Oct 032018
 
 October 3, 2018  Posted by at 9:30 am Finance Tagged with: , , , , , , , , , , , ,  


Paul Gauguin The ford 1901

 

Fed’s Powell Says US Outlook ‘Remarkably Positive’ (R.)
Another Market Volatility Surge Is Likely Ahead (Colombo)
White House Responds To “Misleading” NYTimes’ Trump Tax Fraud Story (ZH)
Italy Folds To Europe On Budget Deficit; Euro Surges (ZH)
Merkel’s End Could Spark EU Breakdown (Luongo)
Vancouver Home Sales Crash 44% As “For Sale” Inventory Soars (ZH)
Australia Banking Royal Commission Could Trigger House Price Collapse (ABC.au)
DMZ Demining Operations Lay Groundwork For Korean Peninsula Peace (YH)
Russia May Veto Greece-FYROM Name Deal at the UN (GR)
The Case For Paying Every American A Dividend On The Nation’s Wealth (MW)
Restaurants In Austin Banned From Throwing Away Food (Hill)
‘We Have Found Hell’: Trauma Runs Deep For Children At Dire Lesbos Camp (G.)

 

 

First, here’s Ted Koppel agreeing with me that Trump Sells Better Than Sex, and Stelter really doesn’t understand:

 

 

And then he closed the spigots…

Fed’s Powell Says US Outlook ‘Remarkably Positive’ (R.)

U.S. Federal Reserve Chairman Jerome Powell on Tuesday hailed a “remarkably positive outlook” for the U.S. economy that he feels is on the verge of a “historically rare” era of ultra-low unemployment and tame prices for the foreseeable future. It is a view, he said, based on how a changed economy is operating today, with businesses and households immunized by strong central bank policy from the inflationary psychology that caused unemployment, inflation and interest rates to swing wildly in the 1960s and 1970s. It is an outlook that includes an economic performance “unique in modern U.S. data,” with unemployment of below 4 percent expected for at least two more years and inflation remaining modest even as wages rise.

And it is an outlook he feels will even survive the Trump administration’s efforts to rewrite the global trading system, a policy shift Powell said may lead to one-time price hikes, but not to persistent changes in the annual rate of inflation going forward. “This forecast is not too good to be true,” Powell told the National Associate for Business Economics, but instead “is testament to the fact that we remain in extraordinary times.” “These developments amount to a better world for households and businesses which no longer experience or even fear the scourge of high and volatile inflation.”

Read more …

There can be no doubt.

Another Market Volatility Surge Is Likely Ahead (Colombo)

The U.S. stock market is climbing to record highs once again and volatility has calmed down dramatically from its panic-induced levels reached earlier this year. Traders have become complacent as they passively ride the stock market higher and bet on lower volatility again. While it may seem like all is well, several reliable indicators are warning that another powerful volatility surge is likely ahead.

The first indicator is the 10-year/2-year Treasury spread that is calculated by subtracting the 2-year Treasury note yield from the 10-year Treasury note yield. The 10-year/2-year Treasury spread is helpful for estimating when the next recession is likely to occur, as I explained in a recent Forbes piece. The chart below (which I recreated from a chart made by BofA’s Savita Subramanian) shows that the inverted 10-year/2-year Treasury spread leads the CBOE Volatility Index or VIX by approximately three years. If this historic relationship holds true, we are about to experience a whole lot more volatility over the next few years.

The next chart shows the positioning of the “smart money” and “dumb money” in the Volatility Index or VIX futures. The “smart money”, or commercial futures hedgers (who tend to be right at major market turning points), are building up another bullish position in VIX futures, just like they did one year ago ahead of the stock market correction and volatility spike. In addition, the “dumb money”, or large traders (who tend to be wrong at major turning points), have built up a large short position, like they did before the early-2018 volatility spike. The positioning of these groups of traders indicates that another volatility spike is likely ahead in the not-too-distant future.

Read more …

Decades old, started when Trump was a toddler, good luck. Of course they pay as little as they can, but once the IRS signs off on it…

White House Responds To “Misleading” NYTimes’ Trump Tax Fraud Story (ZH)

Update 2: The White House has finally responded to the NYTimes story…(via Sarah Sanders) “Fred Trump has been gone for nearly twenty years and it’s sad to witness this misleading attack against the Trump family by the failing New York Times. Many decades ago the IRS reviewed and signed off on these transactions. The New York Times’ and other media outlets’ credibility with the American people is at an all time low because they are consumed with attacking the president and his family 24/7 instead of reporting the news.

The truth is the market is at an all-time high, unemployment is at a fifty year low, taxes for families and businesses have been cut, wages are up, farmers and workers are empowered from better trade deals, and America’s military is stronger than ever, yet the New York Times can rarely find anything positive about the President and has tremendous record of success to report. Perhaps another apology from the New York Times, like the one they had to issue after they got the 2016 election so embarrassingly wrong, is in order.”

The NYT reported that Trump and his siblings set up a “sham” corporation to help disguise otherwise taxable income that came from gifts from their parents. The president also allegedly helped his father take improper tax deductions that amounted to millions of dollars and helped formulate strategy to undervalue his parents’ real estate holdings, with the Internal Revenue Service reportedly providing little pushback against the Trumps’ reported tactics. According to the leaked confidential filings, Trump’s parents left more than $1 billion to their children, which would have resulted in a roughly $550 million tax bill at the time.

However, the Trumps paid a total of $52.2 million on that source of income, according to the NYT report. To achieve this, the newspaper cited records that showed Trump helped undervalue his father’s real estate holdings, which led to a lower tax bill when he and his siblings inherited the properties. In total, Trump received the equivalent today of at least $413 million from his father’s real estate empire, based on questionable tax dealings starting when he was a toddler and continuing to this day. And, in what will attract the most attention, the newspaper wrote that Trump’s behavior amounted to fraud in some cases.

Read more …

I don’t think this one’s over yet.

Italy Folds To Europe On Budget Deficit; Euro Surges (ZH)

After two days of brutal punishment by the markets which sent Italian bond yields to 4 years highs and slammed the euro, the Italian government appears to have folded to pressure from Brussels (and the one place in the world where the bond vigilantes still operate, just ask Sylvio Berlusconi), and according to Corriere della Sera, Italy’s draft budget plan will pledge to cut the deficit to 2% in 2021, after Rome reversed a proposal to maintain a 2.4% shortfall in the face of pressure from the EU. As a result, while the 2019 deficit will still rise to 2.4% of GDP in 2019, it will decline by 0.2% to 2.2% in 2020, and another 0.2% the year after. In kneejerk reaction, futures lept to fresh session highs, Treasury yields jumped by 2bps to 3.07% and the EURUSD spiked 50 pips higher to 1.1590.

Italy is not out of the woods yet though: according to Mizuho, the sustainability of the euro’s rebound will depend on whether the EU sees Italy’s latest budget plan as appropriate. It could be that Italy has already made compromise with the EU, but hard to predict whether the euro’s rebound has more legs until we see a reaction from the EU: “It all boils down to the EU’s response”, and if the ongoing war of words is any indication, merely promising to trim the deficit in the next three years will hardly be smiled upon. Others were even more skeptical. According to bond fund manager Daintree Capital, “The euro’s definitely reacting to the headlines on Italian budget plans, and it will continue to do so for future headlines.” However, “anyone who believes a populist government is all of a sudden going to be particularly responsible in a fiscal sense, has a misguided view.”

Read more …

Merkel’s losing it.

Merkel’s End Could Spark EU Breakdown (Luongo)

I saw a recent poll from Die Welt which has Alternative for Germany (AfD) creep past Merkel’s Grand Coalition partner, the Social Democrats (SPD), and challenge the CDU itself. Because when you back out the Christian Social Union’s (CSU) total which runs between 8% and 9% AfD is now in a position to become the party with the highest backing in Germany. And this is happening on the eve of Bavarian State elections this month. [..] I’ve talked about AfD’s chances to achieve this result in the past in terms of them crossing the 16% Chasm. And it appears, that slowly, they are doing so. German politics, from what I understand, is not used to this kind of upheaval and certainly not these kinds of leadership challenges. Earlier this year Merkel barely survived a challenge by former CSU Leader Horst Seehofer over immigration.

So, where to things go from here? As Mercouris points out, Merkel has very skillfully gutted the landscape of the CDU to keep potential leaders from emerging within the party. The SPD is falling off a cliff having lost more than half of its support since the 2014 elections. And the CSU is primarily a Bavarian party so they don’t have the support of the entirety of Germany. This landscape is why we’ve seen the Greens rise to 15% as well as AfD’s rise. And that cannot be ignored. The hard left of German politics is now split and ineffectual. But, no party has emerged in this chaos to take the reins of power.

This is reminding me of Italy’s situation at the end of 2017 with no less than five parties polling in double digits. It’s a messy situation and it makes more sense in Germany that big shifts in voter preference would occur at a slower rate given the stability of German coalition governments since the modern state was founded after World War II. In other words Germans are loathe to make these kinds of changes. So, you know the situation must be bad if these numbers are changing this quickly. So, it shouldn’t be much of a surprise really to see this type of breakdown and the slow rise of AfD past the 16% chasm. It may be the riots in Chemnitz that finally begin pushing their poll numbers into the 20’s nationally.

Read more …

Glass half full: “”There’s more selection for home buyers to choose from today.”

Vancouver Home Sales Crash 44% As “For Sale” Inventory Soars (ZH)

What happens when prices rise so high that a chasm forms between bids and asks? The market grinds to a halt. That’s what happened in Vancouver housing in September, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 17.3% from August 2018, and a whopping 43.5% from one year ago. In fact, a total of only 1,595 transactions took place as both buyers and sellers continue to sit on their hands amid confusion whether the recent torrid price gains will continue or whether the housing bubble has burst. Sales of detached properties in July was just 508, a decrease of 40.4% from the 852 recorded in September 2017, and the 812 apartments sold was a 44% drop compared to the 1,451 sales in September 2017.

And no, it’s not seasonal: last month’s sales were a whopping 36.1% below the 10-year September sales average. The reason for the collapse in transactions: the formerly all too willing buyers, mostly Chinese oligarchs who would use Vancouver real estate as their offshore Swiss bank account, have disappeared. Meanwhile sellers are dumping properties in the market in hopes of a quick flip. “Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect said. “There’s more selection for home buyers to choose from today. Since spring, home listing totals have risen to levels we haven’t seen in our market in four years.”

Read more …

What would we do without our housing bubble?

Australia Banking Royal Commission Could Trigger House Price Collapse (ABC.au)

There is a lot riding on the policy recommendations from the banking royal commission, not least of which is the stability of the Australian property market, according to some respected analysts. Independent economist Saul Eslake said there was potential for the royal commission’s recommendations to have what economists refer to as “unintended consequences”. The unintended consequences Mr Eslake is referring to include a steep fall in house prices spurred on by a royal commission-inspired clampdown on bank lending. Capital Economics chief economist Paul Dales said while house price falls to date have been small, Australia could be in for a record housing decline, at least in its recent history.

“At the moment the trajectory is a bit worrying cause the house prices seem to be declining at a faster rate and, in our view at Capital Economics, this will eventually prove to be the largest downturn in Australia’s modern history,” he said. Mr Dales is forecasting a protracted slowdown in the housing market as a result of a crackdown in bank lending standards, the banking royal commission itself and rising interest rates. “There’s significant time delays with these things,” he said. “I would have thought over the next six to 12 months is where we would, if there was going to be a big pullback in lending, that’s when we would see it and then, thereafter as and when the royal commission makes any recommendations and the Government implements them, the next six to 12 months after that.

Read more …

Korea’s move on.

DMZ Demining Operations Lay Groundwork For Korean Peninsula Peace (YH)

After a 15-minute bumpy ride along a dusty, hilly path inside the Demilitarized Zone (DMZ), dozens of South Korean troops in full gear disembarked near a grisly site of intense battles during the 1950-53 Korean War. Accompanying them in the buffer zone separating the two Koreas was a phalanx of security guards, medical specialists and other personnel specializing in disposing of unidentified explosives and excavating war remains. They are part of the 120-member team tasked with removing landmines in the Arrowhead Ridge, or Hill 281 in Cheorwon, some 90 kilometers northeast of Seoul — a site that the two Koreas have designated for a joint project to retrieve war remains from April to October next year.

There were three key battles against communist forces on the notorious ridge from 1952-53. The remains of more than 200 South Korean soldiers and dozens of U.N. Command (UNC) forces, such as U.S. and French troops, are thought to be buried in it. “We have made preparations (for the landmine removal) for a long period and are well prepared now,” the commander in charge of the frontline areas told reporters on condition of anonymity on Tuesday, the second day of the demining work set to continue until Nov. 30. “We will not rush and will carry out our mission with the first and foremost priority placed on the safety of our troops,” he added.

Read more …

EU and NATO want to keep pushing, but how about democracy?

Russia May Veto Greece-FYROM Name Deal at the UN (GR)

Russia is implicitly threatening that it may block the Prespa agreement at the UN Security Council. In a statement on Monday, following the referendum in FYROM, the Russian foreign ministry says that the low turnout “means that the referendum cannot be recognised as valid.” It clearly indicates that the voters “chose to boycott the solutions imposed on Skopje and Athens.” The statement also blasts leading politicians from NATO and EU member states who participated in “large-scale propaganda campaign directly, freely interfering in the internal affairs of this Balkan state.” Despite the low turnout, Prime Minister Zoran Zaev vowed to push ahead with the name change on Monday.

The Russian foreign ministry condemned the move: “There is a clear drive to ensure Skopje’s entanglement in NATO despite the will of the Macedonian people.” Russia is traditionally wary of NATO’s enlargement in eastern Europe. The alliance’s 1999 bombings of its ally Serbia caused a major rift in Russia’s relations with the West at the time. Moscow says that a long-term solution can only be agreed upon by the two parties on their own, without any external interference, and only within the framework of the law and with broad public support.

Read more …

Inequality in Europe rises fast, too. Where are the breaking points?

The Case For Paying Every American A Dividend On The Nation’s Wealth (MW)

The newest research shows that unconditional cash transfers boost work productivity and quality of life, including better mental and physical health, and reduce crime. A study by the Roosevelt Institute in New York, a left-leaning think tank, concludes that giving $500 a month to every adult American could meaningfully grow the U.S. economy and address its widening wealth gap. (The top 1% of Americans now receive 20% of the national income, while those in the bottom 50% receive 13%; in 1980, the numbers were essentially reversed, at 11% and 20%, respectively, according to the 2018 World Inequality Report.)

Yet basic income in the U.S., characterized as a utopian solution by its true believers but as welfare, socialism or worse by its detractors, has gone nowhere. Basic income did enjoy a bit of a heyday in the U.S. in the 1960s and 1970s and was even embraced in conservative circles; free-market economist Milton Friedman went so far in 1962 as to propose a negative federal income tax that would guarantee a basic income to the poorest Americans while also incentivizing work. Other ideals of the era — the four-day workweek, the 30-hour workweek, the all but limitless vacation allotment — have fallen by the wayside, even as U.S. labor conditions have worsened.

Read more …

In France, this is a nation-wide law.

Restaurants In Austin Banned From Throwing Away Food (Hill)

Restaurants in Austin, Texas, will no longer be allowed to throw out food waste, the city announced this week. Under a new policy that began Monday, all food-permitted businesses in the city are required to keep organic material, such as food scraps and soiled paper products, from landfills. Businesses can dispose of their food waste by donating extra food, giving scraps to local farms for animals, or composting, the city government said in a press release announcing the policy.

The city’s Universal Recycling Ordinance also requires businesses to provide employees with training on organic waste diversion, and to post information about the plan. Official city data shows that 37 percent of material sent to landfills is organic and could have otherwise been donated or composted, the city said. Austin’s ordinance is the latest move by a major city to introduce eco-friendly policies. Dozens of cities and businesses nationwide have banned plastic straws and other single-use plastic items in an effort to cut down on waste.

Read more …

Welcome to Europe.

‘We Have Found Hell’: Trauma Runs Deep For Children At Dire Lesbos Camp (G.)

The drawings tell of trauma. Stormy seas dotted with terrified faces. Lifeless bodies of children floating among the waves. And planes dropping bombs, down on to homes and on to people. Eyes that weep blood. The pencil scrawls were made by children who are part of a growing phenomenon in the Moria refugee camp in Lesbos, Greece. All have attempted suicide or serious self-harm since they came to this place. Approximately 3,000 minors live in the Moria camp, which Médecins Sans Frontières (MSF) calls a giant open-air “mental asylum” owing to the overcrowding and dire sanitary conditions. Last Tuesday an adolescent attempted to hang himself from a pole. In August, a 10-year-old boy only just failed to take his own life.

The camp, among hills dotted with olive trees a few kilometres from the island’s capital town of Mytilene, is home to 9,000 asylum seekers living in a centre designed to hold one third of that number. Migrants live in groups of up to 30 people, crammed into tents or metal containers situated just centimetres apart. Rubbish, scattered everywhere, makes the air almost unbreathable. Most come from war-torn countries like Syria, Iraq and Afghanistan. They arrive in dinghies from the Turkish towns of Ayvalik or Canakkale. According to aid agencies, the controversial deal brokered between Brussels and Ankara aimed at stopping the flow of migrants to Europe via Turkey, combined with the refusal on the part of European countries to take in asylum seekers arriving in Greece, have transformed Lesbos into an Alcatraz, leaving people imprisoned on the island with no way out.

“Although the vast majority of migrants who arrive in Moria are traumatised, after having fled from violent conflicts in their home countries, conditions in the camp have exacerbated their trauma,” says Luca Fontana, field coordinator of MSF on the island. “After two years, some are still awaiting transferral, even if they know they could be deported to Turkey at a moment’s notice. I’ve worked in camps infested with Ebola in Sierra Leone and Guinea, but I guarantee you that this is the worst situation I’ve ever seen.”

Read more …

Sep 082018
 


Charles Burchfield Bluebird and Cottonwoods (The Birches) 1917

 

 

My Australian friend Wayne Hall, who‘s lived in Athens for many many years, is doing a video project on fellow Aussie Julian Assange. This is an interview with me, recorded 3 weeks or so ago, that’s part of the project. I would have done 1000 things differently, but it’s not my baby, it’s Wayne’s world. At least some snippets of information come through.

Note: it was 100º, and it shows. Very sweaty, very uncomfortable. Still, while I’m not wild about doing videos -we had Nicole for that, right?!- maybe I should be doing more of this. Not that I watched this one, mind you. But you can.

 

 

 

 

Wayne Hall: Good afternoon Raúl Ilargi Meijer. You have a blog called “Automatic Earth” and you are very active with it. Can you say something about “Automatic Earth”? When was it founded? What is its aim?

Ilargi: It was founded almost eleven years ago. Nicole Foss and I founded it because we wanted to write about finance whereas the people we were writing for before that, “The Oil Drum”, didn’t want us to do that and we thought it was too important not to.

WH: And what are you doing here in Athens?

Ilargi: I’m supporting a group of people who feed the homeless and refugees. I’ve written a bunch of articles at “Automatic Earth” about that.

WH: Now even though you have written articles that show clearly how important you think it is to try to defend Julian Assange (I read one that you published today [17/8/2018] that was very much on that subject and it was a powerful article), you really don’t agree with Julian Assange on the importance of defending the European integration project or citizens’ Europe.

Ilargi: I have no idea what either of these things are.

(Note Ilargi: here Wayne leaves several lines untranslated. I said again that I don’t know what the European integration project or citizens’ Europe are. And of course I can’t disagree with Assange, or anyone else, on things I don’t even know exist.)

WH: Well, let’s move on. In an article entitled “I am Julian Assange” on 16th May 2018, you wrote: “Julian Assange appears to be painfully close to being unceremoniously thrown out of the Ecuadorian Embassy in London. If that happens, the consequences for journalism, for freedom of speech and for press freedom, will resound around the world for a very long time”. Would you like to say more about that?

Ilargi: I think there are not nearly enough people who realize what the consequences are going to be of Assange being thrown to the wolves.

WH: What will they be?

Ilargi: He stands for every journalist but he also stands for every citizen. He is the man who offered his freedom to give everybody else freedom..

WH: You say that he has the credibility he has because he has never published anything that is not 100% verifiable and true.

Ilargi: That is the basis of Wikileaks: it’s truth, honesty. Nobody would ever give him another document if they were in doubt that he would preserve secrecy, he would protect their identity or he would treat the documents in the best way possible.

WH: You also wrote: “People like Chelsea Manning, Kim Dotcom, Edward Snowden and Julian Assange are among the smartest people our world has to offer. We should be cherishing the combination of intelligence, courage and integrity they display at their own risk and peril, but instead we allow them to be harassed by our governments because they unveil inconvenient truths about them. And pretty soon there will be nobody left to tell these truths, or any truth at all.” That’s a very pessimistic assessment. Would you like to believe that it is too pessimistic?

Ilargi: Isn’t it more like realistic? How many people like Assange and Snowden or Chelsea Manning are there? We don’t have a never-ending supply of them.

WH: In your article “Julian Assange and the Dying of the Light” you wrote: “The ideal situation would be if Australia would offer Julian Assange safe passage back home. Assange has never been charged with anything, other than the UK’s bail-skipping change.” He has been charged with other things, but the charges have been withdrawn.

Ilargi: He has been charged with what?

WH: Wasn’t he charged with rape or something, in Sweden?

Ilargi: No, no..

WH: What was it? What happened there then if it was not a charge?

Ilargi: They said they wanted to talk to him. That was very strange. From what I know of the story the prosecutor let him go. Told him he was free to go to Britain and then – I don’t know if it was the same prosecutor, Marianne Ny, but anyway the Swedish justice system did a 180 and as soon as he got to London they said that he had to go back because they wanted to talk to him again.

WH: Merry-go-round.

Ilargi: But neither of the two women involved ever filed any charges against him, or any complaint. They even went out of their way, albeit far too late, to say “He didn’t rape me. It never happened.” It seems .. That was a smear thing. And it’s been very successful..

WH: It seems so. Talking about Australia again, and safe passage back home, it’s true that years ago the Australian government acknowledged that it had responsibilities to help and protect Australian citizen Julian Assange. For example in 2001 Australian Prime Minister Julia Gillard said:


“We are supporting Julian Assange the same way that we would support any Australian citizen who got into a legal difficulty overseas.”

But for years after that, these responsibilities seem to have been forgotten. Even supporters of Julian Assange seem to assume that it is OK for the Australian government to allow Ecuador, a weaker, poorer and more vulnerable country than Australia to take responsibilities that the Australian government had said that it was taking but it seems simply was not. .

Ilargi: Who wrote that?

WH: Do you mean this comment about Australia and Ecuador? I wrote it.

Ilargi: OK. OK.

WH: Don’t you agree with it?

Ilargi: The Australian government has a very strange role in this. There is an older speech by the later PM Malcolm Turnbull that is being tossed around on Twitter in which he is very supportive of Assange.

WH: Is this a recent speech?

Ilargi: I think that was also from 2011 too. Apparently he no longer is.

WH: Next subject. Would you like to comment on the controversy Seth Rich versus the hacker Guccifer 2.0.

There seems to be a lot of misunderstanding and disagreement about this. I think a lot of people wouldn’t even know who Seth Rich was. Would you like to enlighten the people who don’t know?

Ilargi: From what I know Seth Rich worked for the Democratic National Committee. He was found murdered in Washington, not far from the White House. He is rumoured to be the guy who gave the DNC e-mails to Assange, to Wikileaks.

WH: This is something that Kim Dotcom apparently also says.

Ilargi: Yes. I don’t know enough about that but it seems obvious that the whole Guccifer 2.0 story is a fabrication. The US really really wants to make a link between Assange and Russia because it smears both. If they can make a connection between the two they will both look a lot worse.

WH: They’re trying hard.

Ilargi: And since neither can really defend themselves this narrative can be built and built. .

WH: Yes, that’s right. If you are dead or you re prevented from speaking, you can’t defend yourself.

Ilargi: No..

 

WH: At the moment I and a few other people are discussing two ideas in relation to Julian Assange. One of them is purely symbolic and it’s aimed at counteracting the media bias against Assange. That is the declaration of a Julian Assange Day. The day we propose is 26th January. We heard a few words from the mayor about the significance of January 26th in Greece in the context of Greece’s liberation from the Ottoman Empire.

But January 26th is also an important day in Australia. It is the national day. But many people are saying today that Australia s national day should be moved to another date, more inclusive of the many Australians who don’t feel that 26th January is suitable for the country’s national day. Let’s see what Amanda Stone has to say. In 2017 she was the mayor of the City of Yarra in Melbourne.

Amanda Stone: We ve been talking to the aboriginal community in Yarra for some time about the meaning of January 26th for them and we’ve heard from them that it is not a day of celebration. It is a day of sadness and loss for them. We ve been considering how we might address that to reflect those views. In February this year (2017) the Council resolved to ask the officers to consult with the aboriginal community about the future of January 26th, and that was also in the context of a growing momentum more broadly around the Change the Date campaign.

So we felt that it was an action whose time has come, that there would be broader support for it. And when the officers presented the results of the consultation with aboriginal people on Tuesday, that’s how we voted. But we’re not telling anyone what to do. We’re not changing the date of Australia Day as it is at the moment. We are not instructing people on how to spend January 26th. It will continue to be a public holiday, 26th January. People will still enjoy their barbecues and picnics and get-togethers in parks and gardens.

Lamourette Folly: Why is it important from your perspective as a mayor to change the date?

Amanda Stone: For me as mayor of the City of Yarra it is important that we are inclusive in what we do as a council. By holding celebratory events on January 26th we are actively excluding an important part of our community, the aboriginal community, who do not find it an occasion for celebration, who have told us so for many years, and are thoroughly supportive of the action we have taken. We want to be inclusive. We don’t want to exclude anybody.We want everyone to be able to celebrate our national identity and we need to find a date that we can do that on.

Lamourette Folly: That’s great. Do you have any date in mind?

Amanda Stone: No. I think it is something that needs to come out of a conversation. And I think lots of people have lots of ideas. And if we are going to be really inclusive we need to discuss it with everybody, not impose another date that might be contentious for another part of the people.

WH: If Julian Assange is freed it could very well be changed subsequently to Media Integrity Day, or something along those lines.

 

The second proposal is more concrete. It was initiated by the following posting by someone who calls himself “Realist” in the discussion that was started by Ray McGovern. What he said was this:

“If the American government thinks better of it and decides not to prosecute Mr. Assange (or perhaps offers him a plea bargain counting his time cloistered in the embassy against a short sentence), I wonder where he will choose and/or be allowed to live. Australia has abandoned him, and now Ecuador has betrayed him. He can’t trust any American vassal state in the EU, NATO or the “Five Eyes” (basically the Anglosphere). Would Putin allow him to run Wikileaks out of Russia? I suspect not. No free press throughout the Middle East, most of Africa and the “–stans” of Central Asia.

China is not looking to harbor a gadfly of the West. Latin America is spotty, though Glenn Greenwald makes his home base in Brazil despite the de facto coup against the Left there. How well are human rights protected in places like India or Malaysia? Singapore, Burma and Thailand are too authoritarian. Arthur C. Clarke decamped in Sri Lanka. Are there any truly sovereign nations in the Indian or Pacific oceans? Too bad New Gingrich didn’t get to establish his proposed Moon base. Julian might have managed Wikileaks from there, beyond the jurisdiction of any nation state on Earth.”

I said in response: “Realist’s” comments on Julian finding asylum on the Moon is frivolous, and if frivolous comments are permitted, why not outrageous comments? Are there Jewish people who would be outrageous enough to begin to lobby for Julian Assange to be given political asylum in Israel? Would he accept such an idea? Just the discussion of such an idea might be helpful in clearing some mental blocks.” ”

“Realist” replied: “Assange finding asylum on the Moon might be a frivolous comment but it underscores the paucity of venues that could pay the price to shield him against American wrath. In response to your invitation to discuss Israel as a plausible safe harbor for Assange, I should think his morals would preclude that possibility, even as a last resort. It would be repudiating everything he has stood for. As they say “tell me who your friends are and I’ll tell you who you are.”

 

Ilargi: That’s a very long way of saying “there are no options”. You don’t have to go through all the options to arrive at the conclusion that there are no options.

WH: So in other words…

Ilargi: A new country that is brought to the front in the past few days is Mexico. .

WH: Mexico.

Ilargi: Yes. People think that Lopez Obrador might be the guy to turn to. I suggested Iceland.

WH: I remember that. . .

Ilargi: They are independent enough to pull off something like that. Though I have no idea what the Icelandic government feels or thinks about Assange. But they’re independent. They’re the only country that locked up a bunch of bankers and told the creditors to go take a hike.

WH: I think what “Realist” would say is that these countries are not strong enough to protect Assange and that the CIA, or whoever is after him, would get at him.

Ilargi: Iceland has got a big moat. That is natural protection. .

WH: A big moat!

Ilargi: Yes. Of course there is no country that could give 100% protection to someone like Assange.

WH: There was a similar discussion in response to an article by Caitlin Johnstone.” “As long as Assange is silenced, claims against him are illegitimate”.

In any case, a campaign is under way. The ideas we are discussing here are not part of the campaign and I don’t want to impose them. The campaign is following its own logic.

Ilargi: There are no ideas. There is just a long list of “no options”.

WH: Yes, as you said. Right. This is continuing the discussion we had with the mayor.

Ilargi: I would like to add what we were saying before we started. The news about Assange’s health is not good. He has severe toothaches. His legs are swelling and his bone density is falling fast because of the lack of exposure to sunlight. So in the end, what it comes down to: Ecuador doesn’t even have to kick him out. They’re counting on the fact that he’ll have to walk out. .

WH: Yes, if he can. .

Ilargi: Or be carried out, on a stretcher. Or in a coffin. .

 

 

Julian Assange: (Trafalgar Square, London – 8th October 2011)

When we understand that wars come about as a result of lies peddled to the British public and the American public and the publics all over Europe and other countries, then who are the war criminals? It is not just leaders. It is not just soldiers. It is journalists. Journalists are war criminals. … If wars can be started by lies, peace can be started by truth.

 

 

Aug 242018
 
 August 24, 2018  Posted by at 7:57 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Café, le soir, Arles 1888

 

Thoughts On The ‘Longest Bull Market Ever’ (Black)
New Reality of China’s Failing Economy Is Coming Soon (Rickards)
UK Tells Drug Companies To Stockpile Medicine In Case Of No-Deal Brexit (Ind.)
Big Oil Asks Government To Protect It From Climate Change (AP)
Scott Morrison New Australian PM As Turnbull Denounces ‘Insurgency’ (G.)
Saudi Modernisation Drive Is Reflected In Aramco’s Faltering Sale (G.)
Libya Refuses To Take Migrants Rejected By Italy (AFP)
Italy Threatens To Stop EU Funding Unless Other States Accept Refugees (ZH)
Inflation Adjusted Gold Is At Historical Lows (von Greyerz)
Monsanto Faces A Surge In Lawsuits Following Cancer Ruling (BBC)
‘Monsanto’s History Is One Full of Vast Lies’ (Spiegel)
After 70 Years, Korean Father, Son Share A Drink For First, Last? Time (H.)

 

 

“..a full SIXTY PERCENT of corporate debt issued by companies in the Russell 2000 is rated as JUNK..”

Thoughts On The ‘Longest Bull Market Ever’ (Black)

Well, it happened. Yesterday the US stock market broke the all-time record for the longest bull market ever. This means that the US stock market has been generally rising for nearly a decade straight… or even more specifically, that the market has gone 3,453 days without a 20% correction. That’s a pretty big milestone. And there’s no end in sight. So it’s possible this market continues marching higher for the foreseeable future. But if you step back and really look at the big picture, there are a lot of things that might make a rational person scratch his/her head. For example– the Russell 2000 index (which is comprised of smaller companies whose shares are listed on various US stock exchanges) is currently right at its all-time high.

Yet simultaneously, according to the Wall Street Journal, a full SIXTY PERCENT of corporate debt issued by companies in the Russell 2000 is rated as JUNK. How is that even possible– a junk debt rating coupled with an all-time high? It’s as if investors are saying, “Well, there’s very little chance these companies will be able to pay their debts… but screw it, I’ll pay a record high price to buy the stock anyhow.” It just doesn’t make any sense. Looking at the larger companies in the Land of the Free (which make up the S&P 500 index), the current ‘CAPE ratio’ is now the second highest on record. ‘CAPE’ stands for ‘cyclically-adjusted price/earnings ratio’. Essentially it refers to how much investors are willing to pay for shares of a company, relative to the company’s long-term average earnings.

And right now investors are willing to pay 33x long-term average earnings for the typical company in the S&P 500. The median CAPE ratio based on data that goes back to the 1800s is about 15.6. So at 33, investors are literally paying more than TWICE as much for every dollar of a company’s long-term average earnings than they have throughout all of US market history. And it’s only been higher ONE other time– just before the 2000 stock market crash (when the dot-com bubble burst). 33 is higher than right before the 2008 crisis. It’s even higher than it was before the Great Depression.

Read more …

Building zombies for the future.

New Reality of China’s Failing Economy Is Coming Soon (Rickards)

There’s no denying China’s remarkable economic progress over the past thirty years. Hundreds of millions have escaped poverty and found useful employment in manufacturing or services in the major cities. Infrastructure gains have been historic, including some of the best trains in the world, state-of-the-art transportation hubs, cutting edge telecommunications systems, and a rapidly improving military. Yet, that’s only half the story. The other half is pure waste, fraud and theft. About 45% of Chinese GDP is in the category of “investment.” A developed economy GDP such as the U.S. is about 70% consumption and 20% investment. There’s nothing wrong with 45% investment in a fast-growing developing economy assuming the investment is highly productive and intelligently allocated.

That’s not the case in China. At least half of the investment there is pure waste. It takes the form of “ghost cities” that are fully-built with skyscrapers, apartments, hotels, clubs, and transportation networks – and are completely empty. This is not just western propaganda; I’ve seen the ghost cities first hand and walked around the empty offices and hotels. Chinese officials try to defend the ghost cities by claiming they are built for the future. That’s nonsense. Modern construction is impressive, but it’s also high maintenance. Those shiny new buildings require occupants, rents and continual maintenance to remain shiny and functional. The ghost cities will be obsolete long before they are ever occupied.

Other examples of investment waste include over-the-top white elephant public structures such as train stations with marble facades, 128 escalators (mostly empty), 100-foot ceilings, digital advertising and few passengers. The list can be extended to include airports, canals, highways, and ports, some of which are needed and many of which are pure waste. Communist party leaders endorse these wasteful projects because they have positive effects in terms of job creation, steel fabrication, glass installation, and construction. However, those effects are purely temporary until the project is completed. The costs are paid with borrowed money that can never be repaid. China might report 6.8% growth in GDP, but when the waste is stripped out the actual growth is closer to 4.5%. Meanwhile, China’s debts grow faster than the economy and its debt-to-GDP ratio is even worse than the U.S.

Read more …

It’s beginning to hit home that time has run out. Wait till the days shorten for real.

UK Tells Drug Companies To Stockpile Medicine In Case Of No-Deal Brexit (Ind.)

Health secretary Matt Hancock has told drug companies to ensure they have six weeks additional supplies of medicines on top of their normal stockpiles to avoid disruption caused by a possible no-deal Brexit. The remarks from Mr Hancock came as Dominic Raab, the Brexit secretary, released the first tranche of technical notes outlining the government’s preparations and warnings to businesses if Britain crashes out of the bloc without a deal. Among the 24 detailed papers it was also revealed that credit card users could be hit with a new “Brexit tax” amounting to £166m, UK citizens living in Europe face the prospect of losing access to pension income and new red tape could delay foreign sperm donations arriving in Britain.

In one of the most stark warnings, Mr Hancock told NHS staff and service providers that the move to increase pharmaceutical companies’ stockpiles was necessary “in case imports from the EU through certain routes” are affected if Theresa May fails to strike a deal with negotiators in Brussels. The request, according to the chief executive of the UK Bioindustry Association, Steve Bates, would be a “massive challenge” for the industry to deliver in less than 200 days. But Mr Hancock also warned that hospitals, GPs and community pharmacies should not hoard or stockpile additional drugs “beyond their business” as usual levels.

Read more …

Priceless.

Big Oil Asks Government To Protect It From Climate Change (AP)

As the nation plans new defenses against the more powerful storms and higher tides expected from climate change, one project stands out: an ambitious proposal to build a nearly 60-mile “spine” of concrete seawalls, earthen barriers, floating gates and steel levees on the Texas Gulf Coast. Like other oceanfront projects, this one would protect homes, delicate ecosystems and vital infrastructure, but it also has another priority — to shield some of the crown jewels of the petroleum industry, which is blamed for contributing to global warming and now wants the federal government to build safeguards against the consequences of it.

The plan is focused on a stretch of coastline that runs from the Louisiana border to industrial enclaves south of Houston that are home to one of the world’s largest concentrations of petrochemical facilities, including most of Texas’ 30 refineries, which represent 30 percent of the nation’s refining capacity. Texas is seeking at least $12 billion for the full coastal spine, with nearly all of it coming from public funds. Last month, the government fast-tracked an initial $3.9 billion for three separate, smaller storm barrier projects that would specifically protect oil facilities.

That followed Hurricane Harvey, which roared ashore last Aug. 25 and swamped Houston and parts of the coast, temporarily knocking out a quarter of the area’s oil refining capacity and causing average gasoline prices to jump 28 cents a gallon nationwide. Many Republicans argue that the Texas oil projects belong at the top of Washington’s spending list. “Our overall economy, not only in Texas but in the entire country, is so much at risk from a high storm surge,” said Matt Sebesta, a Republican who as Brazoria County judge oversees a swath of Gulf Coast. But the idea of taxpayers around the country paying to protect refineries worth billions, and in a state where top politicians still dispute climate change’s validity, doesn’t sit well with some.

Read more …

Another rightwing anti-immigrant yokel. That’s all they have down under.

Scott Morrison New Australian PM As Turnbull Denounces ‘Insurgency’ (G.)

Australia will have a new prime minister in Scott Morrison – the socially conservative architect of Australia’s hardline anti-asylum seeker policies – after he mounted a late challenge during a drawn-out struggle for power in the governing Liberal party. On Friday, incumbent Malcolm Turnbull failed in his attempt to stare down a challenge from hard right MP Peter Dutton, with insurgents in his party gathering enough signatures to call for a “spill” of the leadership. It led to a three-way challenge that included Morrison, Turnbull’s treasurer, and Julie Bishop, the foreign minister. Turnbull himself stood aside from the contest.

In a party room ballot, Bishop was eliminated in the first round, and Morrison won against former home affairs minister Dutton in a subsequent run-off, 45 votes to 40, suggesting the party is still deeply divided. There appears no end in sight to the civil war consuming the ruling Liberal-led coalition government. The country may be headed to an election, with Turnbull saying he will not stay in parliament. His resignation in between general elections would erase the government’s single-seat majority in the House of Representatives. Australia has now had five prime ministers in just over five years. Since 2010 four prime ministers have lost office not at the ballot box, but torn down by their own parties, earning Canberra the unhappy appellation “the coup capital of the Pacific”.

Read more …

Selling 5% of Aramco was supposed to finance ‘diversification’.

Saudi Modernisation Drive Is Reflected In Aramco’s Faltering Sale (G.)

For the Saudis, the implications of the Paris agreement were obvious: the drive to decarbonise the world economy would mean that a considerable part of their oil reserves would have to stay in the ground. This made a warning at the turn of the millennium by the former Saudi energy minister Sheikh Ahmed Zaki Yamani, seem suddenly urgent. “Thirty years from now, there will be a huge amount of oil – and no buyers”, Yamani said. “Oil will be left in the ground. The stone age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”

It was not long before Saudi’s rulers responded to this twin challenge. In the short term, they sought to persuade fellow oil producing nations to agree production curbs that would limit supply, drive up crude prices and so ease the pressures on the public finances. At the current oil price of around $70 a barrel, the Saudis can make their budget arithmetic stack up. In the longer term, there was a plan to diversify the economy away from oil. Saudi Vision 2030 was announced by Crown Prince Mohammed bin Salman in April 2016, shortly after the oil price reached its trough. The idea was to make Saudi Arabia a global investment giant, to turn the country into a hub linking the three continents of Europe, Asia and Africa and to be the heart of the Arab and Islamic worlds.

The proposed sale of part of the state-owned oil company – Saudi Aramco – was a key part of this attempt to transform and modernise the economy. Proceeds were earmarked for the country’s sovereign wealth fund so it could continue investing in companies such as the electric car company Tesla and the ride-hailing app Uber.

Read more …

Thank you Barack and Hillary.

Libya Refuses To Take Migrants Rejected By Italy (AFP)

Libya has refused to take in a group of 177 migrants stranded on an Italian coastguard boat off a Sicilian port after Rome insisted they would not be allowed to disembark. Italy’s Interior Minister Matteo Salvini threatened earlier this week to return the migrants to the North African country unless other European governments offered to take some of them in. But Mohamed Siala, foreign minister of the UN-backed Libyan unity government, said that “Libya does not accept this unjust and illegal measure because it already has more than 700,000 migrants” on its territory.

In a statement late Wednesday, he called on the international community “to put pressure on the countries of departure to repatriate their nationals”, adding that Libya had only served as a transit point. The Italian boat “Diciotti” arrived on Monday night off the Sicilian port of Catania. Plunged into chaos following the fall and killing of longtime dictator Moamer Kadhafi in a 2011 NATO-backed uprising, Libya has become a prime transit point for sub-Saharan African migrants making dangerous clandestine bids to reach Europe. The country takes in migrants whose boats are intercepted in its waters by the Libyan coastguard, but it has repeatedly rejected those rescued by foreign navies or by humanitarian organisations off its coast.

Read more …

Who’s going to blame them?

Italy Threatens To Stop EU Funding Unless Other States Accept Refugees (ZH)

On Thursday, out of the blue, Italy’s Deputy Prime Minister Luigi Di Maio threatened to stop financial contributions to the European Union next year unless other states agreed to take in migrants being held on a coastguard ship in Sicily. The Italian’s ultimatum comes less two months after Europe triumphantly announced a “vaguely worded” deal on how to resolve the continent’s migrant influx. “If tomorrow at the meeting of the European Commission nothing is decided on the redistribution of migrants and the Diciotti ship, I and the entire Five Star Movement are not willing to give 20 billion to the European Union,” Di Maio said in a video posted on his Facebook page.

He echoed statements by Interior Minister and Deputy Premier Matteo Salvini, who has refused to allow 177 migrants to leave the Italian coastguard ship Ubaldo Diciotti, which is docked in the Sicilian port of Catania. While Italian prosecutors opened an investigation into the detention of the migrants and 29 children were allowed to disembark, Salvini still won’t allow the rest of the people to come ashore and has attacked the EU for its “cowardly silence.” Salvini described those aboard as “illegal immigrants,” and said they won’t be allowed to step foot on Italian soil. Instead, he insisted fellow European Union nations take in some of the asylum-seekers. “Italy’s no longer Europe’s refugee camp,” he tweeted. “Upon my authorization, no one is disembarking from the Diciotti.”

Salvini, who is also interior minister, was defiant in the face of a criminal probe into possible kidnapping charges for forcing the migrants to remain on the vessel. The chief prosecutor from the Agrigento court, Luigi Patronaggio, on Wednesday boarded the Diciotti and said afterwards he had opened a probe against “unknown” persons for holding the migrants against their will. “There’s a court that is investigating whether those illegally on board the ship have been kidnapped,” Salvini said in a radio interview. “I’m not unknown. My name is Matteo Salvini… I’m the Interior Minister and I think it is my duty to defend the security of this country’s borders.”

Read more …

Just liked the graph, don’t want to tell anyone to buy anything.

Inflation Adjusted Gold Is At Historical Lows (von Greyerz)

Gold at $1,220, adjusted for real inflation, is almost as cheap as it was in 1999 at the $250 low. More importantly, inflation adjusted gold is now very near the 300 year low of 1999. So right now gold is again unloved and undervalued and therefore a bargain. On an inflation adjusted basis, the 1980 high of $850 would today be $16,650. Long before we get hyperinflationary gold prices, that $16,600 level should be easily reached. Owning physical gold for wealth protection purposes is the best preserved secret in the West. In this part of the world, virtually nobody holds gold. At the same time, the wise people in the East continue to buy all the gold that is produced annually. China, India, Iran, Turkey, Russia and many more Eastern nations understand history and economics. That is why they are accumulating major gold reserves at these levels.

Read more …

Bayer really didn’t see this coming.

Monsanto Faces A Surge In Lawsuits Following Cancer Ruling (BBC)

American agro-chemicals company Monsanto is facing a surge in lawsuits that may cost its new owners, Bayer, billions in damages. Monsanto manufactures glyphosate-based weedkillers which some believe are carcinogenic. Last month it lost a $289m (£225m) court case that alleged its products Roundup and RangerPro had led to a Californian man’s terminal cancer. Bayer said the number of outstanding cases had risen from 5,200 to 8,000. The German firm’s shares have lost 11% of their value since it lost the case in a California court to groundskeeper Dewayne Johnson, who claimed Monsanto herbicides containing glyphosate, had caused his non-Hodgkins lymphoma.

Bayer shares fell another 1.7% on Thursday. Chief executive Werner Baumann said that when it bought Monsanto, Bayer “could not foresee the scope of the current lawsuits.” The $63bn deal was completed earlier this month. “In the course of the acquisition, we carried out due diligence as is standard practice when taking over a listed company. In doing so, we of course also considered the legal risks,” he said in an interview with Germany’s Handelsblatt newspaper. In a conference call on Thursday, Mr Baumann added: “Our view is that the number is not indicative of the merits of the plaintiffs’ cases”.

Read more …

“..Another program is called “Freedom to Operate.” Its purpose is to eliminate everything that might disrupt sales of their products – laws, scientific articles, they go after everything.”

‘Monsanto’s History Is One Full of Vast Lies’ (Spiegel)

On Aug. 10, lawyer Brent Wisner, 34, scored a landmark verdict on behalf of his client, cancer patient Dewayne Johnson. A court in San Francisco ruled that Monsanto was guilty of concealing the potential health risks associated with its weed killer glyphosate, which is sold in the United States under the brand name Round Up. The jury ordered the company to pay $289 million in damages to the plaintiff, who had used Round Up at his job as a janitor for a school district. The court said Monsanto should have labeled the product’s possible dangers for consumers. Monsanto, which was recently acquired by German pharmaceuticals giant Bayer, has denied any link between the product and the disease. Wisner spoke to DER SPIEGEL about the case in an interview.

[..] DER SPIEGEL: How much does Monsanto have to do with the fact that a verdict was reached only now? Wisner: A lot! Monsanto has an internal program called “Let Nothing Go.” The aim of this program is to attack scientists who are critical of Monsanto products. They go after people directly and discredit them. They also pay others to do so. DER SPIEGEL: Are there other such PR strategies? Wisner: Another program is called “Freedom to Operate.” Its purpose is to eliminate everything that might disrupt sales of their products – laws, scientific articles, they go after everything. As part of that effort, they also engage lobbyists – scientists who Monsanto pays for their opportunism. Such programs reflect a corporate culture that shows no interest whatsoever in public health, only in profits.

DER SPIEGEL: Monsanto continues to dispute that it tried to influence scientific research. What was the critical factor for jurors in reaching the verdict? Wisner: I believe it was the scientific findings themselves. The 12 jurors were not lightweights after all. There was a molecular biologist, an environmental engineer, a lawyer. Some colleagues told me: “Be careful Brent, so much intelligence can be an impediment.” But I was certain that the arguments in the critical studies, parts of which were suppressed, were the strongest evidence we had.

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Sad and joyful. Why Korea’s really want peace.

After 70 Years, Korean Father, Son Share A Drink For First, Last? Time (H.)

As soon as 91-year-old Lee Gi-sun got up on the morning of Aug. 22, he pulled out one of the bottles of soju, a potent distilled liquor, that he’d stashed in the bottom of his suitcase. He’d brought this precious liquor to accompany a ceremony for which he’d waited his entire life – a daytime drink with his son! At 10 am on Aug. 22, the final day of the three-day reunion for families divided by the Korean War, family members met in the banquet hall on the second floor of the Mt. Kumgang Hotel to say their goodbyes. A few hours hence, they would return to their respective homes in South and North Korea, with no guarantee of seeing each other again. The father filled a cup with the soju he’d brought.

After taking a sip himself, he silently passed the cup to his son. Gi-sun’s North Korean son, Gang-son (69 years old himself), was also silent as he took the cup and brought it to his lips. This was the first drink shared by the white-haired father and son, and it very well might be their last. It was a heartrending moment when the father’s lifelong dream came true. “We were separated when he was two years old. Two years old,” the father said, letting the last phrase linger in the air. In Jan. 1951, he and his older brother had left their families behind in their home of Yonbaek County, Hwanghae Province, fleeing south with UN troops beaten back by the Chinese onslaught. Gi-sun had assumed he would soon be able to return.

Read more …

Aug 232018
 
 August 23, 2018  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Seated woman 1903

 

 

 

The Weaponization of the Dollar (Lebowitz)
Turkey’s Lira Crisis Was Written In Istanbul’s Skyline (G.)
U.S.-China Trade War Escalates As New Tariffs Kick In (R.)
Shooting War With China More Likely Than You Think (Rickards)
Wall Street Marks Longest-Ever ‘Bull Market’ (AFP)
Saudi Energy Minister Denies Aramco IPO Will Be Called Off (R.)
Australia In Crisis As Prime Minister Faces Down Political Coup Attempt (G.)
Trump Says He’s Considering Pardon For Manafort (R.)
Making Plans For A New World Order (Heiko Maas)
Italian Prosecutors Investigate Salvini’s Bar On Ship Arrivals (G.)

 

 

“..the true all-in cost of borrowing was not 5% but 54%.”

The Weaponization of the Dollar (Lebowitz)

China, Turkey, and Iran are all classified as emerging markets. While the classification is broad and includes a diverse group of countries, these countries have many things in common. One is that their currencies, for the most part, are not liquid or highly valued. Thus, they heavily rely on the world’s reserve currency, the U.S. dollar, to conduct international trade. As an example, when Pakistan buys oil from Qatar, they transact in U.S. dollars, not rupees or riyals. To facilitate trade efficiently, these countries must hold excess dollars in reserve. In almost all cases, emerging market nations rely on U.S. dollar-denominated debt for their transactional needs.

Dollar-denominated debt is currently the cause of much economic pain for Turkey. To understand why, we present a simplified example. Suppose on January 1, 2018, a Turkish corporation borrowed $100 million U.S. dollars with an agreement to pay it back with interest of 5% on August 15th, 2018. The company, as is typical, converts the loaned dollars to Turkish Lira. On August 15, 2018, the company will convert the Lira back to dollars in order to pay the principal and interest due on the loan. The following graph charts the Turkish Lira versus the Dollar over the life of the loan.

On January 1, 2018, one U.S. Dollar was worth 3.79 Lira. Over the next eight months, the U.S dollar appreciated significantly versus the Lira such that one U.S. dollar was worth approximately 5.81 Lira. As such, the company will now need 5.81 Lira to purchase each dollar it needs to repay the loan. Due to the strengthening of the U.S. dollar versus the Lira over the time period of the outstanding loan, the company would need 584,282,000 Lira to pay back what was originally a 378,750,000 Lira loan. In other words, the true all-in cost of borrowing was not 5% but 54%.

Read more …

“90% of the credit in Turkish real estate companies came from loans in foreign currencies.”

Turkey’s Lira Crisis Was Written In Istanbul’s Skyline (G.)

From a distance, Esenyurt, a newly built up neighbourhood on the edges of Istanbul, looks a bit like Hong Kong or Dubai, with a bustling downtown of shiny skyscrapers. Upon closer examination, however, you notice that tower after tower stands incomplete, lacking windows or furnishings; others are only half-occupied, their windows dark after nightfall. “In the residential areas, 100% of the construction has stopped,” says Mohamed Karman, a local estate agent, from his small office in the central square of Esenyurt. “Do you know why? The materials. Everything is in dollars, you pay in dollars.” The crash of the Turkish lira last week after two years of steady decline spooked global markets – but anyone looking at Istanbul’s skyline would have been far from surprised.

Everywhere you look in the city, evidence of a debt-fuelled construction boom abounds: new skyscrapers frame the horizon, huge shopping malls dot the streets and among several megaprojects is a new airport, set to be the world’s largest. Funding for this construction frenzy has been at the heart of Turkey’s economy, accounting for up to 20% of the country’s GDP growth in recent years, and employing around two million people. In a parallel to the 2008 financial crash, the boom was funded by low-interest loans and ballooning debt. Property developers funded their buildings with cheap loans in foreign currencies – and will be struck particularly hard by the lira’s collapse, as those loans grow harder to repay every day. According to government statistics, at the end of 2016 nearly 90% of the credit in Turkish real estate companies came from loans in foreign currencies.

[..] The Istanbul Sapphire – one of the tallest buildings in Europe when completed in 2011 – was financed through loans worth 164m lira in 2013, 154m of which was in US dollars. That loan would now cost around 539m lira.

Read more …

Is this the best they can do?

U.S.-China Trade War Escalates As New Tariffs Kick In (R.)

The United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington. The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth. China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked-in on both sides as scheduled at 12:01 p.m. in Beijing (0401 GMT). “China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement.

“At the same time, to safeguard free trade and multilateral systems, and defend its own lawful interests, China will file suit regarding these tariff measures under the WTO dispute resolution mechanism,” it said. President Donald Trump has threatened to put duties on almost all of the more than $500 billion of Chinese goods exported to the United States annually unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structures, and buys more U.S. goods. That figure would be far more than China imports from the United States, raising concerns that Beijing could consider other forms of retaliation, such as making life more difficult for American firms in China or allowing its yuan currency to weaken further to support its exporters.

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“The U.S. will win this trade war because Xi does not want to lose his throne.”

Shooting War With China More Likely Than You Think (Rickards)

The mainstream media narrative about the U.S.-China trade war implies that Trump is on a highly damaging ego trip and China holds all the cards. The exact opposite is true. Trump has ample financial warfare weapons including tariffs, penalties, bans on direct investment, improved cybersecurity, forced divestiture and freezing of assets. Meanwhile, China has almost run out of room to impose tariffs. Further, they will invite retribution if they try to devalue their currency further. China’s vulnerabilities run deeper than that. The U.S.-China trade war comes in the aftermath of a Chinese Communist Party conference that made Xi Jinping dictator for life and enshrined his doctrines on the same level as Mao Zedong.

Once Xi got these powers, he proceeded on a disastrous policy course that has resulted in a slowdown of the Chinese economy, higher debt defaults, lost investment opportunities in the U.S. and declining hard currency reserves. The knives are now out in Beijing. Reports are circulating that Xi’s opponents are questioning his judgment and the wisdom of expanding his powers at such a critical time. Many are starting to blame Xi for the trade war almost as much as they blame Trump. Xi still has torture, firing squads and concentration camps at his disposal, but the notion of a unified, coherent leadership structure in Beijing is now seen to be a myth. Trump will keep up the pressure; he never backs off and always doubles down.

It will be up to Xi to blink and acquiesce in many U.S. demands. The U.S. will win this trade war because Xi does not want to lose his throne. Yet there will still be material damage to the global economy and lasting animosity between Xi and Trump.

Read more …

Party.

Wall Street Marks Longest-Ever ‘Bull Market’ (AFP)

Wall Street graduated to the longest-ever “bull market” Wednesday, a run that began amid extraordinary crisis-era monetary policy and which experts think could persist at least a while longer. US President Donald Trump cheered the news after the S&P 500 closed for the 3,453rd straight time without a drop of 20 percent over the more than nine-year stretch. “Longest bull run in the history of the stock market. congratulations America!” Trump said on Twitter shortly after the closing bell. The marathon run comes amid signs the US economy has accelerated this year after a long period of slow but steady growth. Experts say trade wars and higher interest rates are among potential threats to the persistence of the bull run.

Market watchers liken the landmark to other stock market records, such as when the Dow hit 25,000 points for the first time. Investing in stocks remains concentrated among the wealthiest, with many Americans still hesitant to buy stocks following the 2008 financial crisis. While financial experts are well aware of the durability of the current stock market cycle, the record is “news more to Main Street than to Wall Street,” according to Art Hogan, chief market strategist at B. Riley FBR. The S&P 500 finished the day down less than 0.1 percent at 2,861.82. When stocks fall at least 20 percent below their previous record, they enter a “bear market.”

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But several people insist it is. it’s just that it can’t be announced right now.

Saudi Energy Minister Denies Aramco IPO Will Be Called Off (R.)

Saudi Arabia’s energy minister denied a Reuters report that state oil giant Aramco’s initial public offering will be called off, in a statement issued early on Thursday. “The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government,” Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency. Reuters reported on Wednesday that four senior industry sources said Saudi Arabia has called off both the domestic and international stock listing of Aramco.

Read more …

Oz politics is so bad it’s not even funny.

Australia In Crisis As Prime Minister Faces Down Political Coup Attempt (G.)

Australia is on the brink of having its sixth prime minister in a decade after a chaotic, internecine coup attempted, but failed, to topple the incumbent Malcolm Turnbull on Thursday. In a media conference during which he refused to resign, Turnbull called on his challengers to prove he had lost the confidence of his own party, and made a thinly veiled swipe at influences “outside the parliament”. The reference was widely interpreted as an attack on the power of Rupert Murdoch’s News Corporation newspapers and TV channels, which have consistently campaigned against him. “The reality is that a minority in the party room supported by others outside the parliament have sought to bully, intimidate others into making this change of leadership that they’re seeking,” Turnbull said.

The leadership brawl stalled political business on Thursday morning when the government voted to shut down the House of Representatives until 10 September, unsure it would be able to command a majority on the floor of the House, and unwilling to face questions from the opposition after at least 13 ministers tendered their resignations. Since 2007, no Australian prime minister has served a full term in office, with four cut down by their own parties while in office, earning Canberra the title of “coup capital of the Pacific”. Turnbull survived Thursday, but appears almost certain to lose the prime ministership to a party room vote, likely as soon as Friday.

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But not today, for sure.

Trump Says He’s Considering Pardon For Manafort (R.)

U.S. President Donald Trump said he would consider pardoning his former campaign chairman Paul Manafort, who was convicted on Tuesday of bank and tax fraud, according to a Fox News reporter who interviewed Trump. Fox News reporter Ainsley Earhardt said Trump told her in an interview on Wednesday that “he would consider” pardoning Manafort.“I think he feels bad for Manafort. They were friends,” Earhardt said in an appearance on Fox News’ “Hannity” program on Wednesday night.

Fox News has been airing excerpts of the interview with Trump, which is scheduled to be shown in its entirety on Thursday morning. The excerpts have not included a clip of Trump saying he would consider pardoning Manafort. Manafort was convicted on Tuesday of two counts of bank fraud, five counts of tax fraud and one charge of failing to disclose foreign bank accounts. In a tweet on Wednesday about the verdict, Trump called Manafort a “brave man” and said, “I feel very badly for Paul Manafort and his wonderful family.”

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Maas is the new German foreign minister. His proposal for an alternative SWIFT system launched a debate. But really, “new world order”?

Making Plans For A New World Order (Heiko Maas)

It starts with us exposing fake news. Like this: If the current account balance of Europe and the US includes more than just trade in goods, then it is not the US that has a deficit, it’s Europe. One reason is the billions in profits that European subsidiaries of Internet giants such as Apple, Facebook and Google transfer to the US every year. So when we talk about fair rules, we must also talk about the fair taxation of profits like that. It is also important to correct fake news because it can quickly result in the wrong policies. As Europeans, we have made it clear to the Americans that we consider the withdrawal from the nuclear agreement with Iran to be a mistake. Meanwhile, the first US sanctions have come back into force.

In this situation, it is of strategic importance that we make it clear to Washington that we want to work together. But also: That we will not allow you to go over our heads, and at our expense. That is why it was right to protect European companies legally from sanctions. It is therefore essential that we strengthen European autonomy by establishing payment channels independent of the US, a European monetary fund and an independent SWIFT [payments] system. The devil is in thousands of details. But every day that the Iran agreement lasts, is better than the potentially explosive crisis that threatens the Middle East otherwise.

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Let the courts decide.

Italian Prosecutors Investigate Salvini’s Bar On Ship Arrivals (G.)

Italian prosecutors have opened an investigation into the illegal detention of 177 migrants onboard a coastguard vessel that the minister of the interior, Matteo Salvini, refuses to allow to land. The Ubaldo Diciotti has been docked for 48 hours at the port of Catania, Sicily, but the migrants have not been allowed to disembark without having certainties from Brussels on their distribution to other countries. The investigation, conducted by the prosecutor of the city of Agrigento, was launched against “unknowns” but it is clear that if the magistrates were to go ahead with a judicial proceeding, Salvini would end up under investigation, being the only one responsible for the landing ban.

“I heard that the prosecutor’s office in Agrigento has opened an investigation,” said Salvini in a recent video on Facebook Live. “I also heard that the suspects are ‘unknown’ at the moment. But I’m not unknown. My name is Matteo Salvini, I’m the minister of the interior. Come on, try me too, I’m here.” The Ubaldo Diciotti docked on Monday night in the port of Catania but the migrants, including 29 unaccompanied minors, were refused authorisation to disembark. The ship picked up 190 people on 15 August from an overcrowded boat about 17 nautical miles from the Italian island of Lampedusa. Thirteen of them were evacuated for emergency medical treatment.

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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.

Read more …

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.

Read more …

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.

Read more …

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.

Read more …

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.”

Read more …

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.

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“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.

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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.

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“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.

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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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