Jan 222018
 
 January 22, 2018  Posted by at 10:38 am Finance Tagged with: , , , , , , , , , , ,  16 Responses »
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Joan Miró Personnages Rythmiques 1934

 

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)
42 People Hold Same Wealth As 3.7 Billion Poorest (G.)
Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)
Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)
20 Senators Support Bipartisan Plan To Reopen Government (ZH)
US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)
FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)
Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)
Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)
Apple Leak Reveals Sudden iPhone X Cancellation (F.)
Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)
Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

 

 

Either we stop this, or it’s pitchforks and guillotines.

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)

Growing inequality resulted in 82% of new global wealth going to the richest 1% last year, while the poorest half of the world saw their prosperity flatline, a report by Oxfam has shown. It means that of the $9.2tn increase in global wealth between July 2016 and June 2017, around $7.6tn (£6tn) went to 75 million people, while the bottom 3.7 billion saw no increase. It helped spark the sharpest increase in the number of billionaires ever recorded, to 2,043, with one created every two days, according to Oxfam’s report, published ahead of the annual World Economic Forum of global political and business leaders in Swiss ski resort Davos. The wealth of those billionaires increased by $762bn over 12 months, it added.

Mark Goldring, chief executive of Oxfam GB, said the statistics signal that “something is very wrong with the global economy”. “The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food.” He said a living wage, “decent conditions” and equality for women were essential if work was to be a “genuine route out of poverty”. “If that means less for the already wealthy then that is a price that we – and they – should be willing to pay,” Mr Goldring added, as he pushed for a crackdown on tax avoidance and a revamp of business models that prioritise social benefit over shareholder returns.

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After everything western workers fought hard and often bloody fights for, how did we end up back in the Middle Ages again?

42 People Hold Same Wealth As 3.7 Billion Poorest (G.)

The development charity Oxfam has called for action to tackle the growing gap between rich and poor as it launched a new report showing that 42 people hold as much wealth as the 3.7 billion who make up the poorest half of the world’s population. In a report published on Monday to coincide with the gathering of some of the world’s richest people at the World Economic Forum in Davos, Oxfam said billionaires had been created at a record rate of one every two days over the past 12 months, at a time when the bottom 50% of the world’s population had seen no increase in wealth. It added that 82% of the global wealth generated in 2017 went to the most wealthy 1%.

The charity said it was “unacceptable and unsustainable” for a tiny minority to accumulate so much wealth while hundreds of millions of people struggled on poverty pay. It called on world leaders to turn rhetoric about inequality into policies to tackle tax evasion and boost the pay of workers. Mark Goldring, Oxfam GB chief executive, said: “The concentration of extreme wealth at the top is not a sign of a thriving economy, but a symptom of a system that is failing the millions of hardworking people on poverty wages who make our clothes and grow our food.” Booming global stock markets have been the main reason for the increase in wealth of those holding financial assets during 2017. The founder of Amazon, Jeff Bezos, saw his wealth rise by $6bn in the first 10 days of 2017 as a result of a bull market on Wall Street, making him the world’s richest man.

Oxfam said it had made changes to its wealth calculations as a result of new data from the bank Credit Suisse. Under the revised figures, 42 people hold as much wealth as the 3.7 billion people who make up the poorer half of the world’s population, compared with 61 people last year and 380 in 2009. At the time of last year’s report, Oxfam said that eight billionaires held the same wealth as half the world’s population. The charity added that the wealth of billionaires had risen by 13% a year on average in the decade from 2006 to 2015, with the increase of $762bn (£550bn) in 2017 enough to end extreme poverty seven times over. It said nine out of 10 of the world’s 2,043 dollar billionaires were men.

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What happens when price discovery is murdered.

Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)

VALUE: The S&P 500 is trading at a Price-to-Sales ratio of 2.35x… a new record high for valuation…

GREED: The S&P 500 is up 8 of the last 9 weeks, 16 of the last 19 weeks, and 15 of the last 15 months (and 22 of the last 23 months – since The Shanghai Accord). This has pushed The S&P 500 to an RSI of 88.4… a new record high for overbought…

FEAR: The S&P 500 has averaged about four 5% declines – from peak to trough – annually since 1927, but volatility in US stocks has evaporated in recent years. Amid a reportedly robust global economy and still supportive global monetary policy, Friday’s 0.4% gain meant that the S&P 500 extended its streak to 395 days without a 5% reversal… a new a new record for tranquillity…

As The FT notes, the last time the S&P 500 suffered a 5% setback was in the global market carnage that followed the UK’s shock vote in June 2016 to leave the EU, which constitutes the last significant, if brief, bout of volatility in markets. The last time the US stock market suffered an actual correction – typically defined as a drop of over 10% from the recent peak — was in early 2016, when investors’ anxiety grew over the state of China’s economy. Some investors and analysts fear that the tranquillity is encouraging investors to stop buying protection against declines, or to making aggressive “short” bets on volatility staying low through complicated derivatives – which could exacerbate any turbulence that might erupt.

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Who’s going to blink first?

Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)

The US government shutdown edged closer to a resolution on Sunday night after a minor concession from the Senate majority leader, Mitch McConnell, who said he would allow a vote on immigration reform in February if Democrats agree to fund the government. However, one Democratic source cautioned that no deal had been reached. McConnell’s proposal represented the fruit of a bipartisan effort among moderates in both parties to resolve the shutdown, which began at midnight on Saturday. The shutdown was spurred by the inability of Congress to reach a deal to resolve the status of “Dreamers” – undocumented migrants brought into the United States as children. They had been protected from deportation until September 2017 when the Trump administration ended the Daca program, which had been created by Barack Obama.

Trump allowed a six-month grace period for Congress to give Dreamers permanent legal status through legislation. However, with that expiring in early March, Democrats, facing heavy pressure from immigration advocates, had pledged not to fund the government until a deal was reached. McConnell’s proposal would allow the Senate to debate and vote on an immigration deal if a broader bipartisan compromise was not reached in the next three weeks. Speaking on the floor, the top Senate Republican said he would push for a Monday vote on a short-term deal to fund the government through 8 February, as well as extend a popular health insurance program called Chip that provides healthcare coverage to nine million children for six years.

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Let’s keep it shut till summer, see what happens.

20 Senators Support Bipartisan Plan To Reopen Government (ZH)

With Senate Majority Leader Mitch McConnell calling for a procedural vote on a senate measure that would keep the federal government running through Feb. 8 to begin at 1 am Monday, a bipartisan group of senators signaled that they’re nearing an agreement to reopen the government following a Sunday afternoon meeting, the Hill reported. Georgia Senator Johnny Isakson said the group had reached a “consensus of understanding” – essentially agreeing to the broad strokes of a plan to satisfy recalcitrant Democrats and Republicans, per the Hill. As they left the meeting in Maine senator Susan Collins’s office, some members expressed optimism that they will reach an understanding, if not a final agreement, that would let them move forward. South Carolina Senator Lindsey Graham predicted that the group could cobble together a deal before the 1 am vote.

“Yeah because if it doesn’t happen tonight it’s going to be a lot harder,” he said, alluding to the fact that most federal agencies have elected to wait until Monday before implementing the terms of the shutdown (here’s a quick guide to what departments and services will be impacted by the shutdown)… As the BBC pointed out, the closure of many federal services will be felt around the country and hundreds of thousands of federal staff face unpaid leave. According to Politico, the senators took their proposal to McConnell and Senate Minority Leader Chuck Schumer after the 90-minute meeting. The plan would reopen the government through Feb. 8 and have McConnell commit on the Senate floor to holding an immigration vote before that date.

[..] this is the first time a government shutdown has happened while one party in this case, the Republicans – controls both Congress and the White House And according to the Associated Press, the 2013 shutdown left 800,000 government workers on temporary leave. The bipartisan group isn’t crafting separate legislation. Instead, senators say the bulk of their talks were about how to get 60 votes for the bill to fund the government through Feb. 8, paired with a commitment that will satisfy Democrats on bringing up an immigration bill. Since before the shutdown even began at 12:01 am ET on Saturday morning, Republicans and Democrats have traded accusations of blame. House Speaker Paul Ryan has said he would bring such a bill up for a vote in the House if it passes the Senate.

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Easy pickings.

US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)

The shutdown of the US government exposes “chronic flaws” in the country’s political system, China’s official news agency said on Sunday. Funding for federal agencies ran out at midnight on Friday in Washington after members of Congress failed to agree on a stopgap funding bill. “What’s so ironic is that it came on the first anniversary of Donald Trump’s presidency on Saturday, a slap in the face for the leadership in Washington,” the Xinhua news agency’s Liu Chang said in a commentary piece. The article said that the Trump administration had “backtracked” on policies supported by his predecessor, Barack Obama, including the Trans-Pacific Partnership trade agreement and US participation in the Paris climate agreement.

“If there was any legacy that has survived the transfer of power, it was the spirit of non-cooperation across party lines,” the commentary said. While Xinhua commentaries are not official statements, they offer a reflection of Beijing’s thinking. “The western democratic system is hailed by the developed world as near perfect and the most superior political system to run a country,” it said. “However, what’s happening in the United States today will make more people worldwide reflect on the viability and legitimacy of such a chaotic political system.”

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First the NSA a few days ago, now the FBI. Both should be under investigation, but who’s going to do the investigating?

Look, you and I have back-ups of our files. So do NSA and FBI. The only way to lose the info is to deliberately delete it, multiple times.

US intelligence is flipping the country the bird’s middle finger.

FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)

The Justice Department has turned over to Congress additional text messages involving an FBI agent who was removed from special counsel Robert Mueller’s investigative team following the discovery of derogatory comments about President Donald Trump. But the department also said in a letter to lawmakers that its record of messages sent to and from the agent, Peter Strzok, was incomplete because the FBI, for technical reasons, had been unable to preserve and retrieve about five months’ worth of communications. New text messages highlighted in a letter to FBI Director Christopher Wray by Sen. Ron Johnson, the Republican chairman of the Senate’s Homeland Security and Governmental Affairs Committee, are from the spring and summer of 2016 and involve discussion of the investigation into Hillary Clinton’s use of a private email server.

They reference Attorney General Loretta Lynch’s decision to accept the FBI’s conclusion in that case and a draft statement that former FBI Director James Comey had prepared in anticipation of closing out the Clinton investigation without criminal charges. Strzok, a veteran counterintelligence agent who also worked the Clinton email case, was reassigned last summer from the team investigating ties between Russia and Trump’s Republican presidential campaign after Mueller learned he had exchanged politically charged text messages — many anti-Trump in nature — with an FBI lawyer also detailed to the group. The lawyer, Lisa Page, left Mueller’s team before the text messages were discovered.

The Justice Department last month produced for reporters and Congress hundreds of text messages that the two had traded before becoming part of the Mueller investigation. Many focused on their observations of the 2016 election and included discussions in often colorful language of their personal feelings about Trump, Clinton and other public figures. Some Republican lawmakers have contended the communication reveals the FBI and the Mueller team to be politically tainted and biased against Trump — assertions Wray has flatly rejected. In addition to the communications already made public, the Justice Department on Friday provided Johnson’s committee with 384 pages of text messages, according to a letter from the Wisconsin lawmaker that was obtained by The Associated Press.

But, according to the letter, the FBI told the department that its system for retaining text messages sent and received on bureau phones had failed to preserve communications between Strzok and Page over a five-month period between Dec. 14, 2016, and May 17, 2017. May 17 was the date that Mueller was appointed as special counsel to oversee the Russia investigation. The explanation for the gap was “misconfiguration issues related to rollouts, provisioning, and software upgrades that conflicted with the FBI’s collection capabilities.”

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Are they really? You don’t think they may have seen this coming, and prepared for it?

Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)

Two time, best-selling author Nomi Prins says central bankers have no idea how to stop the easy money policies that they started after the financial meltdown of 2008. Prins explains, “So, when the Fed says they are going to remove assets from their $4.5 trillion book by not reinvesting the interest payment . . . the reality is they haven’t really done that. They have reduced their book by about $10 billion off of $4.5 trillion since they mentioned they were going to start ‘tapering.” The media discusses this as a major tightening move. Somehow all of our economies have finally worked because of central bank activity. Growth is real. It’s all positive. The markets are evidence of that because of the levels they are at; and, therefore, these central banks, starting with the Fed, are going to reverse course of these last 10 years.

The reality is if you look at the actual activity of the central banks, beyond the Fed raising rates by a little bit, there hasn’t been and there isn’t being a reversal of course because they are scared to death that too much of a reversal is going to cause a major crash throughout the financial system. Everything is connected. All the banks are connected. Money flows around the world in less than nanoseconds, and all of it has the propensity to collapse if that carpet the central banks have created is dragged from beneath the floor of all this activity.”Prins, who just finished traveling the globe to research her upcoming book, thinks there is one big thing that can take the entire system down. Prins contends, “There hasn’t been any real growth in the real economy. That is an indication of the misfire of this entire plan.

There has been tremendous growth in stock markets and bond markets. If you look at localities or states or governments whose debt to GDP levels are well over 100%, in Japan it’s over 200%, in the United States it over 100%, and this is the same throughout the world. These are levels that they have never been, and they are all at their historic highs. That’s why debt will ultimately be the destructor of the system. In order for that to happen, the cheapness of money that allow states, municipalities and corporations to continue to borrow at these cheap levels has to go away. . . At some point, there will be a mistake. There might be a tiny smidge of an interest rate hike at some central bank, probably the Fed, which ripples throughout the system as a mistake, not because real growth has happened, and that’s why interest rates have been raised. That will incur defaults throughout the system.

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Macron defines European democracy. Straight faced.

Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)

When Marine Le Pen lost last year’s French presidential election to Emmanuel Macron in what appeared to be a landslide, the establishment breathed a sigh of relief because not only was the notorious Eurosceptic populist defeated, but also the wind appeared to be turning, and after a tumultuous 2016, 2017 started off with a bang for the unelected Eurocrats in Brussels. After all, the people had spoken and they wanted more Europe (and Euro), not less. Or maybe not. The French president sent shockwaves across Europe after he conceded that French voters would quit the EU if France held an in/out referendum on continued membership in the Brussels-led bloc. Not surprisingly no other EU country has risked putting membership of the bloc to a public vote since Britain shocked member-states by voting to leave the bloc in 2016, despite polls which showed virtually no possibility of such an outcome.

In an interview with BBC’s Andrew Marr, Emmanuel Macron admitted that he would lose a French referendum on EU membership. Asked about the Brexit vote, the candid president told Marr: “I am not the one to judge or comment on the decision of your people.” But, he added “my interpretation is that a lot of the losers of globalisation suddenly decided it was no more for them.” Marr then pushed the French president, regarded by many as the EU’s new leader, on whether Britain’s decision was a one-off. Quoted by Express, the BBC journalist asked: “If France had had the same referendum, it might have had the same result?” Macron responded: “Yes, probably, probably. Yes. In a similar context. But we have a very different context in France” although he said he would not make it easy: “I wouldn’t take any bet though – I would have fought very hard to win.

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Got to admire the efforts to turn this into a positive story.

Apple Leak Reveals Sudden iPhone X Cancellation (F.)

It may be the smartphone of the moment, but a new leak reveals Apple AAPL -0.45% will soon cancel the iPhone X. And the source could not be more credible… In a new report obtained by AppleInsider, acclaimed KGI Securities’ analyst Ming-Chi Kuo says disappointing sales of the iPhone X will lead to the cancellation of the model “with production ceasing in the summer”. This would be the first time Apple has cancelled an iPhone model after just one generation since the iPhone 5C in 2014. Kuo, who has a long track record successfully revealing Apple’s plans, said disinterest in China is the main reason. In China big screens are king and the iPhone X’s polarising ‘notch’ is seen by Chinese consumers as removing too much usable space. Especially when the cheaper iPhone 8 Plus actually delivers slightly more.

The news also follows a new survey from Cowan which claims interest in new iPhones has hit an historic low. That said it is not all doom and gloom. While the iPhone X will not bring Apple the much anticipated sales ‘Super Cycle’, Kuo states Apple will see modest 5% growth in the first half of 2018. This comes from Apple having three premium models (iPhone 8, iPhone 8 Plus, iPhone X) on sale for the first time. Furthermore Kuo believes Apple will enjoy a better end to 2018 with 10% growth as the outgoing iPhone X will be replaced by a total of three new iPhone X-inspired designs: a second generation 5.8-inch iPhone X, 6.5-inch iPhone X Plus and a “$650-750” 6.1-inch iPhone SE replacement which will be fitted with Face ID. Apple hopes it will be the latter two which once again excite the Chinese market.

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Ecuador requires countries to stand with it.

Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)

In an interview the president of Ecuador, Lenin Moreno, stated that WikiLeaks founder Julian Assange is an “inherited problem” that has created “more than a nuisance” for his government. “We hope to have a positive result in the short term,” Lenin Moreno said in an interview with television networks. Ecuador wanted to resolve the Assange issue, so the Australian whistleblower was “granted Ecuadorian citizenship and a diplomatic rank so that he could leave the territory of the embassy” in London, Moreno said. “The problem persists,” the Ecuadorian president said, pointing out that the country’s Foreign Ministry intends to solve it “using the mediation of important people.” The head of state assured that their names will soon be made public.

The Ecuadorian government wants to see a “positive result” with Assange in a short time, Moreno added. Earlier, the Ministry of Foreign Affairs of Ecuador officially confirmed that the authorities granted citizenship to Julian Assange. According to El Universo, the number of his passport is listed in the relevant databases. This is confirmed on the website of the Internal Revenue Service, where the specified number corresponds to a person named Julian Paul Assange. According to the publication, citizenship was granted to him on December 21. Ecuador’s foreign minister, Maria Fernanda Espinosa, said that she fears that third party states may threaten Julian Assange’s life. She added that Assange won’t leave Ecuador’s Embassy in UK because there are no security guaranties.

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“The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly..”

Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

Opioids affect us in complex and mysterious ways . They don’t stop sensation, like local anesthetics. Instead, these drugs work by activating natural opioid receptors in our brains. They change our experience of pain. They replace pain, in part, with pleasure. Pain thresholds are built into us for powerful evolutionary reasons. Opioids make us feel good in the short term, but they also distort essential mechanisms necessary for survival in a Darwinian world. Tolerance is the body’s natural attempt to restore those mechanisms. We become less sensitive to opioids, and need higher doses for the same effect. Tolerance is the first step toward physical addiction; the two are linked. As tolerance rises, the risk of overdose and death follows closely behind. The time it takes for this process to occur is the key to understanding the opioid epidemic. A week or two of opioids may cause euphoria and pleasure, but it will rarely create physical addiction. Given a few months, however, anyone can be made into an opioid addict.

[..] In 1996 a single company, Purdue Pharmaceuticals, introduced a patented new opioid compound into the market with FDA approval. They called it OxyContin, and marketed it as a new drug. OxyContin wasn’t a new drug. It was simply a new pill designed to release an old drug — oxycodone — more slowly. Oxycodone was first synthesized in 1916, and is closely related to heroin. Since it releases oxycodone more slowly, OxyContin doesn’t have to be taken as often to relieve pain. That slower release also allowed Purdue to put higher doses of oxycodone into each pill. Purdue Pharma used this distinction as a pretext for claims that OxyContin was safer and less addictive than other opioids and therefore should be widely prescribed for pain of all kinds.

The FDA enabled this assertion, and the FDA examiner who approved OxyContin’s initial application took a job with Purdue shortly thereafter. Once the FDA approved the drug, Purdue unleashed a fraudulent marketing campaign designed to generate as many new OxyContin consumers as possible. A critical element of their strategy was to expand the traditional indications for opioid prescriptions beyond acute pain into the far more controversial category of chronic pain. Chronic pain is so broadly defined that tens of millions of patients became potential customers. This was hugely consequential. When drugs are approved by the FDA, health insurance pays for them. The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly, but in chronic pain, which is endless.

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Jan 182018
 
 January 18, 2018  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , , , ,  10 Responses »
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Henry Matisse Bouquet of flowers for July 14 Oct 7 1919

 

Japan and Europe Start the Central Bank Reset (BBG)
The Bubble That Could Break the World (Rickards)
South Korea Considers Shutting Down Domestic Cryptocurrency Exchanges (R.)
Trump Reveals Winners Of Controversial ‘Fake News Awards’ (AFP)
Trump Considers Big ‘Fine’ Over China Intellectual Property Theft (R.)
China’s Communists Take More Stakes In Private Companies (BBG)
Apple Expects to Pay $38 Billion Tax on Repatriated Cash (BBG)
Apple May Not Hire 20,000 New Workers, or Bring Back Its Overseas Cash (MW)
Assange Keeps Warning Of AI Censorship (CJ)
Australia’s Household Debt-to-Income Ratio Reaches 200% (AFR)
Mario Draghi Told To Drop Membership Of Secretive Bankers’ Club (G.)
Global Air Traffic At New Record (AFP)
Europe’s Microwave Ovens Emit Nearly As Much CO2 As 7 Million Cars (G.)
1 Million Tonnes A Year: UK Supermarkets Shamed For Plastic Packaging (G.)
The Plastic-Free Stores Showing The Big Brands How To Do It (G.)

 

 

Coordinated efforts to crash the conomy. Ignore the recovery narrative.

Japan and Europe Start the Central Bank Reset (BBG)

This is going to be an exciting year for monetary policy. In fact, it already is, thanks to Europe and Japan. Investors were taken aback last week when the Bank of Japan bought fewer bonds and the ECB revealed – shock, horror – its language would have to evolve with the euro region’s economy. Both developments, and the reaction, were welcome. They say a lot about the strength of global growth and how it still surprises many people. First to Japan: Investors were wrong to interpret the reduced purchases as a sign that a policy shift is imminent. They were, however, right about the long-term direction of policy. It isn’t going to get looser. Will it remain accommodative as far as the eye can see? Yes.

With Japan’s economic sunny patch extending and inflation headed in the right direction – if still way too low – it’s not a stretch to see Governor Haruhiko Kuroda or his successor ease up a little on the stimulus. Just not right now. That was Jan. 9. Two days later, the fever struck in Europe. The proximate cause was the release of minutes from the ECB’s December meeting and the implication contained therein that communications would have to reflect a stronger growth terrain and improving, albeit still low, inflation. The euro jumped and German bond yields climbed. It feels like we just got through a big change from the ECB: the taper of bond purchases to 30 billion euros a month until September. (Remember when officials hated the word “taper”?) Now, here were policymakers flagging further revisions.

What’s the thread linking these two happenings? Despite all the data and pronouncements about a robust global economy and a synchronized upswing, people are still taken aback by signs that (a) it’s a reality and (b) policy is bound to react. I’m not saying policy is going to change overnight. But if you start with a global framework – we are in a global marketplace, are we not? – key to that framework really ought to be the direction of policy. Ask yourself: Are monetary chieftains going to make policy more easy or less easy, assuming the upswing in growth is sustainable? The answer has to be “less.”

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Because it’s by far the biggest, and it’s a debt bubble, not a gossip one.

The Bubble That Could Break the World (Rickards)

The credit-driven bubble has a different dynamic than a narrative-bubble. If professional investors and brokers can borrow money at 3%, invest in stocks earning 5%, and leverage 3-to-1, they can earn 6% returns on equity plus healthy capital gains that can boost the total return to 10% or higher. Even greater returns are possible using off-balance sheet derivatives. Credit bubbles don’t need a narrative or a good story. They just need easy money. A narrative bubble bursts when the story changes. It’s exactly like The Emperor’s New Clothes where loyal subjects go along with the pretense that the emperor is finely dressed until a little boy shouts out that the emperor is actually naked. Psychology and behavior change in an instant.

When investors realized in 2000 that Pets.com was not the next Amazon but just a sock-puppet mascot with negative cash flow, the stock crashed 98% in 9 months from IPO to bankruptcy. The sock-puppet had no clothes. A credit bubble bursts when the credit dries up. The Fed won’t raise interest rates just to pop a bubble — they would rather clean up the mess afterwards that try to guess when a bubble exists in the first place. But the Fed will raise rates for other reasons, including the illusory Phillips Curve that assumes a tradeoff between low unemployment and high inflation, currency wars, inflation or to move away from the zero bound before the next recession. It doesn’t matter. Higher rates are a case of “taking away the punch bowl” and can cause a credit bubble to burst.

The other leading cause of bursting credit bubbles is rising credit losses. Higher credit losses can emerge in junk bonds (1989), emerging markets (1998), or commercial real estate (2008). Credit crack-ups in one sector lead to tightening credit conditions in all sectors and lead in turn to recessions and stock market corrections. What type of bubble are we in now? What signs should investors look for to gauge when this bubble will burst? My starting hypothesis is that we are in a credit bubble, not a narrative bubble. There is no dominant story similar to the Nifty Fifty or dot.com days. Investors do look at traditional valuation metrics rather than invented substitutes contained in corporate press releases and Wall Street research. But even traditional valuation metrics can turn on a dime when the credit spigot is turned off.

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BTC recovered somewhat overnight.

South Korea Considers Shutting Down Domestic Cryptocurrency Exchanges (R.)

South Korean policymakers joined the global chorus of virtual-coin critics on Thursday, saying Seoul is considering shutting down domestic virtual currency exchanges as the new breed of market exposes users to speculative frenzy and crime. The country’s tough stance comes as policymakers from the United States to Germany struggle to come up with stricter regulation against money laundering and other crimes. Responding to questions in parliament, South Korea’s chief of the Financial Services Commission said: “(The government) is considering both shutting down all local virtual currency exchanges or just the ones who have been violating the law.” Separately, Bank of Korea Governor Lee Ju-yeol told a news conference that “cryptocurrency is not a legal currency and is not being used as such as of now.”

Regulators around the world are still debating how to address risks posed by cryptocurrencies, as bitcoin, the world’s most popular virtual currency, soared more than 1,700% last year. Prices have plummeted since South Korea announced last week it may ban domestic cryptocurrency exchanges. On Wednesday, bitcoin slid 18%. According to Bithumb, South Korea’s second-largest virtual currency exchange, the nation’s bitcoin trading price stood at 15,697,000 won ($14,690.69) as of 0314 GMT on Thursday. On the Luxembourg-based Bitstamp exchange, bitcoin was traded at $11,750. [..] On Thursday, the BOK governor said the central bank had begun looking into the market’s impact on the economy. “We have started looking at virtual currency from a long-term standpoint, as central banks could start issuing digital currencies in the future. This sort of research has begun at the Bank of International Settlements and we are part of that research.”

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“Studies have shown that over 90% of the media’s coverage of President Trump is negative…”

Trump Reveals Winners Of Controversial ‘Fake News Awards’ (AFP)

Donald Trump unveiled the winners of his much-touted “Fake News Awards” late Wednesday, escalating his already persistent attacks on a number of major US media outlets. The awards dropped hours after a senator from Trump’s own Republican party hurled a stinging rebuke at the president, accusing the US leader of undermining the free press with Stalinist language. The brash Republican president announced the ten “honorees” using his preferred medium of Twitter, linking to a list published on the Republican Party’s website that crashed minutes after his big reveal. The “winners” of the spoof awards included top networks and newspapers CNN, The New York Times and The Washington Post, all of which have been regular targets of Trump’s ire.

Nobel-prize winning economist Paul Krugman, who writes a regular opinion column for The New York Times, nabbed the number one spot. The administration said he merited the award for writing “on the day of President Trump’s historic, landslide victory that the economy would never recover.” Following the former reality star’s stunning rise to power, Krugman had written that Trump’s inexperience on economic policy and unpredictability risked further damaging the weak global economy. The list also pointed to a reporting error from ABC’s veteran reporter Brian Ross, who was suspended for four weeks without pay after he was forced to correct a bombshell report on ex-Trump aide Michael Flynn.

[..] 11. And last, but not least: “RUSSIA COLLUSION!” Russian collusion is perhaps the greatest hoax perpetrated on the American people. THERE IS NO COLLUSION!

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“We’re talking about big damages. We’re talking about numbers that you haven’t even thought about,” Trump said.”

Trump Considers Big ‘Fine’ Over China Intellectual Property Theft (R.)

President Donald Trump said on Wednesday the United States was considering a big “fine” as part of a probe into China’s alleged theft of intellectual property, the clearest indication yet that his administration will take retaliatory trade action against China. In an interview with Reuters, Trump and his economic adviser Gary Cohn said China had forced U.S. companies to transfer their intellectual property to China as a cost of doing business there. The United States has started a trade investigation into the issue, and Cohn said the United States Trade Representative would be making recommendations about it soon. “We have a very big intellectual property potential fine going, which is going to come out soon,” Trump said in the interview.

While Trump did not specify what he meant by a “fine” against China, the 1974 trade law that authorized an investigation into China’s alleged theft of U.S. intellectual property allows him to impose retaliatory tariffs on Chinese goods or other trade sanctions until China changes its policies. Trump said the damages could be high, without elaborating on how the numbers were reached or how the costs would be imposed. “We’re talking about big damages. We’re talking about numbers that you haven’t even thought about,” Trump said.

U.S. businesses say they lose hundreds of billions of dollars in technology and millions of jobs to Chinese firms which have stolen ideas and software or forced them to turn over intellectual property as part of the price of doing business in China. The president said he wanted the United States to have a good relationship with China, but Beijing needed to treat the United States fairly. Trump said he would be announcing some kind of action against China over trade and said he would discuss the issue during his State of the Union address to the U.S. Congress on Jan. 30. Asked about the potential for a trade war depending on U.S. action over steel, aluminum and solar panels, Trump said he hoped a trade war would not ensue. “I don’t think so, I hope not. But if there is, there is,” he said.

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This is not going to work. It’s a one way ticket back to Mao.

China’s Communists Take More Stakes In Private Companies (BBG)

After tightening the Communist Party’s grip on state-owned enterprises, President Xi Jinping’s administration is signaling an increasing presence in private companies. Xi has called state enterprises the “backbone” of China’s socialist economy. But most of the giants were founded before the boom in technology-driven industries over the past two decades. That’s created a large swathe of the economy that’s largely private – think tech and consumer champions like Alibaba, Tencent and Baidu, along with innovators in sectors from finance to automation. Now, SOEs are on track to take stakes in private companies. “China wants to maintain state control over every aspect of the national economy, and it needs to keep up with the changes in the economic structure,” said Chen Li at Credit Suisse.

“How can it overlook the most important industries to the future economy?” Much of the overhaul of state-owned enterprises under Xi has focused on a consolidation in the hundreds of sprawling units across the country, such as those that have reshaped the shipping and train-making industries. But a lesser-noticed part of the broad “mixed ownership” initiative features SOEs being encouraged to take stakes in private companies. This part of the initiative has yet to gather pace, though equity strategists anticipate moves to come. They would showcase how China continues to develop its own path toward developed-nation status – not entirely state dominated, but with more control by political authorities than in countries like France that have nurtured state champions.

The head of the Beijing agency that oversees China’s SOEs, Xiao Yaqing, reiterated the push in a People’s Daily article on state enterprise reforms Dec. 13. The private stakes will be acquired through various means, he and other top officials have said. The mechanism has already been applied in the case of the state’s crackdown on financier Xiao Jianhua’s Tomorrow Holding empire. The government ordered the holding company to divest from many of its financial assets, people with knowledge of the matter said this month. State-owned Citic Guoan Group Co. bought a $1.4 billion stake in Hengtou Securities – known as Hengtai on the mainland – with a large part of the purchase coming from Tomorrow Group. Investors applauded the move, in a sign of what could happen when the state invests elsewhere. Hengtou has jumped more than 20% this year after announcing the stake sale.

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More Trump success.

Apple Expects to Pay $38 Billion Tax on Repatriated Cash (BBG)

Apple said it will bring hundreds of billions of overseas dollars back to the U.S., pay about $38 billion in taxes on the money and invest tens of billions on domestic jobs, manufacturing and data centers in the coming years. The iPhone maker plans capital expenditures of $30 billion in the U.S. over five years and will create 20,000 new jobs at existing sites and a new campus it intends to open, the Cupertino, California-based company said Wednesday in a statement. “We are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,” Chief Executive Officer Tim Cook said in the statement, which alluded to unspecified plans by the company to accelerate education programs.

In its December approval of the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations — an unusual arrangement that allowed companies to defer U.S. income taxes on foreign earnings until they returned the income to the U.S. That “deferral” provision led companies to stockpile an estimated $3.1 trillion offshore. By switching to a new system that’s designed to focus on domestic economic activity, congressional tax writers also imposed a two-tiered levy on that accumulated foreign income: Cash will be taxed at 15.5%, less liquid assets at 8%. Companies can pay over eight years. Apple has the largest offshore cash reserves of any U.S. company, with about $252 billion in at the end of September, the most recently reported fiscal quarter.

The company, which opened a new headquarters in Cupertino last year, said it also plans to open another site in the U.S. focused initially on employees who provide technical support to Apple product users. Apple said it will announce the location of the new campus at a later date. The company already has a sprawling campus in Austin, Texas, for supply chain and technical support employees.

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Or maybe not.

Apple May Not Hire 20,000 New Workers, or Bring Back Its Overseas Cash (MW)

Apple announced a series of plans Wednesday that were celebrated as promises to hire thousands of workers and bring home billions of dollars in cash. Well, not necessarily. Apple said in its release that the company planned to “create over 20,000 new jobs through hiring at existing campuses and opening a new one.” The key word there is “create,” which Apple really likes to use when discussing jobs: The company even has a portion of its website dedicated to “job creation” that claims it is “responsible for 2 million jobs” in the United States, most of which are jobs “attributable to the App Store ecosystem.” Apple currently employs 84,000 people in the U.S., it said Wednesday, while an October filing with the Securities and Exchange Commission said that it has a total of 132,000 full-time employees worldwide, suggesting that about a third of its employees work abroad.

A quarter of the 2 million jobs Apple claims responsibility for are positions through Apple’s U.S.-based suppliers. “From the people who manufacture components for our products to the people who distribute and deliver them, Apple directly or indirectly supports hundreds of thousands of U.S. jobs,” Apple says on the page. [..] Many also took Apple’s promise to pay $38 billion in repatriation taxes as a promise that Apple would bring home more than a quarter-trillion dollars it currently has overseas. However, Apple does not have to bring home that money, and much of it is tied up in long-term investments that would make it unlikely. The company has to pay taxes on overseas earnings whether it brings the money back to the United States or not, so paying the tax does not mean the money is coming home.

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What I wrote about last week: “digital super states” like Facebook and Google have been working to “re-establish discourse control”.

Assange Keeps Warning Of AI Censorship (CJ)

In a statement that was recently read during the “Organising Resistance to Internet Censorship” webinar, sponsored by the World Socialist Web Site, Assange warned of how “digital super states” like Facebook and Google have been working to “re-establish discourse control”, giving authority over how ideas and information are shared back to those in power. Assange went on to say that the manipulative attempts of world power structures to regain control of discourse in the information age has been “operating at a scale, speed, and increasingly at a subtlety, that appears likely to eclipse human counter-measures.”

What this means is that using increasingly more advanced forms of artificial intelligence, power structures are becoming more and more capable of controlling the ideas and information that people are able to access and share with one another, hide information which goes against the interests of those power structures and elevate narratives which support those interests, all of course while maintaining the illusion of freedom and lively debate. In an appearance via video link at musician and activist M.I.A.’s Meltdown Festival last June, the WikiLeaks editor-in-chief expounded in far more detail about his thoughts on the potential for artificial intelligence to be used for controlling online information and discourse in a way human intelligence can’t hope to keep up with.

Pointing out how AI can already outmaneuver even the greatest chess players in the world, he describes how programs which can operate with exponentially more tactical intelligence than the human intellect can manipulate the field of available information so effectively and subtly that people won’t even know they are being manipulated. People will be living in a world that they think they understand and know about, but they’ll unknowingly be viewing only establishment-approved information. “When you have AI programs harvesting all the search queries and YouTube videos someone uploads it starts to lay out perceptual influence campaigns, twenty to thirty moves ahead,” Assange said. “This starts to become totally beneath the level of human perception.”

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Sell sell sell.

Australia’s Household Debt-to-Income Ratio Reaches 200% (AFR)

The closely tracked Australian household debt-to-income ratio has now reached the 200% level, and analysts at UBS are concerned about rising pressures among borrowers. The increase was because of the Australian Bureau of Statistics revision to include self-managed superannuation debt. That resulted in a 3% rise in household debt from “extremely elevated levels”, and pushed the ratio to income to 199.7%, “one of the highest in the world,” according to UBS. “With subdued growth in household income expected to continue, this implies household leverage is likely to rise further in the near term,” it said. “As a result we expect total household debt to disposable income to peak around 205% before the slow deleveraging process begins.”

High household debt levels will constrain further borrowing and weigh on prospects for earnings growth at the big banks, analysts Jonathan Mott and Rachel Bentvelzen said as they downgraded their forecasts for housing credit growth. House prices, which have begun to decline in Sydney, are expected to slide further as a result of tighter lending standards, the retreat of foreign buyers, lending limits imposed by regulators and concerns about proposed changes to negative gearing and capital gains tax that have been tabled by the Opposition. “Sentiment for investment into the housing market is waning, with the ‘fear of missing out’ euphoria fading quickly, especially in Sydney,” the analysts said in a note to clients.

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The insanity of today.

Mario Draghi Told To Drop Membership Of Secretive Bankers’ Club (G.)

The president of the European Central Bank has been told by the EU’s watchdog he should drop his membership of a secretive club of corporate bankers, after claims the group had been given an inside seat from which it could influence key policies. Following a year-long investigation, Mario Draghi was informed on Wednesday by the European ombudsman, Emily O’Reilly, that his close relationship with the Washington-based G30 group threatened the reputation of the bank, despite his assurances to the contrary. Members of the exclusive club, of which only two of the current 33 are women, are chosen by an anonymous board of trustees, it emerged during the ombudsman’s investigation. Only the identity of the chair of the trustees, Jacob A Frenkel, the chairman of JPMorgan Chase, has been made public.

O’Reilly noted the group’s secrecy and lack of transparency over the content of its meetings. She additionally called for a ban on all future presidents of the ECB taking up membership of the club, previously named the Consultative Group on International Economic and Monetary Affairs. The ruling followed a complaint by the Corporate Europe Observatory (CEO), a Brussels-based NGO, which claimed Draghi’s close relationship to G30 was in contravention of the ECB’s ethical code. During his presidency of the ECB, Draghi, an Italian economist who previously worked at Goldman Sachs, has attended four G30 meetings, in 2012, 2013 and twice in 2015.

O’Reilly said there was a danger that the bank’s independence could be perceived to have been compromised by Draghi’s involvement with the group, whose members include a number of central bank governors, private sector bankers and academics. The governor of the Bank of England, Mark Carney, is a member. But O’Reilly said there was no evidence of sensitive information being shared. The ombudsman said: “The ECB takes decisions that directly affect the lives of millions of citizens. In the aftermath of the financial crisis, and in consideration of the additional powers given to the ECB in recent years to supervise member state banks in the public interest, it is important to demonstrate to that public that there is a clear separation between the ECB as supervisor and the finance industry which is affected by its decisions.”

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Not one word about emissions. Not one. Oh wait, “continuous improvements to its safety, security, efficiency and environmental footprint “. Pants on fire.

Global Air Traffic At New Record (AFP)

Budget carriers continued to push global air traffic to new record levels last year, the International Civil Aviation Organization (ICAO) said on Wednesday. Scheduled air services carried “a new record” of 4.1 billion passengers in 2017, an increase of 7.1% over the previous year, ICAO said, citing preliminary data. The figure compares with 6% growth in 2016. “The sustainability of the tremendous growth in international civil air traffic is demonstrated by the continuous improvements to its safety, security, efficiency and environmental footprint,” ICAO Council president Olumuyiwa Benard Aliu said in a statement from the Montreal-based agency.

Early this month, two industry studies showed that last year was the safest for civil aviation since plane crash statistics were first compiled in 1946. A total of 10 crashes of civil passenger and cargo planes claimed 44 lives, said the Aviation Safety Network. A separate report from the To70 agency said no major airline crashed a plane in 2017. ICAO, a United Nations agency, said Wednesday that low-cost carriers flew an estimated 1.2 billion passengers or about 30% of the global total last year. The budget airline sector “consistently grew at a faster pace compared to the world average growth, and its market share continued to increase, specifically in emerging economies,” ICAO said.

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Missed opportunity: including the emissions of electric cars.

Europe’s Microwave Ovens Emit Nearly As Much CO2 As 7 Million Cars (G.)

Popping frozen peas into the microwave for a couple of minutes may seem utterly harmless, but Europe’s stock of these quick-cook ovens emit as much carbon as nearly 7m cars, a new study has found. And the problem is growing: with costs falling and kitchen appliances becoming “status” items, owners are throwing away microwaves after an average of eight years, pushing rising sales. A study by the University of Manchester worked out the emissions of carbon dioxide – the main greenhouse gas responsible for climate change – at every stage of microwaves, from manufacture to waste disposal. “It is electricity consumption by microwaves that has the biggest impact on the environment,” say the authors.

“Efforts to reduce consumption should focus on improving consumer awareness and behaviour to use appliances more efficiently. For example, electricity consumption by microwaves can be reduced by adjusting the time of cooking to the type of food.” Each year more microwaves are sold than any other type of oven in the EU: annual sales are expected to reach 135m by the end of the decade. David Reay, professor of carbon management at the University of Edinburgh, pointed out that the damage done by microwaves is still a fraction of that done by cars. “Yes, there are a lot of microwaves in the EU, and yes they use electricity,” he said.

“But their emissions are dwarfed by those from cars – there are around 30m cars in the UK alone and these emit way more than all the emissions from microwaves in the EU. Latest data show that passenger cars in the UK emitted 69m tonnes of CO2 equivalent in 2015. This is ten times the amount this new microwave oven study estimates for annual emissions for all the microwave ovens in the whole of the EU.” The energy used by microwaves is lower than any other form of cooking. uSwitch, the price comparison website, lists microwaves as the most energy efficient, followed by a hob and finally an oven, advising readers to buy a microwave if they don’t have one. However, they urge owners to switch them off at the wall after use, to avoid powering the clock.

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The Guardian can try to chest thump as much as it wants, but it too got triggered for real only through David Attenborough’s Blue Planet II, just like Theresa may et al.

1 Million Tonnes A Year: UK Supermarkets Shamed For Plastic Packaging (G.)

Britain’s leading supermarkets create more than 800,000 tonnes of plastic packaging waste every year, according to an investigation by the Guardian which reveals how top chains keep details of their plastic footprint secret. As concern over the scale of unnecessary plastic waste grows, the Guardian asked Britain’s eight leading supermarkets to explain how much plastic packaging they sell to consumers and whether they would commit to a plastic-free aisle in their stores. The chains have to declare the amount of plastic they put on the market annually under an EU directive. But the information is kept secret, and Tesco, Sainsbury’s, Morrisons, Waitrose, Asda and Lidl all refused the Guardian’s request, with most saying the information was “commercially sensitive”. None committed to setting up plastic-free aisles – something the prime minister called for last week.

Only two supermarkets, Aldi and the Co-op, were open about the amount of plastic packaging they put on to the market. Using their data, and other publicly available market share information, environmental consultants Eunomia estimated that the top supermarkets are creating a plastic waste problem of more than 800,000 tonnes each year – well over half of all annual UK household plastic waste of 1.5m tonnes. The 800,000 tonnes of waste from food and beverage products would fill enough large 10-yard skips to extend from London to Sydney, or cover the whole of Greater London to a depth of 2.5cm. The revelations will add to mounting public concern about the damage that plastic does to the natural world. The Guardian has already revealed the vertiginous growth in plastic production, and the heavy environmental toll it exacts.

Dominic Hogg, chairman of Eunomia, said the figures could be higher. “The data reported for plastic packaging put on the market as a whole is an underestimate in our view,” said Hogg. Supermarkets in the UK keep their plastic footprint secret with a confidentiality agreement signed with the agencies involved in the British recycling compliance scheme. It means the amount of plastic packaging created by each supermarket and the money they pay towards its recycling is kept out of the public domain. One leading supermarket manager is calling for the whole system to be made more transparent and targeted to make the irresponsible producers pay more. Iain Ferguson, head of sustainability at the Co-op, said Britain should adopt the French system of “bonus-malus”, where supermarkets are taxed more for using material which is not easily recyclable and less for sustainable and recyclable packaging.

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And it really is this simple.

The Plastic-Free Stores Showing The Big Brands How To Do It (G.)

In the past few weeks Richard Eckersley has noticed a change in the type of people who come into his shop. The former Manchester United footballer, who turned his back on the game to set up the the UK’s first “zero waste” store on Totnes high street in Devon, says it is no longer only committed environmentalists who pop in, looking for a cleaner way to shop. “We thought January might be a bit quieter but it has been crazy,” says Eckersley, who set up the Earth.Food.Love shop with his wife Nicola in March. “A lot of new people are coming in – people who have not necessarily been involved in green issues before … it really feels like this [concern about plastic waste] is starting to break out of the environmental bubble.”

Last week Theresa May put cutting plastic pollution at the heart of the government’s 25-year environmental plan, and although critics said it was short on detail she did call for supermarkets to introduce plastic-free aisles to offer customers more choice. But Eckersley says many consumers are already way ahead of politicians. He and his wife have helped people who are planning to set up similar stores in Wales, Birmingham and Bristol. “We are getting calls every week from around the country from people wanting to set up something similar in their towns … it feels like this has really tapped into something that is growing all the time.” More than 200 miles away, Ingrid Caldironi shares the enthusiasm. She set up the plastic-free Bulk Market in east London last year. It has proven so popular that it is now moving to bigger, permanent premises at the end of the month.

“We have had an amazing response, especially in the last couple of months,” she says. Eckersley and Caldironi are at the vanguard of a burgeoning anti-plastics movement in the UK that has been fuelled by newspaper investigations including the Guardian’s Bottling It series, the Blue Planet television series and a general alarm at the damage plastic is doing to the natural environment. But their enthusiasm is not shared by big supermarkets, which have thus far shown little inclination to reduce their plastic waste. “For a nation of shopkeepers we are lagging behind in this race,” says Sian Sutherland, founder of the campaign A Plastic Planet which led the calls for plastic-free aisles. “The most exciting thing is that politicians and industry are no longer claiming that we can recycle our way out of the plastic problem,” she added. “Banning the use of indestructible plastic packaging for food and drink products is the only answer.”

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Jan 102018
 
 January 10, 2018  Posted by at 10:19 am Finance Tagged with: , , , , , , , , , , , ,  11 Responses »
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Ansel Adams The Tetons and the Snake River 1942

 

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)
Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)
Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)
People Have A Hard Time Even Imagining How The Market Could Decline (ZH)
World Bank Issues Warnings On Interest Rates And Inflation (G.)
South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)
Apple’s Privacy Feature Costs Ad Companies Millions (G.)
Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)
Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)
Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)
The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)
Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

 

 

The Last of the Mohicans. But does Japan really want to, and can it, carry the global financial system on its shoulders now the Fed and ECB no longer want to do their share?

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)

The Bank of Japan is seen as the last grown-up in the room actively filling the global liquidity punch bowl with both hands. That’s why a slight tweak to its bond-buying program caused a flurry across financial markets Tuesday, sparking speculation it was joining the Fed and ECB in cutting back on asset purchases, a move that could ultimately help drive up global interest rates. On Tuesday, the BOJ modestly trimmed its purchases of Japanese government bonds by about $10 billion in the 10- to 25-year maturities and another $10 billion in maturities of more than 25 years. The yen jumped about 0.5% to about 112.60 to the dollar, and bond yields rose. The U.S. 10-year yield also moved higher, breaking above the key 2.50% to as high as 2.55%. Meanwhile, the 10-year JGB yield moved in a range of about 0.16 and saw a high of 0.074%.

But some strategists say while the BOJ may have sent a powerful signal, it is just acting on a technicality that comes with changes it made to its bond purchase program back in 2016. Unlike the U.S. and Europe, where central banks have targeted the balance sheet size, the Japanese central bank is targeting interest rates and its purchases are based on prices. “I think it’s too early to proclaim the easy conditions in Japan are over. That said, I do think it’s constructive and it shows how sensitive the markets are to any potential change,” said Greg Peters, senior portfolio manager at PGIM Fixed Income. The Bank of Japan has been a poster child for central bank easing, taking its rates to negative levels and buying all types of assets, including stocks.

“They’re still buying ETFs, J-REITs, corporate paper. They changed how they’re easing, but they’re still easing,” said Marc Chandler, head of fixed-income strategy at Brown Brothers Harriman. “I think the market is overinterpreting this, partly because of their positions. They’re short yen. They’re long euros. They’re being squeezed on both legs today.” [..] While it’s last to leave the party, a change in BOJ policies would be the most symbolic move yet that the extreme policies adopted in the global financial crisis are finally coming to an end, and the juice that helped push risk assets higher is being slowly withdrawn. Chandler said the BOJ has made a point of saying it will continue to ease. “The BOJ says, ‘We’re going to be patient. We’re going to be the last one out.’ … [Prime Minister Shinzo] Abe told the Bank of Japan..

“If long rates continue to move higher, and the BOJ follows this with a continued reduction in the pace of the purchases, then we know we’re on to something. We’re on to a potential change in monetary policy in Japan,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “I think that is likely in 2018,” Boockvar said. “Whether this is the beginning of it, we’ll have to see. They have some cover too. They know what the Fed is going to do, and they know what the ECB is doing. Does the BOJ want to be the outlier of temporary insanity when every other central bank is pulling back? They are the epitome of extremity in terms of monetary policy.”

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Fed interference will go down in history as the uttermost of stupidities. Not yet though, the narrative of saving the economy can still be kept alive. But wait till things go south.

Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)

Federal Reserve officials puzzled by chronically-low US inflation seem to agree on at least one thing: They worry, almost universally, that they will lack the tools to fight the next recession, whenever it comes. Yet instead of focusing on tried and true policy measures like low interest rates and possibly bond buys, Fed officials current and former appear focused instead on broad shifts in the policy framework, including moving away from the current inflation targeting regime toward a potentially more aggressive approach. More importantly, the string of discordant ideas being offered up at a Brookings Institution conference by such high profile figures as former Fed Chairman Ben Bernanke, former White House economic advisor Lawrence Summers, and two current Fed members, does more to confuse the already muddled outlook for monetary policy than clarify it.

Boston Fed President Eric Rosengren suggested the Fed follow the model of the Bank of Canada, which periodically reviews its approach to maintaining price stability. He also called for the Fed to move toward an inflation target range, which he hinted might be from 1.5% to 3%, rather than the current 2% goal. John Williams, president of the San Francisco Fed, called for a system where the Fed would target the price level, meaning that it would compensate periods of undershooting the 2% inflation goal with periods of overshooting. US inflation has remained stubbornly below the Fed’s 2% target for much of the economic recovery, suggesting the labor market is not as healthy as the 17-year low unemployment rate of 4.1% suggests.

Shifting to a price-level target is “not nearly as scary as you might think” Williams told the audience of monetary economists, academics, and market participants. He worried about the “issue of credibility” that has resulted from persistently below-target inflation, which makes it look ” like the central bank is not committed to its goals.” Prolonged low inflation, which also reflects soft wage growth, can make monetary policy less effective because “it gets into inflation expectations and makes it harder to achieve 2% objective in good times.”

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Possible in theory, but with CB tightening not in practice.

Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)

Worried about higher interest rates putting a dent on the stock market’s rip-roaring rally? Fear not, a rise in rates will actually help stocks, according to legendary investor Bill Miller. “Those 10-year yields go through 2.6% and head towards 3%, I think we could have the kind of melt-up we had in 2013, where we had the market go up 30%,” Miller, the founder of Miller Value Partners, told CNBC’s “Closing Bell” on Tuesday. “If we can get the 10-year towards that 3% level, you’ll see the same thing.” “In 2013, people finally began to lose money in bonds. They took money out of bond funds and put it into equity funds,” Miller said. Miller is considered one of the best investors ever, after beating the market for 15 years in a row while working at Legg Mason. Stocks have been on a rip-roaring rally for more than a year, as economic data and corporate earnings have improved.

On Tuesday, they closed at fresh record highs. But some experts fear the improvements in the economy could force the Federal Reserve to tighten monetary policy faster than they forecast, thus pushing interest rates higher. The 10-year U.S. Treasury yield rose to 2.55% on Tuesday and hit its highest level since March.The yield has not traded above 3% since early 2014. It last traded above 2.6% last March. But Miller thinks the stock market could get another boost from lower corporate tax rates. President Donald Trump signed a bill in December that slashed the corporate tax rate to 21% from 35%. “The tax cuts are probably partly in the market, but maybe not wholly in the market because we’re seeing things like companies raising the minimum wage, giving bonuses,” he said. “The people that are getting those $1,000 bonuses probably have a marginal propensity to consume of 99%.”

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It’s high time for that decline then.

People Have A Hard Time Even Imagining How The Market Could Decline (ZH)

A calm complacency never before seen has fallen blanket-like over US equity markets. “The behavior of volatility has entirely changed since 2014,” noted BAML in a a recent note thanks to major central banks keeping interest rates near historic lows (and printed more money than ever before). As The Wall Street Journal points out, One sign of that: VIX closed below 10 more times last year than any others year in its history, and until today, closed below 10 for the first 5 days of 2018… And while correlation is not causation, there is a clear causal link between the conditioning now deeply embedded within investors’ minds and the endless expansion of central bank balance sheets…

As JPMorgan’s infamous quant guru Marko Kolanovic wrote, “the first four Fed hikes in a decade have failed to generate the revival of volatilities that many had expected at the end of last year,” and a wave of political uncertainty linked to U.S. tensions with North Korea and the new presidential administration also raised the prospect that market tumults could occur with greater frequency… but no… In fact worse still for The Fed, financial conditions eased as they tightened and vol collapsed to levels never seen before…

All of which has led, as The Wall Street Journal reports, to a number of investors abandoning defensive positions taken to protect against a market downturn, in the latest sign that many doubters are shedding caution as the long rally rolls on. “I haven’t seen hedging activity this light since the end of the financial crisis,” said Peter Cecchini, a New York-based chief market strategist at Cantor Fitzgerald. “It started in late 2016 and accelerated in the second half of the year.” But as Morgan Stanley warns in a recent note, what goes up (this fast) typically comes down… “Our team has observed a dramatic shift in sentiment since we initiated coverage in April. In April, it felt as if people were looking for a reason for the market to fail. Now, we have seen a total reversal with people having a hard time even imagining how the market could decline.”

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Recovery is just a story. Unless it has become viable to fight debt with more debt.

World Bank Issues Warnings On Interest Rates And Inflation (G.)

Financial markets are complacent about the risks of sharply higher interest rates that could be triggered by better than expected growth in the global economy this year, the World Bank has warned. The Washington-based organisation said that much of the rich west was running at full capacity as a result of a broad-based upswing in activity, but were now vulnerable to a period of rising inflation that would prompt action from central banks. Launching the Bank’s global economic prospects, the lead author Franziska Ohnsorge said: “There could be faster than expected inflation that would mean faster than expected interest rate hikes.” Ohnsorge added that stock markets were at levels similar to those seen before the Wall Street Crash of 1929, while bond markets were assuming that low inflation would keep official borrowing costs down.

“Financial markets are vulnerable to unforeseen negative news. They appear to be complacent,” she said, while announcing that the Bank has revised up its 2018 forecast for the global economy following a better than expected performance in the US, China, the eurozone and Japan in 2017. In its half-yearly assessment, the Bank said a recovery in manufacturing, investment and trade would mean global growth of 3.1% this year, up from the 2.9% pencilled in last June. But it warned the acceleration in growth would be temporary unless governments implemented structural reforms to raise long-term growth potential. “The broad-based recovery in global growth is encouraging, but this is no time for complacency,” said Jim Yong Kim, the World Bank’s president.

“This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries’ productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity.”

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They’re even planning to march in the Olympics opening ceremony together.

South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)

South Korean President Moon Jae-in credited U.S. President Donald Trump on Wednesday for helping to spark the first inter-Korean talks in more than two years, and warned that Pyongyang would face stronger sanctions if provocations continued. The talks were held on Tuesday on the South Korean side of the demilitarized zone, which has divided the two Koreas since 1953, after a prolonged period of tension on the Korean peninsula over the North’s missile and nuclear programs. North Korea ramped up its missile launches last year and also conducted its sixth and most powerful nuclear test, resulting in some of the strongest international sanctions yet. The latest sanctions sought to drastically cut the North’s access to refined petroleum imports and earnings from workers abroad. Pyongyang called the steps an “act of war”.

Seoul and Pyongyang agreed at Tuesday’s talks, the first since December 2015, to resolve all problems between them through dialogue and also to revive military consultations so that accidental conflict could be averted. “I think President Trump deserves big credit for bringing about the inter-Korean talks, I want to show my gratitude,” Moon told reporters at his New Year’s news conference. “It could be a resulting work of the U.S.-led sanctions and pressure.” Trump and North Korean leader Kim Jong Un exchanged threats and insults over the past year, raising fears of a new war on the peninsula. South Korea and the United States are technically still at war with the North after the 1950-53 Korean conflict ended with a truce, not a peace treaty.

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Ads are killing the experience. Most people by now have ad blockers. That whole industry needs drastic change.

Apple’s Privacy Feature Costs Ad Companies Millions (G.)

Internet advertising firms are losing hundreds of millions of dollars following the introduction of a new privacy feature from Apple that prevents users from being tracked around the web. Advertising technology firm Criteo, one of the largest in the industry, says that the Intelligent Tracking Prevention (ITP) feature for Safari, which holds 15% of the global browser market, is likely to cut its 2018 revenue by more than a fifth compared to projections made before ITP was announced. With annual revenue in 2016 topping $730m, the overall cost of the privacy feature on just one company is likely to be in the hundreds of millions of dollars. Dennis Buchheim, general manager of the Interactive Advertising Bureau’s Tech Lab, said that the feature would impact the industry widely.

“We expect a range of companies are facing similar negative impacts from Apple’s Safari tracking changes. Moreover, we anticipate that Apple will retain ITP and evolve it over time as they see fit,” Buchheim told the Guardian. “There will surely be some continued efforts to ‘outwit’ ITP, but we recommend more sustainable, responsible approaches in the short-term,” Buchheim added. “We also want to work across the industry (ideally including Apple) longer-term to address more robust, cross-device advertising targeting and measurement capabilities that are also consumer friendly.” ITP was announced in June 2017 and released for iPhones, iPads and Macs in September. The feature prevents Apple users from being tracked around the internet through careful management of “cookies”, small pieces of code that allow an advertising technology company to continually identify users as they browse.

Its launch sparked complaints from the advertising industry, which called ITP “sabotage”. An open letter signed by six advertising trade bodies called on Apple “to rethink its plan … [that risks] disrupting the valuable digital advertising ecosystem that funds much of today’s digital content and services.” It also accused the company of ignoring internet standards, which say that a cookie should remain on a computer until it expires naturally or is manually removed by a user. Instead, the industry said, Apple is replacing those standards “with an amorphous set of shifting rules that will hurt the user experience and sabotage the economic model for the internet”.

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We haven’t heard the last of this flaw which is actually a feature.

Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)

Microsoft’s workaround to protect Windows computers from the Intel processor security flaw dubbed Meltdown has revealed the rootkit-like nature of modern security tools. Some anti-malware packages are incompatible with Redmond’s Meltdown patch, released last week, because the tools make, according to Microsoft, “unsupported calls into Windows kernel memory,” crashing the system with a blue screen of death. In extreme cases, systems fail to boot up when antivirus packages clash with the patch. The problem arises because the Meltdown patch involves moving the kernel into its own private virtual memory address space. Usually, operating systems such as Windows and Linux map the kernel into the top region of every user process’s virtual memory space.

The kernel is marked invisible to the running programs, although due to the Meltdown design oversight in Intel’s modern chips, its memory can still be read by applications. This is bad because it means programs can siphon off passwords and other secrets held in protected kernel memory. Certain antivirus products drill deep into the kernel’s internals in order to keep tabs on the system and detect the presence of malware. These tools turn out to trash the computer if the kernel is moved out the way into a separate context. In other words, Microsoft went to shift its cookies out of its jar, and caught antivirus makers with their hands stuck in the pot. Thus, Microsoft asked anti-malware vendors to test whether or not their software is compatible with the security update, and set a specific Windows registry key to confirm all is well.

Only when the key is set will the operating system allow the Meltdown workaround to be installed and activated. Therefore, if an antivirus tool does not set the key, or the user does not set the key manually for some reason, the security fix is not applied. In fact, until this registry key is set, the user won’t be able to apply any Windows security updates – not just this month’s patches, but any of them in the future.

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UK and US will not give in any time soon.

Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)

Ecuador’s foreign minister has said Julian Assange’s five-and-a-half-year stay in her country’s London embassy is “untenable” and should be ended through international mediation. The WikiLeaks founder has been holed up in Knightsbridge since the summer of 2012, when he faced the prospect of extradition to Sweden over claims that he sexually assaulted two women. He denies the accusations. Swedish prosecutors last year unexpectedly dropped their investigation into the allegations, which included a claim of rape. But Assange still faces arrest for breaching bail conditions if he steps outside the embassy and WikiLeaks has voiced fears that the US will seek his extradition and that there is a sealed indictment ordering his arrest. [..] Jeff Sessions, said last May that Assange’s arrest was now a “priority”.

Ecuador’s foreign minister, María Fernanda Espinosa, said her country was now seeking a “third country or a personality” to mediate a final settlement with the UK to resolve the impasse and said it was “considering and exploring the possibility of mediation”. “No solution will be achieved without international cooperation and the cooperation of the United Kingdom, which has also shown interest in seeking a way out,” she told foreign correspondents in Quito, according to Agence France-Presse. Assange, who has received numerous visitors to his modest quarters in the embassy, ranging from Nigel Farage to Lady Gaga, has described the period since his initial arrest as a “terrible injustice”. Not being able to see his children grow up was “not something I can forgive”, he said.

[..] On Tuesday evening, a lawyer for Assange appeared to welcome Ecuador’s proposal. He said his client had a right to asylum and argued that the risk of him being persecuted in the US had “escalated further in recent months under the Trump administration’s war on WikiLeaks” and that the investigation in Sweden had twice been discontinued. “If the UK wishes to show that it is a nation that respects its human rights obligations and commitments to the United Nations, it is time for Mr Assange to be allowed to enjoy his right to liberty, and fundamental right to protection against persecution in the United States,” he said. A spokesperson for the UK government said: “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

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“Julian Assange isn’t hiding from justice, he’s hiding from injustice.”

Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)

Private Manning was tortured. As sure as if they’d strapped her down and set upon her flesh with fire and steel, she was tortured. United Nations special rapporteur on torture Juan E. Mendez stated unequivocally in 2012 that Manning’s treatment at the hands of the US government during her imprisonment was “cruel, inhuman and degrading,” after 295 legal scholars had already signed a letter in 2011 declaring that she was being “detained under degrading and inhumane conditions that are illegal and immoral.” Humans, like all primates, are evolutionarily programmed to be social animals, which is why solitary confinement causes our systems to become saturated in distress signals as real as pain or fear. Studies have shown that fifteen days of this draconian practice causes permanent psychological damage. Manning was in solitary confinement for nearly a year.

Manning attempted suicide in July of 2016. To punish her for her attempt to end her misery, they tortured her some more. She attempted suicide again three months later. The same sadistic regime which inflicted these horrors upon Manning has during the current administration prioritized the arrest of WikiLeaks editor-in-chief Julian Assange, and the international arms of the US power establishment have been working to facilitate that aim. The Guardian reports that Ecuador’s foreign minister is now saying Assange’s continued stay in the nation’s London embassy has become “untenable” and is seeking international mediation, to which a spokesman for the UK government has responded that “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

Justice. A government whose international operations are uniformly indistinct from America’s wants Assange to leave political asylum and trust his life to an international power establishment that tortures whistleblowers in the name of “justice”. Julian Assange isn’t hiding from justice, he’s hiding from injustice. What sane human being wouldn’t? Time after time after time we are shown that whistleblowers, leakers, and those who facilitate them are not shown anything remotely resembling justice by this depraved Orwellian establishment. Which is why Australia must intervene and protect him.

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The value of your life plunges along with that of others.

The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)

More than 15,000 civilians were killed by explosive weapons in 2017, a 42 percent increase on last year, while deaths by airstrikes increased by 82 percent, a new study by Action on Armed Violence has found. The research shows that, while official stats on civilian casualties are on the rise, they’re still modest in comparison to the “true figures.” “The US has a habit of assuming all fighting-aged men are, in fact, fighters…This is the hammer that the US uses to establish the truth in war,” the organization’s Executive Director Iain Overton told RT. Much of the increase is due to the battles to retake Islamic State strongholds in Mosul, Iraq and Raqqa, Syria. The Syrian conflict and the Saudi-led coalition bombing Yemen also accounted for a large proportion of civilian deaths.

The survey, found 8,932 civilians were killed by air-launched explosives in the first 11 months of 2017, compared to 4,902 during the same period in 2016. “At least 60 countries around the world saw explosive weapons being used last year,” Action on Armed Violence’s Executive Director Iain Overton told RT. “We have always acknowledged that our data would likely represent a lower figure of total civilians killed or injured than might actually be the case,” Overton said. “This is particularly true when there is a single fatality or wounding, and particularly in under-reporting of those injured by a bomb blast.” “When the fog of war descends casualty figures often fall short – both because they become highly politicized and because accurate reporting is often a casualty of war itself,” he added.

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Europe has no morals left.

Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

Survivors from a boat that foundered off Libya’s coast on Tuesday said about 50 people who had embarked with them were feared dead, while the coastguard said the number of missing might be as high as 100. Libyan coastguard vessels picked up nearly 300 migrants from three boats off the coast of the North African country on Tuesday, but one rubber boat was punctured and the coastguard only found 16 survivors clinging to its wreckage. “We found the migrant boat at about 10 o’clock this morning. It had sunk and we found 16 migrants. The rest were all missing and, unfortunately, we didn’t find any bodies or [other] survivors,” said Nasr al-Qamoudi, a coastguard commander.

Several of the survivors, who were brought back to a naval base in Tripoli, said there were originally about 70 people on board the boat when it set off near the town of Khoms, east of the capital. A coastguard statement later said that “at least 90-100” migrants were missing. The two other migrant boats were found off Zawiya, west of Tripoli. [..] Libya is the most common departure point for migrants trying to reach Europe from Africa by sea. More than 600,000 have crossed the central Mediterranean in the past four years, generally travelling in flimsy inflatable craft provided by smugglers that often break down or puncture. Under heavy pressure from Italy, some Libyan armed factions have blocked smuggling since last summer. Libya’s Italian-backed coastguard has also stepped up interceptions, returning migrants to Libya, where they are detained and often re-enter smuggling networks.

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Jan 092018
 
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Thomas Abercrombie Beirut 1957

 

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)
US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)
Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)
The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)
Retail Investors Are Finally True Believers with Record Exposure (WS)
iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)
‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)
The Decline of Anti-Trumpism (David Brooks)
Cryptocurrencies Are Selling Off (BBG)
Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)
US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)
Fairy Tale (Jim Kunstler)
Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)
Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

 

 

A nation of expendables. To think how hard earlier generations fought for health care.

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)

As tax season approaches, some consumers are waiting for their refund checks to spend on a long-delayed purchase – a visit to the doctor or dentist. U.S. consumers boosted their out-of-pocket health spending by 60% in the week after they got a tax refund, according to new research from JPMorgan Chase, based on data from Chase customer accounts. Spending stayed high for about 2 1/2 months, with about two-thirds of the extra spending money going to in-person payments to doctors and dentists. Much of the rest was used to pay down past bills. Health insurers and employers have raised copays and deductibles for consumers, making them bear a larger portion of the cost of care when they go see a health-care provider.

As a result, patients sometimes lack the cash to get the care they may need, according to the report. “Cash-flow dynamics are a significant driver of out-of-pocket spending for health care,” the study found. “Even when consumers knew with near-certainty the size and source of a major cash infusion, they still waited until the infusion arrived before spending.” The researchers found that availability of cash had far less of an impact on health-spending decisions among those with credit cards, or who had higher bank-account balances.

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Until about 1970, the US had the lowest child mortality rates. Then something happened.

US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)

The United States has the worst child mortality rate among a group of 20 wealthy democracies, an analysis released Monday found. And despite overall improvement in the child mortality rate in the U.S. and those 19 other countries, the U.S. has persistently outpaced those nations in that grim metric for decades, the Health Affairs report said. “From 2001 to 2010, the risk of death in the US was 76% greater for infants and 57% greater for children age 1-19,” the report said. And during the same decade, children between the ages of 15 and 19 were 82 times more likely to die from gun-related homicide in the U.S. than in the comparison countries.

The authors of the Health Affairs report said that in the full 50-year period their study looked at, the U.S. had more than “600,000 excess deaths” among kids because of the country’s lagging performance in curbing child mortality. Those excess deaths have occurred even as the U.S. spends more money on health care for kids than the other countries. Among the countries looked at, “there has never been a better time to be born in any of these 20 countries,” the Health Affairs report said. “Despite this generalized trend, children are less likely to survive and transition into adulthood in the US than in other [countries examined],” the report said. “Persistently high poverty rates, poor educational outcomes, and a relatively weak social safety net have made the US the most dangerous of wealthy nations for a child to be born into.”

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Due to the tax law.

Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)

New Chapter 11 bankruptcies in the US more than doubled in December 2017 from a year ago to 699 filings. That jump of 362 filings from December 2016 was the largest year-over-year jump since the Financial Crisis. This chart shows Chapter 11 filings back to 2011, based on data from the American Bankruptcy Institute. I marked the prior five Decembers with red dots. Note how they’re near the low point of the seasonal swings. That makes the spike in December 2017 even more spectacular. A spike like this in Chapter 11 filings in a month of December is unheard of in normal times. Normally, bankruptcies jump during tax season, the first four or five months of the year, but not at the end of the year. But these are not normal times.

In December, Chapter 11 filings soared 61% from November. This is also highly unusual, as over the prior five years, presumably the “normal times,” the number of filings from November to December has fallen by an average 8.7%. The chart below shows the year-over-year change in Chapter 11 filings. I marked the prior Decembers in yellow. I circled the oil bust and the brick-and-mortar meltdown. But December 2017 was special.

I think companies and their owners and creditors know one thing: They can write off losses in 2017 under the old corporate tax rates, at 35%, thus getting the government to pick up 35% of the tab of their losses via lower taxes. In 2018, the new tax law applies and all kinds of uncertainties have yet to be ironed out, and these companies – the owners and creditors – are thinking (I assume) that it’s better to try to recognize the loss in 2017, support it with a Chapter 11 filing, and pull the write-off into 2017 against a tax rate of 35%, rather than 21% in 2018. A tax-law change of this drastic nature motivates people jump through all kinds of hoops to save some money – including waiting in line for hours to pay property taxes early, a hitherto unthinkable strategy. And I think this is the likely suspect for the spike.

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Wonderful history lesson about the robber barons. Go read.

The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)

The U.S. is now living through a second Gilded Age. Where once the robber barons were millionaires, today they’ve added a few zeros to their wealth and became billionaires. However, they act with no-less impunity, but a greater sense of entitlement. The Trump administration, together with the Republican-controlled Congress, are functional shills for the current generation of robber barons. As evident from the recently-passed tax bill, legislators jump when their big-money donors order them to deliver the goods — and they did. The U.S. economy has rebounded from the 2007-2009 “great recession,” with the stock market hitting new highs, unemployment the lowest in a generation and home prices recovering. But Americans still haven’t regained the wealth they lost, with incomes remaining stagnant and, on the whole, working Americans worse off than since the late-1990s.

The Federal Reserve’s most recent Survey of Consumer Finances finds that median net worth for all families (measured in 2016 dollars) dropped 8% since 1998. Most sobering, the poorer you are, the worst your fate – and this is compounded by race, education level, gender and age factors. America’s poorest, the bottom fifth, saw their net worth fall 22%; the broad working class, the second-lowest income tier, were the hardest hit with their net worth shrinking by more than a third (34%); and those dubbed “middle class,” with incomes from $43,501 to $69,500, were barely treading water, with their worth gaining a whopping 3.5%. Since 1998, the top 10% saw their worth rise 146%. The share of the nation’s wealth held by the top 1% rose to 38.6% while that portion controlled by the bottom 90% fell 22.8% (from 33.2% in ’89).

Looking at the nation’s income for the period of 2013 to 2016, the same phenomenon is evident: income going to the top 1% climbed to 23.8% (from 20.3%) while the share going to the bottom 90% slipped to about 50% (from 54%). And then there is debt, the lubricant of the U.S. post-WW-II “consumer revolution.” During the 2013 to 2016 period, those with the lowest income (below $25,300), saw their debt rise by 57%; for the lower-middle class (incomes between $25,301 and $43,500), debt increased 58%; and for the middle class (incomes from $43,501 to $69,500), debt rose by a modest 12.5%.

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What beaking points are made of.

Retail Investors Are Finally True Believers with Record Exposure (WS)

As far as the stock market is concerned, it took a while – in fact, it took eight years, but retail investors are finally all in, bristling with enthusiasm. TD Ameritrade’s Investor Movement Index rose to 8.59 in December, a new record. TDA’s clients were net buyers for the 11th month in a row, one of the longest buying streaks and ended up with more exposure to the stock market than ever before in the history of the index. This came after a blistering November, when the index had jumped 15%, “its largest single-month increase ever,” as TDA reported at the time, to 8.53, also a record:

Note how retail investors had been to varying degrees among the naysayers from the end of the Financial Crisis till the end of 2016, before they suddenly became true believers in February 2017. “I don’t think the investors who are engaging regularly are doing so in a dangerous fashion,” said TDA Chief Market Strategist JJ Kinahan in an interview. But he added, clients at the beginning of 2017 were “up to their knees in it and then up to their thighs, and now up to their chests.” The implication is that they could get in a little deeper before they’d drown. “As the year went on, people got more confident,” he said. And despite major geopolitical issues, “the market was never tested at all” last year. There was this “buy-the-dip mentality” every time the market dipped 1% or 2%.

But one of his “bigger fears” this year is this very buy-the-dip mentality, he said. People buy when the market goes down 1% or 2%, and “it goes down 5%, then it goes down 8% — and they turn into sellers, and then they get an exponential move to the downside.” In addition to some of the big names in the US – Amazon, Microsoft, Bank of America, etc. – TDA’s clients were “believers” in Chinese online retail and were big buyers of Alibaba and Tencent. But they were sellers of dividend stocks AT&T and Verizon as the yield of two-year Treasuries rose to nearly 2%, and offered a risk-free alternative at comparable yields. And he added, with an eye out for this year: “It’s hard to believe that the market can go up unchallenged.” This enthusiasm by retail investors confirms the surge in margin debt – a measure of stock market leverage and risk – which has been jumping from record to record, and hit a new high of $581 billion, up 16% from a year earlier.

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Duh!

iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)

Apple investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits. Hedge fund JANA Partners and the California State Teachers’ Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children’s developing brains, an issue that may harm the company’s long-term market value. But some investors said the habit-forming nature of gadgets and social media are one reason why companies like Apple, Google parent Alphabet Inc and Facebook Inc added $630 billion to their market value in 2017. “We invest in things that are addictive,” said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management.

He also owns stock in coffee retailer Starbucks Corp, casino operator MGM Resorts International and alcohol maker Constellation Brands Inc. “Addictive things are very profitable,” Gerber said. Still, the investment community is increasingly holding companies to higher social standards, and there is some concern that market-leading tech companies could draw attention from regulators much like alcohol, tobacco and gambling companies have in the past. Alphabet and Facebook could not immediately be reached for comment on Monday. Facebook has said social media can be beneficial if used appropriately. In a statement to Reuters, Apple said it has offered a range of controls on iPhones since 2008 that allow parents to restrict content, including apps, movies, websites, songs and books, as well as cellular data, password settings and other features.

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This leaves many questions about what the industry knew and what they did not. Hard to believe they were all entirely ignorant for 20 years.

‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)

It was late November and former Intel Corp. engineer Thomas Prescher was enjoying beers and burgers with friends in Dresden, Germany, when the conversation turned, ominously, to semiconductors. Months earlier, cybersecurity researcher Anders Fogh had posted a blog suggesting a possible way to hack into chips powering most of the world’s computers, and the friends spent part of the evening trying to make sense of it. The idea nagged at Prescher, so when he got home he fired up his desktop computer and set about putting the theory into practice. At 2 a.m., a breakthrough: he’d strung together code that reinforced Fogh’s idea and suggested there was something seriously wrong. “My immediate reaction was, ‘It can’t be true, it can’t be true,’” Prescher said.

Last week, his worst fears were proved right when Intel, one of the world’s largest chipmakers, said all modern processors can be attacked by techniques dubbed Meltdown and Spectre, exposing crucial data, such as passwords and encryption keys. The biggest technology companies, including Microsoft, Apple, Google and Amazon.com are rushing out fixes for PCs, smartphones and the servers that power the internet, and some have warned that their solutions may dent performance in some cases. Prescher was one of at least 10 researchers and engineers working around the globe – sometimes independently, sometimes together – who uncovered Meltdown and Spectre. Interviews with several of these experts reveal a chip industry that, while talking up efforts to secure computers, failed to spot that a common feature of their products had made machines so vulnerable.

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David Brooks exposes everything his paper -NYT- has done for well over a year: make it all up. A mea culpa between the lines.

The Decline of Anti-Trumpism (David Brooks)

Let me start with three inconvenient observations, based on dozens of conversations around Washington over the past year: First, people who go into the White House to have a meeting with President Trump usually leave pleasantly surprised. They find that Trump is not the raving madman they expected from his tweetstorms or the media coverage. They generally say that he is affable, if repetitive. He runs a normal, good meeting and seems well-informed enough to get by. Second, people who work in the Trump administration have wildly divergent views about their boss. Some think he is a deranged child, as Michael Wolff reported. But some think he is merely a distraction they can work around. Some think he is strange, but not impossible. Some genuinely admire Trump. Many filter out his crazy stuff and pretend it doesn’t exist.

My impression is that the Trump administration is an unhappy place to work, because there is a lot of infighting and often no direction from the top. But this is not an administration full of people itching to invoke the 25th Amendment. Third, the White House is getting more professional. Imagine if Trump didn’t tweet. The craziness of the past weeks would be out of the way, and we’d see a White House that is briskly pursuing its goals: the shift in our Pakistan policy, the shift in our offshore drilling policy, the fruition of our ISIS policy, the nomination for judgeships and the formation of policies on infrastructure, DACA, North Korea and trade. It’s almost as if there are two White Houses. There’s the Potemkin White House, which we tend to focus on: Trump berserk in front of the TV, the lawyers working the Russian investigation and the press operation.

Then there is the Invisible White House that you never hear about, which is getting more effective at managing around the distracted boss. I sometimes wonder if the Invisible White House has learned to use the Potemkin White House to deke us while it changes the country. I mention these inconvenient observations because the anti-Trump movement, of which I’m a proud member, seems to be getting dumber. It seems to be settling into a smug, fairy tale version of reality that filters out discordant information. More anti-Trumpers seem to be telling themselves a “Madness of King George” narrative: Trump is a semiliterate madman surrounded by sycophants who are morally, intellectually and psychologically inferior to people like us. I’d like to think it’s possible to be fervently anti-Trump while also not reducing everything to a fairy tale.

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Still up and down, but that will be a big problem at some point, not some quaint feature..

Cryptocurrencies Are Selling Off (BBG)

Bitcoin slumped, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the the world’s largest cryptocurrency. Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs. Coinmarketcap.com’s decision to exclude Korean pricing data for coins helped create the appearance of a large drop in prices, which some traders attributed as playing a part in the selloff. “News on the regulatory front is dragging down cryptos,” said Gabor Gurbacs at VanEck Associates.

“South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEC cracking down on illegal offerings.” Bitcoin slumped as much as 17% to $14,820, the most in more than two weeks. The rout in bitcoin is part of a broader selloff in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10%, according to Coinmarketcap.com. Cardano fell 16%, while litecoin slumped as much as 16% to as low as $230. Bitcoin is little changed this year after surging about 1,400% in 2017.

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Liquidity concerns.

Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)

Two U.S. companies shelved proposals to launch bitcoin exchange-traded funds, citing ongoing concerns by the Securities and Exchange Commission (SEC), filings showed on Monday. Staff at the regulatory agency “expressed concerns regarding the liquidity and valuation” of futures contracts based on the digital asset, according to one of the filings. The move adds a new hurdle to the bid by Wall Street firms to capitalize on investor interest in cryptocurrencies, and it opens a rare public divergence between two financial regulatory agencies over how to regulate them. Trusts controlled by Rafferty Asset Management and Exchange Traded Concepts each canceled plans to launch three bitcoin funds that could be traded by retail investors as easily as stocks. Neither firm could be reached for comment.

Fund managers thought the proposals had a chance at winning approval given the launch last month of futures contracts based on bitcoin on both the CME and the CBOE exchanges. Regulators have been scrambling to figure out how to deal with this relatively new asset, and no single one has control. The SEC has dominion over funds, while the Commodity Futures Trading Commission (CFTC) governs futures contracts. The CFTC has been under pressure to address concerns it did not fully assess the potential risks that bitcoin poses to the financial system. [..] The SEC’s decisions also face close scrutiny given its power to clear the way for products that could be among the more volatile traded in U.S. equity markets.

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It was always nonsense, and they know it.

US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)

The US energy watchdog terminated Monday a key proposal by President Donald Trump’s administration to subsidize coal and nuclear plants, finding it neither justified nor reasonable. The decision by the Federal Energy Regulatory Commission (FERC) was handed down in a unanimous verdict by its five members, a majority of whom belong to the president’s Republican Party. Energy Secretary Rick Perry had in September proposed providing federal aid to nuclear and coal power plants with at least 90 days’ worth of production capacity, arguing the move was necessary to make the national grid more resilient in case of extreme events.

Both sectors have seen their share of the energy market diminish in recent years, losing out to oil, natural gas and renewables – which had all opposed Perry’s plan. There are currently only two nuclear reactors under construction in the US, in addition to the 99 in service. Coal is also facing a crisis, and Trump made reversing its decline a major campaign pledge. In announcing its decision, FERC cited an existing department study’s findings that “changes in the generation mix, including the retirement of coal and nuclear generators, have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid.”

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Of the Oprah kind.

Fairy Tale (Jim Kunstler)

Oprah might be the Democratic Party’s last best hope before it collapses into the mausoleum of US political history, where the Whigs, Free Soilers, and Anti-Federalists lie a’moldering. Politics in this land has failed in its effort to become show business, while show business is succeeding wildly in its attempt to replace politics. All Washington can produce these days is a succession of tedious irresolvable soap operas. Hollywood is enacting a grand moral drama of clear-cut heroines and villains, victims and oppressors, sticking to archetypal story-line of our lifetime: the campaign for freedom, equality, and decency. Show business loves the desert sunshine; politics is mired in the Potomac swamp. Oprah even has better hair than the current occupant of 1600 Pennsylvania Avenue.

Oprah herself is an object lesson in the social and political themes that America dares not talk about: a person of humble origins who succeeded wildly in American life by signing onto a once-sturdy and now-fading common culture. In fact, Oprah probably embodies all that remains of American common culture, and the multitudes adore her for it. They are reassured to know that the binding verities still exist. She moves in a realm where blackness and whiteness are emphatically irrelevant — which is surely a relief to people of good will who are sick of race-hustling from all quarters. Though she has credibly acted plenty of sharecropper roles in the movies, Oprah speaks English beautifully and doesn’t apologize for moving up from the ghetto patois of her rough childhood. She may not write all her own material — such as Sunday’s Golden Globes speech that may live on like MLK’s I Have a Dream oration — but she delivers her message with conviction.

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Stumbling from failure to failure.

Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)

U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks. May’s office flagged Monday’s events as “a refresh” of her top team. But instead of the usual parade of lawmakers arriving at her office in quick succession to accept their new roles, things went off script. First Health Secretary Jeremy Hunt, then Education Secretary Justine Greening were locked in discussions with her after rejecting proposed moves. Hunt eventually won his argument to stay on, but Greening, who spent more than two hours in 10 Downing Street, quit rather than accept another job.

May was said to be “disappointed” at losing Greening, who opposed Brexit, and could now vote with pro-European Union rebels in the House of Commons. It was not the restart she wanted. There were echoes of her botched decision to call an election in her announcement of a reshuffle she didn’t have to carry out. In both instances May seemed to dissipate any political goodwill she recouped. She had begun the new year in a position of relative strength, having concluded a problematic first phase of talks over Brexit – still the issue that will define her political legacy and will only get more complicated this year. “She can’t have the government she would choose and has to select from a small group of people,” said Matt Beech, director of the Centre for British Politics at the University of Hull. “Even with a majority she’d be facing tough decisions because her party’s completely divided on Brexit.”

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Want to know when you’re being had? Look no further. The reasoning here is that the German economy is doing so well that climate targets can’t be met. But that’s an impossible contradiction. Because it tries to make you believe that the investments needed to meet the targets will be made when the economy is not doing so well. But they won’t, because by then the story will be that the money is needed to support the economy.

Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

Germany’s would-be coalition partners have agreed to drop plans to lower carbon dioxide emissions by 40% from 1990 levels by 2020, sources familiar with negotiations said on Monday – a potential embarrassment for Chancellor Angela Merkel. Due to strong economic growth and higher-than-expected immigration, Germany is likely to miss its national emissions target for 2020 without any additional measures. Negotiators for Merkel’s conservative bloc and the centre-left Social Democrats (SPD) told Reuters the parties had agreed in exploratory talks on forming a government that the targeted cut in emissions could no longer be achieved by 2020. Instead, they would aim to hit the 40% target in the early 2020s, the sources said, adding that both parties are still sticking to their goal of achieving a 55% cut in emissions by 2030.

The deal would represent something of a U-turn for Merkel, who has long presented herself as an advocate of climate protection policies on the international stage. Sources said both parties had also agreed that the share of renewable energy in Germany’s electricity consumption should rise to 65% by 2030 from roughly a third last year. Currently, the government plans to raise the renewable energy quota to between 45 and 55% by 2025. Negotiators also agreed to cut the tax on electricity in order to reduce energy costs, according to a document seen by Reuters. They also plan to tender an extra 4 gigawatts of solar energy as well as onshore and offshore wind-generating capacity.

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Jan 082018
 
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James Karales Selma to Montgomery March Alabama 1965

 

Beijing’s Yuan Ambitions Look Dashed (BBG)
Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)
New Jersey Poised To Bar Drunken Droning (R.)
South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)
Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)
Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)
Australia Government Can’t Supply Its Way To Housing Affordability (SMH)
Rising Volatility Begets Rising Volatility (Peters)
The Artificial Liquidity Bubble (Henrich)
Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)
US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

 

 

It’s not as if a strong yuan is all that good for China. A stable one might be. But the bottom line remains: nobody wants it.

Beijing’s Yuan Ambitions Look Dashed (BBG)

As 2018 gets underway, China seems to be on top again. The yuan has strengthened 6.8% against the dollar over the past 12 months and foreign-exchange reserves are growing. Not so fast.Remember November 2015, when the IMF- with some fanfare – agreed to add the yuan to its prestigious special drawing rights currency basket. Talk then was of the yuan one day becoming one of the world’s reserve currencies, perhaps even rivaling the dollar.Two years on and central banks aren’t buying the notion. Although China’s currency has a weight of more than 10% in the SDR basket, which gives equal importance to a country’s trade status and balance-sheet metrics, just 1.1% of the world’s forex reserves were held in yuan versus 63% in dollars as of the third quarter.

It’s understandable that central banks have been shying away from the euro. German two-year bunds have been offering a negative yield since mid-2014. But why the yuan? China’s short-dated government notes offer among the best interest rates: Part of the explanation is liquidity. According to the Bank of International Settlements, in 2016, the yuan constituted only 4% of the world’s currency trades. The dollar, through pairs with the euro and the yen, accounted for 88% of transactions.

Then there’s the question of time. It could be decades before any currency, yuan or bitcoin, replaces the greenback.But China itself is also to blame. It seems to have abandoned its great yuan ambitions.What happened to the dim sum bond market? The Chinese government, along with policy banks, sold fewer than $3 billion of offshore yuan notes last year, a sharp pullback from 2016 and 2015. And oddly, last October, China sold its first sovereign dollar debenture since 2004 – a move that was widely interpreted as Beijing wishing to develop a vibrant international bond market for its state-owned enterprises. The panda bond market, where foreign companies raise yuan onshore, is also going nowhere. Hungary had a small, 1 billion yuan ($154 million) issue in July, while the Philippines keeps delaying its plans. China has also hit the pause button on the idea of trading oil in yuan.

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Curious new problems.

Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)

Two big shareholders of Apple are concerned that the entrancing qualities of the iPhone have fostered a public health crisis that could hurt children – and the company as well. In a letter to the smartphone maker dated Jan. 6, activist investor Jana Partners and the California State Teachers’ Retirement System urged Apple to create ways for parents to restrict children’s access to their mobile phones. They also want the company to study the effects of heavy usage on mental health. “There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequences,” according to the letter from the investors, who combined own about $2 billion in Apple shares. The “growing societal unease” is “at some point is likely to impact even Apple.”

“Addressing this issue now will enhance long-term value for all shareholders,” the letter said. It’s a problem most companies would kill to have: Young people liking a product too much. But as smartphones become ubiquitous, government leaders and Silicon Valley alike have wrestled for ways to limit their inherent intrusiveness. France, for instance, has moved to ban the use of smartphones in its primary and middle schools. Meanwhile, Android co-founder Andy Rubin is seeking to apply artificial intelligence to phones so that they perform relatively routine tasks without needing to be physically handled. Apple already offers some parental controls, such as the Ask to Buy feature, which requires parental approval to buy goods and services. Restrictions can also be placed on access to some apps, content and data usage.

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I must admit, another new problem, and one that hadn’t occurred to me yet.

New Jersey Poised To Bar Drunken Droning (R.)

U.S. drone sales in 2017 topped $1 billion for the first time ever, but don’t raise a glass too quickly if you are in New Jersey, where lawmakers are poised to outlaw drunken droning next week. It is one of a wave of U.S. states moving to bring the unmanned aircrafts’ high-flying fun back to earth. New Jersey’s Assembly is slated to vote on a bill approved by the state Senate to ban inebriated or drugged droning, as well as to outlaw flying unmanned aircraft systems over prisons and in pursuit of wildlife. The vote was set for Thursday but postponed until Monday because of a severe snowstorm that triggered a state of emergency in New Jersey. “It’s basically like flying a blender,” said John Sullivan, 41, of New York, a drone buff and aerial cinematographer.

He said he opposed drunk droning but also fretted about regulatory overreach. “If I had like one drink, I’d be hesitant to even fly it.” A 2015 drone crash on the White House lawn fueled debate in the U.S. Congress over the need for drone regulations. It was a drunken, off-duty employee of the National Geospatial-Intelligence Agency who flew the 2-foot-by-2-foot (60 cm by 60 cm) “quadcopter” from a friend’s apartment balcony and lost control of it over the grounds surrounding the White House, the New York Times reported. [..] “Like any technology, drones have the ability to be used for good, but they also provide new opportunities for bad actors,” said Assemblywoman Annette Quijano of Elizabeth, New Jersey. She backed the bill, which would impose a punishment of up to six months prison and a $1,000 fine for drunk droning.

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A big gap: “..bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35..?

South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)

South Korean financial authorities on Monday said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime. The joint inspection by the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) will check if banks are adhering to anti-money laundering rules and using real names for accounts, FSC Chairman Choi Jong-ku told a press conference. [..] Choi said the inspections are intended to provide guidance to banks and are not the result of any suspected wrongdoing. “Virtual currency is currently unable to function as a means of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said Choi. “The side effects have been severe, leading to hacking problems at the institutions that handle cryptocurrency and an unreasonable spike in speculation.”

A Woori Bank spokesperson told Reuters the bank was filling out a checklist for the inspection. The spokesperson said Woori had stopped providing virtual account services last month as the costs of using a real-name transaction system were too prohibitive. [..] Choi said authorities are also looking at ways to reduce risks associated with cryptocurrency trading in the country, which could include shutting down institutions that use such currencies. Last month, the government said it would impose additional measures to regulate speculation in cryptocurrency trading within the country, including a ban on anonymous cryptocurrency accounts and new legislation to allows regulators to close virtual coin exchanges if needed.

Bitcoin and other virtual coins have been extremely popular in South Korea, drawing wide investments from housewives and students. Government officials have expressed concern over frenzied speculation, with South Korea’s central bank chief warning of “irrational exuberance” in trading of virtual currency last month. A South Korean cryptocurrency exchange, Youbit, shut down and filed for bankruptcy in December after it was hacked twice last year, highlighting security and regulatory concerns. South Korea’s virtual currency exchanges have been more vulnerable to hackers as bitcoin trades at higher rates on local exchanges than they do elsewhere. As of 0710 GMT, bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35, according to Coinhills.com.

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Bitcoin and Ripple are falling, ether rises.

Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)

In retrospect, the launch of bitcoin futures one month ago has proven to be a modestly disappointing event: while it helped send the price of bitcoin soaring as traders braced for the institutionalization of bitcoin, the world’s most popular cryptocurrency has stagnated since the beginning of December when first the Cboe then CME started trading bitcoin futures, trading in a range between $12,000 and $17,000. And while bitcoin futures markets volumes have been lower than most had expected, the past 4 weeks have provided enough data to observe how volumes and open interest have evolved.

We discussed previously that Bitcoin futures were off to a slow start in the first week of trading, with volumes of CBOE Bitcoin futures averaging just around $40MM per day, despite intense media hype helping fuel heavy trading when both contracts launched, at least in the first hours of trading. Since then, volumes spike briefly in the following week coinciding with the launch of the CME futures, with volumes of on both exchanges at relatively similar levels. Then, as JPM’s Nikolaos Panagirtzoglou shows, after a spike in volumes to around $200mn on 22 December, which saw sharp swings in underlying Bitcoin prices, volumes have averaged around $50mn and $60mn per day on the CBOE and CME futures, respectively.

One month after their launch, futures trading volumes remain very modest compared to average Bitcoin trading volumes of around $15bn per day since futures contracts were launched according to coinmarketcap.com data. While open interest in both the CBOE and CME contracts has risen steadily, it too remains rather modest at around $60mn and $70mn, respectively. Putting futures volumes in context, on Friday, the combined size of the bitcoin-futures markets at the two exchanges was roughly $150 million, measured in terms of the value of outstanding contracts, while the total value of all bitcoins in existence was around $290 billion.

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That’s a big drop.

Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)

Australia on Monday said it expects iron ore prices to average $51.50 a tonne this year, down 20% from 2017, because of rising global supply and moderating demand from top importer China as its steel sector shrinks. The world’s top three mining companies, BHP and Vale rely heavily on iron ore sales for the bulk of their revenue despite efforts to diversify more into other industrial raw materials, such as copper, aluminium and coal. Brazil-based Vale is planning to lift iron ore exports 7% in 2018 to 390 million tonnes. In Australia, Rio Tinto and BHP, along with Fortescue Metals Group aim to add about 170 million tonnes of new capacity over the next several years.

The forecast price decline — from an average of $64.30 a tonne in 2017 — continues into 2019, when the steelmaking raw material will average only $49 a tonne, according to the Department of Industry, Innovation and Science. “The iron ore price is expected to experience some ongoing volatility in early 2018, as the market responds to uncertainty regarding the impact of winter production restrictions on iron ore demand,” the department warned in its latest commodities outlook paper. Iron ore currently sells for about $75 a tonne.

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All it needs to do is let prices crash. Does wonders for affordability.

Australia Government Can’t Supply Its Way To Housing Affordability (SMH)

Sydney and Melbourne are entering a housing downturn. While the government has hoped record high levels of property development would have an impact, research shows supply is not behind the price falls. Housing economists say the market slowdown is not due to additional home building but a drop in demand, in part thanks to the banking regulator making it more difficult for some to get a loan. In fact, the effect of new supply on property prices has been very limited despite state governments largely pinning hopes on a surging home building industry to rein in affordability. In a recent Australian National University paper Regional housing supply and demand in Australia academics Ben Phillips and Cukkoo Joseph found supply levels from 2001 to 2017 were larger than necessary to cover demand requirements, with thousands of excess homes in Sydney, but prices boomed over the time period.

This flies in the face of conventional economic wisdom, with the law of supply and demand dictating that the more of something you make, the cheaper it should be. There are many reasons why housing doesn’t respond to increases in supply in the way the market for coal, apples or t-shirts might be expected to react. When economists are making models they usually assume they are calculating the impacts on a “normal” good. One of the assumptions often made when modelling supply and demand for these goods is that what is produced is all homogenous, that is they are more or less the same. Typically, someone will pay the same amount for one item as they will for another that is identical.

Housing is not in this category. Even in the most sterile of apartment blocks, there will be many different design features, flaws, views and aspects that differ in each unit. The impact of new supply on the property market is limited by whether the type of property being built caters to existing demand. For instance, new apartments on the outskirts of greater Sydney or Melbourne may not appeal to the same market bidding up the price of mansions with water views.

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It’s just like Minsky: stability begets instability.

Rising Volatility Begets Rising Volatility (Peters)

To sell implied volatility at current 50yr lows, investors must imagine tomorrow will be virtually identical to today. They must imagine that bond yields won’t rise despite every major central bank eager to hike interest rates and exit QE. They must imagine that economies at or near full employment will not create inflation; that GDP will neither accelerate nor decelerate; that governments will tolerate historic levels of income inequality despite citizens voting for the opposite; that strongly rising global debts will be supported by structurally decelerating global growth. And volatility sellers must imagine that nine years into a bull market, amplified by a proliferation of complex volatility-selling strategies and passive ETFs with liquidity mismatches, that we will dodge a destabilizing shock to market infrastructure.

I can imagine a few of those things happening, but neither sustainably nor simultaneously. It is much easier to imagine a tomorrow that looks different from today. Also consider that investment banks and asset managers have always devised creative strategies to make money once asset valuations exceed reasonable levels. These perpetual prosperity machines typically combine leverage and alchemy, transforming real risk into perceived safety. Examples abound. But in this cycle, a proliferation of cleverly disguised volatility-selling strategies has dominated. Zero interest rates and quantitative easing left yield-starved investors with few ways to achieve their target returns. Wall Street’s engineers developed many wonderful solutions to this problem. Their magnificence is matched only by the amount of negative convexity now lurking in investment portfolios.

As volatility has declined, investors have had to sell even more of it to sustain sufficient profits. This selling reinforces the trend lower, which produces an illusion that legacy volatility shorts are less risky today than yesterday. Lower volatility thus begets lower volatility. And this also ensures that quantitative models reduce overall portfolio risk estimates, which allows (and in many cases forces) investors to buy more assets at prevailing prices. This in turn reduces volatility, reflexively. Naturally, the reverse is also true. Rising volatility begets rising volatility. And given the unprecedented volatility-selling in this cycle, this market is exposed to a historic reversal somewhere along the path to policy normalization. Which has now begun.

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aka the everything bubble.

The Artificial Liquidity Bubble (Henrich)

8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus. It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years.

Is the ECB raising rates from record lows? Nope. Has QE ended? Nope. QE continues to run at $30B Euro a month and rates remain in full panic mode. Not what one would’ve expected 8 years ago following a return to full employment. Stimulus programs & interventions used to be methods of crisis management now they have become permanent fixtures in global economies. Why? Because this is what it takes. And they will continue. Japanese Prime Minister Shinzo Abe has just instructed central bank chief Kuroda to keep printing as he decides whether to keep him in his job. Wink wink. Normalizing rates? Reducing balance sheets back to pre-crisis levels? Letting markets run on their own without intervention? Call it the big central banking lie. It will never happen. It can’t. Global debt is now exceeding $233 Trillion.

[..] the math of higher rates doesn’t work and will eventual break the camel’s back. Low rates are an absolute must requirement to keep the construct afloat. It is no accident that Morgan Stanley wealth management has decided to pull out of junk bonds. They are warning of US tax cuts accelerating market excesses bringing about a coming recession. And make no mistake, a recession will come as we are very late in the cycle.

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Count me out.

Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)

Considering that Wikileaks made its name by leaking confidential and/or hard to find documents and information, and also considering the reversal in the Trump administration vis-a-vis Julian Assange, whom it first lauded only to threaten with incarceration in recent months, it is perhaps not surprising that moments ago the official Wikileaks twitter account published Michael Wolff’s controversial – and largely sold out – book, “Fire and Fury” in pdf format.

New Trump book “Fire and Fury” by Michael Wolff. Full PDF: https://t.co/sf7vj4IYAx

— WikiLeaks (@wikileaks) January 7, 2018

Since, somewhat ironically, WikiLeaks picked a google drive to host the leaked pdf, it will unlikely remain available for an extended period, as it would mean substantial lost revenue for book published Henry Holt and Company. So for those who wish to read what all the hoople is about – for free – they are advised to do so sooner rather than later.

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View from the west only. How do you dress for a flight like that?

US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

Temperature extremes across the globe spanned more than 85 degrees Celsius at the weekend as Sydney melted and parts of the U.S. froze. Western Sydney touched 47.3 degrees Celsius (117 degrees Fahrenheit) on Sunday afternoon local time, the city’s hottest day since 1939. Weekend temperatures at Mount Washington Observatory in New Hampshire plummeted to minus 36 degrees Fahrenheit (minus 38 degrees Celsius). Roads melted, firefighters battled wildfires across New South Wales state and Sydney residents retreated to air-conditioned shopping malls as temperatures surged. English cricket captain Joe Root was hospitalized with severe dehydration after battling Australia in the cauldron of the Sydney Cricket Ground. At the same time, freezing fog and snow buffeted Mount Washington, tying the observatory for the second-coldest place on Earth.

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Dec 272017
 
 December 27, 2017  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  11 Responses »
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Vincent van Gogh Landscape with snow 1888

 

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)
The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)
Germany – A Most Dangerous And Ridiculous Nation (Bilbo)
Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)
Bitcoin’s Rally Has Taken A Pause (BBG)
Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)
China Bets on More State Control for 2018 (Balding)
Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)
From Snowden To Russia-gate – The CIA And The Media (Moon of A.)
Italy Rescues More Than 250 Migrants In Mediterranean (R.)

 

 

They won’t be able to keep doing this without facing pitchforks.

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)

The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs. The 23% increase on the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, compares with an almost 20% increase for both the MSCI World Index and Standard & Poor’s 500 Index. Amazon.com founder Jeff Bezos added the most in 2017, a $34,2 billion gain that knocked Microsoft co-founder Bill Gates out of his spot as the world’s richest person in October. Gates, 62, had held the spot since May 2013, and has been donating much of his fortune to charity, including a $4.6 billion pledge he made to the Bill & Melinda Gates Foundation in August.

Bezos, whose net worth topped $100 billion at the end of November, currently has a net worth of $99.6 billion compared with $91.3 billion for Gates. George Soros also gave away a substantial part of his fortune, revealing in October that his family office had given $18 billion to his Open Society Foundations over the past several years, dropping the billionaire investor to No. 195 on the Bloomberg ranking, with a net worth of $8 billion. By the end of trading Tuesday, Dec. 26, the 500 billionaires controlled $5.3 trillion, up from $4.4 trillion on Dec. 27, 2016. “It’s part of the second-most robust and second-longest bull market in history,” said Mike Ryan, chief investment officer for the Americas at UBS Wealth Management, on Dec. 18. “Of all the guidance we gave people over the course of this year, the most important advice was staying invested.”

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It’s curious to see that so many people are so blind to the notion of economies and societies needing a minimum level of balance. When that balance is destroyed, a reaction must automatically and inevitably follow. The rich could have gone on enjoying their privileges for a long time, but greed got in the way.

The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)

It’s never a bad year to be rich, exactly. But 2017 turned out to be a particularly good one. Rich people are doing so well these days that their spending on luxury goods isn’t even keeping up. Luxury spending rose 5% globally in 2017, the management consulting firm Bain & Company found. But that is a fraction of the 40% rise in net worth that people in America’s top-tenth of income earners saw between 2013 and 2016, according to the Federal Reserve. “We used to see that the growth of luxury was closely correlated with the stock market,” said Milton Pedraza, chief executive officer of the Luxury Institute, a consulting firm for high-end brands. “The stock market and real estate have gone up so much that nobody wants to spend all that money. It’s impossible.”

The big increase in wealth has exacerbated a long-evolving financial split between those at the very top and those at the bottom, even as the robust economy has lifted many working people with jobs and higher wages. Here are some examples. The S&P 500 Index has risen 20% since the beginning of the year and the Dow Jones Industrial Average is up 25%, fattening portfolios and boosting dividends. To a certain extent, the benefits are shared through ownership of 401(k) accounts. But only about half of Americans participate in an employer-sponsored retirement fund, according to the Pew Research Center, and a much smaller 18.7% of Americans own stock directly. In both cases, market participation is skewed toward those with higher incomes, which means that the wealthy disproportionately benefit from Wall Street’s boom.

Home prices reached all-time highs, according to the Case-Shiller home price index. That’s especially the case in hot markets like Seattle and San Francisco, where many working people are already unable to afford ownership. Although homeownership is a source of middle class wealth, homeowners generally tend to be higher-income. According to the Census Bureau, 78.4% of families making more than the median income own homes, compared to 49.5% of those making less.

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Just another chapter in the ‘Rich Getting Richer’ files. This too will evoke a response.

Germany – A Most Dangerous And Ridiculous Nation (Bilbo)

Germany’s domination of the EMU is clear both in political and economic terms. The current political impasse within Germany will not change that. Once resolved the on-going government will continue in the same vein – running excessive fiscal surpluses and huge external surpluses. It can sustain those positions because it dominates European policy and can force the adjustment to these overall ‘unsustainable’ positions onto both its own citizens (lowering their material living standards), and, more obviously, onto citizens of other EMU nations, most noticeably Spain and Greece. If it couldn’t bully nations like Greece, Italy, Spain and even France, Germany’s dangerous domestic strategy would be less effective. If all EMU nations followed Germany’s lead – then there would be mass Depression throughout Europe. This dangerous and ridiculous nation is a blight.

Only by exiting the Eurozone and floating their currencies against the currency that Germany uses can these beleaguered EMU nations gain some respite. When the Europhile Left come to terms with that obvious conclusion things might change within Europe. The following graph (using IMF WEO data) shows the sectoral balances for Germany from 1991 to 2017 (the last year is estimated). It is an extraordinary graph really in the context of Germany’s integral role in the Economic and Monetary Union (EMU). Germany is part of a currency union and its outcomes are much more closely tied to the fortunes of its EMU partners than say a nation, such as Australia, which has its own currency and floats it on international markets. What you see are two distinct EMU periods, when Germany was in gross violation in one way or another of the Treaty rules (laws).

It is not overstating the case to say that the increased poverty and hardship for citizens within Europe is directly related to the German government’s obsession with fiscal and external surpluses and its intransigence when confronted about this. Germany has become a dangerous yet ridiculous nation. While the Financial Times article (Dec 22, 2017) – The fiscal surplus that Germany should spend – referred to “Germany’s fiscal surplus” as an: ..a chronic embarrassment of riches.. I would prefer to refer to it as an embarrassing example of policy vandalism and an illegal assault on the rules that Germany has signed up to follow. Why illegal? Because it is directly related to Germany’s violation of the Macroeconomic Imbalance Procedure, which specifies under its so-called Scoreboard Indicators that the “major source of macroeconomic imblances” includes a: “3-year backward moving average of the current account balance as% of GDP, with thresholds of +6% and -4%”.. So the upper warning threshold (for an external surplus) is 6% of GDP.

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Nicely put: “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending..”

Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)

The Christmas spending hangover means that Britons who splurged on plastic will start 2018 owing an average of more than £450 on their credit cards – with many fearful the debt will still be haunting them by next Christmas. Nearly £8.5bn has been loaded on to cards to cover the cost of gifts and entertaining, according to research by the price comparison service uSwitch, which found nearly a fifth of consumers had exceeded their Christmas budget as they grappled with rising living costs. “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending,” said Tashema Jackson, money expert at uSwitch.com which polled 4,000 consumers.

The survey found Britons had borrowed an average of £452 to cover the cost of the festivities. One annual survey found that the UK’s cheapest supermarket Christmas dinner cost 18% more than last year, as the impact of inflation and Brexit-related commodity costs made its way to the festive family table. Half of the respondents told uSwitch they were worried they would still be trying to clear the debt in December 2018. Nearly one in 10 were still paying off debts dating back to last Christmas.

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If you bought at $19,000 and used leverage, does this still feel like a pause?

Bitcoin’s Rally Has Taken A Pause (BBG)

Bitcoin’s rally took a pause Wednesday, suggesting it isn’t about to make another run at its record reached last week. The fervor that propelled the digital currency past $19,000, prompted in part by regulated U.S. derivatives exchanges starting to trade contracts based on the unit this month, has yet to return. Bitcoin traded around $15,947 as of 10:31 a.m. Tokyo time Wednesday, according to composite prices on Bloomberg, up 0.1% from late Tuesday though below that day’s high. “Nobody knows the ultimate value of this underlying asset,” Edward Stringham, president of the American Institute for Economic Research, said on Bloomberg Television. “We cannot predict whether it’s going to be zero or one million dollars or anything in between.”

For skeptics doubting whether individuals and businesses will truly start using bitcoin as a medium of exchange – as opposed to some officially backed digital currency – the short-lived rebound from the past week’s selloff portends further declines. “It’s much more likely once you’ve made a big downward movement like the one we made last week that you have a bigger and more complex correction,” Ric Spooner, a Sydney-based analyst at CMC Markets, told Bloomberg Television. “Once a market like this one locks into those patterns it becomes pretty good” to follow via chart-based analysis, he said. Spooner said it’s possible bitcoin could drop to $5,700 or $8,700 in coming months.

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“Congratulations. The Fed re-blew the housing bubble. In the misguided way in which the Fed calculates inflation, none of this is considered inflationary. Few new buyers can afford to buy.”

Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)

The Case-Shiller national home price index surged past the pre-recession high last year. The city composites lag. Steady gains continue in the Case-Shiller Home Price Indexes.

Case-Shiller Year-Over-Year Summary
• The National Home Price NSA Index reported a 6.2% annual gain in October, up from 6.1% in the previous month.
• The 10-City Composite annual increase came in at 6.0%, up from 5.7% the previous month.
• The 20-City Composite posted a 6.4% year-over-year gain, up from 6.2% the previous month.
• Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In October, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with a 10.2% increase, and San Diego with an 8.1% increase.

Nine cities reported greater price increases in the year ending October 2017 versus the year ending September 2017.

Case-Shiller Month-Over-Month Summary
• Before seasonal adjustment, the National Index, 10-City and 20-City Composites all posted a month-over-month gain of 0.2% in October.
• After seasonal adjustment, the National Index, 10-City and 20-City Composites all recorded a 0.7% month-over-month increase in October.
• Eleven of 20 cities reported increases in October before seasonal adjustment, while all 20 cities reported increases after seasonal adjustment.

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Xi cannot afford to even allow teh suggestion that he loses control; at the same time he needs to generate growth. He may well find the two contradict each other.

China Bets on More State Control for 2018 (Balding)

First, watch the data, not the New Year’s resolutions. While China touts deleveraging efforts, the data is mixed. The debt-to-GDP ratio in China is only up slightly from 2016 to 260%, though it is expected to top out at 327% in 2022. The moderation was due not to slowing debt growth, but a jump in commodity prices that pushed up nominal GDP. Watch debt growth in 2018: Prices are expected to fall again, raising debt-to-GDP. China still has not given up its debt habit. Second, the Federal Reserve rate hikes last year were likely to play a big role in Chinese policy. In retrospect, they did and did not. Interest rates in China are up sharply, with even interbank rates over one month up 1.5% since January 2017. Money market rates are up to 6.39% for 14-day repurchases.

Rate increases are putting pressure on Chinese corporate bonds given the overwhelmingly short-term nature of borrowing, which constantly resets rates. Oddly, even as U.S. interest rates increased, the dollar fell, with indexes down 9%. Though it is unclear why the dollar fell, if the Fed hikes four times as predicted by Goldman Sachs, this could cause the currency to reverse course. A strong dollar and rising U.S. rates will pressure China. Third, heading into the National Congress, I said watch out for Chinese politics. Though Premier Li Keqiang remains in office, Beijing clearly swept away any vestiges of market adherence. The installation of Party committees over the board of directors in foreign firms and major state-owned enterprises laid bare Beijing’s ambition. Communist Party strength would take priority over everything.

As we look into 2018, some of these themes carry forward, but with a twist. Beijing is solidifying its control over all aspects of the economy. The Party released new rules on overseas investments by firms and has enforced rules mandating that banks balance their foreign exchange transactions. After the Fed recently raised rates by 0.25%, the People’s Bank of China followed with a hike of only 0.05%, confident it can tame any potential outflows. If the Fed hikes another three times and the dollar does not drop another 10%, this would push interest rates in China for debt over six months close to an intolerable 8% and reduce foreign exchange reserves beneath the $3 trillion level.

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What a curious mistake.

Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)

Apple defrauded iPhone users by slowing devices without warning to compensate for poor battery performance, according to eight lawsuits filed in various federal courts in the week since the company opened up about the year-old software change. The tweak may have led iPhone owners to misguided attempts to resolve issues over the last year, the lawsuits contend. All the lawsuits – filed in U.S. District Courts in California, New York and Illinois – seek class-action to represent potentially millions of iPhone owners nationwide. A similar case was lodged in an Israeli court on Monday, the newspaper Haaretz reported. The company acknowledged last week for the first time in detail that operating system updates released since “last year” for the iPhone 6, iPhone 6s, iPhone SE and iPhone 7 included a feature “to smooth out” power supply from batteries that are cold, old or low on charge.

Phones without the adjustment would shut down abruptly because of a precaution designed to prevent components from getting fried, Apple said. The disclosure followed a Dec. 18 analysis by Primate Labs, which develops an iPhone performance measuring app, that identified blips in processing speed and concluded that a software change had to be behind them. One of the lawsuits, filed Thursday in San Francisco, said that “the batteries’ inability to handle the demand created by processor speeds” without the software patch was a defect. “Rather than curing the battery defect by providing a free battery replacement for all affected iPhones, Apple sought to mask the battery defect,” according to the complaint.

[..] The problem now seen is that users over the last year could have blamed an aging computer processor for app crashes and sluggish performance – and chose to buy a new phone – when the true cause may have been a weak battery that could have been replaced for a fraction of the cost, some of the lawsuits state.

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“Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public…”

From Snowden To Russia-gate – The CIA And The Media (Moon of A.)

The promotion of the alleged Russian election hacking in certain media may have grown from the successful attempts of U.S. intelligence services to limit the publication of the NSA files obtained by Edward Snowden. In May 2013 Edward Snowden fled to Hongkong and handed internal documents from the National Security Agency (NSA) to four journalists, Glenn Greenwald, Laura Poitras, and Ewen MacAskill of the Guardian and separately to Barton Gellman who worked for the Washington Post. Some of those documents were published by Glenn Greenwald in the Guardian, others by Barton Gellman in the Washington Post. Several other international news site published additional material though the mass of NSA papers that Snowden allegedly acquired never saw public daylight.

In July 2013 the Guardian was forced by the British government to destroy its copy of the Snowden archive. In August 2013 Jeff Bezos bought the Washington Post for some $250 million. In 2012 Bezos, the founder, largest share holder and CEO of Amazon, had already a cooperation with the CIA. Together they invested in a Canadian quantum computing company. In March 2013 Amazon signed a $600 million deal to provide computing services for the CIA. In October 2013 Pierre Omidyar, the owner of Ebay, founded First Look Media and hired Glenn Greenwald and Laura Poitras. The total planned investment was said to be $250 million. It took up to February 2014 until the new organization launched its first site, the Intercept. Only a few NSA stories appeared on it. The Intercept is a rather mediocre site.

Its management is said to be chaotic. It publishes few stories of interests and one might ask if it ever was meant to be a serious outlet. Omidyar has worked, together with the U.S. government, to force regime change onto Ukraine. He had strong ties with the Obama administration. Snowden had copies of some 20,000 to 58,000 NSA files. Only 1,182 have been published. Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public. The Snowden papers were practically privatized into trusted hands of Silicon Valley billionaires with ties to the various secret services and the Obama administration.

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The EU is actively assisting Libya’s slave trade. That is quite something to close off the year with.

Italy Rescues More Than 250 Migrants In Mediterranean (R.)

More than 250 migrants were rescued in the central Mediterranean during the night between Monday and Tuesday, Italy’s Coast Guard said. A statement said the migrants, in one large rubber dinghy and two small boats, were rescued in three missions by two ships, one from a non-governmental organization. Migrant arrivals to Italy have fallen by two-thirds year on year since July after officials working for the U.N.-backed government in Tripoli put pressure on people smugglers in the Libyan city of Sabratha to stop boats leaving. Italy is also bolstering the Libyan coast guard’s ability to turn back boats. Last week, the United Nations began bringing African refugees to Italy from Libya, evacuating them from detention centers whose conditions have been condemned by rights groups as inhumane.

Read more …

Dec 122017
 
 December 12, 2017  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , , , , ,  3 Responses »
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Wassily Kandinsky Clear connection 1925

 

How Fed Rate Hikes Impact US Debt Slaves (WS)
Why Obamacare Is Locked In An Inescapable Death Spiral (ZH)
Sitting Closer To The Exit (Roberts)
Oil Producers Turning to Crypto to Solve Sanctions Problems (Luongo)
Peak Bitcoin Media Mania Yet? (WS)
Bitcoin – Millennials’ “Fake Gold” (Katsenelson)
Next Bank of Japan Governor Faces a ‘Job From Hell’ (BBG)
Sweden: More Signs The World’s Biggest Housing Bubble Is Cracking (ZH)
Trump Tells NASA to Send Americans to the Moon (AFP)
Exxon To Provide Details On Climate Change Impact To Its Business (R.)
Apple Aims To Block Climate, Rights Using SEC Guidance (R.)
EU Could ‘Scrap Refugee Quota Scheme’ (G.)
Lesvos Authorities Block Ship With Container Homes For Refugees (AP)
Germany Rejects Additional Winter Aid For Refugees On Greek Islands (KTG)

 

 

“If the average interest rate on this debt is 20%, credit-cart interest payments alone add $233 a month to their household expenditures.”

How Fed Rate Hikes Impact US Debt Slaves (WS)

Revolving credit outstanding of $1 trillion, spread over 117.72 million households, would amount to $8,300 per household. But many households do not carry interest-bearing credit card debt; they pay their cards off in full every month. Finance charges are concentrated on households that use this form of debt to finance their spending and that cannot pay off their balances every month. Many of these households are already strung out and are among the least able to afford higher interest payments. Consumer credit bureau TransUnion shed some light on this in its Q3 2017 Industry Insights Report, according to which 195.9 million consumers had a revolving credit balance at the end of Q3, with total account balances of $1.35 trillion. This equals $6,892 per person with revolving credit balances.

If there are two people with balances in a household, this would amount to nearly $14,000 of this high-cost debt. If the average interest rate on this debt is 20%, credit-cart interest payments alone add $233 a month to their household expenditures. What is next for these folks? For now, the Fed has penciled in, and economists expect, three hikes next year. But recent developments – particularly the expected tax cuts and what the Fed calls “elevated asset prices” – suggest that the Fed might “surprise” the markets with its hawkishness in 2018. The Fed is currently pegging the “neutral” rate – the rate at which the federal funds rate is neither stimulating nor slowing the economy – at somewhere near 2.5% to 2.75%, so about five or six more rates hikes from today’s target range.

Interest rates on credit cards would follow in lockstep. These rate hikes to “neutral” would extract another $8 billion or so a year, on top of the additional $7.5 billion from the prior rate hikes. But that’s not all. Credit card balances continue to rise as our brave consumers are trying to prop up US consumer spending and thus the global economy by borrowing more and more. Thus, rising credit card balances combined with rising interest rates on those balances conspire to produce sharply higher interest costs. Since consumers with high-interest credit-card balances already don’t have enough money to pay off their costly debt, these additional interest payments will further curtail their efforts at making principal payments and thus inflate their credit card balances further.

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And if/when you manage to pay off your credit cards, there’s the next challenge…

Why Obamacare Is Locked In An Inescapable Death Spiral (ZH)

Ever since it was signed into law in 2010, defenders of Obamacare have dismissed staggering surges in annual premiums by highlighting only the rates paid by those fortunate enough to receive subsidies. In fact, last year we wrote about Marjorie Connolly’s, from Obama’s Department of Health and Human Services, response to the Tennessee insurance commissioner’s fear that the exchanges in his state were “very near collapse” after a staggering 59% premium surge: “Consumers in Tennessee will continue to have affordable coverage options in 2017. Last year, the average monthly premium for people with Marketplace coverage getting tax credits increased just $2, from $102 to $104 per month, despite headlines suggesting double digit increases,” said Marjorie Connolly, HHS spokeswoman, in a statement.

We’re unsure whether Connolly’s comment was just propaganda intended to defend a failing piece of legislation or an intentional, blatant admission that the Department of Health and Human Services just doesn’t care about the majority of Americans, the so-called 1%’ers, who are facing debilitating increases in healthcare costs simply because they manage to live above the poverty line. We’ll let you decide on that one. Be that as it may, as the Miami Herald points out this morning, roughly half of all Obamacare participants, nearly 9 million people in aggregate, don’t qualify for the subsidies that Connolly praised and have been forced to absorb debilitating premium increases for the past several years.

[..] As open enrollment for Affordable Care Act coverage nears the deadline of Dec. 15, and Florida once again leads all states using the federal exchange at healthcare.gov, Heidi and Richard Reiter sit at the kitchen table at their Davie home and struggle to piece together the family’s health insurance for 2018. The Reiters buy their own coverage, but they earn too much to qualify for financial aid to lower their monthly premiums. For 2017, they bought a plan off the exchange and paid $26,000 in premiums for family coverage, including their two sons, ages 21 and 17. Keeping the same coverage for 2018 would have cost the Reiters $40,000 in premiums, a 54% increase. So they selected a lower-priced plan that covers less but costs $29,000 in premiums. “That’s more than a lot of people’s mortgage payments,” Richard Reiter said. “For me, it’s a crisis situation.”

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The odds of a correction (reversion).

Sitting Closer To The Exit (Roberts)

While valuation risk is certainly concerning, it is the extreme deviations of other measures to which attention should be paid. When long-term indicators have previously been this overbought, further gains in the market have been hard to achieve. However, the problem comes, as identified by the vertical lines, is understanding when these indicators reverse course. The subsequent “reversions” have not been forgiving. The chart below brings this idea of reversion into a bit clearer focus. I have overlaid the real, inflation-adjusted, S&P 500 index over the cyclically-adjusted P/E ratio. Historically, we find that when both valuations and prices have extended well beyond their intrinsic long-term trendlines, subsequent reversions beyond those trend lines have ensued. Every. Single. Time.

Importantly, these reversions have wiped out a decade, or more, in investor gains. As noted, if the next correction began in 2018, and ONLY reverts back to the long-term trendline, which historically has never been the case, investors would reset portfolios back to levels not seen since 1997. Two decades of gains lost. With everyone crowded into the “ETF Theater,” the “exit” problem should be of serious concern. “Over the next several weeks, or even months, the markets can certainly extend the current deviations from long-term mean even further. But that is the nature of every bull market peak, and bubble, throughout history as the seeming impervious advance lures the last of the stock market ‘holdouts’ back into the markets.”

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“..the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets..”

Oil Producers Turning to Crypto to Solve Sanctions Problems (Luongo)

Last week, Venezuela announced it would develop a national cryptocurrency backed by its oil reserves, the Petro. Now there is a report that Russia is considering the same thing. Iran will likely follow suit. As of right now this is just a rumor, but it makes some sense. So, let’s treat this rumor as fact for the sake of argument and see where it leads us. The U.S. continues to sanction and threaten all of these countries for daring to challenge the global status quo. There is no denying this. [..] at the heart of this is the petrodollar. Contrary to what many believe, the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets. It is a secondary effect of the dollar’s dominance in global finance today. But it is not the main driver.

Financial market are simply too big relative to the size any one commodity market for it to be the fulcrum on which everything hinges. It was that way in the past. But it is not now. That said, however, getting out from underneath the petrodollar gives a country independence to begin building financial architecture that can be levered up over time to threaten the institutional control it helped create. U.S. foreign policy defends the petrodollar along with other systems in place – the IMF, the World Bank, SWIFT, LIBOR and the central banks themselves – to maintain its control. The main oil producers, however, can escape this control simply by selling their oil in currencies other than the U.S. dollar. That’s not enough to dethrone the dollar, but, like I just said, it is where the process has to start. Therefore, any and all means must be employed to defend the dollar empire by keeping everyone inside that system.

[..] The problem with backing any currency with physical reserves is the fluctuations in value of those reserves. It’s not like oil is a low-beta commodity or anything. But, like everything else in the commodity space, price movements are supposed to be smoothed out by the futures markets helping to coordinate price with time. But the bigger problem is the estimation of those reserves the coin’s value is based on. First, how do you accurately quantify them? Can holders of Petro or Neft-coin trust the Russian or Venezuelan governments to provide accurate assessments of their reserves? Second, there is the ability of the country to pull it out of the ground and sell it into the market at anything close to a fair price. This isn’t a concern for Russia, the world’s 2nd largest supplier of oil and very stable government but Venezuela is the opposite. And, its “Petro” would probably trade at quite a discount early on to the dollar price of oil.

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I doubt it. If only because as Taleb said, you can’t actually short BTC, and they should have introduced options along with futures. They didn’t. This story is far from over.

Peak Bitcoin Media Mania Yet? (WS)

Bitcoin mania is now everywhere. It’s hard to have a conversation with regular people without sooner or later getting into bitcoin. Some of this is just for fun. Manias breed amazement. Miracles are wonderful to behold. But some of it is pretty serious. “We’ve seen mortgages being taken out to buy bitcoin,” said Joseph Borg, president of the North American Securities Administrators Association and director of the Alabama Securities Commission, on CNBC’s Power Lunch today. “People do credit cards, equity lines,” he said. Bitcoin futures trading started Sunday night on the Cboe futures exchange. Next week, the CME will offer trading in bitcoin futures.

This way, speculators can bet with unlimited derivatives on an unregulated digital entity that is backed by nothing and whose cash trading takes place in unregulated opaque and easily hacked exchanges around the world. But Borg doesn’t think that futures contracts legitimize bitcoin. Innovation and technology always outrun regulation, he said. “You’re on this mania curve. At some point in time there’s got to be a leveling off,” he said. “Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don’t know.” And so the media mania over bitcoin has become deafening.

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But there’s definitely a media bubble, even if there’s no BTC one yet.

Bitcoin – Millennials’ “Fake Gold” (Katsenelson)

If you cannot value an asset you cannot be rational. With Bitcoin at $11,000 today, it is crystal clear to me, with the benefit of hindsight, that I should have bought Bitcoin at 28 cents. But you only get hindsight in hindsight. Let’s mentally (only mentally) buy Bitcoin today at $11,000. If it goes up 5% a day like a clock and gets to $110,000 – you don’t need rationality. Just buy and gloat. But what do you do if the price goes down to $8,000? You’ll probably say, “No big deal, I believe in cryptocurrencies.” What if it then goes to $5,500? Half of your hard-earned money is gone. Do you buy more? Trust me, at that point in time the celebratory articles you are reading today will have vanished. The awesome stories of a plumber becoming an overnight millionaire with the help of Bitcoin will not be gracing the social media.

The moral support – which is really peer pressure – that drives you to own Bitcoin will be gone, too. Then you’ll be reading stories about other suckers like you who bought it at what – in hindsight – turned out to be the all-time high and who got sucked into the potential for future riches. And then Bitcoin will tumble to $2,000 and then to $100. Since you have no idea what this crypto thing is worth, there is no center of gravity to guide you or anyone else to make rational decisions. With Coke or another real business that generates actual cash flows, we can at least have an intelligent conversation about what the company is worth. We can’t have one with Bitcoin. The X times Y = Z math will be reapplied by Wall Street as it moves on to something else.

People who are buying Bitcoin today are doing it for one simple reason: FOMO – fear of missing out. Yes, this behavior is so predominant in our society that we even have an acronym for it. Bitcoin is priced today at $11,000 because the fool who bought it for $11,000 is hoping that there is another, greater fool who will pay $12,000 for it tomorrow. This game of greater fools is not new. The Dutch played it with tulips in the 1600s– it did not end well. Americans took the game to a new level with dotcoms in the late 1990s – that round ended in tears, too. And now millennials and millennial-wannabes are playing it with Bitcoin and few hundred other competing cryptocurrencies.

The counterargument to everything I have said so far is that those dollar bills you have in your wallet or that digitally reside in your bank account are as fictional as Bitcoin. True. Currencies, like most things in our lives, are stories that we all have (mostly) unconsciously bought into. Of course, society and, even more importantly, governments have agreed that these fiat currencies are going to be the means of exchange. Also, taxation by the government turns the dollar bill “story” into a very physical reality: If you don’t pay taxes in dollars, you go to jail. (The US government will not accept Bitcoins, gold, chunks of granite, or even British pounds).

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Compared to Japan, all other central banks are wimps and pussies.

Next Bank of Japan Governor Faces a ‘Job From Hell’ (BBG)

The next governor of the Bank of Japan faces a “job from hell.” That’s according to Takeshi Fujimaki, a banker-turned-lawmaker who sees any attempt by Japan’s central bank to exit its program of unprecedented easing as triggering a Greek-like debt crisis. “This is the calm before the battle,” Fujimaki, an opposition Japan Innovation Party politician who once served briefly as an adviser to George Soros, said in an interview at his Tokyo office on Monday. BOJ Governor Haruhiko Kuroda’s five-year term runs out in April, with recent praise from Prime Minister Shinzo Abe strengthening expectations that the 73-year-old will stay on for a second stint. His massive easing program has weakened the yen, bolstered exports and helped stock prices to more than double. But inflation is still short of the government’s 2% target, and critics say the BOJ’s swollen balance sheet is unsustainable.

Fujimaki, 67, said he agreed with the view expressed by Kuroda’s predecessor Masaaki Shirakawa in his 2013 resignation press conference, when he said no judgment could be made on non-traditional monetary easing in Japan and in other developed economies until exits had been completed. Last week, Kuroda said the BOJ can take the appropriate steps to exit when the time comes, but talking specifics of an exit now would end up confusing markets. Even so, Fujimaki said Kuroda should stay on to oversee an exit from the policies he introduced. “Because Mr. Kuroda has taken it this far, he should carry on until the end,” Fujimaki said. “Just taking the good part and running away would be unfair.”

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“(SEB) says 63% of households in Stockholm now expect prices to decline in the coming year while only 21% expect an increase; that’s “a dramatic shift compared with only two months’ ago..”

Sweden: More Signs The World’s Biggest Housing Bubble Is Cracking (ZH)

We like to highlight that although Sweden’s property bubble is not the longest running (that accolade goes to Australia at 55 years), it is probably the world’s biggest, even though it gets relatively little coverage in the mainstream financial media. A month ago, we noted that SEB’s housing price indicator suffered its second biggest ever drop, falling by 39 points, only lagging a steeper fall from ten years earlier. This month the indicator, which shows the balance between households forecasting rising or falling prices, fell into negative territory, dropping to -5 from +11 in November. Households expecting prices to rise has almost halved from 66% In October, to 43% in November and 36% this month. The percentage of households expecting prices to fall has risen from 16% in October, to 32% in November and 41% this month.

After the housing price indicator was published, the Swedish krona fell as much as 0.7% versus the Euro to 10.0118, its lowest level since 5 December 2017. Not surprisingly, the focal point of Sweden’s property boom has been Stockholm, where the decline in the housing price indicator in December 2017 was precipitous. According to Bloomberg. “SEB says sharp drop in home-price expectations in Stockholm was main culprit behind the decline in its Swedish home-price indicator, with the indicator falling to -42 in the Swedish capital in Dec. from -6 in Nov. That means the Stockholm indicator is now close to the record low of -47 that was reached in Dec. 2008, at the height of the global financial crisis. (SEB) says 63% of households in Stockholm now expect prices to decline in the coming year while only 21% expect an increase; that’s “a dramatic shift compared with only two months’ ago..”

Given the disproportionate rate of decline in December in Stockholm, SEB was minded to ask whether special factors are at work “rather than general drivers such as fears over rising interest rates or a weak business cycle”. Indeed, aside from south-eastern Sweden, the outlook in all other regions remains positive. With regard to Stockholm, the bank notes that a large increase in new supply of expensive residential property and what it terms “very negative media reporting” have had an impact. Whether that’s a fair assessment, or whether it’s realist reporting of a monumental asset bubble is a moot point. What is indisputable is that the number of Swedish homes for sale has surged in November 2017 compared with the same month last year.

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After talking to Musk and Bezos. Who target billions in profits from the bridges to nowhere on steroids.

Trump Tells NASA to Send Americans to the Moon (AFP)

US President Donald Trump directed NASA on Monday to send Americans to the Moon for the first time since 1972, in order to prepare for future trips to Mars. “This time we will not only plant our flag and leave our footprint,” Trump said at a White House ceremony as he signed the new space policy directive. “We will establish a foundation for an eventual mission to Mars and perhaps someday to many worlds beyond.” The directive calls on NASA to ramp up its efforts to send people to deep space, a policy that unites politicians on both sides of the aisle in the United States. However, it steered clear of the most divisive and thorny issues in space exploration: budgets and timelines.

Space policy experts agree that any attempt to send people to Mars, which lies an average of 140 million miles (225 million kilometers) from Earth, would require immense technical prowess and a massive wallet. The last time US astronauts visited the Moon was during the Apollo missions of the 1960s and 1970s. Trump, who signed the directive in the presence of Harrison Schmitt, one of the last Americans to walk on the Moon 45 years ago, said “today, we pledge that he will not be the last.” The better known Buzz Aldrin, the second man on the Moon after Armstrong and a fervent advocate of future space missions, was also present at the ceremony but not mentioned by Trump during his speech.

[..] Trump vowed his new directive “will refocus the space program on human exploration and discovery,” and “marks an important step in returning American astronauts to the Moon for the first time since 1972.” The goal of the new Moon missions would include “long-term exploration and use” of its surface. “We’re dreaming big,” Trump said. His administration has previously held several meetings with SpaceX boss Elon Musk and Amazon owner Jeff Bezos, who also owns Blue Origin.

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The article has two authors, and at least one editor (Reuters), and still it says this: “world temperatures are likely to rise by more than 2 degrees Celsius (35.6°F) this century..

Exxon To Provide Details On Climate Change Impact To Its Business (R.)

Exxon Mobil on Monday said it would publish new details about how climate change could affect its business in a move aimed at appeasing critics and forestalling another proxy fight next year. The largest U.S. oil and gas producer said in a filing to U.S. securities regulators that its board agreed to provide shareholders with information on “energy demand sensitivities, implications of two degree Celsius scenarios, and positioning for a lower-carbon future.” Scientists have warned that world temperatures are likely to rise by more than 2 degrees Celsius (35.6°F) this century, surpassing a “tipping point” that a global climate deal aims to avert. Exxon’s statement, which came three days before the deadline for its 2018 annual meeting resolution submissions, said additional information would be released in the near future, but did not provide details.

The company’s board originally opposed providing shareholders with a report outlining the potential impact of global warming on Exxon’s long-term outlook. Thomas P. DiNapoli, New York state’s comptroller, heads one the two lead sponsors of a shareholder resolution calling for Exxon to issue a climate-impact report. He called Monday’s decision “a win for shareholders and for the company’s ability to manage risk.” However, another sponsor noted the lack of specificity in the company’s statement. “This is giving no detail,” said Tim Smith, who leads shareholder engagement efforts at Walden Asset Management, a co-filer of last spring’s resolution. He said Exxon’s statement “needs to be expanded to assure shareowners that they’re responsive to last year’s request.”

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Apple, Exxon, everybody seeks to escape their own shareholders.

Apple Aims To Block Climate, Rights Using SEC Guidance (R.)

Apple is pushing back on shareholder proposals on climate issue and human rights concerns, an effort activists worry could sharply restrict investor rights. In letters to the U.S. Securities and Exchange Commission last month, an attorney for the California computer maker argued at least four shareholder proposals relate to “ordinary business” and therefore can be left off the proxy Apple is expected to publish early next year, ahead of its annual meeting. The attorney, Gene Levoff, cited guidance issued by the SEC on Nov. 1 saying that company boards are generally best positioned to decide if a resolution raises significant policy issues worth putting to a vote.

While companies routinely seek permission to skip shareholder proposals, Apple’s application of the new SEC guidance shows how it could be used to ignore many investor proposals by claiming boards routinely review those areas, said Sanford Lewis, a Massachusetts attorney representing Apple shareholders who had filed two of the resolutions. Were the SEC to side with Apple, “this would be an incredibly dangerous precedent that would essentially say a great many proposals could be omitted,” Lewis said. [..] Often seen as distractions in the past, shareholder measures have taken on new significance as big asset managers increasingly back those on areas like climate change or board diversity.

Apple cited the SEC’s new guidance among other things in seeking to omit the shareholder measures from its proxy, according to letters Apple sent to the SEC. These include calls for Apple to take steps such as establishing a “human rights committee” to address concerns on topics like censorship, and for Apple to report on its ability to cut greenhouse gas emissions.

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Tusk against the rest. Couldn’t be because he’s Polish, could it? And looking at big jobs back home?!

EU Could ‘Scrap Refugee Quota Scheme’ (G.)

The EU could scrap a divisive scheme that compels member states to accept quotas of refugees, one of the bloc’s most senior leaders will say this week. The president of the European council, Donald Tusk, will tell EU leaders at a summit on Thursday that mandatory quotas have been divisive and ineffective, in a clear sign that he is ready to abandon the policy that has created bitter splits across the continent. Tusk will set a six-month deadline for EU leaders to reach unanimous agreement on reforms to the European asylum system, but will propose alternatives if there is no consensus. “If there is no solution … including on the issue of mandatory quotas, the president of the European council will present a way forward,” states a draft letter from Tusk to national capitals, seen by the Guardian.

In effect this means scrapping mandatory quotas, because Hungary, Poland and Czech Republic are fiercely opposed to the idea of dispersing refugees around the bloc based on a formula drawn up in Brussels. Tusk is likely to face opposition, however, from other EU bodies, including the European commission. EU leaders introduced compulsory quotas in 2015 at the height of the migration crisis, as thousands of people arrived daily on Europe’s shores, many of whom were refugees from Syria, Iraq and Eritrea. Hungary, Slovakia, Romania and the Czech Republic voted against the move, but the policy was forced through by a majority vote. Hungary and Poland have defied the rest of the EU by not taking a single refugee under the scheme, which aimed to relocate about 120,000 refugees, mainly Syrians. The Czech republic has taken in only 12. All three countries were referred to the European court of justice last week for failing to implement the policy, the usual procedure for flouting EU rules.

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All refugees living on Lesbos should be evacuated.

Lesvos Authorities Block Ship With Container Homes For Refugees (AP)

Authorities on the Greek island of Lesvos say they have blocked a ship carrying container homes for refugees and other migrants in protest at the refusal of the government and the European Union to move more people to Greece’s mainland. A government-chartered ship carrying the containers remained anchored at Mytilene, the island’s main town, on Monday after municipal vehicles were used to block port facilities. The island’s municipal board was due to meet later on Monday to decide on whether to lift the blockade following talks with the government, state-run TV ERT said. The mayors of five Greek islands facing the coast of Turkey are demanding that the government and EU end a policy of containment for migrants – introduced last year as a deterrent against illegal migration – because living facilities are severely overcrowded.

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Merkel, the story of a great and bitter failure.

Germany Rejects Additional Winter Aid For Refugees On Greek Islands (KTG)

The German Foreign Ministry has made it clear that it will not provide additional winter assistance to refugees on the Aegean islands. In a related question from German newspapers, the foreign ministry replied that “responsibility for accommodating and feeding refugees falls under the jurisdiction of each country.” According to dpa, the Foreign Ministry recalled that Berlin recently funded the installation of 135 heated containers for a total of 800 people in two camps in the Thessaloniki region and that the EU has allocated up to now 1.4 billion euros to tackle the refugee crisis in Greece.

Meanwhile, there is media report that Greece has persuaded Turkey to accept migrant returns from the mainland in order to reduce critical overcrowding in its refugee camps. The Kathimerini daily said the agreement came during a strained two-day state visit by Turkish President Recep Tayyip Erdogan this week, during which he angered his hosts with talk of revising borders and complaints about Greece’s treatment of its Muslim minority. The deal is in addition to Turkey’s existing agreement to take back migrants from Aegean island camps, under the terms of an EU-Turkey pact.

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Dec 052017
 
 December 5, 2017  Posted by at 10:01 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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The Kennedies

 

China’s Property Binge Fuels Mortgage Fraud Frenzy (R.)
This Time IS Different, It Just Ends The Same (Roberts)
What Sowed The Seeds Of The Bitcoin Mania? (TM)
Bitcoin Is A ‘Dangerous Speculative Bubble’ – Stephen Roach (CNBC)
The Two-Tiered European Community (Bilbo)
This Could Mean The End Of May – And The Beginning Of Corbyn (Ind.)
Theresa May Humiliated As DUP Scuppers Border Deal (Ind.)
Confused May In Alignment Only With Herself Over Irish Issue (G.)
White House Weighing Plans For Private Spies To Counter “Deep State” (IC)
Apple Agrees To Pay Over $15 Billion To Ireland In Back Taxes (ArsT)
China, the Digital Giant (PS)
Pilots Across Germany Are Blocking The Deportation Of Asylum Seekers (IBT)
Push To Move Refugees From Greek Islands To Mainland (K.)
The World’s Oceans Are Under The Greatest Threat In History – Attenborough (G.)

 

 

It’s all fraud, and none of it is persecuted: “When everyone is doing it, you can’t put everyone in jail..”

“Operating out of small, cramped offices, often in residential blocks, loan agents “re-package” – or falsify documents for mortgage applications. “Around 60% of property buyers in Shanghai are involved in some kind of re-packaging..”

China’s Property Binge Fuels Mortgage Fraud Frenzy (R.)

[..] across China, unqualified borrowers use fake documents to secure mortgages, while loans deceptively obtained for other purposes are funnelled into property. These frauds are often committed with the consent and encouragement of other parties to the transactions, including lending brokers, property agents, valuation companies and the banks themselves. And these alleged crimes are rarely punished. Hu Weigang, a senior partner at Guangdong Shen Dadi Law Firm, would like to see the law enforced on the mainland as it is in Hong Kong, where creating a bogus document can lead to jail. But, he acknowledges, the scale of this cheating makes it virtually impossible. “When everyone is doing it, you can’t put everyone in jail,” says Hu, who specializes in real estate litigation.

While property prices in China continue to rise, mortgage fraud remains largely a hidden danger, much as subprime loans in the United States remained mostly out of sight ahead of the 2008 global financial crisis. The fear is that in a property correction, fraudulent mortgages would unravel, accelerating a collapse of housing prices in the world’s second biggest economy. This, in turn, would imperil China’s debt-laden financial system. The danger from gravity-defying home prices is clear to the ruling Communist Party. In his marathon speech at the 19th Party Congress in October, Chinese President Xi Jinping warned about the overheated property market. “Houses are built to be lived in, not for speculation,” he said. Top bank officials are also worried. Xu Zhong, head of the research bureau at the central bank, the People’s Bank of China, sees pitfalls ahead.

“We must be very aware that rapidly rising housing prices could not only hamper our economic development, but could easily result in systemic risks and negatively impact the macroeconomy..” The motive for widespread mortgage fraud is simple: fear of missing out. Millions of homeowners are enjoying the sensation of ever-expanding wealth. The average value of residential housing in China more than tripled between 2000 and 2015 as a huge property market emerged from the early decades of economic reforms. So far, China’s new home-owning class has yet to experience a sustained downturn in housing values. Official data showed prices grew 12.4% in 2016, the fastest rate since 2011. A report tracking home price trends by the Chinese Academy of Social Sciences, a state think tank, showed prices in 33 major cities soared 42% in 2016. Private estimates and anecdotal evidence suggest prices in most big Chinese cities actually doubled or tripled since late 2015.

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Look at them bubbles…

This Time IS Different, It Just Ends The Same (Roberts)

“Market bubbles have NOTHING to do with valuations or fundamentals.” [..] Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions. In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.

The pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals. This pattern of bubbles can be clearly seen at every bull market peak in history. The chart below utilizes Dr. Robert Shiller’s stock market data going back to 1900 on an inflation-adjusted basis with an overlay of the asymmetrical bubble shape.

There is currently a strong belief that the financial markets are not in a bubble. The arguments supporting those beliefs are all based on comparisons to past market bubbles. The inherent problem with much of the mainstream analysis is that it assumes everything remains status quo. However, the question becomes what can go wrong for the market? In a word, “much.” Economic growth remains very elusive, corporate profits appear to have peaked, and there is an overwhelming complacency with regards to risk. Those ingredients combined with an extraction of liquidity by the Federal Reserve leaves the markets more vulnerable to an exogenous event than currently believed.

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I can hear the protests from here…

What Sowed The Seeds Of The Bitcoin Mania? (TM)

2017 was an unusual year where financial conditions actually eased despite the Federal Reserve raising rates. The financial tightness in 2015 and 2016 was catalyzed by weakness in the energy market. With the help of central banks, as we have previously stated, the economy narrowly avoided a recession. It’s still remarkable to see how much financial conditions have eased since. According to the Taylor Rule, financial conditions are the easiest since 1970. The Chicago Fed’s net financial conditions index has financial conditions the easiest since 1993.


Chicago Fed- Financial Conditions Index

This explains why GDP growth was above 3% in Q2 and Q3 2017 for the first time since 2004-2005. It also explains why stock volatility has been very low; the S&P 500 has been up for 13 straight months which is the longest streak since at least 1928 (the index was created in 1923). With low interest rates and easy financial conditions, it’s not surprising that we’ve seen intense speculation in bitcoin. The cryptocurrency space has had other years with great performance, but the break out in 2017 is partially a result of the easy monetary environment. As you can see, the financial conditions in the 1990s and in the past year have both been very loose. The economic expansions were both elongated which further increases speculation as traders forget what a recession is. The chart below compares bitcoin’s rally since 2016 with other bubbles.

As you can see, Qualcomm’s performance in the 1990s is like bitcoin’s rally. This is a great analogy because Qualcomm saw its stock collapse in the dot com bust, but it has had a viable business model recently, making the Snapdragon chips in smartphones. The tech bubble was based on optimism which ended up being realized with the expansion of the mobile internet. However, the tech bubble witnessed exaggerated valuations, much like cryptocurrencies are experiencing today. Most of the blockchain startups today will fail like Pets.com did in the 1990s. However, blockchain technology in the future will likely become as synonymous with daily life as the internet is today.

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And more protests. Lots of older economists speak out against bitcoin.

Bitcoin Is A ‘Dangerous Speculative Bubble’ – Stephen Roach (CNBC)

With the price of bitcoin moving toward $12,000, a top economist on Tuesday sent a stark warning to investors: The cryptocurrency is in a “dangerous speculative bubble.” “This is a toxic concept for investors,” said Stephen Roach, Yale University senior fellow and the former Asia chairman and chief economist at investment bank Morgan Stanley. Roach, described by Yale as one of Wall Street’s most influential economists, spent the bulk of his 30-year career at Morgan Stanley heading up a highly regarded team of economists around the world. He had a critical take on the explosion of buying the world’s most popular cryptocurrency. “This is a dangerous speculative bubble by any shadow or stretch of the imagination,” he told CNBC’s “The Rundown.” “I’ve never seen a chart of a security where the price really has a vertical pattern to it. And bitcoin is the most vertical of any pattern I’ve ever seen in my career,” he added.

Bitcoin has surged more than 1,000% this year, accelerated by rising interest from retail and institutional investors who view the digital currency as a possible future means of exchange and store of value. Major exchanges like the CME and CBOE have also legitimized the currency’s investment credentials by saying they plan to introduce futures contracts to their respective exchanges, likely further supporting the price. Roach suggested that exchange legitimization makes bitcoin “somewhat dangerous” for investors, given what he described as a “lack of intrinsic underlying economic value to the concept.” Many investors admit to not understanding the technicalities of the instrument or the blockchain technology that underpins its existence, hoping instead to profit on the expectation that bitcoin as an investment will simply continue to rise. “Like all bubbles, they burst,” Roach said. “They go down, and the one who’s made the last investment gets hurt the most, there’s no question about it.”

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But the Troika demands 3.5% surpluses! “My estimate is that Greece should be running deficits close to 8 to 10% of GDP to move the economy in the right direction.”

The Two-Tiered European Community (Bilbo)

This is the final part of my four-part discussion of a so-called progressive proposal advanced by German academic Fritz Sharpf to reform the Eurozone into two tiers: a ‘Northern’ hard currency tier and a ‘Southern’ non-euro tier with the latter nations tying their currencies to the euro. We have seen that rather than providing a framework for convergence between the current Eurozone Member States, Sharpfs’ proposal would not liberate the weaker nations from the yoke of the euro, In fact, the proposal would just tie the exiting nations to the euro in a slightly different way – one that will not provide sufficient flexibility to make much difference.

In questioning the current orthodoxy, Sharpf also notes that if the ECB strictly behaved within the Maastricht rules then the need for even more aggressive internal devaluation would be required as the “sanctions would be inflicted by anonymous market forces”. That is, the Member States currently in trouble would soon go broke as they would have trouble raising funds from the bond markets at acceptable yields, given they do not issue their own currencies. In this context, Sharpf concludes that: “It is hard to see why Southern governments, after all the sacrifices that they have already been forced to make under the present regime, should opt for an alternative that would not loosen economic constraints but remove the present protections against state insolvency.” The same might be said of his Proposal 2.

Why would the Southern states, who would be forced to exit under his plan, not then fully exploit their new found currency capacities to improve domestic demand conditions immediately, which would then, after a while push their external balances into deficit, and once there was sufficient volumes of their own currency in the system, place downward pressure on their exchange rates? Greece only has a current account close to balance because the enduring Depression has killed import growth. Turn the growth back on and they will soon be back in deficit. As I noted in Part 1, the real exchange rate data shows that despite the painful internal devaluation that has been imposed on many Eurozone nations, only Ireland has improved its international competitiveness against Germany.

I also cannot see the ECB agreeing to unconditionally provide euro and other foreign currency reserves to the exiting nations who are running their fiscal policy outside the parameters of the Northern states. Can you imagine Germany, which proudly runs fiscal surpluses while its major transport network is falling apart (bridges etc) tolerating Greece running the fiscal deficits it needs to restore some sense of prosperity? While Germany sits on current account surpluses of around 7-8% and thus creating massive imbalances within the Eurozone, they lecture everyone else about fiscal rectitude. My estimate is that Greece should be running deficits close to 8 to 10% of GDP to move the economy in the right direction.

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More entertainment.

This Could Mean The End Of May – And The Beginning Of Corbyn (Ind.)

Is this it? The moment when the May premiership is over? Could Corbyn end up taking power in a matter of weeks? It’s at least possible, though I concede it sounds far-fetched at first. In history, some British Prime Ministers have had their premierships wrecked by the “Irish Question”. Others, in more recent times, have been destroyed by Europe. Theresa May is unique in managing to combine both famously intractable and insoluble issues into one lethal cocktail. And so, it seems she is about to swallow the poison. Her premiership may be even shorter than many anticipated, and a Jeremy Corbyn-led government could be a fact of British life by the time the snows melt next year. Here’s how.

From what we can discern, the Government is perfectly happy to concede “special status” for Northern Ireland / Ireland in the Brexit talks – anathema to the Ulster Unionists. This is because the Government desperately needs to get onto the second phase of the process – the trade talks for the whole UK – and MPs, without being too crude about it, are happy to sign whatever the EU sticks under their nose and worry about the consequences later. In the end, they will risk their support from the DUP to get moving on Brexit. Jobs (Tory MPs’ included) are at stake. After all, ministers such as David Davis always say that “nothing’s agreed until everything’s agreed”, so having now ratted on the Democratic Unionists, they can, in due course, re-rat on the Irish and the EU, after a trade deal is sorted out.

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This looks very amateurish. And everybody knows.

Theresa May Humiliated As DUP Scuppers Border Deal (Ind.)

Theresa May’s Brexit strategy is in disarray after the Irish Prime Minister dramatically accused her of reneging on an agreement that would have ended the deadlock in the talks. On a day of drama, the Prime Minister pulled the plug on a deal on the Irish border after it was rejected by the Democratic Unionist Party which props her up in power – triggering claims she is being “held to ransom”. The embarrassment left Ms May scrambling to arrange crisis talks with the DUP before she heads back to Brussels later this week, with the clock ticking on the negotiations. EU leaders have demanded she guarantee there will no hard land border in Ireland before a summit next week, if the talks are to move on to discussing future trade and a transitional deal.

The unravelling of the deal also left many Conservatives questioning Ms May’s handling of the talks, amid disbelief that the DUP had not been squared off in advance. The talks broke down after Arlene Foster, the DUP leader, ruled out any move “which separates Northern Ireland economically or politically from the rest of the United Kingdom”. “We have been very clear. Northern Ireland must leave the EU on the same terms as the rest of the United Kingdom,” she said, speaking at Stormont. The party – despite being the Tories’ partner in government – appeared to be blindsided by the UK’s apparent concession of “regulatory alignment” on both sides of the border, to avoid checks. Within 20 minutes, Ms May interrupted her talks with Jean-Claude Juncker, the EU Commission President, to telephone Ms Foster. When she went back to the lunch, the deal was off.

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“By the time Cornwall had got in on the act by insisting its dogs be allowed to surf wherever they wanted..”

Confused May In Alignment Only With Herself Over Irish Issue (G.)

“Are you sure we can’t fudge the Northern Ireland border issue just a little bit?” she had asked Juncker on arrival in Brussels. Juncker had sniggered. Absolutely not. What bit of “regulatory alignment” did she not get? Theresa had another go. How about we say that pigs, cheese and a few cows are allowed to wander across the border without a passport? So you’re basically giving in and accepting that Northern Ireland must stay inside the single market and the customs union, Juncker had observed. Mmm, yes and no, Theresa whispered, checking over her shoulder to make sure no one was listening. It was like this. Regulatory divergence and regulatory alignment could almost mean exactly the same thing. It just depended which side you were looking at it from. The secret was to persuade the divergers that you weren’t aligning and the aligners you weren’t diverging by drafting something that was equally open to misinterpretation by both.

“Whatever,” Juncker had yawned. Having persuaded herself she had got a deal she could sell – to herself if no one else – Theresa set about drafting an agreement with the Irish government. As the news seeped out that an agreement had been reached, all hell broke loose. If the Northern Irish could have a special nod and a wink for pigs, the Scots must have the same exemptions for scotch. And heather. Then London started making demands. Just because it could. It had never fancied leaving the EU anyway. By the time Cornwall had got in on the act by insisting its dogs be allowed to surf wherever they wanted, it dawned on the prime minister that maybe she ought to run the agreement past the DUP. Arlene Foster’s response had been unequivocal. Theresa could keep her £1bn. Any deal that didn’t make Northern Ireland exactly the same as the rest of the UK was unacceptable. No special status, no nothing. And if push came to shove, she’d bring down the UK government.

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Erik Prince and Oliver North. Yeah, those are the guys I would trust.

White House Weighing Plans For Private Spies To Counter “Deep State” (IC)

The Trump administration is considering a set of proposals developed by Blackwater founder Erik Prince and a retired CIA officer — with assistance from Oliver North, a key figure in the Iran-Contra scandal — to provide CIA Director Mike Pompeo and the White House with a global, private spy network that would circumvent official U.S. intelligence agencies, according to several current and former U.S. intelligence officials and others familiar with the proposals. The sources say the plans have been pitched to the White House as a means of countering “deep state” enemies in the intelligence community seeking to undermine Trump’s presidency. The creation of such a program raises the possibility that the effort would be used to create an intelligence apparatus to justify the Trump administration’s political agenda.

“Pompeo can’t trust the CIA bureaucracy, so we need to create this thing that reports just directly to him,” said a former senior U.S. intelligence official with firsthand knowledge of the proposals, in describing White House discussions. “It is a direct-action arm, totally off the books,” this person said, meaning the intelligence collected would not be shared with the rest of the CIA or the larger intelligence community. “The whole point is this is supposed to report to the president and Pompeo directly.” Oliver North, who appears frequently on Trump’s favorite TV network, Fox News, was enlisted to help sell the effort to the administration. He was the “ideological leader” brought in to lend credibility, said the former senior intelligence official.

Some of the individuals involved with the proposals secretly met with major Trump donors asking them to help finance operations before any official contracts were signed. The proposals would utilize an army of spies with no official cover in several countries deemed “denied areas” for current American intelligence personnel, including North Korea and Iran. The White House has also considered creating a new global rendition unit meant to capture terrorist suspects around the world, as well as a propaganda campaign in the Middle East and Europe to combat Islamic extremism and Iran. “I can find no evidence that this ever came to the attention of anyone at the NSC or [White House] at all,” wrote Michael N. Anton, a spokesperson for the National Security Council, in an email. “The White House does not and would not support such a proposal.”

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“The deal had allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, down to as low as 0.005% in certain years..”

Apple Agrees To Pay Over $15 Billion To Ireland In Back Taxes (ArsT)

According to a top Irish official, Apple has agreed to to pay Ireland around $15.4 billion in back taxes. “We have now reached agreement with Apple in relation to the principles and operation of the escrow fund,” Finance Minister Paschal Donohoe told reporters before a meeting with European Competition Commissioner Margrethe Vestager. “We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year.” Ireland was formally referred to the European Court of Justice after it failed to implement a 2016 order that required the island nation to collect the same amount in unpaid taxes. Over a year ago, as Ars reported, the EU’s competition chief Vestager said that a two-year investigation into so-called sweetheart tax deals in 1991 and 2007 had found Apple guilty of receiving illegal state aid from the Emerald Isle.

The deal had allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, down to as low as 0.005% in certain years, according to Vestager. Apple has denied any wrongdoing and has also said that it received no “special deal.” “We have a dedicated team working diligently and expeditiously with Ireland on the process the European Commission has mandated,” Apple said in a Monday statement according to UPI. “We remain confident the General Court of the EU will overturn the Commission’s decision once it has reviewed all the evidence.” Both Apple and Ireland have challenged the EU’s court order.

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Why not check this for fraud too?

China, the Digital Giant (PS)

China has firmly established itself as a global leader in consumer-oriented digital technologies. It is the world’s largest e-commerce market, accounting for more than 40% of global transactions, and ranks among the top three countries for venture capital investment in autonomous vehicles, 3D printing, robotics, drones, and artificial intelligence (AI). One in three of the world’s unicorns (start-ups valued at more than $1 billion) is Chinese, and the country’s cloud providers hold the world record for computing efficiency. While China runs a trade deficit in services overall, it has lately been running a trade surplus in digital services of up to $15 billion per year. Powering China’s impressive progress in the digital economy are Internet giants like Alibaba, Baidu, and Tencent, which are commercializing their services on a massive scale, and bringing new business models to the world.

Together, these three companies have 500-900 million active monthly users in their respective sectors. Their rise has been facilitated by light – or, perhaps more accurate, late – regulation. For example, regulators put a cap on the value of online money transfers a full 11 years after Alipay introduced the service. Now, these Internet firms are using their positions to invest in China’s digital ecosystem – and in the emerging cadre of tenacious entrepreneurs that increasingly define it. Alibaba, Baidu, and Tencent together fund 30% of China’s top start-ups, such as Didi Chuxing ($50 billion), Meituan-Dianping ($30 billion), and JD.com ($56 billion). With the world’s largest domestic market and plentiful venture capital, China’s old “copy-cat” entrepreneurs have transformed themselves into innovation powerhouses.

They fought like gladiators in the world’s most competitive market, learned to develop sophisticated business models (such as Taobao’s freemium model), and built impregnable moats to protect their businesses (for example, Meituan-Dianping created an end-to-end food app, including delivery). As a result, the valuation of Chinese innovators is many times higher than that of their Western counterparts. Moreover, China leads the world in some sectors, from livestreaming (one example is Musical.ly, a lip-syncing and video-sharing app) to bicycle sharing (Mobike and Ofo exceed 50 million rides per day in China, and are now expanding abroad).

Most important, China is at the frontier of mobile payments, with more than 600 million Chinese mobile users able to conduct peer-to-peer transactions with nearly no fees. China’s mobile-payment infrastructure – which already handles far more transactions than the third-party mobile-payment market in the United States – will become a platform for many more innovations.

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Merkel is losing ground fast. First inviting refugees and then paying them to leave, what is that?

Pilots Across Germany Are Blocking The Deportation Of Asylum Seekers (IBT)

Pilots across Germany are refusing to carry out deportations of asylum seekers and have prevented at least 222 planned flights so far, the government said on Monday (4 December) Germany’s main airline Lufthansa and its subsidiary Eurowings halted at least 85 flights in the first eight months of this year, according to a freedom of information request obtained by the Left party. The majority of the cancellations took place at Frankfurt airport, Germany’s largest and most important transport hub. A large number of the flights were scheduled to repatriate refugees to Afghanistan, a move which has been widely condemned by human rights organisations. Earlier this year, Amnesty International called on European governments to “implement a moratorium on returns to Afghanistan until they can take place in safety and dignity”.

Anna Shea, Amnesty International’s Researcher on Refugee and Migrant Rights, said that government was being “wilfully blind” to the fact that violence was at a record high in Afghanistan. Despite an increase in deportations, Germany remains the top destination for refugees in the European Union. This year, Germany has taken in more asylum seekers than all other 27 EU countries combined. In the first six months of 2017 the country processed 388,201 asylum cases, Die Welt reported, quoting statistics agency Eurostat. To try and curb the numbers, the German government is offering rejected asylum seekers up to €1000 in benefits if they voluntarily return home. Families who agree to leave are entitled to receive up to €3000. Interior Minister Thomas de Maizière (CDU) told the Süddeutsche Zeitung on Sunday (3 December): “If you decide by the end of February for a voluntary return, you will get in addition to first aid, a housing aid for the first 12 months in your country of origin.”

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Tsipras has to ask Brussels (re: Merkel) for permission.

Push To Move Refugees From Greek Islands To Mainland (K.)

Municipal officials from the islands of Lesvos, Chios and Samos, which are bearing the brunt of an increased influx of migrants from neighboring Turkey, are due in Athens on Tuesday to press the government for action to ease the pressure on their local communities. The officials decided to coordinate their protests and seek a meeting with Migration Minister Yiannis Mouzalas to speed up the transfer of migrants from the islands to mainland Greece. There are currently more than 15,000 migrants living in state-run camps on Lesvos, Chios, Samos, Leros and Kos. More than 15,000 have been transferred to the mainland over the past year. Of those more than 3,500 were transferred in the last month alone. But islanders say more action is needed due to growing tensions in the reception centers and among the local communities as arrivals from Turkey have increased.

Hopes that a European Union refugee relocation program could ease some of the pressure have been largely frustrated as the process is a slow one. European Migration Commissioner Dimitris Avramopoulos has said the so-called Dublin Regulation, which dictates that refugees apply for asylum in the first EU country they enter, must be reformed for pressure on countries such as Greece and Italy to ease. In a related development on Monday, a court on Lesvos indicted 16 North African migrants who participated in the occupation of a central square in Mytilene, the main port of Lesvos. Authorities on the island detained a total of 25 protesters late on Sunday but the other nine were released as they are minors. The migrants had staged the protest in a bid to press authorities to accelerate their asylum applications and their transfer to mainland Greece.

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No question there.

The World’s Oceans Are Under The Greatest Threat In History – Attenborough (G.)

The world’s oceans are under the greatest threat in history, according to Sir David Attenborough. The seas are a vital part of the global ecosystem, leaving the future of all life on Earth dependent on humanity’s actions, he says. Attenborough will issue the warning in the final episode of the Blue Planet 2 series, which details the damage being wreaked in seas around the globe by climate change, plastic pollution, overfishing and even noise. Previous BBC nature series presented by Attenborough have sometimes been criticised for treading too lightly around humanity’s damage to the planet. But the final episode of the latest series is entirely dedicated to the issue. “For years we thought the oceans were so vast and the inhabitants so infinitely numerous that nothing we could do could have an effect upon them. But now we know that was wrong,” says Attenborough.

“It is now clear our actions are having a significant impact on the world’s oceans. [They] are under threat now as never before in human history. Many people believe the oceans have reached a crisis point.” Attenborough says: “Surely we have a responsibility to care for our blue planet. The future of humanity, and indeed all life on Earth, now depends on us.” BBC executives were reportedly concerned about the series appearing to become politicised and ordered a fact-check, which it passed. The series producer, Mark Brownlow, said it was impossible to overlook the harm being caused in the oceans: “We just couldn’t ignore it – it wouldn’t be a truthful portrayal of the world’s oceans. We are not out there to campaign. We are just showing it as it is and it is quite shocking.”


Strict management of the herring fishery in Norway has saved it from collapse. Herring now draw in humpback whales and orca. Photograph: Audun Rikardsen

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Sep 072017
 
 September 7, 2017  Posted by at 9:14 am Finance Tagged with: , , , , , , , , , , , ,  6 Responses »
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St. Maarten seen through the eye of Irma

 

Irma Devastates The Caribbean (AlJ)
Trump Sides With Democrats On Debt Limit In Rare Bipartisan Deal (R.)
Fed’s Fischer Resigns, Leaving Trump Earlier Chance To Shape Central Bank (R.)
Deutsche Bank Boss Calls On ECB To Halt Cheap Money (R.)
New Leak Of Brexit Papers Reveals Fissures Between Britain And EU (G.)
Consumption Exhaustion (Lebowitz)
China Realizes It Needs Foreign Companies (Balding)
Apple Needs iPhone 8 To Solve A Giant Financial Headache (BI)
Catalonia Launches Its Independence Challenge Against Spain (AFP)
Emmanuel Macron To Outline Vision For Europe’s Future In Athens Speech (G.)
Crisis-Ridden Greek Households Cut Even On Milk And Bread (KTG)

 

 

Too early to say much of anything. Barbuda is gone. So is much of St. Martin. Close to uninhabitable.

If Irma hits Puerto Rico anywhere near full force, that would be exceedingly dramatic. Ditto for Haiti, Miami. This has just started.

NOAA Hurricane Hunters flight director Richard Henning on CNN: “Irma “is actually getting stronger. … You can’t overhype this storm”.

Irma Devastates The Caribbean (AlJ)

Nearly every building on the island of Barbuda has been damaged and almost 900,000 people have been left without power in Puerto Rico as the Category 5 Hurricane Irma continues its journey towards mainland US. About 60 percent of Barbuda’s roughly 1,400 people were left homeless, Gaston Browne, Antigua and Barbuda prime minister, told the Associated Press news agency, when the eye of the storm passed almost directly overhead early on Wednesday. “Either they were totally demolished or they would have lost their roof,” Browne said after returning to Antigua from a plane trip to the neighbouring island. “It is just really a horrendous situation.” Browne said roads and telecommunications systems were destroyed and recovery will take months. A two-year-old was killed as a family tried to escape a damaged home during the storm, he said.

Puerto Rico was buffeted by powerful winds and heavy rain as authorities struggled to get aid to small Caribbean islands already devastated by the storm. The US National Weather Service said Puerto Rico had not seen a hurricane of Irma’s magnitude since Hurricane San Felipe in 1928, which killed a total of 2,748 people in Guadeloupe, Puerto Rico and Florida. But as the storm moved west, it devastated the small islands in its path. Significant effects were reported on St Martin, an island split between French and Dutch control. Photos and video circulating on social media showed major damage to the airport in Philipsburg and the coastal village of Marigot heavily flooded. The US National Hurricane Center said Irma’s winds would fluctuate, but the storm would probably remain at Category 4 or 5 for the next day or two as it moves past just to the north of the Dominican Republic and Haiti on Thursday, nears the Turks & Caicos and parts of the Bahamas by Thursday night and touches Cuba on Friday night.

Read more …

“Less than an hour before the meeting, Republican House of Representatives Speaker Paul Ryan had called the Democratic proposal that Trump later embraced a “ridiculous and disgraceful” idea..”

Trump Sides With Democrats On Debt Limit In Rare Bipartisan Deal (R.)

President Donald Trump forged a surprising deal with Democrats in Congress on Wednesday to extend the U.S. debt limit and provide government funding until Dec. 15, embracing his political adversaries and blindsiding fellow Republicans in a rare bipartisan accord. Trump, living up to his reputation for unpredictability, met at the White House with congressional leaders from both parties and overruled Republicans and U.S. Treasury Secretary Steven Mnuchin, who wanted a longer-term debt-limit extension rather than the three-month Democratic proposal the president embraced. “We could have done a one-year deal today,” Mnuchin told reporters aboard Air Force One later in the day en route back to Washington from an event in North Dakota where Trump spoke about taxes.

Mnuchin said Trump chose a short-term deal to keep his options open on possibly raising military funding later this year, suggesting a longer-term government funding deal might have blocked that. Trump is very focused on military spending, “particularly with what’s going on in North Korea and other parts of the world today,” Mnuchin said. “The president wasn’t willing to give up his need for additional military spending.” If passed by the Republican-led Congress, the three-month agreement would avert an unprecedented default on U.S. government debt, keep the government funded at the outset of the fiscal year beginning Oct. 1 and provide aid to victims of Hurricane Harvey. “It was a really good moment of some bipartisanship and getting things done,” top Senate Democrat Chuck Schumer said. Less than an hour before the meeting, Republican House of Representatives Speaker Paul Ryan had called the Democratic proposal that Trump later embraced a “ridiculous and disgraceful” idea that would “play politics with the debt ceiling.”

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Curious timing. Note that Reuters has fully entered the anti-Trump echo chamber.

Fed’s Fischer Resigns, Leaving Trump Earlier Chance To Shape Central Bank (R.)

U.S. Federal Reserve Vice Chair Stanley Fischer, a veteran central banker who helped set the course for modern monetary policy, said on Wednesday he will step down from his position in mid-October, potentially accelerating President Donald Trump’s opportunity to reshape the direction of the central bank. In a letter to Trump, Fischer, 73, said he was resigning for personal reasons effective on or around Oct. 13, eight months before his term as vice chair expires in June. In the letter, Fischer said jobs growth had returned to the United States and that “steps to make the financial system stronger and more resilient” had been taken – actions that may now be weakened by the Trump administration.

His departure leaves the seven-person board of governors with as few as three sitting members, depending on whether and when the Senate confirms Trump nominee Randal Quarles to the role of vice chair for supervision, a job distinct from Fischer’s vice chairmanship. The Senate Banking Committee is scheduled to vote on the nomination on Thursday. The White House said it had no immediate comment on Fischer’s departure or on the timing for filling his spot or other positions at the Fed. Though the Fed often operates with fewer than its full complement of seven governors, it has never dipped as low as three. Fischer’s earlier-than-expected departure intensifies the urgency for Trump to decide how deeply he wants to overhaul U.S. monetary policy. Fed Chair Janet Yellen’s term expires in February. While Trump has spoken approvingly of her performance he has also kept the door open to naming his top economic adviser Gary Cohn, or someone else, to the job.

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He thinks he’s taken all he’s going to get.

Deutsche Bank Boss Calls On ECB To Halt Cheap Money (R.)

Deutsche Bank chief executive John Cryan has called on the European Central Bank to change course on providing cheap money, warning he sees price bubbles in stocks, bonds and property. “The era of cheap money in Europe should come to an end – despite the strong euro,” Cryan told a room full of bankers in Frankfurt on Wednesday, a day before the ECB’s governors meet to discuss policy. Low interest rates, money printing and a penalty charge for hoarding cash have been at the heart of attempts by the central bank to reinvigorate the 19-country euro zone economy in the wake of the 2008-09 financial crisis. But the policy, which has seen the ECB print more than €2 trillion ($2.4 trillion) so far, has been politically divisive, prompting fierce criticism from famously thrifty Germans.

It has also imposed a heavy cost on still fragile banks, turning deposits into a hot potato that many would rather avoid so as not to pay charges to their central bank for storing them. The head of Germany’s largest commercial bank warned of the fallout from cheap money, cautioning against using the strong euro as a justification for printing more. “We are now seeing signs of bubbles in more and more parts of the capital market,” he said. Cryan also said Frankfurt was the most natural location as a financial hub as banks move from London after Britain’s decision to leave the European Union – ahead of Paris, Dublin and Amsterdam. “There is only one European city which can fulfil these requirements and that city is Frankfurt,” he said, pointing to Frankfurt’s supervisory authorities, law firms, consultancies and airport.

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Multiple papers have been leaked in recent days. They won’t be the last.

New Leak Of Brexit Papers Reveals Fissures Between Britain And EU (G.)

The EU will risk heightening tensions with the UK on Brexit by publishing five combative position papers in the coming days, including one that places the onus on Britain to solve the problem of the Irish border, according to documents leaked to the Guardian. The Irish document shows that Michel Barnier, the EU’s chief negotiator, will call on the UK to work out “solutions” that avoid the creation of a hard border and guarantee peace on the island. The leaks come a day after the Guardian obtained a draft memo showing the British government’s position on post-Brexit EU migration, which has been denounced as “completely confused”, “economically illiterate” and “a blueprint on how to strangle London’s economy”. The Ireland paper is one of five due to be published by the European commission in the coming days. Each is dated 6 September and was drawn up by Barnier’s article 50 taskforce in Brussels.

Together, the papers lay bare the complexity of disentangling Britain from the European Union. Each paper is focused on withdrawal day, 29 March 2019, delving into technical minefields not dealt with during the referendum campaign. EU proposals include:
• A demand – likely to inflame Brexiters – for the UK to legislate for the “continued protection” of special foods such as Parma ham and feta cheese, as well as French burgundy and Spanish cava. Brussels wants to ensure that more than 3,300 food and drink products are protected from British copycats after Brexit.
• Ensuring that any goods in transit on Brexit day would be subject to the jurisdiction of the European court of justice. In effect, British companies and the British government would be liable to fines from Brussels for breaking EU VAT and customs rules.
• A warning to the government that it must guarantee EU data protection standards on classified EU documents. If not, the EU wants these documents erased or destroyed.
• Asking Britain not to discriminate against EU companies which are carrying out state-funded infrastructure projects that began before Brexit day.

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How to spell deflation.

Consumption Exhaustion (Lebowitz)

Debt serves as a regulator of economic growth and is the focus of ill-advised fiscal and monetary policy. It is no coincidence that no matter what economic topic we explore, debt is usually a central theme. Illustrated in the chart below is the actual trajectory of total U.S. debt outstanding (black) through March 2017 and a calculated parabolic curve (red). The parabolic curve uses 1951 as a starting point and a quarterly 1.82% compounding factor to create the best statistical fit to the actual debt curve. If we start with the $434 billion of debt outstanding on December 1951 and grow it by 1.82% each quarter thereafter, the result is the gray line. If debt outstanding continues to follow this parabolic curve, it will exceed $60 trillion by the first quarter of 2020, or nine quarters from now.

Many economists point to the stability of debt service costs as a reason to ignore the parabolic debt chart. Despite rising debt loads, falling interest rates have served as a ballast allowing more debt accumulation at little incremental cost. While that may have worked in the past, near zero interest rates makes it nearly impossible to continue enjoying the benefits of falling interest rates going forward. Importantly, social safety net obligations, demographics, and political dynamics argue that debt growth is likely to continue accelerating as implied by the chart above. Without interest rates falling in step with rising debt burdens, debt service costs will begin to rise appreciably.

The power of compounding, extolled by Albert Einstein as the eighth wonder of the universe, is as damning in its demands as it is merciful in its generosity. Barring negative interest rates, debt service costs will be an insurmountable burden by 2020. However, if the debt trajectory slows as it did in 2008 that too will bring about painful consequences. In other words, all roads lead to trouble.

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“China maintains a quasi-pegged exchange rate, which requires balancing the inflow and outflow of capital. That means attracting foreign investment is a necessary precondition for investing abroad..”

China Realizes It Needs Foreign Companies (Balding)

China is increasingly desperate for foreign investment. Yet foreign companies are less and less interested in what it has to offer. How this problem gets resolved may be one of the most important questions facing China’s economy. After China joined the World Trade Organization, in 2001, overseas investors couldn’t wait to jump in. Foreign direct investment grew at an annualized rate of 10.8% from 2000 to 2008. Enticed by China’s market size and development capacity, companies were willing tolerate almost any kind of restriction. They turned over intellectual property; entered into joint ventures as junior partners, essentially training their eventual competitors; and accepted restricted access to wide swathes of the economy. Since the financial crisis, however, things have changed.

Wages in China have risen by an average of 11% a year, making it less attractive for outsourcing. Despite years of complaints, intellectual property theft hasn’t abated (just ask Michael Jordan, who had to wage a four-year court battle to get ownership of his own name in China). Add in an increasingly hostile business environment, and it’s not surprising that overseas companies are losing enthusiasm. Since 2008, utilized foreign direct investment has increased by an average rate of only 4% a year. According to quarterly balance-of-payment data, FDI has amounted to only $55 billion this year through June. The last time China’s mid-year inflows were that low was in 2009, the year after the financial crisis. This could have serious economic consequences.

Due to shady invoicing – which many firms use to evade capital controls – the money flowing into China through its trade surplus has shrunk. From 2010 through 2014, banks reported net settlement inflows from goods trade of nearly $1.7 trillion. Since January 2015, net settlement by banks has amounted to only $278 billion, while the official trade surplus is $1.3 trillion. For a country that relies on capital accumulation to sustain growth, this is a significant problem. Making matters worse, China maintains a quasi-pegged exchange rate, which requires balancing the inflow and outflow of capital. That means attracting foreign investment is a necessary precondition for investing abroad, which is China’s main method of advancing its foreign-policy objectives.

Read more …

All on red.

Apple Needs iPhone 8 To Solve A Giant Financial Headache (BI)

Apple will launch its next-generation iPhone (expected to be called the iPhone 8 or the iPhone Edition) on September 12, and this chart from Guggenheim Securities analyst Robert Cihra gives you a good idea of the giant headache Apple needs that new phone to solve. The graph is interesting because it shows Apple’s business in a seldom-seen way: It charts only the revenue growth of the company, broken out by product. The chart does a good job of showing how Apple’s various product lines have increasingly stalled over the years. In each of the last four years, Apple had one or more major product lines with shrinking sales. In 2016, that came to a head, and Apple’s overall revenue went into decline for the first time ever.

Note that in 2016, Apple’s worst year, the only division growing revenues was Services — apps, content, and software in iTunes. The stakes for iPhone 8 and its kindred models — iPhone 7s and iPhone 7s Plus — couldn’t be higher. If they don’t grow revenues, then the company as a whole doesn’t grow. The task facing Apple is not trivial. As this chart from Deutsche Bank shows, the iPhone tends to grow more slowly than the smartphone market as a whole — and the smartphone market has flatlined.

Read more …

Spain threatens criminal charges for people seeking self-determination.

Catalonia Launches Its Independence Challenge Against Spain (AFP)

Catalonia’s regional parliament passed a law on Wednesday (Sep 6) paving the way for an independence referendum on Oct 1 which is fiercely opposed by Madrid, setting a course for Spain’s deepest political crisis in decades. The looming showdown comes three weeks after militant attacks in Barcelona, the capital of Catalonia, and a seaside resort which killed 16 people and wounded more than 120. The law was adopted with 72 votes in favour and 11 abstentions after 12 hours of often stormy debate in the regional assembly. Lawmakers who oppose independence for the wealthy northeastern region of Spain quit the chamber before the vote. After the law was passed, separatist lawmakers, who have a majority in the assembly, sang the Catalan anthem, “Els Segadors”, which recalls a 1640 revolt in the region against the Spanish monarchy.

Lawmakers approved the bill despite a February ruling by Spain’s Constitutional court declaring it would be unconstitutional. Shortly after the law was passed the president of Catalonia, Carles Puigdemont, and the rest of his cabinet signed a decree calling the referendum, presenting a show of unity in the face of threats of legal action by Madrid, which deems the plebiscite illegal. Deputy Prime Minister Soraya Saenz de Santamaria said before the law was passed that the government had asked the Constitutional Court to declare “void and without effect the agreements adopted” by the Catalan parliament. She also denounced the regional assembly’s agreement to quickly vote on the bill with little debate as an “act of force” characteristic of “dictatorial regimes”. At the same time, public prosecutors announced they would seek criminal charges for disobedience against the president of the Catalan parliament, Carme Forcadell, and other Catalan officials for allowing the vote on the referendum law.

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Macron can only do what Merkel allows him.

Emmanuel Macron To Outline Vision For Europe’s Future In Athens Speech (G.)

Emmanuel Macron will make Greece the launchpad for a major policy speech on the future of Europe as he starts his first official trip to the country on Thursday. From the dramatic setting of the ancient Pnyx in Athens, the French president is expected to outline his vision for the continent in what is being called his most important overseas address since taking office in May. Amid the rocky hills of the Pnyx beneath the Acropolis, the speech will focus on the virtues of democracy as the European Union – and Greece – finally show signs of economic revival. “It will be a message of confidence in Greece but also a European symbolic message, given that in many ways Greece has been a symbol of Europe’s crisis,” said an Élysée Palace source. “The restart of Greece is the restart of the eurozone.”

It is a measure of the significance the Greek government is attaching to the visit that Macron is making the address from such an august setting. From the earliest days of Athenian democracy, the Pnyx was a meeting place for popular assemblies. In more modern times its use has been limited to the rare photo op. The young president will be the first French leader to speak from it, in what Greeks are also calling a subliminal message of hope. Macron has been criticised at home for his carefully choreographed media appearances evoking the grandeur of eras past, and has seen his approval ratings drop dramatically. But officials say the rich symbolism of Macron’s Athens speech will underscore the argument that, despite its battle to stay in the eurozone and keep bankruptcy at bay, Greece remains at the heart of Europe’s tradition and history.

“We see it is as a very important visit,” said the deputy minister of economy and development, Stergios Pitsiorlas. “We are very much hoping it will not only deepen economic cooperation but also herald a change in the political dynamic in the EU which for so long has been dominated by a single state, Germany.” France has stood by Greece, often defending it in fraught negotiations, since international creditors, led by Berlin, were forced to come to the debt-stricken country’s rescue issuing the first of three bailouts in return for tough reforms in May 2010. Macron, a former economy minister, has long advocated debt relief for Athens – echoing the view of its leftist-led government that without it the Greek economy can never fully recover.

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While politicians on all sides cheer the ‘recovery’.

Crisis-Ridden Greek Households Cut Even On Milk And Bread (KTG)

The economic crisis continues to plague Greek households struggling too make ends meet – month in, month out. A survey conducted by Nielsen shows a decline in consumption and therefore the plight of thousands of families. Greeks cut on essential goods like milk and bread. The drop in the category of milk in the organized retail market reached 8.6% in the first half of 2017. Sales of essential consumer goods continue to drop, according to a Nielsen survey of the Greek market. Sales of milk, bread and alcoholic beverages are among the goods that suffer most. In the first half of 2017 the drop in the sale of milk reached 8.6%, while sales of packaged bread shrank by 5.3%. Sales of alcoholic beverages also recorded significant losses, as whiskey sales dropped by 6.8% over the same period.

Overall, retail trade lost 1.1% in value in the first half of the year compared to the same period last year. More pronounced downward trends were recorded in personal care products at 4.4%, and household goods at 3.5%. Sales of deodorants and diapers dropped by 7.3% and 7.2% respectively. In household goods, chlorine dropped by 8.9% and kitchen paper towel by 7.7%. The only positive trend in all sectors was in fresh / bulk products where sales increased by 2.0%. An earlier Nielsen survey has shown that food sales in Greece have dropped by 18 percent since 2009, when the current economic crisis begun. In 2009, food sales reached a record high, totalling 13.15 billion euros. However, as Greece entered the first bailout program in 2010, the demand for food items started to drop. The decrease was also attributed partly to the closing down of small grocery and convenience stores..

Read more …

Mar 242017
 
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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DPC “Broad Street and curb market, New York” 1906

 

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

 

 

This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

Read more …

And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

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A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

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Wow.

China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

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“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

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He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

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Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

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“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

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Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

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Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

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We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

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