Apr 242018
 
 April 24, 2018  Posted by at 9:17 am Finance Tagged with: , , , , , , , , , , ,  


John French Sloan A Woman’s Work 1912

 

Japan Can Begin Reducing Stimulus In Five Years – Kuroda (CNBC)
ECB Mulls Shelving Rules Tackling Euro Zone’s Bad Loans Pile (R.)
The Return Of Honest Bond Yields (Stockman)
Stop and Assess (Jim Kunstler)
The Chinese Car Invasion Is Coming (BBG)
Greek Primary Surplus Comes At The Expense Of Growth (K.)
Tensions Grow On Greek Islands (K.)
The UK Has Turned The Right To Education Into A Charitable Cause (G.)
UK Food Bank Use Reaches Highest Rate On Record (Ind.)
Finland To End Basic Income Trial After Two Years (G.)

 

 

Abenomics is a miserable failure. Which is why Abe’s popularity is scraping the gutter. But we keep on pretending. Five years? Why not make it ten, or fifty? Kuroda is stuck….

Japan Can Begin Reducing Stimulus In Five Years – Kuroda (CNBC)

The Bank of Japan will be able to begin winding down its extraordinary monetary stimulus within the next five years, the head of the central bank said. “Sometime within the next five years, we will reach [our] 2% inflation target,” Governor Haruhiko Kuroda told CNBC’s Sara Eisen over the weekend. Once that level is reached, we will start “discussing how to gradually normalize the monetary condition.” Kuroda began his second five-year term this year. He has implemented a massive stimulus policy by cutting the central bank’s benchmark interest rate to negative, keeping the 10-year Japanese government bond yield near 0% in an effort to control the yield curve and stepping up the Bank of Japan’s asset purchases.

However, inflation remains low. Japan reported its consumer price index, excluding fresh food and energy, rose 0.5% in the 12 months through March. “In order to reach [our] 2% inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time,” Kuroda added in his interview with CNBC. Japan’s efforts to boost the sluggish national economy come amid steady growth around the world. The IMF predicts the global economy will increase 3.9% this year and next. Kuroda agreed with the positive outlook. “The world economy will continue to grow at a relatively high pace,” he said. For this year and next, “we don’t see any sign of a turning point.” But protectionism, unexpected rapid tightening of monetary policy in some countries, and geopolitical tensions in North Korea and the Middle East pose potential risks, Kuroda said.

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… and Draghi is stuck too. My article yesterday was timely. The outgoing Bundesbank director in charge of banking supervision says the ECB’s credibility is at stake. A dangerous thing to say.

ECB Mulls Shelving Rules Tackling Euro Zone’s Bad Loans Pile (R.)

The European Central Bank, after suffering a political backlash, is considering shelving planned rules that would have forced banks to set aside more money against their stock of unpaid loans. The guidelines, which were expected by March, had been presented as a main plank of the ECB’s plan to bring down a 759 billion euro ($930 billion) pile of soured credit weighing on euro zone banks, particularly in Greece, Portugal and Italy. The ECB was now considering whether further policies on legacy non-performing loans (NPLs) were necessary “depending on the progress made by individual banks”, an ECB spokeswoman said.

No decision had been made yet and the next steps were still being evaluated, she said. Central Bank sources told Reuters that if the rules were scrapped, supervisors would look to continue putting pressure on problem banks using existing powers. An alternative would be to hold off until the results of pan-European stress tests are published in November but this would be close to the end of Daniele Nouy’s mandate as the head of the ECB’s Single Supervisory Mechanism at the end of the year. A clean-up of banks’ balance sheets from toxic assets inherited from the financial crisis is a precondition for getting countries like Germany to agree on a common euro zone insurance on bank deposits.

And Andreas Dombret, the outgoing Bundesbank director in charge of banking supervision, said in an interview published on Monday that the ECB’s credibility was at stake. “One cannot say that NPLs are one of the biggest risk for the European banking sector and a top priority and then fail to act,” he told Boersen-Zeitung. “It’s about the credibility of the SSM,” he said, calling for a “timely proposal”.

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And as the central bankers find themselves trapped, the bond vigilantes roam free.

The Return Of Honest Bond Yields (Stockman)

In the wee hours this AM, the yield on the 10-year treasury note hit 2.993%. That’s close enough for gubermint work to say that the big 3.00% inflection point has now been tripped. And it means, in turn, that the end days of the Bubble Finance era have well and truly commenced. In a word, honest bond yields will knock the stuffings out of the mainstream fairy tale that passes for economic and financial reality. And in a 2-3% inflation world, by honest bond yields we mean 3% + on the front-end and 4-5% on the back-end of the yield curve. Needless to say, that means big trouble for the myth of MAGA. As we demonstrated in part 2, since the Donald’s inauguration there has been no acceleration in the main street economy—just the rigor mortis spasms of a stock market that has been endlessly juiced with cheap debt.

But the Trump boomlet in the stock averages has now hit its sell-by date. That’s because today’s egregiously inflated equity prices are in large part a product of debt-fueled corporate financial engineering—stock buybacks, unearned dividends and massive M&A dealing. Thus, since the pre-crisis peak in Q3 2007 nonfinancial corporate sector value added is up by 34%, but corporate debt securities outstanding have risen by 85%; and the overwhelming share of that massive debt increase was used to fund financial engineering, not productive assets and future earnings growth. In a world of honest interest rates, of course, this explosion of non-productive debt would have chewed into earnings good and hard because the borrowed cash went to Wall Street, not into the wherewithal of earnings growth.

In fact, during the past 10 years, net value added generated by US nonfinancial corporations rose by just $2 trillion (from $6.1 trillion to $8.1 trillion per annum), whereas corporate debt rose by nearly $3 trillion (from $3.3 trillion to $6.1 trillion). So it should have been a losing battle—with interest expense rising far faster than operating profits. But owing to the Fed’s misguided theory that it can make the main street economy bigger and stronger by falsifying interest rates and other financial asset prices, the C-suite financial engineers got a free hall pass. That is, they pleasured Wall Street by pumping massive amounts of borrowed cash back into the casino, but got no black mark on their P&Ls.

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“That’s what happens when money is just a representation of debt that can’t be paid back.”

Stop and Assess (Jim Kunstler)

Let’s pause today and make an assessment of where things stand in this country as Winter finally coils into Spring. As you might expect, a nation overrun with lawyers has litigated itself into a cul-de-sac of charges, arrests, suits, countersuits, and allegations that will rack up billable hours until the Rockies tumble. The best outcome may be that half the lawyers in this land will put the other half in jail, and then, finally, there will be space for the rest of us to re-connect with reality.

What does that reality consist of? Troublingly, an economy that can’t go on as we would like it to: a machine that spews out ever more stuff for ever more people. We really have reached limits for an industrial economy based on cheap, potent energy supplies. The energy, oil especially, isn’t cheap anymore. The fantasy that we can easily replace it with wind turbines, solar panels, and as-yet-unseen science projects is going to leave a lot of people not just disappointed but bereft, floundering, and probably dead, unless we make some pretty severe readjustments in daily life.

We’ve been papering this problem over by borrowing so much money from the future to cover costs today that eventually it will lose its meaning as money — that is, faith that it is worth anything. That’s what happens when money is just a representation of debt that can’t be paid back. This habit of heedless borrowing has enabled the country to pretend that it is functioning effectively. Lately, this game of pretend has sent the financial corps into a rapture of jubilation. The market speed bumps of February are behind us and the road ahead looks like the highway to Vegas at dawn on a summer’s day.

Tesla is the perfect metaphor for where the US economy is at: a company stuffed with debt plus government subsidies, unable to deliver the wished-for miracle product — affordable electric cars — whirling around the drain into bankruptcy. Tesla has been feeding one of the chief fantasies of the day: that we can banish climate problems caused by excessive CO2, while giving a new lease on life to the (actually) futureless suburban living arrangement that we foolishly invested so much of our earlier capital building. In other words, pounding sand down a rat hole.

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Yeah, we need more cars…

The Chinese Car Invasion Is Coming (BBG)

On a bright spring day in Amsterdam, car buffs stepped inside a blacked-out warehouse to nibble on lamb skewers and sip rhubarb cocktails courtesy of Lynk & Co., which was showing off its new hybrid SUV. What seemed like just another launch of a new vehicle was actually something more: the coming-out party for China’s globally ambitious auto industry. For the first time, a Chinese-branded car will be made in Western Europe for sale there, with the ultimate goal of landing in U.S. showrooms.

That’s the master plan of billionaire Li Shufu, who has catapulted from founding Geely Group as a refrigerator maker in the 1980s to owning Volvo Cars, British sports carmaker Lotus, London Black Cabs and the largest stake in Daimler —the inventor of the automobile. Li is spearheading China’s aspirations to wedge itself among the big three of the global car industry—the U.S., Germany and Japan—so they become the Big Four. “I want the whole world to hear the cacophony generated by Geely and other made-in-China cars,” Li told Bloomberg News. “Geely’s dream is to become a globalized company. To do that, we must get out of the country.”

[..] Chinese companies have announced at least $31 billion in overseas deals during the past five years, buying stakes in carmakers and parts producers, according to data compiled by Bloomberg. The most prolific buyer is Li, who spent almost $13 billion on stakes in Daimler and truckmaker Volvo. Tencent Holdings Ltd., Asia’s biggest internet company, paid about $1.8 billion for 5% of Tesla. As software and electronics become just as critical to a car as the engine, China is ensuring it doesn’t lag behind in that market, either. Baidu, owner of the nation’s biggest search engine, announced a $1.5 billion Apollo Fund to invest in 100 autonomous-driving projects during the next three years.

“We have secured a chance to compete in the U.S. market of self-driving cars through those partnerships,” Li Zhengyu, a vice president overseeing Baidu’s intelligent-driving unit, told Bloomberg News. “Everyone has a good chance to win if it has good development plans.”

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The Troika demands that Greece kills its society even more. 4.2% of GDP disappears from the economy. Where it’s so badly needed.

Greek Primary Surplus Comes At The Expense Of Growth (K.)

The 2017 budget has officially registered a record primary surplus of 4.2% of GDP, against a target for 1.75%, but this came at a particularly heavy price for the economy, which grew just 1.4% against a budget target for 2.7%. It is obvious that securing primary surpluses of more than twice the target, depriving the economy of precious resources, is directly associated with the stagnation of growth compared to original projections. It is no coincidence that consumption edged up just 0.1% last year, which analysts have attributed to taxpayers’ exhaustion due to overtaxation. The surplus was mainly a result of drastic cuts to the Public Investments Program (by about 800 million euros) and social benefits, due to the delay in the application of the Social Solidarity Income.

The government was quick to express its satisfaction upon the release of the fiscal results by the Hellenic Statistical Authority on Monday, although it was just two years ago that Prime Minister Alexis Tsipras accused the previous administration of setting excessive targets for the primary surpluses of 2016, 2017 and 2018 at 4.5% of GDP. Eventually he reached that target with his own government, although the creditors had lowered the bar, to 1.75% for 2017 and 3.5% this year. The Finance Ministry spoke yesterday of proof of “the credibility of the fiscal management,” adding that “those data show that not only is the target of 3.5% feasible for this and the coming years, but there will also be some fiscal space for targeted tax easing and social expenditure in the post-program period.”

That reference concerns the so-called “countermeasures” the government has planned in case it exceeds the 3.5% target in the 2019 and 2020 primary surpluses, but for now they are at the discretion of the IMF, which will decide next month whether they can be introduced. Obviously Athens hopes the 2017 figures will positively affect the Fund’s view. There was also a positive response from Brussels on Monday, with European Commissioner for Economic Affairs Pierre Moscovici and Commission spokesman Margaritis Schinas stating that the efforts and sacrifices of the Greek people are now paying dividend.

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The new head of the Greek Asylum Service flatly ignores the Council of State. Greek justice system overpowered by Brussels and Berlin.

Tensions Grow On Greek Islands (K.)

Concerns have peaked over tensions on the Aegean islands following clashes between residents of Lesvos and migrants in Mytilene port which led to several injuries. Riot police were forced to intervene early Monday morning after dozens of local residents started protesting the presence of migrants in the main square of Mytilene. The migrants, who had been camping in the square since last Tuesday demanding to be allowed to leave the island, were put onto buses and taken back to overcrowded state facilities. According to local reports, the protesters threw flares, firecrackers and stones at the migrants, who formed a circle around women and children to protect them.

Some protesters chanted “Burn them alive,” according to reports which suggested that members of far-right groups were involved. Police detained 122 people – all but two of whom were Afghan migrants – while 28 people were transferred to the hospital for first-aid treatment, 22 of whom were migrants. Political parties issued statements blaming the attack on far-right groups. The mayor of Lesvos, Spyros Galinos, did not rule out the presence of extremists on the island but pointed to broader frustration among locals. “Society is reacting as a whole,” said Galinos, who had appealed to the government last week to reduce overcrowding on the islands.

[..] meanwhile, the new head of the Greek Asylum Service, Markos Karavias, signed an agreement effectively restricting migrants arriving on the Aegean islands from traveling on to the mainland. A Council of State ruling last week overturned previous asylum service restrictions on migrants leaving the islands. The government’s proposed changes to asylum laws – aimed at speeding up the slow pace at which applications are processed – are to be discussed in Parliament on Tuesday.

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How poor Britain is becoming.

The UK Has Turned The Right To Education Into A Charitable Cause (G.)

My nine-year-old son looks at me anxiously. “Mum, you definitely, definitely have my sponsor money plus an extra pound, which I need for the fundraising games. We have to bring it in today.” I search through my wallet for a quid each for him and his brother. I’ve got no cash on me. “We have to,” he repeats, his voice going wobbly. I stick an IOU in his piggy bank and the day is saved. Yet again. And yet again I feel infuriated and indignant at being put in this position. Then I feel even more cross that I now feel mean. Cake sale, plant sale, ticket for a pamper evening, music quiz, another cake sale, school disco (with associated plastic tat and penny sweets on sale), pay to see Santa, raffle for the chocolate hamper (that you’ve already sent in the goddamn chocolate for), dress up for World Book Day (that’s a quid), go pink for breast cancer research (that’s two quid) and why not run a sponsored mile for Sport Relief while you’re at it.

Then … ping! Oh joy, a text from school – another (another?!) cake sale. How much sugar is going down in that playground? The texts keep flooding in. Ransack your wardrobe for Bag 2 School; send in dosh so your child can buy you a Mother’s Day present; scrabble through your (now denuded) wardrobe for next week’s clothes swap and pretty please, the PTA would appreciate donations of booze for this year’s summer fete. If enough of you don’t stump up by Friday, you’ll be harangued daily until you do. Welcome to summer term, peak time for school fundraising – and what feels like a constant assault. Let’s put aside my irritation at being “chugged” via leaflets in book-bags and my mobile phone, in principle it’s a good thing for kids to think about the needs of people other than themselves, so I’ll swallow official charity fundraisers on that basis, even if those charities might not be my personal choice.

What is outrageous, though, is the assumption in some schools that parents can easily afford to donate on a virtually weekly basis, and the idea that we should expect to be paying on top of our taxes for our children’s state education. Schools, suffering the terrible results of the government’s austerity policies, have cut to the chase and are now pumping parents for regular direct debits to cover essentials. But is asking parents to pay doing pupils’ education any good?

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No surprise.

UK Food Bank Use Reaches Highest Rate On Record (Ind.)

Food bank use has soared at a higher rate than ever in the past year as welfare benefits fail to cover basic living costs, the UK’s national food bank provider has warned. Figures from the Trussel Trust show that in the year to March 2018, 1,332,952 three-day emergency food supplies were delivered to people in crisis across the UK – a 13% increase on last year. This marks a considerably higher increase than the previous financial year, when it rose by 6%. Low income is the biggest single – and fastest growing – reason for referral to food banks, accounting for 28% of referrals compared to 26% in the previous year. Analysis of trends over time demonstrates it has significantly increased since April 2016.

Being in debt also accounted for an increasing percentage of referrals – at 9% of referrals up from 8% in the past year. The cost of housing and utility bills are increasingly driving food bank referrals for this reason, with the proportion of referrals due to housing debt and utility bill debt increasing significantly since April 2016. The other main primary referral reasons in the past year were benefit delays (24%) and benefit changes (18%). “Reduction in benefit value” have the fastest growth rate of all referrals made due to a benefit change, while those due to “moving to a different benefit” have also grown significantly.

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It’s dangerous when people trial basic income schemes who don’t understand them. Others will say: it failed in Finland! No it didn’t. It has to be universal, and this is not.

Finland To End Basic Income Trial After Two Years (G.)

Europe’s first national government-backed experiment in giving citizens free cash will end next year after Finland decided not to extend its widely publicised basic income trial and to explore alternative welfare schemes instead. Since January 2017, a random sample of 2,000 unemployed people aged 25 to 58 have been paid a monthly €560 (£475) , with no requirement to seek or accept employment. Any recipients who took a job continued to receive the same amount. The government has turned down a request for extra funding from Kela, the Finnish social security agency, to expand the two-year pilot to a group of employees this year, and said payments to current participants will end next January.

It has also introduced legislation making some benefits for unemployed people contingent on taking training or working at least 18 hours in three months. “The government is making changes taking the system away from basic income,” Kela’s Miska Simanainen told the Swedish newspaper Svenska Dagbladet. The scheme – aimed primarily at seeing whether a guaranteed income might incentivise people to take up paid work by smoothing out gaps in the welfare system – is strictly speaking not a universal basic income (UBI) trial, because the payments are made to a restricted group and are not enough to live on.

But it was hoped it would shed light on policy issues such as whether an unconditional payment might reduce anxiety among recipients and allow the government to simplify a complex social security system that is struggling to cope with a fast-moving and insecure labour market. Olli Kangas, an expert involved in the trial, told the Finnish public broadcaster YLE: “Two years is too short a period to be able to draw extensive conclusions from such a big experiment. We should have had extra time and more money to achieve reliable results.”

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Mar 262018
 
 March 26, 2018  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , , , ,  


Opening night of the movie ‘Grand Hotel’ on Times Square at Astor Theater, New York 1932

 

Dear America: Please Stop This Shit. Signed, The Rest Of The World. (CJ)
Asian Shares Battered As Trade War Fears Sap Sentiment (R.)
US-China Trade Deficit Is Set To Keep On Rising – Stephen Roach (CNBC)
US Seeks Deal With China in Bid to Avert Trade War (BBG)
US and South Korea Reach Agreement on Trade, Tariffs (BBG)
EU Defends Controversial Juncker Aide Promotion (AFP)
EU Antitrust Chief Keeps Open Threat To Break Up Google (R.)
EU Leaders Host Turkish President Erdogan For Uneasy Summit (R.)
Labour Moves to Prevent ‘No-Deal’ Brexit as Blair Seeks EU Vote (BBG)
Facebook Approached Australian Political Parties To Microtarget Voters (ZH)
Glory Days (Eric Peters)
Nearly Half Of Japanese Think Abe Should Quit Over Land Sale Scandal (R.)
Malaysia: Up To 10 Years’ Jail, Hefty Fines For Publishers Of ‘Fake News’ (R.)
China Regulator Bans TV Parodies Amid Content Crackdown (R.)
Kim Dotcom Wins Human Rights Tribunal Case, Says Extradition Bid ‘Over’ (NH)
Global Warming Puts Nearly Half Of Species In Key Places At Risk (CNN)

 

 

Caitlin Johnstone. Is right.

Dear America: Please Stop This Shit. Signed, The Rest Of The World. (CJ)

They want you arguing over who should and shouldn’t be called a terrorist based on what ideology you subscribe to and what color the latest killer’s skin was. They do not want you talking about the way the label “terrorist” itself is being used to justify unconstitutional detentions, torture, mass surveillance, and wars. They want you arguing over whether to support the Democrats because the Republicans will take civil rights away from disempowered groups or Republicans because the Democrats will take away your guns and force you to bake gay wedding cakes. They don’t want you talking about the fact that both parties advance Orwellian surveillance, neoliberal exploitation and neoconservative bloodshed in a good cop/bad cop extortion scheme to keep Americans cheerleading for their own enslavement.

They want you arguing about whether Trump did or did not collude with Russia. They do not want you looking at what preexisting agendas the CNN/CIA Russia narratives are advancing and who stands to benefit from them. They want everyone fighting over table scraps while they pour unfathomable riches into expanding and bolstering their empire. They psychologically brutalize you with propaganda day in and day out, and then expect you to look to them for protection from the phantoms they invented. They don’t want you paying attention to the growing number of signs that the current administration is gearing up for a major military bloodbath which may lead our species into a third and final world war. They want you talking about Stormy Daniels instead.

[..] Please stop this shit, America. If the US war machine goes after Iran or Russia it will likely mean a world war against multiple nuclear-armed countries, which could very easily send our species the way of the dinosaurs should a nuke get deployed in the fog of war. We don’t have time to focus on Stormy fucking Daniels.

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Cool down.

Asian Shares Battered As Trade War Fears Sap Sentiment (R.)

Global markets were shaken when U.S. President Donald Trump moved to slap tariffs on Chinese goods, on top of import duties on steel and aluminum, prompting a defiant response from Beijing. But E-Mini futures for the S&P 500 brushed off the gloom on Monday to leap 0.6% on reports the United States and China have quietly started negotiating to improve U.S. access to Chinese markets. The United States also agreed to exempt South Korea from steel tariffs, imposing instead a quota on steel imports as the two countries renegotiate their trade deal. “If we do start to hear more favorable news from the U.S. administration and indeed from the Chinese side over the next few trading sessions, then we may see a sharp reversal of the recent moves in the market,” said Nick Twidale at Rakuten Securities Australia.

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The curse of the reserve currency.

US-China Trade Deficit Is Set To Keep On Rising – Stephen Roach (CNBC)

Washington’s trade imbalance with Beijing – the stated motivation behind President Donald Trump’s punitive tariffs — will continue expanding in the years ahead, according to Yale University’s Stephen Roach. America’s trade deficits with China and other countries fundamentally reflect “the fact that we don’t save enough,” said Roach, a former Morgan Stanley Asia chairman. “When you don’t save and you want to spend and grow, you import surplus savings from abroad and you run these massive balance of payments and trade deficits to attract the foreign capital,” he told CNBC Monday at the annual China Development Forum. “That’s the way it’s always worked.”

The Trump administration budget deficits are “going to push our savings rate lower and if anything, our trade deficits are going to get bigger in the years ahead, including the one probably with China.” Reducing the U.S. trade deficit is one of Trump’s top policy goals – he’s argued that it hurts American job creation and weighs on overall growth. But many economists, including Roach, say trade imbalances are not a good metric for economic health since they are influenced by a variety of macroeconomic factors. “The bilateral trade deficit in the U.S. is really pretty meaningless,” Roach said.

And Trump’s $1.5 trillion tax cut, which was signed into law in December, is unlikely to change the status-quo. The fiscal stimulus package “is going to take debt-to-GDP ratios up by 1 to 2 %age points a year, relative to what they otherwise would have been,” Roach said. “For an economy like the United States, where the savings rate is already low, that’s going to push our savings rate even lower. So, we’re going to have to keep importing the surplus savings and running these balance of payments deficits to square the circle.”

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“..stop forced technology transfer..”

US Seeks Deal With China in Bid to Avert Trade War (BBG)

Treasury Secretary Steven Mnuchin said he’s optimistic the U.S. can reach an agreement with China that will avert the need for President Donald Trump to impose tariffs on at least $50 billion of goods from the country. “We’re having very productive conversations with them,” Mnuchin said on “Fox News Sunday,” when discussing talks with China. “I’m cautiously hopeful we reach an agreement.” Trump on Thursday also directed Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic. He has said he also wants a $100 billion decrease in the U.S. trade deficit with China.

A day after Trump’s announcement, which led to a selloff in global markets, China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come.

China is conducting research on further lists of U.S. imports subject to tariffs, which are likely to cover airplanes, computer chips and the tourism industry, China Daily reported on Saturday, citing Wei Jianguo, a former vice commerce minister. Mnuchin said the two countries agree on reducing the deficit to some degree and are trying to “to see if we can reach an agreement as to what fair trade is for them to open up their markets, reduce their tariffs, stop forced technology transfer.” The U.S. will proceed with tariffs “unless we have an acceptable agreement that the president signs off on,” Mnuchin said Sunday. “We’re not afraid of a trade war, but that’s not our objective,” he said. “In a negotiation you have to be prepared to take action.”

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First hurdle out of the way.

US and South Korea Reach Agreement on Trade, Tariffs (BBG)

The U.S. and South Korea reached an agreement on revising their six-year-old bilateral trade deal, and the U.S. said it wouldn’t impose President Donald Trump’s tariffs on steel imports from its ally in Asia. The two countries reached agreement “in principle” on the trade deal known as Korus, South Korea’s trade ministry said in a statement on Monday. While Korea avoids the steel tariff, shipments of the metal to the U.S. will be limited to a quota of about 2.7 million tons a year, according to the statement. Trump repeatedly criticized the trade deal with South Korea, calling it a “job-killer” that had increased the bilateral trade deficit. While he had pushed for it to be revised and threatened tariffs, there were also concerns that trade tensions would create a wedge between the allies just as the presidents of both nations look to meet with North Korean leader Kim Jong Un.

The announcement came after Treasury Secretary Steven Mnuchin said U.S. Trade Representative Robert Lighthizer reached “a very productive understanding.” “We expect to sign that agreement soon,” Mnuchin said on the “Fox News Sunday” program, calling it “an absolute win-win.” The quota is unlikely to hurt South Korea’s steel exports as sales to the U.S. account for 11% of total steel shipments overseas, the South Korean ministry said. The quota is set at 70% of the average of steel sales to the U.S. during 2015-2017.

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Europe makes its decisions behind close backroom doors.

EU Defends Controversial Juncker Aide Promotion (AFP)

The European Commission on Sunday insisted the controversial promotion of President Jean-Claude Juncker’s top aide and enforcer was “in full compliance” with rules despite a growing cronyism row. The commission, the EU’s powerful executive arm, said there was nothing untoward about the elevation of Juncker’s former chief of staff Martin Selmayr to the post of secretary general, at the head of the EU’s 30,000-strong civil service. The scandal has gained momentum in recent weeks with the European Parliament launching an investigation and warning the affair risks fuelling eurosceptics around the continent. But the commission insisted Selmayr’s appointment was above board and made with the full backing of all EU commissioners.

“The decision was taken by the college of commissioners unanimously, in full compliance with the staff regulations and the rules of procedure of the commission,” the commission said in a written response to a list of 134 questions posed by MEPs. The row centres on what critics say was effectively an instantaneous double promotion for the 47-year-old Selmayr, Juncker’s former chief of staff, on February 21. During a single meeting of commissioners, Selmayr was made first deputy secretary general and then just minutes later secretary general when the incumbent, Alexander Italianer, suddenly announced his retirement. The commission confirmed that Juncker had known of Italianer’s plan to retire as early as 2015 and had told Selmayr about it.

But it rejected claims that Juncker and Selmayr had cooked up a plan in November last year to bounce the German into the secretary general role. It said that technically Selmayr had not been promoted, as he remains on the same civil service grade as before, and that he had taken a pay cut in switching jobs. As well as the parliamentary probe, the EU ombudsman, which investigates allegations of malpractice in European institutions, has also confirmed it has received two complaints about the matter and is analysing them. Sophie in ‘t Veld, a leading liberal member of the European Parliament, said earlier this month the affair “destroys all the credibility of the EU as a champion of integrity and transparency”.

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Expand it to Facebook?

EU Antitrust Chief Keeps Open Threat To Break Up Google (R.)

The European Union holds “grave suspicions” about the dominance of internet giant Google and has not ruled out breaking it up, according to a warning by the EU’s antitrust chief, Britain’s Telegraph reported on Sunday. European Commissioner for Competition Margrethe Vestager reckons the threat to split Google into smaller companies must be kept open, the newspaper said. Google currently faces new EU rules on its commercial practices with smaller businesses that use its services.

Late last year, Vestager said more cases against Google were likely in the future, after the European Commission slapped a record €2.4 billion ($2.97 billion) fine on the world’s most popular internet search engine and told the firm to stop favoring its shopping service. The European Commission is in the process of drafting a new regulation aimed at regulating e-commerce sites, app stores and search engines to be more transparent in how they rank search results and why they delist some services.

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They should stop his forays into Syria, Iraq. They won’t. He’s got them by the balls.

EU Leaders Host Turkish President Erdogan For Uneasy Summit (R.)

The European Union holds an uneasy summit with Turkey on Monday, when it is likely to provide Ankara with fresh cash to extend a deal on Syrian refugees but deflect Turkish demands for deeper trade ties and visa-free travel to Europe. With the bloc critical of what it considers to be Turkish President Recep Tayyip Erdogan’s growing authoritarianism at home and his intervention in Syria’s war, Brussels had hesitated to agree to the summit. But host Bulgaria viewed the meeting at the Black Sea port of Varna as a rare chance for dialogue with the country that remains a candidate for EU membership despite years of stalled talks.

EU leaders also cited Turkey’s importance as a NATO ally on Europe’s southern flank and in curbing immigration to Europe from the Middle East and Africa. “I am looking with mixed feelings towards the Varna summit because the differences in views between the EU and Turkey are many,” said European Commission President Jean-Claude Juncker, who will represent the bloc along with European Council President Donald Tusk. “It will be a frank and open debate, where we will not hide our differences but will seek to improve our cooperation,” Juncker told reporters on Friday after a two-day EU summit that discussed Turkey.

At that meeting in Brussels, leaders condemned what they said were Turkey’s illegal actions in a standoff over eastern Mediterranean gas reserves with bloc members Greece and Cyprus. But in a familiar pattern of public recrimination, Turkey’s minister for EU affairs, Omer Celik, said Ankara viewed the summit as “an important opportunity to move our relations forward” and that he expected “the same positive and constructive approach from the EU.” Erdogan will seek more money for Syrian refugees, a deeper customs union and progress in talks on letting Turks visit Europe without visas, a Turkish foreign ministry spokesman said.

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Why there’s a new wave of “Corbyn is an antisemite” going around.

Labour Moves to Prevent ‘No-Deal’ Brexit as Blair Seeks EU Vote (BBG)

The U.K. Labour Party said it is seeking an amendment to key Brexit legislation to prevent Britain leaving the European Union without a deal, as former premier Tony Blair renewed his own call for a second referendum. “If Parliament rejects the Prime Minister’s deal, that cannot give licence to her, or the extreme Brexiteers in her party, to allow the U.K. to crash out without an agreement,” Labour’s Brexit spokesman, Keir Starmer, will say in a speech on Monday, according to extracts emailed by his party. “That would be the worst of all possible worlds.”

As Starmer plots to bind Theresa May’s Conservative government to negotiating a smooth exit from the European Union, former Labour leader Blair will say that Parliament should get to vote on the planned future relationship with the EU and then the electorate should “make the final judgment” ahead Britain’s scheduled departure from the bloc on March 29 next year. Starmer’s bid to rewrite the EU Withdrawal Bill throws up a new hurdle to the premier’s plans. While she’s repeatedly said she wants to reach an agreement with the bloc, May maintains that exiting without one is better than accepting a bad deal. A majority of lawmakers in both houses of Parliament oppose a hard Brexit.

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Talk your way out of this one, Mark.

Facebook Approached Australian Political Parties To Microtarget Voters (ZH)

In the wake of a massive data harvesting scandal, it has emerged that Facebook approached at least two major Australian political parties during the final weeks of their 2016 election in order to help them “microtarget” voters using a powerful data matching tool, reports the Sydney Morning Herald. Facebook offered “advanced matching” as part of their so-called Custom Audience feature to both the conservative (if not confusingly named) Liberal Party, as well as the “democratic socialist” Labor Party. The tool promised to allow the parties to compare data they had collected about voters – such as names, birth dates, phone numbers, postcodes and email addresses – and match that information to Facebook profiles.

The combination of data sets would then allow political parties to target Australian swing voters with custom tailored ads over Facebook, which advertised a 17% increase in matching rates using a beta version of the service provided to the Liberal Party. Fairfax Media reports that while the conservative Liberal Party turned Facebook down over concerns that sending voter data overseas to Facebook servers would violate the Privacy Act and the Electoral Act, the Labor Party took Facebook up on their offer.

Asked specifically whether Labor used the tool, a Labor spokesman said in a statement: “A range of different campaign techniques and tools are used for campaigning, from doorknocking to phone banking to online. Labor works with different groups to get our message out, including social media platforms like Facebook.” “All of our work is in complete compliance with relevant laws, including the Commonwealth Electoral Act, which makes it a criminal offence to misuse information on the electoral roll.”

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“Today’s internet companies suck in free customer data through the front door, and sell it out the back door. The greater the flow, the higher the profits. They’re dominant. They’ll soon be regulated.”

Glory Days (Eric Peters)

“May Day 1975 marked the start of Wall Street deregulation,” said the historian. “Banks and brokerages flourished thereafter, expanding their power and political influence.” 1998 marked peak deregulation with Clinton’s repeal of Glass-Steagall. “Pump and dump schemes of all sorts propagated; Wolf of Wall Street excesses. Then came the dot com IPO madness which led to Sarbanes Oxley.” The final debauchery was exposed in 2008, and led to sweeping Dodd-Frank financial regulation. “Wall Street’s been in lock-down ever since.” “The 1996 Telecom Act protected America’s nascent internet companies,” continued the historian. AOL started in 1985. Netscape launched in 1993, went public in 1995. Amazon launched in 1994. Yahoo 1995. Facebook 2004. YouTube 2005.

“The Act protected them from liability for anything republished on their sites.” They were too weak to withstand such liability and needed nurturing to foster innovation. “But Facebook has a $460bln market cap. It’s not responsible for what it publishes but the NY Times is. That’s now preposterous.” “When Wall Street lacked regulation, any product, no matter how absurd, was welcomed through the front door and pumped out to clients through the back door,” explained the historian. “The greater the flow, the higher the profits. Those were the glory days.” Then regulations raised costs, stymied product development, crushed the profit model. “Today’s internet companies suck in free customer data through the front door, and sell it out the back door. The greater the flow, the higher the profits. They’re dominant. They’ll soon be regulated.”

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Shinzo is addicted to power. But he said he would leave.

Nearly Half Of Japanese Think Abe Should Quit Over Land Sale Scandal (R.)

Nearly half of Japanese voters believe Prime Minister Shinzo Abe should quit to take responsibility over a cronyism scandal and cover-up that have sent his support sliding, according to an opinion poll released on Monday. Suspicions have arisen about a sale of state-owned land at a huge discount to a nationalist school operator with ties to Abe’s wife, Akie, setting off the biggest political crisis Abe has faced since returning to power in 2012 and prompting protestors to call almost nightly for him to quit.

Abe has denied that either he or his wife intervened in the sale or were involved in altering documents related to the deal, in which mention of his and Akie’s names were removed. According to a public opinion survey covered by the liberal Asahi newspaper at the weekend, 48% of those polled said Abe and his government should quit, compared to 39% who said that wasn’t necessary.

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They’re all seeking to ban anything they don’t like.

Wonder who’s going to decide which news is fake. How about the Skripal case? Stormy Daniels? Corbyn is an anti-semite?

Malaysia: Up To 10 Years’ Jail, Hefty Fines For Publishers Of ‘Fake News’ (R.)

Malaysian Prime Minister Najib Razak’s government tabled a bill in parliament on Monday outlawing “fake news”, with hefty fines and up to 10 years in jail, raising more concerns about media freedom in the wake of a multi-billion dollar graft scandal. The bill was tabled ahead of a national election that is expected to be called within weeks and as Najib faces widespread criticism over the scandal at state fund 1Malaysia Development Berhad (1MDB). Under the Anti-Fake News 2018 bill, anyone who published so-called fake news could face fines of up to 500,000 ringgit ($128,140), up to 10 years in jail, or both.

“The proposed Act seeks to safeguard the public against the proliferation of fake news whilst ensuring the right to freedom of speech and expression under the Federal Constitution is respected,” it said. It defines fake news as “news, information, data or reports which is or are wholly or partly false” and includes features, visuals and audio recordings. The law, which covers digital publications and social media, also applies to offenders outside Malaysia, including foreigners, as long as Malaysia or a Malaysian citizen were affected.

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“.. in violation of socialist core values..”

China Regulator Bans TV Parodies Amid Content Crackdown (R.)

China’s media regulator is cracking down on video spoofs, the official Xinhua new agency reported, amid an intensified crackdown on any content that is deemed to be in violation of socialist core values under President Xi Jinping. The decision comes after Xi cemented his power at a recent meeting of parliament by having presidential term limits scrapped, and the ruling Communist Party tightened its grip on the media by handing control over film, news and publishing to its powerful publicity department. Xinhua said video sites must ban videos that “distort, mock or defame classical literary and art works”, citing a directive from the State Administration of Press, Publication, Radio, Film and Television on Thursday.

Reuters separately reviewed a copy of the directive, which was unusually labeled “extra urgent”. Industry insiders say the sweeping crackdown on media content, which has been gaining force since last year, is having a chilling effect on content makers and distributors. “It means a lot of content makers will have to transition and make their content more serious. For ‘extra urgent’ notice like this, you have to act immediately,” said Wu Jian, a Beijing-based analyst. “Those who don’t comply in time will immediately be closed down,” Wu said.

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On Twitter: “Let’s see how ‘speculative’ and ‘premature’ my recent Obama affidavit is after we get access to all the puzzle pieces.”

Kim Dotcom Wins Human Rights Tribunal Case, Says Extradition Bid ‘Over’ (NH)

The Human Rights Tribunal has ruled that the Attorney-General broke the law by withholding information from Kim Dotcom, which he says means his extradition case is “over”. In July 2015, Mr Dotcom sent an urgent information privacy request to all 28 Ministers of the Crown as well as almost all Government departments, asking for personal information they had on him, including under his previous names. Nearly all the requests were transferred to the Attorney-General Chris Finlayson, who declined the Megaupload founder’s requests on the grounds that they were “vexatious” and trivial. The Solicitor-General also said Mr Dotcom had not provided sufficient reasons for urgency.

On Monday, the Human Rights Tribunal ruled that the Attorney-General unlawfully withheld information from Mr Dotcom, meaning he perverted the course of justice. The Government and Ministers have been ordered to comply with the original requests and supply all relevant documents to Mr Dotcom. Mr Dotcom was awarded damages for loss of benefit and loss of dignity. In a series of celebratory tweets, Mr Dotcom claimed this decision meant his extradition case is “over”. He has threatened former Prime Minister Sir John Key with legal action, and said he will see everyone involved in the so-called “Mega Conspiracy” in court. He has also called for the immediate resignation of the Privacy Commissioner.

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If temperature rise is kept below 2ºC “only” 25% of species will be lost.

Global Warming Puts Nearly Half Of Species In Key Places At Risk (CNN)

About half of all plants and animals in 35 of the world’s most biodiverse places are at risk of extinction due to climate change, a new report claims. “Hotter days, longer periods of drought, and more intense storms are becoming the new normal, and species around the world are already feeling the effects,” said Nikhil Advani, lead specialist for climate, communities and wildlife at the World Wildlife Fund (WWF). The report, a collaboration between the University of East Anglia, the James Cook University, and the WWF, found that nearly 80,000 plants and animals in 35 diverse and wildlife-rich areas – including the Amazon rainforest, the Galapagos islands, southwest Australia and Madagascar – could become extinct if global temperatures rise. The 35 places were chosen based on their “uniqueness and the variety of plants and animals found there,” the WWF said.

“The collected results reveal some striking trends. They add powerful evidence that we urgently need global action to mitigate climate change,” the report said. A corresponding study was also published by the scientific journal Climate Change. If temperatures were to rise by 4.5 degrees Celsius, animals like African elephants would likely lack sufficient water supplies and 96% of all breeding ground for tigers in India’s Sundarbans region could be submerged in water. However, if temperature rise was kept to below 2 degrees Celsius – the global target set by the landmark Paris Climate Accord in 2015 – the number of species lost could be limited to 25%. “This is not simply about the disappearance of certain species from particular places, but about profound changes to ecosystems that provide vital services to hundreds of millions of people,” the WWF said in its report.

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Mar 192018
 
 March 19, 2018  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , , ,  


Ernest R. Ashton Evening near the Pyramids 1898

 

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)
Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)
Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)
How Seriously is the Treasury Market Taking the Fed? (WS)
65% of Americans Save Little or Nothing (CNBC)
Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)
Rising US Interest Rates May Damage Gulf Economies (MEE)
Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)
Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)
Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)
Apple Is Secretly Developing Its Own Screens for the First Time (BBG)
Canadian Household Debt Hits Record $1.8 Trillion (CP)
German Interior Minister Wants More Internal EU Border Controls (DW)
Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

 

 

Facebook knows more about you than your friends and family do. No, really. But it can’t figure out -for years- that its data are being downloaded and used?! Yeah, I’ll buy that.

The real issue here should be what Facebook itself uses its -or should that be ‘your’- data for, and what intelligence services do with it.

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)

Facebook and that worked with Donald Trump’s election team have come under mounting pressure, with calls for investigations and hearings to explain a vast data breach that affected tens of millions of people. In Britain, the head of the parliamentary committee investigating fake news accused Cambridge Analytica and Facebook of misleading MPs after revelations in the Observer that more than 50m Facebook profiles were harvested and used to build a system that may have influenced voters in the 2016 presidential campaign. The Conservative MP Damian Collins said he would call the heads of both companies, Alexander Nix and Mark Zuckerberg, to give further testimony.

His intervention came after a whistleblower spoke to the Observer and described how the profiles, mostly of US voters, were harvested for Cambridge Analytica, in one of Facebook’s biggest ever data breaches. The disclosures caused outrage on both sides of the Atlantic; in the US, a state attorney general has called for investigations and greater accountability and regulation. There have been reports that Cambridge Analytica is trying to stop the broadcast of a Channel 4 News exposé in which Nix is said to talk unguardedly about the company’s practices. According to the Financial Times, reporters posed as prospective clients and secretly filmed a series of meetings, including one with the chief executive. The report is due to air this week.

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Very little credibility so far. From descriptions of the nerve agent, it would seem impossible that “..at least 38 people in Salisbury had been identified as having been affected by it..” and all lived to tell it. Is the whole Novichok story a fabrication? Know what, Boris? Why not show the proof you claim to have?!

Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)

Boris Johnson will today seek to convince the EU foreign affairs council to join him in fresh condemnation of Russia after his explosive claims that Moscow has been creating and stockpiling nerve agent novichok and working out how to use it for assassinations. Scientists from the UN-backed Organisation for the Prohibition of Chemical Weapons arrive today to analyse samples of the agent used to poison the former spy Sergei Skripal and his daughter Yulia. The foreign secretary made his claims after Russian EU ambassador Vladimir Chizhov issued blanket denials and said British agents might have used their stockpiles at Porton Down.

As the row enters its third week, Johnson dismissed Chizhov’s comments, saying they were “not the response of a country that really believes it’s innocent”. On Sunday, Vladimir Putin, fresh from a profoundly unsurprising electoral victory, denied any such nerve agents existed and said the idea of carrying out such a killing during an election campaign would be “rubbish, drivel, nonsense”. The latest theory to gain prominence is that the Skripals were poisoned via his car’s ventilation system. The report, from ABC news in the US, came as counter-terrorism police renewed their appeal for sightings of Skripal’s burgundy BMW 320D saloon car on 4 March. ABC also reported that at least 38 people in Salisbury had been identified as having been affected by the nerve agent.

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Zero interest rates?!

Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)

U.S. corporate debt levels stand above crisis highs even as default rates among the most leveraged firms remain subdued. With an economy hitting its stride, it’s perhaps no surprise that the high-yield bond market is placid. The extent of the divergence between debt levels and defaults, however, is worrying to some analysts who feel rising corporate indebtedness will eventually catch out unwary investors and deflate the junk-bond market. But beyond complacency John Lonski at Moody’s Capital Market Research, argued that globalization and the tendency of U.S. businesses to hoard cash as reasons why corporate debt levels may no longer move in sync with default rates and credit spreads.

The high-yield default rate in the fourth-quarter of 2017 fell to 3.3%, even as U.S. nonfinancial-corporate debt ended in 2017 at 45.4% of GDP. This compares with a much higher default rate of 11.1% in the second quarter of 2009, with corporate debt levels at 45% of GDP. Granted, the current levels come with the economy in the eighth year of an expansion, while the second quarter of 2009 marked the final quarter of the longest and deepest U.S. recession since the Great Depression. The yield spread between high-yield bonds and safe government paper, as represented by the 10-year Treasury note narrowed to an average 3.63 percentage points in the fourth quarter of 2017, from an average 12.02 percentage points in the second quarter of 2009.

The tight credit spreads reflects that borrowing costs are still close to historic lows, and that investors are demanding minimum compensation for holding arguably the riskiest debt in the bond market. One answer “might be supplied by the ever increasing globalization of U.S. businesses where the more relevant denominator is not U.S. GDP, but world GDP” said Lonski. The fortunes of U.S. companies are now wove into the broader global economy. When commodity prices took a hit in 2015 and early 2016, crimping growth in China and other emerging markets, high-yield bonds were also slammed.

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If they keep up the forward guidance, everyone will sleep on. But will the yield spread sleep too?

How Seriously is the Treasury Market Taking the Fed? (WS)

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that the Fed could never unload the securities it had acquired during QE. How things have changed! On Friday, the three-month Treasury yield closed at 1.78%, the highest since August 19, 2008. When yields rise, by definition bond prices fall:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that The Fed’s target range for the federal funds rate has been 1.25% to 1.50% since its last rate hike at the December FOMC meeting. In other words, the three-month yield is already above the upper limit of the Fed’s target range after the next rate hike. So the market has fully priced in a rate hike at the FOMC meeting ending March 21. And it’s also starting to price in another rate hike in June. In this rate-hike cycle, the Fed has engaged in policy action only at meetings that are followed by a press conference.

There are four of these press-conference meetings per year. The next two are this week and June. If, in this cycle, the Fed hike rates at an FOMC meeting that is not followed by a press conference – there are also four of them this year – it would be considered a “monetary shock” that the Fed decided to administer to the markets. It would be like a rate hike of 50 basis points instead of the expected 25 basis points. There would be a hue and cry in the markets around the world. But I think the Fed isn’t ready to spring that on the markets just yet. Maybe later. The two-year yield rose to 2.31% on Friday, the highest since August 29, 2008:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that In past rate hike cycles, the two-year yield reacted faster to rate-hike expectations than the 10-year yield. This is happening now as well. The 10-year yield has its own dynamics that are not in lockstep with the Fed’s rate-hike scenario. On Friday, the 10-year yield closed at 2.85%, within the same range where it had been since late February, tantalizingly close to 3%:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that [..] After the surge of the two-year yield, the difference between the two-year and the 10-year yield – the “two-10 spread” – has narrowed again. On Friday, it was at 54 basis points. In the chart below, note the narrowing at the end of last year to 50 basis points, then the mini-spike, as the 10-year yield surged faster than the two-year yield, and the recent fallback:

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Always the same braindead question: “What’s keeping Americans from saving?” We still don’t know?!

65% of Americans Save Little or Nothing (CNBC)

Despite a low unemployment rate and increasing wage growth, Americans still aren’t saving much. That’s according to a new survey from Bankrate.com, which found that 20% of Americans don’t save any of their annual income at all and even those who do save aren’t putting away a lot. Only 16% of survey respondents say that they save more than 15% of what they make, which is what experts generally recommend. A quarter of respondents report saving between 6 and 10% of their income and 21% say they sock away 5% or less.

At this rate, many people could be setting themselves up to fall short in retirement, Bankrate warns. “With a steady, significant share of the working population saving nothing or relatively little, it’s virtually guaranteed that they’ll be unable to afford a modest emergency expense or finance retirement,” says Mark Hamrick, senior economic analyst at Bankrate. “That amounts to a financial fail.” The economy might be prospering now, but that won’t last forever: “The party has to stop sometime, and when it does, employers will lay off workers,” the study says. In fact, Bankrate estimates that half of the American population won’t be able to maintain their standard of living once they stop working.

A report from GoBankingRates found similar results: Over 40% of Americans have less than $10,000 saved for when they retire. What’s keeping Americans from saving? “Expenses” was the No. 1 answer of 39% of respondents. Another 16% say they don’t have a “good enough job” to be able to save, which presumably means they aren’t earning enough. “The average American has less than $5,000 in a financial account, a quarter to a fifth of what you should have, and those aged 55 to 64 who have retirement savings only carry $120,000 — which won’t last long in the absence of paychecks,” the survey reports.

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How strong will this make the dollar?

Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)

The expected rise in US interest rates will increase financial pressures on developing countries already struggling with a 60% jump in their debt repayments since 2014, a leading charity has warned. The Jubilee Debt Campaign said a study of 126 developing nations showed that they were devoting more than 10% of their revenues on average to paying the interest on money borrowed – the highest level since before the G7 agreement to write off the debts of the world’s poorest nations at Gleneagles, Scotland, in 2005. Five of the countries on the charity’s list – Angola, Lebanon, Ghana, Chad and Bhutan – were spending more than a third of government revenues on servicing debts.

Developing country debt moved down the international agenda following the Gleneagles agreement in which the G7 industrial countries agreed to spend £30bn writing off the debts owed to the International Monetary Fund and the World Bank by the 18 poor countries. But developing country debt is now once again being closely monitored by the IMF, which says 30 of the 67 poor countries it assesses are in debt distress or at risk of being so. Lending to developing countries almost doubled between 2008 and 2014 as low interest rates in the west led to a search for higher-yielding investments. A boom in commodity prices meant many poor countries borrowed in anticipation of tax receipts that have not materialised.

But the Jubilee Debt Campaign said the boom–bust in commodity prices was only one factor behind rising debt, pointing out that some countries were paying back money owed by former dictators, while others had been struggling with high debts for many years but had not been eligible for help. The campaign said developing countries were also vulnerable to a rise in global interest rates as central banks withdrew the support they have been providing since 2008. [..] The US Federal Reserve is expected to raise interest rates this week – with the financial markets expecting two or three further upward moves during 2018.

Tim Jones, an economist at the Jubilee Debt Campaign, said: “Debt payments for many countries have risen rapidly as a result of a lending boom and fall in commodity prices. The situation may worsen further as US dollar interest rates rise, and as other central banks reduce monetary stimulus. Debt payments are reducing government budgets when more spending is needed to meet the sustainable development goals.”

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A few economies that have not done well.

Rising US Interest Rates May Damage Gulf Economies (MEE)

[..]The latest available data shows that Oman, for instance, has a debt equivalent to 31.4% of their GDP for 2016, which is up from 4.9% in 2014, according to TradingEconomics.com. That jump in debt coincided with a fall in oil prices from more than $100 a barrel in mid-2014 to a low of $26 in early 2016. Rising rates also tend to increase costs for businesses, says Rosso. And the higher costs of borrowing ultimately means that fewer businesses that request loans from banks will receive the money they need. In short, growth in the available credit in the economy will slow. If we learned nothing else from the financial crisis of 2008-2009, it is that the world of business runs on credit. Slower credit growth usually means slower economic growth.

The base case is that among the countries with the dollar peg such as Saudi Arabia, UAE and Oman, the increased interest rates will likely drag on growth for their economies. The timing is really pretty bad for some of the countries involved. For instance, the Saudi economy shrank by 0.43% in the quarter ending September 2017, according to TradingEconomics.com. The prior quarter was worse; the economy sank 1.03%. Two quarters of negative growth is generally seen as a recession. Will the impact of rising rates push Saudi’s economy back into another recession? It’s hard to tell so far, but there is a risk. Similar problems seem likely for some other countries in the dollar-peg group.

The latest data from Oman is awful as well, although not as recent as that on Saudi Arabia. That economy contracted 14.1% in 2015, followed by another 5.1% decline in 2016. Likewise, the UAE has seen its growth steadily decline in each of the five years through 2016 from 6.9% to 3% most recently. That would not be bad for economic growth, but it is going in the wrong direction.

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That’s quite the statement.

Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)

South Korea’s foreign minister has said that North Korea’s leader has “given his word” that he is committed to denuclearization, a prime condition for a potential summit with President Donald Trump in May. Trump has agreed to what would be historic talks after South Korean officials relayed that Kim Jong-un was committed to ridding the Korean Peninsula of nuclear weapons and was willing to halt nuclear and missile tests. North Korea hasn’t publicly confirmed the summit plans, and a meeting place isn’t known. South Korea’s Kang Kyung-wha said Seoul has asked the North “to indicate in clear terms the commitment to denuclearization” and she says Kim’s “conveyed that commitment.” She told the CBS programme Face the Nation that “he’s given his word” and it’s “the first time that the words came directly” from the North’s leader.

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Only include this because it’s exactly what I said last week. Kim still hasn’t publicly agreed to meet.

Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)

U.S. President Donald Trump’s immediate willingness to meet Kim Jong Un for nuclear talks likely caught the North Korean leader by surprise, forcing him to consider his position before responding publicly, the South Korean foreign minister said. “We were all quite surprised by the readiness of that decision,” South Korea’s Kang Kyung-wha said on CBS’s “Face the Nation” Sunday. “It was an extremely courageous decision on the part of President Trump. We believe the North Korean leader is now taking stock.” Trump agreed to meet with Kim on March 8 after a briefing from South Korean officials.

The summit, expected to take place in a few months, would represent the first time a U.S. president has met a North Korean leader – either Kim or his father or grandfather – and is part of an overall strategy to dismantle that nation’s rapidly advancing nuclear weapons program. Pyongyang has already detonated what it described as a hydrogen bomb capable of riding an intercontinental ballistic missile to cities across the U.S., and Kim has threatened to use nuclear arms against Americans. The summit, if it occurs, will likely follow an already-scheduled meeting between Kim and South Korean President Moon Jae-in to take place in South Korea, at which denuclearization will also be discussed, Kang said.

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Yeah, Shinzo, the Russians did it.

Tyler earlier: “82% of Asahi poll respondents said Abe bears responsibility for the doctored documents relating to the Moritomo scandal”

Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)

Japan’s embattled prime minister has hit back at critics over a favouritism and cover-up scandal that has seen his popularity plunge and loosened his grip on power. In a statement in parliament, Shinzo Abe stressed he had not ordered bureaucrats to alter documents relating to a controversial land sale. “I have never ordered changes,” he said. The scandal surrounds the 2016 sale of state-owned land to a nationalist operator of schools who claims ties to Abe and his wife Akie. The sale was clinched at a price well below market value amid allegations that the high-level connections helped grease the deal. The affair first emerged early last year, but resurfaced after the revelation that official documents related to the sale had been changed.

Versions of the original and doctored documents made public by opposition lawmakers appeared to show passing references to Abe were scrubbed, along with several references to his wife Akie and Finance Minister Taro Aso. Aso has blamed the alterations on “some staff members” at the ministry. But Jiro Yamaguchi, a politics professor at Hosei University in Tokyo, said the public was “not at all convinced” by this explanation. “Why was the land sold at a discount price? Without any political pressure, this could never happen, and voters are angry about it,” said Yamaguchi. The prime minister repeated an apology, saying he “keenly felt” his responsibility over the scandal that has “shaken people’s confidence in government administration.”

The affair is hitting Abe’s ratings hard, with a new poll in the Asahi Shimbun showing public support nosediving by 13 percentage points from the previous month to 31%. The figure is the lowest approval rating for Abe in the poll since his return to power at the end of 2012.

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A different kind of protectionism.

Apple Is Secretly Developing Its Own Screens for the First Time (BBG)

Apple is designing and producing its own device displays for the first time, using a secret manufacturing facility near its California headquarters to make small numbers of the screens for testing purposes, according to people familiar with the situation. The technology giant is making a significant investment in the development of next-generation MicroLED screens, say the people, who requested anonymity to discuss internal planning. MicroLED screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry. The screens are far more difficult to produce than OLED displays, and the company almost killed the project a year or so ago, the people say.

Engineers have since been making progress and the technology is now at an advanced stage, they say, though consumers will probably have to wait a few years before seeing the results. The ambitious undertaking is the latest example of Apple bringing the design of key components in-house. The company has designed chips powering its mobile devices for several years. Its move into displays has the long-term potential to hurt a range of suppliers, from screen makers like Samsung, Japan Display, Sharp and LG to companies like Synaptics that produce chip-screen interfaces. It may also hurt Universal Display, a leading developer of OLED technology. Display makers in Asia fell after Bloomberg News reported the plans. Japan Display dropped as much as 4.4%, Sharp tumbled as much as 3.3% and Samsung slid 1.4%.

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“$22,837 per person, not including mortgages…”

Canadian Household Debt Hits Record $1.8 Trillion (CP)

Canadians’ collective household debt has climbed to $1.8 trillion as an international financial group sounds an early warning that the country’s banking system is at risk from rising debt levels. Equifax Canada says consumers now owe $1.821 trillion including mortgages as of the fourth-quarter of 2017, marking a 6% increase from a year earlier. Although nearly half of Canadians reduced their personal liabilities, roughly 37% added to their debt to push the average amount up 3.3% to $22,837 per person, not including mortgages.

The fresh numbers come as an international financial group owned by the world’s central banks says Canada’s credit-to-GDP and debt-service ratios show early warning signs of potential risk to the banking system in the coming years. The latest report by the Bank for International Settlements says Canada’s credit-to-GDP gap and debt-service ratios have surpassed critical thresholds and are signalling red, pointing to vulnerabilities. The group, however, cautions that these indicators should not be treated as a formal stress test, but as a first step in a broader analysis.

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From Merkel’s own camp.

German Interior Minister Wants More Internal EU Border Controls (DW)

Germany should consider stepping up its border controls, German Interior Minister Horst Seehofer said on Sunday. “Not that many border points in Germany are permanently occupied,” Seehofer told German weekly newspaper Die Welt am Sonntag, adding: “We will now discuss whether that needs to change.” Seehofer also appealed for the suspension of the Schengen Agreement, which allows free movement within the EU bloc. “Internal border checks [between EU member states] must be in place so long as the EU fails to effectively control the external border,” he said, adding: “I don’t see it being able to do this in the near future.” The reintroduction of border controls is a prerogative of EU member states. Under EU rules they must remain an exception and respect the principle of proportionality.

Germany’s temporarily reintroduced border controls continue until May 12 and have been imposed on the land border with Austria and on flight connections from Greece because of the “security situation in Europe and threats resulting from the continuous secondary movements,” according to the European Commission. Seehofer’s comments follow EU demands in February that Germany and four other Schengen members – Austria, Denmark, Sweden and Norway – lift their border controls when the current agreed terms run out in May. [..] Seehofer is a member of the Christian Social Union (CSU), the Bavarian sister party of German Chancellor Angela Merkel’s conservative Christian Democrats (CDU).

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Waterwars in waterworld.

Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

More than 5 billion people could suffer water shortages by 2050 due to climate change, increased demand and polluted supplies, according to a UN report on the state of the world’s water. The comprehensive annual study warns of conflict and civilisational threats unless actions are taken to reduce the stress on rivers, lakes, aquifers, wetlands and reservoirs. The World Water Development Report – released in drought-hit Brasília – says positive change is possible, particularly in the key agricultural sector, but only if there is a move towards nature-based solutions that rely more on soil and trees than steel and concrete.

“For too long, the world has turned first to human-built, or ‘grey’, infrastructure to improve water management. In doing so, it has often brushed aside traditional and indigenous knowledge that embraces greener approaches,” says Gilbert Houngbo, the chair of UN Water, in the preface of the 100-page assessment. “In the face of accelerated consumption, increasing environmental degradation and the multi-faceted impacts of climate change, we clearly need new ways of manage competing demands on our freshwater resources.” Humans use about 4,600 cubic km of water every year, of which 70% goes to agriculture, 20% to industry and 10% to households, says the report, which was launched at the start of the triennial World Water Forum.

Global demand has increased sixfold over the past 100 years and continues to grow at the rate of 1% each year. This is already creating strains that will grow by 2050, when the world population is forecast to reach between 9.4 billion and 10.2 billion (up from 7.7 billion today), with two in every three people living in cities. [..] By 2050, the report predicts, between 4.8 billion and 5.7 billion people will live in areas that are water-scarce for at least one month each year, up from 3.6 billion today, while the number of people at risk of floods will increase to 1.6 billion, from 1.2 billion.

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Mar 162018
 
 March 16, 2018  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , , , ,  


Pablo Picasso Women of Algiers (after Delacroix) 1955

 

The British Government’s Russia Nerve Agent Claims Are Bullshit (Nafeez Ahmed)
UK Claims Questioned About Source Of Salisbury Novichok (G.)
Buying Stocks Now Is Betting On Buybacks (F.)
Has Europe Really Recovered From Its 2008 Financial Meltdown? (Steve Keen)
UK Household Debt Levels Close To 2008 Peak (Ind.)
UK Economy In Grip Of Most Feeble Recovery On Modern Record – IFS (Ind.)
More Than 600,000 Britons Sought Help From Debt Charity Last Year (G.)
European Commission Rebuked Over Ex-Chief Barroso’s Goldman Sachs Job (G.)
Japan PM Shinzo Abe’s Cronyism Scandal Worsens (G.)
Greece’s Jobless Rate Jumps To 21.2% In Fourth Quarter (K.)
EU Provides Financial Support For Turkey Amid Ethnic Cleansing (ANF)
The Oxfam Scandal: There Is No Reward For Honest Charities (Crack)
Bali Switches Off Internet Services For 24 Hours For New Year ‘Reflection’ (G.)

 

 

Yesterday was a travel day, hence no post. I’m back in Greece for talks about the Automatic Earth for Athens project.

 

 

Nafeez takes no prisoners. There must be a strong counter narrative to the UK government’s attempt to deflect attention from its dismal performance by conjuring up a common enemy for all Britons. Either show proof or hold your tongue.

The British Government’s Russia Nerve Agent Claims Are Bullshit (Nafeez Ahmed)

[..] far from offering a clear-cut evidence-trail to Vladimir Putin’s chemical warfare labs, the use of Novichok in the nerve gas attack on UK soil points to a wider set of potential suspects, of which Russia is in fact the least likely. Yet a concerted effort is being made to turn facts on their head. No clearer sign of this can be found than in the statement by Ambassador Peter Wilson, UK Permanent Representative to the Organisation for the Prohibition of Chemical Weapons (OPCW), in which he claimed that Russia has “failed for many years” to fully disclose its chemical weapons programme.

Wilson was parroting a claim made a year earlier by the US State Department that Russia had not made a complete declaration of its chemical weapons stockpile: “The United States cannot certify that Russia has met its obligations under the Convention.” Yet these claims are contradicted by the OPCW itself, which in September 2017 declared that the independent global agency had rigorously verified the completed destruction of Russia’s entire chemical weapons programme, including of course its nerve agent production capabilities. [..] The OPCW’s press statement confirmed that:

“The remainder of Russia’s chemical weapons arsenal has been destroyed at the Kizner Chemical Weapons Destruction Facility in the Udmurt Republic. Kizner was the last operating facility of seven chemical weapons destruction facilities in Russia. The six other facilities (Kambarka, Gorny, Maradykovsky, Leonidovka, Pochep and Shchuchye) completed work and were closed between 2005 and 2015.” [..] According to Craig Murray, former US Ambassador to Uzbekistan and prior to that a longtime career diplomat in the UK Foreign Office who worked across Africa, Eastern Europe, and Central Asia, the British government itself has advanced capabilities in Novichok:

“The ‘novochok’ group of nerve agents – a very loose term simply for a collection of new nerve agents the Soviet Union were developing fifty years ago – will almost certainly have been analysed and reproduced by Porton Down. That is entirely what Porton Down is there for. It used to make chemical and biological weapons as weapons, and today it still does make them in small quantities in order to research defences and antidotes. After the fall of the Soviet Union Russian chemists made a lot of information available on these nerve agents. And one country which has always manufactured very similar persistent nerve agents is Israel. ”

[..] A secret British intelligence unit is actively arranging ‘honey trap’ propaganda operations to incriminate ‘adversaries’

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People are subject to abuse for questioning the official story. At least Corbyn has the decency to ask for evidence.

UK Claims Questioned About Source Of Salisbury Novichok (G.)

It was a historic moment largely ignored at the time by most of the world’s media and might have remained so but for the attack in Salisbury. At a ceremony last November at the headquarters of the world body responsible for the elimination of chemical weapons in The Hague, a plaque was unveiled to commemorate the destruction of the last of Russia’s stockpiles. Gen Ahmet Üzümcü, the director general of the Organisation for the Prohibition of Chemical Weapons (OPCW), which works closely with the UN, was fulsome in his praise. “This is a major achievement,” he said. The 192-member body had seemingly overseen and verified the destruction of Russia’s entire stock of chemical weapons, all 39,967 metric tons.

The question now is whether all of Russia’s chemical weapons were destroyed and accounted for. Theresa May – having identified the nerve agent used in the Salisbury attack as novichok, developed in Russia – told the Commons on Wednesday that Russia had offered no explanation as to why it had “an undeclared chemical weapons programme in contravention of international law”. Jeremy Corbyn introduced a sceptical note, questioning whether there was any evidence as to the location of its production. The exchanges provoked a debate echoing the one that preceded the 2003 invasion of Iraq over whether UN weapons inspectors had overseen the destruction of all the weapons of mass destruction in the country or whether Saddam Hussein had retained secret hidden caches.

[..] The former British ambassador to Uzbekistan, Craig Murray, who visited the site at Nukus, said it had been dismantled with US help. He is among those advocating scepticism about the UK placing blame on Russia. In a blog post, he wrote: “The same people who assured you Saddam Hussein had WMDs now assure you Russian ‘novichok’ nerve agents are being wielded by Vladimir Putin to attack people on British soil.” [..] Murray, in a phone interview, is undeterred, determined to challenge the government line, in spite of having been subjected to a level of abuse on social media he had not experienced before. “There is no evidence it was Russia. I am not ruling out that it could be Russia, though I don’t see the motive. I want to see where the evidence lies,” Murray said. “Anyone who expresses scepticism is seen as an enemy of the state.”

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Casino.

Buying Stocks Now Is Betting On Buybacks (F.)

It is no secret that a large portion of the rally in equities over the last few years, and especially the rebound from the lows of early February, has been bolstered by the record amounts of capital sitting in the coffers of American corporations which, has naturally found its way into the stock market. This cash had three main sources. First, corporations built a large precautionary hoard of cash in the aftermath of the financial crisis to prevent being buffeted by credit markets, choosing to recycle their income into savings rather than spending. Some of this cash is now being unleashed. Second, the extremely low level of yields and spreads in the corporate bond markets allows the issuance of longer term bonds to willing yield-starved bond buyers and take in even more cash.

And finally, the tax reform unlocked foreign cash that came flowing back into the U.S. – a good fraction of which has gone into the stock market. This trifecta of positives (for the stock market) has created a systematic bid whenever markets correct downwards. The big question for investors is whether we can count on the buybacks to continue to provide the support on dips as the economic cycle matures. The question really is whether “Buying the Dip” is the same as “Buying the Buyback.” Just like the yield of a bond is the income that an investor receives from cash, the most important component of the yield on a stock is the dividend that the investor receives as the company pays out cash dividends.

The total yield from holding a stock is the sum of the dividend yield and the “buyback” yield. The buyback yield is simply the capital returned to investors divided by the market value of the stock. To compare the relative yield value of stocks and bonds, then, we should compare the yield on bonds and the total yield on stocks. What has been a direct consequence of the large buying of bonds by central banks until recently is that investors have been buying stocks for their total yield since this yield has been much higher than the comparable bond yields. One could also argue that investors have been buying bonds for capital appreciation, not yield. Otherwise why would one hold negatively yielding securities in Europe? Bonds for capital gains, equities for yield – very interesting!

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Household debt. That’s the focal point.

Has Europe Really Recovered From Its 2008 Financial Meltdown? (Steve Keen)

There’s no doubt that Europe is recovering, and those factors have been part of it. But so is another element which economists, especially Krugman himself, continue to ignore: credit. Not only Europe’s crisis, but America’s and the UK’s as well in 2008, was due to a collapse in credit-based demand. In fact, Europe is back largely because credit is back: European (and American and British) consumers and firms are borrowing once again and unleashing that borrowed money into their economies, boosting demand and lowering unemployment. This means the recovery can continue only so long as households and firms can keep getting into debt. Yet, given private debt levels are still high when compared to GDP, it won’t be long before the national credit cards are maxed out again. Then the borrowing will stop, and the recovery will run out of steam.

So why aren’t economists warning of this dark lining in the silver cloud of economic recovery? It’s because they don’t think that credit matters, and they ignore it when making forecasts about where the economy is likely to go. Their logic is that credit simply transfers spending power from one person to another, so changes in the level of private debt only affect the economy if the borrower has substantially different spending patterns to the lender. To use Krugman’s own language here, rising private debt will only affect demand if the borrowers are “impatient people” who spend a lot, while the lenders are “patient people” who spend very little. This implies that large changes in private debt should have only small effects on the macroeconomy.

I could get all theoretical here and prove why this belief is false, but it’s rather easy to show what the biologist Thomas Huxley once described as “no sadder sight in the world,” which is “to see a beautiful theory killed by a brutal fact.” If the theory that credit doesn’t matter were true, then credit and unemployment would be unrelated to each other. But they are! Here’s a killing of this beautiful theory by a brutal fact that’s worthy of a Game of Thrones beheading: Ladies and gentlemen, I give you the relationship between credit (the annual change in private debt, measured as a percentage of GDP) and unemployment in Spain, between 1990 and July 2017 (the latest quarter for which there is data on debt from the Bank of International Settlements).

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You can see the wall ahead that hey’re about to crash into.

UK Household Debt Levels Close To 2008 Peak (Ind.)

Worrying numbers of householders may be “in too deep” with their borrowing, a city regulator boss has told a credit conference. Jonathan Davidson, executive director of supervision for retail and authorisations at the Financial Conduct Authority (FCA), said credit levels were close to a peak seen in 2008. He said the FCA would take action against firms whose businesses were based on people being unable to clear their debts. More can be done to pre-empt future harm to customers, he said, warning: “There are a significant number of households that are in so deep that the slightest sign of rough weather could see them in over their heads.” He said it was “far from certain” that some customers who could just manage to afford loans now would be able to do so in future.

Mr Davidson told the audience: “A business model that is predicated on selling products to customers who can’t afford to repay them is not acceptable. “We will take action against firms who run their businesses this way.” He said that while most borrowers could still comfortably afford their credit, the industry should “think strategically about the issues facing your customers”, adding that this was “the right thing to do, not only for your customers, but for the future of your businesses”. Mr Davidson said the consumer credit sector, which comprises nearly 40,000 firms registered with the FCA, was part of everyday life, serving around 39 million people, whether it was to help finance a car, a big purchase or to make ends meet towards the end of the month.

He said some arrears and default rates, while still low, were on the rise, begging the question: “If we’re seeing this pattern now, what would happen if there was an economic downturn?” Speaking at the Credit Summit in London, Mr Davidson said: “Total credit lending to individuals is currently very close to its September 2008 peak.

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What QE has brought us. This is a global phenomenon revealed stronger and sooner in Britain because of, but not caused by, Brexit.

UK Economy In Grip Of Most Feeble Recovery On Modern Record – IFS (Ind.)

The UK has been living through the most feeble and protracted economic recovery in modern British history, leaving people on course to be almost £9,000 worse off on average by 2022-23 relative to the pre-crisis trend, according to calculations by the Institute for Fiscal Studies. In its analysis of the Government’s Spring Statement on Tuesday, which contained no new tax or spending measures, the think tank took a longer term perspective on the performance of the UK economy in the decade since the UK economy first sank into recession in 2008. It has long been noted that the UK’s recovery from that slump has been the slowest since the Great Depression in the 1930s.

But, analysing historic data on UK GDP per capita, the IFS showed on Wednesday that it has been weaker even than what followed the agonising slump of the early 1920s. In that era output per person fell by 10%, as global industrial overcapacity in the wake of the First World War ravaged once mighty UK firms, resulting in mass unemployment. The UK recession after the global financial crisis was shallower, with GDP per capita falling by around 7% as banks failed and global trade fell off a cliff. Yet a decade after the 1920-21 recession UK output per person was more than 10% higher than before the crisis. Today it is only around 3% higher than it was in 2008-09. “The history matters,” said Paul Johnson, the IFS’s director.

“It matters in part because we should never stop reminding ourselves just what an astonishing decade we have just lived through and continue to live through.” The UK has avoided the mass unemployment that scarred the 1920s and indeed employment has grown strongly since 2010, but the chronic weakness of UK GDP and productivity growth since 2008 is the reason why average real wages are still below where they were a decade ago – and are not set to return to their peak until well into the next decade. The IFS also produced calculations showing that if the pre-crisis trend of GDP per capita growth had continued national income per person would today be £5,900 higher this year. By 2022-23, on current official projections, the financial hit per person will grow to £8,600.

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Third world here we come.

More Than 600,000 Britons Sought Help From Debt Charity Last Year (G.)

More than 600,000 people in financial difficulties last year sought help from the debt charity StepChange, including disproportionate numbers of single parents and those in rental accommodation. The charity said 619,946 new clients contacted it for debt advice last year – 3.5% more than in 2016, and 22% more than four years earlier. There has been a notable increase in recent years in the number of young people seeking debt advice: about one in seven new clients was under 25, and nearly two-thirds were under 40. Most people (80%) contacting the charity were tenants, even though only a third of UK households rent. More than a fifth (21.5%) of new clients, though only 6% of UK households are single-parent families.

The average couple with children owed £16,834 last year, while single parents had unsecured debts of £10,033. Unemployment was the most common reason why people were in financial difficulty, cited by 18.7%, followed by injury or illness (16.4%) and lack of budgeting (14.3%). About two-fifths of people have fallen behind on at least one of their priority household bills when they contact the charity, typically on council tax. Borrowing on credit cards remains the most common debt, with more than two-thirds of new clients having accumulated credit card debts. Other borrowings included store cards, overdrafts, personal loans, doorstep and payday loans.

[..] Phil Andrew, the chief executive of StepChange, said: “It is both striking and shocking that last year about one in every 100 UK adults contacted StepChange alone for debt advice. “Our clients show that the debt problem is far from solved. With the prospect of higher interest rates ahead, it would be a mistake to take too much reassurance from the gradual improvement in the wider economy.”

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This is Brussels. Simple as that. The next crony case is already known in the person of Selmayr. More on that soon. There are a few decent people in Brussels, but they don’t have much time left.

European Commission Rebuked Over Ex-Chief Barroso’s Goldman Sachs Job (G.)

An EU watchdog has rebuked the European commission for failing to prevent potential lobbying by a former president who took a job at Goldman Sachs. In a stinging report, Emily O’Reilly, the European ombudsman who acts as the EU’s public administration watchdog, said the commission had committed “maladministration” by not taking any decision after an ethics inquiry into its former president, José Manuel Barroso. O’Reilly called on the commission to refer Barroso’s appointment to its internal ethics committee, while raising questions about the independence of that body. “Ex-commissioners have a right to post-office employment, but as former public servants they must also ensure that their actions do not undermine citizens’ trust in the EU,” said O’Reilly, Ireland’s former national ombudsman.

She said Barroso’s new post had “generated serious public disquiet”, which should have raised commission concerns about whether he had complied with the “duty of discretion” incumbent on all former officeholders under EU treaties. “Much of the recent negative sentiment around this issue could have been avoided if the commission had at the time taken a formal decision on Mr Barroso’s employment with Goldman Sachs. Such a decision could at least have required the former president to refrain from lobbying the commission on behalf of the bank,” she said.

[..] Barroso, a former Portuguese prime minister, led the commission for a decade until 2014. He took a job at Goldman Sachs in July 2016, after an 18-month cooling-off period during which ex-officials are required to notify the commission of any new jobs and are banned from lobbying. His decision to become a Brexit adviser at the bank triggered an avalanche of criticism, especially as Goldman Sachs had come under fire for its alleged role in the Greek debt crisis that dominated Barroso’s final years in Brussels. More than 150,000 people signed an EU staff petition calling for Barroso to lose his EU pension..

The commission has been set a deadline of 6 June 2018 to make a formal response to the ombudsman. Responding to the report, which followed a one-year investigation, the commission’s chief spokesman said: “The former president joined his current employer after the then applicable cooling-off period of 18 months. “The commission drew a political conclusion from the situation that we inherited by extending this cooling-off period for former presidents from 18 months to three years.”

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Abe had better leave while he can.

Japan PM Shinzo Abe’s Cronyism Scandal Worsens (G.)

A cronyism scandal engulfing the Japanese government has taken a dark turn, with reports that a finance official left a note before his suicide saying that he was forced to rewrite crucial records. The finance ministry admitted this week that it had altered 14 documents surrounding the sale of public land at an 85% discount to a nationalistic school operator with links to prime minister Shinzo Abe’s wife Akie. The revisions, made early last year, included removing references to Abe and the first lady before the records were provided to parliamentarians investigating suspicions of influence-peddling. An official from the local finance bureau that oversaw the transaction was found dead at his home in Kobe last week.

Now it has been revealed the man, aged in his 50s, left a detailed suicide note stating he was worried he might be forced to take all the blame. He said his superiors had told him to change the background section of the official documents surrounding the Osaka land sale because they were supposedly too specific, according to public broadcaster NHK. He reportedly made it clear that he did not act alone but in line with finance ministry instructions. His family described him as an honourable man who “hated to do anything unfair”. He had told relatives in August last year that he was “worn out both mentally and physically” and his “common sense has been destroyed”. “I hope everything will be revealed. I don’t want his death to be wasted,” said a family member…

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How to spell recovery.

Greece’s Jobless Rate Jumps To 21.2% In Fourth Quarter (K.)

Greece’s jobless rate rose by a full %age point to 21.2% in October-to-December from 20.2% in the third quarter, data from the country’s statistics service ELSTAT showed on Thursday. About 71.8% of Greece’s 1.006 million jobless are long-term unemployed, meaning they have been out of work for at least 12 months, the figures showed. Greece’s highest unemployment rate was recorded in the first quarter of 2014, when joblessness hit 27.8%. Athens has already published monthly unemployment figures through December, which differ from quarterly data because they are based on different samples and are seasonally adjusted. Quarterly figures are not seasonally adjusted. Greece’s economy grew for a fourth straight quarter in October-December, driven by stronger investment spending, but the pace was slower than in the previous quarter.

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That EU-Turkey refugee deal looks darker by the minute. Dirty politics.

EU Provides Financial Support For Turkey Amid Ethnic Cleansing (ANF)

The European Commission gave a green light to a second financial aid package for Turkey on the grounds of Syrian refugees. The 3 billion euros allocated for Turkey will be given in the scope of the controversial refugee deal. Several human rights organizations protested the renewed financial aid package for Turkey, arguing that it is not humanitarian as Turkey has openly used refugees as a means of blackmail against the European Union. Turkey had received another 3 billion euros of financial aid before. The European Commission defended that this second package will be granted to Turkey to provide convenience for the refugees.

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No, really, it’s an industry.

The Oxfam Scandal: There Is No Reward For Honest Charities (Crack)

Abuse thrives under two conditions: when victims are afraid to speak out, and when those in power do not listen. Oxfam have been condemned for not listening to demands that they do more to address sexual violence before the Haiti scandal hit the headlines. However, the net of blame needs to be cast wider than NGOs. Those at the top of the aid chain – donor governments – did not listen to warnings of wrongdoing. Donors do not have a good record of being proactive when presented with evidence of abuse. It has emerged that the Dutch Foreign Ministry was given an internal Oxfam report in 2012 detailing the use of prostitutes by staff in Haiti. No action appears to have been taken.

The Swedish International Development Cooperation Agency (SIDA), was told by one of its own officials in 2008 that Roland van Hauwermeiren, the former Oxfam employee at the centre of the Haiti allegations, left another NGO following an investigation into sexual misconduct. Rather than take action, SIDA awarded more than £500k to Oxfam in Chad, where Van Hauwermeiren was county director. In the UK, the Department for International Development (DFID) and the Charity Commission were told by Oxfam in 2011 that staff had been sacked for sexual misconduct, with assurances that no beneficiaries were involved. Priti Patel, former international development secretary, claims that she raised the issue of sexual violence with DFID officials, only for it to be “dismissed as only a problem with UN peacekeepers”.

My research into NGO regulation has led me to ask: do government donors create the impression that they will only fund organisations with glowing track records? NGOs that receive aid money are expected to complete detailed reports that assess measurable outcomes. I have interviewed several senior managers in leading NGOs who described how the pressure to demonstrate value for money drives a tick-box culture where all the incentives are to make the reports as positive as possible. Respondents felt there was very little tolerance for charities that make mistakes.

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There are still a few smart people left.

Bali Switches Off Internet Services For 24 Hours For New Year ‘Reflection’ (G.)

Internet services on Bali will go dark this Saturday, with providers switching off mobile services for 24 hours to mark the Indonesian island’s annual day of silence. Nyepi, or New Year according to the ancient Balinese calendar, is a sacred day of reflection on the Hindu-majority island. Even the international airport shuts down. This year authorities have called on telecommunications companies to unplug – a request Bali says firms have promised to honour. “It was agreed that internet on mobile phones will be cut. All operators have agreed,” Nyoman Sujaya, from the Bali communications ministry, told tirto.id. The plan, based on an appeal put forward by Balinese civil and religious groups, was announced following a meeting at the ministry in Jakarta.

This is the first time internet services will be shut down in Bali for Nyepi, after the same request was denied last year. However, wifi connection will still be available at hotels and for strategic services such as security, aviation, hospitals and disaster agencies. Phone and SMS services will be operational, but the Indonesian Internet Service Provider Association is reviewing whether wifi at private residences will be temporarily cut. Indonesia is one of the most connected nations on earth, with more than 132 million internet users. Balinese governor Made Pastika said it would not hurt to refrain from using the internet for one day. “If the internet is disconnected, people will not die,” he joked to reporters. “I will turn off my gadgets during Nyepi.”

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Mar 122018
 
 March 12, 2018  Posted by at 10:17 am Finance Tagged with: , , , , , , , , , , ,  


Lewis Wickes Hine Labourer on connector, Empire State Building, New York 1930-31

 

On The Bull Market’s Ninth Birthday (CNBC)
‘No Response’ Yet From North Korea On Trump Talks (BBC)
Kim Jong Un Wants a Peace Treaty From Trump (BBG)
China Banking Crisis Warning Signal Still Flashing – BIS (BBG)
Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)
Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)
Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)
Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)
London Property Prices Fall 15% (G.)
European Commissioner Tusk Double-Crossed Poland (GEFIRA)
Half Of US Arms Exports Go To The Middle East (G.)
Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)
America’s Troll Farm Media (CP)
Winston Churchill, Mass Murderer (WaPo)

 

 

John Rubino’s comment: “Emigrate while you still can..”

On The Bull Market’s Ninth Birthday (CNBC)

The bullish run in the Dow Jones industrial average — which celebrates its ninth birthday Friday — is the longest ever and the greatest percentage gain since World War II, according to Leuthold Group. The corresponding run by the S&P 500, notes LPL Financial, is that benchmark’s second-largest and second-longest bull market ever, with only the 1990s stock market run led by technology stocks in the way. Despite a more than 10% correction in equities last month following a burst of bullish activity, Leuthold’s Doug Ramsey doesn’t think the bull is done yet. “Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Ramsey, his firm’s chief investment officer.

“Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.” The Dow hit an all-time high of 26,616.71 on Jan. 26, the same day the S&P 500 clinched its own record of 2,872.87. The major indexes are off their record highs 6.4% and 4.6% respectively. This chart from Leuthold Group shows where the Dow bull market stacks up since 1900. It’s far and away the longest in modern financial times. In terms of percentage gains, it’s third behind two bull markets pre-WWII.

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I’d guess Kim didn’t expect the answer he got, as fast as he got it, and now isn’t quite sure what to say.

‘No Response’ Yet From North Korea On Trump Talks (BBC)

South Korea says it has not received a response from Pyongyang on a summit between North Korean leader Kim Jong-un and US President Donald Trump. In a surprise development, Mr Trump on Friday accepted North Korea’s invitation to direct talks. South Korean officials said Mr Kim was prepared to give up his nuclear weapons. Details on the planned talks remain vague, with no agreement yet on the location or agenda. Analysts are sceptical about what can be achieved through talks given the complexity of the issues involved. “We have not seen nor received an official response from the North Korean regime regarding the North Korea-US summit,” a spokesman for the South Korean Ministry of Unification said on Monday. “I feel they’re approaching this matter with caution and they need time to organise their stance.” South Korean officials who spoke to Trump are now on the way to China and Japan to brief the leaders of each country on the upcoming talks.

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He’s telling his people that’s what his father wanted. They also want to reunite with the south.

Kim Jong Un Wants a Peace Treaty From Trump (BBG)

Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime. Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided. Koh Yu-hwan, who teaches North Korean studies at Dongguk University in Seoul, said the regime has long sought a peace treaty to end the more than 60-year-old ceasefire between the two sides and help guarantee its safety.

“There were agreements between the U.S. and North Korea to open up discussion on a peace treaty, but they never materialized,” Koh said, saying the conditions were key. “The U.S. wants a peace treaty at the end of the denuclearization process, while for the North, it’s the precondition for its denuclearization.” Signing a peace treaty would require addressing issues regarding the U.S. military’s presence in South Korea and its transfer of wartime operational control to South Korea and United Nations forces in South Korea, Koh said.

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China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to BIS

China Banking Crisis Warning Signal Still Flashing – BIS (BBG)

China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements. Canada – whose economy grew last year at the fastest pace since 2011 – was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study. “The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday. The study offered some surprising results: for example, Italy wasn’t shown as being at risk, despite its struggles with a slow-growing economy and banks that are mired in bad debts.

While China was flagged, a key warning indicator known as the credit-to-gross domestic product “gap” showed an improvement, said the BIS, known as the central bank for central banks. This may suggest the government is making progress in its push to reduce financial-sector risk. The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming. In China, the gap fell to 16.7% in the third quarter of 2017, down from a peak of 28.9% in March 2016 and the lowest since 2012, the study showed.

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How does Xi tell his people he doesn’t have their backs? Oh well, he’s president for life.

Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)

The belief in an “implicit guarantee” from the Chinese government on debt is a big problem, said a finance professor on Monday. “I’m concerned with what a lot of people believe, [that] the government is going to take care of investment losses. Under that impression, they are going to take up lot of leverage because they believe they will be bailed out if something does not work out,” said Zhu Ning, a professor of finance at Tsinghua University in Beijing. China has been battling high debt levels for years, but debt-to-GDP ratio is still about 260%, according to the Bank of International Settlements. While that absolute number is not alarming in itself, it is eyebrow-raising for the speed in rising to such levels, particularly in the last five years, Zhu said.

Since China’s economy is far bigger than two decades ago, the country has the size and resilience to overcome issues in the financial system, but Beijing is concerned about systemic risks that may roil the world’s second-largest economy. The key to solving any potential fallout from the ballooning debt is to remove the perception that Beijing will help solve any problems from a debt blowup, said Zhu. “This is a mentality that has taken decades to form so the government would have to do something aggressive and persistent to gradually remove this sense of implicit guarantee,” Zhu said. The Chinese government has been coming down hard on reining in systemic risks, using strong-arm tactics such as the recent state takeover of Anbang Insurance, which was aggressively expanding internationally.

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There’s the shadow banks again.

Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)

Asia’s big developers are “more vulnerable” to shocks after their profitability waned from the boom years at the start of the decade, the Bank for International Settlements warned. The “sector’s deteriorating fundamentals give reason for concern,” said the Basel, Switzerland-based institution, which watches over global financial stability. Many firms’ returns on assets are below their costs of debt, the BIS said in a quarterly review, citing a study of developers in China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.

Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said. While easy money drove property booms worldwide after the global financial crisis, the BIS argues a tightening in the years ahead could force developers to sell off inventory – driving down prices – and lay off workers.

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“Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka..”

Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)

A spiralling cronyism scandal linked to the Japanese prime minister and his wife has reached fever pitch after the finance ministry admitted to tampering with records to remove references to the first lady. Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka. The finance ministry admitted on Monday that it had altered official documents surrounding the decision to provide an 85% discount on the appraised value of the land. One document originally quoted the educational group Moritomo Gakuen as saying that Abe’s wife Akie had recommended the primary school project “move forward because it is a good plot of land”. However, this was removed in a version submitted to lawmakers investigating the sale. Kyodo News reported that the submitted papers also omitted an article in which Akie described being “moved to tears by the school’s education policy”.

Moritomo Gakuen’s existing kindergarten attracted attention for requiring its young pupils to bow before portraits of the imperial family, sing the national anthem daily, and learn the 1890 imperial rescript on education, which emphasises sacrifice for country. Akie was set to serve as honorary principal for the new primary school, but stepped down in February last year when questions were raised over the land deal. The government has previously denied claims that the first lady gave the school operator an envelope containing 1m yen (£6,775) on behalf of the prime minister during a visit she made to the existing kindergarten. The controversy fuelled a steep decline in Abe’s popularity last year but heappeared to ride out the scandal and won a snap lower house election in October. However, the forgery revelations have intensified political pressure on Abe and his long-serving finance minister, Taro Aso.

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Excellent piece by Nomi, which has two topics: Gary Cohn and steel tariffs. The latter a bit much on short term effects, but good read.

Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)

[..] my former boss from my Goldman Sachs days—Gary Cohn—just resigned from his White House post as chief economic adviser to the Chaos Producer in Chief. This was ostensibly in protest against the president’s announcement about imposing steel and aluminum tariffs. The next day, Trump signed the order sealing that deal, citing his actions as a “matter of necessity for our security.” Along the way, he said there would be no exemptions to the tariffs, then said there would be—for Canada and Mexico. Trump glowed in the light of his new-found power grab over trade agreements, leaving himself room to decide which countries would be “in” and “out” with respect to these and other tariffs in the future. And that was the week that was in Trump World.

The timing of Cohn’s departure certainly put a wrench in his plans to convene executives dependent on steel and present their case against steel tariffs to Trump. Instead, Trump signed the tariffs order flanked by steel and aluminum workers supporting it. Speaking of steel, Cohn’s nerves were seemingly made of that metal. At Goldman, he was the man who regularly waded through deals without losing his cool (unlike Trump). On 9/11, I witnessed him directing traders to keep trading oil as shreds of debris and billows of smoke engulfed the windows of the Goldman trading floor, only a few blocks away from the World Trade Center. He became president (or number two) at Goldman, continually handling the less “cool” behavior of chairman and CEO Lloyd Blankfein, who remained above him in the pecking order for decades.

Cohn commanded daily activities at Goldman that led to the firm’s creation of shady financial instruments that were later at the core of the financial crisis. Under Cohn, Goldman was bailed out by U.S. taxpayers. The firm morphed, for government subsidy purposes, into a bank holding company, though it handled scant deposits from regular people. It did this to retain access to Federal Reserve support, as it has done, over the past decade. Cohn was also at Goldman when it reached a $5 billion settlement with the Department of Justice over its consistent misconduct regarding mortgage-related securities from 2005 to 2007. That type of conflict-meets-crisis readied him for his government service. When Cohn came up against Trump, the president’s flavor-of-the-minute trade policy hawk, Peter Navarro, met “Globalist Gary” head on. Then Cohn’s Trump administration career was over.

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Just peeping over the edge for now.

London Property Prices Fall 15% (G.)

House prices in parts of London that were once at the epicentre of the UK property boom have fallen as much as 15% over the past year in fresh evidence of the impact of the EU referendum. Figures from Your Move, one of the UK’s biggest estate agency chains, reveal that the average home in Wandsworth – which includes much of Clapham, Balham and Putney – fell by more than £100,000 in value over the last 12 months. But property prices have surged in the north-west of England, with Blackburn recording the highest growth rates in the UK. Homes in the London borough of Wandsworth were fetching an average of £805,000 in January 2017 but this has now fallen to £685,000.

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Selling out his country and Putin bashing. That’s Tusk. That’s how he got his EU job.

European Commissioner Tusk Double-Crossed Poland (GEFIRA)

The current President of the EU Council has a good reputation in the EU circles, but not in Poland: he had to flee from his home country to Brussels, completely compromised. After all, his government was a catastrophe: mass emigration of young Poles, tampering with the coffers of future pensioners, corruption and benefit scandals, the Amber Gold affair, the all-pervasive nepotism in his Civic Platform (PO) party, numerous sins of omission crowned by Nord Stream. Young unemployed people can light the torch of a revolution. If you want to secure your position in politics, you leave salaries low and open the borders. The discontented young unemployed emigrate and only those who have less motivation to take to the streets remain. In 2005 Donald Tusk made this trick, this intervention on his nation. He threw Poland into the arms of the EU: since then the population has fallen significantly due to the emigration of many young Poles.

Nigel Farage aptly commented on this when he turned to Tusk in the European Parliament: “Your debate is about emigration, and time and again you’ve promised the Polish voters that young poles would return to Poland, and at the same time Mr Cameron has promised the British people that fewer Poles would come to us. Well, it turns out that you’ve both been wrong and your country has been depopulated by 2 million people since you joined the European Union and the reason is obvious: it’s money, isn’t it? And you yourself prove the point. You are the newest Polish emigre and you’ve gone from a salary of 6,000 euros a year to a salary of 30,000 euros a year. So congratulations! You’ve hit the EU jackpot!”

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A picture of the world’s sickest people. Many of them are in your governments.

Half Of US Arms Exports Go To The Middle East (G.)

Nearly half of US arms exports over the past five years have gone to the war-stricken Middle East, with Saudi Arabia consolidating its place as the world’s second biggest importer, a report has shown. The Stockholm International Peace Research Institute (Sipri) said on Monday that global transfer of major weapons systems between 2013 and 2017 rose by 10% compared with the five-year period before that, in a continuation of an upward trend that began two decades ago. The US, which is the world’s biggest exporter, increased its sales between those two periods by 25%. It supplied arms to as many as 98 states worldwide, accounting for more than a third of global exports. Russia, the world’s second biggest exporter, saw a decrease of 7.1% in its overall volume of arms exports; US exports were 58% higher than those of Russia. France, Germany and China were also among the top five exporters. The UK is the sixth biggest weapons exporter.

“Based on deals signed during the Obama administration, US arms deliveries in 2013–17 reached their highest level since the late 1990s,” said Dr Aude Fleurant, the director of the Sipri’s arms and military expenditure programme. “These deals and further major contracts signed in 2017 will ensure that the USA remains the largest arms exporter in the coming years.” The Middle East, a region where in the past five years most countries have been involved in conflict, accounted for 32% of global imports of weapons. Arms imports to the region doubled between 2013 and 2017 and in the five-year period before that. The US, the UK, and France were the main supplier of arms to the region, while Saudi Arabia, Egypt and the UAE were the main recipient countries.

The UK, which rolled out a red carpet for the Saudi crown prince on his visit to London last week, exported nearly half of its arms to the Saudi Arabia, which has increased its imports by 225%. Sipri’s report noted that Saudi Arabia uses its imported weapons in large-scale combat operations, particularly in Yemen. The Saudi-led military intervention in Yemen, which has cost hundreds of civilian lives, was launched in 2015, aiming to counter the advances of Iran-backed Houthi rebels controlling the capital, Sana’a. Saudi Arabia’s shopping list included 78 combat aircraft, 72 combat helicopters and 328 tanks. “Widespread violent conflict in the Middle East and concerns about human rights have led to political debate in western Europe and North America about restricting arms sales,” said Pieter Wezeman, senior researcher at Sipri. Yet the USA and European states remain the main arms exporters to the region and supplied over 98% of weapons imported by Saudi Arabia.”

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How do you regulate global forces? That are part of secret intelligence services?

Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)

Sir Tim Berners-Lee, inventor of the world wide web, has called for large technology firms to be regulated to prevent the web from being “weaponised at scale”. “In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data,” Berners-Lee wrote in an open letter marking the 29th anniversary of his invention. These problems have proliferated because of the concentration of power in the hands of a few platforms – including Facebook, Google, and Twitter – which “control which ideas and opinions are seen and shared”. “What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms,” said the 62-year-old British computer scientist.

These online gatekeepers can lock in their power by acquiring smaller rivals, buying up new innovations and hiring the industry’s top talent, making it harder for others to compete, he said. Google now accounts for about 87% of online searches worldwide. Facebook has more than 2.2 billion monthly active users – more than 20 times more than MySpace at its peak. Together, the two companies (including their subsidiaries Instagram and YouTube) slurp up more than 60% of digital advertising spend worldwide. Although the companies are aware of the problems and have made efforts to fix them – developing systems to tackle fake news, bots and influence operations – they have been built to “maximise profit more than maximise social good”. “A legal or regulatory framework that accounts for social objectives may help ease those tensions,” he said.

Aligning the incentives of the technology sector with those of users and society at large, he argued, will require consulting a diverse group of people from business, government, civil society, academia and the arts. Berners-Lee warned of “two myths” that “limit our collective imagination” when looking for solutions to the problems facing the web: “The myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points we need to be a little more creative,” he said. “I want the web to reflect our hopes and fulfil our dreams, rather than magnify our fears and deepen our divisions,” he said.

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Too many people still believe far too much of what they read and watch.

America’s Troll Farm Media (CP)

Despite all the smoke and mirrors, most Americans seem to see where the stenographers of corporate capitalism are taking us. A recent Gallup poll found that while 84% of Americans see media as “critical” or “very important” to democracy, only 28% see the corporatist mainstream news media (MSM) as actually supporting democracy. They’re right on both counts of course. The quality of a democracy is only as good as the information people have to make informed judgements about public policy and politicians. Even as the mainstream news media continue to lose street cred, they persist in a rumor-saturated full court press against the “Trump-Putin presidency,” which only further exposes their lack of professionalism and increasing vulgarity.

MSM management and their boardroom bosses have long understood that as long as they spice up their “nothing burger” news, ratings and advertising rates will keep them in business and please their commercial and government clients. Tabloid journalism, which can describe most American mainstream media these days, even when wrapped up as “all the news that’s fit to print,” is in constant search of sensation, scandal, gossip, and profit – and only occasionally in public-oriented investigative integrity. [..] 65% of Americans consider the so-called “free press” biased, obsessed with scandal, and full of “fake news” and therefore cannot be trusted. [..] trust in American institutions in general, that is, the government, business, NGOs, and the MSM, is going through the worst crisis in recorded history, according to the marketing firm Edelman in 2018.

[..] On January 27, 2018, the Washington Post editorial board issued this statement: “A foreign power interfered in the 2016 presidential election. U.S. law enforcement is trying to get to the bottom of that story. Congress should be doing everything possible to make sure the investigation can take place.” Obviously referring to Russia, the Post’s declaration, as the late investigative journalist Robert Parry and many other independent and respected writers have pointed out, was and remains without a shred of evidence. It’s WMD time all over again, only this time the propaganda is being trumpeted mainly by the Democrats. It would better serve the cause of democracy to investigate the Post for its covert coalition and collusion with the deep state and the Clinton (right) wing of the Democratic Party. The Post and the rest of their pack have constructed a wicked Russia foil in order to undermine Moscow’s presumed ally Trump and boost bigger Pentagon budgets.

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Britain is not strong on history. Surprising that this comes from the WaPo.

Winston Churchill, Mass Murderer (WaPo)

“History,” Winston Churchill said, “will be kind to me, for I intend to write it myself.” He needn’t have bothered. He was one of the great mass murderers of the 20th century, yet is the only one, unlike Hitler and Stalin, to have escaped historical odium in the West. He has been crowned with a Nobel Prize (for literature, no less), and now, an actor portraying him (Gary Oldman) has been awarded an Oscar. As Hollywood confirms, Churchill’s reputation (as what Harold Evans has called “the British Lionheart on the ramparts of civilization”) rests almost entirely on his stirring rhetoric and his talent for a fine phrase during World War II. “We shall not flag nor fail. We shall go on to the end. … We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets. … We shall never surrender.” (The revisionist British historian John Charmley dismissed this as “sublime nonsense.”)

Words, in the end, are all that Churchill admirers can point to. His actions are another matter altogether. During World War II, Churchill declared himself in favor of “terror bombing.” He wrote that he wanted “absolutely devastating, exterminating attacks by very heavy bombers.” Horrors such as the firebombing of Dresden were the result. In the fight for Irish independence, Churchill, in his capacity as secretary of state for war and air, was one of the few British officials in favor of bombing Irish protesters, suggesting in 1920 that airplanes should use “machine-gun fire or bombs” to scatter them. Dealing with unrest in Mesopotamia in 1921, as secretary of state for the colonies, Churchill acted as a war criminal: “I am strongly in favour of using poisoned gas against the uncivilised tribes; it would spread a lively terror.” He ordered large-scale bombing of Mesopotamia, with an entire village wiped out in 45 minutes.

In Afghanistan, Churchill declared that the Pashtuns “needed to recognise the superiority of [the British] race” and that “all who resist will be killed without quarter.” He wrote: “We proceeded systematically, village by village, and we destroyed the houses, filled up the wells, blew down the towers, cut down the great shady trees, burned the crops and broke the reservoirs in punitive devastation. … Every tribesman caught was speared or cut down at once.” In Kenya, Churchill either directed or was complicit in policies involving the forced relocation of local people from the fertile highlands to make way for white colonial settlers and the forcing of more than 150,000 people into concentration camps. Rape, castration, lit cigarettes on tender spots, and electric shocks were all used by the British authorities to torture Kenyans under Churchill’s rule.

But the principal victims of Winston Churchill were the Indians — “a beastly people with a beastly religion,” as he charmingly called them. He wanted to use chemical weapons in India but was shot down by his cabinet colleagues, whom he criticized for their “squeamishness,” declaring that “the objections of the India Office to the use of gas against natives are unreasonable.” [..] Thanks to Churchill, some 4 million Bengalis starved to death in a 1943 famine. Churchill ordered the diversion of food from starving Indian civilians to well-supplied British soldiers and even to top up European stockpiles in Greece and elsewhere. When reminded of the suffering of his Indian victims, his response was that the famine was their own fault, he said, for “breeding like rabbits.”

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Jul 282017
 
 July 28, 2017  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , , ,  


Gordon Burt Bond Street, Wellington, New Zealand c1957

 

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)
Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)
US Housing Bubble 2.0 (Mark Hanson)
Is This The Bubble? (Lance Roberts)
Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)
Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)
Shell’s Profits Treble As Cost Cuts Take Effect (PA)
Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)
US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)
The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)
France Plans Asylum ‘Hotspots’ In Libya (BBC)
Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)
EU Announces New Emergency Support For Greek Refugee Crisis (AP)

 

 

Three things:

1) Boy, was I right to say US politics should be observed through the eyes of Shakespeare.

2) Playing with people’s health care, let alone for petty political reasons, is not forgiveable.

3) What a bunch of has-beens these people are. Limit their terms, close the revolving doors, and let the future be decided by people young enough to actually have a future. Oh, and get money out of politics.

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)

The Senate blocked the latest Republican attempt to repeal Obamacare in a dramatic floor vote early Friday morning, yet again stalling — for now — the key campaign goal that eludes the GOP six months into the Trump administration. Three GOP defections — Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John McCain of Arizona — sank the measure in a 49-51 vote. McCain, who recently returned to the Senate after getting diagnosed with brain cancer, cast his “no” vote to audible gasps on the chamber’s floor, according to reporters there. Senate Republicans released the plan late Thursday just hours before voting on an amendment to take up the bill. The GOP could only afford to lose two votes on the proposal, which many senators suggested they would not even want to see become law.

The measure came after separate pushes to immediately replace the Affordable Care Act or repeal it with a two-year transition period failed amid GOP divisions. Several Republican senators slammed the plan and appeared to not even want it to become law. It marks another blow to the sprawling agenda that Republicans hoped to accomplish when President Donald Trump won the White House and the GOP held both chambers of Congress in November. After the vote, a visibly frustrated Senate Majority Leader Mitch McConnell called it “clearly a disappointing moment.” “So yes, this is a disappointment, a disappointment indeed … I regret that our efforts were simply not enough this time,” McConnell said.

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But this they do agree on. More reasons to get rid of the old order in Washington.

Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)

Vladimir Putin has accused US lawmakers of “insolence”, and promised Russia will retaliate if the latest round of US sanctions against Russia are signed into law. The House of Representatives voted by 419 votes to three on Tuesday to pass the new sanctions bill, which targets Russia as well as North Korea and Iran. The US legislation was passed overwhelmingly by the Senate on Thursday, and will now go to Donald Trump for his signature. Trump, who enjoyed two warm conversations with Putin at the G20 summit earlier this month, is likely to face a major backlash if he attempts to veto the legislation, with his administration already embroiled in a Russia scandal. “We are behaving in a very restrained and patient way, but at some moment we will need to respond,” said Putin at a press conference with his Finnish counterpart, Sauli Niinistö.

“It’s impossible to endlessly tolerate this kind of insolence towards our country,” Putin said, referring to the sanctions. “This practice is unacceptable – it destroys international relations and international law.” Putin was vague on exactly how Russia might respond. The newspaper Kommersant quoted two unnamed sources saying a range of potential responses was under consideration in Moscow, including expelling US diplomats, seizing diplomatic properties, increasing restrictions on US companies working in Russia and halting enriched uranium shipments to US power plants. [..] Putin and other Russian officials have repeatedly denied any meddling in the US election, while US intelligence agencies say they have overwhelming evidence of a coordinated Russian campaign. Putin on Thursday described the allegations as “hysteria”, and said: “It’s a great pity that Russian-US relations are being sacrificed to resolve questions of domestic politics.”

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And you thought the US housing bubble was over?

US Housing Bubble 2.0 (Mark Hanson)

The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: “so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?” and sarcastically points out that “if this isn’t a house price bubble, I would hate to see one.” His bottom line: “If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.”

[..] Income required to buy the avg priced builder house is at historical highs and has completely diverged from the multi-decade trend line. Historically low growth & rebound relative to resales suggest “lack of supply” meme in the Existing Sales market is over-stated.

“Peak builder is here.”
1) New Home Sales “up to” 1995 levels after $15 TRILLION in debt and Fed liquidity aimed largely at the sector.
2) Builder pricing power largely flat for 2-years.
3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0. Reversion to this mean will occur…either thru a sharp rise in income; new exotic loan programs, which make payment less; or house prices dropping.

4) Last time builders were this euphoric was the peak of the biggest credit bubble in history.

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Rinse, forget and repeat.

Is This The Bubble? (Lance Roberts)

Every major market peak, and subsequent devastating mean reverting correction, has ever been the result of the exact ingredients seen previously. Only the ignorance of its existence has been a common theme. The reason that investors ALWAYS fail to recognize the major turning points in the markets is because they allow emotional “greed” to keep them looking backward rather than forward. Of course, the media foster’s much of this “willful” blindness by dismissing, and chastising, opposing views generally until it is too late for their acknowledgement to be of any real use. The next chart shows every major bubble and bust in the U.S. financial markets since 1871 (Source: Robert Shiller)

At the peak of each one of these markets, there was no one claiming that a crash was imminent. It was always the contrary with market pundits waging war against those nagging naysayers of the bullish mantra that “stocks have reached a permanently high plateau” or “this is a new secular bull market.” Yet, in the end, it was something that was unexpected, unknown or simply dismissed that yanked the proverbial rug from beneath investors. What will spark the next mean reverting event? No one knows for sure, but the catalysts are present from: • Excess leverage (Margin debt at new record levels) •IPO’s of negligible companies (Blue Apron, Snap Chat) • Companies using cheap debt to complete stock buybacks and pay dividends, and; • High levels of investor complacency.

Either individually, or in combination, these issues are all inert. Much like pouring gasoline on a pile of wood, the fire will not start without a proper catalyst. What we do know is that an event WILL occur, it is only a function of “when.” The discussion of why “this time is not like the last time” is largely irrelevant. Whatever gains that investors garner in the between now and the next correction by chasing the “bullish thesis” will be wiped away in a swift and brutal downdraft.

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Abe should just go. But before he does, he’ll throw Kuroda under the bus first, if he has the time.

Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)

Embattled Japanese Defence Minister Tomomi Inada on Friday said she was resigning, after a series of gaffes, missteps and a cover-up at her ministry that have contributed to a sharp plunge in public support for Prime Minister Shinzo Abe. Inada, 58, an Abe protege who shares his conservative views and had been suggested as a possible future premier, had already expected to be replaced in a likely cabinet reshuffle next week that Abe hopes will help rebuild his ratings. Support for the prime minister has sunk below 30% in some polls, due to scandals over suspected cronyism and a view among many voters that he and his aides took them for granted.

Abe apologized “to the people from my heart”, in comments to reporters carried live on national television after Inada announced her resignation. He said Foreign Minister Fumio Kishida would add the defense portfolio to his duties, to eliminate any gap at a time when Japan faces tough security challenges, such as from a volatile North Korea. “I want to make every effort to maintain a high degree of vigilance and protect the security of the people,” Abe said. Abe had drawn fire from both ruling and opposition party lawmakers for retaining Inada despite her perceived incompetence. “He should have thrown Inada under the bus long ago … doing so on the eve of a cabinet reshuffle only looks like desperation,” said Jeffrey Kingston, director of Asian Studies at Temple University Japan.

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Taking it out before the real big scandals come up?

Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)

A global borrowing benchmark that became synonymous with rigged financial markets, and cost banks some $9 billion in fines, is going away. Andrew Bailey, the head of Britain’s Financial Conduct Authority, said in a speech today that the regulator will phase out the indicator, Libor, by the end of 2021. Bailey said the reason the London interbank offered rate is being scrapped is because the market underpinning the benchmark—unsecured bank lending—has dried up. For one particular Libor benchmark—there are many rates for various durations and currencies—there were only 15 transactions last year, he said. Such benchmarks have long been problematic and susceptible to manipulation. Libor, for example, is based on an estimate of what supposed experts at banks think a borrowing rate would be.

Bloomberg describes the process like this: “The benchmark is the average rate a group of 20 banks estimate they’d be able to borrow funds from each other in five different currencies across seven time periods, submitted by a panel of lenders every morning. Its administration was overhauled in the wake of the scandal, with Intercontinental Exchange Inc. taking over from the then-named British Bankers’ Association.” Before the financial crisis, banks submitted daily estimates of borrowing rates to the BBA, which then averaged them to calculate that day’s Libor rate. Via allegedly colluding, the banks submitting rates could nudge the average up or down, depending on what was needed to increase a profit or reduce a loss in their portfolios.

Libor is of global importance because it’s used to help determine borrowing costs for more than $300 trillion in securities, for things like student loans and mortgages. But as a trader once said in a transcript uncovered by regulators, it’s “just amazing how libor fixing can make you that much money.” The Libor scandal was also part of an era in which recorded electronic communications—chat messages—became evidence and got a lot of people in a lot of trouble. Similar market manipulation was discovered in things like foreign-currency exchange rates and commodity prices. And now Libor is being scrapped. Banks didn’t really want to participate in the rate-setting process anymore anyway, Bailey said, given the market had shrank by so much. (Their recent history of being fined billions for their role in daily rate submissions probably didn’t help.) Some new indicator will have to be agreed on.

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When I saw the headline, I thought they must either have been real inefficient before, or they’re selling teh kitchen sink and not investing a penny. And whaddaya know?

Shell’s Profits Treble As Cost Cuts Take Effect (PA)

Royal Dutch Shell has reported a large rise in second quarter profits after the energy giant was boosted by higher oil and gas prices. The firm said adjusted earnings rose from £800m to £2.7bn, an increase of 245 per cent, as chief executive Ben van Beurden said he is making progress on “reshaping the company”. He said: “Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. “The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments.

“I am confident that we are on track to deliver a world-class investment to our shareholders.” The figures were flattered by a disastrous second quarter in 2016, when it was stung by dilapidated crude prices and costs linked to its takeover of BG Group. This time last year Brent Crude was trading at round 45 US dollars a barrel compared to circa 50 US dollars today. Shell is also embarking on an ambitious cost-cutting drive and a £24.6bn divestment initiative. To this end, the oil major has sold off more than £16bn of assets since the BG takeover. Shell this year announced it will sell off a package of North Sea assets for up to £3bn to smaller rival Chrysaor, and recently agreed to sell its stake in Irish gas project Corrib in a deal worth up to £956 million.

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Everybody does it.

Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)

Caution lights are flashing for the oil industry. Facing lower-than-expected commodity prices, drillers from ConocoPhillips to Hess to Statoil have slashed their capital spending plans in recent days, as companies lay out their plans to cope with oil prices stuck below $50 a barrel. The budget cuts won’t necessarily mean less oil or natural gas on the market, with some of the companies saying they can now do more with less and expect to produce just as much oil and gas in 2017. But they speak to an investor community that’s grown anxious as a global rally in crude prices has stalled out this year.

“The expectation was that oil would be at least above $50 by this time,” said Brian Youngberg, an energy analyst with Edward Jones & Co. in St. Louis. “Right now, the market wants you to spend within your cash flow, no exceptions allowed. It’s just a response to that.” The “modest tweaks” in this week’s second-quarter earnings reports will probably continue in the coming days, Youngberg said, as drillers focused on U.S. shale plays take center stage. “Companies are going to be cautious,” he said. “No one wants to be the outlier.”

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The Mt. Gox link is interesting. Will BTC-e also close?

US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)

A US jury indicted a Russian man on Wednesday as the operator of a digital currency exchange he allegedly used to launder more than $4 billion for people involved in crimes ranging from computer hacking to drug trafficking. Alexander Vinnik was arrested in a small beachside village in northern Greece on Tuesday, according to local authorities, following an investigation led by the US Justice Department along with several other federal agencies and task forces. US officials described Vinnik in a Justice Department statement as the operator of BTC-e, an exchange used to trade the digital currency bitcoin since 2011.

They alleged Vinnik and his firm “received” more than $4 billion in bitcoin and did substantial business in the United States without following appropriate protocols to protect against money laundering and other crimes. US authorities also linked him to the failure of Mt. Gox, a Japan-based bitcoin exchange that collapsed in 2014 after being hacked. Vinnik “obtained” funds from the hack of Mt. Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.

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Robert Fisk is part of our conscience.

The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)

I don’t like armies. They are dangerous institutions. Soldiers are not heroes just because they fight. And I’ve grown tired of saying that those who live by the sword sometimes die by the sword. But in an age when the Americans and the Iraqis and Isis can account for 40,000 civilian deaths in Mosul in the past twelve months, compared to 50,000 civilians slaughtered by the Mongols in 13th-century Aleppo – a human rights improvement of US aircrews, Iraqi brutality and Isis sadism over the Mongol hordes by a mere 10,000 souls – death sometimes seems to have lost its meaning. Unless you know the victims or their families. I have a friend whose mother was murdered in the Damascus suburb of Harasta near the start of the Syrian war, another whose brother-in-law was kidnapped east of the city and never seen again.

I met a little girl whose mother and small brother were shot down by al-Nusrah killers in the town of Jisr al-Shughour, and a Lebanese who believes his nephew was hanged in a Syrian jail. And then, this month, in the eastern Syrian desert, near the dust-swept shack village of al-Arak, a Syrian soldier I’d come to know was killed by Isis. He was, of course, a soldier in the army of the Syrian regime. He was a general in an army constantly accused of war crimes by the same nation – the United States – whose air strikes contributed so generously to the obscene massacre in Mosul. But General Fouad Khadour was a professional soldier and he was defending the oil fields of eastern Syria – the crown jewels of Syria’s economy, which was why Isis tried to occupy them all and why they killed Khadour – and the war in the desert is not a dirty war like so many of the conflicts perpetrated in Syria.

When I met him west of Palmyra, Isis had just conquered the ancient Roman city and publicly chopped or blown off the heads of the civilians and soldiers and civil servants who did not manage to flee. Just a year before, the general’s son, also a soldier, had been shot dead in battle in Homs. Fouad Khadour merely nodded when I mentioned this. He wanted to talk about the war in the hot, brown mountains south of Palmyra, where he was teaching his soldiers to fight back against the Isis suicide attackers, to defend their isolated positions around the oil pumping and electricity transmission station where he was based, and to save the T4 pipelines on the road to Homs. The Americans, who proclaimed Isis to be an “apocalyptic” force, sneered that the Syrian army did not fight Isis. But Khadour and his men were standing up to Isis before the Americans ever fired a missile, and learning the only lesson that soldiers can understand when confronted by a horrific enemy: not to be afraid.

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The idea is not exactly new. But Macron wants to go it alone.

France Plans Asylum ‘Hotspots’ In Libya (BBC)

France says it plans to set up “hotspots” in Libya to process asylum seekers, in a bid to stem the flow of migrants to Europe. President Emmanuel Macron said the move would stop people not eligible for asylum from “taking crazy risks”. The centres would be ready “this summer”. He said that between 800,000 and a million people were currently in camps in Libya hoping to get into Europe. But many of them did not have a right to asylum, Mr Macron said. The French leader said that migrants were destabilising Libya and Europe by fuelling people-smuggling, which in turn funded terrorism. “The idea is to create hotspots to avoid people taking crazy risks when they are not all eligible for asylum. We’ll go to them,” he said on Thursday at a naturalisation ceremony in the central city of Orléans.

On Tuesday, Mr Macron mediated talks in Paris between Libya’s opposing governments. UN-backed Prime Minister Fayez al-Sarraj and Khalifa Haftar, the rival military commander who controls the east, committed to a conditional ceasefire after the meeting. They are aiming to end the conflict which has engulfed the country since Col Muammar Gaddafi was ousted in 2011. Mr Macron and other EU leaders had been hoping for some sort of agreement, as Libya has become a key route for migrants making their way to Europe. The French leader said he hoped the deal would be a blow to the human traffickers who work in the region.

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This is not over. Macron wants to show he’s a tough guy, but pushing aside Italy is bad theater.

Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)

Macron’s Libya diplomacy is just one irritant in increasingly tension-filled Franco-Italian relations. In May, after meeting Gentiloni in Paris, Macron announced: “We have not listened enough to Italy’s cry for help on the migration crisis.” But Macron’s position since hasn’t changed much from Francois Hollande, his predecessor in the Elysee Palace, to the Italian government’s rising anger. “Italian pleas for more burden-sharing by other EU countries have, so far, fallen on deaf ears. Italy’s refugee centers and shelters have reached their capacity of 200,000. So far this year nearly 100,000 asylum seekers have crossed the Mediterranean from Libya — a 17% increase over the same period last year — and with months more of good weather, another 100,000 asylum seekers are likely to land at Italian ports.

This month, Italy’s deputy foreign minister, Mario Giro, complained, “it doesn’t seem like France wants to help us concretely.” French police are blocking hundreds of migrants on the Italian side of the border at Ventimiglia from entering France; the French government is refusing to allow asylum seekers rescued in the Mediterranean from landing at French ports and, like nearly every other EU country, France hasn’t come anywhere near meeting its quota of migrants as agreed to under a 2015 EU refugee relocation scheme. Macron this month talked of distinguishing between war refugees and economic migrants, indicating that France won’t admit any asylum-seekers who are just escaping poverty and hunger. But that doesn’t help Italy as it tries to cope with a mounting influx of mainly economic migrants, who, under EU rule, it has little alternative but to admit, at least for processing and to save lives.

Paris has also scorned an Italian proposal for an EU military mission to monitor and interdict migrants along Libya’s southern border. Italians question why a large French military mission in Niger isn’t being used to disrupt migrant trafficking when it is right by the main route being used by smugglers and would-be asylum seekers traveling north. Last month, the European Parliament’s most senior left-wing politician, Italian Gianni Pittella, launched a scathing attack on Macron after French police frogmarched back into Italy more than 100 migrants who’d crossed into France. “The situation is shameful. Italy and the Italians are being abandoned, they’re being expected to deal with all these migrants on their own with no support,” he said.

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I’ve said it before: help for refugees in fine, even though its distribution through NGOs is a colossal mess. But renting homes for refugees, and supplying them with money to live, is a huge blow in the face of the Greeks devastated by EU-induced austerity, who get nothing.

EU Announces New Emergency Support For Greek Refugee Crisis (AP)

The European Commission announced a new emergency support package for Greece Thursday to help it deal with the refugee crisis that has seen tens of thousands of migrants and refugees stuck in the country. The €209 million ($243 million) package includes a €151 million program to help refugee families rent accommodation in Greek cities and provide them with money in an effort to help them move out of refugee camps, EU officials said during a visit to Athens. The Commission said the new funding more than doubles the emergency support extended to Greece for the refugee crisis, bringing it to a total of €401 million.

The rental project is in cooperation with the UN High Commissioner for Refugees and will provide 22,000 rental places with the aim of increasing the number of refugees living in rented apartments to 30,000 by the end of the year, including 2,000 places on Greek islands. A parallel scheme worth €57.6 million will provide refugees and asylum seekers with monthly cash stipends distributed through cash-cards for expenses such as transport, food and medication. “The projects launched today are one part of our wider support to the country but also to those in need of our protection,” said Migration Commissioner Dimitris Avramopoulos. “Around €1.3 billion of EU funds are at the disposal of Greece for the management of the migration crisis.”

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Jul 252017
 
 July 25, 2017  Posted by at 8:34 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle July 25 2017


Vincent van Gogh Sunflowers 1887

 

The Next Financial Crisis Is Parked Out Front (G.)
Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)
How Big Of A Deleveraging Are We Talking About? (Roberts)
IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)
Bloated London Property Prices Fuel Exodus (G.)
The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)
Australian Housing Market At Risk Of Crash – UBS Research (CNBC)
It’s Time To Rethink Monetary Policy (Rochon)
Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)
Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)
EU Divided On How To Answer New US Sanctions Against Russia (R.)
US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)
Tsipras and Varoufakis Go Public With Spat (K.)
Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)
Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)
Greek Spending Cuts Prettify Budget Data (K.)

 

 

Can’t let a headline like that go to waste. More on the topic in the 2nd article.

The Next Financial Crisis Is Parked Out Front (G.)

Good morning – Warren Murray here with your Tuesday briefing. Britain’s rising level of personal debt has prompted a warning from the Bank of England about dire consequences for lenders and the economy. There are “classic signs” that the risks involved in car finance, credit cards and personal loans are being underestimated as financial institutions make hay while the sun shines, says Alex Brazier, the Bank’s director for financial stability. The economy defied expectations when it grew strongly in the six months after the EU referendum. But that was partly fuelled by consumers racking up their credit cards and loans, as lenders offered easier terms and longer interest-free deals. Much higher levels of borrowing compared with income are now being allowed, at a time when household incomes have only marginally risen.

As the anniversary of the global financial meltdown approaches, Brazier has suggested current low rates of default on personal credit may have again caused banks to become blinkered to the potential for disaster. Back in 2007, “banks – and their regulators – were blind to the basic fact that more debt meant greater risk of loss”. “Lenders have not entered, but they may be dicing with, the spiral of complacency. The spiral continues, and borrowers rack up more and more debt. “[In 2007] complacency gave way to crisis. Companies and households were unable to refinance their debts. The result was economic disaster.”

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The BoE creates huge bubbles, and afterwards starts warning about them. Typical central bank behavior.

Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)

The Bank of England has told banks, credit card companies and car loan providers that they risk fresh action against reckless lending as it warned of a looming “spiral of complacency” about mounting consumer debt. In its toughest warning yet about the possibility of a rerun of the financial crisis that devastated the economy 10 years ago, Threadneedle Street admitted it was alarmed about the increase in the amount of money being borrowed on easy terms over the past year. “Household debt – like most things that are good in moderation – can be dangerous in excess”, Alex Brazier, the Bank director for financial stability, said in a speech in Liverpool. “Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.”

Brazier’s said there were “classic signs” of lenders thinking the risks were lower following a prolonged period of good economic performance and low losses on loans. The first signs of the Bank’s anxiety about consumer debt came from its governor, Mark Carney, a month ago, but Brazier’s comments marked a ratcheting up of Threadneedle Street’s rhetoric. “Lenders have been the lucky beneficiaries of the benign way the economy has evolved. In expanding the supply of credit, they may be placing undue weight on the recent performance of credit cards and loans in benign conditions,” Brazier said. The willingness of consumers to take on more debt to fund their spending helped the economy grow strongly in the six months after the EU referendum, a period when the Bank expected growth to fall sharply.

Over the past year, Brazier said, household incomes had grown by just 1.5% but outstanding car loans, credit card balances and personal loans had risen by 10%. He added that terms and conditions on credit cards and personal loans had become easier. The average advertised length of 0% credit card balance transfers had doubled to close to 30 months, while advertised interest rates on £10,000 personal loans had fallen from 8% to around 3.8%, even though official interest rates had barely changed.

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More great work by Lance. if these graphs and numbers don’t scare you, look again.

How Big Of A Deleveraging Are We Talking About? (Roberts)

Debt, if used for productive investments, can be a solution to stimulating economic growth in the short-term. However, in the U.S., debt has been squandered on increases in social welfare programs and debt service which has an effective negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments. The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

It now requires nearly $3.00 of debt to create $1 of economic growth.

In fact, the economic deficit has never been greater. For the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy growing at an average rate of just 2%, the economic deficit has never been greater.

But again, it isn’t just Federal debt that is the problem. It is all debt. As discussed last week, when it comes to households, which are responsible for roughly 2/3rds of economic growth through personal consumption expenditures, debt was used to sustain a standard of living well beyond what income and wage growth could support. This worked out as long as the ability to leverage indebtedness was an option. The problem is that eventually, the debt reaches a level where the level of debt service erodes the ability to consume at levels great enough to foster stronger economic growth. In reality, the economic growth of the U.S. has been declining rapidly over the past 35 years supported only by a massive push into deficit spending by households.

[..]The massive indulgence in debt, or a “credit induced boom”, has now begun to reach its inevitable conclusion. The debt driven expansion, which leads to artificially stimulated borrowing, seeks out diminishing investment opportunities. Ultimately these diminished investment opportunities lead to widespread malinvestments. Not surprisingly, we clearly saw it play out in “real-time” in 2005-2007 in everything from sub-prime mortgages to derivative instruments. Today, we see it again in mortgages, subprime auto loans, student loan debt and debt driven stock buybacks and acquisitions.

When credit creation can no longer be sustained the markets will begin to “clear” the excesses. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE to tax cuts, only delay the clearing process. Ultimately, that delay only potentially worsens the inevitable clearing process. That clearing process is going to be very substantial. With the economy currently requiring roughly $3 of debt to create $1 of real, inflation-adjusted, economic growth, a reversion to a structurally manageable level of debt would involve a nearly $35 Trillion reduction of total credit market debt from current levels.

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Difference: BOJ and ECB still buy trilions in ‘assets’.

IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)

Despite cutting the economic growth outlook for the U.S. and U.K., the IMF kept its global growth forecast unchanged on expectations the euro zone and Japanese growth would accelerate. In the July update of its World Economic Outlook, the IMF forecast global economic growth of 3.5% for 2017 and 3.6% for 2018, unchanged from its April outlook. That was despite earlier cutting its U.S. growth projection to 2.1% from 2.3% for 2017 and to 2.1% from 2.5% for 2018, citing both weak growth in the first quarter of this year as well as the assumption that fiscal policy will be less expansionary than previously expected. A weaker-than-expected first quarter also spurred the IMF to cut its forecast for U.K. growth for this year to 1.7% from 2.0%, while leaving its 2018 forecast at 1.5%.

But slowdowns in the U.S. and U.K. were expected to be offset by increased forecasts for many euro area countries, including Germany, France, Italy and Spain, where first quarter growth largely beat expectations, the IMF said. “This, together with positive growth revisions for the last quarter of 2016 and high-frequency indicators for the second quarter of 2017, indicate stronger momentum in domestic demand than previously anticipated,” the IMF said in its release. It raised its euro-area growth forecast for 2017 to 1.9% from 1.7%. For 2018, it increased its forecast to 1.7% from 1.6%.

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The Guardian has the guts to claim that people don’t move out because they don’t have the money to stay, but because they want to get on the f*cking property ladder.

Bloated London Property Prices Fuel Exodus (G.)

In the Kent seaside town of Whitstable, long-term residents call them DFLs – people who have moved “down from London”, sometimes for the lifestyle but more often for cheaper housing. The number of people fleeing the capital to live elsewhere has hit a five-year high. In the year to June 2016, net outward migration from London reached 93,300 people – more than 80% higher than five years earlier, according to analysis of official statistics. A common theme among the leavers’ destinations is significantly cheaper housing, according to the estate agent Savills, which analysed figures from the Office for National Statistics and the Land Registry. Cambridge, Canterbury, Dartford and Bristol are reportedly among the most popular escape routes for people who have grown tired of London and its swollen property prices.

The most likely destination for people aged over 25 moving from Islington is St Albans in Hertfordshire, where the average home is £173,000 cheaper. People moving from Ealing to Slough – the most popular move from the west London borough – stand to save on average £241,000. Among all homeowners leaving London, the average house price was £580,000 while the average in the areas they moved to was £333,000. The exodus is not just of homeowners, but of renters too. Rents in London have soared by a third in the last decade, compared to 18% in the south-west, 13% in the West Midlands and 11% in the north-west of England.

The only age group that has a positive net migration figure in the capital is those in their twenties, the research found. Everyone else, from teens to pensioners, is tending to get out. Since 2009, the trend has been steadily increasing among people in their thirties with 15,000 more people in that age bracket leaving every year than at the end of the last decade – a 27% rise. The phenomenon is being driven by a widespread desire to “trade up the housing ladder”, something that is all too often impossible in London according to Lucian Cook, Savill’s head of residential research. “Five years ago people would have been reluctant [to move out] because the economy wasn’t as strong and some owners didn’t want to miss out on house price growth [in London],” he said.

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Pretending it’s the last of the pig. We’ll see about that.

The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)

As the effects of the housing crisis further recede, markers of distress are declining, with one notable exception: Among the batches of severely delinquent mortgages bought by institutional investors, foreclosures are on the rise. The trend is a reminder of the reasons many community advocates resisted allowing institutional investors to buy delinquent mortgages in government auctions that began in 2010. Wall Street, those advocates said, shouldn’t be rewarded for its role in creating the housing crisis with the chance to buy for pennies on the dollar the very assets whose values it dented. The government auctions promised a risk-sharing solution that would benefit nearly everyone: Homeowners whose mortgages had been bought dirt-cheap could get loan modifications, investors would get profitable assets, and communities would see tax revenues restored and neighborhoods revitalized.

But that win-win-win scenario may bring little relief to the most distressed among those troubled assets. A new Attom Data analysis for MarketWatch shows increasing foreclosures in the mortgages auctioned by the government. A subsidiary of private-equity firm Lone Star Investments, for example, has foreclosed on nearly 2,000 homeowners this year, through early July, and has increased foreclosures every year since 2013. And a Goldman Sachs subsidiary called MTGLQ, which has more than doubled foreclosures each year from 2014 to 2016, may do the same again this year, based on early 2017 data. Those figures stand in stark contrast to the housing market overall, where foreclosures fell 22% in the second quarter, touching an 11-year low of just over 220,000.

The institutional-investor foreclosure figures are a small fraction of the total, noted Daren Blomquist, Attom’s senior vice president of communications. And they don’t surprise investors who intentionally snatch up the most distressed mortgages available because their elevated risk promises higher yield. Attom Data does show an uptick in foreclosures by other lenders, though not all participated in the government auctions. But they’re a reminder that a decade after the housing downturn began, the pockets of foreclosures that still pop up represent the worst of the worst, prompting even those questioning the program to agree that some foreclosures were inevitable, no matter who owned the mortgages. Analysts call the current crop of foreclosures “the last of the pig moving through the python.”

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All bubble countries now face the issue. There’s no way out. So they’ll deny their bubble for a while longer.

Australian Housing Market At Risk Of Crash – UBS Research (CNBC)

The Australian housing market has peaked and could crash if the country’s central bank raises rates by too much or too quickly according to researchers at the Swiss bank, UBS. Property in Australia has boomed and the most recent government data marked growth in residential property prices at 10.2% year on year for the 2017 March quarter. In a note Monday, UBS Economist George Tharenou said any rash interest rate action from the Reserve Bank of Australia (RBA) could trigger a crash. “We still see rates on hold in the coming year, amid macroprudential tightening on credit growth and interest only loans. “Hence we still see a correction, but not a collapse, but if the RBA hikes too early or too much (as flagged by its hawkish minutes), it risks triggering a crash,” Tharenou warned.

Housing starts fell 19% in the first quarter of the year and May’s mortgage approvals also slid 20%. After a multi-year boom, the cost of an average home in the country now sits at 669,700 Australian dollars ($532,000) but Tharenou said price growth is certain to slow. “Despite weaker activity, house prices just keep booming with still strong growth of 10% y/y in June. However, this is unsustainably 4-5 times faster than income. “Looking ahead, we still see price growth slowing to 7% y/y in 2017 and 0-3% in 2018, amid record supply & poor affordability,” the economist added.

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Raising rates into a gigantesque bubble. No problem.

It’s Time To Rethink Monetary Policy (Rochon)

July 12 marks the date the Bank of Canada ignored common sense and increased its rate for the first time in seven years. Economists are largely divided on whether this was a good move, but in my opinion this was an ill-informed decision, largely based on the usually strong first quarter data, which may prove unsustainable in the longer term. In turn, it raises important questions about the conduct of monetary policy and the need to rethink the role and purpose of central bank policy. For the record, I don’t think there is much to fear from a single increase to 0.75% from 0.50, though it will have an immediate impact on mortgage rates — some Canadians will pay more for their homes. However, it is the prospect of what that move represents that sends chills down this economist’s spine.

As we know all too well, central banks never raise rates once or twice, but usually do so several times. Indeed, the consensus among economists is that there will be at least two more raises before the end of 2018, bringing the bank rate to 1.25%. This is still low by historical standards, but the raises begin to add up. I expect many more rate hikes through 2019 and 2020. You see, the Bank of Canada believes the so-called natural rate is 3%, which means we could possibly see nine more interest rate increases. Imagine the damage that will do. Yet, according to their own model, this rate is the “neutral” or “natural” rate and should have no far reaching impact. Try telling that to Canadians who have consumer debt and a mortgage. Clearly, there is nothing “neutral” about these rate increases. This alone is a reason to rethink monetary policy.

Second, the Bank of Canada targets inflation, and has been officially since 1991, a fact it reminds us of all the time. All other objectives, including economic growth and unemployment, or even household debt and income inequality, are far behind the principal objective of trying to keep the inflation rate on target. There is much to say about this, including whether interest rates and monetary policy in general are the best tool to deliver on the inflation crusade. Even if we accept this, inflation is currently at a near two-decade low. In other words, where’s the inflation beef? Inflation does not represent a current threat, and there are no inflationary pressures in the economy, which raises the question: Why raise rates?

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With Abenomics dead, so is Abe.

Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)

Shinzo Abe is fighting for his future as Japan’s prime minister as scandals drag his government’s popularity close to what political observers describe as “death zone” levels. Apart from clouding Abe’s hopes of winning another term as leader of the Liberal Democratic Party (LDP) when a vote is held next year, the polling slump also undermines his long-running push to revise Japan’s war-renouncing constitution. Abe, who returned to the prime ministership four and a half years ago, was long seen as a steady hand whose position appeared unassailable – so much so that the LDP changed its rules to allow Abe the freedom to seek a third consecutive three-year term at the helm of the party. “He is no longer invincible and the reason why he is no longer invincible is he served his personal friends not the party,” said Michael Thomas Cucek, an adjunct professor at Temple University Japan.

Abe’s standing has been damaged by allegations of favours for two school operators who have links to him. The first scandal centred on a cut-price land deal between the finance ministry and a nationalist school group known as Moritomo Gakuen. The second related to the approval of a veterinary department of a private university headed by his friend, Kotaro Kake. Abe has repeatedly denied personal involvement, but polls showed voters doubted his explanations, especially after leaked education ministry documents mentioned the involvement of “a top-level official of the prime minister’s office” in the vet school story. Abe attempted to show humility in a parliamentary hearing this week by acknowledging it was “natural for the public to sceptically view the issue” because it involved his friend. “I lacked the perspective,” he said. Experts doubt that Abe’s contrition, combined with a planned cabinet reshuffle next week, will do much to reverse his sagging fortunes.

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The limits of the anti-Russia craze.

Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)

The EU should act “within days” if new sanctions the US plans to impose on Russia prove to be damaging to Europe’s trade ties with Moscow, an internal memo seen by the media says. Retaliatory measures may include limiting US jurisdiction over EU companies. An internal memo seen by the Financial Times and Politico has emerged amid mounting opposition to a US bill seeking to hit Russia with a new round of sanctions. The bill, if signed into law, will also give US lawmakers the power to veto any attempt by the president to lift the sanctions. The document reportedly said European Commission chief Jean-Claude Juncker was particularly concerned the sanctions would neglect the interests of European companies. Juncker said Brussels “should stand ready to act within days” if sanctions on Russia are “adopted without EU concerns being taken into account,” according to the FT.

The EU memo also warns that “the measures could impact a potentially large number of European companies doing legitimate business under EU measures with Russian entities in the railways, financial, shipping or mining sectors, among others.” Restrictions against Russia come as part of the Countering Iran’s Destabilizing Activities Act, targeting not only Tehran, but also North Korea. Initially passed by the Senate last month, the measures seek to impose new economic measures on major sectors of the Russian economy. The draft legislation would also introduce individual sanctions for investing in Gazprom’s Nord Stream 2 gas pipeline project, outlining steps to hamper construction of the pipeline and imposing sanctions on European companies which contribute to the project.

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So EU vs US, and EU vs EU. The problem seems to be that US companies could profit from the sanctions, as European ones suffer.

EU Divided On How To Answer New US Sanctions Against Russia (R.)

European Commission preparations to retaliate against proposed new U.S. sanctions on Russia that could affect European firms are likely to face resistance within a bloc divided on how to deal with Moscow, diplomats, officials and experts say. A bill agreed by U.S. Senate and House leaders foresees fines for companies aiding Russia to build energy export pipelines. EU firms involved in Nord Stream 2, a 9.5 billion euro ($11.1 billion) project to carry Russian gas across the Baltic, are likely to be affected. Both the European Union and the United States imposed broad economic sanctions on Russia’s financial, defense and energy sectors in response to Moscow’s annexation of Crimea from Ukraine in 2014 and its direct support for separatists in eastern Ukraine. But northern EU states in particular have sought to shield the supplies of Russian gas that they rely on.

Markus Beyrer, director of the EU’s main business lobby, Business Europe, urged Washington to “avoid unilateral actions that would mainly hit the EU, its citizens and its companies”. The Commission, the EU executive, will discuss next steps on Wednesday, a day after the U.S. House of Representatives votes on the legislation, knowing that the U.S. move threatens to reopen divisions over the bloc’s own Russia sanctions. Among the European companies involved in Nord Stream 2 are German oil and gas group Wintershall, German energy trading firm Uniper, Anglo-Dutch Royal Dutch Shell, Austria’s OMV and France’s Engie. The Commission could demand a formal U.S. promise to exclude EU energy companies; use EU laws to block U.S. measures against European entities; or impose outright bans on doing business with certain U.S. companies, an EU official said.

But if no such promise is offered, punitive sanctions such as limiting the access of U.S. companies to EU banks require unanimity from the 28 EU member states. Ex-Soviet states such as Poland and the Baltic states are unlikely to vote for retaliation to protect a project they have resisted because it would increase EU dependence on Russian gas. An EU official said most member states saw Nord Stream 2 as “contrary or at least not fully in line with European objectives” of reducing reliance on Russian energy. Britain, one of the United States’ closest allies, is also wary of challenging the U.S. Congress as it prepares to leave the EU and seeks a trade deal with Washington. In fact, the EU’s chief executive, Jean-Claude Juncker, has few tools that do not require unanimous support from the bloc’s 28 governments.

The Commission could act alone to file a complaint at the World Trade Organisation. But imposing punitive tariffs on U.S. goods would require detailed proof to be gathered that European companies were being unfairly disadvantaged — a process that would take many months. Diplomatic protests such as cutting EU official visits to Washington are unlikely to have much effect, since requests by EU commissioners for meetings with members of Trump’s administration have gone unanswered, EU aides say.

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Let’s hope they don’t try.

US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)

The new US special representative for Ukraine says Washington is actively reviewing whether to send weapons to help those fighting against Russian-backed rebels. Kurt Volker told the BBC that arming Ukrainian government forces could change Moscow’s approach. He said he did not think the move would be provocative. Last week, the US State Department urged both sides to observe the fragile ceasefire in eastern Ukraine. “Defensive weapons, ones that would allow Ukraine to defend itself, and to take out tanks for example, would actually to help” to stop Russia threatening Ukraine, Mr Volker said in a BBC interview.

“I’m not again predicting where we go on this, that’s a matter for further discussion and decision, but I think that argument that it would be provocative to Russia or emboldening of Ukraine is just getting it backwards,” he added. He said success in establishing peace in eastern Ukraine would require what he called a new strategic dialogue with Russia.

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Undoubtedly not the last we hear of this.

Tsipras and Varoufakis Go Public With Spat (K.)

The coalition on Monday rejected calls for an investigation to be launched into the first months of the government’s time in power, as a dispute between Prime Minister Alexis Tsipras and ex-finance minister Yannis Varoufakis over that period in 2015 became public. “The evaluation of this period has to be conducted with political criteria, not myth-making or gossip,” said government spokesman Dimitris Tzanakopoulos, who accused Varoufakis of trying to advertise his recent book via the “systemic media” he once attacked. Tzanakopoulos’s comments came after Tsipras gave an interview to The Guardian in which he admitted making “big mistakes” in the past and suggested that Varoufakis’s plan for a parallel payment system could not be considered seriously.

“Yanis is trying to write history in a different way,” said Tsipras. “When we got to the point of reading what he presented as his plan B it was so vague, it wasn’t worth the trouble of even talking about. It was simply weak and ineffective.” The former minister immediately responded to the premier’s comments by claiming they displayed a “deep incoherence,” as Varoufakis claims that he had made Tsipras aware of the plan before he came to office yet the SYRIZA leader still chose to appoint him to the cabinet. “Either I was the right choice to spearhead the ‘collision’ with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister,” he wrote in a letter to The Guardian.

New Democracy called for judicial and parliamentary investigations into the claims made by Varoufakis, as well as by former energy minister Panayiotis Lafazanis. The latter claimed in a radio interview on Saturday that he had secured an advance payment from Russia for a gas pipeline to be used to held fund Greece if it left the euro. “Varoufakis and Lafazanis described with clarity the SYRIZA leadership’s plans to take Greece out of the eurozone,” said the conservatives in a statement. “If these plans were seen through to the end, the country would have found itself in a dramatic situation like Venezuela, with unforeseeable social consequences.”

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Makes sense.

Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)

[..] the Greek prime minister, Alexis Tsipras, having admitted to “big mistakes”, was asked if appointing me as his first finance minister was one of them. According to the interviewer, Mr Tsipras said “Varoufakis … was the right choice for an initial strategy of ‘collision politics’, but he dismisses the plan he presented had Greece been forced to make the dramatic move to a new currency as ‘so vague, it wasn’t worth talking about’”. Given that I presented my plans to Mr Tsipras for deterring the troika’s aggression and responding to a potential impasse (and any move by the troika to evict Greece from the eurozone) before we won the election of January 2015, and I was chosen by him as finance minister (one presumes) on the basis of their merit, his answer reflects a deep incoherence.

Either I was the right choice to spearhead the “collision” with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister. Arguing, as Mr Tsipras does, that I was both the right choice for the initial confrontation and that my plan B was so vague it wasn’t worth the trouble of even talking about is disingenuous, albeit insightful, for it reveals the impossibility of maintaining a radical critique of his predecessors while adopting the Tina (There Is No Alternative) doctrine.

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A brand new line of lipstick for farm animals.

Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)

Athens has outlined plans to return to the financial markets for the first time since 2014, with a plan to sell new five-year bonds to investors. Existing Greek five-year bonds were trading at 3.6% on Monday morning compared with 63% at the height of the Greek financial crisis in 2012 when the finance ministry was unable to pay public sector wages and there were riots in the streets. Following the announcement that Athens would be returning to the market, the yield fell to 3.4%. The Greek finance ministry has set a goal of a 4.2% interest rate on the new bond. But banking sources believe that level will be hard to achieve and say an interest rate of between 4.3% to 4.5% is much more likely. Government sources say valuation will take place on Tuesday 25 July.

The market test is crucial to Greece for not only judging sentiment of the market, from which it has been essentially exiled since the start of its economic crisis, but also for weaning itself off borrowed bailout funds. Speaking after the bond issue was announced, the EU’s economy commissioner, Pierre Moscovici, described the public spending cuts imposed on Greece since it almost went bust as “too tough” but “necessary”, adding there was now “light at the end of austerity”. Reuters reported that Greece had employed six banks – BNP Paribas, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and HSBC – to act as joint lead managers for a five-year euro bond “subject to market conditions”. Greek ministers will provide more details on Monday afternoon about how much it hopes to borrow, and on what terms.

If the issue is successful, it could help Greece, which is still coping with a debt to GDP ratio of 180%, to exit its long cycle of austerity and rescue packages. Late on Friday, S&P upgraded its outlook on Greek government debt from stable to “positive”, thanks partly to renewed hopes that the country’s creditors could finally grant it debt relief.

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And here’s how it’s done.

Greek Spending Cuts Prettify Budget Data (K.)

Delays in the funding of hospitals, social spending cuts and low expenditure on the Public Investments Program served to prettify the picture of the state budget over the first half of the year, producing a primary surplus of 1.93 billion euros, Finance Ministry figures showed on Monday. At the same time budget revenues posted a marginal increase over the target the ministry had set for the January-June period. However, the big challenge for the government starts at the end of this month with the payment of the first tranche of income tax by taxpayers, followed later on by the Single Property Tax (ENFIA) and road tax at the end of the year.

In total the state will have to collect 33 billion euros by the end of the year, which is considerably higher than in the second half of 2016. According to the H1 budget data, the primary surplus amounted to 1.936 billion euros, against a primary surplus of 1.632 billion in the same period last year, and a target for 431 million for the year to end-June. Expenditure missed its target by 1.15 billion euros, amounting to 22.86 billion in the first half. Compared to last year it was down 757 million euros. Hospital funding missed its target by 265 million.

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Aug 222016
 
 August 22, 2016  Posted by at 9:29 am Finance Tagged with: , , , , , , , , , , ,  


NPC Wilkins-Rogers Milling Co., Washington, DC 1926

Oil Falls As August Price Rally Seen Overblown, China Fuel Exports Soar (R.)
Less Than 5% Of Japan Inc. Think Abe’s Stimulus Will Boost The Economy (R.)
Grim Outlook for the Economy, Stocks: Stephanie Pomboy (Barron’s)
Citi Is About to Relive the 2008 Derivatives Nightmare (MM)
The Brexit Question That Nobody Asked (BBG)
China Is Grappling With Hidden Unemployment (BBG)
Australia’s Unprecedented Collapse In Business Investment, In One Chart (BI)
Australia Central Bank Loses Credibility As Housing Boom Continues (AFR)
American Journalism Is Collapsing Before Our Eyes (Goodwin)
The Clintons Really Do Think They Can Get Away With Anything (WSJ)
Clinton Not In The Clear (Jack Kelly)
The History of Money: Not What You Think (Minskys)
German Government: Citizens Should Store Food, Water And Cash (DWN)
‘Nobody Believes In Anything Anymore’: Greek Crisis is Far From Over (CNBC)
Rescuing Refugees: ‘You Never Get Used To It – And That’s A Good Thing’ (G.)
Inuit Fear Being Overwhelmed As ‘Extinction Tourism’ Descends On Arctic (G.)

 

 

“China’s July exports of diesel and gasoline soared by 181.8% and 145.2% respectively..”

Oil Falls As August Price Rally Seen Overblown, China Fuel Exports Soar (R.)

Oil prices fell on Monday as analysts doubted upcoming producer talks would rein in oversupply, saying that Brent would likely fall back below $50 a barrel as August’s more than 20% crude rally looks overblown. Soaring exports of refined products from China also pressured prices, as this was seen as the latest indicator of an ongoing global fuel glut, traders said. China’s July exports of diesel and gasoline soared by 181.8% and 145.2% respectively compared with the same month last year, to 1.53 million tonnes and 970,000 tonnes each, putting pressure on refined product margins. Brent crude futures were trading at $50.22 per barrel at 0224 GMT, down 66 cents, or 1.3%.

U.S. West Texas Intermediate (WTI) crude was down 51 cents, or 1.05%, at $48.01 a barrel. Analysts cast doubt on an August price rally, saying that much of it was a result of short-covering and anticipation of upcoming producer talks to discuss means to curb oversupply. “Positioning data seems to confirm our view that the latest oil bounce is more technical and positioning-oriented than fundamental. In fact, new buyers have been mostly absent the past few months,” Morgan Stanley said. Regarding the upcoming producer talks, the bank said a agreement was “highly unlikely” and that there were “too many headwinds and logistical challenges to a meaningful deal”.

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Less than 5% are wrong.

Less Than 5% Of Japan Inc. Think Abe’s Stimulus Will Boost The Economy (R.)

Japanese companies overwhelmingly say the government’s latest stimulus will do little to boost the economy and the Bank of Japan should not ease further, a Reuters poll showed, a setback for policymakers’ efforts to overcome deflation and stagnation. Prime Minister Shinzo Abe this month unveiled a 13.5 trillion yen (£102.6 billion) fiscal package of public works projects and other measures, vowing a united front with the BOJ to revive the economy and raising speculation of a surge in government spending essentially financed by the central bank. But less than 5% of companies believe the steps will boost the economy near-term or raise its growth potential, according to the Reuters Corporate Survey, conducted August 1-16.

“It’s disappointing that the stimulus focuses on public works, and it lacks attention to promoting industry and technology that would lead to future growth,” said a manager at a precision-machinery maker. Abe took office 3 1/2 years ago, pledging to reboot the economy with aggressive monetary stimulus, fiscal spending and reform plans. After an early spurt of growth and surging corporate profits, helped by a sharp fall in the yen, the economy is again sputtering and prices are slipping, underscoring the challenge for Japan to beat nearly two decades of deflation and anaemic growth. “Unless drastic steps are taken to fix the root of Japan’s problems – the falling birthrate and working population – solid economic growth won’t return … only public debt would pile up without sustainable growth,” said an electrical machinery firm.

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You would still have to specify those who have nothing left to save; economists miss out on that.

Grim Outlook for the Economy, Stocks: Stephanie Pomboy (Barron’s)

For some time, Stephanie Pomboy, an economist and the founder of MacroMavens, has pushed a provocative theory that a crisis-chastened U.S. consumer would retard global growth. That is why a U.S. recovery has taken so long to take off, and why Japan and Europe look set to embark on more rounds of quantitative easing. An avid reader of Shakespeare, Pomboy appreciates the comic and tragic dimensions of the markets—the giddy optimism for the second half of the year, and the potentially disastrous consequences of excessively low rates. As stocks teetered at new highs, we phoned Pomboy in Vail, Colo., where she lives when not in Manhattan, to hear her latest views. They aren’t rosy: Investors and policy makers are deluding themselves that we will soon return to a pre-financial crisis framework. Things have changed, she says, which means expectations for economic growth in the second half are far too optimistic. And today’s low rates could cause another financial crisis, bankrupting pension plans, putting retirees at risk, and hurting stocks.

Barron’s: You like to focus on the consumer—and plot U.S. consumer spending as a percentage of GDP versus world trade. Why? Pomboy: What ignited and supported the entire era of globalization was the spendthrift U.S. consumer; economies have been totally reliant on trade to U.S. consumers. This once-in-a-generation asset deflation will fundamentally change behavior, just as the Depression changed an entire generation’s attitude about spending and saving. Obviously, the burden of proof is on me, because for 20 years the consumer has reliably borrowed from China to buy their tube socks. Post-crisis, the consumer has clearly pulled back.

How many months did we have disappointing retail sales numbers that no one could explain? They’d say it’s too hot, too cold, there’s Brexit. But what’s really causing this slowdown in spending is that the post-crisis consumer is determined to save, and do it the old-fashioned way. Historically, when rates go down, people save less. In this cycle, things have completely reversed. Over the same stretch of time that the two-year note has gone from 4% to 1%, the savings rate has doubled. There are mountains of evidence to support my thesis. But every Wall Street analyst and the Fed is using the pre-crisis analytical framework to look at an economy that is fundamentally challenged.

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Note the numbers: “Credit Suisse prudently sold $380 billion of derivatives to Citi, thereby reducing its own leverage exposure by $5 billion.”

Citi Is About to Relive the 2008 Derivatives Nightmare (MM)

Deutsche Bank – with its stock now trading at a 30-year low – was recently called the world’s riskiest financial institution by the IMF. Better late than never… In a last-ditch effort to save itself, DB is trying to dump a bucket load of credit derivatives – the murky, risky financial instruments that triggered the 2008 financial crisis. You would think no one would buy these weapons of financial mass destruction… but you’d be wrong. In a staggeringly stupid move, the American bank I’m telling you about today has gone on a derivatives shopping spree, eagerly taking credit default swaps off the hands of failing Eurozone banks like DB and Credit Suisse. That means, of course, another outsize short opportunity for you to take…

Citigroup already nearly destroyed itself with derivatives during the 2008 crisis, requiring the biggest taxpayer bailout in history in order to stay afloat. Strangely, it didn’t learn its lesson the first time its stock fell below $1. As rival banks see the writing on the wall and scramble to get rid of their derivatives, Citi is now cheerfully snapping up billions of dollars’ worth. Several weeks ago, Credit Suisse prudently sold $380 billion of derivatives to Citi, thereby reducing its own leverage exposure by $5 billion. Last year, Deutsche Bank palmed off $250 billion of credit default swaps on (guess who?) Citi, and is in talks to get rid of even more. The result is that Citi now holds the most derivatives of any of its U.S. rivals. That’s a staggering total exposure of nearly $56 trillion, according to the OCC’s latest report, shown here:

[..] our current $650 trillion derivatives market is a nightmare scenario waiting to happen. First problem: the size. It’s 36x the size of the U.S. GDP and over 8x larger than the world GDP – the entire global output of the entire world in a year. While credit default swaps shrank significantly in size since the financial crisis, they remain large enough to constitute a potential time bomb inside the financial system that could blow up any time. Second problem: the interconnectedness. Every derivative contract involves two parties that agree to make certain payments to each other. But if one party is unable or unwilling to live up to its agreement and make those payments, the other party is left holding the bag and nursing a big loss. In a crisis, this can leave a volume of broken contracts that will overwhelm these institutions and render them instantly insolvent.

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Where is the EU heading?

The Brexit Question That Nobody Asked (BBG)

Mervyn King, former governor of the Bank of England, has written the best article I’ve read on Britain’s exit from the EU. In an essay for the New York Review of Books he makes many excellent points, but one is of surpassing importance. It’s an obvious point, or ought to be, that nonetheless has been almost entirely ignored by other respectable commentators: Whether Britain should stay in the EU depends on where the EU is heading. The EU is plainly in deep trouble with or without the U.K., and its condition as a political project is anything but stable. Judging whether Britain is better off as a member therefore requires a judgment not only about what Britain has gained or lost from membership up to now but also an assessment of the future character of the whole EU enterprise.

Britain’s Remain campaign, expressing the collective opinion of every expert on the subject, has had almost nothing to say about this. As King points out, the EU is structurally unsound. (Joseph Stiglitz in the FT makes the same point.) It has pressed political union both too far and not far enough. That is, it has created half a political union – with a single currency but without a collective fiscal policy or the political apparatus that would be necessary to legitimize it. King: Putting the cart before the horse – setting up a monetary union before a political union – has led the ECB to become more and more vocal about the need to “complete the architecture” of monetary union by proceeding quickly to create a Treasury and finance minister for the entire eurozone.

The ability of such a new ministry to make transfers between member countries of the monetary union would reduce pressure on the ECB to find new ways of holding the monetary union together. But there is no democratic mandate for a new ministry to create such transfers or to have political union – voters do not want either. And voters aren’t the only ones who don’t want it. German officialdom (backed by popular opinion) is viscerally opposed to a “transfer union,” which is Germany’s name for fiscal policy as it operates in any normal country. Germany’s position is understandable, since Germans would give much more than they received in any such arrangement. But that doesn’t alter the conclusion: Not only is the EU structurally unsound, but there’s also little prospect that the structure either can be or will be repaired.

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Color me baffled.

China Is Grappling With Hidden Unemployment (BBG)

Cracks are starting to show in China’s labor market as struggling industrial firms leave millions of workers in flux. While official jobless numbers haven’t budged, the underemployment rate has jumped to more than 5% from near zero in 2010, according to Bai Peiwei, an economics professor at Xiamen University. Bai estimates the rate may be 10% in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave. Many state-owned firms battling overcapacity favor putting workers in a holding pattern to avoid mass layoffs that risk fueling social unrest. While that helps airbrush the appearance of duress, it also slows the shift of workers to services jobs, where labor demand remains more solid in China’s shifting economy.

“Underemployment in overcapacity industries is a drag on the potential improvement of productivity in China, which will lead to a softening wage trend,” said Grace Ng at JPMorgan in Hong Kong. “It would exert pressure on private consumption demand and in turn affect the overall rebalancing of the economy.” Other projections indicate the employment situation is even worse. An indicator of unemployment and underemployment produced by London-based research firm Fathom Consulting has more than tripled since 2012 to 13.2%. The official jobless rate isn’t much help for economists: it’s been virtually unchanged at about 4.1% since 2010 even as the economy slowed. The gauge only counts those who register for unemployment benefits in their home towns, which doesn’t take into account 277 million migrant workers. Total employment is 775 million, National Bureau of Statistics data show.

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Wow. What a chart that is.

Australia’s Unprecedented Collapse In Business Investment, In One Chart (BI)

You’ve probably heard of the “capex cliff”, the term for the collapse in capital expenditure plans by Australian businesses that is an inevitable feature of the economy following the once-in-a-lifetime mining investment boom driven mainly by the surge in Chinese demand over the past two decades. But with Australia’s manufacturing industry having been hollowed out too over the past decade, the capital investment pipeline for both mining and manufacturing are gone. So the fall-off, when measured in terms of a percentage of GDP, is nothing short of spectacular in historical context, as shown in this chart from Macquarie. It’s not hard to see why economists have occasionally mentioned the word “recessionary” in reference to the investment outlook.

Part of what’s driving this is that Australia’s economy is increasingly being driven by much less capital-intensive sectors such as education and tourism, which don’t require huge pieces of machinery and infrastructure like trains, tunnelling machines and factory plant equipment. And on the other side of the ledger, the huge increases in capital investment during the mining boom have laid the foundations for the vast increase in Australia’s commodity export volumes, which have been supporting economic growth since the spending started to fall away. The Macquarie research team notes, however, that “non-mining business capex has yet to meaningfully react to lower interest rates, and that companies are “waiting for clear signs of sustained demand before investing.” Right now, those signs are nowhere to be seen.

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You can make charts just like this one for many countries.

Australia Central Bank Loses Credibility As Housing Boom Continues (AFR)

Australia’s booming housing market has once again head-faked the central bank, which is losing credibility every time it cuts on claims the world’s dearest residential property prices are nothing to worry about. In rationalising its decision to reduce the cash rate to 1.5% in August, the Reserve Bank of Australia alleged that “the likelihood of lower interest rates exacerbating risks in the housing market has diminished”. Yet auction clearance rates in our two largest cities, Sydney and Melbourne, which account for 47% of the metro population, have subsequently risen back to boom-time levels. CoreLogic reports that 86.4% of Sydney auctions on the weekend resulted in a sale, which is 10 percentage points higher than the equivalent clearance rate 12 months ago and just shy of the 89.7% record set in May last year.

In Melbourne, 76.1% of auctions saw a sale, besting the 74.3% clearance rate in the same week last year. Median clearance rates in Sydney and Melbourne over the four weeks since July 31 have been 78% and 76% respectively, materially above the median levels observed in these cities since the current housing boom commenced in 2013 on the back of the RBA’s stimulus. While the RBA argues that much lower sales volumes in 2016 signal weakness, this is likely more a reflection of a four-year boom exhausting supply. And it does not stack up with unusually strong clearance rates or persistently exuberant capital gains across Sydney and Melbourne.

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I can only fully agree. And no, again, that’s not because I support Trump. Everything and everyone should be scrutinized.

American Journalism Is Collapsing Before Our Eyes (Goodwin)

Donald Trump may or may not fix his campaign, and Hillary Clinton may or may not become the first female president. But something else happening before our eyes is almost as important: the complete collapse of American journalism as we know it. The frenzy to bury Trump is not limited to the Clinton campaign and the Obama White House. They are working hand-in-hand with what was considered the cream of the nation’s news organizations. The shameful display of naked partisanship by the elite media is unlike anything seen in modern America. The largest broadcast networks – CBS, NBC and ABC – and major newspapers like The New York Times and Washington Post have jettisoned all pretense of fair play. Their fierce determination to keep Trump out of the Oval Office has no precedent.

Indeed, no foreign enemy, no terror group, no native criminal gang, suffers the daily beating that Trump does. The mad mullahs of Iran, who call America the Great Satan and vow to wipe Israel off the map, are treated gently by comparison. By torching its remaining credibility in service of Clinton, the mainstream media’s reputations will likely never recover, nor will the standards. No future producer, editor, reporter or anchor can be expected to meet a test of fairness when that standard has been trashed in such willful and blatant fashion. Liberal bias in journalism is often baked into the cake. The traditional ethos of comforting the afflicted and afflicting the comfortable leads to demands that government solve every problem. Favoring big government, then, becomes routine among most journalists, especially young ones.

I know because I was one of them. I started at the Times while the Vietnam War and civil-rights movement raged, and was full of certainty about right and wrong. My editors were, too, though in a different way. Our boss of bosses, the legendary Abe Rosenthal, knew his reporters leaned left, so he leaned right to “keep the paper straight.” That meant the Times, except for the opinion pages, was scrubbed free of reporters’ political views, an edict that was enforced by giving the opinion and news operations separate editors. The church-and-state structure was one reason the Times was considered the flagship of journalism. Those days are gone. The Times now is so out of the closet as a Clinton shill that it is giving itself permission to violate any semblance of evenhandedness in its news pages as well as its opinion pages.

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But then you think: well, well, what got into the Wall Street Journal editors? Expect pressure on Clinton Foundation to increase.

The Clintons Really Do Think They Can Get Away With Anything (WSJ)

After years of claiming that the Clinton Foundation poses no ethical conflicts for Bill and Hillary or the U.S. government, Bill Clinton now admits the truth—sort of. If his wife becomes President, he says the Super PAC masquerading as a charity won’t accept foreign or corporate contributions. Bill will also resign from the foundation board, and Chelsea will stop raising money for it. Now they tell us. If such fund-raising poses a problem when she’s President, why didn’t it when she was Secretary of State or while she is running for President? The answer is that it did and does, and they know it, but the foundation was too important to their political futures to give it up until the dynastic couple were headed back to the Oval Office.

Now that Hillary is running ahead of Donald Trump, Bill can graciously accept new restrictions on their pay-to-play politics. Bill must be having a good laugh over this one. The foundation served for years as a conduit for corporate and foreign cash to burnish the Clinton image, pay for their travel expenses for speeches and foreign trips, and employ their coterie in between campaigns or government gigs. Donors could give as much as they wanted because the foundation is a “charity.” President Obama may have banished Sidney Blumenthal from the State Department, but Bill could stash his conspiratorial pal at the foundation, keeping him on the family payroll while Sid flooded Hillary with foreign-policy advice. Her private email server was supposed to hide their email traffic—until that gambit was exposed last year.

But FBI Director James Comey let Hillary off the hook on the emails, and he declined to investigate the foundation, so it looks like they’re home free. By now the corporate and foreign cash has already been delivered, in anticipation that Hillary Clinton could become the next President. So now it’s the better part of political prudence to claim the ethical high ground. If you choose to believe or have a short memory. Readers may recall that the foundation promised the White House when Mrs. Clinton became Secretary of State that the foundation would restrict foreign donations and get approval from the State Department. It turned out the foundation violated that pledge, specifically when accepting $500,000 from Algeria.

The foundation also agreed to disclose donor names but failed to do so for more than 1,000 foreign donors until the failure was exposed by press reports. [..] Far from offering some new clean ethical slate, this latest foundation gambit ought to be a warning about a third Clinton term. Protected by Democrats and a press corps desperate to beat Donald Trump, the Clintons really do think they can get away with anything.

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“.. In 2013, for instance, the Clinton Foundation took in $140 million, but spent just $9 million (6.4%) on direct aid. A typical charity devotes about 75% of receipts to aid.”

Clinton Not In The Clear (Jack Kelly)

Hillary Clinton has little to fear from Donald Trump. But she may be casting nervous glances over her shoulder at Preet Bharara. You may not have heard of Mr. Bharara. Sheldon Silver, former speaker of the New York State Assembly, a Democrat, and Dean Skelos, former majority leader of the New York Senate, a Republican, wish they hadn’t. In May, they were sentenced to 12 years and five years in prison, respectively, for corruption. Preet Bharara is the U.S. attorney for the Southern District of New York. Since his appointment in 2009, Mr. Bharara “has launched a one-man crusade against evil-doers, ranging from corrupt politicians to the Mafia,” wrote Alan Chartock, a political science professor who’s a longtime watcher of New York state government.

The Southern District of New York is the lead of three U.S. attorneys’ offices investigating the Clinton Foundation, a recently retired deputy director of the FBI told the Daily Caller. The Clinton Foundation is headquartered in New York. It was begun in Little Rock, Ark., to raise funds for the Clinton library. The office in Washington, D.C., may focus on when Hillary was secretary of state. The Clinton Foundation has received more than $2 billion in contributions. More than 1,000 donors are foreigners. The foundation won’t disclose their names or amounts donated. Few of the funds raised have been spent on charitable works. In 2013, for instance, the Clinton Foundation took in $140 million, but spent just $9 million (6.4%) on direct aid. A typical charity devotes about 75% of receipts to aid.

Much more is spent on pay and benefits for staff, office rent, conferences and travel. Some of the highest-paid staffers are political operatives, such as Huma Abedin, who for a time was on the payrolls of both the Clinton Foundation and the State Department, and Sid Blumenthal, who ran a private intelligence network for Hillary in Libya. The most ballyhooed project, relief for Haiti after a devastating earthquake in 2010, was an example of “Robin Hood in reverse”— robbing the poor for the benefit of the rich, said financial analyst Charles Ortel. The Clinton Foundation is a “charity fraud network,” Mr. Ortel wrote on his blog. “What possesses powerful, wealthy and educated persons to prey on the most desperately poor humans on earth as they posture as philanthropists?”

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Interesting view.

The History of Money: Not What You Think (Minskys)

Most of us have an idea of how money came to be. It goes something like this: People wanted to exchange goods for other goods, but it was difficult to coordinate. So they started exchanging goods for money, and money for goods. This tells us that money is a medium of exchange. It’s a nice and simple story. The problem is that it may not be true. We may be understanding money entirely wrong. The above story assumes that first there was a market, and then people introduced money to make the market work better. But some people find this hard to believe. Those who subscribe to the Chartalist school of thought give a different history. Before money was used in markets, they say, it was used in primitive criminal justice systems.

Money started as—and still is—is a record of debt. It is a way to keep track of what one person owes another. There’s anthropological evidence to back up this view. Work by Innes, and Wray suggest that the origins of money are more like this: In a pre-market, feudal society, there was usually a system to maintain justice in the community. If someone committed a crime, the authority, let’s call him the king, would decide that the criminal owed a fine to the victim. The fine could be a cow, a sheep, three chickens, depending on the crime. Until that cow was brought forward, the criminal was indebted to the victim. The king would record the criminal’s outstanding debt. This system changed over time. Rather than paying fines to the victim, criminals were ordered to pay fines to the king.

This way, resources were being moved to the king, who could coordinate their use for the benefit of the community as a whole. This was useful for the King, and for the development of the society. But the amount of resources coming from a criminal here and there was not impressive. The system had to be expanded to draw more resources to the kingdom. To expand the system, the king created debt-records of his own. You can think of them as pieces of papers that say King-Owes-You. Next, he went to his citizens and demanded they give him the resources he wanted. If a citizen gave their cow to the king, the king would give the citizen some of his King-Owes-You papers. Now, a cow seems more useful than a piece of paper, so it seems silly that a citizen would agree to this.

But the king had thought of a solution. To make sure everyone would want his King-Owes-You papers, he created a use for them. He proclaimed that every so often, all citizens had to come forward to the kingdom. Each citizen would be in big trouble, unless they could provide little pieces of paper that showed the king still owed them. In that case, the king would let the citizen go, and not owe them any longer. The citizen would be free to go off and acquire more King-Owes-You papers, to make sure he would be safe the next time, too.

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Saw this on Reuters and other sites, but they all left out the need to store cash, for some reason, which is in the original directive. So I ran the article through Google Translate and corrected it a little.

A government advising people to store cash is not a minor point, I would think. Not in the days of plastic and a war on cash.

German Government: Citizens Should Store Food, Water And Cash (DWN)

For the first time since the end of the Cold War, the federal government according to a report wants to encourage new stockpiling the population again, so that they, in the case of a disaster or an armed attack temporarily, can take care of themselves. “The population is ‘advised’ to hold a personal supply of food of ten days,” quoted the “Frankfurter Allgemeine Sonntagszeitung” from a concept for civil defense, which the government is requested to adopt on Wednesday. According to the report, the population should be able to protect themselves in an emergency before calling government action to ensure an adequate supply of food, water, energy and cash. Therefore, the population should also be ‘advised’, to hold, for a period of five days, two liters of drinking water per person per day, it is stated in the text drawn up by the Ministry of the Interior.

According to “FAS” is the first strategy for civil defense since the end of the Cold War in 1989. She had been given in 2012 by the Budget Committee of the Bundestag in order. In the 69-page concept it is stated “that an attack on the territory of Germany, which requires a conventional defense, play” was. Nevertheless, it was necessary, “nevertheless to such sufficiently prepared not fundamentally excluded for the future development of life-threatening”. Interestingly, the FAZ reported in this regard that the Federal Government also worry about their own safety. The newspaper writes that in the paper literally stand “. Precautions are the event the task of the service office to meet in order to relocate the performance of duties of a public authority to another, sheltered place (Emergency Seat) can”

It is not clear whether these preparations related to a possible war. The federal government has recently changed its military strategy and regarded Russia as an enemy. NATO considers Russia an attack on NATO territory possible. Therefore, NATO wants the US and the EU also defend outside their own territory. Reuters writes that in the concept of “the need for a reliable alarm system, a better structural protection of buildings and sufficient capacity discussed in the health system” would. Reuters: “The civilian support of the armed forces should be again a priority. These included modifications to the traffic steering when the Bundeswehr must relocate combat units. “

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Very far from over. Please help me support. Read: Meanwhile in Greece..

‘Nobody Believes In Anything Anymore’: Greek Crisis is Far From Over (CNBC)

With Europe facing pressing crises including the refugee crisis, economic slowdown and political disintegration following the Brexit vote, it’s easy to forget that Greece’s political and economic crisis dominated headlines last summer. One year on and a third bailout worth €86 billion later, arrived at after tortuous negotiations between Greece and its lenders, and the situation in Greece is a game of two halves with many Greeks suffering – and some trying to make something out of a bad situation. Greece’s government has been forced to make widespread spending cuts over the course of its three separate bailout programs, making life harder for most Greeks of ordinary means. The cuts have affected all ages with unemployment rising to the highest level in Europe.

A survey by independent analysis firm DiaNEOsis in June revealed that many Greeks were facing an increasing struggle to get by. Extreme poverty in the Greek population (of 11 million people) had risen from 2.2% in 2009, to 15% in 2015, the public opinion survey of 1,300 people showed, with 1.6 million people now living below in extreme poverty. One resident of the northern Greek city of Thessaloniki, Evangelos Kyrimlis, told CNBC that the Greece’s crisis had taken its toll on society, both at a local and national level. “Disillusionment is the first big thing that’s going on,” he noted. “Nobody believes in anything anymore.” “The second big thing is withdrawal. People have retreated to their families and fight only for the family survival. Society has been fragmented,” he said.

Kyrimlis works for his partner’s family firm, having returned to Greece after working for an engineering consultancy in London. Returning to Greece in the midst of the country’s financial breakdown, he said he now noted an increase in animosity between people, saying there was a “widespread hatred not directed to anyone in particular, it’s like all against all.”

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“When they reached the port in Sicily the Italian Red Cross were there, with coffins and flowers for every person who died [..] The tough MSF doctors who have been going from war to war cried because of the flowers..”

Rescuing Refugees: ‘You Never Get Used To It – And That’s A Good Thing’ (G.)

It was the silence of the passengers that Hassiba Hadj-Sahraoui first noticed. Usually when the humanitarian rescue boat sees a tiny dinghy bobbing about in the Mediterranean there’s frantic waving and shouting. “When our team approached in smaller boats and everyone was so quiet we realised something was wrong,” she says. “We asked permission to go aboard and that’s when we realised the others had been waiting for rescue for hours with dead bodies in the boat.” Twenty-two bodies were recovered that day (21 of them women) and 209 people were saved by the crew of the Aquarius, a boat run by Medicins Sans Frontieres (MSF) that patrols the refugee route between Libya and Italy. MSF advocacy manager Hadj-Sahraoui got an idea of how they died from the testimonies of survivors once they were safely on the Aquarius.

A wooden board that had been placed along the bottom of the dinghy broke and water started to come in, mixing with leaking fuel cans. A panic ensued and the 22 people died either in a stampede or drowning in a mix of water and fuel. The people they rescued were in shock. “The priority – it’s sad to say – is with the living,” says Hadj-Sahraoui. “So there’s a very quick medical team, trying to assess needs.” Once the survivors were on the Aquarius they were each given a blanket, water and some food. The people who were soaked in fuel were sent for a shower, because the fuel and sea salt cause nasty burns. Then they registered them. Hadj-Sahraoui speaks Arabic, French and English, a great advantage in her line of work. She asks each person where they are from, how old they are, and if they are travelling alone.

“We don’t wear sunglasses, because we need to have eye contact. It’s about humanity. It’s big smiles saying: ‘You’re now safe. This is where you are. This is what’s going to happen next.’ What surprised me is how polite people are. How they take their time to say thank you.” Once all the survivors were safely on board, and being tended to, the crew of the Aquarius also felt it was right on this occasion to recover the bodies of the women and one man who died. “For several hours we tried to keep the living on one side of the boat. The bodies had spent hours in the water, so we were trying to protect the living from seeing that. The doctor took pictures for identification, because families will never know what happened to their loved ones.” When they reached the port in Sicily the Italian Red Cross were there, with coffins and flowers for every person who died.

“The tough MSF doctors who have been going from war to war cried because of the flowers,” says Hadj-Sahraoui. “I was one of the suckers who cried a lot.” She says that people who do humanitarian work need to learn to take care of themselves, because there’s a lot of emotional burnout. MSF staff have psychological debriefings before and after they go on missions, and after extreme experiences like this one.

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No-one’s going to stop this.

Inuit Fear Being Overwhelmed As ‘Extinction Tourism’ Descends On Arctic (G.)

In a few days, one of the world’s largest cruise ships, the Crystal Serenity, will visit the tiny Inuit village of Ulukhaktok in northern Canada. Hundreds of passengers will be ferried to the little community, more than doubling its population of around 400. The Serenity will then raise anchor and head through the Northwest Passage to visit several more Inuit settlements before sailing to Greenland and finally New York. It will be a massive undertaking, representing an almost tenfold increase in passenger numbers taken through the Arctic on a single vessel – and it has triggered considerable controversy among Arctic experts. Inuit leaders fear that visits by giant cruise ships could overwhelm fragile communities, while others warn that the Arctic ecosystem, already suffering the effects of global warming, could be seriously damaged.

“This is extinction tourism,” said international law expert Professor Michael Byers, of the University of British Columbia. “Making this trip has only become possible because carbon emissions have so warmed the atmosphere that Arctic sea ice in summer is disappearing. The terrible irony is that this ship – which even has a helicopter for sightseeing and a huge staff-to-passenger ratio – has an enormous carbon footprint that is only going to make things even worse in the Arctic.” The Serenity is by far the biggest cruise vessel to traverse the fabled Northwest Passage, whose exploration has claimed the lives of hundreds of seamen. The ship has a crew of 655 and carries 1,070 passengers, who have paid between £19,000 and £120,000 for a voyage that Crystal Cruises says will take them on an “intrepid adventure” from Anchorage in Alaska to New York over 32 days.

For its part, Crystal insists its clients will have to follow a strict code of conduct during shore visits, while the ship’s air, water and rubbish discharges will be tightly controlled. Only low-sulphur fuel will be burned in the Serenity’s engines, said a spokesman. The Serenity will be accompanied by the UK icebreaker the RSS Ernest Shackleton, he added.

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Aug 022016
 
 August 2, 2016  Posted by at 9:10 am Finance Tagged with: , , , , , , ,  


Lewis Wickes Hine ‘Hot dogs’ for fans waiting for gates to open at Ebbets Field 1920

Asia Stocks Fall as Japan Awaits Stimulus (BBG)
Japanese Bonds Are Plunging, Australia’s Surge To Record (BBG)
China Debt Situation Gets Worse And Other EMs Start To Struggle (VW)
China Set For Special Drawing Rights Bond Issues (SCMP)
China Regulator Shutters 10,000 Funds (R.)
Student-Loan Defaulters in a Standoff With Federal Government (WSJ)
The State Of Europe’s Banks Is Far From Steady (CNBC)
UniCredit Shares Fall Sharply After European Bank Stress Tests (G.)
UK PM May Revives Industrial Policy Killed Off By Thatcher 30 Years Ago (R.)
Home Ownership In England At Lowest Level In 30 Years (G.)
South Korea Halts Sale of 80 Volkswagen Models Over Emissions Scandal (AFP)
Aid Workers Try To Convert Muslim Refugees At Greek Camp (G.)
New Greek Bailout Finds IMF In A Political Bind (AFP)
Let the Games Begin! (Jim Kunstler)

 

 

With the BOJ running out of playing field, what goood can Abe do?

Asia Stocks Fall as Japan Awaits Stimulus (BBG)

Asian stocks fell for the first time in seven days, retreating from an almost one-year high, as Japanese shares slid ahead of the announcement of a $274 billion stimulus package and a slump in oil weighed on energy and commodity companies. The MSCI Asia Pacific Index dropped 0.4% to 136.85 as of 9:03 a.m. in Tokyo after closing Monday at the highest since Aug. 17. Material and industrial shares led losses on the regional gauge, while energy producers also retreated, after crude sank into a bear market and sank below $40 a barrel for the first time since April on Monday. Japan’s Topix index lost 0.8% as investors weighed earnings and the government was poised to give details on steps to bolster an economy threatened by a strengthening yen and weak consumer spending.

Asian equities have extended their July rally, which was the best month since March, on the prospect of more global stimulus. The regional gauge has now shrugged off the fallout of Britain’s vote to leave the European Union and is up 3.7% for the year. Still, oil’s fall of more than 20% from its June high is muddying the waters and raising concerns about the recovery of the global economy. Crude’s decline “will probably weigh on sentiment a little bit and we may see some risk-off moves associated with that,” James Woods, a strategist at Rivkin Securities in Sydney, said by phone. “We’ll have an update from Shinzo Abe in Japan today, just running through the measures of the 28 trillion yen stimulus package. It’s really what’s going to dictate risk sentiment today.”

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Yikes.

Japanese Bonds Are Plunging, Australia’s Surge To Record (BBG)

Japanese bonds are plunging. Australia’s surged to a record. Blame it all on central banks. Benchmark sovereign notes in Japan headed for their biggest loss in three years on speculation the central bank will amend its unprecedented debt-purchase plan as soon as September. Australian yields tumbled to levels never seen before as the Reserve Bank cut interest rates in response to inflation running below its target. The divergence highlights the potency central banks have over their bond markets, even when analysts are questioning the limits of monetary policy. The Reserve Bank of Australia, with a benchmark of 1.5%, still has room to cut. PIMCO said the Bank of Japan – which is buying 80 trillion yen ($780 billion) a year of bonds and uses negative interest rates – has pushed policy as far as it can.

“The financial markets are being driven by what the central banks are doing,” said Roger Bridges at Nikko Asset Management in Sydney. “The central bank here has room to cut if necessary. In Japan, the policy options are deemed to be running out.” [..] Japanese policy makers fueled speculation they’re running out of options when they finished a meeting last week and opted against extending their two main tools, the bond purchases and negative interest rates, even as the inflation rate falls further below zero. They also announced a review of the effectiveness of the central bank’s policies. “We have probably seen the low of the yield of the super long JGBs,” Tomoya Masanao, Pimco’s head of portfolio management in Japan, wrote. “The BOJ hit its limit,” he wrote in a report on the company’s website last week.

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Let’s see the NPLs in the shadow system.

China Debt Situation Gets Worse And Other EMs Start To Struggle (VW)

One article this month pretty much summed up the overbuilding issue in China. In aggregate, Chinese cities are planning for 3.4 billion people in 2030. That’s three times the existing population and forecast population growth is minimal. Peak urbanisation may have arrived for China, the substantial slowdown in wage inflation is a strong indicator that the demand for labour is flat at best. This aligns with recent reports of a substantial increase in the unemployment rate. The city of Tieling is one example of what happens when a construction and manufacturing bubble pops. Remember that local governments earn most of their revenues from property development activities, which would fall flat if urbanisation stops.

A collapse in revenue would make debt servicing problematic, which is particularly concerning as local governments have seen an enormous increase in their debt issuance in 2015 and 2016. This includes continuing to build coal fired power plants when the existing plants are running at low capacity. Local governments are blocking lenders from withdrawing credit in order to protect jobs at zombie companies. 7.5% of companies in China are believed to be economically unviable, with medium and large state owned entities the worst.

Last month I wrote about the first non-performing loan securitisations in China and it looks like this process is ramping up. The Agricultural Bank of China is planning to sell a US$1.6b securitisation of non-performing loans which includes the underlying loans being marked down to 29% of face value. The other big way that banks are planning to clean up their loan books is debt to equity swaps, which are expected to start soon. There’s plenty to worry about with peer to peer lending and a crackdown is coming for wealth management products. In order to reduce fraud in these areas executives are being given tours of prisons, as a reminder of what might happen to them when investors lose money.

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I talked about this yesterday in Why Should The IMF Care About Its Credibility? I don’t see it becoming a major issue any time soon, if at all.

China Set For Special Drawing Rights Bond Issues (SCMP)

China might take another big step forward this month in its long-term aim to forge an IMF money system into the world’s dominant currency. Mainland media group Caixin reported that the World Bank planned to issue bonds denominated in Special Drawing Rights in China as early as the end of this month. It said policy bank China Development Bank was also planning an SDR bond issue. The SDR is a unit of money created by the IMF and defined by a weighted average of various convertible currencies. Market traders questioned the real purpose of such bonds, saying the SDR had little use in investment and trade. China has long had an obsession with the IMF’s SDR and wants to reduce the global reliance on the US dollar.

The IMF agreed last November to add the yuan to its SDR basket of currencies and offered the weighting as the third-biggest in the group, which Beijing saw as a triumph in its push for the yuan to have greater global influence. But the yuan later came under heavy depreciation pressure amid massive capital outflows, raising doubts about its credibility as a global currency. Beijing then began to publish its foreign exchange reserves, overseas investment and payments denominated in SDR. Central bank governor Zhou Xiaochuan said in April that the People’s Bank of China was studying the feasibility of issuing SDR bonds in China. If the World Bank issue went ahead, it would be one month before the yuan was formally included in the currency basket.

Bank of China researcher Zhao Xueqing said the timing was proper because the IMF was looking for ways to expand the use of the monetary unit. However, one Shanghai-based trader at a major bank said the issue would be more symbolic than meaningful. “It’s more like China wanting to show it has a big role in the global financial market”, she said. “But who will buy them? How will they be priced and transacted? … Even yuan-denominated bonds issued by foreign institutions are not actively traded.” An in-house economist at a Shenzhen-based domestic bank said:“I doubt there is any meaningful use to the issuing of such bonds. If such bonds were worth investing in, why hasn’t there been any active issues or transactions in much more mature countries before?”

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China’s financial world is still Wild East. Lots of abuse and losses for grandma’s.

China Regulator Shutters 10,000 Funds (R.)

China’s funds regulator said on Monday it has canceled the licenses of over 10,000 funds, amid a crackdown on the country’s poorly regulated fund management sector, which has been dogged by runaway managers and misappropriation of investments. The move comes after the hedge fund industry was thrown into disarray earlier this year as managers rushed to comply with stringent new rules. “Some funds registered in reality had no intention of getting into the business,” the Asset Management Association of China (AMAC) said. “Some engaged in illegal fundraising for illegal and criminal activities under the guise of funds, cheating the public,” the note added. New rules introduced by AMAC that took effect in July require fund managers to fully disclose their investment risks, review the identities of investors, and set up special accounts to manage capital.

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Something will have to give. The numbers are getting out of hand.

Student-Loan Defaulters in a Standoff With Federal Government (WSJ)

The letters keep coming, as do the emails. They head, unopened, straight into Jason Osborne’s trash and deleted folder. The U.S. government desperately wants Mr. Osborne and his wife to start repaying their combined $46,500 in federal student debt. But they are among the more than seven million Americans in default on their loans, many of them effectively in a standoff with the government. These borrowers have gone at least a year without making a payment—ignoring hundreds of phone calls, emails, text messages and letters from federally hired debt collectors. Borrowers in long-term default represent about 16% of the roughly 43 million Americans with student debt, now totaling $1.3 trillion across the U.S., and their numbers have continued to climb despite the expanding labor market.

Their failure to repay—in many cases due to low wages or unemployment, in other cases due to outright protest at what borrowers see as an unfair system—threatens to leave taxpayers on the hook for $125 billion, the total amount they owe. The Osbornes say they are the victims of a for-profit school that made false promises and a predatory lender—the government. “Do you think I’m going to give them one penny I’m making to pay back the loan for a job I’m never going to hold?” said Mr. Osborne, 45, who studied to be a health-care worker but can’t find a job as one. The rising number of borrowers in default weakens the economy as underwater homeowners did after the housing crash: by damaged credit, an inability to spend and save for the future, and a lack of resources to move to better jobs.

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“..the 34 listed banks in the latest stress tests results have lost on average 33% of their book value since the last stress tests were done less than two years ago..”

The State Of Europe’s Banks Is Far From Steady (CNBC)

Bank investors rejoice! The European Banking Authority declares stress tests should no longer be about pushing fresh capital into the system, as they were five years ago, or drilling down in to asset quality, as in 2014. Nope. The good news is that we are now in a world where “steady-state monitoring” is what’s needed. So will this “steady state’ policy pronouncement provide the confidence and assurance investors need? I hate to say it but I’m not convinced. Even if the stock prices overall bounce a bit this week, the banking sector did not get off to a good start Monday. I fear the market will continue to apply their own version of stress tests and find both the banks – and the regulators for that matter -lacking.

I asked European Central Bank President Mario Draghi at the last policy meeting if investors were over-exaggerating the risks. His response was cautious but positive. ”I don’t want to underplay the situation, to say it’s not a solvency problem, it’s a profitability problem doesn’t mean that one underplays but figure wise, we see from a solvency viewpoint, our banks are better off than years ago but our banks do have profitability issues, especially those with a high share of NPLs (non-performing loans), but not only those with high share of NPLs, some of it has to do with weak growth performance of the past few years. Draghi added that he was pretty confident that “strong supervision, robust regulation and better communication by supervisory authorities will still improve the situation and the perception in the rest of the world’s eyes.”

Call me cynical but I’m not sure the EBA’s “steady state” monitoring communication is quite what investors are looking for. Especially when you have a panel of respected academics including ZEW’s Sascha Steffen suggesting this month that European banks need €900 billion ($1 trillion) of fresh capital to convince investors they are robust. Who knows? But just compare that to the €280 billion the EBA says has been pumped in since 2011. Plus the report’s authors also point out that the 34 listed banks in the latest stress tests results have lost on average 33% of their book value since the last stress tests were done less than two years ago. A clear sign in my mind that the market still had significant concerns about the health of bank balance sheets and their ability to make profits.

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Can Renzi bail out his biggest banks too, like he trying to do with Monte Passchi?

UniCredit Shares Fall Sharply After European Bank Stress Tests (G.)

Italy’s biggest bank, UniCredit, has borne the brunt of lingering anxiety about the country’s banking sector, seeing its shares fall sharply following the EU-wide banking health checks. The 9.4% drop in UniCredit shares, which were being closely monitored by the Italian Borse on Monday amid heavy trading, followed Friday’s publication of stress tests on 51 banks across the EU. In the European Banking Authority tests, UniCredit recorded a capital ratio of more than 7% after the stress test applied a hypothetical shock to global growth, interest rates and currencies. Although well above the legal minimumof 4.5%, it left Unicredit as one of the five weakest out of the 51 banks tested.

The deterioration in its capital ratio was not on the scale of Banca Monte dei Paschi di Siena (MPS) – Italy’s third largest bank – which announced a rescue package on Friday aimed at funding at least €5bn worth of capital, after the stress test showed that its entire capital base would be wiped out under the adverse scenario. MPS was the worst-performing bank of any bank tested. Shares in MPS, regarded as the world’s oldest bank, were among the few to rally after the stress test results as its rescue operation appeared to alleviate pressure on the Italian government to intervene. Even so, questions remained about how easily MPS could find investors willing to stump up €5bn when its existing stock market value was less than €1bn.

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In itself, not a bad idea. Just don’t push it all towards exports. Make your own stuff. It’s the way of the future.

UK PM May Revives Industrial Policy Killed Off By Thatcher 30 Years Ago (R.)

Prime Minister Theresa May will on Tuesday outline her bid to reshape the British economy for a post-Brexit world, reviving the once unfashionable concept of industrial policy 30 years after Margaret Thatcher killed it off. May will chair the first meeting of the “Cabinet Committee on Economy and Industrial Strategy” in her Downing Street Offices, bringing together the heads of 11 other ministries to set out her vision for a state-boosted industrial renaissance. “If we are to take advantages of the opportunities presented by Brexit, we need to have our whole economy firing,” May said ahead of the meeting in a statement released by her office. “We also need a plan to drive growth up and down the country – from rural areas to our great cities.”

After a referendum campaign that revealed dissatisfaction in many of Britain’s struggling post-industrial regions, May is pitching a plan to reunite the country by raising the prospects of those who she casts as “hard-working people”. The June 23 vote to leave the EU has raised serious questions about the future of the world’s fifth largest economy, with some surveys indicating a recession, a hit to consumer confidence and a possible fall in investment. “We need a proper industrial strategy that focuses on improving productivity, rewarding hard-working people with higher wages and creating more opportunities for young people so that, whatever their background, they go as far as their talents will take them,” May said ahead of the meeting.

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This is the kind of pain that takes a long time to heal. But how predictable would you like it? “According to Nationwide, the UK average had risen to £196,930 in February – a 60% increase in 13 years.”

Home Ownership In England At Lowest Level In 30 Years (G.)

Home ownership in England has fallen to its lowest level in 30 years as the growing gap between earnings and property prices has created a housing crisis that extends beyond London to cities including Manchester. The struggle to get on the housing ladder is not just a feature of the London property market, according to a new report by the Resolution Foundation thinktank, with Greater Manchester seeing as big a slump in ownership since its peak in the early 2000s as parts of the capital, and cities in Yorkshire and the West Midlands also seeing sharp drops. Home ownership across England reached a peak in April 2003, when 71% of households owned their home, either outright or with a mortgage, but by February this year the figure had fallen to 64%, the Resolution Foundation said.

The figure is the lowest since 1986, when home ownership levels were on the way up, with a housing market boom fuelled by the deregulation of the mortgage industry and the introduction of the right-to-buy policy for council homes by Margaret Thatcher’s Conservative government. The Resolution Foundation’s analysis highlights the scale of the job faced by the prime minister, Theresa May, who has pledged to tackle the housing deficit. May warned last month that unless the issue was dealt with “young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing.”

The report, based on analysis of the latest Labour Force Survey, showed that in early 2016 only 58% of households in Greater Manchester were homeowners, compared with a peak of 72% in 2003. In outer London, the peak in ownership came earlier, in 2000, but the fall was also from 72% then to 58% in February. The West Midlands and Yorkshire have also seen double-digit drops, driven by declines in Sheffield and Leeds.

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VW had already suspended sales July 25. BTW: 80 different models?!

South Korea Halts Sale of 80 Volkswagen Models Over Emissions Scandal (AFP)

South Korea is suspending sales of 80 Volkswagen models as part of a widening investigation into the German carmaker’s emissions cheating scandal. The environment ministry said most of the models had been showcased for sale until recently, and added that the problem vehicles had fabricated documents for emissions and noise-level tests. “As of August 2 we have revoked the certification of 83,000 vehicles of 80 models,” said a ministry statement. In July South Korean prosecutors arrested an executive of Volkswagen’s South Korean unit as part of their investigations.

The world’s second-largest automaker faces legal action in several countries after it admitted to faking US emissions tests on some of its diesel-engined vehicles. In November 2015 Seoul ordered Volkswagen Korea to recall more than 125,000 diesel-powered cars sold in South Korea and fined the firm 14.1bn won ($12.3m). Foreign carmakers, especially German brands like Volkswagen, have steadily expanded their presence in South Korea’s auto market, long dominated by the local giant Hyundai and its affiliate Kia. Sales of foreign cars account for about 15% of total auto sales, compared with 10% in 2012. Around 70% of foreign auto sales in South Korea are diesel-engined vehicles.

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One of many things that are going wrong in Greece vis a vis refugees.

Aid Workers Try To Convert Muslim Refugees At Greek Camp (G.)

Christians working in Greece’s most notorious asylum detention centre have tried to convert some of the Muslim detainees, who have been held under the terms of the EU-Turkey migration deal. On at least two occasions in recent months, aid workers have distributed conversion forms inside copies of Arabic versions of the St John’s gospel to people held at the Moria detention camp on Lesbos. The forms, seen by the Guardian, invite asylum seekers to sign a statement declaring the following: “I know I’m a sinner … I ask Jesus to forgive my sins and grant me eternal life. My desire is to love and obey his word.” Muslim asylum seekers who received the booklet said they found the aid workers’ intervention insensitive.

“It’s a big problem because a lot of the people are Muslim and they have a problem with changing their religion,” said Mohamed, a detainee from Damascus. “They were trying this during Ramadan, the holiest Muslim month.” A second Syrian, Ahmed, said: “We like all religions, but if you are a Christian, and I give you a Qur’an, how would you feel?” Detainees alleged that the forms were distributed by at least two representatives of Euro Relief, a Greek charity that became the largest aid group active in Moria after other aid organisations pulled out in protest against the EU-Turkey deal. The camp is overseen by the Greek migration ministry, but aid groups perform most of the day-to-day management.

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As I wrote yesterday in Why Should The IMF Care About Its Credibility?, the IMF has a credibility problem. Multiple, in fact.

New Greek Bailout Finds IMF In A Political Bind (AFP)

The IMF can scarcely ignore Europe. Its members together hold the largest voting bloc on the Executive Board, the body which approves bailouts. The United States is still the single-largest member. The result is a complex equation for the Fund, which has pledged to make a decision before the end of the year. If it bails Greece out again, some will surely see Europes hand pulling the strings. But if it abstains, the Fund may appear to suggest the bailout is doomed to fail. “That’s the conundrum they face,” Peter Doyle, a former official in the IMF’s European Department, told AFP. ”If they go along they look like they’re caving in; if they reject, it means that they could potentially be raising new big alarms.” With its nerves already frayed by Brexit, Europe can still hardly afford a new, large-scale Greek crisis.

This latest dilemma could still offer the IMF a means of proclaiming its independence from the member countries. “Theres a need for them to rebuild their credibility,” Desmond Lachman, a former European Department official, told AFP. “By staying out of Greece, they could tell the rest of the world ‘weve realized that we were politically used.’” Doyle does not believe the IMF can be truly independent, saying the United States and Europe will still call the shots. ”That’s only what matters and that has always been the case,” said Doyle, who left the Fund in 2012. At the center of the drama and after six years of recession, Greece has seized on the latest controversy to make its views known. “The IMF has been neither useful nor needed in Europe,” said Olga Gerovassili, a government spokeswoman.

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“And so the great disaster movie of 2016 commences: Godzilla Versus Rodan the Flying Reptile.”

Let the Games Begin! (Jim Kunstler)

The distraction du jour is whether Trump has become an agent of Russia. Notice that this line of intel comes direct from the neo-con central agitprop desk. This unofficial US War Party representing the amalgamated war industries has been busy demonizing Russia throughout the current presidential term. Not all Americans are so easily gulled, though. Those who know history understand, for instance, that the Crimea has been a province of Russia almost continually for hundreds of years — except the brief interval when the ur-Ukrainian Soviet leader, Nikita Khrushchev one drunken evening gave it away to the then-Soviet region of Ukraine in a fit of sentimentality, assuming it would remain a virtual property of Greater Russia forever.

Notice, too, that since Russia annexed it in 2014 (being the site of its only warm water port and major naval stations) not even the US neo-con war party has been able to make a credible case for fighting over it. Instead, they’ve resorted to name-calling: Putin the “thug,” Putin the “worst political gangster in the world.” This is exactly the brand of foreign policy that Hillary will bring to the Oval Office. Not that Donald Trump offers a coherent alternative. The reasonable suspicion persists that he doesn’t know his ass from a hole in the ground vis-à-vis how the affairs of the world actually work. For him it’s all same as tough-talking the sheet-rocker’s union. Then, of course, Trump had to immediately step in dog-shit by bad-mouthing the mother of an American army hero who-just-happened-to-be of the Mohammedan persuasion.

Trump for practical purposes is a child and a reasonable case is not hard to make for denying him presidential power. And so the great disaster movie of 2016 commences: Godzilla Versus Rodan the Flying Reptile. Which one will survive to completely destroy the sclerotic remains of our nation? The good news is that voters are moving to the Third and Fourth party nominees, Gary Johnson (Libertarian) and Jill Stein (Green) in droves, herds, flocks, porpoise pods, and stampedes. Perhaps both of these relatively sane candidates will show enough polling strength to make it into the Great Debates. Won’t that be fun?

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Jul 272016
 
 July 27, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , , , , ,  


John Vachon Five o’clock crowds, Chicago 1941

Japan PM Unveils More Than $266 Billion Stimulus (AFP)
Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)
China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)
China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)
Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)
A Refinery-Driven Correction Is Upon Us’ (BBG)
Cameron Was Right, Britain Is Broken (G.)
Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)
Assange: “A Lot More Material” Will Be Released (ZH)
The Neocons Are Backing Hillary Clinton (Intercept)
The Odious Versus the Tedious (Kunstler)
Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)
Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)
We Love To Talk Of Terror (Robert Fisk)
The Power of “Nyet” (Dmitry Orlov)
Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)
LUCA: The Ancestor Of All Living Things On Earth (IBT)

 

 

Abenomics must end in full-blown madness.

Japan PM Unveils More Than $266 Billion Stimulus (AFP)

Japan on Wednesday announced a whopping economic stimulus package worth more than 28 trillion yen ($266 billion), media reported, to boost the stumbling economy. Prime Minister Shinzo Abe announced the package in a speech in southwestern Japan, giving few details except to say it would include about 13 trillion yen in government spending, according to Jiji Press news agency.

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“..scrapping dividend payments to shareholders, thousands of job cuts and asset sales…”

Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)

Deutsche Bank, the German bank which is an important part of the global financial system, announced revenue and income falls Wednesday which could add further concerns for investors made jittery by a combination of Brexit and previous issues at the bank. Its second-quarter net income was down 98% from the same period in the previous year, to 20 million euros ($22 million), as it exited parts of its business while revenues were down 20% to 7.4 billion euro. Further cuts may be needed, John Cryan, chief executive of Deutsche Bank, warned. “If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring,” he said in a statement.

Deutsche’s CET1 ratio – a key measure of financial strength – improved slightly to 10.8%. The bank, one of Germany’s largest lenders, has lost around 40% of its market value this year as concerns mount about its capital position and $14 billion in fines over past misconduct. John Cryan, the bank’s co-chief executive who was appointed in July last year, has embarked on a drastic plan to meet its capital targets, including scrapping dividend payments to shareholders, thousands of job cuts and asset sales. Raising new capital is likely to be difficult because of the bank’s holdings of debt for some of the worse off euro zone countries.

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As I’ve said 100 times: “China’s “shadow banking” system is masking the rise in indebtedness..

China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)

China’s “shadow banking” system is masking the rise in indebtedness in China, Moody’s Investors Service said in a report Wednesday. The rating agency said overall leverage in China’s economy continued to rise with credit growth outpacing the rise in nominal GDP. “The growth in overall leverage may be understated, because some of the fastest growing components of shadow banking are not included in TSF (total social financing),” said Michael Taylor, Moody’s chief credit officer for Asia Pacific. The credit growth was measured using TSF, an economic barometer of total fundraising by Chinese non-state entities, including individuals. It didn’t, however, include all shadow banking activities, which have grown in recent years.

“We estimate the potential understatement to be significant, amounting to at least RMB16 trillion ($2.4 trillion) or 23% of GDP at end-2015, equivalent to around one-third of shadow banking,” Taylor added. Moody’s said TSF flows were being sustained by formal bank credit flows supported by accommodative monetary policy. The increasing leverage was worrying. “The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said Stephen Schwartz, a Moody’s senior vice president.

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Shadow banks and their ‘wealth’ products.

China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)

Chinese stocks slumped the most in six weeks amid concern regulators are moving to limit equity investments by some wealth-management products. The Shanghai Composite Index fell 1.6% at the mid-day break, reversing a gain of as much as 0.2%. The Shenzhen Composite Index lost 3%, while the ChiNext Index of small-company shares sank 4%, the most since June 13. China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

“There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming at Hengsheng Asset Management. “Under such circumstances, Chinext is especially vulnerable, given its high valuations and the recent gains.” The China Banking Regulatory Commission met with some banks this month on the rule revision and a final version hasn’t been drafted, the 21st Century Business Herald report said. China’s watchdogs have signaled they’re paying closer attention to the fund managers and brokerages who funnel the nation’s household savings into investments from stocks to bonds and derivatives.

The China Securities Regulatory Commission this month issued guidelines curbing the use of leverage by structured asset management plans. Li Chao, vice chairman of the regulator, told a gathering of firms in the northeastern city of Harbin last week to do better due diligence on prospective clients when arranging initial public offerings, secondary share sales and bond issues, people familiar with the matter said.

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Hong Kong=Japan=China. Exact same pattern. World trade collapsing. If Hong Kong weren’t so dependent on imports, those would fall much more than 5.6%. “Domestic exports to the United Kingdom [..] plunged 48.2% in June.”

Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)

Hong Kong’s total exports in June fell for the 14th straight month, dampened by a slowdown in China, with the city’s factories bracing for more pain in coming months from the impact of Brexit. Open and trade-dependent economies in Asia such as Hong Kong are expected to be among the most vulnerable to a slowdown in global trade from Britain’s shock vote to leave the European Union as the effects filter through factory supply chains, analysts say. Hong Kong’s total exports in June fell 1% from a year earlier to HK$296.5 billion ($38.2 billion), government data showed on Tuesday. Total imports fell 0.9%, in its 17th straight month of decline, to HK$342.1 billion. In May, annual exports slipped 0.1% while imports dropped 4.3%.

For the first half of 2016, total exports value dropped 3.9%, while imports fell 5.6%. The city recorded a visible trade deficit of HK$199.6 billion for the first half period, equivalent to 10.8% of the value of imports. “Looking ahead, the external trading environment remains challenging given the uncertainties associated with the outcome of the UK referendum in favor of leaving the EU, slow recovery in the advanced markets, monetary policy divergence among major central banks and heightened geopolitical tensions in various regions,” the government said, adding it will monitor the situation closely. Domestic exports to the United Kingdom, which accounted for 2.2% of the total, plunged 48.2% in June.

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Well, not really, it’s all just about demand.

A Refinery-Driven Correction Is Upon Us’ (BBG)

Gear up for a fall in oil prices. The global oil market is “severely oversupplied” with gasoline — with stocks at a five-year high — serving as a blow to crude prices from next month, reckon Morgan Stanley analysts led by Adam Longson. In a report published on Sunday, the analysts foresee “worrisome trends” for oil supply and demand, led by refineries generating too much gasoline in recent months. Faced with the need to cut back on capacity utilization to protect profit margins, these refineries are set to crimp crude oil purchases and drag prices lower, the analysts say. “Crude oil demand is trending below refined product demand for the first time in three years,” they write.

“Refineries are the true consumer of crude oil, and crude oil demand is ultimately more important than aggregate refined product demand for oil balances. Given the oversupply in the refined product markets, fading refinery margins, and economic run cuts, we expect crude oil demand to deteriorate further over the coming months.” A glut of gasoline could weigh significantly on oil prices, which have been lifted in recent weeks by supply disruptions and healthy petrol demand in emerging markets. Excess gasoline also means that refiners may close their doors sooner and for longer than usual during their traditional summer production shutdown, taking further demand out of the market.

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Reading through a piece like this, it becomes even more surprising that Brexit was a surprise to so many Brits.

Cameron Was Right, Britain Is Broken (G.)

In opposition, David Cameron battered Gordon Brown with two words: Broken Britain. It was his Murdoch-inspired catchphrase for hoodies scrapping in gangs, Neets necking alcopops, teenagers ending up pregnant. It set the framework for Iain Duncan Smith’s welfare reforms. Broken Britain summed up the dark side of the New Labour era: a busted social contract and a class wantonly sponging off the rest of society. It always struck me as the right phrase for the wrong target. The real Broken Britain is the one revealed over the past four days in two reports from MPs. It is workers urinating into bottles at the “Victorian workhouse” of Sports Direct, because their toilet breaks are restricted. It is women being offered permanent jobs in return for sexual favours.

It is BHS, a high-street chain nearly as old as the Queen, effectively killed by two “plundering” owners. It is 10,000 shop workers who will shortly be out on the streets, and 20,000 pension-scheme members who must now worry over how much they’ll have to live on in their old age. The riots of 2011 were taken by Cameron as proof he’d been right all along: “Irresponsibility. Selfishness. Behaving as if your choices have no consequences … Reward without effort. Crime without punishment. Rights without responsibilities.” This is Philip Green and Mike Ashley summed up – along with all the well-heeled consultants, directors and credulous politicians (including Cameron) who applauded and subsidised them on their way, bought off with fat fees and cheap photo-ops.

The rioting kids who stole bottles of water and robbed tellies from their local Argos were given prison sentences worth a total of 1,200 years. By contrast, Green and Ashley weren’t even going to bother facing MPs. Only after five months of back and forth did Sports Direct’s Ashley get in the chauffeured car down to Westminster. Green went one better, demanding that Frank Field resign from the BHS inquiry – then rocking up to parliament and telling MPs to stop looking at him. Such prickliness from a multibillionaire would have been funny had it not been for the thousands of families whose lives he’d just ruined.

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Wow. I found a few sentences at Reuters that sound somewhat sensible on the topic. “If the Russians hadn’t hacked us (for which we have no proof), Americans would have never found out about what we did.” Dumb f**ks!

Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)

“We are again seeing these maniacal attempts to exploit the Russian theme in the U.S. election campaign,” Kremlin spokesman Dmitry Peskov told reporters when asked about the leaked emails. “This is not breaking new ground, this is an old trick which is being played again. This is not good for our bilateral relations, but we understand that we simply have to get through this unpleasant period.” U.S. Secretary of State John Kerry said earlier on Tuesday he had raised the hacking issue at a meeting in Laos with Russian Foreign Minister Sergei Lavrov. “I don’t want to use four-letter words,” was Lavrov’s only response to reporters when asked whether Russia was responsible for the email hack.

Earlier this month, Carter Page, a foreign policy adviser to Trump, visited Moscow, where he gave a lecture complaining that Western governments had often had a hypocritical focus on democratization in the post-Soviet world. Analysts say the Kremlin would welcome a Trump win because the billionaire U.S. businessman has repeatedly praised Putin, spoken of wanting to get along with Russia, and has said he would consider an alliance with Moscow against Islamic State. Trump’s suggestion he might abandon NATO’s pledge to automatically defend all alliance members is also likely to have gone down well in Moscow, where the military alliance is cast as an outdated Cold War relic.

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“Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails..”

Assange: “A Lot More Material” Will Be Released (ZH)

One month ago, when Wikileaks’ Julian Assange told ITV’s Richard Peston that he would publish “enough evidence” to indict Hillary Clinton, few took him seriously. And while Hillary has not been indicted – yet – last Friday’s leak has already managed to wreak havoc and has led to revelations of cronyism and collusion within the Democratic party and the media, the resignation of the DNC Chair Debbie Wasserman Schultz, as well as chaos on the first day of the Democratic convention. Hence, why we believe Assange will be taken more seriously this time. Earlier today, Assange told CNN that Wikileaks might release “a lot more material” relevant to the US electoral campaign. Assange spoke to CNN following the release of nearly 20,000 hacked Democratic National Committee emails.

The topic then turned to the topic du jour: “did Putin do it”? Assange refused to confirm or deny a Russian origin for the mass email leak, saying Wikileaks tries to create ambiguity to protect all its sources. “Perhaps one day the source or sources will step forward and that might be an interesting moment some people may have egg on their faces. But to exclude certain actors is to make it easier to find out who our sources are,” Assange told CNN. The Kremlin has rejected allegations its behind the hacking, calling suggestions it ordered the release of the emails to influence US politics the “usual fun and games” of the US election campaigns, while the Russian foreign minister had an even simpler reaction to the same question: “I don’t want to use four-letter words.”

Dmitry Peskov, the Kremlin spokesman, added, “This is not really good for bilateral relations.” All of this now appears to be irrelevant, and as we speculated earlier, the “anti-Russia” narrative is now in motion and moments ago Obama said that it’s ‘possible’ Putin is trying to sway vote for Trump. Which brings us to the next point: speaking from the Ecuadorian embassy in London, where he faces extradition over sexual assault allegations, Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails, which have had tumultuous affect on the party at the start of its national convention [..]

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And you think Trump is the danger? These are the people who shed blood around the globe. These are the people responsible for the terrorist attacks against the west.

The Neocons Are Backing Hillary Clinton (Intercept)

As Hillary Clinton puts together what she hopes will be a winning coalition in November, many progressives remain wary — but she has the war-hawks firmly behind her. “I would say all Republican foreign policy professionals are anti-Trump,” leading neoconservative Robert Kagan told a group gathered around him, groupie-style, at a “foreign policy professionals for Hillary” fundraiser I attended last week. “I would say that a majority of people in my circle will vote for Hillary.” As the co-founder of the neoconservative think tank Project for the New American Century, Kagan played a leading role in pushing for America’s unilateral invasion of Iraq, and insisted for years afterwards that it had turned out great.

Despite the catastrophic effects of that war, Kagan insisted at last week’s fundraiser that U.S. foreign policy over the last 25 years has been “an extraordinary success.” Republican presidential nominee Donald Trump’s know-nothing isolationism has led many neocons to flee the Republican ticket. And some, like Kagan, are actively helping Clinton, whose hawkishness in many ways resembles their own. The event raised $25,000 for Clinton. Two rising stars in the Democratic foreign policy establishment, Amanda Sloat and Julianne Smith, also spoke.

The way they described Clinton’s foreign policy vision suggested that if elected president in November, she will escalate tensions with Russia, double down on military belligerence in the Middle East and generally ignore the American public’s growing hostility to intervention. Sloat, the former deputy assistant secretary of state in the Bureau of European and Eurasian Affairs, boasted that Clinton will be “more interventionist and forward-leaning than Obama’s been” in Syria. She also applauded Clinton for doing intervention the right way, through coalitions instead of the unilateral aggression that defined the Bush years.

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“What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? ”

The Odious Versus the Tedious (Kunstler)

You thought the Republican convention was a ghastly spectacle of royal Trumpery (and Iago-style backstabbing featuring the arch-asshole Ted Cruz)? Now comes the Democratic Annunciation of I’m-With-Her-It’s-My-Turn, the incarnation of crony corruption in our late-state Republic of Racketeering. Remember that old movie, The Exorcist, with its demonic spewage of projectile vomit. Expect something like that on the grand scale in Philadelphia this week as the Exalted-Breaker-of-Glass-Ceilings steps forth to accept her victory tiara.

The New York Times is blaming the Ruskies for releasing those thousands of new emails disclosing the perfidy of the Democratic National Committee staff in pimping for Hillary against Bernie and trafficking with the major network news operations to manage and spin things Her way — and especially to rig the electoral machinery against Sanders. How much will his supporters Feel the Bern this week in Philly as the party attempts to put on an appearance of unity (Ha!) behind HRC? How can it conceivably be possible now for Bernie to stand by her side for the crucial unity photo op? I suspect he’d rather chew his right arm off.

For my money, the Ruskies should get the Nobel Peace Prize if they were behind the email release. What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? The sudden appearance of 20,000 smoking guns made party chairperson Debbie Wasserman-Schultz vamoose faster than you can say Debbie Wasserman Schultz, though her replacement, Donna Brazile is every inch just another blatant HRC foot-soldier. Perhaps she’ll have to orchestrate the proceedings with smoke signals or invisible ink instead of emails.

As the conventions rolled out, the aggregate miasma we call the news industry resorted to that tired trope of Optimism Versus Pessimism. Translation: you can’t handle the truth so somebody please bring out the rainbow-leaping unicorns. The American zeitgeist is a tattered garment worn by a three hundred pound tranny in a diabetic coma. It’s probably beyond salvation at this point. Somebody please put it out of its misery. Hence: Trump Versus Hillary, the odious versus the tedious, the election to end all elections.

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This makes too much sense.

Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)

Auckland house prices should be deliberately reduced by up to 50% over a period of time to make the market affordable again, Greens co-leader Metiria Turei says. The average house price in Auckland has risen to nearly $1 million, or 10 times the median household income. Ms Turei said the only way to reverse that was to slowly bring prices back down to three or four times the median household income. She told Morning Report the Green Party was considering what timeframe would work without crashing the market and hurting people who already owned homes. “The only way to prevent a bust, and to protect families in the short and long term is to lay out a comprehensive plan, which means using every comprehensive tool that we’ve got so that we can slowly bring down house prices so that they’re reasonable.”

The Auckland Council’s chief economist had suggested bringing prices down to five times the median household income by 2030, she said. Labour leader Andrew Little said Ms Turei’s declaration that Auckland house prices should be deliberately reduced was irresponsible. There was no way a Labour-led government would consider the idea, he said. “We have a very clear plan. It’s not about crashing house prices. It’s about stabilising prices. “We don’t want to cause undue economic harm to those who – in good faith – have bought homes, entered into mortgages. That’s not a responsible approach.”

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“Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.”

Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)

The Catalan government has intensified its war of words with Spain by vowing to use its democratic mandate to forge a separate Catalan state with or without the approval of Madrid. Catalonia is preparing to defy Spain’s constitutional court this week by debating the conclusions of a working group on sovereignty, nine months after the Catalan parliament put forward a resolution calling for the “beginning of a process of the creation of an independent Catalan state”. Carme Forcadell, the president of the parliament, and Raül Romeva, the minister of foreign affairs, told the Guardian enduring hostility from Madrid had left Catalonia with no choice but to press ahead with the independence agenda.

“The [Spanish state] has left us feeling that we just don’t have an alternative,” Romeva said. “We have always said that we would have preferred a Scottish-type scenario, where we could negotiate with the state and hold a coordinated and democratic referendum. We keep talking to Madrid, but all we get back from them is an echo.” Forcadell pointed to a recent scandal as evidence of the Spanish government’s attitude towards Catalonia. Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.

Forcadell said she was incredulous at the idea that the acting Spanish government, led by Mariano Rajoy, could simply brush aside the alleged incident and say nothing was going on. “How can they say that when the interior minister, who’s meant to defend the interests of all citizens, is caught conspiring to find evidence against citizens solely because they think differently? How can absolutely nothing come of that? We don’t understand it,” she said.

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The power of words.

We Love To Talk Of Terror (Robert Fisk)

The frightful and bloody hours of Friday night and Saturday morning in Munich and Kabul – despite the 3,000 miles that separate the two cities – provided a highly instructive lesson in the semantics of horror and hypocrisy. I despair of that generic old hate-word, “terror”. It long ago became the punctuation mark and signature tune of every facile politician, policeman, journalist and think tank crank in the world. Terror, terror, terror, terror, terror. Or terrorist, terrorist, terrorist, terrorist, terrorist. But from time to time, we trip up on this killer cliché, just as we did at the weekend. Here’s how it went. When first we heard that three armed men had gone on a “shooting spree” in Munich, the German cops and the lads and lassies of the BBC, CNN and Fox News fingered the “terror” lever.

The Munich constabulary, we were informed, feared this was a “terrorist act”. The local police, the BBC told us, were engaged in an “anti-terror manhunt”. And we knew what that meant: the three men were believed to be Muslims and therefore “terrorists”, and thus suspected of being members of (or at least inspired by) Isis. Then it turned out that the three men were in fact only one man – a man who was obsessed with mass killing. He was born in Germany (albeit partly Iranian in origin). And all of a sudden, in every British media and on CNN, the “anti-terror manhunt” became a hunt for a lone “shooter”. One UK newspaper used the word “shooter” 14 times in a few paragraphs.

Somehow, “shooter” doesn’t sound as dangerous as “terrorist”, though the effect of his actions was most assuredly the same. “Shooter” is a code word. It meant: this particular mass killer is not a Muslim. [..] It all comes down to the same thing in the end. If Muslims attack us, they are terrorists. If non-Muslims attack us, they are shooters. If Muslims attack other Muslims, they are attackers. Scissor out this paragraph and keep it beside you when the killers next let loose – and you’ll be able to work out who the bad guys are before the cops tell you.

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More power of words.

The Power of “Nyet” (Dmitry Orlov)

The way things are supposed to work on this planet is like this: in the United States, the power structures (public and private) decide what they want the rest of the world to do. They communicate their wishes through official and unofficial channels, expecting automatic cooperation. If cooperation is not immediately forthcoming, they apply political, financial and economic pressure. If that still doesn’t produce the intended effect, they attempt regime change through a color revolution or a military coup, or organize and finance an insurgency leading to terrorist attacks and civil war in the recalcitrant nation. If that still doesn’t work, they bomb the country back to the stone age. This is the way it worked in the 1990s and the 2000s, but as of late a new dynamic has emerged.

In the beginning it was centered on Russia, but the phenomenon has since spread around the world and is about to engulf the United States itself. It works like this: the United States decides what it wants Russia to do and communicates its wishes, expecting automatic cooperation. Russia says “Nyet.” The United States then runs through all of the above steps up to but not including the bombing campaign, from which it is deterred by Russia’s nuclear deterrent. The answer remains “Nyet.” One could perhaps imagine that some smart person within the US power structure would pipe up and say: “Based on the evidence before us, dictating our terms to Russia doesn’t work; let’s try negotiating with Russia in good faith as equals.”

And then everybody else would slap their heads and say, “Wow! That’s brilliant! Why didn’t we think of that?” But instead that person would be fired that very same day because, you see, American global hegemony is nonnegotiable. And so what happens instead is that the Americans act baffled, regroup and try again, making for quite an amusing spectacle.

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But it’s a billion-dollar industry!

Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)

The world’s most widely used insecticide is an inadvertent contraceptive for bees, cutting live sperm in males by almost 40%, according to research. The study also showed the neonicotinoid pesticides cut the lifespan of the drones by a third. The scientists say the discovery provides one possible explanation for the increasing deaths of honeybees in recent years, as well as for the general decline of wild insect pollinators throughout the northern hemisphere. Bees and other insects are vital for pollinating three-quarters of the world’s food crops but have been in significant decline, due to the loss of flower-rich habitats, disease and pests and the use of pesticides.

Neonicotinoids were banned from use on flowering crops in the EU in 2013. The UK opposed the ban and allowed a limited “emergency” lifting of the ban in 2015, but has refused further suspensions this year. There is clear scientific evidence that neonicotinoids harm bees, but there is only a little research showing the pesticides harm the overall performance of colonies. Previous work has shown that neonicotinoids reduce the number of bumblebee queens produced and severely cuts the survival and reproduction of honeybee queens. But the new research, led by Lars Straub at the University of Bern, Switzerland and published in the journal Proceedings of the Royal Society B, is the first to test how neonicotinoids affect male bee fertility.

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We’re really killing off our own family.

LUCA: The Ancestor Of All Living Things On Earth (IBT)

The planet we live on is home to an estimated 10 million species of living organisms. Hard as it may be to fathom, the immense diversity of life we see around us today – from the bacteria living in the garden soil to the majestic blue whale inhabiting the deep blue seas – all evolved from one single-celled ancestor that lived, and died, billions of years ago. In a paper published Monday in the journal Nature Microbiology, researchers have described, in unprecedented detail, this Last Universal Common Ancestor, or LUCA, which was only “half alive.” This ancestor – a single-cell, bacterium-like organism – is believed to have existed roughly four billion years ago, when Earth was just over 500 million years old. LUCA, the researchers say, was the common point of origin for three great domains of life — bacteria, archaea, which are bacteria-like single-cell prokaryotes, and the eukaryotes, a domain that includes all plants and animals.


Phylogeny for LUCA’s genes: In the two-domain tree of life, eukaryotes stem from prokaryotes, so the last universal common ancestor, LUCA, is the ancestor of archaea and bacteria.

“We are seeing something for which there was previously no evidence,” co-author William Martin from the Heinrich Heine University in Düsseldorf, Germany, told the Washington Post. “Just by asking the right questions of genome data, we were able to obtain some very interesting answers that also mesh well with what we know from geochemistry.” In order to get a clear picture of what LUCA was like, the researchers examined over six million protein-coding genes found in the present-day bacteria and archaea. After analyzing the DNA sequence of each gene and determining whether these genes were present in both bacteria and archaea, the researchers identified 355 gene “clusters” that were probably present in LUCA. “It was flabbergasting to us that we found as many as we did,” Martin told New Scientist.

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