Nov 082017
 
 November 8, 2017  Posted by at 9:56 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Henri Cartier Bresson Nehru Announces Gandhi’s Death, Birla House, Delhi, India Jan 30, 1948

 

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)
Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)
Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)
Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)
Lebanon – The Next Front In The Great Gas War (Golem XIV)
UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)
May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)
Those Who Broke The Economy Cannot Fix It (Ann Pettifor)
German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)
Bean Counters: Lost in Paradise (Ren.)
British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)
Brick-and-Mortar Meltdown Sinks Property Prices (WS)
Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)
1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

 

 

Long term is always better.

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)

Forget secular stagnation. One historian says the world is actually in its ninth “real rate depression” and 700 years of data show that – when it comes – the turnaround could be sudden. In research published on the Bank of England’s staff blog, Harvard University’s Paul Schmelzing says most work pointing to a period of permanently lower equilibrium real interest rates is too short term. Instead, he tracked the risk-free rate since 1311 by identifying the dominant asset of each period – starting with sovereign rates in the Italian city states in the 14th and 15th centuries and moving to long-term rates in Spain, then the Province of Holland, the U.K., Germany, and finally the U.S. Real rates, or the benchmark interest rates minus inflation, have averaged 4.78% while the 200-year real-rate average is 2.6%.

That makes the current market environment “severely depressed,” Schmelzing wrote. However, it’s simply following a five-century downward trend, in which there have been nine periods of secular decline followed by reversals. The current period – since the 1980s – is the second-longest recorded and its closest historical analogy is the global “Long Depression” of the 1880s and 1890s which saw low productivity growth, deflationary price dynamics, and the rise of global populism and protectionism. This spell seems to have ended without a push from policy makers. That could be good news for those struggling to find a fix for the current low-rate environment. “There is strong evidence suggesting that the last ‘secular stagnation cycle’ started fading relatively autonomously after just over two decades following the key financial shock, not requiring the aid of decisive fiscal or monetary stimulus.”

Read more …

There’ll be more.

Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)

Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis, one regional banker said, declining to be named because he was not authorised to speak to media.

The banker did not name the companies affected but said they included listed and unlisted firms across many sectors. He added that if the freezes stayed in place for long, they could start to hurt day-to-day business activities such as paying staff and creditors or making other transactions. A second banker said, however, that most of the frozen accounts belonged to individuals rather than companies, and that banks were being allowed by the regulator to continue to fund existing commitments. Among top business executives detained in the probe are billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Nasser bin Aqeel al-Tayyar, founder of Al Tayyar Travel; and Amr al-Dabbagh, chairman of builder Red Sea International.

The stocks of all three companies, which have issued statements saying they continue to operate as normal, plunged between 9 and 10% on Tuesday. One of the bankers speaking to Reuters said the central bank had met with some foreign banks this week to reassure them that the freezing of accounts targeted individuals, and that firms linked to those people would not be damaged.

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WSJ has gone full paywall.

Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)

The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The purge is the most extensive of the kingdom’s elite in recent history. Crown Prince Mohammed bin Salman, the son of King Salman, was named heir to the throne in June and has moved to consolidate power. He has said that tackling corruption at the highest level is necessary to overhaul what has long been an oil-dependent economy. The crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.

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Strange bedfellows.

Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)

Early this morning, Israeli Channel 10 news published a leaked diplomatic cable which had been sent to all Israeli ambassadors throughout the world concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia, which began with Lebanese Prime Minister Saad Hariri’s unexpected resignation after he was summoned to Riyadh by his Saudi-backers, and led to the Saudis announcing that Lebanon had “declared war” against the kingdom. The classified embassy cable, written in Hebrew, constitutes the first formal evidence proving that the Saudis and Israelis are deliberately coordinating to escalate the situation in the Middle East. The explosive classified Israeli cable reveals the following:

• On Sunday, just after Lebanese PM Hariri’s shocking resignation, Israel sent a cable to all of its embassies with the request that its diplomats do everything possible to ramp up diplomatic pressure against Hezbollah and Iran.
• The cable urged support for Saudi Arabia’s war against Iran-backed Houthis in Yemen.
• The cable stressed that Iran was engaged in “regional subversion”.
• Israeli diplomats were urged to appeal to the “highest officials” within their host countries to attempt to expel Hezbollah from Lebanese government and politics.

As is already well-known, the Saudi and Israeli common cause against perceived Iranian influence and expansion in places like Syria, Lebanon and Iraq of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. For Israel, Hezbollah has long been its greatest foe, which Israeli leaders see as an extension of Iran’s territorial presence right up against the Jewish state’s northern border.

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“Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government.”

Lebanon – The Next Front In The Great Gas War (Golem XIV)

The Great Gas War has already two distinct fronts: The now relatively quiet Northern Front in Ukraine and the Southern Front in Syria in which the Western empire has been losing. It looks to me that Lebanon is being targeted as the next front, where the West hopes its loses might be recouped. Yesterday, November 6th, Reuters reported, “Saudi Arabia said on Monday that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah.” This comes after Israel, Saudi’s long time though largely un-offical best friend in the region, has been very publicly preparing to renew its own war with Lebanon – or more accurately with Hezbollah. As the American news journal Newsweek put it recently, “ISRAEL PREPARES FOR ANOTHER WAR WITH HEZBOLLAH AS IDF PRACTICES LEBANON INVASION.”

Why now and why Lebanon? Well the rulers of Saudi, a Sunni dominated country, will tell us that it is because Hezbollah is a Shia terrorist organisation. “Hezbollah” literally means the “Party of Allah” or “Party of God”. Saudi Gulf affairs minister Thamer al-Sabhan yesterday pointedly referred to Hezbollah as, “the Lebanese Party of the Devil”. Saudi is not alone of course, Hezbollah has also been listed as a terrorist organisation by America, Israel, the Arab League, the UK and the EU. It is also, however, part of the popular government of Lebanon having seats in its parliament. I suggest, however, a powerful reason that a new war with Hezbollah may be in the offing is because Lebanon is the next link in any gas pipeline that could potentially bring Iranian Gas to Europe.

That was the reason the West decided to “liberate” the Syrian people and it will be why they decide to enforce the same salvation upon the people of Lebanon. Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government. I would not be surprised to hear quite soon from opposition groups vocally denouncing the government or at least Hezbollah. I expect spokes people from those groups to suddenly get a global platform along-side American and regional supporters such as Saudi.

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How to spell insanity.

UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)

The number of British-made bombs and missiles sold to Saudi Arabia since the start of its bloody campaign in Yemen has risen by almost 500%, The Independent can reveal. More than £4.6bn of arms were sold in the first two years of bombings, with the Government grant increasing numbers of export licences despite mounting evidence of war crimes and massacres at hospitals, schools and weddings. The United Nations says air strikes by the Saudi-led coalition are the main cause of almost 5,295 civilian deaths and 8,873 casualties confirmed so far, warning that the real figure is “likely to be far higher”. It has condemned the “entirely man-made catastrophe” leaving millions more on the brink of famine and sparking the world’s worst cholera epidemic, while blacklisting Saudi Arabia for killing and maiming children.

There is also fresh concern over the Kingdom’s attempt to shut all air, land and sea ports into Yemen, which it said was to stop the flow of weapons but will also halt aid imports. British-made bombs have been found at the scene of bombings deemed to violate international law but the UK has continued its political and material support for Riyadh’s campaign. Figures from the Department for International Trade (DIT) show that in the two years leading up to the Yemen war, £33m of ML4 licences covering bombs, missiles and countermeasures were approved. But in the two years since the start of Saudi bombing in March 2015, the figure increased by 457% to £1.9bn, according to calculations by Campaign Against the Arms Trade (CAAT). Licences covering aircraft including Eurofighter jets have also risen by 70% to £2.6bn in the same period.

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Secret meetings as the Middle East is imploding. And arms sales are exploding.

May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)

Prime Minister Theresa May is weighing whether to fire a member of her cabinet only seven days after her defense secretary quit in a sexual harassment scandal, as the U.K. government faces fresh turmoil in the midst of Brexit talks. May is likely to dismiss her International Development Secretary Priti Patel in a row over a succession of unauthorized meetings she held with Israeli officials behind the prime minister’s back, according to reports from the BBC and The Sun Tuesday, which the U.K. government declined to deny. The premier has not yet had the chance to speak to Patel – who is on an official trip to Africa – about the latest revelations. A conversation would be expected before a decision is made about the minister’s future. If she is forced out, Patel will be the second minister to depart May’s cabinet in one week, after Michael Fallon resigned from the defense ministry amid allegations over his past behavior toward women.

For some, May’s latest headache is yet another demonstration of her weakness, which draws repeated questions over how her government can last long enough to see Brexit to the finish line. If more dominoes drop – in the shape of senior ministers – the last one to fall could ultimately be the prime minister herself. “The destabilizing effect on an already weak administration has prompted another burst of speculation that May could soon be forced to resign,” Mujtaba Rahman of Eurasia Group said in a note to clients. He thought one likely scenario is for May to be toppled if she fails to get a grip on the latest crisis and is ousted because her MPs judge that the government cannot go on like this – and is incapable of recovering the authority a prime minister needs.

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The British economy is being bled dry….

Those Who Broke The Economy Cannot Fix It (Ann Pettifor)

Make no mistake, last week’s increase in interest rates was a big deal. Painful as it might be for a good share of the population, the real point is that the Bank is signalling the end of a particular phase of monetary policy. Since 2010 the counterpart to self-defeating austerity policies has been expansionary monetary policies. These have inflated assets – enriching the already-rich, while failing to stimulate wider economic recovery. Yesterday the Bank of England’s Monetary Policy Committee signalled an end of this dangerous game. But this technocratic realignment makes no difference to the fact that ‘the Guardians of the nation’s finances’ – Bank and Treasury economists – have failed absolutely to revive the economy.

You need look no further than the (ongoing) decline in real wages, to continuing low levels of private investment, and to the dangers of rising household debt. A small interest rate rise is hardly likely to improve these conditions. Bank and Treasury economists (aided and abetted by the OBR) are guilty of defeatism. They argue that despite their powers, THERE IS NOTHING TO BE DONE. It is assumed that somehow ‘the invisible hand’ or ‘the markets’ will, without intervention by the authorities, correct the weakness, insecurity and failures of the British economy. The prolonged and painfully weak recovery is regularly blamed on something defined as “productivity”. By shifting responsibility for economic failure on to productivity, the Bank, Treasury and OBR economists are saying that somehow economic failure is inherent to the economy – to businesses and especially to workers.

“Nothing to do with us, guv” they mutter. They add that the situation has been exacerbated by the vote to leave the EU. This is a handy way of denying that the ongoing economic failure of the British economy (and the Brexit vote) can be explained by austerity policies, and the failures of the financial system. By taking this approach, economists at the Bank have – conveniently – set the scene for endorsing further inaction by the Chancellor later this month. Yesterday the Governor of the Bank was flanked by Ben Broadbent and Dave Ramsden. Ben Broadbent, as a Goldman Sachs economist, was among the earliest to call for austerity policies. Dave Ramsden (who did not vote for the rate rise) implemented these policies as top economist at the Treasury.

But both Broadbent and Ramsden were senior figures in economic policy-making throughout the debt inflation that preceded the crisis, and (we presume) supporters of financial globalisation. It is obvious to anyone with an ounce of common sense that austerity policies have hurt the most vulnerable, and damaged Britain’s economic potential, by forcing a brutal adjustment to lower quality and lower paid work. Labour has been forced to bear the brunt of the Global Financial Crisis. The weakness in productivity is just the outcome of these policies, not the cause.

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… while Germany’s needs diverge ever more from those of southern Europe.

German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)

The German economy is at risk of overheating, according to a leaked advisory council report that follows pressure from the Bundesbank for a swifter end to the ECB’s expansive monetary policy. In their annual report, seen by Handelsblatt newspaper, the five “wise men” who advise the German government on economic policy said the economy, which they expected to expand strongly this year and next, was moving gradually into a “boom phase”. “There are clear signs that economic capacity is over-utilised,” read the report, which is due to be published on Wednesday. Germans have been among the foremost critics of the ECB’s bond-buying program, which was introduced three years ago to depress borrowing costs and reignite growth in the euro zone’s heavily indebted southern periphery.

The wise men expected Germany’s economy to expand by 2% this year and by 2.2% in 2018, Handelsblatt said. With unemployment at its lowest level since the early 1990s, Germany’s circumstances are very different from Italy’s or Spain‘s, straining the ECB’s ‘one-size-fits-all’ monetary policy. ECB President Mario Draghi last month announced a halving n the size of its 2 trillion euro bond-buying program, but this is far from the return to conventional monetary policy many Germans, including Bundesbank president Jens Weidmann, demand. Without an intervention to cool the economy, Germany’s hawks fear the buoyant economy could tip over into an inflationary cycle. Last week, a senior official from Chancellor Angela Merkel’s conservatives warned that German savers would not tolerate continued low interest rates for much longer.

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Accountants and auditors are not doing their jobs.

Bean Counters: Lost in Paradise (Ren.)

“The phrase ‘Set a thief to catch a thief’ is common parlance,” says Professor Atul K. Shah. “‘Set a global brand of professional accountants to rob society and pilfer its taxes, bleeding governments’, is not, but it should be.’ Professor Bill Black says internal controls are absolutely critical in reducing fraud by insiders in particular, but not just insiders, as the Paradise Papers have repeatedly demonstrated. Emile Woolf says there is no way to remove control fraud and dodgy accounting practices from the economy without first prosecuting the culprits. “The devils that committed this criminal negligence – with the exception of the Royal Bank of Scotland (RBS) – have never been fined or prosecuted” he said. “What you can then do is create a ring fenced fund inside those institutions, earmarked to save them from going under. But the company has to recognise it has to be paid back.

“RBS is incapable of paying back the billions of fines it still owes for misconduct,” he says. “Where does that money come from and where does it go? Without the fines RBS would have made £100 million profit this year, but because of the reserve for fines in the USA and UK, all those fines are far too great to allow for payment of a dividend.” Of course calculating a true profit figure is difficult when a significant portion of that profit is fraudulent, because it doesn’t take into account the result of the inequities of ten years ago. “The worrying thing for all of us is if it happens again,” he says. “My hope is that three years from now, banks will be forced to recognise their loans that will never be repaid. But my worry is that this is going to be after the next financial crisis, because it’s happening again. There is no redeeming features in the present. The only difference is the next crisis is going to be bigger.”

Joel Benjamin told Renegade Inc that accounting is as much about *what* you count or don’t count as it is *how* you count it. “This is evidenced through the practice of ‘base erosion and profit shifting’ – shifting profits to offshore low or no tax jurisdictions, ” he said. In the space of 50 years, Britain’s economy has transformed from an industrial power house, to that of a finance-led extractive parasite, where the cash starved productive economy receives less than 10% of bank credit. “Until the Big Four accountancy firms are accurately viewed as enablers of corporate offshore dealing, regulatory arbitrage and ardent defenders of the neoliberal order, not the ‘reputable’ objective independent arbiters of the public interest as they claim, society will continue to be taken for a ride, and public services and social cohesion will continue their long decline,” he said.

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Bill Mitchell in a long talk with his alter ego.

British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)

Mitchell tried to tell me that governments do not spend by ‘printing money’ but rather just adjust bank accounts with numbers. But I know as anyone in the street knows that they just want to print more and more. That is at the core of MMT – they want the government to go on a spending spree and just ignore the inflationary consequences. They hide that by saying that “public spending cannot be unlimited and must be commensurate to the capacity of the economy” which is just a smokescreen that I can see through. And everybody will see through it. It is code for spend like a drunken’ sailor – throw money at lazy people who cannot be bothered finding a job. Throw money at public schools that teach socialist doctrines – you know about inequality and stuff like that.

Throw money at public hospitals so that people can receive unlimited health care without having to pay for it – that is the quickest way to encourage waste and bad behaviour. People know that they can just get sick and no matter what their income is they will get some care. Where is the incentive to stay healthy in that sort of system. The article also shows how stupid Mitchell is when it says he: “… debunks the idea that governments borrow money from international markets and with it the notion that they are hostage to the market.” Well where the hell else do they get the cash from? Does he really think we are that stupid? How come China has all those US government debt bonds or whatever they are called and the US government is spending the Chinese cash? How does he explain that obvious point?

Well he tried to claim the Chinese doesn’t issue US dollars and that only the US government issues US dollars so that it cannot possibly be funded by the Chinese. I don’t buy that, not that I understood anything he said about this – all this talk about trade surpluses accumulating financial claims in the currency that the deficit country issues, and then allowing the surplus nation to use those claims (say, US dollars in the first instance) to purchase US dollar financial assets etc ad nauseum. As if that tells us anything. How come the Chinese can loan the US government money that is what I want to know? Mitchell told the journalist that Jeremy Corbyn should not worry about international capital markets because Britain could impose capital controls if it wanted to. That gets to the nub of my worries – socialist governments stealing hard-earned cash from investors who actually have some get up and go.

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Malls don’t look like good investments.

Brick-and-Mortar Meltdown Sinks Property Prices (WS)

Commercial real estate prices soared relentlessly for years after the Financial Crisis, to such a degree that the Fed has been publicly fretting about them. Why? Because US financial institutions hold nearly $4 trillion of commercial real estate loans. But the boom in most CRE sectors is over. The Green Street Property Price Index – which measures values across five major property sectors – had soared 107% from May 2009 to the plateau that began late last year, and 27% from the peak of the totally crazy prior bubble that ended with such spectacular fireworks. But it has now turned around, dragged down by a plunge in prices for retail space. The CPPI by Green Street Advisors dropped 1.1% in October from September. In terms of points, the 1.4-point decline was the largest monthly decline since March 2009. The index is now below where it had been in June 2016:

This phenomenal bubble, as depicted by the chart above, has even worried the Fed because US financial institutions hold nearly $4 trillion of CRE loans, according to Boston Fed governor Eric Rosengren earlier this year. Of them, $1.2 trillion are held by smaller banks (less than $50 billion in assets). These smaller banks tends to have a loan book that is heavily concentrated on CRE loans, and these banks are less able to withstand shocks to collateral values. Rosengren found that among the root causes of the Financial Crisis “was a significant decline in collateral values of residential and commercial real estate.” But the CRE bubble isn’t unraveling as gently as the chart suggests. Some sectors are still surging, while others are plunging. According to the report, the index, which captures the prices at which CRE transactions are currently being negotiated and contracted, “was pushed down by falling mall valuations.”

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Puidgemont predicted to get 14-15 out of 135 seats. He won’t be the leader.

Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)

Catalan secessionist parties on Tuesday failed to agree on a united ticket to contest a December snap regional election, making it more difficult to rule the region after the vote and press ahead with their collective bid to split from Spain. Catalonia’s secessionist push has plunged Spain into its worst political crisis in four decades, triggered a business exodus, forced Madrid to cut its economic forecast and reopened old wounds from Spain’s civil war in the 1930s. Pro-independence groups have called for a general strike in the restive region on Wednesday. Catalan political parties had until midnight on Tuesday to register coalitions ahead of the Dec. 21 vote, but the two main forces which formed an alliance to rule the region for the last two years did not manage to agree on a new pact in time.

While they could still find an agreement after the vote, political analysts say the lack of a deal on a joint campaign may also trigger a leadership fight at the top of the movement. This is because center-right PdeCat (Catalan Democratic Party) of sacked Catalan president Carles Puigdemont is expected to be overtaken by leftist Esquerra Republicana de Catalunya (ERC) of former regional vice president Oriol Junqueras. Puigdemont and Junqueras are the two main leaders behind the current secession bid that last month led to a unilateral declaration of independence which Spain thwarted by imposing direct rule on the region. Junqueras is currently in custody pending a potential trial on charges of sedition, rebellion and misuse of public funds. Puigdemont, who faces the same charges, is currently in self-imposed exile in Belgium and has said he would oppose extradition.

An opinion poll released on Sunday by Barcelona-based newspaper La Vanguardia showed Junqueras’ ERC could garner between 45 and 46 seats in the 135-strong regional assembly while Puigdemont’s PdeCat would win between 14 and 15 seats. In order to reach the 68-seat threshold for a majority, they would then have to form a parliamentary alliance with anti-capitalist CUP, which is expected to get seven or eight seats. Such an alliance previously existed between 2015 and 2017.

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Down the drain.

1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

More than 300,000 people in Britain – equivalent to one in every 200 – are officially recorded as homeless or living in inadequate homes, according to figures released by the charity Shelter. Using official government data and freedom of information returns from local authorities, it estimates that 307,000 people are sleeping rough, or accommodated in temporary housing, bed and breakfast rooms, or hostels – an increase of 13,000 over the past year. Shelter said the figures were an underestimate as they did not include people trapped in so-called “hidden homelessness”, who have nowhere to live but are not recorded as needing housing assistance, and end up “sofa surfing”. London, where one in every 59 people are homeless, remains Britain’s homelessness centre. Of the top 50 local authority homelessness “hotspots”, 18 were in Greater London, with Newham, where one in 27 residents are homeless, worst hit.

However, while London’s homeless rates have remained largely stable over the past year, the figures show the problem is becoming worse in leafier commuter areas bordering the capital, such as Broxbourne, Luton, and Chelmsford. Big regional cities have also seen substantial year-on-year increases in the rate of homelessness. In Manchester, one in 154 people are homeless (compared with one in 266 in 2016); in Birmingham one in 88 are homeless (119); in Bristol one in 170 are affected (199). Polly Neate, chief executive of Shelter, said: “It’s shocking to think that today, more than 300,000 people in Britain are waking up homeless. Some will have spent the night shivering on a cold pavement, others crammed into a dingy hostel room with their children. And what is worse, many are simply unaccounted for.

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Jun 272017
 
 June 27, 2017  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  10 Responses »
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Egon Schiele Port of Trieste 1907

 

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)
Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)
US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)
Democrats Help Corporate Donors Block California Single-Payer (IBT)
Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)
Europe’s Inequality Highly Destabilizing – Draghi (R.)
Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)
ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)
Europe’s Gradualist Fallacy (Varoufakis)
Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda
Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)
Brazil Top Prosecutor Charges President With Bribery (AFP)
The Technicolor Swan (Jim Kunstler)
California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

 

 

What a great idea to try and prevent the US President from talking to other world leaders (i.e. doing his job).

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)

President Donald Trump is eager to meet Russian President Vladimir Putin with full diplomatic bells and whistles when the two are in Germany for a multinational summit next month. But the idea is exposing deep divisions within the administration on the best way to approach Moscow in the midst of an ongoing investigation into Russian meddling in the U.S. elections. Many administration officials believe the U.S. needs to maintain its distance from Russia at such a sensitive time – and interact only with great caution. But Trump and some others within his administration have been pressing for a full bilateral meeting. He’s calling for media access and all the typical protocol associated with such sessions, even as officials within the State Department and National Security Council urge more restraint, according to a current and a former administration official.

Some advisers have recommended that the president instead do either a quick, informal “pull-aside” on the sidelines of the summit, or that the U.S. and Russian delegations hold “strategic stability talks,” which typically don’t involve the presidents. The officials spoke anonymously to discuss private policy discussions. The contrasting views underscore differing views within the administration on overall Russia policy, and Trump’s eagerness to develop a working relationship with Russia despite the ongoing investigations. Asked about the AP report that Trump is eager for a full bilateral meeting, Putin’s spokesman Dmitry Peskov told reporters in Moscow on Monday that “the protocol side of it is secondary.” The two leaders will be attending the same event in the same place at the same time, Peskov said, so “in any case there will be a chance to meet.”

Peskov added, however, that no progress in hammering out the details of the meeting has been made yet. There are potential benefits to a meeting with Putin. A face-to-face meeting can humanize the two sides and often removes some of the intrigue involved in impersonal, telephone communication. Trump — the ultimate dealmaker — has repeatedly suggested that he can replace the Obama-era damage in the U.S.-Russia relationship with a partnership, particularly on issues like the ongoing Syria conflict. There are big risks, though. Trump is known to veer off-script, creating the possibility for a high-stakes diplomatic blunder. In a brief Oval Office meeting with top Russian diplomats last month, Trump revealed highly classified information about an Islamic State group threat to airlines that was relayed to him by Israel, according to a senior administration official. The White House defended the disclosures as “wholly appropriate.”

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Here’s why people don’t want Trump to talk to Putin.

Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)

Three CNN journalists who worked on a now-retracted story about Russia and a top Trump adviser are leaving the network. CNN is casting their departure as resignations in the wake of the fiasco, but the network has come under substantial criticism since apologizing for the story. The move would also help CNN’s legal position in case of a lawsuit. Anthony Scaramucci, the Trump adviser who is the target of the story, told me that he has no plans to sue. He said he has accepted CNN’s apology and wants to move on. But Scaramucci also told me in an earlier interview, “I was disappointed the story was published. It was a lie.” Lex Harris, executive editor of CNN’s investigative unit, was the highest-ranking official to resign. Thomas Frank, who wrote the story, and Eric Lichtblau, who edited it, also turned in their resignations.

Lichtblau is a highly regarded reporter who spent nearly a decade and a half at the New York Times. The story tried to draw a link between Scaramucci and the Russian Direct Investment Fund. Scaramucci was a Trump transition team member who has been nominated to an ambassadorial-level post based in Paris. The CNN.com article said that Scaramucci, back in January, held a secret meeting with an official from the Russian fund. According to an unnamed source, Scaramucci discussed the possibility of lifting U.S. sanctions at the meeting. But Scaramucci told me there was no secret meeting. He said he had given a speech on Trump’s behalf at Davos, and fund official Kirill Dmitriev approached him in a restaurant to say hello and they had a brief conversation, with no discussion of sanctions. In the retraction, the network said the story “did not meet CNN’s editorial standards.” The network is now requiring approval from two top editors before any Russia-related story can be published.

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Amazing how easy it can be. Now make it permanent.

US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)

The Republican chairman of the Senate foreign relations committee has said the US Congress will hold up approval of arms sales to the Gulf as a result of the Saudi-led blockade of Qatar. Senator Bob Corker said the nations of Gulf Cooperation Council had failed to take advantage of a summit with President Trump in May to overcome their differences and had “instead chosen to devolve into conflict”. Corker continued: “For these reasons, before we provide any further clearances during the informal review period on sales of lethal military equipment to the GCC states, we need a better understanding of the path to resolve the current dispute and reunify the GCC.”

Earlier this month, the Senate narrowly fended off a bid to block a Trump administration plan to sell Saudi Arabia $500m in precision-guided munitions, part of a proposed $110bn arms sales package announced during the president’s visit to Riyadh last month. Congress has the power to block individual sales during a 30-day review period from when the state department gives notification of an impending sale. A Saudi-led coalition that includes Egypt, the United Arab Emirates and Bahrain cut ties with Qatar on 5 June, but only provided a justification 18 days later with the presentation of a list of 13 demands. They want Doha to close the al-Jazeera TV channel, restrict diplomatic ties with Iran, halt the construction of a Turkish military base in the country, and sever contacts with extremist organisations.

Qatar has been given 10 days to meet the demands, but the Saudi-led group has not said what action it would take if the deadline is not met. The US has sent mixed signals on the standoff. In the immediate aftermath of the embargo, Trump gave Riyadh and its allies fulsome support, echoing Saudi claims about Qatari funding for terrorism. However, Rex Tillerson, the secretary of state, last week called on the coalition present its complaints and negotiate a solution. Since the list of 13 demands was presented, Tillerson has been non-committal, observing that some of them would be “very difficult for Qatar to meet”, but arguing there were “significant areas which provide a basis for ongoing dialogue leading to resolution.”

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David Sirota: “Jerry Brown campaigned for president supporting single-payer, then he got big cash from insurers/drugmakers, now he refused to back the bill.”

Single payer is the only thing that can save US health care. But all sides are in debt to the very interests who will block it.

Democrats Help Corporate Donors Block California Single-Payer (IBT)

As Republican lawmakers grapple with their unpopular bill to repeal Obamacare, Democrats have tried to present a united front on health care. But for all their populist rhetoric against insurance and drug companies, Democratic powerbrokers and their allies remain deeply divided on the issue — to the point where a political civil war has spilled into the open in America’s largest state. In California last week, Democratic state Assembly Speaker Anthony Rendon helped his and his party’s corporate donors block a Democrat-sponsored bill to create a universal health care program in which the government would be the single payer. Rendon’s decision shows how progressives’ ideal of universal health care remains elusive — even in a liberal state where government already foots 70% of the total health care bill.

Until Rendon’s move, things seemed to be looking up for Democratic single-payer proponents in deep blue California, which has been hammered by insurance premium increases. There, the Democratic Party — which originally created Medicare — just added a legislative supermajority to a Democratic-controlled state government that oversees the world’s sixth largest economy. That 2016 election victory came as a poll showed nearly two-thirds of Californians support the creation of a taxpayer-funded universal health care system in a state whose population is roughly the size of Canada — which already has such a system. California’s highest-profile federal Democratic lawmaker recently endorsed state efforts to create single-payer systems, and 25 members of its congressional delegation had signed on to sponsor a federal single-payer bill.

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They missed everything so far, but now we need them.

Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)

Former chairman of the Federal Reserve Ben Bernanke said Monday that economists have a “responsibility” to help address populist frustrations. “The credibility of economists has been damaged by our insufficient attention, over the years, to the problems of economic adjustment and by our proclivity toward top-down, rather than bottom-up, policies,” Bernanke, now distinguished fellow in residence, Brookings Institution, said in prepared remarks for a dinner speech called “When growth is not enough.” “Nevertheless, as a profession we have expertise that can help make the policy response more effective, and I think we have a responsibility to contribute wherever we can,” the former Fed chair said.

In the last 18 months, growing populist sentiment contributed to the UK’s surprise vote to leave the European Union last June, and the election of U.S. President Donald Trump last November. Trump promised to bring jobs back from China and Mexico to the U.S., winning him support. The U.S. Census Bureau’s latest report on household income showed the Gini index of income inequality for the U.S. in 2015 of 0.482 was significantly higher than the prior year’s 0.480. “This increase suggests that income inequality increased across the country,” the report said. “Policymakers in recent decades have been slow to address or even to recognize those trends, an error of omission that has helped fuel the voters’ backlash,” Bernanke said. He was speaking at the European Central Bank’s Forum on Central Banking in Sintra, Portugal.

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Bernanke and Draghi greatly increased inequality with their ZIRP and NIRP policies. And today both all of a sudden come out as being worried about it?

Europe’s Inequality Highly Destabilizing – Draghi (R.)

Europe’s growing inequality is highly destabilizing and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, ECB President Mario Draghi said on Monday. Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc’s richer and poorer members, a source of tension for the 19-member currency bloc. “Is this a seriously destabilizing factor that we should cope with?” Draghi said in a rare town-hall style meeting with university students in Lisbon. “Yes it is.” “We have to fight against inequality,” Draghi in response to a student question. Draghi, leading one of Europe’s most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity.

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. Figures also show the highest level of income inequality in the bloc’s periphery, like Greece, Spain and Portugal, hit hardest by the crisis. Calling convergence among euro zone members “fundamental,” Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. He also called on governments to consider better income and wealth redistribution policies. Defending the ECB’s ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality. He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.

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Here’s how ZIRP creates more inequality.

Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)

Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit. Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest. There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes. The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.

This is the magic of fractional reserve lending. The bank is only required to hold a small%age of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves. This is a simplified version of how money is created and issued, but it helps us understand why centrally issued and distributed money concentrates wealth in the hands of those with access to the centrally issued credit and those who have the privilege of leveraging every $1 of cash into $19 newly created dollars that earn interest. Imagine if we each had a relatively modest $1 million line of credit at 0.25% interest from a central bank that we could use to issue loans of $19 million.

Let’s say we issued $19 million in home loans at an annual interest rate of 4%. The gross revenue (before expenses) of our leveraged $1 million would be $760,000 annually –let’s assume we net $600,000 per year after annual expenses of $160,000. (Recall that the interest due on the $1 million line of credit is a paltry $2,500 annually). Median income for workers in the U.S. is around $30,000 annually. Thus a modest $1 million line of credit at 0.25% interest from the central bank would enable us to net 20 years of a typical worker’s earnings every single year. This is just a modest example of pyramiding wealth.

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So Draghi whines about inequality and at the same time makes sure Greece gets hammered even more economically. Does his ass know where his mouth is located?

ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)

The president of the European Central Bank, Mario Draghi, said on Monday that Greece will not join its quantitative easing program (QE) until international creditors specify what sort of debt relief measures the country can expect. “Until sufficient details are given on debt-related measures, serious concerns remain about the sustainability of Greek government debt,” he said in response to a question from Popular Unity (LAE) MEP Nikos Hountis over whether the ECB had completed its own debt sustainability analysis (DSA), and if it had come to any conclusions on the issue. Draghi said that ECB experts “are not currently in a position to complete a fully fledged DSA analysis of Greece’s public debt.” Up until very recently, Greece was banking on its inclusion in QE as a way to return to bond markets, which would put an end to its dependence on bailout programs.

If the ECB were to buy Greek debt it would boost the confidence of investors about the prospects of the Greek economy. But given Draghi’s comment on Monday and the failure of the government to secure more concrete language on debt relief at the Eurogroup on June 15, Athens now believes it can achieve the goal to enter bond markets without having to join QE. And it believes that it has three windows of opportunity to issue a bond in the period stretching from July until early next year. These three opportunities are, reportedly, in July, given the improved climate in international markets. The second chance will be at the end of September and beginning of October after German elections, while the third will be at the end of the year or early 2018, as predicted by the head of the European Stability Mechanism (ESM), Klaus Regling.

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Macron is Merkel’s messenger boy. France has nothing to say in the EU. That’s the essence of Europe’s problem.

Europe’s Gradualist Fallacy (Varoufakis)

Europe is at the mercy of a common currency that not only was unnecessary for European integration, but that is actually undermining the European Union itself. So what should be done about a currency without a state to back it – or about the 19 European states without a currency that they control? The logical answer is either to dismantle the euro or to provide it with the federal state it needs. The problem is that the first solution would be hugely costly, while the second is not feasible in a political climate favoring the re-nationalization of sovereignty. Those who agree that the cost of dismantling the euro is too high to contemplate are being forced into a species of wishful thinking that is now very much in vogue, especially after the election of Emmanuel Macron to the French presidency.

Their idea is that, somehow, by some unspecified means, Europe will find a way to move toward federation. “Just hang in there,” seems to be their motto. Macron’s idea is to move beyond idle optimism by gaining German consent to turn the eurozone into a state-like entity – a federation-lite. In exchange for making French labor markets more Germanic, as well as reining in France’s budget deficit, Germany is being asked to agree in principle to a common budget, a common finance ministry, and a eurozone parliament to provide democratic legitimacy. Macron knows that such a federation would be macroeconomically insignificant, given the depth of the debt, banking, investment, and poverty crisis unfolding across the eurozone. But, in the spirit of the EU’s traditional gradualism, he thinks that such a move would be politically momentous and a decisive step toward a meaningful federation.

“Once the Germans accept the principle, the economics will force them to accept the necessary magnitudes,” is how a French official put it to me recently. Such optimism may seem justified in light of proposals along those lines made in the past by none other than Wolfgang Schäuble, Germany’s finance minister. But there are two powerful reasons to be skeptical. First, Chancellor Angela Merkel and Schäuble were not born yesterday. If Macron’s people imagine a federation-lite as an entering wedge for full-blown political integration, so will Merkel, Schäuble, and the reinvigorated Free Democrats (who will most likely join a coalition government with Merkel’s Christian Democrats after the September federal election). And they will politely but firmly reject the French overtures.

Second, in the unlikely event that Germany gives federation-lite the go-ahead, any change to the functioning of the eurozone would, undoubtedly, devour large portions of the reformers’ political capital. If it does not produce economic and social results that improve, rather than annul, the chances of a proper federation, as I suspect it will not, a political backlash could ensue, ending any prospect of a more substantial federation in the future. In that case, the euro’s dismantling will become inevitable, will cost more, and will leave Europe in even greater shambles.

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Germany doesn’t care one bit about Macron’s agenda; they may pay lip service, but that’s it. In this particular case, do you think Germany wants an Italian bank collapse a few months before Merkel’s election?

Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda

Germany sounded the alarm over Italy’s latest bank bailout, saying the apparent bending of EU rules casts doubt on efforts to further integrate the euro zone. The government in Rome announced the country’s biggest bank rescue to date on Sunday evening as it committed as much as €17 billion ($19 billion) to clean up two failed banks. While the European Commission approved the plan, German officials pointed to the involvement of state aid to shield senior creditors from losses as working around EU law established to deal with bank failures. That exemption drew criticism from members of Chancellor Angela Merkel’s ruling coalition, who cited the need to uphold European law without setting unhealthy precedents.

“We’re in a phase where we are faced with the question of whether we can succeed at applying European law, irrespective of all the understandable domestic policy discussions,” Alexander Radwan, a lawmaker from Merkel’s CSU Bavarian sister party who sits on the Bundestag’s finance committee, said in an interview on Monday. “Cases like these make it more difficult to think about deepening the economic and monetary union.” The growing drumbeat for closer euro-area integration following Emmanuel Macron’s election in France is making some German lawmakers increasingly uneasy. Citing election results in France and the Netherlands this year that open “an opportunity for moving Europe forward,” Merkel has spoken of joint projects with France and left the door open to creating a euro-area budget and a joint finance minister.

“This decision discredits the further completion of the banking union and moves the common deposit-guarantee scheme into the distant future,” said Carsten Schneider, a deputy head of the Social Democrat caucus in Germany’s lower house. “It’s not acceptable that bank wind-downs under national rules offer better conditions for creditors than under the European regime.” Italy’s decision is “a grave mistake,” Schneider said in emailed comments to Bloomberg.

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Brussels hubris in its full splendor. (BRRD= Bank Recovery and Resolution Directive)

Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)

The bailout is dressed up as a rescue by a larger bank along the same lines as Santander’s recent acquisition for a nominal 1 euro of the insolvent Banco Popular. Like Santander, Intesa Sanpaolo, Italy’s second-biggest lender, will buy the two banks 1 euro. But there the similarity ends. Santander took on full responsibility for recapitalizing Banco Popular, for which it announced a 7bn euro rights issue. But Intesa isn’t taking financial responsibility for anything. The Italian government is paying Intesa about 5bn euros in cash to take over the two banks, and is additionally providing guarantees worth 12bn euros for the two banks’ bad assets. The total bailout amount is thus around 17bn euros, though according to the European Commission, the net cost will be much lower: Both guarantees and cash injections are backed up by the Italian State’s senior claims on the assets in the liquidation mass. Correspondingly, the net costs to the Italian State will be much lower than the nominal amounts of the measures provided.

The bailout imposes losses on the two banks’ shareholders and subordinated debtholders. But the all-important seniors have been spared, and small subordinated debtholders will be compensated by Intesa from the funds provided by the Italian government. The BRRD has effectively been sidestepped. Did the EU oppose this sleight of hand? Not a bit of it. In this statement, the European Commission approved the use of taxpayers’ funds to bail out these banks: “The Commission found these measures to be in line with EU State aid rules, in particular the 2013 Banking Communication. Existing shareholders and subordinated debt holders have fully contributed to the costs, reducing the cost of the intervention for the Italian State. Both aid recipients, BPVI and Banca Veneto, will be wound up in an orderly fashion and exit the market, while the transferred activities will be restructured and significantly downsized by Intesa, which in combination will limit distortions of competition arising from the aid.”

Remarkable. Winding up two banks in the Venetian area would cause massive economic disruption. So the solution is to create an effective banking monopoly in that area. And this doesn’t distort competition, apparently. I detect a distinct odor of Eurofudge. Italy’s decision, supported by the European Commission, tramples the BRRD to death. Senior creditors need never again fear losses due to a failing bank. If it is systemically important, it will be given a precautionary recapitalization at taxpayers’ expense. If it is not, an excuse will be found to bail it out at taxpayers’ expense. Either way, seniors and unsecured depositors are safe. That is, they are as safe as politicians want them to be. Italy is able to bail out these banks – and will no doubt in due course bail out others too – because it is a big country which can easily borrow the funds needed.

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“..”abundant” proof that the president received bribe money..”

Brazil Top Prosecutor Charges President With Bribery (AFP)

Brazil’s top prosecutor charged President Michel Temer with bribery on Monday, plunging Latin America’s biggest country into what could be prolonged new political turmoil. The bribery charge filed by Prosecutor General Rodrigo Janot swept Temer into the forefront of a giant graft scandal that has engulfed Latin America’s biggest country over the last three years. Although several past Brazilian presidents and scores of other politicians are currently being investigated for corruption in the “Car Wash” probe, Temer is the first leader in the country’s history to face criminal charges while still in office. Temer acted “in violation of his duties to the state and to society,” Janot wrote, citing “abundant” proof that the president received bribe money.

For Temer to go on trial, the lower house of Congress must first approve Janot’s charge by a two-thirds majority. Temer would then be suspended for six months for the trial. Janot is also probing Temer for alleged obstruction of justice and membership of a criminal group. He could file those charges at a later date, guaranteeing a sustained legal assault. However, Temer’s aides say they are confident he has sufficient support in Congress to get the charges thrown out. In his first comments since returning from a trip to Russia and Norway, the president was defiant. “There is no plan B,” he said at a ceremony to sign a new bill in the capital Brasilia. “Nothing will destroy us – not me and not our ministers.”

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Nothing black about it.

The Technicolor Swan (Jim Kunstler)

I registered as a Democrat in 1972 — largely because good ole Nixon was at the height of his power (just before his fall, of course), and because he was preceded as party leader by Barry Goldwater, who, at the time, was avatar for the John Birch Society and all its poisonous nonsense. The Democratic Party was still deeply imbued with the personality of Franklin Roosevelt, with a frosting of the recent memory of John F. Kennedy and his brother Bobby, tragic, heroic, and glamorous. I was old enough to remember the magic of JFK’s press conferences — a type of performance art that neither Bill Clinton or Barack Obama could match for wit and intelligence — and the charisma of authenticity that Bobby projected in the months before that little creep shot him in the kitchen of the Ambassador Hotel. Even the lugubrious Lyndon Johnson had the heroic quality of a Southerner stepping up to abolish the reign of Jim Crow.

Lately, people refer to this bygone era of the 1960s as “the American High” — and by that they are not talking about smoking dope (though it did go mainstream then), but rather the post World War Two economic high, when American business might truly ruled the planet. Perhaps the seeming strength of American political leaders back then was merely a reflection of the country’s economic power, which since has been squandered and purloined into a matrix of rackets loosely called financialization — a criminal magic act whereby wealth is generated without producing anything of value. Leaders in such a system are bound to be not just lesser men and women but something less than human. Hillary Clinton, for instance, lost the 2016 election because she came off as demonic, and I mean that pretty literally.

To many Americans, especially the ones swindled by the magic of financialization, she was the reincarnation of the little girl in The Exorcist. Donald Trump, unlikely as it seems — given his oafish and vulgar guise — was assigned the role of exorcist. Unlike poor father Merrin, he sort of succeeded, even to his very own astonishment. I say sort of succeeded because the Democratic Party is still there, infested with all its gibbering demons, but it has been reduced politically to impotence and appears likely to soon roll over and die. None of this is to say that the other party, the Republicans, have anything but the feeblest grip on credibility or even an assured continued existence. First of all there is Trump’s obvious plight as a rogue only nominally regarded as party leader (or even member).

Then there is the gathering fiasco of neither Trump nor his party being able to deliver remedies for any of the ills of our time that he was elected to fix. The reason for that is simple: the USA has entered Hell, or at least a condition that looks a lot like it. This is not just a matter of a few persons or a party being possessed by demons. We’ve entered a realm that is populated by nothing but demons — of our own design, by the way. Our politics have become so thoroughly demonic, that the sort of exorcism America needs now can only come from outside politics. It’s coming, too. It’s on its way. It will turn our economic situation upside down and inside out. It’s a Technicolor swan, and you can see it coming from a thousand miles out. Wait for it. Wait for it.

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It’s crazy that we’re still talking about this.

California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

Glyphosate, an herbicide and the active ingredient in Monsanto Co’s popular Roundup weed killer, will be added to California’s list of chemicals known to cause cancer effective July 7, the state’s Office of Environmental Health Hazard Assessment (OEHHA) said on Monday. Monsanto vowed to continue its legal fight against the designation, required under a state law known as Proposition 65, and called the decision “unwarranted on the basis of science and the law.” The listing is the latest legal setback for the seeds and chemicals company, which has faced increasing litigation over glyphosate since the World Health Organization’s International Agency for Research on Cancer said that it is “probably carcinogenic” in a controversial ruling in 2015.

Dicamba, a weed killer designed for use with Monsanto’s next generation of biotech crops, is under scrutiny in Arkansas after the state’s plant board voted last week to ban the chemical. OEHHA said the designation of glyphosate under Proposition 65 will proceed following an unsuccessful attempt by Monsanto to block the listing in trial court and after requests for stay were denied by a state appellate court and the California’s Supreme Court. Monsanto’s appeal of the trial court’s ruling is pending. “This is not the final step in the process, and it has no bearing on the merits of the case. We will continue to aggressively challenge this improper decision,” Scott Partridge, Monsanto’s vice president of global strategy, said.

Listing glyphosate as a known carcinogen under California’s Proposition 65 would require companies selling the chemical in the state to add warning labels to packaging. Warnings would also be required if glyphosate is being sprayed at levels deemed unsafe by regulators. Users of the chemical include landscapers, golf courses, orchards, vineyards and farms. Monsanto and other glyphosate producers would have roughly a year from the listing date to re-label products or remove them from store shelves if further legal challenges are lost.

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Jun 062017
 
 June 6, 2017  Posted by at 6:41 pm Finance Tagged with: , , , , , , , , , ,  5 Responses »
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Joseph Mallord William Turner Wreckers, Coast of Northumberland 1834

 

Is it sheer hubris, or is it just incompetence? It’s a question often asked when it comes to politics. And regularly, the answer is both. Still, what the ruling British political class has put on display recently seems to exist in a category all its own. Less than a year go, then-PM David Cameron lost the Brexit referendum that he called himself and was dead sure he would win by a landslide.

His successor Theresa May, Cameron’s Home Secretary and a staunch Remain advocate, lost the Brexit vote as much as her PM did, but stayed on, was promoted, and acted for 11 months like Downing Street 10 was hers by Divine Decree. Then she did the exact same thing Cameron did: she looked at polling numbers and decided to go for the jugular: more power through a snap vote.

In the process, May has succeeded in accomplishing the remarkable feat of rejuvenating her main opponent Jeremy Corbyn and his Labour party, who had been left for infighting dead until she called the election, while at the same time dividing her own Tories so much they now resemble Labour from just weeks ago.

The thing that sort of irks is that the speed and intensity with which it all came down would have been way more impressive if she had meant to do it. Oh, and what also irks is that despite a performance worthy of the Comedy Capers, May may still win, since there was always little time, there’s so little time left till Thursday and there have been terror attacks.

A nice addition to the comedy sphere, and I mean no disrespect to any of the terror victims, they’ve gotten enough of that from May et al, is the story behind the PM’s refusal to appear in public debates with Corbyn and perhaps others. When I first saw a few weeks ago that she had announced that refusal, I immediately thought she did not make that decision. She doesn’t have the savvy for that kind of thing.

Someone did it for her. I presumed there had been American advisers added to her team, but I didn’t read anything about that. Until a few days ago, when I saw that political -presumed- heavyweights like Australian Lynton Crosby and American Jim Messina had joined around the time of the snap election announcement on April 18.

And now of course I can’t help thinking that these guys are responsible for the epic failure that May has been over the past six weeks. But that might be giving them too much honor, she’s quite capable of screwing up the way she has all on her own.

And yes, it’s hard to escape a comparison with Hillary here. It’s not about gender, it’s about competence. And if you manage to -almost or entirely- lose to the likes of Trump and Corbyn, despite having a huge lead in the polls, as both ladies had, you’re simply in the wrong place at the wrong time. Not that Corbyn has won yet, at least not in the election.

Guys like Crosby and Messina get paid the big bucks for their expertise in both clean and dirty tricks. They have plenty experience in both. They don’t have opinions, but they make up voters’ opinions for them. Messina was Obama’s 2012 re-election campaign leader, Crosby did elections in Australia, New Zealand, Canada. Funny thing is if you check their records, they have lost quite a few of these campaigns. Even funnier would be if they lose this one too.

 

But you’re right, it’s not right to be laughing. This past weekend saw another attack on Britain, and another -to put it mildly- far below par performance by Theresa May in its wake. If after this the Britons still hand her a win in Thursday’s general election, give up the country for lost. Stick a fork in it.

May was the one who as Home Secretary was responsible for an investigation into the foreign funding of extremist Islamist groups in the UK that was set to be released a year ago. Instead, we saw last week, she’s actively suppressing its release now that she’s PM, ostensibly because the report mentions Saudi Arabia as a source of such funding, and May recently used her position to help UK arms manufacturers sell billions worth of additional weapons to the Saudi’s.

She’s even on record as saying that arms sales to the House of Saud make Britain more safe, though the report apparently fingers that same House of Saud as funding the very terrorism her country was hit by, three times in a row now, during her stint as PM.

Where does terrorism originate? May won’t admit it’s Saudi Arabia, so she tried, in her first post-attack speech, to deflect the obvious by blaming ‘the internet’. But the internet doesn’t sell arms to countries that support terrorism. Theresa May does.

 

 

As people understandably call for more protection after three hits in a row, May has another thing to suppress: as Home Secretary she has been responsible for cutting some 22,000 jobs in the police force, 20,000 in the army, and 60,000 in the healthcare system. And if she would win on Thursday, more of all that is in the offing. At least, that was what was planned; she may make yet another U-turn on that one.

It’s really quite amusing to see a candidate trying to hide from the very elections she herself called, but -again-, given the short time-frame this hide-and-seek tactic might actually work. Moreover, if the British media and his own Labour MPs had not turned against Jeremy Corbyn the way they did until very recently, would May be anywhere near having a shot at victory? It looks unlikely.

There are already bets going that even if she wins the election, which if it happens is sure to be a very narrow win, she’ll be replaced as PM by Boris Johnson before July 1. But he’s as much of a clown as all other major Tory figureheads are today.

 

 

The problem of course is that the problems for Britain won’t stop on Thursday, no matter who wins. The problems haven’t even started blooming yet, let alone flowering.

If Corbyn might win, he’s have the entire Conservative entitlement class on his back, and that would turn ugly fast. If May wins, she’ll be ousted in no time, she did far too bad of a job. And then in just a few weeks’ time the Brexit negotiations begin. But with what? With a country that’s been divided to the bone, that’s what.

As things are, Corbyn may yet succeed where Bernie Sanders was rejected and suppressed by his own party. The world today needs people like them, not because it needs ‘socialism’ that much, but because the political landscape has been thrown too far out of balance. If the left gets co-opted by neo-liberalism as much as the right is, there is no left left.

And a sound political system needs representation for the people, the poor(er), as much as representation for the richer ruling classes. It’s not about ideology, but about balance. If you allow either one side or the other of the political equation to run rampant, you will inevitably end up with a dysfunctional society.

 

And that is what Britain is today. There are plenty slogans out there after yet another terror attack that say things like ‘Britain Stands United’, “London is United” , but it doesn’t and they are not. It’s not terrorism that has divided the country, it’s the political class. It’s not terrorism that has ‘crippled democracy’, it’s the sense of entitlement that many -on both sides of the aisle- have brought to Whitehall.

You would think that at least Jeremy Corbyn could do something about that if he wins. But he would then face an EU negotiating team that operates with a very similar sense of entitlement. And they’re going to come after the British people the same way they have in Greece. Not exactly an enviable position.

And that’s just Brussels. Then there are the terrorist attacks, and there’s little reason to think they will stop. What Britain refuses to recognize until now, and has for hundreds of years as I said before, is that these attacks in London and Manchester are not where it has all started. They don’t come out of the blue, and they don’t come from people who ‘hate us for our freedom’.

The first step is the UK et al spreading terror in Libya and Syria and Iraq, bombing away and selling weapons to ‘friendly’ regimes, creating utter chaos as a political power tool. If you don’t stop that you don’t stop terrorism. The only way to stop terror directed at you is to stop directing it at others.

Stop bombing these countires with impunity, and use the money you save with that to rebuild what you’ve destroyed. That will take away the main reason why there is terrorism in our streets. It will likely go a long way towards solving the refugee problems as well.

All this seems a long way away. It’ll recede further if the entitlement-laden establishment win on Thursday. But whichever way the vote goes, Britain will face a decade or more of deepening hardship, don’t underestimate that; there is no easy way out, not for the people.

Oh wait, I totally forgot to mention that the housing bubble is going to burst too. Oh, well, when it rains…

 

 

Dec 212015
 
 December 21, 2015  Posted by at 10:27 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle December 21 2015
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Lewis Wickes Hine Child Labor in Magnolia Cotton Mills spinning room, Mississippi 1911

Brent Oil Slides to 11-Year Low as Producers Seen Worsening Glut (BBG)
Siberian Surprise: Russian Oil Patch Just Keeps Pumping (BBG)
This So-Called Rate Hike Is Completely Jerry-Rigged (E&M)
Central Banks Created A Monster That Drives The Economy On The Way Down (King)
Europe’s Year From Hell May Presage Worse To Come (Reuters)
Spain Election Confusion: Conservatives Win But Podemos Are Stars (Ind.)
Alexis Tsipras Pushes For IMF To Stay Out Of Next Greek Bailout (FT)
After Jumping Over One Hurdle, Greece Faces Another With Pensions (CNBC)
UK Buyers Need To Save For Up To 24 Years To Get On Property Ladder (Guardian)
Canada’s Trudeau Cites Risk in Curbing Foreign Real-Estate Investment (WSJ)
Kansas Suspends Debt Limits To Pay For Tax Cuts (Wichita Eagle)
The Empire Files: ‘America’s Ship is Sinking’: Former Bush Official (TeleSur)
The West Dominates Global Arms Sales (Forbes)
The Refugee Crisis Is Forcing Germans To Ask: Who Are We? (Guardian)
Vice Chancellor: Austria Can’t Accept Over 100,000 Migrants A Year (Reuters)
My Baby, The Refugee: Mothers On The Hardest Journey Of Their Lives (Guardian)
18 Migrants Drown After Boat Sinks Off Turkey’s Southwestern Coast (Reuters)

China demand tanks. For oil, for everything. If there is to be a ‘Story of 2015’, it should be that. But instead, denial pushes it forward to 2016.

Brent Oil Slides to 11-Year Low as Producers Seen Worsening Glut (BBG)

Brent crude slumped to the lowest level since 2004 amid speculation suppliers from the Middle East to the U.S. will exacerbate a record glut as they continue fighting for market share. Futures fell as much as 1.9% in London after a 2.8% drop last week. Producers are focusing on reducing costs amid the price decline, Qatar Energy Minister Mohammed Al Sada said Sunday at a meeting of Arab oil-exporting nations in Cairo. Drillers in the U.S. put the most rigs back to work since July, adding 17, data from Baker Hughes showed. Oil has fallen below levels last seen during the 2008 global financial crisis on signs the market’s oversupply will worsen. OPEC effectively abandoned output limits at a Dec. 4 meeting, while the U.S. on Friday passed legislation that lifted a 40-year ban on crude exports.

“There hasn’t been any significant signs of a pick-up in demand and we haven’t seen any meaningful cuts to production,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Nothing has really changed in the oil market over the past couple of months apart from the price.” Brent for February settlement slid as much as 71 cents to $36.17 a barrel on the London-based ICE Futures Europe exchange, the lowest level in intraday trade since July 13, 2004. The contract was at $36.41 at 2:21 p.m. Singapore time after falling 18 cents to $36.88 on Friday, the lowest close since December 2008. Front-month prices are down 36% this year, set for a third annual loss. West Texas Intermediate for January delivery, which expires Monday, was 28 cents lower at $34.45 a barrel on the New York Mercantile Exchange. It dropped 22 cents to $34.73 on Friday, the lowest close since February 2009. The more active February contract was down 29 cents at $35.77. Total volume was close to the 100-day average.

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Nobody has a choice.

Siberian Surprise: Russian Oil Patch Just Keeps Pumping (BBG)

In the fight for market share among the world’s oil producers this year, Russia wasn’t supposed to be a contender. But the world’s No. 3 producer has been pumping at the fastest pace since the collapse of the Soviet Union, adding to the flood on an already-swamped market and helping push prices to the lowest levels since 2009. Russia’s unexpected oil bounty this year is the result not of a new Kremlin campaign but of dozens of modest productivity improvements across the sprawling sector. Even pressured by plunging prices, as well as U.S. and European Union sanctions that cut access to much foreign financing and technology, Russian companies have managed to squeeze more crude out of some of the country’s oldest fields.

They have also brought new projects on line, offsetting steady declines in its core producing region of West Siberia. With a rise of 0.5% in the first nine months of 2015, Russia hasn’t boosted production as much as its larger rivals, the U.S. (up 1.3%) and Saudi Arabia (up 5.8%), according to Citigroup Inc. But having ignored OPEC’s calls earlier this year to join efforts to support prices by pumping less, Russia is keeping up with the cartel. “I know of no one who had predicted that Russian production would rise in 2015, let alone to new record levels,” said Edward Morse, Citigroup’s global head of commodities research. As recently as April, not even the Russian government thought 2015 would break the record.

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It’s about the banks.

This So-Called Rate Hike Is Completely Jerry-Rigged (E&M)

It’s official. [Last] week the Federal Reserve raised the key overnight Fed Funds rate by 0.25%. The move was discussed, debated, argued, and telegraphed to death. We all heard about it until we hoped anything else financial would happen so we could finally put the tired story to rest. Now that the rate hike is on the books, we can start talking about outcomes, like how in the world the Fed intends to enforce the rate hike, what it means, and what comes next. The first one is not so simple, the second is annoying, and the third is downright depressing. But we’d better start planning for this today, because it will definitely affect our investments in the months to come! This rate hike is unlike any other. It comes on the heels of several quantitative easing programs that have dumped trillions of new dollars into the banking system.

Before the financial crisis, banks held about $60 billion of excess reserves at the Fed. These are funds above and beyond their required reserves. Today, excess reserves total about $2.6 trillion, which represents part of the money the Fed printed and then used to buy bonds. Typically this cash would have flowed into the economy through lending, but in 2008 the Fed started paying interest on excess reserves, which has kept the funds out of circulation. With so much extra cash in their accounts, banks have almost no need to borrow from each other. This creates a problem for the Fed because adjusting the rate at which banks lend to each other, called the Fed Funds rate, is how it historically enforced its interest rate policy. Starting this week, the Fed will have to use new, largely untested tools.

Since there is almost zero demand for money between banks, the Fed is increasing the interest it pays on excess reserves from 0.25% to 0.50%. At the same time, the Fed intends to lend out up to $2 trillion of its own stash of bonds in the overnight repurchase market. It will lend these to banks, money market funds, and other institutions for one night, with an agreement to buy the bonds back the next day at a slightly higher price, effectively paying the counterparty 0.25% interest. It’s more than a little backwards. The upshot is that instead of banks paying each other the higher rate of interest after a rate hike, now it’s the Fed, which means it’s really me and you, since the Fed gets money by taking value from the rest of us. At the new, higher rate, this is about $10.5 billion per year that is nothing but a gift to banks.

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“It depends less on fundamentals, and more on second-guessing what everyone else will do.”

Central Banks Created A Monster That Drives The Economy On The Way Down (King)

The broader narrative – in which central bank liquidity has pushed up asset prices without fostering a similar improvement in the underlying economy – is one we find the vast majority of [fixed income] investors are sympathetic to. The only question is on the timing: no one wants to get out too early. This is one of the reasons we find the outlook for next year so difficult, and why there is so little agreement about it (even internally at Citi, never mind across the street). It depends less on fundamentals, and more on second-guessing what everyone else will do. Of course, markets are always to some extent like that, but self-reinforcing processes seem to have grown in importance in recent years. Rather than the economy driving markets, as is supposed to be the case, the risk is that central banks have now created a monster such that markets drive the economy, if not on the way up, then certainly on the way down.

Suppose, for example, that all does not go according to plan, and that the current squeeze higher in markets fades and even reverses. Perhaps oil price and EM weakness prove persistent, markets and the developed economies continue to prove more susceptible to these than they “ought” to, inflation breakevens fall, spreads widen and equities suffer even in the face of continuing share buybacks and record M&A. The scenario is far from unthinkable: indeed, it would simply be a continuation of everything we’ve seen in the past six months. What we find really alarming in such a scenario is not only that the safety net might be a while in coming, but that we are increasingly doubtful of how much support it would provide, at least initially.

Clearly the threshold for the Fed to reverse its hike, let alone do more QE or move to negative rates, is very high. And while the ECB should eventually do more, the bar to Draghi being able to spur the rest of the Governing Council to arms would now seem to have been raised. Worse, though, the broad market reaction to central bank stimulus seems to be waning. In credit, and in Europe, this is not too bad. We do still think negative rates and QE retain a positive effect, even if it seems to be driving almost as much money into US fixed income as into European credit and equities.

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Brussels is a crisis-producing machine.

Europe’s Year From Hell May Presage Worse To Come (Reuters)

By any measure, it has been a year from hell for the European Union. And if Britons vote to leave the bloc, next year could be worse. Not since 1989, the year the Berlin Wall fell and communism crumbled across eastern Europe, has the continent’s geopolitical kaleidescope been shaken up so vigorously. But unlike that year of joyous turmoil, which paved the way for a leap forward in European integration, the crises of 2015 have threatened to tear the Union apart and left it battered, bruised, despondent and littered with new barriers. The collapse of the Iron Curtain led within two years to the agreement to create a single European currency and, over the following 15 years, to the eastward enlargement of the EU and NATO up to the borders of Russia, Ukraine and Belarus.

That appeared to confirm founding father Jean Monnet’s prediction that a united Europe would be built out of crises. In contrast, this year’s political and economic shocks over an influx of migrants, Greek debt, Islamist violence and Russian military action have led to the return of border controls in many places, the rise of populist anti-EU political forces and recrimination among EU governments. Jean-Claude Juncker, who describes his EU executive as the “last chance Commission,” warned that the EU’s open-border Schengen area of passport-free travel was in danger and the euro itself would be unlikely to survive if internal borders were shut. Juncker resorted to gallows humor after the last of 12 EU summits this year, most devoted to last-gasp crisis management: “The crises that are with us will remain and others will come.”

His gloomy tone was a reality check on the “we can do it” spirit that German Chancellor Angela Merkel – Europe’s pre-eminent leader – has sought to apply to the absorption of hundreds of thousands of mostly Syrian refugees. Merkel has received little support from her EU partners in sharing the migrant burden. Most have insisted the priority is sealing Europe’s external borders rather than welcoming more than a token number of refugees in their own countries. This is partly due to latent resentment of German dominance of the EU and payback for its reluctance to share more financial risks in the eurozone. Some partners also accuse Berlin of hypocrisy over its energy ties with Russia, while friends such as France, the Netherlands and Denmark are simply petrified by the rise of right-wing anti-immigration populists at home.

One of the sharpest rebuffs to sharing more of the refugee burden came from close ally Paris. Prime Minister Manuel Valls said of Merkel’s open door policy towards Syrian refugees: “It was not France that said ‘Come!’.” Merkel’s critics rounded on her at an end-of-year EU summit. Italy’s Matteo Renzi, backed by Portugal and Greece, attacked her refusal to accept a eurozone bank deposit guarantee scheme. The Baltic states, Bulgaria and Italy denounced her support for a direct gas pipeline from Russia to Germany at a time when the EU is sanctioning Moscow over its military action in Ukraine and has forced the cancellation of a pipeline to southern Europe. “It was pretty much everyone against Merkel in the room,” a diplomat who heard the exchanges said.

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Left wing coalition?

Spain Election Confusion: Conservatives Win But Podemos Are Stars (Ind.)

Spain was plunged into the political unknown on Sunday night as no single party emerged as the winner in its closest general election since the end of the Franco dictatorship 40 years ago. The governing Popular Party (PP), led by the Prime Minister, Mariano Rajoy, secured 28.7% of the vote. That put the party in first place, but well below what it needs to maintain its majority. Mr Rajoy will now be given the first opportunity to persuade rival parties to join him in government before parliament reconvenes next month. But the night belonged to Podemos, and its leader, the ponytailed Pablo Iglesias. The left-wing party, which did not even exist two years ago, finished third with 20.6%. The mainstream left-wing opposition, the PSOE, just beat Podemos into second place with 22%.

For four decades the PP and the PSOE have dominated Spanish politics, swapping power at regular intervals. Their combined grip on office is now almost certainly at an end. The 60-year-old Mr Rajoy, who lost two elections before his landslide four years ago, now faces a fight for his political career. Throughout the campaign, commentators have suggested that the PP – always the favourite to emerge as the strongest single party – could overcome a hung parliament by striking a deal with the new centrist party Ciudadanos, which collected 15.2% of the vote. Crucially for Mr Rajoy, however, the election arithmetic – even with Ciudadanos – appears to work against him. Although he only needs a simple majority to be confirmed as prime minister when the Spanish parliament reconvenes on 13 January, he will need at least 176 seats to carry through his programme. According to the exit poll, which surveyed 180,000 people, a combination of the PP and Ciudadanos will not reach that magic number.

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Tsipras should pull the plug on the entire circus.

Alexis Tsipras Pushes For IMF To Stay Out Of Next Greek Bailout (FT)

Greek prime minister Alexis Tsipras is pushing for the IMF to stay out of the country’s €86 billion third bailout, leaving the euro zone to take full responsibility for overseeing economic reforms. Mr Tsipras said in an interview with the Financial Times he was “puzzled by the unconstructive attitude of the fund on fiscal and financial issues”. He indicated that the IMF should leave his country’s third bailout to the euro zone when it decides whether to stay involved early next year. “We think that after six years of managing in extraordinary crisis, Europe now has the institutional capacity to deal successfully with intra-European issues.” Mr Tsipras’s assertion is likely to anger the German government, which has always insisted the IMF stay on board. Berlin values the fund’s technical expertise as much as it doubts the European Commission’s resolve.

Mr Tsipras also risks alienating the IMF, which is a strong advocate of debt relief for Athens while Germany and other euro zone members are strongly against debt writedowns, although he praised the fund’s support on this issue. Mr Tsipras said his government wanted to implement bailout measures as swiftly as possible with the aim of recovering sovereignty and getting rid of the so-called “troika” of bailout monitors from the commission, IMF and ECB. “We believe the sooner we get away from the [bailout] program the better for our country,” he said. “If Greece completes the first [progress] review in January, we’ll be covering more than 70% of fiscal and financial measures in the agreement.” Mr Tsipras also sounded confident that Greece would lift all remaining capital controls by March and resume borrowing on international capital markets “before the end of 2016”.

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Greece saw 12 seperate pension cuts so far.

After Jumping Over One Hurdle, Greece Faces Another With Pensions (CNBC)

Don’t look now, but 2016 may bring a host of new troubles for Greece, which just last week barely overcame a dispute with its international creditors. Struggling to meet the demands of its bailout terms, the Hellenic Republic was forced on Thursday to scrap an effort to alleviate the burden of its austerity program on poorer Greeks. The demise of its so-called “parallel program”, although a short-term defeat for Prime Minister Alexis Tsipras, triggered the release of €1 billion in new bailout funding, expected to be disbursed as early as Monday. The money was part of an agreement that was sealed last summer.

Now, momentum shifts to pension reform, which is expected as soon as next month. The battle will take shape just as the Greek government appears to have won a hard-fought consensus with creditors on other outstanding issues such as deregulation and the establishment of a privatization fund – which must gather €50 billion by 2030. A pension system overhaul, however, is shaping up to be a big hurdle for Greece, a hard sell at a time when the country’s economic crises have sent unemployment skyrocketing above 25% and average income plummeting 25% over the last four years. “Both the government’s willingness to reform and its internal cohesion appear to be weak which does not bode well for the prospects of reform,” said Stathis Kalyvas, a professor of political science at Yale University and the co-director of its Hellenic Studies program.

“On the flip side, there is no real alternative for the government right now and the fact that it has already embarked on reform process following last summer’s agreement will be pushing it to implement it sooner rather than later”. Greece challenge is to convince its creditors that it can reduce government expenditure by up to 1% of its economy via pension cuts. But in a country where the social costs of austerity weighs on the mood of the general population, some think new pension adjustments could be the straw that breaks the camel’s back. Some of the government’s 153 MPs have already made clear that they will not support new cuts to pensions. If as few as three MPs vote against pension reform, analysts say it is likely the government will lose its majority, once again sinking back into political crisis.

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Prime candidate for dumbest term ever invented: housing ladder or property ladder. The UK, like Canada, Oz and New Zealand, is busy blowing up its own housing market, and refusing to halt it.

UK Buyers Need To Save For Up To 24 Years To Get On Property Ladder (Guardian)

Homebuyers now have to save for up to 24 years to set aside a deposit large enough to buy them a foot on Britain’s housing ladder, according to new research. The Resolution Foundation thinktank has used the Bank of England’s latest survey of household finances to show that with house prices rising sharply, it would now take almost a quarter of a century for low- and middle-income households to accumulate a deposit on average, if they set aside 5% of their disposable income each year. It is lower than the peak reached before the financial crisis, but dramatically higher than the three years that was the norm in the 1980s and 1990s – and comes despite interest rates remaining at the emergency level of 0.5% set by the Bank of England in the depths of recession.

George Osborne has introduced a series of help-to-buy policies, including shared ownership schemes and taxpayer guarantees for mortgages for first-time buyers, and pledged in his spending review last month to “turn generation rent into generation buy”. But Resolution’s chief economist, Matt Whittaker, warned that help to buy may simply boost house prices, lifting them further out of the reach of lower-income households. “To the extent that these schemes have stoked demand and so propped up house prices in recent years, they have served to make homeownership even less attainable for many, while increasing the gains flowing to older homeowners who have been the main beneficiaries of the sustained housing boom,” he said.

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It’s an Anglo disease. Trudeau’s too scared to rock the boat, just like the others.

Canada’s Trudeau Cites Risk in Curbing Foreign Real-Estate Investment (WSJ)

Imposing curbs on foreign investment in Canadian real estate could have unintended consequences for the broader economy, Canadian Prime Minister Justin Trudeau warned in a year-end interview with Canada’s Global Television Network, scheduled to air Christmas Day. Mr. Trudeau said there is a lack of “concrete data” about the impact of foreign buying on Canadian real estate, so moving ahead without proper information is risky. Mr. Trudeau’s comments emerge as a debate heats up over the impact overseas buyers may be having on housing affordability in the two of the country’s biggest housing markets—Toronto and Vancouver, British Columbia.

“You know you have to be cautious about decisions like that that are based on a single factor because at the same time [it] would potentially devalue the equity that a lot of people have in their homes right now,” Mr. Trudeau said, according to a transcript of the interview distributed by Global TV. “We have to be very, very cautious about restricting foreign investment in our country at a time where we know we need foreign investment in businesses, in resource development.”

Economists indicate strong sales and price growth in Toronto and Vancouver are supported by job creation in the two metropolitan areas, and an increasing number of people migrating to those urban centers as resource-rich parts of the country suffer under the weight of low commodity prices, as opposed to foreign investment. Meantime, Evan Siddall, the president of Canada Mortgage and Housing Corp., a government-owned mortgage insurer and housing agency, said in a recent speech that foreign investment could be contributing to the overvaluation of housing prices in the two markets. But, he said, the country lacks “accurate and reliable data” to determine the role foreign investment has on housing prices in the country.

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Almost funny.

Kansas Suspends Debt Limits To Pay For Tax Cuts (Wichita Eagle)

Right-wing Republican lawmakers have operated under the radar to suspend all statutory limits on highway debt, and that unprecedented authority was recently used to issue record-breaking levels of long-term debt to pay for their reckless income tax cuts this year and next. Six lines buried deep in a 700-page appropriation bill last spring gave the Kansas Department of Transportation unlimited authority to issue debt, and in early December, without public disclosure, the agency used that authority to issue $400 million in highway bonds. State law requires those debt proceeds to be used for improving state highways, but do not expect that to happen. Lawmakers directed that $400 million and more be swept from the highway fund to help pay for the $700 million dip in state revenues caused by income tax cuts in 2012 and 2013.

The $400 million in new highway debt represents the largest single highway bond in state history and bumps up total outstanding highway debt to $2.1 billion, also a state record. The size of the bond issue was boosted 60% higher than planned last January in order to stabilize at least temporarily the precarious condition of state finances. Never before in state history has a state agency been granted unlimited powers to issue debt. Prior to this extraordinary action, state lawmakers had carefully placed specific limits on the state’s ability to borrow money. KDOT’s authority to issue unlimited debt continues through this fiscal year and next, so additional highway bonds could be issued at any time over the next 18 months. The governor and legislative leaders went to extraordinary lengths to hide their suspension of debt limits from public scrutiny.

The governor’s budget report made no mention of the suspension. Republicans who controlled the appropriations conference committee never raised the issue. The Statehouse press corps missed it as well. Further, neither the governor nor KDOT disclosed to the public that KDOT had issued $400 million in new, record-breaking debt. Only after press inquiries last week, two weeks after the fact, did KDOT acknowledge that new bonds had been issued.Gov. Sam Brownback and Republican legislative leaders have elevated the practice of confiscating highway funds to pay for other state obligations to a new level. In this year alone $436 million will be swept from the highway fund – the single largest transfer ever. That amount plus prior transfers during Brownback’s term brings their displacement of highway funds to a breathtaking total of $1.6 billion.

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How empires fall: overreach.

The Empire Files: ‘America’s Ship is Sinking’: Former Bush Official (TeleSur)

“This ship is sinking,” retired U.S. Army Colonel Lawrence Wilkerson tells Abby Martin, adding that “today the purpose of US foreign policy is to support the complex that we have created in the national security state that is fueled, funded, and powered by interminable war.” The former national security advisor to the Reagan administration, who spent years as an assistant to Secretary of State Colin Powell during both Bush administrations reflects on the sad but honest reflection on what America has become as he exposes the unfixable corruption inside the establishment and the corporate interests driving foreign policy. “It’s never been about altruism, it’s about sheer power.”

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This does not include what’s sold domestically.

The West Dominates Global Arms Sales (Forbes)

In 2014, sales of the world’s top-100 arms manufacturers totalled $401 billion, according to a report from the the Stockholm International Peace Research Institute. There was a moderate 1.5% decline in sales between 2013 and 2014, primarily due to lower sales for companies based in North America and Western Europe. Despite that decline, the West still dominates global arms sales. In 2014, seven out of the top ten largest arms-producing companies were American. Lockheed Martin grabbed the top spot for the first time since 2009, acccording to SIPRI, with arms sales totaling $37.5 billion. Boeing was in second place with $28.3 billion while Britain’s BAE Systems came third with just under $26 billion in sales.

Last year, the United States accounted for 54.4% of the world’s arms sales. The United Kingdom was in second place, with 10.4% while Russian companies had a 10.2% share of the market. Arms sales by Western European countries fell 7.4% in 2014 with only German and Swiss companies showing growth (9.4 and 11.2% respectively). Increasing national military expenditure and exports in Russia have seen the country’s arms industry grow steadily. According to SIPRI, Russia’s top eleven military companies experienced revenue growth of 48.4% between 2013 and 2014.

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“Are other countries’ wars our responsibility? That’s a question you hear a lot these days. But no one wants to hear the answer.”

The Refugee Crisis Is Forcing Germans To Ask: Who Are We? (Guardian)

I recently read that criminality is on the rise in German towns that have accepted refugees. But it’s not the refugees who are responsible for this crime wave: Germans in these towns have been committing arson, damaging property and attacking refugees. In other words, Germans have been making their own worst fears come true. Often the fear of loss leads to the very loss we fear – a principle that holds true not only for jealous lovers but also, it seems, for those who turn to violence out of fear that the refugees will cost them their safety and peace. The refugees haven’t even all been registered yet, but already they raise questions about who we are. Some Germans can imagine what it means to lose everything – hence their empathy; some can imagine what it means to lose everything – hence their fear.

We no longer have a universal frame of reference. Angela Merkel’s declaration that refugees are fundamentally deserving of protection – hers was the only declaration of its kind in Europe – has two main sticking points in her own country. First, there’s the free-market logic according to which the German government will prohibit neither the export of weapons by German companies to warring nations nor the ruthless exploitation of resources under corrupt systems in Africa, Asia and eastern Europe. And then there’s the ever-growing violence, both verbal and physical, from part of the German population: those who would like to see their country walled off with barbed wire – as is happening in Hungary – or, failing that, to at least have the Berlin government refuse to accept even the ridiculously low numbers of refugees mandated by the European Union – as Poland and the UK have done.

But which “European values” are best upheld with barbed wire and fences, regulations, harassment and attacks? Liberté, égalité, fraternité? Or is this mainly about our own survival? In eastern Germany, you can once again hear people chanting Wir sind das Volk (“We are the people”). In 1989 that sentence opened a border; now it’s being used to close a border, to insulate this finally unified Volk from the newcomers, who lack any unity since they are fleeing so many different wars. Are other countries’ wars our responsibility? That’s a question you hear a lot these days. But no one wants to hear the answer.

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Lest we forget: one prediction is for 3 million refugees in 2016. Even ‘just’ half that will lead to complete mayhem.

Vice Chancellor: Austria Can’t Accept Over 100,000 Migrants A Year (Reuters)

Austria’s Vice Chancellor said on Monday that Austria could not accept more than 100,000 migrants a year, following a pledge from its larger neighbor Germany to limit arrivals. Hundreds of thousands of people, many of them fleeing conflict and poverty in the Middle East, Afghanistan and elsewhere, have entered Austria on their route northwest from the Balkans since early September. Most have moved on to Germany, but Austria still expects to have received about 95,000 asylum applications this year, equivalent to more than 1% of its population, compared with the 28,000 registered in 2014. Of those, 38% were approved.

“Around 90-100,000 – a lot more will simply not be possible,” Reinhold Mitterlehner, from the conservative OVP, junior partner in the coalition, told ORF radio. Chancellor Werner Faymann, a Social Democrat who has generally adopted a more compassionate tone on the issue than the conservatives, was quoted as saying on Saturday that Austria should step up deportations of migrants who do not qualify for asylum. Faymann has also emphasized that policy decisions have been closely coordinated with his German counterpart Angela Merkel, who has pledged to “noticeably reduce the number of refugees”, fending off a challenge from critics of her own.

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“If I cry in this Jungle, will anyone help me? No. I am in the Jungle, so I have to try and smile.”

My Baby, The Refugee: Mothers On The Hardest Journey Of Their Lives (Guardian)

In a caravan in Calais, two little girls are playing a game. While their mother’s attention is elsewhere, they hang out of the small gap of an open window, giggling as they see who can lean the farthest. They could be on a family holiday, if it wasn’t for the squalor surrounding them. Instead, the children are living on mud-covered scrubland, without electricity or heating – just two more inhabitants of the unofficial refugee camp on Britain’s doorstep. A few minutes’ drive from the ferry port, the “new Jungle” is a symbol of the UK’s reluctance to deal with the refugee crises on our borders. Here, 200 women and children are said to be living among the 4,000 refugees, crammed into water-logged tents, caravans and even garden sheds. Thousands more live in similar conditions in nearby Dunkirk. While the young men who risk their lives jumping on to trains or lorries crossing the Channel have become the faces of this crisis, hidden in their midst are these families, trapped in an agonising limbo.

Rima, her shy son Adnan, five, and lively three-year-old daughter, Nour, are among them. The family fled Syria two months ago – just in time, Rima says, to avoid the fate of their nextdoor neighbours, who were killed in their homes the week before we speak. The children’s father was imprisoned in 2012, when Nour was two months old. “There is no security in our city,” Rima tells me. “You don’t have to have done anything for them to put you in prison. Every day I begged the guards to release him. They asked me for money, so I sold everything, but it was never enough. Finally, after a year, they told me he was dead. They allowed me to come every day and plead for him when he was dead. They never gave me his body.” Rima and her children joined the stream of refugees on what has become known as the “ant road”, from Turkey to western Europe.

“Walking through the night was terrifying,” Rima says. “I had a bag on my back and I put my daughter in it. She was ill; she had a temperature of 41C. The most frightening point was when a man on a motorbike wanted to carry my little boy – he said he’d take only the boy, not the girl. I thought he might snatch him.” Like many of the mothers here, Rima’s fear of imminent danger has been replaced with anxieties about the filthy, cold and sometimes violent conditions of the camp. As it becomes more permanent, little shops, cafes and even nightclubs have sprung up, giving a cruel imitation of a music festival – until the riot police come into view, standing guard near the motorway bridge. Despite being just yards from pleasant French houses, and a short drive from Calais’s squares and restaurants, the Jungle residents rely on candles for light and open fires for warmth.

Small fires that rip through caravans and tents are now a regular occurrence. In heavy rain, the area floods. At night, when the police clash with refugees, tear gas fills the air. The noise and insecurity are taking their toll on the already exhausted, traumatised children. “Now, there are no bombs, but we are freezing and still afraid,” Rima says, adding that she developed a heart condition after her husband was imprisoned. “There is no heating and we are living in the mud. In the night, my daughter screams in her sleep and hits out, because she has bad dreams. Four days ago, my heart felt so bad that I thought I would die. If I am not here, who will look after my children?”

Around 400 luckier women and children have found a space in the state-run Jules Ferry Centre, which also provides a hot meal every day for up to 2,500 Jungle residents who live outside, and a hot shower for around 1,000. Dedicated British and French donors and charities have also stepped in, offering warm clothes and nappies, and opening a women and children’s centre with a playground. But their goodwill alone cannot provide lights, heating or somewhere private to wash. For the mothers trapped here, all that is left is to put on a brave face and hope for a better life. Communities have sprung up; neighbours look after each other’s children and try to offer support. Despite their trying circumstances, people greet each other warmly. As one woman tells me, with heart-breaking honesty, “If I cry in this Jungle, will anyone help me? No. I am in the Jungle, so I have to try and smile.”

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Just another day in the Aegean.

18 Migrants Drown After Boat Sinks Off Turkey’s Southwestern Coast (Reuters)

Eighteen people died and 14 were rescued late on Friday after a boat carrying migrants trying to sail to Greece sank off the southern Turkish town of Bodrum, Dogan News Agency reported. Fishermen hearing the migrants’ screams of migrants alerted the Turkish coast guard, who picked up the bodies from the sea after the wooden boat carrying migrants from Iraq, Pakistan and Syria capsized about 3.5 km off the coast. Those rescued were taken to the hospital in Bodrum, many in serious condition, the agency said. The coast guard was not immediately available for comment.

A record 500,000 refugees from the four-year-old civil war in Syria have traveled through Turkey then risked their lives at sea to reach Greek islands this year, their first stop in the EU before continuing to wealthier countries. Despite the winter conditions and rougher seas, the exodus has continued, albeit at a slower pace. Nearly 600 people have died this year on the so-called eastern Mediterranean sea route for migrants, according to the International Organization for Migration. Turkey struck a deal with the EU on Nov. 29 pledging to help stem the flow of migrants into Europe in return for €3 billion of cash for the 2.2 million Syrians Ankara has been hosting, visas and renewed talks on joining the 28-nation bloc.

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Nov 182015
 
 November 18, 2015  Posted by at 10:56 am Finance Tagged with: , , , , , , ,  5 Responses »
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Christopher Helin Fisk Service garage, San Francisco 1934

Corporate America Cannibalizes Itself With Stock Buybacks (Reuters)
Fear Spreads as China’s Finance Firms Face Arrests (Bloomberg)
Xi Says China’s Economy Resilient, Ample Room For Manoeuvring (AP)
Wall Street Is Running the World’s Central Banks (Bloomberg)
What Are The Economic Possibilities For Our Grandchildren? (Pettifor)
Arms Sales Becoming France’s New El Dorado, But At What Cost? (France24)
Eurodesperation (Coppola)
UK Plans to Prioritise Nuclear, Gas Over Renewables to Cut CO2 (Bloomberg)
El Nino Is Causing California Power Prices to Spike (Bloomberg)
US Pension Investment Giant TIAA-CREF Accused of Brazil Land Grabs (NY Times)
Police Civil Asset Forfeitures Exceed All Burglaries in 2014 (Martin Armstrong)
Putin Sets Up Commission To Combat Terrorism Financing (Reuters)
White House Rejects State Demands For Information On Syrian Refugees (Bloomberg)
Paris Terror Unites East Europe Against Merkel’s Refugee Plan (Bloomberg)
Flow Of Refugees Fueled by 80% Rise in Terrorist Killings in 2014 (Guardian)
EU Says Nations May Get Budget Reprieve on Refugee Spending (Bloomberg)
Volunteers At Greek Refugee Relief Facilities Brace For Bad Weather (Kath.)

Basically, these firms give up on their own future.

Corporate America Cannibalizes Itself With Stock Buybacks (Reuters)

When Carly Fiorina started at Hewlett-Packard Co in July 1999, one of her first acts as chief executive officer was to start buying back the company’s shares. By the time she was ousted in 2005, HP had snapped up $14 billion of its stock, more than its $12 billion in profits during that time. Her successor, Mark Hurd, spent even more on buybacks during his five years in charge – $43 billion, compared to profits of $36 billion. Following him, Leo Apotheker bought back $10 billion in shares before his 11-month tenure ended in 2011. The three CEOs, over the span of a dozen years, followed a strategy that has become the norm for many big companies during the past two decades: large stock buybacks to make use of cash, coupled with acquisitions to lift revenue.

All those buybacks put lots of money in the hands of shareholders. How well they served HP in the long term isn’t clear. HP hasn’t had a blockbuster product in years. It has been slow to make a mark in more profitable software and services businesses. In its core businesses, revenue and margins have been contracting. HP’s troubles reflect rapid shifts in the global marketplace that pressure most large companies. But six years into the current expansion, a growing chorus of critics argues that the ability of HP and companies like it to respond to those shifts is being hindered by billions of dollars in buybacks. These financial maneuvers, they argue, cannibalize innovation, slow growth, worsen income inequality and harm U.S. competitiveness. [..]

A Reuters analysis shows that many companies are barreling down the same road, spending on share repurchases at a far faster pace than they are investing in long-term growth through research and development and other forms of capital spending. Almost 60% of the 3,297 publicly traded non-financial U.S. companies Reuters examined have bought back their shares since 2010. In fiscal 2014, spending on buybacks and dividends surpassed the companies’ combined net income for the first time outside of a recessionary period, and continued to climb for the 613 companies that have already reported for fiscal 2015.

In the most recent reporting year, share purchases reached a record $520 billion. Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion. The analysis shows that spending on buybacks and dividends has surged relative to investment in the business. Among the 1,900 companies that have repurchased their shares since 2010, buybacks and dividends amounted to 113% of their capital spending, compared with 60% in 2000 and 38% in 1990.

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Shorts are allowed only if they make Xi look good.

Fear Spreads as China’s Finance Firms Face Arrests (Bloomberg)

The high-drama highway arrest of a prominent hedge fund manager. Seizures of computers and phones at Chinese mutual funds. The investigations of the president of Citic Securities Co. and at least six other employees. Now, add the probe of China’s former gatekeeper of the IPO process himself. The arrests or investigations targeting the finance industry in the aftermath of China’s summer market crash have intensified in recent weeks, creating a climate of fear among China’s finance firms and chilling their investment strategies. At least 16 people have been arrested, are being investigated or have been taken away from their job duties to assist authorities, according to statements and announcements compiled by Bloomberg News.

The authorities’ goal is to root out practices such as insider trading as part of China’s anti-corruption campaign, and a desire by “some in the political leadership to find scapegoats to blame” for the market crash, according to Barry Naughton, a professor of Chinese economy at the University of California in San Diego. “Together these are creating uncertainty and anxiety that can only undermine the effort to make these markets work better,” he said by e-mail. Chinese authorities have long encouraged funds and brokerages to create new investment products to keep the finance industry along a development path. Now that’s been halted by regulators’ raids, arrests by police and anti-corruption investigations of even regulators themselves by the Communist Party’s disciplinary committee.

JPMorgan and Credit Suisse have scaled back products that allowed foreign investors to bet on stock declines. At least one Chinese research firm has withdrawn information it used to provide to the market, calling it “too sensitive.” The government’s response to the market crash was intervention: state-directed purchases of shares, a ban on initial public offerings and restrictions on previously allowed practices, such as short selling and trading in stock-index futures. Next, high-ranking industry figures came under scrutiny as officials investigated trading strategies, decried “malicious short sellers” and vowed to “purify” the market.

Policy makers say “now we’re innovating, so you can all come in – using high-frequency trading, hedging, whatever – to play in our markets,” Gao Xiqing, a former vice chairman of the China Securities Regulatory Commission, told a forum in Beijing on Nov. 6. “A few days later, you say no, the rules we made are not right, there are problems with your trading, and we’re putting you in jail for a while first.”

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But of course. 6.5% growth for 5 years running. Because he says so.

Xi Says China’s Economy Resilient, Ample Room For Manoeuvring (AP)

Chinese President Xi Jinping on Wednesday sought to reassure regional economic and political leaders that his government will keep the world’s No. 2 economy growing. In a speech to a business conference on the sidelines of the Asia-Pacific Economic Cooperation summit, Mr. Xi said China is committed to overhauling its economy and raising the living standards of its people. China’s growth fell to a six-year low of 6.8% in the latest quarter as Beijing tries to shift the economy away from reliance on trade and investment. The slowdown, which has been unfolding for several years, has rippled around the world, crimping growth in countries such as South Korea and Australia that were big exporters to China. “The Chinese economy is a concern for everyone, and against the background of a changing world must cope with all sorts of difficulties and challenges,” Mr. Xi said. But China would “preserve stability and accelerate its development,” he said. “We will work hard to shift our growth model from just expanding scale to improving its structure.”

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And not just behind the scenes.

Wall Street Is Running the World’s Central Banks (Bloomberg)

Wall Street is again leading to the corridors of central banks. From Minneapolis to Paris, investors and financiers are increasingly being hired to help set monetary policy less than a decade since the banking crisis roiled the world economy and chilled their public-sector employment prospects. Academic studies of historical voting records at central banks suggest the new trend may mean an increased bias towards tighter monetary policy. Last week’s appointment of Neel Kashkari to run the Federal Reserve Bank of Minneapolis as of January means a third of the Fed’s 12 district banks will soon be run by officials with past ties to Goldman Sachs. Kashkari also worked for Pimco and managed the U.S. Treasury’s $700 billion rescue of banks during the financial crisis.

The New York Fed’s William Dudley was Goldman’s chief U.S. economist for almost a decade before joining the central bank in 2007, while recently appointed Dallas Fed President Robert Steven Kaplan spent 22 years at Goldman and rose to become its vice chairman of investment banking. Although Patrick Harker joined the Philadelphia Fed from the University of Delaware he also served as an independent trustee of Goldman Sachs Trust. Fed Vice Chairman Stanley Fischer and Atlanta Fed President Dennis Lockhart both spent time working for Citigroup Inc. Fed Governor Jerome Powell worked as an investment banker early in his career for Dillon, Read & Co., which eventually became part of Switzerland’s UBS.

It’s not just the Fed. Bank of England Governor Mark Carney and European Central Bank President Mario Draghi both famously worked for Goldman before entering central banking, yet they have recently been joined by others with financial backgrounds. The new head of the Bank of France, Francois Villeroy de Galhau, spent 12 years at BNP Paribas SA, becoming its chief operating officer in 2011. Meanwhile, in September, Gertjan Vlieghe joined the BOE’s Monetary Policy Committee from hedge fund Brevan Howard having also previously worked for Deutsche Bank. So what does the re-emergence of financiers in the halls of central banks mean for monetary policy at a time when it’s set to diverge internationally?

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I’ll go with ultra-slim.

What Are The Economic Possibilities For Our Grandchildren? (Pettifor)

The world desperately needs to recover Keynes, but to do so it also needs to confront some deeply uncomfortable truths about the nature of power and the acceptance or otherwise of ideas. In his 1902 Imperialism, John Hobson observed: “No one can follow the history of political and economic theory during the last century without recognizing that the selection and rejection of ideas, hypothesis, and formulae, the moulding of them into schools or tendencies of thought, and the propagation of them in the intellectual world, have been plainly directed by the pressure of class interests. In political economy…….we find the most incontestable example.” (Hobson, 1902, pp. 218-19)

Given the pressure of class interests on today’s economic ideas and on the economics profession, the long-standing neglect of Keynes’s ideas, most significantly here in Cambridge, comes as no surprise. The “moulds of schools of thought” now dominant in both economics, but also wider society, have led to a vast and prolonged failure of the global economy. A failure to provide people with work, stability, a decent standard of living – and in the light of this weekend’s events in Paris – security. According to the ILO around 200 million people are now unemployed. The Middle East and North Africa has the highest rate of youth unemployment in the world. Even before 2008, 170 million people had no work.

Today most economists regard unemployment as a non-event; not worthy of consideration as a major indicator of economic health. Instead the economics profession seeks only to impose the consequent failure of economic activity as the new norm – “Secular Stagnation”. The appalling conditions of the world today – in Europe, high levels of unemployment, the dominance of liberal, unfettered finance, an ‘independent’ central bank, political tensions and divisions and the rise of right-wing and even fascist parties – are precisely the conditions that Keynes sought to eradicate. From the time of his rejection of the gold standard, Keynes was concerned with the prevention of economic crises.

In the wake of the great depression, he wanted to establish conditions for the restoration of prosperity and to prevent such events ever recurring again. In this Keynes clearly failed. But this failure was through no fault of his own. For the Keynes that survived into conventional wisdom and most importantly, the Keynes that has survived into the lecture theatre – if he is mentioned at all – is a gravely distorted and diminished figure.

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They’re sending in soldiers to combat their own weapons. Quite the business model. Very profitable.

Arms Sales Becoming France’s New El Dorado, But At What Cost? (France24)

When Qatar agreed to buy 24 French Rafale fighter jets in a €6.3 billion contract at the end of April, it represented yet another major success for France’s arms industry, coming hot on the heels of further multi-billion euro sales of Rafales to Egypt and India. The deals have been hailed by Hollande and his government. According to France’s Minister of Defence Jean-Yves Le Drian, in comments made to the Journal du Dimanche newspaper Sunday, the Qatar contract brought the value of the country’s arms exports to more than €15 billion this year so far. That sum is already more than the €8.06 billion for the whole of 2014, which itself was the highest level seen since 2009 – suggesting a continued upward trajectory for the French arms trade and one that is providing a much-needed salve to the country’s economic woes.

But some of these deals have raised more than a few eyebrows, with anti-arms trade campaigners critical of France’s willingness to sell weapons to countries with less than stellar human rights records. These concerns are only set to rise when Hollande heads first to Doha on Monday and then Saudi Arabia’s capital of Riyadh the day after, where furthering the recent success of the French arms industry is likely to be one of his top priorities. Saudi Arabia has already proved a lucrative trading partner for French arms manufacturers, most recently in a deal signed in November that saw the kingdom buy €2.7 billion of French weapons and military equipment to supply the Lebanese army. The oil-rich country is currently on something of an arms spending spree.

Last year, the Saudis surpassed India to become the world’s biggest arms importer, upping its spending by 54% to €5.8 billion, according to a report by industry analyst IHS. France, thanks to some adept diplomatic manoeuvering in recent years, is well placed to take advantage of the Saudi cash cow. Paris has been an increasingly close ally of Riyadh ever since it was among the most vocal in backing military intervention against Syria’s President Bashar al-Assad, a key ally of Shiite Iran – one of Sunni Saudi Arabia’s main regional rivals. The strategic alliance has been boosted by France’s tougher stance on a nuclear deal with Iran than the Saudi’s traditional western partner, the US.

Furthermore, French Foreign Minister Laurent Fabius visited the kingdom in April to show France’s support for the Saudi-led military intervention in Yemen. If Hollande can help secure new arms deals with the Saudis, then he could make the sums involved in this year’s earlier successes look like small change. He may have to overlook certain moral issues to do so, however. The kingdom, where the ultra-conservative Wahhabi form of Islam dominates, is one of the world’s most restrictive and repressive states, where public executions are common practise, women are forbidden from obtaining a passport and blasphemers are punished with whippings.

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Very good from Frances. “We have a “single currency” in name, but not in reality.”

Eurodesperation (Coppola)

The present situation is untenable. We have a “single currency” in name, but not in reality. The price of money in the Eurozone depends not on the creditworthiness of businesses and households, but on the creditworthiness of the sovereign in the country in which they happen to be located. So businesses and households in Germany can obtain finance at lower rates than businesses and households in Italy. This gives Germany an enduring credit advantage over weaker countries, making it all but impossible for weaker countries to close the competitiveness gap. The Eurozone monetary system is a simply massive “postcode lottery”.

Despite their fine words about breaking the toxic link between sovereigns and banks, the Eurozone authorities have abjectly failed to do this. Indeed, at times the actions of Eurozone institutions have actually strengthened this link, rather than resolving it: the ECB’s LTROs, for example, were openly used to finance bank lending to governments in Spain and Italy. The failure to mutualise the costs of resolving failed banks leaves individual sovereigns on the hook for Europe-wide, and even global, financial disasters: while the principle of creditor bail-in simply exposes sovereigns in a different way. In 2012, the Greek PSI blew large holes in the balance sheets of Greek banks and pension funds, holes which were plugged by the Greek sovereign at a cost of yet more unsustainable borrowing, because the welfare costs to the Greek population of allowing the banks and pension funds to fail were far too great.

It is an insult to genuine monetary unions, such as those in the US, Canada, the UK and Switzerland, to call this a “monetary union”. The Euro is a common name for member state currencies, not a common currency. Politicians pay lip service to the idea of a common currency, insisting on independence of monetary policy and free flows of capital – when it suits them. But when it no longer suits them, they impose capital controls and pressure the ECB into doing their bidding. Successive crises have demonstrated that the coherence of the union comes a very poor second to national interests – along with notions of fairness, justice and social cohesion.

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Cameron knows no shame. Mind you, if coal prices keep sinking, it’s going to be too cheap to ignore.

UK Plans to Prioritise Nuclear, Gas Over Renewables to Cut CO2 (Bloomberg)

The U.K. plans to develop new nuclear reactors and gas-fired power plants to cut carbon emissions and limit costs to consumers. Gas and nuclear are both “central to our energy secure future,” Energy Secretary Amber Rudd will say in a speech Wednesday, according to prepared remarks e-mailed by her office. She’ll say they’re both needed to replace ageing coal-fired power stations, which are “not the future.” “In the next 10 years, it’s imperative that we get new gas-fired power stations built,” Rudd will say. “There are plans for a new fleet of nuclear power stations, including at Wylfa and Moorside. This huge investment could provide up to 30% of the low carbon electricity which we’re likely to need through the 2030s.”

The emphasis on nuclear and gas signals a further retreat from renewable energy after Rudd slashed several subsidy programs, arguing they risk exceeding Treasury spending limits. Renewables have taken a battering since Prime Minister David Cameron’s Conservatives came to power in May, with ministers announcing planned cuts to programs subsidizing solar power, onshore wind, biomass and energy efficiency. Rudd’s comments will come in a speech that her office has trailed for months as one that will “reset” energy policy in this country. She is expected to say that the new approach “means controlling subsidies and balancing the need to decarbonize with the need to keep bills as low as possible,” according to her department.

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The future knocks on the door. The El Niño may bring CA the rain relief it needs, though.

El Nino Is Causing California Power Prices to Spike (Bloomberg)

California has yet to see the full force of El Nino, and it’s already tripping up the state’s power-demand forecasters. The state saw “significant” electricity price spikes in the third quarter as El Nino made it difficult to predict how much power would be needed on hot summer and fall days, the California Independent System Operator Corp. said Monday in a report. Record rainfall and regional cloud cover in Southern California also perplexed forecasters, the grid operator said. “With El Nino, California and the Southwest tends to get more storminess and that is inherently more challenging to forecast,” Matt Rogers, president of Commodity Weather Group, said. “The extra cloudiness and sporadic storminess this autumn as well as some heat spikes early in the third quarter can be attributed to El Nino influences.”

El Nino describes the warming of the equatorial Pacific caused by weakening trade winds that normally push sun-warmed waters to the west. It is expected to bring higher-than-average rainfall to California, which is in the midst of a four-year drought. The weather phenomenon has already contributed to Pacific typhoons and drought concerns in parts of Southeast Asia. In California power markets, the odd weather led to “load forecast errors on several days with particularly high loads,” according to the report. In September, there was a “relatively high percentage of intervals” when prices spiked above $1,000 a megawatt-hour in the 5-minute market.

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“TIAA-CREF prides itself on upholding socially responsible values..”

US Pension Investment Giant TIAA-CREF Accused of Brazil Land Grabs (NY Times)

As an American investment giant that manages the retirement savings of millions of university administrators, public school teachers and others, TIAA-CREF prides itself on upholding socially responsible values, even celebrating its role in drafting United Nations principles for buying farmland that promote transparency, environmental sustainability and respect for land rights. But documents show that TIAA-CREF’s forays into the Brazilian agricultural frontier may have gone in another direction. The American financial giant and its Brazilian partners have plowed hundreds of millions of dollars into farmland deals in the cerrado, a huge region on the edge of the Amazon rain forest where wooded savannas are being razed to make way for agricultural expansion, fueling environmental concerns.

In a labyrinthine endeavor, the American financial group and its partners amassed vast new holdings of farmland despite a move by Brazil’s government in 2010 to effectively ban such large-scale deals by foreigners. While the measure thwarted the ambitions of other foreign investors, TIAA-CREF pressed ahead in a part of Brazil rife with land conflicts, exposing the company and its partners to claims that they acquired farms from a shadowy land speculator accused of employing gunmen to snatch land from poor farmers by force. The documents offer a glimpse into how one of America’s largest financial groups took part in what some in the developing world condemn as land grabs. Responding in 2010 to surging international interest in the country’s land, Brazil’s attorney general significantly limited foreigners from carrying out large-scale farmland acquisitions.

Investors sometimes view such deals as a way to diversify their portfolios. But some government officials and activists contend that they uproot poor farmers, transfer the control of vital food-producing resources to a global elite and destroy farming traditions in exchange for industrial-scale plantations producing food for export. “I had heard of foreign funds trying to get around Brazilian legislation, but something on this scale is astonishing,” said Gerson Teixeira, the president of the Brazilian Association for Agrarian Reform and an adviser to members of Congress, referring to the documents about TIAA-CREF’s farmland deals in Brazil.

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Hard to believe?

Police Civil Asset Forfeitures Exceed All Burglaries in 2014 (Martin Armstrong)

Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually. In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. Now, according to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses.

This means that the police are now taking more assets than the criminals. The police have been violating the laws to confiscate assets all over the country. A scathing report on California warns of pervasive abuse by police to rob the people without proving that any crime occurred. Even Eric Holder came out in January suggesting reform because of the widespread abuse of the civil asset forfeiture laws by police. Bloomberg News has reported now that Stop-and-Seize authority is turning the Police Into Self-Funding Gangs. They are simply confiscating money all under the abuse of this civil asset forfeiture where they do not have to prove you did anything.:

…in the U.S., I see some troubling signs of a shift toward low-end institutions. Bounty hunting was a recent example (now happily going out of style). Another example is the use of private individuals or businesses to collect taxes, a practice known as tax farming. A third has been the extensive use of mercenaries in lieu of U.S. military personnel in Iraq and elsewhere. Practices such as these can save money for the government, but they encourage abuses by reducing oversight. I’ve recently been reading about an even more worrying example of low-end statecraft: Stop-and-seize.

This term refers to a practice, increasingly common since the turn of the century, of police confiscating people’s property without making an arrest or obtaining a warrant. That may not sound legal, but it is! The police simply pull you over and take your money. A Washington Post investigative report from a year ago explains: “[A]n aggressive brand of policing [is spreading] that has spurred the seizure of hundreds of millions of dollars in cash from motorists and others not charged with crimes…Thousands of people have been forced to fight legal battles that can last more than a year to get their money back. Behind the rise in seizures is a little-known cottage industry of private police-training firms…

A thriving subculture of road officers…now competes to see who can seize the most cash and contraband, describing their exploits in the network’s chat rooms and sharing “trophy shots” of money and drugs. Some police advocate highway interdiction as a way of raising revenue for cash-strapped municipalities. “All of our home towns are sitting on a tax-liberating gold mine,” Deputy Ron Hain of Kane County, Ill., wrote in a self-published book under a pseudonym…Hain’s book calls for “turning our police forces into present-day Robin Hoods.” With government unable to pay police as much as they need or would like, police are confiscating their revenue directly from the populace.

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Russia targets the Middle East financiers that the west has never touched.

Putin Sets Up Commission To Combat Terrorism Financing (Reuters)

President Vladimir Putin on Wednesday set up a commission to combat terrorism financing, the Kremlin said, in another sign of the Russian leader’s heightened focus on what he says is a fight against Islamic State militants. After attacks in Paris killed 129 people on Friday, security dominated the G20 summit at the weekend, where the group’s leaders, in a rare departure from their usual focus on the global economy, agreed to step up border controls and aviation security and crack down on terrorist financing.

In a decree, effective immediately, Putin ordered the prosecutor general’s office, the central bank and regional authorities to submit any information they may have on suspicious activities to the commission. On Tuesday, the Kremlin said a bomb brought down the Russian passenger plane that crashed in the Sinai Peninsula in Egypt last month, killing all 224 people on board. The decree orders submission to the commission of any information on suspicious activities of organisations and individuals who are not on a list of those against whom there is sound information about their involvement in extremist activities or terrorism, in order to freeze their assets.

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America’s dark side.

White House Rejects State Demands For Information On Syrian Refugees (Bloomberg)

In a call with senior Obama administration officials Tuesday evening, several governors demanded they be given access to information about Syrian refugees about to be resettled by the federal government in their states. Top White House officials refused. Over a dozen governors from both parties joined the conference call, which was initiated by the White House after 27 governors vowed not to cooperate with further resettlement of Syrian refugees in their states. The outrage among governors came after European officials revealed that one of the Paris attackers may have entered Europe in October through the refugee process using a fake Syrian passport. (The details of the attacker’s travels are still murky.)

The administration officials on the call included White House Chief of Staff Denis McDonough, Deputy Secretary of Homeland Security Alejandro Mayorkas, State Department official Simon Henshaw, FBI official John Giacalone, and the deputy director of the National Counterterrorism Center John Mulligan. On the call several Republican governors and two Democrats – New Hampshire’s Maggie Hassan and California’s Jerry Brown – repeatedly pressed administration officials to share more information about Syrian refugees entering the United States. The governors wanted notifications whenever refugees were resettled in their states, as well as access to classified information collected when the refugees were vetted. “There was a real sense of frustration from all the governors that there is just a complete lack of transparency and communication coming from the federal government,” said one GOP state official who was on the call.

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And Europe’s dark side.

Paris Terror Unites East Europe Against Merkel’s Refugee Plan (Bloomberg)

Eastern European nations are toughening their opposition to German Chancellor Angela Merkel’s plan to force them to take in refugees, arguing that the EU’s immigration policies may have aided last week’s terrorist attacks in Paris. Bulgarian Foreign Minister Daniel Mitov on Tuesday called discussions on quotas for migrants “absurd” following the events in Paris, while Poland’s incoming Prime Minister Beata Szydlo said a day earlier the EU should review its stance on immigration, pledging to accept refugees only if they don’t endanger security. At least 129 people were killed in Paris on Friday, with a Syrian passport found next to the body of one of the suicide bombers registered on the Greek island of Leros, suggesting the holder may have come into Europe claiming to be a political refugee.

The EU is increasingly split along east-west lines over how to deal with the immigration crisis as the European Commission estimates 3 million asylum seekers may be heading toward the bloc by 2017. A group of formerly communist countries led by Hungary, one of the nations most affected by the flood of migrants, have opposed German-led efforts to introduce a quota system to settle them, drawing criticism that the recipients of billions of euros in aid from western Europe aren’t willing to help their richer neighbors. “The opposition to the quotas has already been there before the attacks,” said Otilia Dhand, an analyst at political-risk consultancy Teneo Intelligence in Brussels. “The attacks are now being used as an additional argument.”

Merkel, who allowed an estimated 1 million asylum seekers into Germany this year, seeks to relocate those fleeing war and civil strife in the Middle East and North Africa across the 28-nation EU. The plan is straining her ties with countries such as Poland and the Baltic nations, which count on German backing for continued sanctions on Russia following President Vladimir Putin’s annexation of Ukraine’s Crimean peninsula in 2014. Asked whether Syrian refugees can be successfully integrated into society, Merkel told reporters on Tuesday the answer is a “clear yes.” Integration means following the rules and laws of the host country, getting a chance to “participate in society” and being placed into a community prepared to be tolerant and more multi-ethnic, she said.

Such sentiment isn’t widely shared by eastern European politicians, who remain wary of opening their societies to foreigners, including those with different religious beliefs. “Discussing quotas at this point has become absurd,” top Bulgarian diplomat Mitov said in an interview with public radio on Tuesday. “This isn’t the way to solve the problem and to approach it.” Hungary plans to challenge the plan in EU courts, Justice Minister Laszlo Troscsanyi told reporters the same day.

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“We can see the trauma [terrorist attacks] create in the west, but think how much trauma they create in all these other countries in the world..”

Flow Of Refugees Fueled by 80% Rise in Terrorist Killings in 2014 (Guardian)

A surge in activity from Nigeria’s Islamist insurgency Boko Haram – now the world’s deadliest terrorist group – and Islamic State in Iraq and Syria has driven an 80% increase in the number of people killed by terrorists in 2014, this year’s Global Terrorism Index showed. In total, 32,658 people were killed in terrorist attacks in 67 countries last year, according to the index, released on Tuesday by the Institute for Economics and Peace (IEP). The world is reeling from the terrorist attacks in Paris last Friday, which killed at least 129 people. But the index showed that 80% of last year’s terrorist killings were carried out in just five countries: Iraq, Nigeria, Afghanistan, Pakistan and Syria. “We can see the trauma [terrorist attacks] create in the west, but think how much trauma they create in all these other countries in the world,” said Steve Killelea, executive chairman of the IEP.

The index showed a close link between terrorism and people being forced to flee. Of 11 countries with more than 500 deaths from terrorism, 10 had “the highest levels of refugees and [internal] migration in the world”, the index said. The sharp rise in terrorist activity noted in the report is fuelling migration out of areas controlled by Isis and into neighbouring countries. According to figures from the UN’s High Commissioner for Refugees, 369,904 people have fled Iraq and and 4.29 million have fled Syria. “There’s a strong relationship between terrorism and ongoing conflict. What we’re seeing is people are fleeing the conflicts, and so actually tackling the conflicts and terrorism are one and the same,” Killelea said.

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Refugees are still being used as a measure to pressure Greece. Disgrace squared.

EU Says Nations May Get Budget Reprieve on Refugee Spending (Bloomberg)

Refugee spending by European Union nations may receive some reprieve from the bloc’s budget rules if the governments can show proof that outlays are linked to extraordinary circumstances, the European Commission said. None of the draft budget plans submitted to the EU ran the risk of “particularly serious non-compliance” with debt and spending rules, the Brussels-based commission said on Tuesday. France’s budget plan suggests it won’t meet a 2017 deadline – already extended in a move to avoid unprecedented fines – to correct its deficit, it said. Italy, Austria and Lithuania were found to be at risk of not meeting their 2016 budget targets.

The EU executive said that when countries are faced with “unusual events outside the control of the government,” nations can increase spending without drawing budget-related sanctions. The commission said it is “willing to use these provisions” for 2015 and 2016 budget requirements, as long as countries can provide “observed data” to show they’re following the rules. “This means that deviations deriving only and directly from the net extra costs of the refugee crisis will not lead to any stepping up in the procedures,” the commission said. It also promised not to open new deficit-related proceedings if countries keep their deficit “close to” the 3% limit, even if refugee spending causes a breach.

In the wake of terrorist attacks that devastated Paris, French President Francois Hollande said extra spending to ensure France’s security is more important than European budget rules. “The security pact is more important than the stability pact,” he told lawmakers on Monday in Versailles. Debt is starting to fall across the EU for the first time since the beginning of the euro area’s debt and financial crisis, Commission Vice President Valdis Dombrovskis said in a statement. At the same time, he said, progress across Europe is uneven. “The problem of high debt is still holding back a faster recovery,” Dombrovskis said. “It is important for governments to continue implementing responsible fiscal policies and for others to continue cleaning up their public finances.”

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Greece has become a country run by overwhelmed volunteers.

Volunteers At Greek Refugee Relief Facilities Brace For Bad Weather (Kath.)

“The temperature inside the Olympic hockey stadium near the old Athens airport at Elliniko, which houses refugees, had started to drop. There was no hot water in the shower. I saw a newborn baby. Its Afghan mother had been gripped by labor pains on board the boat and she gave birth on a Lesvos beach. It was not possible for the baby to take a bath there because it would freeze, so I took it home along with its parents. We gave it a warm bath and something to eat before putting it down to sleep. When the family left the island two days later, we felt like relatives saying goodbye.” The stories shared by volunteers helping the thousands of migrants and refugees arriving in the country, such as this relayed to Kathimerini by George Vichas, a cardiologist and director of the Metropolitan Community Clinic at Elliniko, are deeply moving.

But they are also highly revealing of the huge challenges facing refugees as weather conditions worsen and state support remains sorely lacking. “The Elliniko venue is expected to house refugees and migrants also in the coming months. A few days ago, some 500 people were temporarily sheltered here. But how are they expected to stay here if the place is not heated?” Vichas says. At the reception center of the Metropolitan Community Clinic, Vichas has set up a second clinic. “On a daily basis, we receive help from one or two pediatricians, two to three pathologists, a cardiologist, an orthopedic surgeon and a pulmonologist,” Vichas says. Their work is aided by six to seven volunteers from the Fair Planet nonprofit organization. “They are very experienced in dealing with refugees as many of them have worked abroad,” he says.

As winter sets in, the clinic is trying to collect sleeping bags and thermal clothes and blankets. “We need people’s support, things will be pretty tough. The state is regrettably absent from all this,” Vichas says, adding that doctors from the Hellenic Center for Disease Control and Prevention (KEELPNO) only drop by the center for two hours between Monday and Friday. “When 500 refugees arrived here on a Saturday evening, they were examined by volunteer doctors,” he says. Nikitas Kanakis, president of Doctors of the World Greece, says the organization is concerned that, as the weather worsens, up to 200,000 refugees could find themselves trapped in Greece. “We are trying to prepare ourselves also for that scenario and have asked for help from branches in other countries,” he says.

Swiss volunteers are helping in Idomeni, near Greece’s northern border with the Former Yugoslav Republic of Macedonia (FYROM), while volunteers from the Netherlands and France are helping out on Chios and Lesvos. On an operational level, Doctors of the World is preparing small flexible groups that can reach more refugee facilities. “Our doctors are at the end of their tether. Over the past months they have been examining about 200 people per day. State care is nowhere to be seen. Greek society is providing clothes, food and care for refugees. How is the state helping?” says Kanakis, who is also critical of the European Union’s failure to deal with the mounting crisis. “Why does the EU not create a safe passage for refugees instead of leaving them at the mercy of traffickers and the Aegean Sea?”

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