Jul 182018
 
 July 18, 2018  Posted by at 9:31 am Finance Tagged with: , , , , , , , , , , ,  


Paul Gauguin Van Gogh painting sunflowers 1888

 

Russia Dumped Most/All Of Its US Treasury Holdings, Disappeared from List (WS)
Japan, EU Sign Trade Deal To Eliminate Nearly All Tariffs (AP)
Going, Going Gone For Australia’s House Price Boom (R.)
Australia’s Expensive Real Estate Problem Remains A Dirty Little Secret (D.)
Right Now, We Are In A New Cold War – Stephen Cohen (Fox)
Is President Trump A Traitor Because He Wants Peace With Russia? (PCR)
A Walk On The Wild Side As Trump Meets Putin At Finland Station (Escobar)
Trump Haters Don’t Get the “Art of the Deal” (Jim Rickards)
Twelve Ham Sandwiches with Russian Dressing (Kunstler)
The EU’s New Data Protection Rules Are Already Hurting Europeans (Mises)
Dear Europe, Follow Ireland, Not France (Lacalle)
Balding Out (Christopher Balding)

 

 

Russia goes for gold.

Russia Dumped Most/All Of Its US Treasury Holdings, Disappeared from List (WS)

It’s a good thing Russia never held as many US Treasury securities as China and Japan. The scenario would have been different. The “grand total” of US Treasury bonds, notes, and bills held by official foreign investors (central banks, governments, etc.) and non-official foreign investors rose by $44.6 billion to $6.17 trillion at the end of May, according to the Treasury Department’s TIC data released Tuesday afternoon. This is in the middle of the range of the past 12 months. But Russia stands out by its sudden absence.

Russia was never a large holder of US Treasuries, compared to China and Japan. In March it was in 16th place with $96.1 billion in Treasury holdings. In April, it liquidated $47.4 billion of its holdings, and ended the month with $48.7 billion. That was down 69% from May 2013 ($153 billion). It knocked Russia into 22nd place behind the UAE and Thailand. And in May, Russia liquidated more of its holdings and disappeared entirely from the TIC’s list of the 33 largest foreign holders of Treasuries. The smallest one on the list was Chile, with $30.2 billion. Russia’s holdings must have fallen below that amount, and I can imagine to zero:

If there was a message in Russia’s liquidation of US Treasuries, it was a pitch in the water: The 10-year Treasury sell-off that had started last September peaked with the 10-year yield at 3.11% on May 17. Since then, the 10-year Treasury has rallied under heavy demand, and the yield has fallen – hence the handwringing about the inverted yield curve. The largest holder of US Treasuries is China, a position it had lost briefly during its era of peak capital-flight from October 2016 through March 2017. Its holdings in May ticked up by $1.2 billion to $1.183 trillion. Its holdings have remained within the same range since August 2017, despite escalating threats of a “trade war.” Japan had been systematically reducing its Treasury holdings. In April its holdings had dropped to $1.031 trillion, the lowest since October 2011. But in May, it increased its holdings by $17.6 billion to $1.049 trillion:

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99% of tariffs to be lifted.

Japan, EU Sign Trade Deal To Eliminate Nearly All Tariffs (AP)

The European Union and Japan signed a landmark deal on Tuesday that will eliminate nearly all tariffs on products they trade. The ambitious pact signed in Tokyo runs counter to President Donald Trump’s moves to hike tariffs on imports from many U.S. trading partners. It covers a third of the global economy and markets of more than 600 million people. “The EU and Japan showed an undeterred determination to lead the world as flag-bearers for free trade,” Abe said at a joint news conference with European Council President Donald Tusk and European Commission President Jean-Claude Juncker.

Tusk praised the deal as “the largest bilateral trade deal ever.” He said the partnership is being strengthened in various other areas, including defense, climate change and human exchange, and is “sending a clear message” against protectionism. The leaders did not mention Trump by name, but they did little to mask what was on their minds — highlighting how Europe and Japan have been pushed closer by Trump’s actions. [..] The deal eliminates about 99 percent of the tariffs on Japanese goods sold to the EU. About 94 percent of the tariffs on European exports to Japan will be lifted, rising to 99 percent in the future. The difference reflects exceptions on such products as rice, which enjoys strong political protection from imports in Japan.

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China’s clampdown.

Going, Going Gone For Australia’s House Price Boom (R.)

It’s a winter weekend in Sydney’s bustling northern suburb of Chatswood and a three-bedroom family house sporting an endless garden is up for auction. It’s priced to sell at A$1.88 million ($1.4 million) but no buyers bite and the sale is abandoned. On the same day, in the heart of the harbor-hugging city a two-bedroom apartment with panoramic views fails to sell as no bidders turn up. Auctions are a bellwether of demand in property-obsessed Australia, where attending sales is almost a national pastime. It is therefore telling that only just over half were successful the weekend last month a Reuters reporter visited some of Sydney’s auctions, compared to more than two-thirds for all of last year.

And while that week was the worst since 2012, it wasn’t a one off. Auction clearance rates have averaged in the mid-to-low 50 percent range for each of the past nine weeks. The recent weakness in the Australian housing market, which has been one of the drivers of an economy that has now grown for 27 years without a downturn, has some economists warning of heightened risks of a recession and even a financial crisis. In anticipation, some hedge funds are shorting the nation’s financial assets and some significant investors are heavily underweight Australia compared to regional benchmarks.

The slack has been partly engineered by the authorities. Curbs on lending to foreigners, foreign buyer taxes and a clampdown on capital flows by Beijing have hurt bubbling demand from Chinese investors, who have been important contributors to the housing boom of recent years. There are signs of a similar fall in Chinese investment in Vancouver, Canada – which has also been a red hot market in recent years and where the authorities have also intervened by raising taxes on foreign buyers. But a decline in Vancouver’s sales is yet to translate into price declines.

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Laundromat.

Australia’s Expensive Real Estate Problem Remains A Dirty Little Secret (D.)

Nobody knows how many billions of dollars in dirty money is pouring into Australia’s housing market, but global authorities describe local real estate as a prime target for money laundering – and you may have paid more for your house because of it. The likelihood of cashed up crooks increasing house prices is much greater than many people realise, given the hidden nature of the problem, a lack of regulation in the Australian real estate industry and the staggering sums involved. AMP chief economist Shane Oliver says criminals willing to pay extra to wash illicit funds have probably already had an impact on the high end of the housing market. “Even one transaction can have a huge effect that pulls the whole lot up.”

Real estate agents say corrupt money can also influence average house prices, because criminals paying more than market value for one house are likely to encourage higher asking prices for similar properties in the same street. “To the extent that money laundering may well have played a role in making houses unaffordable to the average Australian, even if it’s marginal, there’s a case to investigate that,” Mr Oliver says. Estimates vary, however an International Monetary Fund calculation converted to local currency shows up to $5 trillion in corrupt money – more than three times Australia’s GDP – flowing into global financial systems last year. Only 0.2 per cent of the illegal transfers were likely to be seized or frozen, according to a UN report.

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I know, I know, it’s Fox and Tucker Carlson. But this is Stephen Cohen.

Right Now, We Are In A New Cold War – Stephen Cohen (Fox)

NYU Russian studies Professor Emeritus Stephen Cohen says President Trump had no choice but to meet with Putin, blasts ‘pornography passing as analysis’ in the news coverage of Trump.

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“Russian weapons are so superior to the junk produced by the waste-filled US military/security complex that lives high off the hog on the insouciant American taxpayer that it is questionable if the US is even a second class military power.”

Is President Trump A Traitor Because He Wants Peace With Russia? (PCR)

The US Democratic Party is determined to take the world to thermo-nuclear war rather than to admit that Hillary Clinton lost the presidential election fair and square. The Democratic Party was totally corrupted by the Clinton Regime, and now it is totally insane. Leaders of the Democratic Party, such as Nancy Pelosi and Chuck Schumer, my former co-author in the New York Times, have responded in a non-Democratic way to the first step President Trump has taken to reduce the extremely dangerous tensions with Russia that the Clinton, George W. Bush, and Obama regimes created between the two superpowers.

Yes, Russia is a superpower. Russian weapons are so superior to the junk produced by the waste-filled US military/security complex that lives high off the hog on the insouciant American taxpayer that it is questionable if the US is even a second class military power. If the insane neoconservatives, such as Max Boot, William Kristol, and the rest of the neocon scum get their way, the US, the UK, and Europe will be a radioactive ruin for thousands of years.

House Democratic leader Nancy Pelosi (CA), Minority Leader of the US House of Representatives, declared that out of fear of some undefined retribution from Putin, a dossier on Trump perhaps, the President of the United States sold out the American people to Russia because he wants to make peace: “It begs the question, what does Vladimir Putin, what do the Russians have on Donald Trump—personally, politically and financially that he should behave in such a manner?” The “such a manner” Pelosi is speaking about is making peace instead of war.

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“Russophobia is a 24/7 industry..”

A Walk On The Wild Side As Trump Meets Putin At Finland Station (Escobar)

“The Cold War is a thing of the past.” By the time President Putin said as much during preliminary remarks at his joint press conference with President Trump in Helsinki, it was clear this would not stand. Not after so much investment by American conservatives in Cold War 2.0. Russophobia is a 24/7 industry, and all concerned, including its media vassals, remain absolutely livid with the “disgraceful” Trump-Putin presser. Trump has “colluded with Russia.” How could the President of the United States promote “moral equivalence” with a “world-class thug”? Multiple opportunities for apoplectic outrage were in order. Trump: “Our relationship has never been worse than it is now. However, that changed. As of about four hours ago.”

Putin: “The United States could be more decisive in nudging Ukrainian leadership.” Trump: “There was no collusion… I beat Hillary Clinton easily.” Putin: “We should be guided by facts. Can you name a single fact that would definitively prove collusion? This is nonsense.” Then, the clincher: the Russian president calls [Special Counsel] Robert Mueller’s ‘bluff’, offering to interrogate the Russians indicted for alleged election meddling in the US if Mueller makes an official request to Moscow. But in exchange, Russia would expect the US to question Americans on whether Moscow should face charges for illegal actions. Trump hits it out of the park when asked whether he believes US intelligence, which concluded that Russia did meddle in the election, or Putin, who strongly denies it. “President Putin says it’s not Russia. I don’t see any reason why it would be.”

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How it works.

Trump Haters Don’t Get the “Art of the Deal” (Jim Rickards)

I’m continually amazed at the legions of politicos, pundits and so-called “experts” who don’t understand President Trump or how he conducts policy. These elites have a mental model of how a president is supposed to behave and how the policymaking process is supposed to be carried out. Obviously, Trump does not fit their model. Instead of trying to grasp the model that Trump does use, they continually berate and disparage Trump for not living up to their expectations. A more thoughtful group would say, “Well, he’s different, so why don’t we try to understand the differences and analyze the new model?” Really, these people need to get out of Washington, New York and Hollywood more and get away from their screens.

If they knew more everyday Americans, they would come a lot closer to understanding how Trump gets things done. It’s not chaos; it’s just a little different and more down to earth. This is because of Trump’s “art of the deal” style described in his best-selling book by that name. Bush 43 and Obama were totally process-driven. You could see events coming a mile away as they wound their way through the West Wing and Capitol Hill deliberative processes. All you had to do was understand the process and you could forecast big developments in a relatively straightforward way. With Trump, there is a process, but it does not adhere to a timeline or existing template. Trump seems to be the only process participant most of the time.

Here’s the Trump process: 1) Identify a big goal (tax cuts, balanced trade, the wall, etc.). 2) Identify your leverage points versus anyone who stands in your way (elections, tariffs, jobs, etc.). 3) Announce some extreme threat against your opponent that uses your leverage. 4) If the opponent backs down, mitigate the threat, declare victory and go home with a win. 5) If the opponent fires back, double down. If Trump declares tariffs on $50 billion of good from China,and China shoots back with tariffs on $50 billion of goods from the U.S., Trump doubles down with tariffs on $100 billion of goods, etc. Trump will keep escalating until he wins. 6) Eventually, the escalation process can lead to negotiations with at least the perception of a victory for Trump (North Korea) — even if the victory is more visual than real.

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“..the entire exercise is a joke and a fraud..”

Twelve Ham Sandwiches with Russian Dressing (Kunstler)

After two years of Trump-inspired hysteria, it’s pretty obvious what went on in the bungled Obama-Hillary power handoff of 2016 and afterward: the indictable shenanigans of candidate Hillary and her captive DNC prompted a campaign of agit-prop by the US Intel “community” to gaslight the public with a Russian meddling story that morphed uncontrollably into a crusade to make it impossible for Mr. Trump to govern. And what’s followed for many months is an equally bungled effort to conceal, deceive, and confuse the issues in the case by Democratic Party partisans still in high places. It was very likely begun with the tacit knowledge of President Obama, though he remained protected by a shield of plausible deniability.

And it was carried out by high-ranking officials who turned out to be shockingly unprofessional, and whose activities have been disclosed through an electronic data evidence trail. Mr. Trump’s visit to confer with Russian President Putin in Helsinki seems to have provoked a kind of last-gasp effort to keep the increasingly idiotic Russian election meddling story alive — with Robert Mueller’s ballyhooed indictment of twelve “Russian intel agents” alleged to have “hacked” emails and computer files of the DNC and Hillary’s campaign chairman John Podesta. The gaping holes in that part of the tale have long been unearthed so I’ll summarize as briefly as possible:

1) the bandwidth required to transfer the files has been proven to be greater than an internet hack might have conceivably managed in the time allowed and points rather to a direct download into a flash drive device. 2) the DNC computer hard drives, said to be the source of the alleged hacking, disappeared while in the custody of the US Intel Community (including the FBI). 3) the authenticity of the purloined emails by Mr. Podesta and others has never been disputed, and they revealed a lot of potentially criminal behavior by them. 4) Mr. Mueller must know he will never get twelve Russian intel agents into a US courtroom, so the entire exercise is a joke and a fraud. In effect, he’s indicted twelve ham sandwiches with Russian dressing.

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When anti-spam leads to more spam.

The EU’s New Data Protection Rules Are Already Hurting Europeans (Mises)

It’s finally over: the flood of e-mails that every single human being who possesses an inbox has received in the last few weeks thanks to the new data protection rules by the EU. These rules, called GDPR, have caused havoc even before becoming effective on May 25, and have probably caused the greatest spam wave of all time – all in the name of fighting against spam of course. The GDPR rules were designed to protect European consumers from data violations by big tech companies (Brussels thinks that Facebook, Google and Co. are abusing the rights of its people), and include – just as a best of – a “right to be forgotten” (meaning that Europeans can ask companies to delete all their data), “consent” (meaning that the data being processed by a company has to be consented to by the individual – though what “consent” means is still disputed), an obligation to hire a data protection officer if you are a bigger company, and above all else, hefty fines for infringements.

Those infringements shall “be subject to administrative fines up to €20,000,000, or in the case of an undertaking, up to 4 percent of the total worldwide annual turnover of the preceding financial year, whichever is higher.” What has been the result of these data protection rules after a little over a month? Summing it up in one word would probably be: chaos. As the trillions of e-mails that were sent around the globe showed, no one really understands what the rules are all about – or what to do about it.

On the day the rules came into effect, several US pages panickingly switched off their platforms in EU countries, among them the Los Angeles Times, the Chicago Tribune, New York Daily News, and Orlando Sentinel. But not only newspapers have blocked Europeans ever since: the list also includesShoes.com,Instapaper, and the History Channel. Meanwhile, ad companies, being hit the most by the new rules, have pulled out of the EU altogether, including Drawbridge and Verve , citing the GDPR as the reason that they can’t continue their business on the Continent anymore. Those staying have had to incur gigantic costs: British companies have reportedly sunk 1.1 billion dollars, and Americans 7.8 billion in preparation for GDPR.

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There’s always some miracle nation in the EU.

Dear Europe, Follow Ireland, Not France (Lacalle)

Whenever we talk about tax cuts and growth-oriented tax programs in Europe, many tell us that it is not possible and that the European Union does not allow it. However, it is false. Attractive, growth-oriented tax systems are not only possible in the European Union, but those countries that implement them have higher economic growth rates, less unemployment, and a first-class welfare state. To deceive us, we are forced to ignore Ireland, The Netherlands or Luxembourg as well as most of the technology and job creation leaders. Lower taxes and greater liberalization than in the rest of the Eurozone means higher growth, better wealth and greater social welfare. The economic miracle of Ireland is not statism.

Its secret is to put budgetary stability, investment attraction, private initiative and maximize disposable income of citizens as the pillars of its economic policy. Ireland has a corporate tax of 12.5% and a rate of 6.25% on income from patents and intellectual property, a key factor to attract technology companies. Its minimum salary is almost double that of Spain, Portugal and other Eurozone countries, the average pension is higher as well and its health and education systems are of the highest quality, with nine universities among the best in the world according to the Best Global Universities Ranking 2018. Ireland’s debt to GDP is 73%, unemployment is 5.1% (youth unemployment at 11.4%), public deficit is just 0.7% of GDP.

Only a few years ago, Ireland was close to the edge financially, and its 10-year bond yield rose to 14%. Ireland was considered one of the highest risk of default countries with Spain, Portugal, Greece or Italy. Since then, low taxes, budget control and reforms oriented at attracting capital have made Ireland become the fastest-growing European economy, with an unemployment rate that is less than half that of Spain, for example. Deficits have been slashed, debt is under control, the economy is expected to grow 5.1% in 2018, and the economy is expected to reach full employment in 2019.

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Economist Christopher Balding is leaving China after 9 years. Great farewell.

Balding Out (Christopher Balding)

One of my biggest fears living in China has always been that I would be detained. Though I happily pointed out the absurdity of the rapidly encroaching authoritarianism, a fact which continues to elude so many experts not living in China, I tried to make sure I knew where the line was and did not cross it. There is a profound sense of relief to be leaving safely knowing others, Chinese or foreigners, who have had significantly greater difficulties than myself. There are many cases which resulted in significantly more problems for them. I know I am blessed to make it out.

I leave China profoundly worried about the future of China and US China relations. Most attention here has focused on the Thucydides Trap where conflict results from an established and a rising power. This leaves out probably the most important variable not just the distinction between an established and a rising power but the values inherent within each state and the system they want to project defining relations between states and the citizenry to the state.

The United States under Trump and the GOP is facing a significant test and re-evaluation of its principles. However, I remain decidedly confident in the US to handle those tests. The self correction nature of democracy is on clear display. The best case scenario for the Trump administration is to minimize congressional losses with the very real possibility of losing control of the house. President Trump has lost more in the courts than he has won and is under investigations by law enforcement headed by registered Republicans. His own party has been unable to pass consequential legislation except for a tax cut. While none of this confronts the international challenges facing the United States, it speaks to the evolutionary, self corrective nature of US democracy.

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Jun 232018
 
 June 23, 2018  Posted by at 1:07 pm Finance Tagged with: , , , , , , , , , , , , , ,  


René Magritte Le Mal du Pays (Homesickness) 1940

 

The two most viral photographs of the ‘Trump Separation Scandal’ have now been debunked, or at the very least been proven to have been used ‘out of context’. This is a dangerous development, as are the reasons to use them the way they have been. Both pictures are of children who had not been separated from their mothers at all. But both were used to depict just that: a child being taken away from its mother.

What’s dangerous about this is, first, that those who spread the narrative regardless of the truth may next permit themselves to use images from entirely different locations or times to make their point. Yes, children have been taken from parents at US borders. And attention for that is warranted, very much so. But playing loose with the facts turns those facts into a mere narrative in which nobody can tell fact from fiction anymore.

First, a week ago already, I saw this on RT:

 

Debunked: Viral Image Of Crying, Caged Toddler ‘Detained By ICE’ Not What It Seems

A distressing image of a crying toddler locked in a barred cage after purportedly being detained by US immigration officials has gone viral – but despite online claims, it does not actually depict what has been alleged. The image, which shows a little boy crying in a cage as he looks out between its bars, was shared by activist journalist and undocumented migrant Jose Antonio Vargas as a comment on the Trump administration’s immigration crackdown on families.

In the same thread, Vargas admitted that he came across the photo on a friend’s timeline and was still looking for the original source. Nevertheless, the snap quickly went viral with Vargas’ post garnering more than 23,000 retweets and many others sharing the image across their own social media accounts.

 

Vargas explained that he shared the photo because when he was detained by ICE in McAllen, Texas in 2014, he encountered children who were locked up there. “It wasn’t okay then; it’s not okay now,” he wrote, adding that he’s been outraged about the incident for years.

It has since emerged that the picture was in fact not from a detention facility at all, and instead was taken at a protest against Trump’s immigration policies held on June 10 outside Dallas City Hall. The demonstration organized by Brown Berets de Cemanahuac was held to call out the policy of family separation and confining undocumented children.

Ergo: an activist journalist and undocumented immigrant makes it look as if a picture depicts something that in reality it did not. Note also that the article says he wanted to comment on the Trump immigration crackdown, because he has memories of the Obama immigration crackdown, when he saw children locked up. But then, hey, that’s social media, right? Anyone can say anything.

It’s different, though, when TIME Magazine uses such politics. And its editor-in-chief defends the use of the picture by saying it was the most visible symbol of something, even though he knew full well that the photo didn’t depict that something. That’s a mighty slippery scale. If they could have achieved the same effect with a picture of a overripe banana taken in the Pacific in the 1950’s, they probably would have used it. It’s the effect that counts, not the facts.

 

Fact-Check: Was Migrant Girl On US Border Taken From Mother? Unfounded

Two photos that went viral on social media depict scenes that are not directly related to the family separations taking place on the US-Mexico border since early May. The most prominent, of Honduran two-year-old Yanela Varela crying inconsolably, has become a global symbol of the separations – helping to attract more than $18 million in donations for a Texas non-profit called RAICES. The photograph was taken on June 12 in McAllen, Texas by John Moore, a Pulitzer Prize-winning photographer for Getty Images.

 

An online article about the picture, published by Time Magazine, initially reported the girl was taken from her mother, but was subsequently corrected to make clear that: “The girl was not carried away screaming by US Border Patrol agents; her mother picked her up and the two were taken away together.” Time Magazine nonetheless used the image of the sobbing child on its cover, next to an image of President Trump looming over her, with the caption “Welcome to America”. The head of Honduras’ Migrant Protection Office Lisa Medrano confirmed to AFP that the little girl, just two years old, “was not separated” from her family.

The child’s father also said as much. Denis Varela told the Washington Post that his wife Sandra Sanchez, 32, had not been separated from their daughter, and that both were being detained together in an immigration center in McAllen. Under fire for its cover – which was widely decried as misleading including by the White House – the magazine said it was standing by its decision. “The June 12 photograph of the 2-year-old Honduran girl became the most visible symbol of the ongoing immigration debate in America for a reason,” Time’s editor-in-chief Edward Felsenthal said.

 

Nassim Nicolas Taleb, of black swans and Fragility, has found the appropriate term for this ‘phenomenon’, and explains why it works so well that TIME apparently doesn’t care about the damage to its reputation caused by using photographs for such purposes.

 

Pedophrasty, Bigoteering, and Other Modern Scams

Pedophrasty Definition: Argument involving children to prop up a rationalization and make the opponent look like an asshole, as people are defenseless and suspend all skepticism in front of suffering children: nobody has the heart to question the authenticity or source of the reporting. Often done with the aid of pictures. [..] Pedophrasty is effective as it provides arguments to strike before the evidence is formed. People are moved into “doing something” Pedophrasts prey on our maternal (and paternal) instincts.

Pedophrasty has its most effects on actors, journalists and similar types who are intellectually insecure, deprived of critical judgment, and afraid of being classified as violators of some norm of political correctness. For instance, pedophrasty has been commonly used in the Syrian war by such propagandists as Julian Roepke continuously supplying the German public with pictures of dead children. Or the various lobbies hired by Saudi Barbaria (and allies), such as the Middle East Institute in Washington DC, to promote Sunni Islamist policies under the cover of “think tanks”.

The Nayirah testimony: a false congressional testimony by 15-year-old girl who provided only her first name, Nayirah (she turned out to be the daughter of the Kuwaiti ambassador to the U.S.) was a bit responsible into tipping the US into the war. Nayirah claimed that she had witnessed Iraqi soldiers take babies out of incubators a Kuwaiti hospital, and leave the babies to die. Nobody dared to question the veracity of her claims.

That’s what is dangerous: seeing a photo of a child in distress makes people halt their critical thinking. That’s also why such photos are used. They help build a narrative that doesn’t have to be factual to shock people. But at that point TIME becomes a fiction magazine; it’s where it leaves journalism behind.

The narrative also depends to a large extent on the singularity of Trump’s brutality compared to other presidents and nations’ leaders. It seeks to single him out as being extremely cruel. That narrative will fall to pieces going forward, and not only because the stories behind the photos have now been exposed.

First, here’s a look at what happened under earlier US presidents, in this case Obama, published by the ACLU in May 2018:

 

ACLU Obtains Documents Showing Widespread Abuse Of Child Immigrants In US Custody

Documents obtained by the American Civil Liberties Union featured in a new report released today show the pervasive abuse and neglect of unaccompanied immigrant children detained by U.S. Customs and Border Protection. The report was produced in conjunction with the International Human Rights Clinic at the University of Chicago Law School.

“These documents provide a glimpse into a federal immigration enforcement system marked by brutality and lawlessness,” said Mitra Ebadolahi, ACLU Border Litigation Project staff attorney. “All human beings deserve to be treated with dignity and respect regardless of their immigration status — and children, in particular, deserve special protection. The misconduct demonstrated in these records is breathtaking, as is the government’s complete failure to hold officials who abuse their power accountable. The abuse that takes place by government officials is reprehensible and un-American.”

The report is based on over 30,000 pages of documents dated between 2009 and 2014.

Then, what other ‘leaders’, who express their ‘disgust’ and worries at the Trump separation policies do at home. The Guardian yesterday:

 

Theresa May’s Brutal Family Separations Would Make Trump Blush

[..] as a British citizen I cannot, in good faith, reassure myself with that time-old mantra that we are somehow more civilised and less cruel or brutal than our cousins across the pond. Nor do I think that condemnation from our government can carry any real currency. Since long before anybody had heard the words “Make America great again”, splitting up families has been official policy in Theresa May’s Home Office – and it has been carried out with a brutality and on a scale that would make even President Trump blush.

The Children’s Commissioner has found that at least 15,000 children growing up in the UK live without a parent because the right of British citizens to reunite with a foreign spouse is limited by an unreasonable income threshold, an impossible complicated application system fraught with Home Office errors, and no legal aid for families to challenge incorrect decisions.

And the Sydney Morning Herald from December 2017:

 

Australia Is Wilfully Damaging The Health Of Children On Nauru To Make A Point – And It Is Appalling

When we visited Nauru as paediatric specialists three years ago, we were asked to see 30 of the 100 children being detained on the island. Among them was a six-year-old girl who had tried to kill herself and a two-year-old boy with such severe behaviour problems a doctor had prescribed anti-psychotic medicines. Their parents were in despair. They had fled persecution, trying to save their children from harm, but had ended up imprisoned on a remote island, without hope.

We left with the view that these were the most traumatised children we had ever consulted on, far worse than children we had seen in Australia, Africa, Asia or Europe. Three years later, 43 of those children remain on the island. Officially they are now free to move around, but reports of attacks by locals show Nauru is not safe and so they remain in the “Regional Processing Centre”.

In 2014, the Australian Human Rights Commission reported that children at this centre were deeply traumatised psychologically, and had even been abused. Their detention was harming them. When Australia introduced mandatory detention in 1992, it took 10 weeks on average to process an application for refugee status. Now it takes years. As the numbers of children in detention fall, the length of time in detention rises. This is deliberate: wilfully damaging children’s health to deter others from seeking asylum.

See, what TIME Magazine and others do, using pictures of crying children regardless of their actual context, may make for an initially appealing narrative, but in the end their approach only distracts from what really matters. Which is that children need to be with their mothers (and preferably fathers).

Just reporting the facts on this is not only enough, it’s the only way to report on it. Once you start making up stuff, you’re done, and the truth is done.

US immigration laws are clearly not working; so change them. ICE is a terrible organization that has attracted far too many sociopaths. Close it down. Child abuse as a tool to instill fear has been an international political tool for a very long time. Those are the things that should be making headlines. Turning this into yet another anti-Trump narrative, using crying children as shortcuts to people’s emotions, doesn’t work, or not for long.

This is not about Trump. Trying to make it about him is not going to help those children. And that’s what you want, right? Right?

 

 

Jun 082018
 


B-25s fly past erupting Vesuvius, Italy 1944

 

Why Bringing Assange Home Would Be The Best Possible Thing For Australia (CJ)
Julian Assange Gets Embassy Visit From Australian Officials (ITV)
Ben Bernanke: US Economy To Go Off The Cliff In 2020 (ZH)
The Return Of King Dollar Could Create A Feeding Frenzy For US Stocks (MW)
Trouble Brewing in Emerging Markets (Rickards)
Deutsche Bank’s Junk Bond Firesale (ZH)
China Trade Surplus Falls, But US Gap Widens (MW)
Argentina Clinches $50 Billion IMF Financing Deal (R.)
Welcome To The Post-Westphalian World (Escobar)
Turkey Suspends Migrant Deal With Greece (R.)
Mediterranean A ‘Sea Of Plastic’ (AFP)
All UK Mussels Contain Plastic And Other Contaminants (Ind.)

 

 

Caitlin Johnstone: “A beautiful continent where the Aboriginal Dreamtime has been paved over with suburbs and shopping centers.”

Why Bringing Assange Home Would Be The Best Possible Thing For Australia (CJ)

Well I’ll be damned, it’s about time. According to a new report by the Sydney Morning Herald, officials from Australia’s High Commission have just been spotted leaving the Ecuadorian embassy in London, accompanied by Julian Assange’s lawyer Jennifer Robinson. Robinson confirmed that a meeting had taken place, but declined to say what it was about “given the delicate diplomatic situation.” So, forgive me if I squee a bit. I am aware how subservient Australia has historically been to US interests, I am aware that those US interests entail the arrest of Assange and the destruction of WikiLeaks, and I am aware that things don’t often work out against the interests of the US-centralized empire. But there is a glimmer of hope now, coming from a direction we’ve never seen before. A certain southerly direction.

If the Australian government stepped in to protect one of its own journalists from being persecuted by the powerful empire that has dragged us into war after war and turned us into an asset of the US war/intelligence machine… well, as an Australian it makes me tear up just thinking about it. It has been absolutely humiliating watching my beloved country being degraded and exploited by the sociopathic agendas of America’s ruling elites, up to and including the imprisonment and isolation of one of our own, all because he helped share authentic, truthful documents exposing the depraved behaviors of those same ruling elites. I have had very few reasons to feel anything remotely resembling patriotism lately. If Australia brought Assange home, this would change.

We Australians do not have a very clear sense of ourselves; if we did we would never have stood for Assange’s persecution in the first place. We tend to form our national identity in terms of negatives, by the fact that we are not British and are not American, without any clear image about what we are. A bunch of white prisoners got thrown onto a gigantic island rich with ancient indigenous culture, we killed most of the continent’s inhabitants and degraded and exploited the survivors [..] That’s pretty much our entire nation right now. A beautiful continent where the Aboriginal Dreamtime has been paved over with suburbs and shopping centers.

[..] Bringing Julian Assange home could be the first step to giving ourselves a bright, shining image of who we are and what we stand for. At the moment, Australia is a lifeless vassal state hooked up to the US power establishment with our every orifice and resource being used to feed the corporatist empire. Anesthetized to the eyeballs and in a state of total submission, the return of Julian might just be the little spark we need to get the old ticker pumping for itself again. Finally standing up for ourselves, for what’s right, and for the things that Julian stands for might just be the very thing we need as a nation to discover who we really are again.

Bring him home. It’s time.

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It must have been so strange for him. How can he trust these people?

Julian Assange Gets Embassy Visit From Australian Officials (ITV)

WikiLeaks founder Julian Assange has been visited by officials from the Australian High Commission. Two officials went to the Ecuadorian Embassy in London where Mr Assange has been living for almost six years. His internet and phone connections were cut off by the Ecuadorian government six weeks ago and he was denied visitors. The Australian-born campaigner fears being extradited to the US if he leaves the embassy and being questioned about the activities of WikiLeaks. It is believed to be the first time officials from the Australian High Commission in London have visited him.

Jennifer Robinson, a member of Mr Assange’s legal team, said: “I can confirm we met with Australian government representatives in the embassy today. “Julian Assange is in a very serious situation, detained without charge for seven-and-a-half years. “He remains in the embassy because of the risk of extradition to the US. “That risk is undeniable after numerous statements by Trump administration officials, including the Director of the CIA and the US attorney-general. “Given the delicate diplomatic situation we cannot comment further at this time.”

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He probably doesn’t get the irony in contradicting himself.

Ben Bernanke: US Economy To Go Off The Cliff In 2020 (ZH)

Speaking at the American Enterprise Institute, Bernanke echoed Bridgewater’s biggest concern about the sugar high facing the US economy for the next 18 months, saying that the stimulative impact from Trump’s $1+ trillion fiscal stimulus “makes the Fed’s job more difficult all around” because it’s happening at a time of very low unemployment; it also means that the more supercharged the economy gets thanks to the fiscal stimulus, the greater the fall will be when the hangover hits. “What you are getting is a stimulus at the very wrong moment,” Bernanke said Thursday during a policy discussion at the American Enterprise Institute, a Washington think tank. “The economy is already at full employment.”

Stealing further from the Bridgewater note, Bernanke said that while the stimulus “is going to hit the economy in a big way this year and next year and then in 2020 Wile E. Coyote is going to go off the cliff, and it’s going to look down” just when the US economy collides head on with what Bridgewater called “an unsustainable set of conditions.” The irony here is delightful: after all it was Ben Bernanke who consistently blamed Congress for not doing enough to jumpstart the economy during his time in office – a core topic of his 2015 memoir “The Courage to Act: A Memoir of a Crisis and Its Aftermath”; it is the same Bernanke who three years later is now blaming the President and Congress for doing too much. Here is the NYT on the very topic:

“Congress is largely responsible for the incomplete recovery from the 2008 financial crisis, Ben S. Bernanke, the former Federal Reserve chairman, writes in a memoir published on Monday. Mr. Bernanke, who left the Fed in January 2014 after eight years as chairman, says the Fed’s response to the crisis was bold and effective but insufficient. “I often said that monetary policy was not a panacea — we needed Congress to do its part,” he says. “After the crisis calmed, that help was not forthcoming.” And now that Congress has more than done its part, Bernanke predicts collapse in under 2 years.

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It’s starting to feel that way.

The Return Of King Dollar Could Create A Feeding Frenzy For US Stocks (MW)

While Wall Street stocks may well be on their way to fresh highs, the dollar has been taking hits from all comers. That buck weakness is largely due to speculation the ECB may be nearing its own quantitative-easing unwind. The dollar is also sagging a bit as investors fret about the upcoming G-7 and Trump-Kim Jong Un meetings next week. But try to imagine a not-so-distant future, where King Dollar sits on the Iron Throne, while the world burns in chaos. That’s the vision laid out in our call of the day from Santiago Capital CEO Brent Johnson, who predicts the dollar will go “much, much higher” over the next one to two years. That in turn should trigger a global currency crisis and drive investors into U.S. stocks, he argues.

“What it means is we haven’t seen the blowoff top yet. I think equities are going a lot higher. This isn’t a Polyanna view — I’m not saying to go out and buy equities because things are good. I’m saying buy equities because things are bad,” says Johnson in a recent interview with Real Vision . Johnson sees big blowback from the Fed’s unwinding of quantitative easing, already underway and well ahead of the rest of the world’s central banks. That will leave fewer dollars sloshing around the global financial system, even as the world still has a big need for them. He estimates demand for the buck tops $1 trillion a year, just to pay interest on dollar-based debt.

As the Fed tightens and injects less liquidity into the system, it will cause the dollar to go higher and higher, driving more investors toward the buck and then U.S. stocks as well. And a super strong dollar will just cause chaos elsewhere, as other currencies crumble. Just ask emerging-market central bankers how hot it’s getting in the kitchen right now. In Johnson’s opinion, global financial trade revolves around the dollar, which is why it matters so much if it decides to take off in a big way. “And when that money flows into the dollar, it eventually goes into U.S. assets, and I think it is going to push equities to all-time highs,” he says.

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“The U.S. will need to borrow over $3 trillion of new money in the next three years in addition to rolling over the existing $21 trillion in U.S. Treasury debt.”

Trouble Brewing in Emerging Markets (Rickards)

Hot money has been heading out of stocks and moving in the direction of government bonds, where higher risk-adjusted returns await. With this market backdrop in mind, what are the prospects for emerging markets in the months ahead? Outflows from EM stocks have just begun and are set to accelerate dramatically in the months ahead. This could lead to a full-blown emerging-market debt crisis with some potential to morph into a global liquidity crisis of the kind last seen in 2008, possibly worse. Some of the main drivers of this outflow from EMs are:

• China has begun cracking down on excessive leverage, zombie companies and shadow banking. The result will be a slowdown in growth in the world’s second- largest economy as the Communist Party tries to bring a credit bubble in for a soft landing. If they fail, the result will be worse than a slowdown; it could be a made- in-China credit crisis

• President Trump has launched a trade war. Major U.S. trading partners such as China, Canada and Mexico are in the cross hairs. Retaliation by those trading partners will be quick in coming. This trade war is another head wind for world growth and will put added stress on EM exports to developed economies

• The U.S. budget deficit is out of control. The U.S. will need to borrow over $3 trillion of new money in the next three years in addition to rolling over the existing $21 trillion in U.S. Treasury debt. The Federal Reserve is no longer monetizing this debt and is actually reducing its holdings of U.S. Treasuries by shrinking the base money supply and deleveraging its balance sheet. This debt will find buyers at progressively higher interest rates. Since central banks are no longer buyers, private parties will have to buy this debt. Those private buyers will have to sell stocks in developed and emerging markets to have the liquidity to buy government bonds

This is an extremely potent combination. Slower growth in China, a global trade war and an epic portfolio rebalancing from stocks to government bonds will sink U.S. and emerging-market stocks. The best case will be a 30% drawdown in stocks. The worst case will be a new global liquidity crisis that makes 2008 look like a warm-up for the main event.

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The most desperate bank in the world.

Deutsche Bank’s Junk Bond Firesale (ZH)

Deutsche Bank is seeking to sell its portfolio of non-investment grade energy loans, worth about $3 billion, according to people with knowledge of the matter.

The potential firesale comes as Deutsche’s short-dated CDS (counterparty risk) is soaring..

And comes as European HY Energy debt is weakening notably and US HY Energy is as good as it gets… Bloomberg reports that Deutsche is planning to sell the loan book as a whole and has marketed it to North American and European peers, said one of the people. The portfolio is expected to sell for par value, said the people, who asked not to be identified because they weren’t authorized to speak publicly; good luck with that! The bank’s energy business is expected to wrap up on June 30, one of the people said. The bank has been an active lender in the energy space in the past year, participating in the financing of companies including Peabody Energy Corp. and Coronado Australian Holdings Pty., according to data compiled by Bloomberg.

So to summarize: Moody’s is warning that when the economy weakens we will see an avalanche of defaults like we haven’t seen before; Corporate debt-to-GDP and investor risk appetite is reminding a lot of veterans of previous credit peaks; and now the most desperate bank in the world is offering its whole junk energy debt book in a firesale… just as high yield issuance starts to slump. All of which raises more than a single hair on the back of our previous lives in credit necks… and reminds us of this…

Thank you all for coming in a little early this morning. I know yesterday was pretty bad and I wish I could say that today is gonna be less so, but that isn’t gonna be the case. Now I’m supposed to read this statement to you all here, but why don’t you just read it on your own time and I’ll just tell you what the fuck is going on here. I’ve been here all night… meeting with the Executive Committee. And the decision has been made to unwind a considerable position of the firm’s holdings in several key asset classes. The crux of it is… in the firms thinking, the party’s over as of this morning. “For those of you who’ve never been through this before, this is what the beginning of a fire sale looks like.” – Sam Rogers, Margin Call

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“Concerns about more tariffs ahead likely caused some companies to front-load shipments..”

China Trade Surplus Falls, But US Gap Widens (MW)

China’s trade surplus narrowed in May on strong imports, through the gap with the U.S. widened–in part, some economists said, because of concerns that trade tensions could worsen in the months ahead. China reported a trade surplus of $24.92 billion last month, according to customs data released Friday, narrower than April’s $28.78 billion and the $32.6 billion forecast in a poll of economists. Imports were up 26% from a year earlier–driven by rising oil prices and bigger purchases of factory inputs, some economists said–accelerating from April’s 21.5% and beating forecasts. The higher-than-expected figure came after Beijing pledged to its trading partners to increase purchases and narrow trade gaps.

Stripping out price effects, Julian Evans-Pritchard, an economist with Capital Economics, estimated that import volumes in May were still up a seasonally adjusted 5.2% from April, reversing most of the decline since the start of 2018. The increase suggests that industrial activity remains strong following the easing of wintertime pollution controls, he said. Washington and Beijing have skirmished over trade this year, increasing tariffs on some products and threatening to do so on tens of billions of dollars in other goods. Beijing in recent weeks extended an olive branch, announcing plans to increase purchases from abroad and reduce tariffs on automobiles and some consumer products ranging from food and cosmetics.

Even so, China’s trade surplus with the U.S. in May was up 11% from April, at $24.58 billion, according to Friday’s data. Concerns about more tariffs ahead likely caused some companies to front-load shipments, said Liu Xuezhi, an economist with Bank of Communications.

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Shackles.

Argentina Clinches $50 Billion IMF Financing Deal (R.)

Argentina and the International Monetary Fund said on Thursday they reached an agreement for a three-year, $50 billion standby lending arrangement, which the government said it sought to provide a safety net and avoid the frequent crises of the country’s past. Argentina requested IMF assistance on May 8 after its peso currency weakened sharply in an investor exodus from emerging markets. As part of the deal, which is subject to IMF board approval, the government pledged to speed up plans to reduce the fiscal deficit even as authorities now foresee lower growth and higher inflation in the coming years.

The deal marks a turning point for Argentina, which for years shunned the IMF after a devastating 2001-2002 economic crisis that many Argentines blamed on IMF-imposed austerity measures. President Mauricio Macri’s turn to the lender has led to protests in the country. “There is no magic, the IMF can help but Argentines need to resolve our own problems,” Treasury Minister Nicolas Dujovne said at a news conference. Dujovne said he expected the IMF’s board to approve the deal during a June 20 meeting. After that, he said he expects an immediate disbursement of 30% of the funding, or about $15 billion. Argentina will seek to reduce its fiscal deficit to 1.3% of GDP in 2019, down from 2.2% previously, Dujovne said. The deal calls for fiscal balance in 2020 and a fiscal surplus of 0.5% of GDP in 2020.

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Overview of all initiatives to move away from western dominance.

Welcome To The Post-Westphalian World (Escobar)

In his latest, avowedly “provocative” slim volume, Has the West Lost It? former Singaporean ambassador to the UN and current Professor in the Practice of Public Policy at the National University, Kishore Mahbubani frames the key question: “Viewed against the backdrop of the past 1,800 years, the recent period of Western relative over-performance against other civilizations is a major historical aberration. All such aberrations come to a natural end, and that is happening now.” It is enlightening to remember that at the Shangri-la Dialogue two years ago, Professor Xiang Lanxin, director of the Centre of One Belt and One Road Studies at the China National Institute for SCO International Exchange and Judicial Cooperation, described BRI as an avenue to a ‘post-Westphalian world.’

That’s where we are now. Western elites cannot but worry when central banks in China, Russia, India and Turkey actively increase their physical gold stash; when Moscow and Beijing discuss launching a gold-backed currency system to replace the US dollar; when the IMF warns that the debt burden of the global economy has reached $237 trillion; when the Bank for International Settlements (BIS) warns that, on top of that there is also an ungraspable $750 trillion in additional debt outstanding in derivatives. Mahbubani states the obvious: “The era of Western domination is coming to an end.” Western elites, he adds, “should lift their sights from their domestic civil wars and focus on the larger global challenges. Instead, they are, in various ways, accelerating their irrelevance and disintegration.”

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The Greek court system works.

Turkey Suspends Migrant Deal With Greece (R.)

Turkey has suspended its migrant readmission deal with Greece, Foreign Minister Mevlut Cavusoglu was quoted as saying by state-run Anadolu agency, days after Greece released from prison four Turkish soldiers who fled there after a 2016 attempted coup. The four soldiers were released on Monday after an order extending their custody expired. A decision on their asylum applications is still pending. “We have a bilateral readmission agreement. We have suspended that readmission agreement,” Cavusoglu was quoted as saying, adding that a separate migrant deal between the EU and Turkey would continue. Under the bilateral deal signed in 2001, 1,209 foreign nationals have been deported to Turkey from Greece in the last two years, data from the Greek citizens’ protection ministry showed.

Cavusoglu was quoted as saying that he believed the Greek government wanted to resolve the issue about the soldiers but that Greek judges were under pressure from the West. “The Greek government wants to resolve this issue. But we also see there is serious pressure on Greece from the West. Especially on Greek judges,” Cavusoglu was quoted as saying. The eight soldiers fled to Greece following the July 2016 failed coup in Turkey. Ankara has demanded they be handed over, accusing them of involvement in the abortive coup. Greek courts have rejected the extradition request and the soldiers have denied wrongdoing and say they fear for their lives. In May, Greece’s top administrative court rejected an appeal by the Greek government against an administrative decision by an asylum board to grant asylum to one of the Turkish soldiers.

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Worst offender? Turkey.

Mediterranean A ‘Sea Of Plastic’ (AFP)

The Mediterranean could become a “sea of plastic”, the WWF warned on Friday (June 8) in a report calling for measures to clean up one of the world’s worst affected bodies of water. The WWF said the Mediterranean had record levels of “micro-plastics,” the tiny pieces of plastic less than 5mm in size which can be found increasingly in the food chain, posing a threat to human health. “The concentration of micro-plastics is nearly four times higher” in the Mediterranean compared with open seas elsewhere in the world, said the report, “Out of the Plastic Trap: Saving the Mediterranean from Plastic Pollution.” The problem, as all over the world, is simply that plastics have become an essential part of our daily lives while recycling only accounts for a third of the waste in Europe.

Plastic represents 95 per cent of the waste floating in the Mediterranean and on its beaches, with most coming from Turkey and Spain, followed by Italy, Egypt and France, the report said. To tackle the problem, there has to be an international agreement to reduce the dumping of plastic waste and to help clear up the mess at sea, the WWF said. All countries around the Mediterranean should boost recycling, ban single-use plastics such as bags and bottles, and phase out the use of micro plastics in detergents or cosmetics by 2025. The plastics industry itself should develop recyclable and compostable products made out of renewable raw materials, not chemicals derived from oil.

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Bon appetit.

All UK Mussels Contain Plastic And Other Contaminants (Ind.)

All mussels sampled from UK coastlines and supermarkets were found to contain tiny shards of plastic and other debris in a new study. The scientists behind the report said microplastic consumption by people eating seafood in Britain was likely “common and widespread”. Though they were less certain about the resulting impact on human health, the research team emphasised the importance of further studies to determine any potential harm as a result of people eating plastic. In samples of wild mussels from eight coastal locations around the UK and eight unnamed supermarkets, 100 per cent were found to contain microplastics or other debris such as cotton and rayon.

Every 100 grams of mussels eaten contains an estimated 70 pieces of debris, according to the researchers, whose study is published in the journal Environmental Pollution. Mussels feed by filtering seawater through their bodies, meaning they ingest small particles of plastic and other materials as well as their food. There was more debris in the wild mussels, which were sampled from Edinburgh, Filey, Hastings, Brighton, Plymouth, Cardiff and Wallasey, than in the farmed mussels bought in shops. But mussels from the supermarkets, which came from various places around the world, had more particles in them if they had been cooked or frozen than if they were freshly caught, the study found.

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Nov 242017
 
 November 24, 2017  Posted by at 9:50 am Finance Tagged with: , , , , , , , , ,  


Dorothea Lange Migrant agricultural workers in California 1935

 

The Party Is Over for Australia’s $5.6 Trillion Housing Frenzy (BBG)
The UK’s Future Economic Storm Just Got Worse (CNBC)
UK Consumer Confidence Hits Lowest Level Since Aftermath Of Brexit Vote (BBG)
After Sudden Rout, China Stock Traders Question Beijing Put
China Bank Profits Face Squeeze From Tighter Rules – Fitch (BBG)
China Reports Breaking Up Gang That Moved $3 Billion Abroad (AP)
Bitcoin Mining Now Consumes More Electricity Than 159 Countries (PCUK)
Mexico Revokes Monsanto Permit To Market GMO Soy In Seven States (R.)
Turkey, Iran, Russia and India are Playing the New Silk Roads (Escobar)
Greek PM Tsipras ‘Proud’ Of Living Conditions Of Refugees (K.)
Greece Vows Greater Effort To Protect Refugees Over Winter (AP)
Greek Pensioners March Against Government That ‘Took Everything’ (R.)

 

 

In case you were wondering just how big the bubble has become. Look at New Zealand too.

The Party Is Over for Australia’s $5.6 Trillion Housing Frenzy (BBG)

The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come. After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) – or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them. Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.

So far, the Reserve Bank of Australia has relied on banking regulators to apply the brakes with lending curbs. It reckons the financial system is well-placed to withstand any shocks, but isn’t so confident on consumers. That puts it out of step with developed-world peers that are incrementally tightening policy, with Governor Philip Lowe this week making clear local interest rates aren’t going anywhere soon. To be sure, there are key dynamics that differentiate Australia’s housing boom with those that soured in recent years around the world. Aussie banks can claim against other income and assets or chase individuals into bankruptcy if borrowers default. Tax deductions for interest paid on investment loans also support demand, as does a rich pipeline of demand from Asian buyers, especially Chinese. But with prices in major cities like Sydney finally leveling off and a wave of new apartments about to hit markets in Brisbane and Melbourne, it’s worth taking a look at housing’s out-sized influence on Australia’s economy.

The weight of Australian homes on the economy is heavier than policy makers would like. On one hand, the dizzy valuations reflect a desirable location and strong population growth. But they also reflect the massive liabilities that are now tied to these assets. “The risk is that it leaves the Australian economy extremely exposed, and a minor shock could become far more significant,” said Daniel Blake, an economist at Morgan Stanley in Sydney.

The increasing treatment of housing as a financial commodity has seen borrowers rush into a byzantine maze of mortgage-related products. That’s made banks very profitable, but very exposed. While the RBA is satisfied that lenders have adequate buffers to cope with any downturn, banks may find it harder to value their collateral in a falling market as investors look to consolidate their portfolios of multiple homes, said Blake.

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Projecting until 2070 may not be the most useful exercise. The next 10 years is wobbly enough.

The UK’s Future Economic Storm Just Got Worse (CNBC)

Britons should better get used to austerity. Even though the U.K. government has mostly fixed its short-run fiscal problems caused by the global financial crisis, the long-run challenge of keeping fiscal policy on a sustainable path has grown even bigger, according to the latest economic projections published alongside Wednesday’s Autumn Budget. Over the medium term, U.K. fiscal policy looks to be heading towards calm waters. Combining the progress made under then-Finance Minister George Osborne from 2010 until early 2016 with the tax and spending plans announced on Wednesday by the incumbent Philip Hammond, will manage to get the annual fiscal deficit down from a peak of 8% of GDP in 2009 to less than 2.5% this year, and eventually to close to 1% by early next decade.

This should be enough for debt as a percentage of GDP to begin to fall gradually from around 87% of GDP from next year onwards into the 2020s. This is good news. But looking further out, U.K. fiscal policy appears to be heading towards a storm. Back in January, the Office for Budget Responsibility (OBR), the U.K.’s independent fiscal watchdog, projected that U.K. public debt will rise again from the 2030s onwards to nearly 250% of GDP by the 2070s. Rising health, state pension and long-term social care costs linked to demographic factors are likely to cause the fiscal deficit to surge again. U.K. public sector debt is projected to reach highs not seen since World War II. It gets worse. Keep in mind that the projections made in January assumed that productivity growth, the major determinant of economic growth, would average 2% per year into the long run.

Yesterday, the OBR downgraded this judgement to 1.3%. While productivity growth has declined across the advanced world in the past decade, the Brexit-stricken U.K. is suffering an extra hit by weakening the economic ties with its biggest market, the EU. In this new context, the earlier forecast that debt would rise to 250% of GDP within 50 years looks like a significant underestimate, to put it mildly. By reducing projected growth rates for wages and profits, the new lower outlook for trend productivity growth steepens the U.K.’s future fiscal hill. Unlike revenues from taxation, which mostly rise and fall in line with the rate of economic growth, future costs coming from the ageing population are independent of economic factors.

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Everyone can see the clowns in the news everyday.

UK Consumer Confidence Hits Lowest Level Since Aftermath Of Brexit Vote (BBG)

U.K. consumer confidence tumbled in November, reaching the lowest level since the aftermath of the Brexit vote. YouGov and the Centre for Economics and Business Research said optimism suffered its biggest monthly decline since the month after the referendum, with all eight measures that make up the index falling. The score for household financial situations in the past 30 days dropped to its lowest since January 2014, and a gauge of home owners’ expectations for values over the next 12 months slid to the least in a year following the Bank of England’s rate increase on Nov. 2. The report on Friday comes after official data this week highlighted the importance of consumers to the U.K. economy, as a jump in household spending offset slowing business investment and a drag from trade to drive a 0.4% expansion in the third quarter.

It also follows Chancellor of the Exchequer Philip Hammond’s announcement of a downgrade to the economic outlook as a result of a sluggish productivity and Brexit headwinds. Warnings of a consumer slowdown are coming ahead of the crucial Christmas shopping period as the squeeze on incomes from inflation continues. Figures last week showed retail sales fell in October from a year earlier, the first decline in more than four years. “Households are understandably worried.” said Christian Jaccarini, an economist at the CEBR. “The first interest-rate hike in over a decade triggered fears that higher borrowing costs will compound the inflation-induced squeeze on household incomes.”

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How do you go from running a casino to having actual stock markets?

After Sudden Rout, China Stock Traders Question Beijing Put

What happened to the Beijing put? That’s what investors in China are asking themselves after a gauge of large-cap stocks plunged 3% on Thursday, rattling a market that’s grown accustomed to state support when losses get extreme. While there were signs over the past week that the government was looking to cool gains in high-flying shares like Kweichow Moutai – along with concerns over rising corporate bond yields – the severity of Thursday’s slump caught some traders off guard. The biggest surprise was that losses accelerated into the close. The nation’s CSI 300 Index sank 52 points in the final 45 minutes of trading, the steepest afternoon decline since the depths of China’s stock market crash in January 2016. Such late-day selloffs have been rare this year, with the index rising an average 2.9 points.

While it’s unclear why state funds allowed shares to tumble this time, analysts said the episode may help wring some of the complacency out of China’s stocks. Before Thursday’s slump, the CSI 300 had climbed 28% this year to the highest level since July 2015. Margin debt, while still well below its bubble peak in 2015, has increased for six straight months. “Some investors might have been just taking profit in the morning, and that turned into a selling stampede in the afternoon,” said Wang Chen, Shanghai-based partner with XuFunds Investment Management Co. “Investments in blue chips were overcrowded, and a lot of them were bought with margin financing.”

[..] For Sun Jianbo, president of China Vision Capital Management, valuations among large-cap shares are too expensive for state-backed funds to intervene. The CSI 300 traded at its highest level relative to the broader Shanghai Composite Index in at least 12 years at the start of this week as investors flocked to large caps such as Moutai and Ping An Insurance. “There’s no need to prop up the market yet,” Sun said. “A lot of big caps are still expensive and it would do more harm than good to state-backed funds if they buy now.”

The divergence between large-cap shares and the rest of the market may be one reason why the government took aim at Moutai. Before Xinhua warned last week that gains in the liquor maker were excessive, the stock had more than doubled this year. Given that much of the gains in Chinese shares this year can be explained by improving earnings prospects, it’s likely that government’s bigger target is leverage, according to Ken Peng at Citi Private Bank in Hong Kong.

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Aimed at the shadows, but…

China Bank Profits Face Squeeze From Tighter Rules – Fitch (BBG)

Profit margins at Chinese banks will be squeezed next year and credit growth is likely to slow as increasing regulation eats up capital, Fitch Ratings said. The lending businesses of the country’s smaller banks face the most pressure and they will rely more on larger state-owned rivals for liquidity, the ratings company said in a statement Friday. At the same time, the shadow-banking sector, which one brokerage values at about $19 trillion, will attract even more regulatory scrutiny in 2018, Fitch said. Chinese regulators are sweeping through the country’s $40 trillion financial sector in a bid to contain risk after total debt ballooned to about 260 percent of the size of the economy. In the past week alone, they’ve proposed rules governing returns from asset-management products, laid out limits on bank shareholdings and unveiled a purge of cash micro-lenders.

“Credit growth is likely to decelerate next year, given the tighter regulatory stance,” Fitch said. “Funding conditions are likely to remain tight, pointing to continued margin pressure at smaller banks which rely more on non-deposit funding.” The predictions from Fitch and S&P Global Ratings on Thursday suggest the cost of the system-wide measures will be sluggish profit growth at domestic banks, which include Industrial & Commercial Bank of China, the world’s largest by assets. New rules pushing shadow-banking items back on to lenders’ balance sheets will lead to an increase in risk that could weigh on bank capital, Fitch said. Net income growth in the banking sector will remain in the “low single digits” in 2018, it said. The ratings company kept its outlook on Chinese banks at stable, saying sovereign support for the sector remains “very strong.”

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“..as many as 10,000 people might have been involved..”

China Reports Breaking Up Gang That Moved $3 Billion Abroad (AP)

Chinese police say they have broken up a gang that smuggled 20 billion yuan ($3 billion) out of the country, evading financial controls imposed by Beijing to stem an outflow of capital from the economy. Seven suspects were detained in the case centered in the southern city Shaoguan near Hong Kong but as many as 10,000 people might have been involved, the official Xinhua News Agency reported. Chinese authorities have steadily tightened foreign-exchange controls to stem a multibillion-dollar outflow of capital that they say hampers financial management in the world’s second-largest economy. The group in Shaoguan is accused of moving money illegally using 148 bank accounts opened in 20 provinces with stolen identity cards, according to Xinhua.

It said they made unspecified “huge profits” by trading on the difference in exchange rates between Hong Kong dollars and the mainland’s yuan. Beijing allowed an informal financial industry to flourish over the past two decades to support entrepreneurs but is tightening controls due to mounting concern about financial stability. Regulators are especially worried about unauthorized cross-border movement of money at a time when they are trying to stem an outflow of capital. Companies and investors rushed to export money after a change in the mechanism used to set the government-controlled exchange rate in 2015 prompted expectations the yuan would weaken in value. That forced the Chinese central bank to spend heavily to shore up the yuan.

Read more …

“In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%..”

Bitcoin Mining Now Consumes More Electricity Than 159 Countries (PCUK)

Bitcoin’s ongoing meteoric price rise has received the bulk of recent press attention with a lot of discussion around whether or not it’s a bubble waiting to burst. However, most the coverage has missed out one of the more interesting and unintended consequences of this price increase. That is the surge in global electricity consumption used to “mine” more Bitcoins. According to Digiconomist’s Bitcoin Energy Consumption Index, as of Monday November 20th, 2017 Bitcoin’s current estimated annual electricity consumption stands at 29.05TWh. That’s the equivalent of 0.13% of total global electricity consumption. While that may not sound like a lot, it means Bitcoin mining is now using more electricity than 159 individual countries. More than Ireland or Nigeria. If Bitcoin miners were a country they’d rank 61st in the world in terms of electricity consumption.

Here are a few other interesting facts about Bitcoin mining and electricity consumption:

• In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%
• If it keeps increasing at this rate, Bitcoin mining will consume all the world’s electricity by February 2020.
• Estimated annualised global mining revenues: $7.2 billion USD (£5.4 billion)
• Estimated global mining costs: $1.5 billion USD (£1.1 billion)
• Number of Americans who could be powered by bitcoin mining: 2.4 million (more than the population of Houston)
• Number of Britons who could be powered by bitcoin mining: 6.1 million (more than the population of Birmingham, Leeds, Sheffield, Manchester, Bradford, Liverpool, Bristol, Croydon, Coventry, Leicester & Nottingham combined) Or Scotland, Wales or Northern Ireland.
• Bitcoin Mining consumes more electricity than 12 US states (Alaska, Hawaii, Idaho, Maine, Montana, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming)

Read more …

Gracias Mexico.

Mexico Revokes Monsanto Permit To Market GMO Soy In Seven States (R.)

Monsanto said on Thursday that Mexico’s agriculture sanitation authority SENASICA had revoked its permit to commercialize genetically modified soy in seven states, criticizing the decision as unjustified. Monsanto said in a statement that the permit had been withdrawn on unwarranted legal and technical grounds. The company said it would take the necessary steps to safeguard its rights and those of farmers using the technology, but did not elaborate. Mexican newspaper Reforma cited a document saying the permit had been withdrawn due to the detection of transgenic Monsanto soya in areas where it was not authorized. Monsanto rejected that argument, saying in its statement that authorities had not done an analysis of how the soy on which their decision was based was sown. The revocation applies to the states of Tamaulipas, San Luis Potosi, Veracruz, Chiapas, Campeche, Yucatan and Quintana Roo and follows a 2016 legal suspension of the permit.

Read more …

China will build much of it all, but it won’t pay for it. It’s exporting a Ponzi.

Turkey, Iran, Russia and India are Playing the New Silk Roads (Escobar)

Vladimir Putin, Recep Tayyip Erdogan and Hassan Rouhani will hold a summit this Wednesday in Sochi to discuss Syria. Russia, Turkey and Iran are the three power players at the Astana negotiations – where multiple cease-fires, as hard to implement as they are, at least evolve, slowly but surely, towards the ultimate target – a political settlement. A stable Syria is crucial to all parties involved in Eurasia integration. As Asia Times reported, China has made it clear that a pacified Syria will eventually become a hub of the New Silk Roads, known as the Belt and Road Initiative (BRI) – building on the previous business bonanza of legions of small traders commuting between Yiwu and the Levant. Away from intractable war and peace issues, it’s even more enlightening to observe how Turkey, Iran and Russia are playing their overlapping versions of Eurasia economic integration and/or BRI-related business.

Much has to do with the energy/transportation connectivity between railway networks – and, further on the down the road, high-speed rail – and what I have described, since the early 2000s, as Pipelineistan. The Baku-Tblisi-Ceyhan (BTC) pipeline, a deal brokered in person in Baku by the late Dr Zbigniew “Grand Chessboard” Brzezinski, was a major energy/geopolitical coup by the Clinton administration, laying out an umbilical steel cord between Azerbaijan, Georgia and Turkey. Now comes the Baku-Tblisi-Kars (BTK) railway – inaugurated with great fanfare by Erdogan alongside Azerbaijani President Ilham Aliyev and Georgian Prime Minister Giorgi Kvirikashvili, but also crucially Kazakh Prime Minister Bakhytzhan Sagintayev and Uzbek Prime Minister Abdulla Aripov. After all, this is about the integration of the Caucasus with Central Asia.

Erdogan actually went further: BTK is “an important chain in the New Silk Road, which aims to connect Asia, Africa, and Europe.” The new transportation corridor is configured as an important Eurasian hub linking not only the Caucasus with Central Asia but also, in the Big Picture, the EU with Western China. BTK is just the beginning, considering the long-term strategy of Chinese-built high-speed rail from Xinjiang across Central Asia all the way to Iran, Turkey, and of course, the dream destination: the EU. Erdogan can clearly see how Turkey is strategically positioned to profit from it.

Read more …

Alexis, Alexis, we know you don’t mean it that way, so why risk getting caught with your foot in your mouth?

Greek PM Tsipras ‘Proud’ Of Living Conditions Of Refugees (K.)

Prime Minister has said he is “proud” of living conditions for refugees on the Greek mainland, although he admitted that “the situation remains difficult” for those stranded on the islands of the eastern Aegean. Speaking to France’s Le Figaro newspaper on the occasion of his visit to Paris, Tsipras also defended a deal between the European Union and Ankara to stem migrant flows in the Aegean. “The deal between the EU and Turkey is hard but necessary; it helped put an end to the daily deaths in the Aegean. We have received more than 60,000 refugees on mainland Greece who live in good conditions, with access to health and education. It is something I am proud of,” Tsipras said.

“The situation on the islands remains difficult. There is a large number of migrants and refugees and asylum procedures are time-consuming,” he said. Greece has seen a surge of migrant arrivals in recent months. With winter fast approaching and migrant reception centers on the Aegean islands reaching breaking point due to overcrowding, 20 human rights groups this week sent a letter to the Greek government calling for immediate action.

Read more …

People are dying already. It’s only autumn.

Greece Vows Greater Effort To Protect Refugees Over Winter (AP)

Greece has promised to step up efforts to protect migrants and refugees over the winter on the Greek islands, but defended a 2016 deal between Turkey and the European Union to stop the westward flow of migrants into Europe. On a visit to France, Prime Minister Alexis Tsipras told the country’s Figaro newspaper on Thursday that the agreement was difficult but necessary. His remarks followed strongly criticism from aid agencies and human rights groups over conditions at migrant shelters on Lesvos and other Greek islands. Greece has seen a surge of migrant arrivals in recent months. On Thursday, Greek border police recovered the body of a man believed to be a migrant in a river that divides Greece and Turkey – the second such incident in two days.

Read more …

“They’re killing us and they’re mocking us at the same time..”

Greek Pensioners March Against Government That ‘Took Everything’ (R.)

Several hundred elderly Greeks marched through Athens on Thursday, protesting against a government they say “took everything” with a new round of cuts to pensions and crumbling health care benefits. Greece’s three bailouts since 2010 have repeatedly taken aim at the pension system. Cuts have pushed nearly half its elderly below the poverty line with incomes of less 600 euros ($710.70) a month. With nearly a quarter of the workforce unemployed, a quarter of children living in poverty and benefits slashed, parents have grown dependent on grandparents for handouts. But after the cuts to pensions, some Greeks have seen their monthly cheque fall between 40 and 50 percent in seven years. After rent, utility bills and health care, they barely make ends meet.

“I have never seen the country in this state, not even during war,” said 80-year-old Nikos Georgiadis, a former hotel employee whose pension has been reduced by 40 percent. “Pensioners are impoverished, and not only can they not afford to buy medicines, some are looking for food in the trash,” he said, leaning on a tree to catch his breath. Fotini Karavidou, a 75-year-old retired accountant who joined the march in a wheelchair, said she had to “cut back on everything” to afford medicine. “It’s simple – many pensioners cannot afford to eat and to buy medicine,” said Yiannis Karadimas, 67, who heads a local pensioners association. Karadimas said it was “a joke” that the government had legalised marijuana for medical purposes while cutting back on health care spending. “They’re killing us and they’re mocking us at the same time,” he said.

The popularity of Prime Minister Alexis Tsipras has waned since he first won elections in 2015. In an effort to rebuild public support, the government gave Greece’s 1.3 million pensioners a one-off Christmas bonus last year, worth 300 to 500 euros each. But the handouts have failed to whip up any obvious increase in support. Pensioners have taken to the streets time and again in recent months. About 2,000 people joined Thursday’s march. “Unfortunately, I voted for them, and they turned out to be the biggest liars of all,” Georgiadis, the pensioner, said. “It [the government] promised us everything, and it took everything.”

Read more …

Nov 012017
 
 November 1, 2017  Posted by at 2:44 pm Finance Tagged with: , , , , , , , , ,  


Jean-Léon Gérôme Slave market 1866

 

Here’s the story in a nutshell: Ultra low interest rates mark a shift away from people’s wealth residing in their savings and pension plans, and into to so-called wealth residing in their homes, which are bought with ever growing levels of debt. When interest rates rise, they will lose that so-called wealth.

It is grand theft auto on an unparalleled scale, and it’s a piece of genius, because while people are getting robbed in plain daylight, they actually think they’re winning. But as I wrote back in March of this year, home sales, and bubbles, are the only thing that keeps our economies humming.

We haven’t learned a thing since March, and we haven’t learned a thing for many years. People need a place to live, and they fall for the scheme hook line and sinker. Which in a way is a good thing because the economy would have been dead without that ignorance, but at the same time it’s not because it’s a temporary relief only and the end result will be all the more painful for it.

Whatever Yellen decides as per rates, or Draghi, it doesn’t really matter anymore, this sucker’s going down something awful. This is a global issue. Housing bubbles have been blown not only in the Anglosphere, though they are strong there, many other countries have them as well, Scandinavia, Netherlands, even Germany and France. It’s what ultra low rates do.

First, here’s what I said in March:

 

Our Economies Run On Housing Bubbles

What we have invented to keep big banks afloat for a while longer is ultra low interest rates, NIRP, ZIRP etc. They create the illusion of not only growth, but also of wealth. They make people think a home they couldn’t have dreamt of buying not long ago now fits in their ‘budget’. That is how we get them to sign up for ever bigger mortgages. And those in turn keep our banks from falling over.

Record low interest rates have become the only way that private banks can create new money, and stay alive (because at higher rates hardly anybody can afford a mortgage). It’s of course not just the banks that are kept alive, it’s the entire economy. Without the ZIRP rates, the mortgages they lure people into, and the housing bubbles this creates, the amount of money circulating in our economies would shrink so much and so fast the whole shebang would fall to bits.

That’s right: the survival of our economies today depends one on one on the existence of housing bubbles. No bubble means no money creation means no functioning economy.

 

 

What we should do in the short term is lower private debt levels (drastically, jubilee style), and temporarily raise public debt to encourage economic activity, aim for more and better jobs. But we’re doing the exact opposite: austerity measures are geared towards lowering public debt, while they cut the consumer spending power that makes up 60-70% of our economies. Meanwhile, housing bubbles raise private debt through the -grossly overpriced- roof.

This is today’s general economic dynamic. It’s exclusively controlled by the price of debt. However, as low interest rates make the price of debt look very low, the real price (there always is one, it’s just like thermodynamics) is paid beyond interest rates, beyond the financial markets even, it’s paid on Main Street, in the real economy. Where the quality of jobs, if not the quantity, has fallen dramatically, and people can only survive by descending ever deeper into ever more debt.

 

 

Australia’s housing boom has been a thing of beauty, with New Zealand, especially Wellington and Auckland, following close behind. UBS now says the Oz bubble is over. Prices are still rising quite a bit though.

Fresh New Zealand PM Jacinda Ardern has announced new policies to deter foreign buyers from purchasing more property in the country. She may not like what that does to the country’s economy. Most new Zealanders can no longer afford property in major centers, and forcing prices down this way will expose many present owners to margin calls and foreclosures.

Moreover, because Australian banks own their New Zealand peers, if the Aussie boom is really gone, these banks are going to get hit so hard they’ll take down New Zealand with them. Close your eyes and put your fingers in your ears.

 

Australia’s Housing Boom Is ‘Officially Over’

The housing boom that has seen Australian home prices more than double since the turn of the century is “officially over,” after data showed prices now flatlining, UBS said. National house prices were unchanged in October from September, while annual growth has slowed to 7% from more than 10% as recently as July, CoreLogic data released Wednesday showed. “There is now a persistent and sharp slowdown unfolding,” UBS economists led by George Tharenou said in a report. “This suggests a tightening of financial conditions is unfolding, which we expect to weigh on consumption growth via a fading household-wealth effect.”

An end to Australia’s property boom will be welcome news for first-time buyers, who have struggled to break into the market after surging prices propelled Sydney past London and New York to be the second-most expensive housing market. Less impressed may be property investors, already squeezed by regulatory lending curbs that drove up mortgage rates. The cooling housing market may encourage the Reserve Bank to keep interest rates at a record low. A rate hike would be undesirable as it would put further downward pressure on dwelling prices, said Diana Mousina, senior economist at AMP Capital Investors.

 

 

But perhaps a bigger, and more surprising, story is shaping up in the US. Looks like the American housing bubble is back with a vengeance. It’s always amusing to see claims that this is due to a lack of supply. The real problem is not supply, but artificially fabricated demand. Fabricated by low rates. Though the NAR is not known for its accuracy (it’s a PR firm), this Bloomberg piece is still relevant.

 

Homes Are Getting Snapped Up at the Fastest Pace in 30 Years

Homes are sitting on the market for the shortest time in 30 years, according to an annual report on homebuyers and sellers published today by the National Association of Realtors. The typical home spent just three weeks on the market, according to the report, which focused on about 8,000 homebuyers who purchased their home in the year ending in June. That was down from four weeks in the year ending June 2016 and 11 weeks in 2012, when the U.S. housing market was still reeling from the foreclosure crisis.

It was the shortest time since the NAR report began including data on how long homes spend on the market, in 1987. Buyers are snapping up homes quickly at a time when for-sale listings are in short supply, forcing them to compete. The number of available properties declined in September, according to NAR’s monthly report on existing home sales, marking the 28th consecutive month of year-on-year decline in inventory. In addition to moving fast, buyers also had to pony up to close the deal. 42% of buyers paid at least the listing price, the highest share since the NAR survey started keeping track in 2007.

 

Where the fine bubble plan runs astray is in affordability. Ultra low rates can encourage sales, but that also raises prices, and if and when wages do not keep up there must be a point where you hit a wall. In the US that wall is fast approaching, suggests Tyler Durden:

 

US Homes Have Never Been More Unaffordable

Just under a year ago, US home prices finally surpassed their prior all time highs, one decade after the 2006 bubble… and haven’t looked back since. Which, all else equal, would be great news for America, where the bulk of middle-class wealth is not in the stock market contrary to conventional wisdom, but in its biggest, and most illiquid asset-cum-investment: one’s home. There is just one problem: while house prices are once again hitting new all time highs every month, household incomes have failed to keep up; in fact, as the Political Calculations blog shows, in the past two years there has been a distinct trend in home affordability, or lack thereof.

[..] starting in September 2015, the TTM average median new home sale price in the U.S. has been rising at an average rate of $906 per month. That’s the good news; the bad news is that in terms of affordability, the ratio of the trailing twelve month averages of median new home sale prices to median household income in the U.S. has risen to an all time high of 5.454, which following revisions in the data for new home sale prices, was recorded in July 2017. The initial value for September 2017 is 5.437. In other words, the median new home in the US has never been more unaffordable in terms of current income.

 

 

Never more unaffordable is a bold statement, but it’s probably correct. The graph only goes back as far as 1987, but that should do. Another angle on the same issue, also from Tyler:

Home Prices In All US Cities Grow Faster Than Wages… And Then There’s Seattle

US national home prices are up 6.07% YoY in August – the fastest rate since June 2014. We note this data is for August – before the hurricanes. Seattle (up 13.2%), Las Vegas (up 8.6%), and San Diego (up 7.8%) were the top three cities in terms of year-over-year price appreciation; all cities showed gains of at least 3%. Pushing home prices to a new record high…

“Home-price increases appear to be unstoppable,” David Blitzer, chairman of the S&P index committee, said in a statement. “At the same time, “measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking, and the Fed’s interest-rate hikes are likely to push mortgage rates higher over time, “removing a key factor supporting rising home prices,” he said.

 

 

There’s nothing anyone can do to raise wages, and while Yellen may claim not to understand why wages and inflation refuse to shine, it’s not that hard. Whatever is called a job these days is America didn’t use to be labeled that. We’ve all been conned into redefining what a job is, but the benefits and security and all that have still vanished. So what can people afford? They can’t even afford to rent anymore:

 

Renting In The US Has Never Been More Unaffordable

Over the weekend, when looking at the record high ratio in median new home sale prices to household incomes in the US, we concluded that US homes have never been more unaffordable for the average American. What about renting? Isn’t it intuitive that if buying a house has never been more expensive, then at least renting should be cheap(er). Unfortunately no, because not only is renting not cheap(er) in either absolute or relative terms, but when observed through the prism of the only thing that matters, namely disposable income, renting – just like buying a house – has never been more unaffordable.

 

 

Now remember what I said before: millions upon millions see their savings and pensions melt away before their eyes, while at the same time they are forced to spend ever more on housing costs. And when that scheme hits the wall, the economy will remember it’s alive only because of the housing bubble, and then croak. Leaving both renters and owners without jobs and eventually places to live.

A lovely example of where all this is heading comes from a Statista report on the Netherlands 3 weeks ago. The Dutch have tons of interest-only mortgages, just like the Australians, but you can take this graph as a general model for what many of not most countries that have low interest rates and thus housing bubbles, will face:

 

Heading Towards A Mortgage Crisis In The Netherlands?

Bank it or bust. In October 2017, the Dutch Central Bank (DNB) issued a warning on mortgages in the Netherlands. They claimed that almost 55% of the aggregate Dutch mortgage debt consisted of interest-only and investment-based mortgage loans, which did not involve any contractual repayments during the loan term. As prices in the the European housing, or residential real estate, market increase and mortgage rates decrease due the Asset Purchase Programme (APP) of the ECB, interest-only mortgages became more and more popular.

In addition, the Dutch government encouraged home ownership for many years, offering tax exemptions on Dutch mortgage payments alongside other benefits for homebuyers in the Netherlands. Consequently, the total mortgage debt from households in the Netherlands increased from approximately €548 billion in 2006 to approximately €664 billion in 2016. However, the debts must still be repaid when the interest-only mortgages expire.

The DNB stated there could be a risk that the households in question may not have the means to repay their debts before or when their loans expire, risking a new mortgage crisis. Lenders, they say, must actively alert customers to this risk and help them find a suitable solution. Unfortunately, the value of mortgages in 2017 is forecasted to increase with approximately 3.9% compared to 2016.

 

 

The debt accumulation is insane. Combine that with the wholesale erosion of savings and pensions, and you have an economy with either a lot of foreclosures and homelessness in its future, or a bankrupt banking system. More people should, before purchasing property, be shown graphs like that. But that would kill the bubble scheme, wouldn’t it?

Is there a way out of this mess? Well, there is in theory. Just grow your economy, and your wages etc., by let’s say 6.8% per year for decades on end. Problem with that is it’s possible only in a country like China, and that only because whatever Beijing says the growth rate is, goes. But that doesn’t make it real. Still, it entices Chinese grandmas into buying apartments.

What Beijing doesn’t tell them, or us, is how much debt the grandmas have gone into by now to buy all those new nice and shiny apartments. But since stocks and bonds are still not their thing, it’s all they have. Property in China is all on red. In the US about one quarter of household wealth is in housing, in China it’s three quarters.

 

 

So no, there’s no way out. My best guess is the first country to deal with this in an aggressive manner will be the -relative- winner. All others are goners. The governments and politicians who’ve lured their people into this biggest Ponzi in human history will probably be long gone when the house comes down, and if they know what’s good for them will have moved to some street with no name in a land far away.

 

 

Sep 202017
 
 September 20, 2017  Posted by at 8:26 am Finance Tagged with: , , , , , , , , , ,  


Edward Hopper Automat 1927

 

Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB)
With QT On The Way, This Market ‘Is Headed For A Brick Wall’ (Boockvar)
Where Deutsche Bank Thinks The Next Financial Crises Could Happen (CNBC)
Just 4% Own Over 95% Of Bitcoin (HowMuch)
MPs Want Public Inquiry Into UK’s £200 Billion Household Debt Crisis (G.)
Millennials Spend Three Times More Of Income On Housing Than Grandparents (G.)
New Zealand Jet Fuel ‘Debacle’ Disrupts Flights, Exports (G.)
Bain, KKR, Vornado Suffer Wipeout in Toys ‘R’ Us Bankruptcy (BBG)
Manafort Calls On DOJ To Release His Intercepted Phone Calls (ZH)
Trump Warned Saudis Off Military Move on Qatar (BBG)
Putin Orders To End Trade In US Dollars At Russian Seaports (RT)
Eurozone ‘Bouncing Back’? Tell That To The People Of Spain And Greece (DiEM25)
Greece’s Bailout Review Is Leaving Markets Jittery (BBG)
EU’s Dombrovskis: Greek Government Chose To Increase Taxes (K.)
Lesvos Mayor Issues Warning On Refugee Numbers (K.)

 

 

Now there’s a headline.

Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB)

Australia is doomed to become a third-world country unless its government starts “something like the Apollo program” to inspire its citizens into becoming a technology economy, Freelancer.com chief executive Matt Barrie told the AFR Innovation Summit 2017. “Australia is basically a property bubble floating inside a mining bubble inside a commodities bubble inside a China bubble, and that lucky free ride is about to go pop,” he said. The government was focused on “new ways to tax things” in reaction to its looming revenue problem, while neglecting education with proposed cuts to university funding of $1.2 billion, the biggest in 20 years. “Why not try and grow the biggest line of tax, income tax, by encouraging people to study in the right areas like science and engineering, instead of making these cuts which will push the cost of an electrical engineering degree at UNSW above $34,000, while slashing the HECS repayment threshold at the same time,” Mr Barrie said.

…Where is the growth come from? Mr Barrie asks. Governments have achieved growth from a property bubble “like no other”, says Mr Barrie. To paint this picture he says there are cranes in Sydney right now than in most American states combined and that being in postcodes with restricted lending. He is trawling fast through a broad range of figures that highlight Australia’s “basket case” economy including figures around low wage growth, unaffordable housing, manufacturing losses. Mr Barrie [says] we are “delusional” after 26 years of growth based on bubbles: mining, commodities and now property. Mr Barrie is slamming the economy’s structure (it’s hard to keep up, he’s moving fast). “Our economy is completely stuffed. We can’t rely on property to make us…we need serious structural change.”

Read more …

It’s not rocket science.

With QT On The Way, This Market ‘Is Headed For A Brick Wall’ (Boockvar)

We’re finally here. About nine years after quantitative easing (QE) began, quantitative tightening (QT) is about to start. On Wednesday, after the Federal Open Market Committee releases its statement, Janet Yellen will follow with a press conference that she will do her best to make as boring as possible. Every Fed member I suppose is praying for boring because of the epic bubbles that QE and seven years of zero interest rate policy (ZIRP) has created in just about everything. They want this to unfold as orderly and as quietly as possible. Wishful thinking I believe. I also expect the FOMC to lay the groundwork for a December rate hike with the market currently 50/50 on that. If one believes that the stock market still is a discounting mechanism, then there’s nothing to fear with QT and maybe it will actually be like “watching paint dry” as Fed members so desperately want it to be. After all, the S&P 500 is at an all time high.

If you think, like me, that the stock market is not the same discounting tool as it once was because of the major distortion and manipulation of markets via central market involvement and the dominance of machines that are reactive instead of proactive in response to news, then we must review the previous experiences when major Fed changes took place. After all, they were all well telegraphed as this week’s likely news has been. I expect no different an outcome this time and I believe the market – with the S&P at an all-time high – is headed for a brick wall the deeper QT gets. Before I get to that, let me remind everyone that the third mandate of QE was higher stock prices. Ben Bernanke in rationalizing the initiation of QE2 in a Washington Post editorial back in November 2010 said in regards to QE1 and the verbal preparation for QE2, “this approach eased financial conditions in the past and, so far, looks to be effective again.

Stock prices rose and long term interest rates fell when investors began to anticipate the most recent action.” He then went on to say “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.” Well, the belief in the wealth effect hasn’t worked in this expansion. Hence, the record high in stocks last week and the 2.9% year over year rise in core August retail sales, both below the 5 year average and well less than the average seen in the prior two expansions.

After QE1 ended when we knew exactly the full size and expiration date (March 31st, 2010), the market topped out three weeks after and then fell 17%. After QE2 ended when we also knew the exact amount and deadline (June 30th, 2011), the market peaked one week later and then fell about 20%. Around the time QE3 ended with the lead up being a very methodical process of tapering, stocks had a hissy fit of about 10% only saved by James Bullard who hinted that maybe they won’t end QE.

Read more …

And there’s more. Isn’t it great to have all these options?!

Where Deutsche Bank Thinks The Next Financial Crises Could Happen (CNBC)

The Great Central Bank Unwind Central banks including the Federal Reserve, European Central Bank and Bank of England are embarking on what has been called the “Great Unwind” – the winding-down of quantitative easing programs which included trillions of dollars’ worth of asset purchases and record low interest rates that have bolstered economies, financial markets and banking systems. Calling the “Great Unwind” a “journey into the unknown,” the strategists warned that “history would suggest there will be substantial consequences of the move especially given the elevated level of many global asset prices” adding that “even if the unwind stalls as either central banks get cold feet or if the economy unexpectedly weakens, we will still be left with an unprecedented global situation and one which makes finance inherently unstable.”

Out of ammunition? The strategists said there was a danger that central banks and governments could find themselves without ammunition to tackle a recession should one occur, given their already near zero interest rates, creaking balance sheets, and a backdrop of high levels of government debt. “Could the next recession be the one where policy makers are the most impotent they’ve been for 45 years or will they simply go for even more extreme tactics and resort to full on monetization to pay for a fiscal splurge? It does feel that we’re at a crossroads and the next downturn could be marked by extreme events given the policy cul-de-sac we seem to be nearing the end of,” Reid et al warned.

More QE if inflation disappoints? Since the financial crisis of ten years ago, persistently low inflation has been a constant headache for central banks, the Deutsche Bank strategists noted, a situation they found “fairly incredible” given the phenomenal level of central bank and government stimulus. “Although not our base case, given the recent inflation and Trump’s fiscal challenges, it’s not infeasible that markets could be blindsided by a return to more QE rather than less…If central banks do end up conducting increased QE again, the risk is we again go back to negative rates and worries about the banking system and the plumbing of the financial system.”

Italy – Crisis ‘waiting to happen?’ Turning to the euro zone’s third largest economy, Deutsche Bank’s strategists warned of more political and economic uncertainty from Italy. “A country nearing an election and with high populist party support, with a generationally underperforming economy, a comparatively huge debt burden, and a fragile banking system which continues to have to deal with legacy toxic debt holdings ticks a number of boxes to us for the ingredients of a potential next financial crisis.”

A China crisis?Conceding that China’s economy had so far avoided a hard landing predicted by many economists, Deutsche Bank warned that China still needed to transition its economy “from manufacturing to services and investment to consumption,” a process with Deutsche Bank said “needs to take place in the context of also containing the rapid growth of credit in our view.” “Rapid credit expansion due to an insatiable demand for debt fuelled growth, compounded by a hugely active shadow banking system, as well as an ever expanding property bubble fuelled fears for economists that China could inevitably make a hard landing and send shockwaves through the world’s financial markets. However, the economy has seemingly defied the odds.” “However, future growth cannot forever rely on debt and investment alone…The warning signs are there and the fundamental vulnerabilities remain. The greater issue might be ‘when’ rather than ‘if’ the credit bubble pops.”

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That is scary.

Just 4% Own Over 95% Of Bitcoin (HowMuch)

Bitcoin has been making a lot of news lately. The cryptocurrency shot up in value by over 200% in 2017, making many people fear that the market is in a bubble. Last week, China decided to close its bitcoin exchanges, which caused investors around the world to panic about the currency’s long-term viability. But HowMuch.net asks, how many people own bitcoin, and how is the currency distributed around the world? Check out our new visualization. Our graph represents the entire bitcoin market, which has a value of around $60 billion. For comparison, that’s bigger than several well-known companies, like Fed-Ex and General Motors. We then divided the value of the bitcoin market by address. As you can see, over 95% of all bitcoins in circulation are owned by about 4% of the market. In fact, 1% of the addresses control half the entire market.

There are a couple limitations in our data. Most importantly, each address can represent more than one individual person. An obvious example would be a bitcoin exchange or wallet, which hold the currency for a lot of different people. Another limitation has to do with anonymity. If you want to remain completely anonymous, you can use something called CoinJoin, a process that allows users to group similar transactions together. This makes it seem like two people are using the same address, when in reality they are not. So it’s a complex situation. but let’s try to break bitcoin down as simple as possible. Bitcoin is just a type of money, like dollars and euros. The main difference is that there isn’t a sovereign government backing the currency, and it instead lives online. This is possible thanks to something called the blockchain.

Banks and companies must keep detailed records of where they send money, marking it possible to detect fraud and criminal activity. The blockchain works differently because it breaks each transaction into tiny components, routes the pieces through a computer network, and directs them to a recipient who can then re-assemble the code together. If you don’t have the right key, you can’t own a bitcoin. And if you aren’t at the right digital address (think your home network’s IP address), then you can’t receive bitcoin. The technology is hard to understand, and it presents challenges for companies and people who want to use it. That’s why folks typically turn to a vendor like Coinbase to handle their transactions. You know how you carry physical money in your personal wallet? Think of Coinbase as a digital wallet.

You use it to buy stuff and pay for services. But be careful—people can steal your digital wallet, and the thieves can be untraceable. And that’s the issue. There’s only a very limited number of bitcoin wallet providers out there. It’s not like you can just go to your local bank and buy some bitcoin. The big takeaway from all this is that if you are considering purchasing some bitcoin, you have very limited options. There are only a few key players in the game where you can park your investment. And if you do make that purchase, understand that it is highly speculative and unregulated, so prepare for a bumpy ride.

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And then what? Jubilee?

MPs Want Public Inquiry Into UK’s £200 Billion Household Debt Crisis (G.)

The chairs of two powerful parliamentary committees have urged the government to set up an independent public inquiry into the £200bn of debt amassed by households. The call by Rachel Reeves, the Labour chair of the business select committee, and Frank Field, the Labour head of the work and pensions select committee, comes as the Conservative-led Treasury select committee plans to hold meetings around the country to examine the impact of debt on individuals and households. “Debt is a huge emotional burden for people,” said Nicky Morgan, the Conservative MP who chairs the Treasury select committee. She added that “unstable personal finances” often emerged as problems raised by her constituents in Loughborough.

The £200bn of debt amassed on credit cards, personal loans and car deals is now at the same level it reached before the 2008 financial crisis and there are fears that rises in interest rates could put more households under pressure. Mark Carney, the governor of the Bank of England, warned on Monday that interest rates were likely to rise in response to rising inflation and skills shortages brought on by Brexit that will increase pressure on wages. Field said people in his Birkenhead constituency on the Wirral were being pushed into destitution by the actions of loan sharks and finance companies that heaped extra pain on low income households with sky-high interest charges. He said: “We need a commission to assess the current situation. There are so many moving parts that a proper investigation goes beyond the remit of any single committee.”

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Probably true in many countries.

Millennials Spend Three Times More Of Income On Housing Than Grandparents (G.)

Millennials are spending three times more of their income on housing than their grandparents yet are often living in worse accommodation, says a study launched by former Conservative minister David Willetts that warns of a “housing catastrophe”. The generation currently aged 18-36 are typically spending over a third of their post-tax income on rent or about 12% on mortgages, compared with 5%-10% of income spent by their grandparents in the 1960s and 1970s. Despite spending more, young people today are more likely to live in overcrowded and smaller spaces, and face longer journeys to work – commuting for the equivalent of three days a year more than their parents. The research by Willetts’ intergenerational commission at the Resolution Foundation thinktank also reveals that today’s 30-year-olds are only half as likely to own their own home as their baby boomer parents.

They are four times as likely to rent privately than two generations ago, a sector which has the worst record for housing quality, the report claims. The report’s authors argue that the housing crisis is a huge part of public anxiety about the country’s direction, a factor in the result of the EU referendum last year and in the general election in June. A young family today has to save for 19 years on average to afford a typical deposit compared with three years for the previous generation, the report states. “This is the biggest problem facing the younger generation,” said Willetts. “It depresses their living standards and quality of life. It is very important for the Tory party to open up the route to home ownership again. A lot of twentysomethings also have horror stories of bad landlords and we need to help them as well.”

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There’s a lesson about redundancy somewhere in here.

New Zealand Jet Fuel ‘Debacle’ Disrupts Flights, Cars, Exports (G.)

New Zealand’s jet fuel crisis is worsening by the day with airlines restricting ticket sales, politicians limiting travel to essential flights only on some routes in the final days of the election campaign and all but the most critical exports halted. Rationing is set to continue for another week after a digger on Thursday struck the sole jet fuel, diesel and petrol supply pipe to Auckland, the country’s biggest city and major transport hub for international visitors. Three thousand people a day are being affected by cancelled domestic and international flights. Another 6,000 people will be impacted by delays or disruptions to normal service, Air New Zealand said, and it had taken the “unusual” step of restricting ticket sales to all but essential or compassionate travel to try and manage the shortage.

As a result of the tightening fuel shortage, all airlines stopping in Auckland are only able to upload 30% of their normal capacity of jet fuel and the government has instructed its employees to cancel all non-essential travel. Export goods are being off-loaded from domestic and international flights unless they are at risk of rotting to lighten the load. Some international routes have been cancelled altogether or diverted to Australia and Fiji until the crisis is resolved.

Although the jet fuel supply pipe is privately owned and operated, opposition Labour leader Jacinda Ardern has criticized the government’s lack of investment in vital infrastructure in Auckland, as the ruling National party instructed its staffers and candidates around the country to restrict campaigning in the final days of the general election to save on jet fuel. “One pipeline and one digger and New Zealand grinds to a halt,” said Ardern on Tuesday. [..] Petrol and diesel supplies have also been affected by the damaged pipe, with both fuels being driven overland to Auckland from other supply points in the North Island, and the defence force called in to assist with transportation and logistics, including the naval tanker HMNZS Endeavour.

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Wait. They had written their investments down to zero, so how can they suffer a wipeout? is it possible they dumped a whole lot of losses into the black hole?

Bain, KKR, Vornado Suffer Wipeout in Toys ‘R’ Us Bankruptcy (BBG)

Bain Capital, KKR and Vornado Realty Trust stand to have their Toys “R” Us Inc. investment erased as the retailer they bought in 2005 for $7.5 billion seeks bankruptcy protection. The three firms and their co-investors sank $1.3 billion of equity into the takeover of the Wayne, New Jersey-based toy company, financing the rest with debt, according to company filings. The debt included senior loans in which they held a stake. Partly offsetting the loss is more than $470 million in fees and interest payments that Toys “R” Us awarded the firms over time. Toys “R” Us, which has 1,600 stores in 38 countries, filed for bankruptcy late Monday. The filing in Richmond, Virginia, estimated that the company has more than $5 billion in debt, which costs about $400 million a year to service.

The buyout was part of a vast wave of debt-enabled takeovers by private equity firms from 2005 to 2007 that saw deal prices soar to tens of billions of dollars. The wave crashed at the onset of the financial crisis in 2009. The biggest of that era’s private equity deals was the $48 billion buyout of Texas utility TXU, now called Energy Future Holdings Corp. The company went belly-up in 2014, obliterating $8.3 billion of equity put in by KKR, TPG Capital, Goldman Sachs and co-investors.

Toys “R” Us appeared stable out of the gate. The $7.5 billion price worked out to about 7.5 times earnings before interest, taxes, depreciation and amortization – not outlandish by today’s standards. With about $1 billion a year in Ebitda, the company was able to cover the interest on its $5.5 billion of debt and fund store improvements with more than $200 million to spare. But the ravages of the financial crisis, competition from online rivals and price wars blew up that safety cushion. KKR and Vornado, which are publicly traded, had previously written their investments in the company down to zero. As a result, the bankruptcy won’t affect their earnings going forward.

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“..it is a felony to reveal the existence of a FISA warrant, regardless of the fact that no charges ever emerged..”

Manafort Calls On DOJ To Release His Intercepted Phone Calls (ZH)

Less than 24 hours after CNN triggered the latest outbreak of ‘Trump Derangement Syndrome’ by relaying information from anonymous sources that Trump’s former campaign manager Paul Manfort has been under surveillance by the FBI since 2014, Manafort has fired back by calling on the Department of Justice to release all transcripts of his tapped phone calls so that the American public “can come to the same conclusion as the DOJ — there is nothing there.” Per the Daily Caller: “Former Trump campaign manager Paul Manafort is calling on the Justice Department to release transcripts of any intercepted communications he may have had with foreigners. Manafort, a longtime Republican political consultant, also called on the Justice Department’s inspector general to investigate the leak of details of secret surveillance warrants obtained by U.S. investigators.

“Mr. Manafort requests that the Department of Justice release any intercepts involving him and any non-Americans so interested parties can come to the same conclusion as the DOJ — there is nothing there,” Manafort spokesman Jason Maloni said in a statement. Manafort’s spokesman goes on to demand that the DOJ launch an immediate investigation into who continues to commit federal felonies with reckless abandon by leaking details of confidential FISA warrants to the media. Whether or not Manafort committed a crime — and he has not been charged with anything — the leak of information about FISA warrants is a federal crime, Maloni noted in his statement.

“If true, it is a felony to reveal the existence of a FISA warrant, regardless of the fact that no charges ever emerged,” Maloni said. Information about FISA warrants is classified and tightly held by government officials and the federal judges that approve them. Unauthorized disclosures of FISA information is also a felony. At a House Intelligence Committee hearing in March, then-FBI Director James Comey testified that the leak of FISA information is punishable by up to 10 years in prison. In his statement, Maloni called on the Justice Department’s watchdog to “immediately” open an investigation into the leak and to “examine the motivations behind the previous Administration’s effort to surveil a political opponent.”

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No, I’m not going to talk about his UN speech yesterday. That’s all just confirmation bias.

Everyone involved denies any of this ever actually happened.

Trump Warned Saudis Off Military Move on Qatar (BBG)

Saudi Arabia and the United Arab Emirates considered military action in the early stages of their ongoing dispute with Qatar before Donald Trump called leaders of both countries and warned them to back off, according to two people familiar with the U.S. president’s discussions. The Saudis and Emiratis were looking at ways to remove the Qatari regime, which they accused of sponsoring terrorism and cozying up to Iran, according to the people, who asked not to be identified because the discussions were confidential. Trump told Saudi and U.A.E. leaders that any military action would trigger a crisis across the Middle East that would only benefit Iran, one of the people said. More recently, the Trump administration has quietly sent high-level messages to Saudi Arabia and the U.A.E. to try to defuse the quarrel.

Trump, who initially sided with the Saudi-led bloc, had a change of heart because of evidence that a prolonged dispute with Qatar will serve as an advantage to Iran, according to a U.S. official familiar with his thinking. Trump met with Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, at the United Nations General Assembly in New York on Tuesday. Asked by a reporter if he had warned Saudi Arabia and the U.A.E. against military action in the country, Trump responded, “No.” At the same meeting, Trump confronted the Qatari leader with what one U.S. official said is evidence that Qatar is still engaged in terrorism-related activity and told him it has to stop.

[..] Trump said on Tuesday that the U.S. is pushing for an end to the Gulf dispute. “We are right now in a situation where we’re trying to solve a problem in the Middle East,” he said. “I have a very strong feeling that it will be solved, and pretty quickly.” Those comments reflected how Trump has changed his thinking on the Qatar dispute in the past 10 days or so, becoming more sympathetic with the Qataris after previously backing the Saudi-led bloc and saying his priority is to clamp down on terror financing, according to the U.S. official familiar with his thinking.

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There’s no reason for it to happen in other currencies.

Putin Orders To End Trade In US Dollars At Russian Seaports (RT)

Russian President Vladimir Putin has instructed the government to approve legislation making the ruble the main currency of exchange at all Russian seaports by next year, according to the Kremlin website. To protect the interests of stevedoring companies with foreign currency obligations, the government was instructed to set a transition period before switching to ruble settlements. According to the head of Russian antitrust watchdog FAS Igor Artemyev, many services in Russian seaports are still priced in US dollars, even though such ports are state-owned. The proposal to switch port tariffs to rubles was first proposed by the president a year and a half ago.

The idea was not embraced by large transport companies, which would like to keep revenues in dollars and other foreign currencies because of fluctuations in the ruble. Artemyev said the decision will force foreigners to buy Russian currency, which is good for the ruble. In 2016, his agency filed several lawsuits against the largest Russian port group NMTP. According to FAS, the group of companies set tariffs for transshipment in dollars and raised tariffs from January 2015 “without objective grounds.” The watchdog ruled that NMTP abused its dominant position in the market and imposed a 9.74 billion rubles fine, or about $165 million at the current exchange rate. The decision was overturned by a court in Moscow in July this year.

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Everyone thinks corporate tax cuts are the solution?!

Eurozone ‘Bouncing Back’? Tell That To The People Of Spain And Greece (DiEM25)

EU citizens living under squeezed financial circumstances could be forgiven for wondering whether European Commission President Juncker was having a joke at their expense when he spoke recently about how Europe’s economy is finally bouncing back. After a tumultuous decade triggered by the global financial crisis in 2007, the Eurozone’s growth figures are being compared favourably to America’s, with production up 3.2% against last year. However, evidence points to a wide chasm between people’s lived experiences and Juncker’s message of triumph. It is doubtful that the citizens of Spain and Greece, for example, would agree with his assessment. According to the Commission, 30% of Spaniards are at risk of social exclusion due to poverty and income inequality.

The proportion of children in Spain living below the poverty line increased by 9% between 2008 and 2014, to 30.5%, and Spain is in 7th place on the OECD list of countries where inequality has risen the most since 2010. Greece, meanwhile, is at top of this ranking. Now, ‘growth’ may be used to express the success of a country’s economic performance. But how impressive is it really, when the Troika’s austerity-driven politics is causing so much human suffering in countries like Greece and Spain? According to the OECD, countries have continued the trend towards implementing tax policy reforms to boost growth. French President Macron is proposing to cut corporation tax from 33.3% to 25% by 2022. Yet the use of tax levers, primarily cuts to corporation tax, as a means to draw inward investment has been disputed by top economists.

“The way you get a productive economy is changing the fundamentals, says John Van Reenen of the LSE. “You get your people to be more skilled, or you have your infrastructure working efficiently. You’re never really going to get there just by reducing corporate tax.” So what’s the alternative? It is possible to pursue a successful strategy without crucifying ordinary people in the process, and Portugal is leading the way. The country adopted left wing alternatives to austerity policies in 2015 and is now reporting an impressive recovery. It is a model from which governments can learn.

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That’s the intention.

Greece’s Bailout Review Is Leaving Markets Jittery (BBG)

Greece faces two possible outcomes. Officials from both the government and creditors say the aim is to finish the third bailout review by the end of the year, giving the country time to raise more funds in the market and paving the way for its successful program exit. Concluding the review by the end of the year, or even in the early months of next year, would help Greece gain much-needed investor confidence. Prolonged negotiations, on the other hand, could weigh on investor sentiment and hamper the country’s effort to exit its bailout next summer and finance itself. “Investments are at a very low level and, as a result, Greece is growing much slower than it should and, in fact, slower than many of its eurozone partners,” Vettas said.

Greek investment was stagnant in 2016 and fell during the first two quarters of this year. If Greece’s bailout runs out before the country completes all the reforms it has agreed to, it could put at risk any plans for debt relief from the euro area, something the government has sought for years. Greece’s partners agreed to ease the country’s debt at the end of its bailout, provided agreed reforms are successfully concluded. Key sticking points in the review include Greece’s budget for 2018, and whether the country is taking sufficient measures to hit bailout-prescribed targets. Greece is expected to have a primary surplus, which excludes interest payments, of 3.5% of GDP next year, a target that seems more difficult as tax receipts have failed to yield expected revenue, Greek and EU officials say.

Meanwhile, politically contentious issues such as privatizations, the reform of public administration as well as an overhaul of the labor market may be raised in the upcoming talks. Greek banks’ handling of nonperforming loans is also expected to come under fire as is a restructuring of social benefits. Tsipras’s administration has yet to find resources in the budget to avoid cutting some popular benefits. The IMF’s demand for a new asset-quality review for Greek banks may be another bone of contention, this time between the Fund and the ECB. The Greek government and Frankfurt say that such a review will harm the nation’s lenders because they need to focus on addressing the NPL issue. A solution, they say, may be to wait for the results of the banks’ regular stress tests, which are expected before the end of the bailout program, without a new asset-quality review.

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Being blamed for being strangled.

EU’s Dombrovskis: Greek Government Chose To Increase Taxes (K.)

European Commission Vice President Valdis Dombrovskis has told Kathimerini in an exclusive interview that a successful conclusion to the third review of Greece’s third international bailout by the end of the year would send money markets a convincing message that the program is on track and close to its end – although it’s still rather early to discuss a so-called “clean exit,” he said. The Latvian politician also explained it was the government’s decision to raise taxes instead of cutting public spending, and income tax has now failed to meet revenue expectations.

Regarding talk about a “clean exit” from Greece’s third bailout at the end of next summer, Dombrovskis indicated that such a discussion was “premature” and that the priority now is to focus on completing the third bailout review by the end of the year. He said 95 prior actions, some of which have been legislated, must still be implemented. The EU official underlined the importance of Greece meeting a primary surplus target of 3.5% next year and creating a more beneficial environment for potential investors as part of efforts to boost much-needed growth.

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And on and on.

Lesvos Mayor Issues Warning On Refugee Numbers (K.)

Lesvos Mayor Spyros Galinos has written to the government and the European Commission asking that immediate action be taken to reduce the number of refugees on the island. In the letter sent to European Commissioner for Migration Dimitris Avramopoulos and Greek Migration Policy Minister Yiannis Mouzalas, Galinos says there are now more than 6,000 refugees and migrants on the island, which is far more than existing facilities can cope with. The Lesvos mayor attributed this to a steady rise in arrivals and insufficient efforts to reduce the numbers at hotspots. Galinos claimed the island is being “held hostage” and called for immediate action by authorities. He ruled out the possibility of more temporary facilities being built on the island. “Lesvos’s ability to offer hospitality is limited to its current infrastructure,” the mayor wrote.

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Jul 202017
 
 July 20, 2017  Posted by at 8:49 am Finance Tagged with: , , , , , , , , , , ,  


Margaret Bourke-White Breadline, Kentucky 1937

 

Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)
Did the City of London Just Press the Panic Button on Brexit?
Single Payer Is The Only Real Answer, Says Medicare Architect (IC)
Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)
Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)
When Does a Home Become a Prison? (FAFC)
Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)
Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)
US-Style Mega Farms Invade The World (G.)
Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)
Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)
UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)
The World Has Made More Than 9 Billion Tons of Plastic (CNBC)
World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

 

 

The CIA will not like this. The press just can’t mention Putin enough. But a good decision.

Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)

The Trump administration has decided to halt the CIA’s covert program to equip and train certain rebel groups fighting the government of Syrian President Bashar al-Assad, two U.S. officials said, a move sought by Assad ally Russia. The U.S. decision, said one of the officials, is part of an effort by the administration to improve relations with Russia, which along with Iranian-supported groups has largely succeeded in preserving Assad’s government in the six-year-civil war. The CIA program began in 2013 as part of efforts by the administration of then-President Barack Obama to overthrow Assad, but produced little success, said the officials, both of whom are familiar with the program and spoke on the condition of anonymity.

The decision was made with National Security Adviser H.R. McMaster and CIA Director Mike Pompeo after they consulted with lower ranking officials and before Trump’s July 7 meeting with Russian President Vladimir Putin at the G-20 summit in Germany. It was not part of U.S.-Russian negotiations on a ceasefire in southwestern Syria, the two officials said. One of the officials said the United States was not making a major concession, given Assad’s grip on power, although not on all of Syria, “but it’s a signal to Putin that the administration wants to improve ties to Russia.” A downside of the CIA program, one of the officials said, is that some armed and trained rebels defected to Islamic State and other radical groups, and some members of the previous administration favored abandoning the program.

Before assuming office in January, Trump suggested he could end support for Free Syrian Army groups and give priority to the fight against Islamic State. A separate effort by the U.S. military effort to train, arm and support other Syrian rebel groups with air strikes and other actions will continue, the officials said.

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The real Macron.

Did the City of London Just Press the Panic Button on Brexit?

Oh the irony: EU capitals are trying to attract the very institutions that caused some of the worst financial scandals of the last ten years.

In a sign of growing desperation, the City of London Corporation, the enigmatic city within the city that serves as the ultimate bastion of privilege in the UK, is now trying to appeal to brute populist sentiment to defend its position as the world’s most important financial center. In a memo to the British Treasury, MPs, and financial institutions, the City’s Brexit envoy to the EU, Jeremy Browne, bemoaned that the French are pushing for the most damaging Brexit possible, even if France doesn’t directly benefit. The memo was duly leaked to one of the UK’s most anti-EU newspapers, The Daily Mail: “Browne’s recent meeting at the Banque de France was the worst he had had “anywhere in the EU”. The French, he said, “are crystal clear about their objectives: the weakening of Britain and the ongoing degradation of the City of London” and plotting to “actively disrupt and destroy” the UK’s financial sector when Britain leaves the EU.

France isn’t the only country aggressively trying to poach business from the City of London; so too are Germany, Spain, Luxembourg, the Netherlands and even Italy. But France differs from the rest in one key aspect, says Browne: it “sees Britain and the City of London as adversaries, not partners.” The recent election as president of Emmanuel Macron, a former investment banker at Rothschild & Cie Banque, has merely intensified this dynamic. Paris has promised to unfurl the red carpet for the City of London’s highest paid bankers by offering low tax rates and bank-friendly legislation, including scrapping a proposed financial transaction tax, while also seeking to grow as a clearing center. Clearing is a huge business for the City of London. The U.K. is estimated to handle 75% of all euro-denominated derivatives transactions, equivalent to around €930 billion of trades per day.

It’s also home to roughly 90% of US dollar domestic interest-rate swaps. The world’s largest clearinghouse for interest rate swaps, LCH, is based there and is majority-owned by London Stock Exchange Group Plc. LCH functions as a middle man collecting collateral and standing between derivatives and swaps traders to prevent a default from spiraling out of control. As Bloomberg reports, the role of clearing houses like LCH in global finance has become far more entrenched since the 2008 Financial Crisis and the inexorable expansion of derivatives trading. For years the French government, together with the European Central Bank, has wanted a piece of the action. Ironically, it was the European Court of Justice (ECJ) — the same court whose jurisdiction the UK government is now determined to elude — that, in 2015, stopped that from happening on the grounds that the ECB cannot discriminate against an EU member. But if the UK leaves the EU, and thus the ECJ’s jurisdiction, that ruling will no longer be applicable.

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They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

Single Payer Is The Only Real Answer, Says Medicare Architect (IC)

Thanks to a pair of defections from more GOP senators late yesterday, the Republican plan to repeal and replace or simply repeal the Affordable Care Act is dead — for now. But the health care status quo is far from popular, with 57% of Americans telling Gallup pollsters in March that they “personally worry” a “great deal” about health care costs. Many health care activists are now pushing to adopt what is called a “single payer” health care system, where one public health insurance program would cover everyone. The U.S. currently has one federal program like that: Medicare. Expanding it polls very well. One of the activists pushing for such an expansion is Max Fine, someone who is intimately familiar with the program — because he helped create it.

Fine is the last surviving member of President Kennedy’s Medicare Task Force, and he was also President Johnson’s designated debunker against the health insurance industry. Fine, now 91, wrote to The Intercept recently to explain that Medicare was never intended to cover only the elderly population, and that expanding it to everyone was a goal that its architects long campaigned for. “Three years after the enactment of Medicare, in Dec. 1968, a Committee of 100 leading Americans was formed to campaign for single payer National Heath Insurance. The campaign leaders were UAW pres. Walter Reuther, Dr. Michael DeBakey, Nat. Urban League Pres Whitney Young and Mary Lasker, a leader in the formation and funding of NIH,” he wrote.

”The NY Times and other newspapers gave front page play to the announcement of the campaign for ‘Medicare for All’ but the Committee gained even more attention when, shortly before xmas, pres-elect Nixon, emerging from his doctor’s office in San Diego, denounced us as socialists who were trying to create a problem when none existed.” Fine noted that this movement towards single payer has “risen and fallen over the years,” reaching a high point in the early 70s when former Democratic Massachusetts Sen. Ted Kennedy’s bill covering all Americans with government health insurance had 36 co-sponsors. But the Democratic Party decided to go a different direction, turning instead to private insurance to cover Americans.

Fine said he met with former First Lady Hillary Clinton’s health care task force in the early 1990’s, and advised them to incrementally expand Medicare, starting first with children and then lowering the age for the elderly. “They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

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Deutsche already did a review and reported nothing suspicious. Does that make them suspect?

Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)

Executives inside Deutsche Bank, Donald Trump’s personal bankers, are expecting that the bank will soon be receiving subpoenas or other requests for information from Robert Mueller, the special counsel who is investigating possible collusion between the Kremlin and the Trump campaign. A person close to the matter who spoke to the Guardian on the condition of anonymity said that Mueller’s team and the bank have already established informal contact in connection to the federal investigation. Deutsche’s relationship with Trump and questions about hundreds of millions in loans have dogged the German bank and the White House for months. They have also been the subject of intense scrutiny among some Democrats on Capitol Hill, who have demanded the bank turn over detailed information about the president’s accounts.

The requests for information from Maxine Waters, the top Democrat on the House financial services committee, have focused on whether any Russian entities may have provided financial guarantees for the loans that were made to the president or his immediate family members. The Guardian reported in February that the bank launched a review of Trump’s account earlier this year in order to gauge whether there were any suspicious connections to Russia and did not discover anything suspicious. Ivanka Trump, the president’s daughter and adviser in the White House; her husband, Jared Kushner, who is also a presidential adviser; and Kushner’s mother, Seryl Stadtmauer, are all clients of Deutsche Bank.

US media outlets have reported that Mueller’s investigation into possible Russian collusion with the Trump campaign will include a close examination of the president’s finances and businesses. While Deutsche Bank did engage in banking transactions with Russian banks as late as 2005, including some loan activity, a person familiar with the matter said the activity was not related to Trump’s accounts or his family.

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What a surprise. The same ones that signed on to the Paris Accord, by any chance?

Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)

The much-discussed boom in coal-fired power in south-east Asia is being bankrolled by foreign governments and banks, with the vast majority of projects apparently too risky for the private sector. Environmental analysts at activist group Market Forces examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91% of the projects had the backing of foreign governments through export credit agencies or development banks. Export credit agencies, which provide subsidised loans to overseas projects to assist export industries in their home countries, were involved in 64% of the deals and provided 45% of the total lending. The majority of the money was coming from Japan and China, with the Japan Bank for International Cooperation (JBIC) involved in five deals and the Export-Import Bank of China (Cexim) involved in seven deals.

All the deals closed between January 2010 and March 2017. The China Development Bank was the biggest development bank lending to the projects, imparting $3bn, with a further $300,000 in development funds coming from Korea’s Korea Development Bank. The lending comes despite the world’s biggest development bank – the World Bank – warning last year that plans to build more coal-fired power plants in Asia would be a “disaster for the planet” and overwhelm the deal forged at Paris to fight climate change. “Right now, several key countries supporting the Paris climate change agreement are actively undermining it by trying to expand the polluting coal-power sector in other countries,” said Julien Vincent, executive director of Market Forces.

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The upside down logic of the First American Financial Corporation. They need people to buy and sell, or their business is dead. Your home is a prison if you don’t sell it. But the supply shortage illusion is really gone, guys.

When Does a Home Become a Prison? (FAFC)

In most markets, the seller, or supplier, makes their decision about adding supply to the market independent of the buyer, or source of demand, and their decision to buy. In the housing market, the seller and the buyer are, in many cases, actually the same economic actor. In order to buy a new home, you have to sell the home you already own. So, in a market with rising prices and strong demand, what’s preventing existing homeowners from putting their homes on the market? The housing market has experienced a long-run decline in mortgage rates from a high of 18% for the 30-year, fixed-rate mortgage in 1981 to a low of almost 3% in 2012. Today, five years later, mortgage rates remain just a stone’s throw away from that historic low point.

This long-run decline in rates encouraged existing homeowners to both move more often and to refinance more often, in many cases refinancing multiple times between each move. It’s widely expected that mortgage rates will rise further. This is more important than we may even realize because the housing market has not experienced a rising rate environment in almost three decades! No longer is there a financial incentive to refinance for most homeowners, and there’s more to consider when moving. Why move when it will cost more each month to borrow the same amount from the bank? A homeowner can re-extend the mortgage term another 30 years to increase the amount one can borrow at the higher rate, but the mortgage has to be paid off at some point.

Hopefully before or soon after retirement. Existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate. It makes choosing a kitchen renovation seem more appealing than moving.” There is one more possibility caused by the fact that the existing-home owner is both seller and buyer. In today’s market, sellers face a prisoner’s dilemma, a situation in which individuals don’t cooperate with each other, even though it is seemingly in their best interest to do so. Consider two existing homeowners. They both want to buy a new house and move, but are unable to communicate with each other. If they both choose to sell, they both benefit because they increase the inventory of homes available, and collectively alleviate the supply shortage.

However, if one chooses to sell and the other doesn’t, the seller must buy a new home in a market with a shortage of supply, bidding wars and escalating prices. Because of this risk, neither homeowner sells (non-cooperation) and neither get what they wanted in the first place – a move to a new, more desirable home. Imagine this scenario playing out across an entire market. If everyone sells there will be plenty of supply. But, the risk of selling when others don’t convinces everyone not to sell and produces the non-cooperative outcome. Rising mortgage rates and the fear of not being able to find something affordable to buy is imprisoning homeowners and causing the inventory shortages that are seen in practically every market across the country. So, what gives in a market short of supply relative to demand? Prices. According to the First American Real House Price Index, the fast pace of house price growth, combined with rising rates, has had a material impact on affordability.

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A weird turnaround in an already weird file. Tillerson?

Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)

The four Arab nations leading a boycott of Qatar are no longer insisting it comply with a list of 13 specific demands they tabled last month. Diplomats from Saudi Arabia, the United Arab Emirates, Bahrain and Egypt told reporters at the UN they now wanted it to accept six broad principles. These include commitments to combat terrorism and extremism and to end acts of provocation and incitement. There was no immediate comment from Qatar, which denies aiding terrorists. It has refused to agree to any measures that threaten its sovereignty or violate international law, and denounced the “siege” imposed by its neighbours. The restrictions put in place six weeks ago have forced the gas-rich emirate to import food by sea and air to meet the basic needs of its population of 2.7 million.

At a briefing for a group of UN correspondents in New York on Tuesday, diplomats from the four countries said they wanted to resolve the crisis amicably. Saudi permanent representative Abdullah al-Mouallimi said their foreign ministers had agreed the six principles at a meeting in Cairo on 5 July and that they “should be easy for the Qataris to accept”. This latest development does, on the surface, hint at a possible way out of the current standoff between Qatar and its neighbours. But it is unlikely to provide a permanent solution. The problem comes down to how countries choose to interpret “extremism and terrorism”. Qatar has long prided itself on giving voice to alternative views to the edited, government-approved ones aired by its conservative neighbours. Hence one of the reasons why Qatar’s Al Jazeera network has been such a thorn in their sides. However, the charge levelled against Qatar is that those alternative voices include people committed to the overthrow of governments in the region.

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Please pay $64.450 to comply with bylaws.

Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. The city is now threatening to tear down the stairs because they were not built to regulation standards. Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. “I thought they were talking about an escalator,” Astl told CTV News Channel on Wednesday.

Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. Astl’s wife, Gail Rutherford, says the stairs have already been a big help to people who routinely take that route through the park. “I’ve seen so many people fall over that rocky path that was there to begin with,” she said. “It’s a huge improvement over what was there.” Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year. “To me, the safety of people is more important than money,” Astl said. “So if the city is not willing to do it, I have to do it myself.” City bylaw officers have taped off the stairs while officials make a decision on what to do with it. However, Astl has not been charged with any sort of violation.

Mayor John Tory acknowledged that the city estimate sounds “completely out of whack with reality” on Wednesday. However, he says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. “I think everyone will understand that it will be more than $550,” he said on Wednesday. “We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

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Result: reisistant superbugs.

US-Style Mega Farms Invade The World (G.)

Since the days of the wild west frontier, the popular image of American farming has been of cowboys rounding up steers on wide open ranches, to whoops, whips and hollers. Today, the cowboys on their ranches under wide open skies have been replaced by vast sheds, hulking over the plains, housing tens of thousands of animals each, with the noises and smells spreading far beyond their fences. The US has led the world in large-scale farming, pioneering the use of intensive livestock rearing in hog farms, cattle sheds and sheep pens. There are now more than 50,000 facilities in the US classified as concentrated animal feeding operations (CAFOs), with another quarter of a million industrial-scale facilities below that threshold. Around the world, developing countries in particular were quick to catch up.

Intensive farming of livestock offers many advantages over traditional open ranges, not least economies of cost and scale, more efficient healthcare for the herds and flocks, and ultimately cheaper food. According to the UN, globally CAFOs account for 72% of poultry, 42% of egg, and 55% of pork production. In 2000, there were an estimated 15 billion livestock in the world, according to the Worldwatch Institute. By last year, that had risen to about 24 billion, with the majority of eggs, chicken meat and pork produced on intensive farms. Ranching was never an option in the UK, but most people still expect farms to consist of green fields rather than vast industrial-scale sheds. The reality is an increasing number of livestock are “zero graze”, spending all or almost all of their time indoors in large warehouse-type facilities.

[..] at least 789 megafarms, meeting the US definition of CAFOs, now operate around the UK, with every region of the country hosting several such operations, many of them owned by foreign multinationals. These are the biggest in a wave of intensive farms that has increased by more than a quarter in six years. [..] Emma Slawinski, director of campaigns at Compassion in World Farming, said the problems of mega farms around the world included over-medication, where animals are given antibiotics whether they are needed or not. “Factory-farmed animals are regularly given antibiotics in their feed or water, because of the higher risk of disease when large numbers of animals are kept in these overcrowded conditions. There is strong evidence that this overuse of antibiotics in intensive farming is contributing to antibiotic resistance in human medicine.

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How is this new information?

Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)

Australia was colonised about 20,000 years before humans first arrived in Europe, according to new research. The discovery of the world’s oldest stone axes with ground edges, ochre used to make “spectacular rock art” and other artefacts in northern Australia pushes back the earliest known presence of humans to 65,000 years ago. Despite the relative closeness of Europe to Africa, where modern humans first evolved about 200,000 to 3000,000 years ago, the first concrete signs of Europeans are about 45,000 years old. In addition to their sophisticated axes, the people who first arrived on Australia’s shores may also have been armed with spears. The objects were found at Madjedbebe within the traditional lands of the Mirarr clan, an area of land that was excluded from the surrounding Kakadu National Park after a lease to mine uranium in the area was granted in 1982.

Representatives of the Mirarr said the research showed the “universal importance” of the area and called for it to receive the “highest level of conservation and protection”. Writing in the journal Nature, the researchers said: “The settlement of Madjedbebe around 65,000 years ago … sets a new minimum age for the human colonisation of Australia and the dispersal of modern humans out of Africa and across south Asia. “The final stages of this journey took place at a time of lower sea level, when northern Australia was cooler and wetter. “Our chronology … extends the period of overlap of modern humans and Homo floresiensis [the hominin species better known as hobbits] in eastern Indonesia to at least 15,000 years and, potentially, with other archaic hominins – such as Homo erectus – in southeast Asia and Australasia.”

In addition to changing the story of our species’ expansion across the globe, the new much older date challenges theories that Australia’s astonishing megafauna – a two-tonne wombat, giant kangaroos that were so big they couldn’t hop and a two-metre-tall bird – were quickly wiped out by humans. “Our chronology places people in Australia more than 20,000 years before continent-wide extinction of the megafauna,” the Nature paper said.

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Deterrent is still the favorite approach for Greece as well as the EU. Cowards.

Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)

Unaccompanied child refugees are being wrongly identified as adults by Greek authorities and denied vital care in squalid camps, a new report has found. Human Rights Watch (HRW) interviewed children as young as 15, who said they had been denied special protections required under international law. The group found Greece’s legal age assessment procedure was not being “followed in practice” on the island of Lesbos, which has been at the epicentre of the Aegean refugee crisis. [..] Under Greek law, the government is supposed to appoint a guardian for each child to represent them in legal proceedings, hear their views and act in their best interests, separating minors into designated areas of “hotspot” processing centres.

The Greek Reception and Identification Service (RIS) is responsible for identifying unaccompanied children and other vulnerable groups, with support from the UN, Frontex border agency and EU, and referring them to social services and information. But HRW said the authority was “failing to meet its responsibilities” and sometimes “arbitrarily” recording ages above those given, sometimes using controversial dental examinations without any other evidence. Those classified as adults are left to fend for themselves at heightened risk of exploitation, trafficking and other abuse, including prostitution, aid workers have warned. “They live in official and unofficial sites with unrelated adult single men; are exposed to inhumane living conditions, including overcrowding, unsanitary conditions, and frequent incidents of violence; and are unable to go to school or otherwise access education,” HRW said.

[..] When there is no space in safe shelters for unaccompanied children, authorities frequently detain them in police stations, immigration detention facilities and asylum processing centres, with 1,149 unaccompanied minors currently awaiting places. The uncertainty and distress provoked by the process is worsening an ongoing mental health crisis in Greek camps, aid workers said, having already warned of increasing rates of suicide and self-harm. [..] Greek officials told HRW that a thorough procedure is followed to establish the ages of asylum claimants [..] The group called on authorities in Greece to bring age assessments in line with international best practice, so proper accommodation, care, education, counselling and legal aid can be given to those who need it.

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Scandalous. But at least something UK and EU can agree on: let ’em rot.

UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)

Home Office ministers have tried to deflect cross-party anger as it emerged that not a single extra lone child refugee has been brought to Britain from Europe under the “Dubs amendment” this year. The immigration minister, Brandon Lewis, met accusations that the government was “dragging its feet” by disclosing he will visit Italy and Greece next week to follow up the invitation to refer eligible children to be brought to Britain. But during an urgent Commons question raised by the outgoing Liberal Democrat leader, Tim Farron, he faced cross-party criticism that it was taking too long to process eligible refugee children in Europe to bring them to Britain. Home Office ministers have confirmed in written answers that only 200 children were transferred under Dubs in 2016 after the closure of the Calais camp and 280 local authority places remain to be filled.

The Dubs amendment, known as section 67, was passed in April 2016 amid a campaign to bring 3,000 lone refugee children stuck in camps in Europe to Britain. Ministers initially estimated local authority capacity at 350 but extended it to 480 in April after saying there had been “an administrative error” in the initial figure. Lily Caprani, of Unicef UK, said: “It’s unacceptable that we have seen no children brought under the Dubs scheme this year. As a nation we showed our compassion and our principles when we helped refugee children stranded in Calais, but we were told this was not the end of the story. We are seeing too many children still having to make dangerous journeys to reach safety.”

In the Commons, Farron said it was hard to see the government’s response as anything more than lip service and demanded to know when the “measly commitment” of 480 would be met. “I have visited the camps in Greece and elsewhere – something neither the home secretary nor the prime minister have done. I have met these children who, through no fault of their own, find their lives paused as ministers have chosen to ignore them,” said the Lib Dem leader. “Has the UK government even signed a memorandum of understanding with Greece to get these transfers under way? I know of two young people who signed a consent form to be transferred under Dubs over a year ago. They are still stuck in Greece.”

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Bringing carbon to the surface.

The World Has Made More Than 9 Billion Tons of Plastic (CNBC)

More than 9 billion tons of plastic have been made since the 1950s, and the vast majority of it has been thrown in the trash, says a new study. The paper says it is the first attempt to measure the total amount of plastic produced since the beginning of mass plastic production in the middle of the 20th century. A team of researchers from the University of California, Santa Barbara, the University of Georgia, and the Woods Hole Oceanographic Institution, say that although plastic materials such as Bakelite were in use in the early 20th century, the material’s popularity began to rapidly rise after World War II, making it one of the most commonly used man-made materials. For example, the researchers estimated that the amount of plastic in use now is 30% of all the plastic ever produced.

While that has brought its benefits, such as lower-cost materials or capabilities like water resistance, our love of plastic has also produced a lot of trash. About 7 billion tons of it, by their estimate. And as of 2015, only 9% of the plastic waste produced ended up recycled, and another 12% was incinerated, the researchers found in their report. The remaining 79% has built up in landfills or ended up elsewhere in the environment. The team published their results in the journal Science Advances on Wednesday. To make their estimates, the researchers cobbled together datasets on global plastic production, such as global annual pure polymer (resin) production data from 1950 to 2015, published by the Plastics Europe Market Research Group, and global annual plastic fiber production data from 1970 to 2015 published by The Fiber Year and Tecnon OrbiChem.

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Production is not just growing, growth is still accelerating.

World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

Industry has made more than 9.1 billion tons of plastic since 1950 and there’s enough left over to bury Manhattan under more than two miles of trash, according to a new cradle-to-grave global study. Plastics don’t break down like other man-made materials, so three-quarters of the stuff ends up as waste in landfills, littered on land and floating in oceans, lakes and rivers, according to the research reported in Wednesday’s journal Science Advances . “At the current rate, we are really heading toward a plastic planet,” said study lead author Roland Geyer, an industrial ecologist at the University of California, Santa Barbara. “It is something we need to pay attention to.” The plastics boom started after World War II, and now plastics are everywhere. They are used in packaging like plastic bottles and consumer goods like cellphones and refrigerators.

They are in pipes and other construction material. They are in cars and clothing, usually as polyester. Study co-author Jenna Jambeck of the University of Georgia said the world first needs to know how much plastic waste there is worldwide before it can tackle the problem. They calculated that of the 9.1 billion tons made, nearly 7 billion tons are no longer used. Only 9% got recycled and another 12% was incinerated, leaving 5.5 billion tons of plastic waste on land and in water. Using the plastics industry own data, Geyer, Jambeck and Kara Lavender Law found that the amount of plastics made and thrown out is accelerating. In 2015, the world created 448 million tons of plastic — more than twice as much as made in 1998.

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Jun 192017
 
 June 19, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  


Kandinsky Capricious Line 1924

 

Britain’s Brexit jam is Brussels’ Too (Pol.eu)
EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)
Pain Without Gain: The Truth About British Austerity (G.)
France Gives Macron Big Majority With Little Enthusiasm (EUO)
German Politicians Hammer the ECB, But Only to Get Votes (DQ)
Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)
Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)
Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)
Goodbye, Yellow Brick Road (Grant)
Australia Has The World’s Most Costly Energy Bills (MB)
Australia’s Haunted Housing Market (BW)
Greece Blocks EU Statement On China Human Rights At UN (R.)
Greece Cracks Down On Voucher Misuse By Employers (EurActiv)
Greek Summer Calm Before The Storm (K.)

 

 

The Brexit talks start today. They should not. Theresa May can start, but she won’t be there to finish them.

Britain’s Brexit jam is Brussels’ Too (Pol.eu)

As Brexit talks start Monday, Britain’s back is hard against a wall. And nobody, not even in Brussels, wanted it that way. Elections in the U.K. were supposed to give Prime Minister Theresa May a stronger hand against the EU and naysayers back home. Instead, her negotiating team will hobble into the talks with May in peril, still working to finalize a power-sharing agreement to allow her to form a minority government. The EU’s stance on major Brexit issues has been ironclad for months, backed by the 27 nations in a disciplined display of unity. Second-guessing about May’s approach has intensified since her election setback, so much so that there have been calls for the EU to avert potential disaster by laying out clear paths for the U.K.’s exit.

The view in Brussels, however, is there is no way to help May short of making clear that Britain is welcome to change its mind — a point reiterated by German Finance Minister Wolfgang Schäuble, French President Emmanuel Macron and European Commission First Vice-President Frans Timmermans, among others. While no one realistically expects such a total reversal, there is unease over the lack of clarity on the U.K.’s goals. “Clearly the Brits are not ready yet and it’s a pity,” a senior Commission official said. “Everybody has sympathy for [May] now because she put herself in an impossible situation,” the official said. “How we can help her? Where she is now, nobody can help her. What she said to the backbenchers, in a way made sense, ‘I put you in this mess. I will take you out of this mess.’ But who else can do anything for her? It’s just hell.”

“And all the questions,” the official added, “Withdrawal? No withdrawal? Now? Later? It’s for them to consider. What can Brussels say?” The EU has published and transmitted to the U.K. its position papers on the two issues Brussels insists take precedence: citizens’ rights and the financial settlement. May’s aides said she wanted to make a “big, generous” offer on citizens’ rights, but so far the U.K. has not published any similar documents laying out its positions.

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Brussels wants an orderly destruction of Britain, not a messy one.

EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)

European leaders fear that Theresa May’s government is too fragile to negotiate viable terms on which to leave the union, meaning the discussions that officially begin on Monday could end in a “brutal Brexit” – under which talks collapse without any deal. As officials began gathering in Brussels on Sunday night, the long-awaited start of negotiations was overshadowed by political chaos back in Westminster, where chancellor Philip Hammond warned that failing to strike a deal would be “a very, very bad outcome”. The EU side fears that, in reality, the British government will struggle to maintain any position without falling apart in the coming months, because, without support from the Democratic Unionist party, May’s negotiating hand is limited. There are also concerns that any DUP backing to give May a majority in the House of Commons would come with strings attached.

Hammond has been urged to publish the cost of any deals made with the DUP to prop up the government. Shadow chancellor John McDonnell has raised concerns over reports that the DUP wants to end airport tax on visitors to Northern Ireland, which generated about £90m in 2015/16, according to HMRC estimates. The abolition of air passenger duty is one of the DUP’s key demands, as it pits Northern Ireland unfavourably against the Republic of Ireland, where the duty has been abolished. As well as concern over any terms agreed with the DUP, May will have to assuage fears from Ireland’s new taoiseach, Leo Varadkar, when she meets him in Downing Street on Monday, that Brexit will not infringe on the rights of people in Ireland. The taoiseach will also raise the impact of any Tory-DUP deal on power-sharing in Northern Ireland.

The prime minister has said she is confident of getting the Queen’s speech through the Commons, regardless of whether a deal is reached with the DUP by the time of the state opening of parliament on Wednesday. British Brexit negotiators are hoping to shore up confidence in their hardline approach to the start of talks by making early progress on the vexed question of citizens’ rights. [..] Pierre Vimont, a veteran French diplomat, now at the Carnegie Europe thinktank, said lack of clarity did not matter for the opening, which was more about “a first glimpse into their overall attitude and position” and setting the tone. “It will be atmospherics and the way both sides show a genuine commitment to work ahead. I think that will be the most important. “But the British delegation will need to rather quickly put its house in order and to have a clear idea of where it wants to go.”

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We’ve seen that truth in Grenfell Tower.

Pain Without Gain: The Truth About British Austerity (G.)

There are few people in the developed world who still cling to the maxim that “home life ceases to be free and beautiful as soon as it is founded on borrowing and debt”. hese days we can’t afford to take the same view as Helmer, the husband in Ibsen’s A Doll’s House, one of literature’s most cautious budgeters. It’s a nice idea to be free of debt and just spend what you earn. But when a home costs many times the average annual income and life’s running costs often exceed the monthly income, borrowing is not something that can be avoided. The government knows this only too well. This week sees publication of the public borrowing total for May and it is not expected to make pleasant reading.

Together with April’s shocker, when government borrowing was higher than the same month last year, the first two months of this financial year are forecast to show the borrowing requirement for the year is on track to be higher, not lower than last year. When David Cameron and George Osborne were in Downing Street, bringing down the deficit was the main aim of domestic policy. Until just last year, the plan was to cut the deficit to zero by 2020 and start bringing down the debt-to-GDP ratio from this year. The EU referendum vote and Theresa May’s arrival at No 10 changed all that. Once she adopted a hard-Brexit stance, the economy began to turn. Her chancellor, Philip Hammond, was forced to loosen the purse strings. It meant that both of the main political parties went into the election with plans for the deficit to remain at about 2.5%.

Independent forecasts for GDP growth over the next five years are below this figure, meaning that far from cutting the overall debt-to-GDP ratio, both parties were content to push it towards 90% – higher than any government has experienced in 50 years. That’s why so many headlines after the election have declared austerity dead and why the deficit was the dog that didn’t bark when the electorate went to the polls. The pressure on the deficit has only worsened since then. It has become clear to many of May’s advisers and close colleagues that the Tory party might not survive a second election this year without stealing some of Labour’s clothes. There is the possibility she will sanction scrapping, or dramatically reducing tuition fees, to nullify one of Labour’s most popular pledges.

The health secretary, Jeremy Hunt, hinted that the cap on nurses’ pay might be relaxed, while local authority spending may need to increase after the Grenfell Tower fire. Meanwhile, household debts are on the increase. Credit card, car loan and student debt, and borrowing using that most pernicious of loans, the second mortgage, have all risen sharply in the last couple of years. Making matters worse, the proportion of savings in the economy is at rock-bottom levels. It all adds up to an economy running on empty, with everyone, including ministers, borrowing extra each year just to keep the wheels turning.

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Macron won, but his majority is nowhere near as big as predicted. He was expected to get well over 400 seats, and ended up with 308. See the graphs. Next, he’ll be up against the unions. He’s promised to fire 120,000 public workers. Good luck.

France Gives Macron Big Majority With Little Enthusiasm (EUO)

French president Emmanuel Macron won a three-fifth majority in the lower house in the second round of the legislative elections on Sunday (18 June), but less than half of voters cast a ballot. Macron’s political movement, La Republique en Marche (LRM, The Republic on the Move) won 308 seats in the National Assembly, out of 577, after obtaining 43.06% of the vote. Its centrist ally, the Modem party, got 40 seats (6%). While not as big as expected after the first round, LRM’s majority left other parties behind and completed Macron’s destruction of the old political landscape. The conservative Republicans party will be the main opposition faction, with 113 seats (22.2%), down from 192 in the outgoing assembly.

The party leader, Francois Baroin, said he was happy that the Republicans will be “big enough” to “make its differences with LRM heard”. The Socialist Party (PS), which had been the main party with 270 MPs, was left with 29 seats (5.68%). Several ministers who served under former socialist president Francois Hollande lost out to newcomers. The PS leader, Jean-Christophe Cambadelis, who was himself eliminated in the first round, resigned from his position. Some 431 new MPs will enter the assembly and a record 224 of the MPs will be women.

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The ECB has $4.73 trillion in assets. It buys anythng but Greece.

German Politicians Hammer the ECB, But Only to Get Votes (DQ)

These days it’s easy to tell when general elections are approaching in Germany: members of the ruling government begin bewailing, in perfect unison, the ECB’s ultra-loose monetary policy. Leading the charge this time was Finance Minister Wolfgang Schaeuble, who on Tuesday urged the ECB to change its policy “in a timely manner”, warning that very low interest rates had caused problems in “some parts of the world.” Werner Bahlsen, the head of the economic council of Merkel’s CDU conservatives, was next to take the baton. “The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,” he said. “The ECB can only regain trust with the return to a sound monetary policy.” As Schaeuble and Balhsen well know, that is not likely to occur any time soon.

Indeed, like all other Eurozone finance ministers, Schaeuble is benefiting handsomely from the record-low borrowing costs made possible by the ECB’s negative interest rate policy. But by attacking ECB policy he and his peers can make it seem that they take voters’ concerns about low interest rates seriously, while knowing perfectly well that the things they say have very little effect on what the ECB actually does. In short, they are telling their voters what they want to hear. A survey by the CDU’s economic council showed that less than a quarter of its roughly 12,000 members had confidence in the ECB’s current course. 76% said they backed Bundesbank head Jens Weidmann’s monetary policy stance. Herr Weidmann said on Thursday that the ECB is at risk of coming under political pressure because any hint of policy tightening could push yields higher and blow a hole in national budgets.

It’s a probably a bit late in proceedings for such worries, what with the ECB now boasting the largest balance sheet of any central bank on Planet Earth. At last count, it had €4.22 trillion ($4.73 trillion) in assets, which equates to 39% of Eurozone GDP. Many of those assets are sovereign bonds of Eurozone economies like Italy, Spain and Portugal. The ECB’s binge-buying of sovereign and corporate bonds has spawned a mass culture of financial dependence across Europe. In the case of Italy, the sheer scale of the government’s dependence on the ECB for cheap funding is staggering: since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019.

It’s not just governments that are dependent on the ECB’s largesse: so, too, are the banks. In total, European banks have approximately €760 billion of funding from long-term lending schemes, the bulk of which comes from the four rounds of the most recent program launched in March 2016. As of the end of April 2017, Italian banks were holding just over €250 billion of the total long-term loans — almost a third of the total. Spain had €173 billion, while French banks had €115 billion and German lenders €95 billion. As the FT reports, the funding appears to play much less of a role in stimulating economic activity through lending, and a much larger role in mitigating the pain that low interest rates — and poor asset quality — can inflict on banks.

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Propping up zombies.

Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)

If it weren’t for liquidity right now, the stock market rally could be ripping apart, according to BMO Private Bank’s chief investment officer. “Any sense that this IV drip of liquidity coming into the market is slowing down at all is going to cause some issues,” Jack Ablin said on CNBC’s “Futures Now.” He emphasized that investors have been encouraged to take on risk due to the trillions of dollars being pumped into the financial system by central banks. Ablin’s comments came a day after the Federal Reserve decided to lift short-term interest rate by a quarter%age point. Even though the rate hike was expected, Ablin admits there was some concern tied to the Fed’s statement.

The Fed put in some new wording, saying that it “expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.” That part left Ablin “a little bit taken aback with the timing,” he said. However, “I think the good news here is, ‘Look, this is a potentially contrived crisis.’ This could be the taper tantrum all over again where [The Fed says] ‘OK, look, we don’t want to cause major upset here. We will continue to pump if equity risk taking takes a hit.'” Ablin said he’s “somewhat optimistic” that the rally will continue. He prefers developed and emerging markets over U.S. stocks, arguing that places like Europe could see bigger gains than in the United States because the economy has been surprising experts to the upside.

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This story gets insaner by the day.

Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)

In the biggest political story of the past week, one which was timed to coincide with Donald Trump’s Birthday, the WaPo reported citing anonymous sources, that Special Counsel Robert Mueller was investigating President Trump for possible obstruction of justice. Just a few hours later on Thursday night, the DOJ’s Deputy Attorney General Rod Rosenstein, who is overseeing the Russia probe due to Jeff Sessions recusal, released a stunning announcement which urged Americans to be “skeptical about anonymous allegations” in the media, which many interpreted as being issued in response to the WaPo report. “Americans should exercise caution before accepting as true any stories attributed to anonymous ‘officials,’ particularly when they do not identify the country — let alone the branch or agency of government — with which the alleged sources supposedly are affiliated. Americans should be skeptical about anonymous allegations. The Department of Justice has a long-established policy to neither confirm nor deny such allegations.”

Then on Sunday, the plot thickened further when according to ABC, special counsel Robert Mueller has not yet decided whether to investigate President Trump as part of the Russia probe, suggesting the WaPo report that a probe had already started was inaccurate. “Now, my sources are telling me he’s begun some preliminary planning,” Pierre Thomas, the ABC News senior justice correspondent, said of Mueller on ABC’s “This Week” although he too, like the WaPo, was referring to anonymous sources, so who knows who is telling the truth. “Plans to talk to some people in the administration. But he’s not yet made that momentous decision to go for a full-scale investigation.”On Friday, Trump responded to the Washington Post story by tweeting: “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt.” But also on Sunday Trump’s lawyer Jay Sekulow insisted the president was not literally confirming the investigation but was just referring to the story.

“Let me be clear: the president is not under investigation as James Comey stated in his testimony, that the president was not the target of investigation on three different occasions,” Sekulow said Sunday. “The president is not a subject or target of an investigation.” “Now Mueller faces a huge decision,” Thomas told “This Week” host Martha Raddatz. “Does he believe the president, who says there’s no wrongdoing here, or does he go after the president in the way James Comey wants him to do?” And so, yet another blockbuster media report has been cast into doubt as a result of more “he said, he said” innuendo, which will be resolved only if Mueller steps up and discloses on the record whether he is indeed investiating Trump for obstruction, or any other reason. That however is unlikely to happen, and so the daily ping-ponging media innuendos will continue indefinitely.

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“These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)

Russia on Sunday accused the U.S. of returning to “almost forgotten Cold War rhetoric,” after President Donald Trump’s decision to reinstate some sanctions on Cuba. It could have dropped “forgotten.” There’s been a lively debate among historians and diplomats for years over whether the souring of relations between the U.S. and Russia amounts to a new Cold War, and lately the case has been getting stronger by the day. Trump’s restoration on Friday of some of the Cold War restrictions on Cuba his predecessor, Barack Obama, eased just months ago was only one example. Earlier in the week, the U.S. Senate approved a bill to entrench and toughen sanctions on Russia that includes several vivid flashbacks to before the fall of the Berlin wall.

German Chancellor Angela Merkel added her voice on Friday to rising European condemnation of a proposal in the Senate draft that would penalize companies investing in new Russian energy pipelines. Nord Stream 2, a project to double the supply of Russian natural gas to Germany via the Baltic Sea, would be especially vulnerable. President Ronald Reagan used similar sanctions in an attempt to thwart the joint German-Soviet construction of a natural gas pipeline in the early 1980s, only to drop them amid intense opposition from Europe. Again, Germany led the pushback. The Senate bill would also codify a raft of existing sanctions against Russia, so that Trump would need Congressional approval to lift them. That happened in 1974, too, and the measures proved hard to kill.

The legislation wasn’t repealed until a decade after their target, the U.S.S.R., had ceased to exist. The sense of Cold-War deja vu has been building for some time, according to Robert Legvold, a professor at Columbia University and author of “Return of the Cold War.” There’s a renewed arms race, nuclear saber rattling, the buzzing of ships and planes, proxy wars and disputes over whether missile defense systems count as offense or defense. If the trend continues, said Legvold, it will prevent the strategic cooperation between the U.S. and Russia that’s needed to prevent approaching security challenges from spinning out of control: The rise of China, the race to exploit resources in the Arctic, international terrorism and, above all, a world with nine nuclear powers that’s more complex and unstable than in the 20th century. “These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

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It’s hard to agree on gold. Always has been.

Goodbye, Yellow Brick Road (Grant)

It’s no work at all to make modern money. Since the start of the 2008 financial crisis, the world’s central bankers have materialized the equivalent of $12.25 trillion. Just tap, tap, tap on a computer keypad. “One Nation Under Gold” is a brief against the kind of money you have to dig out of the ground. And you do have to dig. The value of all the gold that’s ever been mined (and which mostly still exists in the form of baubles, coins and ingots), according to the World Gold Council, is a mere $7.4 trillion. Gold anchored the various metallic monetary systems that existed from the 18th century to 1971. They were imperfect, all right, just as James Ledbetter bends over backward to demonstrate. The question is whether the gold standard was any more imperfect than the system in place today.

[..] As if to clinch the case against gold—and, necessarily, the case for the modern-day status quo—Mr. Ledbetter writes: “Of forty economists teaching at America’s most prestigious universities—including many who’ve advised or worked in Republican administrations—exactly zero responded favorably to a gold-standard question asked in 2012.” Perhaps so, but “zero” or thereabouts likewise describes the number of established economists who in 2005, ’06 and ’07 anticipated the coming of the biggest financial event of their professional lives. The economists mean no harm. But if, in unison, they arrive at the conclusion that tomorrow is Monday, a prudent person would check the calendar.

Mr. Ledbetter makes a great deal of today’s gold-standard advocates, more, I think, than those lonely idealists would claim for themselves (or ourselves, as I am one of them). The price of gold peaked as long ago as 2011 (at $1,900, versus $1,250 today), while so-called crypto-currencies like bitcoin have emerged as the favorite alternative to government-issued money. It’s not so obvious that, as Mr. Ledbetter puts it, “we cannot get enough of the metal.” On the contrary, to judge by ultra-low interest rates and sky-high stock prices, we cannot—for now—get enough of our celebrity central bankers.

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Pretty far out.

Australia Has The World’s Most Costly Energy Bills (MB)

In reality, there are three main components of household bills. Whether households actual ultimately pocket these savings will depend on what happens with all three. The first, is the wholesale cost. That’s the cost of actually generating the electricity, be it burning lumps of coal, a gas-fired electricity plant, solar panels, wind turbines or whatever clever ways we may come up with in the future to produce electricity. Today, 77 per cent of Australian electricity comes from mostly brown and black coal, 10 per cent from gas, and 13 per cent from renewable sources. For a long time, this part of the system, of producing the electricity and getting it into the grid, has been going pretty well. Australians have enjoyed a reliable and low-cost supply of wholesale energy.

Basically, we burned ship loads of cheap coal, and to hell with the environment. This is the part of the system that is now utterly falling apart and is in most need of repair – which we’ll get to. The second major component of household electricity bills is the cost of transmission and distribution. The costs involved in building poles and wires and actually getting electricity to your wall sockets makes up about 40 per cent of your total bill. This part of the electricity price equation has been broken for decades, and is the main reason power bills have nearly doubled over the last decade. Power lines are natural monopolies. Traditionally they were all government owned. Jeff Kennett privatised Victorian networks, but until very recently, distribution networks in other states, such as NSW and Queensland, have remained government owned, with regulated pricing.

And basically, they stuffed that up for consumers by deciding to let the networks earn a guaranteed rate of return, based on their costs. That is, the more they spent, the more they earned. …The third and final component of a household’s bill is the margin added by electricity retailers. In theory, anyone can set up a business retailing electricity and there are many suppliers. In reality, pricing structures are so complex consumers do not exercise their power to switch providers, and retail margins remain higher than otherwise.

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Moving towards a very deep black hole.

Australia’s Haunted Housing Market (BW)

Forget all the headlines about the undimmed pace of house price inflation – up 19% in Sydney during March, pushing the median house price in the city to A$1.15 million ($875,000) according to Domain, a property-listings website. House prices, after all, aren’t so much a guide to the state of the housing market as to the 1% or so of homes that bought or sold in a typical year. Even there, they’re less an indicator of supply and demand for housing than of how supply and demand for mortgage credit interact with real estate fundamentals. Splurge on mortgage credit, and even an overbuilt housing market can enjoy price appreciation; cut back on home loans, and the opposite may be the case. That’s why it’s worth looking at the state of rents. Right now, they’re growing at the slowest pace in more than two decades, according to calculations based on Australian Bureau of Statistics data.

This hasn’t completely escaped notice. Philip Lowe, who took over as Governor of the Reserve Bank of Australia in September, has included the same boilerplate reference (with minor cosmetic modifications) in each of the eight monetary policy decision statements he’s put out so far: In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. As Lowe indicates, the reason for the slowdown in rents isn’t hard to discern. For most of Australia’s recent history, building has struggled to keep pace with household formation. Supply of new homes has kept close to demand, and as a result rents have tended to grow more or less in line with incomes.

Compare the Housing Institute of Australia’s forecasts of housing starts and the Australian Bureau of Statistics’ forecasts of household formation, and the glut really comes into focus: The surplus of homes that Australian cities have built over the past five years, based on those numbers, is equivalent to a whole year’s worth of excess supply. That’s a worrying development for those hoping that Australia’s house price boom is sustainable, especially given the way that the country’s regulators look to be finally attempting to raise credit standards after years of laxity. Still, if Australia manages to deflate the housing bubble without seriously damaging its economy, the heroes and villains will be quite different from the popular perception. While governments and regulators spent years adding to the problem with tax breaks and hostility to macroprudential regulation, it may well be property investors and foreigners who helped ease the crisis.

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The EU should look at its own human rights record.

Greece Blocks EU Statement On China Human Rights At UN (R.)

Greece has blocked a EU statement at the UNs criticizing China’s human rights record, a decision EU diplomats said undermined efforts to confront Beijing’s crackdown on activists and dissidents. The EU, which seeks to promote free speech and end capital punishment around the world, was due to make its statement last week at the U.N. Human Rights Council in Geneva, but failed to win the necessary agreement from all 28 EU states. It marked the first time the EU had failed to make its statement at the U.N.’s top rights body, rights groups Amnesty International and Human Rights Watch said. A Greek foreign ministry official said Athens blocked the statement, calling it “unconstructive criticism of China” and said separate EU talks with China outside the U.N. were a better avenue for discussions. An EU official confirmed the statement had been blocked.

“Greece’s position is that unproductive and in many cases, selective criticism against specific countries does not facilitate the promotion of human rights in these states, nor the development of their relation with the EU,” a Greek foreign ministry spokesperson said on Sunday. Presented three times a year, the statement gives the EU a way to highlight abuses by states around the world on issues that other countries are unwilling to raise. The impasse is the latest blow to the EU’s credentials as a defender of human rights, three diplomats said, and raises questions about the economically powerful EU’s “soft power” that relies on inspiring countries to follow its example by outlawing the death penalty and upholding press freedoms. It also underscores the EU’s awkward ties with China, its second-largest trade partner, diplomats said.

[..] Hungary, another large recipient of Chinese investment, has repeatedly blocked EU statements criticizing China’s rights record under communist President Xi Jinping, diplomats said. One EU diplomat expressed frustration that Greece’s decision to block the statement came at the same time the IMF and EU governments agreed to release funds under Greece’s emergency financial bailout last week in Luxembourg. “It was dishonorable, to say the least,” the diplomat said. The Greek foreign ministry spokesperson said that “during the formulation of the common statement there were also other countries that expressed similar reservations” and that Greece participates on an equal footing in setting up the EU’s common foreign policy.

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Many will claim this is employers seeking illicit profits. But for many it’s the only way not to be forced to fire people, to keep them fed.

Greece Cracks Down On Voucher Misuse By Employers (EurActiv)

The growing trend of distributing vouchers to employees to avoid taxes has raised eyebrows in the Greek government, which has moved to crack down on unprecedented levels of tax evasion in the cash-strapped country. The government says vouchers are allowed only as an extra benefit and not as part of a taxable salary. But according to Greek media reports, more than 200,000 workers, mostly newcomers, receive up to 25% in their salary via vouchers, which they use in supermarkets to buy food. The total amount, according to the reports, reaches €300 million annually. Up to a specific amount, the vouchers are tax-free for businesses, which are also exempt from employer security contributions. A source at the Greek labour ministry told EURACTIV.com that replacing any part of the legal wage of employees with vouchers is illegal.

“Vouchers are only allowed as an extra benefit and in no case can they be a substitution for legally defined earnings,” the source noted, adding that all complaints filed with the Labour Inspectorate are being investigated. As of June, companies are required to pay salaries only to bank accounts in order to put a stop to the practice of avoiding paying salaries altogether or paying only a fragment. “The Labor Inspectorate (SEPE) is in constant collaboration with Greece’s Financial and Crime Unit (SDOE), the financial police and the Independent Public Revenue Authority to address all forms of labour market violations and the coordination of their audit work,” the source said. Vouchers are coupons companies distribute to their employees to improve work, health and safety by supporting proper nutrition.

The rationale behind vouchers is that they process will enhance satisfaction and boost productivity levels while improving the employee living standards. For the government, the proper use of vouchers should also result in more tax revenues. The labour market in Greece has been in turmoil after 7 years of austerity-driven bailout programmes. There are cases of employers who have taken advantage of the “flexible” labour relations to impose unusual working conditions. For many, the use of vouchers is seen as a means to improve the atmosphere at work. Sotiris Zarianopoulos, a non-attached MEP from the Greek Communist Party (KKE), has recently asked the European Commission about these practices. The Greek lawmaker noted that this is only a part of a “jungle labour market” created by EU policies and implemented by the leftist Syriza government.

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On the verge of heading back to Greece, I’m wary of what comes after the calm.

Greek Summer Calm Before The Storm (K.)

Even though Prime Minister Alexis Tsipras hailed last week’s Eurogroup deal as step in the right direction, Greece still has many rivers to cross as the agreement secured in Luxembourg fell far short of the goals set by the government. First and foremost, Tsipras will have to deal with dissent emanating from SYRIZA MPs that had agreed to vote through a batch of tough legislation last month with the understanding that, in exchange, Greece will be granted debt relief and access to the ECB’s quantitative easing program. However, contrary to the government’s aims at the Eurogroup, debt relief talks were deferred to 2018, while Greece’s inclusion in the QE seems highly unlikely before that.

Although analysts believe that dissenters may not raise the ante during the summer – due to the tourist season and relief provided by the release of a bailout tranche – the government is expected to come under new pressure in the fall when Tsipras drafts the 2018 budget, which must stipulate a primary surplus of 3.5%. Given the huge difficulties to achieve this target, Athens will find it hard to convince representatives of the country’s creditors that it will able to achieve this target without the need for yet more measures. The Greek PM will also struggle in the fall to clear the hurdles leading to the completion of the country’s third bailout review, which will also involve the IMF. The review’s focus will be on streamlining the Greek public sector, from which SYRIZA has drawn a large chunk of votes in the past and would not like to rock the boat.

Another sticking point could be Tsipras’s promise to bring back growth, when forecasts for 2017 see an anemic rate of 1.5 to 1.8%. According to reports, the left-led coalition is banking on elections taking place in June 2018 at the earliest so that it avoids having to implement pension cuts in 2019, as it had agreed with creditors and passed into law. On the other had, some reports suggest that Tsipras may seek to spring an election surprise this fall or by the end of the year. This, however, will hinge on whether Greece will be given specifics by creditors about what sort of debt relief it can expect after the German elections in September, and on the degree of difficulty it will have to draft the 2018 budget.

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Oct 062016
 
 October 6, 2016  Posted by at 9:19 am Finance Tagged with: , , , , , , , ,  


Lewis Wickes Hine 12-year-old newsie, Hyman Alpert, been selling 3 years, New Haven CT 1909

World Is Swimming In Record $152 Trillion In Debt: IMF (R.)
Australia Private-Sector Debt Rises Faster Than Almost Anywhere Else (Aus.)
One-Third Of European Banks Fail IMF Stress Test: (WSJ)
EU Readies Plan for Derivatives Clearing Crisis, the New Too-Big-to-Fail (BBG)
The Noose Is Tightening Quickly On The Global Economy (Alt-M)
Fed’s Fischer Says Low Neutral Rate A Sign Of Potential Economic Trouble (R.)
Goldman Warns Of “Upward Shock” To Rates, Hints At Trillions In Losses (ZH)
Stiglitz Sees Italy, Others Leaving Euro Zone In Coming Years (R.)
Two Thirds Of Young American Adults Live With Their Parents (ZH)
The Math of Escaping From Syria (R.)
Nearly Half Of All Children In Sub-Saharan Africa Live In Extreme Poverty (G.)

 

 

Never mind public debt. $100 trillion in private debt is the big number.

World Is Swimming In Record $152 Trillion In Debt: IMF (R.)

The world is swimming in a record $152 trillion in debt, the IMF said on Wednesday, even as the institution encourages some countries to spend more to boost flagging growth if they can afford it. Global debt, both public and private, reached 225% of global economic output last year, up from about 200% in 2002, the IMF said in its new Fiscal Monitor report. The IMF said about two thirds of the 2015 total, or about $100 trillion, is owed by private sector borrowers, and noted that rapid increases in private debt often lead to financial crises. While debt profiles vary by country, the report said that the sheer size of the debt could set the stage for an unprecedented private deleveraging that could thwart a still-fragile economic recovery.

“Excessive private debt is a major headwind against the global recovery and a risk to financial stability,” IMF Fiscal Affairs Director Vitor Gaspar told a news conference. “Financial recessions are longer and deeper than normal recessions.” While the United States has de-leveraged since the 2008-2009 financial crisis, the report cited the buildup of private debt in China and Brazil as a significant concern, fueled in part by a long era of low interest rates. The report comes as IMF managing director Christine Lagarde is urging the Fund’s 189 member governments that have “fiscal space” – the ability to sustainably borrow and spend more – to do so to boost persistently weak growth.

The Fund’s call for targeted fiscal support for consumer demand comes is accompanied by calls for continued accommodative monetary policy and accelerated structural reforms aimed at boosting countries’ economic efficiency. If a major deleveraging of private debt were to occur, the IMF report recommends that fiscal policy should include targeted interventions to restructure private debt or repair bank balance sheets to mininize damage to the overall economy.

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An Australian take on the IMF debt report, which singles out the country along with Canada.

Australia Private-Sector Debt Rises Faster Than Almost Anywhere Else (Aus.)

Private-sector debt is rising faster in Australia than almost anywhere else in the world, according to the IMF, which is concerned record debt globally may be setting the stage for a future downturn. The fund estimates that total debt levels have kept climbing since the global financial crisis, and are now equivalent to 225% of global GDP, up from 200% before the crisis. “Excessive private debt is a major headwind against the global recovery and a risk to financial stability”, said the head of the fund’s fiscal department, Vitor Gaspar, releasing the fund’s latest review of government finances. The IMF says private-sector debt in most advanced countries reached a peak in 2012 and started coming down, with the biggest reductions recorded in countries such as Ireland and Slovenia that entered the financial crisis with elevated debts.

The IMF says private-sector debt in most advanced countries reached a peak in 2012 and started coming down, with the biggest reductions recorded in countries such as Ireland and Slovenia that entered the financial crisis with elevated debts. In some cases, however, private debt has continued to accumulate at a fast pace-notably, Australia, Canada, and Singapore, the fund says. The IMF estimates that, since 2013, private debt has risen as a share of GDP by 15 percentage points, more than in any other advanced nation. Private debt in Australia has risen from 188% of GDP to 225% since the global financial crisis, mostly driven by lending to households. Mr Gaspar said the risk was not just that private debt could revert to the government in a crisis, as occurred when many advanced country governments had to take over banks during the financial crisis.

“Rapid increases in private debt often end up in financial crises and financial recessions are longer and deeper than normal recessions”, he said. The fund says even without a financial crisis, high private-sector debt will hamper growth because highly indebted borrowers eventually cut back their consumption and investment. It says there is no consensus about the threshold at which debt levels start affecting growth, but says the longer that debt keeps rising, the greater becomes the sensitivity of the economy to any unexpected shocks. The IMF report shows that Australia s federal and state government debt remains one of the lowest in the advanced world, projected to peak at 21.6% of GDP in 2018, compared with an average of 80.5% for the advanced countries in the G20.

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Why Draghi said there are too many banks in Europe. M&A can hide a lot of debt, or have taxpayers shoulder it.

One-Third Of European Banks Fail IMF Stress Test: (WSJ)

Historic debt levels and dwindling policy ammunition risk derailing the meager recovery forecast for next year. Anemic global growth is “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the emergency lender warned. The IMF lays out three major risks to the financial system. First, European banks are facing a chronic profitability crisis. Many haven’t been able to clear the legacy debt off their balance sheets and investors are increasingly skeptical they’ll be remain profitable based on their current structures. But it’s not just market perceptions. The IMF estimates that the recent plunge in bank equity price could curb lending until 2018.

It also conducted a survey of more than 280 banks covering most of the banking systems in the U.S. and Europe to see if an economic recovery would be enough to propel them into long-term profitability. While a large majority of U.S. banks passed, nearly one-third of Europe’s banking system flunked. “A cyclical recovery helps but is not enough,” Mr. Dattels says. Those banking duds—representing $8.5 trillion in assets—remain weak and unable to generate sustainable profits even if growth picks up in the fund’s stress test. “Banks and policy makers need to tackle substantial structural challenges to survive in this new era.” Banks need to first resolve the massive stock of nonperforming loans. That requires banking authorities to fix their insolvency rules, a problem the IMF has been bugging Europe about for years. If officials could finally resolve that problem, it could turn a net capital cost to European banks of €85 billion to a net gain of €60 billion, the fund estimates.

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One goal in mind: save large financial institutions. Not citizens.

EU Readies Plan for Derivatives Clearing Crisis, the New Too-Big-to-Fail (BBG)

The EU plans to give authorities sweeping powers to tackle ailing derivatives clearinghouses to prevent their failure from wreaking havoc throughout the financial system. Draft EU legislation seen by Bloomberg sets out rules on saving or shuttering clearinghouses that would apply to firms such as London-based LCH. The proposals cover everything from the creation of resolution authorities to the powers they would have when winding a company down, including writing down shares, debt and collateral. Having forced most clearing to go through central counterparties to manage risk in the financial system, the EU will come out with recovery and resolution proposals by year-end. Clearing has come into focus after emerging as a pawn in the post-Brexit battle for London’s financial-services industry.

“If we are going to rely more on CCPs, we need to have a clear system in place to resolve them if things go wrong,” Valdis Dombrovskis, the EU’s financial-services chief, said last month. Governments around the world were spooked by the damage inflicted by derivatives trades that went awry during the financial crisis. Since then, they’ve taken steps to ensure trading in the contracts is reported and centrally cleared. Clearinghouses stand between the two sides of a derivative wager and hold collateral, known as margin, from both in case a member defaults. Many transactions were previously conducted directly between traders without a third party requiring collateral. Swaps trading, when it was largely unregulated, amplified the 2008 meltdown and prompted a $182 billion U.S. rescue of AIG.

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“The very system they are built around is a corrupt and unsustainable model, and I hold that this is by design.”

The Noose Is Tightening Quickly On The Global Economy (Alt-M)

The supposed “catalyst” for the 2008 crash is primarily attributed to the fall of Lehman Brothers. I highly recommend any of the “bullish” economists out there arguing today that the central banks intend to prolong a stock rally indefinitely examine the statements made in the mainstream about Lehman and by Lehman leading up to their eventual death rattle. Then, absorb and really think on some of the recent statements and tactics used by Deutsche Bank. Specifically, note Lehman’s use of accounting and derivatives gimmicks and the cycling of funds through various accounts in order to make the company appear solvent. Then, take a look at revelations coming out of places like Italy that Deutsche Bank has been using the same model of false accounts and market manipulation, once again, with derivatives as a main tool for fraud.

Also notice the same outright dismissals of all pertinent evidence that Deutsche Bank might be suffering a capital shortfall, as CEO John Cryan blames “speculators” for the companies losses. Lehman’s Dick Fuld and Bear Stearns’ Jimmy Cain both blamed “speculators” and “rumors and conspiracies” for the fall of their companies during the derivatives debacle eight years ago. It would seem that history doesn’t just rhyme, it sometimes repeats exactly. Below is a rather revealing chart from the folks at Zero Hedge comparing the collapse of Lehman Brothers stock value to the steady decline of Deutsche Bank. To be clear, Lehman was no catalyst. It was only a litmus test for a system completely devoid of tangible value and drowning in toxic debt. Lehman was a part of a much larger problem, it was not the cause of the problem. The same is true for Deutsche Bank.

The panic growing around Germany’s second largest financial institution, Commerzbank, as it moves to lay off nearly 10,000 employees and suspend its dividend is another crisis indicator separate from Deutsche Bank. The clear solvency issues in Italy’s major banks, including Monte dei Paschi, are yet another explosive element.

Keep in mind that when these edifices begin to crumble and Europe enters a state of financial emergency, the mainstream media and numerous governments will continue to blame speculators. They will also claim that the entire disaster was set in motion through a “domino effect”; the first domino probably being Deutsche Bank. This will be a lie. There is no line of dominoes. One bank will not be bringing down the other banks — yes, there is terrible interdependency, but the real issue is that ALL of these banks are falling due to their own cancerous behaviors. The very system they are built around is a corrupt and unsustainable model, and I hold that this is by design.

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Wow, he presents what has long been obvious as some sort of epiphany: “We could be stuck in a new longer-run equilibrium characterized by sluggish growth.”

Fed’s Fischer Says Low Neutral Rate A Sign Of Potential Economic Trouble (R.)

Evidence that the so-called natural rate of interest has fallen to low levels could mean the economy is stuck in a low-growth rut that could prove hard to escape, Federal Reserve Vice Chair Stanley Fischer said on Wednesday. Speaking to a central banking seminar in New York, the Fed’s second-in-command said he was concerned that the changes in world savings and investment patterns that may have driven down the natural rate could “prove to be quite persistent…We could be stuck in a new longer-run equilibrium characterized by sluggish growth.” As a result, he said, central bankers may face a future where the short-term interest rates set by policymakers never get far above zero, and the unconventional tools used during the financial crisis become a “recurrent” fact of life.

“Ultralow interest rates may reflect more than just cyclical forces,” Fischer said, but “be yet another indication that the economy’s growth potential may have dimmed considerably.” Fischer’s remarks did not address current Fed policy or interest rate plans. It is not the first time a Fed official has openly expressed concerns about an underlying decline in U.S. economic potential, or fretted that the crisis shifted savings and investment patterns in a damaging way. Over the past year in particular there has been a vigorous debate, backed up by fresh research, about the “natural” rate of interest. Sometimes referred to as a neutral or equilibrium rate, it is in many ways an abstraction – not a rate that is set by the Fed or used in transactions, but an estimate of the underlying rate that would keep the price level stable while the economy grows at potential.

A number of developments have led many at the Fed to conclude that the natural rate is currently very low, and that its decline may reflect a loss of economic potential. There are immediate implications for the Fed: a low natural rate means the Fed could not move its short-term federal funds rate very high before policy becomes too tight.

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Nothing new here either.

Goldman Warns Of “Upward Shock” To Rates, Hints At Trillions In Losses (ZH)

[..] “The total face value of all US bonds, including Treasuries, Federal agency debt, mortgages, corporates, municipals and ABS, is $40 trillion (Securities Industry and Financial Markets Association). The Barclays US aggregate is a smaller number, $17 trillion, as the index excludes some categories of debt, such as money markets, with low duration. To end up with a more palatable number, Goldman uses the Barclays measure of debt outstanding, although it admits this may lead to an understatement of the total loss potential. Using either measure, total debt outstanding has grown by over 60% in real Dollars since 2000.”

[..] Doing the math, and combining a duration estimate of 5.6 years with the SIFMA total estimated notional exposure of $40trn, and current Dollar price of bonds of $105.6, indicates that, to first order, a 100bp shock to interest rates would translate into a market value loss estimate would be $2.4 trillion. That is the part Garzarelli forgot to write about. Which is ironic, because in trying to paint a bullish picture, the Goldman strategist in effect admitted that not just the Fed, but the entire world is trapped: should the global economy continue to contract, global bond yields will continue to sink, with trillions more bonds going negative yield, leading to even more debt issuance, and resulting in a ZIRP (and NIRP) trap from which there is no escape.

On the other hand, if – as Goldman hopes – inflation does materialize, however briefly, the resultant MTM loss will be staggering. Keep in mind that $2.4 trillion is only in the US. Now add tens of trillions of record low yielding global debt, including some $10.5 trillion in negative yield bonds around the globe, and one can make the case that the global MTM hit from an even 1% rise in rates would be somewhere between $5 and $8 trilion dollars! So, according to Goldman, here is the rather unpleasant choice facing the world: continue slowly sinking into a deflationary singularity, coupled with ever greater systemic leverage which makes escape from the ZIRP/NIRP trap impossible as social unrest builds up and ultimately spills over into the streets, or unleash an inflationary impulse, one which crushes countless debt holders, leads to trillions in losses, and requires yet another consolidated bailout…. oh, and also more social unrest.

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If Italy leaves, there’s no EU left.

Stiglitz Sees Italy, Others Leaving Euro Zone In Coming Years (R.)

Nobel Prize-winning economist Joseph Stiglitz predicted in a interview out on Wednesday that Italy and other countries would leave the euro zone in coming years, and he blamed the euro and German austerity policies for Europe’s economic problems. Europe lacks the decisiveness to undertake needed reforms such as the creation of a banking union involving joint bank deposit guarantees, and also lacks solidarity across national boundaries, Stiglitz was quoted as saying by Die Welt newspaper. “There will still be a euro zone in 10 years, but the question is, what will it look like? It’s very unlikely that it will still have 19 members. It’s difficult to say who will still belong,” the paper quoted Stiglitz as saying. “The people in Italy are increasingly disappointed in the euro.”

“Italians are starting to realize that Italy doesn’t work in the euro,” he added. He said Germany had already accepted that Greece would leave the euro zone, noting that he had advised both Greece and Portugal in the past to exit the single currency. Concerns about the euro zone have escalated in Germany in recent months amid growing concern about a shift away from austerity in southern Europe, the loose money policies of the ECB and the rise of the right-wing Alternative for Germany party. Stiglitz told the paper the euro and austerity policies in Germany were at fault for Europe’s economic malaise. The break-up of the single currency or the division into a north euro and a south euro were the only realistic options for reviving Europe’s stalled economy, the paper quoted him as saying.

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‘Target groups’ may be somewhat confusing: one survey looks at 15-29 year-olds, the other at 18-34 year-olds. But the trends are clear enough.

Two Thirds Of Young American Adults Live With Their Parents (ZH)

As part of its periodic report on “Society at a Glance” which looks at how youth across member states are faring in terms of several social indicators, such as employment, poverty, marriage and health, the OECD also provided a unique glimpse into modern household composition, namely the%age of young adults, those aged 15-29, living at home. What it found is that since the Great Recession, there have been significant shifts worldwide in the number of young adults living at home. From 2007 to 2014, the number of youth living at home in countries belonging to the OECD increased by 0.7%, rising to 59.4%.

As expected, the nations hit hardest by the global economic slowdown such as Italy, Slovenia and Greece had the highest%age of youth living at home with their parents, at 80.6%, 76.4% and 76.3%, respectively. In itself, that is hardly surprising, since countries like Greece and Italy were not only among the harfest hit by the recession, and have a culture of young adults living longer at home, but also have some of the highest unemployment rates for young people. In fact, as the chart below shows, some 15% of young adults in OECD countries, or a whopping 40 million, were what the report classifies as NEET: not in employment, education or training, with both Italy and Greece at the very top, just behind Turkey.

On the other end of the spectrum, Canada had the lowest%age of youth living with parents, with just 30% of the country’s youth still living at home. The Nordic countries, including Denmark, Sweden, Finland and Norway, also had low numbers of young adults living at home. In terms of deterioration, France was by far the leader, with the number of young people cohabitating with their parents rising 12.5% to 53.5% from 2007 to 2014. Report authors attribute the increase in part to the high numbers of young adults in France who are not in the workforce or in education. In France, some 16.6% of young adults were not in a job or education institution in 2015, also a notable an increase over the previous few years.

Cited by US News, Claire Keane, an economist with the OECD’s social policy division said that “we really think this is a crisis story,” In France, she says, many benefits flow through families to reach young people. “They are relying on parents for financial support.” As for the US, there has been a 3.9% increase in the proportion of youth living with their parents from 2007 to 2014, significantly higher than the OECD average. As a result, today, about 66.6% of American 15- to 29 year-olds live with their parents as opposed to on their own or with a roommate, compared to around 62.8% before the crisis.

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Syria was a relatively wealthy country not long ago. So was Libya. Guess what happened?

The Math of Escaping From Syria (R.)

– Duration of Syrian Civil War: 5 years, 6 months, approximately. – Number of refugees through Oct. 1: 302,975. – Number of refugees drowned en route to Europe: 3,502 We’ve seen the pictures. We’ve read the stories. The numbers are stark. A single boat crossing on the Mediterranean cost $2,200 per passenger in the summer of 2015, up from an average $1,500 a year earlier, according to refugees’ accounts. For Syrians, as with most migrants seeking asylum, money is scarce; a report by the Syrian Economic Forum showed average monthly income for a citizen of Aleppo was around $80 last year. So if you’re a refugee, you face the prospect of spending as much as two years of your wages for a journey on which 1 of 87 refugees have drowned.

How bad is the economy you’re leaving behind? Let’s take the Great Recession of 2007 to 2009 in the U.S. as a comparison. GDP decreased at an average annual rate of 3.5%. Unemployment reached a high of 10% in Oct. 2009. In that year, 14.3% of the U.S. were living below the poverty line. In Syria, GDP fell 30% in 2013 and another 36% in 2014; 82% of the population lives below the poverty line; unemployment is at 60%. And 2016 looks pretty bleak as well. And that’s leaving aside falling bombs, chemical weapons and woefully inadequate medical care. Also connecting with international aid groups takes time, as many Syrians are located in hard to reach areas.

And let’s not forget you are probably a kid. More than 50% of refugees are under the age of 18 – and haven’t had educational access for years; not to mention the added trauma of witnessing extreme violence. So spending up to two years of your wages and risking your life to get to a safe haven, versus staying in a country where it’s likely you will die a violent death suddenly seems like a remarkably sound decision.

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How many billions have been spent on ending world hunger? Or maybe we should ask how many have been spent on warfare.

Nearly Half Of All Children In Sub-Saharan Africa Live In Extreme Poverty (G.)

Nearly half of all children in sub-Saharan Africa are living in extreme poverty, according to a joint Unicef-World Bank report released on Tuesday, with figures showing that almost 385 million children worldwide survive on less than $1.90 (£1.50) a day, the World Bank international poverty line. Extreme poverty leads to stunted development, limited future productivity as adults, and intergenerational transmission of poverty, the report (pdf) says. The figures – based on data from 89 countries, and representing 84% of the developing world’s population – indicate that much work will be needed to meet the sustainable development goal of eradicating extreme poverty by 2030.

Children are disproportionately affected by extreme poverty – they make up just a third of the population studied, but comprise half of the extreme poor. They are twice as likely as adults to be living on less than $1.90 a day, the report claims, with 19.5% of children in developing countries living in extremely poor households, compared to just 9.2% of adults. “It’s almost a double blow – firstly, that children are twice as likely as an adult to live in extreme poverty, but also that children are much less likely than an adult to be able to cope with extreme poverty because of stunting, infant mortality, and early childhood development,” said Unicef’s deputy executive director, Justin Forsyth. “Extreme poverty can either kill you, or ruin your potential for the rest of your life.”

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Aug 222016
 
 August 22, 2016  Posted by at 9:29 am Finance Tagged with: , , , , , , , , , , ,  


NPC Wilkins-Rogers Milling Co., Washington, DC 1926

Oil Falls As August Price Rally Seen Overblown, China Fuel Exports Soar (R.)
Less Than 5% Of Japan Inc. Think Abe’s Stimulus Will Boost The Economy (R.)
Grim Outlook for the Economy, Stocks: Stephanie Pomboy (Barron’s)
Citi Is About to Relive the 2008 Derivatives Nightmare (MM)
The Brexit Question That Nobody Asked (BBG)
China Is Grappling With Hidden Unemployment (BBG)
Australia’s Unprecedented Collapse In Business Investment, In One Chart (BI)
Australia Central Bank Loses Credibility As Housing Boom Continues (AFR)
American Journalism Is Collapsing Before Our Eyes (Goodwin)
The Clintons Really Do Think They Can Get Away With Anything (WSJ)
Clinton Not In The Clear (Jack Kelly)
The History of Money: Not What You Think (Minskys)
German Government: Citizens Should Store Food, Water And Cash (DWN)
‘Nobody Believes In Anything Anymore’: Greek Crisis is Far From Over (CNBC)
Rescuing Refugees: ‘You Never Get Used To It – And That’s A Good Thing’ (G.)
Inuit Fear Being Overwhelmed As ‘Extinction Tourism’ Descends On Arctic (G.)

 

 

“China’s July exports of diesel and gasoline soared by 181.8% and 145.2% respectively..”

Oil Falls As August Price Rally Seen Overblown, China Fuel Exports Soar (R.)

Oil prices fell on Monday as analysts doubted upcoming producer talks would rein in oversupply, saying that Brent would likely fall back below $50 a barrel as August’s more than 20% crude rally looks overblown. Soaring exports of refined products from China also pressured prices, as this was seen as the latest indicator of an ongoing global fuel glut, traders said. China’s July exports of diesel and gasoline soared by 181.8% and 145.2% respectively compared with the same month last year, to 1.53 million tonnes and 970,000 tonnes each, putting pressure on refined product margins. Brent crude futures were trading at $50.22 per barrel at 0224 GMT, down 66 cents, or 1.3%.

U.S. West Texas Intermediate (WTI) crude was down 51 cents, or 1.05%, at $48.01 a barrel. Analysts cast doubt on an August price rally, saying that much of it was a result of short-covering and anticipation of upcoming producer talks to discuss means to curb oversupply. “Positioning data seems to confirm our view that the latest oil bounce is more technical and positioning-oriented than fundamental. In fact, new buyers have been mostly absent the past few months,” Morgan Stanley said. Regarding the upcoming producer talks, the bank said a agreement was “highly unlikely” and that there were “too many headwinds and logistical challenges to a meaningful deal”.

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Less than 5% are wrong.

Less Than 5% Of Japan Inc. Think Abe’s Stimulus Will Boost The Economy (R.)

Japanese companies overwhelmingly say the government’s latest stimulus will do little to boost the economy and the Bank of Japan should not ease further, a Reuters poll showed, a setback for policymakers’ efforts to overcome deflation and stagnation. Prime Minister Shinzo Abe this month unveiled a 13.5 trillion yen (£102.6 billion) fiscal package of public works projects and other measures, vowing a united front with the BOJ to revive the economy and raising speculation of a surge in government spending essentially financed by the central bank. But less than 5% of companies believe the steps will boost the economy near-term or raise its growth potential, according to the Reuters Corporate Survey, conducted August 1-16.

“It’s disappointing that the stimulus focuses on public works, and it lacks attention to promoting industry and technology that would lead to future growth,” said a manager at a precision-machinery maker. Abe took office 3 1/2 years ago, pledging to reboot the economy with aggressive monetary stimulus, fiscal spending and reform plans. After an early spurt of growth and surging corporate profits, helped by a sharp fall in the yen, the economy is again sputtering and prices are slipping, underscoring the challenge for Japan to beat nearly two decades of deflation and anaemic growth. “Unless drastic steps are taken to fix the root of Japan’s problems – the falling birthrate and working population – solid economic growth won’t return … only public debt would pile up without sustainable growth,” said an electrical machinery firm.

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You would still have to specify those who have nothing left to save; economists miss out on that.

Grim Outlook for the Economy, Stocks: Stephanie Pomboy (Barron’s)

For some time, Stephanie Pomboy, an economist and the founder of MacroMavens, has pushed a provocative theory that a crisis-chastened U.S. consumer would retard global growth. That is why a U.S. recovery has taken so long to take off, and why Japan and Europe look set to embark on more rounds of quantitative easing. An avid reader of Shakespeare, Pomboy appreciates the comic and tragic dimensions of the markets—the giddy optimism for the second half of the year, and the potentially disastrous consequences of excessively low rates. As stocks teetered at new highs, we phoned Pomboy in Vail, Colo., where she lives when not in Manhattan, to hear her latest views. They aren’t rosy: Investors and policy makers are deluding themselves that we will soon return to a pre-financial crisis framework. Things have changed, she says, which means expectations for economic growth in the second half are far too optimistic. And today’s low rates could cause another financial crisis, bankrupting pension plans, putting retirees at risk, and hurting stocks.

Barron’s: You like to focus on the consumer—and plot U.S. consumer spending as a percentage of GDP versus world trade. Why? Pomboy: What ignited and supported the entire era of globalization was the spendthrift U.S. consumer; economies have been totally reliant on trade to U.S. consumers. This once-in-a-generation asset deflation will fundamentally change behavior, just as the Depression changed an entire generation’s attitude about spending and saving. Obviously, the burden of proof is on me, because for 20 years the consumer has reliably borrowed from China to buy their tube socks. Post-crisis, the consumer has clearly pulled back.

How many months did we have disappointing retail sales numbers that no one could explain? They’d say it’s too hot, too cold, there’s Brexit. But what’s really causing this slowdown in spending is that the post-crisis consumer is determined to save, and do it the old-fashioned way. Historically, when rates go down, people save less. In this cycle, things have completely reversed. Over the same stretch of time that the two-year note has gone from 4% to 1%, the savings rate has doubled. There are mountains of evidence to support my thesis. But every Wall Street analyst and the Fed is using the pre-crisis analytical framework to look at an economy that is fundamentally challenged.

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Note the numbers: “Credit Suisse prudently sold $380 billion of derivatives to Citi, thereby reducing its own leverage exposure by $5 billion.”

Citi Is About to Relive the 2008 Derivatives Nightmare (MM)

Deutsche Bank – with its stock now trading at a 30-year low – was recently called the world’s riskiest financial institution by the IMF. Better late than never… In a last-ditch effort to save itself, DB is trying to dump a bucket load of credit derivatives – the murky, risky financial instruments that triggered the 2008 financial crisis. You would think no one would buy these weapons of financial mass destruction… but you’d be wrong. In a staggeringly stupid move, the American bank I’m telling you about today has gone on a derivatives shopping spree, eagerly taking credit default swaps off the hands of failing Eurozone banks like DB and Credit Suisse. That means, of course, another outsize short opportunity for you to take…

Citigroup already nearly destroyed itself with derivatives during the 2008 crisis, requiring the biggest taxpayer bailout in history in order to stay afloat. Strangely, it didn’t learn its lesson the first time its stock fell below $1. As rival banks see the writing on the wall and scramble to get rid of their derivatives, Citi is now cheerfully snapping up billions of dollars’ worth. Several weeks ago, Credit Suisse prudently sold $380 billion of derivatives to Citi, thereby reducing its own leverage exposure by $5 billion. Last year, Deutsche Bank palmed off $250 billion of credit default swaps on (guess who?) Citi, and is in talks to get rid of even more. The result is that Citi now holds the most derivatives of any of its U.S. rivals. That’s a staggering total exposure of nearly $56 trillion, according to the OCC’s latest report, shown here:

[..] our current $650 trillion derivatives market is a nightmare scenario waiting to happen. First problem: the size. It’s 36x the size of the U.S. GDP and over 8x larger than the world GDP – the entire global output of the entire world in a year. While credit default swaps shrank significantly in size since the financial crisis, they remain large enough to constitute a potential time bomb inside the financial system that could blow up any time. Second problem: the interconnectedness. Every derivative contract involves two parties that agree to make certain payments to each other. But if one party is unable or unwilling to live up to its agreement and make those payments, the other party is left holding the bag and nursing a big loss. In a crisis, this can leave a volume of broken contracts that will overwhelm these institutions and render them instantly insolvent.

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Where is the EU heading?

The Brexit Question That Nobody Asked (BBG)

Mervyn King, former governor of the Bank of England, has written the best article I’ve read on Britain’s exit from the EU. In an essay for the New York Review of Books he makes many excellent points, but one is of surpassing importance. It’s an obvious point, or ought to be, that nonetheless has been almost entirely ignored by other respectable commentators: Whether Britain should stay in the EU depends on where the EU is heading. The EU is plainly in deep trouble with or without the U.K., and its condition as a political project is anything but stable. Judging whether Britain is better off as a member therefore requires a judgment not only about what Britain has gained or lost from membership up to now but also an assessment of the future character of the whole EU enterprise.

Britain’s Remain campaign, expressing the collective opinion of every expert on the subject, has had almost nothing to say about this. As King points out, the EU is structurally unsound. (Joseph Stiglitz in the FT makes the same point.) It has pressed political union both too far and not far enough. That is, it has created half a political union – with a single currency but without a collective fiscal policy or the political apparatus that would be necessary to legitimize it. King: Putting the cart before the horse – setting up a monetary union before a political union – has led the ECB to become more and more vocal about the need to “complete the architecture” of monetary union by proceeding quickly to create a Treasury and finance minister for the entire eurozone.

The ability of such a new ministry to make transfers between member countries of the monetary union would reduce pressure on the ECB to find new ways of holding the monetary union together. But there is no democratic mandate for a new ministry to create such transfers or to have political union – voters do not want either. And voters aren’t the only ones who don’t want it. German officialdom (backed by popular opinion) is viscerally opposed to a “transfer union,” which is Germany’s name for fiscal policy as it operates in any normal country. Germany’s position is understandable, since Germans would give much more than they received in any such arrangement. But that doesn’t alter the conclusion: Not only is the EU structurally unsound, but there’s also little prospect that the structure either can be or will be repaired.

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Color me baffled.

China Is Grappling With Hidden Unemployment (BBG)

Cracks are starting to show in China’s labor market as struggling industrial firms leave millions of workers in flux. While official jobless numbers haven’t budged, the underemployment rate has jumped to more than 5% from near zero in 2010, according to Bai Peiwei, an economics professor at Xiamen University. Bai estimates the rate may be 10% in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave. Many state-owned firms battling overcapacity favor putting workers in a holding pattern to avoid mass layoffs that risk fueling social unrest. While that helps airbrush the appearance of duress, it also slows the shift of workers to services jobs, where labor demand remains more solid in China’s shifting economy.

“Underemployment in overcapacity industries is a drag on the potential improvement of productivity in China, which will lead to a softening wage trend,” said Grace Ng at JPMorgan in Hong Kong. “It would exert pressure on private consumption demand and in turn affect the overall rebalancing of the economy.” Other projections indicate the employment situation is even worse. An indicator of unemployment and underemployment produced by London-based research firm Fathom Consulting has more than tripled since 2012 to 13.2%. The official jobless rate isn’t much help for economists: it’s been virtually unchanged at about 4.1% since 2010 even as the economy slowed. The gauge only counts those who register for unemployment benefits in their home towns, which doesn’t take into account 277 million migrant workers. Total employment is 775 million, National Bureau of Statistics data show.

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Wow. What a chart that is.

Australia’s Unprecedented Collapse In Business Investment, In One Chart (BI)

You’ve probably heard of the “capex cliff”, the term for the collapse in capital expenditure plans by Australian businesses that is an inevitable feature of the economy following the once-in-a-lifetime mining investment boom driven mainly by the surge in Chinese demand over the past two decades. But with Australia’s manufacturing industry having been hollowed out too over the past decade, the capital investment pipeline for both mining and manufacturing are gone. So the fall-off, when measured in terms of a percentage of GDP, is nothing short of spectacular in historical context, as shown in this chart from Macquarie. It’s not hard to see why economists have occasionally mentioned the word “recessionary” in reference to the investment outlook.

Part of what’s driving this is that Australia’s economy is increasingly being driven by much less capital-intensive sectors such as education and tourism, which don’t require huge pieces of machinery and infrastructure like trains, tunnelling machines and factory plant equipment. And on the other side of the ledger, the huge increases in capital investment during the mining boom have laid the foundations for the vast increase in Australia’s commodity export volumes, which have been supporting economic growth since the spending started to fall away. The Macquarie research team notes, however, that “non-mining business capex has yet to meaningfully react to lower interest rates, and that companies are “waiting for clear signs of sustained demand before investing.” Right now, those signs are nowhere to be seen.

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You can make charts just like this one for many countries.

Australia Central Bank Loses Credibility As Housing Boom Continues (AFR)

Australia’s booming housing market has once again head-faked the central bank, which is losing credibility every time it cuts on claims the world’s dearest residential property prices are nothing to worry about. In rationalising its decision to reduce the cash rate to 1.5% in August, the Reserve Bank of Australia alleged that “the likelihood of lower interest rates exacerbating risks in the housing market has diminished”. Yet auction clearance rates in our two largest cities, Sydney and Melbourne, which account for 47% of the metro population, have subsequently risen back to boom-time levels. CoreLogic reports that 86.4% of Sydney auctions on the weekend resulted in a sale, which is 10 percentage points higher than the equivalent clearance rate 12 months ago and just shy of the 89.7% record set in May last year.

In Melbourne, 76.1% of auctions saw a sale, besting the 74.3% clearance rate in the same week last year. Median clearance rates in Sydney and Melbourne over the four weeks since July 31 have been 78% and 76% respectively, materially above the median levels observed in these cities since the current housing boom commenced in 2013 on the back of the RBA’s stimulus. While the RBA argues that much lower sales volumes in 2016 signal weakness, this is likely more a reflection of a four-year boom exhausting supply. And it does not stack up with unusually strong clearance rates or persistently exuberant capital gains across Sydney and Melbourne.

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I can only fully agree. And no, again, that’s not because I support Trump. Everything and everyone should be scrutinized.

American Journalism Is Collapsing Before Our Eyes (Goodwin)

Donald Trump may or may not fix his campaign, and Hillary Clinton may or may not become the first female president. But something else happening before our eyes is almost as important: the complete collapse of American journalism as we know it. The frenzy to bury Trump is not limited to the Clinton campaign and the Obama White House. They are working hand-in-hand with what was considered the cream of the nation’s news organizations. The shameful display of naked partisanship by the elite media is unlike anything seen in modern America. The largest broadcast networks – CBS, NBC and ABC – and major newspapers like The New York Times and Washington Post have jettisoned all pretense of fair play. Their fierce determination to keep Trump out of the Oval Office has no precedent.

Indeed, no foreign enemy, no terror group, no native criminal gang, suffers the daily beating that Trump does. The mad mullahs of Iran, who call America the Great Satan and vow to wipe Israel off the map, are treated gently by comparison. By torching its remaining credibility in service of Clinton, the mainstream media’s reputations will likely never recover, nor will the standards. No future producer, editor, reporter or anchor can be expected to meet a test of fairness when that standard has been trashed in such willful and blatant fashion. Liberal bias in journalism is often baked into the cake. The traditional ethos of comforting the afflicted and afflicting the comfortable leads to demands that government solve every problem. Favoring big government, then, becomes routine among most journalists, especially young ones.

I know because I was one of them. I started at the Times while the Vietnam War and civil-rights movement raged, and was full of certainty about right and wrong. My editors were, too, though in a different way. Our boss of bosses, the legendary Abe Rosenthal, knew his reporters leaned left, so he leaned right to “keep the paper straight.” That meant the Times, except for the opinion pages, was scrubbed free of reporters’ political views, an edict that was enforced by giving the opinion and news operations separate editors. The church-and-state structure was one reason the Times was considered the flagship of journalism. Those days are gone. The Times now is so out of the closet as a Clinton shill that it is giving itself permission to violate any semblance of evenhandedness in its news pages as well as its opinion pages.

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But then you think: well, well, what got into the Wall Street Journal editors? Expect pressure on Clinton Foundation to increase.

The Clintons Really Do Think They Can Get Away With Anything (WSJ)

After years of claiming that the Clinton Foundation poses no ethical conflicts for Bill and Hillary or the U.S. government, Bill Clinton now admits the truth—sort of. If his wife becomes President, he says the Super PAC masquerading as a charity won’t accept foreign or corporate contributions. Bill will also resign from the foundation board, and Chelsea will stop raising money for it. Now they tell us. If such fund-raising poses a problem when she’s President, why didn’t it when she was Secretary of State or while she is running for President? The answer is that it did and does, and they know it, but the foundation was too important to their political futures to give it up until the dynastic couple were headed back to the Oval Office.

Now that Hillary is running ahead of Donald Trump, Bill can graciously accept new restrictions on their pay-to-play politics. Bill must be having a good laugh over this one. The foundation served for years as a conduit for corporate and foreign cash to burnish the Clinton image, pay for their travel expenses for speeches and foreign trips, and employ their coterie in between campaigns or government gigs. Donors could give as much as they wanted because the foundation is a “charity.” President Obama may have banished Sidney Blumenthal from the State Department, but Bill could stash his conspiratorial pal at the foundation, keeping him on the family payroll while Sid flooded Hillary with foreign-policy advice. Her private email server was supposed to hide their email traffic—until that gambit was exposed last year.

But FBI Director James Comey let Hillary off the hook on the emails, and he declined to investigate the foundation, so it looks like they’re home free. By now the corporate and foreign cash has already been delivered, in anticipation that Hillary Clinton could become the next President. So now it’s the better part of political prudence to claim the ethical high ground. If you choose to believe or have a short memory. Readers may recall that the foundation promised the White House when Mrs. Clinton became Secretary of State that the foundation would restrict foreign donations and get approval from the State Department. It turned out the foundation violated that pledge, specifically when accepting $500,000 from Algeria.

The foundation also agreed to disclose donor names but failed to do so for more than 1,000 foreign donors until the failure was exposed by press reports. [..] Far from offering some new clean ethical slate, this latest foundation gambit ought to be a warning about a third Clinton term. Protected by Democrats and a press corps desperate to beat Donald Trump, the Clintons really do think they can get away with anything.

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“.. In 2013, for instance, the Clinton Foundation took in $140 million, but spent just $9 million (6.4%) on direct aid. A typical charity devotes about 75% of receipts to aid.”

Clinton Not In The Clear (Jack Kelly)

Hillary Clinton has little to fear from Donald Trump. But she may be casting nervous glances over her shoulder at Preet Bharara. You may not have heard of Mr. Bharara. Sheldon Silver, former speaker of the New York State Assembly, a Democrat, and Dean Skelos, former majority leader of the New York Senate, a Republican, wish they hadn’t. In May, they were sentenced to 12 years and five years in prison, respectively, for corruption. Preet Bharara is the U.S. attorney for the Southern District of New York. Since his appointment in 2009, Mr. Bharara “has launched a one-man crusade against evil-doers, ranging from corrupt politicians to the Mafia,” wrote Alan Chartock, a political science professor who’s a longtime watcher of New York state government.

The Southern District of New York is the lead of three U.S. attorneys’ offices investigating the Clinton Foundation, a recently retired deputy director of the FBI told the Daily Caller. The Clinton Foundation is headquartered in New York. It was begun in Little Rock, Ark., to raise funds for the Clinton library. The office in Washington, D.C., may focus on when Hillary was secretary of state. The Clinton Foundation has received more than $2 billion in contributions. More than 1,000 donors are foreigners. The foundation won’t disclose their names or amounts donated. Few of the funds raised have been spent on charitable works. In 2013, for instance, the Clinton Foundation took in $140 million, but spent just $9 million (6.4%) on direct aid. A typical charity devotes about 75% of receipts to aid.

Much more is spent on pay and benefits for staff, office rent, conferences and travel. Some of the highest-paid staffers are political operatives, such as Huma Abedin, who for a time was on the payrolls of both the Clinton Foundation and the State Department, and Sid Blumenthal, who ran a private intelligence network for Hillary in Libya. The most ballyhooed project, relief for Haiti after a devastating earthquake in 2010, was an example of “Robin Hood in reverse”— robbing the poor for the benefit of the rich, said financial analyst Charles Ortel. The Clinton Foundation is a “charity fraud network,” Mr. Ortel wrote on his blog. “What possesses powerful, wealthy and educated persons to prey on the most desperately poor humans on earth as they posture as philanthropists?”

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Interesting view.

The History of Money: Not What You Think (Minskys)

Most of us have an idea of how money came to be. It goes something like this: People wanted to exchange goods for other goods, but it was difficult to coordinate. So they started exchanging goods for money, and money for goods. This tells us that money is a medium of exchange. It’s a nice and simple story. The problem is that it may not be true. We may be understanding money entirely wrong. The above story assumes that first there was a market, and then people introduced money to make the market work better. But some people find this hard to believe. Those who subscribe to the Chartalist school of thought give a different history. Before money was used in markets, they say, it was used in primitive criminal justice systems.

Money started as—and still is—is a record of debt. It is a way to keep track of what one person owes another. There’s anthropological evidence to back up this view. Work by Innes, and Wray suggest that the origins of money are more like this: In a pre-market, feudal society, there was usually a system to maintain justice in the community. If someone committed a crime, the authority, let’s call him the king, would decide that the criminal owed a fine to the victim. The fine could be a cow, a sheep, three chickens, depending on the crime. Until that cow was brought forward, the criminal was indebted to the victim. The king would record the criminal’s outstanding debt. This system changed over time. Rather than paying fines to the victim, criminals were ordered to pay fines to the king.

This way, resources were being moved to the king, who could coordinate their use for the benefit of the community as a whole. This was useful for the King, and for the development of the society. But the amount of resources coming from a criminal here and there was not impressive. The system had to be expanded to draw more resources to the kingdom. To expand the system, the king created debt-records of his own. You can think of them as pieces of papers that say King-Owes-You. Next, he went to his citizens and demanded they give him the resources he wanted. If a citizen gave their cow to the king, the king would give the citizen some of his King-Owes-You papers. Now, a cow seems more useful than a piece of paper, so it seems silly that a citizen would agree to this.

But the king had thought of a solution. To make sure everyone would want his King-Owes-You papers, he created a use for them. He proclaimed that every so often, all citizens had to come forward to the kingdom. Each citizen would be in big trouble, unless they could provide little pieces of paper that showed the king still owed them. In that case, the king would let the citizen go, and not owe them any longer. The citizen would be free to go off and acquire more King-Owes-You papers, to make sure he would be safe the next time, too.

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Saw this on Reuters and other sites, but they all left out the need to store cash, for some reason, which is in the original directive. So I ran the article through Google Translate and corrected it a little.

A government advising people to store cash is not a minor point, I would think. Not in the days of plastic and a war on cash.

German Government: Citizens Should Store Food, Water And Cash (DWN)

For the first time since the end of the Cold War, the federal government according to a report wants to encourage new stockpiling the population again, so that they, in the case of a disaster or an armed attack temporarily, can take care of themselves. “The population is ‘advised’ to hold a personal supply of food of ten days,” quoted the “Frankfurter Allgemeine Sonntagszeitung” from a concept for civil defense, which the government is requested to adopt on Wednesday. According to the report, the population should be able to protect themselves in an emergency before calling government action to ensure an adequate supply of food, water, energy and cash. Therefore, the population should also be ‘advised’, to hold, for a period of five days, two liters of drinking water per person per day, it is stated in the text drawn up by the Ministry of the Interior.

According to “FAS” is the first strategy for civil defense since the end of the Cold War in 1989. She had been given in 2012 by the Budget Committee of the Bundestag in order. In the 69-page concept it is stated “that an attack on the territory of Germany, which requires a conventional defense, play” was. Nevertheless, it was necessary, “nevertheless to such sufficiently prepared not fundamentally excluded for the future development of life-threatening”. Interestingly, the FAZ reported in this regard that the Federal Government also worry about their own safety. The newspaper writes that in the paper literally stand “. Precautions are the event the task of the service office to meet in order to relocate the performance of duties of a public authority to another, sheltered place (Emergency Seat) can”

It is not clear whether these preparations related to a possible war. The federal government has recently changed its military strategy and regarded Russia as an enemy. NATO considers Russia an attack on NATO territory possible. Therefore, NATO wants the US and the EU also defend outside their own territory. Reuters writes that in the concept of “the need for a reliable alarm system, a better structural protection of buildings and sufficient capacity discussed in the health system” would. Reuters: “The civilian support of the armed forces should be again a priority. These included modifications to the traffic steering when the Bundeswehr must relocate combat units. “

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Very far from over. Please help me support. Read: Meanwhile in Greece..

‘Nobody Believes In Anything Anymore’: Greek Crisis is Far From Over (CNBC)

With Europe facing pressing crises including the refugee crisis, economic slowdown and political disintegration following the Brexit vote, it’s easy to forget that Greece’s political and economic crisis dominated headlines last summer. One year on and a third bailout worth €86 billion later, arrived at after tortuous negotiations between Greece and its lenders, and the situation in Greece is a game of two halves with many Greeks suffering – and some trying to make something out of a bad situation. Greece’s government has been forced to make widespread spending cuts over the course of its three separate bailout programs, making life harder for most Greeks of ordinary means. The cuts have affected all ages with unemployment rising to the highest level in Europe.

A survey by independent analysis firm DiaNEOsis in June revealed that many Greeks were facing an increasing struggle to get by. Extreme poverty in the Greek population (of 11 million people) had risen from 2.2% in 2009, to 15% in 2015, the public opinion survey of 1,300 people showed, with 1.6 million people now living below in extreme poverty. One resident of the northern Greek city of Thessaloniki, Evangelos Kyrimlis, told CNBC that the Greece’s crisis had taken its toll on society, both at a local and national level. “Disillusionment is the first big thing that’s going on,” he noted. “Nobody believes in anything anymore.” “The second big thing is withdrawal. People have retreated to their families and fight only for the family survival. Society has been fragmented,” he said.

Kyrimlis works for his partner’s family firm, having returned to Greece after working for an engineering consultancy in London. Returning to Greece in the midst of the country’s financial breakdown, he said he now noted an increase in animosity between people, saying there was a “widespread hatred not directed to anyone in particular, it’s like all against all.”

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“When they reached the port in Sicily the Italian Red Cross were there, with coffins and flowers for every person who died [..] The tough MSF doctors who have been going from war to war cried because of the flowers..”

Rescuing Refugees: ‘You Never Get Used To It – And That’s A Good Thing’ (G.)

It was the silence of the passengers that Hassiba Hadj-Sahraoui first noticed. Usually when the humanitarian rescue boat sees a tiny dinghy bobbing about in the Mediterranean there’s frantic waving and shouting. “When our team approached in smaller boats and everyone was so quiet we realised something was wrong,” she says. “We asked permission to go aboard and that’s when we realised the others had been waiting for rescue for hours with dead bodies in the boat.” Twenty-two bodies were recovered that day (21 of them women) and 209 people were saved by the crew of the Aquarius, a boat run by Medicins Sans Frontieres (MSF) that patrols the refugee route between Libya and Italy. MSF advocacy manager Hadj-Sahraoui got an idea of how they died from the testimonies of survivors once they were safely on the Aquarius.

A wooden board that had been placed along the bottom of the dinghy broke and water started to come in, mixing with leaking fuel cans. A panic ensued and the 22 people died either in a stampede or drowning in a mix of water and fuel. The people they rescued were in shock. “The priority – it’s sad to say – is with the living,” says Hadj-Sahraoui. “So there’s a very quick medical team, trying to assess needs.” Once the survivors were on the Aquarius they were each given a blanket, water and some food. The people who were soaked in fuel were sent for a shower, because the fuel and sea salt cause nasty burns. Then they registered them. Hadj-Sahraoui speaks Arabic, French and English, a great advantage in her line of work. She asks each person where they are from, how old they are, and if they are travelling alone.

“We don’t wear sunglasses, because we need to have eye contact. It’s about humanity. It’s big smiles saying: ‘You’re now safe. This is where you are. This is what’s going to happen next.’ What surprised me is how polite people are. How they take their time to say thank you.” Once all the survivors were safely on board, and being tended to, the crew of the Aquarius also felt it was right on this occasion to recover the bodies of the women and one man who died. “For several hours we tried to keep the living on one side of the boat. The bodies had spent hours in the water, so we were trying to protect the living from seeing that. The doctor took pictures for identification, because families will never know what happened to their loved ones.” When they reached the port in Sicily the Italian Red Cross were there, with coffins and flowers for every person who died.

“The tough MSF doctors who have been going from war to war cried because of the flowers,” says Hadj-Sahraoui. “I was one of the suckers who cried a lot.” She says that people who do humanitarian work need to learn to take care of themselves, because there’s a lot of emotional burnout. MSF staff have psychological debriefings before and after they go on missions, and after extreme experiences like this one.

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No-one’s going to stop this.

Inuit Fear Being Overwhelmed As ‘Extinction Tourism’ Descends On Arctic (G.)

In a few days, one of the world’s largest cruise ships, the Crystal Serenity, will visit the tiny Inuit village of Ulukhaktok in northern Canada. Hundreds of passengers will be ferried to the little community, more than doubling its population of around 400. The Serenity will then raise anchor and head through the Northwest Passage to visit several more Inuit settlements before sailing to Greenland and finally New York. It will be a massive undertaking, representing an almost tenfold increase in passenger numbers taken through the Arctic on a single vessel – and it has triggered considerable controversy among Arctic experts. Inuit leaders fear that visits by giant cruise ships could overwhelm fragile communities, while others warn that the Arctic ecosystem, already suffering the effects of global warming, could be seriously damaged.

“This is extinction tourism,” said international law expert Professor Michael Byers, of the University of British Columbia. “Making this trip has only become possible because carbon emissions have so warmed the atmosphere that Arctic sea ice in summer is disappearing. The terrible irony is that this ship – which even has a helicopter for sightseeing and a huge staff-to-passenger ratio – has an enormous carbon footprint that is only going to make things even worse in the Arctic.” The Serenity is by far the biggest cruise vessel to traverse the fabled Northwest Passage, whose exploration has claimed the lives of hundreds of seamen. The ship has a crew of 655 and carries 1,070 passengers, who have paid between £19,000 and £120,000 for a voyage that Crystal Cruises says will take them on an “intrepid adventure” from Anchorage in Alaska to New York over 32 days.

For its part, Crystal insists its clients will have to follow a strict code of conduct during shore visits, while the ship’s air, water and rubbish discharges will be tightly controlled. Only low-sulphur fuel will be burned in the Serenity’s engines, said a spokesman. The Serenity will be accompanied by the UK icebreaker the RSS Ernest Shackleton, he added.

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