Mar 142019
 
 March 14, 2019  Posted by at 10:42 am Finance Tagged with: , , , , , , , , , , , , , ,  


Pablo Picasso Studio with plaster head 1925

 

Zugzwang Brexit : How the UK Can Escape The Checkmate/Stalemate (English)
May Issues Final Warning To Tory Rebels: Back Me Or Lose Brexit (G.)
EU On No-Deal Brexit Motion: ‘Like Titanic Voting For Iceberg To Move’ (G.)
‘No Delay From EU – Or We Elect 73 Nigel Farages Into European Parliament’ (RT)
US Grounds Boeing 737 Max Planes, Citing Links Between 2 Fatal Crashes (CNBC)
Battle Brews over Who Should Analyze Black Boxes from 737 Crash (Fort.)
US Lawmakers Emerge From Whitaker Meeting With Conflicting Accounts (R.)
Mueller’s Forensics-Free Findings (VIPS)
Paul Manafort Sentenced To 43 Additional Months (ZH)
Greek Financial Crisis Still Evokes Pain, Fear On The Streets Of Athens (CNBC)
Sharp Rise In Arctic Temperatures Now Inevitable – UN (G.)
Coca-Cola Produces 200,000 Plastic Bottles A Minute (G.)

 

 

Nice different view of things: in chess, you can be forced to make a move (Zugzwang), even if your position gets worse. Buit there is a way out: forfeit the game, stop playing.

Zugzwang Brexit : How the UK Can Escape The Checkmate/Stalemate (English)

The EU referendum has plunged the United Kingdom into a chaos so unprecedented, that only a fool would bet on the final outcome. What is clear is that each move to try to break the political deadlock has merely shoved the nation into further bedlam. With just two weeks to go before the March 29th deadline – the country is like that coach in the final scene of 1969 crime caper The Italian Job. Any move in any direction risks sending the whole thing tumbling down a cliff, while staying put is likewise not an option. In short, all attempts to resolve the crisis simply make matters worse. The Germans have a word for this. “Zugzwang” is a term used by chess masters to describe the situation where a participant is compelled to play, even when it is clearly not in their interests to do so.

“Zugzwang Brexit” is where we are now at. Consider May’s potential moves. The EU rightly insists it is up to the UK to find a solution – but with her deal voted down, no viable alternative on the table and the EU leaders unwilling to debate the matter further what alternatives does the PM have? It is far from certain that the EU 27 would grant the UK extra time. Even if they did, an extension of Article 50 would merely kick the can further down the road. A second referendum could go either way. If ‘Leave’ were to win again we would be back at square one. If Remain won but not by a considerable margin then the issue would not be satisfactorily resolved. A No Deal Brexit would heap ruin on the country and only serve as an ‘I told you so’ for Remainers as we disappeared down the plughole of global relevance.

If the polls are to be believed a General Election would be unlikely to deliver a result very different to that of 2017 and further uncertainty – possibly lasting years would ensue. Labour’s leadership anyway remain committed to Brexit. So What Can be Done? Well there is a way out of ‘Zugzwang Brexit’ – but it is the political equivalent of forfeiting the game. The UK could revoke Article 50 and simply accept that the country has failed to reach political accord. May has twice failed to get her deal through the House of Commons and it seems likely that any further version, negotiated by any of her successors would meet a similar fate.

By revoking the mechanism by which a member state leaves the EU – dignity and sanity could momentarily be restored and the country could dampen the fuse of the ticking time bomb which Theresa May so recklessly and foolishly lit. That would be in the public’s interest, in the nations’ interest, in the interest of jobs and industry and the UK economy. As such – it’s unlikely to happen.

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“Seething Brexiteer Tory MPs lining up on ERG’s WhatsApp group in their dozens to vote against Govt A50 motion tonight, and John McDonnell confirms to #r4Today Labour will amend it – leaving it no hope of passing. Then what?”

May Issues Final Warning To Tory Rebels: Back Me Or Lose Brexit (G.)

Theresa May will attempt one final desperate roll of the dice on her Brexit deal, issuing a stark warning to mutinous Brexiters that they must approve her offer by next week or face a long article 50 extension. The prime minister was humiliated yet again amid chaotic scenes on Wednesday night in parliament, as her cabinet ruptured three ways and MPs inflicted two more defeats on the government to demand no deal should be taken off the table permanently. In an unprecedented night of Tory splits, four cabinet ministers, Amber Rudd, David Mundell, David Gauke and Greg Clark, defied their party’s last-minute whip and refused to vote against the government’s own motion, after it was amended to rule out any prospect of no-deal Brexit.

Six other cabinet ministers also splintered to back a separate proposal for a “managed no deal”, despite the prime minister’s warning that the plan was doomed. After her defeat, May signalled she would gamble one last time on forcing through her Brexit deal, bringing forward a motion on Thursday on delaying Brexit which would “set out the fundamental choice facing this house”.= If MPs agreed a deal, she said, the government would request a “short, technical extension” to article 50, a hint that May plans a third meaningful vote next week. Without an agreed deal, she said, there would be a “much longer extension” that would require the UK to take part in European parliament elections. “I do not think that would be the right outcome,” May said.

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“..the EU’s deputy Brexit negotiator, Sabine Weyand, told EU ambassadors that she feared the Commons was “divorced from reality”..”

EU On No-Deal Brexit Motion: ‘Like Titanic Voting For Iceberg To Move’ (G.)

Brussels has said a vote by UK MPs to block a no-deal Brexit in any circumstances is a meaningless move, with one senior EU negotiator describing it as “the Titanic voting for the iceberg to get out of the way”. A European commission spokesman offered a withering assessment of the decision by MPs to ignore Theresa May’s assertion that no deal was the default position unless there was a deal in place by the time of the UK’s departure. “We take note of the votes in the House of Commons this evening,” the spokesman said. “There are only two ways to leave the EU: with or without a deal. The EU is prepared for both. To take no deal off the table, it is not enough to vote against no deal – you have to agree to a deal. We have agreed a deal with the prime minister, and the EU is ready to sign it.”

MPs voted by 312 to 308 to support a backbench amendment ruling out a no-deal Brexit and striking out a phrase in a government-backed motion noting that no deal remained the default position in UK and EU law if an agreement was not ratified. They then voted on the amended motion, which won by a majority of 43. On Thursday, MPs will vote on whether to request an extension of the article 50 negotiating period beyond 29 March until 30 June. But the commission is pushing member states to take an uncompromising position. Michel Barnier, the EU’s chief negotiator, speaking to the European parliament in Strasbourg earlier on Wednesday, questioned whether the EU should offer extra time for talks, leading officials to prepare for all options to be on the table at a leaders’ summit next week.

“Why would we extend these discussions?” Barnier asked. “The discussion on article 50 is done and dusted. We have the withdrawal agreement. It is there.” During a private meeting before his public comments, Barnier advised senior MEPs that at present there was no consensus among the EU’s member states over an extension, let alone on the conditions that would be attached. At the same time, the EU’s deputy Brexit negotiator, Sabine Weyand, told EU ambassadors that she feared the Commons was “divorced from reality”. Quoting private remarks by the Dutch prime minister, Mark Rutte, Weyand concurred with his description of the decision to vote for no deal as “like the Titanic voting for the iceberg to get out of the way”.

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What powers would UK MEPs have in case a temporary extension comes into play? Interesting question.

‘No Delay From EU – Or We Elect 73 Nigel Farages Into European Parliament’ (RT)

The UK Parliament is set to seek postponement of Brexit, but Brussels may be reluctant to grant it. One argument against may be a potential poison pill in the form of Eurosceptic MEPs, voted in by offended Britons in May. The dramatic week of Brexit votes in the UK Parliament draws to a conclusion on Thursday. Earlier, MPs rejected both the deal negotiated with the EU by Prime Minister Theresa May’s cabinet, and the option to leave the EU with no deal at all, which the government asked to leave on the table to keep pressure on Brussels. MPs are now set to vote on whether London should ask for a delay in exiting the union.

While a disorderly Brexit would hurt the EU, several top European officials warned that no delay would be granted unless Britain comes up with a clear and substantial plan, which it would try to achieve if given more time. But European bureaucrats may have more reasons not to tolerate Britain dragging its feet, MEP from Scotland David Coburn told RT. If we end up staying beyond a certain period, we have to take part in the European elections. Then what you are going to see is 73 Nigel Farages returned to the European Parliament. It would make the government of the EU impossible. They would probably want to throw us out, I should think.

The next European election is scheduled for the end of May. The UK’s share of the seats would be 73 if it remained part of the EU – with both Britain and the EU making contingencies for this scenario. Nigel Farage, the former leader of the UK Independence Party, is still technically an independent MEP, as is David Coburn, even though they belong to the newly-formed Eurosceptic Brexit Party. [..] “People are becoming more and more angry about the European Union. And more and more people, who previously voted for ‘Remain’, are now supporting ‘Leave’,” he said. “I think people do not like the way that Britain has been treated by the EU.”

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Bopeing will be sued like nuts by airlines. They pay $121 million for the brand new thing and then can’t fly it. Orders are over 5000.

US Grounds Boeing 737 Max Planes, Citing Links Between 2 Fatal Crashes (CNBC)

The Federal Aviation Administration on Wednesday grounded all Boeing 737 Max jets in the U.S., citing new evidence that showed similarities between two fatal crashes of the popular planes that have killed 346 people in less than five months. The move marks a stunning turnaround for the U.S., which has stood by the American-made aircraft as dozens of countries around the world grounded the planes. The crash of Ethiopian Airlines Flight 302 on Sunday came less than five months after a Lion Air Boeing 737 Max 8 — the same type of plane — plunged into the Java Sea minutes into the flight from Jakarta, Indonesia, killing all 189 people on board. Both planes were new, delivered from Boeing just months before their doomed flights.

The FAA said the grounding will remain in effect while it investigates the crash. “An FAA team is in Ethiopia assisting the NTSB as parties to the investigation of the Flight 302 accident,” it said in a statement. New satellite data shows the plane’s movement was similar to the October crash, the FAA’s acting administrator Daniel Elwell told reporters on a call Wednesday. The agency also took physical evidence into account, but Elwell declined to elaborate. “It became clear the track was very close and behaved similarly to the Lion Air flight,” Elwell told reporters on a call Wednesday. “My hope is the FAA, the carriers, the manufacturers and all parties will work very hard to make this grounding as short as possible so that these airplanes can get back up in the sky.”

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US standing in the world.

Battle Brews over Who Should Analyze Black Boxes from 737 Crash (Fort.)

Ethiopia’s aviation authority is unable to read the black box recorders from the Boeing 737 Max plane that crashed Sunday, but a row is brewing over just where the flight recorders will be sent for analysis. The U.S. National Transportation Safety Board is pushing to have its experts analyze the data and voice recorders, which were partly damaged, the Wall Street Journal reports, but Ethiopian authorities would prefer to work with the U.K.’s Air Accidents Investigation Branch to ensure that U.S. experts won’t have undue influence in the probe of the American-made plane. Ethiopian Airlines CEO Tewolde GebreMariam told WSJ that the U.K., France and Germany were being considered as destinations for the black boxes, as was the European Union Aviation Safety Agency based in Cologne.

He added that a decision would be made Wednesday. Aviation authorities worldwide are anxiously awaiting the data from the black box recorders, hoping it will give answers as to why Boeing’s (BA, +0.55%) best-selling model has been involved in two major crashes in the past six months. Ethiopian Airlines’ recently acquired Boeing 737 Max 8 was flying from Addis Ababa to Nairobi, Kenya, when it crashed six minutes into its flight, killing all 157 people on board. The Lion Air plane that crashed 12 minutes into its flight in Indonesia in October, killing 189 people, was the same model.

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Wow. 180º different accounts of one and the same meeting. A good journalist should be able to get a good story out of this.

US Lawmakers Emerge From Whitaker Meeting With Conflicting Accounts (R.)

U.S. lawmakers on the House Judiciary Committee emerged from a closed-door meeting with former acting Attorney General Matthew Whitaker on Wednesday with conflicting accounts of their conversation with the controversial Trump ally. Whitaker was called to Capitol Hill to clarify his testimony at a combative Feb. 8 committee hearing, during which he denied speaking with President Donald Trump about a federal case involving Trump’s former attorney Michael Cohen. House Judiciary Committee Chairman Jerrold Nadler, who met for two hours with Whitaker and the panel’s top Republican, Representative Doug Collins, said Whitaker no longer denied speaking to Trump about Cohen or about the U.S. Attorney’s Office in the Southern District of New York.

“Unlike in the hearing room, Mr. Whitaker did not deny that the president called him to discuss the Michael Cohen case and personnel decisions in the Southern District,” the New York Democrat told reporters. Nadler also said Whitaker told the lawmakers that he was involved in conversations about U.S. Attorney Geoffrey Berman’s recusal from the Cohen investigation in the Southern District of New York and about whether its campaign finance case involving hush money payments to two women who claim they had affairs with Trump had gone too far. Nadler’s committee is seeking evidence that Trump may have urged Whitaker to put the investigations under the supervision of Berman, a Trump donor and former law partner of Trump lawyer Rudy Giuliani who is recused.

But Collins, a Georgia Republican, contradicted much of Nadler’s account. “He (Whitaker) said that he had not talked with the president about Mr. Cohen at all,” Collins told reporters. Collins described Whitaker’s conversations about Berman and the campaign finance case as questions for his personal staff. “(Whitaker) had no conversations with the Southern District of New York,” he said. Collins also dismissed a Nadler statement that Whitaker was involved in conversations about firing one or more U.S. attorneys as “normal personnel issues.”

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US intelligence continues to ignore its own veterans. There’s a long list of them. But their message doesn’t rhyme with official standpoints. I’ve said it before, Mueller’s account relies on hacking Russians and Assange. And he’s a coward and a liar for doing that.

Mueller’s Forensics-Free Findings (VIPS)

MEMORANDUM FOR: The Attorney General Media reports are predicting that Special Counsel Robert Mueller is about to give you the findings of his probe into any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump. If Mueller gives you his “completed” report anytime soon, it should be graded “incomplete.” Major deficiencies include depending on a DNC-hired cybersecurity company for forensics and failure to consult with those who have done original forensic work, including us and the independent forensic investigators with whom we have examined the data. We stand ready to help.

We veteran intelligence professionals (VIPS) have done enough detailed forensic work to prove the speciousness of the prevailing story that the DNC emails published by WikiLeaks came from Russian hacking. Given the paucity of evidence to support that story, we believe Mueller may choose to finesse this key issue and leave everyone hanging. That would help sustain the widespread belief that Trump owes his victory to President Vladimir Putin, and strengthen the hand of those who pay little heed to the unpredictable consequences of an increase in tensions with nuclear-armed Russia. There is an overabundance of “assessments” but a lack of hard evidence to support that prevailing narrative.

We believe that there are enough people of integrity in the Department of Justice to prevent the outright manufacture or distortion of “evidence,” particularly if they become aware that experienced scientists have completed independent forensic study that yield very different conclusions. We know only too well — and did our best to expose — how our former colleagues in the intelligence community manufactured fraudulent “evidence” of weapons of mass destruction in Iraq.

We can prove that the conventional-wisdom story about Russian-hacking-DNC-emails-for-WikiLeaks is false. Drawing largely on the unique expertise of two VIPS scientists who worked for a combined total of 70 years at the National Security Agency and became Technical Directors there, we have regularly published our findings. But we have been deprived of a hearing in mainstream media — an experience painfully reminiscent of what we had to endure when we exposed the corruption of intelligence before the attack on Iraq 16 years ago.

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No love lost for Manafort. But sending him away for years while people like the Podestas walk free, doesn’t sound fair.

Paul Manafort Sentenced To 43 Additional Months (ZH)

Lobbyist and former Trump campaign manager Paul Manafort was sentenced to more than six years in prison by a federal judge in the District of Columbia on two conspiracy counts. Manafort pleaded guilty last fall to the two charges which encompass a host of crimes – including money laundering and obstruction of justice. Manafort was sentenced to 60 months on count one, with 30 months of that overlapping a 47 month sentence handed down last week in a separate trial in Virginia – and 13 months on count two. In total, he will serve 90 months in prison, or 7.5 years.

Manafort asked Judge Amy Berman Jackson for leniency during Wednesday’s hearing, saying that the criminal charges against him have “taken everything from me already,” and asking that Berman Jackson not impose any additional prison time beyond the sentence handed down last week. Jackson agreed with Manafort that the original 19-24 year sentencing guideline “overstates the seriousness of this offense.” “I am sorry for what I have done and all the activities that have gotten us here today,” said Manafort in a calm and steady voice as he read from a prepared statement. “While I cannot undo the past, I will ensure that the future will be very different.”

[..] Before reading her decision, Berman Jackson reamed Manafort – saying that there was no good explanation for granting the leniency Manafort had requested.”What you were doing was lying to Congress and the American public,” said Berman Jackson, adding that Manafort had “contempt for” and “believed he had the right to manipulate these proceedings.” “Saying I’m sorry I got caught is not an inspiring plea for leniency,” the judge said, adding that Manafort’s defense that there was “no collusion” with Russia is not related to the case.

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A few days ago the IMF talked about how great Greece is doing. BS. 2% growth from nothing is still nothing.

Greek Financial Crisis Still Evokes Pain, Fear On The Streets Of Athens (CNBC)

Greece’s financial crisis is still hurting the hopes and dreams of the people that live in the Mediterranean nation. The country has been in economic turmoil for most of the last decade. Years of financial mismanagement alongside a culture of clientelistic politics, where goods and services were exchanged for political support, culminated in a long-term recession.= “I still think the crisis exists. It’s more than in one field now, (it’s) not only (a) financial crisis, but it’s a crisis of our values … I don’t think it’s better now … it is really a stressful period for Greece,” Stavros Dimopoulos, a 23-year-old university student told CNBC in Athens.

Different governments in Greece borrowed above the country’s capacity and its public debt pile became so high that in 2010 investors were no longer willing to keep on financing the Greek government. The end result: George Papandreou, the prime minister at the time, saw no other way out but to ask for a bailout — without even consulting with other European leaders. Since August, the Greek government has tried to show that austerity is over, by providing additional funds to the lower and middle classes. But ordinary Greeks told CNBC they haven’t seen a massive difference in their lives. “We love our city, we love our weather, we love the Greek people, but we are scared and afraid in a way, because the situation is not that good,” Dimopoulos said about him and his friends.

“We have to try harder and harder to make our own money … Sometimes we are talking (about going) abroad: If it is going to be better for us to leave Greece or if it is going to be better to stay in Greece and try harder. It is in our minds.” [..] 2019 is expected to be the country’s third consecutive year of growth, at a pace of about 2.2 percent. Still, this growth doesn’t seem to be making ordinary Greeks happy about the economy. Nikolas complained there hasn’t been a significant improvement for people and there’s still way too many taxes. “Some people have good jobs if they are in the civil service, but the others are suffering, they are paying like 85 percent taxes, which is very hard to get by. You risk losing your house if you don’t have enough money to pay the taxes,” he said. “(the) long term is hard, we just have to smile, pretend.”

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Maybe it’s an idea to rethink the way the data are made public. It’s a litany of ever more of the same now.

Sharp Rise In Arctic Temperatures Now Inevitable – UN (G.)

Sharp and potentially devastating temperature rises of 3C to 5C in the Arctic are now inevitable even if the world succeeds in cutting greenhouse gas emissions in line with the Paris agreement, research has found. Winter temperatures at the north pole are likely to rise by at least 3C above pre-industrial levels by mid-century, and there could be further rises to between 5C and 9C above the recent average for the region, according to the UN. Such changes would result in rapidly melting ice and permafrost, leading to sea level rises and potentially to even more destructive levels of warming. Scientists fear Arctic heating could trigger a climate “tipping point” as melting permafrost releases the powerful greenhouse gas methane into the atmosphere, which in turn could create a runaway warming effect.

“What happens in the Arctic does not stay in the Arctic,” said Joyce Msuya, the acting executive director of UN Environment. “We have the science. Now more urgent climate action is needed to steer away from tipping points that could be even worse for our planet than we first thought.” The findings, presented at the UN Environment assembly in Nairobi on Wednesday, give a stark picture of one of the planet’s most sensitive regions and one that is key to the fate of the world’s climate. Last year’s stark warnings from the Intergovernmental Panel on Climate Change, setting out the dramatic impacts of 1.5C of global warming, did not include the impacts of potential tipping points such as melting permafrost.

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Coca-Cola produces 3 million tonnes of plastic packaging a year.

Coca-Cola Produces 200,000 Plastic Bottles A Minute (G.)

Coca-Cola has revealed for the first time it produces 3m tonnes of plastic packaging a year – equivalent to 200,000 bottles a minute – as a report calls on other global companies to end the secrecy over their plastic footprint. The data from the soft drinks manufacturer was provided to the campaigner Ellen MacArthur, who is pushing for major companies and governments to do more to tackle plastic pollution. The figures – which the company has refused in the past to disclose – reveal the amount of plastic packaging Coca-Cola produced in 2017. The company did not reveal the scale of its bottle production but when its packaging footprint is translated into 500ml PET plastic bottles, it amounts to about 108bn bottles a year, more than a fifth of the world’s PET bottle output of about 500bn bottles a year.

Coca-Cola is one of 31 companies – including Mars, Nestlé and Danone – that have revealed how much plastic packaging they create as part of a drive for transparency by the Ellen MacArthur Foundation. Combined, they produce 8m tonnes of plastic packaging a year. But the majority of the 150 companies who have signed up to MacArthur’s global commitment to reduce plastic pollution are still refusing to publicly disclose figures on their own plastic packaging production. These include Pepsi Co, H&M, L’Oréal, Walmart, Marks & Spencer and Burberry – which was heavily criticised last year when it was revealed that the company burned £28m of stock in a year to prevent counterfeiting.


Photograph: Richard Levine/Corbis via Getty Images

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Jul 262015
 
 July 26, 2015  Posted by at 11:13 am Finance Tagged with: , , , , , , , , ,  


Jack Delano Jewish stores in Colchester, Connecticut 1940

The Last Bubble Standing – Amazon’s Same Day Trip Through The Casino (Stockman)
Europe Braces Itself For Revolutionary Leftist Backlash After Greece (Telegraph)
Varoufakis – A New Kind Of Politics? (Paul Tyson)
Varoufakis Claims He Had Approval To Plan Parallel Banking System (Kathimerini)
Greece, The Sacrificial Lamb (Joe Stiglitz)
Depression’s Advocates (J. Bradford DeLong)
The Latest Rising Greek Political Star Who Says No To Austerity (HuffPo)
How the Euro Turned Into a Trap (NY Times Ed.)
Greek Bailout Talks Pushed Back By A Few Days On Logistics (Reuters)
Renewed Bailout Talks Between Greece And Creditors Hit Snags (FT)
Greek Gov’t Braces For Talks With Creditors Amid Upheaval In SYRIZA (Kath.)
Greek Bank Boldholders Fear Portuguese-Style “Bad Bank” Split (Reuters)
Chancellor George Osborne Takes EU Reform Campaign To Paris (Reuters)
Puerto Rico: Austerity For Residents, But Tax Breaks For Hedge Funds (Guardian)
What A Federal Financial Control Board Means To Puerto Rico (The Hill)
Judge Finds Chicago’s Changes To Pension Funds Unconstitutional (Tribune)
Foreign Criminals Use London Real Estate To Launder Billions Of Pounds (Guardian)
The – Goldman-Related – Scandal That Ate Malaysia (Bloomberg)
Olive Oil Prices Surge Due To Drought And Disease In Spain And Italy (Guardian)
The Future of Food Finance (Barron’s)
Archaeologists Find Possible Evidence Of Earliest Human Agriculture (Guardian)

“..the Wall Street brokers’ explanation for AMZN’s $250 billion of bottled air is actually proof positive that the casino has become unhinged.”

The Last Bubble Standing – Amazon’s Same Day Trip Through The Casino (Stockman)

Right. Amazon is the greatest thing since sliced bread. Like millions of others, I use it practically every day. And it was nice to see that it made a profit -thin as it was at 0.4% of sales- in the second quarter. But the instantaneous re-rating of its market cap by $40 billion in the seconds after its earnings release had nothing to do with Amazon or the considerable entrepreneurial prowess of Jeff Bezos and his army of disrupters. It was more in the nature of financial rigor mortis – the final spasm of the robo-traders and the fast money crowd chasing one of the greatest bubbles still standing in the casino. And, yes, Amazon’s $250 billion market cap is an out and out bubble. Notwithstanding all the “good things it brings to life” daily, it is not the present day incarnation of General Electric of the 1950s, and for one blindingly obvious reason.

It has never made a profit beyond occasional quarterly chump change. And, what’s more, Bezos -arguably the most maniacal empire builder since Genghis Khan- apparently has no plan to ever make one. To be sure, in these waning days of the third great central bank enabled bubble of this century, GAAP net income is a decidedly quaint concept. In the casino it’s all about beanstalks which grow to the sky and sell-side gobbledygook. Here’s how one of Silicon Valley’s most unabashed circus barkers, Piper Jaffray’s Gene Munster, explains it: “Next Steps For AWS… SaaS Applications? We believe AWS has an opportunity to move up the cloud stack to applications and leverage its existing base of AWS IaaS/PaaS 1M + users. AWS dipped its toes into the SaaS pool earlier this year when it expanded its offerings to include an email management program and we believe it will continue to extend its expertise to other offerings. We do not believe that this optionality is baked into investors’ outlook for AWS.”

Got that? Instead, better try this. AMZN’s operating free cash flow in Q2 was $621 million -representing an annualized run rate right in line with its LTM figure of $2.35 billion. So that means there was no cash flow acceleration this quarter, and that AMZN is being valued at, well, 109X free cash flow! Moreover, neither its Q2 or LTM figure is some kind of downside aberration. The fact is, Amazon is one of the greatest cash burn machines ever invented. It’s not a start-up; it’s 25 years old. And it has never, ever generated any material free cash flow – notwithstanding its $96 billion of LTM sales. During CY 2014, for example, free cash flow was just $1.8 billion and it clocked in at an equally thin $1.2 billion the year before that.

In fact, beginning with net revenues of just $8.5 billion in 2005 it has since ramped its sales by 12X, meaning that during the last ten and one-half years it has booked $431 billion in sales. But its cumulative operating free cash flow over that same period was just $6 billion or 1.4% of its turnover. So, no, Amazon is not a profit-making enterprise in any meaningful sense of the word and its stock price measures nothing more than the raging speculative juices in the casino. In an honest free market, real investors would never give a quarter trillion dollar valuation to a business that refuses to make a profit, never pays a dividend and is a one-percenter at best in the free cash flow department -that is, in the very thing that capitalist enterprises are born to produce. Indeed, the Wall Street brokers’ explanation for AMZN’s $250 billion of bottled air is actually proof positive that the casino has become unhinged.

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We may hope so.

Europe Braces Itself For Revolutionary Leftist Backlash After Greece (Telegraph)

A pre-revolutionary fervour is sweeping Europe. “The atmosphere is a little similar to the time after 1968 in Europe. I can feel, maybe not a revolutionary mood, but something like widespread impatience”. These were the words of European council president Donald Tusk, 48 hours after Greece’s paymasters imposed the most punishing bail-out measures ever forced on a debtor nation in the eurozone’s 15-year history. A former Polish prime minister and a politician not prone to hyperbole, Tusk’s comments revealed Brussels’ fears of a bubbling rebellion across the continent. “When impatience becomes not an individual but a social experience of feeling, this is the introduction for revolutions” said Tusk. “I am really afraid of this ideological or political contagion”.

His unease reflects a widespread conviction that Europe’s elites had no choice but to make an example out of Greece. Alexis Tsipras was forced to submit to a deal that punished his government’s insolence, so the argument goes, and destroy the fantasy that a “new eurozone” could be forged for the economies of the southern Mediterranean. Having emerged from the talks, Tusk declared victory, dismissing the “radical leftist illusion that you can build some alternative to this traditional European vision of the economy.” Syriza’s unprecedented rise to power in January marked a watershed in post-crisis Europe, hitherto dominated by conservative-leaning governments from Portugal to Finland.

The first radical-Left regime in Europe’s post-war history, Syriza vowed to tear up the Troika’s austerity contract, forge a Mediterranean alliance against the dominant creditor-bloc, and transform the terms of Greece’s euro membership. Seven months later, these dreams are in tatters. A tortuous 30-hour weekend in Brussels led to Tsipras capitulating to austerity terms more egregious than any negotiated by Greece’s previous centre-right and Socialist governments. Greek assets will now be sequestered into a private fund to pay off debts, external monitors will return to the country, and everything from the price of milk and bakery bread will be subject to Brussels’ scrutiny. “Syriza was the big Leftist experiment and it has gone disastrously wrong in a short period of time,” says Luke March, author of Radical Left Parties in Europe and lecturer at Edinburgh University.

“The Left elsewhere are now being forced to take stock and say “we are not Greece””. But the shadow of 1968 – a year when Europe was gripped by mass discontent, student rebellions, and labour strikes – looms over Europe’s institutions. Over the course of the next 10 months, the entire complexion of the European south could be transformed. General elections in Portugal, Spain and Ireland are poised to bring anti-austerity, Left leaning parties to power. It is the wildfire of political contagion that spooks Europe’s federalists. Greece’s humiliation, rather than cowing the revolutionary Left, is set to embolden the southern calls for mass debt relief and cease the enforcement of the euro’s contractionary dogma.

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“..it seems all too likely that the ‘logic’ of Eurozone finance is a function of Thucydides’ description of primal human barbarity. Here the strong do as they will and the weak suffer as they must.”

Varoufakis – A New Kind Of Politics? (Paul Tyson)

Strangely, one of the most disturbing aspects of Varoufakis’ stint as a Finance Minister concerns the fact that he is an economist. One thing we now readily assume is that economics is the language of power. This gives academic economists a status somewhat like a theologian in relation to the practical priestcraft of public office. However, there are very few professors of economics that actually get into office as politicians, just as you seldom get institutionally savvy bishops or mega-church leaders who are serious theologians. When an economist becomes a politician, this is going to be interesting.

In a few short months, Varoufakis completely exploded the idea that economics is the language of power. What we saw when an actual economist landed in the middle of the Eurozone crisis is that the most basic truths about economic reality have nothing to do with power. The idea that asphyxiating Greek banks and killing the Greek state is good for its economy makes no economic sense at all. The idea that continuing to pursue a savagely contractionary austerity agenda will make it possible to generate sustained state surpluses large enough to repay impossible debt burdens, defies any sort of economic rationality. The conviction that it is somehow both moral and necessary to fiscally execute the Greek polity or eject Greece in order to preserve the financial integrity of the Eurozone, is not a stance grounded in economic science.

Yet these agenda commitments are, obviously, immovable Eurogroup dogmas. When Varoufakis patiently, logically and persuasively sought to point out the economic problems with the sacred Eurozone dogmas, this got him into trouble for “lecturing” his peers. Somehow, the economic irrationality of what the Eurogroup must do was obvious to the Eurogroup, and they could not for the life of them see why Varoufakis didn’t understand this. So Varoufakis became branded as “combative” and “recalcitrant” due to his refusal to be on the same page as all the other European finance ministers, when all along it was the Eurogroup who would not talk about obvious economic realities with Varoufakis. Varoufakis’ failed attempt to negotiate even a modicum of constructive economic and political sanity with Brussels strongly suggests that the governing principles of financial power in Europe are not grounded in economic science or democratic politics.

Indeed, it seems all too likely that the ‘logic’ of Eurozone finance is a function of Thucydides’ description of primal human barbarity. Here the strong do as they will and the weak suffer as they must. The complete lack of impact which Varoufakis’ economic arguments achieved leads one to fear that when it comes to economics and politics, we are being conned: the main purpose of economic speak in politics is obfuscation. If that is indeed the case, then having someone point out the obvious elephant in the room – the economic impossibility of the prevailing dogmas governing high finance and domestic politics – is just too much. It looks like our ruling elites do not want a real economist meddling with power.

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A story that seems to surprise many people. But V already told it ages ago. Only thing new is that it started in December.

Varoufakis Claims He Had Approval To Plan Parallel Banking System (Kathimerini)

Former Finance Minister Yanis Varoufakis has claimed that he was authorized by Alexis Tsipras last December to look into a parallel payment system that would operate using wiretapped tax registration numbers (AFMs) and could eventually work as a parallel banking system, Kathimerini has learned. In a teleconference call with members of international hedge funds that was allegedly coordinated by former British Chancellor of the Exchequer Norman Lamont, Varoufakis claimed to have been given the okay by Tsipras last December – a month before general elections that brought SYRIZA to power – to plan a payment system that could operate in euros but which could be changed into drachmas “overnight” if necessary, Kathimerini understands.

Varoufakis worked with a small team to prepare the plan, which would have required a staff of 1,000 to implement but did not get the final go-ahead from Tsipras to proceed, he said. The call took place on July 16, more than a week after Varoufakis left his post as finance minister. The plan would involve hijacking the AFMs of taxpayers and corporations by hacking into the General Secretariat of Public Revenues website, Varoufakis told his interlocutors. This would allow the creation of a parallel system that could operate if banks were forced to close and which would allow payments to be made between third parties and the state and could eventually lead to the creation of a parallel banking system, he said.

As the general secretariat is a system that is monitored by Greece’s creditors and is therefore difficult to access, Varoufakis said he assigned a childhood friend of his, an information technology expert who became a professor at Columbia University, to hack into the system. A week after Varouakis took over the ministry, he said the friend telephoned him and said he had “control” of the hardware but not the software “which belongs to the troika.” [..] The work was more or less complete: We did have a Plan B but the difficulty was to go from the five people who were planning it to the 1,000 people that would have to implement it. For that I would have to receive another authorisation which never came.”

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“..The Germans say there is to be no debt write-off and that the IMF must be part of the program. But the IMF cannot participate in a program in which debt levels are unsustainable”

Greece, The Sacrificial Lamb (Joe Stiglitz)

As the Greek crisis proceeds to its next stage, Germany, Greece and the triumvirate of the International Monetary Fund, the European Central Bank and the European Commission (now better known as the troika) have all faced serious criticism. While there is plenty of blame to share, we shouldn’t lose sight of what is really going on. I’ve been watching this Greek tragedy closely for five years, engaged with those on all sides. Having spent the last week in Athens talking to ordinary citizens, young and old, as well as current and past officials, I’ve come to the view that this is about far more than just Greece and the euro. Some of the basic laws demanded by the troika deal with taxes and expenditures and the balance between the two, and some deal with the rules and regulations affecting specific markets.

What is striking about the new program (called “the third memorandum”) is that on both scores it makes no sense either for Greece or for its creditors. As I read the details, I had a sense of déjà vu. As chief economist of the World Bank in the late 1990s, I saw firsthand in East Asia the devastating effects of the programs imposed on the countries that had turned to the IMF for help. This resulted not just from austerity but also from so-called structural reforms, where too often the IMF was duped into imposing demands that favored one special interest relative to others. There were hundreds of conditions, some little, some big, many irrelevant, some good, some outright wrong, and most missing the big changes that were really required. Back in 1998 in Indonesia, I saw how the IMF. ruined that country’s banking system.

I recall the picture of Michel Camdessus, the managing director of the IMF at the time, standing over President Suharto as Indonesia surrendered its economic sovereignty. At a meeting in Kuala Lumpur in December 1997, I warned that there would be bloodshed in the streets within six months; the riots broke out five months later in Jakarta and elsewhere in Indonesia. Both before and after the crisis in East Asia, and those in Africa and in Latin America (most recently, in Argentina), these programs failed, turning downturns into recessions, recessions into depressions. I had thought that the lesson from these failures had been well learned, so it came as a surprise that Europe, beginning a half-decade ago, would impose this same stiff and ineffective program on one of its own.

Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina: The macro-policies demanded by the troika will lead to a deeper Greek depression. That’s why the IMF’s current managing director, Christine Lagarde, said that there needs to be what is euphemistically called “debt restructuring” – that is, in one way or another, a write-off of a significant portion of the debt. The troika program is thus incoherent: The Germans say there is to be no debt write-off and that the IMF must be part of the program. But the IMF cannot participate in a program in which debt levels are unsustainable, and Greece’s debts are unsustainable.

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Geez, I’m even quoting Brad DeLong now?

Depression’s Advocates (J. Bradford DeLong)

Back in the early days of the ongoing economic crisis, I had a line in my talks that sometimes got applause, usually got a laugh, and always gave people a reason for optimism. Given the experience of Europe and the United States in the 1930s, I would say, policymakers would not make the same mistakes as their predecessors did during the Great Depression. This time, we would make new, different, and, one hoped, lesser mistakes. Unfortunately, that prediction turned out to be wrong. Not only have policymakers in the eurozone insisted on repeating the blunders of the 1930s; they are poised to repeat them in a more brutal, more exaggerated, and more extended fashion. I did not see that coming.

When the Greek debt crisis erupted in 2010, it seemed to me that the lessons of history were so obvious that the path to a resolution would be straightforward. The logic was clear. Had Greece not been a member of the eurozone, its best option would have been to default, restructure its debt, and depreciate its currency. But, because the European Union did not want Greece to exit the eurozone (which would have been a major setback for Europe as a political project), Greece would be offered enough aid, support, debt forgiveness, and assistance with payments to offset any advantages it might gain by exiting the monetary union. Instead, Greece’s creditors chose to tighten the screws.

As a result, Greece is likely much worse off today than it would have been had it abandoned the euro in 2010. Iceland, which was hit by a financial crisis in 2008, provides the counterfactual. Whereas Greece remains mired in depression, Iceland – which is not in the eurozone – has essentially recovered. To be sure, as the American economist Barry Eichengreen argued in 2007, technical considerations make exiting the eurozone difficult, expensive, and dangerous. But that is just one side of the ledger. Using Iceland as our measuring stick, the cost to Greece of not exiting the eurozone is equivalent to 75% of a year’s GDP – and counting.

It is hard for me to believe that if Greece had abandoned the euro in 2010, the economic fallout would have amounted to even a quarter of that. Furthermore, it seems equally improbable that the immediate impact of exiting the eurozone today would be larger than the long-run costs of remaining, given the insistence of Greece’s creditors on austerity. That insistence reflects the attachment of policymakers in the EU – especially in Germany – to a conceptual framework that has led them consistently to underestimate the gravity of the situation and recommend policies that make matters worse.

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Tsipras can’t afford to lose her.

The Latest Rising Greek Political Star Who Says No To Austerity (HuffPo)

Greece’s charismatic head of parliament, Zoe Konstantopoulou, is one of the most dynamic and outspoken members of the country’s ruling Syriza party. This week, she sent shockwaves through the party by refusing to approve a financial reform bill proposed by her supposed Syriza ally, Prime Minister Alexis Tsipras – for the second time. Konstantopoulou considers measures proposed by Tsipras as part of an agreement with Greece’s European lenders to unlock fresh loans for the country a “violent attack on democracy,” she wrote in a letter to Tsipras and Greek President Prokopis Pavlopoulos. Konstantopoulou’s adamant opposition to the newest austerity reforms is resonating with Greeks who feel the Europe-imposed reforms are excruciatingly harsh.

Konstantopoulou, 38, is the daughter of renowned lawyer Nikos Konstantopoulos, who led of one of Syriza’s largest factions, and well-known journalist Lina Alexiou. She studied law at the University of Athens, La Sorbonne in Paris and Columbia University in New York before becoming a lawyer in Greece in 2003, focusing on international criminal law and human rights. Konstantopoulou first ran for Syriza in 2009 and was elected to the Greek parliament in 2012. She was elected head of the parliament in 2015, the youngest person to hold the position. As parliament chief, her forthright remarks and dedication to formal legal procedure have gained her passionate praise as well as fierce opposition. Her forceful interventions have annoyed some politicians, especially those in opposition parties.

Stavros Theodorakis, leader of To Potami (The River), for example, has called her arrogant and has demanded her resignation. Others have praised her fiery energy, saying her forceful defense of her convictions is invigorating. Despite Konstantopoulou’s rising favor, she remains far less popular than other Syriza politicians, especially Tsipras. Her blunt rejection of the prime minister’s reforms has raised speculation she may leave the party and go her own way, according to Greek daily newspaper Kathimerini. Konstantopoulou denies that scenario. After a one-hour meeting with Tsipras on Thursday, she told reporters that both share “an understanding built on camaraderie and honesty, along with the common wish to protect the rights of the people as well as the unity of Syriza, which some would want to see shattered.”

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NY Times ed staff changing its tack.

How the Euro Turned Into a Trap (NY Times Ed.)

When they introduced the euro in 1999, European leaders said the common currency would be irreversible and would lead to greater economic and political integration among their countries. That pledge of permanence, long doubted by euro-skeptics, seems ever less credible. While the eurozone may have temporarily avoided a Greek exit, it is hard to see how a deal that requires more spending cuts, higher taxes and only vague promises of debt relief can restore the crippled economy enough to keep Greece in the currency union. On Thursday, the Greek Parliament passed a second set of reforms required by the country’s creditors. Other changes, like higher taxes on farmers, are expected later in the year.

The combative finance minister of Germany, Wolfgang Schäuble, has further undermined confidence in the euro’s cohesion by saying that Greece would be better off leaving the common currency for a five-year “timeout.” As a practical matter, an exit from the currency union would almost certainly be permanent, since readmission involves a grueling process. The eurozone requires new members to keep inflation below 2% and to have a maximum fiscal deficit of 3% of GDP and a public debt that is no more than 60% of GDP. The plight of the Greeks has made countries that do not use the euro, like Poland and Hungary, far less eager to join the currency union, which has come to mean a loss of sovereignty and a commitment to austerity, regardless of economic reality.

Of course, the euro was never entirely about economics. European leaders believed the single currency was a big step toward creating an irrevocable alliance among countries on the continent. But many experts warned that it could make its members less stable unless it was followed by a tighter political and budgetary union. Since that did not happen, the currency union was left fully vulnerable to economic crises and to the will of Europe’s more powerful economies. All those fears have played out in Greece, even as the threat of exits from the euro hangs over other weakened countries, like Italy, Portugal and Spain. Senior leaders in Germany, Finland and Slovakia who have publicly suggested a Greek exit seem to think it would scare weaker economies into accepting more austerity.

That may not be necessary; some radical parties in those countries are already openly talking about leaving the euro. The question now is what is the cost of leaving? Can a modern economy withstand the immediate damage of an abrupt currency change if the benefits of devaluation and regaining full control over fiscal and monetary policies could be limited and could take years to realize?

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Not enough 5-star hotel rooms?

Greek Bailout Talks Pushed Back By A Few Days On Logistics (Reuters)

Talks between Greece and its international creditors over a new bailout package will be delayed by a couple of days because of organisational issues, a finance ministry official said on Saturday. The meetings with officials from the EC, ECB and IMF were supposed to start on Monday after being delayed for issues including the location of talks and security last week. A finance ministry official, who declined to be named, said talks between the technical teams of the lenders will start on Tuesday, while the mission chiefs will arrive in Athens with a delay of a couple of days for technical reasons. “The reasons for the delay are neither political, nor diplomatic ones,” the official added.

Greeks have viewed inspections visits by the lenders in Athens as a violation of the country’s sovereignty and six months of acrimonious negotiations with EU partners took place in Brussels at the government’s request. Another finance ministry official denied earlier on Saturday that the government was trying to keep the lenders’ team away from government departments and had no problem with them visiting the General Accounting Office.. Asked if the government would now allow EU, IMF and ECB mission chiefs to visit Athens for talks on a new loan, State Minister Alekos Flabouraris said: “If the agreement says that they should visit a ministry, we have to accept that.”

The confusion around the expected start to the talks on Friday underlined the challenges ahead if negotiations are to be wrapped up in time for a bailout worth up to €86 billion to be approved in parliament by Aug. 20, as Greece intends. Already, Prime Minister Alexis Tsipras is struggling to contain a rebellion in his left-wing Syriza party that made his government dependent on votes from pro-European opposition parties to get the tough bailout terms approved in parliament. One of Tsipras’ closest aides said that the understanding with the opposition parties could not last long and a clear solution was needed, underlining widespread expectations that new elections may come as soon as September or October. “The country cannot go on with a minority government for long. We need clear, strong solutions,” State Minister Nikos Pappas told the weekly Ependysi in an interview published on Saturday.

Apart from the terms of a new loan, Greece and its lenders are also expected to discuss the sustainability of its debt, which is around 170% of GDP. Greece has repeatedly asked for a debt relief and the IMF has said this is needed for the Greek accord to be viable. [..] Tsipras, who is by far the most popular politician in Greece according to opinion polls, has said his priority is to secure the bailout package before dealing with the political fallout from the Syriza party rebellion.

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“..the decision to pursue a new IMF program means euro zone leaders may have to open talks on granting Greece significant debt relief much earlier than originally anticipated..”

Renewed Bailout Talks Between Greece And Creditors Hit Snags (FT)

Talks to agree a new €86bn bailout for Greece ran into trouble on Friday after Athens raised hurdles for negotiators in the Greek capital, forcing them to postpone their arrival amid renewed acrimony. Alexis Tsipras, the Greek prime minister, agreed last week to “fully normalize” talks with creditors on the ground in Athens after resisting their presence for months — a key demand made by euro zone leaders when they agreed to reopen rescue talks after coming close to pushing Greece out of the euro zone. But three senior officials from Greece’s bailout monitors said Athens had instead demanded restrictions on negotiators, including on whom creditors could meet and what topics were to be discussed in the talks.

Two of the officials said Greek authorities had also insisted negotiators no longer use the Athens Hilton as their base — a hotel close to central Syntagma Square and a short drive to the finance ministry — instead proposing hotels far from the capital’s government quarter. “It is fundamentally more of the same,” said a senior official from one of the bailout monitors,colloquially known as the “troika” after the three institutions originally involved in the talks, the EC, ECB and IMF. “They don’t want to engage with the troika.” Greek officials insisted the renewed stand-off was only a temporary delay and that talks would resume over the weekend or Monday at the latest.

George Stathakis, economy minister, said he was confident the negotiations would be finished by mid-August, when Athens needs the bailout cash to pay off a €3.2bn bond held by the ECB. Mr Stathakis said Greece and its creditors had already found common ground on many of the main issues,including fiscal targets, stabilizing the banking sector, liberalization of product markets and professions, labor market reforms and privatizations of state assets. “We have three weeks,and I’m confident that it’s enough for the existing agenda,” Mr Stathakis told the Financial Times. “We agree in certain areas. In others, there are different views and some distance needs to be covered. But the last European summit gave a framework that indicates which directions to follow, and that’s why I think three weeks will be enough.”

Still, one creditor official said negotiating teams were “sitting on their suitcases” and had no plans to go to Athens until the logistical issues were resolved. Adding another potential complication, the Greek government on Friday lodged a formal request with the IMF to begin discussions on a new, third bailout program. The request came after officials at the IMF determined that the current Greek program, which still has about €16.5bn to disburse and was due to expire in March, had become outdated. Those negotiations between Athens and the IMF could take months. But the decision to pursue a new IMF program means euro zone leaders may have to open talks on granting Greece significant debt relief much earlier than originally anticipated, since the IMF will not sign on to a new program unless euro zone lenders agree to restructure their bailout loans.

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Syriza differences are being magnified by the press.

Greek Gov’t Braces For Talks With Creditors Amid Upheaval In SYRIZA (Kath.)

Even as Prime Minister Alexis Tsipras grapples with serious divisions within SYRIZA, government officials are bracing for the launch of face-to-face negotiations with representatives of the country’s creditors which are expected to begin next week. The government is hoping to seal a deal with creditors by mid-August and certainly before August 20 when a €3.2 billion debt repayment to the ECB is to come due. Greece does not have the money to repay the debt and is hoping for a deal to be reached, allowing the partial disbursement of some funding, either from a new program or from residual funding from the recapitalization of Greek banks. But sources indicate that creditors are less optimistic about a deal being finalized so soon.

As a result officials are said to be considering the possibility of a second bridge loan to Greece, which would allow it to cover the ECB debt and other obligations, before an agreement on a third bailout is finalized. Although officials from countries that have taken a hard line opposite Greece, including Germany and some north European states, reportedly want Athens to commit to more prior actions, European Economy and Monetary Affairs Commissioner Pierre Moscovici has indicated that this will not be necessary. Creditors are expected to seek additional measures at some point, however, to plug a widening fiscal gap.

Tsipras is also struggling to keep a lid on dissent within SYRIZA as a bloc of around 30 of the party’s 149 MPs object to his compromise with creditors, which foresees more austerity. The premier has indicated that a party congress should be held in September to refocus SYRIZA. Early elections, which are considered inevitable in view of the upheaval within the party, are expected to take place immediately after the congress, either later in September or in October or even November. In comments on Saturday, State Minister Nikos Pappas acknowledged that the country cannot continue indefinitely with a minority government, referring to the mass defections by SYRIZA MPs in recent parliamentary votes. A meeting of SYRIZA’s political secretariat is due on Monday.

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As long as small depositors are left alone, fine by me.

Greek Bank Boldholders Fear Portuguese-Style “Bad Bank” Split (Reuters)

National Bank of Greece bondholders are nervous that they will suffer heavy losses if authorities decide to siphon off all of the bank’s healthy assets leaving a “bad bank” to deal with their claims, a source close to a creditor group said. A group of senior bondholders in NBG sent a letter to European institutions last week saying they were concerned about measures that may be taken to revitalise the Greek banking sector after months of economic upheaval. After drawn-out negotiations, Greece is close to clinching a third bailout deal but has kept in place the capital controls it used to prevent a bank run last month.

The investors, who hold a significant portion of a €750 million NBG senior bond issued last year, are worried the bank may be split into a good bank and a bad bank as was the case for Portugal’s Banco Espirito Santo last year. Portugal separated out and pumped money into the healthy part of the bank creating a new entity “Novo Banco”, while remaining BES shareholders and subordinated bondholders were left with near worthless investments in the remaining bad bank. NBG bondholders are concerned that such a split in Greece could require a level of recapitalisation that would also see senior bondholders left behind in the bad bank.

Under current Greek law, junior bondholders should contribute to a bail-in, while new legislation passed on Wednesday will also force senior bondholders to contribute from January 1 2016. Recapitalisations of Greek banks may be needed before then, however, leaving the option of a bad bank solution on the table. ECB governing council member Christian Noyer said an initial injection of capital for Greek banks would be preferable before stress tests in the autumn.

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To talk to Le Pen?

Chancellor George Osborne Takes EU Reform Campaign To Paris (Reuters)

Chancellor of the Exchequer George Osborne will take Britain’s case for European Union reform to Paris on Sunday, seeking support from his French counterpart for a deal the Conservative government can put before voters in a promised in-out referendum. British Prime Minister David Cameron has pledged to renegotiate ties with the European Union ahead of a vote on the country’s continuing membership by the end of 2017. Osborne’s trip to Paris, the first in a series of visits to European capitals, will seek to build on Cameron’s meetings with all 27 leaders of the bloc earlier this year, the government said. He will argue that with public support for reform rising across the EU, now is the time to deliver lasting change. “The referendum in Britain is an opportunity to make the case for reform across the EU,” he will say, according to excepts of his speech.

“I want to see a new settlement for Europe, one that makes it a more competitive and dynamic continent to ensure it delivers prosperity and security for all of the people within it, not just for those in Britain.” Cameron’s promise of a referendum was made before national elections in May to neutralise a threat from the anti-EU UK Independence Party and to pacify Euro sceptics in his own party. The possibility that Britain could leave the European Union as a result of the tactic has worried allies such as the United States and opposition parties in Britain. U.S. President Barack Obama said on Friday that a Britain within the European union gave Washington much greater confidence in the strength of the transatlantic union. Some lawmakers were angered by his intervention in the debate, saying he was lecturing Britain.

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What a refreshing MO.

Puerto Rico: Austerity For Residents, But Tax Breaks For Hedge Funds (Guardian)

Caught between the demands of billionaires, pro-bankruptcy activists and more than three million people plagued by unemployment, poverty and government debt, who would you choose? As Puerto Rico confronts the quagmire of its $72bn financial crisis, it has come up with an answer: humouring a few very wealthy people. The island has for three years courted some of Wall Street’s richest citizens, from solitary investors to hedge fund elites. Last year it sold at auction hundreds of millions of its debt to various funds, displeasing many who believe the “vulture funds” only want a quick profit off Puerto Rico as it desperately tries to repay debt with high local taxes and austerity cuts.

Hedge fund manager John Paulson, best known for making billions off the 2008 subprime loan market crash, led the charge last year when he declared the island “the Singapore of the Caribbean”. His fund bought more than $100m of Puerto Rico’s junk-rated bonds last year. The most visible effect has been a rush to buy property akin to the buying spree by two billionaires in Detroit as that city filed for bankruptcy. Detroit’s woes are often held up for comparison to Puerto Rico’s but the island lacks the statehood or permission from Congress it would need to file for bankruptcy and follow Michigan’s decision to declare Motor City bust. While funds have inched away from Puerto Rico’s debt debacle, Paulson has bought into land.

In 2014 he spent more than $260m to buy three of the island’s largest resort properties, and announced plans to develop $500m-worth of “residences and resort amenities” to add to the existing beachfront condos and golf courses. He has a fellow cheerleader in billionaire Nicholas Prouty, who has invested more than $550m into turning San Juan’s marina into a bastion of the elite that includes an exclusive club and slips for “megayachts of 200 feet or larger”. As in Detroit, ultra-high-end developments abut scores of empty buildings, either for sale or abandoned by owners searching for work. With unemployment more than twice the US national average, the island’s median household income is nearly $7,000 less than that in Detroit, and less than half the US average.

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Feudalism?

What A Federal Financial Control Board Means To Puerto Rico (The Hill)

Puerto Rico is spiraling out of control and the Federal government will not break the fall. Island leaders may not have the will, popular support, or financial tools to pay down the $72 billion debt. So it is no surprise that calls for a federal financial control board intensified after Governor Alejandro Garcia Padilla announced that Puerto Rico’s debt is unpayable. Establishing a control board may be the easy way out for a wary Congress but it is not as simple as it seems and could backfire. A federal financial control board for Puerto Rico was first proposed a year ago by supporters of Doral Bank in its dispute with the Puerto Rican government over a $230 million tax refund. Most of Doral’s supporters are affiliated with the conservative Koch brothers.

They include Republican Reps. Jeff Duncan (SC), Scott Garrett (NJ), Darrell Issa (CA) and Matt Salmon (AZ) who received Koch Industries PAC contributions and who prior to Doral had never been involved with Puerto Rico. Last month, Duncan recommended to his House colleagues that a control board be established. The 60 Plus Association, another Koch funding recipient, is lobbying for a control board. While frustrated Puerto Ricans are increasingly talking about the need for a control board, the majority of the Island opposes it with good reason. First, Puerto Ricans feel that given the right tools, they can fix the fiscal crisis on their own. Right now the most important tool is access to Chapter 9 federal bankruptcy. From 1933 until 1984, Puerto Rico could allow its municipalities and public corporations to declare bankruptcy in the same way as the 50 states.

In 1984 Congress amended the bankruptcy code and excluded Puerto Rico for reasons unknown. Most agree that overall losses to investors will be higher if Puerto Rico is not given access to Federal bankruptcy and defaults. To avoid this scenario Puerto Rico passed its own bankruptcy law which was challenged by bondholders of electricity provider PREPA which owes $9 billion. The law was recently struck down in Federal court. The Puerto Rican government may appeal to the U.S. Supreme Court. The same group of creditors is fighting bankruptcy legislation introduced in Congress. Issa, who sits in the subcommittee reviewing the bill, opposes it. The conservative Heritage Foundation calls it a bailout even though it supported Chapter 9 for Detroit.

Second, Puerto Ricans are distrustful of any financial control board established by a national government that has denied it political representation for 117 years. The distrust is heightened by knowledge that the chief supporters of a control board are members of the conservative Koch brothers’ network and creditors whose objective is to make money off Puerto Rico rather than enable Puerto Rico to remake itself.

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It’s not easy being Rahm.

Judge Finds Chicago’s Changes To Pension Funds Unconstitutional (Tribune)

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems. The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services. The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers.

The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations – and are at risk of going broke within 13 years – after many years of low investment returns fueled by recession and inadequate funding. Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation. Friday’s ruling also could further harm the city’s rapidly diminishing credit rating. Even before the decision, Moody’s Investors Service had downgraded the city’s debt rating to junk status based on pension concerns.

And after Novak’s ruling, Standard & Poor’s Ratings Service warned that it would lower the rating on city debt within the next six months without a fix. Novak’s ruling was not unexpected because of a decision in May by the Illinois Supreme Court on a similar pension case. The state’s high court unanimously struck down a law changing state pensions, saying the Illinois Constitution’s protection against “diminished or impaired” pension benefits for public workers and current retirees was absolute. City officials had argued that an agreement reached with 28 of 31 labor unions to alter retirement benefits out of the municipal and laborers pension funds – two of the city’s four pension plans – was different from the plan struck down by the Supreme Court.

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Color me stunned.

Foreign Criminals Use London Real Estate To Launder Billions Of Pounds (Guardian)

Foreign criminals are using the London housing market to launder billions of pounds, pushing up house prices for domestic buyers, a senior police officer has warned. Donald Toon, the director of economic crime at the National Crime Agency, spoke after a spike in receipts from a tax on homes bought up by companies, trusts and investment funds rather than individuals. Such corporations, usually based in offshore tax havens, are sometimes used by buyers keen to hide ownership of assets from their own countries’ tax authorities. The secrecy they offer can equally be used to squirrel away ill-gotten gains. Toon told the Times: “I believe the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK.”

He spoke after provisional tax receipts showed the Treasury had made £142m from the annual tax on enveloped dwellings in just the first three months of the financial year. The tax, introduced last year, is payable every year by companies that own a UK residential property valued above a certain amount. The City of Westminster and the Royal Borough of Kensington and Chelsea accounted for 82% of the revenue, but inflation at the top of the market is thought to ripple down to cheaper properties as wealthy buyers are pushed down the housing chain. Toon’s comments come amid increasing concern that billions of pounds of corruptly gained money has been laundered by criminals and foreign officials buying upmarket London properties through anonymous offshore front companies.

Experts say that London, with its myriad links to tax haven crown dependencies, is arguably the global capital of money laundering. This month a Channel 4 investigation found that estate agents in Britain’s wealthiest postcodes are willing to turn a blind eye to apparent money laundering by corrupt foreign buyers. In the documentary, titled From Russia With Cash, two undercover reporters posed as an unscrupulous Russian government official called Boris in London to purchase an upmarket property for his mistress. The couple viewed five properties ranging in price from £3m to £15m, on the market with five estate agents in Kensington, Chelsea and Notting Hill.

Despite being made aware they are dealing with apparently laundered money, the estate agents agreed to continue with a potential purchase. In several instances the estate agents recommended law firms to help a buyer hide his identity. The agents suggested that secretive purchases of multimillion-pound houses were common in the capital. One claimed that 80% or more of his transactions were with international, overseas-based buyers and “50 or 60%” of them were conducted in “various stages of anonymity … whether it be through a company or an offshore trust”.

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Blowing up one country at a time.

The – Goldman-Related – Scandal That Ate Malaysia (Bloomberg)

In the spring of 2013, Song Dal Sun, head of securities investment at Seoul-based Hanwha Life Insurance, sat down to a presentation by a Goldman Sachs banker. The young Goldman salesman, who had flown in from Hong Kong, made a pitch for bonds to be issued by 1Malaysia Development Bhd., a state-owned company closely tied to Malaysian Prime Minister Najib Razak. It was enticing. The 10-year, dollar-denominated bonds offered an interest rate of 4.4%, about 100 basis points higher than other A-minus-rated bonds were yielding at the time, he recalls. But Song, a veteran of 25 years in finance, sensed something was amiss. With such an attractive yield, 1MDB could easily sell the notes directly to institutional investors through a global offering.

Instead, Goldman Sachs was privately selling 1MDB notes worth $3 billion backed by the Malaysian government. “Does it mean ‘explicit guarantee’?” he recalls asking the Goldman salesman, whom he declined to name. “I didn’t get a straight answer,” Song says. “I decided not to buy them.” The bond sale that Song passed up is part of a scandal that has all but sunk 1MDB, rattled investors, and set back Malaysia’s quest to become a developed nation. Najib, who also serves as Malaysia’s finance minister, sits on 1MDB’s advisory board as chairman. The scandal’s aftershocks have rocked his office, his government, and the political party he leads, United Malays National Organisation, or UMNO.

A state investment company trumpeted as a cornerstone of Najib’s economic policy after he became prime minister in April 2009, 1MDB is now mired in debts of at least $11 billion. Former Prime Minister Mahathir Mohamad, a one-time political mentor who’s turned on Najib, says “vast amounts of money” have “disappeared” from 1MDB funds. 1MDB has denied the claim and said all of its debts are accounted for. From the moment in 2009 when Najib took over a sovereign wealth fund set up by the Malaysian state of oil-rich Terengganu and turned it into a development fund owned by the federal government, 1MDB has been controversial. Since the beginning of this year—with coverage driven by the Sarawak Report, a blog, and The Edge, a local business weekly—the scandal has moved closer and closer to the heart of government, sparking calls for Najib’s ouster and recalling Malaysia’s long struggle with corruption and economic disappointment.

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“..a bacterial disease nicknamed “olive ebola”..”

Olive Oil Prices Surge Due To Drought And Disease In Spain And Italy (Guardian)

Salads have rarely been so expensively dressed after a combination of drought and disease pushed the price of olive oil up 10% so far this year, amid warnings from suppliers that harvests are the worst they have seen. The Italian government has declared a “state of calamity” in the provinces of Lecce and Brindisi on the heel of the country, where olive groves are being attacked by a bacterial disease nicknamed “olive ebola”. Up to 1m centuries-old olive trees could be felled in one of the most picturesque tourist spots of Italy in an attempt to contain the problem. The cost of the raw material has been increasing for two years as crops have been hit by drought in Spain, the world’s biggest producer of the oil, and the bacterial disease Xylella fastidiosa, which is destroying trees in Italy.

Analysts are expecting prices to remain high in coming months as demand is increasing. Retailers and distributors wanted to buy 12% more olive oil than exporters were able to deliver last month, according to industry insiders. Buyers in Latin America have turned to Europe in the wake of poor harvests over the Atlantic, while eastern Europeans have also been using increasing amounts of olive oil. The next harvest from southern Europe is not expected until September, but fears of a third poor harvest in a row in Spain and Italy continue to push up wholesale prices of remaining stocks over the summer. The other two large olive oil producers, Greece and Tunisia, had good yield and production, but not enough to compensate for Spain and Italy.

In the UK, heavy price competition between retailers, led by the rise of discounters Aldi and Lidl, has helped keep prices relatively low for shoppers. But this year, retailers and processors have been forced to pass on increases as the cost of the raw material from Italy has hit a 10-year high. The average retail price of a litre of extra virgin olive oil has risen from £6.32 in December to £6.95 this month, according to data from trade journal the Grocer.

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Humane society.

The Future of Food Finance (Barron’s)

The way people produce and eat food is changing in major ways, presenting both risks and opportunities for those invested in the sustenance sector. Historically, much of our protein has come from animals, but producing just one pound of meat means feeding an animal up to 16 pounds of grains and other crops. The caloric conversion is weak, too: According to a recent report produced in collaboration with the World Bank, even the most efficient sources of meat convert only around 11% of gross feed energy into human food. As global population and per capita meat consumption have grown, this inefficient system has become overburdened. In 1950, the total number of farm animals in the U.S. was somewhere near 100 million; by 2007, that number was roughly 9.5 billion.

To accommodate the enormous demand, nearly all of those animals were moved from farms to factories. According to Agriculture Department data, during the same period that the number of farm animals increased by 9,400%, the number of farmers producing those animals decreased by 60%. So many more animals being reared by so few farmers has come with consequences for consumers, animals, producers, and investors. Take pig production. Over the past several decades, the vast majority of breeding pigs have been moved into “gestation crates,” which are tiny cages that confine animals so tightly they can’t even turn around. The cages are iron maidens for sows. Not surprisingly, some consumers have responded with anger. “Cruel and senseless” is what the New York Times called the cages. “Torture on the farm,” reported the American Conservative magazine.

This outcry has led major food companies to demand changes. More than 60 of the world’s largest food retailers – McDonald’s, Nestlé, Burger King, Oscar Mayer, Safeway, Kroger, Costco, and dozens more – have announced plans to eliminate gestation crates from their pork-supply chains. Addressing animal welfare in corporate-responsibility programs is becoming the norm. “Active concern about how we treat the world around us has moved from the left of center to the mainstream, and savvy businesses are playing a part,” noted an editorial in Nation’s Restaurant News. “The growing number of animal-welfare-related commitments made by companies large and small reflect well-thought-out business –strategies.”

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“11,000 years before the generally recognised advent of organised cultivation..”

Archaeologists Find Possible Evidence Of Earliest Human Agriculture (Guardian)

Israeli archaeologists have uncovered dramatic evidence of what they believe are the earliest known attempts at agriculture, 11,000 years before the generally recognised advent of organised cultivation. The study examined more than 150,000 examples of plant remains recovered from an unusually well preserved hunter-gatherer settlement on the shores of the Sea of Galilee in northern Israel. Previously, scientists had believed that organised agriculture in the Middle East, including animal husbandry and crop cultivation, had begun in the late Holocene period – around 12,000 BC – and later spread west through Europe. The new research is based on excavations at a site known as Ohalo II, which was discovered in 1989 when the water level in the sea of Galilee dropped because of drought and excessive water extraction.

Occupied by a community of hunter-gatherers at the height of the last ice age 23,000 years ago, it revealed evidence of six brush huts with hearths as well as stone tools and animal and plant remains. A series of fortuitous coincidences led to the site’s preservation. The huts had been built over shallow bowls dug by the occupants and later burned. On top of that a deposit of sandy silt had accumulated before the rising lake had left it under 4 metres of water. The study looked for evidence of early types of invasive weeds – or “proto-weeds” – that flourished in conditions created by human cultivation. According to the researchers, the community at Ohalo II was already exploiting the precursors to domesticated plant types that would become a staple in early agriculture, including emmer wheat, barley, pea, lentil, almond, fig, grape and olive.

Significantly, however, they discovered the presence of two types of weeds in current crop fields: corn cleavers and darnel. Microscopic examination of the edges of stone blades from the site also found material that may have been transferred during the cutting and harvesting of cereal plants. Prof Ehud Weiss, head of the archaeological botany lab at the Department of Land of Israel Studies, told the Guardian: “We know what happened ecologically: that these wild plants, some time in history, became weeds. Why? The simple answer is that because humans changed the environment and created new ecological niches, that made it more comfortable for species that would become weeds, meaning they only have to compete with one species.”

According to Weiss, the mixture of “proto-weeds” and grains that would become domesticated mirrors plant findings from later agricultural communities. The site also revealed evidence of rudimentary breadmaking from starch granules found on scorched stones, and that the community may have been largely sedentary, with evidence of consumption of birds throughout the year, including migrating species. “This botanical find is really opening new windows to the past,” Weiss said. “You have to remember Ohalo is a unique preservation. Between Ohalo and the beginning of the Neolithic we have a blank. And when the early Neolithic arrives people start [agriculture again] from scratch.

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