President-elect Donald Trump’s incoming press secretary Sean Spicer denied a report from the Sunday Times on Saturday that said Trump was seeking to have a summit with Russian President Vladimir Putin in Iceland. The Sunday Times reported that Trump aides told British officials that Trump plans to meet with Putin on his first foreign trip, possibly in Reykjavik. The paper, citing unidentified sources, reported that Trump plans to begin working out a deal to limit nuclear weapons and that Moscow agreed to the meeting. According to the newspaper, Trump sought to emulate former President Ronald Reagan’s meeting with the Soviet Union’s Mikhail Gorbachev in 1986 that took place in the Icelandic capital. The two met in an effort to work on a major nuclear disbarment treaty at the height of the Cold War. Spicer lashed out at the report on Twitter, calling it “100% false.”
The last year has taught us, with Brexit, the US elections, growing anti-EU sentiment on the continent of Europe, that ignoring national interests, which are more and more often expressed in terms of national culture and identity, is not possible anymore. Will this translate through into the reconstruction of economic protectionism? Professor Steve Keen, from the University of Kingston, an economist and an author answers this question. Are identity and culture the new important subjects in politics? Professor Keen gives an explanatory answer. To him, a progressive form of identity and gender politics and socialist politics have been bedfellows for the past 40 years.
One of the clearest examples is in France, he says, where you have Hollande; a socialist leader imposing austerity whilst talking about progressive attitudes to identity politics. Progressive identity politics has been tainted with the brush of austerity politics imposed by the European Union. The socialists have been sunk by it, with a resurgent Marine Le Pen benefiting from the support of middle aged white farmers, and white workers in America supporting Trump. It was a massive mistake, Professor Keen says, for the ‘left’ to align itself with neoliberal economics and failed economic policies which are now falling apart. The centre left, Professor Keen continues, which has been the mainstream socialist thought for some time are basically saying that we have to get into power, and then make capitalism work better.
This is a complete travesty, because success was only brought about by leveraging unsuccessful economies. They ended up deregulating the financial sector, and the next thing they know, economies come crashing down. There is identification of failed social policy with the failed neoliberal policy. The main sufferers have been what is used to be called the industrial workers, they are now saying that if you can’t protect us, we are going across to the people who might be able to. They might be ugly but they might allow us to throw a political hand grenade into the system to wake up those Americans who have been neglected ideologically by the left and also because they have actually lost their jobs to benefit people in China, as Trump has been arguing.
During a CNN town hall held by Sen. Bernie Sanders last Monday, the Vermont senator and progressive icon tried to drive home a point that he has frequently made in the past: There is widespread support for most of the economic policies that he ran on, even if they were often portrayed as radical and divisive by the media. “The overwhelming majority of the American people – including many people who voted for Mr. Trump – support the ideas that we’re talking about,” insisted Sanders. “On many economic issues you would be surprised at how many Americans hold the same views. Very few people believe what the Republican leadership believes now: tax breaks for billionaires and cutting Social Security, Medicare and Medicaid.”
Public polling tends to support his claim. A Gallup survey from last May, for example, revealed that a majority of Americans (58%) support the idea of replacing the Affordable Care Act with a federally funded health care system (including four in 10 Republicans!), while only 22% of Americans say they want Obamacare repealed and don’t want to replace it with a single-payer system. A Kaiser Family Foundation poll from last year had similar results: Almost two-thirds of Americans (64%) had a positive reaction to “Medicare-for-all,” while only a small minority (13%) supported repealing the ACA and replacing it with a Republican alternative. These are surprising numbers when you consider how the Sanders campaign’s “Medicare-for-all” plan was written off by critics as being too extreme.
On other issues, a similar story presents itself. Public Policy Polling (PPP) has found that the vast majority (88%) of voters in Florida, Nevada, Ohio, Pennsylvania and Wisconsin – four crucial swing states, three of which went to Trump this fall – oppose cutting Social Security benefits, while a majority (68%) oppose privatizing Social Security. Similarly, 67% of Americans support requiring high-income earners to pay the payroll tax for all of their income (the cap is currently $118,500), according to a Gallup poll. America’s two other major social programs, Medicare and Medicaid, are also widely supported by Americans, and the vast majority oppose any spending cuts to either. In fact, more Americans support cutting the national defense budget than Medicare or Medicaid. It goes on and on. A majority of Americans, 61%, believe that upper-income earners pay too little in taxes.
A majority of 64% believe that corporations don’t pay their fair share in taxes. Significant majorities believe that wealth distribution is unfair in America, support raising the minimum wage (though perhaps not as high as Sanders would like), and say they are worried about climate change. So a consistent majority of Americans would seem to agree almost across the board with a self-proclaimed democratic socialist and object to the reactionary agenda of congressional Republicans. How, then, did we end up with a Republican-controlled Congress that is dead set on repealing the ACA without a viable replacement (let alone a single-payer type of system supported by the majority); cutting and possibly privatizing Medicare, Social Security and Medicaid; slashing taxes for the wealthiest Americans; and ignoring climate change?
FOX’s Tucker Carlson scored another great interview when he spoke to Hawaii’s congresswoman Tulsi Gabbard. Rep. Gabbard talked about her meeting with President-elect Trump some weeks ago to discuss the danger of further neocon escalation of the war in Syria. She has also recently introduced a bill in congress aimed at preventing the US from funding terrorist groups like ISIS in the future. The bill is brilliantly named the “Stop Funding Terrorists Act.” Seems guaranteed to pass – who could possibly justify voting against it to their constituents? Having this on the books would be a useful tool to stop any further terror-funding operations. Something to watch.
When a delicate snowflake is suddenly faced with a perceived reality so devastating as to be an existential crisis, the mind's reaction to dealing with this cognitive dissonance can be disabling for some. Certainly for The New York Times' flip-flopping, hate-mongering, fact-twisting, Keynesian poster-boy Paul Krugman it appears coping with "no" is not going well and his tirade last night in Twitter has us gravely concerned for his mental stability, which is ironic given how he began yesterday…
Is he hoping to maintain a groundswell of "well, if he is not hitler… he must be worse" thoughts among those so easily led? Still, coming from a man who has prognosticated alien invasions as a global economic growth engine, we are not sure if he is mental situation is improving or deteriorating. We wish him well.
Ranging from the most expensive stock market ever to the dis-similarity in the economic situations facing Donald Trump and Ronald Reagan; and from the excess liquidity driving the price oil to the extraordinarily dangerous growth of credit (debt) relative to GDP, Raoul Pal’s Real Vision has expanded its exceptional services into investment research by publishing the “killer charts” that every market participant should comprehend for the first quarter of 2017…
We have long been told a compelling story about the relationship between rich countries and poor countries. The story holds that the rich nations of the OECD give generously of their wealth to the poorer nations of the global south, to help them eradicate poverty and push them up the development ladder. Yes, during colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies – but that’s all in the past. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill. This story is so widely propagated by the aid industry and the governments of the rich world that we have come to take it for granted. But it may not be as simple as it appears.
The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. They tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows (as previous studies have done) but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). As far as I am aware, it is the most comprehensive assessment of resource transfers ever undertaken. What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.
In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States.
More than 100 refugees have drowned after a boat sank in rough conditions in the Mediterranean Sea as the crisis shows no sign of slowing. The Italian Navy was searching for survivors from the vessel, which was believed to be carrying up to 110 people. Only four survivors were pulled from the water, with at least eight bodies found so far. Flavio Di Giacomo, from the International Organisation for Migration, told The Independent around 106 people were thought to have died and described the conditions at sea as “extremely bad”. The boat went down in waters between Libya and Italy, which has become the deadliest sea crossing in the world since the start of the refugee crisis.It claimed the vast majority of more than 5,000 lives lost in treacherous boat journeys to Europe in 2016, the deadliest year on record, with people drowning or being crushed or suffocated in overcrowded smugglers’ boats.
Saturday’s disaster was the worst single incident so far this year, which has already seen at least 122 deaths at sea. Rescue workers warn that the crisis is showing no sign of slowing in the Central Mediterranean, which has become the main route since the EU-Turkey deal was implemented in March to reduce comparatively shorter and safer crossings over the Aegean Sea. At least 550 refugees were rescued on Friday alone off the coast of Libya, where continuing conflict and lawlessness since the British-backed defeat of Muammar Gaddafi has allowed the smuggling and exploitation of migrants to thrive. Two people were found dead at the bottom of one of the four boats saved and the bodies of four other migrants were found off the coast of Spain. Several asylum seekers have also died in the extreme weather conditions gripping much of Europe in recent weeks.
More than 5,000 refugees were drowned, suffocated or crushed while attempting to cross the Mediterranean and Aegean seas in 2016, making it the deadliest year on record. Many deaths are thought to go unrecorded, with bodies either disappearing or washing up on the shores of Libya, where authorities do not routinely release casualty figures. Some boats are sighted by Italian authorities but disappear before they can be reached by rescue ships. The Unravelling the Mediterranean Migration Crisis (Medmig) project partly blamed Britain and EU nations for rocketing death rates, concluding that the refusal to open up legal routes for those seeking safety in Europe has increased demand for people smuggling on ever more dangerous routes.
To anyone who reads this, please send it to as many of your friends and family and others as you can. Tweet and retweet, post and share on Facebook, do whatever you can to make Christmas a better time and place for the poorest Greeks and refugees. And, of course, please donate!
It’s 4 weeks before Christmas and it’s time. Time for me to go back to the basics, the streets, the people of Athens – the people of Greece as a whole. Back to my friends at the O Allos Anthropos (The Other Human) Social Kitchen who by now serve 5,000 meals a day every day spread over a dozen+ locations on -less than- a shoestring, to the poorest Greeks and to refugees. To my dear friend Konstantinos Polychronopoulos, the little engine that could, and does, drive the entire ‘intervention’.
It’s time also to announce a Christmas/New Year’s fund raiser for these people here at the Automatic Earth, to coincide with our usual annual fundraiser for the Automatic Earth itself. As always, please donate through the Automatic Earth’s Paypal widget at the top left hand side of our pages. If you don’t fancy Paypal, there’s an address for checks and money orders on our Store and Donations page.
Donations that end in $0.99 or $0.37 all go straight to O Allos Anthropos. In fact, I will deliver them in person, something that is necessary because of continuing capital controls in Greece. And no, don’t worry, I don’t pay my travel and stay in Athens from the donations for O Allos Anthropos. Every donated penny goes where it belongs. Guaranteed.
I never intended to get involved in aid, I have as many reservations about institutionalized aid as so many people tell me they have. All I wanted to do initially was to donate a few dollars when I first visited Greece in June 2015. But things have taken off from there, both because of Automatic Earth readers’ generosity (over $30,000!) , and because I found what I have come to regard as the perfect vehicle to deliver aid.
O Allos Anthropos is that vehicle, because it does not fit the mold the ‘aid industry’ has built. The flipside of this is that it has a hard time getting funded. It’s mighty ironic that the one ‘organization’ that is by far the most efficient in delivering aid, should also be the one that has by far the hardest time getting support to do that.
‘The Other Human’ Social Kitchen does not rely on government contacts and contracts, as the established aid industry does. It also doesn’t pay hefty salaries (no salaries at all) or have huge overhead. It’s a loosely organized group of dedicated poor Greeks, often homeless themselves, caring for and feeding other poor Greeks and refugees, helping where they can as far as the funding allows.
It’s the difference between top down and bottom up. And yes, it’s crazy that such a difference should exist even in delivering basic needs to the most needy among us, but it’s there.
From Human-The Movie, Yann Arthus-Bertrand
There is a list of about a dozen articles with links at the bottom of this page that I’ve written about my visits to Athens over the past 15 months. And there are 4 new videos of Konstantinos and the O Allos Anthropos ‘movement’ inserted in the article. Do watch them, together they paint a great picture.
But first, please allow me to explain why I support the Greek people the way I do. There are several reasons.
Number one is the state of the Greek economy. The effects of austerity policies on Greek society were front page news a year and a half ago, but since then, the world has largely left the country alone (15 minutes of fame only) while things have gotten worse fast, and an additional issue, that of the refugees, was added.
The treatment of Greece by its creditors continues to be scandalous, the EU, ECB and IMF behave like a nest of boa constrictors. In a nutshell, it has intentionally been made impossible for the Greek economy to recover. No matter what else you may read, it is a cruel joke to even suggest that an economy and society in which 25% of adults, and over 50% of young people, have been unemployed for years on end, could ‘recover’. If you read headlines like ‘Greece Edges Out Of Recession’, you’re being played.
Add to the mix that consumer spending makes up some 60% of GDP in Greece, but many of those who do have jobs work for €100-€400 a month, and pensions have been cut to less than €700 for 60% of pensioners (basic pension is about €380), and 52% of households -must- live off pensions of elderly family members because most unemployed get nothing. 7 out of 10 jobless are long time unemployed, and get nada. Close to half of pensioners live below the poverty line. Never ending tax raises have put the cost of living beyond reach for millions.
Moreover, tens of thousands of the best educated young Greeks (and 1000 doctors a year) have left the country because there are no jobs and no prospects. The education system was once as highly touted globally as the health care system, but both have been gutted so dramatically now it’s hard to see how either could ever be rebuilt. 15 months ago I donated some money to social clinics, now I receive long and detailed lists of medicine that is simply no longer available. With a cry for help.
Under these circumstances, spending can only go down, and that means GDP growth is mathematically impossible. Nor has a bottom been reached; the situation will deteriorate until conditions allow for spending to rise, and no such thing is in sight. The Troika parties keep hammering on more ‘reforms’ -advertized as an investment in the future-, which invariably make matters worse, while they keep quarreling about, and delaying, debt relief. Boa constrictor. Slow strangulation. In the latest talks, the creditors are demanding additional austerity measures for 2019-2020… That is the reality for Greece.
From Destination: Utopia
Number two is the refugee situation. When I first got to Athens, refugees were not yet a major concern, the Greeks themselves were. Much has changed since then. After the initial large wave, most of which ended up in Germany and other countries, borders were shut and Greece was left to deal with those who remained. Promises to ‘fairly’ resettle refugees in the rest of the EU were largely ignored. There are presently about 60,000 refugees in Greece, and they’re stuck where they don’t want to be, in a country that doesn’t have the means to take care of them.
Brussels refuses for Greece to move the refugees stuck in camps on the islands, to the mainland, for fear they will try and travel north. Still, 60,000 should never be the problem that it is. However, the EU never sent the personnel it once promised to deal with asylum applications. Greek Immigration Minister Mouzalas said last week: “We had an agreement for 400 staffers. Just 35 have arrived. We had a new agreement for another 100 and are still waiting..”. Of course, when the applications are delayed, so is the need for Brussels to resettle the refugees. Convenient when there are elections coming in Holland, France and Germany.
But it is Greece that gets the blame for this; Athens should move faster, is the word. And because it doesn’t, Brussels doesn’t send the humanitarian funds it makes available, to the Greek government; it sends them to international NGOs instead. Which leads us to:
From Chris Gal
Number three is the reality of humanitarian aid. First, let me say I don’t mean to sound -overly- negative about this. But at the same time I feel obliged to explain to you why I’m asking for your support despite the aid that’s already flowing through ‘official’ channels. To put it mildly: things don’t work the way they could. There is aid that reaches the target groups, and there are many well-intentioned people involved, but the overall efficiency with which that happens leaves much to be desired.
Many people are reluctant to donate to large (i)NGOs because they are suspicious of their culture(s). I am not an expert on this, but from what I have heard and seen over the past while, that suspicion does not look so crazy. What it comes down to is that humanitarian aid has become an industry. In the Greek situation, this means that the about €300 million (reported numbers vary) dispersed by the EU so far (€700 over 3 years) to assist Greece and Italy with their refugee influx, has by and large been divided over some 150 NGOs and other aid organizations.
But the stories about underfed, poorly housed and overall miserable refugees and migrants keep rolling in. And more often than not, the Greek government gets the blame. However, if €300 million is not enough for NGOs and aid organizations to make sure 60,000 are properly fed and in general taken care of, what is?
What I had heard and observed on the ground was confirmed in September – in one of these ‘glad it’s not just me’ moments – by a series in the Guardian called Secret Aid Worker. An anonymous aid worker with experience in multiple countries wrote this:
At the time of writing, the number of refugees in Greece is approximately 60,000. The problem is not overwhelming. This time we are in an EU country. I feel safe wherever I am – this means I can conduct a visit to monitor the impact of a programme or ensure I am consulting refugees about what they want. But I don’t, because it is something we have talked about but not done for many years, and there is little pressure to change.
The disconnect between the sector’s standards and the reality on the ground is more stark here than in any other mission I’ve been involved in. We have historically been unaccountable, failing to sufficiently consult and engage affected communities. In Greece we are continuing to operate in the same ways as before, but without the traditional excuses to rely on.
When we have enabling infrastructure, a socio-political context that is easy to operate in, access to Wi-Fi, technology and adequate funds, and yet are failing to meet the refugees’ basic needs (even for something as simple as safe accommodation), reduce serious threats (such as the prevalence of sexual violence), or to be accountable or innovative, it suggests we are disinterested or incompetent. Perhaps both.
In Greece the aid community is being exposed. Our exposure is further compounded when we are unfavourably compared to organised and efficient groups of volunteers who work with less and achieve more. In comparison INGOs and the UNHCR seem money-orientated, bloated, bureaucratic and inefficient.
Across Greece there are volunteers working both independently and as organised groups, meeting needs and filling gaps. They take over abandoned buildings to ensure refugees have somewhere to sleep, provide additional nutrition to pregnant and breastfeeding women, organise and manage informal education programmes, including setting up schools inside camps.
All of this while INGO staff sip their cappuccinos in countless coordination meetings – for cash distribution, protection, water, sanitation and hygiene, food distribution and child-protection. Often to avoid engaging meaningfully in the discussions, we furiously take notes. If any response has called into question whether the humanitarian sector is still fit for purpose, it’s the response to the refugee crisis in Greece.
A good example of this is that it was O Allos Anthropos that was asked last year by the lady who ran the Moria refugee facilities on Lesbos, to run the food supply (the kitchen still operates). The NGOs and their millions in funding failed to do it. Konstantinos did, after he organized food donations by the people living on the island, and after I gave him some of your donations, so he could pay for transport etc. needed to make it possible.
O Allos Anthropos doesn’t fit the model developed by the industry that aid has become. In many aspects, that’s a good thing. But it also means it’s a daily struggle to do even the most basic good. And yes, we need to try and change that. But breaking the aid industry mold will not be easy. And in the meantime, the need will continue to be there, and it will keep growing, and Konstantinos will keep trying to fill it.
And then there are people like Konstantinos, who doesn’t make a penny, who has devoted his entire life to helping people in need, and the contrast is so big it borders on insane. Of course Konstantinos is not alone in this; there are many people who work to aid others without asking for anything in return.
Konstantinos doesn’t want to try and fit O Allos Anthropos into the established -international- aid mold. He doesn’t want to fill out paperwork on a constant basis, and rely on permissions, approval or validation from governments and other ‘high-up’ bodies. He wants by the people for the people. But he has come to realize since we met that if he wants to address the ever growing demands made on him, he can’t do it with no money at all.
Recently, he was invited, and traveled to Perugia, Italy, where people want to start their own version of O Allos Anthropos. This week, he is in Barcelona, where the same questions have been asked. And unless he starts saying No to ever more people, he will need funding.
I mentioned a long list of drugs and medical paraphernalia that social pharmacies are asking him for help in acquiring. People die in Greece, they suffer pain, they tumble into misery, from afflictions that just a few years ago were easy to treat. That’s how bad things have gotten. Earlier this year, Konstantinos told me he had an idea to set up a service to deliver food and drugs to old people in villages in the Greek countryside, in the mountains, remote villages that today often house only older people because the young have all left. A great idea, but how is he going to pay for it?
On December 4, O Allos Anthropos will have a party to celebrate its 5th anniversary, and 2 million meals served. By far most of those were served after the Automatic Earth got involved and your donations made it possible to expand the Social Kitchen to the 17 or so locations across the country, and the islands, where aid is delivered under the O Allos Anthropos banner.
In the first few years, it all operated by people donating food directly. But food donations have fallen by 50% or more this year, because ever fewer Greeks can afford to donate. It is time for the rest of the world to step in. And that doesn’t have to cost millions. The $30,000 you have donated over the past 15 months have achieved miracles already.
In an ideal scenario, I would like to be able to collect $50,000 a year for Konstantinos to do his work. More than $100,000 would not be needed, unless things take a dramatic turn for the worse. Talking of which, any of you who work in the medical field and would like to help alleviate the medicine shortages, drop me a line at Contact • at • TheAutomaticEarth • com, and I’ll tell you what’s most needed.
Please, those of you who have been involved on location or otherwise in delivering aid, understand that I don’t mean to insult you. Most of you come with the best intentions, and many do great work, often against the grain. But I think the account of the Secret Aid Worker above cannot sound entirely unfamiliar to you. So much goes wrong that it must be plain for most of you to see.
And it’s perhaps good to wonder whether international volunteers are the best option to deliver aid in countries where locals are available, and willing, to do the same work. The difference is one gets funding and the other does not. Maybe that, more than anything, should change.
But for now, because it’ll soon be Christmas and because we want to give Konstantinos and his people a wonderful Yuletide and a positive start to the new year, please help us by donating generously.
Because whatever economic and/or political and/or election issues you may have gotten worked up about lately, in the end, and certainly at Christmas time, it is about people. Indeed, it is about helping strangers.
For donations to Kostantinos and O Allos Anthropos, the Automatic Earth has a Paypal widget on our front page, top left hand corner. On our Sales and Donations page, there is an address to send money orders and checks if you don’t like Paypal. Our Bitcoin address is 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT. For other forms of payment, drop us a line at Contact • at • TheAutomaticEarth • com.
To tell donations for Kostantinos apart from those for the Automatic Earth (which badly needs them too!), any amounts that come in ending in either $0.99 or $0.37, will go to O Allos Anthropos.
Please give generously.
I made a list of the articles I wrote so far about Konstantinos and Athens.
When Boston Fed governor Eric Rosengren, a voting member of the Federal Open Markets Committee, where monetary policy is decided, shared some aspects of his worries on Friday morning, markets tanked instantly. This came just after the ECB’s refusal to please the markets with promises of additional bond purchases. Instead, it stuck to the promises it had made previously. What a disappointment for markets running on nothing but central-bank mouth-wagging and money-printing! [..] In his speech, Rosengren discussed how the US economy has been “fairly resilient” and is near “reaching the Federal Reserve’s dual mandate from Congress (stable prices and maximum sustainable employment),” despite all the global headwinds, some of which he enumerated.
And so, he said, “a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy.” Hence, rate increases, even though there were some “conflicting signals” in the economic data – “Clearly, the first two quarters did not live up to the forecasts,” he said. But “waiting too long to tighten” would expose the economy to two risks: First, the economy overheats – the belated tightening might “require more rapid increases in interest rates later in the cycle,” which will likely “result” in a recession, as it did “frequently” in the past. And second, asset bubbles – “that some asset markets become too ebullient.” He pointed at commercial real estate prices that “have risen quite rapidly over the past five years, particularly for multifamily properties.”
He added: Because commercial real estate is widely held in the portfolios of leveraged institutions, commercial real estate cycles can amplify the impact of economic downturns as financial institutions need to write down the value of loans and cut back on lending to maintain their capital ratios. And what a bubble it is. Over the past 12 months, prices have jumped only 6%, according to the Green Street Commercial Property Price Index, compared to the double-digit gains in prior years. “Equilibrium,” the report called it. The index has soared 107% from May 2009, and 26.5% from the peak of the totally crazy prior bubble that ended with such spectacular fireworks:
If there is a curse between the covers of this thin, self-satisfied volume, it doesn’t have to do with cash, the title to the contrary notwithstanding. Freedom is rather the subject of the author’s malediction. He’s not against it in principle, only in practice. Ken Rogoff is a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund and (to boot) a chess grandmaster. He laid out his case against cash in a Saturday essay in this newspaper two weeks ago. By abolishing large-denomination bills, he said there, the government could strike a blow against sin and perfect the Federal Reserve’s control of interest rates. “The Curse of Cash,” the Rogoffian case in full, comes in two parts.
The first is a helping of monetary small bites: a little history (in which the gold standard gets the back of the author’s hand), a little central-banking practice, a little underground economy. It’s all in the service of showing where money came from and where it should be going. Terrorists traffic in cash, Mr. Rogoff observes. So do drug dealers and tax cheats. Good, compliant citizens rarely touch the $100 bills that constitute a sizable portion of the suspiciously immense volume of greenbacks outstanding—$4,200 per capita. Get rid of them is the author’s message. Then, again, one could legalize certain narcotics to discommode the drug dealers and adopt Steve Forbes’s flat tax to fill up the Treasury. Mr. Rogoff considers neither policy option. Government control is not only his preferred position.
It is the only position that seems to cross his mind. Which brings us to the business end of this production. Come the next recession, the book’s second part contends, the Fed should have the latitude to drive interest rates below zero. Mr. Rogoff lays the blame for America’s lamentable post-financial-crisis economic record not on the Obama administration’s suffocating tax and regulatory policies. The problem is rather the Fed’s inability to put its main interest rate, the federal funds rate, where it has never been before. In a deep recession, Mr. Rogoff proposes, the Fed ought not to stop cutting rates when it comes to zero. It should plunge right ahead, to minus 1%, minus 2%, minus 3% and so forth.
At one negative rate or another, the theory goes, despoiled bank depositors will stop saving and start spending. According to the worldview of the people who constitute what Mr. Rogoff fraternally calls the “policy community” (who elected them?), the spending will buttress “aggregate demand,” thus restore prosperity. You may doubt this. Mr. Rogoff himself sees difficulties. For him, the problem is cash. The ungrateful objects of the policy community’s statecraft will stockpile it. What would you do if your bank docked you, say, 3% a year for the privilege of holding your money? Why, you might convert your deposit into $100 bills, rent a safe deposit box and count yourself a shrewd investor. Hence the shooting war against currency.
Here’s a gut check for bond investors: corporate America is now more leveraged than ever. As this year’s corporate bond sales raced past $1 trillion on Wednesday – marking the fifth consecutive year of trillion-plus issuance – Morgan Stanley published a report Friday highlighting the growing strains on company balance sheets. The report, which estimated US companies’ collective debt at a record 2.4 times their collective earnings as of June, comes at a time of growing angst in global bond markets “The investment-grade ‘safe’ part of the market is becoming the most dangerous,” said Ashish Shah, CIO at AllianceBernstein. “There are so little returns out there. People are crowding into whatever they can.”
The debt metric, which doesn’t include banks and other financial companies, has climbed for five straight quarters as corporate profits decline at the same time companies load up on the increasingly cheap borrowings, Morgan Stanley analysts led by Adam Richmond wrote in a note to clients. In 2010, when the U.S. economy started recovering from the longest recession since the Great Depression, the ratio fell to 1.7 times. But what has the analysts uneasy isn’t just the speed at which leverage is climbing, but that it’s happening while the economy continues to grow. “Leverage tends to rise most in a recession – so the fact that it is this high in a ‘healthy economy’ is even more concerning,” the analysts wrote. In other words, they said, “mistakes are both more likely and more costly.”
The analysts’ assessment wasn’t totally worrisome. Years of near-zero interest rates have made it a lot easier to service those debt loads. The typical company’s annual earnings before interest, taxes, depreciation and amortization, known as Ebitda, is still almost 10 times its interest payments, Morgan Stanley’s data shows. Even that number has been declining, though, as earnings slump.
Recently, the Fed decided not to change interest rates. Various reasons were given, but as we know, there are two “parties” in the US, one which favors monetary easing, and the other, tightening, and each has arguments for their case. Economists are divided on how to proceed. They disagree on precisely this: which economic policies can facilitate growth in our times? A brief look at the last 50 years provides some context. In the 70s, household incomes fell, most of all from 1972-73, and with them, spending. Starting in 1981, (Reaganomics!), spending began to rise, but income, hardly at all. Economic growth was due to increased consumption driven by a rise in household debt, and from 2008 on, in government debt. If we look at real disposable household income, it is the same today as it was in the early 60s.
Today, average household debt is 120% of annual income, whereas up until 1981 it never exceeded 65%. Note too, that in 1981, the discount rate was 19%, whereas today it is practically zero. Today, consumption can only increase if someone hands out money. This money cannot be earned by companies, because consumers are unable to buy additional products. So the only way is to increase debt. But lowering interest rates is impossible because they are already at zero. So there are two options: 1) print money and hand it out to people through the banks, with the understanding that this money will not be returned, or 2) restructure the existing debt, both personal and corporate, in the hopes that then people will start to consume.
In order to do this, interest rates would have to be raised to at least 3-4%, with the banks taking a major hit, because their customers cannot service their loans at those rates… Voila the collision of interests between the people and the banks. Unsurprisingly, the two US candidates disagree on this issue. Clinton is for option 1, i.e. more monetary easing (helping the banks), and Trump is for tightening (helping the people). The choice, of course, lies with the American voter.
[..] Wells Fargo was fined $185 million by various regulators for opening customer accounts without the customers’ permission, and that is bad, but there is also something almost heroic about it. There’s a standard story in most bank scandals, in which small groups of highly paid traders gleefully and ungrammatically conspire to rip-off customers and make a lot of money for themselves and their bank. This isn’t that. This looks more like a vast uprising of low-paid and ill-treated Wells Fargo employees against their bosses. The Consumer Financial Protection Bureau, which fined Wells Fargo $100 million, reports that about 5,300 employees have been fired for signing customers up for fake accounts since 2011. You’d have a tough time organizing 5,300 people into a conspiracy, which makes me think that this was less a conspiracy and more a spontaneous revolt.
“The fine is a rounding error, and I don’t see any unintended consequences.” So said FBR analyst Paul Miller, describing the $185 million in fines and penalties, plus another $5 million for “customer remediation,” that Wells Fargo agreed to pay. Wells Fargo’s punishment comes to only 0.9% of the $22.9 billion that the bank earned last year. The Consumer Financial Protection Bureau (CFPB) found “widespread unlawful practices” at the third-largest U.S. bank by assets, including the opening of “hundreds of thousands” of accounts by employees without customers’ knowledge so employees could hit lofty sales targets. The fine was the largest levied since the CFPB’s founding in 2011.
Shares of San Francisco-based Wells Fargo fell 2.4% at the close of regular trading Friday, in line with the benchmark S&P 500 suggesting a low level of worry among investors. But there could be longer-term consequences for the bank’s reputation, as Federal Reserve Gov. Daniel Tarullo said during a CNBC interview that criminal charges against bank officers should be pursued. In Wells Fargo’s more than 6,000 retail branches, there has long been a culture of cross-selling as many products to customers as possible, which has been a big part of the bank’s success for decades, according to Marty Mosby, director of bank and equity strategies at Memphis, Tenn.-based broker-dealer Vining Sparks.
Should we all celebrate? Or sink into a great depression, or run for the nearest bunker? It’s hard to know how to react to the news Auckland’s average house value rose over $1 million in August. Auckland’s homeowners should in theory be celebrating their good fortune and voting for more of the same. Anyone who invested just over $53,000 of their money in 2011 to buy an average Auckland house with a 90% mortgage would now be sitting on tax-free capital gains of $486,000. Indeed, some are celebrating. New car sales are at record highs and spending in Auckland’s cafes, bars and restaurants is growing at double-digit rates. But it’s not the sort of go-for-broke debt-fuelled spending binge like the one we saw from 2002-07 when mortgage lending grew at an annual rate of 15%.
Mortgage debt grew 9% in the last year and most people think it has peaked, given the Reserve Bank’s latest restrictions on low deposit lending and a limit on debt to income multiples expected next year. Most Aucklanders don’t believe the manna from the great housing gods in the heavens is real enough to go withdrawing from their household ATMs, which is why the lending growth is relatively subdued. They can also feel in their bones that house prices at 10 times incomes are hyper≠ventilated, if not downright over-valued. New Zealand’s house-price-to-income multiple is the second-most-expensive relative to long run averages in the OECD (behind Belgium), and is the most expensive relative to rents in the OECD. That overvaluation has grown more than any other country in the OECD over the past six years.
This is not the sort of world champion tag we want. The $1m milestone is clearly a moment of despair for those young Aucklanders aspiring to own a home and start a family, particularly those whose parents were also renters. The combination of the price rises and the new LVR rules mean they face decades of saving for a deposit, let along being able to borrow the hundreds and hundreds of thousands to buy a home. All they can hope for is to win Lotto or to marry into a rich family. Another response is to hunker down and prepare for an implosion, which means saving madly to repay debt ahead of the housing market end-times and to diversify into other types of assets. This isn’t so much a celebration as a preparing for the party to be shut down.
After the EU-Mediterranean summit in Athens on Friday, Italian Prime Minister Matteo Renzi expressed his satisfaction that French President Francois Hollande joined Alexis Tsipras’s initiative to form a front against austerity, Italy’s Corriere della Sera newspaper reported on Saturday. “At last, Hollande is with us, he got over his indecisiveness,” the paper quoted Renzi as saying. “Now we can take action.” On the flight back to Rome from Athens, Renzi appeared more than satisfied with the outcome of the summit, the paper reported. Renzi is said to have expressed relief, in comments to journalists, that Hollande signed a declaration embracing the policies that Italy and other southern European countries are promoting. “Now we are many, we can cause a stir,” Renzi is reported to have said, adding that he expected that “in the future the balance of power will change.”
Much as I appreciate Yanis, I’m afraid I have to agree with much of this article. Reforming the EU is akin to reforming the mob. Why not put your energy into an organization that exists ‘parallel’ to the EU?
To his credit, Varoufakis at least recognizes that progressives “have no alternative” but a “head-on clash with the EU establishment,” since the European Union simply cannot be reformed to make it more democratic. But, he nonetheless insists, leftists must not support referenda to leave the EU. He offers two confused reasons for this. First, since exit referenda are “movements that have been devised and led primarily by the Right,” it is “unlikely” that joining them “will help the Left block their opponents’ political ascendancy.” This left defeatism is simply a self-fulfilling prophecy. If the Left refuses to lead exit referenda campaigns, of course the running will be left to the Right. And since the Left cannot convincingly defend the European Union, that leaves the Right to benefit.
Secondly, Varoufakis suggests that restoring national democracy will mean the end of the free movement of “workers.” “Given that the EU has established free movement, Lexit involves acquiescence to – if not actual support for – the reestablishment of national border controls, complete with barbed wire and armed guards.” Leaving aside the fact that left-wing leadership could theoretically persuade an electorate to accept open borders, this defence of the EU is simply bizarre. The European Union is very far from “borderless” (his word). It has created free movement not for “workers,” but for EU citizens, albeit limited for the citizens from accession countries.
But for non-EU workers, the European Union has established Fortress Europe: “barbed wire and armed guards” surround the continent, resulting in thousands of dead Africans and Asians in the Mediterranean Sea, and hundreds of thousands more languishing in squalid conditions in southeast Europe (including Varoufakis’s own home country, Greece) and Turkey. Moreover, the migration crisis has led to the restoration of “barbed wire and armed guards” across the continent. The idea that the European Union safeguards some sort of workers’ paradise of open borders against right-wing revanchism is ludicrous.
Greece’s prime minister promised Saturday to deliver economic growth to a country hammered by years of economic hardship, as thousands gathered in protest at more planned austerity measures. About 15,000 protesters – beating drums, waving black flags and holding helium balloons bearing anti-government slogans – took part in demonstrations, marching through the center of Greece’s second-largest city, Thessaloniki, where Prime Minister Alexis Tsipras spoke on the state of the nation’s economy. “In five disastrous years … a quarter of our national wealth was destroyed, disposable income fell by 40%, unemployment soared to 28% and the level of poverty rose to 38%,” Tsipras told an audience of politicians and business leaders, referring to governments before he took office in early 2015.
“Now, all the indications are that this chapter is closing…Finally, we are going from a negative direction to a positive one.” As expected Tsipras said that €246 million, the proceeds of a recent auction of TV licenses, would go toward the “needs of the welfare state.” He promised 10,000 new jobs at state hospitals, thousands more free meals at schools, more kindergarten places and a program aimed at bringing back young Greeks who left the country due to the crisis. “Every last euro of the €246 million will go the people,” he said. He also heralded a 5-year action plan – “a realistic road map for the recovery of the economy and reduction of burdens” – that would bring about a “new Greece” by 2021 and promised to freeze the social security contributions of self-employed Greeks as well as reducing taxes in two years time.
I had to read 5-6 versions of this, in order to find where the money would be going. Turns out, as I feared, that it goes not to the Greeks but to -mostly- international NGOs, who’ve done a far from stellar job. Give a fraction of the €115 million to Konstantinos and his O Allos Anthropos ‘movement’ that we support, and many more people get help. That this is still needed despite the 100s of millions of euros doled out to those NGOs says more than enough. International NGOs are way too expensive and inefficient. So please click that link and help The Automatic Earth help where it counts.
The European Union will provide humanitarian organizations in Greece an additional €115 million on top of €83 million from earlier this year, the European Commission said on Saturday. “The European Commission continues to put solidarity into action to better manage the refugee crisis, in close cooperation with the Greek Government,” Humanitarian Aid Commissioner Christos Stylianides said. “The new funding has the key aim to improve conditions for refugees in Greece, and make a difference ahead of the upcoming winter.”
About 60,000 refugees and migrants are stranded in Greece due to border closures implemented earlier this year in the Balkans. Rights organizations have documented poor conditions in overcrowded camps. The new funding will help improve existing shelters and build new ones, pay for a voucher system for migrants, and provide education and other support to unaccompanied minors. It will be channelled via humanitarian organizations. The EU’s emergency support aid is in addition to financial assistance given under other funding programmes.
Rescuers pulled 2,300 migrants to safety on Saturday in 18 separate rescue operations in the Mediterranean coordinated by the Italian coast guard. A Spanish boat belonging to an EU naval force, an Irish navy vessel and boats of four non-governmental organizations were involved in the rescue operations, the coast guard said in a statement. It did not say where the migrants, who were traveling in 17 rubber vessel and one small boat, originally came from. Since moves to stop people crossing from Turkey to Greece, Europe’s worst migrant crisis since World War Two is now focused on Italy, where some 115,000 people had arrived by the end of August, according to the United Nations refugee agency UNHCR.
The euro’s founding father has warned that Europe’s latest plan for an EMU-wide finance ministry is a dangerous attempt to smuggle through political union, and breaches the basic tenets of modern democracy. Professor Otmar Issing, the chief architect of monetary union through its early years, said it would be “dangerous” to transfer control over tax and spending to the EU federal level before full political union has been established first on democratic foundations. Such a quantum leap in the constitutional structure of Europe – effectively the creation of an EU superstate, with a parliament comparable in power to the US Congress – is unthinkable in the current political atmosphere. It would require referenda across Europe, and a two-thirds majority in both houses of the German parliament.
“The chances of political union are close to zero,” he said, speaking at the Ambrosetti forum of world policymakers on Lake Como. If Europe were to jump the gun and force the pace of integration, this would lead to a rogue plenipotentiary with unbridled powers over sensitive issues of national life. “It is hard to see how it could be given democratic accountability,” he said. Prof Issing, a towering figure in the pre-EMU Bundesbank and the ECB’s first chief economist, said control of budgets must for now be left to national government and sovereign parliaments that are genuinely answerable to their own peoples. “Political union cannot be obtained in the European Union by the back door. It is a violation of the principle of no taxation without representation, and represents a wrong and dangerous approach,” he said.
Prof Issing was making a clear allusion to the American Revolution and the events that led up to the English Civil War in the 1640s, two great struggles triggered by a monarchical assault on the parliamentary power of the purse. The early democracies of Europe were all rooted in legislative control over spending. The proposals for an EMU finance ministry emerged in a paper by the heads of the Commission, Council, Parliament, Eurogroup, and ECB in June, a document known as the “Five Presidents Report”. It will start with an advisory European fiscal board and a strategic investment fund with enhanced powers, clearly a finance ministry in embryo. It will graduate towards a “euro area Treasury” from 2017 onwards, anchored in the EU treaties.
The report says that the new machinery will be established on a “lasting, fair and democratically legitimate basis”, and is in many ways a soul-searching admission that the EMU project has gone badly wrong, leading to bitter divisions. Yet critics warn that the EU is once again putting the cart before the horse. They point to the same fundamental errors that have led to perma-crisis in monetary union and spawned populist revolts across much of the EU. Prof Issing has always been open to an authentic United States of Europe similar to the US federal democracy. What he objects to is a deformed halfway house where supra-national bodies take decisions behind closed doors. The euro may survive “for a period” under its current structure, but it will break apart if the principles of monetary union are permanently violated. “Pacta sunt servanda (Agreements must be kept),” said Prof Issing.
The UN’s humanitarian agencies are on the verge of bankruptcy and unable to meet the basic needs of millions of people because of the size of the refugee crisis in the Middle East, Africa and Europe, senior figures within the UN have told the Guardian. The deteriorating conditions in Lebanon and Jordan, particularly the lack of food and healthcare, have become intolerable for many of the 4 million people who have fled Syria, driving fresh waves of refugees north-west towards Europe and aggravating the current crisis. Speaking to the Guardian, the UN high commissioner for refugees, António Guterres, said: “If you look at those displaced by conflict per day, in 2010 it was 11,000; last year there were 42,000.
This means a dramatic increase in need, from shelter to water and sanitation, food, medical assistance, education. “The budgets cannot be compared with the growth in need. Our income in 2015 will be around 10% less than in 2014. The global humanitarian community is not broken – as a whole they are more effective than ever before. But we are financially broke.” Recent months have seen severe cuts to food rations for Syrian refugees in Lebanon and Jordan as well as for Somali and Sudanese refugees in Kenya. Darfuris living in camps in Chad have been warned that their rations may end completely at the end of the year. UN-run healthcare services have also been closed across a large part of Iraq, leaving millions of internally displaced people without access to healthcare.
Guterres warned that the damage being done by these cuts would be impossible to reverse. “We know that we are not doing enough, we are failing the basic needs of people. “The situation is beyond irreparable. If you look at the number of children who will see their lives so dramatically impacted by malnutrition and lack of psychosocial support, you will see this is already happening.”
European Commission officials are debating a proposal that would allow some EU countries to pay money in order to opt out of a mandatory quota system for accepting refugees, in a plan that could ease a stand-off between eastern and western members over how to relieve Europe’s migrant crisis. Some eastern states have balked at being forced to accept mandatory numbers, under a plan to divide 160,000 migrants across the region to be announced on Wednesday by commission president Jean-Claude Juncker. They argue that voluntary targets allow member states to provide better care to people looking to settle in Europe. “We are ready to share the burden and take responsibility, but only if we have control over the situation,” said Poland’s minister for Europe, Rafal Trzaskowski.
Over the summer a harrowing exodus of people from the Middle East, Africa and Afghanistan has leapt to the top of Europe’s political agenda, and led to a quadrupling of the EU’s resettlement target from 40,000 people in July. Commission officials and eastern diplomats stressed that the plan would only allow countries to take temporary “time-outs” from any expanded quota regime, in exchange for payments to a fund supporting refugees. “It creates an opportunity for voluntary decision making,” said an eastern EU official. “If they do it with penalties, then that is a bad idea. But if there is a system where you contribute financially to helping the problem in a different way, then that is much more palatable.”EU officials stressed that any opt-out would also have to be justified by “objective reasons” — for example Poland’s desire to have contingency plans in place to accept large numbers of refugees from Ukraine if the conflict there worsens.
Investor sentiment has suffered with the recent correction and is not likely to improve in the short term, setting stocks up for a volatile September as international concerns overshadow domestic ones. Stocks took a big hit last week with the Dow Jones dropping 3.3%, the S&P 500 shedding 3.4%, and the Nasdaq falling 3%. International factors are feeding market volatility more than any other domestic factor, according to Brad McMillan, chief investment officer at Commonwealth Financial. McMillan said that Germany’s weak manufacturing orders report likely had more to do with Friday’s selloff than the jobs report’s effect on a September rate increase from the Federal Reserve.
What could affect the Fed’s decision is a continued stock market selloff. McMillan said if investors come back from the Labor Day holiday and decide to take risk off the table, the S&P 500 could break down through 1,870 as low as 1,790. If that happens, then the likelihood for a September rate increase falls below 50%, he said. “We’ve got another month or so before confidence bounces back,” McMillan said. “A lot of damage has been done to sentiment.” Others believe the correction still has a ways to go, with one indicator showing that investor sentiment has fallen to “panic” levels. Citi Research’s Tobias Levkovich said his Panic/Euphoria model, which brings together such indicators as short-interest ratios, margin debt, compiled bullishness data, and put/call ratios, broke into “panic” territory for the first time since late 2012.
“..the dollar value of foreign currency reserves held by all developing nations ballooned by almost $7 trillion in just one decade to a peak of some $8.05 trillion by the middle of last year.” It was $1.05 trillion 10 years ago….
China’s summer shock may mark the end of an era of globalization that helped define world markets for more than a decade. Investor anxiety about the consequences is well-founded. Beijing’s integration into the global economy since 2002 reshaped the financial as well as economic landscape – mainly by the way China itself and the economies it supercharged with outsize demand for raw materials banked the hard cash windfalls they earned over the following 12 years. According to the IMF, the dollar value of foreign currency reserves held by all developing nations ballooned by almost $7 trillion in just one decade to a peak of some $8.05 trillion by the middle of last year.
While China was the main driver, accounting for about half of that increase, its economic boom created a commodity supercycle that flooded the coffers of resource-rich nations from across Asia to Russia, Brazil and the Gulf. As the vast bulk of this hard cash was banked in U.S. Treasury and other low risk, rich-country bonds, they were at least one critical factor in the halving of U.S. Treasury and other Group of Seven government borrowing costs over the same period. Alongside the disinflationary impact of China’s low cost labor on western goods imports and wages, this reserve stash helped extend what has now been a 20-year bull market in bonds.
What’s more, the drop in yields, by skewing relative returns between stocks and bonds and also the relative cost of capital for companies, also at least partly underwrote a post-credit crisis surge in equity prices to successive records. Reverse that bond buying, even at the margin, and world asset markets may have a major problem. That’s especially so at a time when the big other marginal bid for bonds, the U.S. Federal Reserve’s quantitative easing program, has ended and when western recoveries are pressuring the Fed and others to normalize near zero interest rates.
Last month, Dalian Wanda, one of the most outward facing corporates in China, bought the organiser of the Ironman triathlons from a US private equity firm for $650 million. Meanwhile, Anbang Insurance, another company with similar global aspirations, looked less likely to succeed in its courtship of the Portuguese authorities in the hope of purchasing the remnants of a troubled financial conglomerate in Lisbon — precisely because the Chinese already have purchased so many assets there. At the same time, Chinese tourists continue to flood destinations like Japan, purchasing luxury goods which have become ever more inexpensive as a result of the steady appreciation of the Chinese currency, with the intention to sell them back home for a tidy profit.
It is hard to know what represents prudent diversification and what constitutes capital flight on the part of Chinese groups and wealthy travellers. But for those who track capital outflows from China, the distinction does not much matter. In the four quarters to the end of June, such outflows, (which do not include debt repayment) have totalled more than $500 billion according to data from Citigroup. China’s mountain of foreign reserves, once around $4 trillion, are now down to less than $3.7 trillion and are expected to drop further to $3.3 trillion by the end of the year, Citi calculates. Not long ago, it seems that the world was awash in cheap dollars. Many of those cheap dollars could be traced to the generous monetary policies of the Federal Reserve.
But many of them also came from the mainland as Chinese recycled their dollar earnings from the sale of exports abroad. Chinese capital flowed into everything from farms in Africa to ports in Sri Lanka and Pakistan, to dairies in New Zealand, energy firms in Canada and Treasuries in the US. More recently China started undertaking massive new, and expensive initiatives including the Asian Infrastructure Investment Bank, the New Development Bank, its Silk Route projects and a recapitalisation of the two policy banks that help recycle its reserves.
Suddenly, though, the question has shifted from what China will do with all the capital that flowed in and its arguably excessive reserves to whether it has enough money and adequate reserves at all. “It is neither the sell-off in Chinese stocks nor weakness in the currency that matters most,” notes George Saravelos, a currency strategist in London with Deutsche Bank. “It is what is happening to China’s FX reserves and what this means for global liquidity. The People’s Bank of China’s actions are equivalent to an unwind of QE or, in other words, Quantitative Tightening.”
China refrained from granting new quotas for residents to invest in overseas markets for a fifth month in August, the longest halt in six years, as authorities seek to stem weakness in the yuan. The State Administration of Foreign Exchange, which has approved 132 local institutions to put as much as $89.99 billion in offshore assets via its Qualified Domestic Institutional Investor program, hasn’t granted new allocations since March. Quotas for overseas investors to access domestic capital markets rose $16.4 billion to $140.3 billion in the period, data from the regulator show. The yuan traded 1.5% weaker outside of China than inside the country on Monday, indicating depreciation pressure.
China is trying to open its capital account enough for the yuan to win reserve status from the International Monetary Fund, while trying to curb an exodus of funds from an economy expanding at the slowest pace since 1990. Chinese investors are seeking to diversify in overseas assets after the Shanghai Composite Index of shares tumbled 39% from this year’s peak on June 12. The yuan slumped 3.6% in Shanghai and 4.9% in Hong Kong in the past 12 months. “Interest is there but whether the money can leave in the short term is the problem,” said Thomas Kwan, Hong Kong-based chief investment officer at Harvest Global Investments Ltd., whose Chinese unit offers QDII funds. “To avoid triggering excessive yuan outflows, I don’t think regulators would grant additional QDII quotas in the short term.”
China’s National Bureau of Statistics on Monday revised down 2014 gross domestic product (GDP) growth to 7.3% from a previously reported 7.4%. This growth revision comes on the back of comments by China’s Finance Minister Lou Jiwei over the weekend that GDP growth will remain around 7% in 2015, as predicted earlier in the year, and the new economic normal may last for four to five years. A lower GDP number for 2014 should also make year-on-year comparisons for economic growth in 2015 more favorable. GDP stood at 63.6 trillion yuan ($10.00 trillion) last year, down by 32.4 billion yuan from the initial estimate, Reuters reported, citing the statistics bureau.
“China revises growth data every year, but it’s usually upwards. In that regard, it is unusual that the revision was downwards,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole. “Rationally speaking, a 0.1% revision isn’t a big deal – and it doesn’t tell us much about the Chinese economy, but when it comes to sentiment, this is a negative development,” he said. The government will not particularly care about quarterly economic fluctuations and maintain steady macro-economic policy, Lou said, according to a statement late Saturday on the People’s Bank of China website. China is headed for its slowest economic expansion in 25 years in 2015 and mainland markets have slumped 40% since mid-June, sending global financial markets skittering.
Along Hungary’s border with Serbia, the scene was anything but smooth. “While Europe rejoiced in happy images from Austria and Greece yesterday, refugees crossing into Hungary right now see a very different picture: riot police and a cold, hard ground to sleep on,” Barbora Cernusakova, an Amnesty International researcher, said in a statement released by the group. The new camp in Roszke was being called a “reception center” by Hungarian officials, though the police on the scene referred to it as an “alien holding center.” Both migrants and relief groups were reporting harsh treatment and a hostile reception from the border authorities. On the Serbian side, officials temporarily blocked at least some trains headed north, amid numerous reports of the police demanding bribes to allow the migrants to pass.
Photos on social media from the new camp showed the police with dogs guarding a desolate compound surrounded by high fences. Omar Hadad, 24, from Dara’a, Syria, had been at a nearby camp along the border before he was shifted on Sunday to one west of Budapest, in the town of Bicske. “The Hungarian police came into the camp and they beat me with batons,” he said of his time in the holding center near the Serbian border. He peeled off his socks to show a bruised foot and leg. Journalists were not allowed into the Bicske camp, but the migrants could come out or speak across the entrance gate. Several other migrants rushed toward Mr. Hadad when they saw him displaying his wounds.
“Here, here, look,” said Salam Barajakly, a student from Damascus who began counting off the wounds and scars on his arms, legs and neck that he said he had gotten on the journey to Hungary, some by accident, some from the police, some from crawling under razor-wire fences. Two men held out smartphones showing videos of the camp where they had been held near the Serbian border. Hundreds of people squatted in the dust while the police tossed sandwiches and bottles of water to them over a barbed-wire fence. “Like a zoo,” Mr. Hadad said. “Like we are dogs.”
In a statement that could have far-reaching implications, Pope Francis called on all Catholic parishes and monasteries in Europe to each house one refugee family that has fled “death from war and hunger.” “Every parish, every religious community, every monastery, every sanctuary of Europe, take in one family,” the pope said during his customary Sunday address, the news agency Agence France-Presse reported. He also said the Vatican will welcome two families of refugees. There are about 122,000 Catholic parishes in Europe, according to a study conducted by Georgetown University and published in June. If each of them housed one refugee family consisting of three to four people, about 360,000 to 500,000 refugees could be accommodated in the coming months.
It is unclear, however, whether all parishes will accede to the pope’s wish. In addition, housing refugees in parishes would have little bearing on the strict policies in countries such as France that have left desperate refugees — fleeing conflict and persecution — with limited options when they make their way to European shores. Addressing thousands of people in St. Peter’s Square on Sunday, Francis provided few details about his call to accommodate refugees, many of whom are not Catholics. The pope called his idea a “concrete gesture” ahead of a “year of mercy” that starts in December. The announcement, nevertheless, could relieve some of the countries that have taken in a large share of the refugees who have recently arrived in Europe, such as Germany or Sweden.
If all of Germany’s 12,000 parishes responded favorably to the pope’s demand, they alone could house a total of more than 30,000 refugees, according to Reuters. However, Germany expects about 800,000 refugees to apply for asylum in the country by the end of the year. The pope’s push resembles other, smaller initiatives already popular in the country. Some Germans have invited refugees to stay in their homes for free as authorities confront increasing difficulties in their bid to provide adequate apartments and reception centers. Many refugees are still housed in tent camps, and it is unclear whether alternative housing can be provided before winter arrives, as WorldViews reported earlier.
“If this is your idea of Europe, keep it for yourself.” Thus spoke an irate Matteo Renzi, Italy’s Prime Minister, during an E.U. Council meeting last June as his East European colleagues refused any obligation to accept some of the thousands of Middle Eastern and African refugees lucky enough to reach alive the Greek and the Italian shores. More than two months later, there is still no unified E.U. policy on how to resettle the growing waves of refugees overwhelming Italy, Greece, Serbia and Hungary. In the middle of all that, some European leaders say they are defending Europe’s Christian values with barbed wires and overcrowded railway cars stuffed with suffocating people – the chilling images reminiscent of the darkest chapters in European history.
Viktor Orbán, Hungary’s Prime Minister, and a self-proclaimed defender of the “Christian Europe,” is justifying such acts by saying that “Europeans are scared because they see that their leaders have completely lost control of the situation.” Along with hundreds of thousands of refugees during the recent Balkan wars, and close to a million of refugees and displaced people from Ukraine’s eastern provinces, this latest human tragedy is emblematic of E.U.’s inability to respond to any major challenges – to say nothing of its inability to anticipate such extraordinary events. And that is not for lack of institutional infrastructure. The E.U. Commission has people in charge of everything – economic, social and foreign policy issues, including even the “specialists” writing the rules and procedures for cheese manufacturing.
The refugee crisis is not a sudden emergency. It is a disaster that has brewed over the past three years. The U.N. confirmed last Friday that it repeatedly warned the E.U. Commission of the coming influx of refugees from war-torn areas of Africa and Middle-East. This horrendous case of ineptitude and mismanagement will remind some of the European “shock” at “discovering” in 2009 that many euro area countries had been violating for years the monetary union’s fiscal rules, and that some of them had totally lost control of their banking systems. How was it possible that nobody knew about that? Jean-Claude Trichet, the former President of the ECB had the answer: “They all knew about it … but they just let it go.”
Can you then blame an angry German Chancellor Angela Merkel for roiling the markets with incendiary statements and imposing debilitating austerity policies to punish the fiscal transgression and banks’ mismanagement in a number of euro area countries? Yes, you can. As a key euro area member, Germany had the responsibility to help enforce the fiscal and financial treaty obligations binding the countries where the euro serves as a legal tender. Anger and vindictiveness are no substitutes for anticipating problems and applying proper policies.
Those of us outside Europe are watching the unbelievable images of the Keleti train station in Budapest, the corpse of a toddler washed up on a Turkish beach, the desperate Syrian families chancing their lives on the night trip to the Greek islands — and we keep being told this is a European problem. The Syrian civil war has created more than four million refugees. The United States has taken in about 1,500 of them. The United States and its allies are at war with the Islamic State in Syria — fine, everyone agrees they are a threat — but don’t we have some responsibility toward the refugees fleeing the combat? If we’ve been arming Syrian rebels, shouldn’t we also be helping the people trying to get out of their way? If we’ve failed to broker peace in Syria, can’t we help the people who can’t wait for peace any longer?
It’s not just the United States that keeps pretending the refugee catastrophe is a European problem. Look at countries that pride themselves on being havens for the homeless. Canada, where I come from? As few as 1,074 Syrians, as of August. Australia? No more than 2,200. Brazil? Fewer than 2,000, as of May. The worst are the petro states. As of last count by Amnesty International, how many Syrian refugees have the Gulf States and Saudi Arabia taken in? Zero. Many of them have been funneling arms into Syria for years, and what have they done to give new homes to the four million people trying to flee? Nothing. The brunt of the crisis has fallen on the Turks, the Egyptians, the Jordanians, the Iraqis and the Lebanese.
Funding appeals by the United Nations High Commissioner for Refugees have failed to meet their targets. The squalor in the refugee camps has become unendurable. Now the refugees have decided, en masse, that if the international community won’t help them, if neither Russia nor the United States is going to force the war to an end, they won’t wait any longer. They are coming our way. And we are surprised? Blaming the Europeans is an alibi and the rest of our excuses — like the refugees don’t have the right papers — are sickening. Political leadership from outside Europe could reverse the paralysis and mutual recrimination inside Europe. The United Nations system to register refugees is overwhelmed. Countries like Hungary say they can’t resettle them all on their own. The obvious solution is for Canada, Australia, the United States, Brazil and other countries to announce that they are willing to send processing teams to Budapest, Athens and the other major entry points to register refugees and process them for admission.
Countries will set their own targets, but for the United States and Canada, for example, a minimum of 25,000 Syrian refugees is a good place to start. (The United States’ recent promise to take in 5,000 to 8,000 Syrian refugees next year is still far too small.) Churches, mosques, community groups and families could agree to sponsor and resettle refugees. Most of the burdened countries — Hungary, Greece, Turkey, Italy — would accept help in a heartbeat. Once these states take a lead, other countries — including those wretched autocrats in the Gulf States — could be shamed into doing their part.
A sharp increase in the influx of migrants and refugees, mostly from Syria, into Greece is due in part to a shift in Turkey’s geopolitical tactics, according to diplomatic sources. These officials link the wave of migrants into the eastern Aegean to political pressures in neighboring Turkey, which is bracing for snap elections in November, and to a recent decision by Ankara to join the US in bombing Islamic State targets in Syria. The analyses of several officials indicate that the influx from neighboring Turkey is taking place as Turkish officials look the other way or actively promote the exodus. According to one Greek official, security fears are a key reason for Turkey’s encouragement of migrant flows.
“Turkey is facilitating or at least is not hampering the movement of illegal immigrants toward Greece, thinking that in this way it will limit the risk of a possible new terrorist attack on its territory as a reprisal for the military operations it has carried out on Syrian soil,” the official said. Another diplomat said Turkey wants to create a “dead zone” on its border with Syria that would allow the Turkish military to freely move against jihadists and Syrian Kurds. “This is why it is encouraging, or at least not obstructing, the movement of refugees from camps near the Syrian border to the Aegean and Greece,” he said.
A Hungarian official indirectly admitted that the poster campaign ordered by the government last summer to discourage immigrants from coming into the country was aimed at generating hate towards them. Anti-immigration posters put up by the Hungarian government have sparked political controversy since June, featuring slogans such as “If you come to Hungary, you cannot take away Hungarians’ jobs”, and “If you come to Hungary, you have to respect our culture!”
Strangely enough, the posters can hardly be understood by migrants, because they are written in Hungarian. The posters – widely ridiculed on social media – were part of a larger anti-immigration campaign driven by Prime Minister Viktor Orban in response to a surge in asylum seekers. The campaign included a public questionnaire linking migration to terrorism and blaming EU policies for the influx of refugees.
But now a Hungarian official has admitted that the posters were in fact aimed at instigating hate against the migrants. Gergely Prohle, substitute state secretary of EU affairs in the Ministry of Human Resources, started by saying that the radical football hooligans did not become radical due to the country’s poster campaign. Then he added that Hungarian society displayed vast solidarity with the refugees, and if the poster campaign did have the desired effects on our society this would not be so.
German Chancellor Angela Merkel’s government announced plans to spend an extra €6 billion on refugees next year as thousands more migrants poured into the country over the weekend. Merkel’s governing coalition said on Monday that Germany will add 3 billion euros in spending to the 2016 federal budget and provide another €3 billion to states and municipalities to tackle the region’s biggest refugee crisis since World War II. Germany and Austria plan to end emergency measures that allowed the passage of thousands of migrants over the weekend from Hungary without registering in that country. That decision came after talks between Merkel, Austrian Chancellor Werner Faymann and Hungarian Prime Minister Viktor Orban, Faymann said in a statement on Sunday.
The countries late on Friday suspended European Union rules that require migrants to register and stay in the EU country where they first enter. The refugees, many coming from war-torn Syria, traveled on trains to Munich’s main station and were then sent to shelters around the country as German citizens volunteered in mass numbers to help the newcomers. Merkel’s government is considering putting excess 2015 tax revenue in a fund that would help cover the refugee costs next year, according to a person familiar with the plans, who asked not to be identified discussing private deliberations. In her weekly podcast, Merkel said the government would stick to its balanced budget goal even as it spends more on refugees.
Greece asked the European Union on Monday for humanitarian aid to help it cope with what it called “a volatile situation” following the large flow of migrants and refugees from the Middle East and Africa onto its shores. It requested the EU activate its civil protection mechanism, the bloc’s crisis-response body, to provide staff, medical and pharmaceutical supplies, clothes and equipment, the Interior Ministry said. Greece is struggling to cope with the thousands of people fleeing poverty and war in countries such as Syria for Europe. Tensions have flared on eastern islands including Kos and Lesbos where most refugees land due to their proximity to Turkey.
On Monday morning, a Greek ferry unloaded 2,500 migrants at the port of Piraeus, bringing the total number of people moved to the mainland since last Monday to more than 15,000. Thousands more are waiting to be identified and ferried to Athens to continue their trip to other European countries. “The First Response Service requested that the EU civil protection mechanism is activated in order to substantially strengthen the efforts undertaken by the First Reception Service to manage a volatile situation,” the ministry said. “The satisfaction of the said request is expected to be of critical assistance to the work of the First Response System, which, under current conditions, is extremely difficult.”
The EU’s civil protection mechanism coordinates the bloc’s humanitarian aid efforts, channeling aid and sending special teams with equipment to disaster areas. It has previously helped Greece fight forest fires. European Commission First Vice President Frans Timmermans and Migration Commissioner Dimitris Avramopoulos have already promised Athens €33 million to help it tackle the crisis.
Europe is experiencing an unprecedented humanitarian crisis as a result of the refugees that are fleeing war and violence in our region. Greece is at the forefront of this crisis. Yesterday’s picture of three-year old Ailan, dead in the Aegean Sea, on the coast of Bodrum, was a powerful punch in the gut for all of us. And particularly for Europe. A Europe that has responded with initial indifference, nonsensical repression and now awkwardness in the face of a global drama caused by erratic foreign policy and the West’s military interventions.
Yesterday’s horrific picture that shocked the world unfortunately demonstrates the tremendous irresponsibility and great shame of the political forces and especially of New Democracy, which from the outset sought to exploit the problem for petty gains; stoking the most extreme populist instincts, the very ones Golden Dawn is manipulating as well to gain more votes. For now, I will ignore New Democracy’s inability to manage this – even rudimentarily – as a government, and will concentrate on its criticism of open borders. What exactly were they demanding from the Greek government? To use Greek coast guard ships to sink the inflatable boats carrying refugees? And to turn the Aegean into a watery grave for thousands of children like Ailan? Even populism and trying to win votes must have some limits.
Former prime minister Alexis Tsipras promised on Sunday to fight to improve the terms of Greece’s latest bailout as he tried to shore up a rapidly collapsing lead in opinion polls, two weeks before a snap election. In a campaign speech in the northern town of Thessaloniki, Tsipras offered no new policy ideas but pledged thousands of new jobs and an attack on corruption. He defended his record of battling Greece’s creditors in his seven months in office, even though he was eventually forced to capitulate to their demands to secure the €86 billion rescue package, Greece’s third in a protracted debt crisis that at times has threatened its future in the euro.
“The battle to improve it is far from over,” Tsipras said, referring to the bailout. He said he would seek to win some form of debt relief and press Greek demands to restore collective bargaining powers for workers, a move the creditors oppose. Tsipras resigned last month to make way for the election, hoping to secure a stronger mandate. But having started out as the clear frontrunner, his leftist SYRIZA party’s poll lead has now all but disappeared, making for an unexpectedly close contest against the conservative New Democracy party. The prospect of a fractured result after the September 20 vote has stoked fears of yet more turmoil in a country hit by years of instability and recession, and raised the prospect of Greece having to go to the polls again.
In a session entitled ‘Old and New Conflicts and Challenges in the EU’, featuring also Peter Sutherland (FT), Mario Monti and Otmar Issing, I used the unwillingness of the Eurogroup, and the troika, even to consider a document prepared by my (then) ministry (entitled “A Policy Framework for Greece’s Fiscal Consolidation, Recover and Growth“) as a case in point of how Europe has lost its integrity and is in the process of losing its soul (judging by the scandalous failure to address the refugee crisis).
With little end to their economic misery in sight, Greeks are finding inventive ways to feed the poor while also fighting waste – a movement that is chipping away at traditional attitudes to food. Three years ago, Xenia Papastavrou came up with a simple idea: take unsold food from shops and restaurants that was headed for the bin, and use it to feed the growing number of Greeks going hungry as the financial crisis took hold. “In June, they gave us 3,000 kilos of melons; in August we got 7,200 cartons of milk,” the 39-year-old told AFP at her office behind Athens’ central market. Boroume (“We Can”), the organization she founded, matches donated foodstuffs with charities in need – whether vegetables, bread or “even these 12 tiropita (cheese pies), which weren’t sold at the bakery.”
These days the food routed through Boroume provides an average of 2,500 meals a day across Greece, from Athens to Thessaloniki in the north. “Greece is a country that throws a lot away,” explained Papastavrou from behind a computer screen covered with data tables and the addresses of charities. In Greek tavernas, if the plates aren’t piled with huge pyramids of food, a meal between friends can be considered a failure, she added. “There isn’t really a mentality of paying attention to this,” she said. “Here, it’s: ‘I’ve paid for it, so I can do what I want with it.'” But years of hardship have started to change habits in a country where official figures show a quarter of the population is at risk of poverty.