What a great idea to try and prevent the US President from talking to other world leaders (i.e. doing his job).

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)

President Donald Trump is eager to meet Russian President Vladimir Putin with full diplomatic bells and whistles when the two are in Germany for a multinational summit next month. But the idea is exposing deep divisions within the administration on the best way to approach Moscow in the midst of an ongoing investigation into Russian meddling in the U.S. elections. Many administration officials believe the U.S. needs to maintain its distance from Russia at such a sensitive time – and interact only with great caution. But Trump and some others within his administration have been pressing for a full bilateral meeting. He’s calling for media access and all the typical protocol associated with such sessions, even as officials within the State Department and National Security Council urge more restraint, according to a current and a former administration official.

Some advisers have recommended that the president instead do either a quick, informal “pull-aside” on the sidelines of the summit, or that the U.S. and Russian delegations hold “strategic stability talks,” which typically don’t involve the presidents. The officials spoke anonymously to discuss private policy discussions. The contrasting views underscore differing views within the administration on overall Russia policy, and Trump’s eagerness to develop a working relationship with Russia despite the ongoing investigations. Asked about the AP report that Trump is eager for a full bilateral meeting, Putin’s spokesman Dmitry Peskov told reporters in Moscow on Monday that “the protocol side of it is secondary.” The two leaders will be attending the same event in the same place at the same time, Peskov said, so “in any case there will be a chance to meet.”

Peskov added, however, that no progress in hammering out the details of the meeting has been made yet. There are potential benefits to a meeting with Putin. A face-to-face meeting can humanize the two sides and often removes some of the intrigue involved in impersonal, telephone communication. Trump — the ultimate dealmaker — has repeatedly suggested that he can replace the Obama-era damage in the U.S.-Russia relationship with a partnership, particularly on issues like the ongoing Syria conflict. There are big risks, though. Trump is known to veer off-script, creating the possibility for a high-stakes diplomatic blunder. In a brief Oval Office meeting with top Russian diplomats last month, Trump revealed highly classified information about an Islamic State group threat to airlines that was relayed to him by Israel, according to a senior administration official. The White House defended the disclosures as “wholly appropriate.”

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Here’s why people don’t want Trump to talk to Putin.

Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)

Three CNN journalists who worked on a now-retracted story about Russia and a top Trump adviser are leaving the network. CNN is casting their departure as resignations in the wake of the fiasco, but the network has come under substantial criticism since apologizing for the story. The move would also help CNN’s legal position in case of a lawsuit. Anthony Scaramucci, the Trump adviser who is the target of the story, told me that he has no plans to sue. He said he has accepted CNN’s apology and wants to move on. But Scaramucci also told me in an earlier interview, “I was disappointed the story was published. It was a lie.” Lex Harris, executive editor of CNN’s investigative unit, was the highest-ranking official to resign. Thomas Frank, who wrote the story, and Eric Lichtblau, who edited it, also turned in their resignations.

Lichtblau is a highly regarded reporter who spent nearly a decade and a half at the New York Times. The story tried to draw a link between Scaramucci and the Russian Direct Investment Fund. Scaramucci was a Trump transition team member who has been nominated to an ambassadorial-level post based in Paris. The CNN.com article said that Scaramucci, back in January, held a secret meeting with an official from the Russian fund. According to an unnamed source, Scaramucci discussed the possibility of lifting U.S. sanctions at the meeting. But Scaramucci told me there was no secret meeting. He said he had given a speech on Trump’s behalf at Davos, and fund official Kirill Dmitriev approached him in a restaurant to say hello and they had a brief conversation, with no discussion of sanctions. In the retraction, the network said the story “did not meet CNN’s editorial standards.” The network is now requiring approval from two top editors before any Russia-related story can be published.

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Amazing how easy it can be. Now make it permanent.

US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)

The Republican chairman of the Senate foreign relations committee has said the US Congress will hold up approval of arms sales to the Gulf as a result of the Saudi-led blockade of Qatar. Senator Bob Corker said the nations of Gulf Cooperation Council had failed to take advantage of a summit with President Trump in May to overcome their differences and had “instead chosen to devolve into conflict”. Corker continued: “For these reasons, before we provide any further clearances during the informal review period on sales of lethal military equipment to the GCC states, we need a better understanding of the path to resolve the current dispute and reunify the GCC.”

Earlier this month, the Senate narrowly fended off a bid to block a Trump administration plan to sell Saudi Arabia $500m in precision-guided munitions, part of a proposed $110bn arms sales package announced during the president’s visit to Riyadh last month. Congress has the power to block individual sales during a 30-day review period from when the state department gives notification of an impending sale. A Saudi-led coalition that includes Egypt, the United Arab Emirates and Bahrain cut ties with Qatar on 5 June, but only provided a justification 18 days later with the presentation of a list of 13 demands. They want Doha to close the al-Jazeera TV channel, restrict diplomatic ties with Iran, halt the construction of a Turkish military base in the country, and sever contacts with extremist organisations.

Qatar has been given 10 days to meet the demands, but the Saudi-led group has not said what action it would take if the deadline is not met. The US has sent mixed signals on the standoff. In the immediate aftermath of the embargo, Trump gave Riyadh and its allies fulsome support, echoing Saudi claims about Qatari funding for terrorism. However, Rex Tillerson, the secretary of state, last week called on the coalition present its complaints and negotiate a solution. Since the list of 13 demands was presented, Tillerson has been non-committal, observing that some of them would be “very difficult for Qatar to meet”, but arguing there were “significant areas which provide a basis for ongoing dialogue leading to resolution.”

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David Sirota: “Jerry Brown campaigned for president supporting single-payer, then he got big cash from insurers/drugmakers, now he refused to back the bill.”

Single payer is the only thing that can save US health care. But all sides are in debt to the very interests who will block it.

Democrats Help Corporate Donors Block California Single-Payer (IBT)

As Republican lawmakers grapple with their unpopular bill to repeal Obamacare, Democrats have tried to present a united front on health care. But for all their populist rhetoric against insurance and drug companies, Democratic powerbrokers and their allies remain deeply divided on the issue — to the point where a political civil war has spilled into the open in America’s largest state. In California last week, Democratic state Assembly Speaker Anthony Rendon helped his and his party’s corporate donors block a Democrat-sponsored bill to create a universal health care program in which the government would be the single payer. Rendon’s decision shows how progressives’ ideal of universal health care remains elusive — even in a liberal state where government already foots 70% of the total health care bill.

Until Rendon’s move, things seemed to be looking up for Democratic single-payer proponents in deep blue California, which has been hammered by insurance premium increases. There, the Democratic Party — which originally created Medicare — just added a legislative supermajority to a Democratic-controlled state government that oversees the world’s sixth largest economy. That 2016 election victory came as a poll showed nearly two-thirds of Californians support the creation of a taxpayer-funded universal health care system in a state whose population is roughly the size of Canada — which already has such a system. California’s highest-profile federal Democratic lawmaker recently endorsed state efforts to create single-payer systems, and 25 members of its congressional delegation had signed on to sponsor a federal single-payer bill.

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They missed everything so far, but now we need them.

Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)

Former chairman of the Federal Reserve Ben Bernanke said Monday that economists have a “responsibility” to help address populist frustrations. “The credibility of economists has been damaged by our insufficient attention, over the years, to the problems of economic adjustment and by our proclivity toward top-down, rather than bottom-up, policies,” Bernanke, now distinguished fellow in residence, Brookings Institution, said in prepared remarks for a dinner speech called “When growth is not enough.” “Nevertheless, as a profession we have expertise that can help make the policy response more effective, and I think we have a responsibility to contribute wherever we can,” the former Fed chair said.

In the last 18 months, growing populist sentiment contributed to the UK’s surprise vote to leave the European Union last June, and the election of U.S. President Donald Trump last November. Trump promised to bring jobs back from China and Mexico to the U.S., winning him support. The U.S. Census Bureau’s latest report on household income showed the Gini index of income inequality for the U.S. in 2015 of 0.482 was significantly higher than the prior year’s 0.480. “This increase suggests that income inequality increased across the country,” the report said. “Policymakers in recent decades have been slow to address or even to recognize those trends, an error of omission that has helped fuel the voters’ backlash,” Bernanke said. He was speaking at the European Central Bank’s Forum on Central Banking in Sintra, Portugal.

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Bernanke and Draghi greatly increased inequality with their ZIRP and NIRP policies. And today both all of a sudden come out as being worried about it?

Europe’s Inequality Highly Destabilizing – Draghi (R.)

Europe’s growing inequality is highly destabilizing and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, ECB President Mario Draghi said on Monday. Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc’s richer and poorer members, a source of tension for the 19-member currency bloc. “Is this a seriously destabilizing factor that we should cope with?” Draghi said in a rare town-hall style meeting with university students in Lisbon. “Yes it is.” “We have to fight against inequality,” Draghi in response to a student question. Draghi, leading one of Europe’s most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity.

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. Figures also show the highest level of income inequality in the bloc’s periphery, like Greece, Spain and Portugal, hit hardest by the crisis. Calling convergence among euro zone members “fundamental,” Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. He also called on governments to consider better income and wealth redistribution policies. Defending the ECB’s ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality. He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.

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Here’s how ZIRP creates more inequality.

Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)

Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit. Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest. There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes. The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.

This is the magic of fractional reserve lending. The bank is only required to hold a small%age of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves. This is a simplified version of how money is created and issued, but it helps us understand why centrally issued and distributed money concentrates wealth in the hands of those with access to the centrally issued credit and those who have the privilege of leveraging every $1 of cash into $19 newly created dollars that earn interest. Imagine if we each had a relatively modest $1 million line of credit at 0.25% interest from a central bank that we could use to issue loans of $19 million.

Let’s say we issued $19 million in home loans at an annual interest rate of 4%. The gross revenue (before expenses) of our leveraged $1 million would be $760,000 annually –let’s assume we net $600,000 per year after annual expenses of $160,000. (Recall that the interest due on the $1 million line of credit is a paltry $2,500 annually). Median income for workers in the U.S. is around $30,000 annually. Thus a modest $1 million line of credit at 0.25% interest from the central bank would enable us to net 20 years of a typical worker’s earnings every single year. This is just a modest example of pyramiding wealth.

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So Draghi whines about inequality and at the same time makes sure Greece gets hammered even more economically. Does his ass know where his mouth is located?

ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)

The president of the European Central Bank, Mario Draghi, said on Monday that Greece will not join its quantitative easing program (QE) until international creditors specify what sort of debt relief measures the country can expect. “Until sufficient details are given on debt-related measures, serious concerns remain about the sustainability of Greek government debt,” he said in response to a question from Popular Unity (LAE) MEP Nikos Hountis over whether the ECB had completed its own debt sustainability analysis (DSA), and if it had come to any conclusions on the issue. Draghi said that ECB experts “are not currently in a position to complete a fully fledged DSA analysis of Greece’s public debt.” Up until very recently, Greece was banking on its inclusion in QE as a way to return to bond markets, which would put an end to its dependence on bailout programs.

If the ECB were to buy Greek debt it would boost the confidence of investors about the prospects of the Greek economy. But given Draghi’s comment on Monday and the failure of the government to secure more concrete language on debt relief at the Eurogroup on June 15, Athens now believes it can achieve the goal to enter bond markets without having to join QE. And it believes that it has three windows of opportunity to issue a bond in the period stretching from July until early next year. These three opportunities are, reportedly, in July, given the improved climate in international markets. The second chance will be at the end of September and beginning of October after German elections, while the third will be at the end of the year or early 2018, as predicted by the head of the European Stability Mechanism (ESM), Klaus Regling.

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Macron is Merkel’s messenger boy. France has nothing to say in the EU. That’s the essence of Europe’s problem.

Europe’s Gradualist Fallacy (Varoufakis)

Europe is at the mercy of a common currency that not only was unnecessary for European integration, but that is actually undermining the European Union itself. So what should be done about a currency without a state to back it – or about the 19 European states without a currency that they control? The logical answer is either to dismantle the euro or to provide it with the federal state it needs. The problem is that the first solution would be hugely costly, while the second is not feasible in a political climate favoring the re-nationalization of sovereignty. Those who agree that the cost of dismantling the euro is too high to contemplate are being forced into a species of wishful thinking that is now very much in vogue, especially after the election of Emmanuel Macron to the French presidency.

Their idea is that, somehow, by some unspecified means, Europe will find a way to move toward federation. “Just hang in there,” seems to be their motto. Macron’s idea is to move beyond idle optimism by gaining German consent to turn the eurozone into a state-like entity – a federation-lite. In exchange for making French labor markets more Germanic, as well as reining in France’s budget deficit, Germany is being asked to agree in principle to a common budget, a common finance ministry, and a eurozone parliament to provide democratic legitimacy. Macron knows that such a federation would be macroeconomically insignificant, given the depth of the debt, banking, investment, and poverty crisis unfolding across the eurozone. But, in the spirit of the EU’s traditional gradualism, he thinks that such a move would be politically momentous and a decisive step toward a meaningful federation.

“Once the Germans accept the principle, the economics will force them to accept the necessary magnitudes,” is how a French official put it to me recently. Such optimism may seem justified in light of proposals along those lines made in the past by none other than Wolfgang Schäuble, Germany’s finance minister. But there are two powerful reasons to be skeptical. First, Chancellor Angela Merkel and Schäuble were not born yesterday. If Macron’s people imagine a federation-lite as an entering wedge for full-blown political integration, so will Merkel, Schäuble, and the reinvigorated Free Democrats (who will most likely join a coalition government with Merkel’s Christian Democrats after the September federal election). And they will politely but firmly reject the French overtures.

Second, in the unlikely event that Germany gives federation-lite the go-ahead, any change to the functioning of the eurozone would, undoubtedly, devour large portions of the reformers’ political capital. If it does not produce economic and social results that improve, rather than annul, the chances of a proper federation, as I suspect it will not, a political backlash could ensue, ending any prospect of a more substantial federation in the future. In that case, the euro’s dismantling will become inevitable, will cost more, and will leave Europe in even greater shambles.

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Germany doesn’t care one bit about Macron’s agenda; they may pay lip service, but that’s it. In this particular case, do you think Germany wants an Italian bank collapse a few months before Merkel’s election?

Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda

Germany sounded the alarm over Italy’s latest bank bailout, saying the apparent bending of EU rules casts doubt on efforts to further integrate the euro zone. The government in Rome announced the country’s biggest bank rescue to date on Sunday evening as it committed as much as €17 billion ($19 billion) to clean up two failed banks. While the European Commission approved the plan, German officials pointed to the involvement of state aid to shield senior creditors from losses as working around EU law established to deal with bank failures. That exemption drew criticism from members of Chancellor Angela Merkel’s ruling coalition, who cited the need to uphold European law without setting unhealthy precedents.

“We’re in a phase where we are faced with the question of whether we can succeed at applying European law, irrespective of all the understandable domestic policy discussions,” Alexander Radwan, a lawmaker from Merkel’s CSU Bavarian sister party who sits on the Bundestag’s finance committee, said in an interview on Monday. “Cases like these make it more difficult to think about deepening the economic and monetary union.” The growing drumbeat for closer euro-area integration following Emmanuel Macron’s election in France is making some German lawmakers increasingly uneasy. Citing election results in France and the Netherlands this year that open “an opportunity for moving Europe forward,” Merkel has spoken of joint projects with France and left the door open to creating a euro-area budget and a joint finance minister.

“This decision discredits the further completion of the banking union and moves the common deposit-guarantee scheme into the distant future,” said Carsten Schneider, a deputy head of the Social Democrat caucus in Germany’s lower house. “It’s not acceptable that bank wind-downs under national rules offer better conditions for creditors than under the European regime.” Italy’s decision is “a grave mistake,” Schneider said in emailed comments to Bloomberg.

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Brussels hubris in its full splendor. (BRRD= Bank Recovery and Resolution Directive)

Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)

The bailout is dressed up as a rescue by a larger bank along the same lines as Santander’s recent acquisition for a nominal 1 euro of the insolvent Banco Popular. Like Santander, Intesa Sanpaolo, Italy’s second-biggest lender, will buy the two banks 1 euro. But there the similarity ends. Santander took on full responsibility for recapitalizing Banco Popular, for which it announced a 7bn euro rights issue. But Intesa isn’t taking financial responsibility for anything. The Italian government is paying Intesa about 5bn euros in cash to take over the two banks, and is additionally providing guarantees worth 12bn euros for the two banks’ bad assets. The total bailout amount is thus around 17bn euros, though according to the European Commission, the net cost will be much lower: Both guarantees and cash injections are backed up by the Italian State’s senior claims on the assets in the liquidation mass. Correspondingly, the net costs to the Italian State will be much lower than the nominal amounts of the measures provided.

The bailout imposes losses on the two banks’ shareholders and subordinated debtholders. But the all-important seniors have been spared, and small subordinated debtholders will be compensated by Intesa from the funds provided by the Italian government. The BRRD has effectively been sidestepped. Did the EU oppose this sleight of hand? Not a bit of it. In this statement, the European Commission approved the use of taxpayers’ funds to bail out these banks: “The Commission found these measures to be in line with EU State aid rules, in particular the 2013 Banking Communication. Existing shareholders and subordinated debt holders have fully contributed to the costs, reducing the cost of the intervention for the Italian State. Both aid recipients, BPVI and Banca Veneto, will be wound up in an orderly fashion and exit the market, while the transferred activities will be restructured and significantly downsized by Intesa, which in combination will limit distortions of competition arising from the aid.”

Remarkable. Winding up two banks in the Venetian area would cause massive economic disruption. So the solution is to create an effective banking monopoly in that area. And this doesn’t distort competition, apparently. I detect a distinct odor of Eurofudge. Italy’s decision, supported by the European Commission, tramples the BRRD to death. Senior creditors need never again fear losses due to a failing bank. If it is systemically important, it will be given a precautionary recapitalization at taxpayers’ expense. If it is not, an excuse will be found to bail it out at taxpayers’ expense. Either way, seniors and unsecured depositors are safe. That is, they are as safe as politicians want them to be. Italy is able to bail out these banks – and will no doubt in due course bail out others too – because it is a big country which can easily borrow the funds needed.

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“..”abundant” proof that the president received bribe money..”

Brazil Top Prosecutor Charges President With Bribery (AFP)

Brazil’s top prosecutor charged President Michel Temer with bribery on Monday, plunging Latin America’s biggest country into what could be prolonged new political turmoil. The bribery charge filed by Prosecutor General Rodrigo Janot swept Temer into the forefront of a giant graft scandal that has engulfed Latin America’s biggest country over the last three years. Although several past Brazilian presidents and scores of other politicians are currently being investigated for corruption in the “Car Wash” probe, Temer is the first leader in the country’s history to face criminal charges while still in office. Temer acted “in violation of his duties to the state and to society,” Janot wrote, citing “abundant” proof that the president received bribe money.

For Temer to go on trial, the lower house of Congress must first approve Janot’s charge by a two-thirds majority. Temer would then be suspended for six months for the trial. Janot is also probing Temer for alleged obstruction of justice and membership of a criminal group. He could file those charges at a later date, guaranteeing a sustained legal assault. However, Temer’s aides say they are confident he has sufficient support in Congress to get the charges thrown out. In his first comments since returning from a trip to Russia and Norway, the president was defiant. “There is no plan B,” he said at a ceremony to sign a new bill in the capital Brasilia. “Nothing will destroy us – not me and not our ministers.”

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Nothing black about it.

The Technicolor Swan (Jim Kunstler)

I registered as a Democrat in 1972 — largely because good ole Nixon was at the height of his power (just before his fall, of course), and because he was preceded as party leader by Barry Goldwater, who, at the time, was avatar for the John Birch Society and all its poisonous nonsense. The Democratic Party was still deeply imbued with the personality of Franklin Roosevelt, with a frosting of the recent memory of John F. Kennedy and his brother Bobby, tragic, heroic, and glamorous. I was old enough to remember the magic of JFK’s press conferences — a type of performance art that neither Bill Clinton or Barack Obama could match for wit and intelligence — and the charisma of authenticity that Bobby projected in the months before that little creep shot him in the kitchen of the Ambassador Hotel. Even the lugubrious Lyndon Johnson had the heroic quality of a Southerner stepping up to abolish the reign of Jim Crow.

Lately, people refer to this bygone era of the 1960s as “the American High” — and by that they are not talking about smoking dope (though it did go mainstream then), but rather the post World War Two economic high, when American business might truly ruled the planet. Perhaps the seeming strength of American political leaders back then was merely a reflection of the country’s economic power, which since has been squandered and purloined into a matrix of rackets loosely called financialization — a criminal magic act whereby wealth is generated without producing anything of value. Leaders in such a system are bound to be not just lesser men and women but something less than human. Hillary Clinton, for instance, lost the 2016 election because she came off as demonic, and I mean that pretty literally.

To many Americans, especially the ones swindled by the magic of financialization, she was the reincarnation of the little girl in The Exorcist. Donald Trump, unlikely as it seems — given his oafish and vulgar guise — was assigned the role of exorcist. Unlike poor father Merrin, he sort of succeeded, even to his very own astonishment. I say sort of succeeded because the Democratic Party is still there, infested with all its gibbering demons, but it has been reduced politically to impotence and appears likely to soon roll over and die. None of this is to say that the other party, the Republicans, have anything but the feeblest grip on credibility or even an assured continued existence. First of all there is Trump’s obvious plight as a rogue only nominally regarded as party leader (or even member).

Then there is the gathering fiasco of neither Trump nor his party being able to deliver remedies for any of the ills of our time that he was elected to fix. The reason for that is simple: the USA has entered Hell, or at least a condition that looks a lot like it. This is not just a matter of a few persons or a party being possessed by demons. We’ve entered a realm that is populated by nothing but demons — of our own design, by the way. Our politics have become so thoroughly demonic, that the sort of exorcism America needs now can only come from outside politics. It’s coming, too. It’s on its way. It will turn our economic situation upside down and inside out. It’s a Technicolor swan, and you can see it coming from a thousand miles out. Wait for it. Wait for it.

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It’s crazy that we’re still talking about this.

California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

Glyphosate, an herbicide and the active ingredient in Monsanto Co’s popular Roundup weed killer, will be added to California’s list of chemicals known to cause cancer effective July 7, the state’s Office of Environmental Health Hazard Assessment (OEHHA) said on Monday. Monsanto vowed to continue its legal fight against the designation, required under a state law known as Proposition 65, and called the decision “unwarranted on the basis of science and the law.” The listing is the latest legal setback for the seeds and chemicals company, which has faced increasing litigation over glyphosate since the World Health Organization’s International Agency for Research on Cancer said that it is “probably carcinogenic” in a controversial ruling in 2015.

Dicamba, a weed killer designed for use with Monsanto’s next generation of biotech crops, is under scrutiny in Arkansas after the state’s plant board voted last week to ban the chemical. OEHHA said the designation of glyphosate under Proposition 65 will proceed following an unsuccessful attempt by Monsanto to block the listing in trial court and after requests for stay were denied by a state appellate court and the California’s Supreme Court. Monsanto’s appeal of the trial court’s ruling is pending. “This is not the final step in the process, and it has no bearing on the merits of the case. We will continue to aggressively challenge this improper decision,” Scott Partridge, Monsanto’s vice president of global strategy, said.

Listing glyphosate as a known carcinogen under California’s Proposition 65 would require companies selling the chemical in the state to add warning labels to packaging. Warnings would also be required if glyphosate is being sprayed at levels deemed unsafe by regulators. Users of the chemical include landscapers, golf courses, orchards, vineyards and farms. Monsanto and other glyphosate producers would have roughly a year from the listing date to re-label products or remove them from store shelves if further legal challenges are lost.

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Jun 262017
 
 June 26, 2017  Posted by at 11:49 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Paul Klee Ghost of a Genius 1922

 

The Automatic Earth has written many articles on the topic of EROEI (Energy Return on Energy Invested) through the years, there’s a whole chapter on it in the Automatic Earth Primer Guide 2017 that Nicole assembled recently, which contains 17 different articles.

Still, since EROEI is the most important energy issue there is at present, and not the price of oil or some new gas find or a set of windmills or solar panels or thorium, it can’t hurt to repeat it once again, in someone else’s words and from someone else’s angle. This one comes from Brian Davey on his site CredoEconomics, part of his book “Credo”.

It can’t hurt to repeat it because not nearly enough people understand that in the end everything, the survival of our world, our way of life, is all about the ‘quality’ of energy, about what we get in return when we drill and pump and build infrastructure, what remains when we subtract all the energy used to ‘generate’ energy, from (or at) the bottom line.

Anno 2017, our overall ‘net energy’ is nowhere near where it was for the first 100 years or so after we started using oil. And there’s no energy source that comes close to -conventional- oil (and gas) when it comes to what we are left with once our efforts are discounted, in calories or Joules.

The upshot of this is that even if we can ‘gain’ 10 times more than we put in, in energy terms, that won’t save our complex societies. To achieve that, we would need at least a 15:1 ratio, a number straight from our friend Charlie Hall, which is probably still quite optimistic. And we simply don’t have it. Not anymore.

Also, not nearly enough people understand that it has absolutely nothing to do with money. That you can’t go out and buy more or better energy sources. Which is why we use EROEI instead of EROI (Energy Return on Investment), because the latter leaves some sort of financial interpretation open that doesn’t actually exist, it suggests that a financial price of energy plays a role.

First, here’s Nicole from the Automatic Earth Primer Guide 2017. Below that, Brian Davey’s article.

 

 

Nicole Foss: Energy is the master resource – the capacity to do work. Our modern society is the result of the enormous energy subsidy we have enjoyed in the form of fossil fuels, specifically fossil fuels with a very high energy profit ratio (EROEI). Energy surplus drove expansion, intensification, and the development of socioeconomic complexity, but now we stand on the edge of the net energy cliff. The surplus energy, beyond that which has to be reinvested in future energy production, is rapidly diminishing.

We would have to greatly increase gross production to make up for reduced energy profit ratio, but production is flat to falling so this is no longer an option. As both gross production and the energy profit ratio fall, the net energy available for all society’s other purposes will fall even more quickly than gross production declines would suggest. Every society rests on a minimum energy profit ratio. The implication of falling below that minimum for industrial society, as we are now poised to do, is that society will be forced to simplify.

A plethora of energy fantasies is making the rounds at the moment. Whether based on unconventional oil and gas or renewables (that are not actually renewable), these are stories we tell ourselves in order to deny that we are facing any kind of future energy scarcity, or that supply could be in any way a concern. They are an attempt to maintain the fiction that our society can continue in its current form, or even increase in complexity. This is a vain attempt to deny the existence of non-negotiable limits to growth. The touted alternatives are not energy sources for our current society, because low EROEI energy sources cannot sustain a society complex enough to produce them.

 

 

Using Energy to Extract Energy – The Dynamics of Depletion

 

Brian Davey: The “Limits to Growth Study” of 1972 was deeply controversial and criticised by many economists. Over 40 years later, it seems remarkably prophetic and on track in its predictions. The crucial concept of Energy Return on Energy Invested is explained and the flaws in neoclassical reasoning which EROI highlights.

The continued functioning of the energy system is a “hub interdependency” that has become essential to the management of the increasing complexity of our society. The energy input into the UK economy is about 50 to 70 times as great as what the labour force could generate if working full time only with the power of their muscles, fuelled up with food. It is fossil fuels, refined to be used in vehicles and motors or converted into electricity that have created power inputs that makes possible the multiple round- about arrangements in a high complex economy. The other “hub interdependency” is a money and transaction system for exchange which has to continue to function to make vast production and trade networks viable. Without payment systems nothing functions.

Yet, as I will show, both types of hub interdependencies could conceivably fail. The smooth running of the energy system is dependent on ample supplies of cheaply available fossil fuels. However, there has been a rising cost of extracting and refining oil, gas and coal. Quite soon there is likely to be an absolute decline in their availability. To this should be added the climatic consequences of burning more carbon based fuels. To make the situation even worse, if the economy gets into difficulty because of rising energy costs then so too will the financial system – which can then have a knock-on consequence for the money system. The two hub interdependencies could break down together.

“Solutions” put forward by the techno optimists almost always assume growing complexity and new uses for energy with an increased energy cost. But this begs the question- because the problem is the growing cost of energy and its polluting and climate changing consequences.

 

The “Limits to Growth” study of 1972 – and its 40 year after evaluation

It was a view similar to this that underpinned the methodology of a famous study from the early 1970s. A group called the Club of Rome decided to commission a group of system scientists at the Massachusetts Institute of Technology to explore how far economic growth would continue to be possible. Their research used a series of computer model runs based on various scenarios of the future. It was published in 1972 and produced an instant storm. Most economists were up in arms that their shibboleth, economic growth, had been challenged. (Meadows, Meadows, Randers, & BehrensIII, 1972)

This was because its message was that growth could continue for some time by running down “natural capital” (depletion) and degrading “ecological system services” (pollution) but that it could not go on forever. An analogy would be spending more than one earns. This is possible as long as one has savings to run down, or by running up debts payable in the future. However, a day of reckoning inevitably occurs. The MIT scientists ran a number of computer generated scenarios of the future including a “business as usual” projection, called the “standard run” which hit a global crisis in 2030.

It is now over 40 years since the original Limits to Growth study was published so it is legitimate to compare what was predicted in 1972 against what actually happened. This has now been done twice by Graham Turner who works at the Australian Commonwealth Scientific and Industrial Research Organisation (CSIRO). Turner did this with data for the rst 30 years and then for 40 years of data. His conclusion is as follows:

The Limits to Growth standard run scenario produced 40 years ago continues to align well with historical data that has been updated in this paper following a 30-year comparison by the author. The scenario results in collapse of the global economy and environment and subsequently, the population. Although the modelled fall in population occurs after about 2030 – with death rates reversing contemporary trends and rising from 2020 onward – the general onset of collapse first appears at about 2015 when per capita industrial output begins a sharp decline. (Turner, 2012)

So what brings about the collapse? In the Limits to Growth model there are essentially two kinds of limiting restraints. On the one hand, limitations on resource inputs (materials and energy). On the other hand, waste/pollution restraints which degrade the ecological system and human society (particularly climate change).

Turner finds that, so far it, is the former rather than the latter that is the more important. What happens is that, as resources like fossil fuels deplete, they become more expensive to extract. More industrial output has to be set aside for the extraction process and less industrial output is available for other purposes.

With signficant capital subsequently going into resource extraction, there is insufficient available to fully replace degrading capital within the industrial sector itself. Consequently, despite heightened industrial activity attempting to satisfy multiple demands from all sectors and the population, actual industrial output per capita begins to fall precipitously, from about 2015, while pollution from the industrial activity continues to grow. The reduction of inputs produced per capita. Similarly, services (e.g., health and education) are not maintained due to insufficient capital and inputs.

Diminishing per capita supply of services and food cause a rise in the death rate from about 2020 (and somewhat lower rise in the birth rate, due to reduced birth control options). The global population therefore falls, at about half a billion per decade, starting at about 2030. Following the collapse, the output of the World3 model for the standard run (figure 1 to figure 3) shows that average living standards for the aggregate population (material wealth, food and services per capita) resemble those of the early 20th century.(Turner, 2012, p. 121)

 

Energy Return on Energy Invested

A similar analysis has been made by Hall and Klitgaard. They argue that to run a modern society it is necessary that the energy return on energy invested must be at least 15 to 1. To understand why this should be so consider the following diagram from a lecture by Hall. (Hall, 2012)

eroei

The diagram illustrates the idea of the energy return on energy invested. For every 100 Mega Joules of energy tapped in an oil flow from a well, 10 MJ are needed to tap the well, leaving 90 MJ. A narrow measure of energy returned on energy invested at the wellhead in this example would therefore be 100 to 10 or 10 to 1.

However, to get a fuller picture we have to extend this kind of analysis. Of the net energy at the wellhead, 90 MJ, some energy has to be used to refine the oil and produce the by-products, leaving only 63 MJ.

Then, to transport the refined product to its point of use takes another 5 MJ leaving 58MJ. But of course, the infrastructure of roads and transport also requires energy for construction and maintenance before any of the refined oil can be used to power a vehicle to go from A to B. By this final stage there is only 20.5 MJ of the original 100MJ left.

We now have to take into account that depletion means that, at well heads around the world, the energy to produce energy is increasing. It takes energy to prospect for oil and gas and if the wells are smaller and more difficult to tap because, for example, they are out at sea under a huge amount of rock. Then it will take more energy to get the oil out in the first place.

So, instead of requiring 10MJ to produce the 100 MJ, let us imagine that it now takes 20 MJ. At the other end of the chain there would thus, only be 10.5MJ – a dramatic reduction in petroleum available to society.

The concept of Energy Return on Energy Invested is a ratio in physical quantities and it helps us to understand the flaw in neoclassical economic reasoning that draws on the idea of “the invisible hand” and the price mechanism. In simplistic economic thinking, markets should have no problems coping with depletion because a depleting resource will become more expensive. As its price rises, so the argument goes, the search for new sources of energy and substitutes will be incentivised while people and companies will adapt their purchases to rising prices. For example, if it is the price of energy that is rising then this will incentivise greater energy efficiency. Basta! Problem solved…

Except the problem is not solved… there are two flaws in the reasoning. Firstly, if the price of energy rises then so too does the cost of extracting energy – because energy is needed to extract energy. There will be gas and oil wells in favourable locations which are relatively cheap to tap, and the rising energy price will mean that the companies that own these wells will make a lot of money. This is what economists call “rent”. However, there will be some wells that are “marginal” because the underlying geology and location are not so favourable. If energy prices rise at these locations then rising energy prices will also put up the energy costs of production. Indeed, when the energy returned on energy invested falls as low as 1 to 1, the increase in the costs of energy inputs will cancel out any gains in revenues from higher priced energy outputs. As is clear when the EROI is less than one, energy extraction will not be profitable at any price.

Secondly, energy prices cannot in any case rise beyond a certain point without crashing the economy. The market for energy is not like the market for cans of baked beans. Energy is necessary for virtually every activity in the economy, for all production and all services. The price of energy is a big deal – energy prices going up and down have a similar significance to interest rates going up or down. There are “macro-economic” consequences for the level of activity in the economy. Thus, in the words of one analyst, Chris Skrebowski, there is a rise in the price of oil, gas and coal at which:

the cost of incremental supply exceeds the price economies can pay without destroying growth at a given point in time.(Skrebowski, 2011)

This kind of analysis has been further developed by Steven Kopits of the Douglas-Westwood consultancy. In a lecture to the Columbia University Center on Global Energy Policy in February of 2014, he explained how conventional “legacy” oil production peaked in 2005 and has not increased since. All the increase in oil production since that date has been from unconventional sources like the Alberta Tar sands, from shale oil or natural gas liquids that are a by-product of shale gas production. This is despite a massive increase in investment by the oil industry that has not yielded any increase in “conventional oil” production but has merely served to slow what would otherwise have been a faster decline.

More specifically, the total spend on upstream oil and gas exploration and production from 2005 to 2013 was $4 trillion. Of that amount, $3.5 trillion was spent on the “legacy” oil and gas system. This is a sum of money equal to the GDP of Germany. Despite all that investment in conventional oil production, it fell by 1 million barrels a day. By way of comparison, investment of $1.5 trillion between 1998 and 2005 yielded an increase in oil production of 8.6 million barrels a day.

Further to this, unfortunately for the oil industry, it has not been possible for oil prices to rise high enough to cover the increasing capital expenditure and operating costs. This is because high oil prices lead to recessionary conditions and slow or no growth in the economy. Because prices are not rising fast enough and costs are increasing, the costs of the independent oil majors are rising at 2 to 3% a year more than their revenues. Overall profitability is falling and some oil majors have had to borrow and sell assets to pay dividends. The next stage in this crisis has then been that investment projects are being cancelled – which suggests that oil production will soon begin to fall more rapidly.

The situation can be understood by reference to the nursery story of Goldilocks and the Three Bears. Goldilocks tries three kinds of porridge – some that is too hot, some that is too cold and some where the temperature is somewhere in the middle and therefore just right. The working assumption of mainstream economists is that there is an oil price that is not too high to undermine economic growth but also not too low so that the oil companies cannot cover their extraction costs – a price that is just right. The problem is that the Goldilocks situation no longer describes what is happening. Another story provides a better metaphor – that story is “Catch 22”. According to Kopits, the vast majority of the publically quoted oil majors require oil prices of over $100 a barrel to achieve positive cash flow and nearly a half need more than $120 a barrel.

But it is these oil prices that drag down the economies of the OECD economies. For several years, however, there have been some countries that have been able to afford the higher prices. The countries that have coped with the high energy prices best are the so called “emerging non OECD countries” and above all China. China has been bidding away an increasing part of the oil production and continuing to grow while higher energy prices have led to stagnation in the OECD economies. (Kopits, 2014)

Since the oil price is never “just right” it follows that it must oscillate between a price that is too high for macro-economic stability or too low to make it a paying proposition for high cost producers of oil (or gas) to invest in expanding production. In late 2014 we can see this drama at work. The faltering global economy has a lower demand for oil but OPEC, under the leadership of Saudi Arabia, have decided not to reduce oil production in order to keep oil prices from falling. On the contrary they want prices to fall. This is because they want to drive US shale oil and gas producers out of business.

The shale industry is described elsewhere in this book – suffice it here to refer to the claim of many commentators that the shale oil and gas boom in the United States is a bubble. A lot of money borrowed from Wall Street has been invested in the industry in anticipation of high profits but given the speed at which wells deplete it is doubtful whether many of the companies will be able to cover their debts. What has been possible so far has been largely because quantitative easing means capital for this industry has been made available with very low interest rates. There is a range of extraction production costs for different oil and gas wells and fields depending on the differing geology in different places. In some “sweet spots” the yield compared to cost is high but in a large number of cases the costs of production have been high and it is being said that it will be impossible to make money at the price to which oil has fallen ($65 in late 2014). This in turn could mean that companies funding their operations with junk bonds could find it difficult to service their debt. If interest rates rise the difficulty would become greater. Because the shale oil and gas sector has been so crucial to expansion in the USA then a large number of bankruptcies could have wider repercussions throughout the wider US and world economy.

 

Renewable Energy systems to the rescue?

Although it seems obvious that the depletion of fossil fuels can and should lead to the expansion of renewable energy systems like wind and solar power, we should beware of believing that renewable energy systems are a panacea that can rescue consumer society and its continued growth path. A very similar net energy analysis can, and ought to be done for the potential of renewable energy to match that already done for fossil fuels.

eroei-renewables

Before we get over-enthusiastic about the potential for renewable energy, we have to be aware of the need to subtract the energy costs particular to renewable energy systems from the gross energy that renewable energy systems generate. Not only must energy be used to manufacture and install the wind turbines, the solar panels and so on, but for a renewable based economy to be able to function, it must also devote energy to the creation of energy storage. This would allow for the fact that, when the wind and the sun are generating energy, is not necessarily the time when it is wanted.

Furthermore, the places where, for example, solar and wind potential are at this best – offshore for wind or in deserts without dust storms near the equator for solar – are usually a long distance from centres of use. Once again, a great deal of energy, materials and money must be spent getting the energy from where it is generated to where it will be used. For example, the “Energie Wende” (Energy Transformation) in Germany is involving huge effort, financial and energy costs, creating a transmission corridor to carry electricity from North Sea wind turbines down to Bavaria where the demand is greatest. Similarly, plans to develop concentrated solar power in North Africa for use in northern Europe which, if they ever come to anything, will require major investments in energy transmission. A further issue, connected to the requirement for energy storage, is the need for energy carriers which are not based on electricity. As before, conversions to put a current energy flux into a stored form, involve an energy cost.

Just as with fossil fuels, sources of renewable energy are of variable yield depending on local conditions: offshore wind is better than onshore for wind speed and wind reliability; there is more solar energy nearer the equator; some areas have less cloud cover; wave energy on the Atlantic coasts of the UK are much better than on other coastlines like those of the Irish Sea or North Sea. If we make a Ricardian assumption that best net yielding resources are developed first, then subsequent yields will be progressively inferior. In more conventional jargon – just as there are diminishing returns for fossil energy as fossil energy resources deplete, so there will eventually be diminishing returns for renewable energy systems. No doubt new technologies will partly buck this trend but the trend is there nonetheless. It is for reasons such as these that some energy experts are sceptical about the global potential of renewable energy to meet the energy demand of a growing economy. For example, two Australian academics at Monash University argue that world energy demand would grow to 1,000 EJ (EJ = 10 18 J) or more by 2050 if growth continued on the course of recent decades. Their analysis then looks at each renewable energy resource in turn, bearing in mind the energy costs of developing wind, solar, hydropower, biomass etc., taking into account diminishing returns, and bearing in mind too that climate change may limit the potential of renewable energy. (For example, river flow rates may change affecting hydropower). Their conclusion: “We nd that when the energy costs of energy are considered, it is unlikely that renewable energy can provide anywhere near a 1000 EJ by 2050.” (Moriarty & Honnery, 2012)

Now let’s put these insights back into a bigger picture of the future of the economy. In a presentation to the All Party Parliamentary Group on Peak Oil and Gas, Charles Hall showed a number of diagrams to express the consequences of depletion and rising energy costs of energy. I have taken just two of these diagrams here – comparing 1970 with what might be the case in 2030. (Hall C. , 2012) What they show is how the economy produces different sorts of stuff. Some of the production is consumer goods, either staples (essentials) or discretionary (luxury) goods. The rest of production is devoted to goods that are used in production i.e. investment goods in the form of machinery, equipment, buildings, roads, infrastracture and their maintenance. Some of these investment goods must take the form of energy acquisition equipment. As a society runs up against energy depletion and other problems, more and more production must go into energy acquisition, infrastructure and maintenance. Less and less is available for consumption, and particularly for discretionary consumption.

hall

Whether the economy would evolve in this way can be questioned. As we have seen, the increasing needs of the oil and gas sector implies a transfer of resources from elsewhere through rising prices. However, the rest of the economy cannot actually pay this extra without crashing. That is what the above diagrams show – a transfer of resources from discretionary consumption to investment in energy infrastructure. But such a transfer would be crushing for the other sectors and their decline would likely drag down the whole economy.

Over the last few years, central banks have had a policy of quantitative easing to try to keep interest rates low. The economy cannot pay high energy prices AND high interest rates so, in effect, the policy has been to try to bring down interest rates as low as possible to counter the stagnation. However, this has not really created production growth, it has instead created a succession of asset price bubbles. The underlying trend continues to be one of stagnation, decline and crisis and it will get a lot worse when oil production starts to fall more rapidly as a result of investment cut backs. The severity of the recessions may be variable in different countries because competitive strength in this model goes to those countries where energy is used most efficiently and which can afford to pay somewhat higher prices for energy. Such countries are likely to do better but will not escape the general decline if they stay wedded to the conventional growth model. Whatever the variability, this is still a dead end and, at some point, people will see that entirely different ways of thinking about economy and ecology are needed – unless they get drawn into conflicts and wars over energy by psychopathic policy idiots. There is no way out of the Catch 22 within the growth economy model. That’s why degrowth is needed.

Further ideas can be extrapolated from Hall’s way of presenting the end of the road for the growth economy. The only real option as a source for extra resources to be ploughed into changing the energy sector is from what Hall calls “discretionary consumption” aka luxury consumption. It would not be possible to take from “staples” without undermining the ability of ordinary people to survive day to day. Implicit here is a social justice agenda for the post growth – post carbon economy. Transferring resources out of the luxury consumption of the rich is a necessary part of the process of finding the wherewithal for energy conservation work and for developing renewable energy resources. These will be expensive and the resources cannot come from anywhere else than out of the consumption of the rich. It should be remembered too that the problems of depletion do not just apply to fossil energy extraction coal, oil and gas) but apply across all forms of mineral extraction. All minerals are depleted by use and that means the grade or ore declines over time. Projecting the consequences into the future ought to frighten the growth enthusiasts. To take in how industrial production can hit a brick wall of steeply rising costs, consider the following graph which shows the declining quality of ore grades mined in Australia.

mining-australia

As ores deplete there is a deterioration of ore grades. That means that more rock has to be shifted and processed to refine and extract the desired raw material, requiring more energy and leaving more wastes. This is occurring in parallel to the depletion in energy sources which means that more energy has to be used to extract a given quantity of energy and therefore, in turn, to extract from a given quantity of ore. Thus, the energy requirements to extract energy are rising at the very same time as the amount of energy required to extract given quantities of minerals are rising. More energy is needed just at the time that energy is itself becoming more expensive.

Now, on top of that, add to the picture the growing demand for minerals and materials if the economy is to grow.

At least there has been a recognition and acknowledgement in recent years that environmental problems exist. The problem is now somewhat different – the problem is the incredibly naive faith that markets and technology can solve all problems and keep on going. The main criticism of the limits to growth study was the claim that problems would be anticipated in forward markets and would then be made the subject of high tech innovation. In the next chapter, the destructive effects of these innovations are examined in more depth.

 

 

Jun 262017
 
 June 26, 2017  Posted by at 9:29 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Pablo Picasso Etude Pour Mercure 1924

 

The Next Global Crash Could Arrive ‘With A Vengeance’ – BIS (CNBC)
Push On With The ‘Great Unwinding’, BIS Tells Central Banks (R.)
Japanese Banks at Risk as Borrowing in Dollars Doubles – BIS (BBG)
Four Pronged Proposal to End Japanese Deflation (Mish)
Japan’s Bond Market Grinds To A Halt (ZH)
“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day Of The Next Crash (ZH)
A Stock Market Crash Scenario (CH Smith)
The Fed Is Going to Cause a Recession (James Rickards)
US Dollar Will Strengthen on Fed Hikes – Credit Agricole (CNBC)
The $1.5 Trillion US Business Tax Change Flying Under the Radar (WSJ)
Two Failed Italian Banks Split Into Good And Bad Banks, Taxpayers Pay (G.)
Investors Call For Greece To Accelerate Reforms (K.)
Germans Fearing China’s World Order? Worry About The EU Instead (CNBC)
China’s Hydropower Frenzy Drowns Sacred Mountains (AFP)

 

 

“..the end may come to resemble more closely a financial boom gone wrong..”

The Next Global Crash Could Arrive ‘With A Vengeance’ – BIS (CNBC)

A new financial crisis is brewing in the emerging economies and it could hit “with a vengeance”, an influential group of central bankers has warned. Emerging markets such as China are showing the same signs that their economies are overheating as the US and the UK demonstrated before the financial crisis of 2007-08, according to the annual report of the Bank for International Settlements (BIS). Claudio Borio, the head of the BIS monetary and economic department, said a new recession could come “with a vengeance” and “the end may come to resemble more closely a financial boom gone wrong”. The BIS, which is sometimes known as the central bank for central banks and counts Bank of England Governor Mark Carney among its members, warned of trouble ahead for the world economy.

It predicted that central banks would be forced to raise interest rates after years of record lows in order to combat inflation which will “smother” growth. The group also warned about the threat poised by rising debt in countries like China and the rise in protectionism such as in the US under Donald Trump, City AM reported. Chinese corporate debt has almost doubled since 2007, now reaching 166% of GDP, while household debt rose to 44% of GDP last year. In May, Moody’s cut China’s credit rating for the first time since 1989 from A1 to Aa3 which could potentially raise the cost of borrowing for the Chinese government. The BIS’s credit-to-GDP gap indicator also showed debt, which is seen as an “early warning indicator” for a country’s banking system, is rising far faster than growth in other Asian economies such as Thailand and Hong Kong.

Read more …

“The BIS identified four main risks to the global outlook in the medium-term. A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.”

Push On With The ‘Great Unwinding’, BIS Tells Central Banks (R.)

Major central banks should press ahead with interest rate increases, the Bank for International Settlements said on Sunday, while recognizing that some turbulence in financial markets will have to be negotiated along the way. The BIS, an umbrella body for leading central banks, said in one of its most upbeat annual reports for years that global growth could soon be back at long-term average levels after a sharp improvement in sentiment over the past year. Though pockets of risk remain because of high debt levels, low productivity growth and dwindling policy firepower, the BIS said policymakers should take advantage of the improving economic outlook and its surprisingly negligible effect on inflation to accelerate the “great unwinding” of quantitative easing programs and record low interest rates.

New technologies and working practices are likely to be playing a roll in suppressing inflation, it said, though normal impulses should kick in if unemployment continues to drop. “Since we are now emerging from a very long period of very accommodative monetary policy, whatever we do, we will have to do it in a very careful way,” BIS’s head of research, Hyun Song Shin, told Reuters. “If we leave it too late, it is going to be much more difficult to accomplish that unwinding. Even if there are some short-term bumps in the road it would be much more advisable to stay the course and begin that process of normalization.” Shin added that it will be “very difficult, if not impossible” to remove all those bumps. The BIS identified four main risks to the global outlook in the medium-term. A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.

Read more …

The death of the dollar has been greatly exaggerated.

Japanese Banks at Risk as Borrowing in Dollars Doubles – BIS (BBG)

Japanese banks have more than doubled their borrowing and lending in dollars since 2007, leaving them vulnerable to funding shocks such as those that exacerbated the last financial crisis, the Bank for International Settlements warned in a report released Sunday. Assets denominated in dollars on the balance sheets of Japanese banks surged to about $3.5 trillion by the end of 2016, the coordinating body for the world’s central banks said in its annual report about the global economy. Those exceed liabilities in dollars by about $1 trillion, creating a massive so-called long position in the currency. The report also cited Canadian lenders for following a similar trend, almost doubling their dollar exposure since the crisis. Their net long positions reached almost $200 billion, the BIS said.

European firms, by contrast, have reduced exposure to dollars since the crisis, the report said. German banks, which had among the highest net dollar positions in 2007, now have matching assets and liabilities denominated in the currency after cutting dollar assets by about half. During the financial crisis, European banks’ net dollar exposures, which peaked at $2 trillion, ended up causing several firms to collapse when funding sources dried up and their efforts to dump U.S. mortgage-related assets led to huge losses. Even as post-crisis regulation has strengthened banks’ capital resources to cope with such losses and some funding has shifted to more stable sources, risks haven’t been completely eliminated, according to the Basel, Switzerland-based group.

[..] the biggest portion of dollar funding for non-U.S. banks – $4.1 trillion – now comes from deposits outside the U.S., according to BIS data. That shift toward offshore dollar deposits also presents risks because the Federal Reserve’s funding backstop during the 2008 crisis wouldn’t be present in non-U.S. jurisdictions if dollar funds became scant, the BIS said. The Fed provided $538 billion of emergency loans to European banks that lost dollar funding from U.S. sources during the 2008 crisis ..

Read more …

Is Mish missing out on confidence as a factor? You can lead a horse to water, but…

Four Pronged Proposal to End Japanese Deflation (Mish)

Negative Sales Taxes People hoard cash, especially the miserly wealthy. We need to unlock that cash and put it to work. To free up this money, I propose negative sales taxes. The more you spend, the more money you get back as a direct tax credit against income taxes. I leave specific details to economists Larry Summers and Paul Krugman. What can possibly go wrong?

One Percent Tax Per Month on Government Bonds Negative interest rates are in vogue. However, all negative interest rates have done is to get those with money to hoard bonds. Bond buyers effectively bet on capital gains of still more negative rates. Phooey! Just yesterday I noted Bank of Japan Corners 33% of Bond Market: All Japanese Bonds, 40 Years and Below, Yield 0.3% or Less. 33% cornering of the bond market is truly inadequate as this sentiment implies: Makoto Yamashita, a strategist for Japanese interest rates at Deutsche Bank’s securities unit in Tokyo said “There are investors who have no choice but to buy.” We need to end this “no choice” hoarding sentiment right here, right now. I have just the solution. Tax government bonds at the rate of 1% per month.

No one will want them. Hedge funds and pension plans will dump sovereign bonds en masse. This will allow governments to buy every bond in existence immediately, if not sooner. As soon as the government corners the bond market (at effectively zero cost), debt and interest on the debt will truly be owed to itself. Once the bond market is 100% cornered, I propose government debt be declared null and void annually. This would effectively wipe out the entirety of Japan’s debt. Japan’s debt-to-GDP ratio would immediately plunge from 250% to 0%.

National Tax Free Lottery Japan desperately needs to get people to spend, continually. Once again, I have a logical proposal. For every purchase one makes on a credit card, that person gets a free lottery ticket for a weekly drawing worth $10,000,000 tax free. Each week, a random day of the week is selected and separately a random taxpayer ID is selected. If the person drawn made a credit card purchase exceeding $10 on the day of the week drawn, they win $10,000,000 tax free. If there is no winner, the amount rolls over. This beautiful plan will cost no more than $520 million annually, peanuts these days.

Hav-a-Kid Demographics in Japan are a huge problem. Although various incentives have been tried, none of them have gone far enough. I propose a reduction in income taxes for everyone starting a family. The following scale applies. One new child: 50% reduction in income taxes for a period of ten years. Two new children: 100% reduction in income taxes for a period of twenty years. Three new children: Subsidized housing, free healthcare, free schooling, and no income taxes for thirty years. Those with one new child in the last five years get full credit if they add at least one more child in the next five years.

Read more …

Well, Mish does have the answer to that above: One Percent Tax Per Month

Japan’s Bond Market Grinds To A Halt (ZH)

The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work. As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero. The 10-year JGB yield again closed at 0.055%, where it has been stuck since June 15m and according to data from Nikkei affiliate QUICK, this marks the longest period of stagnation since 1994, Because what comes after record low volatility? Simple: market paralysis.

And that’s what Japan appears to be experiencing right now as private bondholders no longer dare to even breathe without instructions from the central bank. Meanwhile, the implied volatility of JGBs tumbled to the lowest level since January 2008 for the same reason we recently speculated may be the primary driver behind the global collapse in volatility: nobody is trading. This means that trading in newly issued 10-year debt has become so infrequent that broker Japan Bond Trading has seen days when no bonds trade hands. It’s not just cash bonds that find themselves in trading limbo: trading in short-term interest rate futures has also thinned and on Tuesday of last week the Nikkei reports that there were no transactions in three-month Tibor futures – the first time that has happened since such trading began in 1989.

As more market participants throw in the towel on a rigged, centrally planned market, the result will – no could – be a further loss of market function, and a guaranteed crash once the BOJ and other central banks pull out (which is why they can’t). As the Nikkei politely concludes, “if the bond and money markets lose their ability to price credit based on future interest rate expectations and supply and demand, the risk of sudden rate volatility from external shocks like a global financial crisis will rise.” Translation: in a world where only central banks trade, everyone else is destined to forget forget what trading, and certainly selling, means.

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“..when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”

“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day Of The Next Crash (ZH)

While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to “go to cash”, none have dared to commit the cardinal sin of actually predicting when the next crash will take place. On Sunday a prominent hedge fund manager, One River Asset Management’s CIO Eric Peters broke with that tradition and dared to “pin a tail on the donkey” of when the next market crash – one which he agrees with us will be driven by a collapse in the global credit impulse – will take place. His prediction: Valentine’s Day 2018. Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:

“The Fed hikes rates to lean against inflation,” said the CIO. “And they’ll reduce the balance sheet to dampen growing financial instability,” he continued. “They’ll signal less about rates and focus on balance sheet reduction in Sep.” Inflation is softening as the gap between the real economy and financial asset prices is widening. “If they break the economy with rate hikes, everyone will blame the Fed.” They can’t afford that political risk. “But no one understands the balance sheet, so if something breaks because they reduce it, they’ll get a free pass.”

“The Fed has convinced itself that forward guidance was far more powerful than QE,” continued the same CIO. “This allows them to argue that reversing QE without reversing forward guidance should be uneventful.” Like watching paint dry. “Balance sheet reduction will start slowly. And proceed for a few months without a noticeable impact,” he said. “The Fed will feel validated.” Like they’ve been right all along. “But when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”

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One must remember there are no markets left. That makes talking about them dicey.

A Stock Market Crash Scenario (CH Smith)

After 8+ years of phenomenal gains, it’s pretty obvious the global stock market rally is overdue for a credit-cycle downturn, and many research services of Wall Street heavyweights are sounding the alarm about the auto industry’s slump, the slowing of new credit and other fundamental indicators that a recession is becoming more likely. Next February is a good guess, as recessions and market downturns tend to lag the credit market by about 9 months. My own scenario is based not on cycles or technicals or fundamentals, but on the psychology of the topping process, which tends to follow this basic script:

When there are too many bearish reports of gloomy data, and too many calls to go long volatility or go to cash, the market perversely goes up, not down. Why? This negativity creates a classic Wall of Worry that markets can continue climbing. (Central banks buying $300 billion of assets a month helps power this gradual ascent most admirably.) The Bears betting on a decline based on deteriorating fundamentals are crushed by the steady advance. As Bears give up, the window for a Spot of Bother decline creaks open, however grudgingly, as central banks make noises about ending their extraordinary monetary policies by raising interest rates a bit (so they can lower them when the next recession grabs the global economy by the throat). As bearish short interest and bets on higher volatility fade, insiders go short.

A sudden air pocket takes the market down, triggered by some bit of “news.” (Nothing like a well-engineered bout of panic selling to set up a profitable Buy the Dip opportunity.) And since traders have been well-trained to Buy the Dips, the Spot of Bother is quickly retraced. Nonetheless, doubts remain and fundamental data is still weak; this overhang of negativity rebuilds the wall of Worry. Some Bears will reckon the weakened market will double-top, i.e. be unable to break out to new highs given the poor fundamentals, and as a result we can anticipate a nominal new high after the Wall of Worry has been rebuilt, just to destroy all those who reckoned a double-top would mark The Top. Mr. Market (and the central banks) won’t make it that easy to reap a fortune by going short.

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I think the Fed has already done that. By manoeuvering themselves into a position they cannot escape from.

The Fed Is Going to Cause a Recession (James Rickards)

Why did the Federal Reserve (Fed) hike rates last week, and what will its policy look like in the future? They’re trying to prepare for the next recession. They’re not predicting a recession, they never do, but they know a recession will come sooner rather than later. This expansion is 96 months old. It’s one of the longest expansions in U.S. history. It’s also the weakest expansion in U.S. history. A lot of people say, “What expansion? Feels like a depression to me.” I think it is a depression defined as depressed growth, but we’re not in a technical recession and haven’t been since June 2009. So it’s been an eight-year expansion at this point, but it won’t fare well, and the Fed knows that. When the U.S. economy goes into recession, you have to cut interest rates about 3% to get the United States out of that recession. Well, how do you cut interest rates by 3% when you’re only at 1%?

The answer is, you can’t. You’ve got to get them up to 3% to cut them back down, maybe to zero, to get out of the next recession. So that explains why the Fed is raising interest rates. That’s the fourth rate hike getting them up to 1%. They would like to keep going; they would like to get them up to 3, 3.5% by 2019. My estimate is that they’re not going to get there. The recession will come first. In fact, they will probably cause the recession that they’re preparing to cure. So let’s just say we get interest rates to 1% and now you go into recession. We can cut them back down to zero. Well, now what do you do? You do a new round of QE. The problem is that the Fed’s balance sheet is so bloated at $4.5 trillion. How much more can you do—$5 trillion, $5.5 trillion, $6 trillion—before you cause a loss of confidence in the dollar? There are a lot of smart people who think that there’s no limit on how much money you can print. “Just print money. What’s the problem?”

I disagree. I think there’s an invisible boundary. The Fed won’t talk about it. No one knows what it is. But you don’t want to find out the hard way. [..] You probably want to get from $4.5 trillion, down to $2.5 trillion. Well, you can’t sell any treasury bonds. You destroy the market. Rates would go up, putting us in recession, and the housing market would collapse. They’re not going to do that. What they’re going to do is just let them mature. When these securities mature, they won’t buy new ones. They won’t roll it over, and they actually will reduce the balance sheet and make money disappear. They’re going to do it in tiny increments, maybe $10 billion a month or $20 billion a month. They want to run this quantitative tightening in small increments and pretend nothing’s happening. But that’s nonsense. It’s just one more way of tightening money in a weak economy; it will probably cause a recession.

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Views on the dollar are all over the place.

US Dollar Will Strengthen on Fed Hikes – Credit Agricole (CNBC)

While investors seem to have come to a consensus view that the U.S. dollar rally is coming to an end, Credit Agricole has offered a contrarian take: There is room for the greenback to strengthen. David Forrester, the bank’s FX strategist told CNBC Monday that markets have been predominantly focused on U.S. inflation data and pricing in an overly cautious Federal Reserve. But, he thinks the Fed will be more hawkish than what is currently expected, which will support the U.S. dollar. “The Fed seems to have changed its policy response function. Yes it’s going to pay attention to the data, but less so. It now wants to get its rates normalized so that it actually has room to cut rates in the next downturn,” Forrester said.

“Let’s not forget here: The U.S. expansion, while being soft, is actually pretty mature so the Fed is getting lined up here in preparation for the next downturn. That’s why we think they’re going to hike rates and we will see a steepening of the U.S. Treasury curve and that will be supportive of the U.S. going forward.” Credit Agricole expects the Fed to hike rates once more this year, followed by three times in 2018. U.S. inflation — still below its 2% target despite a low unemployment rate — has been a key point in the argument on whether the Fed should continue normalizing rates. Forrester said the divergence between the unemployment rate and inflation is not unique to the U.S. Globally, economies face structural issues such as ageing populations and automation replacing jobs, which could increase the risks of a recession.

But, he said U.S. inflation should pick up on the back of further wage growth and a rebound in oil prices. “We expect the U.S. economy to continue to recover and strengthen, we will believe in the Philips curve in the U.S. We do expect wages growth to accelerate and inflation expectation(s) to pick back up. So all-in-all, we do expect that re-steepening,” he said. The Philips curve relates to a supposed inverse relationship between the level of unemployment and the inflation rate. Forrester’s views are in contrast to that of many analysts, who expect weakness in the U.S. dollar. Ken Peng, Asia investment strategist at Citi Private Bank, told CNBC’s “Squawk Box” that the greenback is headed for a “new cycle” after a six-year rally since 2011. He added that the dollar weakness will be “one of the greatest market trends” for global investors.

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Desperately seeking something.

The $1.5 Trillion US Business Tax Change Flying Under the Radar (WSJ)

Republicans looking to rewrite the U.S. tax code are taking aim at one of the foundations of modern finance—the deduction that companies get for interest they pay on debt. That deduction affects everyone from titans of Wall Street who load up on junk bonds to pay for multibillion-dollar corporate takeovers to wheat farmers in the Midwest looking to make ends meet before harvest. Yet a House Republican proposal to eliminate the deduction has gotten relatively little sustained public attention or lobbying pressure. Thanks in part to the deduction, the U.S. financial system is heavily oriented toward debt, which because of the tax code is often cheaper than equity financing—such as sales of stock. It also is widely accessible. In 2015, U.S. businesses paid in all $1.3 trillion in gross interest, according to Commerce Department data, equal in magnitude to the total economic output of Australia.

Getting rid of the deduction for net interest expense, as House Republicans propose, would alter finance. It also would generate about $1.5 trillion in revenue for the government over a decade, according to the Tax Foundation, a conservative-leaning think thank. The plan would raise money to help offset Republicans’ corporate tax cuts and reduce a “huge bias” toward debt financing, said Robert Pozen, a senior lecturer at MIT’s Sloan School of Management. That bias, he said, hurts companies built around innovation, which tend to not have the physical assets that banks usually require as collateral. [..] Midsize businesses may also get squeezed. “The people that utilize debt, they utilize it because they don’t have the cash and they don’t have the access to equity,” said Robert Moskovitz, CFO of Leaf Commercial Capital, which finances businesses’ purchases of items like copiers and telephone systems.

“A dry cleaner in Des Moines, Iowa? Where is he going to get equity? He can’t do an IPO.” The idea behind the Republican plan is to pair the elimination of this deduction with immediate deductions for investments in equipment and other long-lived assets. Party leaders expect the capital write-offs would encourage more investment and growth and greater worker productivity, but not the debt often associated with it.

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Dijsselbloem et al made a big circus about how taxpayers would never again foot the bill. It was never worth a thing.

“German conservative MEP Markus Ferber (EPP): “With this decision, the European Commission accompanies the Banking Union to its deathbed. The promise that the tax payer will not stand in to rescue failing banks anymore is broken for good. I am very disappointed that the commission has approved this course of action. By doing so the Commission has massively undermined the credibility of the Banking Union. If the common set of rules governing banking resolution is so blatantly ignored, there is no point in negotiating any further on a common deposit insurance scheme. The precondition for a working Banking Union is a common understanding of its rules. If such a basic common understanding is lacking, there is no point in further deepening the Banking Union and mutualising risk.”

Two Failed Italian Banks Split Into Good And Bad Banks, Taxpayers Pay (G.)

The Italian government is stepping in to wind up two failing lenders and prevent a bank run, at a total cost of up to €17bn. After an emergency cabinet meeting on Sunday, ministers agreed to a decree splitting Veneto Banca and Banca Popolare di Vicenza into ‘good’ and ‘bad’ banks, keeping branches open. The ‘good’ assets are being acquired by Italy’s biggest retail bank, Intesa Sanpaolo, with the Italian government handing about €5bn to Intesa as part of the deal. The lenders will then be liquidated, which leaves the state footing the bill for bad loans on both banks’ books, plus restructuring costs.

The Italian government would provide state guarantees worth up to €12bn to cover potential losses at the ‘bad’ bank, Pier Carlo Padoan, the finance minister, told reporters in Rome. That means the total cost could reach €17bn. Padoan added that both banks would operate normally on Monday. The deal is meant to ward off the threat of a bank run, by reassuring nervous savers and deterring them from withdrawing their funds when branches reopen. Paolo Gentiloni, Italy’s prime minister, insisted that the decree fully respected EU rules, even though taxpapers are no longer meant to stump the cost to rescue a failing bank. The funds will come from a €20bn fund created last year to help struggling lenders, so will not affect Italy’s public borrowing, according to the government.

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Lower pensions solve everything.

Investors Call For Greece To Accelerate Reforms (K.)

The return of investor confidence in Greece will require time and the acceleration of the government’s reform program, foreign fund managers told Greek officials during two investment conferences that took place in the last couple of weeks in New York and London with the participation of Greek listed firms. In their meetings with hundreds of funds from the US and Europe, the representatives of Greek companies said that while the recent Eurogroup decision may have banished uncertainty about Greece, the government will need to put in some serious effort and work in addressing the issues of speed and efficiency. This was after Greece had failed to secure any debt-easing measures, while the entry of Greek bonds to the ECB’s QE remains pending.

The main subject at the two investment events was the titanic effort being made by Greek banks to reduce the bad loans in their portfolios. As for the Athens stock market, Alpha Finance noted in its presentation at the 6th Greek Investment Forum in New York on June 21-22 that “there is a light at the end of the tunnel.” The Alpha Bank subsidiary noted that “the Greek market has recorded bigger returns than its European peers and prospects appear very encouraging as Greece has beaten its fiscal targets and restored investor confidence in the timetable of the Greek [bailout] program.”

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“the U.S. will not be indifferent to the mistreatment of the long suffering Greece. That is America’s key strategic base in the Mediterranean, and a location of new military installations on the island of Crete to monitor the Middle East.”

Germans Fearing China’s World Order? Worry About The EU Instead (CNBC)

Criticizing what he saw as Washington’s isolationist bent, German Finance Minister Wolfgang Schäuble voiced a concern in a speech earlier this month that the West could be threatened as China (and Russia) might fill the void. That, he feared, “would be the end of our liberal world order.” He also said that the U.S. was no longer willing to act as a “guardian of global order,” apparently because Washington withdrew from the agreement on climate change, and it allegedly showed no interest for cooperative migration and security policies. The U.S. Department of State has probably something to say about that, but I wish Schäuble were at least partly right. Arguably, the U.S. could cut back on some foreign engagements and pay more attention to pressing domestic problems.

That said, I wonder how the German minister fails to see that the U.S. is all over the map in active, proxy and hybrid warfare — Afghanistan, the Middle East and North Africa, Korean Peninsula, Central and Eastern Europe and the South China Sea. What else would he want? A nuclear war with China and Russia? Germany may wish to think about whether it is in its interest to fuel and broaden the points of friction with the United States. In my view, Berlin should leave the big power dealings alone. Washington and Beijing are engaged on a broad range of issues to build a historically unique relationship between an established superpower and a runner-up that needs space to develop and contribute to the world in peace and harmony. In trying to do that, the two countries are blazing totally new trails of modern statecraft.

Ubiquitous analogies of Sparta (an established power) and Athens (a rapidly developing strategic competitor), and their ensuing Peloponnesian War, are worthless in the case of countries with huge nuclear arsenals and ground, sea, air and airspace delivery vehicles. So, yes, Germany should leave that alone and get over its fury at Washington’s decision to stop the hemorrhage of foreign trade accounts that are killing jobs, incomes and whatever is left of American manufacturing industries. China got that message and is doing something about it. In the first four months of this year, American export sales to China soared 16.1%. By contrast, U.S. exports to the EU, which account for one-fifth of the total, barely eked out a 2.7% increase.

Germany has to make up its mind with regard to the European integration. Bullying the Visegrad Group (and Baltic States) — a task that Germany has subcontracted to France due to dark pages of its history — and pillorying Greece (a task Germany was eager to continue) won’t work. These countries will run to the U.S. for cover, as some of them are doing now by demanding large contingents of U.S. armed forces on their soil. Also, the U.S. will not be indifferent to the mistreatment of the long suffering Greece. That is America’s key strategic base in the Mediterranean, and a location of new military installations on the island of Crete to monitor the Middle East.

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Proud supporters of the Paris Agreement.

China’s Hydropower Frenzy Drowns Sacred Mountains (AFP)

Beijing is building hydropower at a breakneck pace in ethnically Tibetan regions as part of an ambitious undertaking to reduce the country’s dependence on coal and cut emissions that have made it the world’s top polluter. China had just two dams in 1949, but now boasts some 22,000 – nearly half the world total – in all but one of the country’s major waterways. Mountains and rivers are revered as sacred in Tibetan Buddhism, and the extensive construction, which began in 2014, has alarmed locals who believe they can only live peacefully if the nature around them is protected. “Last year, people said that a big forest fire happened because they blasted a road into the holy mountain, and it took revenge,” said villager Tashi Yungdrung, who tends a small herd of yaks in the pastures above her stone, square-windowed home.

Most would not dare remove so much as a single stone from the mountain Palshab Drakar, an important pilgrimage site, she said. Villagers are bracing for mass relocations, an experience that has previously caused havoc elsewhere in China. Beginning in the 1990s, more than a million were moved for the Three Gorges Dam, the world’s largest in terms of capacity, with thousands still mired in poverty. Plans posted at the Lianghekou construction site showed that 22 power plants will be built along the Yalong, a Yangtze tributary, collectively capable of generating 30 gigawatts of electricity – a fifth of China’s current total installed hydropower capacity. Li Zhaolong, a Tibetan from Zhaba village, said he received 300,000 yuan ($44,000) in government compensation to build a new home on higher ground, where he will move next year.

But the 28,000 yuan moving fee his family received per person will not last long once their crops are submerged and they have no other sources of income. “Before we were farmers, and now we have no land,” said Li. [..] Some 80% of China’s hydropower potential lies along the high-flow, glacier-fed rivers of the Tibetan plateau, but dams there bring minimal local benefits because most of the power goes to smog-choked cities in the east, according to the non-governmental organisation International Rivers. Construction worker Zeng Qingtao said the state-owned Power Construction Corporation had brought in some 10,000 employees, but none are locals. “We can’t hire Tibetans. They aren’t reasonable,” he said.

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Jun 252017
 
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Marc Riboud Paris 1953

 

Dems Push Leaders To Talk Less About Russia (Hill)
UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)
The Answer Is Wages, Not Capital (Angusto)
Not All Fossil Fuels Are Going Extinct (BBG)
Reclaiming Public Services (TNI)
Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)
Health Spending In Greece Down 40% In 2009-2015 (Amna)
Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)
Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)
Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

 

 

Endlessly ironic that publications like the Hill write on this. They are more responsible for all the nonsense than any politicians are.

Dems Push Leaders To Talk Less About Russia (Hill)

Frustrated Democrats hoping to elevate their election fortunes have a resounding message for party leaders: Stop talking so much about Russia. Democratic leaders have been beating the drum this year over the ongoing probes into the Trump administration’s potential ties to Moscow, taking every opportunity to highlight the saga and forcing floor votes designed to uncover any business dealings the president might have with Russian figures. But rank-and-file Democrats say the Russia-Trump narrative is simply a non-issue with district voters, who are much more worried about bread-and-butter economic concerns like jobs, wages and the cost of education and healthcare.

In the wake of a string of special-election defeats, an increasing number of Democrats are calling for an adjustment in party messaging, one that swings the focus from Russia to the economy. The outcome of the 2018 elections, they say, hinges on how well the Democrats manage that shift. “We can’t just talk about Russia because people back in Ohio aren’t really talking that much about Russia, about Putin, about Michael Flynn,” Rep. Tim Ryan (D-Ohio) told MSNBC Thursday. “They’re trying to figure out how they’re going to make the mortgage payment, how they’re going to pay for their kids to go to college, what their energy bill looks like. “And if we don’t talk more about their interest than we do about how we’re so angry with Donald Trump and everything that’s going on,” he added, “then we’re never going to be able to win elections.”

Ryan is among the small group of Democrats who are sounding calls for a changing of the guard atop the party’s leadership hierarchy following Tuesday’s special election defeat in Georgia — the Democrats’ fourth loss since Trump took office. But Ryan is hardly alone in urging party leaders to hone their 2018 message. Rep. Tim Walz (D-Minn.) has been paying particularly close attention to voters’ concerns because he’s running for governor in 2018. The Russia-Trump investigation, he said, isn’t on their radar. “I did a 22-county tour. … Nobody’s focusing on that,” Walz said. “That’s not to say that they don’t think Russia and those things are important, [but] it’s certainly not top on their minds.”

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Elections it is then. A rudderless society.

UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)

More than a million households living in private rented accommodation are at risk of becoming homeless by 2020 because of rising rents, benefit freezes and a lack of social housing, according to a devastating new report into the UK’s escalating housing crisis. The study by the homelessness charity Shelter shows that rising numbers of families on low incomes are not only unable to afford to buy their own home but are also struggling to pay even the lowest available rents in the private sector, leading to ever higher levels of eviction and homelessness. The findings will place greater pressure on the government over housing policy following the Grenfell Tower fire disaster in west London, which exposed the neglect and disregard for people living in council-owned properties in one of the wealthiest areas of the capital.

The Shelter report highlights how a crisis of affordability and provision is gripping millions with no option but to look for homes in the private rented sector due to a shortage of social housing. Shelter says that in 83% of areas of England, people in the private rented sector now face a substantial monthly shortfall between the housing benefit they receive and the cheapest rents, and that this will rise as austerity bites and the lack of properties tilts the balance more in favour of landlords. Across the UK the charity has calculated that, if the housing benefit freeze remains in place as planned until 2020, more than a million households, including 375,000 with at least one person in work, could be forced out of their homes. It estimates that 211,000 households in which no one works because of disability could be forced to go.

Graeme Brown, the interim chief executive at Shelter, said: “The current freeze on housing benefit is pushing hundreds of thousands of private renters dangerously close to breaking point at a time when homelessness is rising.” A total of 14,420 households were accepted by local authorities as homeless between October and December 2016, up by more than half since 2009 – with 78% of the increase since 2011 being the result of people losing their previous private tenancy. Local authorities are under a legal obligation to find emergency accommodation, such as in bed and breakfasts.

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A kernel of truth does not a good reasoning make.,

The Answer Is Wages, Not Capital (Angusto)

As in any other religion, faith lies behind capitalism. Faith that capital is a panacea always and in any situation: to push economic growth or to help less developed countries to catch up. Yet the fact is that the EU countries that were the main receivers of cohesion funds, before the extension to the East, later became rescued countries – and we have never before had as much capital on tap along with current low growth.

Both these facts should be enough to break the faith in capital or, at least, to recognise its limits. Let’s see those limits in the above-mentioned causes. The virtue of capital transfers to help low developed countries is based in old Marshall Plan history, which attributes the successful German recovery after WW2 to USA loans. Sure, those loans helped, but the necessary knowledge was already there and the capital transfers allowed the Germans to rebuild their supply capacity. Conversely, in the EU rescued countries, entering the EU came with a local supply capacity destruction, in Schumpeterian terms, for which cohesion funds were unable to compensate. As a result, their domestic demand outstripped internal supply and trade deficits became recurrent until the financial crash.

The key element was not capital but knowledge and its absence or availability in both situations; something very obvious but all too often forgotten. If capital has any virtue it comes from its origin: the capacity to produce output sufficient to recover the inputs used, to satisfy consumption needs and to save a part to be invested as new inputs for raising future output. It means that the virtue is not in the savings/capital itself but in the capacity to generate it. That’s why capital transfers that simply increased the receivers’ inputs provision, without increasing the output/input ratio –or system efficiency–, were in the end wasted money. To avoid this, it would have been necessary to increase the receivers’ efficiency, which is much more correlated with parameters like educational levels than with capitalization! Again, knowledge is the key question.

Furthermore, capital on its own is not only unable to help less developed countries catch up on their wealthier peers but it’s also unable to propel economic growth on its own, as we are now seeing. After years of letting profits grow at the cost of wages, hoping that greater capital would bring greater growth, now we hear companies claiming that they do not invest because they do not have sufficient demand to justify the investment. The clear solution would be to increase wages, but no single company will do it out of fear that the others won’t follow suit. In fact, what any company hopes is that the others increase wages and salaries but not itself. That’s why a global agent is needed: trade unions and the public administration! The latter to increase its spending to guarantee full employment and the former profiting from full employment to bargain higher salaries.

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Bloomberg’s valiant attempt to make you see it doesn’t understand energy. Well done!

Not All Fossil Fuels Are Going Extinct (BBG)

Bloomberg New Energy Finance’s latest New Energy Outlook points the way to a sunny, windy future for the global electric power industry. That doesn’t mean that fossil fuels (or nuclear power) will vanish. It also doesn’t mean that all fossil fuels are the same. The future of natural gas and coal is a tale of two resources — one a story of rising fortunes, the other of slow decline. The latest outlook on natural gas is brighter than ever: BNEF’s forecast for gas shows a higher estimate for consumption in 2040 than in previous years, with a short decline at the end of this decade.

Coal is a different matter. Coal demand is expected to peak late next decade, then decline almost every year to reach a low of 3.1 billion metric tons in 2040, about 25% lower than at its peak.

This long-term outlook is nuanced, as it should be. The aggregated demand for each fuel from 2020 to 2040 has not changed much in three successive New Energy Outlook reports. Total gas consumption has only increased 6% since the 2015 report, while coal consumption from 2020 to 2040 – despite the plunge that is now expected, as noted above – has only changed 3.5%, and was exactly the same in 2016. However, the shape of that coal curve is still important, even if the volume hasn’t changed much. A coal mine that opens today could have a 60-year life, but it is likely to be one fraught with oversupply and competition from other coal producers, as well as other technologies. So how does the 2017 New Energy Outlook for gas and coal compare to how major oil companies and the International Energy Agency see it? For gas, everyone agrees: Consumption grows. Shell expects gas consumption to more than double and, perhaps not surprisingly, Exxon Mobil and BP also expect consumption to increase at least 50%. BNEF’s expectations are a bit more muted.

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Looks a tad hippyish, but as I’ve said a million times, no society should ever sell its basics to anyone. It’s lethal.

Reclaiming Public Services (TNI)

Reclaiming Public Services is vital reading for anyone interested in the future of local, democratic services like energy, water and health care. This is an in-depth world tour of new initiatives in public ownership and the variety of approaches to deprivatisation. From New Delhi to Barcelona, from Argentina to Germany, thousands of politicians, public officials, workers, unions and social movements are reclaiming or creating public services to address people’s basic needs and respond to environmental challenges. They do this most often at the local level. Our research shows that there have been at least 835 examples of (re)municipalisation of public services worldwide since 2000, involving more than 1,600 municipalities in 45 countries.

Why are people around the world reclaiming essential services from private operators and bringing their delivery back into the public sphere? There are many motivations behind (re)municipalisation initiatives: a goal to end private sector abuse or labour violations; a desire to regain control over the local economy and resources; a wish to provide people with affordable services; or an intention to implement ambitious climate strategies. Remunicipalisation is taking place in small towns and in capital cities, following different models of public ownership and with various levels of involvement by citizens and workers. Out of this diversity a coherent picture is nevertheless emerging: it is possible to build efficient, democratic and affordable public services. Ever declining service quality and ever increasing prices are not inevitable. More and more people and cities are closing the chapter on privatisation, and putting essential services back into public hands.

Ulli Sima, Vienna City Councilor for the Environment and Wiener Stadtwerke: “As early as 2001, Vienna protected drinking water with a constitutional decision. Municipal services must remain public and should not be sacrificed to private profit. We want to ally with other cities for strong municipal servicest.” Eloi Badia, the Barcelona Councilor for presidency, water and energy: “It is important to demystify the process of privatisation that has been launched in recent years by several governments, because it’s a model that has not proved its efficiency, failing to offer a better service or a better price.”

Célia Blauel, President of Eau de Paris and Deputy Mayor of Paris in charge of the environment, sustainable development, water and the energy-climate plan: “Bringing local public services under public control is a major democratic issue, especially for such essential services as energy or water. It means greater transparency and better citizen supervision. In the context of climate change, it can contribute to leading our cities toward energy efficiency, the development of renewables, the conservation of our natural resources, and the right to water. ”

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Yesterday I wrote: “To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Today, Don Quijones says: “..when things get serious in the EU, laws get bent.”

That ends to the Cyprus model before it was even truly inaugurated.

Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)

When things get serious in the EU, laws get bent and loopholes get exploited. That is what is happening right now in Italy, where the banking crisis has reached tipping point. The ECB, together with the Italian government, have just this weekend to resolve Banca Popolare di Vicenza and Veneto Banca, two zombie banks that the ECB, on Friday night, ordered to be liquidated. Unlike Monte dei Pachi di Siena, they will not be bailed out primarily with public funds. Senior bondholders and depositors will be protected while shareholders and subordinate bondholders will lose their shirts. However, as the German daily Welt points out, subordinate bondholders at Monte dei Pachi di Siena had billions of euros at stake, much of it owned by its own retail customers who’d been sold these bonds instead of savings products such as CDs. So for political reasons, they were bailed out.

Junior bonds play a smaller role at the two Veneto-based banks. According to the Welt, the two banks combined have €1.33 billion (at face value) in junior bonds outstanding. They last traded between 1 cent and 3 cents on the euro. So worthless. Only about €100 million were sold to their own customers, not enough to cause a political ruckus in Italy. So they will be crushed. The good assets and the liabilities, such as the deposits, will be transferred to a competing bank. According to a rescue plan apparently drawn up by investment bank Rothschild that surfaced a few days ago, Intesa Sao Paolo, Italy’s second largest bank, would get these good assets and the deposits (liabilities), for the token sum of €1, while all the toxic assets (non-performing loans) would be shuffled off to a state-owned “bad bank” – and thus, the taxpayer.

According to the Italian daily Il Sole 24 Ore, the bad bank would be left holding over €20 billion of festering assets. “Intesa gets a free gift, the state takes on all the bad stuff and the taxpayer pays,” said at the time Renato Brunetta, parliamentary leader for former prime minister Silvio Berlusconi’s Forza Italia party. It is testament to just how desperate the situation has become in Italy’s banking crisis. The country’s largest lender, Unicredit, is in no position to help out: it had to raise €13 billion of new capital earlier this year just to keep itself afloat. Whether the deal with Intesa is still possible after the ECB’s decision to liquidate the banks, and what form this deal, if any, will take, and how much the taxpayer will have to fork over, and how to sugarcoat this in the most palatable terms is what the Italian government is currently trying to hammer out in its emergency meeting.

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How anyone can label this anything but ‘criminal’ is beyond me.

Health Spending In Greece Down 40% In 2009-2015 (Amna)

Health spending in Greece plunged 40% in the 2009-2015 period, Deloitte said in a survey released on Thursday. According to the survey, health spending fell to €14.1 billion in 2014, hit by a significant shrinking in medical/pharmaceutical coverage by the state and the social insurance system. It also stressed that this sharp decline mostly hit pharmacies and other professionals in the health sector and less the country’s hospitals. Hospital spending fell to €6.2 billion in 2015, from €9.0 billion in 2009, for an average annual decline of 6.0%, while average annual decline in the retail sector reached 7.0% and 9.0%, respectively. Deloitte said the state social insurance system covers 59.1% of total health spending in Greece, with patients covering 35.5% -a %age significantly higher compared with other European countries (UK 9.5%, France 6.7%, Italy 21.7%).

3.7% of total health spending is covered by private insurance contracts. Private hospitals were also hit during the 2009-2015 period, leading to more consolidation as the number of private hospitals fell by 6.0% and their size grew by around 1.0%. The total number of private and state hospitals in Greece was 283, mostly in Attica, offering 45,900 beds. The survey said that the number of beds surpassed demand by at least 18%. The survey noted that health spending recovered slightly to €14.7 billion in 2015 and stressed that international investors were showing strong interest for business deals in Greece.

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Want Moody’s to be nice to you? Slash your health system by 40%.

Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)

Credit ratings agency Moody’s late Friday raised Greece’s long-term issuer rating to “Caa2” from “Caa3” after eurozone governments extended a credit lifeline to the country. Moody’s also changed its outlook to “positive”, up from “stable” previously, saying it saw signs that the heavily indebted country’s economy was stabilising. It pointed to a mid-June agreement reached by Greece’s creditors to relaunch an aid plan to the country, which had been blocked for months due to disagreements between eurozone countries – especially Germany – and the IMF. The move reduces the spectre of a short-term crisis, after eurozone governments agreed to give Greece a new credit lifeline of some €8.5 billion ($9.5 billion). Moody’s said it expected Greece’s debt ratio to stabilise this year at 179% of GDP, adding that growth should return to the economy this year and next.

Greece returned to growth in the first quarter of 2017, with a 0.4% increase in GDP, according to figures revised upwards in early June. “It is too early to conclude that economic growth will be durable,” Moody’s said. The IMF, which links financial aid to debt relief, has also signed an “agreement in principle” to allow immediate assistance that avoids a payment crisis in Athens this summer. It said Thursday that negotiations with creditors for debt reduction had “made progress”. “If we did not think there was a good chance of reaching a debt deal, we would not have chosen that route,” an IMF spokesman said. Moody’s also raised the long-term country ceilings for foreign-currency and local-currency bonds to B3 from Caa2.

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Another kernel of truth that proves writing articles is not that easy.

Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)

The IMF, which day after day is busy “saving” economically suffering countries such as Greece, also happens to agree with this brave new worldview. In a working paper titled “The Macroeconomics of De-Cashing,” which the IMF claims does not necessarily represent its official views, the fund nevertheless provides a blueprint with which governments around the world could begin to phase out cash. This process would commence with “initial and largely uncontested steps” (such as the phasing out of large-denomination bills or the placement of upper limits on cash transactions). This process would then be furthered largely by the private sector, providing cashless payment options for people’s “convenience,” rather than risk popular objections to policy-led decashing.

The IMF, which certainly has a sterling track record of sticking up for the poor and vulnerable in society, comforts us by saying that these policies should be implemented in ways that would augment “economic and social benefits.” These suggestions, which of course the IMF does not necessarily officially agree with, have already begun to be implemented to a significant extent in the IMF debt colony known officially as Greece, where the IMF has been implementing “socially fair and just” austerity policies since 2010, which have resulted, during this period, in a GDP decline of over 25%, unemployment levels exceeding 28%, repeated cuts to what are now poverty-level salaries and pensions, and a “brain drain” of over 500,000 people—largely young and university-educated—migrating out of Greece.

Indeed, it could be said that Greece is being used as a guinea pig not just for a grand neoliberal experiment in both austerity, but de-cashing as well. The examples are many, and they have found fertile ground in a country whose populace remains shell-shocked by eight years of economic depression. A new law that came into effect on January 1 incentivizes going cashless by setting a minimum threshold of spending at least 10% of one’s income via credit, debit, or prepaid card in order to attain a somewhat higher tax-free threshold. Beginning July 27, dozens of categories of businesses in Greece will be required to install aptly-acronymized “POS” (point-of-sale) card readers and to accept payments by card.

usinesses are also required to post a notice, typically by the entrance or point of sale, stating whether card payments are accepted or not. Another new piece of legislation, in effect as of June 1, requires salaries to be paid via direct electronic transfers to bank accounts. Furthermore, cash transactions of over €500 have been outlawed. In Greece, where in the eyes of the state citizens are guilty even if proven innocent, capital controls have been implemented preventing ATM cash withdrawals of over €840 every two weeks. These capital controls, in varying forms, have been in place for two years with no end in sight, choking small businesses that are already suffering.

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Inevitable. Chemists go where they smell money.

Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

You may remember hearing back in September that Bayer, the largest pharmaceutical company in the world, made a deal to buy out Monsanto for $66 billion. Although Monsanto was voted the most evil company in the world in 2013 and its reputation has continued to fall since, Bayer still went ahead with the buyout. A merger between these two companies is unsurprising, as though they both have long histories of involvement with Nazism and chemical weapons like agent orange which have devastated Vietnam since the war. In fact, Bayer began as a break-off company of the infamous IG Farben, which produced the chemical weapons used on the Jews during the Nazi reign. After the war, Farben was forced to break up into several companies, including BASF, Hoeschst, and Bayer.

Soon after at the Nuremberg trials, 24 Farben executives were sent to prison for crimes against humanity. However, in a matter of just 7 years each of them was released and began filling high positions in each of the former Farben companies, and many of them began working for the Russian, British, and American governments through a joint intelligence venture called “Operation Paperclip”: (“IG (Interessengemeinschaft) stands for “Association of Common Interests”: The IG Farben cartel included BASF, Bayer, Hoechst, and other German chemical and pharmaceutical companies. As documents show, IG Farben was intimately involved with the human experimental atrocities committed by Mengele at Auschwitz. A German watchdog organization, the GBG Network, maintains copious documents and tracks Bayer Pharmaceutical activities.” – Alliance for Human Research Protection)

After all these years, Bayer is now richer and more powerful than their predecessor company I.G. Farben ever was. According to Big Buds Magazine, Monsanto and Scotts Miracle-Gro have a “deep business partnership” and plan on taking over the cannabis industry. Hawthorne, a front group for Scotts, has already purchased three of the major cannabis growing companies: General Hydroponics, Botanicare, and Gavita. Many other hydroponics companies have also reported attempted buyouts by Hawthorne. (“They want to bypass hydroponics retail stores…When we said we won’t get in bed with them they said, ‘Well, we could just buy your whole company like we did with Gavita and do whatever we want.’” – Hydroponics Lighting Representative) Jim Hagedorn, CEO of Scotts Miracle-Gro, has even said that he plans to “invest, like, half a billion in [taking over] the pot business… It is the biggest thing I’ve ever seen in lawn and garden.”

He has also invested in companies such as Leaf, which grows cannabis in an electronically regulated indoor terrarium accessible via smartphone. It is logical that Bayer, being the parent company, would work together with Monsanto in order to share secrets which would advance mutual business. Many people in the cannabis industry have been warning about this, including Michael Straumietis, founder and owner of Advanced Nutrients. (“Monsanto and Bayer share information about genetically modifying crops,” Straumietis notes. “Bayer partners with GW Pharmaceuticals, which grows its own proprietary marijuana genetics. It’s logical to conclude that Monsanto and Bayer want to create GMO marijuana.” – Michael Straumietis)

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Jun 242017
 
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Fred Lyon San Francisco Cable Car rounding the curve at Jones Street 1946

 

US New Home Sales Jump, Median Price Surges To Record High (R.)
Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)
The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)
The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)
Europe’s Banking Union Is Dying in Italy (BBG)
Two Italian Zombie Banks Toppled Friday Night (WS)
‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)
Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)
UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)
Corbyn Vows To Force Early British Election (Ind.)
May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)
The Fed Needs to Acknowledge the Slowing Economy (DDMB)
Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)
America’s Health-Care Rain Dance (Jim Kunstler)
US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)
The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

 

 

They are determined to get all the suckers they can get before the implosion. There’s a huge empty bag to be passed on.

US New Home Sales Jump, Median Price Surges To Record High (R.)

New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum. The Commerce Department said on Friday new home sales increased 2.9% to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Economists polled by Reuters had forecast new home sales, which make up about 10% of all home sales, rising 5.4% to a pace of 597,000 units last month. Sales were up 8.9% on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan. The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3% in May and mortgage rates are still favorable by historical standards. However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated. The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

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Ditto in Australia. This is from real estate broker Domain, responsible for ad campaigns like the one in the photo -which I took in Melbourne in 2011.

Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)

Property prices in affordable areas are expected to jump “overnight” on the back of changes to first-home buyer stamp duty concessions starting in July, experts say. Strategic vendors in these locations are holding off accepting offers until next month to take advantage of the expected surge in demand. First-home buyers in NSW are set to save up to $24,740 with stamp duty concessions for homes up to $800,000 and a full exemption for homes under $650,000. Among those anticipating they will benefit from the changes is Quakers Hill home owner Bhugol Kansakar who bought his house for $611,000 in March 2015 – then a first-home buyer himself. Since May his three-bedroom home at 9 Nyngan Street has been on the market for $730,000 to $760,000. “We’ve had offers around $720,000 to $730,000 … we’re holding out until next month as stamp duty will be off for the first-home buyers,” Mr Kansakar said.

In this price bracket, first-home buyers would get a partial exemption from July. “It is a big block of land, three-bedrooms, perfect for a first home.” He anticipates he will be likely to get $760,000 or more for the home when the new rules come in. And he’s far from the only one anticipating he’ll get a premium, his sales agent Raine & Horne Blacktown business development manager Edwin Almeida said. About 40% of inquiries on homes he had listed across the Blacktown Council area priced under $750,000 were first-home buyers asking if they could formally exchange next month. He expects local prices would jump by $20,000 to $40,000. “Easy money does not make the market more accessible for first-home buyers. It just means vendors and developers will increase the price of property to meet demand,” Mr Almeida said.

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Two pieces from a PDF by “The International Economy” site, entitled: “Has the World Been Fitted With a Debt Straightjacket? Nearly forty distinguished experts offer their wisdom”. Click the link to see all.

First, Steve Keen…

The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)

T he world has been fitted with not just one but two debt straightjackets: one made of public debt and the other of private debt. The situation in the United States is typical. The total U.S. debt level at the end of World War II was equivalent to 130% of GDP, with public debt being three-quarters of the total and private debt one-quarter. Today, it is 250% of GDP, with public debt being two-fifths of the total and private debt three-fifths. But there is a simple trick that could let the United States, like Harry Houdini, magically escape from one of these two straightjackets in a flash. Like any magic act, it’s ruined by the telling: despite all the political hand-wringing over the burden the public debt imposes on future generations, public debt could be eliminated by the stroke of a proverbial pen, for two simple reasons.

First, this debt is exclusively in U.S. dollars; second, the government is the only institution in the nation that “owns its own bank,” the Federal Reserve, which can create U.S. dollars at will. The Fed could buy up—and effectively cancel—this debt overnight. You might not like this trick, but it’s both possible and perfectly legal. That leaves the second straightjacket: private debt. Here Houdini’s escape is not possible, because if any individual tried to do what the U.S. government can do, that person would be gaoled for counterfeiting. All U.S. private debt is, like public debt, owed in U.S. dollars; but only the U.S. government has the privilege of owning its own bank. For the private sector, it’s effectively the banks that own the debtors. But paradoxically, most economists obsess about the public debt trap and ignore the private debt one.

Why? Because they believe that banks do not originate loans, but instead act as “intermediaries” between savers and borrowers. Therefore, they say, private debt doesn’t matter, because if the debtor can’t spend, the lender can, and vice versa. They therefore believe that the level of private debt, and its rate of growth or decline, are economically irrelevant. They can’t see a private straightjacket. Several central banks have recently loudly declared that this model is nonsense—including Germany’s ultraconservative Bundesbank. Banks are not “intermediaries of debt” but originators. They don’t lend pre-existing money, but create money when they make an entry in the borrower’s deposit account, which is matched precisely by an entry in the borrower’s debt account.

Since debtors borrow to spend, rising private debt boosts demand while falling debt reduces it. Demand in the United States was therefore boosted substantially as private debt rose almost fivefold from 1945 until 2008. Now demand from credit is stagnant and as likely to subtract from demand as add to it. So private debt is the real straightjacket constraining the economy. But with mainstream economists ignoring it and fretting about government debt, the U.S. economy is likely to remain in its debt straightjacket indefinitely. As the public has started to realize since the 2008 crisis took them by surprise, mainstream economists are inept magicians.

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…second, Makoto Utsumi, Chairman of the International Advisory Board, Tokai Tokyo F.H., and former Vice Minister of Finance for International Affairs, Japan.

The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)

Can Japan withstand the return to conventional monetary policy? The Bank of Japan has been conducting an unconventional monetary policy for almost two decades, drastically strengthening this policy since Governor Kuroda took office in 2013. As public debt accumulated to 250% of GDP and due to the massive holdings of Japanese Government bonds by the Japanese banking sector, some argue that Japan cannot withstand the return to conventional monetary policy. Here are my points of view: First, let us consider the impact of interest rates hikes on public finances. Many analysts argue that this move would be destructive to public finances due to increased interest payments. There is a point, however, almost all analysts neglect. When interest rates on the JGB rise, the rates on savings and deposits also rise.

As 20% of the interest income is withheld at source, the incremental tax revenue would offset to a great deal the increasing cost of the debt service to be paid by the government. Although the damage caused by the shift in monetary policy on the budget balance would be limited, the fiscal situation of Japan would become increasingly serious with a sustained lack of fiscal discipline. Japanese public finances seem to be on a path to breakdown and the Bank of Japan’s policy to purchase Japanese government bonds up to an amount equal to 80% of new issuances looks more and more like the monetization of the budget deficit. Next, let us see the impact on the banking sector. Two decades of unconventional monetary policy have been squeezing the banks’ profit margins through the extreme flattening of the yield curve.

From this view point, the return to conventional monetary policy is good news for the Japanese banking sector in the long run. On the other hand, in the short and medium terms, this would represent the harshest challenge for banks due to massive valuation losses on their bond holdings. According to the Bank of Japan’s survey, a 1 percentage point rise of interest rates on bonds would cause a loss of US$20 billion for mega-banks, US$25 billion for regional banks, and US$19 billion for credit unions. While the U.S. Federal Reserve is firmly committed toward exit and as the European Central Bank seems to be quietly probing a future exit strategy, where is the Bank of Japan going? If it continues to maintain zero or negative interest rates, current profits of the banking sector would be further squeezed.

If it starts to take steps toward conventional monetary policy, the banking sector would face serious valuation losses. Either way, the future prospects for Japanese banks look like hell. We will probably witness a clear distinction between two groups of banks: those who manage their business based on foresight and those who don’t. And we would see a deep reshuffle in the banking sector along with the exit process from the unconventional monetary policy of the Bank of Japan.

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To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Europe’s Banking Union Is Dying in Italy (BBG)

The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared. The rival bank, Intesa Sanpaolo, would be getting a great deal for little risk. But for the Italian taxpayer, and the credibility of euro zone financial regulation, the plan is a loser and should be stopped. The Italian scheme is radically different from the one put in place two weeks ago, when the Spanish lender Banco Santander bought Banco Popular for one euro. In that case Santander also acquired Popular’s non-performing loans as well as all the future legal risks.

It also immediately went to the markets to raise capital to pay for it. Here, Intesa will only pick the assets it wants and insists that the operation not impact its capital ratio. This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around €10 billion ($11.1) for it. The government could have taken a less expensive route, involving the “bail in” of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, €10 billion is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash – from taxpayers who will feel defrauded.

Most importantly, this plan is a dagger in the heart of the euro zone banking union. This was one of Europe’s main responses to the sovereign debt crisis, designed to limit the contribution of taxpayers to bank rescues and to ensure all euro zone lenders faced a coherent set of rules. Italy is relying for its plan on its domestic liquidation regime. Rome will effectively by-pass the EU’s “single resolution board” which is supposed to handle bank failures in an orderly way and the “Banking Recovery and Resolution Directive,” which should act as the euro zone’s single rulebook. The advantage will be to spare senior bondholders but the cost will be huge: denting, perhaps irreversibly, the credibility of Europe’s newly formed institutions.

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And there we go. After years of trying to save them. One day we’ll realize just how epic this failure is.

Two Italian Zombie Banks Toppled Friday Night (WS)

When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks! It’s over for the two banks that have been prominent zombies in the Italian banking crisis: Veneto Banca and Banca Popolare di Vicenza, in northeastern Italy. The banks have combined assets of €60 billion, a good part of which are toxic and no one wanted to touch them. They already received a bailout but more would have been required, and given the uncertainty and the messiness of their books, nothing was forthcoming, and the ECB which regulates them lost its patience. In a tersely worded statement, the ECB’s office of Banking Supervision ordered the banks to be wound up because they “were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements.”

“Failing or likely to fail” is the key phrase that banking supervisors use for banks that “should be put in resolution or wound up under normal insolvency proceedings,” the statement said. This is the first Italian bank liquidation under Europe’s new Single Resolution Mechanism Regulation. The ECB explained: “The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward. Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.”

[..] nothing worked. Private sector money stayed away in droves. JP Morgan, which had been recruited to save the Italian banks, threw in the towel. These banks had been zombies for too long. Everybody knew it. But the government kept denying it. Just weeks ago, Italy’s Minister of Economy Pier Carlo Padoan insisted that the two banks would not be wound down. Last year, to dispel the mountain of evidence to the contrary, he insisted that that there would be no need of any future bail outs; and that, furthermore, Italy did not even have a banking problem. In early June, the two banks were instructed by the European Commission to raise an additional €1.25 billion in private capital. No one bit. Italy’s government then tried to persuade the European Commission and the ECB to water down the requirement to €600-800 million, and it urged Italian banks to chip in to the bank rescue fund. All that failed.

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That leaves 25 sovereign countries with nothing to say on issues that are vitally important to them. Who are we kidding?

‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)

Emmanuel Macron and Angela Merkel used the French president’s first Brussels summit Friday to deliver an unmistakeable message: their countries intend to lead the EU’s post-Brexit revival. The Franco-German power couple held an unusual joint press conference after meeting their 26 European Union counterparts, against a backdrop of their respective flags and the bloc’s blue banner with yellow stars. “When France and Germany speak with one voice, Europe can move forward,” newcomer Macron told a room almost filled to bursting point with reporters as he stood alongside the German chancellor. “There can be no pertinent solution if it is not a pertinent solution for France and Germany,” the 39-year-old centre-right leader.

Despite her more pragmatic tone, the message from 62-year-old Merkel was the same. “This press conference shows that we are resolved to jointly find solutions to problems,” she said. The joint press conference came exactly a year after Britain’s shock referendum vote to become the first country to leave the European Union, which prompted dire predictions of the break-up of the bloc. But Europe has jumped on the bandwagon of Macron’s stunning election victory over French far-right leader Marine Le Pen to trumpet a newfound optimism after years of austerity and crisis despite Brexit. At the heart of that is the idea that Macron may be able to repair the traditional “engine” behind European integration – the post-war alliance of Paris and Berlin after centuries of conflict.

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Can the Greek finance minister please state that Schaeuble lies to Germans? Just to see the reaction?!

Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)

British people were “endlessly lied to and deceived” in last year’s Brexit referendum campaign, German Finance Minister Wolfgang Schaeuble said on Friday. Speaking in Berlin on the first anniversary of the Brexit vote, Schaeuble was scathing about the “leave” campaigners who persuaded a majority of voters to opt to quit the EU. “The Britons were endlessly lied to and deceived,” Schaeuble told a conference of family-run companies. When the Brexit campaigners “happened to be successful, the ones who did it ran away because they said they can’t take responsibility”. The two sides in Britain’s referendum campaign swapped bitter accusations they were making misleading or untrue statements, such as the claim that leaving the EU would free up large sums for public health spending.

In the days after the vote, Prime Minister David Cameron, who called the referendum, resigned, and several prominent leave campaigners dropped out of the race to succeed him. Schaeuble said the 70 years of growth and prosperity Europe had known since World War Two was not based on pure majoritarianism but on sustainable democratic models. “(We need) not just mechanisms that consist of my promising something to a majority,” he said. “Then you only have to look at the demographics to see that you’ll end up with endless debates about redistribution that lead to jealousy.”

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May has become a very damaging force in Britain.

UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)

MPs from all parties are already planning an alliance to defeat Theresa May’s plans for a hard Brexit, just days into the new Parliament. Strategies to amend future legislation – including a key immigration bill – to force ministers to listen to business groups and to show the EU that Parliament wants a “softer” exit are being drawn up, The Independent has learned. One Conservative MP said the aim was to give confidence to “bullied” ministers who are reluctant to “speak out”, despite sharing the view that the Prime Minister’s plans put Britain on the road to disaster. Another MP outlined the importance of convincing Brussels that Parliament can “coordinate” to present a different, more EU-friendly policy to that of the Government. “It would really show how power has shifted if Parliament can coordinate itself – and that’s not impossible,” the MP said.

Pro-EU Tory Anna Soubry told The Independent: “We are talking to each other and will continue to talk to each other – this is something that transcends normal party political considerations. “It doesn’t have to be about forcing votes, but it may come to that. Certainly, the threat of losing a vote will weigh very heavily on the Government’s mind.” Another MP spoke of giving voice to changing public opinion, amid the first evidence that some people who voted Leave a year ago are changing their minds. Ms Soubry added: “I am up for working with everybody. Hopefully something concrete will come out of it, because this is the most important thing that’s been done in decades.” She said she was in contact with some of the 34 Labour MPs who, this week, challenged Jeremy Corbyn to change course by fighting to stay in the single market.

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Noy much use, perhaps. Don’t say it out loud. Just wait for the Tories to blow up.

Corbyn Vows To Force Early British Election (Ind.)

Jeremy Corbyn has said he will look to “force an early general election” after claiming it was “ludicrous” to suggest Theresa May could stay in power. The Labour leader made the claim before speaking at Unison’s annual conference in Brighton and also added he was pleased with the party’s recent surge in opinion polls. Mr Corbyn’s approval rating has been on the rise since the general election and it appears he will now attempt to pile pressure on the Prime Minister. “Mrs May called the election so not to have a coalition of chaos, but that is exactly what we have got, they don’t seem to have come to an agreement with the DUP two weeks after the election,” Mr Corbyn told the Daily Mirror. “We will challenge this Government at every step and try to force an early general election.”

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George Osborne has some accounts to settle. And a very easy target to blame his own whoppers on.

May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)

Theresa May single-handedly blocked a plan to immediately guarantee the future rights of the 3m EU citizens in the UK last summer, George Osborne has revealed. The then-Home Secretary was the only member of the Cabinet to oppose David Cameron, who “wanted to reassure EU citizens they would be allowed to stay”, after Brexit. “All his Cabinet agreed with that unilateral offer, except his Home Secretary, Mrs May, who insisted on blocking it,” revealed the Evening Standard, now edited by Mr Osborne. The proposal was discussed “in the days immediately after the referendum” exactly one year ago, said the newspaper. Ms May has denied the accusation and said that “was certainly not my recollection” of events. But Tom Brake, the Liberal Democrat Brexit spokesman, said: “It is a badge of shame that Theresa May blocked attempts to guarantee the rights of EU nationals after the referendum.

“It shows how cold and heartless she is. “Now that mean-spirited decision is coming back to haunt her as we see an exodus of skilled EU workers, from nurses to academics.” The revelation comes after EU citizens in the UK protested that Ms May’s “generous” offer – outlined last night – will leave them with less rights after Brexit than “British jam”. The Prime Minister’s proposals also ran into trouble from other EU leaders who warned of “open questions” and a “long, long way to go” before agreement. Ms May was forced to defend her position and said she wants to give EU citizens in the UK “certainty” but the details of the arrangement would be outlined during the negotiation process. Since reaching No 10, Ms May has faced down pleas to act unilaterally, insisting she would only offer guarantees to EU citizens if British ex-pats in the EU were given the same protection.

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It’ll happen only after the round of rate hikes. There’s not enough room to go down right now.

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

As any market veteran can tell you, those on the sell-side are the second-to-last to concede to a slowdown in economic activity. It’s unseemly to make negative calls when a firm’s main objective is keeping its clients fully invested in risky assets; the two aims naturally conflict. Hence the surprise when Bank of America Merrill Lynch said autos are headed for a “decisive downturn” that will trough in 2021 at around a 13-million-unit annualized rate, down from last year’s blistering record 17.6 million. A week earlier, Morgan Stanley, whose numbers are not quite as grim, also reduced its sales forecast, recognizing that the best days of the cycle have come and gone. The U.S. economy is consumption-centric. Growth in the current recovery has centered on three industries that have fed through to consumption in its various forms – autos, energy and financial services.

There’s something almost poetic in finance’s re-emergence, especially for those on Wall Street who’ve profited smartly from unprecedented levels of deal flow. Have a debt problem? Solve it with more debt. And why not? This system has worked for generations; insatiable demand for debt is why interest rates have staged their historic decline. Debt lit the fire that ignited the shale revolution. Debt put a floor under and then helped commercial real estate reach for the skies. Debt kept dying retailers alive. And debt made easier back-to-back years of record car sales. The question so many bullish economists must answer is what debt can do for the economy in the future. Much to the Saudis’ dismay, the energy industry is as lean and mean as it’s ever been; operating efficiency gains have been magnificent in a do-or-die environment. Energy is growth neutral going forward.

[..] It’s all good and well that strained industries want to extract what value remains from their CRE exposure as part of their exit strategies. But this only works in isolation. If motivated sellers move in tandem, you can bet teetering CRE valuations will be among the casualties, taking many over-exposed mid-size and small banks down with them. Call it a confluence of factors that bodes ill for the economic recovery, even as optimists hope the growth streak can stretch into a 10th year. By the way, leading the optimists’ charge is the Federal Reserve itself. Central bank policy makers’ expectations for future growth indicate the current economic recovery will unseat the record holder, the expansion that finally flamed out in 2001 after enjoying a life of exactly 10 years. But then it is the Fed that’s the very last to capitulate, to say nothing of forecast, a slowdown in economic activity.

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“The best thing to do is to break Illinois into pieces right now. Just wipe us off the map.”; “Illinois is merely the canary in the coal mine.”

Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)

Illinois is the perfect example of what happens when your state is run by fiscally irresponsible dunces for decades. The state is buried in debt, and hasn’t passed a budget in over 700 days. 100% of their monthly revenue is being consumed by court ordered payments, and the Illinois Department of Transportation has revealed that they may not be able to pay contractors (who are working on over 700 infrastructure projects) after July 1st if the state doesn’t pass a budget. To top it all off, the state’s credit rating is one step away from junk status, the lowest of any state. Because of these factors, Illinois may become the first state to declare bankruptcy since the Great Depression. Governor Bruce Rauner has gone so far as to call his state a “banana republic.” The state’s comptroller has admitted that “We are in massive crisis mode.”

And a reporter for the Chicago Tribune thinks Illinois has gone so far past the point of no return, that the state should be broken up. He recently wrote what basically sounds like a suicide note for Illinois. “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me. The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America’s heartland and let neighboring states carve us up and take the best chunks for themselves. The group that will scream the loudest is the state’s political class, who did this to us, and the big bond creditors, who are whispering talk of bankruptcy and asset forfeiture to save their own skins. But our beloved Illinois has proved that it just doesn’t deserve to survive.”

So how did it get to this point? The root of the problem is Illinois’ unfunded pension liabilities, which amount to $130 billion. The state’s leaders simply promised what could not be delivered. Most of their employees can retire in their 50’s, and many of them will receive 1-2 million dollars over the course of their retirements. As the debts associated with those pensions reached astronomical levels, the government increased taxes so much that many of the wealthiest and most productive citizens and businesses have moved away, leaving an even smaller tax base to draw from. In short, Illinois is in a death spiral, but it’s not alone. Illinois is merely the canary in the coal mine.

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Hopeless.

America’s Health-Care Rain Dance (Jim Kunstler)

The cost of everything medical is worked out in a private rain-dance between the aforementioned manifold concerned parties on the basis of what they think they can get away with in any particular case. In hospitals, this is enabled by the notorious ChargeMaster system which, to put it as simply as possible, allows hospitals to just make shit up. Any bill in congress that affects to reform the gross financial malfeasance in healthcare ought to start with the absolute requirement to publicly post the cost of everything that doctors and hospitals do, and enable the “service providers” to get paid only those publicly posted costs — obviating the lucrative rain-dance for dividing up the ransoms paid by hostage-patients who come to the “providers,” after all, in extremis. Notice that this crucial feature of the crisis is missing not only from the political debate but also from the supposedly public-interest-minded pages of The New York Times and other organs of the news media.

Perhaps this facet of the problem never entered the editors’ minds — in which case you really have to ask: how dumb are they? (The funniest claim about ObamaCare in today’s New York Times is the statement that 20 million citizens got access to health care under the so-called Affordable Care Act. Really? You mean they got health insurance policies with $8000-deductables, when they don’t even have $500 in savings to pay for car repairs? What planet do The New York Times editorial writers live on?) The corollary questions about deconstructing the insurance armature of the health care racket, and assigning its “duties” to a “single-payer” government agency is, of course, a higher level of debate. I’m not saying it would work, even if it was modeled on one of the systems currently working elsewhere, say in France.

But Americans have acquired an allergy to even thinking about that, or at least they’ve been conditioned to imagine they’re allergic by self-interested politicians. So, the current product of debate in the US Senate is just a scheme for pretending to reapportion the colossal flow of grift among the grifters. Spare yourself the angst of even worrying about the outcome of the current healthcare debate. It’s not going to get “fixed.” The medical system as we know it is going to blow up, and soon, just like the pension systems across the country, and the treasuries of the fifty states themselves, and the rest of the Potemkin US economy.

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“The coalition says it takes as many precautions as possible within the laws of warfare..”

US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)

The U.S.-led coalition’s strikes against the Islamic State militant group (ISIS) in two Syrian provinces killed 472 civilians in the last month, according to a monitor. The Syrian Observatory for Human Rights (SOHR), a U.K.-based monitoring group that has an extensive network of contacts on the ground in Syria, said the toll was more than double the month prior and the highest for a single month since raids began in September 2014. In Raqqa province, where the city of the same name is located, coalition strikes killed 250 civilians, including 53 children, SOHR said. In Deir ez-Zor, strikes killed 222 civilians, 84 of which were children. Rami Abdul Rahman, director of SOHR, told the AFP news agency that the total deaths caused by coalition strikes in Syria now amounted to 1,953. Of the deceased, 456 were children and 333 were women.

The coalition continues its bombing campaign in and around the eastern Syrian city of Raqqa, the largest under ISIS’s control in the country. It is supporting an Arab-Kurdish alliance waging a ground offensive against ISIS in the de facto capital of its self-declared caliphate that straddles the Iraqi-Syrian border. The coalition says it takes as many precautions as possible within the laws of warfare, but top coalition generals have admitted that civilian deaths are inevitable in the campaign to defeat ISIS. Some 100,000 civilians remain under ISIS control in the northern Iraqi city of Mosul, and thousands remain in Raqqa. Human rights groups have criticized the coalition for not exercising enough caution. One case in particular was a March 17 strike in Mosul that killed more than 100 civilians. The coalition investigated the incident and concluded that ISIS had placed booby traps in the building that maximized the damage on impact.

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Greece must refuse.

The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

They say that history repeats itself first as a tragedy then as a farce. It’s a commonplace expression that is nevertheless clearly true in crisis-ridden Greece. During the SYRIZA-AnEl coalition’s time in power(especially under the second mandate), even the seasons of the year have come to resemble each other. Winter is a time of tension, harsh disagreement and bluster. Spring is the season for gradual capitulation. May (2016 and 2017) is the month for government betrayal; June for further prerequisites and an “agreement.” The rest of the summer then marks a period of government euphoria, followed by an autumn of initial discussions with an eye to the next set of negotiations. By using what happened over the same span of time in 2016—along with the language of the Third (and “fourth”)Memorandum of Understanding—as a kind of textbook, it’s easy to tell where we are and where we’re headed.

The June 15 Eurogroup joint statement condenses all the results of the most recent set of negotiations. These are the most essential and specific points: “The reform measures cover areas such as pensions, income tax, the labour market as well as the financial and energy sectors. These should make Greece’s medium-term fiscal strategy more robust and support the growth-friendly rebalancing of the economy. The Eurogroup invited Greece together with the institutions and relevant third parties to develop and support a holistic, growth enhancing strategy.”

In this paragraph, the Eurozone Finance Ministers are essentially borrowing a page from 1984. In that legendary novel by George Orwell, war is peace; freedom is enslavement; ignorance is power. For the Eurogroup (as per usual), pension cuts, reductions in tax exemptions, an administration well-disposed to mass lay-offs, and the sale of Public Power Corporation shares all count as positive “reform measures.” Greece’s sentence to a “long-term memorandum,” requiring surpluses of 3.5% until 2022 and a little over 2% until 2060, constitutes “support [of] a holistic, growth enhancing strategy.” “The Eurogroup reconfirmed its approach to the sustainability of Greece’s public debt that was agreed in May 2016, while providing some further detail on the medium-term debt measures that could accrue to Greece. These measures would be implemented after successful completion of the programme, if a new debt sustainability analysis were to confirm that such measures are necessary.”

These two brief paragraphs finalize the results of the multi-month Greek debt negotiations. In short and as is plainly evident, the Greek government gained nothing in terms of its debt, while after months of Eurozone attempts to secure further relief the Eurogroup simply determined that everything decided back in May 2016 still holds. Even the government’s recent expectation that the (highly dangerous) phrase “if necessary” would be removed from the relief-program wording was ultimately frustrated. “The Eurogroup welcomed Greece’s commitment to maintain a primary surplus of 3.5% of GDP until 2022, and a fiscal path consistent with the European fiscal framework thereafter. According to analysis by the European Commission, such compliance would be achieved with a primary surplus of equal to or above but close to 2.0% of GDP in the period of 2023-2060.”

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Jun 232017
 
 June 23, 2017  Posted by at 9:55 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Fred Lyon Embarcadero lunch San Francisco 1948

 

Americans Are Dying With An Average Of $61,500 In Debt (ZH)
34 Biggest Banks in US Clear First Hurdle In Fed’s Annual Stress Tests (R.)
Credit-Card Debt Slaves Move to Top of Fed’s Bank Worries (WS)
Citizens Will Soon Turn Their Rage Towards Central Bankers (Albert Edwards)
UK Homelessness Surges 34% Under Tories Since 2010 (Ind.)
UK High Court Judges Tory Policy Causes ‘Real Misery For No Purpose’ (Ind.) /span>
Buy-to-Let Uk Property Sales Fall By Almost 50% In A Year (G.)
Canada’s Private Sector Debt Growing Faster Than Any Advanced Economy (PA)
Warren Buffett Becomes Lender Of Last Resort For Canada’s Home Capital (BBG)
EU Political Class Rides Roughshod over Citizens’ Concerns & Frustrations (DQ)
Dear Oliver: About Those Putin Interviews (RM)
Arab States Send Qatar 13 Demands To End Crisis (R.)
In Yemen’s Secret Prisons, UAE Tortures and US Interrogates

 

 

Double or nothing?!

Americans Are Dying With An Average Of $61,500 In Debt (ZH)

According to a recent study, the average total household debt in America is just over $132,500, broken down as per the chart below… and thanks to the Fed’s recent and ongoing rate increases, the repayment of said debt will become increasingly more difficult. So difficult, in fact, that most Americans will be saddled with a sizable chunk of it at the time of their death. Actually, most already are. According to December 2016 data from credit bureau Experian provided to credit.com, 73% of American consumers had outstanding debt when they were reported as dead. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875. As credit.com reports, the data is based on Experian’s FileOne database, which includes 220 million consumers.

To determine the average debt people have when they die, Experian looked at consumers who, as of October 2016, were not deceased, but then showed as deceased as of December 2016. Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%). The breakdown of unpaid balances was as follows: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391. And, as a reminder, debt doesn’t just disappear when someone dies.

What happens to that debt when you die, aside from it continuing to accrue interest until someone remembers to inform the creditors? “Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might. That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.

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Let’s do a stress test that assumes the Fed is no longer around, see what happens.

34 Biggest Banks in US Clear First Hurdle In Fed’s Annual Stress Tests (R.)

The 34 largest U.S. banks have all cleared the first stage of an annual stress test, showing they would be able to maintain enough capital in an extreme recession to meet regulatory requirements, the Federal Reserve said on Thursday. Although the banks, including household names like JPMorgan Chase and Bank of America, would suffer $383 billion in loan losses in the Fed’s most severe scenario, their level of high-quality capital would be substantially higher than the threshold that regulators demand, and an improvement over last year’s level. “This year’s results show that, even during a severe recession, our large banks would remain well capitalized,” said Fed Governor Jerome Powell, who leads banking regulation for the central bank. “This would allow them to lend throughout the economic cycle, and support households and businesses when times are tough.”

The Fed introduced the stress tests in the wake of the financial crisis to ensure the health of the banking industry, whose ability to lend is considered crucial to the health of the economy. Since the first test was conducted in 2009, big banks have seen losses abate, loan portfolios improve and profits grow. The banks that now undergo the exam have also strengthened their balance sheets by adding more than $750 billion in top-notch capital, the Fed said. Banks and their investors have been hoping the improvements would prompt the Fed to allow them to use more capital for stock buybacks and dividends, especially as the Trump administration is seeking to relax financial regulations. Wall Street analysts and trade groups quickly cheered the results on Thursday, saying regulators should feel comfortable easing tough rules put in place since the financial crisis. “We see today’s…stress test results as a positive for Trump administration efforts to deregulate the banks,” said Jaret Seiberg, a policy analyst with Cowen & Co.

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The biggest debts are still in mortgages. Falling home prices will hurt most.

Credit-Card Debt Slaves Move to Top of Fed’s Bank Worries (WS)

The comforting news in the results from the Federal Reserve’s annual stress test is that the largest 34 bank holding companies would all survive a recession. Based on this glorious accomplishment, the clamoring has already started for regulators to allow these banks to pay bigger dividends and to blow more money on share buybacks, and for these regulators to slash regulation on these banks and make their life easier and riskier in general. We don’t want these banks to survive a recession in too good a condition apparently. And it would likely be better for Wall Street anyway if banks could lever up with risks so that a few of them would get bailed out during the next recession. Let’s remember, for the Fed’s no-holds-barred bailout-year 2009, Wall Street executives and employees were doused with record bonuses.

The Fed’s bailouts were good for them. And it has been good for them ever since. The less comforting news in the stress test is that credit card debt – generally the most expensive and risky debt for consumers – has now moved to the top of the Fed’s worry list in the “severely adverse scenario” of the stress test. The projected losses for the 34 largest banks – not counting the losses at the 4,997 smaller banks – are expected to hit $100 billion, up nearly 9% from the stress test a year ago. The projected losses rose for several reasons, including that credit card balances have grown by 5.6% from a year ago to over $1 trillion. The delinquency rate has risen to 2.4%. The Fed is also blaming looser lending standards. Sharing the top spot on the Fed’s worry list in the “severely adverse scenario” are Commercial & Industrial loans, whose balances are over twice as large, at $2.1 trillion, but whose projected losses are also pegged at $100 billion. In total, the “severely adverse scenario” sees $493 billion in losses for these 34 banks:

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“..investors, drunk with the liquor of loose money..”

Citizens Will Soon Turn Their Rage Towards Central Bankers (Albert Edwards)

Albert Edwards pwrites “Theft redux: the citizens will soon turn their rage towards Central Bankers.” The core of his argument is familiar: “While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE. In an age of “radical uncertainty” how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.” That’s just the beginning from Edwards, who appears to be getting increasingly angrier and more frustrated with a market that makes increasingly less sense: his fiery sermon continue with the following preview of the “inevitable catastrophe that lies ahead.”

“Evidence of the impact of monetary madness on assets prices is all around if we care to look. I read that a parking spot in Hong Kong was just sold for record HK$5.18 million ($664,200). What about the 3.5x oversubscribed 100 year Argentine government bond? Sure, everything has a market clearing price, even one of the most regular defaulters in history. But what concerned me most about the story was it was demand from investors (“reverse enquires”) that prompted the issue. Is it just me or can I hear echoes of the mechanics of the CDO crisis? But no one cares when the party is still raging and investors, drunk with the liquor of loose money, are blind to the inevitable catastrophe that lies ahead. There is a lot of anger out on the streets, as demonstrated most visibly in recent elections.

Even in France where investors feel comforted that a “moderate” has gained (absolute?) power, it is salutary to remember that the two establishment parties have just been decimated by a man who had never before stood for public office! This is perhaps even more radical than Trump’s anti-establishment victory under the Republican umbrella. The global political situation is incredibly fluid and unpredictable. While a furious electorate has turned its pent up anger on the establishment political parties, the target for their rage is misguided. I am not completely alone in thinking it is the unelected and virtually unaccountable central bankers who are primarily responsible for the poverty of working people and who will be ultimately held to account in the next crisis.

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In other news: ” Government-funded new social housing has fallen 97% since 2010″.

UK Homelessness Surges 34% Under Tories Since 2010 (Ind.)

The number of families being declared homeless has rocketed by more a third since the Conservatives took power in 2010, analysis of new official statistics by The Independent has revealed. Between April 2016 and March 2017, 59,100 families were declared homeless by local authorities in England – a rise of 34% on the same period in 2010-11. The statistics paint a bleak picture of the UK housing crisis and the impact a lack of decent, affordable homes is having on thousands of families. There has been a 60% increase in the number of families being housed in insecure temporary accommodation. In particular, bed and breakfast-type hotels are increasingly being used to house families for long periods of time as local councils struggle to find them proper homes to live in.

There are now 77,240 families in England currently living in temporary accommodation – up from 48,240 just six years ago. Of these, almost fourth-fifths (78%) are families with children, meaning there are currently 120,500 children living in insecure, temporary homes. Of those being housed temporarily, 6,590 households are living in B&Bs, including 3,010 families with children. Almost half have been living in this type of accommodation, which often sees families crammed into one room and forced to share limited bathroom and cooking facilities with strangers, for more than six weeks. This is illegal under the Homelessness (Suitability of Accommodation) Order 2003, which banned local authorities from housing families with children in B&Bs for more than a six-week period.

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The Tories are done. Someone should tell them.

UK High Court Judges Tory Policy Causes ‘Real Misery For No Purpose’ (Ind.)

Today, the High Court ruled that the benefits cap, one of the Tories’ flagship welfare policies, is unlawful, because it amounts to illegal discrimination against single parents with small children. It’s likely that the Government will be forced to alter or completely scrap their benefits cap, a policy that limits the total amount a household can receive in benefits to £23,000 in London and £20,000 elsewhere in the UK. High Court judge Justice Collins described the benefit cap as causing “real damage” to single parent families and said “real misery is being caused to no good purpose”. This is the fundamental truth at the heart of Tory welfare policy – misery without progress or reason.

Welfare reform as part of the coalition government’s austerity measures has driven thousands more people into poverty and in many tragic cases, some deaths occurred after individuals were declared fit to work. Austerity was not inevitable. It was an ideologically-motivated programme designed to force the poorest and most vulnerable in our society to shoulder the burden of a financial crisis that they had less than nothing to do with creating. Four claimants brought this case to court. Two of them had been made homeless as a result of domestic violence, and were trying to work as many hours as possible while taking care of children under the age of two. Imagine fleeing an abusive partner, seeking support from a domestic violence service that’s had its funding brutally slashed by the Tory government, trying to work and look after a small child, then having your benefits cut, again by the Tory government.

The claimants are not alone. The benefits cap has inflicted a massive amount of suffering, with 200,000 children from the very lowest income families affected, as their parents’ income has fallen drastically. In real terms, this means that these children’s lives have become even more difficult, and they weren’t easy to begin with. This means a colder house, less food to eat, more shame at school due to unwashed clothes, uniforms that are too small, worn-through shoes. It means stressed, unhappy and increasingly desperate parents, and in family, children can’t fail to pick up on this mood of misery. [..] In this wealthy, highly developed country, poverty is the single biggest threat to the wellbeing of children and families. Poverty affects a quarter of all children in Britain, a massive, disgraceful, inexcusable proportion. one in five parents are struggling to feed their children, and 50% of all parents living in food poverty have gone without meals in order to give their children more to eat.

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There goes the bubble. Look out below.

Buy-to-Let Uk Property Sales Fall By Almost 50% In A Year (G.)

The number of properties bought by landlords has almost halved in a year after a tax and regulatory clampdown, prompting a leading banking body to downgrade its forecasts for buy-to-let lending in 2017 and 2018. The Council of Mortgage Lenders said buy to let had had a weak start to 2017, with lending falling faster than expected as landlords withdrew from the market in response to major tax changes and tighter lending rules. The data follows a series of recent surveys and indices suggesting the housing market is running out of steam. However, the crackdown on buy to let may have helped young people trying to get a foot on the property ladder. CML said house purchase activity was being driven predominantly by first-time buyers, with their numbers up 8% in the 12 months to April.

Buy-to-let homebuying activity was “nearly half what it was a year ago” and had averaged around 6,000 purchases a month over the last 12 months, said the body, which represents banks and building societies. The number of landlord purchases involving a mortgage was 5,300 in April this year. This compared with 10,300 in February 2016 and 11,800 in July 2015. As a result, the CML has cut its forecast for buy-to-let lending from £38bn being lent in both 2017 and 2018 to £35bn in 2017 and £33bn in 2018. The organisation warned against hitting landlords with any further changes to taxation and lending rules, saying the figures “re-emphasise the case for avoiding further changes to the tax and regulatory framework until the effect of these already in train have been properly assessed”.

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Download report here: Addicted to Debt – Tracking Canada’s rapid accumulation of private sector debt .

Canada’s Private Sector Debt Growing Faster Than Any Advanced Economy (PA)

For the first time ever, Canada’s private sector is racking up debt faster than any other of the world’s 22 advanced economies, putting the country at risk of serious economic consequences, according to new research by the Canadian Centre for Policy Alternatives. A new report authored by CCPA Senior Economist David Macdonald reveals that Canada added $1 trillion in private sector debt over the past five years ($2016), with the corporate sector responsible for the majority of it. Economies can become dependent on debt in order to fuel economic and asset price growth. With both rapid private debt accumulation and a high private debt-to-GDP ratio, even a small change in debt growth rates, brought on by changes in interest rates for instance, could have a devastating impact on the larger economy.

“Private sector debt growth is one of the best predictors of economic crisis, and Canada is now the only advanced economy squarely in the debt ‘danger zone’ of having high private sector debt that continues to rise rapidly,” Macdonald says. The report identifies several areas of concern:
• Canada has never before led the advanced economies in private debt growth;
• The last time Canada was close to leading the world in private debt growth was the early 1990s, just as housing prices plummeted and then stagnated for a decade;
• The country’s private debt-to-GDP ratio has risen by a fifth since 2011, from 182% to 218%. The US ratio currently stands at 152%;
• The $315 billion increase in household debt since 2011 ($2016) is almost entirely attributable to the rise in mortgage debt related to rapid home prices increases;
• Corporate debt is less well studied, and rose $671 billion since 2011 ($2016), accounting for two thirds of private debt accumulation over that time;
• Corporate debt was largely spent on mergers and acquisitions as well as real estate purchases, neither of which make the country more productive.

“Canada’s economy has become addicted to binging on ever more private sector debt, and weaning us off it should be our primary public policy concern,” adds Macdonald, who recommends further study of corporate debt and consideration of a housing speculators’ tax to further reign in mortgage debt increases.

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Well, it can’t be because Buffett see a bright future in Canada’s housing market. So draw your own conclusion.

Warren Buffett Becomes Lender Of Last Resort For Canada’s Home Capital (BBG)

Warren Buffett has become the lender of last resort for Home Capital. The billionaire investor agreed to buy shares at a deep discount and provide a fresh credit line for the Canadian mortgage company, tapping a formula he used to prop up lenders from Goldman Sachs to Bank of America. Buffett’s Berkshire Hathaway Inc. will buy a 38% stake for about C$400 million ($300 million) and provide a C$2 billion credit line with an interest rate of 9% to backstop the embattled Toronto-based lender, Home Capital said late Wednesday in a statement. The interest on the one-year loan would net Berkshire at least C$180 million if it’s fully tapped.

“While the terms of the new credit line with Berkshire Hathaway remain harsh, we believe the purpose of this loan is to motivate Home Capital’s management to bolster their own funding sources,” said Hugo Chan at Kingsferry Capital in Shanghai, which owns shares in Home Capital. “This again shows Mr. Buffett’s masterful capital allocation skills,” said Chan, citing his investment motto: “be greedy when others are fearful.” The financial backing from Buffett sent the stock higher Thursday, though it comes at a cost, in keeping with his past bailouts of financial firms. Buffett has buoyed some of the biggest U.S. corporations in times of trouble, including a combined $8 billion injection to prop up Goldman Sachs and General Electric when credit markets froze during the 2008 financial crisis.

In the Home Capital deal, Buffett’s firm agreed to pay an average price of C$10 a share, a 33% discount to Wednesday’s closing price of C$14.94. Berkshire would become the largest shareholder in Home Capital, which has a market value of about C$1 billion. Home Capital surged 27% to C$19 in Toronto on Thursday. That gives Buffett a 90% return on paper for the equity investment, assuming the deal goes through.

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They always have, it’s an MO.

EU Political Class Rides Roughshod over Citizens’ Concerns & Frustrations (DQ)

Merkel has expressed a willingness to go along with two central French demands — the appointment of a Eurozone finance minister and the creation of a common budget — as long as certain conditions are met. “We can of course think about a Eurozone budget as long as it’s clear that this is really strengthening structures and achieving sensible results,” she said. [..] Back on the table is a proposal to upgrade the grossly unaccountable Luxembourg-based European Stability Mechanism (ESM) into a full-fledged European Monetary Fund. As we’ve noted before, creating a European Monetary Fund (EMF) would be an important statement of intent. If Europe’s core countries are truly set on taking the EU project to a whole new level, such as by pursuing the creation of an EU army, an EU border force (with full powers), fiscal union, and ultimately political union, some form of burden sharing will ultimately be necessary.

The establishment of a fully operational EMF could be an important move in that direction. The EMF would essentially act as a fiscal backdrop to the banking system, something the Eurozone has desperately needed ever since its creation. As Bruegel proposes, it would serve as a fiscal counterpart of the ECB to guarantee the financial stability of the euro area in the event of a sovereign or banking crisis, or a threat thereof — of which there are plenty these days, in particular emanating from Italy’s broken banking system. Naturally, the creation of an EMF would deal a further blow to the fading remnants of national sovereignty in Europe. But that’s a price that many (but certainly not all) of Europe’s elite is more than happy to pay; some would say that destroying national sovereignty was the ultimate goal of the EU all along.

In a survey of more than 10,000 EU citizens and 1,800 EU elites carried out by Chatham House, of the elites, 37% believe the EU should get more powers, 28% want to keep the status quo and 31% would prefer to return more powers to individual member countries. This enthusiasm for a more centralized, more powerful EU is not shared with equal enthusiasm by European citizens: 48% want powers returned to the individual member countries. Citizens, overall, do not feel they have benefited from European integration in the same way Europe’s elite does. Whereas 71% of elites report feeling they have gained something from the EU, the figure among the public is only 34%. Even more worrisome for national leaders, a clear majority of the public — 54% — feel that their country was a better place to live 20 years ago, before the euro existed.

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I’ve seen a few parts. Liked them quite a bit.

Dear Oliver: About Those Putin Interviews (RM)

Dear Mr. Stone: I have just finished watching all four episodes of The Putin Interviews. May I give you my critique? Overall, I felt that the series is Very Good but felt just short of Great. I will explain below what I feel could have made it Great. First, I want to tell you what I really loved about it. 1. You have an easy style. I felt as if Mr. Putin was at ease with you, and you with him. You have a warm command of the English language and can transmit your ideas into language in a very personable way — an art that is missing among so many American media people these days. I felt that you drew out a candid side of Putin, well, that is, as far as a man of his intellectual prowess and disciplined self-control will allow. 2. Best moment of the show: Sitting next to Vlad and watching Dr. Strangelove! Oh my goodness, most people would not even dream of adding such a thing to their bucket list.

3. I loved the walking tour of the President’s offices and the general background of the Kremlin architecture and decor. I pay attention to the daily, tweeted photos from the Kremlin’s official account. I have seen those desks and tables a million times in the photos. But now I have them all within a mental frame, thanks to your film. Question: I was burning to know why Vlad had a pair of scissors and multi-colored construction paper in the middle of his desk, did you happen to ask him, off-camera?

Where It Fell Short Mr. Stone, I hated that so much time was wasted talking about the contrived “Russia hacked the election” meme. Hillary might not know why she lost the election, but the rest of the nation does. When my father would get on a roll with his bad jokes, Mom would tell us kids: “Don’t encourage him.” Well, you too need to stop encouraging the MSM to keep breathing life into a dead meme.

You also wasted time re-hashing Crimea. “Read My Lips,” Vlad said, “the Crimeans ASKED, BEGGED, AND VOTED to rejoin Russia.” Good grief, when McCain’s and Nuland’s beloved neo-Nazi Svoboda party took illegal control of Ukraine, their first move was to try and make it illegal to speak Russian. Geez, half the people in Ukraine ARE Russian! Mr. Putin has exercised considerable restraint towards Ukraine.

Mr. Stone, I have been following the development of BRICS, the “Silk Road Project,” and the EEU (European Economic Union) for a half-decade now. I can’t have a conversation with my neighbors and friends about all of that here in America because not one of them has heard anything about it! You had a great opportunity to ask Mr. Putin to school us on the Sino-Russian version of a multi-polar world without war, but you totally blew it. I don’t think you ever asked Vlad about China, did you?

 

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Saudi Arabia accuses Qatar of supporting terrorism. Rich.

Arab States Send Qatar 13 Demands To End Crisis (R.)

Four Arab states boycotting Qatar over alleged support for terrorism have sent Doha a list of 13 demands including closing Al Jazeera television and reducing ties to their regional adversary Iran, an official of one of the four countries said. The demands aimed at ending the worst Gulf Arab crisis in years appear designed to quash a two decade-old foreign policy in which Qatar has punched well above its weight, striding the stage as a peace broker, often in conflicts in Muslim lands. Doha’s independent-minded approach, including a dovish line on Iran and support for Islamist groups, in particular the Muslim Brotherhood, has incensed some of its neighbors who see political Islamism as a threat to their dynastic rule.

The list, compiled by Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain, which cut economic, diplomatic and travel ties to Doha on June 5, also demands the closing of a Turkish military base in Qatar, the official told Reuters. Qatar must also announce it is severing ties with terrorist, ideological and sectarian organizations including the Muslim Brotherhood, Islamic State, al Qaeda, Hezbollah, and Jabhat Fateh al Sham, formerly al Qaeda’s branch in Syria, he said, and surrender all designated terrorists on its territory, The four Arab countries accuse Qatar of funding terrorism, fomenting regional instability and cozying up to revolutionary theocracy Iran. Qatar has denied the accusations.

[..] on Monday, Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani said Qatar would not negotiate with the four states unless they lifted their measures against Doha. The countries give Doha 10 days to comply, failing which the list becomes “void”, the official said without elaborating, suggesting the offer to end the dispute in return for the 13 steps would no longer be on the table.

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Bunch of sicko’s.

Edward Snowden on Twitter: “Biggest @AP scoop in a long time: US government behind UAE torture in Yemen, with some reportedly grilled alive.

In Yemen’s Secret Prisons, UAE Tortures and US Interrogates

Hundreds of men swept up in the hunt for al-Qaida militants have disappeared into a secret network of prisons in southern Yemen where abuse is routine and torture extreme — including the “grill,” in which the victim is tied to a spit like a roast and spun in a circle of fire, an Associated Press investigation has found. Senior American defense officials acknowledged Wednesday that U.S. forces have been involved in interrogations of detainees in Yemen but denied any participation in or knowledge of human rights abuses. Interrogating detainees who have been abused could violate international law, which prohibits complicity in torture. The AP documented at least 18 clandestine lockups across southern Yemen run by the United Arab Emirates or by Yemeni forces created and trained by the Gulf nation, drawing on accounts from former detainees, families of prisoners, civil rights lawyers and Yemeni military officials.

All are either hidden or off limits to Yemen’s government, which has been getting Emirati help in its civil war with rebels over the last two years. The secret prisons are inside military bases, ports, an airport, private villas and even a nightclub. Some detainees have been flown to an Emirati base across the Red Sea in Eritrea, according to Yemen Interior Minister Hussein Arab and others. Several U.S. defense officials, speaking on condition of anonymity to discuss the topic, told AP that American forces do participate in interrogations of detainees at locations in Yemen, provide questions for others to ask, and receive transcripts of interrogations from Emirati allies. They said U.S. senior military leaders were aware of allegations of torture at the prisons in Yemen, looked into them, but were satisfied that there had not been any abuse when U.S. forces were present.

“We always adhere to the highest standards of personal and professional conduct,” said chief Defense Department spokeswoman Dana White when presented with AP’s findings. “We would not turn a blind eye, because we are obligated to report any violations of human rights.” In a statement to the AP, the UAE’s government denied the allegations. “There are no secret detention centers and no torture of prisoners is done during interrogations.” Inside war-torn Yemen, however, lawyers and families say nearly 2,000 men have disappeared into the clandestine prisons, a number so high that it has triggered near-weekly protests among families seeking information about missing sons, brothers and fathers.

None of the dozens of people interviewed by AP contended that American interrogators were involved in the actual abuses. Nevertheless, obtaining intelligence that may have been extracted by torture inflicted by another party would violate the International Convention Against Torture and could qualify as war crimes, said Ryan Goodman, a law professor at New York University who served as special counsel to the Defense Department until last year

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Jun 222017
 
 June 22, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Paul Klee Analysis of Various Perversities 1922

 

The Little Putsch That Could Beget a Great Big Coup (Stockman)
US Should Mind Its Own Business; It Shouldn’t Be In Syria (Ron Paul)
US Is A “Second Tier” Country (ZH)
America Grows Older And More Ethnically Diverse (BBG)
The Wheels Come Off Uber (Yves Smith)
Oil Prices ‘Like A Falling Knife’ (CNBC)
The Rise of a Prince Ends Doubts Over Saudi Arabia’s Direction (BBG)
Canada’s Housing Bubble Will Burst (BBG)
Rehousing Of Grenfell Tower Families In Luxury Block Gets Mixed Response (G.)
China NPL Prices Up 30% as New Gold Rush Gets Under Way (BBG)
Strong Interest, Low Price For NPLs of Greece’s Eurobank (K.)
Greeks Skeptical About Benefits, Prospects of EU (K.)
Greek Tourism Minister Says Arrivals Will Top 30 Million This Year (K.)

 

 

Davis is getting upset. He’s offering a free copy of his Trump book to every American at the link.

The Little Putsch That Could Beget a Great Big Coup (Stockman)

Let’s start with two obvious points about the whole Russia fiasco… Namely, there is no “there, there.” First off, the president has the power to declassify secret documents at will. But in this instance he could also do that without compromising intelligence community (IC) “sources and methods” in the slightest. That’s because after Edward Snowden’s revelations in 2013, the whole world was put on notice — and most especially Washington’s adversaries — that it collects every single electronic digit that passes through the worldwide web and related communications grids. Washington essentially has universal and omniscient SIGINT (signals intelligence). Acknowledging that fact by publishing the Russia-Trump intercepts would provide new knowledge to exactly no one. Nor would it jeopardize the lives of any American spy or agent (HUMINT).

It would just document the unconstitutional interference in the election process that had been committed by the U.S. intelligence agencies and political operatives in the Obama White House. That pales compared to whatever noise comes out of Langley (CIA) and Ft. Meade (NSA). And I do mean noise. Yes, I can hear the boxes on the CNN screen harrumphing that declassifying the “evidence” would amount to obstruction of justice! That is, since Trump’s “crime” is a given (i.e. his occupancy of the Oval Office), anything that gets in the way of his conviction and removal therefrom amounts to “obstruction.” Given that he is up against a Deep State/Democratic/Neoconservative/mainstream media prosecution, the Donald has no chance of survival short of an aggressive offensive of the type I just described. But that’s not happening because the man is clueless about what he is doing in the White House.

And he’s being advised by a cacophonous coterie of amateurs and nincompoops. So he has no action plan except to impulsively reach for his Twitter account. That became more than evident — and more than pathetic, too — when he tweeted out an attack on his own Deputy Attorney General, Rod Rosenstein. At least Nixon fired Elliot Richardson (his Attorney General) and Bill Ruckelshaus (Deputy AG): “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt.” Alone with his Twitter account, clueless advisors and pulsating rage, the Donald is instead laying the groundwork for his own demise. Were this not the White House, this would normally be the point at which they send in the men in white coats with a straight jacket.

[..] Even Senator John Thune, an ostensible Swamp-hating conservative, had nothing but praise for Special Counsel Robert Mueller, that he would fairly and thoroughly get to the bottom of the matter. No he won’t! Mueller is a card-carrying member of the Deep State who was there at the founding of today’s surveillance monster as FBI Director following 9/11. Since the whole $75 billion apparatus that eventually emerged was based on an exaggerated threat of global Islamic terrorism, Russia had to be demonized into order to keep the game going — a transition that Mueller fully subscribed to.

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“One thing that I am concerned about – because I’ve seen it happen so often over the years, are false flags.”

US Should Mind Its Own Business; It Shouldn’t Be In Syria (Ron Paul)

RT: Australia halted its cooperation. How significant is this development? Why did they do it? Ron Paul: I think that is good. Maybe wise enough, I wish we could do the same thing – just come home. It just makes no sense; there’s a mess over there. So many people are involved, the neighborhood ought to take care of it, and we have gone too far away from our home. It has been going on for too long, and it all started when Obama in 2011 said: “Assad has to go.” And now as the conditions deteriorate …it looks like Assad and his allies are winning, and the US don’t want them to take Raqqa. This just goes on and on. I think it is really still the same thing that Obama set up – “Get rid of Assad” and there is a lot of frustration because Assad is still around and now it is getting very dangerous, it is dangerous on both sides.

One thing that I am concerned about – because I’ve seen it happen so often over the years, are false flags. Some accidents happen. Even if it is an honest accident or it is deliberate by one side or the other to blame somebody. And before they stop and think about it, then there is more escalation. When our planes are flying over there and into airspace where we shouldn’t be, and we are setting up boundaries and say “don’t cross these lines or you will be crossing our territory.” We have no right to do this. We should mind our own business; we shouldn’t be over there, when we go over there and decide that we are going to take over, it is an act of aggression, and I am positively opposed to that. And I think most Americans are too if they get all the information they need.

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“..the US received its lowest marks in the categories of “tolerance and inclusion” and “health and wellness.“

US Is A “Second Tier” Country (ZH)

Most Americans’ idea of happiness involves lounging by the water or on a beach somewhere. But it turns out, human happiness can flourish even in freezing climates far from the equator. To wit, the Social Progress Imperative, a US-based nonprofit, released the results of its annual Social Progress Index report, which purports to rank countries based on the overall wellbeing of their citizens. Four Scandinavian countries – Denmark, Finland, Iceland and Norway claimed the top spots, while the US placed 18th out of 128, leaving it in what the SPI defines as the “second-tier” of countries based on citizens’ wellbeing, according to Bloomberg. Luckily, being “second-tier” doesn’t seem that bad, according to a definition found in the report. “Second-tier countries demonstrate “high social progress” on core issues, such as nutrition, water, and sanitation.

However, they lag the first-tier, “very high social progress” nations when it comes to social unity and civic issues. That more or less reflects the U.S. performance. (There are six tiers in the study.)” “We want to measure a country’s health and wellness achieved, not how much effort is expended, nor how much the country spends on healthcare,” the report states. In a nod to the controversy surrounding President Donald Trump’s anti-immigrant rhetoric, as well as his efforts to repeal and replace Obamacare, the report noted that the US received its lowest marks in the categories of “tolerance and inclusion” and “health and wellness.” America’s “tolerance” score has been sliding since 2014, around the time that several high-profile shootings of unarmed black men ignited the “Black Lives Matter” movement, sparking a national conversation about the prevalence of racism in US society.

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Just very slowly.

America Grows Older And More Ethnically Diverse (BBG)

The United States is growing older and more ethnically diverse, a trend that could put strains on government programs from Medicare to education, the Census Bureau reported Thursday. Every ethnic and racial group grew between 2015 and 2016, but the number of whites increased at the slowest rate — less than one hundredth of 1% or 5,000 people, the Census estimate shows. That’s a fraction of the rates of growth for non-white Hispanics, Asians and people who said they are multi-racial, according to the government’s annual estimates of population. President Donald Trump’s core support in the racially divisive 2016 election came from white voters, and polls showed that it was especially strong among those who said they felt left behind in an increasingly racially diverse country.

In fact, the Census Bureau projects whites will remain in the majority in the U.S. until after 2040. “Even then, (whites) will still represent the nation’s largest plurality of people, and even then they will still inherit the structural advantages and legacies that benefit people on the basis of having white skin,” said Justin Gest, author of “The New Minority,” a book about the 2016 election. The Census Bureau reported that the median age of Americans — the age at which half are older and half are younger — rose nationally from just over 35 years to nearly 38 years in the years between 2000 and 2016, driven by the aging of the “baby boom” generation. The number of residents age 65 and older grew from 35 million to 49.2 million during those 16 years, jumping from 12% of the total population to 15%.

That’s a costly leap for taxpayers as those residents move to Medicare, government health care for seniors and younger people with disabilities, which accounted for $1 out of every $7 in federal spending last year, according to the Kaiser Family Foundation. By 2027, it will cost $1 out of every $6 of federal money spent. Net Medicare spending is expected to nearly double over the next decade, from $592 billion to $1.2 trillion, the KFF reported.

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Excellent take-down from Yves.

The Wheels Come Off Uber (Yves Smith)

Not surprisingly, the financial press has been all ago about the drama of Travis Kalanick’s forced departure from Uber’s CEO position yesterday, and has focused on getting salacious insider details of his ouster. That means journalists largely ignored what ought to be the real story, which is whether Uber has any future. I anticipate that Hubert Horan will offer a longer-form treatment of this topic. Hubert had already documented, in considerable detail in his ten-part series, how Uber has no conceivable path to profitability. Its business model has been based on a massive internal contradiction: using a ginormous war chest to try to achieve a near-monopoly position in a low-margin, mature business that is fragmented geographically and locally.

Monopolies and oligopolies are sustainable only when certain factors are operative: the ability to attain a superior cost position through scale economies, which include network effects, or barriers to entry, such as regulations, very high skill levels, or high minimum investment requirements. Neither of these apply in the local car ride business. Even if Uber were able to drive literally every competing cab operator in the world out of business due to its ability to continue its predatory pricing, once Uber raised prices to a level where it achieved profits, new entrants (or revived old entrants) would come in. Uber will thus never be able to charge the premium prices (in excess of the level for a traditional taxi operator to be profitable) for the very long period necessary for Uber to merely be able to recoup the billions of dollars it has burned, mainly in subsidizing the cost of rides, let alone to achieve an adequate return on capital.

And that’s before you get to the fact that systematically much higher prices would mean fewer fares. The developments of the last few months mean Uber’s decay path is sure to accelerate. I’ve been following the business press for over 30 years. I can’t think of a single case where even an established, profitable business with an established franchise has had so many top level positions vacant, and for such bad reasons. As reader vidimi quipped, “With no CEO, CFO, COO, and CIO, uber is coming very close to becoming a self-driving company.” And that’s not even a full list. World-class communications expert Rachel Whetstone, who is recognized as a key force in rebuilding the Tories’ brand in the UK, quit in April.

The heads of engineering departed for failing to disclose a previous sexual investigation; the head of product and growth was forced out over a sexual impropriety at a company function. And in a scandal that will have a much longer tail, Uber’s former head of its Waymo driverless car unit, Anthony Levandowski, has had his case involving alleged theft of intellectual property from Google referred to the Department of Justice. Kalanick was deeply involved in Levandowski sudden exodus. It seems implausible that Kalanick didn’t know Levandowski was making off with Google files. If the case does lead to a criminal prosecution, it is hard to see how Kalanick could escape scrutiny as a potential criminal co-conspirator.

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Just in case you were wondering why King Salman named a new crown prince…

Oil Prices ‘Like A Falling Knife’ (CNBC)

Oil prices could be poised to fall below $40 a barrel before too long, according to an analyst at Energy Aspects, as the commodity appeared set to post its largest price slide in the first half of the year for the past two decades. “This is like a falling knife right now, I genuinely haven’t seen sentiment this bad ever,” Amrita Sen, the co-founder and chief oil analyst at Energy Aspects, told CNBC on Wednesday. “We have had clients emailing saying they have been trading this for 20 or 30 years and they have never seen something like this,” she added. Oil prices have tumbled more than 20% his year, marking its worst performance for the first six months of the year since 1997 and putting the commodity in bear market territory.

The ongoing decline in prices appears to have stemmed from investors discounting evidence of robust compliance by OPEC and non-OPEC producers with a deal to curtail a global supply overhang. Prices took a fresh leg lower in the previous session – dipping 2% – as new signs of rising output from Nigeria and Libya, the two OPEC members exempt from a deal to cut production. Output from the 14-member exporter group ticked higher in May due to rising production in Nigeria, Libya and Iraq, raising concerns about OPEC’s effort to shrink global stockpiles of crude oil. OPEC and other producers have committed to keeping 1.8 million barrels a day off the market through March. Libya’s oil production rose more than 50,000 barrels per day to 885,000 bpd. Meanwhile, exports of Nigeria’s benchmark Bonny Light crude oil are set to rise by 62,000 barrels per day in August.

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Absolutely. He’s the War Prince.

The Rise of a Prince Ends Doubts Over Saudi Arabia’s Direction (BBG)

With the anointment of Prince Mohammed bin Salman as heir to the Saudi throne, any doubts over the continuation of policies that have shaken up the Middle East have gone. Western diplomats already referred to the 31-year-old as “Mr. Everything,” because of his control over most aspects of domestic, foreign and defense affairs. His elevation ends a behind-the-scenes struggle for power and answers the question of what would happen to his plans for Saudi Arabia when King Salman, now 81, dies or steps aside. The most ambitious of these, Vision 2030, seeks to recalibrate the economy to end the country’s near-total dependence on oil revenue. But internationally, there are also ramifications. Last month, the prince again raised the stakes in the regional rivalry with Iran, saying that dialog was “impossible” as they fight a proxy war in Yemen.

He also led a multi-nation effort to isolate neighboring Qatar, causing a rift among fellow members of the Gulf Cooperation Council. That also looks set to turn into another long and potentially fruitless test of wills as Iran and Turkey come to Qatar’s aid. “The switch offers him the legitimacy and consensus of becoming the next king and that will validate his vision, his plans and his policies,” said Sami Nader, head of the Beirut-based Levant Institute for Strategic Affairs. “There were a lot of question marks about the future of Saudi Arabia and the transition. Now this debate has ended.” Widely known as MBS, he was made crown prince just after dawn in Riyadh, displacing his older cousin, Mohammed bin Nayef, who was also stripped of his post as interior minister in charge of domestic security forces and counter-terrorism policy.

The move was neither a shock nor a coup, and it means he could be running the kingdom for decades to come. What’s more, his tough approach to the intractable problems of the Middle East would appear to mesh well with U.S. President Donald Trump, who visited Saudi Arabia last month. Trump called the new crown prince Wednesday to offer congratulations on his elevation, the White House said in a statement. Trump and the prince “committed to close cooperation to advance our shared goals of security, stability, and prosperity across the Middle East and beyond,” according to the statement. The problem is what comes next. On Tuesday, the U.S. Department of State questioned Saudi Arabia’s justification at striking out at Qatar by cutting it off from diplomatic and transport links.

The bombing campaign in Yemen aimed at destroying the rebel Houthi forces that Saudi Arabia sees as proxies for Iran, meanwhile, appears to have no end in sight. Two years later, it has become bogged down, bloody and increasingly unpopular. “On the foreign policy side he’s also embroiled Saudi Arabia in Yemen and Qatar without an exit strategy,” said James Dorsey at Singapore’s Nanyang Technological University. These aren’t changes of direction for Saudi Arabia, but “what he has done is to stretch up a notch and put some very sharp edges on it, and at this point those are backfiring.”

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Any Canadian with a substantial mortgage who’s not actively trying to sell right now…..

Canada’s Housing Bubble Will Burst (BBG)

Canadian home sales fell the most in five years last month. That didn’t stop an increase in prices, which were up 18% nationwide from a year earlier. When you consider that most houses are leveraged assets, this represents huge gains for homeowners. While leverage can help boost performance on the way up, it becomes very dangerous on the way down. Leverage can turn even the best investments into poor ones when things go wrong, as losses are amplified. Equity can get wiped out pretty quickly on an overleveraged asset. Canadian real estate has been on fire for years. The housing price data there has made the U.S. real estate market during the boom of the mid-2000s look mild. The Federal Reserve Bank of Dallas puts out a global housing price index for more than 20 countries every quarter. Using this data, I looked at the real house price index data for Canada and compared it with the same data in the U.S. going back to 1975. Here’s this relationship from 1975 through the end of 2005:

Although there were some divergences in the early and late 1980s, both housing markets essentially ended up in the same place after 30 years. Now let’s add in the most recent data to see how things have unfolded since:

An enormous divergence occurred in 2006, when U.S. housing prices really began to soften, while Canadian price barely skipped a beat. This makes any differences in the past look like blips. The rise in Canadian real estate prices has been relentless. The U.S. housing market peaked in late 2006. Since then, based on this index, U.S. housing prices are still down almost 13% from their peak through the end of 2016. In that same time frame, Canadian housing prices are up 56%. From the 2006 peak, it took until late 2012 for real estate in the U.S. to bottom. We’ve since witnessed a 19% recovery from what was a 27% decline nationwide, on average. While the U.S. real estate downturn lasted almost six years, Canada’s housing market experienced just a 7% drawdown that lasted less than a year. And house prices in Canada reclaimed those losses in about a year and a half. Canadian housing has also outpaced its neighbors to the south since the 2012 bottom in U.S. real estate, with a 30% gain in that time.

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You can’t even blame these people. It’s the whole crazy idea of cities and governments blowing housing bubbles on purpose, that’s what’s wrong here.

Rehousing Of Grenfell Tower Families In Luxury Block Gets Mixed Response (G.)

Two miles south of the charred skeleton of Grenfell Tower is a large complex of sleek new apartments that some of those displaced by last week’s inferno will soon be able to call home. Kensington Row’s manicured lawns, clipped trees and burbling fountains are a haven from the rumbling traffic of two busy London thoroughfares, and its spacious, air-conditioned foyers a relief from June’s oppressive heatwave. Four unfinished blocks house the 68 flats purchased by the Corporation of London for families who lost their homes in Grenfell Tower. Workmen had been instructed not to talk to the media, but one said there was now a rush to complete the building work. “It’s a brilliant idea,” he said of the resettlement plan. Among those exercising dogs and small children, the views were more mixed. “It’s so unfair,” said Maria, who was reading the news in the Evening Standard with two neighbours.

She bought her flat two years ago for a sum she was unwilling to disclose. “We paid a lot of money to live here, and we worked hard for it. Now these people are going to come along, and they won’t even be paying the service charge.” Nick, who pays £2,500 a month rent for a one-bedroom flat in the complex, also expressed doubts about the plan. “Who are the real tenants of Grenfell Tower?” he asked. “It seems as though a lot of flats there were sublet. Now the people whose names are on the tenancies will get rehoused here, and then they’ll rent the flats out on the private market. And the people who were actually living unofficially in the tower at the time of the fire won’t get rehoused. “I’m very sad that people have lost their homes, but there are a lot of people here who have bought flats and will now see the values drop. It will degrade things. And it opens up a can of worms in the housing market.”

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When your bad debt is in a bubble, I guess you got it made?! Or should that be: you should be afraid?

China NPL Prices Up 30% as New Gold Rush Gets Under Way (BBG)

Bad loans are rapidly becoming the latest hot commodity in China as more domestic and foreign investors rush into the market and bid up prices. Non-performing loan prices have risen more than 30% this year, according to distressed investor Belos Capital Asia. The average selling price of NPLs has climbed to around 50 cents on the dollar in the past two years, from 30 cents, said Victor Jong, a partner in the deals and business recovery services unit of PricewaterhouseCoopers in Shanghai. Such a high level is “very rare” in international markets, Jong said. “There are just too many buyers grabbing a limited supply of NPLs,” said Hanson Wong, CEO of Belos Capital in Hong Kong. “At these prices, it’s pretty hard for these NPLs to be profitable.” Distressed investors are increasing as Chinese authorities encourage market-oriented ways to resolve lenders’ mounting piles of non-performing debt amid slowing economic growth.

A jump in valuations of real estate, which often act as underlying assets for secured loans, has boosted the debt’s recovery prospects. Combined with a surge in money supply, this has lifted bad-loan prices even in some less-developed regions of China, according to domestic distressed debt investor Bald Eagle Asset Management. Foreign investors including Oaktree Capital, Lone Star, Goldman Sachs and PAG have bought China NPLs in the current cycle that began in 2014, according to a March report from PwC. Non-performing loans at the country’s lenders jumped 61% in the past two years to 1.58 trillion yuan ($231 billion) at the end of March. In the previous NPL cleanup in China, between 2001 and 2008, secured debt was typically sold at 20 cents on the dollar, and unsecured creditors got back only 5 cents, said Wang Yingyi, a partner at Bald Eagle in Beijing.

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Looks like Greece should try China’s bad debt recipe.

Strong Interest, Low Price For NPLs of Greece’s Eurobank (K.)

The loans portfolio put up for sale by Eurobank is attracting strong investment interest but low offers as the lender begins the process for the transfer of nonperforming loans. This is a portfolio valued at €2.8 billion which has attracted the interest of about 20 investment funds in the data room, illustrating the strong leverage the NPL market commands, partly due to the banks’ commitment to reducing their bad loans by 40% by the end of 2019. The portfolio that Eurobank is selling includes debt from consumer loans and credit cards that have gone unpaid for years, most for at least a decade – i.e. since before the financial crisis broke.

Eurobank has made all the necessary moves for the collection of part of the €2.8 billion, without getting a great response. Therefore the prices in the market are expected to be particularly low for the portfolio, with estimates speaking of just 5% of the original value. Market professionals note that Eurobank’s effort to recover part of the dues just before the opening of the portfolio’s sale, offering debtors a haircut of up to 95% without any significant results, means that the price will likely drop below 5% too.

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Greeks are still stuck in the mindset of being proud to be deemed worthy of being a full member of the EU. So much so that they can’t see they’re not.

Greeks Skeptical About Benefits, Prospects of EU (K.)

As the European Union’s cohesion faces being sorely test by the upcoming Brexit negotiations and other challenges, Greeks appear increasingly skeptical about the benefits and prospects of the EU, according to a new study by London-based international policy institute Chatham House and research company Kantar. 74% of Greeks are worried about the outlook for the EU, according to the survey which was carried out on a sample of 1,000 people in 10 European countries: Britain, Belgium, Germany, Greece, Spain, France, Italy, Austria, Hungary and Poland.

The Greek figure was almost double the research average of 38%. Greeks were also significantly more downbeat than their counterparts, with 60% declaring themselves to be pessimistic compared to a research average of 40%. An even larger proportion of Greeks, 80%, said they believed more members of the bloc would follow Britain’s lead and decide to break away from the Union in the next 10 years. Predictably, following seven years of belt-tightening imposed by foreign creditors, a significant proportion of Greeks (67%) said that austerity was the EU’s biggest failure. 73% of Greeks believe that the decision of Britain to leave the EU will weaken the Union.

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A debt colony AND a tourist colony. With most of the best assets sold off to foreigners.

BTW, both Greeks and tourists would be much better off if Greece had its own currency and could lower daily prices.

Greek Tourism Minister Says Arrivals Will Top 30 Million This Year (K.)

The tourism sector is showing genuine signs of growth this year that suggest it will be the main driver of the Greek recovery, as it will help state revenues, the private economy, the country’s current accounts and employment. The government is for the first time speaking of 30 million arrivals in 2017. Bank of Greece data show that in the first four months of the year travel receipts increased by 2.4% or 23 million euros year-on-year, reaching 997 million euros. This increase was thanks to the 3.2% rise in arrivals and not average spending per trip, which posted a 0.8% decline. This means the 4.8% drop in travel receipts during the first quarter was offset in April, when arrivals rose 12% and receipts 11.3% annually. This positive picture is expected to have continued in May.

Retail sector representatives are looking forward to cashing in on the increase in arrivals, to offset the losses resulting from Greek households’ ever shrinking disposable incomes. Based on the bookings picture, turnover in retail commerce could rise by up to 5% this year. Addressing a conference organized by the Panhellenic Exporters Federation, Tourism Minister Elena Kountoura said that the data of the first five months point to an increase in arrivals, revenues, nights stayed and occupancy rates. They also show an increase in bookings for the summer ranging between 15 and 70%, depending on area, which led to her conclusion that Greece will have more then 30 million tourists this year after welcoming 28 million in 2016 and 26 million in 2015. The growth in tourism is also reflected in employment and commerce. The number of unemployed registered last month dropped by 56,820 people from April to 913,518, mainly thanks to the rise in seasonal employment in tourism and commerce.

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »
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Fred Lyon Post&Powell Union Square San Francisco 1947

 

100% Chance of Recession Within 7 Months? (DR)
The Secret Source of Eternal Australian Growth (Steve Keen)
We Need A Public Inquiry Into The Economics Profession (Pettifor)
Where Are The Empty Homes In Kensington? (Whoownsengland)
Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)
Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)
House Republicans Block Russia Sanctions Bill (ZH)
We Are Inches From A New World War (Medium)
Iran Slams Tillerson Call For Regime Change (RT)
The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)
EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)
Europe’s Unserious Plan for Greece (BBG)
Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)
At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

 

 

The numbers say it.

100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

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Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

 

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

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A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

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If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

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Science and technology will not enforce human rights. Moral values will.

Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

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Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

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We’re still not clued in to how dangerous ‘our own’ are.

We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

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No surprise here.

The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

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Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060

EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

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Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

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While taxes have risen. An endless hole.

Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

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So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

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Jun 202017
 
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Pablo Picasso Dans l’atelier 1954

 

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)
Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)
Absent Without Leave (Jim Kunstler)
Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)
Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)
Britiain’s Carmakers Face Brexit Cliff Edge (BBC)
UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)
UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)
China Cracks Down On Online Moneylenders Targeting Students (BBC)
China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)
Household Debt Sees Australian Banks Downgraded Again (ABCAu)
296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)
Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)
Could There Be A Bidding War For Whole Foods? (CNN)
Amazon Will Kill Your Local Grocer (BBG)

 

 

Funny how opinions of Russia revert to communism all the time.

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)

The neoconservative American Jan Wenner’s Rolling Stone magazine headlined on June 16th about these Showtime interviews, «10 Most WTF Things We Learned From Oliver Stone’s Putin Interviews», and sub-headlined: «From denying any involvement with U.S. election hacking to Putin’s love of Judo and Stalin, our takeaways from these truly baffling conversations».

Wenner’s reporter opened: “What’s the Russian equivalent of Kool-Aid? Whatever it is, it’s definitely red – and Oliver Stone has eagerly drunk it down. The trailers for The Putin Interviews, Showtime’s four-part series documenting conversations between Russian President Vladimir Putin and Stone, would have you believe that you’re going to hear some pretty hard-hitting stuff as the autocrat and the filmmaker face off, Frost-Nixon style. What we got instead was a series of softballs lobbed lovingly in the direction of one of the most powerful and dangerous men in the world. Except for a few moments, Stone seems serenely unconcerned with anything beyond flattering his subject – and engaging in some supremely one-sided exchanges about history and policy along the way.”

The term «red» in this context refers, of course, to communism, and alleges that Russia is still a communist country. To allow that type of smear to appear in any ‘news’ vehicle, is to expose itself as being actually a propaganda-vehicle, unless the allegation is backed up by solid documentation, which Wenner’s magazine didn’t do — Wenner’s magazine presented no documentation at all, for the inflammatory allegation. The magazine’s presumption was that their readers will simply believe what Wenner’s operation delivers, to be ipso-facto ‘true’.

But any such reader would be welcoming his own deception by Wenner’s propaganda-operation. Evidently, successful magazines can insult their own subscribers’ intelligence, so long as it’s done in ‘the right way’ — the subscribers won’t despise the publisher for trying to deceive them about such important matters as what countries to invade, or whether to invade, or why to invade. The U.S. military-industrial complex (MIC) can attract cannon-fodder for its operations, by means of such ‘news’ media to produce dupes for that MIC. During the 2016 U.S. Presidential campaign, Mr. Wenner’s propaganda-machine had ardently campaigned for the neoconservative Hillary Clinton against the moderately progressive Bernie Sanders in the U.S. Democratic Party primaries.

And, then, once she (and her friend Debbie Wasserman Schultz who ran the DNC) managed to steal the nomination from her opponent, Wenner’s operation campaigned for Ms. Clinton against her Republican opponent Trump, who claimed (falsely as it turns out, in lies exceeding Clinton’s own) to be opposed to neoconservatives (whom he has actually loaded into his Administration). Trump now relies upon neocons for his support, but perhaps Wenner and Robert Kagan and other neoconservatives won’t be satisfied until the U.S. government takes control over Russia — which cannot happen except upon all of our dead bodies (WW III) — which is precisely what Hillary Clinton was aiming for (and maybe Trump is, too). That’s how insane the U.S. aristocracy (and its PR organs such as Wenner’s) now is – they’re pushing the world toward nuclear Armageddon.

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There will come a point when Russia’s had enough. But they won’t shoot down US planes.

Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)

Russia says it will now consider US planes in Syria as “aerial targets” and cease communications via a military hotline in a rapid escalation of tensions between the two nations. The Russian defence ministry released a statement Monday afternoon, local time, condemning the US for shooting down a Syrian warplane that had dropped bombs near ground forces supported by the US. The ministry said it would now track all US-led coalition jets and drones found west of the Euphrates River in Syria and treat them as targets. This is a significant development because, while it is not uncommon for the two nations to criticise each other politically, Russia stays in contact with the US-led coalition via a military hotline to ensure there is no unintended military conflict between the two powers in the region.

The statement says that Russia will no longer use the communication channel, designed to avoid incidents in Syrian airspace. “The command of the coalition forces did not use the established communication channel for preventing incidents in Syrian airspace,” the defence ministry said in the statement. Russia said it would now “end co-operation with the American side”. “Any flying objects, including planes and drones of the international coalition, discovered west of the Euphrates River will be tracked as aerial targets by Russia’s air defences on and above ground,” it said. [..] The campaign has often put the US at odds with the regime of Syrian President Bashar al-Assad, which is leading its own attack against IS with air cover support from Russia. Syria is also in the grip of a civil war that has claimed more than 400,000 lives, according to the United Nations.

An American F/A-18 Super Hornet shot down a Syrian SU-22 about 7pm on Sunday. The coalition said the Syrian plane had dropped bombs near its allies, the Syrian Democratic Forces, which were fighting IS south of Tabqah. Russia said the shooting down of the plane was an act of aggression against Syria and called for a “careful investigation by the US command” into the incident. “Repeated military actions by US aircraft against the lawful armed forces of a United Nations member state, under the guise of a ‘fight against terrorism’, are a profound violation of international law and, in fact, military aggression against the Syrian Arab Republic,” the Russian Defence Ministry said. “As a result of the strike, the Syrian plane was destroyed. The Syrian pilot catapulted into an area controlled by Islamic State terrorists. His fate is unknown.”

The coalition said the Syrian warplane had been shot down “in accordance with rules of engagement and in collective self-defence of coalition partnered forces”. The deputy chairman of the Russian Senate’s defence committee, Frants Klintsevich, said there was “no defence” for the US shooting down the plane. “Blatant aggression and provocation. To provoke, above all, Russia. It seems that the US under Donald Trump is a source of a qualitatively new level of danger not only in the Middle East but also around the world,” he wrote on Facebook.

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“That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent.”

Absent Without Leave (Jim Kunstler)

After nearly a year of investigating, the FBI, the CIA, the NSA, the DIA, DHS, et. al. haven’t been able to leak any substantial fact about “Russian collusion” with the Trump election campaign — and, considering the torrent of leaks about all manner of other collateral matters during this same period, it seems impossible to conclude that there is anything actually there besides utterly manufactured hysteria. Now, one might imagine that this intelligence community could have manufactured some gift-wrapped facts rather than just waves of hysteria, but that’s where the incompetence and impotence comes in. They never came up with anything besides Flynn and Sessions having conversations with the Russian ambassador — as if the ambassadors are not here to have conversations with our government officials.

You’d think that with all the computer graphics available these days they could concoct a cineplex-quality feature film-length recording of Donald Trump making a “great deal” to swap Kansas for Lithuania, or Jared Kushner giving piggyback rides to Vladimir Putin in the Kremlin. But all we’ve really ever gotten was a packet of emails from the Democratic National Committee and John Podesta of the Clinton campaign gloating about how nicely they fucked over Bernie Sanders — and that doesn’t exactly reflect so well on what has evolved to be the so-called “Resistance.” The net effect of all this sound and fury is a government so paralyzed that it can’t even pass bad legislation or execute its existing (excessive) duties. That might theoretically be a good thing, except what we’re seeing are individual departments just veering off on their own, especially the military, which now operates without any civilian control.

Apparently General Mattis, the Secretary of Defense, pretty much decided on his own to dispatch another 8,000 US troops to Afghanistan to move things along there in the war’s 16th year. Or did he get President Trump to look up from his Twitter window for three seconds to explain the situation and get a nod of approval? Perhaps you also didn’t notice the news item over the weekend that a US-led fighter plane coalition shot down a Syrian air force plane in Syrian airspace. In an earlier era that could easily be construed as an act of war. Who gave the order for that, you have to wonder. And what will the consequences be? Reasonable people might also ask: haven’t we already made enough deadly mischief in that part of the world? With the US military gone rogue in foreign lands, and the intelligence community off-the-reservation at home, and the Trump White House all gummed up in the tarbaby of RussiaGate, and the House and Senate lost in the shuffle, you also have to wonder what anybody is going to do about the imminent technical bankruptcy of the USA as the Treasury Department spends down its dwindling fund of remaining cash money to pay ongoing expenses — everything from agriculture subsidies to Medicare.

That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent. I don’t see any indication that the House and Senate will be able to bluster their way through this. Instead, the situation will compel extraordinary new acts of financial fraud via the central banks and its cadre of Too-Big-To-Fail associates. In the event, the likely outcome will be a spectacular fall in the value of the US dollar, and perhaps consecutively, the collapse of the equity and real estate markets.

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Actual bankers charged? Or is this just more of the sudden anti-Qatar campaign?

Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)

Barclays and four former executives have been charged with conspiracy to commit fraud and the provision of unlawful financial assistance. The Serious Fraud Office charges come at the end of a five-year investigation and relate to the bank’s fundraising at the height of 2008’s financial crisis. Former chief executive John Varley is one of the four ex-staff who will face Westminster magistrates on 3 July. Barclays says it is considering its position and awaiting further details. Mr Varley, former senior investment banker Roger Jenkins, Thomas Kalaris, a former chief executive of Barclays’ wealth division, and Richard Boath, the ex-European head of financial institutions, have all been charged with conspiracy to commit fraud in the June 2008 capital raising. In addition, Mr Varley and Mr Jenkins have also been charged with the same offence in relation to the October 2008 capital raising and with providing unlawful financial assistance.

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The Greeks are the only ones who’ve seen the real face of the EU.

Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)

Two-thirds of Europeans believe the EU should take a hard line with the UK over Brexit, according to a survey. 65% of those questioned in Belgium, Germany, Greece, Spain, France, Italy Austria, Hungary and Poland said the EU, while trying to maintain a good relationship with Britain, should not compromise on its core principles. The Chatham House-Kantar survey showed just 18% of people in the nine countries – compared with 49% of people in Britain – believed the opposite; that the European commission should aim to keep the UK as close as possible, at the expense of its principles, during the talks, which began on Monday. f those surveyed across the nine continental countries, 57% said the EU had been weakened by Brexit, while 46% felt Britain’s departure would be bad for the bloc. By contrast, 70% of Britons felt the EU would suffer from the UK leaving.

The survey interviewed more than 1,000 people in each of the 10 countries including Britain earlier this year before elections in the Netherlands and France and an economic uptick that have significantly bolstered pro-European sentiment. The election of pro-European centrist Emmanuel Macron in France has in particular given the bloc a boost. The eurozone economy, too, is now growing faster than that of the UK or US. Britain’s confusion over what Brexit strategy to adopt have also helped swing EU opinion. A Pew survey last week found markedly higher approval for the EU since the Brexit vote: 63% of respondents in the 10 EU countries had favourable views about the bloc.

The figures mark a sharp increase from spring last year, with favourable opinions up 18 points in Germany and France, 15 in Spain, 13 in the Netherlands – and 10 in the UK. Only 18% of continental respondents wanted their country to leave the EU. Overall, the survey revealed that more than half (58%) of people in 10 countries believed another EU country might leave the bloc within the next decade. Four-fifths of Greeks, hardest hit by the 2008 financial crisis, backed this view, compared with less than half of Hungarians and Poles. Asked about what they considered the EU’s greatest achievements, the freedom to live and work across Europe and the creation of the border-free Schengen zone came top among continental respondents (both on 17%), followed by European peace and the euro (13%) and the single market (8%).

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“..almost a million people were employed across the wider automotive industry.”

Britiain’s Carmakers Face Brexit Cliff Edge (BBC)

The government must secure a transitional Brexit deal to protect the future of the UK car industry, a trade group has said. The Society of Motor Manufacturers and Traders (SMMT) said Britain was highly unlikely to reach a final agreement with the EU by the March 2019 deadline. That meant carmakers could face a “cliff edge”, whereby tariff-free trade was sharply pulled away. It warned the industry would suffer without a back-up plan in place. The EU is by far the UK’s biggest automotive export market, buying more than half of its finished vehicles – four times as many as the next biggest market. UK car plants also depend heavily on the free movement of components to and from the continent.

The SMMT said any new relationship with the EU would need to address tariff and non-tariff barriers, regulatory and labour issues, “all of which will take time to negotiate”. “We accept that we are leaving the European Union,” said chief executive Mike Hawes. “But our biggest fear is that, in two years’ time, we fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior World Trade Organization terms. “This would undermine our competitiveness and our ability to attract the investment that is critical to future growth.” UK car manufacturing generated £77.5bn of turnover last year and accounted for 12% of all goods exports, according to the trade group. It added that almost a million people were employed across the wider automotive industry.

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At least divvy up the monopoly money with a little sense of justice, you’d say. The fall will be hard enough already.

UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)

A £2.3tn windfall for those lucky enough to own their own homes during the property boom of the 1990s and early 2000s has opened up a deep and widening inequality gap between the generations, a thinktank has warned. Rising house prices that have enriched older generations have priced the young out of home ownership, said the Resolution Foundation, adding that the pattern whereby each generation was wealthier than the previous one had broken down. In a new report, the thinktank noted that the baby boomers born in the 20 years after the second world war were the big beneficiaries of rapidly rising house prices, but had amassed most of the wealth through no skill of their own. Wealth disparities would have “worrying consequences” for the living standards of younger generations, it added.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership. “Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”

The report found that 82% of housing wealth increases between 1993 and 2012-14 were due to the property boom, which saw the average price of a residential property in the UK rise threefold, rather than through any active behaviour – such as buying, moving house or paying off mortgages. At the boom’s zenith in 2003, one in six of all working property-owning adults were earning more from the rising value of their homes than from their jobs.

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What a great idea! Take your money now?!

UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)

The Co-operative Group’s stake in the Co-op Bank could fall dramatically under a rescue plan being drawn up by hedge funds. The UK’s largest mutual, which owns supermarkets and funeral homes, has a 20% stake in the bank, which put itself up for sale in February in a search for £750m of extra funding. But under a proposal being discussed by the bank’s controlling hedge fund shareholders, this stake could drop towards zero unless the group decides to pump millions of pounds into the loss-making bank. In April, the group wrote down the value of its stake to zero, taking a further £140m hit on its shareholding that had stood at 100% before the problems at the banking arm were uncovered in 2013.

Four years ago, hedge funds which owned bonds issued by the Co-op bank helped contribute to its rescue and they are again regarded as the most likely source for the extra capital the bank needs to appease the Bank of England. In an update on the sales process on Monday, the Co-op bank, which has 4 million customers, said it was “in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise”. A liability management exercise would involve bondholders agreeing to convert debt into shares. In a previous update to the market, the bank had warned that it would need to undergo a liability management exercise regardless of whether it was sold, signalling that bondholders faced losses under all the options being considered. In the latest announcement, the Co-op Bank said it was still continuing with talks about a sale of the business.

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A few thoughts:

• A) China’s not all that different from the US, is it? Student debt is hot.

• B) This is largely shadow banking, and Beijing has very little grip on it

• C) Well, OK, haven’t heard this from the US yet: “.. borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral.”

China Cracks Down On Online Moneylenders Targeting Students (BBC)

China is cracking down on online moneylenders who target university students, following concerns about the largely unregulated industry. A recent government directive has ordered such lenders to suspend all activities wooing student borrowers. The move follows reports of exorbitant interest rates and unsavoury practices in the industry, including demanding “nude selfies” as collateral. Online peer-to-peer moneylending has grown popular in China in recent years. Known as “wang dai” in Chinese, it sees strangers providing small loans to others via websites and phone apps. The directive (in Chinese) was made by China’s banking, education and social security authorities, according to a copy released by the Jiangxi provincial government on its website on Friday.

It said the measures were needed to address moneylenders “making extortionate loans” and other behaviour that has “severely harmed the safety of university students”. The exact number of online moneylenders in China is not known, but one microfinancing portal called Wangdaizhijia lists at least 500 such platforms. In recent years some moneylenders and loan sharks have begun targeting university students in need of quick and easy credit, according to Chinese reports. Some students have since fallen prey to spiralling debt as a result of high interest rates. In some cases, borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral. They would threaten to release the pictures if the student defaulted on their debts. In December the naked pictures and contact details of more than 100 young female borrowers were leaked online, causing an outcry and shining a spotlight on the underground business.

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Silly to suggest this is some new development. China prints funny money, and blows bubbles with everywhere. Been going on for years.

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)

Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse. The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are “wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.

Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system. As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers.” And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.” “OSFI does not dictate what type of collateral (federally regulated banks) can accept,” spokeswoman Annik Faucher said. “Whether the borrower is foreign or domestic, OSFI (allows) financial institutions to compete effectively and take reasonable risks.”

The underlying reason for Canada’s growing, if paradoxical, exposure to Chinese collateral is due to an explosion of Canada’s shadow banking system. An investigation by Cooper found “massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called “shadow banking.” This is similar, if smaller in scale, to the gargantuan $8.5 trillion shadow banking market in China, where “shadow” lenders and creditors bypass conventional banks to provide and obtain funding, often at far higher terms than prevailing rates, an increasingly dangerous proposition at a time when Chinese interest rates, especially on the short-end, are suddenly spiking. The Vancouver Sun adds that as a result of tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver’s market “are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market.”

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First of many. Canada, Denmark, Netherlands et al, there’s a long list.

Household Debt Sees Australian Banks Downgraded Again (ABCAu)

Global ratings agency Moody’s has downgraded the big four banks and eight other institutions over fears about the housing market. Moody’s cut ANZ, CBA, NAB and Westpac by one notch from Aa3 to Aa2. Bendigo and Adelaide Bank and Newcastle Permanent Building Society went from A3 to A2 while Heritage Bank, Members Equity, QT Mutual, Teachers Mutual, Victoria Teachers Mutual and Credit Union went from A3 to Baa1. Moody’s action comes a month after rival agency S&P Global downgraded almost all Australian banks over fears of “a sharp correction in property prices”. Moody’s said while it did not expect a sharp downturn in housing as its key scenario, it could not ignore the risk that high levels of debt and the rapid credit expansion could pose down the track.

“Whilst mortgage affordability for most borrowers remains good at current interest rates, the reduction in the savings rate, the rise in household leverage and the rising prevalence of interest-only and investment loans are all indicators of rising risks,” the Moody’s statement said. The agency worries that while Australians have been taking on record amounts of debt, wages have not increased, while underemployment has. It also did not like “the rising prevalence of interest-only and investment loans” which it believed were indicators of rising risks. Banks are carrying an arsenal of cash, as required now by regulators, in preparedness for any downturn in the economy or problems in the housing market but Moody’s indicates it is not sure whether it will be enough. “The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private-sector indebtedness,” it said.

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Yellowstone is a huge threat, but specifics must be viewed with extreme caution.

296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)

I spend a lot of time documenting how the crust of our planet is becoming increasingly unstable. Most of this shaking is taking place far away from the continental United States, and so most Americans are not too concerned about it. But we should be concerned about it, because a major seismic event could change all of our lives in a single instant. For instance, a full-blown eruption of the Yellowstone supervolcano would have the potential of being an E.L.E. (extinction level event). That is why it is so alarming that there have been 296 earthquakes in the vicinity of the Yellowstone supervolcano within the last 7 days. Scientists are trying to convince us that everything is going to be okay, but there are others that are not so sure.

The biggest earthquake in this swarm occurred last Thursday evening. It was initially measured to be a magnitude 4.5 earthquake, but it was later downgraded to a 4.4. It was the biggest quake in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it as far away as Bozeman… “The main quake was centered about 5.8 miles underground. The quake and aftershocks occurred just over 8 miles northeast from West Yellowstone, according to the U.S. Geological Service. A witness reported that she felt the building she was in move. Dozens of people reported that they felt it in and around West Yellowstone, Gardiner, Ennis, and Bozeman”. But by itself that one quake would only be of minor concern. What is troubling many of the experts is that this earthquake has been accompanied by 295 smaller ones.

[..] I would like to try to describe for you what a full-blown eruption of the Yellowstone supervolcano would mean for this country. Hundreds of cubic miles of ash, rock and lava would be blasted into the atmosphere, and this would likely plunge much of the northern hemisphere into several days of complete darkness. Virtually everything within 100 miles of Yellowstone would be immediately killed, but a much more cruel fate would befall those that live in major cities outside of the immediate blast zone such as Salt Lake City and Denver. Hot volcanic ash, rock and dust would rain down on those cities literally for weeks. In the end, it would be extremely difficult for anyone living in those communities to survive.

In fact, it has been estimated that 90% of all people living within 600 miles of Yellowstone would be killed. Experts project that such an eruption would dump a layer of volcanic ash that is at least 10 feet deep up to 1,000 miles away, and approximately two-thirds of the United States would suddenly become uninhabitable. The volcanic ash would severely contaminate most of our water supplies, and growing food in the middle of the country would become next to impossible. In other words, it would be the end of our country as we know it today.

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Never privatize basic needs. Always a bad idea.

Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)

As the Senate has quietly been toying with the House’s proposed replacement for the Affordable Care Act, a new study, from researchers at Harvard Medical School and the University of British Columbia, found evidence that single-payer systems may lead to lower pharmaceutical prices. Could that data impact U.S. health care reform? U.S. drug prices are so high that the researchers didn’t even factor them into the study, focusing instead on other developed countries. It’s common knowledge that drug prices have been on the steady rise, increasing faster than average wages; at issue is how to push prices back down, or at least slow their escalation.

Examining the roots of high drug expenditures in 10 wealthy countries with universal health care, the study, published last week in the Canadian Medical Association Journal, discovered lower average drug prices in the nations with single-payer systems, which appeared to be better able to negotiate drug prices with pharmaceutical manufacturers. “There is some advantage to having a not-for-profit body, whether it’s a government body, a crown body… running a system without a profit motive,” said Steven Morgan, one of the authors and a professor of economics at University of British Columbia’s School of Population and Public Health. “The blunt instrument of government regulation will not in itself lower drug prices.”

Using drug price and expenditure data for 2015, the researchers established that the 10 countries with universal health care systems examined in the study — New Zealand, the United Kingdom, Canada, France, Germany, Switzerland, the Netherlands, Norway, Sweden and Australia — exhibited relatively little variation in volume of drug price purchases, with a difference as large as 41%. But the disparities in drug prices told a different story, with the two ends of the spectrum differing by 600%. For example, the average price of drug treatment per capita, per day, in New Zealand, which has a single-payer system, stood at just $23, or a third of those of the nine others. Norway, Australia, Sweden and the U.K., the other countries categorized in the study as single-payer, exhibited average daily per-capita drug expenditures of $59, $91, $56 and $81, respectively.

Switzerland, which has a multi-payer, social insurance-based system, had an average per-diem treatment cost of $171, twice as high as the other nine nations. Its fellow multi-payer countries examined in the study — France, Germany and the Netherlands — paid, per capita, on average, $106, $97 and $49, respectively, per day on drug treatments. Canadians, whose health care system the study described as “mixed,” purchased roughly the same volume of drugs as citizens of the other nine countries, but would’ve collectively saved $1.7 billion if their drug prices were comparable to those of the nine other countries, the study noted.

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As long as there’s plenty free money…

Could There Be A Bidding War For Whole Foods? (CNN)

Whole Foods will eventually be part of Amazon CEO Jeff Bezos’s empire. Or will it? Some Wall Street analysts are starting to wonder whether another retailer will come up with a higher offer and start a bidding war. Amazon announced on Friday that it was offering to pay $13.7 billion in cash for Whole Foods – a deal that values the chain of organic grocery stores at $42 a share. But Whole Foods stock closed above $42 on Friday, and it rose again Monday to top $43. That might not sound significant. But any price for Whole Foods stock that is higher than Amazon’s offer could be a sign that Wall Street thinks another company could swoop in with an even better deal. Barclays analyst Karen Short wrote in a report that she “would not be surprised” if other companies make offers for Whole Foods.

She raised her price target on the company to $48 – nearly 15% higher than Amazon’s bid. Short said in the report that “in theory, all retailers that sell food and compete with Amazon” could come up with their own offer for Whole Foods because they may “have too much to lose not to bid.” She said the likely bidders could include Walmart and Target, both of which have big grocery businesses, and the Kroger supermarket chain. She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. Oppenheimer analyst Rupesh Parikh agreed. He raised his price target on Whole Foods to $45 after the Amazon deal was announced. He wrote in a report that “another bid cannot be ruled out” because other big retailers may want to do anything they can to prevent Amazon from getting even more powerful.

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The worst thing you can do is let your food supply be controllled from some point a thousand miles away. But then, Amazon has killed so much community already, and no-one sproke up. It’s labeled ‘progress’.

Amazon Will Kill Your Local Grocer (BBG)

Amazon’s done it to books. And electronics. And clothing. Now it wants to rule the grocery aisles. But Amazon still has a ways to go — the online retailing behemoth has taken a slow, yet calculated approach to attacking the grocery store. After years of testing the AmazonFresh program in its Seattle hometown, it began expanding the grocery delivery service to other cities in 2013. Today, it delivers fresh fruit and meat in parts of New York, New Jersey, Pennsylvania, Connecticut, California, Washington and Maryland. It also delivers food through its Amazon.com website and its Prime Now program. And even though research from Cowen & Co pegs Amazon’s market share of food and beverages sold online in 2015 at about 22 percent, that overall online grocery market in the U.S. is pretty small.

Out of the $795 billion Cowen expects Americans to spend on food and drinks this year, it estimates only about $33 billion of it will be spent online. That’s because it has taken shoppers a long time to grow comfortable with buying their apples, chicken breasts and granola online when they can stop by a physical store on the way home from work and actually touch and smell the food they’re buying. Companies struggle to profit from the very expensive business of picking, packing and transporting fresh food to their customers. It’s much easier to mail a video game or book, which doesn’t have to be kept cold or free of bruises. But for Amazon, the grocery business not only brings more sales, it could also make its business more profitable.

People tend to buy groceries weekly or daily, so getting them hooked on delivery justifies sending trucks out more frequently. Then any general merchandise, like a book or toy, that Amazon sells along with the food adds to profits. And since Amazon will need more trucks for grocery delivery, it could reduce its reliance on shipping companies, which have contributed to soaring costs. For now, Amazon is likely to take added grocery costs on the chin, in hopes it will pay off down the line. Growing its AmazonFresh and Prime Now offerings suggests Amazon is gearing up for the long haul in grocery. Though traditional grocers are not likely to see sales migrate to Amazon right away, that luxury won’t last. And just like bookstores, your local grocer could be toast.

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Jun 192017
 
 June 19, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Kandinsky Capricious Line 1924

 

Britain’s Brexit jam is Brussels’ Too (Pol.eu)
EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)
Pain Without Gain: The Truth About British Austerity (G.)
France Gives Macron Big Majority With Little Enthusiasm (EUO)
German Politicians Hammer the ECB, But Only to Get Votes (DQ)
Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)
Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)
Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)
Goodbye, Yellow Brick Road (Grant)
Australia Has The World’s Most Costly Energy Bills (MB)
Australia’s Haunted Housing Market (BW)
Greece Blocks EU Statement On China Human Rights At UN (R.)
Greece Cracks Down On Voucher Misuse By Employers (EurActiv)
Greek Summer Calm Before The Storm (K.)

 

 

The Brexit talks start today. They should not. Theresa May can start, but she won’t be there to finish them.

Britain’s Brexit jam is Brussels’ Too (Pol.eu)

As Brexit talks start Monday, Britain’s back is hard against a wall. And nobody, not even in Brussels, wanted it that way. Elections in the U.K. were supposed to give Prime Minister Theresa May a stronger hand against the EU and naysayers back home. Instead, her negotiating team will hobble into the talks with May in peril, still working to finalize a power-sharing agreement to allow her to form a minority government. The EU’s stance on major Brexit issues has been ironclad for months, backed by the 27 nations in a disciplined display of unity. Second-guessing about May’s approach has intensified since her election setback, so much so that there have been calls for the EU to avert potential disaster by laying out clear paths for the U.K.’s exit.

The view in Brussels, however, is there is no way to help May short of making clear that Britain is welcome to change its mind — a point reiterated by German Finance Minister Wolfgang Schäuble, French President Emmanuel Macron and European Commission First Vice-President Frans Timmermans, among others. While no one realistically expects such a total reversal, there is unease over the lack of clarity on the U.K.’s goals. “Clearly the Brits are not ready yet and it’s a pity,” a senior Commission official said. “Everybody has sympathy for [May] now because she put herself in an impossible situation,” the official said. “How we can help her? Where she is now, nobody can help her. What she said to the backbenchers, in a way made sense, ‘I put you in this mess. I will take you out of this mess.’ But who else can do anything for her? It’s just hell.”

“And all the questions,” the official added, “Withdrawal? No withdrawal? Now? Later? It’s for them to consider. What can Brussels say?” The EU has published and transmitted to the U.K. its position papers on the two issues Brussels insists take precedence: citizens’ rights and the financial settlement. May’s aides said she wanted to make a “big, generous” offer on citizens’ rights, but so far the U.K. has not published any similar documents laying out its positions.

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Brussels wants an orderly destruction of Britain, not a messy one.

EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)

European leaders fear that Theresa May’s government is too fragile to negotiate viable terms on which to leave the union, meaning the discussions that officially begin on Monday could end in a “brutal Brexit” – under which talks collapse without any deal. As officials began gathering in Brussels on Sunday night, the long-awaited start of negotiations was overshadowed by political chaos back in Westminster, where chancellor Philip Hammond warned that failing to strike a deal would be “a very, very bad outcome”. The EU side fears that, in reality, the British government will struggle to maintain any position without falling apart in the coming months, because, without support from the Democratic Unionist party, May’s negotiating hand is limited. There are also concerns that any DUP backing to give May a majority in the House of Commons would come with strings attached.

Hammond has been urged to publish the cost of any deals made with the DUP to prop up the government. Shadow chancellor John McDonnell has raised concerns over reports that the DUP wants to end airport tax on visitors to Northern Ireland, which generated about £90m in 2015/16, according to HMRC estimates. The abolition of air passenger duty is one of the DUP’s key demands, as it pits Northern Ireland unfavourably against the Republic of Ireland, where the duty has been abolished. As well as concern over any terms agreed with the DUP, May will have to assuage fears from Ireland’s new taoiseach, Leo Varadkar, when she meets him in Downing Street on Monday, that Brexit will not infringe on the rights of people in Ireland. The taoiseach will also raise the impact of any Tory-DUP deal on power-sharing in Northern Ireland.

The prime minister has said she is confident of getting the Queen’s speech through the Commons, regardless of whether a deal is reached with the DUP by the time of the state opening of parliament on Wednesday. British Brexit negotiators are hoping to shore up confidence in their hardline approach to the start of talks by making early progress on the vexed question of citizens’ rights. [..] Pierre Vimont, a veteran French diplomat, now at the Carnegie Europe thinktank, said lack of clarity did not matter for the opening, which was more about “a first glimpse into their overall attitude and position” and setting the tone. “It will be atmospherics and the way both sides show a genuine commitment to work ahead. I think that will be the most important. “But the British delegation will need to rather quickly put its house in order and to have a clear idea of where it wants to go.”

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We’ve seen that truth in Grenfell Tower.

Pain Without Gain: The Truth About British Austerity (G.)

There are few people in the developed world who still cling to the maxim that “home life ceases to be free and beautiful as soon as it is founded on borrowing and debt”. hese days we can’t afford to take the same view as Helmer, the husband in Ibsen’s A Doll’s House, one of literature’s most cautious budgeters. It’s a nice idea to be free of debt and just spend what you earn. But when a home costs many times the average annual income and life’s running costs often exceed the monthly income, borrowing is not something that can be avoided. The government knows this only too well. This week sees publication of the public borrowing total for May and it is not expected to make pleasant reading.

Together with April’s shocker, when government borrowing was higher than the same month last year, the first two months of this financial year are forecast to show the borrowing requirement for the year is on track to be higher, not lower than last year. When David Cameron and George Osborne were in Downing Street, bringing down the deficit was the main aim of domestic policy. Until just last year, the plan was to cut the deficit to zero by 2020 and start bringing down the debt-to-GDP ratio from this year. The EU referendum vote and Theresa May’s arrival at No 10 changed all that. Once she adopted a hard-Brexit stance, the economy began to turn. Her chancellor, Philip Hammond, was forced to loosen the purse strings. It meant that both of the main political parties went into the election with plans for the deficit to remain at about 2.5%.

Independent forecasts for GDP growth over the next five years are below this figure, meaning that far from cutting the overall debt-to-GDP ratio, both parties were content to push it towards 90% – higher than any government has experienced in 50 years. That’s why so many headlines after the election have declared austerity dead and why the deficit was the dog that didn’t bark when the electorate went to the polls. The pressure on the deficit has only worsened since then. It has become clear to many of May’s advisers and close colleagues that the Tory party might not survive a second election this year without stealing some of Labour’s clothes. There is the possibility she will sanction scrapping, or dramatically reducing tuition fees, to nullify one of Labour’s most popular pledges.

The health secretary, Jeremy Hunt, hinted that the cap on nurses’ pay might be relaxed, while local authority spending may need to increase after the Grenfell Tower fire. Meanwhile, household debts are on the increase. Credit card, car loan and student debt, and borrowing using that most pernicious of loans, the second mortgage, have all risen sharply in the last couple of years. Making matters worse, the proportion of savings in the economy is at rock-bottom levels. It all adds up to an economy running on empty, with everyone, including ministers, borrowing extra each year just to keep the wheels turning.

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Macron won, but his majority is nowhere near as big as predicted. He was expected to get well over 400 seats, and ended up with 308. See the graphs. Next, he’ll be up against the unions. He’s promised to fire 120,000 public workers. Good luck.

France Gives Macron Big Majority With Little Enthusiasm (EUO)

French president Emmanuel Macron won a three-fifth majority in the lower house in the second round of the legislative elections on Sunday (18 June), but less than half of voters cast a ballot. Macron’s political movement, La Republique en Marche (LRM, The Republic on the Move) won 308 seats in the National Assembly, out of 577, after obtaining 43.06% of the vote. Its centrist ally, the Modem party, got 40 seats (6%). While not as big as expected after the first round, LRM’s majority left other parties behind and completed Macron’s destruction of the old political landscape. The conservative Republicans party will be the main opposition faction, with 113 seats (22.2%), down from 192 in the outgoing assembly.

The party leader, Francois Baroin, said he was happy that the Republicans will be “big enough” to “make its differences with LRM heard”. The Socialist Party (PS), which had been the main party with 270 MPs, was left with 29 seats (5.68%). Several ministers who served under former socialist president Francois Hollande lost out to newcomers. The PS leader, Jean-Christophe Cambadelis, who was himself eliminated in the first round, resigned from his position. Some 431 new MPs will enter the assembly and a record 224 of the MPs will be women.

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The ECB has $4.73 trillion in assets. It buys anythng but Greece.

German Politicians Hammer the ECB, But Only to Get Votes (DQ)

These days it’s easy to tell when general elections are approaching in Germany: members of the ruling government begin bewailing, in perfect unison, the ECB’s ultra-loose monetary policy. Leading the charge this time was Finance Minister Wolfgang Schaeuble, who on Tuesday urged the ECB to change its policy “in a timely manner”, warning that very low interest rates had caused problems in “some parts of the world.” Werner Bahlsen, the head of the economic council of Merkel’s CDU conservatives, was next to take the baton. “The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,” he said. “The ECB can only regain trust with the return to a sound monetary policy.” As Schaeuble and Balhsen well know, that is not likely to occur any time soon.

Indeed, like all other Eurozone finance ministers, Schaeuble is benefiting handsomely from the record-low borrowing costs made possible by the ECB’s negative interest rate policy. But by attacking ECB policy he and his peers can make it seem that they take voters’ concerns about low interest rates seriously, while knowing perfectly well that the things they say have very little effect on what the ECB actually does. In short, they are telling their voters what they want to hear. A survey by the CDU’s economic council showed that less than a quarter of its roughly 12,000 members had confidence in the ECB’s current course. 76% said they backed Bundesbank head Jens Weidmann’s monetary policy stance. Herr Weidmann said on Thursday that the ECB is at risk of coming under political pressure because any hint of policy tightening could push yields higher and blow a hole in national budgets.

It’s a probably a bit late in proceedings for such worries, what with the ECB now boasting the largest balance sheet of any central bank on Planet Earth. At last count, it had €4.22 trillion ($4.73 trillion) in assets, which equates to 39% of Eurozone GDP. Many of those assets are sovereign bonds of Eurozone economies like Italy, Spain and Portugal. The ECB’s binge-buying of sovereign and corporate bonds has spawned a mass culture of financial dependence across Europe. In the case of Italy, the sheer scale of the government’s dependence on the ECB for cheap funding is staggering: since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019.

It’s not just governments that are dependent on the ECB’s largesse: so, too, are the banks. In total, European banks have approximately €760 billion of funding from long-term lending schemes, the bulk of which comes from the four rounds of the most recent program launched in March 2016. As of the end of April 2017, Italian banks were holding just over €250 billion of the total long-term loans — almost a third of the total. Spain had €173 billion, while French banks had €115 billion and German lenders €95 billion. As the FT reports, the funding appears to play much less of a role in stimulating economic activity through lending, and a much larger role in mitigating the pain that low interest rates — and poor asset quality — can inflict on banks.

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Propping up zombies.

Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)

If it weren’t for liquidity right now, the stock market rally could be ripping apart, according to BMO Private Bank’s chief investment officer. “Any sense that this IV drip of liquidity coming into the market is slowing down at all is going to cause some issues,” Jack Ablin said on CNBC’s “Futures Now.” He emphasized that investors have been encouraged to take on risk due to the trillions of dollars being pumped into the financial system by central banks. Ablin’s comments came a day after the Federal Reserve decided to lift short-term interest rate by a quarter%age point. Even though the rate hike was expected, Ablin admits there was some concern tied to the Fed’s statement.

The Fed put in some new wording, saying that it “expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.” That part left Ablin “a little bit taken aback with the timing,” he said. However, “I think the good news here is, ‘Look, this is a potentially contrived crisis.’ This could be the taper tantrum all over again where [The Fed says] ‘OK, look, we don’t want to cause major upset here. We will continue to pump if equity risk taking takes a hit.'” Ablin said he’s “somewhat optimistic” that the rally will continue. He prefers developed and emerging markets over U.S. stocks, arguing that places like Europe could see bigger gains than in the United States because the economy has been surprising experts to the upside.

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This story gets insaner by the day.

Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)

In the biggest political story of the past week, one which was timed to coincide with Donald Trump’s Birthday, the WaPo reported citing anonymous sources, that Special Counsel Robert Mueller was investigating President Trump for possible obstruction of justice. Just a few hours later on Thursday night, the DOJ’s Deputy Attorney General Rod Rosenstein, who is overseeing the Russia probe due to Jeff Sessions recusal, released a stunning announcement which urged Americans to be “skeptical about anonymous allegations” in the media, which many interpreted as being issued in response to the WaPo report. “Americans should exercise caution before accepting as true any stories attributed to anonymous ‘officials,’ particularly when they do not identify the country — let alone the branch or agency of government — with which the alleged sources supposedly are affiliated. Americans should be skeptical about anonymous allegations. The Department of Justice has a long-established policy to neither confirm nor deny such allegations.”

Then on Sunday, the plot thickened further when according to ABC, special counsel Robert Mueller has not yet decided whether to investigate President Trump as part of the Russia probe, suggesting the WaPo report that a probe had already started was inaccurate. “Now, my sources are telling me he’s begun some preliminary planning,” Pierre Thomas, the ABC News senior justice correspondent, said of Mueller on ABC’s “This Week” although he too, like the WaPo, was referring to anonymous sources, so who knows who is telling the truth. “Plans to talk to some people in the administration. But he’s not yet made that momentous decision to go for a full-scale investigation.”On Friday, Trump responded to the Washington Post story by tweeting: “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt.” But also on Sunday Trump’s lawyer Jay Sekulow insisted the president was not literally confirming the investigation but was just referring to the story.

“Let me be clear: the president is not under investigation as James Comey stated in his testimony, that the president was not the target of investigation on three different occasions,” Sekulow said Sunday. “The president is not a subject or target of an investigation.” “Now Mueller faces a huge decision,” Thomas told “This Week” host Martha Raddatz. “Does he believe the president, who says there’s no wrongdoing here, or does he go after the president in the way James Comey wants him to do?” And so, yet another blockbuster media report has been cast into doubt as a result of more “he said, he said” innuendo, which will be resolved only if Mueller steps up and discloses on the record whether he is indeed investiating Trump for obstruction, or any other reason. That however is unlikely to happen, and so the daily ping-ponging media innuendos will continue indefinitely.

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“These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)

Russia on Sunday accused the U.S. of returning to “almost forgotten Cold War rhetoric,” after President Donald Trump’s decision to reinstate some sanctions on Cuba. It could have dropped “forgotten.” There’s been a lively debate among historians and diplomats for years over whether the souring of relations between the U.S. and Russia amounts to a new Cold War, and lately the case has been getting stronger by the day. Trump’s restoration on Friday of some of the Cold War restrictions on Cuba his predecessor, Barack Obama, eased just months ago was only one example. Earlier in the week, the U.S. Senate approved a bill to entrench and toughen sanctions on Russia that includes several vivid flashbacks to before the fall of the Berlin wall.

German Chancellor Angela Merkel added her voice on Friday to rising European condemnation of a proposal in the Senate draft that would penalize companies investing in new Russian energy pipelines. Nord Stream 2, a project to double the supply of Russian natural gas to Germany via the Baltic Sea, would be especially vulnerable. President Ronald Reagan used similar sanctions in an attempt to thwart the joint German-Soviet construction of a natural gas pipeline in the early 1980s, only to drop them amid intense opposition from Europe. Again, Germany led the pushback. The Senate bill would also codify a raft of existing sanctions against Russia, so that Trump would need Congressional approval to lift them. That happened in 1974, too, and the measures proved hard to kill.

The legislation wasn’t repealed until a decade after their target, the U.S.S.R., had ceased to exist. The sense of Cold-War deja vu has been building for some time, according to Robert Legvold, a professor at Columbia University and author of “Return of the Cold War.” There’s a renewed arms race, nuclear saber rattling, the buzzing of ships and planes, proxy wars and disputes over whether missile defense systems count as offense or defense. If the trend continues, said Legvold, it will prevent the strategic cooperation between the U.S. and Russia that’s needed to prevent approaching security challenges from spinning out of control: The rise of China, the race to exploit resources in the Arctic, international terrorism and, above all, a world with nine nuclear powers that’s more complex and unstable than in the 20th century. “These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

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It’s hard to agree on gold. Always has been.

Goodbye, Yellow Brick Road (Grant)

It’s no work at all to make modern money. Since the start of the 2008 financial crisis, the world’s central bankers have materialized the equivalent of $12.25 trillion. Just tap, tap, tap on a computer keypad. “One Nation Under Gold” is a brief against the kind of money you have to dig out of the ground. And you do have to dig. The value of all the gold that’s ever been mined (and which mostly still exists in the form of baubles, coins and ingots), according to the World Gold Council, is a mere $7.4 trillion. Gold anchored the various metallic monetary systems that existed from the 18th century to 1971. They were imperfect, all right, just as James Ledbetter bends over backward to demonstrate. The question is whether the gold standard was any more imperfect than the system in place today.

[..] As if to clinch the case against gold—and, necessarily, the case for the modern-day status quo—Mr. Ledbetter writes: “Of forty economists teaching at America’s most prestigious universities—including many who’ve advised or worked in Republican administrations—exactly zero responded favorably to a gold-standard question asked in 2012.” Perhaps so, but “zero” or thereabouts likewise describes the number of established economists who in 2005, ’06 and ’07 anticipated the coming of the biggest financial event of their professional lives. The economists mean no harm. But if, in unison, they arrive at the conclusion that tomorrow is Monday, a prudent person would check the calendar.

Mr. Ledbetter makes a great deal of today’s gold-standard advocates, more, I think, than those lonely idealists would claim for themselves (or ourselves, as I am one of them). The price of gold peaked as long ago as 2011 (at $1,900, versus $1,250 today), while so-called crypto-currencies like bitcoin have emerged as the favorite alternative to government-issued money. It’s not so obvious that, as Mr. Ledbetter puts it, “we cannot get enough of the metal.” On the contrary, to judge by ultra-low interest rates and sky-high stock prices, we cannot—for now—get enough of our celebrity central bankers.

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Pretty far out.

Australia Has The World’s Most Costly Energy Bills (MB)

In reality, there are three main components of household bills. Whether households actual ultimately pocket these savings will depend on what happens with all three. The first, is the wholesale cost. That’s the cost of actually generating the electricity, be it burning lumps of coal, a gas-fired electricity plant, solar panels, wind turbines or whatever clever ways we may come up with in the future to produce electricity. Today, 77 per cent of Australian electricity comes from mostly brown and black coal, 10 per cent from gas, and 13 per cent from renewable sources. For a long time, this part of the system, of producing the electricity and getting it into the grid, has been going pretty well. Australians have enjoyed a reliable and low-cost supply of wholesale energy.

Basically, we burned ship loads of cheap coal, and to hell with the environment. This is the part of the system that is now utterly falling apart and is in most need of repair – which we’ll get to. The second major component of household electricity bills is the cost of transmission and distribution. The costs involved in building poles and wires and actually getting electricity to your wall sockets makes up about 40 per cent of your total bill. This part of the electricity price equation has been broken for decades, and is the main reason power bills have nearly doubled over the last decade. Power lines are natural monopolies. Traditionally they were all government owned. Jeff Kennett privatised Victorian networks, but until very recently, distribution networks in other states, such as NSW and Queensland, have remained government owned, with regulated pricing.

And basically, they stuffed that up for consumers by deciding to let the networks earn a guaranteed rate of return, based on their costs. That is, the more they spent, the more they earned. …The third and final component of a household’s bill is the margin added by electricity retailers. In theory, anyone can set up a business retailing electricity and there are many suppliers. In reality, pricing structures are so complex consumers do not exercise their power to switch providers, and retail margins remain higher than otherwise.

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Moving towards a very deep black hole.

Australia’s Haunted Housing Market (BW)

Forget all the headlines about the undimmed pace of house price inflation – up 19% in Sydney during March, pushing the median house price in the city to A$1.15 million ($875,000) according to Domain, a property-listings website. House prices, after all, aren’t so much a guide to the state of the housing market as to the 1% or so of homes that bought or sold in a typical year. Even there, they’re less an indicator of supply and demand for housing than of how supply and demand for mortgage credit interact with real estate fundamentals. Splurge on mortgage credit, and even an overbuilt housing market can enjoy price appreciation; cut back on home loans, and the opposite may be the case. That’s why it’s worth looking at the state of rents. Right now, they’re growing at the slowest pace in more than two decades, according to calculations based on Australian Bureau of Statistics data.

This hasn’t completely escaped notice. Philip Lowe, who took over as Governor of the Reserve Bank of Australia in September, has included the same boilerplate reference (with minor cosmetic modifications) in each of the eight monetary policy decision statements he’s put out so far: In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. As Lowe indicates, the reason for the slowdown in rents isn’t hard to discern. For most of Australia’s recent history, building has struggled to keep pace with household formation. Supply of new homes has kept close to demand, and as a result rents have tended to grow more or less in line with incomes.

Compare the Housing Institute of Australia’s forecasts of housing starts and the Australian Bureau of Statistics’ forecasts of household formation, and the glut really comes into focus: The surplus of homes that Australian cities have built over the past five years, based on those numbers, is equivalent to a whole year’s worth of excess supply. That’s a worrying development for those hoping that Australia’s house price boom is sustainable, especially given the way that the country’s regulators look to be finally attempting to raise credit standards after years of laxity. Still, if Australia manages to deflate the housing bubble without seriously damaging its economy, the heroes and villains will be quite different from the popular perception. While governments and regulators spent years adding to the problem with tax breaks and hostility to macroprudential regulation, it may well be property investors and foreigners who helped ease the crisis.

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The EU should look at its own human rights record.

Greece Blocks EU Statement On China Human Rights At UN (R.)

Greece has blocked a EU statement at the UNs criticizing China’s human rights record, a decision EU diplomats said undermined efforts to confront Beijing’s crackdown on activists and dissidents. The EU, which seeks to promote free speech and end capital punishment around the world, was due to make its statement last week at the U.N. Human Rights Council in Geneva, but failed to win the necessary agreement from all 28 EU states. It marked the first time the EU had failed to make its statement at the U.N.’s top rights body, rights groups Amnesty International and Human Rights Watch said. A Greek foreign ministry official said Athens blocked the statement, calling it “unconstructive criticism of China” and said separate EU talks with China outside the U.N. were a better avenue for discussions. An EU official confirmed the statement had been blocked.

“Greece’s position is that unproductive and in many cases, selective criticism against specific countries does not facilitate the promotion of human rights in these states, nor the development of their relation with the EU,” a Greek foreign ministry spokesperson said on Sunday. Presented three times a year, the statement gives the EU a way to highlight abuses by states around the world on issues that other countries are unwilling to raise. The impasse is the latest blow to the EU’s credentials as a defender of human rights, three diplomats said, and raises questions about the economically powerful EU’s “soft power” that relies on inspiring countries to follow its example by outlawing the death penalty and upholding press freedoms. It also underscores the EU’s awkward ties with China, its second-largest trade partner, diplomats said.

[..] Hungary, another large recipient of Chinese investment, has repeatedly blocked EU statements criticizing China’s rights record under communist President Xi Jinping, diplomats said. One EU diplomat expressed frustration that Greece’s decision to block the statement came at the same time the IMF and EU governments agreed to release funds under Greece’s emergency financial bailout last week in Luxembourg. “It was dishonorable, to say the least,” the diplomat said. The Greek foreign ministry spokesperson said that “during the formulation of the common statement there were also other countries that expressed similar reservations” and that Greece participates on an equal footing in setting up the EU’s common foreign policy.

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Many will claim this is employers seeking illicit profits. But for many it’s the only way not to be forced to fire people, to keep them fed.

Greece Cracks Down On Voucher Misuse By Employers (EurActiv)

The growing trend of distributing vouchers to employees to avoid taxes has raised eyebrows in the Greek government, which has moved to crack down on unprecedented levels of tax evasion in the cash-strapped country. The government says vouchers are allowed only as an extra benefit and not as part of a taxable salary. But according to Greek media reports, more than 200,000 workers, mostly newcomers, receive up to 25% in their salary via vouchers, which they use in supermarkets to buy food. The total amount, according to the reports, reaches €300 million annually. Up to a specific amount, the vouchers are tax-free for businesses, which are also exempt from employer security contributions. A source at the Greek labour ministry told EURACTIV.com that replacing any part of the legal wage of employees with vouchers is illegal.

“Vouchers are only allowed as an extra benefit and in no case can they be a substitution for legally defined earnings,” the source noted, adding that all complaints filed with the Labour Inspectorate are being investigated. As of June, companies are required to pay salaries only to bank accounts in order to put a stop to the practice of avoiding paying salaries altogether or paying only a fragment. “The Labor Inspectorate (SEPE) is in constant collaboration with Greece’s Financial and Crime Unit (SDOE), the financial police and the Independent Public Revenue Authority to address all forms of labour market violations and the coordination of their audit work,” the source said. Vouchers are coupons companies distribute to their employees to improve work, health and safety by supporting proper nutrition.

The rationale behind vouchers is that they process will enhance satisfaction and boost productivity levels while improving the employee living standards. For the government, the proper use of vouchers should also result in more tax revenues. The labour market in Greece has been in turmoil after 7 years of austerity-driven bailout programmes. There are cases of employers who have taken advantage of the “flexible” labour relations to impose unusual working conditions. For many, the use of vouchers is seen as a means to improve the atmosphere at work. Sotiris Zarianopoulos, a non-attached MEP from the Greek Communist Party (KKE), has recently asked the European Commission about these practices. The Greek lawmaker noted that this is only a part of a “jungle labour market” created by EU policies and implemented by the leftist Syriza government.

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On the verge of heading back to Greece, I’m wary of what comes after the calm.

Greek Summer Calm Before The Storm (K.)

Even though Prime Minister Alexis Tsipras hailed last week’s Eurogroup deal as step in the right direction, Greece still has many rivers to cross as the agreement secured in Luxembourg fell far short of the goals set by the government. First and foremost, Tsipras will have to deal with dissent emanating from SYRIZA MPs that had agreed to vote through a batch of tough legislation last month with the understanding that, in exchange, Greece will be granted debt relief and access to the ECB’s quantitative easing program. However, contrary to the government’s aims at the Eurogroup, debt relief talks were deferred to 2018, while Greece’s inclusion in the QE seems highly unlikely before that.

Although analysts believe that dissenters may not raise the ante during the summer – due to the tourist season and relief provided by the release of a bailout tranche – the government is expected to come under new pressure in the fall when Tsipras drafts the 2018 budget, which must stipulate a primary surplus of 3.5%. Given the huge difficulties to achieve this target, Athens will find it hard to convince representatives of the country’s creditors that it will able to achieve this target without the need for yet more measures. The Greek PM will also struggle in the fall to clear the hurdles leading to the completion of the country’s third bailout review, which will also involve the IMF. The review’s focus will be on streamlining the Greek public sector, from which SYRIZA has drawn a large chunk of votes in the past and would not like to rock the boat.

Another sticking point could be Tsipras’s promise to bring back growth, when forecasts for 2017 see an anemic rate of 1.5 to 1.8%. According to reports, the left-led coalition is banking on elections taking place in June 2018 at the earliest so that it avoids having to implement pension cuts in 2019, as it had agreed with creditors and passed into law. On the other had, some reports suggest that Tsipras may seek to spring an election surprise this fall or by the end of the year. This, however, will hinge on whether Greece will be given specifics by creditors about what sort of debt relief it can expect after the German elections in September, and on the degree of difficulty it will have to draft the 2018 budget.

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