May 242018
 
 May 24, 2018  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , , , ,  


Wassily Kandinsky Contrasting Sounds 1924

 

Every Fed Tightening Cycle ‘Creates A Meaningful Crisis Somewhere’ (MW)
Fed Minutes Show Support For June Hike And Calm About Inflation Outlook (MW)
US Launches Auto Import Probe (R.)
China Signals To State Giants: ‘Buy American’ Oil And Grains (R.)
Turkey Halts Lira’s Free Fall – But It’s Not Out Of The Woods Yet (MW)
Argentines Brace For Another Crisis As Nation Again Seeks IMF Help (R.)
US Birth Rates Are Falling Because This Is A Harsh Place To Have A Family (G.)
Yulia Skripal Gives First Interview (RT)
NHS Needs £2,000 In Tax From Every Household To Stay Afloat (Ind.)
Trump’s Blocking Of Critics On Twitter Violates Constitution – US Judge (R.)
Hitting Toughest Climate Target Will Save World $30 Trillion In Damages (G.)
The Mediterranean Diet Is Gone: Region’s Children Are Fattest In Europe (G.)

 

 

Take their power away?!

Every Fed Tightening Cycle ‘Creates A Meaningful Crisis Somewhere’ (MW)

Federal Reserve rate increases are a lot like shaking an overripe fruit tree. That’s the analogy offered by Deutsche Bank macro strategist Alan Ruskin in a note late Wednesday, in which he urged clients not to “overcomplicate” the macro picture. “A starting point should be that every Fed tightening cycle creates a meaningful crisis somewhere, often external but usually with some domestic (U.S.) fallout,” he wrote. To back it up, Ruskin offered the following history lesson:

“Going back in history, the 2004-6 Fed tightening looked benign but the US housing collapse set off contagion and a near collapse of the global financial system dwarfing all post-war crises. The late 1990s Fed stop/start tightening included the Asia crisis, LTCM and Russia collapse, and when tightening resumed, the pop of the equity bubble. The early 1993-4 tightening phase included bond market turmoil and the Mexican crisis. The late 1980s tightening ushered along the S&L crisis. Greenspan’s first fumbled tightening in 1987 helped trigger Black Monday, before the Fed eased and ‘the Greenspan put’ took off in earnest. The early 80s included the LDC/Latam debt crisis and Conti Illinois collapse. The 1970s stagflation tightening was when the Fed was behind ‘the curve’ and where inflation masked a prolonged decline in real asset prices.”

So what about now? The fed funds rate stands at 1.50% to 1.75% following a series of slow rate increases that began in December 2015, lifting it from near zero. The degree of tightening might seem pretty tame, but Ruskin notes that it comes after a period of “extreme and prolonged” accommodation and is also taking forms that economists and investors don’t fully understand as swollen balance sheet begins to shrink.

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The stronger the dollar the more likely rate hikes get.

Fed Minutes Show Support For June Hike And Calm About Inflation Outlook (MW)

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. “Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90% chance of a June rate hike. Although inflation hit the Fed’s 2% target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long.

“It was noted that it was premature to conclude that inflation would remain at levels around 2%, especially after several years in which inflation had persistently run below the Fed’s 2% objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2% target. “It has taken them so long to get there, with so many fits and starts, they are not quite sure it’s going to stay there,” said Michael Arone, chief investment strategist for State Street Global Advisors. Arone said the minutes were consistent with three total hikes this year although the Fed gave itself wiggle room if inflation picks up markedly. “They didn’t take [a fourth hike] off the table,” he said.

On the trade dispute with China, officials said the possible outcome on inflation and growth remained “particularly wide,” but there was some concern the dispute would hurt business confidence.

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Up to 25% tariffs. How about building better cars? Or weaning yourself off the addiction?

US Launches Auto Import Probe (R.)

The Trump administration has launched a national security investigation into car and truck imports that could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March. The national security probe under Section 232 of the Trade Expansion Act of 1962 would investigate whether vehicle and parts imports were threatening the industry’s health and ability to research and develop new, advanced technologies, the Commerce Department said on Wednesday. “There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement, promising a “thorough, fair and transparent investigation.”

Higher tariffs could be particularly painful for Asian automakers including Toyota, Nissan, Honda and Hyundai, which count the United States as a key market, and the announcement sparked a broad sell-off in automakers’ shares across the region. The governments of Japan, China and South Korea said they would monitor the situation, while Beijing, which is increasingly eyeing the United States as a potential market for its cars, added that would defend its interests. “China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order,” Gao Feng, spokesman at the Ministry of Commerce, said at a regular news briefing in Beijing on Thursday which focused largely on whether it is making any progress in its trade dispute with Washington.

[..] Roughly 12 million cars and trucks were produced in the United States last year, while the country imported 8.3 million vehicles worth $192 billion. This included 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany, according to U.S. government statistics. At the same time, the United States exported nearly 2 million vehicles worldwide worth $57 billion. German automakers Volkswagen, Daimler and BMW all have large U.S. assembly plants. The United States is the second-biggest export destination for German auto manufacturers after China, while vehicles and car parts are Germany’s biggest source of export income. Asked if the measures would hit Mexico and Canada, a Mexican source close to the NAFTA talks said: “That probably is going to be the next battle.”

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For now it’s all opaque.

China Signals To State Giants: ‘Buy American’ Oil And Grains (R.)

China will import record volumes of U.S. oil and is likely to ship more U.S. soy after Beijing signalled to state-run refiners and grains purchasers they should buy more to help ease tensions between the two top economies, trade sources said on Wednesday. China pledged at the weekend to increase imports from its top trading partner to avert a trade war that could damage the global economy. Energy and commodities were high on Washington’s list of products for sale. The United States is also seeking better access for imports of genetically modified crops into China under the deal. As the two sides stepped back from a full-blown trade war, Washington neared a deal on Tuesday to lift its ban on U.S. firms supplying Chinese telecoms gear maker ZTE, and Beijing announced tariff cuts on car imports.

But U.S. President Donald Trump indicated on Wednesday that negotiations were still short of his objectives when he said any deal would need a “different structure”. China is the world’s top importer of both oil and soy, and already buys significant volumes of both from the United States. It is unclear how much more Chinese importers will buy from the United States than they would have otherwise, but any additional shipments would contribute to cutting the trade surplus, as demanded by Trump. Asia’s largest oil refiner, China’s Sinopec will boost crude imports from the United States to an all-time high in June as part of Chinese efforts to cut the surplus, two sources with knowledge of the matter said on Wednesday.

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Erdogan defeated?

Turkey Halts Lira’s Free Fall – But It’s Not Out Of The Woods Yet (MW)

Turkey’s central bank intervened to halt the free fall of the Turkish lira on Wednesday, but it isn’t clear whether policy makers will be able to stave off a full-fledged currency crisis. The Central Bank of the Republic of Turkey raised its late liquidity window lending rate by 300 basis points on Wednesday, in a surprise move that put a halt to the lira selloff — at least for now. The lending rate now sits at 16.5%, compared with 13.5% before. The U.S. dollar had rallied to a historic high against Turkey’s lira on Wednesday, buying 4.9233 lira at the high, before the path reversed on the back of the CBRT’s action and the lira found its feet again. The buck last bought 4.7015 lira. In the year to date, the Turkish currency has dropped more than 20% against the dollar, according to FactSet data.

The euro-lira pair behaved similarly, first rallying to an all-time high but paring the rise after the rate increase. The euro last bought 5.5084 lira. The U.S. and eurozone are two of Turkey’s most important trading partners. The central bank has been operating in a peculiar environment given that Turkey’s inflation has been hitting double digits and its currency keeps sliding to historic lows. Moreover, the government of President Recep Tayyip Erdogan has been critical of the central bank, calling for lower interest rates.

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Rising dollar.

Argentines Brace For Another Crisis As Nation Again Seeks IMF Help (R.)

Maria Florencia Humano opened a clothing store in 2016, convinced that Argentina’s long history of economic crises had ended under pro-business President Mauricio Macri. She will shutter it later this month, unable to make rent or loan payments. Soaring interest rates and a plunging currency have upended her dream and returned Argentina to a familiar place: asking the IMF for a lifeline. Humano’s decision comes just weeks after a somber Macri announced in a televised May 8 speech that Argentina would start talks with the IMF. He is seeking a credit line worth at least $19.7 billion to fund the government through the end of his first term in late 2019. The unexpected move surprised investors and stoked Argentines’ fears of a repeat of the nation’s devastating 2001-2002 economic collapse.

Many here blame IMF-imposed austerity measures for worsening that crisis, which impoverished millions and turned Argentina into a global pariah after the government defaulted on a record $100 billion in debt. Word of a potential bailout sent thousands of angry Argentines into the streets this month, some with signs declaring “enough of the IMF.” As recently as a few months ago, analysts were hailing Argentina as an emerging-market success story. Now some are predicting recession. Macri’s popularity has plummeted. [..] Macri’s free-market credentials earned him a 2017 invitation to the White House to meet U.S. President Donald Trump, who just last week on Twitter hailed the Argentine leader’s “vision for transforming his country’s economy.”

But economists say Macri badly damaged his credibility in December when his administration weakened tough inflation targets. The central bank followed with a January rate cut to goose growth, even as consumer prices kept galloping. Rising U.S. interest rates did not help. Argentina is saddled with more than $320 billion in external debt, equivalent to 57.1% of GDP, much of it denominated in dollars. Jittery investors hit the exits. The peso swooned. The central bank sold $10 billion in reserves trying to prop up the peso, forcing Macri to seek assistance from the IMF.

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And getting harsher all the time.

US Birth Rates Are Falling Because This Is A Harsh Place To Have A Family (G.)

America’s birth rate has fallen to a 30-year low, let the hand-wringing and finger-pointing begin. It’s those selfish women, wanting careers before kids! Or, gasp, not wanting kids at all! It’s all those abortions! It’s Obama’s fault! The reality is, for all its pro-family rhetoric, the US is a remarkably harsh place for families, and particularly for mothers. It’s a well-known fact, but one that bears repeating in this context, that the US is one of only four countries in the world with no government-subsidized maternity leave. The other three are Lesotho, Swaziland, and Papua New Guinea, countries that the US doesn’t tend to view as its peer group.

This fact is met with shrugs from those who assume that companies provide maternity leave. Only 56% do, and of those, just 6% offer full pay during maternity leave. This assumption also ignores the fact that 36% of the American workforce, a number expected to surpass 50% in the next 10 years, are contract laborers with no access to such benefits. That gig economy you keep hearing so much about, with its flexible schedule and independence? Yeah, it sucks for mothers. That doesn’t stop companies and pundits from pushing it as a great way for working moms to balance children and career. As a gig-economy mother myself, I can tell you exactly how great and balanced it felt to go back to work two hours after giving birth.

If they return to work, mothers can look forward to an increasingly large pay gap for every child they have, plus fewer promotions. Who could resist? The option for one parent to stay home with kids is increasingly not economically viable for American families, either. A data point that got far less attention than the falling birth rate was released by the Bureau of Labor Statistics last month: 71.1% of American mothers with children under 18 are in the workforce now. It’s not just because they want to be (not that there’s anything wrong with that), but increasingly because they have to be in order to support the family.

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Scripted interview?

Yulia Skripal Gives First Interview (RT)

In her first interview since surviving an alleged nerve agent attack, Yulia Skripal said she eventually wants to return to Russia. She has not shed any light on what happened in March in Salisbury. “I came to the UK on the 3rd of March to visit my father, something I have done regularly in the past. After 20 days in a coma, I woke to the news that we had both been poisoned,” Skripal said in a video that was recorded by Reuters. She reiterated her words in a handwritten statement. She and her father, Sergei Skripal, a former Russian double-agent, were found unconscious on a public bench in the British city of Salisbury on March 4. The UK government immediately accused Russia of being behind their poisoning, but it has yet to provide evidence for the claim.

Skripal did not comment on who she thought was to blame for her poisoning. “I still find it difficult to come to terms with the fact that both of us were attacked. We are so lucky to have both survived this attempted assassination. Our recovery has been slow and extremely painful,” she said. “The fact that a nerve agent was used to do this is shocking. I don’t want to describe the details but the clinical treatment was invasive, painful and depressing.” She also said that she was “grateful” for the offers of assistance from the Russian Embassy, “but at the moment I do not wish to avail myself of their services.” Skripal reiterated what she had said in an earlier written statement released by British police: “no one speaks for me, or for my father, but ourselves.”

Following the release of the interview, Russia’s Foreign Ministry spokeswoman addressed Yulia Skripal in a comment to RT. “We’d like Yulia Skripal to know that not a single day passed without the Foreign Ministry, Russia’s Embassy in London trying to reach her with the main purpose to make sure she was not held against her will, she was not impersonated by somebody else, to get the first-hand information about her and her father’s condition,” Maria Zakharova said.

Russia’s Embassy in the UK welcomed the release of the interview, stating: “we are glad to have seen Yulia Skripal alive and well.” The video itself and the wording of the written statements, however, raised concerns with Russian diplomats, who urged London once again to allow consular access to Yulia “in order to make sure that she is not held against her own will and is not speaking under pressure.” Skripal said that the ordeal had turned her life “upside down,” both “physically and emotionally.” She added that she was now focused on helping her father to make a full recovery, and that “in the long term I hope to return home to my country.”

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With the level of incompetence in UK politics, the NHS looks beyond salvation.

NHS Needs £2,000 In Tax From Every Household To Stay Afloat (Ind.)

Taxes will “almost certainly” have to rise over the coming years simply to prevent the National Health Service and social care system from slipping further into crisis, a major new report concludes. The Institute for Fiscal Studies and the Health Foundation state that the NHS, which has been suffering the most severe fiscal squeeze since its foundation over the past eight years, now requires an urgent increase in government spending in order to cope with an influx of older and sicker patients. Funding the projected increases in health spending through the tax system would need taxes to rise by between 1.6 and 2.6% of GDP – the equivalent of between £1,200 and £2,000 per household, the experts said.

The two organisations say that state funding growth rate, which has been just 1.4% a year since 2010, will have to more than double to between 3.3% and 4% over the next 15 years if government pledges, such as bringing down waiting times and increasing the provision of mental health services, are to stand any chance of being delivered. They also say that to finance this increase the government would “almost certainly need to increase taxes”. “If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax,” said the IFS’s director Paul Johnson.

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Raises some interesting questions. I can block him, but he cannot block me. I can all him “Corrupt Incompetent Authoritarian” and much much worse, and he’s going to have to swallow it.

Trump’s Blocking Of Critics On Twitter Violates Constitution – US Judge (R.)

Trump has made his @RealDonaldTrump Twitter account an integral and controversial part of his presidency, using it to promote his agenda, announce policy and attack critics. He has blocked many critics from his account, which prevents them from directly responding to his tweets. U.S. District Judge Naomi Reice Buchwald in Manhattan ruled that comments on the president’s account, and those of other government officials, were public forums, and that blocking Twitter users for their views violated their right to free speech under the First Amendment of Constitution. Eugene Volokh, a University of California Los Angeles School of Law professor who specializes in First Amendment issues, said the decision’s effect would reach beyond Trump.

“It would end up applying to a wide range of government officials throughout the country,” he said. The U.S. Department of Justice, which represents Trump in the case, said, “We respectfully disagree with the court’s decision and are considering our next steps.” Twitter, which is not a party to the lawsuit, declined to comment on the ruling. Buchwald’s ruling was in response to a First Amendment lawsuit filed against Trump in July by the Knight First Amendment Institute at Columbia University and several Twitter users. The individual plaintiffs in the lawsuit include Philip Cohen, a sociology professor at the University of Maryland; Holly Figueroa, described in the complaint as a political organizer and songwriter in Washington state; and Brandon Neely, a Texas police officer.

Cohen, who was blocked from Trump’s account last June after posting an image of the president with words “Corrupt Incompetent Authoritarian,” said he was “delighted” with Wednesday’s decision. “This increases my faith in the system a little,” he said. Novelists Stephen King and Anne Rice, comedian Rosie O’Donnell, model Chrissy Teigen, actress Marina Sirtis and the military veterans political action committee VoteVets.org are among the others who have said on Twitter that Trump blocked them. Buchwald rejected the argument by Justice Department lawyers that Trump’s own First Amendment rights allowed him to block people with whom he did not wish to interact.

“While we must recognize, and are sensitive to, the president’s personal First Amendment rights, he cannot exercise those rights in a way that infringes the corresponding First Amendment rights of those who have criticized him,” Buchwald said. She said Trump could “mute” users, meaning he would not see their tweets while they could still respond to his, without violating their free speech rights.

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Said it before: putting it in monetary terms is counter-productive. Only when we recognize that it’s not about money will we do something.

Hitting Toughest Climate Target Will Save World $30 Trillion In Damages (G.)

Achieving the toughest climate change target set in the global Paris agreement will save the world about $30tn in damages, far more than the costs of cutting carbon emissions, according to a new economic analysis. Most nations, representing 90% of global population, would benefit economically from keeping global warming to 1.5C above pre-industrial levels, the research indicates. This includes almost all the world’s poorest countries, as well as the three biggest economies – the US, China and Japan – contradicting the claim of US president, Donald Trump, that climate action is too costly. Australia and South Africa would also benefit, with the biggest winners being Middle East nations, which are threatened with extreme heatwaves beyond the limit of human survival.

However, some cold countries – particularly Russia, Canada and Scandinavian nations – are likely to have their growth restricted if the 1.5C target is met, the study suggests. This is because a small amount of additional warming to 2C would be beneficial to their economies. The UK and Ireland could also see some restriction, though the estimates span a wide range of outcomes. The research, published in the journal Nature, is among the first to assess the economic impact of meeting the Paris climate goals. Data from the last 50 years shows clearly that when temperatures rise, GDP and other economic measures fall in most nations, due to impacts on factors including labour productivity, agricultural output and health.

The scientists used this relationship and 40 global climate models to estimate the future economic impact of meeting the 1.5C target – a tough goal given the world has already experienced 1C of man-made warming. They also assessed the long-standing 2C target and the impact of 3C of warming, which is the level expected unless current plans for action are increased.

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It’s not gone. But it is under threat.

The Mediterranean Diet Is Gone: Region’s Children Are Fattest In Europe (G.)

For kids in Greece, Spain and Italy, the Mediterranean diet is dead, according to the World Health Organisation, which says that children in Sweden are more likely to eat fish, olive oil and tomatoes than those in southern Europe. In Cyprus, a phenomenal 43% of boys and girls aged nine are either overweight or obese. Greece, Spain and Italy also have rates of over 40%. The Mediterranean countries which gave their name to the famous diet that is supposed to be the healthiest in the world have children with Europe’s biggest weight problem. Sweets, junk food and sugary drinks have displaced the traditional diet based on fruit and vegetables, fish and olive oil, said Dr Joao Breda, head of the WHO European office for prevention and control of noncommunicable diseases.

“The Mediterranean diet for the children in these countries is gone,” he said at the European Congress on Obesity in Vienna. “There is no Mediterranean diet any more. Those who are close to the Mediterranean diet are the Swedish kids. The Mediterranean diet is gone and we need to recover it.” Children in southern Europe are eating few fruit and vegetables and drinking a lot of sugary colas and other sweet beverages, said Breda. They snack. They eat sweets. They consume too much salt, sugar and fat in their food. And they hardly move. “Physical inactivity is one of the issues that is more significant in the southern European countries,” he said. “A man in Crete in the 60s would need 3,500 calories because he was going up and down the mountain.”

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May 212018
 


Margaret Bourke-White Great Ohio River Flood, Louisville, Kentucky 1937

 

The Soaring Dollar Will Lead To An “Explosive” Market Repricing (ZH)
Draghi Calls for Consolidation of Debts? (Martin Armstrong)
Italy’s Organic Crisis (Thomas Fazi)
Italy Has A New Government As Populist Parties Agree On New Premier (ZH)
Argentina: From The “Confidence Fairy” To The -Still Devilish- IMF (CF)
US-China Trade War ‘On Hold’ As America Backs Off On Tariffs (Ind.)
Bill Aimed At Saving Community Banks Is Already Killing Them (Dayen)
EU Blocking Cities’ Efforts To Curb Airbnb (G.)
End Of Greek Bailout Means Fresh Cuts To Salaries, Pensions (K.)
Why Boomtown New Zealand Has A Homelessness Crisis
Hundreds Of Homeless People Fined And Imprisoned In UK (G.)
Scientists Revise Their Understanding of Novichok (Slane)

 

 

Dollar shortage grows as interest rates grow.

The Soaring Dollar Will Lead To An “Explosive” Market Repricing (ZH)

Something curious took place one month ago when the PBOC announced on April 17 that it would cut the reserve requirement ratio (RRR) by 1% to ease financial conditions: it broke what until then had been a rangebound market for both the US Dollar and the US 10Y Treasury, sending both the dollar index and 10Y yields soaring…

… which led to an immediate tightening in financial conditions both domestically and around the globe, and which has – at least initially – manifested itself in a sharp repricing of emerging market risk, resulting in a plunge EM currencies, bonds and stocks.

Adding to the market response, this violent move took place at the same time as geopolitical fears about Iran oil exports amid concerns about a new war in the middle east and Trump’s nuclear deal pullout, sent oil soaring – with Brent rising above $80 this week for the first time since 2014 – a move which is counterintuitive in the context of the sharply stronger dollar, and which has resulted in even tighter financial conditions across the globe, but especially for emerging market importers of oil.

Meanwhile, all this is playing out in the context of a world where the Fed continues to shrink its balance sheet – a public sector “Quantitative Tightening (QT)” – further tightening monetary conditions (i.e., shrinking the global dollar supply amid growing demand), even as high grade US corporate bond issuance has dropped off a cliff for cash-rich companies which now opt to repatriate cash instead of issuing domestic bonds, with the resulting private sector deleveraging, or “private sector QT”, further exacerbating tighter monetary conditions and the growing dollar shortage (resulting in an even higher dollar).

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Europe has no bond market left. Japan has no bond market left. All they have is central banks.

Draghi Calls for Consolidation of Debts? (Martin Armstrong)

COMMENT: You were here in Brussels a few weeks ago. Suddenly, the ECB is talking about the need to merge the debts to prevent a crisis. So your lobbying here seems to work. – RGV, Brussels. REPLY: I do not lobby. It is rather common knowledge I have made those proposals since the EU commission attended our World Economic Conference held back in 1998 in London. I focused on the reason the Euro would fail if the debts were not consolidated. So it is not a fair statement to say I meet in Brussels to lobby for anything. I meet with people who call me in because of a crisis brewing.

So everyone else understands what this is about, the ECB President Mario Draghi has come out and proposed interlocking the euro countries to create a “stronger” and “new vehicle” as a “crisis instrument” to save Europe. He is arguing that this should prevent countries from drifting apart in the event of severe economic shocks. Draghi has said it provides “an extra layer of stabilization” which is a code phrase for the coming bond crash. He has conceded that the legal structure is difficult because what he is really talking about is the consolidation of national debts into a single Eurobond market. There is no bond market that is viable in Europe after the end of Quantitative Easing. There will be NO BID.

There is no viable bond market left in Europe. The worst debt is below US rates only because the ECB is the buyer. Stop the buying and the ceiling comes crashing down. This is why what he is saying is just using a different label. He is not calling it debt consolidation, just an extra layer of stabilization to bind the members closer together. It will be a hard sell and it may take the crisis before anyone looks at this. You have “bail-in” policies because of the same problem. If the banks in Italy need a bailout from Brussels, then other members will look at it as a subsidization for Italy which is unfair. There is no real EU unity behind the curtain which is when the debt was NEVER consolidated from day one. They wanted a single currency, but not a single responsibility for the debt.

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“..20% of Italy’s industrial capacity has been destroyed, and 30% of the country’s firms have defaulted..”

Italy’s Organic Crisis (Thomas Fazi)

The Italian Marxist Antonio Gramsci coined the term “organic crisis” to describe a crisis that differs from ”ordinary” financial, economic, or political crises. An organic crisis is a “comprehensive crisis,” encompassing the totality of a system or order that, for whatever reason, is no longer able to generate societal consensus (in material or ideological terms). [..] Gramsci was talking about Italy in the 1910s. A century later, the country is facing another organic crisis. More specifically, it is a crisis of the post-Maastricht model of Italian capitalism, inaugurated in the early 1990s.

[..] The downfall of the political establishment—and the rise of the “populist” parties—can only be understood against the backdrop of the “the longest and deepest recession in Italy’s history,” as the governor of the Italian central bank, Ignazio Visco, described it. Since the financial crisis of 2007–9, Italy’s GDP has shrunk by a massive 10%, regressing to levels last seen over a decade ago. In terms of per capita GDP, the situation is even more shocking: according to this measure, Italy has regressed back to levels of twenty years ago, before the country became a founding member of the single currency. Italy and Greece are the only industrialized countries that have yet to see economic activity surpass pre–financial crisis levels.

As a result, around 20% of Italy’s industrial capacity has been destroyed, and 30% of the country’s firms have defaulted. Such wealth destruction has, in turn, sent shockwaves throughout the country’s banking system, which was (and still is) heavily exposed to small and medium-sized enterprises (SMEs). Italy’s unemployment crisis continues to be one of the worst in all of Europe. Italy has an official unemployment rate of 11% (12% in southern Italy) and a youth unemployment rate of 35% (with peaks of 60% in some southern regions). And this is not even considering underemployed and discouraged workers (people who have given up looking for a job and therefore don’t even figure in official statistics).

If we take these categories into consideration, we arrive at a staggering effective unemployment rate of 30%, which is the highest in all of Europe. Poverty has also risen dramatically in recent years, with 23% of the population, about one in four Italians, now at risk of poverty—the highest level since 1989.

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Europe gets nervous.

Italy Has A New Government As Populist Parties Agree On New Premier (ZH)

Taking the biggest step toward forming Italy’s next government, the head of the anti-immigration League party Matteo Salvini said he’s reached a deal with Five Star leader Luidi Di Maio on forming a populist government, and picked a premier. According to a report in Corriere, Florence University law professor Giuseppe Conte was chosen as prime minister, while Matteo Salvini would be proposed as interior minister, and Five Star head Luigi and Di Maio would be labor minister. On Saturday, Il Messaggero reported that Salvatore Rossi, the Bank of Italy’s director general, could be picked as finance minister.

Today, Ansa added that according to Di Maio, Five Star will head joint ministry of economic development and labor; separately Giancarlo Giorgetti, Matteo Salvini’s right-hand man, will be proposed as economy minister, while Nicola Molteni would become minister of the infrastructure and transport and Gian Marco Centinaio would head the department of Agriculture and Tourism. ANSA added that Salvini will present the proposal to President Sergio Mattarella on Monday. As Bloomberg adds, the endgame follows a week of turmoil in Italian bonds and stocks triggered by reports about the coalition’s spending plans and rejection of European Union budget rules.

Italy’s 10-year yield spread over German bonds shot up to 165 bps on Friday, the most since October, prompting a warning from Paris. French Finance Minister Bruno Le Maire said in a Sunday interview with Europe 1 radio that “if the new government took the risk of not respecting its commitments on debt, the deficit and the cleanup of banks, the financial stability of the entire euro zone will be threatened.” Salvini fired back on Twitter, suggesting the warning was “unacceptable” interference. “Italians first!” he said, clearly referencing Donald Trump.

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No crisis until now because so much was borrowed. Crisis now because so much was borrowed. It’s like a blue print for the entire world.

Argentina: From The “Confidence Fairy” To The -Still Devilish- IMF (CF)

[..] looking at the external front, one may even be forgiven for asking: why did this crisis take so long to burst? Argentina was haemorrhaging dollars for many years, and with no sign of reversal: since 2016 the domestic non-financial sector acquired an accumulated amount of USD 41 billion in external assets. During the same period, the current account deficit totalled another USD 30 billion, in the form of trade deficit, tourism deficit, profit remittances by foreign companies and increasing interest payments. The well-known factor that allowed all these trends to last until now is the foreign borrowing spree that involved the government, provinces, firms, and the central bank, including the inflow from short-term investors for carry trade operations.

In the case of debt issuance, since 2016 the central government, provinces and private companies, have issued a whopping USD 88 billion of new foreign debt (13% of GDP). In the case of carry trade operations, since 2016 the economy recorded USD 14 billon of short-term capital inflows (2% of GDP). The favourite peso-denominated asset for this operations were the debt liabilities of the central bank called LEBAC (Letters of the Central Bank). Because of this, the outstanding stock of this instrument has now become the centre of all attention. It is important to understand the LEBACs. They were originally conceived as an inter-bank and central bank liquidity management instrument.

Since the lifting of foreign exchange and capital controls and the adoption of inflation targeting, the stock of LEBACs grew by USD 18 billion. Moreover, the composition of holders has changed significantly since 2015: At that time, domestic banks held 71% of the stock, and other investors held 29%. In 2018 that proportion has reverted to 38% banks/62% to other non-financial institution holders, which includes other non-financial public institutions (such as the social security administration) (17%), domestic mutual investment funds (16%), firms (14%), individuals (9%), and foreign investors (5%). That means that a large part of all the new issuance of LEBAC is held by investors outside the regulatory scope of the central bank, especially individuals and foreign investors. [..] these holdings could easily be converted into foreign currency, causing a large FX depreciation.

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They’re talking.

US-China Trade War ‘On Hold’ As America Backs Off On Tariffs (Ind.)

The US will hold off on imposing steep tariffs on China that ignited fears of a trade war as both sides pursue a broader deal, a top economic official said. “We’re putting the trade war on hold,” Treasury secretary Steve Mnuchin said during an appearance on Fox News Sunday. “We have agreed to put the tariffs on hold”. The announcement of a detente in the escalating trade dispute came after Chinese officials visited Washington last week, leading the White House to release an optimistic statement about both sides agreeing to take “measures to substantially reduce the United States trade deficit in goods with China” and to work on expanding trade and protecting intellectual property.

Donald Trump has railed against trade imbalances, particularly with China, as he seeks to renegotiate America’s economic relationship with other nations he accuses of exploiting the US. Breaking with some of his top economic advisers, Mr Trump announced earlier this year that he would levy tariffs on steel and aluminium. He also signed a memorandum seeking tariffs on $60bn worth of Chinese goods. [..] Mr Mnuchin signalled that America was using the leverage from tariff threats to pivot to negotiation, saying talks with Chinese officials had produced “very meaningful progress” – including a “Very productive” oval office meeting between Mr Trump and a top Chinese official.

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Unintended?

Bill Aimed At Saving Community Banks Is Already Killing Them (Dayen)

After initial reluctance, House Republicans have finally reached an agreement to move forward on a bipartisan bank deregulation bill that the Senate passed in March. Its stated aim — to help rural community banks thrive against growing Wall Street power — appears to have been enough to power it across the finish line. But banking industry analysts say the bill is already having the opposite effect, and its loosening of regulations on medium-sized banks is encouraging a rush of consolidation — all of which ends with an increasing number of community banks being swallowed up and closed down. “We absolutely expect bank consolidation to accelerate,” Wells Fargo’s Mike Mayo told CNBC the day after the Senate passed the deregulation bill in March.

The reason? Banks no longer face the prospect of stricter and more costly regulatory scrutiny as they grow. And regional banks in Virginia, Ohio, Mississippi, and Wisconsin have already taken note before the bill has even passed into law, announcing buyouts of smaller rivals. The expected consolidation simply furthers an existing trend. Community banks have been struggling for decades against an epidemic of consolidation; the number of banks in America has fallen by nearly two-thirds in the past 30 years. Ironically, the one state that has seemingly figured out how to arrest this systemic abandonment of smaller communities is North Dakota, the home state of the bill’s co-author, Democratic Sen. Heidi Heitkamp. That’s because North Dakota has a public bank.

Using idle state tax revenue as its deposit base, the Bank of North Dakota partners with community lenders on infrastructure, agriculture, and small business loans. It has thrived, earning record profits for 14 straight years, which have funneled back into state coffers. And while Heitkamp has complained that the Dodd-Frank Act has been disastrous for community banks, in North Dakota they appear to be doing well. According to a Institute for Local Self-Reliance analysis of Federal Deposit Insurance Corp. data, North Dakota has more banks per capita than any other state, and lends to small businesses at a rate that is four times the national average.

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The wonders of lobbying.

EU Blocking Cities’ Efforts To Curb Airbnb (G.)

The explosive rise of short-stay Airbnb holiday rentals may be shutting locals out of housing and changing neighbourhoods across Europe, but cities’ efforts to halt it are being stymied by EU policies to promote the “sharing economy”, campaigners say. “It’s pretty clear,” said Kenneth Haar, author of UnfairBnB, a study published this month by the Brussels-based campaign group Corporate Europe Observatory. “Airbnb is under a lot of pressure locally across Europe, and they’re trying to use the top-down power of the EU institutions to fight back.” While it might have started as a “community” of amateur hosts offering spare rooms or temporarily vacant homes to travellers, Airbnb had seen three-digit growth in several European cities since 2014 and was now a big, powerful corporation with the lobbying clout to match, Haar said.

The platform lists around 20,500 addresses in in Berlin, 18,500 in Barcelona, 61,000 in Paris and nearly 19,000 in Amsterdam. Data scraped by the campaign group InsideAirbnb suggests that in these and other tourist hotspots, more than half – sometimes as many as 85% – of listings are whole apartments. Many of the properties are also rented out year-round, removing tens of thousands of homes from the residential rental market. Even in cities where short-term lets are now restricted, about 30% of Airbnb listings are available for three or more months a year, the data indicates. In those where they are not, such as Rome and Venice, the figure exceeds 90%.

[..] local attempts to protect residents’ access to affordable housing and preserve the face of city-centre neighbourhoods are being undermined, campaigners say, by the EU’s determination to see the “collaborative economy” as a key future driver of innovation and job creation across the bloc. “The commission seems almost hypnotised by the prospect of a strong sharing economy, and not really interested in its negative consequences,” said Haar. “Commissioners talk about ‘opportunities, not threats’. The parliament, too, recently condemned cities’ attempts to restrict lettings on online platforms.”

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The torture never stops. Death by a thousand cuts.

End Of Greek Bailout Means Fresh Cuts To Salaries, Pensions (K.)

Millions of salaried workers and pensioners stand to lose at least one monthly payment within two years, in 2019 and 2020. For Greece to boast of a successful – as the government desires – exit from the third bailout program without facing any obstacles by August, the Finance Ministry has ruled out the option of avoiding a reduction to pensions from 2019 and will also be proceeding with demands to reduce the minimum tax threshold as of 2020. [..] January 2019 is when the barrage of cuts to pensions is due to start, lasting at least until 2022, with reductions to main as well as auxiliary pensions and also the abolition of family benefits. The bulk of cuts will affect some 1.1 million retirees, who will see their main pension slashed as of this December (when the January 2019 pensions are paid out) by up to 18%.

In total, in the private and public sector, the reduction of pension expenditure from this particular measure in 2019 is estimated at 2.13 billion euros. Reductions will start at 5 euros a month and may reach up to 350 euros a month. There will even be cuts to pensions where there is no personal difference, owing to the abolition of family benefits currently being paid out with the pensions in the public and private sectors. This is expected to concern around 1 million pensioners. Some 200,000 pensioners will also be affected by the cut of the personal difference from auxiliary pensions. According to the midterm fiscal plan, the reduction in 2019 will amount to savings of 232 million euros for state coffers, which is the amount pensioners will also be deprived of.

According to the government’s plans, the sum of cuts that will become evident as of this December will mean that new pensions will eventually be 30 percent below the original level before the law introduced in May 2016 by then labor minister Giorgos Katrougalos. Therefore, the vast majority of monthly pensions will hover in the 700-euro range, even for retirees who used to bring in an average of 1,300 euros.

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“They’re a long way down a hole that was created by somebody else..”

Why Boomtown New Zealand Has A Homelessness Crisis

New Zealand’s dairy-fuelled economy has for several years been the envy of the rich world, yet despite the rise in prosperity tens of thousands of residents are sleeping in cars, shop entrances and alleyways. The emerging crisis has created a milestone that New Zealanders won’t be proud of: the highest homelessness rate among the 35 high-income OECD countries. It’s a curious problem afflicting boom towns where some residents get pushed onto the streets as they can no longer afford the rocketing rents in a flourishing economy – let alone purchase a house as the price of property has soared. “I have no assets at the moment,” said 64-year-old Victor Young, who spoke to Reuters at a soup kitchen in New Zealand’s capital, Wellington.

“It’s not a kind country, it’s not an easy country. I slept in my car 20 days last year. I worked 30 hours a week.” That sentiment is something the country’s popular Prime Minister Jacinda Ardern would like to reverse. Last Thursday, across town from the Sisters of Compassion Soup Kitchen, her Labour-led government unveiled its first budget with an ambitious plan to build social infrastructure. The government has allocated NZ$3.8 billion ($2.62 billion) of new capital spending over a five-year period. This includes an extra NZ$634 million for housing, on top of the NZ$2.1 billion previously announced to fund Kiwibuild, a government building program to increase affordable housing supply.

[..] But experts say the government’s first budget underwhelms on the radical reforms the wider public wanted. “They’re a long way down a hole that was created by somebody else and they haven’t really got a great or easy solution,” said John Tookey, professor of construction management at Auckland University of Technology. He said the government’s much-vaunted Kiwibuild could come unstuck because there weren’t enough skilled workers to deliver on its ambitious target to build 100,000 homes in the next decade.

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Where does this originate? WIth Theresa May of course.

Hundreds Of Homeless People Fined And Imprisoned In UK (G.)

Growing numbers of vulnerable homeless people are being fined, given criminal convictions and even imprisoned for begging and rough sleeping. Despite updated Home Office guidance at the start of the year, which instructs councils not to target people for being homeless and sleeping rough, the Guardian has found over 50 local authorities with public space protection orders (PSPOs) in place Homeless people are banned from town centres, routinely fined hundreds of pounds and sent to prison if caught repeatedly asking for money in some cases. Local authorities in England and Wales have issued hundreds of fixed-penalty notices and pursued criminal convictions for “begging”, “persistent and aggressive begging” and “loitering” since they were given strengthened powers to combat antisocial behaviour in 2014 by then home secretary, Theresa May.

Cases include a man jailed for four months for breaching a criminal behaviour order (CBO) in Gloucester for begging – about which the judge admitted “I will be sending a man to prison for asking for food when he was hungry” – and a man fined £105 after a child dropped £2 in his sleeping bag. Data obtained by the Guardian through freedom of information found that at least 51 people have been convicted of breaching a PSPO for begging or loitering and failing to pay the fine since 2014, receiving CBOs in some cases and fines up to £1,100. Hundreds of fixed-penalty notices have been issued. Lawyers, charities and campaigners described the findings as “grotesque inhumanity”, saying disadvantaged groups were fined for being poor.

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“..one of its primary effects is to generate in its victims a strong desire to go out for a beer followed by a pizza.”

Scientists Revise Their Understanding of Novichok (Slane)

Warning: This article is likely to contain traces of satire. In the aftermath of the poisoning of Sergei and Yulia Skripal in Salisbury on 4th March, scientists are currently re-evaluating their understanding of A-234 – or Novichok as it is more commonly known. Prior to the poisoning, it had been thought that the substance was around 5-8 times more toxic than VX nerve agent, and therefore that just a tiny drop would be likely to kill a person within minutes or possibly even seconds of them coming into contact with it. In the unlikely event of a person surviving, it was believed that their central nervous system would be completely destroyed, and that they would suffer numerous chronic health issues, including cirrhosis, toxic hepatitis, and epilepsy before dying a premature and miserable death, probably within a year or so.

However, according to an anonymous source at the Porton Down laboratory, which is located just a few miles down the road from Salisbury, scientists now believe they may have completely misunderstood the properties and effects of the chemical: “All the available information we had about Novichok before March this year suggested that it was by far the most lethal nerve agent ever produced, and we had assumed that even the tiniest drop would kill a person within minutes. However, after studying the movements of the Skripals after being poisoned, we have now revised our understanding, and we now believe that one of its primary effects is to generate in its victims a strong desire to go out for a beer followed by a pizza.”

Yet it’s not only the effects of the substance that have led to this reappraisal, but also its mysterious ability to move about from location to location, seemingly at will. According to the source: “At first, differing reports of the location of the poisoning baffled us. First it was the restaurant, then it was the pub, followed by the bench, the car, the cemetery, the flowers, the luggage, the porridge, and then finally the door handle three weeks after the incident. However, we now believe we have an explanation for this phenomena. When Novichok was developed, we think it may have been given the ability to appear in one place, only to then disappear and turn up in an entirely different place.

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May 182018
 
 May 18, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , ,  


Daniel Garber Lambertville holiday 1941

 

Almost Half Of US Families Can’t Afford Basics Like Rent And Food (CNN)
A Liquidity Crisis of Biblical Proportions Is Upon Us (Mauldin)
Fake News No Problem: Internet Totally Dominates Advertising in the US (WS)
Blundering Into Recession (Rickards)
Peso Crisis Highlights Fragility Of Argentina’s Economy (AFP)
China Offers Trump $200 Billion Package To Slash US Trade Deficit (R.)
Ecuador Orders Withdrawal Of Extra Assange Security From London Embassy (R.)
How Public Ownership Was Raised From The Grave (NS)
EU Dashes Membership Hopes Of Balkan States (G.)
US House Committee Approves Provision To Freeze Arms Sales To Turkey (K.)
Alabama Congressman Blames Sea Level Rise On Rocks Falling Into The Ocean (Al)
Climate Change On Track To Cause Major Insect Wipeout (G.)
EU Court Upholds Curbs On Bee-Killing Pesticides (AFP)

 

 

“California, New Mexico and Hawaii have the largest share of struggling families, at 49% each. North Dakota has the lowest at 32%.”

Almost Half of US Families Can’t Afford Basics Like Rent And Food (CNN)

Nearly 51 million households don’t earn enough to afford a monthly budget that includes housing, food, child care, health care, transportation and a cell phone, according to a study released Thursday by the United Way ALICE Project. That’s 43% of households in the United States. The figure includes the 16.1 million households living in poverty, as well as the 34.7 million families that the United Way has dubbed ALICE — Asset Limited, Income Constrained, Employed. This group makes less than what’s needed “to survive in the modern economy.” “Despite seemingly positive economic signs, the ALICE data shows that financial hardship is still a pervasive problem,” said Stephanie Hoopes, the project’s director.

California, New Mexico and Hawaii have the largest share of struggling families, at 49% each. North Dakota has the lowest at 32%. Many of these folks are the nation’s child care workers, home health aides, office assistants and store clerks, who work low-paying jobs and have little savings, the study noted. Some 66% of jobs in the US pay less than $20 an hour. [..] in Seattle’s King County, the annual household survival budget for a family of four (including one infant and one preschooler) in 2016 was nearly $85,000. This would require an hourly wage of $42.46. But in Washington State, only 14% of jobs pay more than $40 an hour.

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“For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell.”

A Liquidity Crisis of Biblical Proportions Is Upon Us (Mauldin)

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control. Lower asset prices aren’t the result of a recession. They cause the recession. That’s because access to credit drives consumer spending and business investment. Take it away and they decline. Recession follows. Corporate debt is now at a level that has not ended well in past cycles. Here’s a chart from Dave Rosenberg:

The Debt/GDP ratio could go higher still, but I think not much more. Whenever it falls, lenders (including bond fund and ETF investors) will want to sell. Then comes the hard part: to whom? You see, it’s not just borrowers who’ve become accustomed to easy credit. Many lenders assume they can exit at a moment’s notice. One reason for the Great Recession was so many borrowers had sold short-term commercial paper to buy long-term assets. Things got worse when they couldn’t roll over the debt and some are now doing exactly the same thing again, except in much riskier high-yield debt. We have two related problems here. • Corporate debt and especially high-yield debt issuance has exploded since 2009. • Tighter regulations discouraged banks from making markets in corporate and HY debt.

Both are problems but the second is worse. Experts tell me that Dodd-Frank requirements have reduced major bank market-making abilities by around 90%. For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell. That means all the bids can “magically” disappear just when you need them most. These “shadow banks” are not in the business of protecting your assets. They are worried about their own profits and those of their clients.

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“Internet advertising revenues in the US soared 21.4% in 2017 from a year earlier to a record of $88 billion..”

Fake News No Problem: Internet Totally Dominates Advertising in the US (WS)

You might think you never look at these ads or click on them, and you might think they’re the biggest waste of money there ever was, but reality is that internet advertising revenues in the US are surging, and are blowing all other media categories out of the water. But only two companies divvy up among themselves nearly 60% of the spoils. Internet advertising revenues in the US soared 21.4% in 2017 from a year earlier to a record of $88 billion, thus handily demolishing TV ad revenues, which declined 2.6% to $70.1 billion, according to annual ad revenue report by the Interactive Advertising Bureau (IAB). It was the second year in a row that internet ad revenues beat TV. In 2016, internet ad revenues (or “ad spend”) had surpassed TV ad revenues for the first time in US history.

And 2017 was the first year in the data series going back to 2010 that TV advertising actually declined. That formerly unstoppable growth industry is now a declining industry. [..] Social Media sizzles, fake news no problem. Advertising spend on social media surged 36% from the prior year to $22.2 billion, now accounting for a quarter of all internet advertising, up from just an 8% share in 2012. But who’s getting all this internet ad manna? The report is presented at an “anonymized aggregate level,” and no company names are given. But it’s not hard to figure out. The top ten companies got 74% of the share in Q4 2017, according to the report.

For further detail, we mosey over to eMarketer, which estimates that in 2017, Google captured 38.6% of the total internet ad spend in the US and Facebook captured 19.9% in the US, for a combined total of 58.5% of total internet ad spend. Just by these two companies! For perspective, Google’s parent Alphabet reported global revenues of $111 billion in 2017, and Facebook $40 billion. Practically all of it was generated by internet advertising.

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Well, you can’t do QE forever.

Blundering Into Recession (Rickards)

Contradictions coming from the Fed’s happy talk wants us to believe that QT is not a contractionary policy, but it is. They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy. They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a major impact. My estimate is that every $500 billion of quantitative tightening could be equivalent to one .25 basis point rate hike. Some estimates are even higher, as much 2.0% per year. That’s not “background” noise. It’s rock music blaring in your ears.

For an economy addicted to cheap money, this is like going cold turkey. The decision by the Fed to not purchase new bonds will therefore be just as detrimental to the growth of the economy as raising interest rates. Meanwhile, retail sales, real incomes, auto sales and even labor force participation are all declining or showing weakness. Every important economic indicator shows that the U.S. economy can’t generate the growth the Fed would like. When you add in QT, we may very well be in a recession very soon. Then the Fed will have to cut rates yet again. Then it’s back to QE. You could call that QE4 or QE1 part 2. Regardless, years of massive intervention has essentially trapped the Fed in a state of perpetual manipulation. More will follow.

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You can’t resolve a crisis with 40% interest rates. That spells panic.

Peso Crisis Highlights Fragility Of Argentina’s Economy (AFP)

Argentina appears to have resolved, at least in the short term, the crisis over the peso and its depreciation by taking drastic action — but analysts warn the policy is untenable over time. To sustain the Argentinian peso, the Central Bank raised its benchmark interest rate up to 40% and injected more than $10 billion into the economy. A crisis of confidence in the peso saw it plunge nearly 20% over six weeks as investors concerned by Argentina’s high inflation yielded to the lure of a strong dollar. On Monday, the unit dipped to a historic low of 25.51 against the dollar, as talks continued with the International Monetary Fund for a stabilizing loan. Argentina’s center-right president, Mauricio Macri, has sought to be reassuring, saying Thursday that “we consider the turbulence overcome.”

But he pointed the finger at an endemic problem: the budget deficit of Latin America’s third largest economy – even though it has dropped from six to four% of gross domestic product since he took power in late 2015. “It’s a real structural problem, well identified for a long time by the IMF, difficult to resolve politically,” said Stephane Straub, an economist at the Toulouse School of Economics. “If rates remain at this level, it will pose problems in the medium-to-long term. But confidence must return in order to reduce the rates. That’s where the intervention of the IMF can be useful, to bring back confidence and halt the flight of capital and the pressure on the currency.” Annual inflation at more than 20% and a balance of trade deficit still stifle economic reform efforts in an economy whose annual growth was 2.8% in 2017.

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But how?

China Offers Trump $200 Billion Package To Slash US Trade Deficit (R.)

China is offering U.S. President Donald Trump a package of trade concessions and increased purchases of American goods aimed at cutting the U.S. trade deficit with China by up to $200 billion a year, U.S. officials familiar with the proposal said. News of the offer came during the first of two days of U.S.-China trade talks in Washington focused on resolving tariff threats between the world’s two largest economies. But it was not immediately clear how the total value was determined. One of the sources said U.S. aircraft maker Boeing would be a major beneficiary of the Chinese offer if Trump were to accept it. Boeing is the largest U.S. exporter and already sells about a quarter of its commercial aircraft to Chinese customers.

Another person familiar with the talks said the package may include some elimination of Chinese tariffs already in place on about $4 billion worth of U.S. farm products including fruit, nuts, pork, wine and sorghum. [..]The top-line number in the Chinese offer would largely match a request presented to Chinese officials two weeks ago by Trump administration officials in Beijing. But getting to a $200 billion reduction of the U.S. China trade deficit on a sustainable basis would require a massive change in the composition of trade between the two countries, as the U.S. goods deficit was $375 billion last year. The United States’ two biggest exports to China were aircraft at $16 billion last year, and soybeans, at $12 billion.

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An invitation to London and Washington?!

Ecuador Orders Withdrawal Of Extra Assange Security From London Embassy (R.)

The president of Ecuador, Lenin Moreno, ordered the withdrawal on Thursday of additional security assigned to the Ecuadorian embassy in London, where WikiLeaks founder Julian Assange has remained for almost six years. The Australian took refuge in the small diplomatic headquarters in 2012 to avoid sexual abuse charges in Sweden. He rejects the charges and prosecutors have abandoned their investigation. However, British authorities are still seeking his arrest.

“The President of the Republic, Lenin Moreno, has ordered that any additional security at the Ecuadorian embassy in London be withdrawn immediately,” the government said in a statement. “ From now on, it will maintain normal security similar to that of other Ecuadorian embassies,” the statement said. Ecuador suspended Assange’s communication systems in March after his pointed political comments on Twitter. Moreno has described Assange’s situation as “a stone in his shoe.”

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Own your own basics.

How Public Ownership Was Raised From The Grave (NS)

For decades, nationalisation was a taboo subject in British politics. New Labour accepted all of Margaret Thatcher’s privatisations and even extended the market into new realms (such as air traffic control and Royal Mail). Few expected public ownership to return in any significant capacity. But the state has since risen from its slumber. Chris Grayling, the Transport Secretary, yesterday announced that the East Coast Mainline rail franchise would be renationalised (for the third time in 12 years) after its private operators defaulted on payments. Labour, which has called for the whole network to be restored to public ownership, can boast of changing policy from opposition. Further franchises, rail experts say (Northern Rail, South Western, Transpennine Express and Greater Anglia), may also be renationalised out of necessity.

Grayling emphasised that the East Coast move was a “temporary” and purely pragmatic one; the Conservatives usually deride nationalisation as retrogressive, redolent of the grim 1970s. But the voters back Labour’s interventionism. A poll published last year by the Legatum Institute and Populus found that they favour public ownership of the UK’s water (83%), electricity (77%), gas (77%) and railway (76%). Voters are weary of the substandard service and excessive prices that characterise many private companies. (And saw the commanding heights of the British banking system renationalised following the financial crisis.) .

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People are tired of more EU.

EU Dashes Membership Hopes Of Balkan States (G.)

Keep waiting in line, but don’t expect the door to open any time soon. That was the message delivered on Thursday to six Balkan states hoping to join the EU. The six had been invited to the EU heads of state summit in Sofia, Bulgaria, as a gesture to reaffirm their path towards EU membership. Instead, the summit was notable for divisions on whether or not the bloc could cope with further enlargement in the foreseeable future. The EU is keen to offer enticements to the six states, given worries about potential instability and the growing role of Russia in the region. Johannes Hahn, the commissioner for enlargement, has said on a number of occasions that the EU should “export stability” to the region to avoid “importing instability”.

But many member states are uneasy about giving concrete commitments. Emmanuel Macron has emerged as the leading opponent of further EU expansion. “I think we need to look at any new enlargement with a lot of prudence and rigour,” the French president told journalists in Sofia. “The last 15 years have shown a path that has weakened Europe by thinking all the time that it should be enlarged.” A declaration was adopted at the summit that offered support for the “European perspective” of the six Balkan countries but was noticeably lacking words about “accession” or “enlargement”.

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“The draft was approved with votes 60-1..”

US House Committee Approves Provision To Freeze Arms Sales To Turkey (K.)

The United States House Committee on Armed Services of the US Congress approved in principle on Thursday a draft bill on the US budget for 2019 national defense which includes a provision that would halt any sale of military equipment to Turkey until the Secretary of Defense submits a report on the US-Turkish relationship to the congressional defense committees. The draft was approved with votes 60-1 and will be followed by a debate on various amendments, while a similar procedure will take place in the Senate.

If this provision comes into force after the end of the debate, the restrictions imposed on Turkey’s military supplies will be wide-ranging, including, but not limited to, the sales of F-35 Lightning II JSF and F-16 Fighting Falcon, CH- 47 Chinook helicopters, H-60 Blackhawk, and Patriot missiles. The effort to freeze the delivery of the F-35 fighter aircraft to Ankara has formed part of an important campaign conducted by the Hellenic American Leadership Council (HALC) in Washington. As explained by HALC’s executive director, Endy Zemenides, the fact that this provision was included in the draft law is another important step towards fulfilling the goal of the HALC campaign.

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No comment.

Alabama Congressman Blames Sea Level Rise On Rocks Falling Into The Ocean (Al)

North Alabama Congressman Mo Brooks is making headlines again for blaming sea level rise on rocks falling into the ocean and silt washing from major rivers. Brooks was one of several Republican lawmakers sparring with a climate scientist at a Wednesday hearing of the House Science, Space, and Technology Committee. Included in the arguing were Republicans Lamar Smith of Texas, the committee’s chairman, and California’s Dana Rohrabacher, but the websites for Science and Esquire used Brooks’ picture to illustrate their coverage. “Republican lawmaker: Rocks tumbling into ocean causing sea level rise,” read the Science site’s headline.

“Is the Human Race Too Dumb to Survive on This Planet?” asked Esquire also featuring Brooks. “Here’s how big a rock you’d have to drop into the ocean to see the rise in sea level happening now,” chimed in the Washington Post. Brooks was quoted saying, “Every time you have that soil or rock or whatever it is that is deposited into the seas, that forces the sea levels to rise, because now you have less space in those oceans, because the bottom is moving up.” He referred to erosion on the California coastline and England’s White Cliffs of Dover and silt from the Mississippi and Nile rivers.

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I think chemicals are a much bigger issue.

Climate Change On Track To Cause Major Insect Wipeout (G.)

Global warming is on track to cause a major wipeout of insects, compounding already severe losses, according to a new analysis. Insects are vital to most ecosystems and a widespread collapse would cause extremely far-reaching disruption to life on Earth, the scientists warn. Their research shows that, even with all the carbon cuts already pledged by nations so far, climate change would make almost half of insect habitat unsuitable by the end of the century, with pollinators like bees particularly affected. However, if climate change could be limited to a temperature rise of 1.5C – the very ambitious goal included in the global Paris agreement – the losses of insects are far lower.

The new research is the most comprehensive to date, analysing the impact of different levels of climate change on the ranges of 115,000 species. It found plants are also heavily affected but that mammals and birds, which can more easily migrate as climate changes, suffered less. “We showed insects are the most sensitive group,” said Prof Rachel Warren, at the University of East Anglia, who led the new work. “They are important because ecosystems cannot function without insects. They play an absolutely critical role in the food chain.” “The disruption to our ecosystems if we were to lose that high proportion of our insects would be extremely far-reaching and widespread,” she said. “People should be concerned – humans depend on ecosystems functioning.” Pollination, fertile soils, clean water and more all depend on healthy ecosystems, Warren said.

In October, scientists warned of “ecological Armageddon” after discovering that the number of flying insects had plunged by three-quarters in the past 25 years in Germany and very likely elsewhere. “We know that many insects are in rapid decline due to factors such as habitat loss and intensive farming methods,” said Prof Dave Goulson, at the University of Sussex, UK, and not part of the new analysis. “This new study shows that, in the future, these declines would be hugely accelerated by the impacts of climate change, under realistic climate projections. When we add in all the other adverse factors affecting wildlife, all likely to increase as the human population grows, the future for biodiversity on planet Earth looks bleak.”

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It’s a start. But why the focus still only on bees?

EU Court Upholds Curbs On Bee-Killing Pesticides (AFP)

A top European Union court on Thursday upheld the ban on three insecticides blamed for killing off bee populations, dismissing cases brought by chemicals giants Bayer and Syngenta. The decision involves a partial ban by the European Union from 2013, but the bloc has since taken more drastic action after a major report by European food safety agency targeted the chemicals. “The General Court confirms the validity of the restrictions introduced at EU level in 2013 against the insecticides clothianidin, thiamethoxam and imidacloprid because of the risks those substances pose to bees,” a statement said.

“Given the existence of new studies … the Commission was fully entitled to find that it was appropriate to review the approval of the substances in question,” it said. Bees help pollinate 90% of the world’s major crops, but in recent years have been dying off from “colony collapse disorder,” a mysterious scourge blamed partly on pesticides. The pesticides – clothianidin, imidacloprid and thiamethoxam – are based on the chemical structure of nicotine and attack the nervous systems of insect pests. Past studies have found neonicotinoids can cause bees to become disorientated such that they cannot find their way back to the hive, and lower their resistance to disease.

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May 162018
 


Alfred Wertheimer Elvis 1956

 

What If Wall Street Is Waiting For The Wrong Disaster? (BI)
US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)
Economic Numbers Are Less Than Meet the Eye (Rickards)
Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)
Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)
Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)
Ecuador Spent Millions On Spy Operation For Julian Assange (G.)
New York City Poised To Join Airbnb Crackdown (Pol.)
US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)
Debt Relief Woes Threaten Greece’s Bailout Exit (K.)
Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)
UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)
Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

 

 

Deflation.

What If Wall Street Is Waiting For The Wrong Disaster? (BI)

What if the entire world of money is preparing for the wrong disaster — which would be a disaster in and of itself? Since the financial crisis, Wall Street, central-bank heads, economists, and policymakers have been waiting for the return of inflation. At the beginning of this year, they thought they had found it. It came, so they thought, in the form of a weak dollar, wage growth, economic stability in China, and steadily rising interest rates. So here in the US, the Fed started talking about the importance of preparing to fight runaway inflation. In fact, it’s obsessed with the idea. According to Deutsche Bank analyst Torsten Slok, the Fed is talking more about inflation now (in its minutes and in its reports) than it did in 2006 when the economy was actually overheating, right before the crash.

This, even though personal-consumption expenditures haven’t grown by the Federal Reserve’s 2% target since the financial crisis. There’s a lot of noise, from data revisions and Trump tweets, trade-war threats and hopes of growth from tax policy, a wobbling stock market, and rising interest rates. But when it comes down to it, the things that everyone is saying will be sources of inflation may not be sources at all. Meanwhile, the weak dollar, wage growth, and a stable China elixir that got markets high in January have since faded. That should be a warning. If we play our cards wrong and pay attention to all the wrong signs, we may still be in a world tilting dangerously closer to our old enemy, deflation.

[..] As Slok said, aging can’t fully explain why wage growth has been suppressed, but he has other ideas too. “One important reason why the expansion since 2009 has been so weak is that wealth gains have been unevenly distributed (see chart below). A decline in the homeownership rate and the number of households holding stocks has dampened consumer spending growth for the bottom 90% of households,” he wrote in a note to clients back in March.

The deflationary impacts of economic inequality and an aging population are not going away with the flick of a wrist or the push of a button. They are long-term challenges that require imaginative, difficult policy solutions. It’s hard to see that coming from the Trump administration or an increasingly polarized, uncooperative world. So we need to ask ourselves: Are we waiting for the wrong disaster?

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That’s the end?!

US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)

A sharp sell-off in the bond market is sending mortgage rates to the highest level in seven years. The average contract rate on the 30-year fixed will likely end the day as high as 4.875% for the highest creditworthy borrowers and 5% for the average borrower, according to Mortgage News Daily. Mortgage rates, which loosely follow the yield on the 10-year Treasury, started the year right around 4% but began rising almost immediately. They then leveled off in March and early April, only to begin rising yet again. Tuesday’s move follows positive economic data in retail sales, suggesting that newly imposed tariffs would not hit sales as hard as expected.

Rates have been widely expected to rise, as the Federal Reserve increases its lending rate and pulls back its investments in mortgage-backed bonds. But mortgage rates have reacted only in fits and starts. “The bottom line is that the writing on the wall has been telling rates to go higher since at least last September,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Rates keep looking back to see if the writing has changed, and although there have been opportunities for hope (trade wars, stock selling-sprees, spotty data at times), it hasn’t. Today is just the latest reiteration of that writing.”

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10% unemployment.

Economic Numbers Are Less Than Meet the Eye (Rickards)

Let’s start with the employment report. The U.S. Department of Labor, Bureau of Labor Statistics report dated May 4, 2018, showed the official U.S. unemployment rate for April 2018 at 3.9%, with a separate unemployment rate for adult men of 4.1% and adult women of 3.7%. The 3.9% unemployment rate is based on a total workforce of 160 million people, of whom 153 million are employed and 6.3 million are unemployed. The 3.9% figure is the lowest unemployment rate since 2001, and before that, the early 1970s. The average rate of unemployment in the U.S. from 1948 to 2018 is 5.78%. By these superficial measures, unemployment is indeed low and the economy is arguably at full employment.

Still, these statistics don’t tell the whole story. Of the 153 million with jobs, 5 million are working part time involuntarily; they would prefer full-time jobs but can’t find them or have had their hours cut by current employers. Another 1.4 million workers wanted jobs and had searched for a job in the prior year but are not included in the labor force because they had not searched in the prior four weeks. If their numbers were counted as unemployed, the unemployment rate would be 5%. Yet the real unemployment rate is far worse than that. The unemployment rate is calculated using a narrow definition of the workforce. But there are millions of able-bodied men and women between the ages of 25–54 capable of work who are not included in the workforce.

These are not retirees or teenagers but adults in their prime working years. They are, in effect, “missing workers.” The number of these missing workers not included in the official unemployment rolls is measured by the Labor Force Participation Rate, LFPR. The LFPR measures the total number of workers divided by the total number of potential workers regardless of whether those potential workers are seeking work or not. The LFPR plunged from 67.3% in January 2000 to 62.8% in April 2018, a drop of 4.4percentage points. If those potential workers reflected in the difference between the 2018 and 2000 LFPRs were added back to the unemployment calculation, the unemployment rate would be close to 10%.

[..] Another serious problem is illustrated in Chart 1 below. This shows the U.S. budget deficit as apercentage of GDP (the white line measured on the right scale) compared with the official unemployment rate (the blue line measured on the left scale). From the late 1980s through 2009, these two time series exhibited a fairly strong correlation. As unemployment went up, the deficit went up also because of increased costs for food stamps, unemployment benefits, stimulus spending and other so-called “automatic stabilizers” designed to bring the economy out of recession. That makes sense. But as the chart reveals, the correlation has broken down since 2009 and the two time series are diverging rapidly. Unemployment is going down, but budget deficits are still going up.

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Too late to get a new government?

Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)

In financial markets, memories can be short. Last year, Argentina sold 100-year bonds, joining a select club of countries with the confidence to borrow for such an extended period. Yes, the same Argentina that has defaulted on its debt eight times in the past 200 years, including the largest sovereign default in history in 2001. Not long before investors decided it was a good idea to lend to the South American nation for 100 years, it was largely shut out of international capital markets. In June 2017, Argentina sold $2.75 billion of US dollar-denominated 100-year bonds at an effective yield of 8%. The history of defaults seemed to be forgotten—nearly $10 billion in bids were placed for the bonds.

The sale came at a time when investors were hungry for high-yielding debt, but it also showed confidence in president Mauricio Macri and his program of pro-market reforms. Less than a year later, Macri has asked the IMF for a $30 billion loan to help it combat a currency crisis and limit further damage to the Argentinian economy from a dangerous outbreak of market turmoil. What went wrong?

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Not sure it’ll be all that slow. Turekey has borrowed in dollars up the wazoo.

Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)

Turkey’s economy is overheating and if the government doesn’t act then the country is in trouble, according to several analysts. “The government has no intention of tackling imbalances or overheating,” Marcus Chevenix, global political research analyst at TS Lombard, said in a research note this week. “It is this unwillingness to act that leads us to believe that we can now say that Turkey is entering a slow burning crisis.” The Turkish lira is at a record low against the dollar, and is ranked among the worst-performing currencies this year. After comments this week by Turkish President Recep Erdogan promising to lower interest rates after the country’s June election, the currency tanked to its lowest point yet against the greenback, hitting 4.4527 on Tuesday mid-afternoon.

The dollar has appreciated by around 18% against the lira so far this year. The reason? Erdogan has been sitting on interest rates, opting for a monetary policy that prioritizes growth over controlling its double-digit inflation. Turkey’s growth rate reached an impressive 7.4% for 2017 and leads the G-20, but at the expense of inflation, which has shot up to 10.9%. Market sentiment has driven much of the lira’s sell-off, as investors worry about government intervention in monetary policy and central bank independence. Investors have been hoping for a rate rise by the bank, but that now appears unlikely.

Erdogan plays an unusually heavy-handed role in deciding his country’s monetary policy, and many observers say he keeps the Central Bank of the Republic of Turkey’s (TCMB) hands tied. The bank finally raised its rates for the first time in several sessions in late April, moving its late liquidity window rate (which it uses to set policy) up by 75 basis points to 13.5%. The lira temporarily jumped on the news. But Erdogan aims to bring the rate back down, saying it must be done to ease pressure on Turkish households and drive the growth needed to create jobs for Turkey’s youth. “I’m seriously concerned about the Turkish lira,” Piotr Matys at Rabobank told CNBC via email. “Is Turkey the domino the market expects to fall next? It’s got all those problems — high current account deficit, government borrowing in other currencies.”

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He went to the City for this?!

Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)

“Shock and disbelief” – that’s how global money managers reacted to an attempt by Turkish President Tayyip Erdogan to re-assure foreign investors about his economic management as the lira went into tailspin. Fund managers who met Erdogan and his delegation in London on Monday, part of a three-day visit to Britain, were baffled about how he plans to tame rising inflation and a currency in freefall – while simultaneously seeking lower interest rates. Some said that while Erdogan has crushed his domestic enemies, he would find taking on international financial markets with policies that defy economic orthodoxy much tougher.

A resurgent dollar, rising oil prices and a jump in borrowing costs have caused havoc across emerging markets in recent weeks. However, Turkey has been among the worst affected due to its a gaping current account deficit and growing puzzlement over who exactly holds the reins of monetary policy. Erdogan’s comments that he planned to take greater control of the economy after snap presidential and parliamentary elections next month deepened investors’ worries about the central bank’s ability to fight inflation, helping to send the lira to a record low on Tuesday.

Rampant inflation dogged Turkey for decades before 2000 and has been back in double digits since the start of 2017. But Erdogan has styled himself as an enemy of high interest rates, defying orthodox monetary policy that prescribes tighter credit to keep a lid on prices. Speaking on condition of anonymity due to the political sensitivity of the meetings, investors told Reuters they were flabbergasted by his stance and willingness to go into battle with world markets at such a fragile time.

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A suggestive and tendentious piece by the Guardian, which seems to prepare us for a justification of Ecuador throwing Julian out. Other articles in today’s paper have titles like “How Julian Assange became an unwelcome guest in Ecuador’s embassy” and “Why does Ecuador want Assange out of its London embassy?”

Ecuador Spent Millions On Spy Operation For Julian Assange (G.)

Ecuador bankrolled a multimillion-dollar spy operation to protect and support Julian Assange in its central London embassy, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police, according to documents seen by the Guardian. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected the WikiLeaks founder while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Other guests included hackers, activists, lawyers and journalists.

[..] Documents show the intelligence programme, called “Operation Guest”, which later became known as “Operation Hotel” – coupled with parallel covert actions – ran up an average cost of at least $66,000 a month for security, intelligence gathering and counter-intelligence to “protect” one of the world’s most high-profile fugitives. An investigation by the Guardian and Focus Ecuador reveals the operation had the approval of the then Ecuadorian president, Rafael Correa, and the then foreign minister, Ricardo Patiño, according to sources. [..] Worried that British authorities could use force to enter the embassy and seize Assange, Ecuadorian officials came up with plans to help him escape.

They included smuggling Assange out in a diplomatic vehicle or appointing him as Ecuador’s United Nations representative so he could have diplomatic immunity in order to attend UN meetings, according to documents seen by the Guardian dated August 2012. In addition to giving Assange asylum, Correa’s government was apparently prepared to spend money on improving his image. A lawyer was asked to devise a “media strategy” to mark the “second anniversary of his diplomatic asylum”, in a leaked 2014 email exchange seen by the Guardian.

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Force them to open the books.

New York City Poised To Join Airbnb Crackdown (Pol.)

New York’s City Council is plotting a crackdown on Airbnb, the largest home-sharing platform in the world, as the hotel industry and its unionized workers push lawmakers in some of the nation’s biggest cities to blunt the $30 billion company’s growth. New York City’s push resembles a legislative effort underway in Los Angeles, and comes months after San Francisco passed a measure mandating that hosts of short-term rental platforms register their homes with the city, leading to a decline in listings. The coastal cities are among Airbnb’s largest markets in the United States.

The Council is crafting a bill that would require online home-sharing companies to provide the Mayor’s Office of Special Enforcement with the addresses of their listings — a potential blow to Airbnb if its users are revealed to be turning rent-regulated apartments into business enterprises in a city starved for more housing. The move is coming two years after New York’s state Legislature first took aim at Airbnb with a bill that banned the advertising of illegal short-term rentals — but ultimately did little to hurt the company. The New York push comes amid a well-funded advertising and lobbying campaign by the hotel industry, which has run ads supporting a recent report from City Comptroller Scott Stringer that was critical of Airbnb, and is accusing the company of reducing the amount of affordable housing in cities.

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What’s taking so long?

US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)

Litigation against OxyContin maker Purdue Pharma is intensifying as six more U.S. states on Tuesday announced lawsuits, accusing the company of fueling a national opioid epidemic by deceptively marketing its prescription painkillers to generate billions of dollars in sales. U.S. state attorneys general of Nevada, Texas, Florida, North Carolina, North Dakota and Tennessee also said Purdue Pharma violated state consumer protection laws by falsely denying or downplaying the addiction risk while overstating the benefits of opioids. “It’s time the defendants pay for the pain and the destruction they’ve caused,” Florida State Attorney General Pam Bondi told a press conference.

Florida also sued drugmakers Endo Pharmaceuticals, Allergan, units of Johnson & Johnson and Teva Pharmaceutical Industries, and Mallinckrodt, as well as drug distributors AmerisourceBergen, Cardinal Health and McKesson. [..] Lawsuits have already been filed by 16 other U.S. states and Puerto Rico against Purdue. The privately-held company in February said it stopped promoting opioids to physicians after widespread criticism of the ways drugmakers market highly addictive painkillers. Bondi said state attorneys general from New York, California and Massachusetts were preparing similar lawsuits.

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And on and on and on…

Debt Relief Woes Threaten Greece’s Bailout Exit (K.)

The tug of war between the IMF and Berlin over the Greek debt issue is threatening Greece’s successful bailout program exit in August. Germany insists on granting Greece gradual debt relief under the condition that it will be approved every year by the Bundestag. For its part, the IMF disagrees with Berlin’s insistence on reviewing the measures every year and is threatening to leave the Greek program. If the IMF were to leave the program because it thinks that debt relief measures are inadequate to secure the sustainability of Greece’s debt, the country’s access to international market funding will be cast in doubt. This means that, inevitably, the government will have to resort to precautionary credit to shield itself from complications.

The chasm between Berlin and the IMF was clear during Monday’s session of the so-called Washington Group – representatives of Greece’s creditors as well as the governments of Germany, France, Spain and Italy, the biggest eurozone economies. Poul Thomsen, the head of the IMF’s European Department, who attended Monday’s meeting, countered that Berlin’s conditions were not acceptable. Thomsen said Tuesday that the Fund wants to activate the program for Greece but warned that time is running out and asked for final decisions on the matter by the next Eurogroup on May 24.

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Speed up deportations and appeals, restrict freedom of movement. Lovely

Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)

Greece’s parliament approved legislation Tuesday that is designed to speed up the asylum process for migrants, ease the overcrowding at Greek island refugee camps and to deport more people back to Turkey. Under the new law, staff will be added at the office that handles asylum requests, the appeals process for rejected applications will be shortened and travel restrictions can be imposed on asylum-seekers who are moved from the Greek islands to the mainland. Currently, restrictions on asylum-seekers are mostly limited to five islands near the coast of Turkey, where strained refugee camps are trying to cope with up to three times more residents than planned.

More than 16,000 people are stuck there. A group of 13 Greek human rights organizations, however, has accused the government of ignoring refugee rights. The number of newly arriving migrants and refugees has risen sharply this year at the islands and Greece’s land border with Turkey, prompting the change in policy. Police cleared out two abandoned factory buildings used by migrants in the city of Patras in western Greece early Tuesday. More than 600 people will be moved from there to refugee camps on the mainland, police said.

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Have we lost the ability to frame everything in anything else than monetary terms?

UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)

Never mind that the new environmental watchdog will have no teeth. Never mind that the government plans to remove protection from local wildlife sites. Never mind that its 25-year environment plan is all talk and no action. We don’t need rules any more. We have a pouch of magic powder we can sprinkle on any problem to make it disappear. This powder is the monetary valuation of the natural world. Through the market, we can avoid conflict and hard choices, laws and policies, by replacing political decisions with economic calculations. Almost all official documents on environmental issues are now peppered with references to “natural capital” and to the Natural Capital Committee, the Laputian body the government has created to price the living world and develop a set of “national natural capital accounts”.

The government admits that “at present we cannot robustly value everything we wish to in economic terms; wildlife being a particular challenge”. Hopefully, such gaps can soon be filled, so we’ll know exactly how much a primrose is worth. The government argues that without a price, the living world is accorded no value, so irrational decisions are made. By costing nature, you ensure that it commands the investment and protection that other forms of capital attract. This thinking is based on a series of extraordinary misconceptions. Even the name reveals a confusion: natural capital is a contradiction in terms. Capital is properly understood as the human-made segment of wealth that is deployed in production to create further financial returns.

Concepts such as natural capital, human capital or social capital can be used as metaphors or analogies, though even these are misleading. But the 25-year plan defines natural capital as “the air, water, soil and ecosystems that support all forms of life”. In other words, nature is capital. In reality, natural wealth and human-made capital are neither comparable nor interchangeable. If the soil is washed off the land, we cannot grow crops on a bed of derivatives. A similar fallacy applies to price. Unless something is redeemable for money, a pound or dollar sign placed in front of it is senseless: price represents an expectation of payment, in accordance with market rates. In pricing a river, a landscape or an ecosystem, either you are lining it up for sale, in which case the exercise is sinister, or you are not, in which case it is meaningless.

Still more deluded is the expectation that we can defend the living world through the mindset that’s destroying it. The notions that nature exists to serve us; that its value consists of the instrumental benefits we can extract; that this value can be measured in cash terms; and that what can’t be measured does not matter, have proved lethal to the rest of life on Earth. The way we name things and think about them – in other words the mental frames we use – helps determine the way we treat them.

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Make a fresh bed every day.

Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

Chimpanzees have much cleaner beds – with fewer bodily bacteria – than humans do, scientists have found. A study comparing swabs taken from chimp nests with those from human beds found that people’s sheets and mattresses harboured far more bacteria from their bodies than the animals’ beds did from theirs. The researchers say their findings suggest that our attempts to create clean environments for ourselves may actually make our surroundings “less ideal”. More than a third – 35 per cent – of the bacteria in human beds comes from our own saliva, skin and faecal particles. By contrast, chimps – humans’ closest evolutionary relatives – appear to sleep with few such bacteria.

“We found almost none of those microbes in the chimpanzee nests, which was a little surprising,” said Megan Thoemmes, lead author of the paper. The researchers collected samples from 41 chimpanzee beds – or nests – in Tanzania and tested them for microbial biodiversity. At 15 primates’ nests, researchers also used vacuums to find out whether there were arthropods, such as insects, spiders, mites and ticks. “We also expected to see a significant number of arthropod parasites, but we didn’t,” said Ms Thoemmes. In addition, the team were shocked to find very few fleas, lice and bed bugs – ectoparasites – in the chimp nests.

“There were only four ectoparasites found, across all the nests we looked at. And that’s four individual specimens, not four different species,” said Ms Thoemmes, a PhD student at North Carolina State University. She believes chimps’ beds are cleaner because they make them freshly in treetops each day.

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May 112018
 
 May 11, 2018  Posted by at 8:33 am Finance Tagged with: , , , , , , , , , , ,  


Pablo Picasso La lecture 1932

 

‘Everything’ in Argentina is 20% to 30% Overvalued – Lacalle (BI)
About That FBI ‘Source’ (Strassel)
The Art of Breaking a Deal (Escobar)
China Walks A Fine Line In Iran (Dorsey)
Capitalism Is Collectivist (CA)
Karl Marx Sacrificed Logic On The Altar Of His Desire For Revolution (Keen)
Theresa May Turns Brexit Into Role-Reversal Game (G.)
Third of British Homeowners Priced Out Of Their Own Property (Ind.)
Greece Sees Spike In Waivers Of Inheritance (K.)
The Answer To Life, The Universe And Everything Might Be 73. Or 67 (G.)
Palm Oil Producers Are Wiping Out Orangutans (G.)

 

 

“Obviously the economy will shrink, but it shrinks to reality..”

‘Everything’ in Argentina is 20% to 30% Overvalued – Lacalle (BI)

“Everything” in Argentina is 20% to 30% overvalued, making a financial crisis inevitable, Daniel Lacalle, an economist and fund manager, told Business Insider. A financial crisis has been building in Argentina for years but was hidden by an inflationary bubble which politicians refused to address because they wanted to “avoid the pain,” said Lacalle, chief economist at Tressis SV and a fund manager at Adriza International Opportunities. “Argentina was an accident waiting to happen… Right now GDP [in Argentina] is a fabrication… a complete invention. Obviously the economy will shrink, but it shrinks to reality. It needs to face reality,” he said.

The Argentine peso has been struggling against an increasingly strong dollar. Two interest rate hikes in 24 hours failed to prevent the fall of the currency’s value and the country is seeking billions from the International Monetary Fund, according to reports. The news shocked Argentines who are still traumatized by the last IMF loan which coincided with austerity and the financial crisis in 2001 that caused social and economic chaos. The next crisis could already be underway. “The crisis is already happening. You have seen prices go through the roof, discontent, the economy is not growing as it was supposed to grow,” said Lacalle.

He added that the problems have been building for years but were disguised by a “massive bubble” which came from an “extreme inflow of cheap dollars” during the end of QE and helpful “tailwind” conditions. The tailwind has now reversed thanks to an increasingly strong dollar and the prospect of an interest rate rise from the US Federal Reserve. The result is a crisis which interest rate rises have failed to stave off. It was disguised by politicians who wanted to “avoid the pain of facing the problems, so they tried to indebt their way out of it,” Lacalle said.

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Planting a spy in a political campaign may cause a problem or two.

About That FBI ‘Source’ (Strassel)

Did the bureau engage in outright spying against the 2016 Trump campaign? The Department of Justice lost its latest battle with Congress Thursday when it allowed House Intelligence Committee members to view classified documents about a top-secret intelligence source that was part of the FBI’s investigation of the Trump campaign. Even without official confirmation of that source’s name, the news so far holds some stunning implications. Among them is that the Justice Department and Federal Bureau of Investigation outright hid critical information from a congressional investigation. In a Thursday press conference, Speaker Paul Ryan bluntly noted that Intelligence Chairman Devin Nunes’s request for details on this secret source was “wholly appropriate,” “completely within the scope” of the committee’s long-running FBI investigation, and “something that probably should have been answered a while ago.”

Translation: The department knew full well it should have turned this material over to congressional investigators last year, but instead deliberately concealed it. House investigators nonetheless sniffed out a name, and Mr. Nunes in recent weeks issued a letter and a subpoena demanding more details. Deputy Attorney General Rod Rosenstein’s response was to double down—accusing the House of “extortion” and delivering a speech in which he claimed that “declining to open the FBI’s files to review” is a constitutional “duty.” Justice asked the White House to back its stonewall. And it even began spinning that daddy of all superspook arguments—that revealing any detail about this particular asset could result in “loss of human lives.” This is desperation, and it strongly suggests that whatever is in these files is going to prove very uncomfortable to the FBI.

The bureau already has some explaining to do. Thanks to the Washington Post’s unnamed law-enforcement leakers, we know Mr. Nunes’s request deals with a “top secret intelligence source” of the FBI and CIA, who is a U.S. citizen and who was involved in the Russia collusion probe. When government agencies refer to sources, they mean people who appear to be average citizens but use their profession or contacts to spy for the agency. Ergo, we might take this to mean that the FBI secretly had a person on the payroll who used his or her non-FBI credentials to interact in some capacity with the Trump campaign. This would amount to spying, and it is hugely disconcerting.

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“Trump has reshuffled the Grand Chessboard. Persians, though, happen to know a thing or two about chess.”

The Art of Breaking a Deal (Escobar)

To cut to the chase, the US decision to leave the JCPOA will not open the path to an Iranian nuclear weapon. Supreme Leader Ayatollah Khamenei, who has the last word, repeatedly stressed these are un-Islamic. It will not open the path toward regime change. On the contrary, Iran hardliners, clerical and otherwise, are already capitalizing on their interpretation from the beginning – Washington cannot be trusted. And it will not open the path toward all-out war. It’s no secret every Pentagon war-gaming exercise against Iran turned out nightmarish. This included the fact that the Gulf Cooperation Council, or GCC, could be put out of the oil business within hours, with dire consequences for the global economy.

President Hassan Rouhani, in his cool, calm, collected response, emphasized Iran will remain committed to the JCPOA. Immediately before the announcement, he had already said: “It is possible that we will face some problems for two or three months, but we will pass through this.” Responding to Trump, Rouhani stressed: “From now on, this is an agreement between Iran and five countries … from now on the P5+1 has lost its 1… we have to wait and see how the others react. “If we come to the conclusion that with cooperation with the five countries we can keep what we wanted despite Israeli and American efforts, Barjam [the Iranian description of the JCPOA] can survive.”

Clearly, a titanic internal struggle is already underway, revolving around whether the Rouhani administration – which is actively working to diversify the economy – will be able to face the onslaught by the hard-liners. They have always characterized the JCPOA as a betrayal of Iran’s national interest. [..] So, Trump has reshuffled the Grand Chessboard. Persians, though, happen to know a thing or two about chess.

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China will not turn its back on Iran. Neither will Russia.

China Walks A Fine Line In Iran (Dorsey)

Chinese businessman Sheng Kuan Li didn’t worry about sanctions when he decided in 2010 to invest $200 million in a steel mill in Iran that started producing ingots and billet within months of the lifting of punitive measures against the Islamic republic as part of 2015 international nuclear agreement with Iran. With no operations in the United States, Mr. Li was not concerned about being targeted by the US Treasury. Mr. Li, moreover, circumvented financial restrictions on Iran by funding his investment through what he called a “private transfer,” a money swap that was based on trust and avoided regular banking channels. In doing so, Mr. Li was following standard Chinese practice of evading the sanctions regime by using alternative routes or establishing alternative institutions that were in effect immune.

To be able to continue to purchase Iranian oil while sanctions were in place, China, for example, established the Bank of Kunlun to handle Chinese payments. The Chinese experience in circumventing the earlier sanctions will come in handy with Beijing rejecting US President Donald J. Trump’s renewed effort to isolate Iran and force it to make further concessions on its nuclear and ballistic missiles programs as well as the Islamic republic’s regional role in the Middle East by walking away from the 2015 agreement and reintroducing punitive economic measures. Chinese foreign ministry spokesman Geng Shuang said in response to Mr. Trump’s announcement that the People’s Republic was committed to the deal and would “maintain communication with all parties and continue to protect and execute the agreement fully.”

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How can you maintain individualism rules when you see how people interact with social media?

Capitalism Is Collectivist (CA)

One of the central tenets of late-20th century consumer capitalism is the sanctity of the individual. Margaret Thatcher declared that “There’s no such thing as society, there are individual men and women.” Ayn Rand’s philosophy glamorized anti-social übermenschen who stand against everyone else. Friedrich von Hayek thought mild social welfare policy could be compared to Nazi fascism because they are both “collectivist.” Libertarians promote “individual freedom” with a level of brand discipline that would make Apple proud.

It’s easy to swallow this idea at face value, agreeing that market fundamentalists really do value the inviolability of the individual, while the left believes instead in the collective and the community. After all, market zealots don’t merely try to dismantle policies that benefit the common good. They attack the idea that there can be a common good to begin with. Because leftists talk about social welfare, and supporters of markets put the Individual at the center of their framework, one can forgive those who are seduced by this rhetoric. But it is only rhetoric. In fact, today’s economy is a collectivist enterprise, insofar as collectivism elevates the good of the aggregate and the organization over that of individual human beings.

Get past the well-crafted agitprop, and we see that corporate capitalism is all about subsuming the particular will of an individual to that of the institution. The institutions vary: a monopolistic corporation, a nonprofit charity, an arm of government, the police. But in each, the individual is actually helpless and powerless, with the needs, wants, and will of the larger entity taking priority. Amazon workers work for Amazon: They don’t set the rules of their own workplace, that’s done from above. They don’t own the company, they don’t get to say what it does. And Amazon in particular is a pioneer in sacrificing the sanctity (and dignity) of the individual to the company. The employees serve the corporation, rather than the other way around.

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Steve on Marx’s crucial mistake.

Karl Marx Sacrificed Logic On The Altar Of His Desire For Revolution (Keen)

With both use-value and exchange-value quantitative, there will be a difference between these two “intrinsically incommensurable magnitudes” (Capital I. Ch. 19) that is the source of surplus. Marx’s best statement of this in relation to labor was in Capital I itself: “The daily cost of maintaining it [Labour], and its daily expenditure in work, are two totally different things. The former determines the exchange-value of the labour power, the latter is its use-value. The fact that half a [working] day’s labour is necessary to keep the labourer alive during 24 hours, does not in any way prevent him from working a whole day… The seller of labour power, like the seller of any other commodity, realises its exchange value, and parts with its use-value.”

He thus had a far more satisfying, positive proof as to why Labour was a source of surplus. But was it the only source? What about machinery as well? In the Grundrisse, when he was still enthralled by his new methodology, he applied it correctly to machinery: “It also has to be postulated (which was not done above) that the use-value of the machine [is] significantly greater than its value; i.e. that its devaluation in the service of production is not proportional to its increasing effect on production.” But Gadzooks! This means that machinery can be a source of surplus as well. And if so, then an increasing “organic composition of capital” has no implications for the levels of surplus and profit: they could go up just as well as go down when production became less labour-intensive.

The “Tendency for the Rate of Profit to Fall” disappears. Socialism is no longer inevitable. Marx’s reaction to this shock discovery was to employ verbal gymnastics until such a time that he could fool himself that he had reconciled the two approaches. He then set about fooling everyone else, and finally declared emphatically—and falsely—that: “However useful a given kind of raw material, or a machine, or other means of production may be, though it may cost £150… yet it cannot, under any circumstances, add to the value of the product more than £150”. With this false statement swallowed by Marx’s followers, the belief in the inevitability of socialism continued. Accidents of history led to his Russia’s Bolshevik followers attempting to impose socialism on feudal Russia, and the rest is a very unfortunate history.

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What despair looks like.

Theresa May Turns Brexit Into Role-Reversal Game (G.)

Theresa May has ordered Brexiters to study her “customs partnership” model, and remainers to go over the leavers’ “maximum facilitation” proposal, in a bid to thrash out a compromise between the two sides. Boris Johnson and Philip Hammond – apparently regarded as the “ultras” of leave and remain, respectively – have been sitting out of the cabinet working groups. May’s “customs partnership” will be examined by Brexiters Liam Fox and Michael Gove, teamed with remainer and Cabinet Office minister David Lidington. “Max-fac” will be workshopped by remainers Greg Clark, the business secretary, and Karen Bradley, the Northern Ireland secretary, along with Brexit secretary David Davis, a leaver.

The ministers have until Tuesday to examine their options, but entrenched positions mean a breakthrough is not expected. One cabinet minister told the Guardian it is partly about May wanting to “kick any decisions down the road for as long as she can”. It certainly looks that way, after Andrea Leadsom, the leader of the Commons, announced government business for the next fortnight – minus the EU withdrawal bill, which needs to come back from the Lords but is peppered with amendments that have enraged Brexiters. Labour accused the government of “subverting democracy” with the delay.

Sir John Major, meanwhile, has hit out at Brexiters’ failure to grasp that leaving the customs union would mean a hard border in Ireland and damaging consequences for peace there. The Conservative former PM, speaking at the Irish embassy in London, said without a customs union, border checks would be required by law, especially for food, animals and animal feed. “If so, a physical border seems unavoidable,” he said.

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How bubbles implode. Slowly at first.

Third of British Homeowners Priced Out Of Their Own Property (Ind.)

More than one in three UK homeowners wouldn’t be able to afford their home if it were listed on the property market at today’s value says new research, as the latest data confirms prices stutter upwards. The Halifax House Price Index, a leading measure of the state of the property market, this week released figures showing prices in the last three months were 2.2% higher than in the same period last year, with the average property now coming in at £220,962. The figures support separate findings that suggest that a significant proportion of those who have owned their own home even for a few years would already be priced out of the market if they were to attempt the purchase again, despite historically low mortgage interest rates.

More than one in three of the 3,000 property owners surveyed by MyJobQuote said their home’s value had increased to the point that they would be unable to afford it at the current value – an average of £50,000 more than their original purchase price – or that changes to their financial circumstances would now make it impossible. However, the Halifax data suggests that a downward price trend that had been contained in geographical pockets until recently is becoming more widespread. While the annual figures still show a reasonable increase, month by month, prices are currently dropping nationally by an average of more than 3%. At a time when the property market traditionally enters a stronger summer buying season, the latest data, which follows a 1.6% increase in average prices in March, suggests a rocky state of affairs.

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Properties become unused and useless. There is no reason for this to happen. Scorched Earth.

Greece Sees Spike In Waivers Of Inheritance (K.)

The exhaustion of Greeks’ taxpaying capacity and the difficulties in meeting day-to-day expenses are leading to more and more citizens waiving inheritances, especially when they concern real estate assets. Legal sources say that the phenomenon no longer only concerns people waiving inheritances due to the debts of the deceased (which they would have to pay), but has spread to those wishing to avoid the payment of the inheritance tax and the Single Property Tax (ENFIA), as well as expenses related to property maintenance. According to the latest data available, in 2017 such waivers amounted to 130,000, while the definitive data will be issued soon, according to Justice Ministry sources.

That figure is quite impressive, given that it is almost three times the number of inheritance waivers in 2016 (54,422), and is up by 333 percent on the 2013 figure. This means that the state takes ownership of properties that cannot be utilized, as the fate of those assets remains unknown given that the state’s auction programs are fairly limited. For instance, in the first half of this month, the state will auction just three properties, after 15 assets went under the hammer over the previous fortnight but without any success. It also remains unknown how many assets have come under state ownership as a result of confiscations and property concessions.

What is certain is that all these properties are assets that will drop in value, which will make it even more difficult to find buyers for them in the future. Every beneficiary has the right to waive an inheritance, except for the state. The deadline for waiving an inheritance is four months after the day a will is published. If there is no will, the four-month period starts on the day the person dies. However, if the deceased lived abroad or the heir has their main residence in another country, then the deadline for waiving an inheritance extends to 12 months. The acceptance or waiver has to concern the entire inheritance, not parts of it.

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“..the universe is getting bigger quicker than it should be..”

The Answer To Life, The Universe And Everything Might Be 73. Or 67 (G.)

A crisis of cosmic proportions is brewing: the universe is expanding 9% faster than it ought to be and scientists are not sure why. The latest, most precise, estimate of the universe’s current rate of expansion – a value known as the Hubble constant – comes from , which is conducting the most detailed ever three-dimensional survey of the Milky Way. The data has allowed the rate of expansion to be pinned down to a supposed accuracy of a couple of percent. However, this newest estimate stands in stark contradiction with an independent measure of the Hubble constant based on observations of ancient light that was released shortly after the Big Bang. In short, the universe is getting bigger quicker than it should be.

The mismatch is significant and problematic because the Hubble constant is widely regarded as the most fundamental number in cosmology. “The fact the universe is expanding is really one of the most powerful ways we have to determine the composition of the universe, the age of the universe and the fate of the universe,” said Professor Adam Riess, at the Space Telescope Science Institute in Baltimore, Maryland, who led the latest analysis. “The Hubble constant quantifies all that into one number.” In an expanding universe, the further away a star or galaxy is, the quicker it is receding. Hubble’s constant – proposed by Edwin Hubble in the 1920s – reveals by how much.

So one approach to measuring it is by observing the redshifts of bright supernovae, whose light is stretched as the very space it is travelling through expands. A challenge, though, is pinpointing the exact distance of these stars. [..] The new data puts the Hubble constant at 73, which translates to galaxies moving away from us 73km per second faster for each additional megaparsec of distance between us and them (a megaparsec is about 3.3m light-years). However, a separate estimate of Hubble comes from observations of the Cosmic Microwave Background, relic radiation that allows scientists to calculate how quickly the universe was expanding 300,000 years after the big bang.

“The cosmic microwave background is the light that is the furthest away from us that we can see,” said Riess. “It’s been travelling for 13.7bn years… and it’s telling us how fast the universe was expanding when the universe was a baby.” Scientists then use the cosmic equivalent of a child growth chart (a computational model that roughly describes the age and contents of the universe and the laws of physics) to predict how fast the universe should be expanding today. This gives a Hubble value of 67.

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Mass extinction and mass insanity.

Palm Oil Producers Are Wiping Out Orangutans (G.)

These extraordinary creatures are our closest relatives, sharing 97% of our DNA. Their similarity to us is astonishing. They are intelligent, inquisitive, smile and show empathy. They even laugh when tickled, like us, when most other animals have evolved to be ticklish only in an itchy, irritating sort of way as a protective reflex. Encountering orangutans in the wild is like nothing else I’ve experienced. They once thrived in Indonesia’s lush, green rainforests but over the last 50 years they have been forced from their home and killed. In the last 16 years alone, 100,000 Bornean orangutans have been lost. All three species – Bornean, Sumatran and the Tapanuli, a species discovered only last year – are now on the critically endangered list.

The reason? It started in the 1960s as forests were logged for timber, but now it’s palm oil. Global demand for palm oil has increased six-fold since 1990. It’s in half of all packaged products on supermarket shelves and to avoid it completely would be incredibly tricky. Although palm oil in food can no longer be described simply as vegetable oil and must be clearly labelled (thanks to an EU directive in 2014), there is no such law for products such as soap, shampoo and other cosmetics. The supermarket Iceland’s decision to ditch palm oil from all of its own-brand products was, it says, a response to the palm oil industry’s catastrophic failure to halt deforestation and deal with the problem.

Even the Roundtable on Sustainable Palm Oil (RSPO) – the industry body charged with ensuring registered companies trade only in oil that has not come from deforestation – is failing spectacularly. Just over a week ago, Greenpeace exposed massive rainforest destruction in Papua allegedly caused by palm oil companies that are subsidiaries of a current RSPO member. Buying from them were big multinationals including Unilever, Nestlé, Pepsico and Mars. The companies concerned have responded by saying they are taking Greenpeace’s claims seriously and taking appropriate action. But if Greenpeace’s assertions are correct, no company can claim the palm oil it uses is 100% “sustainable”.

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May 102018
 
 May 10, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , , ,  


Paul Gauguin Road in Tahiti 1891

 

Beware of the Coming Economic Debt Bomb (Tanous)
Argentina Looks To Be Headed For Another Economic Storm (CNBC)
At Last, A Reason To Celebrate: House Prices Are Falling (G.)
RBS Reaches $4.9 Billion Deal To Settle US Mortgage Bond Probe (R.)
The Deep State First (Stockman)
Turkey Detains Dozens Of Air Force Personnel Over Gulen Links (R.)
Did Putin Green-Light Tonight’s Massive Israeli Strikes On Syria? (ZH)
Trump Welcomes Home Three Americans Released By North Korea (G.)
Democrats’ Lead Is Slipping In Generic Ballot Poll (Hill)
Is Capitalism a Threat to Democracy?
Bullshit Jobs: Why They Exist And Why You Might Have One (Vox)

 

 

“..over half of all personal income taxes will be required just to service the national debt.”

Beware of the Coming Economic Debt Bomb (Tanous)

In 2009, the year President Obama took office, the national debt held by the public was $7.27 trillion. At the end of fiscal 2016, that had soared to approximately $14 trillion. Given that our marketable debt doubled from 2009 to 2016, it’s remarkable that the annual cost of the interest on the debt rose far less, from $185 billion to $223 billion. The long march of rising rates that began recently is a dramatic reversal after nearly 40-years of declining interest rates. The new trend portends a return to more historic rates. You may be asking: what are the historic rates? We calculate that the average rate paid on the federal debt over the last 30 years was close to 5%. The Congressional Budget Office (CBO) has just raised its estimate that debt held by the public will rise to $17.8 trillion in 2020.

Some economists believe that the figure will be much higher. For our exercise though, let’s stick with the CBO estimate. We are postulating that the interest rate on our national debt may return to the long-term, 30-year average of 5%. Note, too, that Treasury debt rolls over every 3 to 4 years so the maturing bonds at low interest rates will be refinanced at the then current higher rates. Let’s do the math together. Take the CBO estimate of debt held by the public of $17.8 trillion in 2020, a 5% average interest on that amount comes to annual debt service of $891 billion, an unfathomable amount. (In 2017, interest on the debt held by the public was $458.5 billion, itself a scary number.)

In its current report, the CBO added: “It also reflects significant growth in interest costs, which are projected to grow more quickly than any other major component of the budget.” Here’s the danger: • According to CBO, individual income taxes produced $1.6 trillion in revenue in fiscal year 2017. • Under this 2020 scenario, over half of all personal income taxes will be required just to service the national debt. • Annual debt service in 2020 will exceed our newly increased defense budget of $700 billion in FY 2018. • Annual debt service would exceed our Social Security obligations.

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[The IMF] “..admitted shortly after the intervention that its support to keep the peso’s peg against the dollar prolonged the crisis in the country.”

Argentina Looks To Be Headed For Another Economic Storm (CNBC)

Argentina has started talks with the IMF seeking financial rescue once again, as inflation soars and the currency sinks. Buenos Aires looks to be going through another economic nightmare, with prices rising rapidly while the Argentine peso drops. The central bank announced last week another increase in rates to 40% — as the 12-month inflation rate hit 25.4%, above its 15% target. At the same time, since the start of the year, the peso is down by more than 20% against the U.S. dollar. [..] Asking for help from the Fund is a contentious issue for the country. Back in 2001, Argentina defaulted on $132 billion of foreign debt. The Washington-based institution, which was helping the country at the time, admitted shortly after the intervention that its support to keep the peso’s peg against the dollar prolonged the crisis in the country.

Following Macri’s announcement Tuesday, several people protested against a new IMF intervention, still traumatized by the economic collapse at the start of the century, Reuters reported. “The IMF has a terrible reputation among Argentinians, and so this is a big political gamble for the government,” Fiona Mackie, regional director for Latin America at the Economist Intelligence Unit, told CNBC via email. “At present, though, (the government) clearly sees the need to regain the confidence of markets as more pressing, and is hoping that its program of adjustment gets back on track in time for the presidential election late next year,” she added.

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“The Germans are right. Ever-rising house prices are a curse. They are bad for social mobility. They are bad for young people. And they are bad for the economy. ”

At Last, A Reason To Celebrate: House Prices Are Falling (G.)

The housing market is dead. Britain’s biggest mortgage lender, the Halifax, says that prices fell in April by 3.1%, the biggest monthly drop in almost eight years. Newspapers bury this disastrous news way back in their editions for fear that it will spread gloom and despondency. We need to wean ourselves off this way of thinking. Falling house prices are not disastrous, and only in a country with such a perverted relationship with bricks and mortar could they be seen as such. In Germany, they scratch their heads in bemusement when they hear Britons boast of how the value of their house has soared. The Germans are right. Ever-rising house prices are a curse. They are bad for social mobility. They are bad for young people. And they are bad for the economy.

The billions that are spent pushing up property prices could be more productively invested elsewhere. Imagine for a second that the next time you went to the train station the rail operating company had unexpectedly cut fares by 5%. Or that when doing your weekly shop you discovered that the supermarket had slashed your normal bill by £10. Would you think this was an unwelcome development? Daft question. Of course you would be happy, because your money would go further. Conversely, you would be less than chuffed to find more of your pay being spent on getting to work or putting food on the table. That’s why there are no headlines in the papers screaming “Boom-boom Britain: joy for commuters as rail fares rise by 10% for third year in a row”, or “Good news for families as supermarkets add £10 a week to the average shop”.

The papers stand up for their readers when they think they are being gouged by train companies and supermarkets. They stick up for buyers rather than sellers. But different rules apply to property. If the average house price had risen rather than fallen by £7,000 in April, that would have been front-page news and hailed as a sign that all was well with the economy. The papers tend to side with owner-occupiers rather than the buyers of property getting the rough end of the deal. This fetishisation of rising house prices is relatively recent. For the first 25 years after the second world war, a combination of mass housebuilding and strict controls on credit meant that the cost of property rose only modestly.

But since 1970, financial deregulation, much lower levels of housebuilding and a tax system heavily weighted in favour of owner-occupation have meant demand for housing in parts of the country has tended to outstrip supply. There have been four big house-price booms – the early 1970s, the late 80s, the mid 00s and the mid 10s. None of them have ended well.

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No criminal charges.

RBS Reaches $4.9 Billion Deal To Settle US Mortgage Bond Probe (R.)

The British state-backed bank said that $3.46 billion of the proposed civil settlement will be covered by existing provisions and the bank will take a $1.44 billion incremental charge in 2018’s second quarter to cover the rest. The accord would resolve a major issue that has weighed on the company’s share price and complicated the UK government’s plan to sell down its more than 70 percent stake in the bank. RBS Chief Executive Ross McEwan called the deal a “milestone.” “Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer,” he said in a statement.

The U.S. Attorney’s Office in Massachusetts, which led the probe, confirmed it had reached an agreement in principle with RBS that would resolve potential civil claims related to mortgage-backed securities that were issued from 2005 to 2008. “Further details remain to be negotiated, however, before a formal agreement can be reached,” the office said. The implosion of markets for risky residential mortgage-backed securities and related derivatives contributed to the 2008 global financial crisis and prompted a series of investigations by authorities including the Justice Department. The U.S. Attorney’s Office in Massachusetts had also been conducting a criminal investigation into RBS and former employees who were involved in structuring and selling the securities.

But the settlement that RBS and the office disclosed on Thursday was only civil in nature, signaling no criminal charges were likely to result. RBS previously agreed in July 2017 to pay $5.5 billion to resolve a lawsuit by the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, claiming it misled the U.S. mortgage giants into buying mortgage-backed securities. It resolved similar claims by the National Credit Union Administration related to mortgage-backed securities RBS sold to credit unions that later failed for $1.1 billion in 2016.

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“The mere threat of a military attack from the White House is madness because it arises from blatant lies that have absolutely nothing to do with US national security..”

The Deep State First (Stockman)

At his so-called Cabinet meeting this morning, the Donald basically threatened Iran with annihilation if it does what 15 other signatories to the nuclear non-proliferation treaty (NPT) do every day: Namely, increase production of industrial grade nuclear fuel (3.5%-5.0% purity) at its enrichment plant at Natanz—which, in any event, is crawling with IAEA inspectors. Moreover, it really doesn’t matter whether Trump was play-acting in the style of Art of the Deal or that the JPAOC could be improved. The mere threat of a military attack from the White House is madness because it arises from blatant lies that have absolutely nothing to do with US national security. Nor, for that matter, the security of any other country in the region, including Saudi Arabia and Israel.

The real purpose of the Donald’s missile-rattling is nothing more than helping Bibi Netanyahu keep his coalition of right wing religious and settler parties (Likud, United Torah Judaism, Shas, Kulanu and the Jewish Home) together, thereby maintaining his slim 61-vote majority in the 120-seat Knesset. Netanyahu’s malefic political glue is the utterly false claim that Iran is an “existential threat” to Israel because it is hell-bent on getting the bomb. But that’s where the whopper comes in. It amounts to the ridiculous postulate that Iran is so fiendishly evil that if it is involved in the nuclear fuel cycle in any way, shape or form – presumably even just operating a uranium mine – it is only a matter of months before it will have a bomb.

As a matter of record, of course, Netanyahu has been saying this since the early 1990s and he has always been wrong because there were never any facts or logic to support his blatant fear-mongering.

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Madman,

Turkey Detains Dozens Of Air Force Personnel Over Gulen Links (R.)

Turkish police detained 65 suspects on Thursday in an operation targeting air force personnel accused of links to the U.S.-based preacher whom Ankara says orchestrated an attempted coup in 2016, state-run Anadolu news agency said. Prosecutors issued arrest warrants for a total 96 people, of which 91 were from the air force, and police were still seeking the remaining suspects in an operation focused on the western city of Izmir and spread across 15 provinces, it said. The suspects were said to have ties to the cleric Fethullah Gulen, whose network is accused of being behind the failed putsch in July 2016, during which 250 people were killed. Gulen has denied involvement.

In a separate operation, an Ankara prosecutor on Thursday issued detention warrants for 93 employees of a private tutoring center that was previously closed down on suspicion of links to Gulen’s network, Anadolu said. Turkish authorities have detained 160,000 people and dismissed nearly the same number of civil servants since the failed military intervention, the U.N. human rights office said in March. Among those detained, more than 50,000 have been formally charged and kept in jail during their trials.

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Hmmm…

Did Putin Green-Light Tonight’s Massive Israeli Strikes On Syria? (ZH)

Just off a 10-hour visit with Russian President Vladimir Putin in Moscow, and less than a day after Trump pulled out of the Iran nuclear deal, Israeli Prime Minister Benjamin Netanyahu said on Wednesday he doesn’t expect Russia to act against Israeli forces as they continue exchanging fire with Syria. It appears the meeting wrapped up at the very moments a major escalation began along the Golan Heights, with both Syria and Israel trading blame for an initial attack which quickly escalated into Israeli cruise missile launches and shelling on targets in southern Syria and notably, on Damascus itself. The question remains, did Putin give Netanyahu the green light for tonight’s events?

If it wasn’t clear over the past weeks and months of unprovoked Israeli strikes on Syria—ostensibly to roll back Iranian troop presence—then it should be very clear by now that Syria, Israel, and Iran are now in a state of war and all signs point to a continued intensification of the conflict. And crucially, there’s currently no sign that Russia came to the aid of its close ally as rockets rained down on Damascus overnight. Russia has routinely looked the other way while Israel has conducted, by its own admission, over one hundred major strikes on Syria—most of which have come after Russian intervention on behalf of Assad in 2015. As Reuters reported late in the day Wednesday, Netanyahu told reporters just before departing Moscow: “Given what is happening in Syria at this very moment, there is a need to ensure the continuation of military coordination between the Russian military and the Israel Defence Forces.”

The Russians and Israelis coordinate their actions through a direct military hotline intended to avoid accidental clashes which could lead to escalation between the two countries. A reportedly “upbeat” Netanyahu further said, “”In previous meetings, given statements that were putatively attributed to – or were made by – the Russian side, it was meant to have limited our freedom of action or harm other interests and that didn’t happen, and I have no basis to think that this time will be different.” Thus it appears Israel may have been given a green light by Putin to engage targets in Syria, however, at this point it is unclear what limitations or restrictions Putin may have issued, if any at all.

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Victory.

Trump Welcomes Home Three Americans Released By North Korea (G.)

Three Americans released by North Korea have landed in the US under cover of darkness, with Donald Trump waiting on the tarmac to greet their plane. The three men emerged from a US government plane, flashing peace signs high above their heads. A huge US flag hung between two fire trucks served as a backdrop against the night sky. “I want to thank Kim Jong-un,” Trump said. “I think he wants to do something and bring that country into the real world.” “We didn’t think this was going to happen, and it did. It was very important to all of us,” he said, referring to the prisoner release. “The true honour will be if we have a victory in getting rid of nuclear weapons.” The US secretary of state, Mike Pompeo, flew to Pyongyang for a surprise one-day visit on Wednesday, when he met the North Korean leader and secured the release of the three men.

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What do Democrats stand for?

Democrats’ Lead Is Slipping In Generic Ballot Poll (Hill)

The lead held by Democrats over Republicans on generic ballot polls ahead of the 2018 midterm elections is beginning to slip, a new CNN poll suggests. Overall, 31% of respondents in a poll released Wednesday told CNN that they believe the country would be better off with Democrats in control of Congress, while 30% said Republicans should hold the reins. However, the largest proportion of respondents, at 34%, said it makes no difference to them who is in charge. Among registered voters asked whether they would vote Democratic or Republican in their congressional district if the elections were held today, Democrats had a three-point advantage, at 44% to 41%, which is within the poll’s margin of error.

Democrats have seen a steady decline in their advantage over Republicans in recent months, according to CNN polling, falling from a 16-point advantage in February to a 6-point one in March, to just a 3-point lead this week, roughly six months away from the midterm elections. An ABC News/Washington Post poll similarly found last month that Democrats’ lead over Republicans among registered voters was only 4 points, at 47% to 43%, down from a 12-point lead the poll found Democrats held in January. Democrats still have an edge in enthusiasm, according to CNN. Among respondents who said they are excited to vote in November, more plan to vote Democratic than Republican, at 53% to 41%.

But enthusiasm does seem to be growing among GOP voters. According to the CNN poll, 44% of Republican and Republican-leaning registered voters said they were “very enthusiastic” about voting, which is a jump from 36% in March. [..] President Trump’s own job approval has increased recently, with his approval rating at 41% in the CNN poll and his approval over his handling of the economy at 52%.

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On Polanyi.

Is Capitalism a Threat to Democracy?

In a sweeping, angry new book, “Can Democracy Survive Global Capitalism?” (Norton), the journalist, editor, and Brandeis professor Robert Kuttner champions Polanyi as a neglected prophet. Like Polanyi, he believes that free markets can be crueller than citizens will tolerate, inflicting a distress that he thinks is making us newly vulnerable to the fascist solution. In Kuttner’s description, however, today’s political impasse is different from that of the nineteen-thirties. It is being caused not by a stalemate between leftist governments and a reactionary business sector but by leftists in government who have reneged on their principles.

Since the demise of the Soviet Union, Kuttner contends, America’s Democrats, Britain’s Labour Party, and many of Europe’s social democrats have consistently tacked rightward, relinquishing concern for ordinary workers and embracing the power of markets; they have sided with corporations and investors so many times that, by now, workers no longer feel represented by them. When strongmen arrived promising jobs and a shared sense of purpose, working-class voters were ready for the message.

[..] Polanyi starts “The Great Transformation” by giving capitalism its due. For all but eighteen months of the century prior to the First World War, he writes, a web of international trade and investment kept peace among Europe’s great powers. Money crossed borders easily, thanks to the gold standard, a promise by each nation’s central bank to sell gold at a fixed price in its own currency. This both harmonized trade between countries and stabilized relative currency values. If a nation started to sell more goods than it bought, gold streamed in, expanding the money supply, heating up the economy, and raising prices high enough to discourage foreign buyers—at which point, in a correction so smooth it almost seemed natural, exports sank back down to pre-boom levels.

The trouble was that the system could be gratuitously cruel. If a country went into a recession or its currency weakened, the only remedy was to attract foreign money by forcing prices down, cutting government spending, or raising interest rates—which, in effect, meant throwing people out of work. “No private suffering, no restriction of sovereignty, was deemed too great a sacrifice for the recovery of monetary integrity,” Polanyi wrote. The system was sustainable politically only as long as those whose lives it ruined didn’t have a say. But, in the late nineteenth and early twentieth centuries, the right to vote spread. In the twenties and thirties, governments began trying to protect citizens’ jobs from shifts in international prices by raising tariffs, so that, in the system’s final years, it hardened national borders instead of opening them, and engendered what Polanyi called a “new crustacean type of nation,” which turned away from international trade, making first one world war, and then another, inevitable.

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More Graeber. Most jobs are bullshit.

Bullshit Jobs: Why They Exist And Why You Might Have One (Vox)

Corporate lawyers. Most corporate lawyers secretly believe that if there were no longer any corporate lawyers, the world would probably be a better place. The same is true of public relations consultants, telemarketers, brand managers, and countless administrative specialists who are paid to sit around, answer phones, and pretend to be useful. A lot of bullshit jobs are just manufactured middle-management positions with no real utility in the world, but they exist anyway in order to justify the careers of the people performing them. But if they went away tomorrow, it would make no difference at all. And that’s how you know a job is bullshit: If we suddenly eliminated teachers or garbage collectors or construction workers or law enforcement or whatever, it would really matter. We’d notice the absence.

But if bullshit jobs go away, we’re no worse off. [..] We’re all taught that people want something for nothing, which makes it easy to shame poor people and denigrate the welfare system, because everyone is lazy at heart and just wants to mooch off other people. But the truth is that a lot of people are being handed a lot of money to do nothing. This is true for most of these middle-management positions I’m talking about, and the people doing these jobs are completely unhappy because they know their work is bullshit. I think most people really do want to believe that they’re contributing to the world in some way, and if you deny that to them, they go crazy or become quietly miserable.

[..] You expect this outcome with a Soviet-style system, where you have to have full employment so you make up jobs whether a need exists or not. But this shouldn’t happen in a free market system. I think one of the reasons is there’s huge political pressure to create jobs coming from all directions. We accept the idea that rich people are job creators, and the more jobs we have, the better. It doesn’t matter if those jobs do something useful; we just assume that more jobs is better no matter what. We’ve created a whole class of flunkies that essentially exist to improve the lives of actual rich people. Rich people throw money at people who are paid to sit around, add to their glory, and learn to see the world from the perspective of the executive class.

Read more …

May 092018
 


Edgar Degas Two laundresses 1876

 

Fed Chair Powell To Emerging Markets: You Are On Your Own (ZH)
Argentina Seeks IMF Aid ‘To Avoid Crisis’ (BBC)
Europe On Collision Course With US Over Iran Deal (AFP)
Mnuchin: Revoking Boeing, Airbus Licenses To Sell Jets To Iran (R.)
Pompeo, In North Korea, To Return With Detained Americans (R.)
Central Banks Rigged The Cost Of Money And The State Of The Markets (Prins)
US Student Debt Just Hit $1.5 Trillion (MW)
The State of the American Debt Slaves, Q1 2018 (WS)
UK PM May Suffers Upper House Defeat Over Plans To Leave EU Single Market (R.)
UK Retailers Suffer Sharpest Sales Drop For 22 Years In April (G.)
Sharp Drop In UK Retail Job Vacancies As High Street Crisis Deepens (Ind.)
Cynthia Nixon: Marijuana Industry Could Be ‘A Form Of Reparations’ (Hill)
Record Drop In Greek Savings Last Year (K.)
Debt Repayment Feasible if Greece ‘Implements Reforms’ – Regling (AMNA)
British Diplomats: Saving The Rainforest Could Hurt Fighter Jet Sales (UE)

 

 

As the dollar keeps rising.

Fed Chair Powell To Emerging Markets: You Are On Your Own (ZH)

Over the weekend, when commenting on the ongoing rout in emerging markets, Bloomberg published an article titled “Rattled Emerging Markets Say: It’s Over to You, Central Bankers.” Well, overnight the most important central banker of all, Fed Chair Jay Powell responded to these pleas to “do something”, and it wasn’t what EMs – or those used to being bailed out by the Fed – wanted to hear. As Powell explained, speaking at a conference sponsored by the IMF and Swiss National Bank in Zurich, the Fed’s gradual push towards higher interest rates shouldn’t be blamed for any roiling of emerging market economies – which are well placed to navigate the tightening of U.S. monetary policy. In other words, with the Fed’s monetary policy painfully transparent, Powell’s message to EM’s was simple: “you’re on your own.”

Arguing that the Fed’s decision-making isn’t the major determinant of flows of capital into developing economies (which, of course, it is especially as the Fed gradually reverses the biggest monetary experiment in history) Powell said the influence of the Fed on global financial conditions should not be overstated, despite Bernanke taking the blame five years ago for the so-called taper tantrum. “There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs,” Powell said, adding that “markets should not be surprised by our actions if the economy evolves in line with expectations.”

[..] Meanwhile, as the Fed refuses to change course, other policy makers have been forced to step in to counter the sharp, sudden capital outflows, with Argentina’s central bank abruptly raising rates three times, to 40% to halt a sell-off in the peso. Russia has also put the brakes on further monetary easing. Turkey, which is a unique basket case in that Erdogan is expressly prohibiting the central bank from doing the one thing it should to ease the ongoing panic, i.e., raise rates, is seeking to bring down its current account deficit. Overnight, we learned that Indonesia was burning reserves to prop up its currency.

Meanwhile, also overnight, JPM CEO Jamie Dimon said it’s possible U.S. growth and inflation prove fast enough to prompt the Fed to raise interest rates more than many anticipate, and it would be wise to prepare for benchmark yields to climb to 4%. Such a scenario would be a disaster for EMs: “A sustained move higher would pressure local currencies and lure away foreign investors. The IMF warned last month that risks to global financial stability have increased over the past six months.” “Central banks may have to respond with interest rate hikes if the sell-off intensifies,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research in Singapore. Those most vulnerable include Ukraine, China, Argentina, South Africa and Turkey according to the Institute for International Finance.

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IMF demand: austerity. Back to the hoovervilles.

Argentina Seeks IMF Aid ‘To Avoid Crisis’ (BBC)

Argentina is to start talks about a financing deal with the International Monetary Fund (IMF) on Wednesday amid reports it is seeking $30bn (£22bn). Finance minister Nicolas Dujovne is due to fly to the IMF’s Washington offices. After recent turmoil that saw interest rates hit 40%, President Mauricio Macri said IMF aid would “strengthen growth” and help avoid crises of the past. The talks come 17 years after Argentina defaulted on its debts and 12 years since it severed ties with IMF. Mr Macri said in an address to the nation on Tuesday: “Just a few minutes ago I spoke with (IMF) director Christine Lagarde, and she confirmed we would start working on an agreement.”

“This will allow us to strengthen our program of growth and development, giving us greater support to face this new global scenario and avoid crises like the ones we have had in our history,” he said. Local media and Bloomberg reported that Argentina was seeking $30bn, although the government declined to comment. The peso has lost a quarter of its value in the past year amid President Macri’s pro-market reforms. Last week the central bank raised interest rates from 33.25% to 40%. Many people still blame IMF austerity requirements for policies that led to a financial and economic meltdown in 2001 to 2002 that left millions of middle class Argentines in poverty. Argentina eventually defaulted on its debts. And although its last IMF loan was paid down in 2006, the country severed ties with the Washington-based body.

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“US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately,” tweeted the US ambassador in Berlin, Richard Grenell.

Europe On Collision Course With US Over Iran Deal (AFP)

Donald Trump’s decision to pull out of the landmark 2015 deal curbing Iran’s nuclear programme is a bitter pill to swallow for European leaders and risks a creating a major transatlantic rift. French President Emmanuel Macron, who has spent the past year cultivating the closest ties with Trump among EU leaders, made saving the Iran deal one of his priorities during his state visit to Washington last month. German Chancellor Angela Merkel had also travelled to the US in late April and she worked closely with Macron and British Prime Minister Theresa May right up to the last minute.

In a joint statement issued shortly after Trump walked away from 2015 accord, they said they noted the decision with “regret and concern” but they said they would continue to uphold their commitments. “Our governments remain committed to ensuring the agreement is upheld, and will work with all the remaining parties to the deal to ensure this remains the case,” they said. They noted that this included the “economic benefits to the Iranian people that are linked to the agreement,” which means European firms would in theory continue to invest and operate there. This would appear to set the three countries, all signatories along with Russia, China and the EU, on a direct collision course with Washington.

European leaders have clashed with the White House already on issues ranging from climate change to trade and Trump’s decision to move the US embassy in Israel to Jerusalem. Trump’s hawkish National Security Advisor John Bolton said that European firms would have a “wind down” period to cancel any investments made in Iran under the terms of the accord. “US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately,” tweeted the US ambassador in Berlin, Richard Grenell. Under the 2015 deal, Iran was meant to benefit from increased trade and contracts with foreign firms in exchange for accepting curbs on its nuclear activity and stringent monitoring.

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Airbus? But it’s European. Oh: “All the deals are dependent on U.S. licenses because of the heavy use of American parts in commercial planes.”

Mnuchin: Revoking Boeing, Airbus Licenses To Sell Jets To Iran (R.)

Licenses for Boeing Co and Airbus to sell passenger jets to Iran will be revoked, U.S. Treasury Secretary Steven Mnuchin said on Tuesday after President Donald Trump pulled the United States out of the 2015 Iran nuclear agreement. Trump said he would reimpose U.S. economic sanctions on Iran, which were lifted under the agreement he had harshly criticized. The pact, worked out by the United States, five other world powers and Iran, lifted sanctions in exchange for Tehran limiting its nuclear program. It was designed to prevent Iran from obtaining a nuclear bomb. IranAir had ordered 200 passenger aircraft – 100 from Airbus SE, 80 from Boeing and 20 from Franco-Italian turboprop maker ATR.

All the deals are dependent on U.S. licenses because of the heavy use of American parts in commercial planes. Boeing agreed in December 2016 to sell 80 aircraft, worth $17 billion at list prices, to IranAir under an agreement between Tehran and major world powers to reopen trade in exchange for curbs on Iran’s nuclear activities. The U.S. Treasury Department, which controls licensing of exports, said the United States would no longer allow the export of commercial passenger aircraft, parts and services to Iran after a 90-day period. “The Boeing and (Airbus) licenses will be revoked,” Mnuchin told reporters at the Treasury. “Under the original deal, there were waivers for commercial aircraft, parts and services and the existing licenses will be revoked.”

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Are they going to say they were well treated?

Pompeo, In North Korea, To Return With Detained Americans (R.)

U.S. Secretary of State Mike Pompeo is expected to return from North Korea with three American detainees, as well as details of an upcoming summit between leader Kim Jong Un and U.S. President Donald Trump, a South Korean official said on Wednesday. Pompeo arrived in Pyongyang on Wednesday from Japan and headed to the Koryo Hotel in the North Korean capital for meetings, a U.S. media pool report said. Trump earlier broke the news of Pompeo’s second visit to North Korea in less than six weeks and said the two countries had agreed on a date and location for the summit, although he stopped short of providing details. An official at South Korea’s presidential Blue House said Pompeo was expected to finalize the date of the summit and secure the release of the three American detainees.

While Trump said it would be a “great thing” if the American detainees were freed, Pompeo told reporters en route to Pyongyang he had not received such a commitment but hoped North Korea would “do the right thing”. “We’ll talk about it again today,” he said. “I think it’d be a great gesture if they would choose to do so.” The pending U.S.-North Korea summit has sparked a flurry of diplomacy, with Japan, South Korea and China holding a high-level meeting on Wednesday. Chinese Premier Li Keqiang said concerned parties should seize the opportunity to promote denuclearization of the Korean peninsula, the official Xinhua news agency reported.

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More Nomi.

Central Banks Rigged The Cost Of Money And The State Of The Markets (Prins)

Nomi Prins: The word “collusion” has come to be associated with Russia, Trump and the US election. My book is about something entirely different, much more global: the collusion (or coordination) that the US central bank (the Federal Reserve) forged with other major countries to fabricate an abundance of money in the wake of the 2008 financial crisis to support the US financial system at first, and banks and select companies and markets worldwide, as well, since. The Fed conjured up this money to provide liquidity for Wall Street banks. The policy was then exported to the major central banks who acted as a lender and supplier of last resort to the world.

Some of the most notable central banks include the European Central Bank (ECB), the Bank of Japan and the Bank of England. Collusion is about these powerful institutions’ relationships with each other. The book dives into how central banks rigged the cost of money and the state of the markets, and ultimately created more inequality and instability as a result. They did all of this in order to subsidize private banks at the expense of people everywhere. The book reveals the people in charge of these strategies, their elite gatherings and public and private communications. It uncovers how their policies rerouted economies, geopolitics, trade wars and elections.

How do central banks relate to the world’s markets? Central banks have several functions from an official standpoint. The first is to regulate the smooth and orderly operation of private banks or public banks within a particular country or region (the ECB is responsible for many countries in Europe). The other function they are tasked with is setting interest rates (the cost of borrowing money) so that there’s adequate economic balance between full employment and a select inflation rate. The idea is that if the cost of money is cheap enough, private banks will lend to the general population and businesses. The ultimate goal is that the money can be used to expand enterprise, hire people and develop a strong economic posture.

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What cannot be repaid will not be.

US Student Debt Just Hit $1.5 Trillion (MW)

America’s student loan problem just surpassed a depressing milestone. Outstanding student debt reached $1.521 trillion in the first quarter of 2018, according to the Federal Reserve, hitting $1.5 trillion for the first time. Though the marker is somewhat arbitrary, it offers a reminder of how quickly student debt has grown—jumping from about $600 billion 10 years ago to more than $1.5 trillion today—and that the factors fueling the increase aren’t likely to disappear any time soon. “People pay attention to milestones,” said Mark Kantrowitz, a financial aid expert. When student debt surpassed $1 trillion in 2012, “it definitely caused a shift in coverage of student loans in the news media,” he said.

In theory, that helps raise awareness of the issue for student advocates, lawmakers and, in particular, borrowers when considering what college to attend. But Kantrowitz added, “What’s more important is the impact on individual borrowers.” And they are feeling it. College graduates leave school with about $37,000 in debt on average, according to Kantrowitz’s data, a sum that can be bearable for many, given that the average starting salary for a new college graduate last year hovered around $50,000. But a large share—as many as one in six college graduates, Kantrowitz estimates—will leave school with debt that exceeds their income. That will make it challenging for those borrowers to pay off their loans on a standard 10-year repayment plan, he said.

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Now let’s throw in some rate hikes, see what happens.

The State of the American Debt Slaves, Q1 2018 (WS)

Total consumer credit rose 5.1% in the first quarter, compared to a year earlier, or by $184 billion, to $3.824 trillion (not seasonally adjusted), according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. That 5.1% year-over-year increase isn’t setting any records – in 2011, year-over-year increases ran over 11%. But it does show that Americans are dealing with the economy and their joys and woes the American way: by piling on debt faster than the overall economy is growing. The chart below shows the progression of consumer debt since 2006. In line with seasonal patterns for first quarters, consumer credit (not seasonally adjusted) edged down from Q4, as the spending binge of the holiday shopping season turned into hangover, an annual American ritual:

Note how the dip after the Financial Crisis – when consumers deleveraged mostly by defaulting on those debts – didn’t last long. Over the 10 years since Q1 2008, consumer debt has now surged 47%. Over the same period, the consumer price index has increased 16.9%: Auto loans and leases for new and used vehicles rose by 3.8% from a year ago, or by $41 billion, to $1.118 trillion. It was one of the smaller increases since the Great Recession: The peak year-over-year jumps occurred at the peak of the new vehicle sales boom in the US in Q3 2015 ($87 billion or 9%). However, the still standing records were set in Q1 and Q2 2001 near the end of the recession, with each quarter adding around $93 billion, or 16%, year-over-year.

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It really makes no difference; the EU will say no anyway to all plans acceptable to the UK.

UK PM May Suffers Upper House Defeat Over Plans To Leave EU Single Market (R.)

Britain’s upper house of parliament on Tuesday inflicted another embarrassing defeat on Prime Minister Theresa May’s government on Tuesday, challenging her plan to leave the European Union’s single market after Brexit. May, who has struggled to unite the government behind her vision of Brexit, has said Britain will also leave the European Union’s single market and customs union after it quits the bloc next March. That stance has widened divisions not only within her own Conservative Party but also across both houses of parliament, which like Britons at large, remain deeply split over the best way to leave the EU after more than four decades of membership.

By a vote of 245 to 218, the unelected upper chamber, the House of Lords, supported an amendment to her Brexit blueprint, the EU withdrawal bill, requiring ministers to negotiate continued membership of the European Economic Area, meaning that it would remain in the single market. “The time has come over Brexit, really, for economic reality and common sense to prevail over political dogma and wishful thinking,” said Peter Mandelson, a member of the House of Lords from the main opposition Labour Party, who backed the amendment.

His comments drew criticism from pro-Brexit peers, including Conservative member Michael Forsyth who described the amendment as part of an attempt by “a number of people in this house who wish to reverse the decision of the British people”. Those proposing the amendment deny the charge. This is the 13th time in recent weeks that the government has been defeated in the House of Lords on the draft legislation that will formally terminate Britain’s EU membership.

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Must have been the weather.

UK Retailers Suffer Sharpest Sales Drop For 22 Years In April (G.)

Britain’s retailers suffered the sharpest drop in business in more than two decades last month as bad weather, the squeeze on household budgets and the timing of Easter led to a hefty cut in consumer spending. In the latest evidence of the slowdown in the economy since the turn of the year, the latest health check from the British Retail Consortium (BRC) and KPMG found that sales were down by 3.1% in April, the biggest decline since the survey was launched in 1995. Spending on non-food items has been particularly hard hit over the last three months, and retailers are braced for tough trading conditions to continue for the rest of the year even though wages have now started to rise more quickly than prices.

Retailers have been hit hard by a combination of problems on top of the squeeze on spending, including higher labour costs as a result of increases in the minimum wage, the shift to online shopping and rapidly changing spending patterns. Toys R Us and the electricals retailer Maplin collapsed in February and a number of retailers, including House of Fraser, New Look, Carpetright and Poundworld, are all pursuing agreements with their landlords to cut their rents and close stores. The industry had been expecting that year-on-year comparisons would look poor for April, but the BRC’s chief executive, Helen Dickinson, said the problem ran deeper.

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Pickers and packers.

Sharp Drop In UK Retail Job Vacancies As High Street Crisis Deepens (Ind.)

Wages rose in April amid strong demand for candidates, but the number of retail vacancies dropped sharply as the crisis on the high street worsened, a recruitment industry survey has found. Growth of overall job vacancies picked up to a three-month high in April, the Recruitment and Employment Confederation said. Demand for permanent staff increased in the “vast majority” of job categories during the month, with the notable exception of retail, the REC said. The study of 400 recruitment consultancies found that engineering and IT saw the steepest increases in vacancies. REC director of policy Tom Hadley said the high-profile struggles of many retailers indicated it was a good time for staff to consider how they could transfer their skills into other roles, such as in the technology sector or as pickers and packers in distribution centres. “Helping people make career transitions will become increasingly important in this fast-changing business and employment landscape,” he said.

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Smart.

“..In New York in 2017, 86% of fifth-degree marijuana arrests were of people of color, while only 9% of those arrested were white..”

Cynthia Nixon: Marijuana Industry Could Be ‘A Form Of Reparations’ (Hill)

New York gubernatorial candidate and actress Cynthia Nixon on Saturday expanded on her calls for marijuana legalization, saying that the industry could provide a form of “reparations” for communities of color. Nixon, who expressed her support for legalizing marijuana earlier this year, told Forbes that she views marijuana as a racial justice issue. “We’re incarcerating people of color in such staggering numbers,” she said. She expressed support for what is known as an “equity” program, which would prioritize giving marijuana business licenses to people who have received marijuana convictions in the past. “Now that cannabis is exploding as an industry, we have to make sure that those communities that have been harmed and devastated by marijuana arrests get the first shot at this industry,” she told Forbes.

“We [must] prioritize them in terms of licenses. It’s a form of reparations.” In New York in 2017, 86% of fifth-degree marijuana arrests were of people of color, while only 9% of those arrested were white, despite data showing that black and white people are about equally likely to use marijuana. “Arresting people — particularly people of color — for cannabis is the crown jewel in the racist war on drugs and we must pluck it down,” she said. “We must expunge people’s records; we must get people out of prison.” “The use of marijuana has been effectively legal for white people for a really long time,” she told Forbes. “It’s time that we legalize it for everybody else.”

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Everything keeps going down. It’s guaranteed.

Record Drop In Greek Savings Last Year (K.)

Household savings shrank by 32.5 billion euros in total in the period from 2011 to 2017, as families increasingly resorted to dipping into their deposits after finding that disposable incomes are no longer enough to cover their outgoings. Last year the drop in savings reached an historic high of 8.3 billion euros in current prices, according to an analysis by Eurobank. In addition, households have resorted to liquidating assets such as properties, deposits, shares and bonds, among other investments. Notably consumption shrank by almost a quarter from 2008 to 2017, falling from 163.3 billion euros to 123.3 billion last year, which was the sixth in a row with negative savings for Greek households; this means that disposable income was less than consumption.

Eurobank data showed that the wealth of the country’s households has been in constant decline since 2011, falling at an average rate of 6.6 billion euros per year, which is transformed from various forms of savings into consumption. The report by Eurobank’s analysis department highlighted that the economic recession, the stagnation in investments and the major fiscal adjustment Greece experienced from 2009 to 2017 have compressed households’ saving capacity, both in terms of incomes and their obligations to the state through taxes and social security contributions.

The figures reveal that Greek households’ net annual savings amounted to 11.4 billion euros in 2009, or 7% of their gross disposable income, while last year the balance was negative by 8.3 billion, or 6.7% of households’ gross disposable income. Shrinking private consumption has had a direct impact on investments: In 2009 investments had amounted to 18.3% of GDP and were 31.8% funded by domestic consumption and the rest from borrowing. In 2017 the investment rate slipped to 11.6% of GDP, with domestic consumption accounting for 91.1%.

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Delusional or lying to our faces?

Debt Repayment Feasible if Greece ‘Implements Reforms’ – Regling (AMNA)

“If the government in Athens implements all the remaining reforms decisively, Greece can successfully emerge from the ESM program in August 2018,” Klaus Regling, president of the European Stability Mechanism, has said. The ESM chief spoke at en event held in Aachen, Germany on the occasion of the awarding of the 60th International Charlemagne Prize to French President Emmanuel Macron. Regling expressed confidence that Greece could repay its loans, provided the maturity times are sufficiently extended and the obligations do not exceed 15-20% of the country’s economic performance. The ESM chief said that if the latest report on Greece’s bailout program is positive, there will be a final disbursement from the ESM, and then decisions will be made on possible further debt relief.

He argued that there was absolutely no alternative to the establishment of the rescue mechanism, without which, as he said, Greece, Portugal and Ireland would have probably come out of Economic and Monetary Union under “chaotic conditions,” while at the same time other countries such as Germany, would have problems. Regling also stressed that ESM interest rates are clearly below the level that countries would have to pay in the markets, and that is why they save a lot of money. In the case of Greece, “we estimate that ESM loans lead to savings of almost €10 billion [$11.8 billion] each year for the Greek budget”, he said and stressed that this is happening costing nothing to the European taxpayer.

“These savings are an expression of the solidarity shown by the member states of the euro zone,” he said, and referred to “great efforts” that Greece is making to fulfill the strict reform conditions. “Overall, Greece now has impressive adaptation efforts behind it. The budget deficit at the start of the 2009 crisis was above 15% of GDP. For two years, the country has been generating a budget surplus. Such a success is only possible with profound reforms,” Regling noted and said that if Greece implements all reforms, eurozone finance ministers would give Greece further debt relief, namely longer repayment times.

Finally, explaining the reasons why Greece remains in a program while the other countries have completed their own, referred to the country as a “special case” for three reasons: “Firstly, the Greek economy has had problems that are deeper rooted than for other countries in a program. Secondly, the country suffered from a much weaker public administration than the other eurozone member states. “And thirdly, the Greek government in the first half of 2015 went in the wrong direction with then finance minister (Yanis Varoufakis): major reforms were revoked and an effort was made to stop the agreed reform program. “As a result, the Greek economy had fallen into a recession. Grexit suddenly became a realistic scenario. The Bank of Greece estimates that this wrong move cost Greece €86 billion.”

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How we think.

British Diplomats: Saving The Rainforest Could Hurt Fighter Jet Sales (UE)

British government officials warned a proposed EU ban on palm oil in biofuels could harm UK defence sales to Malaysia, specifically Typhoon fighter jets, according to government emails obtained by Unearthed. The correspondence reveals that the British high commission in Kuala Lumpur even expected Malaysian Prime Minister Najib Razak to lobby Theresa May personally on the issue at last month’s Commonwealth Heads of Government meeting. In the event, Razak did not attend the meeting in London, a Number 10 spokeswoman told Unearthed. Correspondence between the Ministry of Defence, the Department for Environment, Food and Rural Affairs and the British high commission reveals British officials were concerned that EU moves to ban palm oil in biofuels could result in Malaysian trade reprisals against the UK.

MEPs voted in January to phase out the use of palm oil in biofuels, citing environmental concerns. The move sparked a furious response from the governments of Indonesia and Malaysia, which produce most of the world’s palm oil. The debate over palm oil is playing a significant role in the run-up to Malaysia’s general election, which will be held tomorrow. On the morning of 5 February, an official at the British high commission in Malaysia sent an email warning that the EU decision was “a big issue for Malaysia and, if not handled correctly, has the potential to impact on bilateral trade, particularly defence sales (Typhoon)”.

Read more …

May 072018
 


John French Sloan Sunday, Women Drying Their Hair 1912

 

Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)
Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)
WTF Just Happened to Argentina’s Peso? (Fernet)
Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)
In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)
Mueller Investigation is In Jeopardy (ZH)
Why The Justice Department Defies Congress (WSJ)
Merkel Allies Reject Idea Of European Finance Minister (R.)
Weak Foreign Demand Pushes Down German Industrial Orders (R.)
A Million More UK Children In Poverty Than In 2010 (G.)
Air France Survival In Doubt Over Strikes (BBC)
Greece’s Incredibly Shrinking Middle Class (K.)
Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

 

 

Argentina, Turkey, Indonesia. Brazil in a bit. The list will grow. As the dollar rises, emerging countries need more dollars to pay their debt, pushing the dollar up even more. And investors pull their money out of these countries. Vicious circles everywhere.

Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)

Argentina even issued a one-hundred-year bond at a spectacularly low rate (8.25%) with a very high demand, more than 3.5 times bid-to-cover. That $ 2.5 billion issuance seemed crazy. A one-hundred-year bond from a nation that has defaulted at least six times in the previous hundred years! Worse of all, those funds were used to finance current expenditure in local currency. The extraordinary demand for bonds and other assets in Argentina or Turkey was justified by expectations of reforms and a change that, as time passed, simply did not happen. Countries failed to control inflation, deliver lower than expected growth and imbalances soared just as the U.S. started to see some inflation, rates started to rise.

Suddenly, the yield spread between the U.S. 10-year bond and emerging markets debt was unattractive, and liquidity dried up faster than the speed of light even with a modest decrease of the Federal Reserve balance sheet. Liquidity disappears because of extremely leveraged bets on one single trade – a weaker dollar, higher global growth- unwind. However, another problem exacerbates the reaction. An aggressive increase in the monetary base by the Argentine central bank made inflation rise above 23%. With an increase in the monetary base of 28% per year, and seeking to finance excess spending by printing money and raising debt to “buy time”, the seeds of the disaster were planted. Excess liquidity and the US dollar weakness stopped. Local currencies and external funding face risk of collapse.

The Sudden Stop. When most of the emerging economies entered into twin deficits -trade and fiscal deficits- and consensus praised “synchronized growth”, they were sealing their destiny: When the US dollar regains some strength, US rates rise due to an increase in inflation, the flow of cheap money to emerging markets is reversed. Synchronized indebted growth created the risk of synchronized collapse.

Read more …

Is this really the end of cheap debt? It’s dangerous too: if Turkey gets into real trouble, Erdogan will seek a scapegoat.

Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)

A resurgent dollar and higher borrowing costs are smashing through Argentina and Turkey’s currencies like a wrecking ball and raising the likelihood more broadly that emerging markets’ three-year long interest rate cutting cycle is at an end. Emerging markets came into the year flying, riding on the back of a healthy global economy and rising commodity prices alongside tame inflation and a weak dollar. It looked more than likely that a wave of rate cuts would keep rolling, allowing a bond rally to continue. From Brazil and Russia to Armenia and Zambia, developing countries, big and small, have been on a rate cutting spree. With hundreds of rate cuts since Jan. 2015, the average emerging market borrowing cost fell under 6% earlier this year from over 7% at the time.

Fund managers’ profits too have soared in this time, with emerging local currency debt among the best performing asset classes, with dollar-based returns of 14% last year. Even in the first quarter of 2018, returns were a buoyant 4.3% Now though, almost exactly five years since the so-called taper tantrum shook an emerging market rally, these gains appear to be on the cusp of reversal. Argentina has jacked up its interest rates to 40% in response to a rout in its peso currency, while Turkey was also forced into a rate rise as its lira hit record lows against the dollar. Indonesia, after heavy interventions to stem rupiah bleeding, has also said it could resort to policy tightening.

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Déja vu.

WTF Just Happened to Argentina’s Peso? (Fernet)

If you’re watching Argentina’s economy, it hasn’t been a banner week. This week, Argentina had to raise its key interest rate three times to keep the Argentine peso from losing even more value against the dollar. Three interest rate hikes in one week is a lot – it implies the first two didn’t work, and the Central Bank is not in control. The interest rate currently sits at 40%. That means the Central Bank pays 40% per year on peso-denominated debt, which can imply that they expect the value of the peso to fall somewhere in the ballpark of 40% over a one year period. A year ago in April, the rate was closer to 26%. Yikes. And the exchange rate kicked off the week at around 20.5 ARS/USD. It jumped almost to 23 ARS/USD, and is currently hovering around 21.8 ARS/USD.

[..] When the US dollar increases in value, emerging market currencies decrease, meaning in Argentina’s case it will take increasingly more pesos to buy dollars. This then amplifies the risk that emerging markets will be unable to make payments on dollar denominated debt, causing investors to sell their emerging market investments, further amplifying the currency stress. The timing specifically in the case of Argentina is uncannily bad. Until this week, non-residents investing in Argentina were exempt from paying the equivalent of capital gains taxes across the board, including local-currency peso-denominated central bank notes, or LEBACs. This Tuesday, this exemption on LEBACs officially no longer applied, meaning foreign holders of these notes now incur a tax equal to 5% on profits.

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“Increased American consumption born of an overstimulated economy..”

Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)

Remedies the Trump administration is prescribing for U.S. trade problems won’t work, and forays in trade disputes with China will harm the United States, a veteran China expert with decades of experience in bilateral relations said [in Silicon Valley] on Saturday. “I believe that Washington has misdiagnosed our trade problems, that its remedies for them won’t work, and that what it is doing will harm the United States and other countries as much or more than it does China,” said Chas Freeman, senior fellow at Brown University’s Watson Institute, when addressing the annual conference of a prominent Chinese American group, the Committee of 100 (C100).

“The United States and China are each too globalized and dynamic to contain, too big and influential to ignore, and too successful and entangled with each other to divorce without bankrupting ourselves and all associated with us,” Freeman, also former U.S. assistant secretary of defense, said in an opening keynote speech. Pointing out that there are many reasons for the United States to seek cooperative relations with a rising China, Freeman added that the Trump administration has decided “to pick a fight — to confront China both militarily and economically.” “The fact that we Americans consume more than we save means that we import more than we produce. That creates an overall trade deficit. Ironically, the Trump administration has just taken steps guaranteed to increase this deficit,” he said.

“It has reduced tax revenues and boosted deficit spending, mostly on military research, development, and procurement. These actions take the national savings rate even lower while inflating domestic demand for goods and services. They cause imports to surge,” he added. “Increased American consumption born of an overstimulated economy explains why China’s trade surplus with the United States is again rising even as its surplus with the rest of the world falls,” he said. “Unless Americans boost our national savings rate by hiking taxes or cut our consumption by falling into recession, our overall trade deficit is sure to bloat,” he said.

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The Market Will Plummet if Global Central Banks Pull Plug

“..the reality is when a financial crisis happens, banks close their doors to depositors..”

In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)

Join Greg Hunter as he goes One-on-One with two-time, best-selling author Nomi Prins, who just released “Collusion: How Central Bankers Rigged The World.” Will the next crash be worse than the last one? Prins says, “Yes, it will because we will be falling from a higher height. The idea here is you are sinking on the Titanic as opposed to sinking on a canoe somewhere. All of this artificial conjured money is puffing up the system, along with money that is borrowed cheaply is also puffing up the system and creating asset bubbles everywhere. So, when things pop, there is more leakage to happen. The air in all these bubbles has created larger bubbles than we have had before.”

How does the common man protect himself? Prins says, “They have to own things, and by that I mean real assets, hard assets like silver and gold. That’s not as liquid, so taking cash out of banks and sort of keeping it in real things and keeping it on site . . . keeping cash physically. You need to extract it from the system because the reality is when a financial crisis happens, banks close their doors to depositors. . . . Also, basically try to decrease your debt.”

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Did Flynn plead guilty because he couldn’t pay the legal bills?

How much longer until Mueller is whistled back by his superiors? Can Rosenstein keep silent as one judge after another slams the Special Counsel?

Mueller Investigation In Jeopardy (ZH)

A funny thing happened on the way to impeaching Donald Trump. After two-years of investigations by a highly politicized FBI and a Special Counsel stacked with Clinton supporters, Robert Mueller’s probe has resulted in the resignation of National Security Advisor Michael Flynn, the arrests of Paul Manafort and Rick Gates, and the indictment of 13 Russian nationals on allegations of hacking the 2016 election – along with the raid of Trump’s personal attorney, Michael Cohen.

The nation has been on the edge of insanity waiting for that much-promised and long awaited link tying President Trump to Vladimir Putin we were all promised, only to find out that there is no link, the deck appears to have been heavily stacked against Donald Trump by bad actors operating at the highest levels of the FBI, DOJ, Obama admin and Clinton camp, and the real Russian conspiracy in the 2016 election was the participation of high level Kremlin sources used in the anti-Trump dossier that Hillary Clinton paid for. Now, as the out-of-control investigation moves from the headlines and into court, the all-encompassing “witch hunt,” as Trump calls it, may be in serious jeopardy.

As of Friday, three separate Judges have rendered harsh setbacks to the Mueller investigation – demanding, if you can believe it, facts and evidence to back up the Special Counsel’s claims – in unredacted format as one Judge demands, or risk having the cases tossed out altogether. [..] And as we noted yesterday, some have suggested that Flynn pleaded guilty due to the fact that federal investigations tend to bankrupt people who aren’t filthy rich – as was the case with former Trump campaign aide Michael Caputo, who told the Senate Intelligence Committee “God damn you to hell” after having to sell his home due to mounting legal fees over the inquiry. “Your investigation and others into the allegations of Trump campaign collusion with Russia are costing my family a great deal of money — more than $125,000 — and making a visceral impact on my children.”

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Quite strong for the Wall Street Journal: “Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust.”

Why The Justice Department Defies Congress (WSJ)

Until this week, Deputy Attorney General Rod Rosenstein and fellow institutionalists at the department had fought Congress’s demands for information with the tools of banal bureaucracy – resist, delay, ignore, negotiate. But Mr. Rosenstein took things to a new level on Tuesday, accusing House Republicans of “threats,” extortion and wanting to “rummage” through department documents. A Wednesday New York Times story then dropped a new slur, claiming “Mr. Rosenstein and top FBI officials have come to suspect that some lawmakers were using their oversight authority to gain intelligence about [Special Counsel Bob Mueller’s ] investigation so that it could be shared with the White House.”

Mr. Rosenstein isn’t worried about rummaging. That’s a diversion from the department’s opposite concern: that it is being asked to comply with very specific – potentially very revealing – demands. Two House sources confirm for me that the Justice Department was recently delivered first a classified House Intelligence Committee letter and then a subpoena (which arrived Monday) demanding documents related to a new line of inquiry about the Federal Bureau of Investigation’s Trump investigation. The deadline for complying with the subpoena was Thursday afternoon, and the Justice Department flouted it. As the White House is undoubtedly monitoring any new congressional demands for information, it is likely that President Trump’s tweet Wednesday ripping the department for not turning over documents was in part a reference to this latest demand.

Republicans also demand the FBI drop any objections to declassifying a section of the recently issued House Intelligence Committee report that deals with a briefing former FBI Director James Comey provided about former national security adviser Mike Flynn. House Republicans say Mr. Comey told them his own agents did not believe Mr. Flynn lied to them. On his book tour, Mr. Comey has said that isn’t true. Someone isn’t being honest. Is the FBI more interested in protecting the reputations of two former directors (the other being Mr. Mueller, who dragged Mr. Flynn into court on lying grounds) than in telling the public the truth?

We can’t know the precise motivations behind the Justice Department’s and FBI’s refusal to make key information public. But whether it is out of real concern over declassification or a desire to protect the institutions from embarrassment, the current leadership is about 20 steps behind this narrative. Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust. There is nothing to be gained from pretending this is business as usual, or attempting to stem continued fallout by hiding further details.

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And debt pooling. So much for closer integration.

Merkel Allies Reject Idea Of European Finance Minister (R.)

Leading politicians from Chancellor Angela Merkel’s conservatives want to pass a resolution at a meeting this week to reject any pooling of debts in Europe and any fiscal policy without national parliamentary controls, Handelsblatt reported. The daily business newspaper, citing sources from the conservative bloc’s parliamentary leadership, said the senior politicians also oppose European Commission plans for a European finance minister. The group includes the parliamentary leaders of the conservative bloc in the Bundestag, the European Parliament as well as from Germany’s 16 states, Handelsblatt reported.

Merkel will join them on Monday for a meeting in Frankfurt. The report highlights the resistance among Merkel’s conservatives to any euro zone reforms that could see more German taxpayers’ money being used to fund other member states. The conservatives are nervous about European Union reform after bleeding support to the anti-euro Alternative for Germany (AfD) party at national elections last September. Last month, Merkel called for a spirit of compromise on reforming the euro zone at a meeting with French President Emmanuel Macron, who pressed for solidarity among members of the currency union.

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No smooth sailing.

Weak Foreign Demand Pushes Down German Industrial Orders (R.)

German industrial orders unexpectedly dropped for the third month running in March due to weak foreign demand, data showed on Monday, suggesting factories in Europe’s largest economy are shifting into a lower gear. Contracts for German goods fell 0.9% after a downwardly revised drop of 0.2% the previous month, data from the Federal Statistics Office showed. Analysts polled by Reuters had on average predicted a 0.5% rise in orders. “The economy is slowing down, that’s the sure take-away from today’s industrial orders data,” VP Bank Group analyst Thomas Gitzel said, adding that some growth forecasts would soon have to be revised down.

The government last month cut its 2018 growth forecast to 2.3% from 2.4% and expressed concern about international trade tensions. “The debate about tariffs has probably created great uncertainty in Europe’s export-driven industry,” Gitzel added. As Europe’s biggest exporter to the United States, Germany is desperate to avoid an EU trade war with the United States. In the run-up to a June 1 deadline for U.S. President Donald Trump to decide on whether to impose steel and aluminum tariffs on the EU, Berlin is urging its European partners to be flexible and pursue a broad deal that benefits both sides. The drop in industrial orders was led by foreign orders which fell by 2.6%, while domestic orders rose 1.5%, the data showed.

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But the government says there a million LESS people in poverty.

A Million More UK Children In Poverty Than In 2010 (G.)

The number of children growing up in poverty in working households will be a million higher than in 2010, a new study has found. Research for the TUC estimates that 3.1 million children with working parents will be below the official breadline this year. About 600,000 children with working parents have been pushed into poverty because of the government’s benefit cuts and public sector pay restrictions, according to the report by the consultancy Landman Economics. The east Midlands will have the biggest increase in child poverty among working families, followed by the West Midlands and Northern Ireland, the research found. Frances O’Grady, the TUC general secretary, said child poverty in working households had shot up since 2010.

“Years of falling incomes and benefit cuts have had a terrible human cost. Millions of parents are struggling to feed and clothe their kids,” she said. “The government is in denial about how many working families just can’t make ends meet. We need ministers to boost the minimum wage now, and use the social security system to make sure no child grows up in a family struggling to get by.” [..] A government spokeswoman said it did not recognise the TUC’s figures. She said: “The reality is there are now 1 million fewer people living in absolute poverty compared with 2010, including 300,000 fewer children. “We want every child to get the very best chances in life. We know the best route out of poverty is through work, which is why it’s really encouraging that both the employment rate and household incomes have never been higher.”

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Shares down 13% this morning.

Air France Survival In Doubt Over Strikes (BBC)

The survival of strike-hit Air France is in the balance, according to the country’s economy minister. Bruno Le Maire’s warning that Air France could “disappear” comes as staff begin another round of industrial action over a pay dispute. Despite the French state owning 14.3% of the Air France-KLM parent group, the loss-making airline would not be bailed out, he said. On Friday Air France-KLM’s chief executive quit over the crisis. Air France-KLM is one of Europe’s biggest airlines, but has seen a series of strikes in recent weeks. Monday’s walk-out is the 14th day of action, as staff press for a 5.1% salary increase this year. The government’s response is seen as a test of labour reforms launched by French President Emmanuel Macron. There have also been strikes at the state-owned SNCF rail company.

On Sunday, Mr Le Maire told French news channel BFM: “I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes. “The survival of Air France is in the balance,” he said, adding that the state would not serve as a backstop for the airline’s debts. “Air France will disappear if it does not make the necessary efforts to be competitive,” he warned. Despite the strike, the airline insisted that it would be able to maintain 99% of long-haul flights on Monday, 80% of medium-haul services and 87% of short-haul flights. On Friday, Jean-Marc Janaillac, chief executive of parent company Air France-KLM, resigned after staff rejected a final pay offer from him, which would have raised wages by 7% over four years.

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That’s about 1 in 20: “From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more..”

Greece’s Incredibly Shrinking Middle Class (K.)

For salaried workers to bring home 1,500 euros per month net on a 12-month basis, or 18,000 euros per year not including holiday bonuses, their employers need to pay 2,610 euros a month or over 31,300 euros a year, given Greece’s particularly high taxes and social security contributions. For a self-employed professional to pocket the same amount , about 18,000 euros per annum, he or she would have to earn at least 50,000 euros on a yearly basis so as to cover professional expenses, taxes and contributions. As for new pensioners, a net income of 1,500 euros/month or 18,000 euros/year can only be achieved if they worked without pause for 40 years at an average monthly salary of 2,400 euros over that entire period.

The framework that has emerged in the last three years with tax and contribution hikes, in particular, as well as the new way pensions are being calculated are drastically reducing the chances of any worker or pensioner to have a decent monthly salary or pension. Official figures already highlight the shrinking of the so-called middle class: From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more, down from 840,000 in 2010. The shrinking trend of the middle class is expected to continue both for taxation and for practical reasons.

An employer will face the same cost hiring five or six part-timers offering a total of 20-24 working hours per day as in hiring one full-timer offering eight hours of work. Particularly in sectors where there is no need for highly skilled workers, such as retail commerce or tourism, the trend to replace well paid positions has already become dominant. Among the self-employed, overtaxation is this year anticipated to reduce the number of those declaring a taxable income of over 30,000 euros per year. As for pensioners, already the first pensions issues on the basis of the new system of calculation prove that the chances for anyone to secure a benefit of 1,500 euros after retirement are next to zero, and will shrink further in the years to come.

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Curious. Bonaire and St. Eustatius are part of the Dutch Kingdom. Conoco can’t move without their permission.

Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

U.S. oil firm ConocoPhillips has moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award over a decade-oil nationalization of its projects in the South American country, according to two sources familiar with its actions. The U.S. firm targeted Caribbean facilities on the islands of Bonaire and St. Eustatius that play critical roles in PDVSA’s oil exports, the country’s main source of revenue. PDVSA relies on the terminals to process, store and blend its oil. “We will work with the community and local authorities to address issues that may arise as a result of enforcement actions,” ConocoPhillips said in a statement to Reuters.

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May 052018
 


Edgar Degas Landscape with Path Leading to a Copse of Trees 1890-92

 

40% Unemployment Ain’t Awesome (Stockman)
The Next Recession Is Closer Than You Think (Cook)
US Lays Down A List Of Trade Demands To China (CNBC)
Theresa May Under Pressure To Ditch New Immigration Clampdown (Ind.)
150,000 UK ‘Mortgage Prisoners’ Need Help To Escape Expensive Deals (Ind.)
Argentina Hikes Interest Rates To 40% Amid Inflation Crisis (Ind.)
Judge In Manafort Case Rebukes Mueller For Exceeding Authority (G.)
The Horsefly Cometh (Jim Kunstler)
Chemical Weapons Watchdog Backtracks On ‘100g Of Novichok’ Claim (Ind. )
Greek Unpaid Taxes Build Up Again As Taxpayers Are Unable To Pay (K.)
Monsanto Appeals To India Supreme Court Over GMO Cotton Patents (R.)
Congo To Drill For Oil In Parks Home To Endangered Mountain Gorilla (Ind.)

 

 

“..at some point it gets pretty hard to hide 16.6 million missing workers..”

40% Unemployment Ain’t Awesome (Stockman)

[..] the Awesome Economy narrative gets more threadbare by the month. As Jeff Snider astutely observed in his commentary on today’s report—at some point it gets pretty hard to hide 16.6 million missing workers. What he means is that if the labor force participation rate had not plunged from more than 67.0% to the 62.8% level reported again for April, there would be 16.6 million more persons employed in the US economy today at the ostensible 3.9% unemployment rate.

“Here in the United States, the Bureau of Labor Statistics (BLS) sends us another farce. These payroll Friday’s were always a little overwrought, but in the past four years they have become ridiculous spectacles. It’s not the fault of the BLS (apart from questions about their estimates for 2014), mainly it is the same issue as in Japan. What should be obvious is misinterpreted sometimes intentionally. According to the latest figures, the unemployment rate in the US is now down to 3.9%. The reason it crossed the 4% line in April was perfect. Not in the manner of what a 3.9% unemployment should indicate, rather it was all the wrong things that expose the unemployment rate for what it is – meaningless. The primary reason for its drop was another monthly subtraction from the labor force. Down for a second month in a row, in April by 236k, the HH Survey managed to increase by all of 3k. The result: a perfectly representative decline to 3.9%.”

The Keynesian gummers reject Snider’s point entirely, of course, on the vague theory that retirements and the aging demographics of the US explain away much of the change in the participation rate. As a matter of fact, they don’t. And, besides, the whole BLS employment/unemployment reporting framework and model is essentially a pile of garbage that might have been relevant during the days of your grandfather’s economy, if even then. That is, it is built on the flawed notion that labor inputs can be accurately measured by a unit called a “job” and that an economic trend in motion tends to stay in motion.

To the contrary, in today’s world labor is procured by the hour and by the gig—meaning that the “job” units counted in both the establishment and household surveys are a case of apples, oranges and cumquats. The household survey, for example, would count as equally “employed” a person holding: • a 10-hour per week gig with no benefits; • a worker holding three part-time jobs adding to less than 36 hours per week with some benefits; and • a 50-hour per week manufacturing job (with overtime) providing a cadillac style benefit package.

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How about Kondratieff?

The Next Recession Is Closer Than You Think (Cook)

Business cycles run for periods of years, not days, weeks, or months. So business cycle analysis is different from the common definition of market-timing because it is concerned with a much longer time horizon. It is difficult for anyone other than politicians to deny the existence of a business cycle, which includes both an expansion and a recession phase because they are a fact of economic life. A recent Goldman Sachs research piece not only acknowledges the existence of cycles but divides them into four phases and produces recommended asset allocations for each phase, as shown below.

Goldman’s investment recommendation for 2018 is based on the belief that 2018 lies within Phase 3, in which the economy is operating above capacity and growing. More broadly, Goldman’s chart and table show that identifying the Phases is a crucial determinant of investment success. For example, if 2018 truly lies within Phase 4, cash and bonds would outperform commodities and equities. \The Fed appears to agree with Goldman’s analysis of Phase 3, based on its simultaneous campaigns to lift the Fed Funds rate and to reduce the size of its bond holdings that were acquired during its QE experiment. In another admission that business cycles exist, Bank of America/Merrill Lynch (BAML) produces a monthly Fund Manager Survey, in which it asks the largest institutional investment managers a simple question; where are we in the business cycle?

[..] The BAML survey extends further back than 2008, so we can get a better idea of investors’ beliefs leading to the recession of 2008-09, as shown below. During these years, investors were given two other choices to describe the economy; early-cycle or recession. A majority of investors believed the economy was late-cycle beginning in 2005, with a peak in that belief occurring in late 2007 (thin black line), which coincided with a continuous decline in the percentage believing the economy was mid-cycle. During the period 2005-2007, almost no investors believed that the economy was in either in its early-cycle or recession.

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China is negotiating.

US Lays Down A List Of Trade Demands To China (CNBC)

The U.S. stands ready to impose further trade tariffs on Chinese products if Beijing walks away from agreed-upon commitments, according to a reporter at the Wall Street Journal. Trade representatives from the U.S. and China entered a second day of trade discussions on Friday, as the world’s two largest economies sought to find a way to stave off global concerns of a full-blown trade war. The discussions, led by Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, are expected to cover a wide range of U.S. complaints about alleged unfair trade practices in Beijing. A major breakthrough deal to fundamentally change China’s economic stance was widely viewed as highly unlikely.

In a tweet posted Friday, Lingling Wei, a China economics correspondent at the Wall Street Journal, said the U.S asked China to reduce its trade surplus by at least $200 billion by year-end 2020, citing a document issued to the Chinese before the talks. President Donald Trump has often called on China to reduce its bilateral trade deficit by $100 billion a year. The U.S. trade envoy also wanted China not to target U.S. farmers and agricultural products and sought assurances from the Asian giant that it would not retaliate over restrictions on investments from Beijing, Wei said.

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The entire British press seems set on ignoring Labour’s win. Which, true enough, isn’t big enough.

Theresa May Under Pressure To Ditch New Immigration Clampdown (Ind.)

Theresa May is under mounting pressure to ditch a fresh immigration clampdown dubbed “the next Windrush”, ahead of a crucial Commons vote next week. Thirty-four organisations have joined forces to urge the prime minister not to repeat the blunders that sparked the scandal by preventing other immigrants from proving their right to be in the UK. Under planned new data laws, people will be denied access to the personal information the government holds about them if releasing it would “undermine immigration control”. Leading lawyers have warned that withholding potentially vital proof would lead to people being wrongly deported, detained or denied health treatment – in a mirror image of the treatment of the Windrush generation.

On Wednesday, Labour and the Liberal Democrats will join forces to try to throw out the exemption, arguing it is the “first test” of Ms May’s promise to learn the lessons of the Windrush debacle. Now, the joint letter – seen by The Independent – brings together human rights campaigners, trade unions, migrant support groups and law firms to warn it will “foster fear within minority communities”. Unless halted, the plan will make it “near-impossible” to prevent the “disposing of information that could help people prove their right to reside in the UK – as it did with the Windrush landing cards”, they say. People would also avoid using essential public services “for fear that their medical or school records will be secretly passed to the Home Office”.

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The lenders don’t own the loans anymore, they’ve been packaged and sold.

150,000 UK ‘Mortgage Prisoners’ Need Help To Escape Expensive Deals (Ind.)

Tens of thousands of people are “mortgage prisoners”, trapped on expensive deals and not allowed to switch, the financial regulator has said. The Financial Conduct Authority urged for more innovation to help around 150,000 people who signed up for deals before interest rates plummeted after the financial crisis. They have since been switched to more expensive “reversion rates” once their previous deal expired and are unable to switch because they do not meet stricter affordability rules which have been brought in. Christopher Woolard, director of strategy and competition at the FCA, said: “For many, the market is working well, with high levels of consumer engagement. “However, we believe that things could work better with more innovative tools to help consumers.

“There are also a number of long-standing borrowers that have kept up-to-date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.” The FCA said it will consider seeking an industry-wide agreement to approve applications from those who are affected and are up-to-date with payments. However, this will only help 30,000 people who are with authorised mortgage lenders. The remaining 120,000 are with firms who are not authorised to lend, often because the lender has sold on a batch of mortgages. These firms are outside the FCA’s remit, which is set by parliament, meaning new legislation would be required to enable the regulator take action.

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“..large twin budget and current account deficits, a heavy dollar debt burden, entrenched high inflation and an overvalued currency..”

Argentina Hikes Interest Rates To 40% Amid Inflation Crisis (Ind.)

Argentina has jacked up its interest rates to 40 per cent in a drastic attempt to keep a lid on domestic inflation and stabilise its currency. The Latin American country’s central bank announced the hike on Friday, the third in seven days, saying it would keep using the tools at its disposal to get inflation back down to it 15 per cent target. Inflation in the country is currently running at 25.4 per cent, despite the investor-friendly economic reforms of President Mauricio Macri. Argentina is one of several emerging market economies that have suffered from currency pressure in recent weeks as the US dollar has strengthened and foreign capital has been withdrawn.

“Investors are moving out of [emerging markets], frontier [economies], and other risky assets and so countries like Argentina remain at heightened risk,” said Win Thin of Brown Brothers Harriman. The value of the Argentinian peso has declined from 18.6 against the greenback in January to 23 this week. President Macri succeeded the Peronist Cristina Fernandez de Kirchner in 2015 and has been seeking to reverse her policies of protectionism and high government spending. “This crisis looks set to continue unless the government steps in to reassure investors that it will take more aggressive steps to fix Argentina’s economic vulnerabilities,” said Edward Glossop of Capital Economics.

“Risks to the peso have been brewing for a while – large twin budget and current account deficits, a heavy dollar debt burden, entrenched high inflation and an overvalued currency. The real surprise is how quickly and suddenly things seem to be escalating.”

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“It’s unlikely you’re going to persuade me the special prosecutor has power to do anything he or she wants. ..”

Judge In Manafort Case Rebukes Mueller For Exceeding Authority (G.)

A federal judge has rebuked the special counsel investigating alleged collusion between Trump aides and Russia, for overstepping his bounds in a criminal case against the president’s former campaign manager. Robert Mueller last year brought tax and bank fraud charges against Paul Manafort, the first indictment in the Russia investigation. Manafort maintains his innocence. On Friday TS Ellis, a judge in the eastern district of Virginia, suggested that Mueller’s real motivation for pursuing Manafort was to compel him to “sing” against Trump. “You don’t really care about Mr Manafort’s bank fraud,” the judge, reportedly losing his temper, challenged lawyers from the office of special counsel.

“You really care about getting information Mr Manafort can give you that would reflect on Mr Trump and lead to his prosecution or impeachment.” The comments, at a tense court hearing in Alexandria, were a boost for Manafort’s lawyers who contend that the charges against him are outside Mueller’s mandate to investigate Russian interference in the 2016 election. Ellis added: “I don’t see what relationship this indictment has with anything the special counsel is authorised to investigate. “We don’t want anyone in this country with unfettered power. It’s unlikely you’re going to persuade me the special prosecutor has power to do anything he or she wants. The American people feel pretty strongly that no one has unfettered power.”

[..] Ellis withheld ruling on dismissal of the indictment. He asked the special counsel’s office to share privately with him a copy of deputy attorney general Rod Rosentein’s August 2017 memo elaborating on the scope of Mueller’s Russia investigation. The current version has been heavily redacted, he said. Leaving the White House on his way to Texas on Friday, Trump claimed he would welcome an interview with Mueller. “So I would love to speak,” he told reporters. “I would love to go. Nothing I want to do more, because we did nothing wrong. We ran a great campaign. We won easily.” But he added: “I have to find that we’re going to be treated fairly, because everybody sees it now, and it is a pure witch-hunt. Right now, it’s a pure witch-hunt.”

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The FBI is far from squeaky clean.

The Horsefly Cometh (Jim Kunstler)

You can see where this Mueller thing is going: to the moment when the Golden Golem of Greatness finally swats down the political horsefly that has orbited his glittering brainpan for a whole year, and says, “There! It’s done.”

It suggests that Civil War Two will end up looking a whole lot more like the French Revolution than Civil War One. The latter unfurled as a solemn tragedy; the former as a Coen Brothers style opéra bouffe bloodbath. Having executed the presidential swat to said orbiting horsefly, Trump will try to turn his attention to the affairs of the nation, only to find that it is insolvent and teetering on the most destructive workout of bad debt the world has ever seen. And then his enemies will really go to work. In the process, they’ll probably wreck the institutional infrastructure needed to run a republic in constitutional democracy mode.

They got a good start in politicizing the upper ranks of the FBI, a fatal miscalculation based on the certainty of a Hillary win, which would have enabled the various schemers in the J. Edgar Hoover building to just fade back into the procedural woodwork of the agency and get on with life. Instead, their shenanigans were exposed and so far one key player, Deputy Director Andrew McCabe, was hung out to dry by a committee of his fellow agency execs for lying about his official conduct. Long about now, you kind of wonder: is that where it ends for him? Seems like everybody else (and his uncle) is getting indicted for lying to the FBI. How about Mr. McCabe, since that is exactly why his colleagues at the FBI fired him?

Perhaps further resolution of this murky situation awaits Inspector General Michael Horowitz’s forthcoming report, which the media seems to have forgotten about lately. An awful lot of the mischief at the FBI and its parent agency, the Department of Justice, is already on the public record, for instance the conflicting statements of Andrew McCabe and his former boss James Comey concerning who illegally leaked what to the press. On the face of it, it looks pretty bad when at least one of these Big Fish at the top of a supposedly incorruptible agency is lying. There are at least a dozen other Big Fish in there who still have some serious ‘splainin’ to do, and why not in the grand jury setting?

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There goes the OPCWs credibility.

Chemical Weapons Watchdog Backtracks On ‘100g Of Novichok’ Claim (Ind. )

The international chemical weapons watchdog has backtracked on a suggestion that as much as 100 grams of nerve agent may have been used in the poisoning of former Russian spy Sergei Skripal and his daughter Yulia. Ahmet Uzumcu, director general of the Organisation for the Prohibition of Chemical Weapons (OPCW), had said the relatively large quantities of novichok used suggested it had been created as a weapon rather than for research purposes. But a new OPCW statement said the organisation was not able to “estimate or determine the amount of the nerve agent that was used” in the incident. Mr Uzumcu had said samples collected suggested the nerve agent used to poison the Skripals was of “high purity”.

He said: “For research activities or protection you would need, for instance, five to 10 grams or so, but even in Salisbury it looks like they may have used more than that. “Without knowing the exact quantity, I am told it may be 50, 100 grams or so, which goes beyond research activities for protection. “It’s not affected by weather conditions. That explains, actually, that they were able to identify it after a considerable time lapse.” It came as Czech President Milos Zeman said his country had produced small quantities of novichok. Britain has argued the use of Novichok – which was developed by the former Soviet Union in the 1980s – meant there was no “plausible alternative” explanation other than the Russian state was behind the attack.

However Mr Zeman’s comments were seized on by President Vladimir Putin’s spokesman Dmitry Peskov, who said they were a “clear illustration of the groundless stance the British authorities have taken”.

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And they want you to believe the economy is growing.

Greek Unpaid Taxes Build Up Again As Taxpayers Are Unable To Pay (K.)

Concerns are growing in the Finance Ministry as expired debts to the tax authorities grew at an unexpectedly high rate in March – a month with no major obligations. Unpaid taxes came to 776 million euros in March, taking total new arrears to the state in the first quarter of the year to 3.55 billion euros. According to figures released on Friday by the tax administration, the sum of old and new debts to the state amounted to 101.6 billion euros at end-March. Out of the 3.55 billion created in Q1, 3.3 billion euros was in the form of unpaid taxes. Ministry officials argue that the increase in tax debts is due to the fact that many taxpayers missed the deadlines for them to pay installments as part of debt settlement programs concerning the revelation of previously undeclared incomes.

Other reasons cited are that taxpayers have failed to pay fines, as well as many individuals and enterprises having exhausted all means for paying taxes. If this situation continues in the following months, the hole in budget revenues will grow considerably, given that the submission process for income tax statements has just begun and the first tranche is payable by end-July. The state’s response to this phenomenon is confiscations, which in March alone numbered 21,275. This takes the sum of taxpayers who have suffered confiscations to 1,109,971, while the total number of Greeks owing to the state has risen to 3,907,847.

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“..agricultural products, including seeds, cannot be patented in India..”

Monsanto Appeals To India Supreme Court Over GMO Cotton Patents (R.)

Monsanto has appealed to the Supreme Court against a ruling by the Delhi High Court which decreed last month that the world’s biggest seed maker cannot claim patents on its genetically modified or GM cotton seeds, a company spokesman said on Friday. The Delhi High Court on April concurred with Indian seed company Nuziveedu Seeds Ltd (NSL), which argued that the Patent Act does not allow Monsanto any patent cover for its genetically modified cotton seeds. Monsanto has appealed to the Supreme Court, said a Monsanto India spokesman. “In the Supreme Court, we’ll maintain our stand that agricultural products, including seeds, cannot be patented in India,” said Narne Murali Krishna, a company secretary for NSL.

“The judgement of the Delhi High Court has already vindicated our stand.” New Delhi approved Monsanto’s GM cotton seed trait, the only lab-altered crop allowed in India, in 2003 and an upgraded variety in 2006, helping transform the country into the world’s top producer and second-largest exporter of the fibre. Monsanto’s GM cotton seed technology went on to dominate 90 percent of India’s cotton acreage. But for the past few years Monsanto has been at loggerheads with NSL, drawing in the Indian and US governments, Reuters revealed last year.

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Gorilla’s, bonobos, dwarf chimpanzees, Congo peacocks and forest elephants…

Congo To Drill For Oil In Parks Home To Endangered Mountain Gorilla (Ind.)

The Democratic Republic of Congo is planning to reclassify two protected national parks to allow oil exploration. Documents seen by The Independent show the government wants to redraw the boundaries of the Salonga and Virunga national parks, which are home to critically endangered species such as mountain gorillas, to remove protected status from certain areas. Both parks are UNESCO World Heritage sites, a status which in theory should protect them from oil exploration and other extractive activities. In a letter, Congo’s oil minister Aime Ngoi Muken invited the environment minister and the minister for scientific research to a special commission meeting to discuss the plans on 27 April.

Minutes and notes of the meeting give more details about the areas in which the Congolese government wants to allow exploration. In another series of letters seen by NGO Global Witness, Congo’s oil minister Ngoi Muken argued for the need to open up the protected sites for oil exploration and set out the legal procedures to do so. Global Witness said the plans would be a violation of the UNESCO World Heritage Convention to which the Democratic Republic of Congo is a signatory. The Virunga park is one of the most biologically diverse areas on the planet and is home to about a quarter of the world’s remaining mountain gorillas. According to UNESCO, the Salonga park is Africa’s largest tropical rainforest, home to many endangered species such as bonobos, dwarf chimpanzees, Congo peacocks and forest elephants.

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Mar 052016
 
 March 5, 2016  Posted by at 9:42 am Finance Tagged with: , , , , , , , , ,  


DPC Country store, Venezuela 1905

China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)
China’s Rebalancing Is Overrated (Balding)
China Lays Out Its Vision To Become A Tech Power (Reuters)
Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)
US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)
It Begins: Palace Revolt Against ECB’s NIRP (WS)
What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)
Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)
Brazil Ex-President Lula Detained In Corruption Probe (Reuters)
Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)
Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)
BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)
Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)
What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)
The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)
Athens Given Deadlines For Schengen Requirements (Kath.)
Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)
Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

Saw that coming from miles away.

China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)

China intervened to support its stock market on Friday, helping the benchmark index cap its best weekly gain of 2016 before policy makers meet to approve a five-year road map for the economy, according to two people with direct knowledge of the situation. State-backed funds bought primarily bank shares, while some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during the National People’s Congress and the Chinese People’s Political Consultative Conference, said the people, who asked not to be named because the matter isn’t public. China’s biggest banks, seen as prime targets for state support because of their large weightings in benchmark indexes, paced gains in the $5.5 trillion market on Friday even as small-capitalization shares tumbled.

Authorities have been known to intervene in markets before key national events, with government funds stepping in to boost share prices last August before a military parade celebrating the 70th anniversary of the World War II victory over Japan. “It looks like the national team has been buying as large caps of the Shanghai index jumped, while small caps fell,” said Steve Wang at Reorient Financial Markets in Hong Kong. China’s stock market has become one of the most visible symbols of anxiety toward Asia’s largest economy after a $5 trillion crash last summer rattled global investors. By publicly intervening to support equity prices in 2015, President Xi Jinping’s government has staked some of its credibility as a steward of the economy on the state’s ability to stabilize one of the world’s most volatile markets.

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It’s just word, really: “..by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.”

China’s Rebalancing Is Overrated (Balding)

The optimists’ case for China is fairly straightforward. Yes, the world’s second-largest economy is grinding to its slowest pace in decades. But as investment and manufacturing – traditionally the key drivers of Chinese growth – decline in importance, domestic consumption and services are playing a bigger role: For the first time, services accounted for just over 50% of GDP last year. This much-desired rebalancing should move China toward a far more sustainable growth model. New economy companies in technology, health-care, finance and retail are more productive and less polluting than smokestack industries. Robust consumption – rail traffic is growing at 10% as Chinese spend more on leisure travel, while mobile Internet traffic has doubled – is key to weaning the economy off its addiction to investment.

As unproductive coal mines and steel factories shed workers, labor-intensive services should pick up the slack. A closer look at the data, however, paints a different and decidedly gloomier picture. Take travel. While overall rail traffic is up, total passenger turnover, which accounts for the number of kilometers traveled, grew only 3.1% in 2015. Moreover, it’s important to remember that only 11% of trips are done by rail. (International air travel, which grew 34% last year, only covers 0.2% of trips.) The vast majority of travel takes place by road and highway traffic actually declined last year. If so many more Chinese are going on pleasure trips, why is hotel revenue flat? Similarly, sales at the 100 biggest retailers in China, which one would expect to be thriving if the economy were rebalancing, were down 0.1% in 2015.

Luxury brands have been hit particularly hard (in part because of the ongoing anti-corruption campaign) and sales of even basic consumer durables such as TVs, refrigerators, audio equipment and washing machines are flat or declining. Services are certainly growing faster than manufacturing and real estate. But much of that growth comes from two sectors. The first, financial services, got a major boost in 2015 from the stock-market boom in the first half of the year and from the continuing flood of lending encouraged by the government. If one strips out the contribution made by the sector, consumption continued to slow last year. The bursting of the equity bubble is sure to crimp growth, as may a souring of loans, many of which are going to loss-making heavy industries. Indeed, by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.

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By exercising more state control…

China Lays Out Its Vision To Become A Tech Power (Reuters)

China aims to become a world leader in advanced industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites, the government said in its blueprint for development between 2016 and 2020. In its new draft five-year development plan unveiled on Saturday, Beijing also said it aims to use the internet to bolster a slowing economy and make the country a cyber power. China aims to boost its R&D spending to 2.5% of GDP for the five-year period, compared with 2.1% of GDP in 2011-to-2015. Innovation is the primary driving force for the country’s development, Premier Li Keqiang said in a speech at the start of the annual full session of parliament.

China is hoping to marry its tech sector’s nimbleness and ability to gather and process mountains of data to make other, traditional areas of the economy more advanced and efficient, with an eye to shoring up its slowing economy and helping transition to a growth model that is driven more by services and consumption than by exports and investment. This policy, known as “Internet Plus”, also applies to government, health care and education. As technology has come to permeate every layer of Chinese business and society, controlling technology and using technology to exert control have become key priorities for the government.

China will implement its “cyber power strategy”, the five-year plan said, underscoring the weight Beijing gives to controlling the Internet, both for domestic national security and the aim of becoming a powerful voice in international governance of the web. China aims to increase Internet control capabilities, set up a network security review system, strengthen cyberspace control and promote a multilateral, democratic and transparent international Internet governance system, according to the plan. Since President Xi Jinping came to power in early 2013, the government has increasingly reined in the Internet, seeing the web as a crucial domain for controlling public opinion and eliminating anti-Communist Party sentiment.

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“..if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.”

Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)

Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months. During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100% probability that the U.S. economy would be in a downturn within one year. “It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” he said. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.” Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33%.

Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion. The former partner of George Soros suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering. “If you look at the … payroll tax figures [in the U.S.], you see they’re already flat,” he concluded. “Don’t pay attention to the government numbers, pay attention to the real numbers.” In light of the economic turmoil envisioned by Rogers, he is long the U.S. dollar.

“It might even turn into a bubble,” he said of the greenback. “I mean, if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.” Rogers added that a strengthening U.S. dollar has historically been negative for commodities—the asset class that the investor is best-known for. While the yen is often designated as a risk-off currency, it won’t benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan’s balance sheet, according to Rogers, who said he exited his position in the yen last Friday.

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Don’t hold your breath.

US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)

A U.S. watchdog agency is preparing to investigate whether the Federal Reserve and other regulators are too soft on the banks they are meant to police, after a written request from Democratic lawmakers that marks the latest sign of distrust between Congress and the central bank. Ranking representatives Maxine Waters of the House Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations asked the Government Accountability Office on Oct. 8 to launch a probe of “regulatory capture” and to focus on the New York Fed, according to a letter obtained by Reuters. In an interview, the congressional agency said it has begun planning its approach. The probe, which had not been previously reported or made public, is the first by an outside agency into the perception that government regulators are “captured” by and too deferential toward the bankers they supervise, so that Wall Street benefits at the public’s expense.

Such perceptions have dogged the U.S. central bank since it failed to head off the 2007-2009 financial crisis that sparked a global recession. The Fed’s biggest critics have since been Republicans looking to curb its policy independence, but the request by Democrats could cool its somewhat warmer relationship with the left. “We currently do have some ongoing work looking at the concept known as regulatory capture. We’re in initial stages of outlining that engagement,” Lawrance Evans, director of the GAO’s financial markets and community investment division, said in an interview. The agency will conduct “an assessment across all financial regulators, and the Federal Reserve will be one institution,” he said. It was unclear whether the majority Republicans on the House committee, including Chairman Jeb Hensarling, backed the request from the minority Democrats.

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This is how simple it is. The NIRP boomerang.

It Begins: Palace Revolt Against ECB’s NIRP (WS)

The Association of Bavarian Savings Banks, which represents 71 savings banks in the German State of Bavaria, has had it with the ECB’s negative deposit-rate absurdity, and it’s now instigating a palace revolt. In 2014, when negative interest rates first hit Eurozone banks and ricocheted out from there, Germans called it “punishment interest” (Strafzinsen) because these rates were designed to flog banks and savers until their mood improves. But inexplicably, their mood hasn’t improved. Bank stocks have gotten clobbered as their profits have gotten hit by the negative interest rate environment. Stocks of Eurozone companies in general have come down hard, and the Eurozone economy simply hasn’t responded very well though the ECB is flogging it on a daily basis with its punishment interest.

And so Bavarian savings banks have had enough. The Frankfurter Algemeine has obtained a memo by the Association of Bavarian Savings Banks that openly encourages its member banks to stash cash in their own vaults rather than depositing it at the ECB and paying the penalty interest of 0.3% to the ECB on these deposits. The savings banks therefore are asking if it might be more economical for them to keep high cash values in their safes and not -as usual- store them at the ECB, the memo said. To estimate total costs and determine which would be the better deal -hang on to the cash or send it to the ECB- the association analyzed the costs of additional insurance coverage needed for these higher levels of cash-in-vault and further discussed some options concerning this insurance coverage, or as it says, for ECB-cash protection.

According to its analysis, insurance coverage on cash costs 0.15%, plus insurance tax, in total 0.1785%. This is below the ECB’s punishment rate of 0.3%. Each additional €1,000 of cash in its vault would therefore cost the bank €1.785 per year. But if the bank deposited that €1,000 at the ECB, it would cost €3.00 per year. Multiply the difference of €1.21 by tens or hundreds of millions, and pretty soon you’re talking about some real money. Banks have a total of €245 billion deposited at the ECB. At a deposit rate of negative 0.3%, extrapolated over a year, it costs them €735 million in punishment interest. “Punishment interest is already costing real money,” is how a senior central bankers explained it to the Frankfurter Algemeine.

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More interest rate manipulation damage.

What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)

Not many experts thought that the “emergency” base rate cut to 0.5% on March 5, 2009 would last for long. But seven years later savers have lost around £160bn in interest, while the prospect of rate rises are slipping further into the distance. In the immediate aftermath of the cut to 0.5%, rates for savers remained relatively high. Our analysis shows how cash Isas were offering 3%, and notice accounts 3.5%, in March 2009, and for the next couple of years they hovered around this level. After all, most banks and building societies were desperate for deposits after the great financial crash, so they were willing to pay far above the Bank of England base rate. The real villain turns out to be the Funding for Lending government programme introduced in July 2012, which effectively provided cheap money for cash-strapped lenders.

The effect was almost instantaneous: banks no longer needed to attract cash from savers, so they cut the rates on offer. Susan Hannums of Savingschampion.co.uk says: “While the base rate hitting the record 0.5% was bad enough, it was Funding for Lending that had one of the biggest impacts. Almost overnight, best-buy rates for savers dropped like a stone, followed by an unprecedented number of reductions on existing rates. “Today we’ve hit over 4,000 rate reductions for existing savers, with little sign of this slowing down. This means all savers would be wise to keep checking the rate they are getting, and to switch to improve returns when they are no longer competitive. “With almost 50% of easy-access accounts paying 0.5% or less, and the best-paying 1.55%, it’s easy to see why so many need to switch.”

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Bizarro.

Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)

Argentina plans to return to international credit markets in April with three bonds sales totaling $11.68 billion under U.S. law if Congress swiftly approves a debt deal for holdout creditors, top finance ministry officials told Congress on Friday. Finance Minister Alfonso Prat-Gay said the bonds, which will be used to finance the payouts to investors holding unpaid debt stemming from the country’s 2002 default, would carry maturities of five, ten and thirty years. Prat-Gay and his deputy, Luis Caputo, on Friday presented a package of debt agreements brokered with creditors, including a $4.65 billion cash payout to the main holdouts suing in a Manhattan court led by billionaire Paul Singer. Argentina has now reached provisional settlements with about 85% of bondholders and says negotiations continue with the rest.

“If the deal extends to all holdout investors, the bond issue will be for $11.684 billion. That’s what we need to close this chapter definitively,” Prat-Gay said. The debate in Congress is the first major political test of President Mauricio Macri’s ability to garner cross-party support for his economic reform package, the success of which hinges on ending the festering 14-year debt battle. Legislators will also be asked to repeal two laws blocking settlement of the debt case. Macri’s government is confident it can corral the votes needed to win approval even though the opposition holds a majority in the Senate and Macri holds only the largest minority in the lower chamber. Caputo told legislators the bonds would carry an interest rate of about 7.5%. While debt brokers see healthy appetite for Argentine debt after its prolonged absence from global debt markets, the gloomy global context may weigh.

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“News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.”

Brazil Ex-President Lula Detained In Corruption Probe (Reuters)

Former Brazilian President Luiz Inacio Lula da Silva was briefly detained for questioning on Friday in a federal investigation of a vast corruption scheme, fanning a political crisis that threatens to topple his successor, President Dilma Rousseff. Lula’s questioning in police custody was the highest profile development in a two-year-old graft probe centered on the state oil company Petrobras, which has rocked Brazil’s political and business establishment and deepened the worst recession in decades in Latin America’s biggest economy. The investigation threatens to tarnish the legacy of Brazil’s most powerful politician, whose humble roots and anti-poverty programs made him a folk hero, by putting a legal spotlight on how his left-leaning Workers’ Party consolidated its position since rising to power 13 years ago.

Police picked up Lula at his home on the outskirts of Sao Paulo and released him after three hours of questioning. They said evidence suggested Lula had received illicit benefits from kickbacks at the oil company, Petrobras, in the form of payments and luxury real estate. The evidence against the former president brought the graft investigation closer to his protege Rousseff. She is already fighting off impeachment for allegedly breaking budget rules, weakening her efforts to pull the economy out of recession. Rousseff expressed her disagreement with the police taking her mentor into custody, saying it was “unnecessary” after his voluntary testimony. But she repeated her backing for institutions investigating corruption and said the probe must continue until those responsible were punished. News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.

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Yeah, do fear for the Olympics.

Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)

The ruling party in Brazil has drawn up crisis plans to tap the country’s foreign exchange reserves to fight recession and prevent a surge in unemployment, heightening fears of a populist lurch as the economic crisis deepens. Any such move by Brazil would mark an escalation in the emerging market crisis, leading to intense scrutiny of other countries across the world facing similar difficulties following the collapse of the commodity boom and the end of cheap dollar liquidity from the US Federal Reserve. The plan is in direct conflict with the policies of president Dilma Rousseff and implies a head-on clash between the government and its own political base in the Workers Party (PT), with serious implications for the stability of the currency and Brazil’s debt markets.

It came as official data showed Brazil’s economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, setting the stage for what could be the country’s deepest recession on record. Brazil’s gross domestic product shrank 3.8pc in 2015, capped by another steep contraction in the fourth quarter. It was the steepest annual drop for the country’s GDP since 1990, when hyperinflation and debt default blighted the country’s recent return to democracy. Rui Falcão, the PT’s president, personally drafted the crisis document known as the National Emergency Plan. He reportedly has the backing of former president Lula, Luiz Inacio da Silva. It calls for a draw-down on the country’s $371bn foreign reserves to finance a development and jobs fund, as well as demanding a sharp cut in interest rates, a move that would effectively strip the central bank of its independence.

The 16 proposals together mark a dramatic shift back to the party’s Marxist roots and a rejection of its free-market concordat over recent years. While investors might be willing to accept use of the reserves to back up a stabilisation policy and radical reform, they would be horrified if it was used to finance a last-ditch populist agenda. “If the PT taps the reserves, they risk setting off a run on the currency. This is very dangerous,” said one economist, dismissing the scheme as complete madness. While the reserves are large, they are also opaque since the central bank has taken out $115bn in currency swaps, partly in order to support companies struggling to cope with dollar debts that have suddenly doubled in local terms due to the devaluation of the Brazilian real.

Lisa Schineller, a director of sovereign ratings at Standard & Poor’s, said Brazil’s safety margin on external debt is weaker than it looks, a key reason why the agency downgraded the country deeper into junk status in late February. Total external debt is $470bn, but on top of this there are $200bn of inter-company loans that have a “debt-like” character. “This is a very large order of magnitude. Brazil’s situation is not as strong as some people suggest,” she told The Daily Telegraph. “Their external assets do not exceed their external debts. They are much lower than they have been historically.”

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“There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)

Two giant California pension funds plan to sue Volkswagen in a German court, joining other institutional investors who argue the automaker should pay for losses they experienced since the revelation last year that VW cheated on emissions tests. The California State Teachers’ Retirement System, or CalSTRS, on Friday announced plans to join in a securities case against VW. A spokesman for the California Public Employees’ Retirement System, or CalPERS, confirmed that fund is separately pursuing a similar action. CalSTRS owned about 354,000 common and preferred shares of VW as of Dec. 31. Common shares fell by as much as 37%, and preferreds by as much as 43%, in the first weeks of the mushrooming scandal that began in September. Shares have since recovered somewhat.

CalSTRS said its holdings are now worth $52 million, though the pension fund has not said how much it believes it has lost. Its VW investment is a tiny fraction of the fund’s roughly $180 billion portfolio. “The emissions cheating scandal has badly hurt [VW’s] value,” CalSTRS Chief Executive Jack Ehnes said in a statement Friday. “Volkswagen’s actions are particularly heinous since the company marketed itself as a forward-thinking steward of the environment.” Ehnes said the pension fund hopes to recover money, as well as send a message to VW and the auto industry “that we will not tolerate these illegal actions.” CalPERS, the nation’s largest pension fund, with assets of $279 billion, also holds VW shares, though it has not publicly reported the number of shares since the summer of 2014.

It is not clear whether either pension fund has sold or acquired shares since the emissions scandal. It’s relatively common in the United States for investors to sue public companies following scandal-driven stock slumps, but such suits are less common in Europe, said Bruce Simon, a partner at law firm Pearson Simon & Warshaw, which specializes in class-action and securities litigation. He said the big question for the pension funds and other U.S. investors in VW is how much they’ll be able to recover under German securities law. “There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

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“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable..”

BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)

The pay package for BP chief executive Bob Dudley jumped by $3.2m (£2.1m) last year, despite profits plunging at the oil giant and thousands more staff facing the axe. His total package rose by 20% from $16.4m to $19.6m and was condemned by critics for being the latest example of a company losing “contact with reality” – after BP said a further 3,000 workers would lose their jobs on top of 4,000 gone in January. A further 4,000 went last year, with BP predicting that the oil price downturn would be long-lasting. About 250,000 jobs have been cut in the sector in 18 months. Mr Dudley’s base salary was unchanged at $1.85m but his annual cash bonus rose by $300,000 to $1.3m. Pension contributions soared from $3m to $6.5m.

But the biggest contributor to his package was $7.1m worth of vested performance shares, which he will receive during the current year. BP said one third of this award was based on total shareholder returns, one third on “strategic imperatives”, including safety and operational risk, and the final third on operating cashflow. The company added that the executive directors had “responded early and decisively to the lower oil price environment” – and said Mr Dudley deserved his extra cash because of his performance in a difficult period. “Despite the very challenging environment,” it stated, “BP delivered strong operating and safety performance throughout 2015.

“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable. BP surpassed expectations on most measures ,and directors’ remuneration reflects this.” The pay boost came as the falling oil price and continuing liabilities related to the Gulf of Mexico oil spill in 2010 led BP to report a record 2015 deficit of $6.5bn.

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As talks with EU are ongoing. Too much.

Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)

Turkish police on Friday raided the premises of a daily newspaper staunchly opposed to President Recep Tayyip Erdogan, using tear gas and water cannon to disperse supporters and enter the building to impose a court order placing the media business under administration. Police fired the tear gas and water cannon to move away a hundreds-strong crowd that had formed outside the headquarters of the Zaman newspaper in Istanbul following the court order that was issued earlier in the day, an AFP photographer said. Zaman, closely linked to Erdogan’s arch-foe the US-based preacher Fethullah Gulen, was ordered into administration by the court on the request of Istanbul prosecutors, the state-run Anatolia news agency said.

There was no immediate official explanation for the court’s decision. The move means the court will appoint new managers to run the newspaper, who will be expected to transform its editorial line. Hundreds of supporters had gathered outside the paper’s headquarters in Istanbul awaiting the arrival of bailiffs and security forces after the court order. “We will fight for a free press,” and “We will not remain silent” said placards held by protestors, according to live images broadcast on the pro-Gulen Samanyolu TV. “Democracy will continue and free media will not be silent,” Zaman’s editor-in-chief Abdulhamit Bilici was quoted as saying by the Cihan news agency outside its headquarters. “I believe that free media will continue even if we have to write on the walls. I don’t think it is possible to silence media in the digital age,” he told Cihan, part of the Zaman media group.

[..] The court order had already aroused the concern of the United States, which said it was “the latest in a series of troubling judicial and law enforcement actions taken by the Turkish government targeting media outlets and others critical of it.” “We urge Turkish authorities to ensure their actions uphold the universal democratic values enshrined in their own constitution, including freedom of speech and especially freedom of the press,” State Department spokesman John Kirby said.

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Somehow it’s hard to believe this still continues.

What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)

This column has cheered for an American failure in Ukraine since first forecasting one in the spring of 2014. Brilliant that it is upon us at last. Forcing a nation to live under a neoliberal economic regime so that American corporations can exploit it freely, as the Obama administration proposed when it designated Arseniy Yatsenyuk as prime minister in 2014, is never to be cheered. Turning a nation of 46 million into a bare-toothed front line in America’s obsessive campaign against Russia is never to be cheered. Forcing the Russian-speaking half of the country to live under a government that would ban Russian as a national language if it could is never to be cheered. The only regret, a great regret of mind and heart, is that American failures almost always prove so costly in consequence of the blindness and arrogance of the policy cliques.

Readers may remember when, with a defense authorization bill in debate last June, two congressmen advanced an amendment banning military assistance to “openly neo-Nazi” and “fascist” militias waging war against Ukraine’s eastern regions. John Conyers and Ted Yoho got two things done in a stroke: They forced public acknowledgment that “the repulsive neo-Nazi Azov battalion,” as Conyers put it, was active, and they shamed the (also repulsive) Republican House to pass their legislative amendment unanimously. Obama signed the defense bill then at issue into law just before Thanksgiving. The Conyers-Yoho amendment was deleted but for a single phrase. The bill thus authorizes, among much, much else, $300 million in aid this year to “the military and national security forces in Ukraine.” In a land ruled by euphemisms, the latter category designates the Azov battalion and the numerous other fascist militias on which the Poroshenko government is wholly dependent for its existence.

An omnibus spending bill Obama signed a month later included an additional $250 million for the Ukraine army and its rightist adjuncts. This is your money, taxpayers, should you need reminding. As Obama signed these bills, the White House expressed its satisfaction that “ideological riders” had been stripped out of them. No, you read next to nothing of this in any American newspaper. Yes, you now know what the often-lethal combination of blindness and arrogance looks like in action. Yes, you can now see why American policy in Ukraine must fail if this crisis is ever to come to a rational, humane resolution.

The funds just noted are in addition to a $1 billion loan guarantee—in essence another form of aid—that Secretary of State Kerry announced with fanfare last year. And that is in addition to the International Monetary Fund’s $40 billion bailout program, a $17.5 billion tranche of which is now pending. Since the I.M.F. is the external-relations arm of the U.S. Treasury (and Managing Director Christine Lagarde thus the Treasury’s public-relations face) this is a big commitment on the Obama administration’s part (which is to say yours and mine).

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“Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.”

The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)

“Yesterday was the funeral,” Ramadan says. “It was very cold. We make sure Yasmin always has family around her.” Yasmin wears a red scarf, maroon jumper and blue jeans. She is small and slight. Her face seems unable to assemble itself into any form of meaning. Nothing shapes it. Her eyes are terrible to behold. Blank and pitiless. Yet, in the bare backstreet apartment in Mytilini on the Greek island of Lesbos in which we meet on a sub-zero winter’s night, she is the centre of the room, physically, emotionally, spiritually. The large extended family gathered around Yasmin – a dozen or more brothers, sisters, cousins, nephews, nieces, her mother and her father, Ramadan, an aged carpenter – seem to spin around her. And in this strange vortex nothing holds.

Yasmin’s family has come from Bassouta, an ancient Kurdish town in Afrin, near Aleppo, and joined the great exodus of our age, that of 5 million Syrians fleeing their country to anywhere they can find sanctuary. Old Testament in its stories, epic in scale, inconceivable until you witness it, that great river of refugees spills into neighbouring countries such as Lebanon, Jordan and Turkey, and the overflow – to date more than a million people – washes into Europe across the fatal waters of the Aegean Sea. “We were three hours in a black rubber boat,” Ramadan says. “There were 50 people. We were all on top of each other.” The family show me. They entwine limbs and contort torsos in strange and terrible poses. Yasmin’s nine months pregnant sister, Hanna, says that people were lying on top of her.

I am told how Yasmin was on her knees holding her four-year-old son, Ramo, above her. The air temperature just above freezing, the boat was soon half sunk, and Yasmin wet through. But if she didn’t continue holding Ramo up he might have been crushed to death or drowned beneath the compressed mass of desperate people. Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.

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But how do they see this? How is this not as hollow as can be?

Athens Given Deadlines For Schengen Requirements (Kath.)

Greece was handed Friday a timeline for the improvements it has to make in its border controls by May, as the European Commission presented a step-by-step plan to implement measures, including a new EU border and coast guard, to curb the influx of refugees and migrants to Europe. “We cannot have free movement internally if we cannot manage our external borders effectively,” Migration Commissioner Dimitris Avramopoulos said, as he presented the report ahead of Monday’s summit between the EU and Turkey. According to the Commission’s document, Greece has by March 12 to present its action plan to address concerns about its border controls and explain what action it is taking to correct failings discovered during an inspection in November.

Exactly a month later, Brussels will deliver its assessment on the Greek action plan. A new Schengen evaluation will be carried out by EU experts, who will inspect Greece’s land and sea borders, from April 11-17. Finally, Athens will have to report to the European Council by May 12 on the steps it has taken to meet its recommendations. The report presented Friday estimates that the collapse of passport-free travel in the 26-nation Schengen zone could cost the European economy up to €18 billionß a year.

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10,000 kilometers of coastline.

Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)

Greek Prime Minister Alexis Tsipras said Friday his country can’t stop migrants who want to head to northern Europe, and sharply criticized Balkan countries for shutting their borders. “How can we stop people if they want to keep going?” Tsipras, whose country has faced a major refugee influx via Turkey, told Germany’s top-selling Bild daily. “We cannot imprison people, that would contravene international agreements. We can only help to rescue these people at sea, to supply and register them. Then they all want to move on. That’s why a resettlement process is the only solution.” “They have been bombed in their homes, have risked their lives to escape to come to Greece, the gateway to Europe. But the refugees’ ‘Mecca’ lies to the north.”

Tsipras’s comments came a day after Austria’s foreign minister urged Greece to stop migrants from pursuing their journey to northern Europe, saying Athens should hold new arrivals at registration “hot spots.” Sebastian Kurz told the Sueddeutsche Zeitung in an interview that “those who manage to arrive in Greece should not be allowed to continue on their journey.” But Tsipras retorted that while Greece, as Europe’s main gateway for refugees, had “met more than 100% of our obligations, others haven’t even met 10% and love to criticize us”. “What some countries have agreed and decided goes against all the rules, against the whole of Europe, and we consider it an unfriendly act.” “These countries are destroying Europe!” he charged, according to the German translation.

Athens has been seething over a series of border restrictions along the migrant trail, from Austria to the Former Yugoslav Republic of Macedonia, that has caused a bottleneck in Greece. “Greece is the only country that is fulfilling its obligations,” the leftist leader said, adding that it was now hosting 30,000 refugees. While Greece can protect its land borders, it can’t do the same for some 10,000 kilometers (6,000 miles) of coastline, he said. Tsipras said that “in the end those who are now putting up barbed wire, expelling refugees by force and turning their countries into fortresses, will be isolated in Europe. “We, however, are in an alliance with the countries showing solidarity,” he added, in an apparent reference to Germany, Europe’s top destination for migrants. “And these are the countries with which we had very big problems during the financial crisis,” he said, hinting at Berlin’s tough austerity demands from Greece in return for international bail-out loans.

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Somone better stop Tusk. “..if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them..”

Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

On Thursday, European Council President Donald Tusk, dismissing refugees fleeing war-torn Syria as “economic migrants,” stated, “Do not come to Europe.” Middle East analyst Hafsa Kara-Mustapha sat down with Sputnik’s Brian Becker to discuss the dire status of Middle Eastern refugees in Europe. What will be the impact of European Council President Tusk’s Statements? “First of all, I have to talk about the wording he used,” Kara-Mustapha told Loud & Clear. “He insisted on using the word migrant and specifically using the phrase ‘economic migrant’ when all the people presently coming into Europe are actually war refugees fleeing conflict.” Kara-Mustapha expressed concern that by rebranding the refugees as economic migrants, the EU aims to alter the requirements of member states to provide asylum.

“In effect, when he says that Europe should stop welcoming economic migrants he is actually changing the whole subject and making the issue about economy and migration when simply it is about refugees,” she noted, adding that, “if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them because these people are just coming for financial gain and nobody owes them anything,” observed Kara-Mustapha. In reality, however, “these people are coming to Europe for safety and to avoid the horrors of war.” She also noted that the current aim of European leadership appears to be to fundamentally change public opinion toward refugees by referring to them as “migrants.” The wording, she said, “makes the topic less acceptable to ensure people turn against these refugees… the underlying meaning is that they are coming here for the benefits, to raid the welfare system, and to make money.”

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