Jun 242017
 


Fred Lyon San Francisco Cable Car rounding the curve at Jones Street 1946

 

US New Home Sales Jump, Median Price Surges To Record High (R.)
Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)
The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)
The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)
Europe’s Banking Union Is Dying in Italy (BBG)
Two Italian Zombie Banks Toppled Friday Night (WS)
‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)
Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)
UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)
Corbyn Vows To Force Early British Election (Ind.)
May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)
The Fed Needs to Acknowledge the Slowing Economy (DDMB)
Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)
America’s Health-Care Rain Dance (Jim Kunstler)
US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)
The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

 

 

They are determined to get all the suckers they can get before the implosion. There’s a huge empty bag to be passed on.

US New Home Sales Jump, Median Price Surges To Record High (R.)

New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum. The Commerce Department said on Friday new home sales increased 2.9% to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Economists polled by Reuters had forecast new home sales, which make up about 10% of all home sales, rising 5.4% to a pace of 597,000 units last month. Sales were up 8.9% on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan. The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3% in May and mortgage rates are still favorable by historical standards. However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated. The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

Read more …

Ditto in Australia. This is from real estate broker Domain, responsible for ad campaigns like the one in the photo -which I took in Melbourne in 2011.

Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)

Property prices in affordable areas are expected to jump “overnight” on the back of changes to first-home buyer stamp duty concessions starting in July, experts say. Strategic vendors in these locations are holding off accepting offers until next month to take advantage of the expected surge in demand. First-home buyers in NSW are set to save up to $24,740 with stamp duty concessions for homes up to $800,000 and a full exemption for homes under $650,000. Among those anticipating they will benefit from the changes is Quakers Hill home owner Bhugol Kansakar who bought his house for $611,000 in March 2015 – then a first-home buyer himself. Since May his three-bedroom home at 9 Nyngan Street has been on the market for $730,000 to $760,000. “We’ve had offers around $720,000 to $730,000 … we’re holding out until next month as stamp duty will be off for the first-home buyers,” Mr Kansakar said.

In this price bracket, first-home buyers would get a partial exemption from July. “It is a big block of land, three-bedrooms, perfect for a first home.” He anticipates he will be likely to get $760,000 or more for the home when the new rules come in. And he’s far from the only one anticipating he’ll get a premium, his sales agent Raine & Horne Blacktown business development manager Edwin Almeida said. About 40% of inquiries on homes he had listed across the Blacktown Council area priced under $750,000 were first-home buyers asking if they could formally exchange next month. He expects local prices would jump by $20,000 to $40,000. “Easy money does not make the market more accessible for first-home buyers. It just means vendors and developers will increase the price of property to meet demand,” Mr Almeida said.

Read more …

Two pieces from a PDF by “The International Economy” site, entitled: “Has the World Been Fitted With a Debt Straightjacket? Nearly forty distinguished experts offer their wisdom”. Click the link to see all.

First, Steve Keen…

The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)

T he world has been fitted with not just one but two debt straightjackets: one made of public debt and the other of private debt. The situation in the United States is typical. The total U.S. debt level at the end of World War II was equivalent to 130% of GDP, with public debt being three-quarters of the total and private debt one-quarter. Today, it is 250% of GDP, with public debt being two-fifths of the total and private debt three-fifths. But there is a simple trick that could let the United States, like Harry Houdini, magically escape from one of these two straightjackets in a flash. Like any magic act, it’s ruined by the telling: despite all the political hand-wringing over the burden the public debt imposes on future generations, public debt could be eliminated by the stroke of a proverbial pen, for two simple reasons.

First, this debt is exclusively in U.S. dollars; second, the government is the only institution in the nation that “owns its own bank,” the Federal Reserve, which can create U.S. dollars at will. The Fed could buy up—and effectively cancel—this debt overnight. You might not like this trick, but it’s both possible and perfectly legal. That leaves the second straightjacket: private debt. Here Houdini’s escape is not possible, because if any individual tried to do what the U.S. government can do, that person would be gaoled for counterfeiting. All U.S. private debt is, like public debt, owed in U.S. dollars; but only the U.S. government has the privilege of owning its own bank. For the private sector, it’s effectively the banks that own the debtors. But paradoxically, most economists obsess about the public debt trap and ignore the private debt one.

Why? Because they believe that banks do not originate loans, but instead act as “intermediaries” between savers and borrowers. Therefore, they say, private debt doesn’t matter, because if the debtor can’t spend, the lender can, and vice versa. They therefore believe that the level of private debt, and its rate of growth or decline, are economically irrelevant. They can’t see a private straightjacket. Several central banks have recently loudly declared that this model is nonsense—including Germany’s ultraconservative Bundesbank. Banks are not “intermediaries of debt” but originators. They don’t lend pre-existing money, but create money when they make an entry in the borrower’s deposit account, which is matched precisely by an entry in the borrower’s debt account.

Since debtors borrow to spend, rising private debt boosts demand while falling debt reduces it. Demand in the United States was therefore boosted substantially as private debt rose almost fivefold from 1945 until 2008. Now demand from credit is stagnant and as likely to subtract from demand as add to it. So private debt is the real straightjacket constraining the economy. But with mainstream economists ignoring it and fretting about government debt, the U.S. economy is likely to remain in its debt straightjacket indefinitely. As the public has started to realize since the 2008 crisis took them by surprise, mainstream economists are inept magicians.

Read more …

…second, Makoto Utsumi, Chairman of the International Advisory Board, Tokai Tokyo F.H., and former Vice Minister of Finance for International Affairs, Japan.

The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)

Can Japan withstand the return to conventional monetary policy? The Bank of Japan has been conducting an unconventional monetary policy for almost two decades, drastically strengthening this policy since Governor Kuroda took office in 2013. As public debt accumulated to 250% of GDP and due to the massive holdings of Japanese Government bonds by the Japanese banking sector, some argue that Japan cannot withstand the return to conventional monetary policy. Here are my points of view: First, let us consider the impact of interest rates hikes on public finances. Many analysts argue that this move would be destructive to public finances due to increased interest payments. There is a point, however, almost all analysts neglect. When interest rates on the JGB rise, the rates on savings and deposits also rise.

As 20% of the interest income is withheld at source, the incremental tax revenue would offset to a great deal the increasing cost of the debt service to be paid by the government. Although the damage caused by the shift in monetary policy on the budget balance would be limited, the fiscal situation of Japan would become increasingly serious with a sustained lack of fiscal discipline. Japanese public finances seem to be on a path to breakdown and the Bank of Japan’s policy to purchase Japanese government bonds up to an amount equal to 80% of new issuances looks more and more like the monetization of the budget deficit. Next, let us see the impact on the banking sector. Two decades of unconventional monetary policy have been squeezing the banks’ profit margins through the extreme flattening of the yield curve.

From this view point, the return to conventional monetary policy is good news for the Japanese banking sector in the long run. On the other hand, in the short and medium terms, this would represent the harshest challenge for banks due to massive valuation losses on their bond holdings. According to the Bank of Japan’s survey, a 1 percentage point rise of interest rates on bonds would cause a loss of US$20 billion for mega-banks, US$25 billion for regional banks, and US$19 billion for credit unions. While the U.S. Federal Reserve is firmly committed toward exit and as the European Central Bank seems to be quietly probing a future exit strategy, where is the Bank of Japan going? If it continues to maintain zero or negative interest rates, current profits of the banking sector would be further squeezed.

If it starts to take steps toward conventional monetary policy, the banking sector would face serious valuation losses. Either way, the future prospects for Japanese banks look like hell. We will probably witness a clear distinction between two groups of banks: those who manage their business based on foresight and those who don’t. And we would see a deep reshuffle in the banking sector along with the exit process from the unconventional monetary policy of the Bank of Japan.

Read more …

To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Europe’s Banking Union Is Dying in Italy (BBG)

The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared. The rival bank, Intesa Sanpaolo, would be getting a great deal for little risk. But for the Italian taxpayer, and the credibility of euro zone financial regulation, the plan is a loser and should be stopped. The Italian scheme is radically different from the one put in place two weeks ago, when the Spanish lender Banco Santander bought Banco Popular for one euro. In that case Santander also acquired Popular’s non-performing loans as well as all the future legal risks.

It also immediately went to the markets to raise capital to pay for it. Here, Intesa will only pick the assets it wants and insists that the operation not impact its capital ratio. This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around €10 billion ($11.1) for it. The government could have taken a less expensive route, involving the “bail in” of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, €10 billion is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash – from taxpayers who will feel defrauded.

Most importantly, this plan is a dagger in the heart of the euro zone banking union. This was one of Europe’s main responses to the sovereign debt crisis, designed to limit the contribution of taxpayers to bank rescues and to ensure all euro zone lenders faced a coherent set of rules. Italy is relying for its plan on its domestic liquidation regime. Rome will effectively by-pass the EU’s “single resolution board” which is supposed to handle bank failures in an orderly way and the “Banking Recovery and Resolution Directive,” which should act as the euro zone’s single rulebook. The advantage will be to spare senior bondholders but the cost will be huge: denting, perhaps irreversibly, the credibility of Europe’s newly formed institutions.

Read more …

And there we go. After years of trying to save them. One day we’ll realize just how epic this failure is.

Two Italian Zombie Banks Toppled Friday Night (WS)

When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks! It’s over for the two banks that have been prominent zombies in the Italian banking crisis: Veneto Banca and Banca Popolare di Vicenza, in northeastern Italy. The banks have combined assets of €60 billion, a good part of which are toxic and no one wanted to touch them. They already received a bailout but more would have been required, and given the uncertainty and the messiness of their books, nothing was forthcoming, and the ECB which regulates them lost its patience. In a tersely worded statement, the ECB’s office of Banking Supervision ordered the banks to be wound up because they “were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements.”

“Failing or likely to fail” is the key phrase that banking supervisors use for banks that “should be put in resolution or wound up under normal insolvency proceedings,” the statement said. This is the first Italian bank liquidation under Europe’s new Single Resolution Mechanism Regulation. The ECB explained: “The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward. Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.”

[..] nothing worked. Private sector money stayed away in droves. JP Morgan, which had been recruited to save the Italian banks, threw in the towel. These banks had been zombies for too long. Everybody knew it. But the government kept denying it. Just weeks ago, Italy’s Minister of Economy Pier Carlo Padoan insisted that the two banks would not be wound down. Last year, to dispel the mountain of evidence to the contrary, he insisted that that there would be no need of any future bail outs; and that, furthermore, Italy did not even have a banking problem. In early June, the two banks were instructed by the European Commission to raise an additional €1.25 billion in private capital. No one bit. Italy’s government then tried to persuade the European Commission and the ECB to water down the requirement to €600-800 million, and it urged Italian banks to chip in to the bank rescue fund. All that failed.

Read more …

That leaves 25 sovereign countries with nothing to say on issues that are vitally important to them. Who are we kidding?

‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)

Emmanuel Macron and Angela Merkel used the French president’s first Brussels summit Friday to deliver an unmistakeable message: their countries intend to lead the EU’s post-Brexit revival. The Franco-German power couple held an unusual joint press conference after meeting their 26 European Union counterparts, against a backdrop of their respective flags and the bloc’s blue banner with yellow stars. “When France and Germany speak with one voice, Europe can move forward,” newcomer Macron told a room almost filled to bursting point with reporters as he stood alongside the German chancellor. “There can be no pertinent solution if it is not a pertinent solution for France and Germany,” the 39-year-old centre-right leader.

Despite her more pragmatic tone, the message from 62-year-old Merkel was the same. “This press conference shows that we are resolved to jointly find solutions to problems,” she said. The joint press conference came exactly a year after Britain’s shock referendum vote to become the first country to leave the European Union, which prompted dire predictions of the break-up of the bloc. But Europe has jumped on the bandwagon of Macron’s stunning election victory over French far-right leader Marine Le Pen to trumpet a newfound optimism after years of austerity and crisis despite Brexit. At the heart of that is the idea that Macron may be able to repair the traditional “engine” behind European integration – the post-war alliance of Paris and Berlin after centuries of conflict.

Read more …

Can the Greek finance minister please state that Schaeuble lies to Germans? Just to see the reaction?!

Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)

British people were “endlessly lied to and deceived” in last year’s Brexit referendum campaign, German Finance Minister Wolfgang Schaeuble said on Friday. Speaking in Berlin on the first anniversary of the Brexit vote, Schaeuble was scathing about the “leave” campaigners who persuaded a majority of voters to opt to quit the EU. “The Britons were endlessly lied to and deceived,” Schaeuble told a conference of family-run companies. When the Brexit campaigners “happened to be successful, the ones who did it ran away because they said they can’t take responsibility”. The two sides in Britain’s referendum campaign swapped bitter accusations they were making misleading or untrue statements, such as the claim that leaving the EU would free up large sums for public health spending.

In the days after the vote, Prime Minister David Cameron, who called the referendum, resigned, and several prominent leave campaigners dropped out of the race to succeed him. Schaeuble said the 70 years of growth and prosperity Europe had known since World War Two was not based on pure majoritarianism but on sustainable democratic models. “(We need) not just mechanisms that consist of my promising something to a majority,” he said. “Then you only have to look at the demographics to see that you’ll end up with endless debates about redistribution that lead to jealousy.”

Read more …

May has become a very damaging force in Britain.

UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)

MPs from all parties are already planning an alliance to defeat Theresa May’s plans for a hard Brexit, just days into the new Parliament. Strategies to amend future legislation – including a key immigration bill – to force ministers to listen to business groups and to show the EU that Parliament wants a “softer” exit are being drawn up, The Independent has learned. One Conservative MP said the aim was to give confidence to “bullied” ministers who are reluctant to “speak out”, despite sharing the view that the Prime Minister’s plans put Britain on the road to disaster. Another MP outlined the importance of convincing Brussels that Parliament can “coordinate” to present a different, more EU-friendly policy to that of the Government. “It would really show how power has shifted if Parliament can coordinate itself – and that’s not impossible,” the MP said.

Pro-EU Tory Anna Soubry told The Independent: “We are talking to each other and will continue to talk to each other – this is something that transcends normal party political considerations. “It doesn’t have to be about forcing votes, but it may come to that. Certainly, the threat of losing a vote will weigh very heavily on the Government’s mind.” Another MP spoke of giving voice to changing public opinion, amid the first evidence that some people who voted Leave a year ago are changing their minds. Ms Soubry added: “I am up for working with everybody. Hopefully something concrete will come out of it, because this is the most important thing that’s been done in decades.” She said she was in contact with some of the 34 Labour MPs who, this week, challenged Jeremy Corbyn to change course by fighting to stay in the single market.

Read more …

Noy much use, perhaps. Don’t say it out loud. Just wait for the Tories to blow up.

Corbyn Vows To Force Early British Election (Ind.)

Jeremy Corbyn has said he will look to “force an early general election” after claiming it was “ludicrous” to suggest Theresa May could stay in power. The Labour leader made the claim before speaking at Unison’s annual conference in Brighton and also added he was pleased with the party’s recent surge in opinion polls. Mr Corbyn’s approval rating has been on the rise since the general election and it appears he will now attempt to pile pressure on the Prime Minister. “Mrs May called the election so not to have a coalition of chaos, but that is exactly what we have got, they don’t seem to have come to an agreement with the DUP two weeks after the election,” Mr Corbyn told the Daily Mirror. “We will challenge this Government at every step and try to force an early general election.”

Read more …

George Osborne has some accounts to settle. And a very easy target to blame his own whoppers on.

May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)

Theresa May single-handedly blocked a plan to immediately guarantee the future rights of the 3m EU citizens in the UK last summer, George Osborne has revealed. The then-Home Secretary was the only member of the Cabinet to oppose David Cameron, who “wanted to reassure EU citizens they would be allowed to stay”, after Brexit. “All his Cabinet agreed with that unilateral offer, except his Home Secretary, Mrs May, who insisted on blocking it,” revealed the Evening Standard, now edited by Mr Osborne. The proposal was discussed “in the days immediately after the referendum” exactly one year ago, said the newspaper. Ms May has denied the accusation and said that “was certainly not my recollection” of events. But Tom Brake, the Liberal Democrat Brexit spokesman, said: “It is a badge of shame that Theresa May blocked attempts to guarantee the rights of EU nationals after the referendum.

“It shows how cold and heartless she is. “Now that mean-spirited decision is coming back to haunt her as we see an exodus of skilled EU workers, from nurses to academics.” The revelation comes after EU citizens in the UK protested that Ms May’s “generous” offer – outlined last night – will leave them with less rights after Brexit than “British jam”. The Prime Minister’s proposals also ran into trouble from other EU leaders who warned of “open questions” and a “long, long way to go” before agreement. Ms May was forced to defend her position and said she wants to give EU citizens in the UK “certainty” but the details of the arrangement would be outlined during the negotiation process. Since reaching No 10, Ms May has faced down pleas to act unilaterally, insisting she would only offer guarantees to EU citizens if British ex-pats in the EU were given the same protection.

Read more …

It’ll happen only after the round of rate hikes. There’s not enough room to go down right now.

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

As any market veteran can tell you, those on the sell-side are the second-to-last to concede to a slowdown in economic activity. It’s unseemly to make negative calls when a firm’s main objective is keeping its clients fully invested in risky assets; the two aims naturally conflict. Hence the surprise when Bank of America Merrill Lynch said autos are headed for a “decisive downturn” that will trough in 2021 at around a 13-million-unit annualized rate, down from last year’s blistering record 17.6 million. A week earlier, Morgan Stanley, whose numbers are not quite as grim, also reduced its sales forecast, recognizing that the best days of the cycle have come and gone. The U.S. economy is consumption-centric. Growth in the current recovery has centered on three industries that have fed through to consumption in its various forms – autos, energy and financial services.

There’s something almost poetic in finance’s re-emergence, especially for those on Wall Street who’ve profited smartly from unprecedented levels of deal flow. Have a debt problem? Solve it with more debt. And why not? This system has worked for generations; insatiable demand for debt is why interest rates have staged their historic decline. Debt lit the fire that ignited the shale revolution. Debt put a floor under and then helped commercial real estate reach for the skies. Debt kept dying retailers alive. And debt made easier back-to-back years of record car sales. The question so many bullish economists must answer is what debt can do for the economy in the future. Much to the Saudis’ dismay, the energy industry is as lean and mean as it’s ever been; operating efficiency gains have been magnificent in a do-or-die environment. Energy is growth neutral going forward.

[..] It’s all good and well that strained industries want to extract what value remains from their CRE exposure as part of their exit strategies. But this only works in isolation. If motivated sellers move in tandem, you can bet teetering CRE valuations will be among the casualties, taking many over-exposed mid-size and small banks down with them. Call it a confluence of factors that bodes ill for the economic recovery, even as optimists hope the growth streak can stretch into a 10th year. By the way, leading the optimists’ charge is the Federal Reserve itself. Central bank policy makers’ expectations for future growth indicate the current economic recovery will unseat the record holder, the expansion that finally flamed out in 2001 after enjoying a life of exactly 10 years. But then it is the Fed that’s the very last to capitulate, to say nothing of forecast, a slowdown in economic activity.

Read more …

“The best thing to do is to break Illinois into pieces right now. Just wipe us off the map.”; “Illinois is merely the canary in the coal mine.”

Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)

Illinois is the perfect example of what happens when your state is run by fiscally irresponsible dunces for decades. The state is buried in debt, and hasn’t passed a budget in over 700 days. 100% of their monthly revenue is being consumed by court ordered payments, and the Illinois Department of Transportation has revealed that they may not be able to pay contractors (who are working on over 700 infrastructure projects) after July 1st if the state doesn’t pass a budget. To top it all off, the state’s credit rating is one step away from junk status, the lowest of any state. Because of these factors, Illinois may become the first state to declare bankruptcy since the Great Depression. Governor Bruce Rauner has gone so far as to call his state a “banana republic.” The state’s comptroller has admitted that “We are in massive crisis mode.”

And a reporter for the Chicago Tribune thinks Illinois has gone so far past the point of no return, that the state should be broken up. He recently wrote what basically sounds like a suicide note for Illinois. “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me. The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America’s heartland and let neighboring states carve us up and take the best chunks for themselves. The group that will scream the loudest is the state’s political class, who did this to us, and the big bond creditors, who are whispering talk of bankruptcy and asset forfeiture to save their own skins. But our beloved Illinois has proved that it just doesn’t deserve to survive.”

So how did it get to this point? The root of the problem is Illinois’ unfunded pension liabilities, which amount to $130 billion. The state’s leaders simply promised what could not be delivered. Most of their employees can retire in their 50’s, and many of them will receive 1-2 million dollars over the course of their retirements. As the debts associated with those pensions reached astronomical levels, the government increased taxes so much that many of the wealthiest and most productive citizens and businesses have moved away, leaving an even smaller tax base to draw from. In short, Illinois is in a death spiral, but it’s not alone. Illinois is merely the canary in the coal mine.

Read more …

Hopeless.

America’s Health-Care Rain Dance (Jim Kunstler)

The cost of everything medical is worked out in a private rain-dance between the aforementioned manifold concerned parties on the basis of what they think they can get away with in any particular case. In hospitals, this is enabled by the notorious ChargeMaster system which, to put it as simply as possible, allows hospitals to just make shit up. Any bill in congress that affects to reform the gross financial malfeasance in healthcare ought to start with the absolute requirement to publicly post the cost of everything that doctors and hospitals do, and enable the “service providers” to get paid only those publicly posted costs — obviating the lucrative rain-dance for dividing up the ransoms paid by hostage-patients who come to the “providers,” after all, in extremis. Notice that this crucial feature of the crisis is missing not only from the political debate but also from the supposedly public-interest-minded pages of The New York Times and other organs of the news media.

Perhaps this facet of the problem never entered the editors’ minds — in which case you really have to ask: how dumb are they? (The funniest claim about ObamaCare in today’s New York Times is the statement that 20 million citizens got access to health care under the so-called Affordable Care Act. Really? You mean they got health insurance policies with $8000-deductables, when they don’t even have $500 in savings to pay for car repairs? What planet do The New York Times editorial writers live on?) The corollary questions about deconstructing the insurance armature of the health care racket, and assigning its “duties” to a “single-payer” government agency is, of course, a higher level of debate. I’m not saying it would work, even if it was modeled on one of the systems currently working elsewhere, say in France.

But Americans have acquired an allergy to even thinking about that, or at least they’ve been conditioned to imagine they’re allergic by self-interested politicians. So, the current product of debate in the US Senate is just a scheme for pretending to reapportion the colossal flow of grift among the grifters. Spare yourself the angst of even worrying about the outcome of the current healthcare debate. It’s not going to get “fixed.” The medical system as we know it is going to blow up, and soon, just like the pension systems across the country, and the treasuries of the fifty states themselves, and the rest of the Potemkin US economy.

Read more …

“The coalition says it takes as many precautions as possible within the laws of warfare..”

US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)

The U.S.-led coalition’s strikes against the Islamic State militant group (ISIS) in two Syrian provinces killed 472 civilians in the last month, according to a monitor. The Syrian Observatory for Human Rights (SOHR), a U.K.-based monitoring group that has an extensive network of contacts on the ground in Syria, said the toll was more than double the month prior and the highest for a single month since raids began in September 2014. In Raqqa province, where the city of the same name is located, coalition strikes killed 250 civilians, including 53 children, SOHR said. In Deir ez-Zor, strikes killed 222 civilians, 84 of which were children. Rami Abdul Rahman, director of SOHR, told the AFP news agency that the total deaths caused by coalition strikes in Syria now amounted to 1,953. Of the deceased, 456 were children and 333 were women.

The coalition continues its bombing campaign in and around the eastern Syrian city of Raqqa, the largest under ISIS’s control in the country. It is supporting an Arab-Kurdish alliance waging a ground offensive against ISIS in the de facto capital of its self-declared caliphate that straddles the Iraqi-Syrian border. The coalition says it takes as many precautions as possible within the laws of warfare, but top coalition generals have admitted that civilian deaths are inevitable in the campaign to defeat ISIS. Some 100,000 civilians remain under ISIS control in the northern Iraqi city of Mosul, and thousands remain in Raqqa. Human rights groups have criticized the coalition for not exercising enough caution. One case in particular was a March 17 strike in Mosul that killed more than 100 civilians. The coalition investigated the incident and concluded that ISIS had placed booby traps in the building that maximized the damage on impact.

Read more …

Greece must refuse.

The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

They say that history repeats itself first as a tragedy then as a farce. It’s a commonplace expression that is nevertheless clearly true in crisis-ridden Greece. During the SYRIZA-AnEl coalition’s time in power(especially under the second mandate), even the seasons of the year have come to resemble each other. Winter is a time of tension, harsh disagreement and bluster. Spring is the season for gradual capitulation. May (2016 and 2017) is the month for government betrayal; June for further prerequisites and an “agreement.” The rest of the summer then marks a period of government euphoria, followed by an autumn of initial discussions with an eye to the next set of negotiations. By using what happened over the same span of time in 2016—along with the language of the Third (and “fourth”)Memorandum of Understanding—as a kind of textbook, it’s easy to tell where we are and where we’re headed.

The June 15 Eurogroup joint statement condenses all the results of the most recent set of negotiations. These are the most essential and specific points: “The reform measures cover areas such as pensions, income tax, the labour market as well as the financial and energy sectors. These should make Greece’s medium-term fiscal strategy more robust and support the growth-friendly rebalancing of the economy. The Eurogroup invited Greece together with the institutions and relevant third parties to develop and support a holistic, growth enhancing strategy.”

In this paragraph, the Eurozone Finance Ministers are essentially borrowing a page from 1984. In that legendary novel by George Orwell, war is peace; freedom is enslavement; ignorance is power. For the Eurogroup (as per usual), pension cuts, reductions in tax exemptions, an administration well-disposed to mass lay-offs, and the sale of Public Power Corporation shares all count as positive “reform measures.” Greece’s sentence to a “long-term memorandum,” requiring surpluses of 3.5% until 2022 and a little over 2% until 2060, constitutes “support [of] a holistic, growth enhancing strategy.” “The Eurogroup reconfirmed its approach to the sustainability of Greece’s public debt that was agreed in May 2016, while providing some further detail on the medium-term debt measures that could accrue to Greece. These measures would be implemented after successful completion of the programme, if a new debt sustainability analysis were to confirm that such measures are necessary.”

These two brief paragraphs finalize the results of the multi-month Greek debt negotiations. In short and as is plainly evident, the Greek government gained nothing in terms of its debt, while after months of Eurozone attempts to secure further relief the Eurogroup simply determined that everything decided back in May 2016 still holds. Even the government’s recent expectation that the (highly dangerous) phrase “if necessary” would be removed from the relief-program wording was ultimately frustrated. “The Eurogroup welcomed Greece’s commitment to maintain a primary surplus of 3.5% of GDP until 2022, and a fiscal path consistent with the European fiscal framework thereafter. According to analysis by the European Commission, such compliance would be achieved with a primary surplus of equal to or above but close to 2.0% of GDP in the period of 2023-2060.”

Read more …

Mar 182016
 
 March 18, 2016  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , ,  


Idomeni: where human rights go to die

Either Something Spooked The Fed Or There Is A “Central Bank Accord” (ZH)
Next Financial Crisis Could Overwhelm World’s Defenses, IMF Says (BBG)
Global Currencies Soar, Defying Central Bankers (WSJ)
Yen Rally Is Piling Pressure On BOJ (CNBC)
China Adjusts Yuan by Biggest Margin Since November (WSJ)
Bank IPOs Expose Dark Arts Of Chinese Finance (Reuters)
China Home Prices Rise Most In 2 Years, Big Cities Bubble Worries (Reuters)
UK Household Debt Binge Has No End In Sight (Telegraph)
800,000 Barrels Of Oil Go Missing Every Day (WSJ)
Brazil Tumbles Like ‘House Of Cards’ In Crisis
Merkel Dodges European Banking Union Push From Draghi (BBG)
Catalonia Said to Court Default in Spanish Game of Chicken (BBG)
Italy Passes Law To Make Supermarkets Give Wasted Food To Charity (Ind.)
EU and Turkey Harden Positions Over Latest Refugee Plan (FT)
Greece Has Much Work To Do If EU Reaches Refugee Deal With Turkey (Kath.)
Idomeni, The Train Stop That Became An ‘Insult To EU Values’ (Guardian)
‘Refugees’ and ‘Migrants’- There Is A Distinction That Matters (UNHCR)

The US beggaring all of its neighbors. Short term only.

Either Something Spooked The Fed Or There Is A “Central Bank Accord” (ZH)

Yesterday’s FOMC meeting and press conference generated widespread unease. My personal uncomfortable feeling was reminiscent of a time many decades ago when a date stood me up and provided an excuse that made little sense. Simply put, the combination of the FOMC’s forecasts, economic assessment, and guidance on the future path of interest rates were incongruous and disconnected to their ‘data dependency’ message. This week was a curious time to recalibrate to a far more dovish stance since it has followed clear improvement in labor markets, inflation indicators, and inflationary expectations. Even with the modest downward adjustments to their economic projects, the Fed’s goals and mandates have not only (basically) been achieved but they seemingly have economic momentum behind them as well.

Core year-over-year inflation measures have been rising. Core CPI rose to 2.3% earlier this week. The PCE deflator has risen to 1.7% which already stands above the Fed’s year-end estimate. The Fed once again lowered the level it believes to be its longer-run estimate of the natural rate to 4.8%. Regardless, with the unemployment rate currently at 4.9%, the Fed is implying by its belief in the Philips Curve that wages will soon accelerate. Despite modest changes in the Fed’s economic projections, the Fed is forecasting growth above its estimate of potential growth. So how is it possible that a ‘data dependent’ Fed turned dovish? Reporters tried to address these questions during the press conference. Yellen was uncharacteristically opaque. She deflected questions.

It had the appearance of a coach who had a specific game plan, but the familiar playbook was replaced on the day of the game. The market place is abuzz with two possibilities for such a shift. The first possibility is that something spooked the board. The market is only learning now from Bernanke’s book that QE2 and QE3 were initiated because of fears of the European crisis, not due to a shortfall in economic targets as claimed. Most people believe that the Fed deferred a hike in September due to “international developments”. The first possibility may have been the catalyst for the second. The second possibility being discussed is that some type of central bank accord was reached at the G20 meeting in Shanghai February 25-26.

Maybe they noticed that diverging central bank policies were leading to extreme market volatility and accusations of currency wars. It is not difficult to envision an agreement where central banks agreed to provide more stimuli, if the Fed agreed to pause in order to not offset the effects of such moves. This would mean that the Fed would have to ignore economic data. Since markets have become more correlated, a pause would allow the dollar to weaken, and in turn, take pressure off of China to devalue the yuan. This would also help commodities to rise and emerging markets to soar. As global financial conditions begin to improve, the Fed would then have better cover under which to hike interest rates.

[..] The time has come to end NIRP and ZIRP, and other forms of aggressive central bank experimentation and the dangerous consequences that come with them. It’s time they take a giant collective BURP, I mean BIRP (Basic Interest Rate Policy).

Read more …

No kidding. But what happened to the recovery then?

Next Financial Crisis Could Overwhelm World’s Defenses, IMF Says (BBG)

The global financial safety net has become increasingly fragmented, making it harder to respond to crises in a world roiled by volatile capital flows, International Monetary Fund staffers warned. Defenses haven’t kept up with the growth of external debt in recent years, the Washington-based fund said in a report released Thursday. As a result, a system-wide shock could overwhelm the world’s crisis resources, which include nations’ foreign-exchange reserves, central-bank swap lines, regional funds such as the euro area’s European Stability Mechanism, and the IMF itself, the lender said. Financial cycles have been “growing in amplitude and duration, capital flows have become more volatile, and non-banks have gained importance, altering the nature of systemic risk,” IMF staff said in the report, which was presented to the fund’s executive board on March 7.

In a major event, “the needs could exceed the collective resources available,” the fund said. The paper takes stock of the global monetary system that has prevailed since 1973, the year that marked the collapse of the Bretton Woods system of exchange rates pegged to the dollar. At a meeting in Shanghai last month, Group of 20 finance ministers and central bankers said the IMF’s work would inform the group’s study of the “evolution” of the world’s financial architecture. The current monetary system, with the freedom it offers to countries to choose their exchange-rate strategy, has proven more flexible in responding to shocks, the IMF said. But the 2008 crisis exposed the system’s weaknesses, including a lack of financial oversight. Since then, the global economy has continued to undergo major structural shifts that are having a significant effect on the international monetary landscape, the IMF said.

The growth of emerging-market and developing countries has made the global economy more “multipolar,” fund staff said. Still, financial markets in such nations aren’t as deep as in advanced economies, and the system remains highly dependent on the dollar as a reserve currency. The central role of one or two reserve currencies can have significant spillover effects on other countries, especially those with open economies and less developed financial markets, the IMF said. At the same time, the globalization of finance has led to a dramatic increase in capital flows. “Periodic episodes of high capital flow volatility appear to have become a feature of the new global landscape,” putting pressure on emerging markets in particular, the IMF said.

Read more …

No, what happens is the USD weakens. Deliberate ploy.

Global Currencies Soar, Defying Central Bankers (WSJ)

Efforts by many of the world’s central banks to weaken their currencies are failing, raising concerns about whether policy makers are losing the ability to wield control over financial markets. This was the case again in Japan on Thursday, when the dollar fell 1.1% against yen, to ¥111.39. Despite the Bank of Japan’s efforts to push down its currency and jump-start the economy with negative interest rates, the yen is up 8% this year and is at its strongest level against the dollar since October 2014. European central bankers are having similar problems containing the strength of the euro and other currencies. These difficulties are a reminder that the long stretch of exceptionally low rates in response to the 2008 financial crisis has created market distortions that may be difficult for central bankers to contain.

This disconnect could produce more volatility in financial markets. Even if investors can predict what actions central banks are likely to take, they are having a hard time predicting how markets will react, potentially sparking a pullback from riskier assets, such as emerging markets or commodities. It also underscores long-standing concerns about the prospects for global growth. A number of central bankers are reaching for the lever of lower interest rates to weaken their currency and make their exports more competitive. But because policy makers are all following the same approach, they are in effect canceling each other out. “There is a rising concern that central banks are testing the limits of their policies,” said Brian Daingerfield, a currency strategist at RBS Securities. “Each time you take a tool out of the tool kit, it gets closer to being empty.”

The European Central Bank has struggled with its efforts to weaken the euro, which gained 0.8% against the dollar on Thursday. Last week, the ECB cut interest rates further into negative territory, yet the currency is up 4.2% this year. Even some central banks with less actively traded currencies are having a hard time guiding markets. Norway’s central bank on Thursday cut its main interest rate to a record low of 0.5%, and a bank governor said he wouldn’t rule out negative rates, in which central banks charge big lenders to hold deposits. The Norwegian krone gained more than 1% against the dollar and was up against the euro.

Read more …

Japan may have to sit this one out.

Yen Rally Is Piling Pressure On BOJ (CNBC)

The strengthening yen could see Japan’s central bank eke out more stimulus as early as next month, confounding expectations for policy inaction following January’s surprise move to negative interest rates. The yen rallied to 110 against the greenback during Thursday’s U.S. session, its strongest level since October 2014, amid relentless dollar selling after the Federal Reserve played down prospects for tighter monetary policy on Wednesday. “At these [yen] levels, it is hard to see the Bank of Japan not extending their stimulus program in some form at their April 28 meeting,” IG market strategist Angus Nicholson said on Friday. A stronger yen hurts Japan’s economy and is especially detrimental to the export sector because it makes local goods more expensive for overseas buyers, providing a fillip to rival Asian manufacturers with weaker currencies, such as South Korea.

The central bank held fire at Monday’s monetary policy review, as anticipated, and economists believed it would continue to take a wait-and-see approach to assess the impact of January’s negative interest rates decision. But that may no longer be the case. “If USD/JPY drifts lower again, we expect more aggressive action from the Bank of Japan,” Kathy Lien at BK Asset Management said on Friday. As an indicator of just how worrying the latest currency strength is to Japan, strategists believe the BOJ intervened in markets on Thursday in attempt to move the yen off its 16-month peak. “In a matter of minutes right around lunchtime in the U.K., USD/JPY jumped nearly 100 pips from its low of 110.67. This is the third time in two months that the BOJ stepped in to buy USD/JPY below 111 as they clearly don’t want to see the currency pair trading on the 110 handle,” observed Lien.

During early Asian trade on Friday, the pair hovered around 111. Japanese finance minister Taro Aso said on Friday that he was closely monitoring the currency’s moves, but minutes released at the market open from the central bank’s January meeting made no mention of the yen. “At 113, the BoJ has leeway to wait but at 110-111 with the risk of further losses, they may not be able to forestall easing for much longer,” said Lien.

Read more …

When the USD starts rising again, and it will, China will have to move in the opposite direction.

China Adjusts Yuan by Biggest Margin Since November (WSJ)

China on Friday set its currency 0.52% stronger against the dollar, in the yuan’s steepest one-day fixing increase since November, reflecting the weakness in the dollar after the U.S. Federal Reserve moved to a more dovish tone. The People’s Bank of China set the currency’s daily midpoint at 6.4628 yuan to a dollar, reaching the yuan’s strongest level against the U.S. dollar since Dec. 16. The yuan now trades at 6.4645 to a dollar versus its last official closing of 6.4930. The steep gain in the yuan’s fixing Friday is only surpassed by the 0.54% gain in the daily benchmark on Nov. 2, which remains the biggest daily adjustment since the yuan was de-pegged from the dollar in 2005. In each daily trading session, the central bank allows the dollar/yuan rate to move no more than 2% above or below the benchmark, or the central parity rate, it sets.

Analysts have linked the November appreciation to China’s efforts to have the yuan included in the IMF’s basket of reserve currencies. The IMF announced its decision to include the yuan at the end of November. For Friday’s move, however, traders say the jump in the central parity rate reflects the strength of major currencies in the valuation basket used by the PBOC in determining the daily currency benchmark. The euro, Japanese yen, and Australian dollar have made significant gains against the U.S. dollar after the Fed, at the conclusion of its monetary policy meeting on Wednesday, toned down its expectations of the pace of interest rate increases. The euro and the Japanese yen have both risen by nearly 2% against the dollar since the Fed suggested it would likely only raise the benchmark rate just twice this year, down from earlier projections of four increases.

Read more …

Wall Street 10 years ago, all over again.

Bank IPOs Expose Dark Arts Of Chinese Finance (Reuters)

Hong Kong’s stock market is shining a new light on the dark arts of Chinese finance. The country’s mid-sized lenders have become skilled at repackaging loans to look like lower-risk investments. Two impending share offerings from state-backed banks underscore how such wizardry has fueled growth. In recent years mid-sized Chinese banks have devoted an increasing proportion of their balance sheets to various investment products, often issued by other financial institutions. These vehicles, known as trust plans, asset management plans or wealth management products, tend to be backed by loans or bonds, though it’s often hard to tell exactly where the money has ended up. What’s clear, however, is that Chinese banks find this business more attractive than regular lending.

This may be because it requires them to hold less capital than for corporate loans, and also carry fewer provisions for possible bad debts. To see how important this business has become, just look at China Zheshang Bank, which is based in Hangzhou, the home town of e-commerce giant Alibaba. It is currently completing a $1.75 billion initial public offering in Hong Kong. At the end of 2013, Zheshang had less than $3 billion of debt instruments, such as wealth management products, on its balance sheet. By the end of last year this had exploded to $66 billion – 42% of its total assets. Income and fees from these activities – which the bank calls “Treasury Business” – brought in a staggering 80% of pre-tax profit last year.

It isn’t alone. Bank of Tianjin, which is seeking to raise $1.23 billion from Hong Kong investors, has also embraced what it calls “non-standard credit”. The group, whose shareholders include Australia’s ANZ, had $19 billion of such loans outstanding in September last year – three times as much as at the end of 2012. Chinese banks’ increasing dependence on these financial instruments raises several risks. For one, it means that long-term and illiquid loans are increasingly funded with short-term investments which are susceptible to a sudden loss of confidence. Second, it increases the web of links between banks and other financial institutions, increasing the vulnerability of the overall system. Rapid growth also raises the risks of loose lending. Financial sorcery rarely ends well.

Read more …

Government credibility erodes further.

China Home Prices Rise Most In 2 Years, Big Cities Bubble Worries (Reuters)

China’s home prices rose at their fastest clip in almost two years in February thanks to red-hot demand in big cities, but risks of overheating in some places combined with weak growth in smaller cities threaten to put more stress on an already slowing economy. Average new home prices in 70 major cities climbed 3.6% in February from a year ago, quickening from January’s 2.5% rise, according to Reuters calculations on Friday. That was the quickest year-on-year increase since June 2014, and encouragingly, 32 of 70 major cities tracked by the NBS saw annual price gains, up from 25 in January. Ordinarily, that should be welcome news for policymakers who have rolled out a raft of stimulus measures to support an economy growing at its slowest pace in a quarter of a century.

But the divergence in home prices – surging values in bigger cities and depressed markets in smaller cities plagued by a supply glut – makes Beijing’s job harder as it looks to reanimate growth without inflating asset bubbles. “The government’s all-out encouragement of housing sales seems to be working, but at the cost of surging prices in big cities,” said Rosealea Yao at Gavekal Dragonomics in Beijing. “These surges in big cities are not sustainable and would increase uncertainties and instability in the overall housing market.” The data showed tier 1 cities, including Shenzhen, Shanghai and Beijing, remained the top performers, with prices surging 56.9%, 20.6% and 12.9% respectively. “Prices in first-tier cities are very expensive now, it’s hard for new families to afford a home,” said Tan Huajie, vice president China’s biggest property firm Vanke.

The trouble is that speculators and ordinary investors, who have been shaken by the summer crash in mainland stock markets, are increasingly ploughing their money into the housing market – most of it going to the frothy sector in big centers. A slowing economy has also meant most jobs are in the biggest cities, drawing more people into these places and feeding the insatiable demand for homes. A breakdown of NBS data showed that a slew of government measures and increased lending has failed to arrest persistent softness in property markets in smaller cities where a glut of unsold houses have weighed on prices. Most third-tier cities still saw on-year prices drops in February, though the declines eased from the previous month.

Read more …

How Britain keeps the illusion going.

UK Household Debt Binge Has No End In Sight (Telegraph)

Britain’s credit binge has no end in sight as weak pay growth and low interest rates encourage households to load up on debt, official forecasts show. The Office for Budget Responsibility (OBR) said UK households were on course to spend more than they earned for the rest of the decade. Such a long period of households living so far beyond their means would be “unprecedented”, the fiscal watchdog said. Households are expected to spend £58bn more than they earn this year, rising to £68bn by the end of the decade. This is up from respective deficit forecasts of £41bn and £49.2bn in November. The OBR said data suggested spending had “significantly outpaced the growth of labour income” at the end of last year.

Consumers are expected to raid their savings to fuel consumption growth. Borrowing over the next five years would also be supported by the Bank of England’s “extremely accommodative monetary policy”. “The persistence of a household deficit of this size would be unprecedented in the latest available historical data, which extend back to 1987,” the OBR said in its latest UK healthcheck. It said comparable data stretching back to the early 1960s also “showed the household surplus moving into negative territory in only one year between 1963 and 1987”. The eight years of deficits forecast by the OBR contrast with a household surplus of £37.7bn in 2012 as Britons tightened their belts in the wake of the financial crisis and saved more.

Read more …

“..The agency found that “[statistical] limitations can introduce errors into the data, although the magnitude and direction of these errors are not clear.”

800,000 Barrels Of Oil Go Missing Every Day (WSJ)

There is mystery at the heart of the oversupplied global oil market: missing barrels of crude. Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude. Some analysts say the barrels may be in China. Others believe the barrels were created by flawed accounting and they don’t actually exist. If they don’t exist, then the oversupply that has driven crude prices to decade lows could be much smaller than estimated and prices could rebound faster. Whatever the answer, the discrepancy underscores how oil prices flip around based on data that investors are often unsure of.

Barrels have gone missing before, but last year the tally of unaccounted-for oil grew to its highest level in 17 years. At a time when the issue of oversupply dominates the oil industry, this matters. “If the market is tighter than assumed due to the missing barrels, prices could spike quicker,” said David Pursell at energy-focused investment bank Tudor, Pickering, Holt. Here’s how a barrel of crude goes “missing” in the data. Last year, the IEA estimated that on average the world produced around 1.9 million barrels a day more crude than there was demand for. Of that crude, 770,000 barrels went into onshore storage while roughly 300,000 barrels were in transit on the seas or through pipelines. That left roughly 800,000 barrels a day unaccounted for in the data. Global oil supply is about 96 million barrels a day.

In the fourth quarter, the number of missing barrels reached as high as 1.1 million barrels a day, or 43% of the estimated oversupply during that period. The IEA collates production and demand data from around the world, and its monthly reports often move prices. Other major market monitors, like the U.S. EIA and the OPEC, don’t break down their data to show the number of missing barrels. In 1998, the last time the number of missing barrels was so high, concern over the discrepancy reached the US Congress. A U.S. senator asked the Government Accountability Office, a nonpartisan agency working for Congress, to examine the IEA data. The agency found that “[statistical] limitations can introduce errors into the data, although the magnitude and direction of these errors are not clear.”

Read more …

Fascinating drama, but, really guys? Olympics? There? In a few months?

Brazil Tumbles Like ‘House Of Cards’ In Crisis

The plot to Brazil’s political crisis has become so complicated that even makers of political drama ‘House of Cards’ joke they are now following events. There is even an online quiz where one has to guess: did it happen in Brazil or in House of Cards, or both? But this is no laughing matter in Brazil. This is the country’s toughest political crisis since the early 1990s, when its first democratically-elected President in the modern era, Fernando Collor, was removed from power. On Wednesday night the crisis took a bizarre turn, as a judge revealed phone conversations between President Dilma Rousseff and her predecessor Luiz Inacio Lula da Silva and suggested they are trying to obstruct the course of an investigation into corruption. Spontaneous protests erupted in more than 15 cities across the country and riot police acted against demonstrators in Brasilia.

Both Rousseff and Lula – as he is known – are fighting for their political survival. Their political project has been shaping Brazil since 2003, when Lula defeated the opposition and established the Workers’ Party at the top of Brazilian politics. Rousseff is under fire for allegedly doctoring government accounts last year and could be suspended from her job as early as May if she loses a key vote in Congress. Lula is investigated for allegedly having received gifts from construction firms that were benefitted with inflated contracts from state oil giant Petrobras. Two weeks ago it looked like investigators were close to charging Lula for corruption, after he was detained and questioned for three hours. On Sunday, opponents of Rousseff and Lula staged one of the country’s largest demonstrations in history asking for her removal and his imprisonment.

Usually when politicians are involved in corruption allegations, they are either fired or suspended from their jobs – not invited into the government. But these are strange times in Brazilian politics. Rousseff’s reaction this week took everyone by surprise. She invited Lula to become her Chief of Staff and help lead her efforts out of the impeachment mess. On Wednesday, she justified her decision by saying he is “important and relevant for his unequivocal political experience”. She dismissed criticism that Lula was only being offered a job to escape criminal charges. As a minister, he will have prosecution privileges and only Brazil’s Supreme Court will be able to try him. She also denied that Lula would become a “de-facto” President – a “super minister” more powerful than the President herself.

“I have to laugh when you ask that,” she told journalists on Wednesday. But hours after Rousseff’s announcement to the press, a “bomb” was dropped in Brazil’s political scene. A phone conversation between Rousseff and Lula – taken earlier that day – was released to the public. Rousseff tells Lula that she is sending him a document which he can use “if necessary”. That document confirmed Lula’s nomination as a minister. One reading of that conversation suggests that Lula should use it in case prosecutors want to charge him before he is sworn in. That would corroborate the idea that Lula’s nomination is nothing but a plan to save him from prison. The phone conversation was revealed by federal judge Sergio Moro who has become a central person in the Petrobras probe and a hero to many people who are anti the Workers’ Party.. In Sunday’s mass protests, demonstrators showed hostility towards opposition politicians. The only unanimous figure amongst them was Moro.

Read more …

Not going to happen.

Merkel Dodges European Banking Union Push From Draghi (BBG)

ECB President Mario Draghi pushed European Union leaders for clarity on the future of the euro on Thursday. But Germany still chose to skirt a critical area of disagreement with its partners. During a closed-door session in Brussels, Draghi told EU leaders that the most important thing they could do would be to set out a clear path forward for the monetary union, according to two officials familiar with deliberations. When Portugal later called for a specific commitment to discuss banking union at an upcoming summit in June, German Chancellor Angela Merkel said such language wasn’t warranted, the officials said, asking not to be named because the talks were private.

Merkel, struggling to reassure her voters that she can get a grip on immigration flows, is sensitive to the risk of a domestic backlash against underwriting bank deposits in the rest of the bloc; Draghi has already faced German dissent in his battle to fan inflation across the currency union. At Thursday’s summit, Draghi said the ECB has “no alternative” to its recent rate cuts and monetary policy actions, and he encouraged them to support the central bank by reassuring savers, insurers and bankers about potential market distortions or risks to financial stability from the latest stimulus efforts. Draghi also spoke to reporters after leaders wrapped up the economic part of their deliberations and he left the meeting.

“I made clear that even though monetary policy has been really the only policy driving the recovery in the last few years, it cannot address some basic structural weaknesses of the euro-zone economy,” Draghi said. He also pledged that rates would stay low and that the ECB would use “all the appropriate instruments” as the outlook requires. [..] One particular area of German opposition has been further moves on banking union. The euro area has already adopted common banking supervision and resolution frameworks, while stopping short of creating a common deposit insurance framework. Germany has said it can’t proceed with pooling guarantees until the euro area has addressed broader questions about sovereign debt risk and financial stability. Draghi identified the euro area’s lack of joint deposit insurance as one of the main policy changes facing the EU..

Read more …

High stakes games.

Catalonia Said to Court Default in Spanish Game of Chicken (BBG)

Catalonia is deliberately flirting with default on its bank loans as the region’s separatist government tries to force the Spanish state to deliver aid payments, according to two people familiar with the situation. Officials in the regional capital Barcelona are counting on Spain to step in and supply the funds they need to meet loan repayments coming due this year, betting the central government will be forced to back down because the costs of a default would be greater for the Spanish sovereign, the people said, asking not to be identified discussing confidential matters. The region already missed payments on at least two bank loans, Regional President Carles Puigdemont said earlier this month according to El Mundo newspaper. Albert Puig, a spokesman for the Catalan government, said the region is trying to persuade Spain to release aid money due from 2014.

He said Wednesday there’s “no scenario” in which Catalonia would default. Catalan bonds maturing in February 2020 plunged the most since June 2013 on Wednesday after El Mundo reported that the region could be placed on selective default by credit rating company Standard & Poor’s. The yield on the debt rose by 21 basis points to 4.18% on Thursday after jumping by 84 basis points during the previous session. Similarly dated Spanish debt yields 0.36%. The separatist government in Catalonia, Spain’s biggest regional economy, is locked in a battle with the authorities in Madrid as it fights for independence. Puigdemont has pledged to prepare for secession by the middle of next year, though caretaker Prime Minister Mariano Rajoy says his plans are illegal.

The latest skirmish between the two administrations is over Catalonia’s plan to extend the maturity of approximately €1.6 billion of bank loans coming due this year. Such modifications require approval from the central government under the terms of the region’s 2012 bailout deal and Spain has been dragging its feet. Those loans are from Banco Santander, Banco Bilbao Vizcaya Argentaria, CaixaBank and Banco Sabadell, the two people said.

Read more …

Must be EU law ASAP. Make that global.

Italy Passes Law To Make Supermarkets Give Wasted Food To Charity (Ind.)

Italy has passed a law which will make supermarkets donate more of their waste food to charities. The country is now the second in Europe to pass such a law, after a bill was introduced in France in February which fines retailers who throw away unsold food. The bill received strong support from all parties, and was passed by the Italian parliament’s lower house on Thursday. It is expected to get approval from the Senate this week. Rather than penalising retailers who throw away food, the new law makes it easier for them to give it away, through the reform of certain tax laws which previously made it difficult to donate unsold produce. The law also allows businesses to give away food which is past its ‘sell by’ date, if it is not spoiled.

Italian agriculture minister Maruizio Martina told La Repubblica: “We are making it more convenient for companies to donate than to waste.” “We currently recover 550 million tonnes of excess food each year, but we want to arrive at one billion in 2016.” According to food producers’ organisation Coldiretti, the equivalent of 76kg of food for each person in the country is thrown away every year. With the passing of the new bill, it is hoped that some of this food will be passed on to the six million Italians who rely on donations from charities to eat. The anti-waste movement has been gathering momentum across Europe recently – French politician Arash Derambarsh, who is trying to pass EU-wide food donation legislation, has previously told The Independent: “The problem is simple – we have food going to waste and poor people who are going hungry.”

Read more …

The deal can’t be done without the EU playing fast and loose with a whole slew of international laws.

EU and Turkey Harden Positions Over Latest Refugee Plan (FT)

The EU and Turkey on Thursday night hardened their positions over the EU’s latest migration plan, leaving many disputes still to be resolved on a big-bang proposal to systematically turn back migrants reaching Greek islands. After five-hours of summit talks in Brussels, EU leaders agreed a negotiating position that further diverged from Ankara’s demands, setting the stage for a clash on Friday over key legal, practical and political elements of the package. These include Turkey’s refusal to apply full international standards on refugees, a Cypriot veto on opening parts of Ankara’s EU-membership talks, and Greece’s demands for thousands more staff to implement the plan. Differences also remain on the EU side over promises to accept Syrian migrants directly from Turkey to compensate for those turned back from Greek islands.

Angela Merkel, the German chancellor, said the final round of negotiations “will be anything but easy”. François Hollande, the French president, added: “I can’t guarantee you a happy conclusion.” Talks with Turkey on the offer will begin on Friday morning, when Ahmet Davutoglu, Turkish prime minister, will meet with Donald Tusk, the European Council president, Mark Rutte, the Dutch premier, and Jean-Claude Juncker, the European Commission president. Diplomats said one of the biggest stumbling blocks was the legal status of the plan, with Spain, Portugal and France pressing for Turkey to revamp its asylum system so migrants from all countries are able to seek international protection there. According to a draft of the EU’s position seen by the FTs, the bloc calls on Turkey to offer a “commitment that migrants returned to Turkey will be protected in accordance with the relevant international standards”.

Ankara is resisting any such formal legal changes, which EU officials fear would blow a hole in the legal basis for the deal. Ms Merkel said there were “certain legal prerequisites” needed to ensure migrants would be treated humanely in Turkey. Mariano Rajoy, Spain’s premier, said: “I defended the principle that whatever decision that is adopted must be in conformity with international law, and I made clear that without that we couldn’t support the conclusions.” Also sensitive are Ankara’s demands that Cyprus lifts a freeze on several “chapters” in its EU membership talks, a concession Nicosia is unwilling to make without Turkey recognising its government. While the issue touches on 40 years of enmity and has the potential to flare up, diplomats are discussing various compromises to work around the Cypriot block. Mr Hollande said leaders were “careful not to name the [specific] chapters”.

On the practical front, Greece also requested 4,000 extra staff — including 2,500 from other EU countries — to help it man borders and detain and handle an estimated 10,000 arrivals per week, who must be processed individually according to the terms of the deal. Ms Merkel said Germany was willing to contribute personnel to the Greek effort, saying EU member states could be able to commit specific numbers in a matter of days. “Each and every refugee has to be evaluated, each and every individual case has to be analysed,” Ms Merkel said. “From a logistical point of view, it’s going to be very important to have the necessary personnel on the islands to make this procedure possible.”

Read more …

Imagine the mess this will cause: “Each person applying for asylum will have to be interviewed as part of the process and each application examined separately. The arrivals will have the right to appeal if their asylum claim is rejected.”

Greece Has Much Work To Do If EU Reaches Refugee Deal With Turkey (Kath.)

Late last night European Union leaders were discussing the plan for Greece to return refugees to Turkey, which will require the government in Athens to conduct a huge amount of work in the coming days if the scheme is approved. European Council President Donald Tusk said he was “more cautious than optimistic” that an agreement could be reached on the plan, which is based around the EU resettling one refugee directly from Turkey for every refugee that crosses the Aegean and arrives in Greece. If approved, the deal will entail a huge amount of legal and technical work for Greek authorities in the next few days.

Firstly, the country’s asylum service will have to be overhauled immediately, starting with the recognition of Turkey as a “safe third country,” which would allow asylum seekers to be returned there from Greece. Legislation would also have to change so that asylum applications are processed within days rather than months, as is the case now. At the same time, Greece will have to remove all the refugees and migrants currently on its islands and take them to camps on the mainland. This has to happen before the agreement with Turkey for the return of anyone arriving on the islands can begin. This means some 8,000 people will have to be transferred.

Having done this, the Greek government will have to set up a system to register and process any new arrivals on the islands and examine their asylum applications. Each person applying for asylum will have to be interviewed as part of the process and each application examined separately. The arrivals will have the right to appeal if their asylum claim is rejected. This would require hundreds of public servants and other personnel to be stationed on the islands. This includes judges, employees of Greece’s asylum service, translators, security staff and officials from the EU’s border agency, Frontex. Also, there will be Turkish observers on the islands to ensure the refugees sent back have traveled from Turkey in the first place.

Read more …

“All they want is a better life, to escape war, to escape poverty. And what do they get? Greece of [Nazi] occupation. These are scenes from another century, another time.”

Idomeni, The Train Stop That Became An ‘Insult To EU Values’ (Guardian)

Not long ago few had heard of Idomeni, a train stop on the Greek-Macedonian border. Now it has become Europe’s biggest favela: an embarrassment to the values the continent holds so dear. Its tents, clinics and cabins lie on mud-soaked land. Its fields, once fertile, are toxic dumps. Its air is acrid and damp. Children dart this way and that, exhausted, hungry, unwashed. Waterlogged tents surround them – women sitting inside, men sitting in front, attempting vainly to stoke fires on rain-sodden wood. Everywhere there are lines: of bedraggled refugees queuing for food, of scowling teenage boys waiting for medics, of teenage girls holding babies, of older men and women staring into the distance in disbelief. And everywhere there are piles: of sodden clothes, soaked blankets, muddy shoes, tents, wood, rubbish – the detritus of despair but also desperation of people who never thought that this was where they would end up.

Taking in the camp’s chaotic scenes on Tuesday, the EU’s top immigration official Dimitris Avramopoulos, momentarily struggled to find the words. “These are images that offend us all,” he said, young boys breaking into a fight as they scavenged for wood behind him. “The situation is tragic, an insult to our values and civilisation.” Idomeni was never meant to happen. It is a bottleneck that abruptly occurred when Macedonia – following other eastern European and Balkan states – arbitrarily decided to seal its frontier. At its most intense, 14,000 people – mainly Syrians and Iraqis but also Afghans, Iranians, Moroccans, Algerians and Tunisians – have converged on this boggy plain, all bound by a common dream to continue their journey into central Europe.

For many the sight of Avramopoulos, wading through the slush in pristine wellies, was the first sign that hope was in the offing. Few politicians have ventured this far north. With almost every refugee in close contact with relatives abroad, hopes abound that the visit will augur well when EU leaders meet to decide their fate in Brussels on Thursday. More than 45,000 migrants and refugees are now stranded in Greece. Urging “pan-European” solutions to Europe’s biggest crisis yet, the German chancellor, Angela Merkel, declared on Wednesday that time was of the essence. “The situation in Greece should very much worry us all,” she told Berlin’s federal parliament ahead of the summit. “Because it won’t be without consequences for any of us in Europe.”

No one knows this better than those in Idomeni. Doctors are quick to say that until they got to the camp they had no idea what a public health emergency meant. Exposed to the elements, the place is being described as a timebomb. The vast majority of refugees have been here for weeks with some close to completing a month. Cases of fever, pneumonia, septicaemia, hysteria and psychotic breaks are all on the rise, according to health workers. “We have found women in tents writhing in pain as a result of [intrauterine] foetal deaths,” says Despoina Fillipidaki, who is coordinating volunteers, clinics, drug supplies and medics for the Red Cross in the tent city. “My biggest fear is that soon people will start to die. And what was their crime? All they want is a better life, to escape war, to escape poverty. And what do they get? Greece of [Nazi] occupation. These are scenes from another century, another time.”

Read more …

UNHCR confirms what I’ve written repeatedly. Compare this for instance to the standard BBC ‘disclaimer’, which is clearly disingenuous and doesn’t comply with international legal definitions:

The BBC uses the term migrant to refer to all people on the move who have yet to complete the legal process of claiming asylum. This group includes people fleeing war-torn countries such as Syria, who are likely to be granted refugee status, as well as people who are seeking jobs and better lives, who governments are likely to rule are economic migrants.

‘Refugees’ and ‘Migrants’- There Is A Distinction That Matters (UNHCR)

1. Are the terms ‘refugee’ and ‘migrant’ interchangeable? No. Although it is becoming increasingly common to see the terms ‘refugee’ and ‘migrant’ used interchangeably in media and public discussions, there is a crucial legal difference between the two. Confusing them can lead to problems for refugees and asylum-seekers, as well as misunderstandings in discussions of asylum and migration.

2. What is unique about refugees? Refugees are specifically defined and protected in international law. Refugees are people outside their country of origin because of feared persecution, conflict, violence, or other circumstances that have seriously disturbed public order, and who, as a result, require ‘international protection’. Their situation is often so perilous and intolerable, that they cross national borders to seek safety in nearby countries, and thus become internationally recognized as ‘refugees’ with access to assistance from states, UNHCR, and relevant organizations. They are so recognized precisely because it is too dangerous for them to return home, and they therefore need sanctuary elsewhere. These are people for whom denial of asylum has potentially deadly consequences.

5. Can ‘migrant’ be used as a generic term to also cover refugees? A uniform legal definition of the term ‘migrant’ does not exist at the international level. Some policymakers, international organizations, and media outlets understand and use the word ‘migrant’ as an umbrella term to cover both migrants and refugees. For instance, global statistics on international migration typically use a definition of ‘international migration’ that would include many asylum-seeker and refugee movements. In public discussion, however, this practice can easily lead to confusion and can also have serious consequences for the lives and safety of refugees. ‘Migration’ is often understood to imply a voluntary process, for example, someone who crosses a border in search of better economic opportunities.

This is not the case for refugees who cannot return home safely, and accordingly are owed specific protections under international law. Blurring the terms ‘refugees’ and ‘migrants’ takes attention away from the specific legal protections refugees require, such as protection from refoulement and from being penalized for crossing borders without authorization in order to seek safety. There is nothing illegal about seeking asylum – on the contrary, it is a universal human right. Conflating ‘refugees’ and ‘migrants’ can undermine public support for refugees and the institution of asylum at a time when more refugees need such protection than ever before.

Read more …