Jul 012018
 
 July 1, 2018  Posted by at 8:10 am Finance Tagged with: , , , , , , , , , , , , ,  


Giuseppe Leone Ragusa Sicily 1953

 

US Dollar Hegemony Tripped Up by Chinese Renminbi? Um, No (WS)
Even Eva Peron Would Be Crying… (ZH)
No Chance Of Brexit Deal By October Says EU (Ind.)
VW CEO Says Arrest Of Audi’s Stadler Hard To Comprehend (R.)
Trump Claims Saudi Arabia Has Agreed To Boost Oil Production Amid Turmoil (G.)
Trump Ally Giuliani Says End Is Near For Iran’s Rulers (R.)
The EU Is Killing Our Democratic Spaces Using Copyright As A Trojan Horse (OD)
Angela Merkel Secures Asylum Seeker Return Deals With 14 EU Countries (Ind.)
Hungary, Poland & Czech Republic Deny Sealing Migrant Deal With Merkel (RT)
EU’s New Refugee Policy Under Fire As Children Stuck In Limbo In Niger (G.)
End Of The Bailouts And Onto A Path To A New Bankruptcy (Economides)
Deluge Of Electronic Waste Turning Thailand Into ‘World’s Rubbish Dump’ (G.)
Bayer-Monsanto Partnership Signals Death Knell for Humanity (Bridge)

 

 

Rumors about the demise of the dollar are greatly…

US Dollar Hegemony Tripped Up by Chinese Renminbi? Um, No (WS)

Global central banks are not dumping US-dollar-denominated assets from their foreign exchange reserves. They’re not dumping euro-denominated assets either. And they remain leery of the Chinese renminbi – despite China’s place as the second largest economy in the world and despite all the hoopla of turning the renminbi into a major global reserve currency. This is clear from the IMF’s just released “Currency Composition of Official Foreign Exchange Reserves” (COFER) data for the first quarter 2018. The IMF is very stingy with what it discloses. The COFER data for each individual country – each country’s specific holdings of reserve currencies – is “strictly confidential.” But it does disclose the global allocation of each major currency.

In Q1 2018, total global foreign exchange reserves, including all currencies, rose 6.3% year-over-year, or by $878 billion, to $11.59 trillion, within the upper range of the past three years (from $10.7 trillion in Q4 2016 to $11.8 trillion in Q3, 2014). For reporting purposes, the IMF converts all currency balances into US dollars. This data was for Q1. The dollar bottomed out in the middle of the quarter and has since been rising. US-dollar-denominated assets among foreign exchange reserves continued to dominate in Q1 at $6.5 trillion, or 62.5% of “allocated” reserves (more on this “allocated” in a moment).

[..] The RMB is the thin red sliver in the pie chart below with a share of just 1.39% of allocated foreign exchange reserves. Minuscule as it is, it is the highest share ever, up from 1.2% in Q4 2017. In other words, its inclusion in the SDR basket hasn’t exactly performed miracles as central banks seem to remain leery of it and have not yet displayed any kind of eagerness to hold RMB-denominated assets.

[..] Note the term “allocated” reserves. Not all central banks disclose to the IMF how their overall foreign exchange reserves are allocated by specific currency. But over the years, more and more central banks have disclosed their holdings to the IMF, and the mystery portion has been shrinking. Back in Q4 2014, unallocated reserves – the undisclosed mystery portion – accounted for 41% of total reserves. In Q1, only 10.3% of the reserves remained undisclosed. [..] folks who’ve been eagerly anticipating “the death of the dollar” or similar scenarios will have to be very patient.

Since 1965, the dollar’s share has fluctuated sharply, and the current share of 62.5% remains in the middle of the range. The chart below shows the dollar’s share at year-end for each of the past 52 years, plus for Q1 2018. Note its low point in 1991 with a share of 46%. And note that the Financial Crisis made no visible dent:

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Don’t cry 4-3 Argentina.

Even Eva Peron Would Be Crying… (ZH)

The last 24 hours have not been great for Argentina. First – despite endless jawboning about The IMF bailout and how it will secure the nation’s future and enable reforms, the currency collapsed to a new record low on Friday…

Second – the central bank decided to step in with their newly minted IMF funds and blew over a billion dollars to buy pesos, managing a very modest bounce (but ARS still closed down 3% on the day)

Third – IMF officials spoke with Argentina’s union leaders, warning of the social impact of the ongoing disruptions. IMF spokesman Raphael Anspach confirmed Werner and Cardarelli’s participation in the call, which “reiterated the main elements of the IMF support to the government’s economic plans, including the measures aimed at supporting the most vulnerable in Argentine society.” And union officials told the media that The IMF was not worried about the ongoing collapse: “They are betting on a virtuous behavior by private investors, with the economy falling in the third and fourth quarters of 2018, but rebounding 1.5% in the first quarter of 2019” “They were not worried about the flight of capital”

Fourth, and finally, and perhaps worst of all – Argentina is now out of The World Cup. A nation mourns.

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The British people don’t seem to have a clue what this means.

No Chance Of Brexit Deal By October Says EU (Ind.)

EU negotiators have abandoned all hope that a Brexit deal will be signed with the UK at October’s European Council summit, The Independent has learned. Brussels officials said a complete standstill in talks with Britain means securing settlements on major outstanding issues in the remaining three-and-a-half months is fanciful. They point to the political logjam in Theresa May’s government as the obstacle blocking negotiations, piling pressure on the prime minister to break the deadlock this week. She is set to meet her full cabinet on Friday at Chequers for a meeting that may go late into the night, in a bid to finally thrash out the government’s approach to post-Brexit relations with the EU.

The EU officials were speaking after last week’s European Council summit which saw the bloc focus on tackling immigration from north Africa, while warning Ms May that time to secure a deal is now running out. One Brussels insider said: “There is no hope really for October now. We don’t know exactly what she is asking for yet, so how can there be? “First the UK needs to decide what it wants, then there needs to be a discussion here and even if it is acceptable, there are processes that have to take place first before everyone agrees to move forward.” Another source close to the European Commission told The Independent: “Now we are looking at December as a more likely option, but there are questions about how much time that leaves for the deal to be ratified in time before March.”

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VW owns Audi.

VW CEO Says Arrest Of Audi’s Stadler Hard To Comprehend (R.)

The CEO of Volkswagen, Herbert Diess, told a German newspaper the arrest of Audi head Rupert Stadler was a shock and hard to comprehend. VW has suspended Stadler, head of VW’s most profitable brand, after German authorities arrested him as part of an emissions probe. “It was a massive shock for me. The arrest of a CEO of a major car brand: that’s never happened before,” Diess told Germany newspaper Bild am Sonntag. “The arrest is hard to comprehend. I knew Rupert Stadler as a problem solver,” the newspaper quoted him as saying.

Diess said that for him, Stadler was innocent until proven guilty. Stadler, who has not made any public comment, has not been charged and prosecutors are set to continue questioning him next week. Asked whether he could imagine Stadler returning, Diess said it depended on what facts emerge: “Should the accusations of the state prosecutors prove to be true, then it’s a clear decision.”

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2 millions barrels a day in spare capacity? Don’t think so. He may have to ask Putin to join in.

Trump Claims Saudi Arabia Has Agreed To Boost Oil Production Amid Turmoil (G.)

Donald Trump said on Saturday he had received assurances from King Salman of Saudi Arabia that the kingdom would increase oil production “maybe up to 2,000,000 barrels”, in response to turmoil in Iran and Venezuela. Saudi Arabia acknowledged the call took place, but mentioned no production targets. Trump wrote on Twitter that he had asked the king in a phone call to increase oil production “to make up the difference … Prices to [sic] high! He has agreed!” A little over an hour later, the state-run Saudi Press Agency acknowledged the call, but offered few details. “During the call, the two leaders stressed the need to make efforts to maintain the stability of oil markets and the growth of the global economy,” the statement said.

It added that there also was an understanding that oil-producing countries would need “to compensate for any potential shortage of supplies”. It did not elaborate. Oil prices have edged higher as the Trump administration has pushed US allies to end all purchases of oil from Iran. Prices have also risen given ongoing unrest in Venezuela, as well as with fighting in Libya over control of that country’s oil infrastructure. Last week, members of the OPEC cartel led by Saudi Arabia agreed to pump 1m barrels more crude oil per day, a move that should help contain the recent rise in global energy prices. However, summer months in the US usually lead to increased demand for oil, which would push up the price of gasoline in a midterm election year. A gallon of regular gasoline sold on average in the US for $2.85, up from $2.23 a gallon last year.

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But Putin.

Trump Ally Giuliani Says End Is Near For Iran’s Rulers (R.)

U.S. President Donald Trump will suffocate Iran’s “dictatorial ayatollahs”, his close ally Rudy Giuliani said on Saturday, suggesting his move to re-impose sanctions was aimed squarely at regime change. The former New York mayor who is now Trump’s personal lawyer, was addressing a conference of the Paris-based National Council of Resistance of Iran (NCRI), an umbrella bloc of opposition groups in exile that seek an end to Shi’ite Muslim clerical rule in Iran. “I can’t speak for the president, but it sure sounds like he doesn’t think there is much of a chance of a change in behavior unless there is a change in people and philosophy,” Giuliani told Reuters in an interview.

“We are the strongest economy in the world … and if we cut you off then you collapse,” he said, pointing to protests in Iran. In May, Trump withdrew the United States from a 2015 international deal to curb Tehran’s nuclear program in exchange for lifting some sanctions. Trump supporters have spoken at NCRI events in the past, including national security adviser John Bolton, who, before taking his post at the same conference last July, told the group’s members they would be ruling Iran before 2019 and their goal should be regime change. Bolton said in May that the administration’s policy was to make sure Iran never got nuclear weapons and not regime change.

In Tehran, supreme leader Ayatollah Ali Khamenei said Trump would fail in any attempt to turn the Iranian people against the ruling system. “They bring to bear economic pressure to separate the nation from the system … but six U.S. presidents before him (Trump) tried this and had to give up,” Khamenei said on his website.

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From DiEM 25 members: “..a tool to control speech, expression, criticism and increase the surveillance levels imposed on all EU citizens.

The EU Is Killing Our Democratic Spaces Using Copyright As A Trojan Horse (OD)

Europe was one of the regions that connected massively to the Internet. Not only that, it was one of the few adopting literacy and inclusion programs early enough on to unleash the power of connected citizens, showing them how to create new business models and improve education but also how to express themselves, create, organize and protest. But alarmingly, the European Parliament is on the verge of a dramatic change of direction. The EU has recently embarked on a new mission: controlling the Internet through the monopoly of copyright. This attempt to reform and control the Internet has not received half the attention it deserves.

As Julia Reda, MEP for the Pirate Party, has explained, the current project of EU legislation would impose automatic filters that control ANY content that anyone wants to upload. The reason would be the protection of copyright, a monopoly right that primarily benefits large media behemoths, without any possibility of advance verification. You read that right: the EU wants to put in place a global censorship machine, on the basis of unverifiable monopoly rights, mostly held by large media corporations. In DiEM25, we do not see this as just an outdated law, isolated from current politics. Indeed, that is precisely what is most worrying about it.

We cannot see it as unconnected to the big push in Europe by authoritarian leaders wanting to restrict, to truly shrink the spaces of civil society. Increasing censorship online will reduce the ability of citizens to say what they think, filtering content before it is published. This will not only harm speech but increase surveillance and the meting out of punishments for things we say online. This is combined with all the existing online state surveillance already endured by EU citizens, which remains as powerful as ever. With dismay, we are witnessing now an open boycott of the democratic achievement of a connected Europe. The European Parliament Legal Committee has just given the green light to a law that will be a tool to control speech, expression, criticism and increase the surveillance levels imposed on all EU citizens.

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It’s all and only about Save Angela now. Not about the refugees.

Angela Merkel Secures Asylum Seeker Return Deals With 14 EU Countries (Ind.)

Angela Merkel has reportedly secured agreements with 14 European Union countries to rapidly return some asylum seekers arriving in Germany. The chancellor is seeking to end a divide in her coalition government over a migration policy that has attracted ire from immigration hardliners. Ms Merkel has said she also wants to establish “anchor centres” to process migrants at Germany’s borders, the DPA news agency reported on Saturday. The announcements came in a letter Ms Merkel wrote to leaders of her Christian Democratic Union’s Bavaria-only sister party, the Christian Social Union, as well as to her junior coalition government partner, the Social Democrats, after she attended a two-day EU summit in Brussels.

Ms Merkel on Friday came away from an EU summit with agreements from Greece and Spain to take back migrants previously registered in those countries, and an overall agreement by the 28-nation bloc to ease the pressures of migration into Europe. In the eight-page letter obtained Saturday by DPA, the chancellor said that she had also secured agreement with half of the EU nations to return migrants to them if they had first registered in those countries. The countries included Hungary, Poland and the Czech Republic, which have all been harsh critics of Ms Merkel’s welcoming stance to migrants, as well as Belgium, France, Denmark, Estonia, Finland, Lithuania, Latvia, Luxembourg, the Netherlands, Portugal and Sweden.

In addition, the chancellor threw her support behind establishing large collection centres in Germany for migrants as their cases are processed. DPA reported the centres would be used for migrants who attempt to bypass border controls and for those whose cases don’t fall under bilateral return agreements.

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And so she stretches the truth a little here and there. Save Angela.

Hungary, Poland & Czech Republic Deny Sealing Migrant Deal With Merkel (RT)

Three EU countries have denied reaching any final agreement with Germany on the return of migrants to the country of entry, despite Angela Merkel’s claim she’d received “political consent” from 14 EU nations to strike such a deal. “No such deal has been reached,” spokesman for Hungary’s government Zoltan Kovacs said, adding that Budapest has repeatedly rejected German attempts to “return” migrants to their first country of entry into the EU. Similar statements have been produced by Poland and the Czech Republic, which also denied reaching any agreements on the matter. “There are no any new agreements regarding the reception of asylum seekers from EU countries, we confirm (that), like the Czech Republic and Hungary,” Polish Foreign Ministry spokesman Artur Lompart said.

Earlier on Saturday, media reported that, during the EU summit, 14 European countries, including some outspoken opponents of German Chancellor’s ‘open door’ policy, had allegedly “consented on a political level” to make a deal on taking migrants back. The document on the deal has been sent by Merkel to her coalition partners, according to Reuters. “At the moment, Dublin repatriations from Germany succeed in only 15% of cases,” the document says, as quoted by Reuters. “We will sign administrative agreements with various member states… to speed the repatriation process and remove obstacles.”

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But Save Angela.

EU’s New Refugee Policy Under Fire As Children Stuck In Limbo In Niger (G.)

Stop people in Africa, before they get anywhere near the Mediterranean, and sort them into refugees and migrants there, only allowing the refugees to continue to Europe. This was the big idea that came out of last week’s EU migration summit. But campaigners say the predicament of 260 children stuck in limbo in Niger demonstrates that there is no guarantee EU countries would eventually take the refugees, even if African countries agreed to this arrangement. In November, amid horrific tales of Africans being enslaved, imprisoned and tortured in Libya, Niger agreed to act as a halfway house for refugees that UNHCR, the UN’s refugee agency, had identified and could get out.

Evacuated from detention camps in Libya, the unaccompanied minors are among 1,200 people waiting in Niger for resettlement. Mainly aged 14 to 17, they were all in detention, and most are deeply traumatised by the violence they experienced and witnessed there. But so far no country has agreed to take them. “In Europe we have been talking a lot about legal pathways,” said UNHCR’s representative in Niger, Alessandra Morelli. “If we want to combat trafficking, if people in need of international protection, who fit the profile of asylum seekers, get out of that flow, I have to offer an alternative. Otherwise, what are we talking about here? But when I take them out I have no alternative. You see? This is our fight.” About 54,000 refugees and asylum seekers have been identified in Libya, but no more can leave until the 1,200 in Niger have been processed.

[..] One aspect of the migration deal reached on Friday looked to fall apart before it had even begun: four European countries – Austria, France, Germany and Italy – said they would not open “controlled centres” to assess asylum claims of people who had been rescued from the Mediterranean. At the same time they are asking some of the world’s poorest and least secure countries to do what Europe will not.

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“Is there a solution for Greece? Yes, but it is in quite the opposite direction of the EU and IMF plans this far.”

End Of The Bailouts And Onto A Path To A New Bankruptcy (Economides)

Last week’s Eurogroup set up the final conditions for the end of the third Greek bailout program in August. Since 2010, Greece has borrowed 275 billion euros from European Union countries and the IMF. Greece also shed 100 billion euros of private debt in an agreement with the borrowers in 2012. However, present debt is still over 300 billion euros for an economy of officially 185 billion GDP (plus 30% unaccounted illegal income). Thus, debt to gross domestic product remains extremely high. Even though the borrowing is over, the EU and the IMF have imposed new long-term austerity conditions on the Greek economy, including additional sharp pension decreases and the requirement that Greece produces a 3.5% of GDP budget surplus.

To achieve this, the government has imposed skyrocketing taxes including a 24% value-added tax (and plans to increase taxes to those making as little as 6,000 euros a year). Taxes suck out all the extra cash businesses and people have. Investment has plummeted, and consumption is 25% lower than a few years ago. Unemployment is at 23% but this number is misleadingly low because those working only two days a week are considered employed. With huge taxes and a business-unfriendly bureaucracy, Greece is unlikely to attract investment and will not achieve fast growth. Without growth, the country will be unable to pay back its debt in full despite a 10-year postponement of maturities on one-third of its debt granted by the EU last Thursday.

[..] Is there a solution for Greece? Yes, but it is in quite the opposite direction of the EU and IMF plans this far. Greece needs to achieve fast growth, 4-5% per year, for five years, and start paying its debt after that. To achieve high growth, the country needs to abandon the multi-year 3.5% surplus target for the much more reasonable 1.5-2% target. With lower surpluses, lower taxes and less bureaucracy, Greece will be able to attract investment and realize high growth. Once it has achieved high growth and its economy has expanded, only then will Greece start paying its debt, and it will be able to pay its debt in full over time.

Instead, the EU/IMF plan forces the country to create huge surpluses when its economy is hurting, thereby driving it in a downward spiral. Imposing the requirement of large surpluses now is catastrophic and forces Greece to take a path of low or zero growth and misery. Greece will never be able to pay back its debt in full on this path.

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They seem to be waking up. But then it’ll all just go to a poorer place.

Deluge Of Electronic Waste Turning Thailand Into ‘World’s Rubbish Dump’ (G.)

At a deserted factory outside Bangkok, skyscrapers made from vast blocks of crushed printers, Xbox components and TVs tower over black rivers of smashed-up computer screens. This is a tiny fraction of the estimated 50m tonnes of electronic waste created just in the EU every year, a tide of toxic rubbish that is flooding into south-east Asia from the EU, US and Japan. Thailand, with its lax environmental laws, has become a dumping ground for this e-waste over the past six months, but authorities are clamping down, fearful that the country will become the “rubbish dump of the world”. The global implications could be enormous.

A factory visited by the Guardian in Samut Prakan province, south of Bangkok, which was recently shut down in a raid for operating illegally, illustrated the mammoth scale of the problem. Printers made by Dell and HP, Daewoo TVs and Apple computer drives were stacked sky-high next to precarious piles of compressed keyboards, routers and copy machines. Labels showed the waste had mainly come from abroad. For locals, it is unclear why Thailand should be taking this waste. The Samut Prakan factory sits in the middle of hundreds of shrimp farms and there were concerns it was poisoning the landscape, with no environmental protections or oversight in place.

Until the beginning of this year, China was a willing recipient of the world’s electronic waste, which it recycled in vast factories. According to the UN, 70% of all electronic waste was ending up in China. But in January, having calculated that the environmental impact far outweighed the short-term profit, China closed its gates to virtually all foreign rubbish. It has prompted something of a global crisis, not just for e-waste but plastic waste as well. Asian nations such as Thailand, Laos and Cambodia stepped in. Chinese businessmen have set about attempting to open about 100 plastic and e-waste recycling plants across Thailand since January.

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“Like a Hollywood villain falling into a crucible of molten steel only to turn up later in some altered state, Monsanto has been subsumed under the Orwellian-sounding ‘Bayer Crop Science’ division..”

Bayer-Monsanto Partnership Signals Death Knell for Humanity (Bridge)

On what plane of reality is it possible that two of the world’s most morally bankrupt corporations, Bayer and Monsanto, can be permitted to join forces in what promises to be the next stage in the takeover of the world’s agricultural and medicinal supplies? Warning, plot spoiler: There is no Mr. Hyde side in this horror story of epic proportions; it’s all Dr. Jekyll. Like a script from a David Lynch creeper, Bayer AG of poison gas fame has finalized its $66 billion purchase of Monsanto, the agrochemical corporation that should be pleading the Fifth in the dock on Guantanamo Bay instead of enjoying what amounts to corporate asylum and immunity from crimes against humanity. Such are the special privileges that come from being an above-the-law transnational corporation.

Unsurprisingly, the first thing Bayer did after taking on Monsanto, saddled as it is with the extra baggage of ethic improprieties, was to initiate a rebrand campaign. Like a Hollywood villain falling into a crucible of molten steel only to turn up later in some altered state, Monsanto has been subsumed under the Orwellian-sounding ‘Bayer Crop Science’ division, whose motto is: “Science for a better life.” Yet Bayer itself provides little protective cover for Monsanto considering its own patchy history of corporate malfeasance. Far beyond its widely known business of peddling pain relief for headaches, the German-based company played a significant role in the introduction of poison gas on the battlefields of World War I.

Despite a Hague Convention ban on the use of chemical weapons since 1907, Bayer CEO Carl Duisberg, who sat on a special commission set up by the German Ministry of War, knew a business opportunity when he saw one. Duisberg witnessed early tests of poison gas and had nothing but glowing reports on the horrific new weapon: “The enemy won’t even know when an area has been sprayed with it and will remain quietly in place until the consequences occur.” Bayer, which built a department specifically for the research and development of gas agents, went on to develop increasingly lethal chemical weapons, such as phosgene and mustard gas. “This phosgene is the meanest weapon I know,” Duisberg remarked with a stunning disregard for life, as if he were speaking about the latest bug spray. “I strongly recommend that we not let the opportunity of this war pass without also testing gas grenades.”

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Jun 192018
 
 June 19, 2018  Posted by at 8:27 am Finance Tagged with: , , , , , , , , , , , ,  


Vittorio Matteo Corcos Sogni 1896

 

Threatened By The Truth – Julian Assange Anniversary (IE)
25,000 Flee As Fighting In Yemen Port City Hodeida Escalates (AP)
It’s Time To Get Enraged At What Western Imperialists Have Done To Syria (CJ)
Paul Tudor Jones Warns The Next Recession Will Be ‘Really Frightening’ (Y.)
Trump Threatens New Tariffs On $200 Billion In Chinese Goods (CNBC)
China Enters the Trade Trap (IICS)
Chasing Yield during ZIRP & NIRP Evidently Starved Human Brains of Oxygen (WS)
Why Germany Neither Can Nor Should Pay More To Save The Eurozone (Varoufakis)
Macron’s Euro Zone Reforms: Grand Vision Reduced To Pale Imitation (R.)
Hopeless European Millennials And The Populist Takeover (John Rubino)
Spain’s New Government To Remove Franco’s Remains From Mausoleum (AFP)
A Very British Disease (Coppola)
Thousands Of Public Buildings And Spaces In England Sold Off A Year (G.)
Coercion (Jim Kunstler)
Sharp Fall In Number Of People Seeking Asylum In EU (G.)

 

 

If you’re not outraged by Assange’s situation, you have no right to be outraged by anything else.

Threatened By The Truth – Julian Assange Anniversary (IE)

Today marks the sixth anniversary of Wikileaks founder Julian Assange’s effective house arrest in London. He cannot move around in public, because he fears he will be arrested and extradited to America — a daunting prospect, since a UN special rapporteur described Chelsea Manning’s treatment by that country’s justice system as torture. Assange is divisive. Hawks wish him nothing but misfortune and a stretch in jail. According to journalist John Pilger, a leaked official memo says: “Assange is going to make a nice bride in prison. Screw the terrorist. He’ll be eating cat food forever.” If you stand at the other end of the spectrum, Assange is a hero who revealed how our world really works.

Consequently, he has been relentlessly targeted. Hilary Clinton has contributed to this process, as Assange highlighted the Clintons’ links with Saudi Arabia and the multimillion donations that kingdom made to their foundation, after she, as secretary of state, sanctioned an $80bn Saudi arms deal. Assange remains, despite illegal efforts to revoke it, an Australian citizen, but he has not enjoyed the support a person who has not been charged with anything, much less convicted of anything, might expect from a democracy. These are indeed murky waters, but Assange’s ordeal reconfirms a truth: News is something someone, somewhere, does not want published. That’s why he is such a threat.

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Yes, the treatment of children on America’s borders is a disgrace. But don’t make it an echo chamber issue. Kids in Hodeida are much worse off. Where is the outrage?

25,000 Flee As Fighting In Yemen Port City Hodeida Escalates (AP)

The UN spokesman said on Monday that tens of thousands of residents have fled the fighting along Yemen’s western coastline, where Yemeni fighters backed by a Saudi-led coalition are engaged in fierce battles with Iranian-backed Houthi rebels. Stephane Dujarric, the spokesman for the UN secretary-general, told reporters on Monday that about 5,200 families, or around 26,000 people, have fled the fighting and sought safety within their own districts or in other areas in Hodeida governorate. ‘‘The number is expected to increase as hostilities continue,’’ he said. Emirati troops, along with irregular and loyalist forces in Yemen, have been fighting against Houthis for Hodeida since Wednesday.

Coalition warplanes rained missiles and bombs on Houthi positions near Hodeida airport, in the city’s south. The offensive for Hodeida has faced criticism from international aid groups, who fear a protracted fight could force a shutdown of the city’s port and potentially tip millions into starvation. About 70 percent of Yemen’s food enters via the port, as well as the bulk of humanitarian aid and fuel supplies. Around two-thirds of the country’s population of 27 million relies on aid, and 8.4 million are already at risk of starving.

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And there are more things you should be outraged by.

It’s Time To Get Enraged At What Western Imperialists Have Done To Syria (CJ)

Rumors are again swirling of an impending false flag chemical weapons attack in Syria, just as they did shortly before the highly suspicious Douma case in April. Warnings from Syrian and Russian intelligence, as well as US war ship movements and an uptick in US funding for the Al Qaeda propaganda firm known as the White Helmets, give these warnings a fair bit of weight. Since the US war machine has both a known regime change agenda in Syria and an extensive history of using lies, propaganda and false flags to justify military interventionism, there’s no legitimate reason to give it the benefit of the doubt on this one. These warnings are worth taking seriously.

So some people are understandably nervous. The way things are set up now, it is technically possible for the jihadist factions inside Syria and their allied imperialist intelligence and defense agencies to keep targeting civilians with chemical weapons and blaming the Assad government for them until they pull one off that is so outrageous that it enables the mass media to manufacture public support for a full-scale assault on Damascus. This would benefit both the US-centralized empire which has been plotting regime change in Syria for decades and the violent Islamist extremists who seek control of the region. It also creates the very real probability of a direct military confrontation with Syria’s allies, including Russia.

But the appropriate response to the threat of a world war erupting in Syria is not really fear, if you think about it. The most appropriate response to this would be unmitigated, howling rage at the western sociopaths who created this situation in the first place.

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No stabilizers.

Paul Tudor Jones Warns The Next Recession Will Be ‘Really Frightening’ (Y.)

Legendary global macro trader Paul Tudor Jones is warning that asset prices are too high. And furthermore, he’s concerned about what the next recession might look like. He shared his thoughts on Monday during a conversation with Goldman Sachs CEO Lloyd Blankfein as part of the firm’s “Talks at GS” series. The hedge fund billionaire, who rarely gives interviews or makes public comments on the markets, cautioned that across asset classes “you have to be thinking this is a highly dubious sustainable price.” Jones doesn’t think the low interest rates we have now due to easy monetary policy are sustainable over time. He said that interest rate policy is “crazy.” He further argued that the Trump administration’s stimulative fiscal policy isn’t sustainable either.

“You look at prices of stocks, real estate, anything,” he said. “We’re going to have to mean revert to a normal real rate of interest with a normal term premium that’s existed for 250 years. We’re going to have to get back to that. We’re going to have to get back to a sustainable fiscal policy and that probably means the price of assets goes down in the very long run.” In the short run, the market is “jacked up and ready to go,” he said. Blankfein added that it’s like “pouring lighter fluid on an already lit fire.” During the financial crisis, central banks had a lot of room to ease monetary policy and governments had more flexibility to push stimulative fiscal policy. Today, there’s less room and flexibility.

“The next recession is really frightening because we don’t have any stabilizers,” Jones said. “We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers.”

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“Trump is going to have to find some way to back down and let China save face..”

Trump Threatens New Tariffs On $200 Billion In Chinese Goods (CNBC)

President Donald Trump has requested the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. The new duties will go into effect “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” the president said in a statement provided by the White House late on Monday. Beijing has pledged to fight back if Trump goes ahead with the new tariffs. U.S. stock index futures fell following the news, while Asian equity markets were mixed. It’s the latest development in escalating trade tensions between the world’s two largest economies.

On Friday, the U.S. announced a 25 percent tariff on up to $50 billion of Chinese products, prompting Chinese President Xi Jinping’s administration to respond witha 25 percent tariff on $34 billion of U.S. goods. “It’s one thing to retaliate with $50 billion here and $50 billion there but when the [U.S.] president trots out another $200 billion, that’s quite concerning,” Max Baucus, former U.S. ambassador to China under President Barack Obama, told CNBC. “This reminds me little bit of an old western … If there’s a gunfight trade war, somebody’s going to get hurt,” he continued: “Trump is going to have to find some way to back down and let China save face so that both sides can back down gradually and respectfully.”

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Democracy?

China Enters the Trade Trap (IICS)

Perhaps nobody knows what President Trump will do next, including President Trump, but right now it looks like he has successfully maneuvered China into a trade trap. The goal is to slow China’s economy such that military modernization slows and its economy cannot catch up with the United States. Meanwhile, implementation of this strategy is called “Beijing’s playbook” and the whole time President Trump speaks positively about Xi Jinping and China’s help in other areas. Bloomberg: Xi to Counter Trump Blow for Blow in Unwanted Trade War “The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. China “thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now.”

This is the mistake autocrats always make about Western governments and the United States. They view the messy and inefficient political system (intentionally designed that way to protect liberty) as a weakness. They think politicians care more about elections than anything else. They see the difficulty in reaching consensus as a weakness. However, they miss the fact that democratic governments enjoy greater legitimacy. If the U.S. reaches a majority in favor of confronting China on trade, then President Trump has the far stronger political hand. Confronting China on trade raises President Trump’s popularity. His base and independent voters favor this policy. Democrats oppose him because he is Trump, but they would lose votes if the only issue in November was “Confront China on trade, yes or no?”

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“..new issuance of Treasuries “will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

Chasing Yield during ZIRP & NIRP Evidently Starved Human Brains of Oxygen (WS)

Let’s be clear: It’s not just Argentina. But Argentina is the most elegant example. The exodus of the hot money from emerging markets where cheap dollar-debts were used to fund pet projects and jack up leverage is – once again – in full swing. Cheap dollar-debt in emerging markets is an old sin that, like all old sins, is repeated endlessly. The outcome is always trouble. But during the act, it sure is a lot of fun for everyone. The exodus of the hot money is even gripping the non-basket-case emerging economies of Asia where it’s causing the worst indigestion since 2008.

Bloomberg: “Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 – withdrawing $19 billion from India, Indonesia, the Philippines, South Korea, Taiwan, and Thailand so far this year.” While emerging markets shone in the first quarter, suggesting resilience to Federal Reserve tightening, that image has shattered over the past two months. With American money market funds now offering yields around 2% – where 10-year Treasuries were just last September – and prospects for more Fed hikes, the bar for heading into riskier assets has been raised.”

“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase, told Bloomberg. “We’ve still only priced in about two thirds of the US rate increases we expect to see over the next 12 months. So the Fed is continuing to get more hawkish, but the market still hasn’t caught up.” [..] “Dollar funding of emerging market economies has been in turmoil for months now,” Patel wrote – because yeah, the era of the cheap dollar is over, and investors should have figured that out two-and-a-half years ago when the Fed started hiking rates. But the market didn’t want to believe that the Fed would actually do it. And suddenly over the past two months, it downs on these geniuses that the Fed has actually been hiking rates and will continue to do so for some time.

Patel not only blamed the QE unwind but also the simultaneous and massive issuance of new Treasury debt by the US government to fund its ballooning deficits. This new issuance of Treasuries “will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

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Excellent speech by Yanis. Read and learn. He may be the only one around with a real way to save the EU.

Why Germany Neither Can Nor Should Pay More To Save The Eurozone (Varoufakis)

[..] I wanted a Germany that was hegemonic and efficient, not authoritarian and caught up in a European Ponzi scheme. That was in 2013. Two years later, in March 2015, I wrote an article, while Greece’s finance minister, referring to the first and second bailout loans, of 2010 and 2012. Allow me to quote from it: “The fact is that Greece had no right to borrow from German – or any other European – taxpayers at a time when its public debt was unsustainable. Before Greece took on any loans, it should have initiated debt restructuring and undergone a partial default on debt owed to its private-sector creditors. But this “radical” argument was largely ignored at the time.

Similarly, European citizens should have demanded that their governments refuse even to consider transferring private losses to them. But they failed to do so, and the transfer was effected soon after. The result was the largest taxpayer-backed loan in history, provided on the condition that Greece pursue such strict austerity that its citizens have lost one-quarter of their incomes, making it impossible to repay private or public debts. The ensueing – and ongoing – humanitarian crisis has been tragic… Animosity among Europeans is at an all-time high, with Greeks and Germans, in particular, having descended to the point of moral grandstanding, mutual finger-pointing, and open antagonism. This toxic blame game benefits only Europe’s enemies.”

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More Europe at this point in time will only lead to more tension.

Macron’s Euro Zone Reforms: Grand Vision Reduced To Pale Imitation (R.)

When French President Emmanuel Macron laid out a sweeping vision for eurozone reform last September, he spoke of “rebuilding Europe”, with a common budget for the euro nations and a single minister to oversee it all. The proposals he will discuss when he sits down with German Chancellor Angela Merkel outside Berlin on Tuesday will be far less ambitious, with deep differences between the two European powerhouses. Many economists agree with Macron that fundamental reforms are needed to strengthen the eurozone and insulate the single currency — the most potent symbol of Europe’s integration — from future crises, like the 2010-13 sovereign debt contagion that nearly tore the euro apart.

But Merkel has limited room to act due to political pressure at home, and is always at pains to ensure France and Germany aren’t pushing ahead with plans that have no deep backing from the rest of the European Union. Macron and Merkel will discuss a separate budget for the 19 countries that share the single currency but much smaller than he wanted. Then there are gaps in opinion over a fund to calm bond markets in a crisis and a backstop for the banking system. “Things are going in the right direction, but the proposals we’re getting from the Germans aren’t sufficient,” said a French official who acknowledged there were deep differences between the two sides.

A German official said there were still big questions about what sort of agreement Tuesday’s meeting would produce on the budget for the euro zone. The official said Merkel’s recent political troubles over migration policy could mean she is less inclined to make concessions to the French leader. Besides the disagreement between France and Germany, it is also the nature of negotiations between the eurozone countries that grand ideas get chipped away at until a compromise is reached that satisfies all parties.

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“Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.”

Hopeless European Millennials And The Populist Takeover (John Rubino)

Europe is frequently held up as an example of how the rest of the world should behave on a variety of issues. But this comparison misses at least two things: First, “Europe” is actually a lot of different countries in a lot of different situations. Second, much of what seems to work over there only does so because it’s being financed with ever-increasing amounts of debt. For countries, as for individuals, borrowing money is fun at first but beyond a certain point becomes debilitating, as interest payments begin to crowd out everything else. That’s where a growing number of Europe’s failed states now find themselves, with overly-generous pensions and overly-restrictive labor laws making it virtually impossible to run a functioning market-based economy.

The result: Fewer good jobs and more frustrated voters – especially young ones who have seen only the downside of the current system – and the resulting rise of populist political parties that recognize the problems without offering coherent solutions, thus guaranteeing even more chaos in the future. As Today’s Wall Street Journal notes, in Italy and Greece, nearly a third of young adults not only aren’t working but aren’t enrolled in school or training. What are they doing? Apparently just sitting around and stewing about life’s injustice. As for where they’re sitting and stewing, in Greece, Italy and Spain it’s now normal for adults all the way into their 30s to live with their parents, largely because they can’t find work that pays enough to afford a house, car and other requirements of independent life.

As for Germany, which looks great by comparison, keep in mind that a big part of its economic outperformance is due to other EU countries borrowing huge amounts of money to buy German exports. When the latter run out of money – a point which is clearly coming – Germany suffers twice, once when it loses important customers and again when its banks, having lent trillions of euros to Italy, Spain, et al, have to eat those losses. But bad-mouthing Europe should not be seen as implicit praise of the US. We, like Germany, have an advantage that’s both unfair and temporary. Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.

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Starting to like Sanchez.

Spain’s New Government To Remove Franco’s Remains From Mausoleum (AFP)

Spain’s new Socialist government is determined to remove the remains of Francisco Franco from a vast mausoleum near Madrid and turn it into a place of “reconciliation” for a country still coming to terms with the dictator’s legacy. “We don’t have a date yet, but the government will do it,” Prime Minister Pedro Sanchez said late Monday during his first television interview since being sworn in on June 2 after toppling his conservative predecessor Mariano Rajoy in a confidence vote. He recalled that a non-binding motion approved last year in parliament called for Franco’s remains to be exhumed from the massive Valley of the Fallen mausoleum some 50 kilometres (30 miles) northwest of Madrid and the site turned into a “memorial of the victims of fascism”.

“Spain can’t allow symbols that divide Spaniards. Something that is unimaginable in Germany or Italy, countries that also suffered fascist dictatorships, should also not be imaginable in our country,” Sanchez added. Earlier on Monday Socialist party spokesman Oscar Puente said the mausoleum should be transformed into a “place of reconciliation, of memory, for all Spaniards, and not of apology for the dictatorship.” Franco ruled Spain with an iron fist from the end of the country’s 1936-39 civil war until his death in 1975, when he was buried inside a basilica drilled into the side of a mountain at the Valley of the Fallen, one of Europe’s largest mass graves.

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A history. “Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.”

A Very British Disease (Coppola)

The desire to judge people’s motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain’s repeated attempts to “categorise the poor”.

[..] worst of all, using rules and sanctions to compel the genuinely work-shy to work diverts attention and resources away from those who really need help. And it unfairly stigmatises the vast majority of those who are not working, or who are not working as many hours as we think they should, whether through unemployment, sickness or disability. Study after study has shown that in general, people want to work. The problem is that suitable jobs aren’t always available. And yet there remains a prevalent view, even among people who should know better, that people must be compelled to work, or to work harder, with harsh treatment. But today’s sanctions for those who won’t or can’t work are mild compared to the punishments of old: why should they be any more successful?

We would do better to concentrate our attention on helping those who genuinely want to work to find fulfilling, productive and well-paid jobs. And we should also stop trying to decide whether someone “deserves” social support. We have been trying to distinguish between the “deserving” and “undeserving” poor for eight hundred years, and we are no better able to make that judgement now than we were in the fourteenth century, or the sixteenth, or the nineteenth. It is time to give up this fruitless attempt to judge people’s motives. Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.

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Next up: sell Parliament.

Thousands Of Public Buildings And Spaces In England Sold Off A Year (G.)

More than 4,000 public buildings and spaces in England are being sold off every year, with more than 7,000 others at risk over the next five years, a charity has said. Locality says the majority of the sites being offloaded by local authorities are sold to private developers for the highest price, forever lost to communities around them. The charity wants the government to create a £200m-a-year community ownership fund for the next five years to help preserve the buildings and spaces for the use of local people. Tony Armstrong, its chief executive, said: “This is a sell-off on a massive scale. We know that many of the buildings being lost have valuable community uses.

“Everyone of us can think of a local public building or outside space we love and use, from libraries to lidos and town halls to youth centres. They are owned by the public and they’re being sold off for short-term gain to fill holes in council budgets. “Many hundreds of local community groups are stepping up and fighting for community ownership. But they urgently need support and help with startup costs if they are to compete with the commercial developers.” The Great British Sell Off report is published on Tuesday and is based on freedom of information requests sent to all 353 local authorities in England. Locality received 55 responses on the number of buildings and spaces sold between the financial years 2012-13 and 2016-17, as well as 127 replies about sites identified as surplus over the next five years, extrapolating the results to obtain national totals.

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“..if human relations are solely about power, than exercising power over others is all that matters..”

Coercion (Jim Kunstler)

Mr. Peterson laid it out nicely: identity politics assigns everyone to ethnic, racial, and sexual groups, and all the human relations among them amount to never-ending battles for political power. Nothing else matters. Individuals especially don’t matter, only the group. And no group has abused its power more than European white men. This animating idea comes out of the mid-20th century “post-structural critical theorists” Jacques Derrida and Michel Foucault, whose Marxian views emerged conveniently at a time when women and non-white people were vying for departmental chairs in the college humanities and social science programs, and thus have two generations been indoctrinated.

Well, if human relations are solely about power, than exercising power over others is all that matters. Hence, the key to identity politics: it’s all about coercion, making others do your will by threat of force and force itself. These days, the main threat is depriving heretics and apostates of their livelihood. That’s what happened to Brett Weinstein at Evergreen U in Washington State last year, and to Jordan Peterson himself at the U of Toronto, when he objected loudly and publicly to a new Canadian federal law that sought to punish citizens who refused to use the new menu of personal pronouns for the rapidly multiplying new gender categories (e.g. ze, zir, they, xem, nem, hir, nir….)

Both Weinstein and Peterson refused to be coerced and found themselves inadvertently leading a movement against the pervasive, creeping coercion of our time — which has now spread from the campuses into corporate life, with the HR departments working overtime to enforce thought among employees, because company profits are at stake (e.g. Starbucks day-off for “diversity and inclusion training”).

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Somewhat curious that the big political problems start just as the numbers fall.

Sharp Fall In Number Of People Seeking Asylum In EU (G.)

Fewer people sought asylum in the European Union last year, although numbers remain higher than before the arrival of 1 million people in 2015 triggered a political crisis that continues to divide Europe. Showing a sharp drop in asylum claims, the latest report from the EU’s asylum office was published on Monday after emergency talks in the German government over asylum policy and a bitter standoff between EU nations over a migrant rescue ship that eventually docked in Spain after being banned from Italy and Malta. The EU’s asylum office counted 728,470 applications for international protection in 2017, a 44% reduction on the 1.3m applications the previous year.

More than 1 million people entered the EU in 2015, many fleeing the war in Syria. Syria, Iraq and Afghanistan remain the most frequent countries of origin for asylum seekers, accounting for 29% of all claims. The downward trend of asylum claims continued in the first four months of 2018, the EU asylum office said, although numbers have still not returned to pre-crisis levels. About 460,000 people applied for asylum in EU countries in 2013. The fall in asylum applications reflects a sharp drop in people making the hazardous journey over the eastern Mediterranean to Greece and the central Mediterranean to Italy, although there has been an increase in people travelling from west Africa to Spain, albeit from a lower base.

Germany continues to receive more applications for asylum than any other country in Europe, with 222,560 claims in 2017, folowed by Italy, France and Greece. The UK was in fifth place, with 33,780 applications, accounting for 4.6% of all EU asylum claims. But the backlog remains high: 954,100 claims are awaiting a decision, including 443,640 in Germany, according to the EU asylum office.

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May 012018
 
 May 1, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , ,  


Théodore Géricault Prancing Grey Horse 1812

 

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)
The Global Debt Addiction: China’s Out of Control Debt (GT)
Governments Are Nothing Like Households (Coppola)
St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)
US Extends Tariff Exemptions For European Union And Other Allies (CNBC)
Brexit Talks At Risk Of Collapse Over Irish Border (G.)
South Korea President Says Trump Deserves Nobel Peace Prize (R.)
Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)
First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)
That Collapse You Ordered…? (Kunstler)
Are Our Online Lives About To Become ‘Private’ Again? (BBC)
Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

 

 

“..spending increased at three times the pace of revenue growth..”

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)

U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter. “It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said in a Bloomberg TV interview on Monday. “But I think the market can easily handle it.” Earlier on Monday the Treasury said net borrowing totaled $488 billion from January through March, a record for that period and about $47 billion more than it had previously estimated, according to a statement released in Washington. The end-of-March cash balance was $290 billion, compared with an initial estimate of $210 billion.

“By definition supply and demand will equate,” Mnuchin said. “I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries,” he said when asked about the risks of reduced demand for Treasuries and increased supply. The Treasury’s debt-management plans were complicated earlier this year by a political fight that was resolved when lawmakers agreed to suspend the federal debt limit in a two-year budget agreement in February. The U.S.’s need to issue more Treasuries is expected to grow as the fiscal picture deteriorates. The budget deficit widened to $600 billion halfway through the fiscal year, as spending increased at three times the pace of revenue growth in the October-to-March period, according to Treasury figures released earlier this month.

Tax and spending measures approved by Congress and President Donald Trump are expected to push the budget gap to $804 billion in the current fiscal year, from $665 billion in fiscal 2017, and then surpass $1 trillion by 2020, according to the Congressional Budget Office. In an accompanying statement about the state of the economy, the Treasury said Monday that tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”

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The debt keeps the economy going.

The Global Debt Addiction: China’s Out of Control Debt (GT)

China has developed a craving for consumer goods, the more luxurious, the better. Along with most other countries, China’s credit boom and spending spree are being followed by out-of-control debt. While household debt is spiraling, the Chinese government is pushing to double the size of the economy by 2020 (setting this goal in 2010). This ambitious project will almost certainly entail more lending and increased debts. There is a question as to exactly how much more debt China can handle. China’s debt has been rising steadily, from 141 percent of GDP in 2008 to 256 percent of GDP in 2017. This type of rapidly-increasing debt level has frequently been the precursor of a hard economic fall, and the world is watching China carefully.

While countries such as the U.S. and the U.K. also have large debt-to-GDP ratios, the difference is that both are high-income countries, while China has only reached middle-income status, with only $15,400 in household purchasing power. This is a quarter of the household purchasing power of the US. Getting out of debt on China’s low level of income will be far more difficult than in higher-income nations. [..] China’s economic growth has encouraged widespread home buying and mortgage debts as property prices soar. Mortgage debt has increased by 25 percent in two years. People who have bought during the economic boom are now facing monthly mortgage payments that equal up to half of their monthly income.

Household budgets are stretching to the breaking point. This has forced many to curtail spending elsewhere and putting off other necessary big purchase items. This at a time when the government is encouraging greater consumer consumption.

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“Austerity is for the good times, not the bad times.”

Governments Are Nothing Like Households (Coppola)

Politicians like to describe government as like a household. When you’ve borrowed too much, you cut your spending so you can pay off debt, don’t you? You might be able to get a better-paid job, which helps you to pay it off faster. But you still budget to reduce your debt over time. Going on a spending spree means tightening your belt later. Similarly, if government borrows too much, there must be austerity to pay it down. Stands to reason, doesn’t it? People understand this reasoning. It is politically popular, especially when times are hard. In March 2009, when the U.S. was in the deepest recession since the 1930s, John Boehner, former Speaker of the House of Representatives, said on CBS News that “it’s time for government to tighten their belts and show the American people that we ‘get it.’”

“Government is like a household” can even win elections. At the height of the financial crisis in 2008, David Cameron, then leader of the U.K.’s Conservative party, wrote this in the (now defunct) News of the World: “This [Labour] government has maxed out our nation’s credit card—and they want to keep on spending by getting another. We believe we need to get a grip, be responsible and help families now in a way that doesn’t cost us our future.” He became the U.K.’s Prime Minister in May 2010. Keynesian economists such as Paul Krugman argue that instead of trying to reduce public deficits in a recession, government should increase spending, helping businesses to grow and providing employment. Government debt will rise, of course, but the government can run fiscal surpluses to pay it down when growth returns. Austerity is for the good times, not the bad times.

But this message has not been heard. In the name of “living within our means,” “balancing the books” and “paying down the debt,” governments on both sides of the Atlantic have pursued austerity policies ever since the Great Recession. The terrible story of Greece shows us that harsh austerity is the wrong medicine for a poorly-performing, highly indebted economy. But Greece is merely the worst example. Many Western countries have suffered deep and lasting damage, both from the Great Recession itself and from premature attempts to reduce public deficits.

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“..bitcoin units have no intrinsic value” – but currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.”

St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)

The Federal Reserve Bank of St. Louis has provided some high-profile validation for a core premise of Bitcoin and other cryptocurrency. A blog post this week based on an earlier Fed research paper said that “bitcoin units have no intrinsic value” – but added that currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.” The post, titled “Three Ways Bitcoin is Like Regular Currency,” doesn’t precisely endorse Bitcoin or cryptocurrency. In another recent report, the St. Louis Fed was critical of Bitcoin’s inefficiency. Cryptocurrency has also become rife with scams since its surge in value last year, and may constitute a global risk because it enables clandestine money laundering, capital flight, and tax evasion.

But the St. Louis Fed has provided a credible rebuttal to one of the most widespread and misguided criticisms of cryptocurrency: That, because it isn’t tied to a particular real-world commodity, it should have a monetary value of zero. As Fed researchers point out, since decoupling from the gold standard in the early 1970s, almost all global reserve currencies rely on nothing but trust to function as a media of value exchange. In the case of the dollar, that’s mostly trust in the U.S. government and economy. For Bitcoin and other cryptocurrencies, it’s trust in computer code and, at least to some extent, developers.

Surprisingly, the Fed’s new statement also echoes one of the predominant arguments that cryptocurrency fans use to disparage government-backed currency – though in a rather roundabout way. The post argues in part that “there’s a limited supply” of both cash and Bitcoin. The libertarian boosters at the heart of the crytpocurrency movement have often argued that Bitcoin is better than government currency because central banks can devalue national currencies through inflation, while Bitcoin has a strictly fixed supply. Though the Fed’s post points out that it doesn’t actually print cash – in the sense of physical notes – it acknowledges its ability to expand the money supply.

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Concessions will be forthcoming.

US Extends Tariff Exemptions For European Union And Other Allies (CNBC)

The May 1 deadline for steel and aluminum tariff exemptions for U.S. allies has been extended, the White House said. Instead, the White House has decided to postpone the decision on some allies, including the European Union, for 30 days to allow further discussions. Those extensions will affect the EU, Canada and Mexico. As for Argentina, Australia and Brazil, a senior White House official said agreements have been reached in principle, and they will also receive a 30-day extension so details can be finalized. South Korea’s exemption from tariffs is permanent because it agreed to quotas as part of a new trade deal. Administration officials have asked other countries what level of quotas they would agree to.

One person briefed by the administration told CNBC: “Quotas are an active part of the discussion with every country on the exemption list.” U.S. Trade Representative Robert Lighthizer is leading the process for country exemptions, except for the European Union, which Commerce Secretary Wilbur Ross is leading. The Department of Commerce is also spearheading the process for product exemptions. The National Security Council is overseeing the entire process. The May 1 deadline on the tariff exemptions was set in a presidential memorandum on the topic.

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UK says they have a solution, but not what that is.

Brexit Talks At Risk Of Collapse Over Irish Border (G.)

The EU’s chief Brexit negotiator has warned that talks are at risk if the UK does not soften its red line on the Irish border issue. Speaking to reporters on his third visit to Ireland since the referendum, Michel Barnier said he was “not optimistic” and “not pessimistic” but “determined” that the two sides can break the current impasse on talks. He repeated recent declarations that unless Britain came up with fresh thinking on how to avoid a hard border by the June EU council summit, further talks were in danger of collapsing. “Until we reach this agreement and this operational solution for Northern Ireland, a backstop [solution], and we are ready for any proposal … there is a risk, a real risk,” he said.

But he hinted that the UK would not have to come up with the final deal for Ireland, describing the June summit as “a stepping stone” to the October deadline for the wider Brexit deal to be completed. The Irish prime minister, Leo Varadkar, said Britain’s “approach to negotiations will need to change in some way” if there is to be agreement over the issue. Appearing alongside Varadkar and his deputy, Simon Coveney, Barnier said the EU was “absolutely united” on the Irish question but wanted to work with the UK to find a practical solution. Coveney warned that there would be “difficulties” at the next EU council summit in June in progressing to wider Brexit talks unless the UK commited to wording for a “backstop” solution for the Irish border.

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It would be fun.

South Korea President Says Trump Deserves Nobel Peace Prize (R.)

South Korean President Moon Jae-in said U.S. President Donald Trump deserves a Nobel Peace Prize for his efforts to end the standoff with North Korea over its nuclear weapons program, a South Korean official said on Monday. “President Trump should win the Nobel Peace Prize. What we need is only peace,” Moon told a meeting of senior secretaries, according to a presidential Blue House official who briefed media. Moon and North Korean leader Kim Jong Un on Friday pledged at a summit to end hostilities between their countries and work toward the “complete denuclearization” of the Korean peninsula. Trump is preparing for his own summit with Kim, which he said would take place in the next three to four weeks.

The Trump administration has led a global effort to impose ever stricter sanctions on North Korea and the U.S. president exchanged bellicose threats with Kim in the past year over North Korea’s development of nuclear missiles capable of reaching the United States. In January, Moon said Trump “deserves big credit for bringing about the inter-Korean talks. It could be a resulting work of the U.S.-led sanctions and pressure”. Trump’s predecessor, Barack Obama, won the 2009 Nobel Peace Prize just months into his presidency, an award many thought was premature, given that he had little to show for his peace efforts beyond rhetoric.

Even Obama said he was surprised and by the time he collected the prize in Oslo at the end of that year, he had ordered the tripling of U.S. troops in Afghanistan. As well as Obama, three U.S. presidents have won the Nobel Peace Prize: Theodore Roosevelt, Woodrow Wilson, and Jimmy Carter. Moon’s Nobel Prize comment came in response to a congratulatory message from Lee Hee-ho, the widow of late South Korean President Kim Dae-jung, in which she said Moon deserved to win the prize, the Blue House official said. Moon responded by saying Trump should get it.

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Nothing leaks like Washington.

Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)

Robert Mueller, the special counsel investigating Russian interference in the US election, wants to ask Donald Trump about contact between his former election campaign manager Paul Manafort and Russia, the New York Times reported on Monday. The paper said it had obtained a list of nearly 50 questions that Mueller, investigating Russian meddling in the 2016 presidential election, wants to put to the US president. More than half relate to potential obstruction of justice. “What knowledge did you have of any outreach by your campaign, including by Paul Manafort, to Russia about potential assistance to the campaign?” is one of the more dramatic questions published by the Times.

The pointed reference to Manafort breaks tantalising new ground, since there was no previous evidence linking him to outreach to Moscow. Benjamin Wittes, a senior fellow at the Brookings Institution thinktank in Washington, tweeted: “This is very interesting – strong evidence that there are still collusion threads that are not yet public.” Manafort and his deputy, Rick Gates, pleaded not guilty last October to a 12-count indictment accusing them of conspiring to defraud the US by laundering $30m from their work for a Russia-friendly political party in Ukraine. a dramatic insight into the special counsel’s mind and make clear that Trump is a subject, not a mere witness, in the investigation. It is not yet known whether the president will agree to be interviewed.

One batch of questions relates to alleged coordination between the Trump election campaign and Moscow. Donald Trump Jr’s June 2016 meeting at Trump Tower in New York with a Russian lawyer who promised damaging information about rival Hillary Clinton is naturally under scrutiny. Mueller wants to ask when Trump became aware of the meeting; Trump Jr claimed his father did not know about it in advance.

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Set up a program to bring peace to Central America. Kick out the CIA. They will stop coming.

First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)

The first eight members of a “caravan” of Central American migrants entered U.S. territory to seek asylum on Monday, after a month-long journey through Mexico that drew the wrath of President Donald Trump. The eight women and children walked through a door into the San Ysidro port of entry on the bidding of a customs and border patrol officer, a Reuters witness said, hours after Vice President Mike Pence promised they would be processed in line with U.S. law. About three quarters of claims by Central American asylum seekers are ultimately unsuccessful, resulting in detention and deportation.

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Medium or well-done?

That Collapse You Ordered…? (Kunstler)

I had a fellow on my latest podcast, released Sunday, who insists that the world population will crash 90-plus percent from the current 7.6 billion to 600 million by the end of this century. Jack Alpert heads an outfit called the Stanford Knowledge Integration Lab (SKIL) which he started at Stanford University in 1978 and now runs as a private research foundation. Alpert is primarily an engineer. At 600 million, the living standard in the USA would be on a level with the post-Roman peasantry of Fifth century Europe, but without the charm, since many of the planet’s linked systems — soils, oceans, climate, mineral resources — will be in much greater disarray than was the case 1,500 years ago.

Anyway, that state-of-life may be a way-station to something more dire. Alpert’s optimal case would be a world human population of 50 million, deployed in three “city-states,” in the Pacific Northwest, the Uruguay / Paraguay border region, and China, that could support something close to today’s living standards for a tiny population, along with science and advanced technology, run on hydropower. The rest of world, he says, would just go back to nature, or what’s left of it. Alpert’s project aims to engineer a path to that optimal outcome. I hadn’t encountered quite such an extreme view of the future before, except for some fictional exercises like Cormac McCarthy’s The Road. (Alpert, too, sees cannibalism as one likely byproduct of the journey ahead.)

Obviously, my own venture into the fictionalized future of the World Made by Hand books depicted a much kinder and gentler re-set to life at the circa-1800 level of living, at least in the USA. Apparently, I’m a sentimental softie. Both of us are at odds with the more generic techno-optimists who are waiting patiently for miracle rescue remedies like cold fusion while enjoying re-runs of The Big Bang Theory. (Alpert doesn’t completely rule out as-yet-undeveloped energy sources, though he acknowledges that they’re a low-percentage prospect.) We do agree with basic premise that the energy supply is mainly what supports the way we live now, and that it shows every evidence of entering a deep and destabilizing decline that will halt the activities necessary to keep our networks of dynamic systems running.

A question of interest to many readers is how soon or how rapid the unraveling of these systems might be. When civilizations crumble, it tends to fast-track. The Roman empire seems to be an exception, but in many ways it was far more resilient than ours, being a sort of advanced Flintstones economy, with even its giant-scale activities (e.g. building the Coliseum) being accomplished by human-powered work.

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Never again.

Are Our Online Lives About To Become ‘Private’ Again? (BBC)

In May, tough new privacy laws are being introduced across Europe, offering EU consumers far greater control over their data and large fines for firms which break the rules. It is worth pausing to think about how we got to this point. To begin to understand, we must remember that data can easily be copied, shared and collected from multiple sources. Whenever we use digital devices – everything from web browsers, to phones, loyalty cards and CCTV cameras – we create data that allows advertisers, insurers, the police and others to understand aspects of our lives. Only its availability and the ingenuity of its handler limits what it can tell us. This is very different to a traditional commodity that can be bought and sold: a house, for example.

If you sell your house, the buyer might come to understand something of your personality, perhaps through a taste for high-spec kitchens and red carpets. Beyond that, the potential insight into your life is limited – your diaries and photo albums will have moved with you. With data, it is more complicated. Once you sign up for an online service, constant and often seamless data collection starts. Minimal understanding and agreement are often sufficient for this collection to begin: clicking “I agree” to terms and conditions you may or may not have read can be enough. It’s as if, rather than handing over a clean and tidy house, you have invited the buyer to move in with you and start taking notes: how you behave, whom you talk to, who visits you and who spends the night.

Many people never have a clear understanding of how the data they produce is shared, collected and interpreted. It can be combined with data from other sources, and investigated in unpredictable and unforeseen ways to gain in-depth knowledge about our lives, preferences, and likely future behaviours. This knowledge can be used to influence us in subtle but powerful ways. The advertisements, news, and friends we encounter online are often the result of this nudging. And, unlike a house, the data can be copied again and again at little to no cost, reaching an unlimited number of people. It is clear that the risks to privacy with data are substantial. Recognising this, additional safeguards are being introduced.

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The damage being done to Britain is unbelievable.

Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

In 2014 Gemma Morton, the headteacher of a large secondary school, told Education Guardian her school had helped to pay for the funeral of a student whose family couldn’t afford it, even after they had sold their car. Three years on, she has helped to pay for two more funerals. “When a child dies, nobody’s saved for it,” says Morton. “There is literally nowhere for families to go apart from the people they already know, and most of them are poverty-struck too.” Over the past few years, as austerity has deepened, more schools and individual teachers are bailing out disadvantaged families because they simply can’t say no. The latest government figures show 100,000 more children propelled into poverty in just 12 months.

There are 4.1 million children – nearly a third of the entire child population – living in households on less than 60% of the average income. At Gill Williams’s primary school in the north-west of England, local supermarkets deliver bread and fresh vegetables three times a week, which are placed in the playground for parents to help themselves. There is rarely a crumb left. Williams says it is not so much that poverty is more severe, but that it has spread. “It’s everybody. Your average family is like that now.” The core group of those needing support in her school is three times larger than when she became a head 10 years ago.

Evidence of hungry children is clear, say teachers. “You notice kids borrowing money from friends to buy food, kids falling asleep, kids saying they’ve got a tummy ache, and they didn’t have breakfast because Mummy didn’t have anything in,” says Morton. She has also seen children taking scraps from the school bins. Heads in poor catchments notice a difference when they attend meetings at other schools. “If you go and see kids in two different areas, they’ll be noticeably different heights,” says Morton.

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Nov 042017
 
 November 4, 2017  Posted by at 2:11 pm Finance Tagged with: , , , , , , , , ,  


Claude Monet The house at Yerres 1876

 

If there is one thing the Spain vs Catalonia conflict reminds us of, it has got to be Turkey. And that is a much bigger problem for the EU than it realizes. First of all, Brussels can no longer insist that this is an internal, domestic, Spanish issue, since Catalan president Puidgemont is in…Brussels. So are 4 members of his government.

That moves decisions to be made about his situation from the Spanish legal system to its Belgian counterpart. And the two are not identical twins. Even if both countries are EU members. This may expose a very large European problem: the lack of equality among justice systems. Citizens of EU member countries are free to move and work across the Union, but they are subject to different laws and constitutions.

The way the Spanish government tries to go after Puidgemont is exactly the same as the way Turkish president Erdogan tries to get to his perceived archenemy, Fethullah Gülen, a longtime resident of Pennsylvania. But the US doesn’t want to extradite Gülen, not even now Turkey arrests US embassy personnel. The Americans have had enough of Erdogan.

Erdogan accuses Gülen of organizing a coup. Spanish PM Rajoy accuses the Catalan government of the same. But they are not the same kind of coup. The Turkish one saw violence and death. The Spanish one did not, at least not from the side of those who allegedly perpetrated the coup.

Brussels should have intervened in the Catalonia mess a long time ago, called a meeting, instead of claiming this had nothing to do with the EU, a claim as cowardly as it is cheap. You’re either a union or you’re not. And if you are, the well-being of all your citizens is your responsibility. You don’t get to cherry pick. You got to walk your talk.

Belgian news paper De Standaard today makes an interesting distinction. It says the Belgian judicial system is not asked to “extradite” Puidgemont to Spain (uitlevering), but to “surrender” him (overlevering). Legal gibberish.

The paper also states that the case will go through three different courts, each of which has 15 days to announce a decision, so Puidgemont is safe for at least a month and a half. And then on December 21, Rajoy had called elections in Catalonia. For which, reportedly, he will seek to ban several parties. Don’t be surprised if that includes Puidgemont’s.

Moreover, even if the democratically elected president of Catalonia loses all appeals available to him, he could then ask for asylum in Belgium (apparently, Belgium is the only EU member country in which EU citizens can ask for asylum). And then you would really get into a mix-up of EU versus Belgian versus Spanish laws. In a way this is good, it would test a system that is not prepared at all for such divergences.

But what a disaster this is, once more, for the EU. It has shown zero leadership in the case, neither from the likes of European Commission head Juncker nor from Angela Merkel, its most powerful head of state. How can one not conclude that the Union is completely rudderless? This is just as bad as the refugee crisis, and the beheading of the Greek economy.

Threatening people with 30-year jail terms for organizing a peaceful vote is not what the EU should stand for. And now that is does, it threatens its own survival. Europe cannot be the land of Erdogan or Franco, it cannot look the other way and live.

That may be why the German armed forces, the Bundeswehr, have prepared a report that looks at future scenarios for Europe, including worst-case ones. The article in Der Spiegel is in German only, and my command of the language is a tad rusty, but the translation through Google is surprisingly accurate, I only had to change a few words.

The authors don’t seek the worst case option in either Spain or Greece, but perhaps they should. Then again, some of their projections are stark enough to offer plenty food for thought.

 

Military planners think EU collapse is conceivable

According to SPIEGEL information, the Bundeswehr played through social and political trends until 2040 for the first time. Strategists are also developing a worst-case scenario. The Bundeswehr believes that an end to the West in its current form over the next few decades is possible. This is according to information from Der Spiegel from the “Strategic Perspective 2040”, which was adopted at the end of February by the top of the Ministry of Defense and since then kept under wraps.

For the first time in its history, the Bundeswehr’s 102-page document shows how social trends and international conflicts could influence German security policy in the coming decades. The study sets the framework in which the Bundeswehr of the future is likely to move.

The paper does not yet provide any concrete conclusions for equipment and strength. In one of the six scenarios (“The EU in Disintegration and Germany in Reactive Mode”), the authors assume a “multiple confrontation”. The future projection describes a world in which the international order erodes after “decades of instability”, value systems worldwide diverge and globalization is stopped.

“The EU enlargement has been largely abandoned, other states have left the community, Europe has lost its global competitiveness,” write the Bundeswehr strategists: “The increasingly disorderly, sometimes chaotic and conflict-prone world has dramatically changed the security environment of Germany and Europe.” In the fifth scenario (“West against East”), some eastern EU countries are freezing the state of European integration while others have “joined the Eastern bloc”.

In the fourth scenario (“multipolar competition”), extremism is on the rise and there are EU partners who “even occasionally seem to seek a specific approach to Russia’s” state capitalist model “. The document expressly makes no prognosis, but all scenarios are “plausible with the 2040 time horizon,” write the authors. The simulations were developed by scientists of the Federal Armed Forces Planning Office.

Funny, that ‘future projection’ looks a lot like how I see the EU today, not in 2040.

There’s a longer article behind a paywall at Der Spiegel, but this should be sufficient to get a conversation going. Angela Merkel may be all EU all the time, just like all her EU peers, but her own army has serious questions about that. And given the Catalonia swamp, who could doubt that they are right about having doubts?

Yanis Varoufakis’ DiEM25 movement is all set towards democratizing the EU, but how realistic is that goal? How divergent does a Union have to get before you give up on it? Poland, Hungary, Czechia all want completely different things from what Holland and Germany want. New French president Macron is finding out as we speak that he can only do what Merkel allows him to.

And then along comes Spain and tries to inflict Franco era laws and violence on its citizens. But Brussels does nothing, and neither does Berlin. Refugees can rot away on Greek islands if eastern Europe doesn’t want them, and Catalan grandmas can get beaten to a pulp by the remnants of Franco’s troops, Brussels has zilch.

The way the EU functions today is no accident, and it’s not some new development. Present-day Brussels is the culmination of 50-60 years of institutionalization. You don’t change that with an election here or there.

Will Catalonia be the endgame of Brussels? Will it be the refugee crisis? Brexit? It’s impossible to say, but what is certain is that in its present state, the Union has no future. And at the same time, there’s no solution in sight. The powers that be are deeply invested, and they’re not going to let go just because some country, or part of a country, or political party, or group of voters wants them to.

The EU is profoundly anti-democratic, and it intends to stay that way. But imagine that Belgium ‘surrenders’ Puidgemont, a man whose movement has lifted anti-violence to a whole new and modern level, and Rajoy jails him for 30 years, and the next day sits in on some meeting in Brussels, what picture does that paint for the 500 million EU citizens?

They’re crazy if they think they can get away with this.

 

 

May 052017
 
 May 5, 2017  Posted by at 8:29 am Finance Tagged with: , , , , , , , , , , ,  


Fred Stein Under the El New York 1949

 

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)
Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)
Oil Extends Slump Below $45 (BBG)
Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)
Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)
Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)
Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)
Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)
Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)
Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)
Syria Safe Zones To Be Shut For US, Coalition Planes (R.)
EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)
EU Seeks to Ward Off New Refugee Crisis (Spiegel)
Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)
Greece Paying Asylum Seekers To Reject Appeals (EUO)
Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)
Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

 

 

This could take a while. And that’s a good thing.

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)

Several key Senate Republicans said they will set aside the narrowly passed House health-care bill and write their own version instead, a sign of how difficult it will be to deliver on seven years of promises to repeal Obamacare. Lamar Alexander of Tennessee, who chairs the Senate health committee, and Roy Blunt of Missouri, a member of GOP leadership, both described the plan, even as the House was celebrating passing its repeal after weeks of back and forth. The decision will likely delay even further the prospect of any repeal bill reaching President Donald Trump’s desk. Hospital stocks dipped on the House vote, but quickly bounced back on the news the Senate would start over with its own version, with the BI North America Hospitals Index up 0.9% at 2:39 p.m. Hospitals fear the winding-down of Obamacare’s Medicaid expansion will leave them with more customers who can’t afford to pay.

Trump celebrated the House vote with a news conference at the White House, standing alongside dozens of Republican lawmakers. “This has really brought the Republican Party together,” he said. But in the wake of the House’s razor-thin 217-213 vote, the Senate made clear it was going in a different direction. Alaska’s Lisa Murkowski, who has been very critical of the House bill, said Thursday she hopes they start with “a clean slate” in the Senate. To get some kind of bill through his chamber, Majority Leader Mitch McConnell will need to unite moderate and conservative wings of the party that want to pull the measure in entirely different directions. The GOP controls the chamber 52-48, meaning he can lose no more than two Republicans and still pass it, given the united Democratic opposition.

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At ZIRP.

Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)

With debt ceilings, spending plans, and tax reforms focusing all eyes on Washington, we thought it notable that for the first time in US history, the cost of interest on US government debt has risen above half a trillion dollars… One wonders, given the grandiose spending plans, if we will ever get back below half a trillion dollars?

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We’ve been saying all along OPEC cuts were fantasy. US shale is a minor factor. Lack of demand is a major one.

Oil Extends Slump Below $45 (BBG)

Oil slid below $45 a barrel for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices. Futures have collapsed 11% this week, slumping to the lowest since Nov. 15 – two weeks before OPEC agreed to production curbs to boost prices and ease a global glut. The decline is being driven by expanding U.S. output that’s countering the group’s curbs. Energy companies in Asia slumped on Friday, after their American counterparts were hammered in the previous session. While news of OPEC’s cuts drove prices in early January to the highest since July 2015, that increase encouraged U.S. drillers to pump more.

The result has been 11 straight weeks of expansion in American production in the longest run of gains since 2012. Prices are still more than 50% below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share. “There’s disappointment that the production cuts we’ve seen from OPEC and others has not had any impact at this stage on global inventory levels,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market seems to be much further away from a balanced situation than some had previously forecast. There is a possibility that oil could be headed to the low $40s range from here.”

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Expecting the dollar to fall. Doesn’t look all that wise.

Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)

Emerging-market companies are showing up to the U.S. debt market at the fastest pace ever, and finding plenty of appetite for their bonds. Sales of dollar-denominated notes have climbed to about $160 billion this year, more than double offerings at this point in 2016 and the fastest annual start on record, according to data compiled by Bloomberg going back to 1999. Emerging-market assets tanked after Donald Trump’s surprise election in November, but they’ve quickly recovered, with bonds returning 4% this year and outperforming U.S. investment-grade and high-yield debt. The deluge of issuance began when companies anticipating a surge in borrowing costs amid economic stimulus from Trump rushed to sell notes before his inauguration Jan. 20.

But the expected jump never materialized, extending the window for companies like Petroleo Brasileiro SA and Petroleos Mexicanos to pursue multi-billion-dollar deals. They found plenty of demand from investors keen to buy shorter-dated debt that’s better insulated against rising U.S. interest rates. Jean-Dominique Butikofer, the head of emerging markets for fixed income at Voya Investment Management in Atlanta, said he’s seen new interest in emerging markets from investors who already own U.S. high-yield bonds or emerging market sovereign debt that’s more vulnerable to rising interest rates. “You want to be less sensitive to U.S. rates, but you still want to diversify and you still want to play the EM catch-up growth story,” said Butikofer, whose firm manages $217 billion. “You’re going to gradually add emerging-market corporates.”

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There should never be something like a pesticides and seeds group. Break them up.

Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)

ChemChina has won more than enough support from Syngenta shareholders to clinch its $43 billion takeover of the Swiss pesticides and seeds group, the two companies said on Friday. The deal, announced in February 2016, was prompted by China’s desire to use Syngenta’s portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output. It is China’s biggest foreign takeover to date. It is one of several deals that are remaking the international market for agricultural chemicals, seeds and fertilisers. The other deals in the sector are a $130 billion proposed merger of Dow Chemical and DuPont, and Bayer’s plan to merge with Monsanto. The trend toward market consolidation has triggered fears among farmers that the pipeline for new herbicides and pesticides might slow.

Regulators have required some divestments as a condition for approving the Syngenta deal. Based on preliminary numbers, around 80.7% of Syngenta shares have been tendered, above the minimum threshold of 67% support, the partners said in a joint statement. [..] The transaction is set to close on May 18 after the start of an additional acceptance period for shareholders and payment of a special 5-franc dividend to holders of Swiss-listed shares on May 16. Holders of U.S.-listed depositor receipts will get the special dividend in July. Syngenta shares will be delisted from the Swiss bourse and its depository receipts from the New York Stock Exchange. Chief Executive Erik Fyrwald played down the transition from publicly listed group to becoming part of a Chinese state enterprise, stressing that Syngenta would remain a Swiss-based global company while under Chinese ownership.

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May has nothing, election or not. “..the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)

The President of the EU’s ruling Council has intervened to calm Brexit tensions 24 hours after Theresa May launched a vicious attack on “Brussels bureaucrats” on the steps of No 10. Donald Tusk warned that talks would become “impossible” if emotions got out of hand between the UK and EU and called for “mutual respect” between the negotiating parties. The call for calm comes after Theresa May accused the EU’s bureaucracy of trying to influence the result of Britian’s general election by maliciously leaking the content of discussions to the media. In an aggressive speech on Wenesday she tore into officials, warning that her government would not let “the bureaucrats of Brussels run over us”.

The European Commission this morning reacted indignantly to Ms May’s conspiracy theory, with a spokesperson telling reporters that the organisation was “rather busy” and preoccupied with more important matters than trying to fix the poll. But Mr Tusk, a Polish national who represents the EU states’ heads of government in Brussels, said on Thursday afternoon: “Brexit talks [are] difficult enough. If emotions get out of hand, they’ll become impossible. Discretion, moderation and mutual respect needed. “At stake are the daily lives and interests of millions of people on both sides of the Channel.”

The call for calm contrasts with that of a Commission spokesperson earlier today, who said: “We are not naive, we know that there is an election taking place in the United Kingdom. People get excited whenever we have elections. “This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work. “We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work. “To put it in the words of an EU diplomat, the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

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10 years too late? 20?

Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)

Alitalia will be put up for sale in two weeks having earlier this week fallen into administration. In a radio interview cited by the Financial Times, Carlo Calenda, the country’s economic development minister, said that the priority is for the whole company to get bought. “Within 15 days the commissioners will be open to expressions of interest,” he said. On Tuesday, Alitalia started bankruptcy proceedings for the second time in a decade after employees rejected job cuts and concessions linked to a €2bn recapitalisation plan. Shareholders voted unanimously to file for special administration. According to the Financial Times, the government of Prime Minister Paolo Gentiloni has extended a bridge loan of €600m to keep Alitalia afloat for the next six months, but has ruled out nationalisation.

This loan should give the commissioners appointed by the government time to come up with a strategy that will ensure the airline’s fleet is not grounded. Speaking to the broadcaster, Mr Calenda said the €600m loan would be the “maximum” of state aid on offer. Speaking about possible buyers, Mr Calenda said “any idea is welcome”. He stressed, however, that “Alitalia needs an alliance with a big European group”. Alitalia, whose major shareholders are Abu-Dhabi based Etihad Airways and Italian banks, has about 12,500 employees. It has been struggling ever since a previous bankruptcy in 2008.

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Somone will buy it for pennies on the buck. China?

Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)

Given its rich history, Italy is rightly attached to its relics. Unfortunately, this affection for the past does not stop at the Colosseum: It applies to failing companies too. Take Alitalia, Italy’s loss-making flag carrier, which has survived for years thanks to a string of public and private rescues. On Tuesday, the airline went into administration, prompting the government to provide a fresh loan worth €600 million ($655 million) to guarantee another six months of operation. Surely the time has come for Italy to stop losses. Unless Alitalia can find a buyer, the government should allow it to go bust. Politically, that is a tall order, of course. Politicians want to protect workers, who stand to lose their jobs if a company shuts down. But every euro used in a bailout is one that can’t be spent elsewhere; what economists call “opportunity cost.” How many more jobs could have been created had the government invested €600 million into upgrading Italy’s digital infrastructure?

Keeping Alitalia alive is also a burden on productivity, since it takes resources that might be deployed by more efficient competitors. Last year, a study for the European Commission found that the misallocation of workers and capital in Italy has steadily worsened since 1995, accounting for a large fraction of Italy’s productivity slowdown. If the government is serious about Italy returning to sustainable growth, it should stop helping losers get in the way of productive companies. There are also questions of financial stability. Between 1974 and 2014, Italian taxpayers have spent €7.4 billion propping up Alitalia, according to Mediobanca. Italy’s addiction to helping companies in trouble has contributed to its huge government debt, which now stands at nearly 133% of GDP, exposing Rome to the risk of a financial crisis.

The same problem also applies to banks. From UniCredit to Intesa Sanpaolo, many of Italy’s big lenders have granted hundreds of millions in credit lines to Alitalia, only to see their loans go up in smoke. The list also includes Monte Dei Paschi di Siena, the troubled bank which in December had to apply for a multi-billion euro government bailout. The reason? It was struggling under the weight of non-performing loans, like those it provided to Alitalia. While European rules on state aid will make it difficult for Rome to help Alitalia beyond the initial six months, one should never underestimate the ability of the Italian government to find a way to stitch together another flawed rescue. But if Italy is to finally start focusing on future growth, it will have to stop dwelling on the ruins of the past.

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A great economist died.

Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)

William Baumol — an economist who just died at the age of 95 — had a famous idea, commonly known as Baumol’s cost disease, that explains a lot about our modern world. It explains why barbers make more in San Francisco than in Cleveland and why services such as health care and education keep getting more expensive. And it provides a possible explanation for why rich countries like America are devoting more and more of their workforces to low-productivity services, dragging down the economy-wide rate of productivity growth. In the 1960s, Baumol was trying to understand the economics of the arts, and he noticed something surprising: Musicians weren’t getting any more productive — playing a piece written for a string quartet took four musicians the same amount of time in 1965 as it did in 1865 — yet musicians in 1965 made a lot more money than musicians in 1865.

The explanation wasn’t too hard to figure out. Rising worker productivity in other sectors of the economy, like manufacturing, was pushing up wages. An arts institution that insisted on paying musicians 1860s wages in a 1960s economy would find their musicians were constantly quitting to take other jobs. So arts institutions — at least those that could afford it — had to raise their wages in order to attract and retain the best musicians. The consequence is that rising productivity in the manufacturing sector of the economy inevitably pushes up the cost of labor-intensive services like live musical performances. Rising productivity allows factories to cut prices and raise wages at the same time. But when wages rise, music venues have no alternative but to raise ticket prices to cover the higher costs.

This became known as Baumol’s cost disease, and Baumol realized that it had implications far beyond the arts. It implies that in a world of rapid technological progress, we should expect the cost of manufactured goods — cars, smartphones, T-shirts, bananas, and so forth — to fall, while the cost of labor-intensive services — schooling, health care, child care, haircuts, fitness coaching, legal services, and so forth — to rise. And this is exactly what the data shows. Decade after decade, health care and education have gotten more expensive while the price of clothing, cars, furniture, toys, and other manufactured goods has gone down relative to the overall inflation rate — exactly the pattern Baumol predicted a half-century ago.

Baumol’s cost disease is a powerful tool for understanding the modern economic world. It suggests, for example, that the continually rising costs of education and health care isn’t necessarily a sign that anything has gone wrong with those sectors of the economy. At least until we invent robotic professors, teachers, doctors, and nurses, we should expect these low-productivity sectors of the economy to get more expensive. While some argue that prices keep rising because the government subsidizes health care through programs like Medicare and college educations through student loans and grants, you see the same basic pattern with services like summer camps, veterinary services, and Broadway shows that aren’t hamstrung by government regulations and subsidies.

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Putin keeps his enemies close.

Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)

Russia said it’s ready to send peacekeepers to Syria as it won backing from Turkey and Iran for a plan to establish safe zones inside the war-torn country in an effort to shore up a shaky cease-fire brokered by the three powers. The three countries signed a memorandum on the creation of so-called de-escalation areas on Thursday after two days of talks in Kazakhstan that also included representatives of the Syrian government and rebel groups. Opposition leaders distanced themselves from the plan, saying they can’t accept Iran as a guarantor of the truce and that they want “clear and tangible” guarantees the deal will be enforced. The U.S. also expressed doubts. “Russia is ready to send its observers” to help enforce the safe zones, President Vladimir Putin’s envoy to Syria, Alexander Lavrentiev, told reporters in the Kazakh capital, Astana. “We believe the Syrian crisis can only be resolved through political methods.”

Putin said on Wednesday that he’d secured the backing of U.S. President Donald Trump for the proposal, which could include a ban on bombing raids. But State Department spokeswoman Heather Nauert said Thursday that the U.S. has “concerns” about the accord, “including the involvement of Iran as a so-called “guarantor,”’ and said Russia should do more to stop violence. [..] The latest initiative would establish four zones patrolled by foreign forces – possibly including Russian ones – in the northwestern Idlib province, Homs province in the west, the East Ghouta suburb of the capital Damascus and southern Syria. It will take a month to finalize the maps of the proposed safe zones, Iranian Deputy Foreign Minister Hossein Jaberi Ansari said. The United Nations’ Special Envoy for Syria, Staffan de Mistura, who also attended the Astana talks, described the agreement as a “step in the right direction.”

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That’ll go down well with Wolfowitz et al.

Syria Safe Zones To Be Shut For US, Coalition Planes (R.)

The safe zones which are being created in Syria will be closed for warplanes of the United States and those of the U.S.-led coalition, Russian news agencies quoted Russian envoy at Syria peace talks Alexander Lavrentyev as saying on Friday. Turkey and Iran agreed on Thursday to Russia’s proposal for “de-escalation zones” in Syria, a move welcomed by the United Nations but met with scepticism from the United States.

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Stop selling rubber boats, problem solved!

EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)

The European Union wants China to help prevent migrants and refugees using Chinese-made inflatable boats to get into the bloc by stopping the boats reaching them, the European Commissioner for Migration said on Thursday. Dimitris Avramopoulos, speaking to reporters in Beijing after meeting Chinese Minister for Public Security Guo Shengkun, said the rubber boats used by people smugglers were made in China. “The rubber boats used by the smuggler networks in the Mediterranean are fabricated somewhere in China, they are exported to the countries in Asia and they are used by them,” Avramopoulos said.

“So I requested the support and cooperation from the Chinese authorities in order to track down this business and dismantle it, because what they produce is not serving the common good of the country. It is a very dangerous tool in the hands of ruthless smugglers.” He gave no further details, but said he and Guo had not discussed the possibility of China taking any of the refugees or migrants. More than a million people sought asylum in Europe’s rich north in 2015, mostly in Germany but also in large numbers in Sweden, straining the capacity of countries to cope. A contentious deal with Turkey to stop Syrian refugees from reaching Greece and the overland route to Germany, in return for EU funds, has reduced flows to a trickle, though thousands of migrants still try to reach Europe from Libya via sea routes.

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Who cares about the law? “..a more restrictive interpretation of asylum rights..”

EU Seeks to Ward Off New Refugee Crisis (Spiegel)

Merkel has promised that the refugee crisis seen two years ago will not be repeated: Never again will Europe see an uncontrolled inflow of millions of people. The refugee deal with Turkey is working, we are repeatedly told, and the crisis is over. That, though, could turn out to be wrong. With German voters set to go to the polls on Sept. 24, Merkel’s re-election campaign hinges on there not being a repeat of the refugee crisis, even if it’s not as substantial as the 2015 influx. But west of the closed Balkan route, a new migrant stream has been growing since the beginning of the year. From Jan. 1 to April 23, 36,851 migrants have followed the central Mediterranean route from North Africa to Italy. That represents a 45% increase over the same period last year, when a record 181,000 people crossed the Mediterranean on the route.

Even more concerning is the fact that summer hasn’t even begun. Experience has shown that most migrants only climb into the boats once the Mediterranean grows calmer. Italian authorities estimate that a quarter million people will arrive on its shores this year. “There are challenges ahead,” says a senior German security official. Berlin is particularly concerned because it’s not just Africans who are taking the Mediterranean route to Italy. An increasing number of South Asians are as well, which could mean that the route across the sea to Italy is now seen as a viable alternative to the defunct Balkan route. People from Bangladesh now represent the second largest group of migrants that have crossed over from Libya this year. From January to March 2016, by contrast, exactly one Bangladeshi was picked up on the route. Pakistanis have also chosen the Mediterranean route more often in recent months.

[..] The EU is currently working on an emergency plan in case a “serious crisis situation” develops. The discussions are focusing on a scenario under which more than 200,000 refugees would have to be redistributed each year. An unpublished report by Malta, which currently holds the rotating European Council presidency, calls for a more restrictive interpretation of asylum rights in such a case. In other words, should too many migrants begin arriving, the EU will increase efforts at deterrence. Controversial proposals for reception camps to be established in North Africa also remain under discussion. Most of those currently fleeing from countries like Nigeria, Guinea and the Ivory Coast are doing so to escape grinding poverty and in the hopes of finding better opportunities in Europe. Very few of them have much chance of being granted asylum. That reality has made redistribution within the EU even more difficult. According to current law, those with no chance at asylum are supposed to be sent back home as quickly as possible and not sent to other European countries.

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Now add a huge rise in arrival numbers.

Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)

Tensions are rising on the eastern Aegean island of Chios, which is currently favored by human smugglers ferrying migrants over from neighboring Turkey, with an increasing number of brawls at overcrowded state reception centers and local residents’ tolerance wearing thin. Clashes between migrants of different ethnicities are an almost daily occurrence, residents said following a violent confrontation on Tuesday night between Afghan and Algerian nationals at the Vial reception facility. That incident started as a fight between two small groups throwing stones at each other and escalated into a full-blown brawl involving around 60 people. Riot police stationed nearby were eventually obliged to enter the facility and break up the fight.

According to sources at the Citizens’ Protection Ministry, migrants have been arriving in greater numbers on Chios as it still lacks a so-called pre-departure camp due to protests by local residents against the creation of new facilities on the island. As a result, migrants landing on Chios and deemed ineligible for asylum are not being deported to Turkey as foreseen in an agreement signed between Turkey and the EU in March last year. Around 200 migrants have arrived on Chios this week, according to government figures, compared to virtually none on other islands in the eastern Aegean. And, according to a top-ranking police official, the problem is unlikely to be resolved until a center is set up. “The message being sent to those deciding to make the journey is that if you get to Chios they won’t send you back,” he said.

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NGOs to be thrown off the islands this summer, Greek army and the Greek Red Cross to take over.

Greece Paying Asylum Seekers To Reject Appeals (EUO)

The Greek government is giving cash incentives for rejected asylum seekers on the islands to forgo their legal rights to appeal their cases. Some €1,000 and free plane tickets home are now part of a largely EU-financed package to send them packing as quickly as possible. “This is quite complicated and quite immoral,” a Greek lawyer working for Save the Children, an international NGO, told EUobserver on Tuesday (2 May). The move is part of a larger effort to return people to Turkey and free up administrative bottlenecks, but the plan has generated criticism from human rights defenders who say asylum seekers are being pushed into taking the money. People have five days to decide whether to take the cash, with reports emerging that even that short delay was not being respected by authorities. Previously, people were entitled to the assistance even if they appealed.

The scheme only applies to those in so-called eu hotspots on the Chios, Kos, Leros, Lesvos, and Samos islands, where arrivals are screened, given that Turkey does not accept people back from mainland Greece. Greek minister of migration Ioannis Mouzalas has said the financial bait was needed to prevent bogus claimants from abusing the asylum system. The new rules on excluding people who appeal their cases, imposed last month, also come after the European Commission pressured Athens into shortening its appeal process and removing administrative barriers to send more people home. The EU-Turkey deal last year was supposed to ensure that new asylum arrivals whose applications have been declared unfounded would be returned to the country. But only around 1,500 have been sent back since its launch, with the Greek appeals system consistently ruling in favour of initially rejected asylum seekers over broader concerns that Turkey was not safe.

[..] The whole appears to be part of bigger plan to squeeze asylum-seeker rights on the islands and get them out of Greece as fast as possible. It also comes on the heels of a new plan that aims to boot NGOs from the islands. “Many NGOs will longer be on the islands after July, it means there is going to be a lot less scrutiny and a lot less visibility on what is going on as well,” said Claire Whelan from the Norwegian Refugee Council, an independent humanitarian organisation. NGOs working in the medical field in the Vial hotspot in Chios island have already been replaced by the Greek army and the Greek Red Cross. All were informed earlier this year that DG ECHO, the EU Commission’s humanitarian branch, would no longer fund them. Instead, the money will be coming from the Commission’s interior and security department, DG Home. “One of the biggest gaps we see, that remains, is access to legal assistance and legal counseling. And I don’t know if that will be funded under DG Home and the government,” the Norwegian Refugee Council’s Whelan said.

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Europe doesn’t care what Greece wants.

Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)

Prime Minister Alexis Tsipras called on Greece’s international lenders on Thursday to reach an agreement on easing its debt burden by May 22, when eurozone finance ministers meet in Brussels to discuss the country’s bailout progress. Athens and its creditors reached a long-awaited deal at staff-level this week on a series of bailout reforms Greece needs to unlock loans from its €86 billion rescue package, the country’s third since 2010. The EU and the IMF, which has yet to announce if it will participate in the bailout, have now started negotiations over Greece’s post-bailout fiscal targets, a key element for granting it further debt relief. Greece is being firm that it has done what was asked of it and now wants to see movement from the other side. “Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday.

“Greece has done its part and all parties must now fulfill their commitments.” The creditors have been not been quite as upbeat and there is no guarantee that the May 22 meeting will actually sign off on the new tranche of loans, let alone draft up debt relief. But Luxembourg Finance Minister Pierre Gramenga did cite progress when speaking to reporters on the sidelines of a conference in Luxembourg. “We’re one step closer. They [Greece] over-performed last year, they are on track this year, we have now an agreement looming that we will hopefully agree on in Eurogroup,” he said. “Those who have been pessimistic all the time have been proved wrong. I’m very pleased about that. The worst case is not always the scenario that plays out.” Greece’s economy and budget have improved markedly recently, although major problems of poverty and unemployment persist.

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Additional 18% cuts to come.

Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

At least 23 cuts have been inflicted on pensioners since 2010, with losses adding up to more than €50 billion. For some, their benefits have fallen by as much as 50%. The United Pensioners network has just added a 23rd cut to its list – the reduction of up to 18% of main and supplementary pensions agreed by the government this week. Network chief Nikos Hatzopoulos says the cuts have impoverished pensioners. The other 22 cuts on the list are as follows:

– In 2010, Christmas, Easter and holiday bonuses ended.

– In 2011, all pensioners under the age of 60 took a 6-10% cut.

– In the same year, pensioners were also slapped with a solidarity levy ranging from 3 to 13% for monthly pensions over €1,400. Also cuts to supplementary pensions started, from 3 to 10%.

– Main pensions to under-60s were slashed in 2011 and supplementary pensions of more than 150 euros a month fell by 15-30%.

– From January 2012, there were fresh cuts to any “high” pensions not affected until then.

– In 2012, monthly pensions over 1,000 euros were hit with a new cut.

– Summer 2014 saw a 5.2% cut to all supplementary pensions.

– In 2015, minimum pensions fell.

– In the same year, all early retirements incurred a 10% cut.

– From last May, all new pensioners were informed they would get up to 30% less.

– Some 250,000 supplementary pensions fell by up to 40%.

– The EKAS benefit to 160,000 low-income pensioners was ended.

– Civil servants’ share fund dividends were slashed 45%.

– High pensions took a retroactive cut from late 2016 to end-2018.

– Widows’ benefits fell and stricter criteria were introduced.

– The pensions of people with employment were slashed 60%.

– Early retirees took big cuts.

– Retirement lump sums shrank 15-20%.

– New disability pensions were slashed last May.

– The healthcare levy on main pensions rose.

– A similar 6% levy was imposed on supplementary pensions.

– Since January, 650,000 farmers have had to pay a 14% income levy.

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Feb 232017
 
 February 23, 2017  Posted by at 9:53 am Finance Tagged with: , , , , , , , , , ,  


Jack Delano Colored drivers entrance, U.S. 1, NY Avenue, Washington, DC 1940

 

The Absolute Dominance Of The US Economy, In One Chart (MW)
Trump Scorns the IMF’s Globalism, and Now He Gets to Vote on It
The Problem with Gold-Backed Currencies (CHS)
What’s So Great About Europe? (BBG)
Italy Warned by EU Over High Public Debt With Spillover Risk (BBG)
‘Spain Is Ruined For 50 Years’ (Exp.)
Why Greece’s Crisis Has Broken All Previous Records (K.)
Millions In UK Are Just One Unpaid Bill Away From The Abyss (G.)
Oz Reserve Bank Interest Rate Moves Limited By High Debt, House Prices (AbcAu)
Exxon Wiped A Whopping 19.3% Of Its Oil Reserves Off Its Books In 2016 (Q.)
Turkish Provocations Test Greek Resolve (K.)
Greece Okays Asylum Requests Of 10,000 Refugees (K.)

 

 

Not sure that’s what I get from the graph.

The Absolute Dominance Of The US Economy, In One Chart (MW)

Despite the bleak picture painted by President Donald Trump of the U.S. as a country in disarray, America’s status as an economic superpower is still very much intact, even as China steadily closes the gap. The U.S. economy, as measured by GDP, is by far the largest in the world at $18.04 trillion. China, the closest thing the U.S. has for a competitor, is No. 2 with a GDP of $11 trillion, while Japan is a distant third with $4.38 trillion. As the chart by HowMuch.net illustrates, the U.S. accounts for about a quarter of the global economy, nearly 10 percentage points more than China’s 14.84%. Put another way, the U.S. economy is roughly equivalent to the combined GDPs of the eight next-biggest countries after China — Japan, Germany, the U.K., France, India, Italy, Brazil and Canada.

However, the narrative shifts when countries are grouped by geography, with Asia clearly in the lead. The region, denoted in yellow in the chart, contributed 33.84% to the global GDP. “Asia’s economic center of gravity is in the east, with China, Japan and South Korea together generating almost as much GDP as the U.S.,” said Raul Amoros at HowMuch.net. North America follows Asia at 27.95%, and Europe trails at 21.37%. The three blocs combined represent about 83% of the world’s economic activity. The chart also highlights the chasm between wealthy and poor countries. South America’s four largest economies — Brazil, Argentina, Venezuela and Colombia — only add up to 4% of the global GDP, while Africa’s three biggest — South Africa, Egypt and Nigeria — account for around 1.5%.

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I picked the last bit of the article.

Trump Scorns the IMF’s Globalism, and Now He Gets to Vote on It

The IMF has already survived one major mission-change. It’s known today as the lender of last resort to countries facing balance-of-payments crises. But in its first three decades, the Fund managed the world’s currency order. That was the role assigned at Bretton Woods in 1944, when the IMF and World Bank were set up. Forty-five nations attended the summit, but two men dominated it: John Maynard Keynes and America’s Harry Dexter White. From the back of her car in Uganda, Lagarde calls them the “founding fathers.” Their goal was to avoid a repeat of the 1930s, when competitive devaluations and tariff wars led to the collapse of world trade. Keynes wanted the IMF to act as a central bank of central banks, denominating their accounts in a new global currency. It would let members devalue or borrow with relative ease. Both creditors and debtors would pay interest on their holdings, discouraging large trade surpluses as well as deficits.

White’s plan was more creditor-friendly, reflecting the U.S. position as world lender. There would be no new currency: IMF members would tie their money to the dollar. They couldn’t devalue without consulting the Fund, and were only supposed to borrow short-term to close balance-of-payments gaps. “The British wanted an automatic source of credit, the Americans a financial policeman,” wrote Keynes’s biographer Robert Skidelsky. The English economist was one of the 20th century’s sharpest thinkers, but it was the U.S. Treasury official who got his way. The system turned out to have a flaw: It depended on the supply of U.S. dollars backed by gold. That link came under pressure as America, financing social programs at home and war in Vietnam, slipped into persistent deficit. In 1971, President Richard Nixon took the dollar off the gold standard, ending phase one at the IMF.

Today there’s a patchwork of floating rates, pegs and currency unions like the euro. It’s not working to everyone’s satisfaction – notably Trump’s. His team has called out several countries, from China to Germany, for gaming the system. Money courses around that system on a scale that would have been unimaginable at Bretton Woods. Massive trade imbalances built up. The dollar remains central. The risks were laid bare in 2008, when a collapsed U.S. housing bubble led to world recession. Since then, some financial leaders – among them the governor of the People’s Bank of China, Zhou Xiaochuan, and his U.K. counterpart Mark Carney – have gently hinted that something more like Keynes’s plan might be in order, to reduce the world’s dollar dependency.

Lagarde doesn’t see that happening on her watch. “It didn’t happen in 1944, when the world had destroyed itself,” she said. “I’m not a dreamer.” She argues instead that what the IMF is doing today will remain useful tomorrow. Countries will always be getting in a financial mess. Someone has to clean it up. Ukraine needed money in 2015: without the IMF, “where would the $17.5 billion come from? Whose pocket would it be?”

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The curse of the reserve currency. And if you look a bit deeper, any gold-backed currency.

The Problem with Gold-Backed Currencies (CHS)

There is something intuitively appealing about the idea of a gold-backed currency –money backed by the tangible value of gold, i.e. “the gold standard.” Instead of intrinsically worthless paper money (fiat currency), gold-backed money would have real, enduring value–it would be “hard currency”, i.e. sound money, because it would be convertible to gold itself. Many proponents of sound money identify President Nixon’s ending of the U.S. dollar’s gold standard in 1971 as the cause of the nation’s financial decline. If our currency was still convertible to gold, the thinking goes, the system would never have allowed the vast pile of debt to accumulate. The problem with this line of thinking is that it is disconnected from the real-world mechanisms of capital flows and the way money is created in our financial system.

This article explains why Nixon took the USD off the gold standard: since the U.S. was running trade deficits, all of America’s gold would have been transferred to the exporting nations. America’s gold reserves would have disappeared, leaving nothing to back the dollar. The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard. The problem to sound-money proponents is trade deficits: if the U.S. only had trade surpluses, then the gold would not drain away. But Triffin’s Paradox explains why this doesn’t work for a reserve currency: a reserve currency has two distinct sets of users: domestic users and global users. Each has different needs, so there is a built-in conflict between the two sets of users.

Global users of the USD need enormous quantities of dollars to use as reserves, to pay debts denominated in USD and to facilitate international trade. The only way the issuing nation can provide enough currency to meet this global demand is to run large, permanent trade deficits–in effect, “exporting” dollars in exchange for goods and services. This is the paradox: to maintain the “exorbitant privilege” of a reserve currency, a nation must “export” its currency in size; a nation that runs trade surpluses cannot supply the world with enough of its currency to act as a reserve currency.

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That is one damning set of numbers.

What’s So Great About Europe? (BBG)

A woman said that maybe the problem with the European Union – or at least the common currency, the euro – was that it was too advantageous to Germany. “Because we have a common currency, we get an edge in exports,” she said. “I profit from this. Thanks!” “Do you think this is harming our neighbor countries?” Armbruster asked. “Yes, definitely,” she responded. “Germany was always a problem in Europe,” interjected Andre Wilkens, a Berlin-based policy wonk who was one of the evening’s featured speakers but mostly sat and listened. “The EU was formed to solve that problem.” Others got up to say that Europe needed more solidarity, with Germans leading the way. It needed more of a sense of community. More attention needed to be paid to the millions of jobless young people in Greece, Italy, Portugal and Spain.

Then things shifted to straight-out Euroenthusiasm. “To be totally honest, I think Europe is super,” said a woman sitting in the front row. Added a man a few rows back: “There are problems that we Germans alone can’t solve.” By working together with the rest of Europe, he went on, Germany had a better shot at fighting climate change and preventing war. It isn’t exactly news that a bunch of people gathered in a theater in downtown Stuttgart support the idea of Europe and even, for the most part, the reality of the European Union. The home of Daimler, Porsche and Robert Bosch is one of the continent’s great economic success stories – and its residents’ political views aren’t necessarily shared by other Germans. On the whole, Germans see the EU in a more positive light than the citizens of most other European countries (I’ve included the 10 most populous EU member countries in the chart below), but they’re still pretty negative about it.

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All Italy can do is pretend. And Brussels likes it that way.

Italy Warned by EU Over High Public Debt With Spillover Risk (BBG)

The European Commission warned that Italy faces excessive economic imbalances as the country’s shaky center-left government struggles to control public debt, boost sluggish growth and mend ailing banks. Troubles including soured bank loans risk spilling into other euro-area countries, the commission said on Wednesday. Italy’s public debt is projected to rise to 133.3% of gross domestic product this year from an estimated 132.8% in 2016. “High government debt and protracted weak productivity dynamics imply risks with cross-border relevance looking forward, in a context of high non-performing loans and unemployment,” the European Union’s executive arm in Brussels said in a set of annual policy recommendations to EU governments. Italy is struggling to maintain government stability amid infighting in the ruling Democratic Party, where some members are pushing for early elections.

The country also faces sluggish GDP growth of 0.9% this year and lingering issues at domestic banks, which are weighed down by €360 billion of bad loans that have eroded profitability, undermined investor confidence and curtailed new lending. “The stock of non-performing loans has only started to stabilize and still weighs on banks’ profits and lending policies, while capitalization needs may emerge in a context of difficult access to equity markets,” the commission said. In May it plans to recommend whether Italy should be subject to a stricter oversight regime – one with fines as a last resort – for failing to keep public debt on a trajectory toward the EU limit of 60% of GDP. The assessment will take into account final economic data for 2016 and Italian government pledges to adopt by the end of April budget-austerity measures worth 0.2% of GDP.

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“We have a third world production model of speculators and waiters, with a labour market where the majority of jobs created are temporary and with remunerations of €600, the largest wage decline in living memory..”

‘Spain Is Ruined For 50 Years’ (Exp.)

A leading Spanish economist has hit out at the ECB saying “crazy” loans will ruin the lives of the population for the next 50 years.And it is only a matter of time before the Government is forced to default as a debt bubble and low wages effectively forge the worst declines in “living memory”. Leading economist Roberto Centeno, who was an advisor to US president Donald Trump’s election team on hispanic issues, says the country has borrowed €603 billion that it cannot conceivably pay back. And he says Spanish politicians including Minister of Economy Luis de Guindos are “insulting their intelligence” after doing back door deals with the ECB. In a blog post Mr Centeno says there needs to be audits so the country can understand the magnitude of its debt mountain.

He said Spain was “moving steadily towards the suspension of payments which is the result of out of control public waste, financed with the largest debt bubble in our history, supported by the ECB with its crazy policy of zero interest rate expansion and without any supervision.” The expert added the doomed situation will “lead to the ruin of several generations of Spaniards over the next 50 years”. And that current Prime Minister Rajoy has employed 2500 special advisors in his central government as opposed to other leaders. He said: ”Our economic future requires drastic decisions to cut public waste, such as eliminating thousands of useless public companies, thousands of useless advisers, [Prime Minister Mariano] Rajoy has 2,500 in Moncloa, compared to Obama’s 600, Merkel’s 400 or the 250 working for Theresa May.

“There’s disastrous management of Health and Education, the cost of which has skyrocketed 60 per cent since they were transferred to the Autonomous Communities while the quality plummeted.” Mr Centento also said the Government and the European Union’s estimations of GDP are completely wrong and has presented them with figures he claims are accurate. He said the country is currently suffering from a “third world production model”. He added: “We have a third world production model of speculators and waiters, with a labour market where the majority of jobs created are temporary and with remunerations of €600, the largest wage decline in living memory, “And all this was completed with a broken pension system and an insolvent financial system.”

Forecasting an unprecedented shock to the European financial model, Mr Centento is calling for an immediate audit despite a recent revelation that the ECB is failing in its supervisory role over Europe’s banks. He also claimed the Spanish government and European Union leaders have been manipulating figures since 2008. Mr Centento said: “We will require the European Commission and Eurostat to audit and audit the Spanish accounting system for serious accounting discrepancies that may jeopardise stability. “The gigantic debt bubble accumulated by irresponsible governments, and that never ceases to grow, will be the ruin of several generations of Spaniards. “The Bank of Spain’s debt to the Eurosystem is the largest in Europe. “The day that the ECB minimally closes the tap of this type of financing or markets increase their risk aversion, the situation will be unsustainable.”

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A feature not a bug.

Why Greece’s Crisis Has Broken All Previous Records (K.)

How unique is the Greek crisis? Two charts tell the tragic tale. The first – from the International Monetary Fund’s recent Article IV report on Greece – compares four major economic crises that took place in the developed world in the last 100 years: the Great Depression in the United States, the Asian financial crisis of the late 1990s, the eurozone recession and Greece’s long collapse. Greece’s performance is by far the worse. The East Asian countries caught in the hurricane of 1997-8 returned to pre-crisis real GDP within three years. The eurozone needed six years, and today its real GDP is only 2% higher than the pre-crisis high point. The output of the US economy had shrunk by a quarter three years after the Wall Street Crash of 1929, but by 1936 it had recovered to pre-crisis levels. The Greek economy contracted by 26% in real terms between 2007 and 2013, and at the end of 2016 – nine years after the start of its own Great Depression – it remained stuck at the bottom.

The second chart, from the analysis service Macropolis, compares the performance of eight countries that have sought assistance from the IMF since 1997 seven years after the start of their programs. The Fund’s best student was Turkey, which doubled its GDP in real terms between 2000 and 2007. Russia was a close second, largely thanks to growth fueled by climbing oil and gas prices. South Korea comes next, with growth well above 50% from its baseline year, while Indonesia, Brazil and Thailand are hovering around 25%. The only countries which remained below their pre-crisis GDP levels seven years after seeking the Fund’s assistance are Argentina (in the aftermath of the 1998-2002 crisis) and Greece. At its low point, three years into its crisis, Argentina’s dollar-denominated GDP – largely because of the devaluation of the peso after the abolition of convertibility – had fallen by two-thirds compared to pre-crisis highs. At the seven-year mark, Argentina, unlike Greece, was experiencing a robust recovery.

Focusing on the comparison with the Great Depression in the United States, US unemployment peaked in May 1933 at 26%, to be cut by more than half by the end of 1936. In Greece it reached 28% in July 2013, and has since fallen to 23%. The Dow Jones Industrial index lost 85% of its value between August 1929 and May 1932, but it rose fourfold in the three-and-a-half years to the end of 1936 (another 23 years would pass, however, before it got back to pre-crisis levels).

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No, it’s not just the EU, or the euro.

“..an economic climate that is normalising low-income families having to live hand to mouth..”

Millions In UK Are Just One Unpaid Bill Away From The Abyss (G.)

As the cocktail of long-term austerity, rising living costs and a slumping post-Brexit economy hits, what’s really frightening is the crisis that is brewing but is barely being noticed. Look at this week’s finding that one in four families now have less than £95 in savings. That’s staggering, not simply because it gives an insight into how large swaths of families in Britain are clinging on financially in a climate of low wages, cut benefits and high rents, but also because it offers us a warning of how little it will take to push them over the edge. There are now 19 million people in this country living below the minimum income standard (an income required for what the wider public view as “socially acceptable” living standards), according to figures released by the Joseph Rowntree Foundation (JRF) this month.

Around 8 million of them could be classed as Theresa May’s “just about managing” families: those who can, say, afford to put food on the table and clothe their children but are plagued by financial insecurity. The other 11 million live far below the minimum income standard and are, the JRF warns, “at high risk of falling into severe poverty”. We are entering a period not simply of growing hardship in this country but of what I would call precarious poverty: the sort that isn’t characterised by the traditional image of lifelong, deep-seated deprivation, but which can hit in a matter of days: a broken washing machine, a late child tax credit payment, an injury that leads to time off work. In an economic climate that is normalising low-income families having to live hand to mouth, increasingly, for a whole economic class, one small unexpected cost can trigger a spiral into debt.

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And now they’re stuck. This is where it gets risky.

Oz Reserve Bank Interest Rate Moves Limited By High Debt, House Prices (AbcAu)

Fears of inflating housing bubbles in Sydney and Melbourne are stopping the Reserve Bank from cutting interest rates to boost the economy, the central bank governor conceded today. The stark admission by Reserve Bank governor Phillip Lowe about the RBA’s dilemma comes as soaring house prices in the eastern states have Australians carrying “more debt than they ever have before”. Dr Lowe delivered the reality check at the Australia Canada Economic Leadership Forum, where he said low interest rates made it attractive for borrowers in both countries to invest in real estate, making further rate cuts an undesirable option. “We are trying to balance multiple objectives at the moment,” he said in response to questions after the speech.

“We’d like the economy to grow a bit more quickly and we’d like the unemployment rate to come down a bit more quickly than is currently forecast. “But if we were to try and achieve that through monetary policy it would encourage people to borrow more money and it probably would put more upward pressure on housing prices and, at the moment, I don’t think either of those two things are really in the national interest.” For the moment, it looks like the Reserve Bank feels content — or locked in — to leaving official interest rates on hold at a record low 1.5%. However, Dr Lowe expressed optimism that this level of rates was low enough to spark business investment and stronger economic growth, and therefore there would be no need to lower rates further.

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That’s a lot of (not) oil.

Exxon Wiped A Whopping 19.3% Of Its Oil Reserves Off Its Books In 2016 (Q.)

ExxonMobil has taken a big hit to one of the pillars underlying its decades of braggadocio: its oil reserves. In an announcement today, Exxon said it had written down its proven oil reserves by a massive 19.3%, a stinging reduction to what is a primary measure of any oil company’s value. As of the end of 2016, Exxon had 20 billion barrels in proven reserves, compared with 24.8 billion a year earlier. This includes the erasure of all 3.5 billion barrels of Exxon’s proven oil sands reserves at Canada’s Kearl field. Last year’s low oil prices made it uneconomical to drill at Kearl, which had been at the core of Exxon’s growth strategy. In addition, for the second straight year, Exxon failed to replace all the reserves it pumped—in 2016, it replaced just 65% of its produced reserves. In 2015, it replaced just 67%.

Prior to these years, Exxon had replaced at least 100% of its production every year since 1993. As bad as that was, it was expected: Exxon had signaled that it would write down reserves in 2016, and analysts had expected the company not to replace what it pumped. What wasn’t anticipated was the impact on Exxon’s vaunted longer-term performance. Almost every year, when Exxon announces its earnings, dividend payouts, reserve replacement results—and nearly any other important annual result—it throws in its 10-year record in the respective category to demonstrate its steady, reliable hand on the tiller. This time, bringing up the 10-year record backfired: The replacement failures of the last two years and the 2016 writedown punched a hole in Exxon’s vaunted 10-year reserves replacement average—it plunged to 82% in 2016, from 115% a year earlier.

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Simmering conflict.

Turkish Provocations Test Greek Resolve (K.)

The recent spike in Turkish provocations in the Aegean and incendiary comments emanating from Ankara are aimed at testing Greece’s resolve, according to Greek analysts. In what was seen as its latest transgression, Turkey dispatched its Cesme research vessel to conduct surveys on Wednesday in international waters between the islands of Thasos, Samothrace and Limnos, but within the area of responsibility of the Hellenic Search and Rescue Coordination Center. The night before, Turkish coast guard vessels conducted patrols in the region around the Imia islets. At the same time, the Cyprus talks are being undermined over what Greeks believe is a minor detail – the decision by the Cyprus Parliament for schools to commemorate a 1950 referendum calling for union with Greece.

Greeks say it is an attempt to shift attention from the fundamental issues of the peace talks, namely post-settlement security and guarantees. In response, Athens has pursued the principle of proportionality by countering the presence of Turkish military and coast guard vessels with an equivalent number of Greek ones, while embarking on a diplomatic campaign at international organizations and in major capitals. Analysts also attribute the spike in tension to the Supreme Court’s refusal to extradite the Turkish servicemen that Ankara says were involved in the July coup attempt. But they also note that it serves as a convenient pretext for Turkey to up the nationalistic rhetoric ahead of the April 16 referendum called by President Recep Tayyip Erdogan in a bid to expand his powers.

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Think maybe rich Europe has slipped Tsipras a few bucks?

Greece Okays Asylum Requests Of 10,000 Refugees (K.)

At least 10,000 refugees, including around 2,000 minors, are expected to remain in Greece over the coming three years as their asylum applications have been approved. The approved asylum claims account for about a sixth of more than 60,000 migrants who are currently stranded in Greece following the decision last year by a series of Balkan states to close their borders amid a massive influx of refugees from Syria and other war-torn states. The arrival of migrants in Greece has slowed significantly following an agreement between the European Union and Turkey in March last year to crack down on human smuggling across the Aegean.

However, boatloads of migrants continue to arrive on Greek shores from neighboring Turkey. On Wednesday, another 145 migrants arrived on the eastern Aegean island of Chios alone. Authorities attribute the sudden spike in arrivals to the unseasonably good weather. According to the Greek Asylum Service, a total of 1,912 migrants lodged asylum applications in January of this year. Last year, when hundreds of thousands of migrants flooded through Greece toward other parts of Europe, a total of 51,091 people applied for asylum in Greece, compared to 13,195 in 2015, 9,432 in 2014 and 4,814 in 2013.

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Jun 182016
 
 June 18, 2016  Posted by at 8:41 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle June 18 2016


Harris&Ewing F Street N.W., Washington, DC 1918

Stocks Slump Most In 4 Months As Global Financial Stress Nears 5-Year Highs (ZH)
The Fed And Other Central Banks Have Lost Their Magic Powers (Das)
ECB Closes Ranks With Bank Of England To Avert Brexit Crunch (AEP)
Canada’s Housing ‘Affordability Crisis’ Fueled By Overseas Money: Trudeau (G.)
Rio State Declares ‘Public Calamity’ Over Finances Weeks Before Olympics (BBC)
Japan: A Future of Stagnation (CH Smith)
EU Is Too Big and ‘Sinking’, UK Should Leave (CNBC)
Money and Banking, Keen and Krugman (Legge)
All You Need To Know About Blockchain, Explained Simply (WEF)
Digital Currency Ethereum Is Cratering Because Of A $50 Million Hack (BI)
German Minister Criticises ‘Warmongering’ NATO (BBC)
Greece Sidelines Officials Who Blocked Expulsion Of Refugees To Turkey (G.)
MSF Rejects EU Funds Over ‘Shameful’ Migrant Policy (AFP)

Oh what fun it is to play….

Stocks Slump Most In 4 Months As Global Financial Stress Nears 5-Year Highs (ZH)

Global Financial Stress Index spikes up most since Aug 2011…

 

As Brexit polls surge towards "Leave"…

 

As USDollar Scarcity (panic demand) rears its ugly head again…

 

And GDP-weighted European Sovereign risk surged to 2 year highs…

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They were always only illusionary.

The Fed And Other Central Banks Have Lost Their Magic Powers (Das)

During the financial crisis of 2008-09, politicians facing difficult and electorally unpopular decisions cleverly passed the responsibility for the economy to central bankers. These policymakers accepted the task to nurse the global economy to health. But there are increasing doubts about central banks’ powers and their ability to deliver a recovery. Policymakers have engineered an artificial stability. Budget deficits, low-, zero-, and now negative interest rates , and quantitative easing (QE) have not restored global growth or increased inflation to levels necessary to bring high-debt under control. Instead, low rates and the suppression of volatility have encouraged asset-price booms in many world markets.

Since prices of assets act as collateral for loans, central banks are being forced to support these inflated values because of the potential threat to financial institutions holding the debt. As the tried and tested policies lose efficacy, new unconventional initiatives have been viewed by markets with increasing suspicion and caution. Key to this debate is negative interest rate policy (NIRP), now in place in Europe and Japan, and most recently affecting German bonds. Markets do not believe that NIRP will create the borrowing-driven consumption and investment that generates economic activity. Existing high-debt levels, poor employment prospects, low rates of wage growth, and overcapacity have lowered potential growth rates, sometimes substantially.

NIRP is unlikely to create inflation for the same reasons, despite the stubborn belief among economic clergy that increasing money supply can and will ultimately always create large changes in price levels. There are toxic by-products to this policy. Low- and negative rates threaten the ability of insurance companies and pension funds to meet contracted retirement payments. Bank profitability also has been adversely affected. Potential erosion of deposits may reduce banks’ ability to lend and also reduce the stability of funding.

The capacity of NIRP to devalue currencies to secure export competitiveness is also questionable. The euro, yen and Swiss franc have not weakened significantly so far, despite additional monetary accommodation. One reason is that these countries have large current account surpluses: the eurozone (3.0% of GDP), Japan (2.9% of GDP), and Switzerland (12.5% of GDP). The increasing ineffectiveness of NIRP in managing currency values reflects the fact that the underlying problem of global imbalances remains unresolved.

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Crumbling.

ECB Closes Ranks With Bank Of England To Avert Brexit Crunch (AEP)

The European Central Bank has pledged to flood the financial system with euro liquidity if credit markets seize up after a Brexit vote. The move came as European bank stocks plummeted across the board for another day, the epicentre of stress as nerves fray over the potential fall-out from British referendum. The Euro Stoxx index of bank equities fell to a four-year low, and is nearing levels last seen in during the eurozone debt crisis in 2012. Europe’s banks have lost half their value in the last year. “We have taken the necessary precautionary measures to meet liquidity needs,” said Ewald Nowotny, Austria’s central bank governor and an ECB board member. “We have assured that there will be no liquidity bottlenecks, either among English banks or European banks, if it becomes necessary,” he said.

The soothing words put to rest any fear that the ECB might withhold full cooperation from the Bank of England in the poisonous political mood after a withdrawal vote. A spat might have sparked fears of a funding crunch for international banks in the City of London with short term debts in foreign currencies. The Bank of England cannot print euros or dollars. The world’s central banks tend to work closely together as an Olympian fraternity, knowing that their fates are bound together regardless of the political fighting around them. The US Federal Reserve and the central banks of Japan, Switzerland, Sweden, and Canada are all working as tightknit team with the Bank of England and the ECB, determined to avoid being caught off guard as they were when the payments system went into meltdown after the Lehman crisis.

[..] German banks are in surprisingly deep trouble, struggling with the corrosive effects of negative interest rates on their profit margins. But Italian lenders worry regulators most as tougher capital adequacy rules come into force, and the eurozone’s new ‘bail-in’ policy for creditors turns the sector into a lepers’ colony. The non-performing loans of Italian banks have reached 18pc of their balance sheets, the legacy of Italy’s economic Lost Decade. This is coming into focus as premier Matteo Renzi bleeds support and risks losing a make-or-break referendum in October.

Euro Intelligence reports that he faces an “insurrection” after ex-premier Massimo D’Alema – supposedly a Renzi ally – said he has switched his support to the radical Five Star movement of comedian Beppe Grillo. It is no longer implausible to imagine a Five Star government in charge of Italy within months, setting off a political earthquake. The picture is equally dramatic in Spain where the ultra-Left Podemos coalition has pulled well ahead of the establishment Socialist Party (PSOE) in the polls and has an outside chance of winning the elections on June 26, opening the way for an anti-austerity government in Madrid. The possibility of a ‘Syriza-style’ rebellion in Spain is viewed with horror in Brussels.

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No shit, Justin.

Canada’s Housing ‘Affordability Crisis’ Fueled By Overseas Money: Trudeau (G.)

An influx of capital from Asia is partly responsible for soaring housing prices in Vancouver and Toronto, Justin Trudeau has said, as a new study showed more than 90% of all detached homes in Vancouver are now worth more than C$1m($772,141). “We know that there is an awful lot of capital that left Asia in the past few years,” Canada’s prime minister told public broadcaster CBC on Friday. “Obviously overseas money coming in is playing a role” in Canada’s housing affordability crisis, he said. Trudeau provided no supporting data Friday to back up his remarks, although his government set aside funds to study the widespread perception that overseas investors and speculators are to blame for Canada’s housing bubble.

Concern over the overheated property market has focused on Vancouver, where the proportion of million-dollar homes in the city has climbed this year to 91%. The figure marks a leap from two years ago, when around 59% of houses were worth a million or more, according to the study by Andy Yan, acting director of Simon Fraser University’s City Program. “This shows how what used to be the earnest product of a lifetime of local work is perhaps quickly becoming a leveraged and luxurious global commodity,” Yan said. The median household income in Vancouver, meanwhile, rose just 8.6% between 2009 to 2013, according to the most recent data from Statistics Canada. Adjusted for inflation, it would be about C$77,000 a year in 2016.

That puts typical incomes well below the threshold needed to purchase million-dollar homes, said Yan, noting other factors must be driving the sharp increase in home values in Vancouver. “It’s global cash, meeting cheap money, meeting limited supply,” he said, adding that all three factors are working to “magnify each other” and drive further speculation.

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To quote myself: “You sure about those Olympics?”

Rio State Declares ‘Public Calamity’ Over Finances Weeks Before Olympics (BBC)

The Brazilian state of Rio de Janeiro has declared a financial emergency less than 50 days before the Olympics. Interim Governor Francisco Dornelles says the “serious economic crisis” threatens to stop the state from honouring commitments for the Games. Most public funding for the Olympics has come from Rio’s city government, but the state is responsible for areas such as transport and policing. Interim President Michel Temer has promised significant financial help. The governor has blamed the crisis on a tax shortfall, especially from the oil industry, while Brazil overall has faced a deep recession.

The measure could accelerate the release of federal emergency funds. Rio state employees and pensioners are owed wages in arrears. Hospitals and police stations have been severely affected. In a decree, Mr Dornelles said the state faced “public calamity” that could lead to a “total collapse” in public services, such as security, health and education. He authorised “exceptional measures” to be taken ahead of the Games that could impact “all essential public services”, but no details were given.

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Make that the entire western world.

Japan: A Future of Stagnation (CH Smith)

One of our longtime friends in Japan just sold the family business. The writing was on the wall, and had been for the past decade: fewer customers, with less money, and no end of competition for the shrinking pool of customers and spending. Our friend is planning to move to another more vibrant economy in Asia. She didn’t want to spend the rest of her life struggling to keep the business afloat. She wanted to have a family and a business with a future. It was the right decision, not only for her but for her family: get out while there’s still some value in the business to sell. [..] The Keynesian Fantasy is that encouraging people to borrow money to replace what they no longer earn is a policy designed to fail, and fail it has.

Borrowing money incurs interest payments, which even at low rates of interest eventually crimps disposable earnings. Banks must loan this money at a profit, so interest rates paid by borrowers can’t fall to zero. If they do, banks can’t earn enough to pay their operating costs, and they will close their doors. If banks reach for higher income, that requires loaning money to poor credit risks and placing risky bets in financial markets. Once you load them up with enough debt, even businesses and wage earners who were initially good credit risks become poor credit risks. Uncreditworthy borrowers default, costing the banks not just whatever was earned on the risky loans but the banks’ capital.

The banking system is designed to fail, and fail it does. Japan has played the pretend-and-extend game for decades by extending defaulting borrowers enough new debt to make minimal interest payments, so the non-performing loan can be listed in the “performing” category. Central banks play the game by lowering interest rates so debtors can borrow more. This works like monetary cocaine for a while, boosting spending and giving the economy a false glow of health, but then the interest payments start sapping earnings, and once the borrowed money has been spent/squandered, what’s left is the interest payments stretching into the future.

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“These opportunities come along once in a generation where people actually get to vote on what they want.”

EU Is Too Big and ‘Sinking’, UK Should Leave (CNBC)

The European Union is too big and is “sinking,” and the United Kingdom should take the chance to get out while it can, economist David Malpass said Friday. British citizens vote next Thursday on whether the U.K. should exit the union. “The EU is just too big. It’s too expensive. It doesn’t work,” the president of Encima Global said in an interview with CNBC’s “Power Lunch.” “They haven’t even made progress on their mission, which was fiscal responsibility, banking reforms, defending the external borders. They’re just not doing the job.” He believes the Brits should not squander the opportunity, noting that the last referendum the country held was in 1975. “These opportunities come along once in a generation where people actually get to vote on what they want.”

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More on an old feud.

Money and Banking, Keen and Krugman (Legge)

Keen carved out a major distinction between his approach and that of Krugman, but also of that of many of the economists who agree that money is not neutral. He argues that an increase in bank lending affects the macro economy by increasing demand. It follows that measured growth should be decomposed into workforce growth, productivity growth, and debt growth. Keen’s third term is deeply disturbing, because he goes on to argue that that a major part of the observed economic growth since 1980 has been driven by rising household debt levels.

Since all household debt involves interest, there must be a point at which households have all the debt that they can carry, and don’t take on any more. At this point, argues Keen, the affected economy will become a “debt zombie”, stuck in a low or even negative growth trajectory. Keen proposes a “debt jubilee” to write off excessive household debt and allow growth to resume. On its own, this would only postpose the debt/stagnation crisis; but perhaps after one debt jubilee they could become regular events.

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101. But nothing on security threats. Hmm.

All You Need To Know About Blockchain, Explained Simply (WEF)

Many people know it as the technology behind Bitcoin, but blockchain’s potential uses extend far beyond digital currencies. Its admirers include Bill Gates and Richard Branson, and banks and insurers are falling over one another to be the first to work out how to use it. So what exactly is blockchain, and why are Wall Street and Silicon Valley so excited about it? Currently, most people use a trusted middleman such as a bank to make a transaction. But blockchain allows consumers and suppliers to connect directly, removing the need for a third party. Using cryptography to keep exchanges secure, blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.

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What’s that about the chain and its weakest link?

Digital Currency Ethereum Is Cratering Because Of A $50 Million Hack (BI)

The value of the digital currency Ethereum has dropped dramatically amid an apparent huge attack targeting an organisation with huge holdings of the currency. The price per unit dropped to $15 from record highs of $21.50 in hours, with millions of units of the digital currency worth as much as $50 million stolen at post-theft valuations. At a pre-theft valuation, it works out as a staggering $79.6 million. Ethereum developers have proposed a fix that they hope will neutralise the attacker and prevent the stolen funds from being spent. The core Ethereum codebase does not appear to be compromised. Ethereum is a decentralised currency like bitcoin, but it is built in such a way that it also allows for decentralised organisations to be built on top of its blockchain (the public ledger of transactions) and for smart contracts that can execute themselves automatically if certain conditions are met.

One of these organisations is the DAO, the Decentralised Autonomous Organisation, which controls tens of millions of dollars’ worth of the digital currency. ( The bitcoin news site CoinDesk has a good feature explaining more about how the DAO operates.) The DAO is sitting on 7.9 million units, known as ether, of the currency worth $132.7 million. Early Friday morning, it appears to have been hit with a devastating attack, with unidentified attackers appearing to exploit a software vulnerability and draining drain millions of ether – with a theoretical value in the tens of millions of dollars. One ether wallet identified by community members as a recipient of the apparently stolen funds holds more than 3.5 million ether. At an exchange rate of about $14 a unit, that works out at $47 million. At $21.50, the value of ether before the hack, it’s significantly more – $79.6 million.

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Germany wants to be able to talk to Russia.

German Minister Criticises ‘Warmongering’ NATO (BBC)

German Foreign Minister Frank-Walter Steinmeier has criticised Nato military exercises in Eastern Europe, accusing the organisation of “warmongering”. Mr Steinmeier said that extensive Nato manoeuvres launched this month were counterproductive to regional security and could enflame tensions with Russia. He urged the Nato military alliance to replace the exercises with more dialogue and co-operation with Russia. Nato launched a simulated Russian attack on Poland on 7 June. The two-week-long drill involves about 31,000 troops, including 14,000 from the US, 12,000 from Poland and 1,000 from the UK. It will also feature dozens of fighter jets and ships, along with 3,000 vehicles.

“What we shouldn’t do now is inflame the situation further through sabre-rattling and warmongering,” Mr Steinmeier said in an interview to be published in Germany’s Bild am Sontag newspaper. “Whoever believes that a symbolic tank parade on the alliance’s eastern border will bring security, is mistaken. “We are well-advised to not create pretexts to renew an old confrontation,” he said. The exercises are intended to test Nato’s ability to respond to threats, and take place every two years. But Russia has repeatedly said that Nato troops close to its borders are a threat to its security.

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This is serious. No sovereignty, no independent legal system, and hardly a constitution left. The political system trumps all. This is the EU. And Tsipras should never sign off on it, of course. Bus boy.

Greece Sidelines Officials Who Blocked Expulsion Of Refugees To Turkey (G.)

The Greek government has sidelined members of an independent authority that had blocked the deportation of Syrian refugees, following sustained pressure from other European countries. Greek MPs voted on Thursday to change the composition of the country’s asylum appeals board, in an attempt to sideline officials who had objected on legal grounds to the expulsion of Syrians listed for deportation to Turkey. The appeals board had jeopardised the EU-Turkey migration deal, the agreement enacted in March that is meant to see all asylum seekers landing on the Greek islands detained in Greece – and then deported. While Greek police had enacted the first part of the plan,

Greek appeals committees have largely held up the planned deportations – potentially giving Syrians greater incentive to reach Greece. The appeals committees argued that Turkey does not uphold refugee law, and is therefore not a safe country for refugees. Currently the three-person appeals committees consist of one government-appointed official, and two appointed independently by the UN refugee agency and Greece’s national committee for human rights. After pressure from European politicians who feared a new surge in arrivals to Greece, Greek MPs have voted to create new committees formed of two administrative judges and one person appointed by the UN, meaning that state officials will now outnumber independent ones on the committees.

An independent appeals committee member interviewed by the Guardian in the run-up to the law change said it was a political move designed to bend an independent judicial process to the will of the executive. Speaking on condition of anonymity, the official said the change was “a serious blow to the independence of the committee. We think like legal scientists. We have a specific view that is based on legal analysis. If we lose our [places on the committee] then the cases will be handled the way that politicians want.”

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This mirrors the long held view of our friend Kostas, who we actively support with TAE funds here in Athens: “We cannot accept funding from the EU or the Member States while at the same time treating the victims of their policies..

MSF Rejects EU Funds Over ‘Shameful’ Migrant Policy (AFP)

Aid group Doctors Without Borders said on Friday that it would no longer take funds from the EU in protest at its “shameful” policies on the migration crisis including a deal with Turkey. The charity, more widely known by its French acronym MSF, received €56 million from EU institutions and the 28 member states last year.”MSF announces today that we will no longer take funds from the EU and its Member States in protest at their shameful deterrence policies and their intensification of efforts to push people and their suffering back from European shores,” the group said in a statement. The group singled out for criticism the EU’s deal with Turkey in March to stem the biggest flow of migrants into the continent since World War II.

“For months MSF has spoken out about a shameful European response focused on deterrence rather than providing people with the assistance and protection they need,” Jerome Oberreit, international secretary general of MSF, told a press conference. “The EU-Turkey deal goes one step further and has placed the very concept of ‘refugee’ and the protection it offers in danger.” [..] Oberreit also criticised a proposal last week to make similar deals with African and Middle Eastern countries. He added: “We cannot accept funding from the EU or the Member States while at the same time treating the victims of their polices. It’s that simple.” MSF said it received €19 million from EU institutions and €37 million from member states in 2015, amounting to 8% of its funding. It added that its activities are 90% privately funded.

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Jun 162016
 
 June 16, 2016  Posted by at 8:10 am Finance Tagged with: , , , , , , ,  


Arthur Rothstein Bank that failed. Kansas 1936

Brexit Is The Only Way The Working Class Can Change Anything (G.)
It’s Time To Call Time On The EU Experiment (Steve Keen)
Osborne’s ‘Punishment Budget’ Is Economic Vandalism (AEP)
JPMorgan CIO: Brexit “Hardly The Stuff Of Economic Calamity” (ZH)
Brexit: Which Banks Will Be Hit Hardest (WSJ)
Yellen Says Forces Holding Down Rates May Be Long Lasting, New Normal (BBG)
Yellen Says Brexit Vote Influenced Fed (BBG)
Bank of Japan Stands Pat Ahead of Brexit Vote (WSJ)
Is The World Turning Its Back On Free Trade? (BBC)
Switzerland Withdraws Longstanding Application To Join EU (RT)
Highrise Harry Whispers The Terrible Truth (MB)
EU Pushes Greece To Set Up New Asylum Committees (EUO)
Could We Set Aside Half The Earth For Nature? (G.)

The essence behind the Leave surge. People dislike Cameron so much they’ll vote for anything he doesn’t want.

Brexit Is The Only Way The Working Class Can Change Anything (G.)

In working-class communities, the EU referendum has become a referendum on almost everything. In the cafes, pubs, and nail bars in east London where I live and where I have been researching London working-class life for three years the talk is seldom about anything else (although football has made a recent appearance). In east London it is about housing, schools and low wages. The women worry for their children and their elderly parents – what happens to them if the rent goes up again? The lack of affordable housing is terrifying. In the mining towns of Nottinghamshire where I am from, the debate again is about Brexit, and even former striking miners are voting leave.

The mining communities are also worried about the lack of secure and paid employment, the loss of the pubs and the grinding poverty that has returned to the north. The talk about immigration is not as prevalent or as high on the list of fears as sections of the media would have us believe. The issues around immigration are always part of the debate, but rarely exclusively. From my research I would argue that the referendum debate within working-class communities is not about immigration, despite the rhetoric. It is about precarity and fear. As a group of east London women told me: “I’m sick of being called a racist because I worry about my own mum and my own child,” and “I don’t begrudge anyone a roof who needs it but we can’t manage either.”

Over the past 30 years there has been a sustained attack on working-class people, their identities, their work and their culture by Westminster politics and the media bubble around it. Consequently they have stopped listening to politicians and to Westminster and they are doing what every politician fears: they are using their own experiences in judging what is working for and against them.

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Think I made it very and abundantly clear in the past that I fully agree with this. Tad surpised to see it come from Steve, given his link to Varoufakis.

It’s Time To Call Time On The EU Experiment (Steve Keen)

The arguments for and against Brexit have focused on the economic costs and benefits for the UK in leaving or remaining within the EU. Though I am an economist, I am taking a more political perspective to this vote by focusing on the utterly undemocratic nature of the key institutions of the EU. The European Parliament is a weak, diversionary figurehead, while the real power resides within the unelected bureaucracy of the EU and the key political appointees of the Europe’s governments—and particularly its Finance Ministers. These effective cabals run roughshod over political democracies when they elect leaders that oppose core EU economic policies, while at the same time these policies are leading to the ruin of southern Europe, and the stagnation of France and Italy.

The EU has been a failed enterprise ever since 1992, when the Maastricht Treaty was approved. As the prescient non-mainstream English economist Wynne Godley realised at the time, the fetish in this Treaty for government surpluses would lead to the collapse of Europe. Godley wrote that “If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation” (Godley, Maastricht and all that, London Review of Books, 1992). Godley’s words, which surely seemed rash and insanely pessimistic at the time, have proven true with time. I therefore think that it’s time to call time on the EU experiment. I’ll be voting for Brexit for this reason.

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A bit surprisingly, Ambrose has turned hard against Brussels and Remain.

Osborne’s ‘Punishment Budget’ Is Economic Vandalism (AEP)

George Osborne is disqualified from serving as Chancellor of the Exchequer for a single week longer. Whatever his past contributions, his threat to push through draconian fiscal tightening in an emergency Brexit budget is economic madness, if not criminal incompetence. Such action would leverage and compound the financial shock of Brexit, and would risk pushing the country into a depression. It violates the known tenets of macro-economics, whether you are Keynesian or not. Alistair Darling, the former Labour Chancellor, has connived in this Gothic drama. He professes to be “much more worried now” than he was even during the white heat of the Lehman crisis and the collapse of the Western banking system in 2008. So he should be. The emergency Budget that he endorses might well bring about disaster.

The policy response is the mirror image of what he himself did – wisely – during his own brief tenure through the Great Recession. We all understand why George Osborne is toying with such pro-cyclical vandalism – or pretending to – for he is acting purely as as partisan for the Remain campaign. He has fatally mixed his roles. No head of the Treasury can behave in this fashion. The emergency Budget would aim to cover a £30bn ‘black hole’ with a mix of tax rises and spending cuts. These “illustration” measures include 2p on income tax and a 5 percentage point rise on inheritance tax, and petrol and alcohol duties. Transport, the police, and local government would be axed by 5pc. There would be cuts in pensions and defence. Spending on the NHS would be “slashed’.

This is a fiscal contraction of 1.7pc of GDP. It would hammer the economy just as it was reeling from the immediate trauma of a Brexit vote and the probable contagion effects across eurozone periphery, already visible in widening bond spreads. It would come amid political chaos, before it was clear what the UK negotiating strategy is, or what the EU might do. It would be the worst possible moment to tighten. The Treasury has already warned that the short-term shock of Brexit would slash output by 3.6pc, or 6pc with 820,000 job losses in its ‘severe’ scenario. The Chancellor now states he will reinforce this with austerity a l’outrance. It is a formula for a self-feeding downward spiral, all too like the scorched-earth policies imposed on southern Europe during the debt crisis.

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“.. the history of the last two centuries can be summed up in two words: democracy matters.”

JPMorgan CIO: Brexit “Hardly The Stuff Of Economic Calamity” (ZH)

First The Telegraph, then The Sun, and today The Spectator all came out on the “Leave” side of the Brexit debate. However, perhaps even more shocking to the establishment is the CIO of a major bank’s asset management arm dismissing the apparent carnage that Cameron, Obama, and Osborne have declared imminent, warning that, “many articles on the Brexit vote overstate its risks and consequences.” As JPM’s Michael Cembalest adds, the reality is “hardly the stuff that economic calamity is made of.” As The Spectator concludes, “the history of the last two centuries can be summed up in two words: democracy matters.” As JPMorgan Asset Management CIO Michael Cembalest explains…

“My sense is that many articles on the Brexit vote overstate its risks and consequences for the UK, and/or overstate the vote’s impact on political movements and economic malaise in the Eurozone that predate it by months and years. Here are some thoughts on issues I have seen raised over the last few weeks. “UK growth will suffer a huge hit”. Of all the analyses I’ve read about a possible Brexit scenario, I found Open Europe’s report to be the most clear-headed and balanced. Their realistic case estimates the cumulative impact of Brexit on UK GDP at just -0.8% to 0.6% by the year 2030; hardly the stuff that economic calamity is made of.

“UK-EU trade will collapse”. Not necessarily. Norway, Iceland and Switzerland have entered into agreements with the EU on trade and labor mobility (European Economic Area, European Free Trade Area). As shown below, these three non-EU countries export as much to the EU as its members do. Such agreements could serve as a template for post-Brexit trade between Britain and the EU, if both sides see it in their mutual self-interest.”

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The City could take a big hit.

Brexit: Which Banks Will Be Hit Hardest (WSJ)

Barclays and HSBC are the banks with the most business in Europe. Barclays got just under 9% of its profits from continental European businesses in 2015. At HSBC, roughly 5.5% of last year’s profits came from continental Europe, where it has a large French retail business. Local businesses could become much more difficult to run from the U.K. if a Brexit vote provokes a big change in the trade arrangements with the rest of Europe. Meanwhile, their large London-based investment banks—and those of other European and U.S. groups—would also face losing direct access to Europe without a new trade deal that preserved Britain’s “passport” for services. In this case, Deutsche Bank, BNP Paribas and Société Générale, for example, would suffer some of the same disruption and relocation costs as Barclays or HSBC.

The other vulnerable group would be U.K. mortgage lenders, such as Lloyds Banking Group, Virgin Money and OneSavings. If international investors react badly to Brexit, pulling capital out of the country, the pound will fall further and the Bank of England may feel compelled to lift interest rates to attract investors back into U.K. government bonds. Some believe benchmark interest rates might only have to go to, say, 2%, to make U.K. assets attractive, but that could upend the housing market, where prices have risen dramatically in the past couple of years, helped by substantial lending to small-time landlords. Ultra-low interest rates have kept debt-service costs minuscule, a situation that could be upended quickly.

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Sounds like she’s giving up.

Yellen Says Forces Holding Down Rates May Be Long Lasting, New Normal (BBG)

Federal Reserve Chair Janet Yellen seems to be coming around to what her one-time rival, Lawrence Summers, has been arguing for a while: Some of the forces holding down interest rates may be long-lasting and secular. That’s reflected in a marked downgrade in rate projections released by policy makers after their meeting on Wednesday. Six of 17 now only see one rise this year, after the central bank lifted rates effectively from zero in December. Officials also slowed the pace of expected moves in both 2017 and 2018: They now only foresee three increases in each of those years, down from the four they expected in March, according to their latest median forecast.

Yellen in the past has ascribed the low level of rates mainly to lingering headwinds from the financial crisis – tight mortgage credit, for instance – and suggested that they would dissipate over time. On Wednesday, though, she also pointed to more permanent forces that could depress rates for longer, namely, slow productivity growth and aging societies, in the U.S. and throughout much of the world. In a press conference after the Fed held policy steady, Yellen spoke of a sense that rates may be depressed by ”factors that are not going to be rapidly disappearing, but will be part of the new normal.”

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She means the Leave vote did. When it looked like Remain would win easily, things were different.

Yellen Says Brexit Vote Influenced Fed (BBG)

Federal Reserve chair Janet Yellen said next week’s referendum in the UK on whether to remain in the EU was a factor in the US central bank’s decision to hold interest rates steady at its meeting Wednesday in Washington. “It is a decision that could have consequences for economic and financial conditions in global financial markets,” Yellen said during a press conference following the meeting. A vote on June 23 by Britons to leave the EU “could have consequences in turn for the US economic outlook,” she said. Fewer Federal Reserve officials now expect the central bank to raise interest rates more than once this year, as policy makers gave a mixed picture of a US economy where growth is picking up and job gains are slowing.

While the median forecast of 17 policy makers remained at two quarter-point hikes this year, the number of officials who see just one move rose to six from one in the previous forecasting round in March, according to projections released by the Federal Open Market Committee on Wednesday following a two-day meeting in Washington. “The central bank reiterated that interest rates are likely to rise at a “gradual” pace, without referring in the statement to the next meeting in July or any other specific timing for another increase.

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“The BOJ might also have found itself short of ammunition to respond to that turbulence.”

Bank of Japan Stands Pat Ahead of Brexit Vote (WSJ)

The Bank of Japan stood pat Thursday despite a surging yen and faltering inflation, opting to wait until after the results of a British referendum next week that could roil global markets. The central bank’s decision comes amid growing skepticism about the effectiveness of Prime Minister Shinzo Abe’s economic program in ending Japan’s long cycle of lackluster growth and sporadic deflation. Abenomics, which has leaned most heavily on the central bank, hasn’t produced sustained, robust growth since it was launched more than three years ago. Japan’s economy has swung between modest expansions and contractions in recent quarters, while the BOJ’s hard-won gains in the battle against falling prices are starting to slip away.

Economists have expected the BOJ to take additional action in recent months, particularly given that BOJ Gov. Haruhiko Kuroda has repeatedly vowed to take action “without hesitation” if the central bank’s 2% inflation target is in danger. The central bank also stood pat in April, when expectations for action were high. Some BOJ policy board members, though, signaled ahead of this week’s meeting that they preferred to wait until after the U.K. votes next week on whether to leave the European Union, according to people familiar with the central bank’s thinking. They were concerned that even if the BOJ acted this week, the market impact of its move would fade if a “Brexit” vote rocked global financial markets, according to people close to the bank. The BOJ might also have found itself short of ammunition to respond to that turbulence.

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Free trade, like all forms of centralization, depends on a growing economy. There is no such thing anymore.

Is The World Turning Its Back On Free Trade? (BBC)

Which politician has captured the curve, summed up a growing mood, in a ferocious speech? “Your iron industry is dead, dead as mutton. Your coal industries, which depend greatly on the iron industries, are languishing. Your silk industry is dead, assassinated by the foreigner. Your woollen industry is in articulo mortis, gasping, struggling. Your cotton industry is seriously sick. Your shipbuilding industry, which held out longest, is come to a standstill.” The Latin, the silk and the mutton are a dead giveaway. Not Trump, but Lord Randolph Churchill in 1884 denouncing Free Trade. The system he preferred – “Fair Trade” – is coming back into fashion.

We have heard a lot about the revolt against the political elites, the backlash by those “left behind” by globalization; a lot about the movements and political personalities this has brought to the fore; a lot about the implications for immigration. But not so much about the economics of it all. It many signal a new rejection of one of the global elite’s most cherished policies – free trade. This is the notion that the fewer economic barriers around the world, and the less countries protect their own goods and trade with special policies, the richer we all end up. The opposite is protectionism – making foreign goods more expensive by putting taxes on their import , tariffs, in order to make home-grown products cheaper by comparison. While few embrace the word protectionism, growing numbers of politicians are openly embracing the principle behind it.

Donald Trump has said he would put a swingeing 45% tax on goods from China and 35% on many from Mexico. Many economists mock this as crazy stuff, but it is a sentiment that goes down well with many Americans. [..] Bernie Sanders has made it very clear he is opposed to NAFTA, the free trade bloc with Mexico and Canada, and the planned Asia Pacific agreement. He has been saying it for a while. This is him in 2011: “Let’s be clear: one of the major reasons that the middle class in America is disappearing, poverty is increasing and the gap between the rich and everyone else is growing wider and wider, is due to our disastrous unfettered free trade policy.”

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“..only “a few lunatics” may want to join the EU now..”

Switzerland Withdraws Longstanding Application To Join EU (RT)

The upper house of the Swiss parliament on Wednesday voted to invalidate its 1992 application to join the European Union, backing an earlier decision by the lower house. The vote comes just a week before Britain decides whether to leave the EU in a referendum Twenty-seven members of the upper house, the Council of States, voted to cancel Switzerland’s longstanding EU application, versus just 13 senators against. Two abstained. In the aftermath of the vote, Switzerland will give formal notice to the EU to consider its application withdrawn, the country’s foreign minister, Didier Burkhalter, was quoted as saying by Neue Zürcher Zeitung. The original motion was introduced by the conservative Swiss People’s Party MP, Lukas Reimann.

It had already received overwhelming support from legislators in the lower house of parliament in March, with 126 National Council deputies voting in favor, and 46 against. Thomas Minder, counsellor for the state of Schaffhausen and an active promoter of the concept of “Swissness,” said he was eager to “close the topic fast and painlessly” as only “a few lunatics” may want to join the EU now, he told the newspaper. Hannes Germann, also representing Schaffhausen, highlighted the symbolic importance of the vote, comparing it to Iceland’s decision to drop its membership bid in 2015. “Iceland had the courage and withdrew the application for membership, so no volcano erupted,” he said, jokingly.

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Australia: “We have nothing else except real estate…”

Highrise Harry Whispers The Terrible Truth (MB)

Highrise Harry’s media foghorns continue his campaign to abolish foreign buyer stamp duties today at the AFR: “Alluding to remarks by Meriton boss Harry Triguboff that he might have to reduce his apartment prices in the wake of the surcharges, Ms Berejiklian said that, given so many people were worried about housing affordability, the NSW government would be “happy to wear that consequence”. Mr Triguboff labelled the new taxes “very dangerous”, coming as they did on top of moves by the banks to tighten up lending to foreign buyers. He also urged caution in light of the decline of the mining sector. “We have nothing else except real estate. We have to be very careful,” Mr Triguboff told the AFR.” True indeed, Highrise. But that’s why policy must shift away from property and towards the repair of everything else.

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Brussels trying to bend Greek sovereign law and legal system.

EU Pushes Greece To Set Up New Asylum Committees (EUO)

The EU wants Greece to quickly set up new appeals committees to better cope with the large number of asylum requests. “New appeals committees under the new law will be set up in the next 10 days, I am confident that procedures will be accelerated soon,” EU migration commissioner Dimitris Avramopoulos [said]. The Greek commissioner said the government in Athens decided on Tuesday to “upgrade and enhance” the appeals committees. “We salute that the Greek government took that initiative,” he said. The aim was “to speed up judicial procedures to assess all the requests and give prompt answers”. The committees are an essential part of an agreement reached in March between Turkey and the EU for sending back migrants.

So far, dealing with appeals regarding asylum requests has been the job of the so-called backlog committees, created in 2010 to deal with the large number of pending asylum cases in Greece. But these committees were not designed to deal with massive influx, as more than 8,000 migrants are still stranded on the Greek islands. EU officials claim it was always the goal of Brussels and Athens to create new committees to take this burden off the backlog committees. A Greek source told EUobserver however that an amendment to the existing law on appeals committees is still being debated in the Greek parliament, and there is no guarantee that the new committees will be set up the next 10 days.

But the issue has become especially important for EU member states after it emerged that the committees had ruled in 55 cases involving Syrians that the claimant could not be returned back to Turkey. In effect ruling that Turkey is not a safe country. Only in two cases did they agree to send those Syrians back to Turkey. According to an EU source, the first decision by the backlog committees that said Turkey is not a safe country created a major upset in Brussels and in other EU capitals, prompting fears that the EU-Turkey deal could unravel. “They are seen as the enemy of the deal,” the source added.

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E.O. Wilson makes a last desperate call.

Could We Set Aside Half The Earth For Nature? (G.)

As of today, the only place in the universe where we are certain life exists is on our little home, the third planet from the sun. But also as of today, species on Earth are winking out at rates likely not seen since the demise of the dinosaurs. If we don’t change our ways, we will witness a mass extinction event that will not only leave our world a far more boring and lonely place, but will undercut the very survival of our species. So, what do we do? E.O. Wilson, one of the world’s most respected biologists, has proposed a radical, wild and challenging idea to our species: set aside half of the planet as nature preserves. “Even in the best scenarios of conventional conservation practice the losses [of biodiversity] should be considered unacceptable by civilised peoples,” Wilson writes in his new book, Half-Earth: Our Planet’s Fight for Life.

One of the world’s most respected biologists, Wilson is known as the father of sociobiology, a specialist in island biogeography, an expert on ant societies and a passionate conservationist. In the book, Wilson argues eloquently for setting aside half of the planet for nature, including both terrestrial and marine ecosystems. He writes that it’s time for the conservation community to set a big goal, instead of aiming for incremental progress. “People understand and prefer goals,” he writes. “They need a victory, not just news that progress is being made. It is human nature to yearn for finality, something achieved by which their anxieties and fears are put to rest…It is further our nature to choose large goals that while difficult are potentially game-changing and universal in benefit. To strive against odds on behalf of all life would be humanity at its most noble.”

The reason why half is the answer, according to Wilson, is located deep in the science of ecology. “The principal cause of extinction is habitat loss. With a decrease of habitat, the sustainable number of species in it drops by (roughly) the fourth root of the habitable area,” Wilson wrote via email, referencing the species-area curve equation that describes how many species are capable of surviving long-term in a particular area. By preserving half of the planet, we would theoretically protect 80% of the world’s species from extinction, according to the species-area curve. If protection efforts, however, focus on the most biodiverse areas (think tropical forests and coral reefs), we could potentially protect more than 80% of species without going beyond the half-Earth goal. In contrast, if we only protect 10% of the Earth, we are set to lose around half of the planet’s species over time. This is the track we are currently on.

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Jun 142016
 
 June 14, 2016  Posted by at 8:00 am Finance Tagged with: , , , , , , , , , ,  


G. G. Bain Metropolitan Opera baritone Giuseppe De Luca, New York 1920

Donald Tusk: Brexit Could Destroy Western Political Civilisation (BBC)
Dutch PM Says He’s ‘Totally Against Referendums’ (EuA)
ECB Says Oil-Price Slump Not the Global Boon It Might Have Been (BBG)
What American Consumers Owe Uncle Sam (BBG)
There’s a Seismic Change Coming to Money Markets (BBG)
Silicon Valley’s Audacious Plan to Create a New Stock Exchange (BBG)
How China Tamed Stocks (WSJ)
Bringing the Troika to Paris (Weisbrot)
Executive Pay Is Obscene (Mason)
More Freeloaders Than Free Market (G.)
Rethinking Robin Hood (Angus Deaton)
Wikileaks To Publish ‘Enough Evidence’ To Indict Hillary – Assange (RT)
First Mammal Species Wiped Out By Human-Induced Climate Change (G.)
Merkel Ready To Give In To ‘Blackmail’ Over Turkish Visas (BB)
Stranded Refugees Line Up For Greek Asylum Cards (Kath.)

On June 24, you will see pigs fly! Tusk wants Cameron to lose, I guess.

Donald Tusk: Brexit Could Destroy Western Political Civilisation (BBC)

European Council president Donald Tusk has warned that a UK vote to leave the EU could threaten “Western political civilisation”. Mr Tusk said a vote to leave the EU would boost anti-European forces. “As a historian I fear Brexit could be the beginning of the destruction of not only the EU but also Western political civilisation in its entirety,” he told the German newspaper Bild. UKIP MP Douglas Carswell said the Remain campaign was “falling apart”. He tweeted: “Why hasn’t Western civilisation come to an end already seeing as how most countries are self governing?” The UK votes on whether to remain in the EU or leave on 23 June. Mr Tusk said everyone in the EU would lose out economically if Britain left.

“Every family knows that a divorce is traumatic for everyone,” he said. “Everyone in the EU, but especially the Brits themselves, would lose out economically.” In the interview he also said Turkey would not become a member of the European Union “in its current state”. Leave campaigners have regularly accused Remain of scaremongering after repeated warnings from high-profile figures against leaving the EU. Employment Minister Priti Patel said: “This is extraordinary language from the EU president, and serves only to reveal his own desperation. “The only thing that is destroying civilisations is the euro, which has ruined economies and led to youth unemployment soaring to nearly 50% in southern Europe.”

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Not sure you could say anything less appropriate as a PM of a democracy. But he’ll keep trying.

Dutch PM Says He’s ‘Totally Against Referendums’ (EuA)

Dutch Prime Minister Mark Rutte today (13 June) admitted a referendum called by eurosceptic groups on whether to back closer ties between Ukraine and the EU had been “disastrous” after voters soundly rejected the pact. “I’m totally against referenda, and I’m totally, totally, totally against referenda on multilateral agreements, because it makes no sense as we have seen with the Dutch referendum,” Rutte told a conference of European MPs. “The referendum led to disastrous results,” he added. His comments were his toughest since the 6 April Dutch referendum, which had been closely watched by eurosceptic groups in Britain, who hailed the results as a blow to EU unity.

Although the Dutch referendum only scraped past the 30% voter turnout to be valid, over 60% of those who cast ballots rejected the EU-Ukraine cooperation accord. The Netherlands, which currently holds the rotating presidency of the European Union, is the only country in the 28-nation bloc which has still not ratified the deal. Even though April’s vote is non-binding Rutte’s coalition government is now left with a dilemma of how to proceed. Although Rutte did not mention the June 23 referendum when British voters will choose whether to leave the EU, Britain’s eurosceptic parties have seized upon the Dutch results as supporting their own campaign to leave the European Union.

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You heard it here first. Oil is such an integral part of so much of the economy that any large price swing will have outsize consequences.

ECB Says Oil-Price Slump Not the Global Boon It Might Have Been (BBG)

Cheaper oil prices since 2014 have probably been of little net benefit to the global economy and may even have been a drag on growth, according to the ECB. “While most of the oil-price decline in 2014 could be explained by the significant increase in the supply of oil, more recently the lower price has reflected weaker global demand,” the ECB said on Monday in an article from its Economic Bulletin. “Although the low oil price may still support domestic demand through rising real incomes in net oil-importing countries, it would not necessarily offset the broader effects of weaker global demand.”

The analysis strikes at the ECB’s debate over whether it should be adding monetary stimulus to the euro-area economy as lower heating and fuel bills give consumers more spending power. President Mario Draghi has argued that as well as depressing inflation — the ECB’s main challenge – a drop in energy prices can be a sign of subdued economic activity that needs to be countered. “Assuming that, for example, 60% of the oil price decline since mid-2014 has been supply driven and the remainder demand driven, the models suggest that the combined impact of these two shocks on world activity would be close to zero, or even slightly negative,” the ECB report showed.

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The economy can survive only by digging itself ever deeper into debt.

What American Consumers Owe Uncle Sam (BBG)

U.S. consumers have long had an impressive propensity to get into debt. Lately, though, one lender has been playing a much bigger role in enabling them: Uncle Sam. Total U.S. consumer credit – which includes credit cards, auto loans and student debt, but not mortgages – stood at $3.54 trillion at the end of March, according to the latest data from the Federal Reserve. That’s the most on record, both in dollar terms and as a share of GDP. What’s really unusual, though, is the source of the money: The federal government accounted for almost 28% of the total. That’s up from less than 5% before the 2007-2009 recession, thanks in large part to the government’s efforts to promote education by making hundreds of billions of dollars in student loans directly, rather than going through banks. Here’s how that looks:

To some extent, the government’s growing role makes sense. Amid a deep economic slump and slow recovery, it was best equipped to satisfy the demand for credit among Americans looking to improve their job prospects through education. Without the government’s involvement, consumer credit as a share of gross domestic product would still be well below the pre-recession level (all else equal). Here’s how that looks:

That said, the government assist has helped push total student debt to a record $1.3 trillion, much of which has been spent on rising tuition costs or on courses that didn’t do much to improve people’s earning potential. Because student debt is extremely difficult to discharge through bankruptcy, it will weigh on the borrowers – and on the U.S. economy – for many years to come.

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Seismic? A Libor successor?

There’s a Seismic Change Coming to Money Markets (BBG)

Bankers seeking to manipulate the London Interbank Offered Rate with a flurry of tactless messages probably had little idea that the impact of their actions would be felt all the way to the Federal Reserve target rate. But—like bubbles from a bottle of Bollinger champagne—the effects of the Libor scandal are still emanating across money markets many years later. In 2014, the Financial Stability Oversight Council (FSOC) asked U.S. regulators to look into creating a replacement for Libor—one that would prove more immune to the subjective, scandalous, scurrilous whims of traders. The Alternative Reference Rates Committee (ARRC), as the resulting body is known, last month suggested two potential replacements for the much-maligned Libor.

While the new reference rate would be important simply by dint of underpinning trillions of dollars worth of derivatives contracts, its significance could go much further. Fresh research from Credit Suisse Securities USA LLC suggests the chosen rate could also become the new target rate for the Federal Reserve, replacing the federal funds rate that has dominated money markets for decades but has been neutered by recent regulation and asset purchase programs. “The question of alternative reference rates and alternative policy rates are [sic] intertwined: ideally, they would be the same,” writes Zoltan Pozsar, director of U.S. economics at the Swiss bank. “So it is likely that the rate the ARRC will ultimately choose will also be the Fed’s new target rate. But there are problems with both alternatives.”

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“..compensation plans designed to make sure executive pay is not tied to short-term stock performance..”

Silicon Valley’s Audacious Plan to Create a New Stock Exchange (BBG)

Five years ago, when Eric Ries was working on the book that would become his best-selling entrepreneurship manifesto “The Lean Startup,” he floated a provocative idea in the epilogue: Someone should build a new, “long-term” stock exchange. Its reforms, he wrote, would amend the frantic quarterly cycle to encourage investors and companies to make better decisions for the years ahead. When he showed a draft around, many readers gave him the same piece of advice: Kill that crazy part about the exchange. “It ruined my credibility for everything that had come before,” Ries said he was told. Now Ries is laying the groundwork to prove his early skeptics wrong.

To bring the Long-Term Stock Exchange to life, he’s assembled a team of about 20 engineers, finance executives and attorneys and raised a seed round from more than 30 investors, including venture capitalist Marc Andreessen; technology evangelist Tim O’Reilly; and Aneesh Chopra, the former chief technology officer of the United States. Ries has started early discussions with the U.S. Securities and Exchange Commission, but launching the LTSE could take several years. Wannabe exchanges typically go through months of informal talks with the SEC before filing a draft application, which LTSE plans to do this year. Regulators can then take months to decide whether to approve or delay applications. If all goes according to plan, the LTSE could be the stock exchange that fixes what Ries sees as the plague of today’s public markets: short-term thinking that squashes rational economic decisions.

It’s the same stigma that’s driving more of Silicon Valley’s multi-billion-dollar unicorn startups to say they’re not even thinking of an IPO. “Everyone’s being told, ‘Don’t go public,'” Ries said. “The most common conventional wisdom now is that going public will mean the end of your ability to innovate.” [..] A company that wants to list its stock on Ries’s exchange will have to choose from a menu of LTSE-approved compensation plans designed to make sure executive pay is not tied to short-term stock performance. Ries complains that it’s common to see CEOs or top management getting quarterly or annual bonuses tied to certain metrics like earnings per share, which pushes them to goose the numbers. Ries wants to encourage companies to adopt stock packages that continue vesting even after executives have left the company, which will push them to make healthy long-term moves.

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It’s a really bright idea for a government to control its markets whenever it doesn’t like what they do. Kill price discovery. Why should anyone want to know what things are really worth?

How China Tamed Stocks (WSJ)

Chinese stocks are at an odd crossroads this week: A key decision by index provider Morgan Stanley Capital International could make them a bigger part of international investors’ portfolios, even as a regulatory clampdown drives local traders away. Average daily trading turnover of shares on China’s two main markets, in Shanghai and Shenzhen—so-called A-shares—plunged last month to less than one-third of its level at its peak in June 2015. The amount of money that investors are borrowing from brokers to trade, known as margin debt, has dropped to its lowest level since December 2014.

And despite a 3.2% drop on Monday, the Shanghai stock market has just passed one of its least-eventful months ever, having moved less than 1% either way on all but two trading days in the past three weeks. Observers attribute the calm to heavy-handed intervention by Chinese officials who have tried to tame the country’s roller-coaster stock markets with support from state funds, curbs on some trading and direct hints to investors. All of that presents a forbidding backdrop for global investors ahead of MSCI’s decision, due Tuesday evening in New York, on whether to include mainland-listed shares in a key index tracked by international fund managers.

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French protests are not over.

Bringing the Troika to Paris (Weisbrot)

I have argued for years, and in my last post on this blog, that a big part of the story we have seen in Europe over the past eight years is a result of social engineering. This has involved a major offensive by the European authorities, taking advantage of an economic crisis, to transform Europe into a different kind of society, with a smaller social safety net, lower median wages, and – whether intended or not – increasing inequality as a result. In recent weeks France has faced strikes and protests as the battle has come to their terrain, over a new, sweeping labor law. Among other provisions, the law would weaken workers’ protections regarding overtime pay, the length of the work week, and job security. But most damaging of all are the provisions that would structurally weaken unions and undermine their bargaining power.

These would push collective bargaining away from the sectoral level, and toward the level of individual companies, thus making it more difficult for unions to establish industry standards for wages, hours and working conditions. Such structural “reforms” have been promoted by the European authorities (including the IMF) for years, and the ostensible rationale is to reduce unemployment. Economist Thomas Piketty succinctly sums up the major flaw in that argument: In the labor law you find the same mixture of lack of preparation and cynicism. If unemployment hasn’t stopped climbing since 2008, with an additional 1.5 million unemployed workers (and 2.1 million category A jobseekers in mid 2008, 2.8 million in mid 2012, 3.5 million in mid 2016) it’s not because the [current] labor law has suddenly become more rigid.

It’s because France and the Eurozone have provoked, through excessive austerity, an absurd slowdown of activity from 2011 to 2013, contrary to the U.S. and to the rest of the world, thereby transforming the financial crisis that came from the other side of the Atlantic into an interminable European recession. In a recent discussion, economist Yanis Varoufakis recounts a conversation that he had with his German counterpart Wolfgang Schäuble. It was at the height of the conflict between Greece and the European authorities last summer: “I had many interesting conversations with the Finance Minister of Germany, Dr. Wolfgang Schäuble. At some point, when I showed him this ultimatum, and I said to him… “Would you sign this? Just, let’s take off our hats as Finance Ministers for a moment. I’ve been in politics for five months. You’ve been in politics for 40 years.

You keep barking in my ear that I should sign it. Stop telling me what to do. As human beings, you know that my people, now, are suffering a Great Depression. We have children at school that faint as a result of malnutrition. Can you just do me the favor and advise me on what to do? Don’t tell me what to do. As somebody with 40 years, a Europeanist, somebody who comes from a democratic country, just Wolfgang to Yanis, not Finance Minister to Finance Minister.” And to his credit, he looked out of the window for a while. .. and he turned around and he said, “As a patriot I wouldn’t.” Of course the next question was, “so why are you forcing me to do it?” He said, “Don’t you understand?! I did this in the Baltics, in Portugal, in Ireland, you know, we have discipline to look after. And I want to take the Troika to Paris.” The Troika has arrived.

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Shock doctrine in the UK.

Executive Pay Is Obscene (Mason)

[..] if you want to prevent wealth flowing from productive people to the elite, you have to restructure the economy. You have to stop believing £24m annual paydays are the result of an accident. You have to make property speculation a crime and pursue policies that can suppress boom and bust, whether it is in the property market, the stock market or any other market. And you have to tax assets, not just income. Executive pay is structured around share options, not just salaries and bonuses, because it is more “tax efficient”. A tax on shares held; a tax on the value of property designed to stop it rising faster than GDP – these are the measures that would actually work. Plus, make a positive case for rent controls.

If Jeremy Corbyn’s Labour can become the first advanced-country government to suppress the causes of obscene executive pay, it will reap a massive first-mover advantage. The property market will stabilise; housing will become affordable as billionaires – foreign and domestic – take their money elsewhere. The stock market then will move in line with the real economy, not the fantasy economy created by a shortage of housing and a glut of money. Finally, the overpaid elite will drag their sorrows through the world to another jurisdiction. Personally, I cannot wait to see them go.

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Still surprised Britain will vote against anything Cameron does or says?

More Freeloaders Than Free Market (G.)

On Wednesday, two very different men will have to explain themselves. Both appear in London, to a room full of authority figures – but their finances and their status place them at opposite ends of our power structure. Yet put them together and a picture emerges of the skewedness of today’s Britain. For the Rev Paul Nicolson, the venue will be a magistrate’s court in London. His “crime” is refusing to pay his council tax, in protest against David Cameron’s effective scrapping of council tax benefit, part of his swingeing cuts to social security. In order to pay for a financial crisis they didn’t cause, millions of families already on low incomes are sinking deeper into poverty. In order to pay bills they can’t afford, neighbours of the retired vicar are going without food.

The 84-year-old faces jail this week, for the sake of £2,831. Meanwhile, a chauffeur will drive Philip Green to parliament, where he’ll be quizzed by MPs over his part in the collapse of BHS. A business nearly as old as the Queen will die within a few weeks, leaving 11,000 workers out of a job and 22,000 members of its pension scheme facing a poorer retirement. There the similarities peter out. Nicolson was summoned to court; Green wasn’t going to bother showing up at Westminster. When the multibillionaire was invited by Frank Field to make up BHS’s £600m pension black hole, he demanded the MP resign as chair of the work and pensions select committee.

But then, Green is used to cherry-picking which rules he plays by. Take this example: he buys Arcadia, the company that owns Topshop, then arranges for it to give his wife a dividend of £1.2bn. Since Tina Green is, conveniently, a resident of Monaco, the tax savings on that one payment alone are worth an estimated £300m. That would fund the building of 10 large secondary schools – or two-thirds of the annual cut to council tax benefits.

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Sorry Angus, but “cosmopolitan prioritarianism” sounds like a real silly term. Maybe you should talk to people in words they can understand.

Rethinking Robin Hood (Angus Deaton)

International development aid is based on the Robin Hood principle: take from the rich and give to the poor. National development agencies, multilateral organizations, and NGOs currently transfer more than $135 billion a year from rich countries to poor countries with this idea in mind. A more formal term for the Robin Hood principle is “cosmopolitan prioritarianism,” an ethical rule that says we should think of everyone in the world in the same way, no matter where they live, and then focus help where it helps the most. Those who have less have priority over those who have more. This philosophy implicitly or explicitly guides the aid for economic development, aid for health, and aid for humanitarian emergencies.

On its face, cosmopolitan prioritarianism makes sense. People in poor countries have needs that are more pressing, and price levels are much lower in poor countries, so that a dollar or euro goes twice or three times further than it does at home. Spending at home is not only more expensive, but it also goes to those who are already well off (at least relatively, judged by global standards), and so does less good. I have thought about and tried to measure global poverty for many years, and this guide has always seemed broadly right. But I currently find myself feeling increasingly unsure about it. Both facts and ethics pose problems. Huge strides have undoubtedly been made in reducing global poverty, more through growth and globalization than through aid from abroad.

The number of poor people has fallen in the past 40 years from more than two billion to just under one billion – a remarkable feat, given the increase in world population and the long-term slowing of global economic growth, especially since 2008. While impressive and wholly welcome, poverty reduction has not come without a cost. The globalization that has rescued so many in poor countries has harmed some people in rich countries, as factories and jobs migrated to where labor is cheaper. This seemed to be an ethically acceptable price to pay, because those who were losing were already so much wealthier (and healthier) than those who were gaining.

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Can’t wait.

Wikileaks To Publish ‘Enough Evidence’ To Indict Hillary – Assange (RT)

Wikileaks co-founder Julian Assange warns more information will be published about Hillary Clinton, enough to indict her if the US government is courageous enough to do so, in what he predicts will be “a very big year” for the whistleblowing website. Expressing concerns in an ITV interview about the Democratic presidential candidate, who he claims is monitoring him, Assange described Republican presumptive nominee Donald Trump as an “unpredictable phenomenon”, but predictably, given their divergent political views, didn’t say if he preferred the billionaire to be president.

“We have emails relating to Hillary Clinton which are pending publication,” Assange told Peston on Sunday when asked if more of her leaked electronic communications would be published. About 32,000 emails from her private server have been leaked by Wikileaks so far, but Assange would not confirm the number of emails or when they are expected to be published. Speaking via video link from the Ecuadorian Embassy in London, Assange said that there was enough information in the emails to indict Clinton, but that was unlikely to happen under the current Attorney General, Obama appointee Loretta Lynch. He does think “the FBI can push for concessions from the new Clinton government in exchange for its lack of indictment.”

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Well done, boys. Next!

First Mammal Species Wiped Out By Human-Induced Climate Change (G.)


The Bramble Cay melomys has become extinct, Australian scientists say (/span)

Human-caused climate change appears to have driven the Great Barrier Reef’s only endemic mammal species into the history books, with the Bramble Cay melomys, a small rodent that lives on a tiny island in the eastern Torres Strait, being completely wiped-out from its only known location. It is also the first recorded extinction of a mammal anywhere in the world thought to be primarily due to human-caused climate change. An expert says this extinction is likely just the tip of the iceberg, with climate change exerting increasing pressures on species everywhere. The rodent, also called the mosaic-tailed rat, was only known to live on Bramble Cay a small coral cay, just 340m long and 150m wide off the north coast of Queensland, Australia, which sits at most 3m above sea level.

It had the most isolated and restricted range of any Australian mammal, and was considered the only mammal species endemic to the Great Barrier Reef. When its existence was first recorded by Europeans in 1845, it was seen in high density on the island, with sailors reporting they shot the “large rats” with bows and arrows. In 1978, it was estimated there were several hundred on the small island. But the melomys were last seen in 2009, and after an extensive search for the animal in 2014, a report has recommended its status be changed from “endangered” to “extinct”.

Led by Ian Gynther from Queensland’s Department of Environment and Heritage Protection, and in partnership with the University of Queensland, the survey laid 150 traps on the island for six nights, and involved extensive measurements of the island and its vegetation. In their report, co-authored by Natalie Waller and Luke Leung from the University of Queensland, the researchers concluded the “root cause” of the extinction was sea-level rise. As a result of rising seas, the island was inundated on multiple occasions, they said, killing the animals and also destroying their habitat.

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It’s starting to look like Merkel no longer understands the limits of her powers.

Merkel Ready To Give In To ‘Blackmail’ Over Turkish Visas (BB)

According to a British diplomat, Chancellor Angela Merkel is ready to give visa-free travel in the Schengen zone to 75 million Turkish citizens despite the failure to meet key EU conditions. In starkly undiplomatic language, British Ambassador to Germany Sir Sebastian Wood has said that Chancellor Merkel’s officials are ready to strike a “compromise formulation” on the Turkish terrorism law which was a sticking point to the proposed EU-Turkey migrant deal. The Turkish leader, President Erdogan, recently said that telling his country to soften its counter-terror laws was tantamount to asking it to give up its struggle against terrorism. In saying so he was threatening to scupper the deal which is designed to give Turks visa-free travel to Europe in return for stemming the flow of illegal migrants to the continent.

At first the EU said it would not give in to Turkish pressure, but now The Daily Telegraph reports that a leaked diplomatic telegram (‘DipTel’) written last month by Sir Sebastian suggests otherwise. In the May 13 memo, Sir Sebastian said President Erdogan’s pursuit of German satirist Jan Böhmermann “only strengthened the view that he is an authoritarian bully who is trying to blackmail Europe.” He also wrote, regarding the migrant deal: “Despite the tough public line, there are straws in the wind to suggest that in extremis the Germans would compromise further to preserve the EU-Turkey deal. “Merkel has begun to paint the deal in humanitarian terms, (pointing out that since it came into force, only 9 people have drowned), to pre-empt human rights opposition. Officials here have shown some interest, behind the scenes, about possible compromise formulations on the anti-terror law.”

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As I said before: the plan is to leave them all stranded in Greece.

Stranded Refugees Line Up For Greek Asylum Cards (Kath.)

Greece aims to register 1,400 people a day in its new asylum access system in a bid to expedite asylum applications by refugees, to relocate them to other EU member-states or reunite them with their families. The operation, which began last Wednesday, seeks to deal with the some 48,000 migrants – many with expired papers – who got stranded on the Greek mainland after the Balkan route into Europe was closed. So far, 1,200 people have been “pre-registered” – as the process has been dubbed – in Athens and Thessaloniki. Pre-registration will grant refugees and migrants the legal right to stay in Greece for one year and access to basic services.

According to the head of Greece’s asylum service, Maria Stavropoulou, “pre-registration” will be “a first step either for relocation to other member-states, or for family reunification, or to apply for international protection in Greece.” Once they are registered, refugees receive an asylum applicant’s card which means they will get an interview in the next few months with the asylum service. The program will last for two months and aims to pre-register all applicants that arrived in Greece from January 1 2015 until March 19, 2016, the day before the treaty between the EU and Turkey to stem their flow went into effect. The process is open to three different groups: those with the right to move to EU countries where they have relatives as part of the family reunion program, those that will be part of the resettlement program (Syrians and Iraqis), and those who want to apply for asylum in Greece.

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Jun 092016
 
 June 9, 2016  Posted by at 8:33 am Finance Tagged with: , , , , , , , , ,  


G. G. Bain Temporary footpath, Manhattan Bridge 1908

Everything’s a Buy as Central Banks Keep on Greasing Markets (BBG)
Draghi Starts Buying Junk Bonds, “Means Business” (BBG)
FinMin: Greece In ECB’s QE Program By This Fall (Kath.)
Europe Junk Borrowers Rush to Refinance Before Brexit Vote (BBG)
China’s Factory-Gate Deflation Eases Somewhat (BBG)
Chinese Trade Data Lies Exposed -Again- (ZH)
Cheap Oil Will Weigh On Global Economy, Says World Bank (G.)
Gulf Nations Must Cut Deficits to Keep Currency Pegs, IMF Says (BBG)
Hedge Funds’ Fast Money Not Welcome as Iceland Bolsters Defenses (BBG)
Britain’s Defiant Judges Fight Back Against Europe’s Imperial Court (AEP)
Greek Asylum Service Starts Process Of Recording Applications (Kath.)
Erdogan’s Draconian New Law Demolishes Turkey’s EU Ambitions (G.)

As per the apt title of my article yesterday, ‘the only thing that grows is debt’. Markets need price discovery to function, but right now it’s everyone’s biggest fear. “Oil at 8-month high!”

Everything’s a Buy as Central Banks Keep on Greasing Markets (BBG)

Misery is making strange bedfellows in global markets. At a time when risky assets including stocks, commodities, junk bonds and emerging-market currencies are rallying to multi-month highs, so are the havens, from gold, government bonds to the Swiss franc and the Japanese yen. No matter that the U.S. labor market is deteriorating and the World Bank has just cut its estimates for global economic growth. Investors either don’t believe the news is bad enough to kill a global recovery that’s already long in the tooth, or they’re betting that sluggishness in some of the biggest economies means central banks will stay more accommodative for longer.

“Everything is being driven by high liquidity that ultimately is being provided by central banks,” Simon Quijano-Evans at Commerzbank, Germany’s second-largest lender, said in London. “It’s an unusual situation that’s a spill over from the 2008-09 crisis. Fund managers just have cash to put to work.” For much of the time since the financial meltdown eight years ago, investors have been in the mindset that bad economic data is good news for markets. The near-zero interest-rate policies by major central banks – and negative borrowing costs in Japan and some European nations – have pushed traders to grab anything that offers yield. And every indication that the liquidity punch bowl will stay in place is greeted by markets with a cheer.

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Paraphrasing Springsteen: “Someday we’ll look back on this and it will all seem not one bit funny.”

Draghi Starts Buying Junk Bonds, “Means Business” (BBG)

Since a surprise interest-rate cut at his first meeting as ECB President, Mario Draghi has shown a penchant for pushing the envelope. The bank’s entry into the corporate bond market on Wednesday was no exception: buying bonds with junk ratings. Purchases on the first day included notes from Telecom Italia, according to people familiar with the matter, who aren’t authorized to speak about it and asked not to be identified. Italy’s biggest phone company has speculative-grade ratings at both Moody’s Investors Service and S&P Global Ratings. The company’s bonds only qualifies for the central bank’s purchase program because Fitch Ratings ranks it at investment grade.

By casting his net as wide as the program allows, Draghi ensured that the first day of corporate bond purchases made an impact. While the ECB has said it would buy bonds from companies with a single investment-grade rating, investors expected the central bank to start with the region’s highest-rated securities. “It’s been an aggressive start to the program,” said Jeroen van den Broek at ING Groep in Amsterdam. “The wide-reaching nature of the purchases shows Draghi means business.” [..] Telecom Italia’s bonds are in Bank of America Merrill Lynch’s Euro High Yield Index and credit-default swaps insuring the notes against losses are part of the Markit iTraxx Crossover Index linked to companies with mostly junk ratings.

Moody’s and S&P have ranked Telecom Italia one level below investment grade, at Ba1 and an equivalent BB+ respectively, since 2013. Fitch puts the company at the lowest investment-grade rating and only revised its outlook on that level to stable from negative in November. “This dispels any doubts investors may have had about the commitment of the ECB and the central banks to tackle lower-rated names,” said Alex Eventon at Oddo Meriten Asset Management. “Telecom Italia is firmly at the weak end of the spectrum the ECB can buy.”

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I’ll have to see it to believe it. Draghi buys everything not bolted down, but not Greece.

FinMin: Greece In ECB’s QE Program By This Fall (Kath.)

Greece will enter the ECB’s quantitative easing (QE) program “soon,” Finance Minister Euclid Tsakalotos told Bloomberg in an interview on Wednesday. However, the Greek government’s optimism is not shared by banking sources and analysts, who estimate that Greece’s inclusion in ECB Governor Mario Draghi’s bond-buying program will be tied to the successful completion of the second bailout review in the fall, as well as the progress in talks on settling the problem of the Greek national debt.

In his interview Tsakalotos went as far as to say that Greece will join the QE program by September, stressing that such a development would open the way for the lifting of the capital controls and the gradual restoration of investor trust. He also said that the ECB will start accepting Greek bonds as collateral for loans after Athens completes the July debt repayments to Frankfurt. “I feel confident the Greek bonds will be eligible” by September, he predicted. He also forecast that once Greece enters the QE program, depending also on the decisions on the country’s debt, “you can take Grexit off the table,” referring to the possibility of a Greek exit from the eurozone. “Then you have a straight runway for investors,” he added in the same optimistic spirit.

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Draghi’s got your back, guys.

Europe Junk Borrowers Rush to Refinance Before Brexit Vote (BBG)

Junk-rated companies in Europe are hurrying to refinance debt, locking in borrowing costs at one-year lows amid concerns that a U.K. referendum on EU membership will paralyze markets. Leveraged-loan borrowers are poised to raise more money in euros this week for refinancing than in the whole of May, according to data compiled by Bloomberg. The amount amassed for repaying old debt from selling high-yield bonds is on track to be equal to about two-thirds of comparable sales last month. Companies including Altice and Verisure Holding have entered the market as the start of corporate-bond purchases by the ECB on Wednesday has driven down borrowing costs across the continent.

The window may prove short-lived as banks including Goldman Sachs have said a June 23 vote in favor of a Brexit could roil European markets and endanger economic growth. “It’s possible that uncertainty will rise as we approach the Brexit referendum,” said Colm D’Rosario at Pioneer Investment Management. “Issuers won’t want to wait until then.” Companies may sell about €2.5 billion of leveraged loans and at least €2.6 billion of high-yield bonds for refinancing this week, the Bloomberg data show.

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The new reality: “..raw-material producer prices fell 7.2%, less than the prior month’s 7.7% decline..” And what does BBG call this? Yes, that’s right: “Firmer producer prices..”

China’s Factory-Gate Deflation Eases Somewhat (BBG)

Deflationary pressures in China’s industries eased further in May, while consumer price gains continued to be subdued enough to offer the central bank scope for more easing if needed. Amid a drive by the Communist Party leadership to cut excess capacity, producer prices fell 2.8%, the least since late 2014 and less than the 3.2% decline economists had estimated in a Bloomberg survey. The consumer price index rose 2% from a year earlier, less than the median forecast of 2.2%. Easing factory-gate deflation is the latest signal of stabilization after more than four years of falling producer prices. Tepid consumer price gains may allow the People’s Bank of China, which has kept interest rates at a record low since October, room to add further stimulus in the short term to help prop up growth.

“The deflationary threat has substantially diminished,” said Raymond Yeung at Australia & New Zealand Banking Group in Hong Kong. “Domestic demand has stabilized so we don’t see a strong upward pressure either. We still think the PBOC will remain moderately accommodative.” [..] Mining and raw-materials producer prices slumped less in May than the previous month, though still recorded the biggest declines. Mining producer goods fell 9.6% last month, versus a 13% drop in April, while raw-material producer prices fell 7.2%, less than the prior month’s 7.7% decline, the statistics bureau reported.

“Firmer producer prices reflect a combination of factors,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. “Commodity prices are a big part of the picture, with oil and iron ore both down less sharply than in 2015. So, too, is slightly more resilient domestic demand. Capacity utilization remains extremely low in historical comparison, but has ticked up over the last few months.”

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Different version of the graph I posted yesterday with the comment: “Where would China’s imports be without the fake invoices?”

Chinese Trade Data Lies Exposed -Again- (ZH)

If March’s 116.5% surge in China imports from Hong Kong didn’t raise eyebrows as the veracity of the trade data, then perhaps following last night’s data drop, this month’s 242.6% explosion year-over in China imports from Hong Kong must at minimum deserve a second glance. As Bloomberg’s Tom Orlik previously noted, the implausible 242.6% YoY surge screams that China is clearly disguising capital flows… Trade mis-invoicing as a way to hide capital flows remains a factor. In the past, over-invoicing for exports was used as a way to hide capital inflows. The latest data show the reverse phenomenon, with over-invoicing of imports as a way of hiding capital outflows. Does this look “real”?

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Yes, that’s right. Cheap oil is now bad, all of a sudden. Who could have thought? Oh wait, me.

Cheap Oil Will Weigh On Global Economy, Says World Bank (G.)

Global growth will slow this year as oil exporters in the developing world struggle to cope with lower energy prices, the World Bank has said in its half-yearly economic health check. The benefit of cheaper oil prices for Europe, Japan and other oil importing nations, which has sustained their growth through 2015 and 2016, has failed to offset a slowdown in parts of Africa, Asia and South America that depend on selling energy to sustain their incomes. In one of the gloomiest predictions by an international forecaster, the bank said the effect of the collapse in oil income on developing countries would restrict global growth to 2.4% this year, well down on its January forecast of 2.9%.

In the UK the growth rate will be restricted to 2% this year and 2.1% in 2017 and in 2018. The US will also stabilise at about 2% annually for the next couple of years, while the eurozone will expand at a more modest 1.6% in 2016 and in 2017 before slipping to 1.5% in 2018. The tumbling price of metals and food on world markets last year hit emerging and developing economies without triggering a significant rise in spending by richer countries. The Washington-based bank, which lends more than £25bn a year to developing countries, said weaker global trade, a downturn in private and public investment and a slump in manufacturing added to the woes of economies that have become dependent on high oil prices to bolster growth.

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They all pray for growing demand. There won’t be any.

Gulf Nations Must Cut Deficits to Keep Currency Pegs, IMF Says (BBG)

Gulf oil exporters must cut spending and narrow their budget shortfalls to keep their currencies pegged to the dollar, the IMF said. While substantial foreign assets have allowed the six members of the Gulf Cooperation Council to fix the value of their currencies to the greenback, keeping the status quo comes at a price as lower crude prices strain public finances, the lender said in a report titled “Learning to Live with Cheaper Oil.” “When a country faces prolonged fiscal and external deficits, policy adjustment must come from fiscal consolidation measures,” the IMF said in the report authored by Martin Sommer, deputy chief of its regional studies division. Maintaining the currency pegs “will require sustained fiscal consolidation through direct expenditure cutbacks and non-oil revenue increases,” it said.

As investors increased bets that currency fixes may become too expensive to maintain, the United Arab Emirates and Saudi Arabia renewed their commitment to their pegs – with the latter also said to ban betting against its currency. Gulf oil producers’ budgets swung from surplus to deficit as Brent crude fell by as much as 75% from June 2014 to January this year, before a partial recovery in recent months. Even after cutting spending, the combined budget gap in the GCC region – which also includes Kuwait, Qatar, Bahrain and Oman – as well as Algeria is expected to reach $900 billion for the period 2016-2021, and represent 7% of their gross domestic product in the final year, the IMF said. Their debt-to-GDP ratio is expected to rise to 45% in 2021 from 13% last year as governments issue debt to plug their budget gaps.

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Iceland’s learned a lesson or two.

Hedge Funds’ Fast Money Not Welcome as Iceland Bolsters Defenses (BBG)

Iceland has gone its own way since its three largest lenders collapsed in 2008 under a mountain of debt almost eight times the size of its economy. The steps included capital controls that locked in hedge funds, mortgage writedowns and throwing bankers in jail. With the recovery well under way, the island nation – once a hedge fund paradise – is continuing on its isolated path. Lawmakers have effectively outlawed the kind of trade that inflated the bubble a decade ago, protecting against a repeat. Surrounded by sub-zero interest rates, Iceland’s benchmark gauge of 5.75%, the highest in the developed world, is luring cash from abroad. That’s unlikely to change any time soon.

“The problem is the ability to have an independent monetary policy and an independent monetary policy means the ability to have a different interest rate than the rest of the world,” central bank Governor Mar Gudmundsson said on Monday. “If that’s not possible, then you can’t have an independent monetary policy. And the problem of very significant interest rate differential – interest rates in Iceland are higher than the rest of the world – will not disappear overnight.” Both geographically and financially Iceland is a small island in vast, turbulent waters. Under the law enacted last week, the central bank over the weekend set rules that will force investors in Icelandic bonds to keep 40% of their investments in a 0% account for a year. That will limit the profit to be made from investing in Iceland, where government bonds offer yields of more than 6%.

Those type of returns are tempting in a world of near zero and even negative key rates. As evidence, the Icelandic krona has strengthened this year even as the central bank has been selling the currency to build up foreign holdings as it prepares to lift the capital controls that have been in place since 2008. But the country may have seen nothing yet, according to the governor. The new rules are a “precautionary” measure to stifle any major flows after the controls are lifted, he said. “There have been certain inflows in the last few months,” he said. “We thought there was a possibility of much greater inflows going forward, especially if the auction goes well and we take further steps to liberalize the capital account and the economy is booming and interest rates are high.”

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As I’ve said many times, the EU is made up of sovereign countries, and they’re not going to give up their sovereignty, not a single one of them.

Britain’s Defiant Judges Fight Back Against Europe’s Imperial Court (AEP)

The British judiciary has begun to draw its sword. For the first time since the European Court asserted supremacy and launched its long campaign of teleological conquest, our own judges are fighting back. It is the first stirring of sovereign resistance against an imperial ECJ that acquired sweeping powers under the Lisbon Treaty, and has since levered its gains to claim jurisdiction over almost everything. What has emerged is an EU supreme court that knows no restraint and has been captured by judicial activists – much like the US Supreme Court in the 1970s, but without two centuries of authority and a ratified constitution to back it up. This is what the Brexit referendum ought to be about, for this thrusting ECJ is in elemental conflict with the supremacy of Parliament. The two cannot co-exist. One or the other must give.

It is the core issue that has been allowed to fester and should have been addressed when David Cameron went to Brussels in February to state Britain’s grievances. It was instead brushed under the carpet. The explosive importance of Lisbon is not just that it enlarged the ECJ’s domain from commercial matters (pillar I), to broad areas of defence, foreign affairs, immigration, justice and home affairs, nor that this great leap forward was rammed through without a referenda – after the French and the Dutch had already rejected it in its original guise as the European Constitution. Lisbon also made the Charter of Fundamental Rights legally-binding. As we have since discovered, that puts our entire commercial, social, and criminal system at the mercy of the ECJ.

The Rubicon was crossed in Åklagaren v Fransson, a VAT tax evasion case in non-euro Sweden. The dispute had nothing to do with the EU. The Charter should come into force only when a country is specifically applying EU law. The ECJ muscled into the case on the grounds that since VAT stems from an EU directive, Sweden was therefore operating “within the scope of EU law”. This can mean anything, and that is the point. To general consternation, it ruled that Sweden had violated the double-jeopardy principle of Article 50 of the Charter. Almost nothing is safe when faced with a court like this, neither the City of London, nor our tax policies or labour laws, nor even our fiscal and monetary self-government. The ECJ can strike down almost any law it wants, with no possibility of appeal.

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The EU slowly but surely forces Greece to take in 10s of 1000s of refugees on a -much more- permanent basis. But Erdogan can send a million more.

Greek Asylum Service Starts Process Of Recording Applications (Kath.)

Greece’s asylum service on Wednesday launched a new scheme for processing registrations from migrants who want to apply for asylum in the country, a process that could take up to a year for many of the applicants, according to sources. The “recognition documents” issued to migrants to date will have their validity extended to cover a year. Many of the documents held by migrants in camps across the country have expired as they apply for six months for Syrians and just one month for all other nationalities.

Once the migrants have been registered, they will be issued with a yellow bracelet bearing their name and other personal details. The registration document and bracelet will grant each migrant the right to legal residence in Greece and access to free healthcare but will not give them permission to work in Greece which must be sought separately. The applicants will be informed by SMS about their interview, according to an official of Greece’s asylum service who said the interview could take place several months after their application “due to the large population of refugees in the country.”

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Got the feeling he’s just getting started.

Erdogan’s Draconian New Law Demolishes Turkey’s EU Ambitions (G.)

Any chance Turkey could join the EU by 2020, as Brexit campaigners have asserted, went up in smoke on Wednesday after the country’s president, Recep Tayyip Erdogan, signed a draconian new law that in effect demolishes any notion that his country is a fully functioning, western-style democracy. EU rules dating to 1993, known as the Copenhagen criteria, insist all applicant states must adhere to a system of democratic governance and uphold other basic principles, such as the rule of law, human rights, freedom of speech, and protection of minorities. Turkey is struggling to meet these standards. The new measures make EU membership even more of a chimera.

They are expected to eviscerate parliamentary opposition to Erdog an’s ruling neo-Islamist Justice and Development party (AKP) by allowing politically inspired, criminal prosecutions of anti-government MPs. The main target is the pro-Kurdish Peoples’ Democratic party (HDP), which Erdog an accuses of complicity in terrorism, although other opposition parties are also affected. By signing the new law, Erdog an, who has dubbed the EU a “Christian club”, has signalled the end of any realistic chance of Turkey joining the union for the foreseeable future. Critics say he may also have sounded the death knell for Turkey’s secular democracy and set the stage for intensified armed conflict with Kurdish groups. Erdogan’s move comes against a backdrop of heightened violence between Turkey’s security forces and militants belonging to the outlawed Kurdistan Workers’ party (PKK) and its radical offshoots.

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