Dec 142016
 
 December 14, 2016  Posted by at 10:02 am Finance Tagged with: , , , , , , , , ,  


Louise Rosskam General store in Lincoln, Vermont 1940

Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)
Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)
Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)
China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)
Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)
Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)
There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)
How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)
Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)
Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)
Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)
Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)
A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

 

 

“Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.”

Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)

If Janet Yellen had any class, she wouldn’t just be announcing an interest rate hike this week – she would also be offering her resignation. Yellen was appointed chair of the Federal Reserve by President Obama in 2014. While most heads of government agencies will soon be offering their resignations to President-elect Donald Trump, the Fed is not a government agency. It’s an independent entity. Which means Yellen doesn’t have to resign. Her term as chair – which makes her, perhaps, the second-most powerful person in Washington — doesn’t end until January 2018. And even then, she can hang around as a mere board member – one of 14 – until 2024. So, although Yellen and her colleagues have screwed things up, they get to keep their jobs. And boy has the Fed screwed things up — both before and since the financial crisis that started in 2007. [..]

It’s clear that Trump doesn’t like Yellen. And she hasn’t said anything nice about the incoming president or his policies either. So the two aren’t likely to get along. Yellen has shown no inclination to give up her job even though Trump has lashed out at her. “I think the Fed is being totally controlled,” Trump said during a campaign stop at the Economic Club of New York. “They’re not raising rates. And they’re being controlled politically.” Welcome to reality, Mr. Trump. The Fed lost its independence four decades ago. And you’ll be trying to control it soon. Yellen has hit back at Trump, saying that his pledge to spend $1 trillion on infrastructure to help the economy was dangerous. She said that after Trump spent that much money, there “is not a lot of fiscal space should a shock to the economy occur.”

Yellen also continued to assert her preposterous notion that the “economy is operating close to full employment.” If true, why hasn’t she already raised interest rates vigorously? And why, if the economy was doing so well, did the election go so badly for the incumbents — the Democrats? The Fed boss understands economics better than Trump. The higher borrowing costs that are already being seen (and which the Fed will pile onto this week) will automatically cause government borrowing costs – and therefore, spending – to increase and make US debt levels much worse. How much worse? That depends on how high rates go and how reluctant the Chinese are to continue to lend us money, especially now that Trump has picked a fight with Beijing. Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.

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Few people in the west know China the way Roach does.

Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)

Stock markets are euphoric after Donald Trump’s victory as pundits bet on U.S. economic growth based on the president-elect’s stimulus plans, but be aware of trade deficits and funding U.S. consumption, said Yale economist and noted author on China, Stephen Roach. “Given the overall savings of the U.S., that spells bigger trade deficits and for a president who is clearly raising some protectionist flags at a time when our trade deficits are going to widen, that’s a big disconnect,” Roach, a former chairman of Morgan Stanley Asia and chief economist, told CNBC’s “Squawk Box”. “The idea of larger trade deficits colliding with protectionist shifts in policy is a very worrisome development for the U.S. and for the broader global economy,” added Roach.

Roach’s comments come against a background of Trump having campaigned on remedying a wide trade gap in favor of Beijing that he said was spurred by moves to artificially weaken the yuan and restrict entry into home markets. He has also angered China by taking a congratulatory phone call from Taiwan President Tsai Ing-wen and calling into question the foundations of the “One China” policy. China is the world’s top holder of U.S Treasurys, and any major change in that stance would have broad macroeconomic impact. “The deeper question is less about the integrity of the leadership skills he can bring to the job, but how much scope for action he will have in the Trump administration … (after) Mr Trump has made some very strong statements about a number of critical foreign policy issues,” said Roach.

Roach also commented broadly on issues that will have to be resolved in the early phase of a Trump administration, including how a U.S. savings shortfall will be financed, suggesting choices of higher interest rates or a weak dollar as possibilities. He also expects a reassessment of Trump’s economic policies and outcomes in late 2017. As for Trump’s goals to shore up the battered manufacturing industries, Roach said Americans will have to pay a price for penalizing offshore operations. “As they bring those activities home, the cost of goods sold, the prices that go to American families who are hard strapped who voted for Mr. Trump, those prices are going to go up … We can’t have it both ways,”he said.

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Only, the author doesn’t really say how.

Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)

When Donald Trump talks about China devaluing its currency it’s difficult for investors to figure out exactly what he’s trying to convey. China, in fact, is trying to strengthen its own currency against the dollar as part of an effort to prevent capital from leaving the country. It leaves people uncertain whether Trump–who has access to people who know the capital markets and can point out his mistake–simply misunderstands what’s happening in global capital markets, or if he’s picking a fight with China. Trump’s decision to take a phone call Dec. 2 from Taiwan’s President, Tsai Ing-wen, sent off alarms in Beijing, and leaders there appear to be moving toward the conclusion that Trump is picking a fight. Trump’s response that the longstanding U.S. “one China” policy may be a bargaining chip in potential trade negotiations made matters worse.

China subsequently sent a bomber capable of carrying a nuclear payload outside its borders over the contested South China Sea in a show of force aimed at expressing displeasure with Trump’s posture. China held $1.16 trillion of U.S. government debt as of September, according to the most recent data available from the Treasury. That’s down by $100 billion from the year before. During that period Treasuries have actually rallied, with the benchmark 10-year note yield falling to 1.60% from 1.99%. China’s reduction in holdings didn’t hurt the bond market, as the economic stresses that led them to allocate cash away from Treasuries led other investors to seek out safety in the debt. China is well-positioned to use the bond market to show its displeasure with the U.S. in a manner that would be more than symbolic: it could sell more Treasuries. For the President-elect, who has plans to borrow to pay to ramp up infrastructure spending, that could cause real pain. The 10-year note yield has risen to a two-year high of 2.49% up from 1.88% on election day.

For more than a decade, politicians have expressed concern that China and other foreign government could use their significant stakes in Treasuries against the U.S. by dumping them on the market. Such a move would potentially drive borrowing costs throughout the U.S. sharply higher. Bond market conventional wisdom has been that this would be unlikely because it would reduce the value of the seller’s remaining reserves, weakening it’s own capital bulwarks against a future crisis. Trump’s pugnacity mixed with his seeming willingness to ignore facts contrary to his argument make it hard to assess his motives, which may scramble conventional thinking and raise the risks of an unorthodox response from China.

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Let the games begin.

China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)

China will soon slap a penalty on an unnamed U.S. automaker for monopolistic behavior, the official China Daily newspaper reported on Wednesday, quoting a senior state planning official. News of the penalty comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of “one China”. Beijing maintains that self-ruled Taiwan is a wayward province of China and has never renounced the use of force to take it back. Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau, was quoted as saying.

In an exclusive interview with the newspaper, Zhang said no one should “read anything improper” into the timing or target of the penalty. China, the world’s largest auto market, has become crucial to the strategies of car companies around the world, including major U.S. players General Motors and Ford. “We are unaware of the issue,” said Mark Truby, Ford’s chief spokesman for its Asia-Pacific operations. In a statement, GM said: “GM fully respects local laws and regulations wherever we operate. We do not comment on media speculation.”

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There’s just so much borrowing going on. And that was never the Chinese way.

Just Another Chinese Cash Crunch, But Bigger (BBG)

In markets where investors are highly leveraged, things tend to happen slowly at first, then fast. China is having one of those moments, and as with the 2008 crisis, it can’t be pinned on one event. On Monday, the Shanghai Composite Index sank 2.5%, then extended that decline Tuesday before rebounding to close little changed. The one-year government note yield rose 7 basis points to 2.72%, on top of Monday’s 15 basis-point increase. The root cause may be banks. There’s clearly a liquidity squeeze on Chinese lenders. Nothing new there: Financial institutions tend to face higher demand for cash in December, and this year that’s been exacerbated because Chinese New Year falls early – the holiday, when many people withdraw deposits to buy gifts and travel, begins Jan. 28.

Perhaps more important, banks also want to boost the deposits they can account for as of Dec. 31, when they close their books. Financial institutions struggled to meet a loan-to-deposit ratio ceiling of 75%, and that cap was scrapped in June. None of the banks wants to show that the amount they lend is completely disconnected from what they have in the coffers, however. Which may explain why short-term deposit rates are far higher than longer-term ones. In simple terms, this is a seasonal cash crunch. The issue is that this time it’s on steroids, because it comes after several months when the People’s Bank of China increased short-term rates. This boosted funding costs for wealth-management products and for investors using leverage to buy everything from stocks to bonds to iron ore. As some of the trades begin to offer negative returns, these investors are selling.

Curiously, Hong Kong is going through a similar issue because of the impending Federal Reserve rate increase. Then the vicious circle of leverage begins: Assets being sold drop below agreed levels, triggering margin calls – or the requirement that someone borrowing money to buy securities post more cash to back up the loan. To meet those calls, investors sell more of their securities, putting further pressure on prices and prompting new margin calls. The slump in Chinese stocks last year was exacerbated by just such a dynamic. Investors must now hope that China has learned the lesson from that rout and will use its pension funds to steady the market. Otherwise, if this selloff really is the result of a liquidity squeeze, it’s unlikely to stop before February, when people return from the holiday.

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And neither has the FBI.

Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)

The overseers of the U.S. intelligence community have not embraced a CIA assessment that Russian cyber attacks were aimed at helping Republican President-elect Donald Trump win the 2016 election, three American officials said on Monday. While the Office of the Director of National Intelligence (ODNI) does not dispute the CIA’s analysis of Russian hacking operations, it has not endorsed their assessment because of a lack of conclusive evidence that Moscow intended to boost Trump over Democratic opponent Hillary Clinton, said the officials, who declined to be named. The position of the ODNI, which oversees the 17 agency-strong U.S. intelligence community, could give Trump fresh ammunition to dispute the CIA assessment, which he rejected as “ridiculous” in weekend remarks, and press his assertion that no evidence implicates Russia in the cyber attacks.

Trump’s rejection of the CIA’s judgment marks the latest in a string of disputes over Russia’s international conduct that have erupted between the president-elect and the intelligence community he will soon command. “ODNI is not arguing that the agency (CIA) is wrong, only that they can’t prove intent,” said one of the three U.S. officials. “Of course they can’t, absent agents in on the decision-making in Moscow.” The FBI, whose evidentiary standards require it to make cases that can stand up in court, declined to accept the CIA’s analysis – a deductive assessment of the available intelligence – for the same reason, the three officials said. [..] In October, the U.S. government formally accused Russia of a campaign of cyber attacks against American political organizations ahead of the Nov. 8 presidential election. President Barack Obama has said he warned Vladimir Putin about consequences for the attacks.

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That’s quite the claim. Especially since all western reporting contradicts even the possibility.

Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)

Foreign Minister Sergei Lavrov said talks with the United States on Syria were at a dead end, and Islamic State’s advance to Palmyra may have been staged by the United States and its regional allies to allow Syrian rebels in Aleppo a respite. During a visit to Belgrade, Lavrov said Russia was ready to quickly negotiate with the United States the opening of corridors for the pullout of rebels from Aleppo, but said these would have to be agreed before any ceasefire happened. “Our American colleagues do, so to speak, agree with that, and from Dec. 3 when we met John Kerry in Rome they supported such a concept and even gave us their approval on paper,” Lavrov told reporters at a news conference with his Serbian counterpart on Monday.

“But after three days they revoked that agreement and returned to their old, dead-end position which comprises this: Before the agreement on corridors there has to be a truce… as I understand, this would just mean the rebels would get a break,” he said. Earlier in the day, a military source said the Syrian army was on the verge of announcing victory in its battle to retake rebel-held eastern Aleppo. The Syrian army made new advances on Monday after taking the Sheikh Saeed district, leaving rebels trapped in a tiny part of the city. Lavrov also said he believed that Islamic State’s seizure of Palmyra might have been engineered by the U.S.-led coalition to divert attention from Aleppo. “That leads us to a thought – and I am sincerely hoping I am wrong, that this is all orchestrated, coordinated to give a break to those bandits that are in eastern Aleppo,” he said.

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Robert Fisk suggests Lavrov may be on to something.

There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)

[..] it’s time to tell the other truth: that many of the “rebels” whom we in the West have been supporting – and which our preposterous Prime Minister Theresa May indirectly blessed when she grovelled to the Gulf head-choppers last week – are among the cruellest and most ruthless of fighters in the Middle East. And while we have been tut-tutting at the frightfulness of Isis during the siege of Mosul (an event all too similar to Aleppo, although you wouldn’t think so from reading our narrative of the story), we have been willfully ignoring the behaviour of the rebels of Aleppo. Only a few weeks ago, I interviewed one of the very first Muslim families to flee eastern Aleppo during a ceasefire. The father had just been told that his brother was to be executed by the rebels because he crossed the frontline with his wife and son.

He condemned the rebels for closing the schools and putting weapons close to hospitals. And he was no pro-regime stooge; he even admired Isis for their good behaviour in the early days of the siege. Around the same time, Syrian soldiers were privately expressing their belief to me that the Americans would allow Isis to leave Mosul to again attack the regime in Syria. An American general had actually expressed his fear that Iraqi Shiite militiamen might prevent Isis from fleeing across the Iraqi border to Syria. Well, so it came to pass. In three vast columns of suicide trucks and thousands of armed supporters, Isis has just swarmed across the desert from Mosul in Iraq, and from Raqqa and Deir ez-Zour in eastern Syria to seize the beautiful city of Palmyra all over again.

It is highly instructive to look at our reporting of these two parallel events. Almost every headline today speaks of the “fall” of Aleppo to the Syrian army – when in any other circumstances, we would have surely said that the army had “recaptured” it from the “rebels” – while Isis was reported to have “recaptured” Palmyra when (given their own murderous behaviour) we should surely have announced that the Roman city had “fallen” once more under their grotesque rule. Words matter. These are the men – our “chaps”, I suppose, if we keep to the current jihadi narrative – who after their first occupation of the city last year beheaded the 82-year-old scholar who tried to protect the Roman treasures and then placed his spectacles back on his decapitated head.

By their own admission, the Russians flew 64 bombing sorties against the Isis attackers outside Palmyra. But given the huge columns of dust thrown up by the Isis convoys, why didn’t the American air force join in the bombardment of their greatest enemy? But no: for some reason, the US satellites and drones and intelligence just didn’t spot them – any more than they did when Isis drove identical convoys of suicide trucks to seize Palmyra when they first took the city in May 2015. There’s no doubting what a setback Palmyra represents for both the Syrian army and the Russians – however symbolic rather than military. Syrian officers told me in Palmyra earlier this year that Isis would never be allowed to return. There was a Russian military base in the city. Russian aircraft flew overhead. A Russian orchestra had just played in the Roman ruins to celebrate Palmyra’s liberation.

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The craziest thing I’ve seen in a long time.

How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)

From rising sea levels to more severe storms and more intense droughts, climate change will present serious risks to, and create major opportunities for, nearly every industry. Citizens, consumers, businesses, governments, and international organisations are all taking action. And entrepreneurs are developing disruptive technologies that will create and destroy value. The challenge is that investors currently don’t have the information they need to respond to these developments. This must change if financial markets are going to do what they do best: allocate capital to manage risks and seize new opportunities. Without the necessary information, market adjustments to climate change will be incomplete, late and potentially destabilising.

Public policy, consumer demand and technological innovation are driving a shift towards a low-carbon economy. Which companies and industries are most, and least, dependent on fossil fuels? And who stands ready to provide resilient and sustainable infrastructure? Which financial institutions are best positioned to gain and which to lose? In every case, which firms have the governance, resources and the strategy to manage, and profit from, these major shifts? We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed.

In response to a G20 request to consider the financial stability risks, the Financial Stability Board created a taskforce on climate-related financial disclosures. Its purpose is to develop voluntary, consistent disclosures to help investors, lenders and insurance underwriters manage material climate risks. As befits a solution by the market for the market, the taskforce is led by members of the private sector from across the G20, including major companies, large investors, global banks and insurers. After a year of intensive work and widespread consultation its recommendations are now publicly available. They concentrate on the practical, material disclosures most relevant to investors and creditors and which can be compiled by all companies that raise capital as well as financial institutions.

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Poul Thomsen was always a disgrace.

Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)

The row over how to stabilise the indebted Greek economy has resurfaced with renewed vigour after the European Union on Tuesday angrily rejected charges by the IMF that its current rescue programme is “not credible”. The spectre of the country’s economic crisis flaring up again deepened as the extent of the differences between creditors was laid bare. Caught in the middle, Athens also ratcheted up the rhetoric, as its finance minister told the Guardian that the IMF was “economising with the truth”. “Greece is being boxed into a corner,” said Euclid Tsakalotos, claiming that the country was under intense pressure to specify new austerity measures that made “no economic or political sense”. The war of words intensified after the IMF issued a 1,300-word statement distancing itself from the economic policies underpinning the nation’s latest bailout.

The adjustment programme agreed last summer in exchange for €86bn (£72bn) worth of rescue loans – a plan the IMF has so far refused to support – was based on measures that were “unfriendly to growth”, wrote Poul Thomsen, who directs the IMF’s European department, and Maurice Obstfeld, its chief economist. “It is not the IMF that is demanding more austerity,” the officials argued in a blog published late on Monday. “If Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF … when we ask to see the measures required to make such targets credible.” Athens, they said, had agreed to achieve a budget surplus – where state tax income exceeds expenditure – of 3.5% of GDP once the bailout expired in 2018, a feat that was not feasible without further cuts, said the IMF.

On Tuesday, the European commission hit back, insisting that the economic fundamentals were not only sound, but working. “The European institutions consider that the policies of the ESM program are sound and if fully implemented can return Greece to sustainable growth and can allow Greece to regain market access,” said commission spokeswoman Annika Breidthardt. The plan, she added, had undergone “several parts of scrutiny”, and even the European court of auditors had provided feedback, which had been taken into account. [..] Hopes of a political breakthrough are now resting on meetings Tsipras will have later this week with German and French leaders. But on past form, lenders are unlikely to yield, and Greek officials are now worrying that the row could be the precursor of the IMF pulling out of the programme altogether.

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“s it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?”

Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)

Prime Minister Alexis Tsipras is to suggest to European counterparts this week that the IMF should be left out of the Greek program, sources have told Kathimerini. Tsipras is expected to sound out Francois Hollande, who he is due to hold talks with Wednesday, and Angela Merkel, with whom he will have a working lunch on Friday, about the idea of the Fund no longer having a role in Greece’s bailout. If an agreement cannot be reached on this proposal, Tsipras will put forward the possibility of the IMF retaining just a technical role in the program. Athens believes that the political cost of the Fund remaining on board has become too high after the latest spat between the government and the organization, which flared up as the institutions returned to the Greek capital for further talks aimed at completing the bailout review.

The talks resumed under a cloud after the IMF’s European director Poul Thomsen and head of research Maurice Obstfeld published a blog post on Monday night in which they denied that the Fund was responsible for asking Greece to adopt more austerity measures and claimed that the country’s pensions and tax benefits are still too generous. Finance Minister Euclid Tsakalotos confronted the IMF mission chief Delia Velculescu over the blog post when talks between the Greek government and the institutions resumed in Athens Tuesday. Velculescu is said to have assured the Greek minister that the IMF did not want to make negotiations harder but simply to express its view.

A little earlier, Tsakalotos had publicly countered the claims made by the IMF officials in their article. “In effect [the Fund] is arguing for Greek pensioners and poorer wage earners to make further economies, while it economizes on the truth,” he told The Guardian. “Greek expenditure on both pensions and other subsidies is about 70% of the EU average and 52% of that of Germany. Is it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?” he added.

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But of course they are short on anti-depressants too.

Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)

Greece’s debt crisis has made its population the unhappiest not only in western Europe but also in comparison with people in some former Communist countries, a study showed on Tuesday. The “Life in Transition” survey conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank has questioned households across a broad region since 1991 as the Cold War came to an end, but Greece was included for the first time this year. Over 92% of Greeks said the debt crisis had affected them, with 76% of households suffering reduced income due to wage or pension cuts, job losses, delayed or suspended pay or fewer working hours.

Only one in 10 Greeks were satisfied with their financial situation and only 24% with life overall, compared with 72% in Germany and 42% in Italy, the two western European countries used as comparisons. The figure was 48% in post-communist countries. Austerity measures demanded by international creditors have been tough on Greeks. Pensions, for example, have been reduced by about a third since the crisis began in 2009. Only 16% of the respondents in Greece saw their situation improving over the next four years, compared with 48% in post-communist countries and 35 and 23% in Germany and Italy, respectively. “This signals that, despite the recent political changes and attempts at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report said.

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So that stops all fracking, right?!

Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)

The U.S. Environmental Protection Agency (EPA) has released its widely anticipated final report on hydraulic fracturing, or fracking, confirming that the controversial drilling process indeed impacts drinking water “under some circumstances.” Notably, the report also removes the EPA’s misleading line that fracking has not led to “widespread, systemic impacts on drinking water resources.”The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances,” the agency stated in a media advisory. This conclusion is a major reversal from the EPA’s June 2015 pro-fracking draft report. That specific “widespread, systemic” line baffled many experts, scientists and landowners who—despite the egregious headlines—saw clear evidence of fracking-related contamination in water samples.

Conversely, the EPA’s top line encouraged Big Oil and Gas to push for more drilling around the globe. But as it turns out, a damning exposé from Marketplace and APM Reports revealed last month that top EPA officials made critical, last-minute alterations to the agency’s draft report and corresponding press materials to soft-pedal clear evidence of fracking’s ill effects on the environment and public health. Thomas Burke, EPA deputy assistant administrator and science advisor, discussed the agency’s final report released Tuesday. “There are instances when hyrdofracking has impacted drinking water resources. That’s an important conclusion, an important consideration for moving forward,” Burke told reporters today, according to The Hill. Regarding the EPA’s contentious “national, systemic conclusion,” Burke said, “that’s a different question that this study does not have adequate evidence to really make a conclusive, quantified statement.”

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Small state, but big chunk of ice.

A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

An iceberg the size of Delaware is starting to break away from Antarctica. It began with a small crack, but has now grown 70 miles long and more than 300 feet wide. When it reaches the edges of the ice sheet, the state-sized chunk will drift away into the sea. The crack is a third of a mile deep—reaching all the way to the sea below. It’s a relatively new rift in the ice sheet, called Larsen C, but is following in its icy brethren’s footsteps: Larsen A and B both broke away from the main Antarctic sheet in the last two decades in much the same way. All three began with clefts in the ice and eventually floated away to disintegrate. That dramatic a cleft is unusual—it’s more common for ice sheets to slowly break up along the edges and fall in smaller chunks. Only in the last half century has it become common for the Antarctic to form these dramatic fault lines, and scientists say global warming is likely to blame.

NASA has been monitoring the Larsen ice sheets since Larsen A broke off in 1995. Larsen B followed it in 2002, and Larsen C is expected to go the same way soon. Operation IceBridge has surveyed the polar ice caps annually for the past eight years as a way to track changes in the glaciers and ice sheets. The MIDAS Project, a U.K.-based research group, first reported the Larsen C rift in 2014 and has kept a watchful eye on it ever since. [..] The more than 2,400 square miles that is likely to break away from Larsen C will only be about 12% of the ice sheet’s total area. But once that part comes loose, the MIDAS Project predicts that the rest of the sheet could become unstable and completely disintegrate. The crack is growing steadily and shows no signs of stopping, though the break won’t happen immediately. It takes much longer for ice sheets to break up—unlike many human relationships, this one will last through the holiday season.


A rare ice crack not formed by that squirrel from the Ice Age movies – NASA/John Sonntag

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Mar 302015
 
 March 30, 2015  Posted by at 9:31 am Finance Tagged with: , , , , , , , , ,  


John M. Fox “The new Hudson” 1948

How The Fed Is ‘Screwed,’ And What Happens Next (CNBC)
Cinderella’s New Moral: Be Rich Or Be A Pumpkin (Lynn Stuart Parramore)
The ECB’s Put – Explained By Draghi (CNBC)
Angola Joins Venezuela Among Biggest Losers Of Oil’s Tumble (CNBC)
China’s Developers Face More Price Pain (FT)
China Central Bank Governor Calls For Vigilance On Deflation (Reuters)
Greece Says Not Backing Down On Debt Relief Goal (Reuters)
How Greece Pushed Europe’s Creditors To The Edge (Telegraph)
Greek Bailout Proposals Lack Necessary Detail, Officials Say (WSJ)
Investors Fear Greece Will Impose Capital Controls (AFR)
Greek Markets Show All at Risk Should Mistake Trigger a Default (Bloomberg)
ECB Nerves Fray on Greece as Supervisors Rile Central Bankers (Bloomberg)
Globalist Financiers Fleece Greece (StealthFlation)
Australia To Introduce Tax On Bank Deposits (ABC)
Swiss Banking Model Is ‘Dead’, Says Abu Dhabi Finance Centre Chief (FT)
Kim Dotcom Loses $67 Million Of Assets To US Government (RT)
Who’s Fighting For Whom In Yemen’s Proxy War? (Reuters)
Ukraine’s Oligarchs Turn on Each Other (Robert Parry)
Risks Involved In UK Smart Meter Scheme Are ‘Staggering’ (BBC)
Antarctica Recorded Its Hottest Temperature Ever This Week (CP)

“There will never be a good time to raise rates off zero when you’ve been there for six years..”

How The Fed Is ‘Screwed,’ And What Happens Next (CNBC)

Call it a box, or perhaps even a paradox, but the Federal Reserve finds itself in an uncomfortable position heading into its first rate-hiking cycle in nearly a decade. A central bank that has prided itself on transparency during its ultra-easy cycle following the financial crisis is now doing an awkward dance with a market not quite sure what to make of the road to tightening financial conditions. The essential problem is this: When the Fed could have raised rates it didn’t want to. Now that it wants to raise rates, it may not be able to, at least not without causing substantial turmoil in the same financial markets it has sought so strenuously to soothe. The Fed hasn’t raised rates since June 2006. “There will never be a good time to raise rates off zero when you’ve been there for six years,” Peter Boockvar at The Lindsey Group, told CNBC. “The Fed’s screwed, essentially.”

The extension of the central bank’s dilemma, or box, or paradox, goes like this, as highlighted in Boockvar’s argument: Zero interest rates were a response to the worst U.S. economic crisis since the Great Depression. The economy, though, is far removed from its crisis days. The recession ended in mid-2009, gross domestic product has been on a steady if uninspiring march higher and financial markets, which have received by far the most benefit from Fed programs, have soared. While all that happened, the Fed could have begun the tightening process without disrupting the recovery. What’s left now, though, is a point where the Fed has indicated a desire to tighten at a time when its biggest global counterparts are easing. That’s resulted in a firming of the dollar, a looming earnings recession in which U.S. profits are forecast to decline in two consecutive quarters—and could well turn negative for the year—and first-quarter GDP gains that could be anemic or nonexistent.

“Zero … is just an unnatural rate six years into a recovery.” Boockvar said. “But the problem is that GDP growth hasn’t averaged more than 2.5% (during the recovery), so they’re stuck in this lackluster, mediocre-type growth rate.” Investors have recoiled amid the current conditions. Outflows from equity-based funds have reached their highest level since the darkest days of 2009, just as the recession was ending and the Fed was kicking its zero interest rate policy and quantitative easing into high gear. The central bank expanded its balance sheet to $4.5 trillion during QE as it bought bonds and injected liquidity into the capital markets.

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“..your chances of marrying outside your income bracket have been dropping since the 1950s because of something called assortative mating..”

Cinderella’s New Moral: Be Rich Or Be A Pumpkin (Lynn Stuart Parramore)

Once upon a time, during a brief egalitarian period in postwar America, people of different classes did not live in separate worlds. The promise of mobility and prosperity was alive throughout the land. In 1950, Walt Disney Productions was saved from bankruptcy with its smash hit Cinderella, which audiences cheered at a time when the future looked bright and it was still possible for the dream of marrying up to come true. A new Disney film of Cinderella is a big box-office success today, but how different things look! Cinderella marriages are getting to be as rare as golden coaches. Economist Jeremy Greenwood has found that your chances of marrying outside your income bracket have been dropping since the 1950s because of something called assortative mating, which means that we are increasingly drawn to people in similar circumstances.

Since the 1980s, inequality has grown and mobility has stalled. Today, the rich forge their unions in exclusive social clubs, Ivy League colleges and gated communities. Unless you have a fortune or a fairy godmother, you’re probably out of luck. Without that magic, the gates remain closed. At first glance, Kenneth Branagh’s remake of the classic Disney film seems to offer a sunny romp through the magic kingdom. But a closer look reveals a troubling economic message. Economists like Thomas Piketty have been warning that if we don’t do something to stop growing income inequality, we may end up back in a 19th-century world, where hard work won’t lift you up the economic ladder because the income you can expect from labor is no match for inherited wealth. This is the world of the new Cinderella.

More so than the original Disney film, Branagh’s version highlights what happens when people are forced to compete for illusive rewards in a harsh economy. Families turn on each other, chances to get ahead are few and you’d better hope for a magic wand. Subtle changes to the story bring the point home. In the original animated version, the father is a gentleman, a widower who remarries and then promptly dies, leaving a jealous stepmother and her mean-girl daughters to torment his beloved only child. But in Branagh’s film, the father is a merchant, and his death deprives the family of his income — leaving them all in straitened circumstances.

The stepmother’s first thought on hearing of her husband’s demise is entirely practical: How shall we survive economically? Her answer: Turn Cinderella into a servant and search for wealthy matches for her two daughters. The marriage market illustrated in the movie reflects what economists like Robert H. Frank describe as a tournament, a “winner-take-all” game associated with economies where wealth is increasingly concentrated at the top. In these cutthroat markets, only a handful of people can win big, while the rest are left with little.

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He makes it up afresh every morning.

The ECB’s Put – Explained By Draghi (CNBC)

Investors in euro-denominated assets can get very useful insights from important points that European Central Bank (ECB) President Mario Draghi made last week while addressing several committees of the Italian Parliament. At the outset, Draghi pointed out that the main purpose of the ECB’s asset purchase program (“quantitative easing”) was to create a more favorable environment for structural reforms. These reforms are an absolutely essential part of freeing up market mechanisms in Europe’s rigid economies and bloated welfare systems. They are supposed to create conditions necessary for steady and balanced economic growth. The rub is that the short-term impact of these reforms also creates flammable socio-political problems of rising unemployment and falling revenues.

No euro area government has a mandate for such policy outcomes. Those who tried sank to oblivion. Witness the social turmoil and political changes in Greece, France, Italy, Spain and Portugal. All of these countries are currently experiencing a powerful pushback to reforms and austerity policies. The new leftwing government in Greece got an overwhelming popular vote to roll back most of the socially painful structural reforms and accompanying austerity policies. Last week’s regional elections in France showed a similar result. Spain’s Podemos party, an upstart anti-austerity movement, is breaking up the country’s traditional two-party system, leading to a huge defeat of the center-right government in regional parliamentary elections a week ago.

And tens of thousands of people were marching in Rome last Saturday to protest against new regulations introducing a bit of much-needed flexibility to an excessively rigid Italian labor market. These are the people Mario Draghi was addressing while speaking two days earlier to Budget, Finance and European Affairs Committees of the Italian Parliament. What he said there is that the ECB can help with expansionary monetary policies to ease the (short-term) pain of structural reforms, but that without these reforms the euro area recovery will peter out, bringing the economies back to stagnation, falling output and rising unemployment. [That reminded me of a good old Spanish proverb: “Pan de hoy, hambre de mañana,” literally translated as “bread today, hunger tomorrow”.]

Elaborating on this argument, Draghi told Italian legislators that the encouraging signs of improving economic activity in the euro area are mainly the result of falling energy costs, cheap credit (and the sinking euro)and favorable effects of structural reforms in some member countries. But he warned that what he sees is a “cyclical recovery” rather than a more sustainable “structural recovery,” which rests on flexible markets, rising productivity and an increasing non-inflationary growth potential.

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Emerging countries are no longer that.

Angola Joins Venezuela Among Biggest Losers Of Oil’s Tumble (CNBC)

Plunging oil prices have been an economic windfall for U.S. consumers, primarily through greater savings at the pump. In energy-reliant countries around the world like Angola, however, the effect has been far less beneficial. Social and economic turmoil in countries like Venezuela and Russia—largely because of the swoon in global oil prices—has drawn attention away from Angola, an OPEC member that is Africa’s second-largest oil producer. The country churns out 1.75 million barrels of oil per day, according to the Energy Information Agency (EIA). The sub-Saharan country is hugely dependent on oil production to generate revenue for its economy, which the International Monetary Fund (IMF) says accounted for 97% of total export revenues in 2012, marginally more than Venezuela’s 95%.

Although Angola’s economic tumult is not as bad as Venezuela’s, the situation in the country is pretty grim. Last year, Angola saw net oil export revenue plunge by more than 12% to $24 billion, due to tumbling production and crude prices, EIA data notes. Its oil exports account for 50% of its domestic economy, and Angola had to drastically slash its 2015 oil price assumptions to $40 per barrel, from $81 per barrel. The tumble in black gold has precipitated massive created wrenching adjustment in the country, which Rabah Arezki, head of the commodities research team at IMF, said puts upward pressure on domestic oil prices, resulting in “social unrest” and a recently proposed $14 billion in budget belt-tightening.

The massive budget cuts “is of course a huge shock,” Arezki told CNBC, suggesting that “the government may decide to cushion the shock using fiscal buffers.” And not unlike Venezuela, Angola’s oil crisis has created a crisis that has sent its currency, the Kwanza, to an all-time low. Arezki points out that is likely to hinder the effectiveness of monetary policy. The situation has put Angolan president Jose Eduardo dos Santos in the crosshairs of public anger. Luanda has been forced to reach out to international lenders for at least $1 billion in loans, the Financial Times reported recently, and is reportedly soliciting banks like Goldman Sachs for millions in private loans.

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China saw the west lying about its wealth and thought: why stop there?

China’s Developers Face More Price Pain (FT)

Chinese property developers are finding themselves forced to sacrifice profits to boost sales, as the downturn in the housing market saddles them with bulging inventories and limited access to new funding. Most listed mainland homebuilders recorded a steady rise in revenue last year but sharp declines in profit for many are a symptom of aggressive price-cutting designed to shift stock and generate much-needed cash in the debt-laden sector. Revenue at Agile Property increased 8% in 2014, the company said in its latest earnings report yet profits sank 11%. Profit fell by 15% at Guangzhou R&F and by 8% at Yuzhou Properties, even as both reported growth in sales. “We expect prices will remain under pressure over the next few months as developers continue to offer price incentives for their projects,” Moody’s analysts wrote in a report.

Margins at some of the more successful companies also have come under pressure. Country Garden’s income rose by more than a third last year, yet profit was up by only a fifth. Still, China Vanke – the country’s largest builder by sales – reports earnings on Monday, and is expected to show operating profit rising by over 30%. Weakness in the housing market has been a key factor in China’s broad slowdown. The economy grew 7.4% last year, the slowest pace in more than 20 years, as the government sought to reduce dependence on credit-fuelled construction. Overall home sales dropped 8% last year, according to official figures.

“With the downward pressure on the economy, the real estate industry will continue to undergo a period of profound correction,” said Cao He, chairman of Hong Kong-listed builder Franshion. “Property developers will face challenges including shrinking profit margins and intensifying competition.” Kiyan Zandiyeh and Daili Wang of Roubini Global Economics warn that the current “supply glut” in Chinese housing is likely to get even more severe. “With companies trying to meet sales growth and defend market share, the incentive has been to keep building – meaning today’s excess supply in the market will only worsen,” they wrote in a report. “Developers will struggle with stronger headwinds from falling house prices, given that most of them are operating with unsustainable levels of inventory and debt.”

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Spending in China is way down, so deflation is a fact.

China Central Bank Governor Calls For Vigilance On Deflation (Reuters)

China’s central bank governor Zhou Xiaochuan warned on Sunday that the country needs to be vigilant for signs of deflation and said policymakers were closely watching slowing global economic growth and declining commodity prices. Zhou’s comments are likely to add to concerns that China is in danger of slipping into deflation and underline increasing nervousness among policymakers as the economy continues to lose momentum despite a raft of stimulus measures. “Inflation in China is also declining. We need to have vigilance if this can go further to reach some sort of deflation or not,” Zhou said at a high-level forum in Boao, on the southern Chinese island of Hainan.

Zhou added that the speed with which inflation was slowing was a “little too quick”, though this was part of China’s ongoing market readjustment and reforms. Beijing is determined to keep the world’s second-largest economy from taking the same path of recession and deflation that has blighted its neighbor Japan for the past 20 years. The central bank’s newspaper warned last month that China is dangerously close to slipping into deflation. The People’s Bank of China (PBOC) has cut interest rates twice since November and taken other steps to support growth, but economists believe it will be forced to take more aggressive measures in coming months if prices and the economy weaken further.

Zhou also said China had a “clear direction” in terms of interest rate liberalization – a long-term goal – although he added it was difficult to put a clear timetable on the move. He pointed to comments made last year when he said the country’s deposit rates were likely to liberalized in one to two years. Last week, Zhou said China could undermine structural reforms if it adopts an excessively loose monetary policy, while pledging to relax capital controls to help make the yuan currency fully convertible. Zhou also said on Sunday that China hoped to work on streamlining regulations around foreign exchange this year and that through the adoption of new rules China would eventually be able to achieve capital account convertibility.

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And they won’t.

Greece Says Not Backing Down On Debt Relief Goal (Reuters)

– Greece has not given up on its aim to renegotiate its debt to render it manageable, the country’s deputy finance minister said on Monday as talks between Athens and its lenders on reforms to unlock aid continue. “The government has not abandoned any claim regarding its aim to make the country’s debt viable,” Deputy Finance Minister Dimitris Mardas told financial daily Naftemporiki. Greece’s public debt burden reached more than 177% of national output last year. The country’s new government came to power in January promising to demand that its euro zone partners let it write off a large part of that debt.

But it has said little about the issue in recent weeks, as Greece struggles to cope with a cash crunch and the government focuses on reaching agreement with its lenders on reforms that would unlock the remaining funds of the country’s bailout. “The solutions are known — either there will be a haircut or it will be extended, or (repayment) will be linked to an increase in output or exports, or there will be lower interest rates,” Mardas told the paper. He reiterated a plan to link the repayment of Greece’s 318 billion euros of debt with economic growth or exports, along the lines of a deal applied for post-World War Two Germany.

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“The ECB has always been the most powerful but least accountable player in bail-out talks”.

How Greece Pushed Europe’s Creditors To The Edge (Telegraph)

Greece has pleaded for forbearance from its creditors. The parlous state of the government’s coffers has led to fears it could run out of cash to make wage and pensions bill in the coming weeks. After a brief reprieve, deposit flight has resumed apace. A primary budget surplus registered over the same period last year, has disappeared. Ratings agency Fitch slashed the country’s sovereign bonds citing the “tight liquidity conditions” that have put “extreme pressure on Greek government funding”. The spectre of an “accidental” Greek exit – or “Grexident” – now looms over the eurozone. “Grexit will not happen” assured Greece’s central bank governor Yannis Stournaras to an audience at the London School of Economics last week. “The eurozone has all the tools to ensure a Grexident cannot occur.”

But of the all the institutions that has pushed his country to the brink, it is the European Central Bank’s role in the saga that has come under the fiercest criticism from Athens. The ECB has long disbanded providing its ordinary loans to Greece’s banks, who have been reliant on emergency funding to keep themselves alive. The limits on this lifeline have been repeatedly hit as deposits flee the country. ECB funding for Greek banks has now topped €100bn. “The ECB has always been the most powerful but least accountable player in bail-out talks” says Raoul Ruparel, head of economic research at Open Europe. “As in Cyprus, they have the power to squeeze liquidity, but it’s a power that has never been properly scrutinised. It’s a concern the eurozone is not paying attention to,” adds Mr Ruparel.

Moves to withdraw a collateral waiver on Greek bonds, and officially ban banks from increasing their holdings of treasury debt has led to accusations the central bank is acting “ultra vires”. When asked about the Bank’s position, the ECB’s chief economist Peter Praet chose to exercise “verbal constraint in a moment of crisis” – itself a tacit admission that the Greek saga still has a way to run before the ECB will alleviate the funding pressures on the nascent government. In a drama littered with soft deadlines, Greece has now promised to present a final list of fleshed out reforms to creditors on Monday. Yet the pattern of over-promising and under-delivering is one that may well repeat itself in April, says Mr Ruparel. “Negotiations have gone in such a way that Greece presents the reforms, and the list underwhelms. This could well happen again – the key is where the eurogroup now draws the line. Maybe the Greeks have convinced them the situation is now dire enough.”

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Well, what a surprise.

Greek Bailout Proposals Lack Necessary Detail, Officials Say (WSJ)

Greek proposals for a revised bailout program don’t have enough detail to satisfy the government’s international creditors, eurozone officials said, making it more likely that Athens will need to go several more weeks without a new infusion of desperately-needed cash. Officials from Greece’s leftist government were in Brussels over the weekend to present the proposals to officials from the European Commission, the European Central Bank and the International Monetary Fund—the trio of institutions representing the government’s creditors. Getting their thumbs-ups is crucial for Athens to regain access to bailout funds and restore normal lending from the ECB. The Greek government is facing a dire shortage of cash: It must pay salaries and pensions at the end of the month and repay debts to the IMF on April 9.

While talks over the weekend were friendly, officials said, mistrust at a political level continues to stew between the outspoken government in Athens and the rest of the eurozone. Following a meeting last week between Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel, Greece said it would submit a list of bailout proposals to its creditors on Monday. Officials hoped that discussions over the weekend would ensure the list is roughly in line with the creditors’ demands. But officials say crucial details were again missing from the Greek proposals after talks that started Friday night, lasted all day Saturday and continued on Sunday. “The proposals were piecemeal, vague and the Greek colleagues could not explain technically what some of them actually implied,” a eurozone official said. “So, let’s hope that they present something more competent next week.”

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Sure, real scary.

Investors Fear Greece Will Impose Capital Controls (AFR)

Will Athens be able to avoid imposing capital controls? That’s the question anxious investors are asking as they wait to see whether the long-awaited reform package proposed by the radical leftist government of Alexis Tsipras does the trick in terms of unlocking billions of euros in badly needed cash. Representatives of Greece’s Troika lenders spent the weekend debating the draft list of economic reforms sent through by Athens on Friday. The approval of the “Brussels Group” (formerly known as the “troika”), followed by the blessing of eurozone finance ministers, will be needed for Athens to be able to tap the frozen aid money and stave off bankruptcy.

The list of reforms include 18 measures aimed at boosting state revenues by €3 billion in 2015, and allowing the country to achieve a primary budget surplus (which excludes debt servicing costs) of 1.5% of GDP. The Greek government is counting on economic growth of 1.4% this year. The main thrust of the reforms is aimed at combating tax evasion and increasing the amount of tax paid by the wealthy. The government’s coffers will also be boosted by measures such as raising the sales tax on certain luxury products, and forcing Greek television chains to pay licence fees. Although Athens has previously ruled out lifting the retirement age or cutting pension payments, the reform package also includes some restrictions on the payment of early pensions,

In addition, the Tsipras government has agreed to proceed with planned privatisations, even though it wants to retain some management control of the businesses after selling off stakes. Investors are hoping that intensive negotiations between Athens and Brussels over the next few days result in a compromise package that goes far enough to persuade the European Union and the IMF to unfreeze at least some of the €7.2 billion that remains from Greece’s last international bailout, allowing the country to stave off bankruptcy. Cash-strapped Greece is hoping that eurozone finance ministers will meet and approve its reform program this week. The head of the group of eurozone finance ministers, Jeroen Dijsselbloem, has previously signalled that €1 to €2 billion Greece’s remaining aid money could be released quickly if Athens is able to reach agreement with its lenders.

But Brussels is in less of a hurry. EU officials are refusing to call a new meeting of the region’s finance ministers unless Athens is prepared to agree to “significant” reforms. As a result, the crucial meeting of euro zone finance meetings may not take place until after Easter. The Europeans are confident that the immediate risk of a Greek default has receded because the Tsipras government has forced state-controlled corporations and social security funds to transfer their cash reserves to the central bank. As a result, the country now has enough money to pay the €1.7 billion bill for pensions and public-sector wages at the end of March.

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“The only feasible solution in the absolute extreme would be to turn all the official debt into a perpetual bond so it never gets repaid.”

Greek Markets Show All at Risk Should Mistake Trigger a Default (Bloomberg)

In Athens, the unspeakable is at risk of becoming the inevitable. Market metrics show Greece is in danger of sinking under the burden of its debt, putting repayments of about €500 billion owed to European taxpayers, rescue funds, banks and bondholders in jeopardy. PM Alexis Tsipras is locked in talks with creditors over measures attached to Greece’s bailout loans and a government official said on Friday the country won’t service its debt if creditors don’t release the funds. The government has also floated a restructuring that would link some future payments to economic growth, reduce interest rates and allow more time for repayments. While their intention is to exclude private bondholders, the danger is that talks collapse and Greece leaves the euro, leaving all parties facing losses.

“The biggest fear now is that Greece exits by mistake,” said Padhraic Garvey at ING in London. “The only feasible solution in the absolute extreme would be to turn all the official debt into a perpetual bond so it never gets repaid.” With the country running out of cash, credit-default swaps indicate a 72% chance of Greece reneging on its debt within five years compared with 67% at the start of the month, according to CMA. Three-year note yields are almost 10 %age points higher than 10-year rates. Typically investors get more to lend for a longer period to compensate for inflation. With Greece, the immediate worry is whether they get their cash back. The price of five-year securities has tumbled to 68% of face value, from almost 100% after they were sold a year ago.

Greece sold the current three-year notes in July 2014, its second tap of capital markets within three months, after a five-year debt offering in April that year had been hailed by German Chancellor Angela Merkel as a step toward normalcy. Sales of those securities, which totaled about €6 billion, increased the amount of Greek bonds outstanding to €67.5 billion, of which the ECB and national central banks own about 40%, according to data compiled by Bloomberg. The market was reduced when Greece enacted the biggest-ever debt restructuring in 2012, which saw private bondholders write off about €100 billion. The 10-year yield went as high as 44.21% in March 2012 as the country moved to restructure its debt.

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Infighting!

ECB Nerves Fray on Greece as Supervisors Rile Central Bankers (Bloomberg)

Inside the five-month-old union between monetary policy and financial oversight at the ECB, nerves are beginning to fray. As officials seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are irking the old guard. Central bankers under ECB President Mario Draghi worry that overly-strict orders to lenders could worsen the Greek turmoil. After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come.

“Clearly there is tension, and it was obvious from the beginning that there would be,” said Nicolas Veron, a fellow at the Brussels-based Bruegel research group. “But there’s a productive kind of tension, like there was between Treasury Secretary Tim Geithner and Federal Deposit Insurance Corporation Chair Sheila Bair in 2008. It could end up creating the right mix of policy.” Just as those U.S. policy makers in the 2008 financial crisis had to choose between the moral hazard of bailing out banks and the economic chaos of watching them fail, European officials are trapped between giving in to Greek cash demands and the political debacle of letting the country leave the euro.

That stress is bubbling up inside the ECB, affecting the interaction between central bankers in their new premises in Frankfurt’s east end, and bank supervisors installed in a temporary home two kilometers away. SSM Chair Daniele Nouy may give clues on the relationship with the Governing Council when she testifies to the European Parliament on Tuesday. Her officials sought this month to prevent Greek banks from increasing holdings of short-term government debt, hours before critical meetings including Prime Minister Alexis Tsipras and Draghi. The move, which makes it harder for the state to fund itself, initially floundered as the ECB’s Governing Council balked at its severity and the monetary-policy goals that it referred to.

From the supervisory point of view, the proposal reflected the ECB’s restrictions on Emergency Liquidity Assistance for the Greek banking system. Since last month, the Governing Council has approved only small weekly increases in central- bank cash to its lenders, on concern funds might be used directly to buy illiquid government debt, violating European Union law. For some central bankers, the SSM proposal was a clumsy intervention in crisis policy that threatened to upset the Governing Council’s measured strategy of addressing the Greek turmoil, according to officials familiar with the discussions.

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Angry Bruno!

Globalist Financiers Fleece Greece (StealthFlation)

Greece was brought to her knees at the hands of its corrupt political class elites with the full support of an avaricious international banking cabal. Please don’t put the blame on the little old lady pushing her Gyro cart up the steep streets of Kolonaki. She was perfectly within her rights to assume that the leadership of her country knew what the hell they were doing whilst managing her distinguished nation’s finances. Yet today, she has taken the full brunt of the fiscal pain, while those most responsible for this massive over leveraged abomination, namely the Greek political family dynasties and their complicit int’l banksters, continue to bask in the sun off of Mykonos on their luxury yachts. Along with the privilege of leadership comes responsibility, it’s way too easy to simply blame the little people. According to Atlantic Media today:

The Greek government might run out of money in two weeks. Or perhaps four. Capital controls are either imminent or a month away. Whatever the case, depositors are draining Greek banks dry, which could hasten a state default and, potentially, ejection from the euro zone altogether. The four-month bailout extension that Greece got in February now seems a distant memory, with €7.2 billion in much-needed funds still contingent on Greece drawing up a detailed list of reforms, which creditors are vetting this weekend. If they don’t like what they see, it might mark the beginning of the end for Greece’s membership in the euro.

The first mandate SYRIZA obtained from a sovereign electorate, who rightly rejected the corrupt old-guard Greek political establishment, was to offer to negotiate a more rational, realistic and productive debt repayment schedule/structure with the TROIKA. That is what Alexis Tsipras & Yanis Varoufakis have tried diligently to accomplish thus far, if they fail because Brussels insists on sucking blood from a rock, then the next momentous mandate will be to leave the Eurozone altogether, and for that they will require a national referendum from the Greek people themselves. Tsipras is much smarter than many give him credit for, he knows that he must be perceived to progress cautiously and as constructively as possible, in order not to be pigeonholed as an extreme radical, which the EU establishment is so desperately trying to paint him as.

Make no mistake, the international banking cartel of our times our are on a mission to dismantle the sovereignty of all people. Greece is the first nation to fully recognize and realize this craven conniving cataclysm, as pain often gives people proper perspective. This Multilateral Central Banking Cabal and its high finance agents are planning to transition to a new international monetary order by devaluing the USD, as they fold it into the SDR world reserve currency, backed by a basket of the existing currencies of the major trading block nations. This will serve to both ease the burden of the most indebted nation in history, the U.S., by permitting its outstanding debt denominated USDs to be debased, as well as appease the creditor nations, who will agree to have their US dollar denominated debt holdings devalued, because they now require a true stake in the globe’s future monetary system moving forward. The only question remaining is will the global economy disintegrate before we get there……..

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There’s already no interest left on deposits, and now the government wants to take more? Judging from prices on just about everything, but especially alcohol and tobacco, people here may have not much left anyway at the end of the day.

Australia To Introduce Tax On Bank Deposits (ABC)

The Federal Government looks set to introduce a tax on bank deposits in the May budget. The idea of a bank deposit tax was raised by Labor in 2013 and was criticised by Tony Abbott at the time. Assistant Treasurer Josh Frydenberg has indicated an announcement on the new tax could be made before the budget. The Government is heading for a fight with the banking industry, which has warned it will have to pass the cost back onto customers. Mr Frydenberg is a member of the Government’s Expenditure Review Committee but has refused to provide any details. “Any announcements or decisions around this proposed policy which we discussed at the last election will be made in the lead up or on budget night,” he said. Speaking at the Victorian Liberal State Council meeting Mr Abbott has repeated his budget message, focusing on families and small businesses.

“There will be tough decisions in this year’s budget as there must be, but there will also be good news.” The banking industry has raised concerns about a deposit tax, saying it will have to pass the cost back onto customers. Steven Munchenberg from the Australian Bankers’ Association said it would be a damaging move for the Government. “It’s going to make it harder for banks to raise deposits which are an important way of funding banks. And therefore for us to fund the economy,” he said. “And we also oppose it because particularly at this point in time with low interest rates a lot of people who are relying on their savings for their incomes are already seeing very low returns and this will actually mean they get even less money.”

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The new off-shore?

Swiss Banking Model Is ‘Dead’, Says Abu Dhabi Finance Centre Chief (FT)

Abu Dhabi intends to set itself up as a new hub for wealth management, with the head of its nascent international financial centre declaring Switzerland’s old model of private bank secrecy to be “dead”. Abu Dhabi Global Markets is an expression of world ambition, intended to elevate the oil-and-gas-rich emirate to the tables of the most influential global institutions, such as the Basel Committee on Banking Supervision and the Group of 20 Nations, using Singapore rather than Switzerland as its model, its chairman told the Financial Times. “Innovation is coming from this new, emerging market.

This is why Asian financial centres are sitting on Basel committees and legislating for the west, because they didn’t make one mistake in 15 years,” Ahmed Ali al-Sayegh said in London as he set out ADGM’s stall to banks. “We have a similar ambition.” His comments come as the centre of gravity of such institutions has shifted palpably from west to east, and as Asia is developing its own bodies to rival those in the west, such as the China-led Asian Infrastructure Investment Bank. ADGM, which will have its own regulator and courts based on English common law, is an attempt to diversify the UAE capital’s economy. Its heavy-hitting sovereign wealth funds, the Abu Dhabi Investment Authority and Mubadala, will both be based in the free zone, built on al-Marya island in the capital.

That has worried some in neighbouring Dubai, whose own International Financial Centre opened a decade ago, attracting the world’s biggest banks and law firms. Mr Sayegh and his team, which includes Sir Hector Sants, the former head of the UK’s financial watchdog, are adamant that there is room for two financial centres within two hours’ drive of each other, stressing that not only will Abu Dhabi focus specific areas such as wealth management but also that nearby centres can complement each other.

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Still a crazy story.

Kim Dotcom Loses $67 Million Of Assets To US Government (RT)

Megaupload streaming service mogul Kim Dotcom has just been slapped with a civil penalty from the US government. The lawsuit will cost him $67 million worth of assets, including cars, property and luxury goods. The victory by the US court comes as he lost the right to contest the seizure of the assets. Dotcom, who is wanted in the United States for copyright infringement through the former file-sharing website, told the Herald on Sunday that this is indicative of the “sad state” of the US justice system. “By labeling me a fugitive, the US court has allowed the US government to legally steal all of my assets without any trial, without any due process, without any test of the merits,” he said, vowing to appeal the decision, which his legal team says would likely not hold up in New Zealand or Hong Kong courts.

“The asset forfeiture was a default judgment. I was disentitled to defend myself,” the internet guru went on. “First the US judge ruled that I can’t mount any defense in the asset forfeiture case because according to him I’m a ‘fugitive’… Think about that for a moment. I have always said that I’m innocent. There was no conspiracy. I have done nothing wrong.” He also claims the US government had to act in this way to spare the New Zealand authorities from having to return all of his assets in mid-April, when he claims he will have gone to the Appeals Court and won them back. “They would have had to return everything. Imagine all of the New Zealand media at the mansion when the police has to return everything, all my cars, my TVs, my servers and me directing them where to put my stuff.”

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Complicated.

Who’s Fighting For Whom In Yemen’s Proxy War? (Reuters)

An aerial campaign on Yemen’s capital, launched by a Saudi-led pan-Arab force, has escalated what had in many ways been a proxy war between Iran and Saudi Arabia. While the worsening war in Yemen shares similarities with other conflicts in the Arab world, it is the role of foreign powers in Yemen’s descent into leaderless chaos that is particularly striking. Because Yemen is viewed as the Arab world’s poor brother — inconsequential and with little influence over the region as a whole — it serves as an avenue for the Arab world to push back against Iran. There is little other incentive for Arab governments to become involved with Yemen’s internal quagmire, other than not having a hostile government in a nation bordering the Bab al-Mandeb strait, a highly trafficked shipping line leading to the Suez Canal.

Though Yemen’s domestic power struggle since the end of President Ali Abdullah Saleh’s reign three years ago was based largely on local grievances, these two historical foes, Shi’ite Iran and Sunni Saudi Arabia, worked to use who they could in Yemen for political advantage. The Saudi kingdom long was Yemen’s largest benefactor and held sway over powerful Yemeni tribal leaders. Yet following Saleh’s resignation in November 2011, Iran swiftly worked to increase its influence in Yemen by creating ties with whomever shared a common disdain for Saudi Arabia, including liberal anti-Saleh activists. The Houthi rebels, an oft-ignored militia from Yemen’s far north, were an obvious ally for Iran. Houthi fighters, who follow a sect of Shi’ite Islam known as Zaydism, consolidated power in the wake of the 2011 government collapse.

They are staunchly anti-Saudi. They believe that the Kingdom was involved in the systematic corruption of their distinct Zaydi culture via the promotion of Wahhabism (a strict interpretation of Sunni Islam that began in Saudi Arabia) in the Houthis’ traditional homeland in the north. Then last September, Houthi militia swept into Yemen’s capital, Sanaa, taking over government institutions and effectively forcing the resignation of President Abd- Rabbu Mansour Hadi — a man whose power stemmed from Western governments and the United Nations, which crafted and promulgated the transition agreement that made him president. There was no real attempt at a democratic transition in Yemen. Hadi was propped up by the West despite his lack of leadership experience, local support and political savvy.

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Only one gets full US support, though.

Ukraine’s Oligarchs Turn on Each Other (Robert Parry)

In the never-never land of how the mainstream U.S. press covers the Ukraine crisis, the appointment last year of thuggish oligarch Igor Kolomoisky to govern one of the country’s eastern provinces was pitched as a democratic “reform” because he was supposedly too rich to bribe, without noting that his wealth had come from plundering the country’s economy. In other words, the new U.S.-backed “democratic” regime, after overthrowing democratically elected President Viktor Yanukovych because he was “corrupt,” was rewarding one of Ukraine’s top thieves by letting him lord over his own province, Dnipropetrovsk Oblast, with the help of his personal army. Ukrainian oligarch Igor Kolomoisky confronting journalists after he led an armed team in a raid at the government-owned energy company on March 19, 2015. (Screen shot from YouTube)

Last year, Kolomoisky’s brutal militias, which include neo-Nazi brigades, were praised for their fierce fighting against ethnic Russians from the east who were resisting the removal of their president. But now Kolomoisky, whose financial empire is crumbling as Ukraine’s economy founders, has turned his hired guns against the Ukrainian government led by another oligarch, President Petro Poroshenko. Last Thursday night, Kolomoisky and his armed men went to Kiev after the government tried to wrest control of the state-owned energy company UkrTransNafta from one of his associates. Kolomoisky and his men raided the company offices to seize and apparently destroy records. As he left the building, he cursed out journalists who had arrived to ask what was going on. He ranted about “Russian saboteurs.”

It was a revealing display of how the corrupt Ukrainian political-economic system works and the nature of the “reformers” whom the U.S. State Department has pushed into positions of power. According to BusinessInsider, the Kiev government tried to smooth Kolomoisky’s ruffled feathers by announcing “that the new company chairman [at UkrTransNafta] would not be carrying out any investigations of its finances.” Yet, it remained unclear whether Kolomoisky would be satisfied with what amounts to an offer to let any past thievery go unpunished. But if this promised amnesty wasn’t enough, Kolomoisky appeared ready to use his private army to discourage any accountability.

On Monday, Valentyn Nalyvaychenko, chief of the State Security Service, accused Dnipropetrovsk officials of financing armed gangs and threatening investigators, Bloomberg News reported, while noting that Ukraine has sunk to 142nd place out of 175 countries in Transparency International’s Corruptions Perception Index, the worst in Europe. The see-no-evil approach to how the current Ukrainian authorities do business relates as well to Ukraine’s new Finance Minister Natalie Jaresko, who appears to have enriched herself at the expense of a $150 million U.S.-taxpayer-financed investment fund for Ukraine. Jaresko, a former U.S. diplomat who received overnight Ukrainian citizenship in December to become Finance Minister, had been in charge of the Western NIS Enterprise Fund (WNISEF), which became the center of insider-dealing and conflicts of interest, although the U.S. Agency for International Development showed little desire to examine the ethical problems – even after Jaresko’s ex-husband tried to blow the whistle.

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Not so smart.

Risks Involved In UK Smart Meter Scheme Are ‘Staggering’ (BBC)

The government’s smart meter scheme could be an “IT disaster”, the Institute of Directors (IoD) has said. The risks involved with “the largest UK government-run IT project in history” were “staggering”, a report said. It recommended that the government drastically scale back the programme or abandon it altogether. Smart Energy GB, the independent body set up to publicise smart meters, said the IoD wanted to take the UK “back to an analogue dark age”. Energy-saving digital smart meters, designed to replace existing analogue gas and electricity meters, should help householders to monitor their energy-use far more accurately, and energy companies to do away with estimated bills. By some estimates, the new meters could save us £17bn on our energy bills.

But the IoD believes the government’s plan to roll out smart meters to all 30 million UK households by 2020 is far too ambitious. “The pace of technological innovation may well leave the current generation of meters behind and leave consumers in a cycle of installation, de-installation and re-installation,” it said. Under the scheme, energy companies must begin offering free smart meters to their customers from the autumn. Despite the £11bn estimated cost to the industry, it will not be compulsory to have one. Responding to the IoD report, Sacha Deshmukh, chief executive of Smart Energy GB, said: “The IoD does not understand what’s needed to secure Britain’s energy infrastructure for the future. “The smart meter rollout must be for everybody. It will only deliver the national transformation Britain needs if every home is part of this national upgrade.” Nearly 1.4 million households have already had a smart meter installed, he added.

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And you’re sitting on your asses watching it happen. What are you thinking, someone else is going to solve it for you?

Antarctica Recorded Its Hottest Temperature Ever This Week (CP)

The coldest place on Earth just got warmer than has ever been recorded. According to the weather blog Weather Underground, on Tuesday, March 24, the temperature in Antarctica rose to 63.5°F (17.5C) – a record for the polar continent. Part of a longer heat wave, the record high came just a day after the previous record was set at 63.3°F. Tuesday’s temperature was taken at the Argentina’s Esperanza Base, located near the northern tip of the Antarctic Peninsula. The Monday record was from Marambio Base, about 60 miles southeast of Esperanza. Both are records for the locations, however the World Meteorological Organization is yet to certify that the temperatures are all-time weather records for Antarctica.

Before these two chart-toppers, the highest recorded temperature from these outposts was 62.8°F in 1961. Setting a new all-time temperature record for an entire continent is rare and requires the synthesizing of a lot of data. As Weather Underground’s weather historian, Christopher C. Burt, explains, there is debate over what exactly is included in the continent Antarctica, and by the narrowest interpretation, which would include only sites south of the Antarctic Circle, Esperanza would not be part of the continent. According to the WMO, the official keeper of global temperature records, the all-time high temperature for Antarctica was 59°F in 1974. As Mashable reports, the verification process for these new records could take months as the readings must be checked for accuracy.

Even in their unofficial capacity, the readings are stunning. As Burt reports, these temperature records occurred nearly three months past the warmest time of year in the Antarctic Peninsula, December, when the average high is 37.8°F. The average high for March is 31.3°F, making this week’s records more than 30°F above average. Burt also points out that temperature records for Esperanza have previously occurred in October and April, so these spikes are not unheard of. They should also not be unexpected: the poles are warming faster than any part of the planet and rapid ice melt is being observed at increased rates in Antarctica. According to a new study, ice shelves in West Antarctica have lost as much as 18% of their volume over the last two decades, with rapid acceleration occurring over the last decade. The study found that from 1994 to 2003, the overall loss of ice shelf volume across the continent was negligible, but over the last decade West Antarctic losses increased by 70%.

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