May 132018
 
 May 13, 2018  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Le repos 1932
This painting has a story. It’s very funny. Read below.

 

Bill Gross’s Wife Paints Fake Picasso, Swaps It With Real Thing In Divorce (NYP)
Fed To Deliver ‘Punch In The Face’ Markets Aren’t Prepared For – Boockvar (CNBC)
Who’s Most Afraid of a Latin American Debt Crisis? (DQ)
Can We Blame The Bankers? (Pettifor)
UK’s 17-Year Wage Squeeze The Worst In Two Hundred Years (Tily)
EU Set To Push For 6-Month Extension To Brexit Transition Period (Ind.)
The Hard Border Is Too Hard A Question (G.)
Half A Million ‘Hidden’ Young People In UK Left Without State Help (Ind.)
UK Campaigners Slam £1 Million Incentive To Store Nuclear Waste (G.)
Italy Could Blow Up Europe As We Know It (Pol.eu)
Italy’s Radical M5S And League On Verge Of Forming Government (G.)
EU’s Mogherini: Iran Nuclear Deal Will Hold (Pol.eu)
Damage To North Korea’s Nuclear Test Site Is Worse Than Anyone Thought (Ind.)
Bad Bitches From Mars (Jim Kunstler)

 

 

Bill Gross’s wife. About the Picasso above.

Bill Gross’s Wife Paints Fake Picasso, Swaps It With Real Thing In Divorce (NYP)

A woman locked in a contentious divorce with her bond-trader husband took a Picasso off his wall and replaced it with a forgery she made herself. Sue Gross didn’t wait until she and Wall Street titan Bill Gross had finalized their split, swapping out a 1932 Pablo Picasso painting entitled “Le Repos” hanging in their bedroom with her own rendering. The original is expected to fetch as much as $35 million at Sotheby’s Monday evening. The painting, which depicts Picasso lover Marie-Thérèse Walter, had belonged to them jointly. But a coin flip in August 2017 amid the couple’s divorce proceedings awarded Sue full custody of Picasso’s depiction of his sleeping mistress, which the couple had owned since 2006.

After the flip, Bill Gross tried to make arrangements for the piece to be transferred from his Laguna Beach, Calif., house to his ex-wife, sources told The Post. But the ex-Mrs. Gross said that was unnecessary; she already had taken the real thing. The couple’s art collection had been appraised by Sotheby’s in January 2017 amid the divorce proceedings, but Bill learned only later the Picasso was appraised in a different location than Laguna Beach. Bill was shocked Sue already had the piece, a source said, adding that Bill said, She stole the damn thing. In November testimony, the ex-wife readily admitted to swiping the Picasso, citing an e-mail Bill sent to her where he instructed her to “take all the furniture and art that you’d like”.

“And so I did,” she said. But it wasn’t quite that simple, as testimony revealed the ex-wife’s prowess for both painting and artful deception. “Well, you didn’t take it and leave an empty spot on the wall, though, did you?” lawyers for Bill Gross asked. “No,” Sue responded. “You replaced it with a fake?” the lawyer asked. “Well, it was a painting I painted,” Sue responded. “A replication of the Picasso?” the lawyer asked. “A replication, yes,” Sue answered. “And it had the Picasso signature and everything, didn’t it?” the lawyer asked. “Not exactly . . .” she said. “Whose signature was it? Sue Gross?” the lawyer asked.

“I don’t remember how I signed it. Bill will remember because I painted it at home years ago,” she said. “Did you tell him that you took the Picasso?” the lawyer asked. “No. We didn’t speak for a year and a half,” she answered just before the line of questioning turned to a 7-foot, 300-pound rabbit sculpture she also admitted taking.

Read more …

“..it’s very rare that the Fed engineers soft landings, and I’m not a believer that they’re going to do it again this time.”

Fed To Deliver ‘Punch In The Face’ Markets Aren’t Prepared For – Boockvar (CNBC)

Markets already know the Federal Reserve will deliver more rate hikes this year. They’re just not prepared for how much it will hurt, according to Peter Boockvar, chief investment officer of Bleakley Advisory Group. “The Fed is trying to ease the effect of their rate hike cycle by being very transparent,” Boockvar told CNBC’s “Futures Now” this week. It is “trying to convince us that quantitative tightening is like watching paint dry.” Fed chair Jerome Powell is carrying on Janet Yellen’s legacy of full transparency by prepping the markets as best as he can for inevitable monetary tightening. The Fed’s message of ‘steady-as-she-goes’ rate increases has calmed Wall Street into thinking this will mostly be a smooth path higher.

Boockvar expects tighter monetary policy will have a far greater impact than the Fed is telegraphing, and the market is anticipating. “Regardless of how they tell us, regardless of how they do it, there’s still a rise in the cost of capital, there’s still a drain of liquidity,” he said. He used a colorful analogy for the shock the markets will be dealt, even with the Fed’s fair warning. “If I gave you a month’s notice that I’m going to punch you in the face, when I punch you in the face, it’s still going to feel the same, it’s still going to hurt,” he said. Even worse, it’s more like two blows: While the Fed hikes interest rates, it’s also shrinking its balance sheet, Boockvar points out. “The biggest risk to the market is that they’re really tightening twice through the reduction of the size of their balance sheet,” said Boockvar.

[..] “At the same time, they’ll likely raise two more times this year, so the rise in interest rates to me is very noteworthy,” said Boockvar. “In a very over-levered, credit-dependent economy, that is my main concern because it’s very rare that the Fed engineers soft landings, and I’m not a believer that they’re going to do it again this time.”

Read more …

Spain.

Who’s Most Afraid of a Latin American Debt Crisis? (DQ)

Economic history appears to be rhyming once again in Latin America. Perennial credit-basket-case Argentina was one of the first countries to suffer a major currency crisis this century. Now, its government has asked the IMF for a brand-new bailout. But if this classic last-gasp fix was meant to calm the markets, it isn’t working. Previous Latin American debt crises have taught us two things: • The direct impact on the general populace, already suffering from sky-high poverty rates, is devastating; • Once the first domino falls, contagion can spread like wildfire. The debt crisis of the early 1980s, which spread to virtually all corners of the region, famously paved the way to Latin America’s “lost decade.”

Mexico’s Tequila Crisis of 1994-5 at one point became so serious that it almost brought down some of Wall Street’s biggest banks. At the moment, as long as the US dollar and US yields continue to rise, emerging market jitters can be expected to grow. As British financial correspondent Neal Kimberley notes, markets often behave like predators, running down what they perceive as the weakest prey first — a role being filled, with usual aplomb, by Argentina. Emerging market weakness is by now a generalized trend. The jitters could soon spread to Latin America’s two largest economies, Brazil and Mexico, which between them account for close to 60% of Latin America’s GDP. Both of the countries face general elections in the next two months.

[..] But it’s not just countries that are at risk of contagion; so, too, are global companies with a big stake in the affected markets. Few companies are more exposed to Latin America than large Spanish ones. Some were already burnt in Argentina’s last crisis and default. But in the aftermath of Spain’s real estate collapse, opportunities at home dried up to such an extent that access to Latin America’s fast-growing economies became a godsend. But it could soon become a curse.

Read more …

What makes austerity dangerous.

Can We Blame The Bankers? (Pettifor)

At a Rethinking Economics conference in Oslo last month I pointed out that western politicians and economists are repeating policy errors of the 1930s. The pattern of a global financial crash, followed by austerity in Europe and the UK, led in those years to the rise of populism, authoritarianism and ultimately fascism. The scale of economic and political failures and missteps led in turn to a catastrophic world war. Today that pattern – of a global financial crash, austerity and a rise in political populism and authoritarianism – is evident in both Europe and the US. And talk of war has risen to the top of the US political agenda. Why have we not learnt lessons from the past?

The “fount and matrix” (to quote Karl Polanyi) of the international financial system prior to its collapse in 1929, was the self-regulating market. The gold standard was the policy by which the private finance sector, backed by economists, central bankers and policy-makers, sought to extend the domestic market system to the international sphere – beyond the reach of regulatory democracy. In the event, the 1929 stock market crash put an end to the delusional aspirations of Haute Finance: namely that financiers could detach their activities from democratic, accountable political oversight. (Polanyi, The Great Transformation 1944).

Between 1929 and 1931 the losses from the US stock market crash were estimated at $50bn. It was the worst economic failure in the history of the international economy. Within three years of the crash millions of Americans were unemployed, and farmers were caught between rising debts and deflating commodity prices. In Germany between 1930 and 1932, Heinrich Brüning, the Chancellor, with the tacit support of Social Democrats, imposed a savage austerity programme that led to high levels of unemployment and cuts in welfare programmes. This in turn led to the demise of social democracy, the rise of fascism and ultimately a global war.

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Again, austerity. Theresa May trumps Napoleon.

UK’s 17-Year Wage Squeeze The Worst In Two Hundred Years (Tily)

A decade on from the financial crisis, real wages today are still worth £24 a week less than they were in 2008. By the time they’re forecast to return to their pre-crash level in 2025, real wages will have been in decline for 17 years – the longest period since the beginning of the nineteenth century. The TUC compared the current wage squeeze (including the forecast) with every major earnings crisis over the past two centuries. We found that the only slump longer than the one we’re experiencing today was the 24 years between 1798 and 1822, a period when Europe was ravaged by the Napoleonic Wars and their aftermath. In fact, real wages even recovered faster during the Great Depression (10 years) and after the Second World War (7 years), as the chart below shows:


Year zero is the pre-crisis peak. Outcomes in subsequent years are measured as an index relative to that point. The real wage index returns to 100 when the crisis is over.

The current crisis not only dwarfs all others during the last century; it is the biggest since the period between 1798, when Nelson destroyed the French Fleet at the Battle of the Nile, and 1822, when the economy finally began to recover from the devastation of the Napoleonic Wars:

Read more …

What’s the difference?

EU Set To Push For 6-Month Extension To Brexit Transition Period (Ind.)

The EU is to push for an optional six-month extension to the Brexit transition period to be built in to the UK’s withdrawal agreement, The Independent understands. European Commission officials will seek the extension to give the EU added flexibility, but it comes as key figures in the UK also look to extend the transition to give time to implement new customs arrangements. Next week a crunch meeting will see Theresa May’s top ministers try to agree what kind of customs relations to seek in negotiations, with both of her proposed options potentially needing more time than the current transition allows. The Independent has been told by two sources in Brussels that the EU wants the six-month extension to protect its own interests, as Brexit negotiations come to their most critical phase.

One said: “Of course they are aware of the sensitivity around the issue in London, but it is about giving the commission more leeway if needed, at the end of the transition to get things in place.” A second official in Brussels said it would be normal for the commission to seek the added time, simply as a safety precaution given the uncertainty surrounding the British position. The commission is expected to try to put the optional six-month extension into the withdrawal agreement late on in the negotiations process, in order to maximise the chance of it being accepted. According to the current withdrawal agreement text, the transition period is set to last around 18 months from the end of March 2019 until December 2020 – to give time for both sides to get their houses in order before new legal and trade systems come into play.

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They have no clue how to solve this. This whole Brexit preparation thing is just a waste of time.

The Hard Border Is Too Hard A Question (G.)

[..] it would be satisfying to rewind and show that the reason many now believe Britain must stay connected to the EU for five years or so relates to complex customs rules and how they cannot be reconciled with open borders. Parliament only took notice when MPs on the Brexit select committee damned the government’s dithering. The committee’s message was that keeping the Irish border open and at the same time installing border controls with the EU couldn’t work. Ever since their report last December, the border contradiction has travelled through Whitehall like a virus, forcing civil servants to drop what they are doing in a desperate bid to find a cure. As one senior civil servant put it, officials are too busy finding a way to put the right export stamp on a sheep’s backside to think about anything else.

So far, no cure has been found and the situation is looking desperate. Foreign companies have virtually switched off the stream of investment into the UK. By the end of last year, OECD figures show foreign direct investment down by half on the average seen from 2012 to 2015 and by 90% on the bumper inflow of funds seen in 2016. [..] Even the most confident Brexiters have noticed the economy flagging under the weight of the customs union uncertainty. It’s such a quandary that last week Tory MPs were openly considering adding another three years to the transition deal just to give the brightest minds in the civil service enough time to sort it out. That would take the UK’s membership of the customs union to 2023.

They recognise that any attempt to stay inside an economic zone with the EU – whether that be the “Norway option”, under the banner of the European Economic Area, or the “Swiss option”, which involves negotiating upwards of 100 separate trade agreements – comes with a demand for free movement of labour. That, as we know, is an unacceptable outcome for Leave voters.

Read more …

Throwing away much of a generation. Just like in Greece.

Half A Million ‘Hidden’ Young People In UK Left Without State Help (Ind.)

Almost half a million young people are at risk of “a life of unemployment and poverty” after being left without any state help to survive and find work, ministers have been warned. The alarm has been raised over a staggering number of “hidden jobless” who have “fallen off the government radar”, despite promises of intensive support to achieve their potential. The new research has found that 480,000 16- to 24-year-olds are missing out on both benefits and advice – no less than 60 per cent of the official total of young jobless. Strikingly, many of them have good job prospects, boasting impressive GCSE qualifications and having continued with their education beyond 16.

But they refuse to go to job centres because they are “unhelpful” or they “fear being treated badly” – due to the threat of sanctions – while others lack the necessary documents. A senior MP has now demanded answers from ministers, while campaigners are urging the government to let them plug the gap where the state is failing young people. Frank Field, the chairman of the Commons Work and Pensions Committee, told The Independent: “It seems as though a small army of unemployed young people have fallen through the gaps in the safety net without any official data recording whether they are destitute. “If we are to prevent them from being consigned to a life of unemployment and poverty, a first move must involve gathering accurate data on which young people are without either a job or an income, so they can then receive appropriate support.”

Read more …

One word: Yucca.

UK Campaigners Slam £1 Million Incentive To Store Nuclear Waste (G.)

MPs from both major parties have attacked the government’s latest incentive to entice communities into volunteering to host Britain’s first deep underground store for nuclear waste as “completely inadequate”. Ministers have offered up to £1m per community for areas that constructively engage in offering to take part in the scheme, and a further sum of up to £2.5m where deep borehole investigations take place. The aim is to find a permanent underground geological disposal facility (GDF) that could store for thousands of years the waste from Britain’s nuclear energy and bomb-making programmes. The scheme could involve building stores under the seabed to house highly radioactive material. It is predicted that the UK is likely to have produced 4.9m tonnes of nuclear waste by 2125.

But critics say the inducements offered by the government – part of the consultations it launched this year – to ensure local cooperation are “simply not good enough”, and point to the example of France, which has a similar amount of nuclear waste. It offers around €30m (£26.5m) a year as local support for districts neighbouring the site at Bure, in north-east France, and has also offered €60m in community projects. [..] The government is seeking to dispose of the UK’s nuclear waste underground because current storage facilities are both ineffective and expensive to maintain. A GDF would involve sealing the waste in rock for as long as it remains a hazard. The plan was also criticised by the Conservative MP Zac Goldsmith, who said the UK should stop making nuclear waste and stop building new reactors.

“We are still pouring untold billions of taxpayer money into propping up an industry that the free market would have killed off years ago,” he said. “In return, we will be compounding the catastrophe of a nuclear waste build-up, which we are no closer to solving than we were when the industry was born.” Nina Schrank, energy campaigner at Greenpeace UK, added: “The lack of seriousness with which the UK government treats nuclear legacy issues makes it predictable that their quest for a suitable site has been so unsuccessful that they are looking again at the Irish Sea, which Sellafield turned into one of the most radioactively contaminated seas in the world.”

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“..we all know what usually happens when the EU goes on the ballot (see France and Netherlands in 2005, Ireland in 2008, Britain in 2016, pick your year in Denmark)”

Italy Could Blow Up Europe As We Know It (Pol.eu)

As Italy’s leading vote-getters work through the weekend to hammer out a coalition deal — about time, some might add, two months after the election — the EU and Brussels establishments are in a state of heightened anxiety. A government of the 5Stars (anti-establishment, in media shorthand) and the League (far right, ditto) together, or somehow alone, is unprecedented. Never before in any of the six original EU countries, much less one of its leading powers, have parties deeply skeptical toward the EU grabbed the reins of power. If that happens, the consequences for Italy and the EU could be felt for months and years to come. But the appetizer has been served. A surprise election outcome that sidelined Italy’s more traditional left and right parties and catapulted this odd couple into the limelight is disrupting European politics in unexpected ways.

[..] an Italian euro-exit is hardly off the table either. Beppe Grillo, the 5Stars’ founder, last week revived the idea of forcing a referendum on Italy’s membership in the single currency. It is, after all, in the party’s DNA — and we all know what usually happens when the EU goes on the ballot (see France and Netherlands in 2005, Ireland in 2008, Britain in 2016, pick your year in Denmark). Italy’s high debt, low growth and terrible demographics make it an unhappy fit in a eurozone dominated by northern economic powerhouses. If anything, the speculation about the intentions of any government with the 5Stars in it hardly helps boost investor confidence in Italy.

[..] The success of these two parties brings home the changed mood among Italians. That’s especially true for the young. In a 2017 poll, just over half of people under 45 said they would vote to leave the EU if Italy holds a referendum on EU membership (while 68 percent of respondents over 45 supported staying in the bloc). Young adults in Italy have memories only of economic stagnation and crisis. While domestic politics and finance can be blamed for much of that, the heavy hand of the EU is often present in the tale of woe.

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Just yesterday, Berlusconi got permission to run again. So maybe no new government yet?

Italy’s Radical M5S And League On Verge Of Forming Government (G.)

When Italians went to the polls in early March, the message was loud and clear: it was time for the parties that had dominated politics since the early 1990s to vacate the stage. Over 50% of voters backed two outsider parties, the anti-establishment Five Star Movement (M5S) and the far-right League. Over two months later, the pair are on the verge of forming a coalition government that could break decisively with the centrist policies that went before. Matteo Salvini, leader of the League (formerly the Northern League), and his M5S counterpart, Luigi di Maio, have been thrashing out a deal that could be revealed as soon as Sunday. “The Italian people want this government,” said Mattia Diletti, a professor at Sapienza University in Rome.

“They want to see something new, and I think Sergio Mattarella [Italy’s president] understands this.” Salvini and Di Maio, an odd couple who have spent most of the past two months hurling insults at each other, are working to put together a policy document and are expected to update Mattarella on Sunday. Di Maio has said that “considerable steps forward” have been made on a policy programme, with agreement on issues such as tougher laws on immigration, reform of pensions, a flat tax and a universal basic income. But it is unclear who Italy’s next prime minister will be. The names mooted in the Italian press include the League’s deputy leader, Giancarlo Giorgetti; Giampiero Massolo, chairman of shipbuilder Fincantieri and ex-chief of the secret service, and Elisabetta Belloni, the foreign ministry’s secretary general.

In any event, the candidate is likely to be someone who will heed Mattarella’s thinly disguised warning to the coalition on Thursday against retreating from Europe. M5S has softened its stance on the EU, saying it would like to open discussions on “some treaties” rather than pull Italy out, while Salvini has said he wants to “defend Italy” within the bloc.

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Hmmm…doubtful at best: .. the secret of change — and we need change — is to put all energies not in destroying the old, but rather in building the new.

So change, but decided by the same people…

EU’s Mogherini: Iran Nuclear Deal Will Hold (Pol.eu)

The Iran nuclear deal can survive without the United States’ support, Federica Mogherini, the EU’s foreign policy chief, said Friday. Speaking at a State of the Union conference, Mogherini said she has received assurances from Iranian President Hassan Rouhani that the country would stand by the agreement, despite U.S. President Donald Trump’s decision to withdraw and reimpose sanctions on Iran earlier this week. “We are determined to keep this deal in place,” Mogherini said, adding that only Iran has the power to unilaterally wreck the deal.

The Italian diplomat will meet with the foreign ministers of Germany, France and the United Kingdom — the three European powers that brokered the nuclear deal along with the EU, U.S., China and Russia — in Brussels Tuesday to discuss the future of the agreement. The European diplomats will also meet with Iranian Foreign Minister Mohammad Javad Zarif. Europeans are seeking to demonstrate that they can still deliver most of the economic benefits Tehran was promised in exchange for giving up its nuclear weapons program and allowing a robust system of international inspections, as well as persuade European companies active in Iran not to abandon their deals out of fear of being penalized by the U.S.

In her speech, Mogherini took several shots at Trump, though she did not mention the U.S. president by name, saying: “It seems that screaming, shouting, insulting and bullying, systematically destroying and dismantling everything that is already in place, is the mood of our times. While the secret of change — and we need change — is to put all energies not in destroying the old, but rather in building the new. “This impulse to destroy is not leading us anywhere good,” she added. “It is not solving any of our problems.”

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And he’s going to make closing it into a wonderful ceremony. Everyone’s welcome.

Damage To North Korea’s Nuclear Test Site Is Worse Than Anyone Thought (Ind.)

The damage to North Korea’s nuclear test site after its latest missile firing is believed to be worse than previously thought, it has been reported. Space-based radar showed that after the initial impact of the blast, which took place in September 2017, a large part of the underground Punggye-ri test site caved in. Chinese scientists had previously said that due to a partial collapse of a mountain near the test region that part of the site was no longer useable. The new research, from a study published in Science magazine, confirms this is likely to be the case. Sylvain Barbot, one of the authors of the study, said: “This means that a very large domain has collapsed around the test site, not merely a tunnel or two.”

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I made that title up.

Bad Bitches From Mars (Jim Kunstler)

I sense that with Schneiderman we’ve reached the zenith in this comic phase of American cultural collapse. The same week, Vanity Fair Magazine ran this item about the pop star Rihanna: Rihanna’s lingerie collection will drop on Friday [today], and there’s one very special addition that is making people lose their minds: her line, Savage x Fenty, will feature handcuffs. [Fenty is Ms. Rihanna’s surname.] Just days after she reimagined the Pope at the Met Gala, Rihanna is reminding us that this is still her week. She told Vogue that it was only natural that Fenty Beauty, which launched last fall, feature a lingerie line for women who want to express agency over their own looks and bodies…. ‘Women should be wearing lingerie for their damn selves,’ Rihanna [told Vogue]. I want people to wear Savage x Fenty and think, I’m a bad bitch.’”

[..] The Martian in me sees America turning into something like a Fellini movie, a panorama of fabulous excess and sinister fantasy, with the more malign forces of commerce propelling the garbage barge to ever darker extremes at the edge of a flat earth. On one part of the edge stands President Trump, all greatness and little goodness; and on the other edge stand characters like Eric Schneiderman and Harvey Weinstein, deposed champions of social justice — now cultural blood-brothers in the Sexual Predators Hall of Infamy. Mr. Schneiderman was all set to drag Mr. Weinstein, figuratively speaking, over several miles of broken glass and old Gillette blue blades in the state courts, and now it looks like the former NY AG himself may submit to a death of a thousand cuts by civil litigation, or maybe even a trip to one of his old criminal courtrooms, if the ever-vengeful Governor Andrew Cuomo has his wicked way.

If America were an X-rated billiard parlor, I’d think it had run the table on political sex stories, with nothing but the eight-ball of doom left on the table, and a wrathful deity — the Pope’s boss, shall we say — standing there chalking up his cue stick. When he sinks that last shot, a new game will get underway. I believe it will have to do with financial markets and currencies, and a lot more will hang on the outcome. The break itself should be a doozy — all those colored balls banging into each other and dropping into oblivion.

Read more …

 


For your Sunday calm: Philip Glass paints both the river flowing by, and the traffic of New York City, all at the same time. For him, in the end, it’s the same thing.

 

 

Mar 112018
 
 March 11, 2018  Posted by at 10:06 am Finance Tagged with: , , , , , , , , , , , ,  


James McNeill Whistler Nocturne Blue and Gold Southampton Water 1872

 

$21 Trillion And Rising: Central Banks’ Leveraged Buyout of The World (ZH)
The $233 Trillion Dollar Dark Cloud of Global Debt (GT)
Trump Is Going For A Clean Reset in The West Wing (Vanity Fair)
Trump ‘Clarity’ on Tariff Conditions Not What EU Was Looking For (BBG)
China Ties Future to Xi as Congress Scraps President Term Limits (BBG)
Putin Says He ‘Couldn’t Care Less’ If Russians Meddled In 2016 Elections (NBC)
Millions Of Struggling UK Families Face Deepest Benefit Cuts In Years (O.)
UK Government Leaves At Least £1 Billion For Affordable Housing Unspent (O.)
‘We Are Nowhere Near Out Of Austerity’ – Institute for Fiscal Studies (G.)
UK Consumers Losing Interest In Buying New Cars On Credit (Ind.)
Erdogan Slams Allies’ Refusal To Support Turkey Offensive In Syria’s Afrin (RT)
Greek Defense Minister: We’re Close To A ‘Fatal Accident’ With Turkey (K.)
Post-Bailout Credit Line For Greece Probably Not Needed – Regling (R.)
UK Government Asks Public For Ideas To Curb Plastic Pollution (Ind.)

 

 

$21 trillion to buy out a broken system.

$21 Trillion And Rising: Central Banks’ Leveraged Buyout of The World (ZH)

Back in late 2016, we showed the unprecedented domination of capital markets by central banks using a chart from Citi, which had put together a fascinating slideshow asking simply “Where is the utility in marginal QE” and specifically pointing out that the longer unconventional monetary policy such as QE continues, the bigger its marginal cost, until eventually QE becomes a detriment. A broad criticism of monetary policy, the presentation carried an amusing footnote: “This presentation does not change any of Citi’s existing, published views on the actual future path of monetary policy. It is merely intended as a contribution to the ongoing debate about the efficacy of available policy tools” – after all, the last thing the market wanted is the realization that even banks no longer have faith in the central planners.

Incidentally, Citi’s broad critique of global QE took place when central banks owned just over $18 trillion in assets. Fast forward to today when in its latest update of central bank holdings, Citi shows that as of this moment not only has the total increased by another $3 trillion to a grand total of $21 trillion and rising, but that the big six central banks now own over 40% of global GDP, more than double the 17% they held before the financial crisis less than a decade ago. Which is remarkable in a world where there is still some confusion about what is behind the “global coordinated recovery”, and where there are deluded people who claim that central banks are now out of the picture.

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I admit: it was the headline. Nothing much else there.

The $233 Trillion Dollar Dark Cloud of Global Debt (GT)

Global debt has reached record heights without any signs of relief. While central bankers try to explain away the phenomenon of these out-of-control numbers, it’s not much of a mystery. Immediate consumption with the promise of repayment sometime in the future has consequences. Global debt is staggering to the point most of it will never be repaid. Certainly not in our generation. Perhaps by our grandchildren, but as global debt keeps mounting, the picture is doubtful. The per capita global debt is $30,000. Who, exactly, will be making repayments? Economists insist that the 2007 financial crisis could not have been predicted. Yet, all the signs of out-of-control credit where there.

Today, economists are repeating the same mantra, despite the spiraling world debt. The question is not if the next bubble will strike. It’s a matter of when. The math is fairly simple. The more a country increases its debt to simply stay afloat, the more like the increasing debt will cause a tightening of credit. The next step in the equation is a burst bubble and economic crisis. This is what happened in 1929, happened again in 2007, and it’s happening now. Past behavior is the best predictor of future behavior. Out-of-control credit will undoubtedly slow down the US’s current economic growth. It probably won’t cause an outright crisis. Other countries may not be as fortunate.

Countries such as China, Belgium, South Korea, Australia, and Canada are experiencing an unprecedented credit bubble, with few systems in place to control it. The resulted inflation or simply write-offs of debts could result in a global financial disaster we have not seen before. The current economic upswing is unlikely to continue.

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Coming out of the sophomore year. Cohn wanted to be Chief of Staff… Still, Bolton would be a grave mistake, he would be shredded.

Trump Is Going For A Clean Reset in The West Wing (Vanity Fair)

Even before he decided to launch a trade war and roll the nuclear dice by agreeing in the course of a West Wing afternoon to a risky sit-down with Kim Jong Un, Donald Trump was telling friends he was tired of being reined in. “I’m doing great, but I’m getting all these bad headlines,” Trump told a friend recently. A Republican in frequent contact with the White House told me Trump is “frustrated by all these people telling him what to do.” With the departures of Hope Hicks and Gary Cohn, the Trump presidency is entering a new phase—one in which Trump is feeling liberated to act on his impulses. “Trump is in command. He’s been in the job more than a year now. He knows how the levers of power work. He doesn’t give a fuck,” the Republican said.

Trump’s decision to circumvent the policy process and impose tariffs on imported steel and aluminum reflects his emboldened desire to follow his impulses and defy his advisers. “It was like a fuck-you to Kelly,” a Trump friend said. “Trump is red-hot about Kelly trying to control him.” According to five Republicans close to the White House, Trump has diagnosed the problem as having the wrong team around him and is looking to replace his senior staff in the coming weeks. “Trump is going for a clean reset, but he needs to do it in a way that’s systemic so it doesn’t look like it’s chaos,” one Republican said. Sources said that the first officials to go will be Chief of Staff John Kelly and National Security Adviser H.R. McMaster, both of whom Trump has clashed with for months.

On Tuesday, Trump met with John Bolton in the Oval Office. When he plans to visit Mar-a-Lago next weekend, Trump is expected to interview more candidates for both positions, according to two sources. “He’s going for a clean slate,” one source said. Cohn had been lobbying to replace Kelly as chief, two sources said, and quit when he didn’t get the job. “Trump laughed at Gary when he brought it up,” one outside adviser to the White House said. Next on the departure list are Jared Kushner and Ivanka Trump. Trump remains fiercely loyal to his family, but various distractions have eroded their efficacy within the administration. Both have been sidelined without top-secret security clearances by Kelly, and sources expect them to be leaving at some point in the near future.

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But he’s clear.

Trump ‘Clarity’ on Tariff Conditions Not What EU Was Looking For (BBG)

Hours after European Union trade chief Cecilia Malmstrom said she had “no immediate clarity” on whether the bloc will be let off the hook from planned U.S. tariffs, President Donald Trump laid down his conditions and repeated a threat if they’re not met. “The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum,” he wrote on Twitter. “If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!” Trump’s response came after Malmstrom on Twitter described what she called “frank” but fruitless talks with U.S. Trade Representative Robert Lighthizer in Brussels on Saturday.

There was still “no immediate clarity on the exact U.S. procedure on exemption,” Malmstrom, the 28-nation bloc’s trade commissioner, said after the meeting that also included Japanese Trade Minister Hiroshige Seko. “As a close security and trade partner of the U.S. the EU must be excluded from the announced measures,” she said. Canada, Mexico and Australia have secured exemptions from the tariffs of 25% on imported steel and 10% on aluminum announced by Trump, though Canada’s and Mexico’s were conditioned on progress renegotiating NAFTA. Trump has called the tariffs a matter of national security while threatening to tax European car imports and impose “reciprocal taxes” on countries that charge higher duties on U.S. goods than the U.S. now charges on their products.

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Just as China’s economic model is about to ‘go into a next phase..’

China Ties Future to Xi as Congress Scraps President Term Limits (BBG)

China’s parliament voted to repeal presidential term limits, allowing President Xi Jinping to retain power indefinitely in a formal break from succession rules set up after Mao Zedong’s turbulent rule. The rubber-stamp National People’s Congress agreed Sunday to strike a 36-year-old constitutional provision barring the president from serving more than two consecutive terms. The amendment – announced by the Communist Party two weeks ago – removes the only barrier keeping Xi, 64, from staying on after his expected second term ends in 2023. The vote – never in doubt – gives Xi more time to enact plans to centralize party control, increase global clout and curb financial and environmental risks.

It also ties the world’s most populous country more closely to the fate of a single man than at any point since reformer Deng Xiaoping began establishing a system for peaceful power transitions in the aftermath of Mao’s death. Before Sunday’s vote in Beijing, Donald Trump had joked that Xi was “now president for life.” The NPC could appoint Xi to a second term as soon as Saturday. “In the long run, the change may bring some uncertainties, like ‘key man’ risk,” Yanmei Xie, a China policy analyst for Gavekel Dragonomics in Beijing, said before the vote. “Dissenting is becoming riskier. The room for debate is becoming narrower. The risk of a policy mistake could become higher and correcting a flawed policy could take longer.”

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They all reported on the Megyn Kelly interview a while ago. Now all of a sudden there’s a new headline from that same interview. And.. “he even said it might be Jews..”

Putin Says He ‘Couldn’t Care Less’ If Russians Meddled In 2016 Elections (NBC)

Russian President Vladimir Putin has told NBC News that he “couldn’t care less” if Russian citizens tried to interfere in the 2016 American presidential election because, he claims, they were not connected to the Kremlin. In an exclusive and at-times combative interview with NBC’s Megyn Kelly, Putin again denied the charge by U.S. intelligence services that he ordered meddling in the November 2016 vote that put Donald Trump in the White House. “Why have you decided the Russian authorities, myself included, gave anybody permission to do this?” asked Putin, who will probably be returned as president in the March 18 elections.

Putin was unmoved by an indictment filed by special counsel Robert Mueller last month that accused 13 Russian nationals and three Russian companies of interfering in the election – including supporting Trump’s campaign and “disparaging” Hillary Clinton’s. Mueller is investigating whether the Trump campaign colluded with the Kremlin. “So what if they’re Russians?” Putin said of the people named in last month’s indictment. “There are 146 million Russians. So what? … I don’t care. I couldn’t care less. … They do not represent the interests of the Russian state.” Putin even suggested that Jews or other ethnic groups had been involved in the meddling.

“Maybe they’re not even Russians,” he said. “Maybe they’re Ukrainians, Tatars, Jews, just with Russian citizenship. Even that needs to be checked. Maybe they have dual citizenship. Or maybe a green card. Maybe it was the Americans who paid them for this work. How do you know? I don’t know.” Asked whether he was concerned about Russian citizens attacking U.S. democracy, Putin replied that he had yet to see any evidence that the alleged interference had broken Russian law. “Are we the ones who imposed sanctions on the United States? The U.S. imposed sanctions on us.” “We in Russia cannot prosecute anyone as long as they have not violated Russian law,” he said. “At least send us a piece of paper. … Give us a document. Give us an official request. And we’ll take a look at it.”

U.S. intelligence agencies and many Western analysts have said that Russian interference came at the orders of the Kremlin. Putin, Russia’s longest-serving leader since Stalin, dismissed this. “Could anyone really believe that Russia, thousands of miles away … influenced the outcome of the election? Doesn’t that sound ridiculous even to you?” he said. “It’s not our goal to interfere. We do not see what goal we would accomplish by interfering. There’s no goal.”

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In praise of austerity, of destroying the social and health care systems. A class society, more suited to the 19th than the 21st century.

Millions Of Struggling UK Families Face Deepest Benefit Cuts In Years (O.)

Families struggling to make ends meet will be hit by the biggest annual benefits cut for six years, according to a new analysis that exposes the impact of continuing austerity measures on the low paid. Chancellor Philip Hammond is preparing to give a stripped-down spring statement on Tuesday, where he is expected to boast of lower than expected borrowing figures. He will use them to suggest Britain has reached a “turning point”. He will point to forecasts showing the “first sustained fall in debt for a generation” to claim “there is light at the end of the tunnel” in turning around Britain’s finances. However, he will be speaking just weeks before a further public spending squeeze will see the second largest annual cut to the benefits budget since the financial crash.

According to new research by the Resolution Foundation thinktank, the changes from April will save around £2.5bn and dent the incomes of the “just about managing” families that Theresa May has vowed to help. The cuts will affect around 11 million families, including 5 million of the struggling families that the prime minister stated she would focus on. There will also be some good news for the low paid, with more than 1.5 million workers set to benefit from a 4.4% pay rise when the national living wage increases from £7.50 to £7.83 at the start of April. However, that measure will be outweighed by the effective £2.5bn cuts to working-age benefits.

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The real face of the British government.

UK Government Leaves At Least £1 Billion For Affordable Housing Unspent (O.)

MPs are demanding an urgent explanation from ministers after being told that £817m allocated for desperately needed affordable housing and other projects in cash-strapped local authorities has been returned to the Treasury unspent. The surrender of the unused cash has astonished members of the cross-party housing, communities and local government select committee at a time when Theresa May has insisted housebuilding is a top priority and when many local authorities are becoming mired in ever deeper financial crises. On Monday the committee, which discovered the underspend for 2017-18, will interrogate housing minister Dominic Raab and homelessness minister Heather Wheeler on the issue, before Tuesday’s spring statement by the chancellor, Philip Hammond.

He is under heavy pressure from MPs, and the Tory-controlled Local Government Association, to signal extra help for the local authority sector, which has seen budget cuts of around 50% since 2010. The acting chair of the committee, the Tory MP Bob Blackman, said: “We will be wanting to know why this very large sum has not been spent at a time of great strain on local authority budgets, and why it was not channelled to other spending projects. It does not help those of us who argue that more should be given to local authorities if the chancellor knows money he gave last time has not even been spent.” MPs believe they can argue for more for local authorities because Hammond will announce that unexpectedly high tax receipts have left the Treasury with a windfall of between £7bn and £10bn.

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Never trust anything that sounds even remotely like “Institute for Fiscal Studies”. This wanker goes on to praise the achievements of Britain’s austerity.

‘We Are Nowhere Near Out Of Austerity’ – Institute for Fiscal Studies (G.)

When the chancellor Philip Hammond sits down on Tuesday after delivering his first spring statement – the streamlined replacement for what we used to call the budget – one man will be greatly in demand, popping up on every media outlet to tell us what the figures on borrowing levels and the projected deficit really mean. That man is Paul Johnson, director of the Institute for Fiscal Studies (IFS). I suggest to him that his official role is to pour a bucket of cold water over Hammond’s head, and he doesn’t disagree. [..] The idea of the spring statement, with the budget now pushed back to autumn, is to tell us where we are financially, and to kickstart consultations about the long-term fiscal challenges facing the UK. That, for Johnson, is the important bit.

If the spring statement works, it is an opportunity to counteract the short-termism that bedevils British politics and to start thinking about the issues that really matter – the ageing population, the buckling health service, the lack of any coherent plan for social care, the fact that soon taxes are going to have to rise or public services will fall to pieces. There comes a point when you can no longer kick the can down the road because the road is no longer usable. The Office for Budget Responsibility numbers cited in the spring statement will be better than those projected last autumn because tax receipts have been higher than anticipated, and Johnson reckons Hammond will indulge in some self-congratulation for having met the government’s austerity targets (albeit two years later than his predecessor George Osborne forecast) and eliminated the deficit on day-to-day spending.

But Johnson is ready with his bucket of cold water. “Chancellors always talk up the positive numbers,” he says, “but we’re not out of austerity; we’re nowhere near out of austerity. There are still big spending cuts and big social security cuts to come.” [..] He says the government has done well to get the deficit under control [..] Local government until 2014 was coping fine. It really isn’t any more. Clearly, the health service is struggling in a way that, three or four years ago, it wasn’t. So it feels as if we’ve got to the crunch point. We’re really beginning to feel the cost.” Government borrowing is now back to pre-financial crash levels. “It is quite an achievement to have got borrowing down from the highest level since the war to pretty much normal kinds of levels,” he says.

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Followed by a car sales promo. No. 1 advertizers for newspapers.

UK Consumers Losing Interest In Buying New Cars On Credit (Ind.)

The march of the brand new car once seemed unstoppable. Cheap finance and personal contract plans (PCPs) fuelled a boom in new cars, accounting for more than 80% of all new car registrations. A fall at the start of 2017 was blamed on a collapse in consumer confidence in diesel vehicles and last year remains one of the highest on record for new car registrations. However, the latest figures reveal that the number of new cars registered in February fell by 2.8% compared with the same month last year, making it the 11th month in a row to show a decline. And once again it’s being blamed on falling demand for diesel vehicles; diesel cars accounted for just 35% of the new cars registered last month, compared with more than 44% in February 2017.

[..] The previous surge in new car registrations had been partly fuelled by changes to the way we buy vehicles. Buying a brand new car with a relatively small deposit and monthly fee can be more immediately affordable than buying an older car upfront. 37% of car buyers claim to have bought on finance because it enabled them to spread out their payment monthly, 36% to get a better deal and, revealingly, 36% because they couldn’t afford to purchase a car otherwise. [..] Justin Benson, KPMG’s UK head of automotive, says: “Consumers aren’t necessarily turning away from car finance. There is, however, evidence to suggest that the new car market is pretty saturated, ie most cars in the last few years have been bought using PCP plans. So many are using the vehicles they already have and we are seeing a drop in demand – although Brexit is also in the back of people’s minds.”

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Hollow phrases: “Washington has repeatedly called upon Turkey to stop its “aggression” against the Afrin region..”

Erdogan Slams Allies’ Refusal To Support Turkey Offensive In Syria’s Afrin (RT)

Turkey’s leader has scorched NATO allies over their failure to support his “counter-terrorist” operation in the Kurdish-held Syrian region of Afrin, but expressed gratitude that they at least had no guts to openly oppose Ankara. President Recep Tayyip Erdogan delivered the inflammatory comments while speaking before a gathering of his ruling AK Party in the Turkish city of Mersin on Saturday. “Hey NATO where are you? We’re fighting so much. NATO, Turkey is not a NATO country? Where are you? You’ve invited NATO-member states to Afghanistan,” Erdogan said. NATO members not only show no support towards Turkey’s Operation Olive Branch and would even openly oppose Ankara’s actions in Syria, but did not have the guts to do so, Erdogan claimed.

The offensive against Kurdish militias in Syria’s region of Afrin was launched late in January. Turkey describes the militias as offshoots of the terrorist-labeled outlawed Kurdistan Workers’ Party (PKK). So far, 3,213 “terrorists” have been killed during the operation, carried out by Turkish troops and affiliated Free Syrian Army (FSA) militants, Erdogan stated. “In fact, they would openly oppose Turkey in Syria if they could. But seeing Turkey’s adamant position, they did not find [the] resolve to do so,” the president said. The Turkish leader also reiterated his earlier statements, that his only goal in Syria was the “fight against terrorism.” When Ankara reaches it, the troops will be pulled out of the country, he stated.

[..] Washington has repeatedly called upon Turkey to stop its “aggression” against the Afrin region, omitting the fact that the US-led coalition itself spent years in Syria without any invitation from the government or international approval. The recent UNSC resolution, which urged a 30-days Syria-wide ceasefire, has been also used to call upon Erdogan to halt the invasion. “Turkey is more than welcome to go back and read the exact text of this UN Security Council resolution, and I would suggest that they do so,” US State Department spokeswoman Heather Nauert said on February 27, stating that the Afrin region was “certainly within Syria.”

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Don’t say you weren’t warned.

Greek Defense Minister: We’re Close To A ‘Fatal Accident’ With Turkey (K.)

As tensions rise over the detention of two Greek soldiers who crossed the Turkish border accidentally and over Turkish aggression off Cyprus, statements by both Greek and Turkish officials over the weekend underscored the fragility of the situation. In an interview with French daily Liberation on Saturday, Greek Defense Minister Panos Kammenos declared that “Greece is very close to a fatal accident with Turkey,” referring to Turkish violations of Greek air space and territorial waters. “We are obliged to defend our territory which is not only Greek but also European,” he said. Late last week, meanwhile, Kammenos had referred to two Greek soldiers being detained in Turkey as “hostages.”

Meanwhile, in an interview with German weekly Die Zeit published on Saturday, Turkish Foreign Minister Mevlut Cavusogu said Turkey’s judiciary was seeking to determine whether the Greek soldiers crossed into Turkey by accident or deliberately. Asked whether Ankara was considering exchanging the two men with eight Turkish servicemen who fled to Greece following an attempted Turkish coup in 2016, Cavusoglu ruled out such a prospect. “We do not want such an agreement,” he said.

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Oh yes, it will. Brussles won’t set its slaves free voluntarily.

Post-Bailout Credit Line For Greece Probably Not Needed – Regling (R.)

Greece will probably not need a precautionary credit line after its bailout ends in August if the country sticks to reforms, the head of Europe’s rescue fund said in an interview released on Saturday. Greece has received 260 billion euros in financial aid from euro zone countries and the IMF since 2010, and its third bailout expires in August. The country regained market access last year but some European Union policymakers and Greek central bankers believe Athens cannot go it alone without a standby line of credit after its financial support ends. But a precautionary credit line would come with conditions attached, something the government is keen to avoid after eight years of austerity that has worn down Greeks and hurt its popularity in polls.

In an interview with Proto Thema newspaper, the head of the European Stability Mechanism (ESM), Klaus Regling, said having a precautionary arrangement available is good because it gives more assurances to markets, investors and the Greek population. “But it very much depends whether it’s really needed,” he said. “If everything remains quiet, reforms continue and Greece continues to develop its market access, then based on what we know today it’s probably not needed.” The ESM and the European Financial Stability Facility are Greece’s largest creditors, together holding more than half of its 332 billion euro public debt, a sum equal to nearly 180% of economic output.

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They talk the talk because their pollsters say they must. And then deflect responsibility because they have no intention of doing anything. This way it becomes along term issue; the public must be heard first, and that takes years.

A tax on disposable cups is ridiculous. Just ban them, what’s the problem?

UK Government Asks Public For Ideas To Curb Plastic Pollution (Ind.)

The public will be urged by the Government to suggest tax changes to curb plastic pollution, amid growing criticism that ministers are dragging their heels. A “call for evidence” on how tax incentives could cut the amount of single-use plastics – such as cutlery, foam trays and coffee cups – that end up littering the land and poisoning the seas will be launched. But the move, in Tuesday’s Spring Statement, is not expected to include any specific proposals, nor will a formal consultation be launched by the Treasury. Philip Hammond, the Chancellor, will tell MPs he is determined that Britain will “lead the world in creating innovative solutions to tackling this global problem”.

But the call for evidence was first proposed by Mr Hammond four months ago, the delay prompting criticism that ministers have simply “talked the talk on plastic pollution”. A proposal for a 25p “latte levy” on disposable coffee cups, made by a cross-party Commons committee in January was met with a cool response from the Government. In January, Theresa May delivered the first major speech on the environment from a sitting prime minister since 2004 and published a 25-year Environment Plan with the ambition of abolishing plastic waste by 2042. However, it was widely criticised for being vague, for the lack of proposed legislation and for the lengthy timescales for dealing with the problems involved. [..] The UK still creates 2.26 million tons of plastic packaging waste a year and recycles only around a third.

On Tuesday, Mr Hammond will say the call for evidence is intended to find ways to use the tax system to deliver both technological progress and behavioural change. Individuals, green groups and industry will be urged to have their say, as the Chancellor announces a £20m innovation fund for businesses and universities to develop the new technologies and approaches needed. The Chancellor said: “Single-use plastics waste is a scourge to our environment. From crisp packets to coffee cups, each year the UK produces millions of tonnes of waste which is neither recyclable nor biodegradable. “That’s why I want British businesses and universities to lead the world in creating innovative solutions to tackling this global problem.

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Mar 052018
 
 March 5, 2018  Posted by at 11:04 am Finance Tagged with: , , , , , , , , , , , ,  


Astor Theater, Times Square NYC 1945

 

Monetary Policy In The Grip Of A Pincer Movement (BIS)
The Arithmetic of Risk (John Hussman)
BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)
Trump’s Trade War Is For The Forgotten People (Eric Peters)
Italy Faces Political Gridlock After 5-Star Surges (R.)
China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)
Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)
Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)
15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)
The Tyranny of Algorithms (G.)
US Embassy In Turkey Closed Due To Security Threat (R.)
Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)
Australia: Global Deforestation Hotspot (G.)
Europe Tree Loss Pushes Beetles To The Brink (BBC)

 

 

Financial cycles appear to have grown in amplitude and length. Next move could be really wild.

Monetary Policy In The Grip Of A Pincer Movement (BIS)

The emergence of disruptive financial cycles and the limited sensitivity of inflation to domestic slack may at first sight seem to be unrelated. In fact, there may be a common thread: the behaviour of monetary policy. Consider each in turn. The first major development is that, since around the early 1980s, financial cycles appear to have grown in amplitude and length. There is no unique definition of the financial cycle. A useful one refers to the self-reinforcing processes between funding conditions, asset prices and risk-taking that generate expansions followed by contractions. These processes operate at different frequencies. But if one is especially interested in those that cause major macroeconomic costs and banking crises, probably the most parsimonious description is in terms of credit and property prices.

Graph 1 illustrates the phenomenon for the United States using some simple statistical filters, although the picture would not be that different for many other countries or using other techniques (eg peak-trough analysis). The graph shows that the amplitude and length of the fluctuations has been increasing, that the length of the financial cycle is considerably longer than that of the traditional business cycle (blue versus red line) and that banking crises, or serious banking strains, tend to occur close to the peak of financial cycle. Another key feature of financial cycles is that the bust phase tends to generate deeper recessions. Indeed, if the bust coincides with a banking crisis, it causes very long-lasting damage to the economy.

There is evidence of permanent output losses, so that output may regain its pre-crisis long-term growth trend while evolving along a lower path. There is also evidence that recoveries are slower and more protracted. And in some cases, growth itself may also be seriously damaged for a long time. Some recent work with colleagues sheds further light on some of the possible mechanisms at work. Drawing on a sample of over 40 countries spanning over 40 years, we find that credit booms misallocate resources towards lower-productivity growth sectors, notably construction, and that the impact of the misallocations that occur during the boom is twice as large in the wake of a subsequent banking crisis.

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“.. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle…”

The Arithmetic of Risk (John Hussman)

At present, I view the market as a “broken parabola” – much the same as we observed for the Nikkei in 1990, the Nasdaq in 2000, or for those wishing a more recent example, Bitcoin since January. Two features of the initial break from speculative bubbles are worth noting. First, the collapse of major bubbles is often preceded by the collapse of smaller bubbles representing “fringe” speculations. Those early wipeouts are canaries in the coalmine. In July 2007, two Bear Stearns hedge funds heavily invested in sub-prime loans suddenly became nearly worthless. Yet that was nearly three months before the S&P 500 peaked in October, followed by a collapse that would take it down by more than 55%.

Observing the sudden collapses of fringe bubbles today, including inverse volatility funds and Bitcoin, my impression is that we’re actually seeing the early signs of risk-aversion and selectivity among investors. The speculation in Bitcoin, despite issues of scalability and breathtaking inefficiency, was striking enough. But the willingness of investors to short market volatility even at 9% was mathematically disturbing. See, volatility is measured by the “standard deviation” of returns, which describes the spread of a bell curve, and can never become negative. Moreover, standard deviation is annualized by multiplying by the square root of time. An annual volatility of 9% implies a daily volatilty of about 0.6%, which is like saying that a 2% market decline should occur in fewer than 1 in 2000 trading sessions, when in fact they’ve historically occurred about 1 in 50.

The spectacle of investors eagerly shorting a volatility index (VIX) of 9, in expectation that it would go lower, wasn’t just a sideshow in some esoteric security. It was the sign of a market that had come to believe that stock prices could do nothing but advance, and could be expected to do so in an uncorrected diagonal line. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle. With market internals now unfavorable, following the most offensive “overvalued, overbought, overbullish” combination of market conditions on record, our market outlook has shifted to hard-negative. Rather than forecasting how long present conditions may persist, I believe it’s enough to align ourselves with prevailing market conditions, and shift our outlook as those conditions shift.


Annotation in blue by Mish

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Perhaps this is truly a coordinated effort. The BIS could be doing the coordination.

BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)

The end of the easy money era which spanned the global economy for the last decade came into even sharper focus as the Bank of Japan gave fresh insight into when it might slow its stimulus program. Governor Haruhiko Kuroda’s remarks on Friday that the central bank will start thinking about how to complete its unprecedented easing around the fiscal year starting April 2019 was the clearest signal yet that a conclusion might be in sight to emergency support for the Japanese economy. While Kuroda’s statement in response to questions from lawmakers was in some ways stating the obvious – the BOJ forecasts inflation to reach its 2% target in fiscal 2019 – the significance is that he’s put down a marker in public that he can be held to.

“It’s notable how over the past few weeks Kuroda has been forced into talking more specifically about the exit,” said Izumi Devalier, head of Japan economics at BofAML. “A year and a half ago he would have shut down the discussion altogether with the blanket ‘it’s too early to talk about it’ statement.” That means the last of the big central banks is finally thinking out loud about policy normalization or how to begin the process of unwinding years of asset purchases and ultra-low interest rates that were used to stoke growth after the 2008 financial crisis sparked the worst global recession in decades. The Fed, Bank of Canada and Bank of England have already raised interest rates and may do so again soon, while the ECB is debating how soon to end its own bond-buying. China’s central bank is sticking to what it describes as neutral policy settings and is ratcheting up money market rates to cool the pace of borrowing.

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Peters is never boring.

Trump’s Trade War Is For The Forgotten People (Eric Peters)

“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel,” warned the IMF, their army of nerds in full sweat. Panic. Just 200k Americans work in steel, aluminum and iron. 5.5mm of our 154mm workers are employed by businesses that use steel. “How could the Americans make such an idiotic mistake?” howled the nerds. But of course, they entirely miss the point. “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” tweeted Trump.

The US currently imposes a 2.5% tariff on EU auto imports. The EU imposes a 10% tariff on US auto imports. Germany exports $25bln of autos to America annually. “US auto prices will rise,” warned the Washington Post. But of course, they entirely miss the point. “Trade wars are good, easy to win,” tweeted Trump, knowing the statement would trigger every nerd with a college degree. Some worried about their jobs. But not terribly. Because their unemployment rate is just 2%, their labor force participation is 74%. They’re as well off as they’ve ever been. Particularly when set against those who never went to college, 5% of whom are unemployed, and 50% don’t even participate in the labor force. They’ve given up. These trade policies are for these forgotten people. To hell with the consequences. That’s the point.

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More for forgotten people. Beppe got them where he wanted; largest party by a huge margin. Merkel and Macron’s “More Europe” plans can be shelved. But first, expect more tricks to keep the old guard in power.

Italy Faces Political Gridlock After 5-Star Surges (R.)

Italy faces a prolonged period of political instability after voters delivered a hung parliament on Sunday, spurning traditional parties and flocking to anti-establishment and far-right groups in record numbers. With votes counted from more than 75% of polling stations, it looked almost certain that none of the three main factions would be able to govern alone and there was little prospect of a return to mainstream government, creating a dilemma for the EU. A rightist alliance including former prime minister Silvio Berlusconi’s Forza Italia (Go Italy!) held the biggest bloc of votes. In a bitter personal defeat that appeared unlikely last week, the billionaire media magnate’s party looked almost certain to be overtaken by its ally, the far-right League, which campaigned on a fiercely anti-migrant ticket.

But the anti-establishment 5-Star Movement saw its support soar to become Italy’s largest single party by far, and one of its senior officials said on Monday that forming a coalition without it would be impossible. The League’s economics chief on Monday raised the possibility of an alliance with 5-Star. Any government based on that combination would be euro-skeptic, likely to challenge EU budget restrictions and be little interested in further European integration. The full result is not due until later on Monday and, with the centre-right coalition on course for 37% of the vote and 5-Star for 31%, swift new elections to try to break the deadlock are another plausible scenario.

Despite overseeing a modest economic recovery, the ruling centre-left coalition trailed a distant third on 22%, hit by widespread anger over persistent poverty, high unemployment and an influx of more than 600,000 migrants over the past four years.

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Plus huge cuts to steel production. China is hurting.

China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)

China stepped up its push to curb financial risk, cutting its budget deficit target for the first time since 2012 and setting a growth goal of around 6.5% that omitted last year’s aim for a faster pace if possible. The deficit target – released Monday as Premier Li Keqiang delivered his annual report to the National People’s Congress in Beijing – was lowered to 2.6% of GDP from 3% in the past two years. The 6.5% goal is consistent with President Xi Jinping’s promise to deliver a “moderately prosperous” society by 2020. Policy makers dropped a target for M2 money supply growth, saying it’s expected to expand at similar pace to last year. Authorities reiterated prior language saying prudent monetary policy will remain neutral this year and that they’ll ensure liquidity at a reasonable and stable level.

Xi has ratcheted up his drive to curb debt risk, pollution and poverty at a time when the world’s second-largest economy is on a long-term growth slowdown. His efforts to rein in spending contrast with an historic expansion of U.S. borrowing under Donald Trump during a period of economic expansion. The 2018 targets “suggest slower growth and a fiscal drag,” said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. “This makes sense for China in the context of the new focus on financial de-risking, poverty alleviation and environmental clean-up, but is less good news at the margin for those economies that have high export exposure to China.”

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Is it too late to close the gap in a peaceful manner?

Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)

Britain should impose higher wealth taxes on the older generation to ease the growing burden on young people, according to the Resolution Foundation. In a speech Monday, Executive Chair David Willetts will warn that welfare spending is set to rise by the equivalent today of 60 billion pounds ($83 billion) by 2040 as aging “baby boomers” drive up the cost of health care. “The time has come when we Boomers are going to have reach into our own pockets,” he will say. “The alternative could be an extra 15 pence on the basic rate of tax, paid largely by our kids. Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren?”

Willetts, a former minister in the ruling Conservative Party, will make the case for reform of council tax – a property-based levy that helps fund local services – and of inheritance tax. Failure to act could fuel a sense of grievance among young people who are already struggling to match to the living standards enjoyed by older generations, he will say.

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“..deficits aren’t only not bad, they’re necessary…”

Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)

Congratulations, everyone! We did it! The deficit has been eliminated! George Osborne, the architect of austerity, emerged from one of his non-jobs as the editor of the London Evening Standard to tell us all it was a “remarkable national effort” on Twitter, as if he’d ever broken a sweat over it. David Cameron, who will go down as arguably the worst prime minister in history thanks to the gigantic power move of doing a Brexit and running away, simply added: “It was the right thing to do” – safe in the knowledge that he was now out of the line of fire from tough questions.

That will all be cold comfort to the thousands of homeless people struggling to cope with sub-zero temperatures, or those having to choose between keeping the heating on, or risk going into rent arrears and losing their home entirely; to public sector workers in the NHS or local government, trying to keep the wheels from falling off as they deliver vital services in the face of budget cuts; and to disabled and unemployed people, bearing the brunt of the government’s spending cuts and facing harassment from the authorities. Forget all that. We’ve eliminated the deficit, and all we had to do was attack the poor and vulnerable with a relentless fury, create a new generation of young people for whom the concept of pensions or even steady wages is a fantasy, and undermine public services to such a grotesque extent that it will take years to rebuild what we’ve lost. Hooray!

[..] As Richard Murphy of Tax Research UK points out: “A growing economy requires general price increases, or inflation. Except under unusual circumstances, a general increase in prices requires an increasing money supply. A fiscal deficit is the only way in which money can be injected into an economy continuously. It follows that governments must run a near perpetual deficit or face the risk of creating a liquidity crisis due to a shortage in the money supply, which would then create a risk of deflation.” In other words, deficits aren’t only not bad, they’re necessary. Without them we get deflation, an over-indebted household sector, and an explosion in inequality.

The government is not like your household. It does not “run out of money,” because its job is to match the quantity of money to the desired economic activity. Its “debts” are not like your debts – they’re your savings and your pension funds. Osborne’s “remarkable national effort” was always and only to ensure that the government sector took more money out of the economy than it put into it. His great legacy is that we’re now at the stage where for every pound the government spends in day-to-day services, it taxes, and therefore destroys, more than a pound somewhere else. And we put people on the streets to freeze to achieve it. Go us.

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Thatcher-inflicted pain continues.

15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)

Some of the UK’s biggest cities are allowing developers to plan huge new residential developments containing little or no affordable housing. In Manchester, none of the 14,667 homes in big developments granted planning permission in the last two years are set to be “affordable”, planning documents show – in direct contravention of its own rules, and leading to worries that London’s affordable housing crisis is spreading. In Sheffield – where house prices grew faster last year than in any other UK city, according to property portal Zoopla – just 97 homes out of 6,943 (1.4%) approved by planners in 2016 and 2017 met the government’s affordable definition. That says homes must either be offered for social rent (often known as council housing), or rented at no more than 80% of the local market rate.

In Nottingham, where the council aims for 20% of new housing to be affordable, just 3.8% of units given the green light by council planners meet the definition, Guardian research found. In Manchester, named by Deloitte earlier this month as one of Europe’s fastest growing cities and where property now sells three times as quickly as in London, planners have routinely waved through huge new developments – some containing swimming pools, tennis courts and more than 1,000 flats. Not one of the swanky apartments meets the national definition of “affordable” – leading critics to accuse the council of social cleansing. Others worry the city could become like London, where people on average salaries can no longer afford to live anywhere central.

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Aka the terror of social media.

The Tyranny of Algorithms (G.)

For the past couple of years a big story about the future of China has been the focus of both fascination and horror. It is all about what the authorities in Beijing call “social credit”, and the kind of surveillance that is now within governments’ grasp. The official rhetoric is poetic. According to the documents, what is being developed will “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”. As China moves into the newly solidified President Xi Jinping era, the basic plan is intended to be in place by 2020. Some of it will apply to businesses and officials, so as to address corruption and tackle such high-profile issues as poor food hygiene.

But other elements will be focused on ordinary individuals, so that transgressions such as dodging transport fares and not caring sufficiently for your parents will mean penalties, while living the life of a good citizen will bring benefits and opportunities. Online behaviour will inevitably be a big part of what is monitored, and algorithms will be key to everything, though there remain doubts about whether something so ambitious will ever come to full fruition. One of the scheme’s basic aims is to use a vast amount of data to create individual ratings, which will decide people’s access – or lack of it – to everything from travel to jobs. The Chinese notion of credit – or xinyong – has a cultural meaning that relates to moral ideas of honesty and trust.

There are up to 30 local social credit pilots run by local authorities, in huge cities such as Shanghai and Hangzhou and much smaller towns. Meanwhile, eight ostensibly private companies have been trialling a different set of rating systems, which seem to chime with the government’s controlling objectives. The most high-profile system is Sesame Credit – created by Ant Financial, an offshoot of the Chinese online retail giant Alibaba. Superficially, it reflects the western definition of credit, and looks like a version of the credit scores used all over the world, invented to belatedly allow Chinese consumers the pleasures of buying things on tick, and manage the transition to an economy in which huge numbers of people pay via smartphones. But its reach runs wider.

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What does Washington have to say?

US Embassy In Turkey Closed Due To Security Threat (R.)

The U.S. embassy in Turkey’s capital Ankara will be closed to the public on Monday due to a security threat and only emergency services will be provided, it said in a statement on Sunday. The embassy advised U.S. citizens in Turkey to avoid large crowds and the embassy building and to be aware of their own security when visiting popular tourist sites and crowded places. It did not specify what the security threat was that prompted the closure. Additional security measures were taken after intelligence from U.S. sources suggested there might be an attack targeting the U.S. embassy or places U.S. citizens were staying, the Ankara governor’s office said in a statement. Visa interviews and other routine services would be canceled on Monday, the embassy said, adding that it would make an announcement when it was ready to reopen.

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Same guy said if Greeks set foot on -their own- Imia islets, it will basically mean war.

Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)

A close advisor of Turkish President Recep Tayyip Erdogan has warned of a “strike” in the eastern Mediterranean if any attempt to explore or drill for hydrocarbons goes ahead without Ankara’s approval. Yigit Bulut, who is known for his incendiary remarks, was quoted by the Cyprus News Agency as telling Turkish state broadcaster TRT that Erdogan is prepared to call a “strike” at any “attempt at provocation.” “Have no doubt about it,” he said. Ankara has vowed to prevent any exploration for oil or gas around Cyprus and last month was accused to threatening to use force against a drillship chartered by Italy’s Eni to explore Block 3 of Cyprus’s exclusive economic zone.

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3 million hectares to be lost over 15 years.

Australia: Global Deforestation Hotspot (G.)

Australia is in the midst of a full-blown land-clearing crisis. Projections suggest that in the two decades to 2030, 3m hectares of untouched forest will have been bulldozed in eastern Australia. The crisis is driven primarily by a booming livestock industry but is ushered in by governments that fail to introduce restrictions and refuse to apply existing restrictions. And more than just trees are at stake. Australia has a rich biodiversity, with nearly 8% of all Earth’s plant and animal species finding a home on the continent. About 85% of the country’s plants, 84% of its mammals and 45% of its birds are found nowhere else. But land clearing is putting that at risk. About three-quarters of Australia’s 1,640 plants and animals listed by the government as threatened have habitat loss listed as one of their main threats.

Much of the land clearing in Queensland – which accounts for the majority in Australia – drives pollution into rivers that drain on to the Great Barrier Reef, adding to the pressures on it. And of course land clearing is exacerbating climate change. In 1990, before short-lived land-clearing controls came into place, a quarter of Australia’s total greenhouse gas emissions were caused by deforestation. Emissions from land clearing dropped after 2010 but are rising sharply again. “It has gotten so bad that WWF International put it on the list of global deforestation fronts, the only one in the developed world on that list,” says Martin Taylor, the protected areas and conservation science manager at WWF Australia. In Queensland, where there is both the most clearing and the best data on clearing, trees are being bulldozed at a phenomenal rate.

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And more deforestation. Sometimes you wonder what will be left of Europe in 100 years. Or 50.

Europe Tree Loss Pushes Beetles To The Brink (BBC)

The loss of trees across Europe is pushing beetles to the brink of extinction, according to a new report. The International Union for the Conservation of Nature assessed the status of 700 European beetles that live in old and hollowed wood. Almost a fifth (18%) are at risk of extinction due to the decline of ancient trees, the European Red List of Saproxylic Beetles report found. This puts them among the most threatened insect groups in Europe. Saproxylic beetles play a role in natural processes, such as decomposition and the recycling of nutrients. They also provide an important food source for birds and mammals and some are involved in pollination.

“Some beetle species require old trees that need hundreds of years to grow, so conservation efforts need to focus on long-term strategies to protect old trees across different landscapes in Europe, to ensure that the vital ecosystem services provided by these beetles continue,” said Jane Smart, director of the IUCN Global Species Programme. Logging, tree loss and wood harvesting all contribute to the loss of habitat for the beetles, said the IUCN. Other major threats include urbanisation and tourism development, and an increase in wildfires in the Mediterranean region. Conservation efforts need to focus on long-term strategies to protect old trees and deadwood across forests, pastureland, orchards and urban areas, the report recommended.

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Mar 042018
 
 March 4, 2018  Posted by at 10:58 am Finance Tagged with: , , , , , , , , , , , ,  


James McNeill Whistler Nocturne: Blue and Silver – Chelsea 1871

 

Global Bond Markets Have Become Grotesquely Distorted – Jim Grant (ZH)
From Currency War To Trade War To Shooting War (Rickards)
Central Banks Are The Agents Of Baby Boomers (G.)
Osborne’s Austerity Has Left UK Social Fabric In Tatters (Pettifor)
How America’s Clean Coal Dream Unravelled (G.)
Putin’s Megyn Kelly Interview (ZH)
Germany’s SPD Votes For Coalition Handing Merkel Fourth Term (G.)
Europe’s Band-Aid Ensures Greece’s Debt Bondage (Varoufakis)
Modern Food Farming Puts UK Wildlife Species At Risk Of Extinction (Ind.)
Three Billboards In Hollywood, California (TAM)

 

 

It’s all just one giant distortion.

Global Bond Markets Have Become Grotesquely Distorted – Jim Grant (ZH)

Jim Grant, the world’s most famous interest rate observer, ventured on CNBC this week to expose and explain the utterly farcical world of financial markets (and in particular, risk assets) and how grotesquely distorted global bond markets have become. He began with an example… “As an example of where the world is mispricing interest rates… look to Italy, which is having a big [potentially disruptive] election on Sunday… …there is a speculative grade Italian security, Telecom Italia, the 5 1/4’s of 2022 are trading at 0.61 percent, that is a junk bond with a zero handle.” This bond traded with almost a 6 handle just 5 years ago… Thank you Mr Draghi. But it doesn’t stop there, Grant warns…

“…and since interest rates are critical in the pricing of financial instruments, these distortions preceded the uplift in all asset values.. and the manifestation of this manipulation is in many ways responsible for what we are now seeing in the markets.” These distortions and the chaotic aftermath of their withdrawal are exactly what current Fed Chair Powell warned of in 2013… “[W]hen it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.

“I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.”

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But history merely rhymes.

From Currency War To Trade War To Shooting War (Rickards)

Currency wars do not exist all the time; they arise under certain conditions and persist until there is either systemic reform or systemic collapse. The conditions that give rise to currency wars are too much debt and too little growth. In those circumstances, countries try to steal growth from trading partners by cheapening their currencies to promote exports and create export-related jobs. The problem with currency wars is that they are zero-sum or negative-sum games. It is true that countries can obtain short-term relief by cheapening their currencies, but sooner than later, their trading partners also cheapen their currencies to regain the export advantage. This process of tit-for-tat devaluations feeds on itself with the pendulum of short-term trade advantage swinging back and forth and no one getting any further ahead.

After a few years, the futility of currency wars becomes apparent, and countries resort to trade wars. This consists of punitive tariffs, export subsidies and nontariff barriers to trade. The dynamic is the same as in a currency war. The first country to impose tariffs gets a short-term advantage, but retaliation is not long in coming and the initial advantage is eliminated as trading partners impose tariffs in response. Despite the illusion of short-term advantage, in the long-run everyone is worse off. The original condition of too much debt and too little growth never goes away. Finally, tensions rise, rival blocs are formed and a shooting war begins. The shooting wars often have a not-so-hidden economic grievance or rationale behind them.

The sequence in the early 20th century began with a currency war that started in Weimar Germany with a hyperinflation (1921–23) and then extended through a French devaluation (1925), a U.K. devaluation (1931), a U.S. devaluation (1933) and another French/U.K. devaluation (1936). Meanwhile, a global trade war emerged after the Smoot-Hawley tariffs (1930) and comparable tariffs of trading partners of the U.S. Finally, a shooting war progressed with the Japanese invasion of Manchuria (1931), the Japanese invasion of Beijing and China (1937), the German invasion of Poland (1939) and the Japanese attack on Pearl Harbor (1941). Eventually, the world was engulfed in the flames of World War II, and the international monetary system came to a complete collapse until the Bretton Woods Conference in 1944.

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We’re going to be watching this unfold until it’s too late.

Central Banks Are The Agents Of Baby Boomers (G.)

The greatest threat to our economy comes from its ageing population. With the baby-boomer generation making up a large proportion of society, we find ourselves in a situation where public policy is mostly geared towards shoring up the gains made by boomers over the past 40 years, and industrial disputes are driven by an ageing union membership most worried about its pension entitlements. It is a problem that Britain shares with its continental cousins, the US and Japan, now that all are struggling with a situation where a fifth of their populations is aged over 65 and the proportion is rising fast. Ageing populations have many effects on an economy, not least the desire among those nearing retirement age to save excessively.

Each country’s baby boomers pursue the holy grail of wealth slightly differently, but in the main, property and pensions are the twin pillars supporting decades of retirement. When wealth is your goal, there is one evil monster that needs slaying, and that is inflation. This is one of the main reasons that since the 1990s the Bank of England is under instruction to keep inflation anchored around 2%. A recent blog by economists at the Bank has caused a stir by arguing that far from the baby-boomer savings glut being a passing phase – or at least a situation that will fade as the boomers die off – it will be with us for decades to come.

They argue that boomers have shown that they want to keep saving even as they move into their 80s and 90s, to fund possible extra health and care costs, and to pass on the maximum amount of wealth they can to their heirs. Some academics have argued that boomers will be forced to spend more than they save in later life to pay for health and long-term care, but that doesn’t appear to be happening. The $100 trillion of savings sloshing round the global financial system just keeps growing. This is not just because people in young nations such as Indonesia and India are starting to build up savings, but because older Brits, Germans and Swedes are doing the same when there had been an expectation that they would switch to spending.

[..] The Bank of England blog argues that the persistent glut of savings in stocks, bonds and property will maintain the trend of the past 30 years – of an excess of money chasing too few investment opportunities. And if older savers resist spending some of their pension, demand for goods is lower than expected, and inflation stays low. Central banks, in seeking to maintain a 2% inflation target, are the agents of baby boomers. It is their savings and wealth that are protected, not those of the young, who have much less, if any.

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This is not typical for Osborne or the UK. ‘Saving’ the economy by making the poor, poorer, is widely accepted.

Osborne’s Austerity Has Left UK Social Fabric In Tatters (Pettifor)

There is growing consensus among economists that Osborne’s post-crisis austerity programme deepened and lengthened Britain’s post-crisis recession, causing public and private investment to fall further and real wages to decline. Making large reductions to government spending is itself a major reason why the economy has been so slow in recovering. (Consider the multiplier effect where an injection of public money helps generate income and tax revenues.) In his first budget (June 2010) Osborne told parliament: “We are on track to have debt falling and a balanced structural current budget by the end of this parliament” (ie March 2015).

He slashed welfare as promised, but the economy slowed further. While employment revived, jobs have been recast as part-time, temporary and insecure. As a result, productivity stalled. These declines will cause permanent damage to the British economy. Convinced that a chancellor should “never let a crisis go to waste”, Osborne used the opportunity to shrink the state, as cuts to government spending tore into welfare provision and public services. Real spend per head of population fell, and the real spend per head was particularly felt by the vulnerable citizen, as the population grew older and more fragile. Under his watch, total managed expenditure was cut in real terms by £14bn (2016-17 prices).

These cuts were made worse by a 3-4% rise in population, and by the increasing needs of an ageing population. Public sector net investment was allowed to fall from £60bn in 2010 to £35bn in 2016. It caused intense suffering to small and large firms and suppliers, many of which went and are going bust, laying off staff. The insistence on balancing the current budget also hurt millions of individuals innocent of the causes of the crisis.

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Oxymoron self-immolation.

How America’s Clean Coal Dream Unravelled (G.)

High above the red dirt and evergreen trees of Kemper County, Mississippi, gleams a 15-story monolith of pipes surrounded by a town-sized array of steel towers and white buildings. The hi-tech industrial site juts out of the surrounding forest, its sharp silhouette out of place amid the gray crumbling roads, catfish stands and trailer homes of nearby De Kalb, population: 1,164. The $7.5bn Kemper power plant once drew officials from as far as Saudi Arabia, Japan and Norway to marvel at a 21st-century power project so technologically complex its builder compared it to the moonshot of the 1960s. It’s promise? Energy from “clean coal”. “I’m impressed,” said Jukka Uosukainen, UN director for the Climate Technology Centre and Network, after a 2014 tour: “maybe using coal in the future is possible”.

Kemper, its managers claimed, would harness dirt-cheap lignite coal – the world’s least efficient and most abundant form of coal – to power homes and businesses in America’s lowest-income state while causing the least climate-changing pollution of any fossil fuel. It was a promise they wouldn’t keep. Last summer the plant’s owner, Southern Company, America’s second-largest utility company, announced it was abandoning construction after years of blown-out budgets and missed construction deadlines. “It hit us hard,” said Craig Hitt, executive director of the Kemper County Economic Development Authority. Some 75 miners, roughly half living inside Kemper County, have already been affected in a region where unemployment is 7.1% compared to a national average of just 4.1%. “It was going to be the biggest project in the history of the county, possibly in the state of Mississippi,” Hitt said.

Instead, this year, Kemper County was home to one of the first large coalmining layoffs of the Trump era. It’s failure is also likely to have a profound impact on the future of “clean coal”. “This was the flagship project that was going to lead the way for a whole new generation of coal power plants,” said Richard Heinberg, senior fellow at the Post Carbon Institute. “If the initial project doesn’t work then who’s going to invest in any more like it?” [..] a review by the Guardian of more than 5,000 pages of confidential company documents, internal emails, white papers, and other materials provided anonymously by several former Southern Co insiders, plus on- and off-record interviews with other former Kemper engineers and managers, found evidence that top executives covered up construction problems and fundamental design flaws at the plant and knew, years before they admitted it publicly, that their plans had gone awry.

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“If you were to speak about an arms race, then an arms race began exactly at the time and moment the U.S. opted out of the Anti-Ballistic Missile Treaty..”

Putin’s Megyn Kelly Interview (ZH)

NBC’s Megyn Kelly has tried to establish herself as the US media’s preeminent “Putin whisperer” since confronting the Russian president last year over allegations he sanctioned interference by hacking groups in the 2016 US presidential election. In a formal interview with the Russian president, Kelly asked the Russian leader about the latest development in the ongoing controversy, Mueller’s indictment of 13 Russians and 3 Russian entities for election meddling. Ignoring that the indictment stated that the alleged activities of the trolls at the Internet Research Agency had no impact on the outcome of the election, Kelly insisted on pressing the Russian president about why Russia hadn’t acted to prosecute the men – including Yevgeniy Prigozhin, a wealthy Russian businessman.

Putin pointed out that no formal requests had been made by the US government, and no effort to share the incriminating information had been made. “I have to see first what they’ve done. Give us a document, give us an official request” Putin said in the NBC interview adding that “We can not respond to that if they do not violate Russian laws.” Kelly responded by listing some of the allegations, before Putin insisted that they shouldn’t be presented to him personally – but to Russia’s general prosecutor. “This has to go through official channels, not through the press, or yelling and hollering in the United States Congress,” Putin said. The broadcast aired a day after Putin grabbed headlines in Western media by revealing that Russia had recently finished testing a range of nuclear weapons that were capable of evading US anti-ballistic missile batteries, showing animated footage and digital representations of the missiles’ capabilities striking Florida which prompted an uproar at the US State Department.

Meanwhile, even though Russia has repeatedly criticized the US and NATO for installing anti-ballistic missile shields in Eastern Europe that Russia says more closely resemble offensive missile batteries, Putin pushed back against questions about whether the US and Russia were entering a new Cold War. The Russian leader said anybody spreading these accusations are more concerned with propaganda than accurate representations of the relationships between the two countries. “My point of view is that the individuals that have said that a new Cold War has started are not analysts. They do propaganda.” Repeating a claim that has been made by many Russian officials, Putin said the arms race between the US and Russia began when George W Bush withdrew from the anti-ballistic missile treaty in 2002. “If you were to speak about an arms race, then an arms race began exactly at the time and moment the U.S. opted out of the Anti-Ballistic Missile Treaty,” he said.

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Never a good idea for a party that losses big in elections to be in government; what are elections for? The SPD is so divided now it could turn its back on Merkel at literally any moment over the nexy 4-5 years.

Germany’s SPD Votes For Coalition Handing Merkel Fourth Term (G.)

Germany’s Social Democratic party has agreed to form another “grand coalition” government with the conservative CDU, ending months of political uncertainty in Europe and guaranteeing Chancellor Angela Merkel a fourth term in office. Sunday’s announcement by the party’s leadership ends almost six months of uncertainty in German politics, the longest the country has been without a government in its postwar history. A majority of 66.02% members of 463,723 eligible SPD members voted in favour of renewing the constellation that has governed Germany for the last four years, its treasurer, Dietmar Nietan, confirmed at the party’s headquarters in Berlin.

“We now have some clarity”, said the Social Democrats’ caretaker leader, Olaf Scholz, a contender for the role of finance minister, speaking at the Willy Brandt House. “The SPD will enter into government”. The leadership of the SPD had initially ruled out joining Merkel in government in the wake of historically disappointing results at federal elections in September last year. But the collapse of talks to form an unorthodox “Jamaica” coalition between Merkel’s conservatives, the pro-business Free Democrats and the Green party forced the German centre-left back to the negotiating table, where it managed to secure a surprising victory in getting the chancellor to cede control of the influential finance ministry.

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“..to borrow that €3 billion on behalf of its creditors, the Greek state added €816 million in interest payments to its debt repayments for 2025. Germany’s cost for rolling over the same sum, on the same day, was a mere €63 million…”

Europe’s Band-Aid Ensures Greece’s Debt Bondage (Varoufakis)

The big moment, it is said, will come in August, when Greece will be pronounced a “normal” European country again. Recently, in preparation for the government’s return to the money markets – from which it has been effectively excluded since 2010 – Greece’s public-debt authority has been testing the waters with a long-term bond issue. Unfortunately, all the happy talk about impending “debt relief” and a “clean exit” from Greece’s third “bailout” obscures an uglier truth: the country’s debt bondage is being extended to 2060. And, by ossifying Greece’s insolvency, while pretending to have overcome it, Europe’s establishment is demonstrating its dogged refusal to address the eurozone’s underlying fault lines. This augurs ill for ALL Europeans.

For an EU country to be considered “normal,” it should be subject to the scrutiny facing countries that were never bailed out. That means the standard twice-yearly checks of compliance with the EU’s Stability and Growth Pact, as performed by the European Commission under the so-called European Semester procedure. Nevertheless, for countries like Ireland or Portugal, a tougher “post-program surveillance” procedure was designed following their bailouts: quarterly checks conducted not only by the European Commission but also by the European Central Bank.

It is plain to see why Greece’s road will be much bumpier than Ireland’s or Portugal’s. The ECB had already begun purchasing Irish and Portuguese debt in the secondary markets well before these countries’ bailout exit, as part of its “quantitative easing” program. This enabled the Irish and Portuguese governments to issue large quantities of new debt at low interest rates. Greece was never included the ECB’s quantitative easing program, for two reasons: its debt burden was too large to service in the long term, even with the help of ECB-sponsored low interest rates, and the ECB was under pressure, mainly from Germany, to wind down the program. Moreover, the post-program surveillance procedure does not give the “troika” of official creditors the leverage over Greece that they desire.

In celebrating Greece’s “clean exit,” while retaining its iron grip on the Greek government and withholding debt restructuring, Europe’s establishment is once again displaying its skill at inventing neologisms. Until 75% of Greece’s public debt is repaid – in 2060, at the earliest – the country, we are told, will be subject to “enhanced surveillance” (a term with unfortunate echoes of “enhanced interrogation”). In practice, this means 42 years of quarterly reviews, during which the European Commission and the ECB “in collaboration with the IMF” may impose new “measures” on Greece (such as austerity, fire sales of public property, and restrictions on organized labor). In short, the next two generations of Greeks will grow up with the troika and its “process” (perhaps under a different name) as a permanent fixture of life.

The celebration of Greece’s return to normality began a few weeks ago with the government’s oversubscribed €3 billion issue of its first seven-year bond in years. What the revelers failed to note, however, was that, to borrow that €3 billion on behalf of its creditors, the Greek state added €816 million in interest payments to its debt repayments for 2025. Germany’s cost for rolling over the same sum, on the same day, was a mere €63 million. Will Greece’s income rise by a similar amount between now and 2025 to make this sustainable?

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“The agricultural feed companies, the chemical companies, the pharmaceutical companies that provide the antibiotics fed en masse to factory-farmed animals, the equipment manufacturers that sell cages and tractors – they all benefit.”

Modern Food Farming Puts UK Wildlife Species At Risk Of Extinction (Ind.)

Some of Britain’s favourite wildlife is at risk of becoming extinct unless there is a new, 21st-century agricultural revolution, experts are warning. Species from hedgehogs to skylarks and birds of prey are being wiped out – in part by companies with vested interests in “destructive” factory farming, it was claimed on World Wildlife Day, which takes place today. The “alarming” declines in wildlife will threaten not just the richness of the planet but also our ability to grow food, according to the RSPB. After scientists warned last year that the world is facing a sixth mass extinction, turtle doves are on the brink of being wiped out, the latest survey figures show. Numbers of grey partridges, corn buntings and tree sparrows have dropped by at least 90 per cent in 40 years, leaving them all at risk of vanishing from Britain.

Earlier this month, a new report revealed that the number of hedgehogs in the countryside had more than halved since 2000. Nearly two-thirds of Britain’s skylarks and lapwings have disappeared, the European bird census showed, while Birdlife International says 95 per cent of turtle doves have vanished in 20 years. Just days after Environment Secretary Michael Gove unveiled plans to reward farmers who care for the environment, ornithologist Philip Lymbery warned of a culture among government policymakers and scientists of blaming biodiversity declines on climate change – instead of tackling those with “vested interests” in “disastrous” modern farming practices – because it was easier to avoid blaming anyone.

Mr Lymbery, head of charity Compassion in World Farming (CiWF), said changes in farming in the past half-century to drastically and artificially push up quantities of food produced were destroying species from nightingales to butterflies and peregrines. “I’m worried that policymakers and some scientists duck the issue by blaming all the things damaging nature on climate change,” he told The Independent. [..] “The agricultural feed companies, the chemical companies, the pharmaceutical companies that provide the antibiotics fed en masse to factory-farmed animals, the equipment manufacturers that sell cages and tractors – they all benefit. “It’s not the average farmer who benefits from industrial agriculture. And it needs to change.”

Read more …

Hollywood mirrors international charities like Oxfam. Pedophilia rules both.

Three Billboards In Hollywood, California (TAM)

Just days before the first Academy Awards ceremony since Hollywood was hit with allegations of rampant sexual harassment, assault, and pedophilia, a Los Angeles street artist made a bold statement just a few miles from the Dolby Theater where the Oscars will be held. Sabo, a conservative-leaning artist who has previously tagged the city with art referencing former President Obama’s drones, purchased three billboards, echoing the sentiment of a Academy Award-nominated film, Three Billboards Outside Ebbing, Missouri, which tells the story of a mother who seeks accountability for her daughter’s rape and murder, which police in her small town have failed to solve. In the film, the mother purchases three billboards that read:

“RAPED WHILE DYING”

“AND STILL NO ARRESTS?”

“HOW COME CHIEF WILLOUGHBY?”

In Sabo’s version, the billboards plastered in Hollywood read:

“AND THE OSCAR FOR BIGGEST PEDOPHILE GOES TO…”

“WE ALL KNEW AND STILL NO ARRESTS”

“NAME NAMES ON STAGE OR SHUT THE HELL UP!”

Kevin Spacey’s career went down in flames last year amid the fallout of widespread allegations of abuse by now-scorned producer Harvey Weinstein. Anthony Rapp accused the actor of making advances on him in 1986, when Rapp was only 14. Other accusations against Spacey followed, including some others that alleged Spacey attempted to take advantage of the victims when they were under the age of 18. Further, Corey Feldman, who has long warned of predatory, pedophilic behavior in Hollywood, revealed several of his accused abusers last year, citing John Grissom, former talent manager Marty Weiss, and Alphy Hoffman, who was the son of a high-power producer and ran the trendy Soda Pop Club, where Feldman claims widespread harassment took place in the 1980s.

Feldman claimed there were six abusers total, saying one is an A-list actor who might kill him. He has previously said his fellow child star, Corey Haim, now deceased, received worse abuse than he did. In a 2011 appearance on Nightline, Feldman said: “[T]he No. 1 problem in Hollywood was and is and always will be pedophilia…that’s the biggest problem for children in this industry… It’s the big secret.”

Read more …

Dec 162017
 
 December 16, 2017  Posted by at 6:45 pm Finance Tagged with: , , , , , , , , , , , , ,  


Tamara de Lempicka The refugees 1937

 

Note: I feel kind of sorry this has become such a long essay. But I still left out so much. You know by now I care a lot about Greece, and it’s high time for another look, and another update, and another chance for people to understand what is happening to the country, and why. To understand that hardly any of it is because the Greeks had so much debt and all of that narrative.

The truth is, Greece was set up to be a patsy for the failure of Europe’s financial system, and is now being groomed simultaneously as a tourist attraction to benefit foreign investors who buy Greek assets for pennies on the dollar, and as an internment camp for refugees and migrants that Europe’s ‘leaders’ view as a threat to their political careers more than anything else.

I would almost say: here we go again, but in reality we never stopped going. It’s just that Greece’s 15 minutes of fame may be long gone, but its ordeal is far from over. If you read through this, you will understand why that is. The EU is deliberately, and without any economic justification, destroying one of its own member states, destroying its entire economy.

 

 

A short article in Greek paper Kathimerini last week detailed the latest new cuts in pensions the Troika has imposed on Greece, and it’s now getting beyond absurd. For an economy to function, you need people spending money. That is what keeps jobs alive, jobs which pay people the money they need to spend on their basic necessities. If you don’t do at least that, there’ll be ever fewer jobs, and/or ever less money to spend. It’s a vicious cycle.

We may assume the Troika is well aware of this, and that would mean they are intentionally killing off the Greek economy. Something I’ve said a thousand times before. Still, both the Greek Tsipras government and exterior voices continue to claim the economy is recovering. Even if that is mathematically impossible. There undoubtedly are sectors of the economy being boosted, but they are only the ones the Troika members are interested in.

The economy’s foundation, the ‘normal’ people, who work jobs if they’re lucky, are not recovering or being boosted. Quite the contrary. Half of young people are unemployed and receive no money at all. Most of those who do have jobs receive less than €500 for a full month of work. Mind you, this is while the cost of living is as high as it is in Germany or Holland, where people would protest vehemently if even their unemployment benefits were cut that low. Unemployment benefits hardly exist at all in Greece.

This situation, as also mentioned often before, means that entire families must live off the pension a grandmother or grandfather gets. As of next year, such a pension will be cut to net €480. Of which most will go to rent. And the cuts are not finished. There are plenty neighborhoods in Athens where there are more boarded-up shops then there are open ones. It is fiscal waterboarding, it is strangulation of an entire society, and there is no valid economic reason for it, nor is there a justification.

If Greece had access to international debt markets, if would perhaps pay a higher interest rate, but investors would buy its bonds. The Troika denies Greece that access. Likewise, if the ECB had not excluded the country from its QE bond-buying programs, the country would be nowhere near its present disastrous predicament. The ECB’s decision not to buy Greek bonds can only be a political one, it’s not economic. There is something else going on.

Here’s that latest pension news:

 

Greek Pension Cuts To Hit 70% Since The Start Of The Bailouts

The next batch of pension cuts, voted through in the last couple of years and set to come into force within the next two years, will take total losses for pensioners since the start of the bailout period in 2010 up to 70%. A recent European Commission report on the course of Greece’s bailout program revealed that the reforms passed since 2015 will slash up to 7% of the country’s GDP up to 2030. The United Pensioners network has made its own calculations and estimates that the impending cuts will exacerbate pensioners’ already difficult position, with 1.5 million of them threatened with poverty. The network argues that when the cuts expected in 2018 and 2019 are added to those implemented since 2010, the reduction in pensions will reach 70%.

Network chief Nikos Hatzopoulos notes that “owing to the additional measures up until 2019, the flexibility in employment and the reduction of state funding from 18 billion to 12 billion euros, by 2021, one in every two pensioners will get a net pension of 550 euros [per month]. If one also takes into account the reduction of the tax-free threshold, the net amount will come to 480 euros.” Pensioners who retired before 2016 stand to lose up to 18% of their main and auxiliary pensions, while the new pensions to be issued based on the law introduced in May 2016 by then minister Giorgos Katrougalos will be up to 30% lower.

More than 140,000 retirees on low pensions will see their EKAS supplement decrease in 2018, as another 238 million euros per year is to be slashed from the budget for benefits for low income pensioners. The number of recipients will drop from 210,000 to 70,000 in just one year. There will also be a reduction in new auxiliary pensions (with applications dating from January 2015), a 6% cut to the retirement lump sum, and a freeze on existing pensions for another four years, as retirees will not get the nominal raise they would normally receive based on the growth rate and inflation.

 

As half of the pensioners see their pensions cut to €480 a month, they’re not the worst off in the country. There are about a million unemployed who get nothing at all, and 580,000 who do have ‘jobs’ but ‘earn’ just €407 a month. And that’s if they’re lucky enough to get a contract. Many don’t, and work for even less. Yeah, that’s how you keep unemployment numbers down; Americans should know all about it.

 

Unemployment Decreases, Yet 580,000 Workers Earn Just €407 Per Month

Greece’s jobless rate fell to 20.2% in July-to-September from 21.1% in the second quarter, data from the country’s statistics service ELSTAT have showed. About 75.6% of Greece’s 970,000 jobless are long-term unemployed, meaning they have been out of work for at least 12 months, the figures showed on Thursday. Greece’s highest unemployment rate was recorded in the first quarter of 2014, when joblessness hit 27.8%.

Athens has already published monthly unemployment figures through June, which differ from quarterly data because they are based on different samples and are seasonally adjusted. Quarterly figures are not seasonally adjusted. At the same time, part-time employment has been constantly increasing. According to latest data, 580,000 workers earn just 407 euros per month. An amount that is for sure not enough to help people come through the month. And this data refers to declared work contracts. In undeclared work market people earn even 200 or 300 euros.

 

While all these Greeks don’t make enough to feed themselves and their families, the Troika-induced tax rises keep on coming like a runaway train with broken brakes. Every single day, more people are added to the list of those who simply can’t afford to pay their taxes, under the guise of going after ‘strategic defaulters’. There is no way out if this other than large scale debt forgiveness, debt restructuring, debt write-offs. Consumer spending is what keeps economies alive, but in Greece that is what’s shrinking day after day.

 

Greeks Crushed By Tax Burden

Tax authorities have confiscated the salaries, pensions and assets of more that 180,000 taxpayers since the start of the year, but expired debts to the state have continued to rise, reaching almost €100 billion, as the taxpaying capacity of the Greeks is all but exhausted. In the month of October, authorities made almost 1,000 confiscations a day from people with debts to the state of more than €500. In the first 10 months of the year, the state confiscated some €4 billion, and the plans of the Independent Authority for Public Revenue provide for forced measures to be imposed on 1.7 million state debtors next year.

IAPR statistics show that in October alone, the unpaid tax obligations of households and enterprises came to €1.2 billion. Unpaid taxes from January to October amounted to €10.44 billion, which brings the total including unpaid debts from previous years to almost €100 billion, or about 55% of the country’s GDP. The inability of citizens and businesses to meet their obligations is also confirmed by the course of public revenues, which this year have declined by more than €2.5 billion. The same situation is expected to continue into next year, as the new tax burdens and increased social security contributions look set to send debts to the state soaring. Notably, since 2014, there has been a consolidated trend of a €1 billion increase each month in expired debts to the state.

There are now 4.17 million taxpayers who owe the state money. This means that one in every two taxpayers is in arrears to the state, with 1,724,708 taxpayers facing the risk of forced collection measures. Of the €99.8 billion of total debt, just €10-15 billion is still considered to be collectible, as the lion’s share concerns debts from previous years, in many cases of bankrupt enterprises and deceased individuals.

 

Lately, a narrative is being force-fed into, and by, western media about Greece becoming some sort of paradise for investors. But why would anyone want to invest into an economy that clearly is no longer functioning, not even viable? Well, in such an economy, all kinds of things can be bought on the cheap. And because Greece is very beautiful, and has beautiful weather, why not buy it all and turn it into a tourist colony owned by foreigners and the odd rich Greek?

One tiny thing: they would prefer a different, even more business-friendly government. As if Tsipras hasn’t crawled up the Troika’s where-the-sun-never-shines parts enough. That’s the context into which to place for instance Kyle Bass’s comments:

 

Kyle Bass: Investors to Pour Billions into Greece after Political Change

Hedge fund manager Kyle Bass believes that Greece will come out of the crisis and investors will pour billions into its economy once the government changes, according to a CNBC report. The founder and chief investment officer of Hayman Capital Management; which manages an estimated $815 million in assets, is closely following the course of the Greek economy and political situation, and has invested in Greek bank stocks.

Bass says that foreign investors are waiting on the sidelines for a political shift to take place in 2018. “My best guess is a snap election for prime minister will be called between April and September of next year and Prime Minister Alexis Tsipras will lose power. When that happens, there will be a massive move into the Greek stock market. Big money will flow in as investors feel more confident with a more moderate administration,” Bass said.

“It’s going to take Kyriakos Mitsotakis; president of New Democracy, the Greek conservative party, to be voted in as prime minister to reform the culture and rekindle investor confidence,” the investor said. “I have no doubt 15 billion euros in bank deposits will come back to Greek banks if he’s elected. The stock and bond markets will also jump following the election.” Bass says that global investors are waiting for the political change in order to invest in real estate, energy and tourism.

So far, the hedge fund manager noted, Greece has proceeded with privatizations of its main port; regional airports; its railway system; the largest insurance company, and there are more important ones to be completed within the next two years. “There is so much potential in Greece,” Bass said, noting that investors are waiting for the right moment to enter, the CNBC report concludes.

Kyle Bass and all his ilk are lining up for the goodies for pennies on the dollar. If only the desolate pensioners and unemployed young are desperate enough to believe that, and vote for, a right-wing government is good, simultaneously, for both their interests and that of international vultures and hedge funds.

 

Funds Take Positions Ahead Of Government Change In Greece

Brevan Howard Asset Management, one of Europe’s biggest hedge funds, revealed to Bloomberg on Tuesday that it has set up two investment funds whose exclusive targets are assets in Greece such as real estate, enterprises and securities, and is aiming to collect 500 million euros from private investors. Co-founder of Brevan Howard and head of one of the two funds Trifon Natsis said that some 250 million euros has already been collected. The company was co-founded by four others, including Alan Howard, in 2002. “After eight years of crisis and recession that’s hit Greece, we’re at a point where the tail risks have disappeared and the country is stabilizing at a low base,” he said.

“We anticipate a material uplift in the Greek economy and asset prices.” “The likely political transition over the next 12 to 18 months will add momentum and reinforce that process,” Natsis said. Brevan Howard seems to be in agreement with Hayman Capital, whose head Kyle Bass said a few weeks ago that the brewing change in government in Greece within the next 18 months will benefit the market: “You’re starting to see green shoots, you’re starting to see the banks do the right things finally in Greece, and you’re about to have new leadership,” he stated recently.

My personal assessment after spending much of my time over the past 2.5 years in Athens is that they will be disappointed. Not only does a country, to make it attractive for foreigners, need a functioning economy, which Greece no longer has even at a “low base”, but the anger that has been building up here, which was held in check by Syriza and its ultimately empty promises, is bound to explode when some right winger manages to seize power.

Athens is the most peaceful city you can imagine, the only violence is between ‘anarchists’ and police, and it mostly takes place at set dates and places. Violence among people is virtually non-existent, despite all the deception, the betrayal, the poverty and the youthful testosterone energy that has nowhere to go. But that’s not going to last, I’m afraid.

 

And that will also be because many Greeks understand the contents of the following, devastating, interview by Michael Nevradakis for Mint Press News with Nicholas Logothetis, former member of the board of the Greek Statistical Authority (ELSTAT). Greece has been set up. And many people here know it. They have put their hopes in the democratic process, in voting into power a different government from the same old clique they have seen for many decades.

The likely winner of the next elections is New Democracy, led by Kyriakos Mitsotakis, the man the hedge-funders want in. Mitsotakis, a banker, is very much part of the old Greek elite, his father was a prime minister. If he gets elected things are not very likely to remain peaceful. Says my gut.

 

Update: while I was writing this article, the following came out. Eurogroup head Dijsselbloem admitting the first Greek referendum had nothing to do with helping Greece, the reason always provided for why it happened. Instead, it was always, as we’ve said so many times, meant to save German and French banks. And now that he’s leaving the job, Dijsselbloem, who obviously feels untouchable, just lays it out there. After having played a large role in destroying the country, the society, the economy. It’s almost hard to believe. But only almost. Because the Troika doesn’t answer to anyone. Then again, Greece has an independent judicial system.

 

The Aim Of The First Memorandum Was To Rescue Investors Outside Greece, Dijsselbloem Admits

The main aim of the first Greek memorandum, especially, was to rescue investors outside Greece, outgoing Eurogroup chief Jeroen Dijsselbloem admitted in the Europarliament on Thursday. “There were mistakes in the first programmes, we improvised. The way we dealt with the banks was expensive and ineffective. It is true that our aim was to rescue investors outside Greece and for this reason I support the rules for bail-ins, so that investors aren’t rescued with tax-payers’ money,” said Dijsselbloem in reply to independent Greek MEP Notis Marias.

Dijsselbloem noted that it had been a huge crisis because the fiscal sector had faced the risk of a total collapse that would have left many countries with a high debt. However, he pointed out that banks had only needed €4.5 billion in the third programme because the private sector had a huge participation. Referring to the non-performing loans, he said that a private solution that did not once again place the burden on tax-payers was near. He also pointed to measures being taken in Greece for the protection of the socially weaker groups, to make sure that they were not the victims of the auctions.

Referring to the early payment of the IMF loans with the remaining money of the programme, the Eurogroup chief said that this made sense financially, given that the IMF’s loans were more expensive than those of the Europeans. However, from a political point of view, the Eurogroup prefers that the IMF remain fully involved in the Greek programme, with its own responsibilities, he added. In any case, he noted that the final decisions on debt relief will be made later, when the programme is concluded and the sustainability of the Greek debt has been examined.

 

As an introduction, a piece of that interview with former Greek Statistical Authority bioard member Nicholas Logothetis (see the rest below). Greece being set up is not just some fantasy idea.

In my opinion, joining these medieval memorandums, which have brought about this economic crisis that Greece is still experiencing, was beyond any doubt pre-planned and predetermined. This arises not only from Strauss-Kahn’s own admission that the IMF had been preparing every detail of this with Papandreou, it also arises for other reasons that subsequently became known – that Greece was chosen by the designers of the European Union to become the guinea pig for the implementation of harsh austerity and other forms of economic punishment, set up for all as an example to be avoided, in the context of a new EU economic policy for handling the member countries with fiscal problems.

Indeed, the policy of the memorandums gave the opportunity not only to the IMF to put a foot in Europe – until then its activities always were, with devastating consequences, limited to developing countries in Africa and Latin America – but also gave the opportunity to the French and German banks to get rid of their so-called toxic bonds, that were loaded onto the Greek people by turning a private debt into a state debt.

In order to achieve all of this, of course, they had to plant the appropriate person in ELSTAT at a time when certain statistical adjustments were required, in order to support their treacherous plan. Where did this lead eventually? To the bankruptcy of the Greek state.

This is some story. It’s being denied in what just about amounts to a full blast PR campaign by many of those involved on the Troika side. Their narrative is: how dare the Greeks attack, and drag into court, their own unblemished ex-IMF statistician (who’s not even a statistician)? Whereas the actual question should be: how dare the Troika et al attack the Greek judicial system?

They’re getting away with it so far, but there are still court cases pending. And as Nicholas Logothetis says, he is confident that the Greek court system is the only party that has the power and the independence to set this straight.

I wanted to take bits and pieces out of this, shorten it etc., but it’s just too good. Sorry, Michael, sorry MintPress! It reads like a crime novel. And you can never again say you didn’t know. We can only hope that the Greek court system will hold Europe to task.

But while they can probably call on Papandreou to stand trial, what about Strauss-Kahn or Lagarde? Or Schäuble and Dijsselbloem? What if they can even prove Greece was set up, who’s going to pay the damage done to the Greek population, society, and the Greek economy, over a decade?

It’ll take many decades for the country to recover from what has been perpetrated upon it. And this could only happen because western media have been too lazy and compliant to question what has been going on. 90%+ of what you’ve been reading about Greece has been fake news. Note: I always put everything I quote in italics, but this is an exception to that rule:

Here we go:

 

The Trials of Andreas Georgiou and the Fraud That Drove Greece into Austerity

The mainstream narrative regarding the cause of the severe economic crisis Greece has experienced is that the Greek people and Greek state were irresponsible with their finances, lived “beyond their means” at the expense of EU taxpayers, and provided overly generous social benefits and pensions to an underproductive, uncompetitive, and lazy populace.

These characterizations have then been used to justify the successive memorandum agreements, or “bailouts,” and the austerity measures that have been imposed in Greece since 2010, as the country’s “just deserts” — the “bitter medicine” that must be prescribed to correct Greece’s previous ills.

A different view exists, however — one that is based on allegations that Greece was driven into the memorandum and austerity regime not by economic incompetence and cultural deficiencies, but by a fraud that was perpetrated against the Greek people and the country of Greece.

In this interview, which aired in November on Dialogos Radio, Nicholas Logothetis, a former member of the board of the Greek Statistical Authority (ELSTAT), describes allegations that have been made against Andreas Georgiou, ELSTAT’s former president, and against EU statistical authority Eurostat, regarding how Greece’s deficit and debt figures were illegitimately inflated in 2010, providing the rationale to drag Greece under a regime of austerity and extreme economic oversight.

Logothetis details how debt swaps and other questionable financial dealings were added to Greece’s debt and deficit, as well as the consequences of these actions, the criminal and civil convictions against Georgiou, and the court cases that are still pending.

 

MPN: Let’s begin with a discussion about Andreas Georgiou, the embattled former president of ELSTAT, who oversaw the augmentation of the Greek deficit and debt. Describe for us Georgiou’s background prior to taking on the role of president of ELSTAT. Was Georgiou even a statistician?

NL: No, he wasn’t. The operation of the Hellenic Statistical Authority (ELSTAT), as a continuation of the initial National Statistical Authority, as we called it, officially began in late June of 2010. This was the time that the members of ELSTAT’s management board were selected and approved by the conference of parliamentary presidents, with the required supermajority of four-fifths.

Georgiou has been working at the International Monetary Fund since the late 1980s. For a few years before he came to Greece, he was deputy head of a division of the IMF’s statistics department, the financial institutions division. However, the Greek Ministry of Finance announced the appointment of ELSTAT’s board of directors through a press release to all Greek newspapers. In that press release, it presented Georgiou as deputy head of the entire IMF statistics department, a very big department in the IMF and a very important one, hiding his actual organizational position in the IMF, a position of an economic nature rather than a statistical nature, in a subordinate division of the statistics department.

Obviously, the objective of the Greek Minister of Finance was to present Georgiou as an experienced statistician with a significant management position at the IMF, who supposedly left America and came here to “save” Greece by putting in order all of its statistics. In fact, this gentleman was not only unable to run an important institution such as ELSTAT, with over 1,000 employees, but he wasn’t even a statistician, with no academic publications and no knowledge of statistics.

Moreover, for at least six months after assuming the ELSTAT presidency, Georgiou still held his organizational position at the IMF, something that was explicitly forbidden by ELSTAT’s founding law.

 

MPN: What were the actions undertaken by Georgiou as president of ELSTAT? In other words, how were the Greek deficit and debt figures manipulated and in what other ways were Greece’s official economic figures altered?

NL: First of all, Georgiou’s first moves were to remove from the other members of the board any ability and initiative to propose discussion topics or to be involved in the calculation of the deficit or the debt. They were forbidden even to communicate with the remaining staff of ELSTAT! This behavior of Georgiou was not only due to his inability to act as a manager but also due to the fact that he understood from the very beginning, even from the second meeting of the board in September 2010, our refusal to adopt the deficit and debt calculation procedures he wanted to follow. He knew that eventually, the majority of the board members would not approve his deficit figures to be officially published before the end of October 2010.

 


Andreas Georgiou, stands outside the headquarters of the Statistics agency, in Athens, Greece. (AP/Petros Giannakouris)

 

Shortly after the last meeting of the board in early October 2010, the final silencing of the whole board followed and we were never convened again, thus leaving the way free for Georgiou, always under the auspices of senior Eurostat executives, on the one hand, to change the founding law—as he always wanted, to turn ELSTAT into one-person authority—and on the other hand, to inflate the 2009 figures. Exactly how he did this became clear later, but we had suspected soon enough what he was going to do.

My first disagreement with him was when I realized he would add to the deficit figures and to the national debt of Greece the Simitis swaps — that is, the swaps that former Greek prime minister Costas Simitis had made use of in 2001 in order for Greece to get accepted to the Eurozone. Allow me to briefly explain what these swaps are, as they indicate clearly an activity typical of the statistical mishandlings that had always been used and are still taking place in our country, every time the government’s leaders want to achieve something with communication or financial benefits for themselves or for third parties. Swaps are a type of a bond, a banking derivative or simply a stock exchange bet, a currency exchange bet. Many countries do it, even now they are doing it, converting their existing debt into currencies of other countries, say in Swiss francs or Japanese yen, betting that the value of that currency will rise and at the maturity of this debt, the owner will gain from the difference in the value of currencies.

In a way, what happened in 2001 is that much of Greece’s debt was converted into yen, but at the value that the yen had in 1995, which was higher than that of 2001! Remember, the swaps were made in 2001, but the price of the yen in 1995 was the one used for this swap. We can put a big question mark here because I don’t know how legitimate this was, to consider as valid the exchange value of the yen of six years ago. But anyway, this was what happened.

From this action, Greece was theoretically gaining an amount of 2.8 billion euros, which theoretically reduced our debt by this amount, and also reduced the annual deficit below 3%, thus meeting the requirement of the Maastricht Treaty for Greece’s entry into the Eurozone. But let us not forget, however, that this was a bet. It’s not unlike, say, a bond that matures and is redeemable after 30 years: at the time of the swap, there was no applicable European regulation allowing the “bond” to be cashed in prior to maturity, and therefore the swaps were of indeterminate value.

However, Walter Radermacher — at the time the general director of Eurostat, the EU’s statistical authority — decided only for Greece and only for that time and while the value of the yen had collapsed, that this swap value had to be included in our total debt, thus raising our national debt by 21 billion euros because of the losses of the yen. So we found ourselves with an additional fiscal debt of 21 billion euros.

Radermacher’s additional act was to instruct Georgiou to divide this amount by four and to include what came out of it in the deficits for the years 2009, 2008, 2007, and 2006. So eventually, for 2009 and all the three previous years, we found ourselves with an additional deficit of about 5.5 billion euros. But I’m pointing out again that swaps should not be used in any way before their maturity, in order to manipulate negatively or positively the fiscal debt, let alone the yearly deficit.

Another illegal augmentation of our deficit made by Georgiou included the addition of 3.6 billion euros in hospital costs that were not even approved by the Court of Auditors. The Court of Auditors is one of the three institutions of Greek justice, along with the Supreme Court and the Council of State. With regards to this cost, as it turned out later, no one committed to it and no one was paying for it. And finally, the major swelling of the budget deficit was accomplished by the overnight inclusion of the deficits of 17 public utilities, violating many Eurostat criteria and rules. That alone added 18.2 billion euros, equivalent to 20 billion dollars, to the fiscal debt of Greece.

As a result of all the above, Greece ended up with a huge deficit for the year 2009 — 36 billion euros, or equivalently, 15.4% of GDP. This legitimated the first memorandum, paved the way for the second and worst memorandum, and justified the imposition of these cumbersome austerity measures, such as the pension cuts, social insurance and healthcare, and the tax increases — huge tax increases — measures that we are still suffering today.

 

MPN: Dominique Strauss-Kahn himself, the former president of the International Monetary Fund, has gone on the record as saying that he met with George Papandreou to discuss an IMF “bailout” of Greece in April 2009. This was several months before Papandreou was elected as prime minister and at a time when Papandreou was saying, while campaigning, that plenty of money existed to fund the social programs he was promising to Greek voters. Do you believe that the economic “crisis” in Greece was pre-ordained or pre-planned?


Greek Prime Minister George Papandreou, right, shakes hand with the head of the International Monetary Fund, Dominique Strauss-Kahn, during a joint news conference in Athens, Dec. 7, 2010. (AP/Thanassis Stavrakis)

NL: Yes, I do. In my opinion, joining these medieval memorandums, which have brought about this economic crisis that Greece is still experiencing, was beyond any doubt pre-planned and predetermined. This arises not only from Strauss-Kahn’s own admission that the IMF had been preparing every detail of this with Papandreou, it also arises for other reasons that subsequently became known — that Greece was chosen by the designers of the European Union to become the guinea pig for the implementation of harsh austerity and other forms of economic punishment, set up for all as an example to be avoided, in the context of a new EU economic policy for handling the member countries with fiscal problems.

Indeed, the policy of the memorandums gave the opportunity not only to the IMF to put a foot in Europe — until then its activities always were, with devastating consequences, limited to developing countries in Africa and Latin America — but also gave the opportunity to the French and German banks to get rid of their so-called toxic bonds, that were loaded onto the Greek people by turning a private debt into a state debt.

In order to achieve all of this, of course, they had to plant the appropriate person in ELSTAT at a time when certain statistical adjustments were required, in order to support their treacherous plan. Where did this lead eventually? To the bankruptcy of the Greek state.

 

MPN: Andreas Georgiou is no longer in Greece, despite the fact that various legal cases and judicial decisions are outstanding against him. Where does Georgiou find himself today and what is he presently involved with?

NL: He’s away, because he knows what he’s faced with, with trials and legal cases. Georgiou is currently in his comfortable villa in Maryland. He left Greece in the summer of 2015, one month before the end of his five-year term as ELSTAT chairman. Coincidentally, this was shortly after the call from the House of Parliament to testify before the examination committee that had been formed at that time to investigate the reasons for our accession to the first memorandum. He never came to the examination room, pretending to be in the hospital with “pneumonia.” Who on earth has ever heard of a pneumonia case in the middle of the Greek summer?

Anyway, immediately after his “discharge” from the hospital, he left for America. I repeat, one month before the end of his term and without requesting a renewal of the chairmanship position for another five years. He could have done that, but he didn’t, apparently having realized that he could not have avoided the imminent court hearing on the prosecutions for breach of duty and for the felony of inflating the deficit figures — which in the legal language is expressed as “felony of false certification at the expense of the state” together with the “aggravating order for public abusers,” a very impressive legal phrase. This is a legal category that leads to life imprisonment.

I presume that he’s engaged at this time in preparing his defense, through statements via his lawyers in Greece, while he remains absent, missing from every trial that has taken place regarding him.

 

MPN: A few months ago Georgiou was found guilty by the Greek justice system. What were the charges for which Georgiou was convicted and sentenced?

NL: There are two convictions Georgiou had this year. In March, in a criminal court, he was convicted for libel and for written defamation, and he was given one-year imprisonment with a three-year suspension. He appealed through his lawyers, but the Penal Court of Appeals condemned Georgiou again, giving him the same sentence.

Georgiou’s crime was that, in an official ELSTAT news release, he accused former ELSTAT board member Dr. Nicholas Stroblos of being a statistical swindler, obviously trying to divert guilt from himself for statistical fraud. I’m pointing out here that Dr. Stroblos is the former director of the national accounts department of ELSTAT, whom Georgiou illegally replaced with one of his now co-defendants. Consequently, Stroblos sued him in both criminal and civil courts and, apart from the one-year imprisonment imposed by the criminal court, the civil court fined Georgiou 10,000 euros for damages resulting from libel.

Georgiou’s most recent conviction is concerned with one of the three accusations included in the prosecution for breach of duty. The first accusation was related to the fact that he was in parallel for several months, from July to November 2010, as head of the statistical authority in Greece but also as an employee of the IMF, a duplication of employment explicitly prohibited by ELSTAT’s founding law 3832 of 2010. That law required him to work exclusively and with full employment in the ELSTAT board. Georgiou deluded the Greek parliament about his ongoing post with the IMF — and note that the IMF is one of the lenders of Greece — while at the same time he had accepted the post as president of ELSTAT’s board. He would not have been selected as ELSTAT president, not even as a simple member of the board, had the parliament known about his double post.

The second accusation concerned the fact that Georgiou did not convene the ELSTAT board for a whole year, violating the law that required meetings at least once a month.

The third accusation, and the most important of all three, concerned the fact that the decision to endorse the revised figures for 2009’s deficit was taken only by Georgiou, without the agreement of the other members of the board — which had been selected, I remind you, and approved exactly for this purpose by the conference of the parliamentary presidents with a majority of four-fifths. For this accusation, he was convicted in the context of breach of duty, and this had to do with the publication of deficit figures without our approval, as required by law. Georgiou appealed this conviction to the Supreme Court, and we are waiting to see what the Supreme Court will decide.

Georgiou was acquitted on the charge that he did not timely convene the ELSTAT board, although this is intimately interconnected with the non-convening of the board for the approval of the data, for which he was convicted. So we ended up with a paradoxical situation here. He was also acquitted of the charge that while he was a member of the IMF — that is to say, a servant of the lender — he was also chairman of ELSTAT — that is, a servant of the borrower — something that is inconceivable worldwide and yet happened in today’s occupied and economically enslaved Greece.

Naturally, the people who were present in the courtroom were annoyed and protested these acquittals, but when they heard the announcement of his conviction on the third charge they were relieved, of course, and for this charge he was sentenced to two years’ imprisonment with a three year suspension — without being granted, of course, any mitigation.

I, together with fellow whistleblower and former ELSTAT board member Zoe Georganta, filed an objection against the court judgment for the two accusations for which he was acquitted, and we expect a Supreme Court decision as to whether or not Georgiou will go to a new trial for these new accusations. At the moment, the two acquittals cannot be considered irrevocable. But it is true that the most important accusation, for which Georgiou desperately wanted to be acquitted, was the one for which he got convicted.

Indeed, the fact that Georgiou published the inflated elements of the deficit without approval by the ELSTAT board not only proves his guilt of the second accusation, of not convening the board as he should have, but it also implies a deception, because he knew that his swollen deficit figures would never be accepted by a majority of the board members. He further recognized that such a disagreement would sooner or later become public and reveal the irregularities he used with the help of Eurostat itself. Such a revelation would result in the failure of the plan to legitimize the first memorandum and thence to impose onerous austerity measures on Greece. That was not acceptable by the initiators of this plan, who I believe had to use Georgiou and instructed him to silence the rest of the ELSTAT board.

 

MPN: Following the guilty verdicts against Georgiou this past spring, a barrage of positive coverage and PR in favor of Georgiou appeared in the Greek and international media — including Bloomberg, the Washington Post and Politico. We also heard numerous statements of support from major political figures in Greece, the European Union, and elsewhere. These statements criticized the supposed lack of independence of the Greek justice system in the verdicts against Georgiou. How would you describe or characterize Georgiou’s network of support within and outside of Greece, and these arguments made in his favor?

NL: Yes, indeed, various statements have been heard and continue to be heard in support of Georgiou, trying to sanctify him, to elevate him as a serious personality and as an honest scientist. All this in order to justify everything he did illegally as ELSTAT president. All that has been said rests on myths that have been circulated by the domestic and foreign supporters of Georgiou, who are desperate that the case not be brought to the court of justice — the major case of the inflation of the deficit figures.

But this also proves their own guilt in the matter. If they really believe that Georgiou is innocent and that we are the slanderers and the liars, why don’t they let Greek justice do its job and prove his presumed innocence in a court hearing? I would even expect Georgiou himself to be the first to grab this opportunity to be redeemed. This furious effort of all his supporters to prevent the case from being brought to trial reveals their panic as well as their guilt, because they know very well that in the forthcoming court hearing all the evidence will be revealed proving that Greece has suffered the greatest national betrayal since the time of the Thermopylae treason, 2500 years ago, when Efialtes betrayed the Greek army which was fighting the Persian invasion.

The participation of all those major political figures in Greece and the European Union in the betrayal perpetrated by Georgiou will also be revealed. Indeed, the core of this support network includes first and foremost Eurostat, whose senior staff advised Georgiou on how to inflate the 2009 deficit and also how to change ELSTAT’s founding laws in order to neutralize the rest of the board.

Imagine therefore what impact Georgiou’s conviction would have on Eurostat’s image! Eurostat’s political chief is the European Commission, Brussels — that is, one-third of the troika — with all that implies, of course, for many high-ranking political figures in the European Union and beyond. So one can clearly understand why high-level managers from Eurostat and major political figures from the EU itself are continuing to build a wall of protection and support for Georgiou — in the hope that the government and the Supreme Court of Greece will believe all these myths they are promoting.


Greece’s Statistics agency employees walk past the logo of the agency in Piraeus, near Athens. (AP/Petros Giannakouris)

The first myth is that in recent years Georgiou was acquitted many times but the persecution against him continues. That’s what they say. The supporters of Georgiou claim again and again that Georgiou was acquitted, but it’s not true. The acquittal may occur only after the irrevocable final judgment in a court trial, or after an exonerating court order is accepted by the Supreme Court. As appeals against all rulings in Georgiou’s case have been filed with the Supreme Court, he has not been acquitted irrevocably for any charges brought against him.

On the contrary, he has had an irrevocable conviction for defamation, as I said before, and a conviction for one of the three accusations for breach of duty — regarding which the Supreme Court decision is awaited, whether or not it will become irrevocable. But the other two accusations for breach of duty for which he has been acquitted, as I have already said, for these we have filed a complaint and they cannot, therefore, be considered irrevocable or a final acquittal. So it’s in keeping with due process that the prosecutions against him still continue.

The second myth goes as follows: Georgiou took over the presidency of ELSTAT after the first memorandum. He cannot, therefore, be regarded responsible for the memorandum and the economic crisis that followed. Well indeed, when Georgiou took action in ELSTAT, we were already under the first memorandum. If you remember, our entry into the first memorandum was announced by George Papandreou in his speech made on the Greek island of Kasterllorizo in April 2010, and the reason for this was allegedly the high level of the 2009 deficit, which was put by Papandreou at 13.6% of GDP. That’s equivalent to about 30 billion euros.

However, it was not the actual deficit, but the prediction by Papandreou of what it would be after all relevant calculations took place. Papandreou did not have the right to take such an important decision, one that would affect Greek society so much, based only on a prediction that had not even been approved by the Court of Auditors. We would be the ones, as ELSTAT’s management board, to supervise the calculations of the actual deficit, to approve it and publish it in October 2010, six months later.

Actually, if we had been given the opportunity to do that and found these deficit figures to be less than 10%, we would have been able to denounce the first memorandum and cancel it! And of course, the rest of the memorandums that followed. But obviously, this would not be something that the designers of the first memorandum wished to happen, and so the appropriate person must be found who, with specific statistical adjustments, could make the deficit of 2009 “confirm” the “validity” of Papandreou’s deficit “forecast” in April 2010, and fully justify our entry into the first memorandum. This is what they wanted.

Furthermore, in order to avoid any controversies with the rest of the board that could endanger their plan, it was decided to neutralize not only the dissidents on the board but the whole of ELSTAT’s board. As a result of all these unlawful actions, the first memorandum was legitimized — and the door opened for the second and worst memorandum and obviously the rest of the memorandums that have followed, and for the austerity measures that have been imposed since then. Therefore, it’s perhaps wrong to say that the first memorandums was due to Georgiou. It’s more appropriate to say that all memorandums and their related medieval austerity measures that we still have on our backs are actually due to Georgiou!

The third myth: since Eurostat has approved Georgiou’s practices and figures, they must be right, they must be correct. But would it have been possible for Eurostat not to approve these statistics, provided by Georgiou, and the methods of administration that he was using? It was Eurostat’s director himself, Walter Radermacher, who gave orders to Georgiou as to what data to add to the deficit. Correspondence has been revealed, from Radermacher to Georgiou, that shows how to add this amount of debt that was incurred by the Simitis swaps, how to add it into four years’ deficits until 2009 — prior to the expiry date, as we previously explained, and although no European regulation existed at the time that would allow this.

Also, it was the permanent representative of Eurostat at ELSTAT, Hallgrimur Snorrason, who — with the assistance of Eurostat’s legal adviser, Per Samuelson — advised Georgiou on how to change ELSTAT’s founding law in order to transform ELSTAT into one-man authority. It’s hardly surprising therefore that Eurostat approved the practices and the deficit figures of Georgiou. Of course, that does not mean that they were correct.

The final myth that I want to mention is that his proponents are saying Georgiou applied all proper European regulations. On the contrary, most European regulations and Eurostat’s own criteria for the deficit and debt calculations were violated by Georgiou and his advisers from Eurostat, in order to justify the unjustifiable integration of deficits of many public utilities into the 2009 deficit — a decision that would require a thorough study of several months for each public utility. You can’t just decide to include the deficit of a utility in the public debt; you need a thorough study, for several months, six months. So what kind of European regulations did Georgiou actually apply, I wonder? No one knows.

 

MPN: What is plainly evident is that there is a very extensive and very powerful network of support for the likes of Andreas Georgiou, a network that includes powerful media voices, major politicians and political figures, major centers of power and influence and decision-making. How can such a powerful and seemingly unified network of political and media forces even be countered by the Greek people?

NL: Indeed, Georgiou’s support network, composed of high-ranking political figures — domestic and foreign — is powerful. But no matter how much influence this network can have on political affairs in Greece, I think that it is not in a position to influence the Greek justice system, which I consider impartial. The fact that the case has reached up to the level of the Supreme Court, which so far has justified many of our objections and appeals against Georgiou, gives us hope that ultimately the systemic power network that exists supporting Georgiou can be successfully dealt with.

At the end of the day, our justice system, perhaps the only irreproachable institution in our country, seems to have borne the burden of this matter. I believe that the truth will soon be revealed, no matter how many powerful political and media forces try to force an acquittal of Georgiou.

 

MPN: What are the judicial cases still outstanding regarding the ELSTAT case and Andreas Georgiou? What are the charges which Georgiou is still facing? And what is your expectation regarding the outcome of these cases?

NL: Most importantly, the cases of the false inflation of data and of the breach of duty by Georgiou, involve crimes of public document forgery and violation of ELSTAT’s founding law. As I have already said, Georgiou was convicted of one of the more important accusations related to the breach of duty — that of the publication of the 2009 deficit figures without the approval of the ELSTAT board. He has been acquitted on the other two charges — the duplication of his appointment in the IMF and ELSTAT and the non-convening of the board — but we have appealed these two verdicts, and we hope that the Supreme Court will decide to repeat the trial for these two related charges.

If this affair is remanded back to the trial courts, we certainly expect Georgiou to be convicted, because the evidence we have against him is rock solid and undeniable. This is what Georgiou’s supporters know. That’s why they push as hard as they can to prevent the case from reaching the high court of justice.

 

MPN: In what way do you believe the verdicts that will be reached by the Greek justice system concerning the ELSTAT and Georgiou cases impact the future of Greece, particularly with regard to the austerity policies and memorandums that are being imposed and the non-serviceable public debt of Greece?

NL: I agree with you that Greek debt is non-serviceable. Even if we get away from the memorandums, we don’t get away from the related loan agreements, and we will continue to be under supervision by the EU until we pay 75% of our debt, something impossible for the next 60 years!

If, however, as we hope, there is an irrevocable conviction of Georgiou for the act of inflating the deficit figures, this will prove that all these medieval memorandums were imposed on the basis of false figures — which gives Greece the right to claim compensation from the European Union for the damage we suffered in the last seven years of the financial crisis.

Article 340 of the Treaty on the Functioning of the European Union gives us the right to claim this compensation, and we have even estimated the financial loss since Georgiou set foot in Greece, a cost that may well exceed 210 billion euros. A compensation of this magnitude would certainly overturn the disgraceful economic situation we are experiencing today. However, I emphasize again that a necessary condition is an irrevocable conviction of Georgiou regarding the felony of inflating the deficit figures.

And what about these instigators who used Georgiou to carry out their treacherous plans? Even Grigoris Peponis — the impeccable investigator who proposed the criminal prosecution of Georgiou in the first place — has suggested that the possible existence of certain instigators within the Greek and European political systems, who directed Georgiou on what to do, has to be taken into consideration. These are the ones who do not want the case to reach an open court hearing — the ones who are so desperate for the acquittal of Georgiou as early as possible, in order to cover their own involvement in the above crime, because they’re well aware that we have evidence of their unlawful intervention in inflating the deficit and also in transforming ELSTAT from an independent authority into one-man authority.

If the Supreme Court sends Georgiou to trial in the high court of justice, all his supporters know that this will mean a likely conviction for him. The support network will then collapse, and they will find themselves accused for their betrayal of their homeland and crimes against its citizens. Our country will then pass from an underprivileged position of a beggar, to the strong position of a challenger, on the basis of specific articles of the Treaty on the Functioning of the European Union itself.


Protesters hold a banner during a rally in Athens, Thursday, Dec. 8, 2016. (AP/Yorgos Karahalis)

As far as we are concerned, we do not really care about the strict or non-strict punishment of Georgiou, who is now a pensioner of the IMF. What interests us is to prove his guilt and thereby to remove the injustice that has been committed against Greece through the false inflation of the public debt and deficit of 2009, and also prove the criminal involvement of the European Commission and Eurostat. This will only be done when the case is referred to an open court hearing, in which Eurostat and Georgiou will have to be present, in order to testify under oath whether or not they have falsely inflated the statistical figures of Greece, and the reasons for doing so.

I do not know when and if this will happen, and how many battles we have to give from now on in order to achieve this. Some tell us that there’s no point in continuing to fight, as it seems that with such a front of support for Georgiou by strong decision-making centers, the battle has already been won against us. We reply by saying that if we stop fighting, there will simply be no other battle — something we don’t want, because let’s not forget what Bertolt Brecht said once: “He who fights, can lose. He who doesn’t fight, has already lost.”

 

MPN: Looking at the situation in Greece today and the economic claims that are being made by the Greek government — that the country has returned to economic growth, that Greece has turned a corner — do you believe that the Greek statistical figures today are credible, or are they perhaps still being manipulated?

NL: Unfortunately, the statistical figures have already been exploited by any government in power so far in Greece. We have seen this happen with the alchemies of swaps in order to get into the Eurozone. By the way, I wish that we had never gotten into the Eurozone in the first place! Our economy was not in a position to handle such a strong and competitive currency. We saw another exploitation of the statistical figures, of the deficit, this time. They became the reason for an economic crisis of the past seven years.

I cannot say what is happening these days with the statistical figures, as I am not in ELSTAT. But we will find out sooner or later what is happening. The truth always comes out for any case of mishandling of statistical figures. We’ve seen this happen. But unfortunately, as long as there is no reliable team to correctly manage the handling of the statistical data in the Greek Statistical Authority, I’m afraid we should again expect irregularities and alchemies of the data.

 

 

Nov 232017
 


Nicolas de Staël Mer du nord 1954

 

Punxsutawney Phil Hammond, the UK chancellor, presented his Budget yesterday and declared five more years of austerity for Britain. As was to be expected. One doesn’t even have to go into the details of the Budget to understand that it is a dead end street for both the country and for Theresa May’s Tory party.

So why the persistent focus on austerity while it becomes clearer every day that it is suffocating the British economy? There are many answers to that. Sheer incompetence is a major one, a lack of empathy with the poorer another. Conservative Britain is a class society full of people who dream of empire, and deem their class a higher form of life than those who work low-paid jobs.

When you see that the British Parliament has even voted that animals don’t feel pain or emotions, you’d be tempted to think it’s a throwback all the way back to the Middle Ages, not just the British Empire. They’re as lost in time as Bill Murray is in Groundhog Day. Only worse.

But perhaps incompetence is the big one here. The inability to understand that if your economy is not doing well, you need to stimulate it, not drain even more of what’s left out of it. The people in government don’t understand economics, and therefore rely on economic theory for guidance. And the prevailing theories of the day prescribe bloodletting as the cure, so they bloodlet (let blood?). Let it bleed.

This is not a British problem, it’s pan-European if not global. Neither is the UK Tory party the only one being killed by it, all Conservative parties share that faith. They’re just lucky that their left wing opponents have all committed hara kiri, and joined their ranks when it comes to economics. All of Europe’s poorer have lost the voices that were supposed to speak for them, to economic incompetence.

Obviously, the US democrats did their own hara kiri years ago. One might label -some of- Bernie Sanders’ views left-wing, but he’s trapped in a system that won’t let him breathe.

 

All of this leads me to question the following:

A letter in the Guardian published on Sunday called on Chancellor Philip Hammond, ahead of his budget presentation on Wednesday, to end austerity in the UK. It is signed by 113 people, a veritable who’s who from the academic field, one -economics- professor after another. They include people like Joe Stiglitz, Steve Keen, Dave Graeber.

Looking at the letter itself, and then the entire list, makes me wonder: I’m sure you all mean well, guys, but I think perhaps you should first of all ask yourselves how it is possible that such a large group of well-educated ladies and gentlemen has become so utterly sidelined over time when it comes to major economic decisions, has allowed itself to be sidelined.

It’s one thing to ask what someone else is doing wrong, it’s another to ask yourself what you have done wrong. My question to y’all would be: where were you? Shouldn’t you have written and/or signed this letter 7 years ago, or 5, even just 3? Isn’t calling on the Chancellor to ‘end austerity now’ a bit late in the game?

Is it even the right call, or should you maybe be calling for him to simply resign (along with the entire cabinet)? After all, what are the odds that the Tories are going to turn on a dime and reverse their entire economic policies? They would look stupid, and they will avoid that like the plague. Here’s that letter:

 

The Chancellor Must End Austerity Now – It Is Punishing An Entire Generation

Seven years of austerity has destroyed lives. An estimated 30,000 excess deaths can be linked to cuts in NHS spending and the social care crisis in 2015 alone. The number of food parcels given to impoverished Britons has grown from tens of thousands in 2010 to over a million. Children are suffering from real-terms spending cuts in up to 88% of schools. The public sector pay cap has meant that millions of workers are struggling to make ends meet. Alongside the mounting human costs, austerity has hurt our economy.

The UK has experienced its weakest recovery on record and suffers from poor levels of investment, leading to low productivity and falling wages. This government has missed every one of its own debt reduction targets because austerity simply doesn’t work. The case for cuts has been grounded in ideology and untruths. We’ve been told public debt is the outcome of overspending on public services rather than bailing out the banks. We’ve been told that while the government can find money for the DUP, we cannot afford investment in public services and infrastructure.

We’ve been told that unless we “tighten our belts” we’ll saddle future generations with debt – but it’s the onslaught of cuts that is punishing an entire generation. Given the unprecedented economic uncertainty posed by Brexit negotiations and the private sector’s failure to invest, we cannot risk exacerbating an already anaemic recovery with further public spending cuts. We’ve reached a dangerous tipping point. Austerity has failed the British people and the British economy. We demand the chancellor ends austerity now.

If you ask me, Britain reached that ‘dangerous tipping point’ years ago. And talking about ‘an anaemic recovery’ sounds like total nonsense. There is no recovery, as you yourselves make clear with the examples you provide of the consequences of austerity. So why say it?

I don’t know if we can blame individual economists for missing out on the effects of political measures, although when those measures affect economics, we probably should. But regardless, the big game in town these days is politics, not economics. Everywhere there are ‘leaders’ fighting for survival, and it’s telling that Donald Trump is not nearly the most besieged among them.

That Theresa May is still PM of the UK is as surprising as it is ridiculous. But it also points to the lack of coherence and timing among her opponents, including those 113 academics. That once May goes, which could be soon, the Tories get to pick yet another one of their own as PM, is even more ridiculous. To top off the absurdity, the next in line could be Boris Johnson.

A country that finds itself in a quandary as immense as the UK faces post-Brexit vote, should not let one party that had a mere 42% of the vote, run all the plans, decisions and negotiations, be they domestic and/or international. There is no surer way for disaster to ensue. It’s the system itself that fails if that possibility exists, more than that one party.

The UK needs, more than anything, a national government (or something in that vein), an option in which at least a majority of the population is represented. That is much more important than some call for some policy to be halted.

Moreover, everyone should see this in the light of international political developments as a whole. What’s happening in Albion is not an isolated event, and it doesn’t happen under the influence of isolated forces or developments. What happened overnight on Sunday with the failure of Angela Merkel’s attempt to form a German coalition government makes that more obvious than ever.

Traditional political parties, left and right, have been swept out of power all over Europe. Germany is just one more example. The process doesn’t have the same shape, or the same speed, everywhere. But it’s real. It’s due to a mixture of rising inequality, deteriorating economic conditions and no left left to represent the people, the victims, at the bottom of societies. Well, and there’s the incessant lies about economic recovery.

But let’s take a little detour first. Just in order to illustrate the point even more. The Guardian ran a piece, also on Sunday, on newly minted French President Emmanuel Macron and his government and party, that is pretty hilarious.

 

New Head Of Macron’s Party Vows To Recapture Its Grassroots ‘Soul’

A fiercely loyal, self-styled “man of the people” has been appointed to lead Emmanuel Macron’s fledgling political movement, La République En Marche (The Republic on the Move, or La REM), promising to recapture the party’s“soul” after a hiatus since the recent election win. Christophe Castaner, 51, a burly member of parliament with a southern accent, styles himself as both in touch with everyday voters and devoted to Macron’s well-oiled communications machine. He was handpicked by the French president to take over the running of La REM.

Castaner, currently a minister and government spokesman, was a Socialist mayor of a picturesque small town in Provence for more than a decade before becoming one of the first politicians to jump ship to Macron’s centrist project in its early days. He grew up in a military family in the south of France, left school before his final exams – which he retook as an adult – and has a reputation for straight-talking. At La REM’s first party congress in Lyon this weekend, Castaner was the lone candidate for the role of party director.

He was picked by Macron at a presidential palace dinner, then confirmed by a group of party members with a show of hands rather than a secret ballot, sparking criticism from the media and political observers about undemocratic internal party practices. A small group of 100 party followers went public last week with an open resignation letter, claiming the party had no internal democracy. Others, including La REM members of parliament, responded that Castaner was “the obvious choice”.

Macron founded his own movement because he saw an opening to defeat all traditional French parties. He won the presidential elections, and only after that organized the movement into an actual political party ahead of parliamentary elections. I’d still like to see someone explain who paid for the campaigns of hundreds of candidate parliamentarians. It’s a mystery. France’s banking and business sector?

Macron has set an example for many people in other countries, provided they can unravel that mystery, of how they, too, can defeat incumbents and other long time power blocks. There are two countries where such tactics have until now not seemed possible: the UK and US. But that, too, will change.

In many other European countries, age-old blocks have already been beaten into submission. Even if many deep state powers in France et al have merely shifted allegiances. As their peers elsewhere will. But that’s just the way things are. It doesn’t negate the huge shifts in politics. Voters all over feel they’ve been had for too long. It’s all part of a tectonic shift. Deteriorating economic conditions will do that for you.

What makes the article on Macron et al so entertaining is the mention of the promise to “..recapture the party’s grassroots “soul”. A political party that’s barely a year old does not have grassroots, let alone a soul. Anyone who thinks otherwise is not thinking. And that is a good thing to keep in mind, because Macron’s example – and success- will inspire similar initiatives in many places, and similar nonsensical narratives.

 

Ironically, if that’s the right word, the world -or at least the EU- is now Macron’s oyster. Angela Merkel has shown her weaknesses, and she has blinked first, in her failed attempt to form a new cabinet, and she will not recover from that, not with anything remotely like her past clout. Maybe -more than- 12 years as head of state is not such a good idea.

While Macron is a blank sheet without a soul or grassroots, Merkel and her CDU party possess both in spades. It’s just that in today’s world these things tend to easily turn against you. You’re better off without a past that you can be blamed for. Macron has no past. And no soul.

Merkel leaves an enormous void both in Germany and in Europe (even globally). And it’s one thing for her to have become too powerful at home, but it’s quite another for the same to have been allowed on the entire continent. Germany, under any leadership, will remain the only power in Europe that matters, no matter what grand plans Macron devises. And that is the EU’s fatal flaw. If you have 27-28 sovereign countries and you try to order them around all the time, you have a problem on your hands.

 

There is an inherent contradiction in being both the leader of political union’s strongest country and -simultaneously- of the union as a whole, and Merkel has bitterly failed in addressing, let alone solving, that contradiction. Merkel didn’t create it, true enough, but because she is/was the boss, it is her responsibility to address it. Even if it’s ultimately unsolvable.

In the present setting, any German leader, Angela or someone else, will be voted in by Germans, and focus on their interests, to hold on to these votes. But German interests are not always the same as those of other countries. That means Germany will always come out on top, and more so as time passes. Ever more wealth will flow to Berlin. That’s the fatal flaw, and at present there’s no way out of it.

With Merkel weakened, or soon even gone, lots of voices will speak up across Europe for their countries’ sovereignty, and the attack on them from Brussels. We already have Poland, Czechia and Hungary. Expect a lot more noise from Italy in the run-up to its elections. The power balance that Merkel held together is gone for good.

Yes, her refugee policy backfired, which is no surprise given that she decided on it like some empress. But what may be more important is that her traditional opponent, the left wing SPD, was not only her coalition partner, but it has no ideas that are notably different from her conservatives, and its new head is the former head of the European Parliament.

Where does one turn as a German who doesn’t want all that more EU all the time? Either far left or far right. Everything else has become a homogenous blob, all across Europe. And all of that blob is in favor of imposing ever more austerity on the most unlucky in their societies, because bloodletting is the most advanced treatment they know of.

 

It’s not even so much the financial crisis that has caused a political crisis in Europe, it’s the answers to it, the incompetence. Greece is a far worse-off victim of austerity than Britain is, and Yanis Varoufakis has described very well why that is: an absolute stonewalling refusal to talk about any alternatives to bloodletting. Because austerity is an ideology bordering on religion, executed by people who care much more about their own careers than they do about their people.

Greece is beyond salvation, its economy has been so thoroughly destroyed it will take decades to recover, if it ever can. Britain is set to follow the Greek example. The blame for that will be put on Brexit, not disastrous economic ‘policies’. In the same way that the Greek crisis was blamed on the Greeks, not the German and French banks that treated the country like an overleveraged game of Texas Hold ’em.

After Merkel Europe will fall victim to a vast power vacuum. In effect, today’s already ‘After Merkel’, even if it will take people a while to understand that. The EU is unraveling, and the blame goes to austerity and its incompetent priests. Including Angela. The bloodletters destroy their own economies, and they don’t understand that either.

Merkel hasn’t just demolished Greece, she has, in doing that, fatally undermined the foundations of the EU as well. And Germany. Look, ‘Mutti’ Merkel invited a million refugees to her country, and now refuses to let hundreds of war-traumatized children stuck on Greek islands join their parents in Germany, because she fears it could cost her votes. Talk about priorities. Theresa May does the same as we speak.

There’s a price to be paid for incompetence. It’s a shame that Merkel and Theresa May and Punxsutawney Phil Hammond won’t be the ones paying -the worst of- it.

 

 

Nov 232017
 
 November 23, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , , , ,  


Roger Viollet Great Paris Flood, Avenue Daumesnil 1910

 

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)
Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)
Pressure on US Households Intensifies (DDMB)
Zombie Firms Roam Europe Because Banks Help Keep Them Undead
China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)
Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)
China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)
Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)
Budget Shows Tories Are Unfit For Office – Corbyn (G.)
Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)
Putin Tell Russian Firms To Be Ready For War Production (Ind.)
PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)
Night Being Lost To Artificial Light (BBC)

 

 

“I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)

Former Federal Reserve insider Danielle DiMartino Booth says the record high stock and bond prices make the Fed nervous because it’s fearful of popping this record high credit bubble. DiMartino Booth says, “The Fed’s biggest fear is they know darn well this much credit has built up in the background, and the ramifications of the un-wind for what has happened since the great financial crisis is even greater than what happened in 2008 and 2009. It’s global and pretty viral. So, the Fed has good reason to be fearful of what’s going to happen when the baby boomer generation and the pension funds in this country take a third body blow since 2000, and that’s why they are so very, very intimidated by the financial markets and so fearful of a correction.”

Why will the Fed not allow even a small correction in the markets? DiMartino Booth says, “Look back to last year when Deutsche Bank took the markets to DEFCON 1. Maybe you were paying attention and maybe you weren’t, but it certainly got the German government’s attention. They said the checkbook is open, and we will do whatever we need to do because we can’t quantify what will happen when a major bank gets into a distressed situation. I think what central banks worldwide fear is that there has been such a magnificent re-blowing of the credit bubble since 2007 and 2008 that they can’t tell you where the contagion is going to be. So, they have this great fear of a 2% or 3% or 10% (correction) and do not know what the daisy chain is going to look like and where the contagion is going to land.

It could be the Chinese bond market. It could be Italian insolvent banks or it might be Deutsche Bank, or whether it might be small or midsize U.S. commercial lenders. They can’t tell you where the systemic risk lies, and that’s where their fear is. This credit bubble is of their making.” In short, the Fed does not know what is going to happen, and according to DiMartino Booth, nobody does. DiMartino Booth contends, “I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

“2017 is the record for quantitative easing (money printing) globally. We have never, not even in the darkest days of the financial crisis, central banks have never injected as much money as they have into the markets. . . . I am not a gold bug, but we do know that in times of corrections that there is no place to hide in traditional asset classes that you can get at your Merrill Lynch brokerage. Gold and silver in the precious metals complex are the only places to hide and get true diversification and safety.”

Read more …

They do know what’s going on.

Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)

The world has become used to cheap credit. And the increase in borrowing by emerging economies could pose a risk as monetary policy normalizes. In response to the most recent recession, central banks around the world decreased their main policy rates to almost zero, as seen in the figure below.

[..] The downward trend in short-term and long-term interest rates has made borrowing cheaper over time. As a result, global debt has increased substantially since 2007. According to Bank for International Settlements (BIS) data, total debt of the nonfinancial sector (that is, households, government and nonfinancial corporations) amounted to $145 trillion in the first quarter of 2017, an increase of 40% since the first quarter of 2007. Most of this increase has been driven by an increase in total debt in emerging economies, especially in China, as seen in the following figure.

Furthermore, emerging economies have borrowed heavily in foreign currency, mainly in U.S. dollars, shown in the figure below.

According to the BIS, total dollar-denominated debt outside the U.S. reached $10.7 trillion in the first quarter of 2017, and about a third of this debt is owed by the nonfinancial sector of emerging economies. Analysts have stressed that the rapid accumulation of debt in emerging economies could pose risks for the global economy in the presence of U.S. monetary policy normalization. Market expectations of a rapid increase in the policy rate and the reduction of the Federal Reserve’s balance sheet could lead to higher borrowing costs and an appreciation of the U.S. dollar. This, in turn, would increase the cost of refinancing debt in emerging economies. If these risks materialized, there could be an increase in the demand for safe assets, particularly U.S. Treasuries. This would lead to a decrease in long-term rates. In times of monetary normalization, the yield curve would flatten, and banks profitability could be eroded.

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After the storms…

Pressure on US Households Intensifies (DDMB)

The full effects of Hurricanes Harvey and Irma are rapidly showing up in the data. In September, according to Black Knight, the number of mortgages either past due or in foreclosure rose by 214,000, or 9%, compared with August. At 5.1%, the combined rate is far off the previous month’s 4.7% and the most recent low of 4.5% recorded in March 2007. October’s numbers have brought the picture more clearly into focus. More than 229,000 past-due mortgages are tied to the storms. Hurricane Irma accounted for 163,000 and Harvey, 66,000. To place the damage to households in context, before the storms, Florida and Texas ranked 22nd and 20th among non-current mortgage states. As of October, Florida has risen to second place and Texas is in fifth place.

The economy has also enjoyed a rush of car sales as sufficiently-collateralized and insured drivers immediately replaced vehicles destroyed by the storms. According to the latest retail data, car sales slowed to a 0.7% growth rate in October, far below September’s blistering 4.6-percent pace. Nonetheless, the next development could be a further deterioration in auto delinquencies attributed to storm victims. The most recent third-quarter data from the New York Fed suggest struggling households continue to buckle under the strains of their monthly payments. The delinquency rate for subprime loans originated by auto-finance companies, as opposed to banks, hit 9.7% in the three months ended in September.

With one in four auto loans outstanding going to subprime borrowers, the rate has been rising since 2013 and is at a seven-year high. What’s most notable is that these delinquency rates are being recorded outside recession, all but ensuring 2009’s peak of 10.9% will be breached in the next downturn. And while credit-card delinquencies are nowhere near their crisis-era double-digit peaks, the New York Fed noted that serious delinquencies have been on the rise for one year. The serious delinquency rate hit 4.6% in the third quarter, up from 4.4% the prior quarter. Adjusted for inflation, the growth of U.S. credit-card spending has outpaced that of incomes for 26 straight months.

Read more …

Anyone shorting Italy for real yet?

Zombie Firms Roam Europe Because Banks Help Keep Them Undead

So-called zombie firms – companies that would be out of business or painfully restructured in a competitive economy – have become a key issue for policy makers grappling with sluggish productivity growth in developed economies. The fear is that those “zombies” are sucking up capital that could otherwise go to more productive firms. A new study by the OECD helps explaining how banks favor the spread of zombie firms. It shows that weak companies tend to be connected to weak banks which prefer to roll over or restructure bad loans rather than declaring them delinquent and writing them off. The OECD’s research by Dan Andrews and Filippos Petroulakis lends new urgency to the ECB’s efforts to slash non-performing loans in the region.

Supervisors have asked for detailed plans of how NPLs will be cut and are mulling requiring banks to set aside more capital for soured loans. “In order to facilitate the unwinding of the zombie problem, it is essential that bank balance sheets are strong, underlining the need for fast recapitalizations after crises and other measures to reduce NPLs,” write the authors. “The zombie firm problem in Europe may at least partly stem from bank forbearance.” Weak productivity matters in an ageing continent like Europe, where a shrinking working population is expected to support an ever increasing number of retirees. This can’t happen unless technology and education make it possible to squeeze more and more output from labor and capital.

The OECD has been investigating the impact of living-dead companies for years. It argues that zombification leads to capital misallocation, as weak banks tend to steer less capital to healthier and more productive firms. This in turn leads to low productivity and returns, making it more difficult to get credit even for innovative companies. Andrews and Petroulakis also say that, in addition to forcing banks to work down their NPLs and bolster capital, efficient laws on insolvency are needed. It is not a coincidence that Italy – the European country with the largest NPL problem – overhauled its bankruptcy rules last month to make them quicker and more efficient.

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Mr. Xi, sir, it’s time to be careful.

China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)

China has been pumping a lot of cash into its system to lift market sentiment, as the world’s second-largest economy walks a thin line between curbing debt and keeping everything running smoothly. Last week, the People’s Bank of China injected cash totaling 810 billion Chinese yuan ($122.4 billion) in five straight days of daily liquidity management operations. Those actions, which represented the largest weekly net increase since January, were in part a Beijing response to its 10-year sovereign bond yields spiking to multiyear highs, experts said. “Surging Chinese government bond yields hit the nerve of policymakers, so in order to further prevent a greater surge, they injected liquidity into the system to improve market sentiment,” said Ken Cheung, a foreign exchange strategist at Mizuho Bank who focuses on Chinese currencies and monetary policies.

Nomura analysts said last week in a note that the bond rout was due to fears of regulatory tightening from Beijing. Bond yields, which move inversely to prices, briefly hit 4% in China for the first time in three years. A rise in the benchmark government bond yield threatens to drive up overall borrowing costs — and potentially worsen the country’s debt situation. On Monday and Tuesday of this week, the PBOC injected a net 30 billion yuan ($4.5 billion), but it didn’t expand that money supply on Wednesday. Analysts said that pause may have been due to market sentiment seemingly stabilizing, but it may be short-lived. As Chinese 10-year yields are still near the psychologically important 4% level, Cheung told CNBC he expects more injections ahead if necessary, as Beijing needs to “maintain liquidity to please the market.”

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“It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea?”

Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)

The last time Asian investors borrowed money to invest in structured-credit products – during the run-up to the financial crisis – it didn’t work out so well. Now, a new set of buyers from China are hoping things turn out differently. Instead of snapping up packages of risky derivatives tied to U.S. home loans, they’re buying collateralized loan obligations that bundle together corporate loans to highly leveraged companies. And while such CLOs weathered the last crisis relatively well, there’s already concern that these investors are being tempted to deploy leverage to amplify their returns. The problem is that even the riskiest pieces of CLOs can yield less than the 8 to 10% targets Chinese investors have grown accustomed to in their markets, according to Collin Chan, a CLO analyst at Bank of America Corp.

So CLOs, the junk-rated slices of which yield just 5.5 percentage points more than Libor, “may not be crazily attractive” to them, said Chan, whose team has trekked to China multiple times this year to pitch the products to investors there. On a recent trip to China, potential new investors expressed interest in the idea of applying leverage for the purchase of CLOs, even at the riskier BB level, Chan said. He estimates levered returns for the BB-rated CLO slice may be almost 20%. Leverage is employed using the repo financing market, where short-term loans allow investors to borrow money by lending securities. It’s the latest evidence of the search for yield that has engulfed credit markets and provided a significant boost for CLO sales this year. China and its many types of financial institutions now look like promising buyers for a product that in Asia has typically been bought by Japanese banks and Korean insurers.

“It wouldn’t be wise for the Chinese to use leverage at this stage,” said Asif Khan, head of CLO origination and distribution at MUFG. “It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea? Any potential use of leverage by Chinese investors could pose potential risk in case of severe volatility.” [..] Chinese investors have yet to enter the CLO market en masse. However signs point to their growing participation. In some cases, investment banks and CLO managers have made as many as five trips to Asia this year, adding on special CLO-focused investor conferences in mainland China for the first time ever to raise the product’s profile. The demand to diversify into dollar assets has grown from a wide range of investors, despite Chinese-government capital controls limiting deployment of capital abroad.

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$3.4 trillion sounds low.

China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)

China’s deleveraging campaign is finally starting to bite in the nation’s corporate-bond market, a shift that will make 2018 a clearer test of policy makers’ appetites to let struggling companies fail. Yields on five-year top-rated local corporate notes have jumped about 33 basis points since the month began, to a three-year high of 5.3%, according to data compiled by clearing house ChinaBond. Government bonds, which have far greater liquidity, had already moved last month as the central bank warned further deleveraging was needed. With more than $1 trillion of local bonds maturing in 2018-19, it will become increasingly expensive for Chinese companies to roll over financing – and all the tougher for those in industries like coal that the nation’s leadership wants to shrink.

Two companies based in Inner Mongolia, a northern province that’s suffered from a debt-and-construction binge, missed bond payments on Tuesday, in a demonstration of the kind of pain that may come. In the long haul, that all may be good for China. Allowing more defaults could see its bond market become more like its overseas counterparts, with a greater differentiation in price. And that could mean it channels funds more productively. “The deleveraging campaign and the new rules on the asset management industry will further differentiate good and bad quality credits, and make the onshore credit market more efficient,” said Raymond Gui at Income Partners Asset Management. “Weaker companies will find it harder to roll over their debts because funding costs will stay high.” Gui predicts yields will keep climbing. The average for top-rated corporate bonds is already 2.2 percentage points above what investors demanded to hold them in October last year.

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More austerity.

Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)

Britain faces its worst period of economic growth in more than half a century after official data revealed a country hamstrung by feeble productivity and Brexit. Dismal figures released alongside Philip Hammond’s Budget led the Chancellor to announce a £25bn cash injection to strengthen the ailing economy. The major giveaway will see money head towards housebuilding, preparing Whitehall for Brexit, the NHS and boosting the tech sector. But despite the extra cash most government departments will still experience deep cuts over the next five years, as Mr Hammond struggles to get the public finances under control. Mr Hammond tried to put a positive sheen on progress towards reducing net debt and abolishing the deficit, but data suggested Britain would now fail to achieve a budget surplus before 2031.

Forecasts from the Office for Budget Responsibility indicated GDP would grow by 1.5% in 2017, down from the 2% forecast in March. The Government’s official financial auditor said growth would drop to 1.4% next year – as low as 1.3% in 2019 and 2020 – and then pick up to 1.5% in 2021 and 1.6% in 2022. The OBR said the main downward pressure on growth was a big fall in the UK’s projected productivity, intensifying public spending cuts and Brexit uncertainty. The body was established in 2010 by then-Chancellor George Osborne to end a system under which the Treasury produced its own economic growth estimates. The latest predictions are the gloomiest that the auditor has ever given, and they are also smaller than any produced by the Treasury since 1983. Institute for Fiscal Studies director Paul Johnson said the 1.4% average growth forecast over the period was “much worse than we have had over the last 60 or 70 years”.

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“.. the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.”

Budget Shows Tories Are Unfit For Office – Corbyn (G.)

In his response to the budget, Corbyn – it is the leader of the opposition who traditionally speaks rather than the shadow chancellor – said Hammond had completely failed to tackle a national crisis of stagnation and falling wages. “The test of a budget is how it affects the reality of people’s lives all around this country,” the Labour leader said. “And I believe as the days go ahead, and this budget unravels, the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.” Largely eschewing direct focus on Hammond’s specific announcements in favour of a broader critique of the government’s wider economic approach, Corbyn castigated Hammond for again missing deficit reduction targets, and for a continued spending squeeze on schools and the police.

Speaking about housing, Corbyn said rough sleeping had doubled since 2010, and that this Christmas 120,000 children would be living in temporary accommodation. “We need a large-scale publicly funded housebuilding programme, not this government’s accounting tricks and empty promises.” Summing up, he said: “We were promised a revolutionary budget. The reality is nothing has changed. People were looking for help from this budget. They have been let down. Let down by a government that, like the economy they’ve presided over, is weak and unstable and in need of urgent change. They call this budget ‘Fit for the Future’. The reality is this is a government no longer fit for office.”

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Mish commented on Twitter he’d be more interested in seeing which CIA propaganda sites he’d liked.

Question is: should we trust Facebook’s assessment of what is Russian and what not? I don’t think so.

Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)

Facebook said on Wednesday it would build a web page to allow users to see which Russian propaganda accounts they have liked or followed, after U.S. lawmakers demanded that the social network be more open about the reach of the accounts. U.S. lawmakers called the announcement a positive step. The web page, though, would fall short of their demands that Facebook individually notify users about Russian propaganda posts or ads they were exposed to. Facebook, Alphabet Inc’s Google and Twitter are facing a backlash after saying Russians used their services to anonymously spread divisive messages among Americans in the run-up to the 2016 U.S. elections. U.S. lawmakers have criticized the tech firms for not doing more to detect the alleged election meddling, which the Russian government denies involvement in.

Facebook says the propaganda came from the Internet Research Agency, a Russian organization that according to lawmakers and researchers employs hundreds of people to push pro-Kremlin content under phony social media accounts. As many as 126 million people could have been served posts on Facebook and 20 million on Instagram, the company says. Facebook has since deactivated the accounts. Facebook, in a statement, said it would let people see which pages or accounts they liked or followed between January 2015 and August 2017 that were affiliated with the Internet Research Agency. The tool will be available by the end of the year as “part of our ongoing effort to protect our platforms and the people who use them from bad actors who try to undermine our democracy,” Facebook said.

The web page will show only a list of accounts, not the posts or ads affiliated with them, according to a mock-up. U.S. lawmakers have separately published some posts. It was not clear if Facebook would eventually do more, such as sending individualized notifications to users.

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NATO is a real threat.

Putin Tell Russian Firms To Be Ready For War Production (Ind.)

Russian business should be prepared to switch to production to military needs at any time, said Vladimir Putin on Wednesday. The Russian president was speaking at a conference of military leaders in Sochi. “The ability of our economy to increase military production and services at a given time is one of the most important aspects of military security,” Mr Putin said. “To this end, all strategic, and simply large-scale enterprise should be ready, regardless of ownership.” A day earlier, the president had spoken of a need to catch up and overtake the West in military technology. “Our army and navy need to have the very best equipment — better than foreign equivalents,” he said. “If we want to win, we have to be better.”

Since the 2008 Georgian war, which was a difficult operation, the Russian military has undergone extensive modernisation. Ageing Soviet equipment has gone. There is a new testing regime. There are new command structures. The budget has also increased exponentially. This year, military expenses will cross 3 trillion roubles, or 3.3% of GDP. This would be a record were it not for one-off costs in 2016. Over the next two years, spending is forecast to be cut back slightly, to approximately 2.8% of GDP. Though that budget remains less than 30% of the combined Nato budget in Europe, many countries are increasing their military spending in response to the “Russian threat”. Nato military command has also been restructured — it says in response to Russian cyber and military threats.

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First thing that needs to happen is Australian media reporting on this. Then people must protest. New Zealand recently offered to take a whole group of these people, Australia declined. Many need medical treatment. Australia refuses.

PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)

Papua New Guinea police moved into the shuttered Australian refugee camp on the country’s Manus Island Thursday in the most aggressive push yet to force hundreds of men to leave, the Australian government and detainees said. The police operation was confirmed by Australia’s Immigration Minister Peter Dutton, who said Canberra was “very keen for people to move out of the Manus regional processing centre”. “I think it’s outrageous that people are still there,” he told Sydney commercial radio station 2GB. “We want people to move.” Iranian Behrouz Boochani tweeted from inside the camp earlier Thursday, writing that “police have started to break the shelters, water tanks and are saying ‘move, move'”.

“Navy soldiers are outside the prison camp. We are on high alert right now. We are under attack,” he said, adding that two refugees were in need of urgent medical treatment. Other refugees posted photos to social media sites showing police entering the camp, which Australia declared closed on October 31 after the PNG Supreme Court declared it unconstitutional. [..] Australia had shut off electricity and water supplies to the camp and demanded that some 600 asylum-seekers detained there move to three nearby transition centres. Around 400 of the asylum-seekers have refused to leave, saying they fear for their safety in a local population which opposes their presence on the island. They also say the three transition centres are not fully operational, with a lack of security, sufficient water or electricity.

[..] Canberra has strongly rejected calls to move the refugees to Australia and instead has tried to resettle them in third countries, including the United States. But so far, just 54 refugees have been accepted by Washington, with 24 flown to America in September. Despite widespread criticism, Canberra has defended its offshore processing policy as stopping deaths at sea after a spate of drownings.

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Oh, the lights will go out eventually…

Night Being Lost To Artificial Light (BBC)

A study of pictures of Earth by night has revealed that artificial light is growing brighter and more extensive every year. Between 2012 and 2016, the planet’s artificially lit outdoor area grew by more than 2% per year. Scientists say a “loss of night” in many countries is having negative consequences for “flora, fauna, and human well-being”. A team published the findings in the journal Science Advances. Their study used data from a Nasa satellite radiometer – a device designed specifically to measure the brightness of night-time light. It showed that changes in brightness over time varied greatly by country. Some of the world’s “brightest nations”, such as the US and Spain, remained the same. Most nations in South America, Africa and Asia grew brighter. Only a few countries showed a decrease in brightness, such as Yemen and Syria – both experiencing warfare.

The nocturnal satellite images – of glowing coastlines and spider-like city networks – look quite beautiful but artificial lighting has unintended consequences for human health and the environment. Lead researcher Christopher Kyba from the German Research Centre for Geoscience in Potsdam said that the introduction of artificial light was “one of the most dramatic physical changes human beings have made to our environment”. He and his colleagues had expected to see a decrease in brightness in wealthy cities and industrial areas as they switched from the orange glow of sodium lights to more energy-efficient LEDs; the light sensor on the satellite is not able to measure the bluer part of the spectrum of light that LEDs emit.

“I expected that in wealthy countries – like the US, UK, and Germany – we’d see overall decreases in light, especially in brightly lit areas,” he told BBC News. “Instead we see countries like the US staying the same and the UK and Germany becoming increasingly bright.” Since the satellite sensor does not “see” the bluer light that humans can see, the increases in brightness that we experience will be even greater than what the researchers were able to measure.


UK, Netherlands, Belgium

Read more …

Nov 162017
 
 November 16, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , , ,  


Leonardo da Vinci Salvator Mundi 1513

 

Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)
Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)
Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)
No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)
China’s Outbound Investment Plunged 41% On Year In January To October (BBG)
Senior China Minister Says Some Officials Practice Sorcery (R.)
Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)
The Complete Idiot’s Guide To The Biggest Risks In China (ZH)
Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)
Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)
Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)
Why Japan Knocks Down Its Houses After 30 Years (G.)
Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)
Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)
Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)
Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

 

 

It doesn’t get much more damning than this. Nothing Monty Python about it.

Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)

The Conservatives have been accused of “economic murder” for austerity policies which a new study suggests have caused 120,000 deaths. The paper found that there were 45,000 more deaths in the first four years of Tory-led efficiencies than would have been expected if funding had stayed at pre-election levels. On this trajectory that could rise to nearly 200,000 excess deaths by the end of 2020, even with the extra funding that has been earmarked for public sector services this year. Real terms funding for health and social care fell under the Conservative-led Coalition Government in 2010, and the researchers conclude this “may have produced” the substantial increase in deaths.

The paper identified that mortality rates in the UK had declined steadily from 2001 to 2010, but this reversed sharply with the death rate growing again after austerity came in. From this reversal the authors identified that 45,368 extra deaths occurred between 2010 and 2014, than would have been expected, although it stops short of calling them “avoidable”. Based on those trends it predicted the next five years – from 2015 to 2020 – would account for 152,141 deaths – 100 a day – findings which one of the authors likened to “economic murder”. The Government began relaxing austerity measures this year announcing the end of its cap on public sector pay rises and announcing an extra £1.3bn for social care in the Spring Budget. Over three years the additional funding for social care is expected to reach £2bn, which Labour leader Jeremy Corbyn said was “patching up a small part of the damage” wrought by £4.6bn cuts.

[..] The papers’ senior author and a researcher at UCL, Dr Ben Maruthappu, said that while the paper “can’t prove cause and effect” it shows an association. And he added this trend is seen elsewhere. “When you look at Portugal and other countries that have gone through austerity measures, they have found that health care provision gets worse and health care outcomes get worse,” he told The Independent. One of his co-author’s, Professor Lawrence King of the Applied Health Research Unit at Cambridge University, said it showed the damage caused by austerity “It is now very clear that austerity does not promote growth or reduce deficits – it is bad economics, but good class politics,” he said. “This study shows it is also a public health disaster. It is not an exaggeration to call it economic murder.”

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After a report like that, yes. The Tories have taken things too far.

Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)

Yanis Varoufakis, former finance minister of Greece and author of “Adults in the Room: My Battle with the European and American Deep Establishment,” explains that Jeremy Corbyn as Prime Minister may be a likely scenario and that this would be beneficial for the UK economy. The following is a transcript of the video. Isn’t it astonishing that after Jeremy Corbyn was being described as “the longest suicide note by the Labour Party” about a year ago, today there is an air of inevitability in a Corbyn-led government. I think it’s a delicious irony and I’m very excited by this transition from impossibility to inevitability. In the interests of full disclosure, I’m a friend of Jeremy Corbyn, a supporter, I’ve worked with his team and will continue to do so.

I believe that the re-orientation of British politics under Corbyn and in particular of the Labour Party is highly beneficial, not only to the large strata within British society that have been discarded in the last 20 to 30 years, but interestingly also for British business that produces real stuff as opposed to the City of London and various other service sectors that produce precarious jobs and nothing much of substance. British manufacturing has been left in the margins for far too long and the dearth of investment in fixed capital is something that this Conservative government has absolutely no interest in, or no concept of. A Labour, Corbyn-led government, might be what is necessary in order to create better circumstances both for labour and manufacturing capital in the United Kingdom.

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“Quite simply, people get hurt when the rich don’t pay their taxes.”

Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)

Will the Paradise Papers shift the public’s focus? The leaks alone are seemingly not enough. The 2016 British Social Attitudes survey was conducted just four months after the release of the Panama Papers. Even then, the British public remained more concerned about benefit claimants than tax avoiders. Fundamentally, the Paradise Papers are about numbers – vast sums of money disappearing offshore that could be spent on public services here in the UK. However, as the former chair of the UK Statistics Authority, Andrew Dilnot, has often pointed out, people are bad at dealing with numbers on this scale. Unless you are an economist or a statistician, numbers in the millions and billions are just not particularly meaningful.

The key is to link these numbers to their consequences. The money we lose because people like Lewis Hamilton don’t pay some VAT on their private jet means thousands more visits to food banks. The budget cuts leading to rising homelessness might not have been necessary if Apple had paid more tax. Fewer people might have killed themselves after a work-capability assessment if companies like Alphabet (Google) had not registered their offices in Bermuda, and the downward pressure on benefits payments was not so intense. The causal chains connecting these events are complex and often opaque, but that does not make their consequences any less real, especially for those who have felt the hard edge of austerity.

The Paradise Papers have dragged the murky world of offshore finance into the spotlight. However, calls for change may founder against the British public’s persistent focus on the perceived crimes of the poor. That is, unless we – as academics, politicians, journalists and others – can articulate how the decisions of the very rich contribute to the expulsion of the vulnerable from the protection of state-funded public services. Quite simply, people get hurt when the rich don’t pay their taxes.

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Oh, cut it out.

No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)

Theresa May has rejected allegations that Russia interfered in the Brexit referendum. Speaking during Prime Minister’s Questions, she stated: “If they care to look at the speech on Monday, they will see that the examples I gave were not in the UK.” During a speech May gave at the Lord Mayor’s banquet, the British leader accused Russia of meddling in European elections, hacking attacks on western government institutions, and spreading fake news. During the customarily confrontational Prime Minister’s Questions, May said that, in her speech, she had indeed cited “Russian interference” occurring “in a number of countries in Europe.” However, she denied that this applied in any way to her own country.

Following the session, a spokesperson for Labour leader Jeremy Corbyn said that “I think we need to see more evidence about what’s being talked about. “In relation to Russia and tensions between NATO and Russia and western powers and Russia more generally, Jeremy has made clear on a number of occasions that we need to see an attempt through dialogue to ratchet down tensions with Russia.” May was responding to a question from Labour MP Mary Creagh, who referred to an assertion by Foreign Secretary Boris Johnson that he had seen no evidence of Russia interfering in the Brexit referendum. Johnson made the comment during an appearance before a Commons committee hearing on November 1. Upon prompting by a senior civil servant, Johnson replied “nyet,” and added in English that there was “not a sausage” of evidence.

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Once again: China needs its foreign reserves.

China’s Outbound Investment Plunged 41% On Year In January To October (BBG)

China’s non-financial outbound investment slumped to $86.3 billion in January to October, plunging 41% from a year earlier, as projects in some industries dried up. There were no new real estate, sports or entertainment deals for the period, the Commerce Ministry said in a statement Thursday. Most outbound investment was in leasing and business services, manufacturing, wholesale and retail sales and information technology services. “Irrational” outbound investment has been curbed further, the ministry said, repeating the language it has used this year as authorities push to halt capital outflows.

That’s reversing an unbroken streak of acceleration since at least 2010: Outbound investment soared 44.1% last year to $170.1 billion, about four times the 2009 level, Mofcom data show. “The combination of hardened capital controls and a crackdown on outbound M&A has dented China’s overseas investment,” said Tom Orlik, chief Asia economist at Bloomberg Economics in Beijing. “A short-term downturn was necessitated by the pressing need to stabilize the yuan. Sustained for too long, falling overseas investment would be tough to square with ambitions for greater international influence through the Belt and Road program.”

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In which sorcery is somehow the opposite of socialism.

Senior China Minister Says Some Officials Practice Sorcery (R.)

Some top Chinese officials are guilty of practicing sorcery and would rather believe in gurus and Western concepts of democracy than the Communist Party, a senior minister wrote on Thursday, warning of the danger they presented to its survival. China guarantees freedom of religion for major belief systems such as Buddhism, Christianity and Islam, but party members are meant to be atheists and are barred from what it calls superstitious practices, such as visits to soothsayers. Recent years have seen several cases of officials jailed as part of President Xi Jinping’s crackdown on corruption being accused of superstition, part of the party’s efforts to blacken their names.

Some senior officials in leadership positions had “fallen morally”, their beliefs straying from the correct path, wrote Chen Xi, the recently appointed head of the party’s powerful Organisation Department that oversees personnel decisions. “Some don’t believe in Marx and Lenin but believe in ghosts and gods; they don’t believe in ideals but believe in sorcery; they don’t respect the people but do respect masters,” he wrote in the official People’s Daily, referring to spiritual leaders or gurus. People in China, especially its leaders, have a long tradition of turning to soothsaying and geomancy to find answers to their problems in times of doubt, need and chaos. The practice has grown more risky amid Xi’s war on graft, in which dozens of senior officials have been imprisoned.

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Large scale arrests in the future?

Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)

China must step up its battle against corruption in order to safeguard against a Soviet-style collapse, the country’s second most senior graft buster said in an editorial on Wednesday. Yang Xiaodu, the deputy secretary of the Central Commission for Discipline Inspection, who was promoted to the ruling Communist Party’s 25-strong Politburo last month, said failure would risk the “red country changing colour”. In unusually direct and strongly worded criticism of previous administrations, Yang said “in a previous period”, corruption had been allowed to fester to such an extent that the party’s leadership had weakened, with supervision soft, and ideology apathetic. “It had developed to the point where if not rectified, the country could change colour,” Yang wrote in the official People’s Daily.

“The future fate of the party and the country’s people could follow the same old road to ruin as the Soviet Union and the Eastern Bloc.” President Xi Jinping, like many officials before him, is steeped in the party’s long-held belief that loosening control too quickly or even at all could lead to chaos and the break up of the country. The party regularly implores cadres to study the collapse of the Soviet Union in the early 1990s. Yang’s editorial is the latest salvo signalling that the intensity of Xi’s signature war on corruption would not wane despite the departure of Xi’s right-hand man, Wang Qishan, who was widely seen as China’s second most powerful politician before being replaced as anti-corruption chief in a leadership reshuffle last month. Wang’s replacement, Zhao Leji, wrote a similarly strongly worded editorial in the People’s Daily on Saturday.

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Not doing well. At all.

The Complete Idiot’s Guide To The Biggest Risks In China (ZH)

With both commodities and Chinese stocks suffering sharp overnight drops, it is hardly surprising that today trading desks have quietly been sending out boxes full of xanax their best under-25 clients (those veterans who have seen one, maybe even two 1% market crashes), along with reports explaining just what China is and why it matters to the new generation of, well, traders. One such analysis, clearly geared to the Ritalin generation complete with 3 second attention spans, comes from Deutsche Bank which in a few hundred words seeks to explain the key risks threatening the world’s most complex centrally-planned economy, and ground zero of the next financial crash. Which, one day after our summary take on why the Chinese commodity, economic and financial crash is only just starting (as those who traded overnight may have noticed), is probably a good place to reiterate some of the more salient points.

As Deutsche Bank’s Zhiwei Zhang writes in “Risks to watch in the next six months”, the key thing to keep in mind about China now that the 19th Party Congress is in the rear-view mirror, is that the government is likely to tolerate slower growth in 2018. Han Wenxiu, the deputy head of the Research Office of the State Council, said that GDP growth at 6.3% in 2018-2020 would be sufficient to achieve the Party’s 2020 growth target. And while this is a positive message for the long term, it indicates growth will likely slow in 2018. And, as DB warns, recent economic data suggest the economic cycle has indeed cooled down. For all those seeking key Chinese inflection points, here are the three big red flags involving China’s economy:

For the first time since Q4 2004, fixed asset investment (FAI) growth turned negative in real terms in Q3 this year.

Growth of property sales for the nation turned negative as well in October, the first time since 2015.

The property market boom in Tier 3 cities is also losing momentum.

We hope not to have lost by now all the Millennial traders who started reading this post. To those who persevered, here – in addition to the risks facing the economy – are the other two main risks facing China’s investors: (rising) inflation and (rising) interest rates.

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The most corrupt are the most powerful. Cue China.

Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)

The problem in resource-rich states is that corruption is not marginal to political power, but central to acquiring it and keeping it. Corruption at the top is a form of patronage manipulated by those in charge, to create and reward a network of self-interested loyalists. It is the ruling family and its friends and allies who cherrypick what is profitable: this is as true of Saudi Arabia as it was true of Libya under Gaddafi, Iraq under Saddam Hussein and his successors, or Iraqi Kurdistan that was supposedly different from the rest of the country. Corruption is a nebulous concept when it comes to states with arbitrary rulers, who can decide – unrestrained by law or democratic process – what is legal and what is illegal. What typifies the politics of oil states is that everybody is trying to plug into the oil revenues in order to get their share of the cake.

This is true at the top, but the same is the case of the rest of the population, or at least a large and favoured section of it. The Iraqi government pays $4bn a month to about seven million state employees and pensioners. These may or may not do productive work, but it would be politically risky to fire them because they are the base support of the regime in power. Anti-corruption drives don’t work, because if they are at all serious, they soon begin to cut into the very roots of political power by touching the “untouchables”. At this point principled anti-corruption campaigners will find themselves in serious trouble and may have to flee the country, while the less-principled ones will become a feared weapon to be used against anybody whom the government wants to target.

A further consequence of the traditional anti-corruption drive is that it can paralyse government activities in general. This is because all officials, corrupt and incorrupt alike, know that they are vulnerable to investigation. “The safest course for them is to take no decision and sign no document which might be used or misused against them,” a frustrated American businessman told me in Baghdad some years ago. He added that it was only those so politically powerful that they did not have to fear legal sanctions who would take decisions – and such people were often the most corrupt of all.

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Wishful thinking?

Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)

Saudi Arabia’s dramatic moves to counter Iran in the region appear to have backfired, significantly ratcheting up regional tensions and setting off a spiral of reactions and anger that seem to have caught the kingdom off guard. Now it’s trying to walk back its escalations in Lebanon and Yemen. On Monday, the kingdom announced that the Saudi-led coalition fighting Shiite rebels in Yemen would begin reopening airports and seaports in the Arab world’s poorest country, days after closing them over a rebel ballistic missile attack on Riyadh. The move came just hours after Lebanese Prime Minister Saad Hariri, who shocked the nation by announcing his resignation from the Saudi capital on Nov. 4, gave an interview in which he backed off his strident condemnation of the Lebanese militant Hezbollah, saying he would return to the country within days to seek a settlement with the Shiite militants, his rivals in his coalition government.

The two developments suggest that Saudi Arabia’s bullish young crown prince, Mohammed bin Salman, may be trying to pedal back from the abyss of a severe regional escalation. “This represents de-escalation by the Saudis,” said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center in Beirut. “The general trend is that the Saudis are going to back off and this is largely because of the unexpected extent of international pressure, and not least of all U.S. pressure.” Mohammed bin Salman, widely known by his initials, MBS, has garnered a reputation for being decisive, as well as impulsive. At just 32 years old and with little experience in government, he has risen to power in just three years to oversee all major aspects of politics, security and the economy in Saudi Arabia. As defense minister, he is in charge of the Saudi-led war in Yemen.

He also appears to have the support of President Donald Trump and his son-in-law, senior adviser Jared Kushner, who visited the Saudi capital earlier this month. Saudi partners in the Gulf and the Trump administration rushed to defend the kingdom publicly after a rebel Houthi missile was fired at the Saudi capital, Riyadh, from Yemen last week. A top U.S. military official also backed Saudi claims that the missile was manufactured by Iran. However, Saudi Arabia’s move to tighten an already devastating blockade on Yemen in response to the missile was roundly criticized by aid groups, humanitarian workers and the United Nations, which warned that the blockade could bring millions of people closer to “starvation and death.” Saudi Arabia’s decision to ease the blockade after just a week suggests it bowed to the international criticism, and did not want the bad publicity of even more images of emaciated Yemeni children and elderly people circulating online and in the media.

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“WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.”

Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)

Jeff Bezos, currently the wealthiest human being on planet Earth, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a lucrative resurgence. This self-evident fact doesn’t receive enough attention. I will say it again for emphasis: Jeff Bezos, who has used his business prowess to become the wealthiest person in the world, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a profitable comeback. That did not happen. What did happen is the world’s richest plutocrat realizing that he needed a mouthpiece to manufacture public support for the neoliberal corporatist establishment that he is building his empire upon. This is why WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.

[..] Last year Silicon Valley venture capitalist Chamath Palihapitiya said that Amazon is “a multi-trillion-dollar monopoly hiding in plain sight.” In June Stacy Mitchell, co-director of the Institute for Local Self-Reliance, wrote that Amazon is trying to “control the underlying infrastructure of the economy.”\ Bezos continues to get cozier and cozier with the US power establishment as his empire metastasizes across human civilization. He kicked WikiLeaks off Amazon servers in 2010, he scored a 600 million dollar contract with the CIA in 2013, he joined a Pentagon advisory board in 2016, he hung out with Defense Secretary James Mattis in August, and he’s spent nearly ten million dollars this year lobbying the federal government, which is likely what led to an NDAA amendment gifting Amazon a $54 billion market it’s expected to dominate as a supplier to the Pentagon. Billion. With a ‘b’.

[..] I gave this story a jokey headline, but seriously, watch Jeff Bezos very closely. Your future is increasingly more likely to be imperiled by new money tech plutocrats like him than by old money plutocrats like Soros and the Rothschilds.

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Interesting. Earthquakes are no. 1 incentive.

Why Japan Knocks Down Its Houses After 30 Years (G.)

In the suburban neighbourhood of Midorigaoka, about an hour by train outside Kobe, Japan, all the houses were built by the same company in the same factory. Steel frames fitted out with panel walls and ceilings, these homes were clustered by the hundreds into what was once a brand new commuter town. But they weren’t built to last. Daiwa House, one of the biggest prefabricated housing manufacturers in Japan, built this town in the 60s during a postwar housing boom. It’s not unlike the suburban subdivisions of the western world, with porches, balconies and rooflines that shift and repeat up and down blocks of gently curving roads. Most of those houses built in the 60s are no longer standing, having long since been replaced by newer models, finished with fake brick ceramic siding in beiges, pinks and browns.

In the end, most of these prefabricated houses – and indeed most houses in Japan – have a lifespan of only about 30 years. Unlike in other countries, Japanese homes gradually depreciate over time, becoming completely valueless within 20 or 30 years. When someone moves out of a home or dies, the house, unlike the land it sits on, has no resale value and is typically demolished. This scrap-and-build approach is a quirk of the Japanese housing market that can be explained variously by low-quality construction to quickly meet demand after the second world war, repeated building code revisions to improve earthquake resilience and a cycle of poor maintenance due to the lack of any incentive to make homes marketable for resale. In Midorigaoka, even the newer homes built in the 80s and 90s are nearing the end of their expected lifespan.

Under normal circumstances, their days might be numbered. But down at the end of one block, there’s a sign things are changing. Scaffolding surrounds a vacant house on a corner and workers from Daiwa House are clanging away inside. They’re not demolishing the house but refurbishing it – reorganising the floor plan, knocking down walls, opening up the kitchen and enhancing the insulation. Rather than tear down the house so the next buyer can build something new, they’re rebuilding it from the inside and putting it back on the market. It’s a relatively rare commodity, but something that is increasingly common across Japan: a secondhand home.

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I’ve long predicted that Greece will be much less peaceful once Syriza loses power. But yeah, the whole country’s put up for sale, so foreigners are certain to take over.

Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)

Hedge fund manager, Kyle Bass, believes that Greece will come out of the crisis and investors will pour billions into its economy once the government changes, according to a CNBC report. The founder and chief investment officer of Hayman Capital Management; which manages an estimated $815 million in assets, is closely following the course of the Greek economy and political situation, and has invested in Greek bank stocks. Bass says that foreign investors are waiting on the sidelines for a political shift to take place in 2018. “My best guess is a snap election for prime minister will be called between April and September of next year and Prime Minister Alexis Tsipras will lose power. When that happens, there will be a massive move into the Greek stock market. Big money will flow in as investors feel more confident with a more moderate administration,” Bass said.

“It’s going to take Kyriakos Mitsotakis; president of New Democracy, the Greek conservative party, to be voted in as prime minister to reform the culture and rekindle investor confidence,” the investor said. “I have no doubt 15 billion euros in bank deposits will come back to Greek banks if he’s elected. The stock and bond markets will also jump following the election.” Bass says that global investors are waiting for the political change in order to invest in real estate, energy and tourism. So far, the hedge fund manager noted, Greece has proceeded with privatizations of its main port; regional airports; its railway system; the largest insurance company, and there are more important ones to be completed within the next two years. “There is so much potential in Greece,” Bass said, noting that investors are waiting for the right moment to enter, the CNBC report concludes.

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Europe just lets it get worse.

Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)

With reception centers on Lesvos bursting at the seams and dozens more migrants arriving daily, the island’s mayor, Spyros Galinos, on Tuesday declared a general strike for Monday in protest. Currently, some 1,500 people – including hundreds of small children – are stranded on the island living in tents, and fears are growing that winter may bring a new humanitarian crisis. In total, there are more than 8,000 migrants and refugees on Lesvos, a favored destination of traffickers bringing people over from neighboring Turkey. “Lesvos has a population of 32,000 residents and there are at the moment 8,300 migrants and refugees,” Galinos told Kathimerini. Moreover, local police union members held a protest over deteriorating working conditions.

“The situation on Lesvos has fueled insecurity among citizens. The police force is dealing exclusively with the migrant issue,” the union chief Dimitris Alexiou said. “We are not expendables,” he added. And with flows to the eastern Aegean islands from Turkey showing no signs of letting up, locals and migrants have reached the end of their tether. Since the beginning of November, 1,603 people have arrived on the islands. In September, 6,000 people arrived from Turkey, the same number as in October. On Monday, another 101 migrants landed on eastern Aegean islands, while more than 400 arrived over the weekend. The situation in the Moria camp on Lesvos is a case in point.

“Conditions at Moria have reached breaking point as the facility is three times over capacity,” said Michael Bakas, coordinator of the northern Aegean branch of the Ecologist Greens, who escorted visiting Group of the Greens MEP and vice chairwoman of the European Parliament’s Subcommittee on Human Rights Barbara Lochbihler. Bakas said about 1,000 children are currently stranded at the camp. The issue will be discussed at the EU assembly on Wednesday.

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Monsanto must now have as many lawyers as scientists on its payroll. Time to say enough is enough.

Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)

Monsanto and U.S. farm groups sued California on Wednesday to stop the state from requiring cancer warnings on products containing the widely used weed killer glyphosate, which the company sells to farmers to apply to its genetically engineered crops. The government of the most populous U.S. state added glyphosate, the main ingredient in Monsanto’s herbicide Roundup, to its list of cancer-causing chemicals in July and will require that products containing glyphosate carry warnings by July 2018. California acted after the World Health Organization’s International Agency for Research on Cancer (IARC) concluded in 2015 that glyphosate was “probably carcinogenic”. For more than 40 years, farmers have applied glyphosate to crops, most recently as they have cultivated genetically modified corn and soybeans.

Roundup and Monsanto’s glyphosate-resistant seeds would be less attractive to customers if California requires warnings on products containing the chemical. In the lawsuit, filed in federal court in California, Monsanto and groups representing corn, soy and wheat farmers reject that glyphosate causes cancer. They say the state’s requirement for warnings would force sellers of products containing the chemical to spread false information.“Such warnings would equate to compelled false speech, directly violate the First Amendment, and generate unwarranted public concern and confusion,” Scott Partridge, Monsanto’s vice president of global strategy, said in a statement.

The controversy is an additional headache for Monsanto as it faces a crisis around a new version of an herbicide based on another chemical known as dicamba that was linked to widespread U.S. crop damage this summer. The company, which is being acquired by Bayer AG for $63.5 billion, developed the product as a replacement for glyphosate following an increase of weeds resistant to the chemical. Monsanto has already suffered damage to its investment of hundreds of millions of dollars in glyphosate products since California added the chemical to its list of products known to cause cancer, according to the lawsuit.

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Weep.

Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

Animals from the deepest places on Earth have been found with plastic in their stomachs, confirming fears that manmade fibres have contaminated the most remote places on the planet. The study, led by academics at Newcastle University, found animals from trenches across the Pacific Ocean were contaminated with fibres that probably originated from plastic bottles, packaging and synthetic clothes. Dr Alan Jamieson, who led the study, said the findings were startling and proved that nowhere on the planet was free from plastics pollution. “There is now no doubt that plastics pollution is so pervasive that nowhere – no matter how remote – is immune,” he said. Evidence of the scale of plastic pollution has been growing in recent months. Earlier this year scientists found plastic in 83% of global tapwater samples, while other studies have found plastic in rock salt and fish.

Humans have produced an estimated 8.3bn tonnes of plastic since the 1950s and scientists said it risked near permanent contamination of the planet. Jamieson said underlined the need for swift and meaningful action. “These observations are the deepest possible record of microplastic occurrence and ingestion, indicating it is highly likely there are no marine ecosystems left that are not impacted by anthropogenic debris.” He said it was “a very worrying find.” “Isolating plastic fibres from inside animals from nearly 11 kilometres deep (seven miles) just shows the extent of the problem. Also, the number of areas we found this in, and the thousands of kilometre distances involved shows it is not just an isolated case, this is global.”

[..] The team examined 90 individual animals and found ingestion of plastic ranged from 50% in the New Hebrides Trench to 100% at the bottom of the Mariana Trench. The fragments identified include semi-synthetic cellulosic fibres, such as Rayon, Lyocell and Ramie, which are all microfibres used in products such as textiles, to plastic fibres that are likely to come from plastic bottles, fishing equipment or everyday packaging. Jamieson said deep-sea organisms are dependent on food “raining down from the surface which in turn brings any adverse components, such as plastic and pollutants with it.” “The deep sea is not only the ultimate sink for any material that descends from the surface, but it is also inhabited by organisms well adapted to a low food environment and these will often eat just about anything.”


This microscopic arrow worm has eaten a blue plastic fibre that is blocking the passage of food along its gut. Photograph: Richard Kirby/Courtesy of Orb Media

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Nov 142017
 
 November 14, 2017  Posted by at 10:15 am Finance Tagged with: , , , , , , , ,  


Vincent van Gogh Laboureur dans un champ 1889

 

The Largest Transfer Of Wealth In Living Memory (OD)
How The American Dream Turned Into Greed And Inequality (WEF)
The Fed Destroyed Functioning American Democracy and Bankrupted the Nation (CH)
The Fatal Flaw Of Neoliberalism: It’s Bad Economics (Rodrik)
China Home Sales Fall by Most in Almost Three Years on Curbs (BBG)
Australia’s Whole Economy Is Built On China Buying Our Stuff (News.com.au)
Austerity, Not Brexit, Has Doomed The Tory Party (G.)
Saudi Retreat From U.S. Oil Market Cuts Exports to 30-Year Low (BBG)
Arab States Spent $130 Billion To Destroy Syria, Libya, Yemen (PressTV)
EU Countries Agree To Create A European Mega-Army (R.)
Fisheries Collapse On US West Coast: “It’s The Worst We’ve Seen” (SHTF)

 

 

Or, as yours truly phrased it 2 weeks ago: The Biggest Ponzi in Human History. But the writer makes a big mistake when she says “this will be passed on to the next generation via inheritance or transfer”. It won’t, because prices will plunge. What will be passed on is the debt.

The Largest Transfer Of Wealth In Living Memory (OD)

Last week, the Office for National Statistics (ONS) released new data tracking how wealth has evolved over time. On paper, the UK has indeed become much wealthier in recent decades. Net wealth has more than tripled since 1995, increasing by over £7 trillion. This is equivalent to an average increase of nearly £100,000 per person. Impressive stuff. But where has all this wealth come from, and who has it benefitted? Just over £5 trillion, or three quarters of the total increase, is accounted for by increase in the value of dwellings – another name for the UK housing stock. The Office for National Statistics explains that this is “largely due to increases in house prices rather than a change in the volume of dwellings.” This alone is not particularly surprising. We are forever told about the importance of ‘getting a foot on the property ladder’.

The housing market has long been viewed as a perennial source of wealth. But the price of a property is made up of two distinct components: the price of the building itself, and the price of the land that the structure is built upon. This year the ONS has separated out these two components for the first time, and the results are quite astounding. In just two decades the market value of land has quadrupled, increasing recorded wealth by over £4 trillion. The driving force behind rising house prices — and the UK’s growing wealth — has been rapidly escalating land prices. For those who own property, this has provided enormous benefits. According to the Resolution Foundation, homeowners born in the 1940s and 1950s gained an unearned windfall of £80,000 between 1993 and 2014 alone.

In the early 2000s, house price growth was so great that 17% of working-age adults earned more from their house than from their job. Last week The Times reported that during the past three months alone, baby boomers converted £850 million of housing wealth into cash using equity release products – the highest number since records began. A third used the money to buy cars, while more than a quarter used it to fund holidays. Others are choosing to buy more property: the Chartered Institute of Housing has described how the buy-to-let market is being fuelled by older households using their housing wealth to buy more property, renting it out to those who are unable to get a foot on the property ladder. And it is here that we find the dark side of the housing boom.

House prices are now on average nearly eight times that of incomes, more than double the figure of 20 years ago. It’s unlikely that house prices will be able to outpace incomes at the same rate for the next 20 years. The past few decades have spawned a one-off transfer of wealth that is unlikely to be repeated. While the main beneficiaries of this have been the older generations, eventually this will be passed on to the next generation via inheritance or transfer. Already the ‘Bank of Mum and Dad’ has become the ninth biggest mortgage lender. The ultimate result is not just a growing intergenerational divide, but an entrenched class divide between those who own property (or have a claim to it), and those who do not.

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The dream is dead.

How The American Dream Turned Into Greed And Inequality (WEF)

[..] the idea that every American has an equal opportunity to move up in life is false. Social mobility has declined over the past decades, median wages have stagnated and today’s young generation is the first in modern history expected to be poorer than their parents. The lottery of life – the postcode where you were born – can account for up to two thirds of the wealth an individual generates.The growing gap between the rich and the poor, the old and the young, has been largely ignored by policymakers and investors until the recent rise of anti-establishment votes, including those for Brexit in the UK and for President Trump in the US. This is a mistake. Inequality is much more than a side-effect of free market capitalism.

It is a symptom of policy negligence, where for decades, credit and monetary stimulus shortcuts too easily substituted for structural reform, investment and economic strategy. Capitalism has been incredibly successful at boosting wealth, but it has failed at redistributing it. Today, without a push to redistribute wealth and opportunity, our model of capitalism and democracy may face self-destruction. The widening of inequality has deep historical roots. Keynes’ interventionist policies worked well during the post-war recovery, as fiscal stimulus for the reconstruction boosted demand for US goods from Europe and Japan. But soon the stimulus faded. The U.S. found itself with declining growth and rising inflation at a time when it was mired in the Cold War and Vietnam conflicts. The baby boomer generation demanded higher living standards.

The response was the Nixon shock in 1971: a set of policies which moved away from the gold standard, initiating the era of fiat money and free credit. Credit was the answer to declining growth and rising inequality: if you couldn’t afford university, a new house or a new car, Uncle Sam would lend you the key to the American Dream in the form of that extra loan you needed. Over the following decades, state subsidies to private credit became popular, spreading to the U.K. and Europe. It was the start of debt-based democracies. Private debt outgrew GDP four times in the US and Europe over the following decades up to the 2008 financial crisis, accompanied by the deregulation of financial markets and of banks. The rest is history: nine long years after the crisis, our economies are still healing from excess debt, and regulators are still working on strengthening our financial system. Inequality, however, has deepened even further. Has capitalism failed?

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Very good from Chris Hamilton.

The Fed Destroyed Functioning American Democracy and Bankrupted the Nation (CH)

Against the adamant wishes of the constitutions framers, in 1913 the Federal Reserve System was Congressionally created. According to the Fed’s website, “it was created to provide the nation with a safer, more flexible, and more stable monetary and financial system.” Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was supposedly established to serve the public interest. A quick overview; monetary policy is the Federal Reserves actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States. The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy.

Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates. Through these channels, monetary policy influences spending, investment, production, employment, and inflation in the United States. I suggest what truly happened in 1913 was that Congress willingly abdicated a portion of its responsibilities, and through the Federal Reserve, began a process that would undermine the functioning American democracy. How, you ask? The Fed, believing the free-market to be “imperfect” (aka; wrong) believed it should control and set interest rates, determine full employment, determine asset prices; not the “free market”. And here’s what happened:

• From 1913 to 1971, an increase of $400 billion in federal debt cost $35 billion in additional annual interest payments.
• From 1971 to 1981, an increase of $600 billion in federal debt cost $108 billion in additional annual interest payments.
• From 1981 to 1997, an increase of $4.4 trillion cost $224 billion in additional annual interest payments.
• From 1997 to 2017, an increase of $15.2 trillion cost “just” $132 billion in additional annual interest payments.

[..] As the chart below highlights, since the creation of the Federal Reserve the growth of debt (relative to growth of economic activity) has gone to levels never dreamed of by the founding fathers. In particular, the systemic surges in debt since 1981 are unlike anything ever seen prior in American history. Although the peak of debt to GDP seen in WWII may have been higher (changes in GDP calculations mean current GDP levels are likely significantly overstating economic activity), the duration and reliance upon debt was entirely tied to the war. Upon the end of the war, the economy did not rely on debt for further growth and total debt fell.

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Perhaps the biggest mystery is why the (formerly) left got so involved with it.

The Fatal Flaw Of Neoliberalism: It’s Bad Economics (Rodrik)

We live in the age of neoliberalism, apparently. But who are neoliberalism’s adherents and disseminators – the neoliberals themselves? Oddly, you have to go back a long time to find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of the political magazine Washington Monthly, published an essay titled A Neo-Liberal’s Manifesto. It makes for interesting reading 35 years later, since the neoliberalism it describes bears little resemblance to today’s target of derision. The politicians Peters names as exemplifying the movement are not the likes of Thatcher and Reagan, but rather liberals – in the US sense of the word – who have become disillusioned with unions and big government and dropped their prejudices against markets and the military.

The use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments, neither of which Peters’s article had mentioned. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle. The second was economic globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialisation and globalisation have become the most overt manifestations of neoliberalism in today’s world.

That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation, financial liberalisation and individual enterprise? Much of our contemporary policy discussion remains infused with principles supposedly grounded in the concept of homo economicus, the perfectly rational human being, found in many economic theories, who always pursues his own self-interest.

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Wonder what Xi is thinking.

China Home Sales Fall by Most in Almost Three Years on Curbs (BBG)

China’s new home sales fell by the most in almost three years last month, adding to signs of cooling as local governments keep rolling out curbs to limit price increases. Sales by value dropped 3.4% from a year earlier to 909 billion yuan ($137 billion), according to Bloomberg calculations based on data released Tuesday by the National Bureau of Statistics. That was the biggest year-on-year decline since November 2014. Signs of a property slowdown, including price rises in fewer cities in September, may concern policy makers who want to avoid any sharp economic deceleration. The government is grappling with fueling growth while containing runaway home prices.

President Xi Jinping last month renewed a yearlong call that homes are built “to be inhabited’’ and not for speculation, in his speech at the twice-a-decade Communist Party Congress, inking the language in one of the nation’s top policy frameworks. Investment in real estate development slowed, growing 5.6% last month from a year earlier, down from a 9.2% increase in September, according to Bloomberg calculations. A Bloomberg Intelligence index of Chinese real-estate owners and developers slipped 0.3%. It’s up 89% this year. The data came amid signs of the government easing financing for property developers and as economic releases for October pointed to a moderating economy.

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Excellent takedown of Australia’s dying economic model.

Australia’s Whole Economy Is Built On China Buying Our Stuff

Australia’s Whole Economy Is Built On China Buying Our Stuff (News.com.au)

I recently watched the federal Treasurer Scott Morrison proudly proclaim that Australia was in “surprisingly good shape”. Indeed, Australia has just snatched the world record from the Netherlands, achieving its 104th quarter of growth without a recession, making this achievement the longest streak for any OECD country since 1970. I was pretty shocked at the complacency, because after 26 years of economic expansion, the country has very little to show for it. For over a quarter of a century our economy mostly grew because of dumb luck. Luck because our country is relatively large and abundant in natural resources, resources that have been in huge demand from a close neighbour — China. Out of all OECD nations, Australia is the most dependent on China by a huge margin, according to the IMF.

Over one-third of all merchandise exports from this country go to China including all physical products and things we dig out of the ground. Outside of the OECD, Australia ranks just after the Democratic Republic of the Congo, Gambia and the Lao People’s Democratic Republic and just before the Central African Republic, Iran and Liberia. Does anything sound a bit funny about that? As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble. Unfortunately for Australia, that “lucky” free ride is just about to end. Societe Generale’s China economist Wei Yao recently said: “Chinese banks are looking down the barrel of a staggering $1.7 trillion worth of losses”. Hayman Capital’s Kyle Bass calls China a “$34 trillion experiment” which is “exploding”, where Chinese bank losses “could exceed 400% of the US banking losses incurred during the subprime crisis”.

A hard landing for China is a catastrophic landing for Australia, with horrific consequences to this country’s delusions of economic grandeur. The initial rally in commodities at the beginning of 2016 was caused by a bet that more economic stimulus and industrial reform in China would lead to a spike in demand for commodities used in construction. That bet rapidly turned into full-blown mania as Chinese investors, starved of opportunity and restricted by government clamp downs in equities, piled into commodities markets. This saw, in April of 2016, enough cotton trading in a single day to make a pair of jeans for everyone on the planet, and enough soybeans for 56 billion servings of tofu. Market turnover on the three Chinese exchanges jumped from a daily average of about $78 billion in February to a peak of $261 billion on April 22, 2016 — exceeding the GDP of Ireland.

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It’s the people.

Austerity, Not Brexit, Has Doomed The Tory Party (G.)

What is destroying the Conservatives is not outside forces, nor the cack-handed pricking of a gusher of ministerial ineptitude. No, the fundamental cause is their own economic strategy of austerity. Of cutting taxes for the wealthy, while cutting public services and social security for the rest. Of rewarding the owners of capital, while punishing those who rely on their labour. Of claiming to have fixed the economy, while tanking voters’ living standards. Austerity is now the thudding drumbeat behind every ministerial misstep, from a family holiday with the Netanyahus to a fauxpology over Nazanin Zaghari-Ratcliffe. It is what unites these individual Westminster outrages into an outline of a ruling party no longer fit for office. By forcing an arbitrary limit on already severely constrained Whitehall and town hall budgets, it renders meaningful government close to impossible.

This is what makes next week’s autumn budget from Philip Hammond so crucial. If the Tories wish to regain any credibility, they will have to ditch the very strategy that defines them. In the days immediately following this summer’s general election, I asked a number of leading figures in Labour how they managed to pull off one of the biggest surprises in postwar political history and rob May of her majority. Their answers all circled back to one thing: austerity fatigue. After seven straight years of seeing their kids’ school classes get bigger and their parents’ hospital waits grow longer, voters were ready for an anti-austerity party leader such as Jeremy Corbyn. Austerity has done more than tear up the public realm; it has imposed private misery on millions of households.

The age of austerity has been the era of the foodbank, the zero-hours contract, the privately rented slum. Unless there is a miracle, the economists at the Resolution Foundation project that the 2010s will be the worst decade for wage growth since the Napoleonic wars of the early 1800s.

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But but.. the petrodollar!

Saudi Retreat From U.S. Oil Market Cuts Exports to 30-Year Low (BBG)

For a generation, the huge, whitewashed storage tanks at America’s largest oil refinery in Port Arthur, Texas, have stored almost nothing but Saudi crude. The plant is owned the Saudi Arabia’s state-run oil company, Aramco, and since it first bought a stake in 1988, the Motiva refinery guaranteed the kingdom a strategic foothold in the world’s largest energy market. The tankers carrying millions of barrels a month of Arab Light crude from the Saudi export terminals to Port Arthur were testament to the strength of the energy and political ties binding Riyadh and Washington. All of a sudden, there are very few Saudi ships arriving in Texas. Since July, Aramco has constricted supply, attempting to drain the crude storage tanks at Motiva – and many others across America -part of a plan to lift oil prices, even at the cost of sacrificing its once prized U.S.

While Motiva is most affected, the rest of the U.S. oil refining system, from El Segundo in California to Lake Lake Charles in Louisiana, has also taken a hit. The result: Saudi crude exports into America fell to a 30-year low last month. “The drop is huge,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. “It’s not just that Saudi exports are low, but they have been low for several months.” At a stroke, the freedom from Saudi oil that’s been a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush, is within reach – even if it’s largely the choice of supplier rather than the customer. The U.S. imported just 525,000 barrels a day of Saudi crude in October, the lowest since May 1987 and down from 1.5 million barrels a day a decade ago, according to Bloomberg News calculations based on custom data.

The combination of falling Saudi oil exports into the U.S. last year, cheap crude and higher exports of American weapons had already turned upside-down the trade relationship between the two countries. Last year, the U.S. enjoyed its first trade surplus with Saudi Arabia since 1998 — only the third in 30 years, according to data from the U.S. Census Bureau. The sharper cuts in oil exports since the summer will likely amplify that trend.

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“..the United Arab Emirates had planned a military invasion of Qatar with thousands of US-trained mercenaries [..] but it was never carried out as Washington did not give the green light to it..”

Arab States Spent $130 Billion To Destroy Syria, Libya, Yemen (PressTV)

Algerian Prime Minister Ahmed Ouyahia says some regional Arab states have spent $130 billion to obliterate Syria, Libya and Yemen. Ouyahia made the remarks on Saturday at a time when much of the Middle East and North Africa is in turmoil, grappling with different crises, ranging from terrorism and insecurity to political uncertainty and foreign interference. Algeria maintains that regional states should settle their differences through dialog and that foreign meddling is to their detriment. Syria has been gripped by foreign-sponsored militancy since 2011. Takfirism, which is a trademark of many terrorist groups operating in Syria, is largely influenced by Wahhabism, the radical ideology dominating Saudi Arabia.

Libya has further been struggling with violence and political uncertainty since the country’s former ruler Muammar Gaddafi was deposed in 2011 and later killed in the wake of a US-led NATO military intervention. Daesh has been taking advantage of the chaos in Libya to increase its presence there. Yemen has also witnessed a deadly Saudi war since March 2015 which has led to a humanitarian crisis. Last Month, Qatar’s former deputy prime minister Abdullah bin Hamad al-Attiyah said the United Arab Emirates had planned a military invasion of Qatar with thousands of US-trained mercenaries. The UAE plan for the military action was prepared before the ongoing Qatar rift, but it was never carried out as Washington did not give the green light to it, he noted. In late April, reports said the UAE was quietly expanding its military presence into Africa and the Middle East, namely in Eritrea and Yemen.

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As I wrote yesterday, insanity.

EU Countries Agree To Create A European Mega-Army (R.)

France and Germany edged toward achieving a 70-year-old ambition to integrate European defenses on Monday, signing a pact with 21 other EU governments to fund, develop and deploy armed forces after Britain’s decision to quit the bloc. First proposed in the 1950s and long resisted by Britain, European defense planning, operations and weapons development now stands its best chance in years as London steps aside and the United States pushes Europe to pay more for its security. Foreign and defense ministers gathered at a signing ceremony in Brussels to represent 23 EU governments joining the pact, paving the way for EU leaders to sign it in December. Those governments will for the first time legally bind themselves into joint projects as well as pledging to increase defense spending and contribute to rapid deployments.

“Today we are taking a historic step,” Germany’s Foreign Minister Sigmar Gabriel told reporters. “We are agreeing on the future cooperation on security and defense issues … it’s really a milestone in European development,” he said. The pact includes all EU governments except Britain, which is leaving the bloc, Denmark, which has opted out of defense matters, Ireland, Portugal and Malta. Traditionally neutral Austria was a late addition to the pact. Paris originally wanted a vanguard of EU countries to bring money and assets to French-led military missions and projects, while Berlin has sought to be more inclusive, which could reduce effectiveness. Its backers say that if successful, the formal club of 23 members will give the European Union a more coherent role in tackling international crises and end the kind of shortcomings seen in Libya in 2011, when European allies relied on the United States for air power and munitions.

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There are a few things we need to stop doing, urgently.

Fisheries Collapse On US West Coast: “It’s The Worst We’ve Seen” (SHTF)

The Gulf of Alaska cod populations appears to have taken a nose-dive. Scientists are shocked at the collapse and starving fish, making this the “worst they’ve ever seen.” “They [Alaskan cod] get weak and die or get eaten by something else,” said NOAA’s Steve Barbeaux. The 2017 trawl net survey found the lowest numbers of cod on record forcing scientists to try to unravel what happened. A lot of the cod hatched in 2012 appeared to survive, but by 2017, those fish were largely gone for the surveys, which also found scant evidence of fish born in subsequent years. Many of the cod that have come on board trawlers are “long skinny fish” according to Brent Paine, executive director of United Catcher Boats. “This is a big deal,” Paine said. “We just don’t see these (cod) year classes disappear from one year to the next.”

The decline is expected to substantially reduce the gulf cod harvests that in recent years have been worth — before processing — more than $50 million to Northwest and Alaska fishermen who catch them with nets, pot traps, and baited hooks set along the sea bottom. Barbeaux says the warm water, which has spread to depths of more than 1,000 feet, hit the cod like a kind of a double-whammy. Higher temperatures sped up the rate at which young cod burned calories while reducing the food available for the cod to consume. And many are blaming “climate change” for the effects on the fish, although scientists aren’t directly correlating the two events. “They get weak and die or get eaten by something else,” said Barbeaux, who in October presented preliminary survey findings to scientists and industry officials at an Anchorage meeting of the North Pacific Fishery Management Council.

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Nov 062017
 
 November 6, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , ,  


Salvador Dalí Figure at a window 1925

 

The Next Market Cleanse Will Be Sharp, Deep, Fast (Peters)
Round-Up Of Saudi Princes, Businessmen Widens, Travel Curbs Imposed (R.)
Saudi Arabia Seals Yemen Borders, Accuses Iran Over Missile Strike (AFP)
Paradise Papers Leak Reveals Secrets Of The World Elite’s Hidden Wealth (G.)
Are We Taming Offshore Finance? (BBC)
Queen’s Private Estate Invested Millions of Pounds Offshore (G.)
UK Families Thousands Of Pounds Worse Off After Years Of Cuts (G.)
Britain ‘Would Be Booming’ If It Wasn’t For Brexit – Mark Carney (Tel.)
Most EU Firms Plan Retreat From UK Suppliers (R.)
UK Ministers ‘Could Be In Contempt Of Parliament Over Brexit Papers’ (G.)
China’s Shadow Banking Halts as Regulation Bites – Moody’s (BBG)
Catalonia’s Puigdemont Conditionally Released By Belgian Judge (G.)

 

 

Eric Peters gets points for style.

The Next Market Cleanse Will Be Sharp, Deep, Fast (Peters)

Anecdote: “The most common example is a ball sitting atop a hill,” she said, polished accent, hint of condescension. “Locally stable, but one nudge and it’s all over.” She drove terribly fast, discussing Minsky Moments; the idea that persistent stability breeds instability. “Naturally each cycle is different in key respects, and that’s because you’re far better at preventing past problems from recurring than new ones from arising.” I smiled, amused, insulted. “Despite knowing this all too well, you humans remain inexplicably fixated on the rearview mirror. And this blinds you to all manner of hazards ahead.”

She initiated a few perfect turns of the Tesla, dodging a squirrel or two, tumbling, unhurt. “The source of instability in this cycle is your dissatisfaction with ultra-low bond yields.” $8trln of sovereign debt carries a negative yield, still our central bankers buy. “You should logically respond to this historic rise in valuations across asset classes with a reduction in your expectations for future returns.” I nodded. “But instead you respond with indignation.” So I explained to her that without robust growth and a compounding stream of uninterrupted 7.5% returns, our entitlement systems will implode. They probably will anyway. And lacking the stomach for an honest accounting of this predicament, we prefer to pretend it doesn’t exist.

“Is this humor or sarcasm?” she asked. “Both,” I answered. “Fascinating, anyhow, you then demand that we algorithms produce mathematically impossible returns. So we apply leverage, which makes nearly anything possible, even at valuations that are 99th percentile in all of human history. The more leverage we apply, the more stable your system appears. The flatter your hilltop. Naturally, we ensure that today’s leverage looks different from yesterday’s disaster, recognizing your powerful aversion to repeating recent mistakes.” And I stared out the window, lost in thought, fall’s kaleidoscope whizzing by.

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Not done yet.

Round-Up Of Saudi Princes, Businessmen Widens, Travel Curbs Imposed (R.)

An anti-corruption probe that has purged Saudi Arabian royals, ministers and businessmen appeared to be widening on Monday after the founder of one of the kingdom’s biggest travel companies was reportedly detained. Shares in Al Tayyar Travel plunged 10 percent in the opening minutes of trade after the company quoted media reports as saying Nasser bin Aqeel al-Tayyar, who is still a board member, had been held by authorities. The company gave no details but online economic news service SABQ, which is close to the government, reported Tayyar had been detained in an investigation by a new anti-corruption body headed by Crown Prince Mohammed bin Salman.

Dozens of people have been detained in the crackdown, which has consolidated Prince Mohammed’s power while alarming much of the traditional business establishment. Billionaire Prince Alwaleed bin Talal, Saudi Arabia’s best-known international investor, is also being held, officials said at the weekend. The front page of Okaz, a leading Saudi newspaper, challenged businessmen on Monday to reveal the sources of their assets, asking: “Where did you get this?” in a bright red headline. Pan-Arab newspaper Al-Asharq Al-Awsat reported that a no-fly list had been drawn up and security forces in some Saudi airports were barring owners of private jets from taking off without a permit.

Among those detained are 11 princes, four ministers and tens of former ministers, according to Saudi officials. The allegations against the men include money laundering, bribery, extorting officials and taking advantage of public office for personal gain, a Saudi official told Reuters. Those accusations could not be independently verified and family members of those detained could not be reached. A royal decree on Saturday said the crackdown was in response to “exploitation by some of the weak souls who have put their own interests above the public interest, in order to, illicitly, accrue money”.

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The big fear is that it’s all a set-up to go after Iran. Which just signed a $30 billion energy deal with Russia.

Saudi Arabia Seals Yemen Borders, Accuses Iran Over Missile Strike (AFP)

The Saudi-led coalition battling Shiite Huthi rebels in Yemen closed the country’s air, sea and land borders Monday and accused Iran of being behind a weekend missile attack on Riyadh, saying it “may amount to an act of war”. Saudi Arabia intercepted and destroyed the ballistic missile, which was launched from Yemen as rebels appeared to escalate hostilities, near Riyadh’s international airport on Saturday. The missile was the first aimed by the Shiite rebels at the heart of the Saudi capital, underscoring the growing threat posed by the raging conflict. “The leadership of the coalition forces therefore considers this… a blatant military aggression by the Iranian regime which may amount to an act of war,” the official Saudi news agency SPA said in a statement.

Smouldering debris landed inside the King Khalid International Airport, just north of Riyadh, after the missile was shot down but authorities reported no major damage or loss of life. Yemen’s complex war pits the Saudi-backed government of President Abedrabbo Mansour Hadi against former president Ali Abdullah Saleh and his Iran-backed Huthi rebel allies. The Saudi statement said that the borders were being closed “to fill the gaps in the inspection procedures which enable the continued smuggling of missiles and military equipment to the Huthi militias loyal to Iran in Yemen”. Despite the temporary closure of the air, sea and land ports, Saudi would protect “the entry and exit of relief and humanitarian personnel”. “The coalition… affirms the kingdom’s right to respond to Iran at the appropriate time and in the appropriate form,” it added.

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Most of this is legal. But what are the Queen, Bono, Trudeau thinking?

Paradise Papers Leak Reveals Secrets Of The World Elite’s Hidden Wealth (G.)

The world’s biggest businesses, heads of state and global figures in politics, entertainment and sport who have sheltered their wealth in secretive tax havens are being revealed this week in a major new investigation into Britain’s offshore empires. The details come from a leak of 13.4m files that expose the global environments in which tax abuses can thrive – and the complex and seemingly artificial ways the wealthiest corporations can legally protect their wealth. The material, which has come from two offshore service providers and the company registries of 19 tax havens, was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with partners including the Guardian, the BBC and the New York Times. The project has been called the Paradise Papers. It reveals:

• Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund – and some of her money went to a retailer accused of exploiting poor families and vulnerable people. • Extensive offshore dealings by Donald Trump’s cabinet members, advisers and donors, including substantial payments from a firm co-owned by Vladimir Putin’s son-in-law to the shipping group of the US commerce secretary, Wilbur Ross. • How Twitter and Facebook received hundreds of millions of dollars in investments that can be traced back to Russian state financial institutions. • The tax-avoiding Cayman Islands trust managed by the Canadian prime minister Justin Trudeau’s chief moneyman. • A previously unknown $450m offshore trust that has sheltered the wealth of Lord Ashcroft.

• Aggressive tax avoidance by multinational corporations, including Nike and Apple.• How some of the biggest names in the film and TV industries protect their wealth with an array of offshore schemes. • The billions in tax refunds by the Isle of Man and Malta to the owners of private jets and luxury yachts.• The secret loan and alliance used by the London-listed multinational Glencore in its efforts to secure lucrative mining rights in the Democratic Republic of the Congo. •The complex offshore webs used by two Russian billionaires to buy stakes in Arsenal and Everton football clubs.

The disclosures will put pressure on world leaders, including Trump and the British prime minister, Theresa May, who have both pledged to curb aggressive tax avoidance schemes. The publication of this investigation, for which more than 380 journalists have spent a year combing through data that stretches back 70 years, comes at a time of growing global income inequality. Meanwhile, multinational companies are shifting a growing share of profits offshore – €600bn in the last year alone – the leading economist Gabriel Zucman will reveal in a study to be published later this week. “Tax havens are one of the key engines of the rise in global inequality,” he said. “As inequality rises, offshore tax evasion is becoming an elite sport.”

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No. Hell no.

Are We Taming Offshore Finance? (BBC)

The offshore finance industry puts trillions of dollars worldwide beyond the taxman’s reach. Bringing it to heel is like taming a cat; not just a normal moggy – a thankless task in itself – but a Cheshire Cat: nebulous, hard to pin down, disappearing and reappearing when it likes. No-one can actually agree on what a tax haven is. Or even on the name: one person’s tax haven is another’s “offshore financial centre”. No-one can agree on how many there are. Nor on exactly how much money is stashed offshore. No statistics are fully reliable. And this suits those who operate in offshore finance, from the owner of the wealth to the lawyer or accountant middlemen who manage the funds, to the often sun-kissed beaches of the jurisdictions where they are secluded or pass through. The industry’s key word is privacy. Or secrecy – a word it doesn’t like so much.

One adage cited by the taxation author and expert Nicholas Shaxson sums it up: “Those who know don’t talk. And those who talk don’t know.” But do we really not know how much is stashed offshore? A report this September, co-authored by the economist Gabriel Zucman, estimates about 10% of global GDP – the way we measure the size of the world’s economy – is held offshore, about $7.8tn (£6tn) . The Boston Consulting Group reported it last year at about $10tn. If you are thinking, wow, that’s bigger than Japan’s economy, you’d be right. But if you want a real wow, try $36tn – the estimate offered by James Henry, author of the book Blood Bankers. That’s twice as big as the US economy.

But no-one really knows. And here’s another wow. Remember the slogan “we are the 99%” coined by the Occupy movement to lambast the top 1% of the population for their disproportionate share of wealth? Well, the Zucman report says 80% of all offshore cash is owned by 0.1% of the richest households, with 50% held by the top 0.01%. So if you read this and are thinking, if you can’t beat them… quite frankly, it’s unlikely you will ever join them.

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This cannot be. Many Britons are miserable, and their Queen dodges taxes. As someone suggested, she should go live where her money is stashed.

Queen’s Private Estate Invested Millions of Pounds Offshore (G.)

Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund as part of an offshore portfolio that has never before been disclosed, according to documents revealed in an investigation into offshore tax havens. Files from a substantial leak show for the first time how the Queen, through the Duchy of Lancaster, has held and still holds investments via funds that have put money into an array of businesses, including the off-licence chain Threshers, and the retailer BrightHouse, which has been criticised for exploiting thousands of poor families and vulnerable people. The duchy admitted it had no idea about its 12-year investment in BrightHouse until approached by the Guardian and other partners in an international project called the Paradise Papers.

Though the duchy characterised its stake in BrightHouse as negligible, it would not disclose the size of its original 2005 investment, which coincided with a boom in the company’s value. BrightHouse has since been accused of overcharging customers, and using hard sell tactics on people with mental health problems and learning disabilities. Last month, it was ordered to pay £14.8m in compensation to 249,000 customers. Critics are likely to ask why the Queen had money in there in the first place, and the duchy may face awkward questions about whether there was enough oversight and management of the Queen’s “onward investments” to ensure they remained ethical. The duchy has also disclosed investments in “a few overseas funds”, including one in Ireland, and will be under pressure to give details of where the money is being held.

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This is Britain’s reality….

UK Families Thousands Of Pounds Worse Off After Years Of Cuts (G.)

Seven years of cuts to tax credits and universal credit have hugely eroded their role in supposedly rewarding people for working, leaving many families thousands of pounds a year worse off, a study has concluded. Ministers’ promises that the systems would benefit families for taking on more work had effectively been broken because of the cuts, according to the report by the Child Poverty Action Group (CPAG) and the Institute for Public Policy Research thinktank. The study, titled Austerity Generation, details what it says are the huge numbers of families with children pushed into poverty due to cuts and freezes to benefits, as well as measures such as the new two-child limit for payments. It calls for the chancellor, Philip Hammond, to tackle the issue in next month’s budget by restoring previous levels of universal credit work allowances, the amount of monthly income that can be earned without penalty. These were cut in April 2016.

It also seeks a pension-style triple lock of the child benefit and child credit element of universal credit, ensuring it kept pace with prices and earnings. This alone, the report argues, would keep 600,000 children out of poverty. Introduced in 2003, working tax credits are intended to top up low earnings. It is among a series of benefits replaced by universal credit, which is gradually being rolled out nationally and is intended to incentivise working. But, according to the report, cuts have eroded much of this effect for families. It calculates that a couple with two young children, one working full-time and the other part-time on the national living wage, will lose more than £1,200 a year due to universal credit cuts. Another example given is that of a single parent with two young children who starts work at 12 hours a week on the national living wage and will have an effective hourly wage of £4.18, as opposed to £5.01 before the cuts.

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… and this is what its central bank chief thinks it is instead.

Britain ‘Would Be Booming’ If It Wasn’t For Brexit – Mark Carney (Tel.)

Britain’s economy would be “booming” if not for Brexit, the Governor of the Bank of England has said. Mark Carney said businesses were waiting for the outcome of Theresa May’s negotiations with the EU before making investment decisions, which was slowing down economic growth. He said the bank’s predictions for foreign investment in Britain was now 20 per cent lower than they estimated in the month before the referendum. Speaking to Peston on Sunday, he said: “Since the referendum, what we’re seeing is that business investment has picked up, but it hasn’t picked up to any of the extent that one would have expected given how strong the world is, how easy financial conditions are, how high profitability is and how little spare capacity they have. Despite acknowledging the strength of economy, Mr Carney warned: “It should really be booming, but it’s just growing.

“I think we know why that’s the case, because they’re waiting to see the nature of the deal with the European Union. “It’s the most important investment destination and [businesses] need to know transition and end state, everybody knows this, the government knows it and is working on it, UK businesses know it and the Europeans know it.” Asked if the economy would take a hit if the UK left the EU without a Brexit deal, he said: “In the short term, without question, if we have materially less access (to the EU’s single market) than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth.” He added that in the event of a bad Brexit deal, the bank would not be able to cut future interest rates because of that inflationary pressure.

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Uncertainty.

Most EU Firms Plan Retreat From UK Suppliers (R.)

Most European businesses plan to cut back orders from British suppliers because of the slow progress of Brexit talks, a survey of company managers showed on Monday. 63% of non-British European companies expect to move some of their supply chain out of Britain, up from 44 percent in May, the Chartered Institute of Procurement and Supply (CIPS) said. With only 17 months left until Britain is due to exit the EU, the lack of clear progress in the negotiations has raised fears among executives of an abrupt departure with no transition. Monday’s survey raised the prospect of disruption for British manufacturers with EU clients. On Sunday, the Confederation of British Industry said almost two in three British firms will have implemented Brexit contingency plans by March if Britain and the rest of the EU have not struck a transitional deal by then.

Britain and the EU said last week they were ready to speed up talks, but CIPS said it was already too late for scores of businesses that look likely to be dropped by European customers. “British businesses simply cannot put their suppliers and customers on hold while the negotiators get their act together,” said Gerry Walsh, CIPS’ group CEO. “The lack of clarity coming from both sides is already shaping the British economy of the future – and it does not fill businesses with confidence.” British finance minister Philip Hammond said last month that a transition deal needed to be struck by early 2018. CIPS said a fifth of British businesses were struggling to secure contracts that extend beyond March 2019, the date Britain is due to leave the EU.

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“Offenders can also theoretically be confined to a room in the Big Ben clock tower, although this power has not been used since 1880.”

UK Ministers ‘Could Be In Contempt Of Parliament Over Brexit Papers’ (G.)

Labour is to warn ministers on Monday that they risk being held in contempt of parliament if they do not immediately release dozens of papers outlining the economic impact of Brexit. The government conceded last week that it had to publish the 58 studies covering various parts of the economy after the move was supported in a Labour opposition motion that was passed unanimously on Wednesday. While normal opposition motions are advisory, Labour presented this one as a “humble address”, a rare and antiquated procedure which the Speaker, John Bercow, advised was usually seen as binding. The leader of the Commons, Andrea Leadsom, said on Thursday that the government accepted the motion as binding, and that “the information will be forthcoming”.

However, she gave no timescale – the government has previously said it will respond to opposition motions within 12 weeks – and indicated some elements of the papers would need to be redacted to avoid “disclosing information that could harm the national interest”. The Labour motion called for the papers to be released immediately to the Brexit select committee, which has a majority of Conservative MPs, and which would then decide what elements should not be published more widely. The shadow Brexit secretary, Keir Starmer, has warned that Labour will refer the matter to Bercow over possible contempt if the studies are not passed to the committee before parliament’s one-week recess begins on Tuesday.

The parliamentary rulebook, known as Erskine May after its 19th-century author, says actions that obstruct or impede the Commons “in the performance of its functions, or are offences against its authority or dignity, such as disobedience to its legitimate commands” be can viewed as contempt. MPs held in contempt can be asked to apologise, suspended or even expelled by their fellows. Offenders can also theoretically be confined to a room in the Big Ben clock tower, although this power has not been used since 1880.

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Yeah, yeah, but: “core shadow banking activity,” including entrusted loans, trust loans, and undiscounted bankers’ acceptances, continues to expand…”

China’s Shadow Banking Halts as Regulation Bites – Moody’s (BBG)

China’s shadow banking sector, estimated by some analysts to be worth 122.8 trillion yuan ($18.5 trillion), stopped growing in the first half of the year as issuance of wealth management products declined, according to Moody’s Investors Service. For the first time since 2012, China’s gross domestic product grew faster than shadow banking assets in the six-month period, Moody’s said in a statement Monday. Following last month’s Communist Party Congress, further regulation will continue to rein in shadow banking and address some of the key systemic imbalances, Moody’s said. While Moody’s assessment offers some evidence that China’s crackdown on shadow financing is starting to bite, authorities continue to sound the alarm on high debt levels.

In an article on the People’s Bank of China’s website late Saturday, Governor Zhou Xiaochuan pointed to latent risks that are “hidden, complex, sudden, contagious and hazardous.” Government, household and corporate debt adds up to about 260 percent of the economy, according to Bloomberg Intelligence. Moody’s said that shadow banking assets accounted for 83 percent of GDP on June 30, down from a peak of 87 percent in 2016. Michael Taylor, the company’s chief credit officer for the Asia-Pacific region, said “core shadow banking activity,” including entrusted loans, trust loans, and undiscounted bankers’ acceptances, continues to expand even as regulation has had an effect.

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The pressure on the judge(s) must be deafening.

Catalonia’s Puigdemont Conditionally Released By Belgian Judge (G.)

A Belgian judge has released the ousted Catalan leader, Carles Puigdemont, and four of his ministers under certain conditions after a hearing lasting more than 10 hours. Puigdemont, who faces charges of misuse of public funds, disobedience and breach of trust relating to the secessionist campaign, turned himself in to Belgian police earlier on Sunday. The judge decided to grant them conditional release late in the evening pending a ruling by a court within the next 15 days whether to execute the European arrest warrant issued by Spain. The five have been told they must not leave the country and stay in a fixed address. “The request made by the Brussels’ Prosecutor’s Office for the provisional release of all persons sought has been granted by the investigative judge,” a statement from the federal prosecutor’s office said.

On Friday, the Spanish government had issued European arrest warrants against Puigdemont, Antoni Comín, Clara Ponsatí, Meritxell Serret and Lluís Puig for trying to “illegally change the organisation of the state through a secessionist process that ignores the constitution”. The formal charges, punishable by 30 years in prison, are rebellion, sedition, embezzlement of public funds and disobedience to authority, for their role in organising the referendum on Catalan independence on 1 October. The secessionist politicians fled to Belgium on Monday after the Spanish authorities removed Puigdemont and his cabinet from office for pushing ahead with a declaration of independence following an illegal referendum. From his self-imposed exile, Puigdemont claimed he would not receive a fair trial in Spain but promised to cooperate with the Belgian justice system.

[..] In a sign of the growing headache the crisis is causing the Belgian coalition government, the country’s deputy prime minister, Jan Jambon, from the Flemish nationalist party, questioned Spain’s handling of the crisis in Catalonia and suggested the EU should intervene. “When the police hit people, we can still ask questions,” he said. “When the Spanish state has locked two opinion leaders, I have questions. And now the Spanish government will act in the place of a democratically elected government? “Members of a government are put in prison. What have they done wrong? Simply apply the mandate they received from their constituents.”

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