Sep 052017
 
 September 5, 2017  Posted by at 7:43 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Irma

 

The Supernova Nature Of Asset Bubbles (CHS)
Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal (BBG)
China ICO Crackdown May Just Be The Start (R.)
Caribbean, Florida Brace For Hurricane Irma (BBC)
Landlords Demand Rent On Flooded Houston Homes (G.)
Germany Must Pay Poland Up To $1 Trillion In Reparations – Minister (Ind.)
Populist Hopeful Shunned by Italian Elite on Shores of Lake Como (BBG)
China May Be The Real Target Of North Korea’s Pressure (AFP)
Nuclear-Armed Nations Brought The North Korea Crisis On Themselves (G.)
New Kind Of Black Hole Found At The Centre Of The Milky Way (RT)
Established Story That Humans Came From Africa May Be Wrong (Ind.)

 

 

It takes ever more effort to keep a bubble inflated.

The Supernova Nature Of Asset Bubbles (CHS)

The trouble with inflating asset bubbles is that you have to keep inflating them or they pop. Unfortunately for the bubble-blowing central banks, asset bubbles are a double-bind: you cannot inflate assets forever. At some unpredictable point, the risk and moral hazard that are part and parcel of all asset bubbles trigger an avalanche of selling that pops the bubble. This is another facet of The Fed’s Double-Bind: if you stop pumping asset bubbles, they pop as participants realize the music has stopped, and if you keep pumping them, they expand to super-nova criticality and implode.

There are several dynamics at play in this double-bind.

1. The process of inflating a bubble (for example, the current bubbles in stocks and real estate) requires pushing investors and speculators alike into risky asset classes. This puts the market at increasing risk as everyone is pushed to one side of the boat.

2. Those on the other side of the boat (i.e. shorts) are slowly but surely eradicated as the pumping keeps inflating the bubble. When the bubble finally bursts, there are no shorts left to cover, i.e. buy stocks at lower prices to reap their profits.

3. As the bubble continues to expand, the money available to enter the market and keep prices rising declines. The very success of the pumping process strips the markets of new sources of new money, leading to a point where normal selling exceeds new-money buying and the bubble collapses.

4. Money pumping by central banks and governments follows a curve of diminishing return. One analogy is insulin insensitivity: as the systemic distortions build, markets become increasingly insensitive to money pumping. Authorities respond to this intrinsic process of increasing insensitivity by pumping even more money into the system. But as with insulin insensitivity, at some point the system loses all sensitivity to money pumping: no matter how much money central authorities inject, the markets refuse to go higher. At this point, the stick-slip nature of bubbles manifests and modest selling triggers a collapse as participants all rush for the exits. Buyers have vanished and there is no longer a bid at any price.

5. Having pumped the assets higher with ever-greater injections of speculative risk and pumping, central banks and states have exhausted their ability to re-inflate assets as they collapse.

Systems cannot be controlled once risk and moral hazard have been raised to levels where instability is an intrinsic feature of the system. Those who actually believe the Fed can keep asset bubbles inflated at a permanently high plateau will discover their error in dramatic fashion, as the bigger the bubble, the more violent the implosion. This is the super-nova nature of asset bubbles: if you try to deflate the bubble slowly, it implodes, but if you keep inflating the bubble it eventually implodes from its internal extremes.

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China needs its foreign reserves. The last thing it needs is a way for money to leave the country that it has no control over. Other countries have no choice but to follow suit.

Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal (BBG)

Bitcoin tumbled the most since July after China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales. The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors. It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions – the short story is we all know regulations are coming,” said Jehan Chu at Kenetic Capital in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.” Bitcoin tumbled as much as 11.4%, the most since July, to $4,326.75. The ethereum cryptocurrency was down more than 16% Monday, according to data from Coindesk. ICOs are digital token sales that have seen unchecked growth over the past year, raising $1.6 billion. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.

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The Chinese know how corrupt their countrymen are.

China ICO Crackdown May Just Be The Start (R.)

China is poised to further tighten rules on virtual currencies after regulators on Monday banned virtual coin fundraising schemes, Chinese financial news outlet Yicai reported, citing sources. China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, targeting so-called initial coin offerings (ICO) in a market that has exploded since the start of the year. Yicai’s report late Monday cited a source close to decision-makers as saying the announcement on the ban was just the start of further follow-up regulations of virtual currencies. In total, $2.32 billion has been raised through ICOs globally, with $2.16 billion of that being raised since the start of 2017, according to cryptocurrency analysis website Cryptocompare.

Bitcoin rival ethereum, which token-issuers usually ask to be paid in and which has seen dramatic growth this year, fell sharply on the news. It was down almost 20% on Monday at $283, according to trade publication Coindesk. Bitcoin was also down 8%, while the total value of all cryptocurrencies was down around 10% after China’s ban was announced, according to industry website Coinmarketcap.com.

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Wonder what reporting will look like if islands are destroyed but US mainland is not.

Caribbean, Florida Brace For Hurricane Irma (BBC)

Hurricane Irma has been upgraded to a powerful category four storm as warnings have been issued for several Caribbean islands. The hurricane had sustained winds of up to 220km/h (140mph) and was likely to strengthen in the next 48 hours, the US National Hurricane Center (NHC) said. Irma was projected to hit the Leeward Islands, causing storm surges, life-threatening winds and torrential rain. The US state of Florida has declared a state of emergency. It comes as residents in Texas and Louisiana are reeling from the effects of Hurricane Harvey, which struck as a category four storm, causing heavy rain and destroying thousands of homes. However the NHC warned that it was too early to forecast Irma’s exact path or effects on the continental US. Irma was set to reach the Leeward Islands, east of Puerto Rico, by late Tuesday or early Wednesday (local time), the centre added.

The storm was moving at a speed of 20km/h (13mph). It may cause rainfall of up to 25cm (10in) in some northern areas and raise water levels by up to 3m (9ft) above normal levels, the NHC said. Puerto Rico also declared a state of emergency and activated the National Guard. Governor Ricardo Rossello announced the opening of emergency shelters able to house up to 62,000 people, and schools would be closed on Tuesday. Long queues of people formed in shops, with residents stocking water, food, batteries, generators and other supplies. Hurricane warnings have been issued for the islands of Antigua and Barbuda, Anguilla, Montserrat, St Kitts and Nevis, St Martin, Sint Maarten, St Barthelemy, Saba, St Eustatius, Puerto Rico, British Virgin Islands and US Virgin Islands. It means that hurricane conditions are expected in the next 36 hours.

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Absurdity.

Landlords Demand Rent On Flooded Houston Homes (G.)

An acute housing crisis is starting to grip thousands of other families in south-east Texas as the floodwaters ebb away, with a death toll put at 60 on Monday. More than 180,000 houses in the Houston area have been badly damaged, with only a fraction of occupants owning any flood insurance. And under Texas law, rent must still be paid on damaged dwellings, unless they are deemed completely uninhabitable. A spokeswoman for the city of Houston’s housing department said city officials “are aware these problems exist” but said that state law deals with the situation. She said the city was still assessing the total number of people in need of housing assistance. Under the Texas property code, if a rental premises is “totally unusable” due to an external disaster then either the landlord or tenant can terminate the lease through written notice.

But if the property is “partially unusable” because of a disaster, a tenant may only get a reduction in rent determined by a county or district court. “There are a lot of property owners who aren’t conscious of what has gone on; they are being rude and kicking people out,” said Isela Bezada, an unemployed woman who lived with 10 family members in a Houston house until her landlord took her to court to evict her after the hurricane hit. Bezada, like Fuentes, has had almost every area of her life touched by the flood. Her relatives, who work in home renovations, have little opportunity to bring in money until the full gutting of sodden houses – piles of torn up carpet, broken chairs and children’s toys have become a common adornment to the front of Houston homes – and she worries about other family members stranded in Port Arthur by a flooded highway.

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Greece first.

Germany Must Pay Poland Up To $1 Trillion In Reparations – Minister (Ind.)

Germany should consider paying Poland as much as $1 trillion in World War II reparations, according to the Polish foreign minister. Poland’s foreign minister Witold Waszczykowski told local radio station RMF that “serious talks” were needed with Germany to “find a way to deal with the fact that German-Polish relations are overshadowed by the German aggression of 1939 and unresolved post-war issues.” He said Poland’s material losses were about $1 trillion, or higher. Polish defense minister Antoni Macierewicz also accused European critics of trying to “erase” the fate of the Poles at German hands during the war “from the historical memory of Europe”.

The country’s right-wing government has dismissed a 1953 resolution by Poland’s former communist government which dropped any claim to reparations from Germany, and are instead claiming that Germany is “shirking” its moral responsibility. Critics of the government say they are talking about reparations to divert attention from their nationalistic agenda. Around six million Polish citizens, including about three million Jews, were killed during the war and much of Warsaw was destroyed. Mr Waszczykowski did not say when Poland would make public its formal position on repatriations.

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Just keep saying populist often enough. He’s right about the euro: “a currency tailor-made for the German economy.”

Populist Hopeful Shunned by Italian Elite on Shores of Lake Como (BBG)

Populist would-be premier Luigi Di Maio had an awkward introduction to the Italian elite. The Five Star Movement’s most likely candidate for next year’s election was ignored by Italy’s business and financial establishment when he arrived at an exclusive networking event by Lake Como on Sunday. Di Maio, 31, was reduced to posing for photographers, while a passing banking executive muttered that he hoped the populist might learn something from his visit. His group, which wants a referendum on Italy’s euro membership, is virtually tied in opinion polls with the Democratic party of ex-premier Matteo Renzi, and with a possible center-right alliance including the Forza Italia party of Silvio Berlusconi. Di Maio sought to reassure.

Those opinion polls – as well as the possibility of a hung parliament – are prompting fears of political instability and financial turbulence with elections due by late May, even as the third-biggest economy in the euro area recovers from its worst recession since World War II. “We don’t want a populist, extremist or anti-European Italy,” he told the Ambrosetti Forum in Cernobbio, in a bid to win round his skeptical audience. The euro referendum plan is simply “a last resort,” he added, to force reforms of the European Union and “a currency tailor-made for the German economy.”

The proposals of Five Star, co-founded by ex-comic Beppe Grillo, also include a monthly €780 “citizen’s income” for the poor and the jobless, purging private lenders from control of the Bank of Italy, and tougher penalties for managers of bankrupt banks. “We want to stay in the EU and discuss some of the rules which are suffocating and damaging our economy,” Di Maio said. “And the money we’re giving the EU budget every year must be one of the themes to put forward to the other countries.” Many of those ideas were anathema to those debating world affairs at the luxury Villa D’Este hotel – a five-star institution with which the assembled ruling class was altogether more comfortable.

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Xi has to polish his image before the Congress in October. He can’t let this continue.

China May Be The Real Target Of North Korea’s Pressure (AFP)

North Korea’s escalating nuclear provocations are putting putative ally China in an increasing bind, and may be part of a strategy to twist Beijing’s arm into orchestrating direct talks between Pyongyang and Washington, analysts said. The North’s Kim dynasty has repeatedly used nuclear brinkmanship over the years in a push to be taken seriously by the United States but traditionally avoided causing major embarrassment to China, its sole major ally and economic lifeline. But leader Kim Jong-Un’s detonation Sunday of what he called a hydrogen bomb marked the second time this year that the 33-year-old family scion upstaged Chinese President Xi Jinping just as he was hosting a carefully choreographed international gathering.

Communist propaganda deifies Xi as an infallible father figure, but Kim’s actions are puncturing the facade and exposing the Chinese leader’s impotence toward the nuclear crisis on his doorstep. “North Korea’s repeated nuclear and missile tests have put China in a more and more difficult position,” said Shi Yinhong, Director of the Center for American Studies at Renmin University in Beijing. Shi said Kim – who has never met Xi – had become “more and more hostile towards China” after Beijing signed on to tougher new international sanctions against Pyongyang. That has apparently made Kim more willing to bring pressure on Xi, said Jean-Pierre Cabestan, a political science professor at Hong Kong Baptist University. Kim may be using Xi “like a cue ball in billiards,” Cabestan said, “in order to get negotiations with the United States.” “But he has to be careful not to infuriate Xi as China is his only lifeline.”

Pyongyang’s sixth nuclear test, by far its most powerful to date, came just as leaders of the five BRICS emerging economies – Brazil, Russia, India, China, and South Africa – gathered for a summit. The meeting in the southeastern city of Xiamen was intended to be the typical China-hosted event — micromanaged to the smallest detail to portray Xi at home as a wise and benevolent world leader. But Kim stole the spotlight, just as he did in May when the North conducted a missile test that embarrassed Xi as he hosted a large international summit on trade.

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Valid points.

Nuclear-Armed Nations Brought The North Korea Crisis On Themselves (G.)

North Korea’s defiant pursuit of nuclear weapons capabilities, dramatised by last weekend’s powerful underground test and a recent long-range ballistic missile launch over Japan, has been almost universally condemned as posing a grave, unilateral threat to international peace and security. The growing North Korean menace also reflects the chronic failure of multilateral counter-proliferation efforts and, in particular, the longstanding refusal of acknowledged nuclear-armed states such as the US and Britain to honour a legal commitment to reduce and eventually eliminate their arsenals. In other words, the past and present leaders of the US, Russia, China, France and the UK, whose governments signed but have not fulfilled the terms of the 1970 nuclear non-proliferation treaty (NPT), have to some degree brought the North Korea crisis on themselves.

Kim Jong-un’s recklessness and bad faith is a product of their own. The NPT, signed by 191 countries, is probably the most successful arms control treaty ever. When conceived in 1968, at the height of the cold war, the mass proliferation of nuclear weapons was considered a real possibility. Since its inception and prior to North Korea, only India, Pakistan and Israel are known to have joined the nuclear “club” in almost half a century. To work fully, the NPT relies on keeping a crucial bargain: non-nuclear-armed states agree never to acquire the weapons, while nuclear-armed states agree to share the benefits of peaceful nuclear technology and pursue nuclear disarmament with the ultimate aim of eliminating them. This, in effect, was the guarantee offered to vulnerable, insecure outlier states such as North Korea. The guarantee was a dud, however, and the bargain has never been truly honoured.

Rather than reducing their nuclear arsenals, the US, Russia and China have modernised and expanded them. Britain has eliminated some of its capability, but it is nevertheless renewing and updating Trident. France clings fiercely to its “force de frappe”. Altogether, the main nuclear-weapon states have an estimated 22,000 nuclear bombs. A report by the non-governmental British-American Security Information Council in May said nuclear security was getting worse. “The need for nuclear disarmament through multilateral diplomacy is greater now than it has been at any stage since the end of the cold war. Trust and confidence in the existing nuclear non-proliferation regime is fraying, tensions are high, goals are misaligned and dialogue is irregular,” the report said.

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It’s only 100,000 suns. The biggest one is 4,000 times larger.

New Kind Of Black Hole Found At The Centre Of The Milky Way (RT)

A new kind of black hole has been found at the centre of the Milky Way – a find that may help explain the evolution of the phenomena. In research conducted by Japanese astronomers using the ALMA Observatory in northern Chile, a black hole 100,000 times the size of our sun was found within a molecular gas cloud. Its relatively small size means that it is the first to be identified as an intermediate-mass black hole (IMBH). Professor Tomoharu Oka of Japan’s Keio University believes that black holes with masses greater than a million solar masses are at the centre of all galaxies and are essential to their growth. The origins of supermassive black hole, however, remain a mystery. “One possible scenario is IMBHs – which are formed by the runaway coalescence of stars in young compact star clusters – merge at the centre of a galaxy to form a supermassive black hole,” said Prof Oka.

Using the ALMA telescope, the team observed the cloud more than 195 light years from the centre of the Milky Way. In findings published in the journal Nature Astronomy, Prof Oka then used computer simulations to show the high speed motion of the gas cloud, which the team concluded was a sign that it is surrounding a black hole. “Based on the careful analysis of gas kinematics, we concluded a compact object with a mass of about 100,000 solar masses is lurking in this cloud,” Prof Oka added. The IMBH is the second-largest black hole discovered in the Milky Way next to Sagittarius A*, which is 400 million times the size of our sun. According to theories, the Milky Way should be home to about 100 million smaller black holes, but only 60 have been found.

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“.. the absence of evidence for later humans could suggest that the journey “may not have ended well..”

Established Story That Humans Came From Africa May Be Wrong (Ind.)

The belief that humans came out of Africa millions of years ago is widely believed. But it might be about to be entirely re-written, according to the authors of a new study. They claim to have found a footprint in Crete that could change the narrative of early human evolution, suggesting that our ancestors were in modern Europe far earlier than we ever thought. The accepted story of the human lineage has been largely set since researchers found fossils of our early ancestors in South and East Africa, in the middle of the 20th century. Later discoveries appeared to suggest that those that followed remained isolated in Africa for millions of years before finally moving out and into Europe and Asia. But the new discovery of a footprint that appears to have belonged to a human that trod down in Crete 5.7 million years ago challenges that story.

Humans may have left and been exploring other continents including Europe far earlier than we knew. “This discovery challenges the established narrative of early human evolution head-on and is likely to generate a lot of debate,” said Professor Per Ahlberg, who was an author on the study. “Whether the human origins research community will accept fossil footprints as conclusive evidence of the presence of hominins in the Miocene of Crete remains to be seen.” The study looked at the characteristics of the footprint, in particular examining its toes. It found that the footprint didn’t have claws, walked on two feet and had inner toes that went out further than its outer ones. All of that led them to conclude that the foot appeared to belong to our early human ancestors, who could have been walking around Europe at an early time than we ever knew.

They also make clear that the owner of the footprint and their species could have developed the same traits separately from those in Africa. At the time the footprint was made, the Sahara Desert didn’t exist and lush, savannah-like environments went all the way from North Africa to the eastern Mediterranean, and Crete hadn’t yet detached from the Greek mainland. All of that makes it easier to see how those early hominins made their way to the island. But the journey might not run into problems. Mark Maslin from University College London told The Times that while the discovery supports the idea that our ancestors used their new found bipedalism to walk into modern Europe, the absence of evidence for later humans could suggest that the journey “may not have ended well”.

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Apr 272015
 
 April 27, 2015  Posted by at 1:05 pm Finance Tagged with: , , , , , , , , ,  3 Responses »
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Jack Delano Brakeman H.B. Van Santford on the AT&SF line from Summit to San Bernardino 1943

Debt Addiction Could Send Us The Way Of The Mayans (Satyajit Das )
Negative Interest Rates: The Black Hole of The Financial System (SI)
The S&P 500 Has A Serious Revenue Problem (CNBC)
Boston Fed Admits There Is No Exit, Suggests QE Become “New Normal” (Zero Hedge)
China Inc. Finds Cure to Debt Hangover in Stock-Market Boom (Bloomberg)
Chinese Energy Figures Suggest Much Slower Growth Than Advertised (Cobb)
China Considers Launching QE; Shanghai Stocks Soar (Zero Hedge)
Talking To My Daughter About The Economy (Yanis Varoufakis)
Greece’s Day of Reckoning Inches Closer as Debt Payments Loom
Greeks Add Pressure on Tsipras to Compromise as Talks Resume (Bloomberg)
The “War on Cash” in 10 Spine-Chilling Quotes (Don Quijones)
Deutsche Bank’s Record Fine Reveals Its Rotten Heart (Coppola)
World’s Coolest Economist Hot On His Numbers (NZ Herald)
Putin Says US Helped North Caucasus Militants In The 2000s (Guardian)
Russian Jews Face ‘Grave Dangers’ If Putin Is Ousted, Warns Senior Rabbi (RT)
Chipotle Removes All GMO Ingredients From Menu (WSJ)
Forget The ‘War On Smuggling’, We Need To Be Helping Refugees (Guardian)
Five Billion People ‘Have No Access To Safe Surgery’ (BBC)

“It isn’t that they can’t see the solution. It is that they can’t see the problem.”

Debt Addiction Could Send Us The Way Of The Mayans (Satyajit Das )

Nowadays many countries’ social and political structure relies on debt-driven consumption and increasing levels of entitlements. Blame the policy makers. To drive economic growth, boost living standards, and manage growing inequality, policy makers have used debt and monetary tools to create economic activity. This has resulted in excessive borrowing and imbalances in global trade and capital. Governments played a part, too, allowing the buildup of social entitlements to win or maintain office. Private companies also encouraged the growth of employee benefits to avoid immediate pressure on wages as well as boost current earnings and share prices. But such expensive commitments were rarely fully funded.

Rather than deal with the fundamental issues, policy makers substituted public spending, financed by government debt or central banks, to boost demand. Strong growth and higher inflation, they hoped or believed, would correct the problems. The current state of affairs echoes Archaeologist Arthur Demarest’s observation about the Mayan civilization: “Society had evolved too many elites, all demanding exotic baubles…all needed quetzal feathers, jade, obsidian, fine chert, and animal furs. Nobility is expensive, non-productive and parasitic, siphoning away too much of society’s energy to satisfy its frivolous cravings.” Seven years into this crisis, the level of debt in major economies has increased. Global imbalances have decreased, but primarily as a result of slower economic growth.

Countries such as China and Germany are reluctant to inflate their domestic economies, moving away from their export-driven model. Major borrowers, such as the U.S., refuse to reduce spending and bring their public finances into order. Enthusiasm for fundamental financial reform has dissipated, driven by concern that lower credit growth will decrease economic growth. Policy makers refused to acknowledge that available fiscal and monetary policy tools cannot address the underlying problems. They repeatedly use complex jargon, obscure mathematics and tired ideologies to disguise their failures and limitations. Perhaps, as the writer G. K. Chesterton suggested: “It isn’t that they can’t see the solution. It is that they can’t see the problem.”

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” If this is how the system ends up working, we fear that the effects will be irreversible.”

Negative Interest Rates: The Black Hole of The Financial System (SI)

A black swan event is a metaphor for an enormous problem that develops underneath the surface and then suddenly puts the whole financial system at risk. The financial crisis of 2008 was a black swan event, for example, that slowly developed in the US real estate market where excess had ruled in the years before. Today, market conditions are ideal for a new black swan event to develop. An event like this takes people by surprise, because it matures under the radar in places where no one is looking. Today, for example, everyone is afraid of deflation. That means that everyone is also trying to prepare for deflation.

If everyone takes measures against deflation you get a mass migration to cash and government bonds, however, which are the assets that perform the best in a deflationary environment. Take a look at Japan: the yen had been on the rise for years up until the Japanese central bank took exceptionally aggressive monetary measures to fight the trend (at which they succeeded). Japanese investors historically also like its country’s government bonds, however, ever since deflation tormented the country in the ‘90s. At one point you got a 5% yield on a 10-year Japanese government bond, today you get 0.3% per year for the next 10 years. [..]

Who is going to save money then? Not a single soul, of course. People will start to create debt en masse, because it is the better and cheaper option. The resulting investments will rise in value, moreover, when an increasing amount of people take on debt in search for returns. Things cannot get a lot crazier than this. If this is how the system ends up working, we fear that the effects will be irreversible. It is like a black hole that sucks in more and more matter – read: capital – and never lets go. This financial black hole story will also end with a sudden implosion, a flash of light and a big bang, just like in space, and those who do not own hard assets at that point in time could lose every bit of wealth they’ve ever accumulated.

As Alan Greenspan, former chairman of the Fed and original promoter of monetary expansion, said once: “Or how you can lose your savings in a blink of an eye”. The big issue is that we do not see any measure that can reverse this process. Governments are not moving a finger to turn things around; and why would they? They are on the side of the debt creators; the ones that are profiting enormously from this black hole. Central bankers are frustrated, however, because they do not have a lot of tools other than to make monetary demands more flexible, which has the wrong effect: it accelerates the wildfire of negative interest rates.

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Why make money when stock proces keep rising and you can borrow your way into profit?

The S&P 500 Has A Serious Revenue Problem (CNBC)

The bottom line of earnings season adds up to this: companies are running into big trouble with their top lines. While companies generally tend to beat both earnings and revenue expectations, this year more have missed their first-quarter top-line estimates than beaten. Out of the first 201 S&P 500 Index companies to report first-quarter earnings, only 47% have beaten revenue estimates, according to FactSet. If this number holds, it will be the first time that more companies have missed than beaten earnings expectations since the first quarter of 2013.

Now, analysts on the whole expect to see S&P 500 revenue fall 3.5% year-over-year, whereas they had expected just a 2.6% drop when the first quarter ended. Meanwhile, earnings have surpassed analyst expectations nicely, with 73% of companies beating earnings-per-share estimates, according to FactSet. That’s equal to the five-year averag epercentage of beats. The surging dollar and sliding crude oil have certainly played a role in leading to this divergence.

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“.. the Fed’s exit strategy is that there should be no exit.”

Boston Fed Admits There Is No Exit, Suggests QE Become “New Normal” (Zero Hedge)

Perhaps it was inevitable. After all, the term “QEfinity” entered the financial lexicon long ago and there were already quite a few commentators out there suggesting that it may now be too late to remove the punchbowl, meaning an “exit” will not only prove difficult, but may well be impossible. Take Makoto Utsumi, who oversaw foreign-exchange policy at the Japanese Ministry of Finance from 1989-1991, for example. Utsumi recently said a BoJ QE exit was out of the question “for the foreseeable future” and went on to note that “even the thought of an exit is a nightmare.”

Meanwhile, it’s virtually impossible to say what effect Fed tightening will have in both the Treasury and corporate bond markets given the lack of liquidity in both and then there’s EM where carnage unfolded in 2013 after a certain bearded bureaucrat said the wrong thing about the direction of Fed policy. Given all of this, we’re not surprised to learn that in a new paper entitled “Let’s Talk About It: What Policy Tools Should The Fed ‘Normally’ Use?”, the Boston Fed is now suggesting that QE become a permanent tool at the disposal of the Fed. After all, “financial stability” depends on it…

During the onset of a very severe financial and economic crisis in 2008, the federal funds rate reached the zero lower bound (ZLB). With this primary monetary policy tool therefore rendered ineffective, in November 2008 the Federal Reserve started to use its balance sheet as an alternative policy tool when it began the large-scale asset purchases. Now attention is turning to how the Fed should transition back to a more conventional monetary policy stance. Largely missing from these discussions about the Fed’s “exit strategy” is a consideration that perhaps it should retain, not discard, the balance sheet tools.

Yes, oddly missing from the Fed’s exit strategy is the idea that there should be no exit.

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Sounds like a dangerous cure.

China Inc. Finds Cure to Debt Hangover in Stock-Market Boom (Bloomberg)

China Inc. is turning to the stock market for a cure to its unprecedented debt hangover. As authorities show a newfound tolerance for defaults and debt levels at Shanghai Composite Index members climb to all-time highs, Chinese companies are increasingly tapping the equity market for funds to pay down liabilities and invest in growth. They’ve announced $82 billion of secondary stock offerings in 2015, a figure UBS predicts will increase to a record $161 billion by December. That comes on top of $10 billion already raised through IPOs. Investor appetite for new shares has rarely been stronger after a world-beating rally in the Shanghai Composite added $4.4 trillion to China’s market capitalization over the past year.

While the gains came too late to stave off the first default on domestic debt by a state-run company last week, officials at both China’s securities regulator and the central bank have endorsed the flow of funds into equities as a way to support an economy growing at the slowest pace since 2009. “Valuations are very high now thanks to the stock rally and capital is very cheap,” said Xu Gao, the chief economist at China Everbright. “Companies that have access to the stock market will be able to tap the cheap funds.” Equity fundraising in China surpassed net sales of corporate debt last month for just the third time in the past three years, according to data compiled by Bloomberg. In one of the latest examples of the shift, China Eastern Airlines said on April 23 that it plans to sell as much as 15 billion yuan ($2.4 billion) of stock to fund the purchase of 23 planes and pay off debt. Shares rose 10% in Shanghai after the news as they resumed trading following a two-week halt.

Shanghai Fosun Pharmaceutical, a drugmaker backed by billionaire Guo Guangchang, said April 16 it will raise as much as 5.8 billion yuan from a stock sale and apply more than 60% of the proceeds toward repaying debt. Lingyuan Iron & Steel, whose share price has more than doubled in the past 12 months, said in February it will sell as much as 2 billion yuan of shares in a private placement to repay bank loans. The aggregate debt-to-equity ratio for companies in the Shanghai Composite reached 165% in January, the highest level since Bloomberg began compiling the data in 2005.

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“February data showed a 6.3% decline in electricity consumption from the previous month. March saw another decline of 2.2%.”

Chinese Energy Figures Suggest Much Slower Growth Than Advertised (Cobb)

Last year China reported the slowest economic growth in 24 years, about 7.4%. But the true figure may actually be much lower, and the evidence is buried in electricity figures which show just 3.8% growth in electricity consumption. David Fridley, a staff scientist in the China Energy Group at the Lawrence Berkeley National Laboratory, has been a longtime collaborator with the Chinese on energy management, efficiency and policy. Fridley, who has held Chinese energy-related jobs for 35 years, believes that electricity consumption in China is a better indicator of its economic growth. Historically, electricity consumption and economic growth in China have been very closely linked. “From 2005 to 2013, the average elasticity of electricity demand was 1.09, meaning electricity demand was up about 1.09% for every % rise in GDP,” Fridley wrote.

“In 2014, that number fell to 0.51, the lowest in this 10-year period. During the economic crisis of 2008, it did fall below the average, to 0.60, but quickly rebounded to above 1.” That tells Fridley that something is up. He’s not the only one who thinks the government growth numbers aren’t reliable. China’s premier, Li Keqiang, has said China’s GDP figures are “for reference only.” Bloomberg reported that in a declassified U.S. diplomatic cable from 2007 then-U.S. ambassador Clark Randt related a dinner conversation with Li, secretary general of Liaoning Province at the time, in which Li revealed his preferred indicators of Chinese economic activity: rail cargo volume, loan disbursements and–wait for it–electricity consumption. China’s leaders don’t believe their own government growth numbers.

Fridley notes that electricity consumption figures are considered quite reliable and have suffered only minor revisions over the years. Preliminary numbers for the first quarter of 2015 suggest further slowing of the economy as year-over-year electricity consumption growth decelerated to just 0.8%. February data showed a 6.3% decline in electricity consumption from the previous month. March saw another decline of 2.2%. Fridley also notes that residential electricity growth registered an extraordinary fall: “From 1980 to 2013, residential electricity grew on average 13.5% a year—and last year it fell to 2.2%. From 2005 to 2013, elasticity of residential energy demand was 1.11, and fell to 0.30 in 2014. This is unprecedented.”

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“..finally leading to the terminal phase for fiat currencies.”

China Considers Launching QE; Shanghai Stocks Soar (Zero Hedge)

Nearly two months ago we explained “How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable” in which we cited Cornerstone who reminded us “that from 2007 to late 2008, U.S. fed funds dropped 500 bp, and then the Fed still needed to do QE? The backdrop for China looks a bit similar. We had a credit bubble, they have a credit bubble. We had a housing bubble, they have a housing/investment bubble. Will China eventually have to go down the same path as the U.S., and the Eurozone? … The PBoC will first cut rates to 0%, before contemplating QE.”

To this we added that “once China, that final quasi-Western nation, proceeds to engage in outright monetization of its debt, then and only then will the terminal phase of the global currency wars start: a phase which will, because global economic growth and that all important lifeblood of a globalized economy – trade – at that point will be zero if not negatve, will see an unprecedented crescendo of money printing by absolutely everyone, before coordinated devaluations mutate into uncoordinated, and when central bank actions morph from “all for one” to “each man for himself.” We may not have long to wait because just hours ago, MarketNews first among the wire services hinted at what we suggested was the endgame.

*PBOC DISCUSSING DIRECT PURCHASES OF LOCAL GOVT BONDS: MNI; *PBOC IS DISCUSSING UNCONVENTIONAL POLICIES: MNI

Bloomberg adds more, citing MNI as saying that the Chinese central bank discussing “adopting unconventional policies to rebuild its balance sheet and reinvigorate economy, including making direct purchases of local government bonds from market.” Of just as we predicted. MNI continues that “although wide range of possibilities tabled about how PBOC operations could change, common thread of discussion involves need to expand balance sheet to ensure supply of liquidity meets economy’s demands, report says.” In other words, China is about to engage in the biggest QE of them all, and drown the world with exported deflation as the global supply glut which we explained yesterday, hits unprecedented levels and ultimately leads to the biggest inventory dumping phase in global history which central bankers will have no choice but to offset with Friedman’s infamous “helicopter drop” of money, finally leading to the terminal phase for fiat currencies.

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“..European peoples [..] to be set apart by a… common currency.”

Talking To My Daughter About The Economy (Yanis Varoufakis)

One of the enduring memories from my early childhood is the crackling sound of Deutsche Welle radio transmissions. Those were the bleak years of our dictatorship (1967-1974) when Deutsche Welle was the Greeks’ most precious ally against the crushing power of state propaganda. Mum and dad would huddle together next to the wireless, sometimes covered by a blanket to make sure that nosy neighbours would not get a chance to call the secret police. Night after night these ‘forbidden’ radio programs brought into our home a breath of fresh air from a country, Germany, that was standing firm on the side of Greek democrats. While I was too young to understand what the radio was telling my mesmerised parents, my child’s imagination identified Germany as a source of hope.

As I am writing this preface to the German edition of a book aimed at another child, my daughter, I feel the urgent need to recount that memory. To turn it into a small homage to the idea of Europe as a realm of shared democratic ideals. A small gesture of defiance against the recent tendency for European peoples, who were hitherto coming closer and closer together, to be set apart by a… common currency. Our European Union began life under the presumption that to achieve political and social union we must first bind together our economic interests; that economics would lead the way to a united European polity. It was a good idea except that, as the years and the decades went by, a problem emerged: our collective understanding of ‘economics’ became increasingly crude.

We slipped into a simplistic mindset according to which the sphere of the economy began decoupling, separating itself from that of politics, of philosophy, of culture. As it did so, the economic sphere acquired massive discursive and social power for itself, thus causing democracy, politics and culture to fade out, to become shadows of their former selves. We economists were, I confess, responsible for this steady erosion of our collective understanding of the economic sphere. Before we knew it, markets were no longer means to be placed in the service of social ends but emerged surreptitiously as ends in themselves.

Under the influence of, on the one hand, financialisation and, on the other, economic theory, we began to resemble Oscar Wilde’s definition of the cynic: one who knows everything about prices and nothing about values. Naturally, our European Union’s institutions also tended towards the conviction that the large decisions should be taken by technocratic committees that constitute ‘politics-free zones’. In an ironic twist the language of economists helped usher in a mindset that jettisoned from the corridors of power and the halls of decision making not only politics and culture but also …economics.

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Daily dose.

Greece’s Day of Reckoning Inches Closer as Debt Payments Loom

Greece will look for ways to assemble enough cash to pay its pensioners and employees this week, after euro area finance ministers on Friday said they won’t disburse more aid until bailout terms are met. Europe’s most-indebted state will use the deposits of local governments, cities and other funds to meet end-of month payments totaling over €1.5 billion.. By doing so, they risk straining liquidity buffers, after households and companies withdrew almost €1.3 billion in savings last week, according to a person who wasn’t authorized to speak publicly on the matter.Greece has fought to unlock aid since striking a deal to extend its bailout program in February. The government has repeatedly expressed confidence that a deal was imminent, only to be rebuffed by euro-area officials seeking concrete steps.

Last week was no different: days after Finance Minister Yanis Varoufakis said views were converging, his counterparts across the region hit him with a volley of criticism.Greek bonds fell on Friday, sending yields on three-year notes up 144 basis points to 26.3%.Greek Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel last week and later told reporters he was “very optimistic we are closer than before.”Still, support for his confrontational strategy fell to 46% in a University of Macedonia poll for Skai TV published on Tuesday, compared with 56% a month earlier. Researchers interviewed 1,007 people between April 15 and 17 and the margin of error was three percentage points.

The consensus at the IMF meetings in Washington this month was increasingly that a Greek default would be systemically manageable, UBS Chairman Axel Weber told the Swiss newspaper Neue Zuercher Zeitung. The Governing Council of the ECB may debate on May 6 whether to raise the haircut on Greek collateral posted against Emergency Liquidity Assistance, a decision that could worsen the country’s cash squeeze. ECB staff have already proposed increasing the discounts imposed on the securities banks post as collateral when borrowing emergency cash from the Bank of Greece. State coffers may be further depleted on the same day when Greece needs to find €200 million for an IMF payment. Bleeding deposits and unable to access ECB’s regular financing operations while the bailout review remains stalled, Greek lenders currently rely on a €75.5 billion ELA lifeline.

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Making it look like the Greeks hate Syriza. Predictable tactic.

Greeks Add Pressure on Tsipras to Compromise as Talks Resume (Bloomberg)

Greece resumed efforts to break a deadlock with its creditors as weekend polls showed a majority of the country’s people want the government to make compromises needed to release funds for its economy. Two opinion polls published over the weekend showed a continuing drop in support for the government’s confrontational stance in talks with the euro area and the IMF. More than half of respondents in an Alco survey in Proto Thema newspaper said the government should compromise even if creditors reject Greek demands.

“The Greek people are absolutely clear that they want to stay in the euro come what may,” said Aristidis Hatzis, associate professor of law and economics at the University of Athens. “They’ve understood that it will require hard compromises, even austerity.”
Greece is struggling to amass cash to pay its pensioners and employees this week. Europe’s most-indebted state is counting on deposits of local governments, cities and other funds to meet end-of-month payments of over €1.5 billion after euro-area finance ministers on Friday said they won’t disburse more aid until bailout terms are met. State coffers will be further strained on May 6, when Greece needs to find €200 million for an IMF payment.

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Cash will stay.

The “War on Cash” in 10 Spine-Chilling Quotes (Don Quijones)

The war on cash is escalating. As Mises’ Jo Salerno reports, the latest combatant to join the fray is JP Morgan Chase, the largest bank in the U.S., which recently enacted a policy restricting the use of cash in selected markets; bans cash payments for credit cards, mortgages, and auto loans; and disallows the storage of “any cash or coins” in safe deposit boxes. In other words, the war has moved on from one of words to actions. Here are ten quotes that should chill the spine of any individual who cherishes his or her freedom and anonymity:

1. Kenneth Rogoff (from the intro to his paper The Costs and Benefits to Phasing Out Paper Currency): “Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries… Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate.”

In other words, cash (not money) is the source of all evil and must be destroyed because governments can’t trace its every movement, and it represents a limiting factor on central banks’ ability to continue their insane negative-interest-rate experiment.

2. Citigroup’s Chief Economist Willem Buiter responds to the monetary economist Charles Goodhart’s description of abolishing currency as “shockingly illiberal.” “(T)his cost has to be seen against the cost that the anonymity of currency presents to society. Even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency.”

This, I believe, is the hidden intent behind all the excited talk about banning cash: to do away with the personal anonymity it offers.

3. France’s finance minister Michel Sapin adds a dose of scare-mongering, which can do wonders. In the wake of the Charlie Hebdo murders, he put much of the blame for the attacks on the assailants’ ability to buy dangerous things with cash. Shortly thereafter he announced a raft of capital controls that included a €1,000 cap on cash payments, down from €3,000. Such radical counter measures were necessary, he said, to “fight against the use of cash and anonymity in the French economy.”

4. Guillermo de la Dehesa, a Spanish economist, former senior civil servant and current international advisor to Banco Santander and… (cue drum roll) Goldman Sachs, already demonized cash (as opposed to digitalized bank credit) as a source of all crime and evil back in 2007, when he wrote the following in an El Pais article titled “The Great Advantage of a Cashless World”: “Without cash, we would live in a much safer, less violent world with enhanced social cohesion, since the major incentive fuelling all illegal activity [i.e. cash]… would disappear.”

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It’s the entire field. And they get away with it.

Deutsche Bank’s Record Fine Reveals Its Rotten Heart (Coppola)

Deutsche Bank has been issued with the largest fine of any bank for rigging international bank offer rates – what the UK’s Financial Conduct Authority (FCA) calls “IBORs”. There are several of these rates: the best-known is Libor – “London Inter-Bank Offer Rate” – but there are also the EU’s Euribor, China’s Shibor and Japan’s Tibor. Deutsche Bank’s fine is specifically for the manipulation of Libor and Euribor. Libor and its siblings are commonly known as the rates at which banks lend to each other. But that is not their most important purpose. What is far more important is their role as benchmark rates for the pricing of all sorts of financial products. The NY Department of Financial Services has a useful summary:

The London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate used in financial markets around the world. It is the primary benchmark for short term interest rates globally, written into standard derivative and loan documentation, used for a range of retail products, such as mortgages and student loans, and the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges. It is also used as a barometer to measure the health of the banking system and as a gauge of market expectation for future central bank interest rates.

For traders, a move of a few basis points in a Libor rate could make an enormous difference to their profits. The incentive for them to manipulate rates is obvious. Not that rate manipulation is solely the province of traders at investment banks. Until now, the largest fine issued by the FCA for benchmark rate rigging was issued to the UK retail bank Lloyds, which had the temerity not only to rig the Libor rate but also the repo rate used by the Bank of England to price emergency liquidity provided to, among others, Lloyds. The Guardian newspaper described this as “biting the hand that feeds it”. It is now clear that manipulating benchmark rates has been so widespread in the banking industry that it could be described as “the way we do things round here”. Eradicating this practice will require not just severe penalties, but a fundamental change in attitude.

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Nice little story.

World’s Coolest Economist Hot On His Numbers (NZ Herald)

Michael Pettis must be the world’s coolest economist. That’s a very uncool thing to say of course. He’d probably dispute it too. But it is hard to imagine a much cooler character than the casually dishevelled American who greets me at his hole-in-the-wall underground rock club, buried on an otherwise nondescript street in Beijing’s university district. There’s black paint falling off the walls, there are skateboards parked in the corner and the ashtrays are still full from the night before. If it wasn’t for the hip Chinese indie kids busily working around the place it might have been lifted up in its entirety from the New York post-punk scene and rebuilt in China like some crazy art installation.

In his day job Pettis is a finance professor at the Guanghua School of Management at Peking University. He’s also a highly influential blogger and author when it comes to the Chinese economy. The club is a base for Maybe Mars, his independent record label, and the local avant garde music scene he is fostering. Broadly it’s art rock, he says. Think New York rockers Sonic Youth, a band which the 50-something Pettis – dressed today in black jeans, skater sneakers and unbuttoned business shirt – could easily pass for a member of. He grabs some Tsing Tao beers from behind the bar, we head up a claustrophobic stairway and grab a seat in his loft office where we talk some more about the peculiar administrative difficulties of trying to foster a music scene in Beijing.

“Do you like The Clean,” he asks, making the New Zealand connection via one of Dunedin’s legendary alternative rock acts. It turns out The Clean’s Hamish Kilgour has been producing for Carsick Cars, one of the hottest Beijing bands on Pettis’ label. You get the feeling he could talk all day about the music but of course that’s not what we are here for. We’re here because Pettis is considered one of the smartest and broadest thinkers in the world on the Chinese economic rebalancing act. Pettis is a rare breed in the world of academic finance and economics, he’s a Wall St veteran. Before moving to China in 2001, he was managing director and head of the liability management and Latin American capital markets groups at Bear Stearns. He has also run fixed income trading and capital market teams at CSFB and JPMorgan.

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“..a lot of presidents and prime minister told me later on that they had decided for themselves by then that Russia would cease to exist in its current form..”

Putin Says US Helped North Caucasus Militants In The 2000s (Guardian)

Intercepted calls showed that the US helped separatists in Russia’s North Caucasus in the 2000s, Russian president Vladimir Putin claimed in a new documentary in which he underscored his suspicions of the west. The two-hour documentary, to be aired on the state-owned Rossiya-1 TV channel later on Sunday, is dedicated to Putin’s 15 years in office. It focuses on Putin’s achievements as well as challenges to his rule – which the producers and Putin blame on western interference. Putin was elected Russian president on 26 March 2000, after spending three months as acting president, and was sworn in on 7 May 2000. The documentary shows Putin interviewed at the Kremlin in the dimly lit St Alexander’s Hall.

In excerpts released shortly before the film’s broadcast, Putin said Russian intelligence agencies had intercepted calls between the separatists and US intelligence based in Azerbaijan during the early 2000s, proving that Washington was helping the insurgents. He did not specify when the calls took place. Following a disastrous war in the 1990s, Russia fought Islamic insurgents in Chechnya and neighboring regions in the volatile North Caucasus. “They were actually helping them, even with transportation,” Putin said. Putin said he raised the issue with then-US President George W Bush, who promised Putin he would “kick the ass” of the intelligence officers in question.

But in the end, Putin said the Russian intelligence agency FSB received a letter from their “American counterparts” who asserted their right to “support all opposition forces in Russia”, including the Islamic separatists in the Caucasus. Putin also expressed his fears that the west wishes Russia harm as he recalled how some world leaders told him they would not mind Russia’s possible disintegration. “My counterparts, a lot of presidents and prime minister told me later on that they had decided for themselves by then that Russia would cease to exist in its current form,” he said, referring to the time period around the second conflict in the Caucasus. “The onl question was when it happens and what consequences would be.”

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“..Putin’s government provides more guaranteed support for the Jews than those in Europe and the US..”

Russian Jews Face ‘Grave Dangers’ If Putin Is Ousted, Warns Senior Rabbi (RT)

Russian Jews would be in serious danger if Russian President Vladimir Putin was ever ousted from power, a senior Russian rabbi has stated. He added, the current government guarantees the safety of Jewish people better than many Western powers do. “The Jews of Russia must realize the dangers inherent in the possible collapse of the Putin government, understand the rules of the game and be aware of the limitations,” the head of Russian Federation of Jewish Communities Aleksandr Boroda said at an annual Jewish learning event, which was organized by Limmud FSU. The conference, which saw around 1,400 participants attend, opened on Friday at the state-owned Klyasma resort in the Moscow region.

Boroda mentioned that Putin’s government provides more guaranteed support for the Jews than those in Europe and the US, adding that Russian religious institutions are better protected against anti-Semitism, while other countries don’t provide enough security. “In Russia, there is virtually unlimited freedom of religion and the Jewish community must ensure this situation continues,” Boroda said. “We do not have the privilege of losing what we have achieved and the support of the government for the community.” All Russian Jews, especially those who oppose Putin and his administration “must understand the grave dangers that they take upon themselves and the potential consequences,” he added.

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Let’s make this a wide campaign.

Chipotle Removes All GMO Ingredients From Menu (WSJ)

Chipotle Mexican Grill Inc. said it has finished removing genetically modified ingredients from its foods, becoming the first major restaurant chain to do so amid growing U.S. consumer questions about the agricultural technology. Chipotle, which has 1,831 restaurants, has been working for more than two years to eliminate ingredients made with genetically modified organisms, or GMOs—corn, soybeans and other crops whose DNA is altered to achieve traits like pest-resistance. The company had said it hoped to be done by the end of 2014, but the transition “took a little longer than we thought,” a Chipotle spokesman said late Sunday.

The Food and Drug Administration has approved a number of genetically modified crops, which proponents, including many science groups, argue are safe. Critics claim they cause a variety of environmental ills and could be harmful to human health. The skepticism is part of a wider backlash in recent years among consumers seeking simpler, more natural ingredients. Chipotle in 2013 began telling consumers which of its menu items contained GMOs. Founder and co-Chief Executive Steve Ells has said Chipotle is making the move to avoid GMOs until the science around the technology is more definitive. The effort involved substituting a non-GMO sunflower oil for a genetically modified soybean oil it had been using, and sourcing non-GMO tortillas.

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But we don’t want to.

Forget The ‘War On Smuggling’, We Need To Be Helping Refugees (Guardian)

The crisis in the Mediterranean, which has led to more than 1,700 deaths already this year, has evoked an immediate response from European political leaders. Yet the EU response fundamentally and wilfully misunderstands the underlying causes. It has focused increasingly on tackling smuggling networks, reinforcing border control and deportation. Somehow European politicians have managed to turn a human tragedy into an opportunity to further reinforce migration control policies, rather than engage in meaningful international cooperation to address the real causes of the problem. The deaths in the Mediterranean have two main causes. First, the abolition in November 2014 of the successful Mare Nostrum search-and-rescue programme, which saved more than 100,000 lives last year, immediately led to a reduction in the number of rescues and an increase in the number of deaths.

Second, and most importantly, there is a global displacement crisis. We know that in last week’s tragedy – as with wider data on this year’s Mediterranean crossings – a growing proportion are coming from refugee-producing countries such as Syria, Eritrea and Somalia. These people are fleeing conflict and persecution. Of course, others are coming from relatively stable countries such as Senegal and Mali, but the majority now are almost certainly refugees. Around the world there are currently more displaced people than at any time since the second world war. More than 50 million people are refugees or internally displaced, and the current international refugee regime is being stretched to its absolute limits. For example, there are nine million displaced Syrians, of whom three million are refugees. The overwhelming majority are in neighbouring countries such as Jordan, Lebanon and Turkey.

A quarter of Lebanon’s entire population is now made up of Syrian refugees. Yet the capacity of these states is limited. Faced with this influx, Jordan and Lebanon have closed their borders to new arrivals. But these people have to go somewhere to seek protection and, with few alternatives, increasing numbers are making the perilous journey across the Mediterranean to Europe. In this context, there are no easy solutions. Yet European politicians are taking the easy option of failing to understand the wider world of which Europe is a part. From early last week, Italy’s prime minister, Matteo Renzi, focused on proclaiming a “war on trafficking”. Politicians across Europe followed suit. Yet this fails to recognise that smuggling does not cause migration; it responds to an underlying demand. Criminalising the smugglers serves as a convenient scapegoat, but it cannot solve the problem. Rather like a “war on drugs”, it will simply displace the problem, increase prices, introduce ever less scrupulous market entrants and make the journey more perilous.

The proposals to emerge from last week’s emergency EU meetings in Luxembourg and Brussels have been similarly disappointing. They have focused on destroying the vessels of smugglers and committing to higher levels of rapid deportation, presumably to unstable and unsafe transit countries such as Libya. The humanitarian provisions of the plans have been vague and problematic. The EU has committed to triple funding for Operation Triton. Yet unlike the abolished Mare Nostrum, that operation has never had a search-and-rescue focus. As the head of the EU border agency, Frontex, has explained, it is primarily a border security operation with little capacity to save lives.

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Many of us wouldn’t have survived.

Five Billion People ‘Have No Access To Safe Surgery’ (BBC)

Two-thirds of the world’s population have no access to safe and affordable surgery, according to a new study in The Lancet – more than double the number in previous estimates. It means millions of people are dying from treatable conditions such as appendicitis and obstructed labour. Most live in low and middle-income countries. The study suggests that 93% of people in sub-Saharan Africa cannot obtain basic surgical care. Previous estimates have only looked at whether surgery was available. But this research has also considered whether people can travel to facilities within two hours, whether the procedure will be safe, and whether patients can actually afford the treatment.

One of the study’s authors, Andy Leather, director of the King’s Centre for Global Health, said the situation was outrageous. “People are dying and living with disabilities that could be avoided if they had good surgical treatment,” he said. “Also, more and more people are being pushed into poverty trying to access surgical care.” The study suggests a quarter of people who have an operation cannot in fact afford it. Twenty-five experts spent a year and a half gathering evidence and testimony, from healthcare workers and patients, from more than 100 different countries as part of this report.

They are now calling for a greater focus on, and investment in, surgical care. They say a third of all deaths in 2010 (16.9 million) were from conditions which were treatable with surgery. That was more than the number of deaths from HIV/AIDS, tuberculosis and malaria combined. The authors suggest the cost to the global economy of doing nothing will be more than $12 trillion between now and 2030.

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Feb 272015
 
 February 27, 2015  Posted by at 10:29 am Finance Tagged with: , , , , , , , ,  3 Responses »
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William Henry Jackson Portales of the market of San Marcos, Aguascalientes, Mexico 1890

The US Recovery Story Is A Fraud: Albert Edwards (CNBC)
The US Is Not As Strong As You Think: Jim O’Neill (CNBC)
Québec Caisse’s Sabia Says Stock Markets Will ‘Run Out of Gas’ (Bloomberg)
Only One-Quarter Of Americans Plan To Retire (MarketWatch)
Americans No Longer Regard China As Top Enemy (CNBC)
Oil Futures Down Sharply On Rising US Inventories (Reuters)
China’s Real Estate Bust Is Worse Than It Seems (Pesek)
Greece Bailout Saga Strains German Patience (Guardian)
Greece To Stop Privatisations As Syriza Faces Backlash On Deal (AEP)
Greek Government Raises Concern Over Payment To IMF In March (Kathimerini)
Postponing an IMF Tranche ‘Means Default’ (Kathimerini)
After Facing Down SYRIZA MPs, Greek PM Mulls Parliament Vote (Kathimerini)
In UK Labour Market ‘Flexibility’ Means Letting Employers Off The Hook (Guardian)
Internet, RIP? (Ron Paul)
NATO’s Russia Border Games (Daniel McAdams, Ron Paul Institute)
Gestapo Tactics At US Police ‘Black Site’ In Chicago Raise Alarms (Guardian)
Can Europe Stop Migrants Dying In The Mediterranean? (BBC)
Impossible Black Hole Is More Massive Than 12 Billion Suns (Forbes)
Study Confirms Carbon Dioxide Is Warming The Earth (Space Reporter)

“I’ve been here before though and know full well how this story ends and it doesn’t involve me being detained in a mental health establishment (usually).”

The US Recovery Story Is A Fraud: Albert Edwards (CNBC)

Societe Generale’s notoriously bearish strategist, Albert Edwards, has poured scorn on the belief that the U.S. economy is recovering and predicts “violent” reactions in asset markets during the second half of 2015. “The downturn in U.S. profits is accelerating and it is not just an energy or U.S. dollar phenomenon – a broad swathe of U.S. economic data has disappointed in February,” he said in a research note published Thursday. U.S. indexes have continued to hit all-time highs this year and the Nasdaq is also looking to break through a level last seen at the peak of the tech bubble in 2000. However, Edwards said that, rather than concentrating on these corporate earnings or dismal economic data points, market participants were too focused on the “pillow talk” about decent payroll data from the U.S. Federal Reserve.

Fed Chair Janet Yellen sounded a dovish tone this week in front of Congress, saying the central bank would be patient with its goal of normalizing benchmark interest rates. Analysts have been busy dialing back their estimates for the next rate hike in the U.S., with many now believing that it could be September, or even later – rather than June – when a change in policy takes place. “The reality is that the vast bulk of economic, as well as earnings, data (even outside the energy sector), has been simply dreadful,” Edwards said. “The economic cycle will be brought down by asset bubbles bursting long before ‘tight’ policy has any effect. Lessons were learned from the global financial crisis, but not that one.”

In the research note, he highlights a slew of data that has surprised on the downside so far in 2015, adding that it was the worst start-of-year since 2009. Examples he gave included retail sales, factory orders and personal spending. There have also been a number of disappointing earnings, with Wall Street powerhouse Morgan Stanley seeing adjusted earnings fall short of estimates and retail giant Wal-Mart posting worse-than-expected revenue last week. Edwards said that such an earnings slump was normally associated with an outright U.S. recession. “With equity markets galore hitting record highs clearly I must be missing something big!” he said. “I’ve been here before though and know full well how this story ends and it doesn’t involve me being detained in a mental health establishment (usually).”

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“When the U.S. consumer is starting to be more than 70% of GDP, as it’s threatening to do again, the U.S. structural story is not as powerful as so many people seem to now believe it is,”

The US Is Not As Strong As You Think: Jim O’Neill (CNBC)

The U.S. may not be as strong as investors think because it is growing overly dependent on the consumer for economic growth, said Jim O’Neill, former chairman of Goldman Sachs Asset Management. “When the U.S. consumer is starting to be more than 70% of GDP, as it’s threatening to do again, the U.S. structural story is not as powerful as so many people seem to now believe it is,” O’Neill told CNBC on Thursday. “It was, but it’s weakening.” A bull case emerged for the United States after the financial crisis in part because investors saw growth coming from structural improvement, rather than cyclical momentum, O’Neill said.

The idea was the country would begin rebuilding its savings rate and shore up exports and investments as the consumer took a smaller role in fueling growth, he said. That shift was beginning to take shape, but in the last year, signs are beginning to emerge that “the consumer is back to being king,” O’Neill said in a “Squawk Box” interview. “In some ways, the reason we had the whole mess in the first place is because the U.S. consumer was too much of the king,” he said, referring to the financial and subprime mortgage crises. He pointed to the role of oil production in improving the country’s balance of payments with the rest of the world.

Last year, President Barack Obama’s Council of Economic Advisers highlighted strength in the American oil industry as one of three structural changes that would support sustained U.S. growth. However, oil prices fell 60% between last summer and January. Many marketwatchers have said that is a net positive for growth because consumers will spend what they save at the pump in the broader economy, but O’Neill said collapsing crude prices are a negative for the rebalancing of the U.S. economy. “It’s not really in the U.S.’s long-term interest for oil prices to drop so sharply on a sustained basis,” he said.

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Pension bubble.

Québec Caisse’s Sabia Says Stock Markets Will ‘Run Out of Gas’ (Bloomberg)

The double-digit gains global stock markets have experienced in the past few years can’t continue much longer, and more modest gains are in store, said Michael Sabia, the head of Canada’s second-largest pension fund. “It’s going to run out of gas,” said Sabia, chief executive of the Caisse de Depot et placement du Quebec, in an interview in Montreal. The Caisse has benefited from the run-up in stock prices, in particular in the U.S., coming out of the recession. The Montreal-based pension fund posted an overall return of 12% in 2014 on its investments, fueled by an increase in its equities portfolio. Over the past five years, its overall return on its investments has averaged 10.4% annually.

Sabia said a more realistic annual return would be in the single digits once the public equity markets cool, although he cautioned he didn’t know when that will be. The bulk of gains in corporate profitability, in particular among U.S. multinationals, have come from cost cuts, he said. Companies will have to boost sales too, for the Standard & Poor’s 500 Index to continue rising. The Caisse isn’t forecasting a massive correction. Instead, single-digit returns are a more likely scenario, he said. The fund had C$225.9 billion ($182 billion) in total assets at the end of 2014, compared with C$200 billion a year earlier.

The pension fund, which oversees the retirement savings of those living in Quebec, is a prominent investor in infrastructure, real estate, public and private equity worldwide. The fund is looking to diversify its portfolio globally and will pursue opportunities in the U.S., Australia, and Mexico, Sabia said. It will also be exploring some opportunities in India and Europe. The Caisse has shifted about 5% of its exposure in Canada to other markets in the past four years and currently has about about C$117 billion, or 47% of its investments, outside of the country. That’s up from C$72 billion in 2010.

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“Many people feel like all their money is going to making ends meet and having enough money to save for retirement seems like a stretch.”

Only One-Quarter Of Americans Plan To Retire (MarketWatch)

Many Americans appear to be giving up on retirement. Just over one-quarter (26%) of Americans have a traditional notion of retirement in which they plan to stop working altogether when they reach retirement age, according to a new survey of 7,000 households — “Americans’ Financial Security: Perception and Reality” — released Thursday by The Pew Charitable Trusts. Asked about their retirement plans, 21% said they are never planning to retire, while 53% anticipate doing something else, including working at a different job. “Some people really enjoy working and imagine working for a great deal longer, whereas the reluctance to retire for other people reflects their income and retirement savings shortfalls,” says Diana Elliott, research manager for financial security and mobility at Pew.

“Many people feel like all their money is going to making ends meet and having enough money to save for retirement seems like a stretch.” The survey included additional focus groups in Orlando, Fla., Boston and Phoenix. Roughly 10,000 baby boomers reach retirement every day, so it’s not unexpected that so many of them are either not willing or able to stop work altogether, says Andrew Meadows, a San Francisco-based producer of “Broken Eggs,” a documentary about retirement. He spent seven weeks traveling around the U.S. and interviewed over 100 people about why they haven’t saved enough money. “You tend to get a negative tone when you talk to people about retirement,” he says.

One reason fewer people plan to retire is that more families with older breadwinners have debt. The%age of families with a head of household ages 55 or older that carried debt increased to 65.4% in 2013 from 63.4% in 2010, according to “Debt of the Elderly and Near Elderly, 1992-2013”, released last month by the Employee Benefit Research Institute. Furthermore, the%age of these families with debt payments greater than 40% of income—a traditional threshold measure of debt load trouble—increased to 9.2% in 2013 from 8.5% in 2010. The amount of debt shouldered by all families has soared over the last two decades, mainly due to mortgage debt, says Craig Copeland, author of the EBRI report. The median debt level of all indebted families with heads aged 55 and over hit $47,900 in 2013, up from $17,879 in 1992.

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Mission accomplished.

Americans No Longer Regard China As Top Enemy (CNBC)

Americans no longer see China as public enemy number one, with Russia now cited as the country’s top adversary, according to a new poll. 12% of Americans named China when asked which country they consider the U.S.’s greatest enemy in Gallup’s annual World Affairs poll, down from 20% in 2014 when it topped the list. China now ranks behind Russia and North Korea, which received 18 and 15% of the vote, respectively, compared with 9 and 16% last year. The poll is based on interviews conducted on February 8-11, 2015 with a random sample of 837 adults, aged 18 and older, living across the country.

“China is distinct from the other countries that typically rank among the top U.S. enemies in that it represents primarily an economic threat to the U.S., whereas Russia, Iran, Iraq and North Korea represent more of a security threat,” said Gallup. “International events over the past year, particularly the dispute with Russia over the Ukraine situation and the growing influence of ISIS militants in Iraq and Syria, have likely made countries other than China seem more threatening to the U.S,” it said. A simultaneous strengthening of the U.S. economy and slowdown in China’s economy is another possible factor in Americans’ seeing the mainland as less of a threat than in recent years.

Last year, China’s economy grew 7.4%, its slowest pace in 24 years, undershooting the government’s target for the first time since 1998. Meantime, the U.S. economy expanded 2.4%, up from 2.2% in the year before. “As Americans have grown more confident in the health of the U.S. economy, their views of what threatens the U.S. may shift more to security concerns than economic ones,” Gallup said. The proportion of Americans that regard “the economic power of China” as a critical threat to the vital interests of the U.S fell to 40%, down from 52% in both 2013 and 2014.

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Volatility.

Oil Futures Down Sharply On Rising US Inventories (Reuters)

Crude oil futures fell sharply on Thursday as rising inventories in the United States pressured both Brent and U.S. contracts and countered expectations for recovering demand. While Brent losses were tempered by those expectations for improving global demand and geopolitical concerns about energy supplies from Libya and Russia, U.S. crude losses more than wiped out Wednesday’s gains. Brent April crude fell $1.58, or 2.56%, to settle at $60.05 a barrel, off a $62.63 intraday peak. On Wednesday, Brent surged 5%. U.S. April crude fell $2.82, or 5.53%, to settle at $48.17, after rallying 3.47% on Wednesday. Brent’s premium to U.S. crude on Thursday increased to $12.06, the widest spread since January 2014.

Both crude contracts rallied on Wednesday after Saudi oil minister Ali al-Naimi said demand was growing. Earlier in the week, a Gulf OPEC delegate predicted stronger demand growth in the second half of 2015. Brent prices collapsed after hitting $115 in June 2014 on global oversupply and OPEC’s subsequent decision to defend market share against rival producers rather than cut output. Brent’s recovery from a nearly six-year low of $45.19 in January was sparked by signs that lower prices are starting to reduce investment in production in non-OPEC countries. “But stopping production growth is not the same as lowering production,” said a Texas-based cash crude broker.

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“This is a supply-side correction in property..”

China’s Real Estate Bust Is Worse Than It Seems (Pesek)

As China slows down, leaders in Beijing are understandably turning to one of their favored growth stabilizers: housing. A record decline in new-home prices in January has, as my Bloomberg News colleagues reported this week, prompted Chinese officials to contemplate additional stimulus measures, including reducing the required down payments on second homes and eliminating sales tax after only two years of ownership instead of five. And why not? To this point, various price-boosting schemes have helped China ward off the kind of downturn that befell America in the late 2000s and Japan two decades earlier. Unfortunately, though, they’re no longer likely to have the same impact today.

That’s because of a little-recognized shift in the nature of China’s property bust – from the demand side to the supply side. As research done by Rosealea Yao of Gavekal Dragonomics shows, China’s real problem is that new construction is evaporating no matter what sales and prices do. That means the knock-on effects of additional stimulus – on cement, steel and so on – will necessarily be limited. “This is a supply-side correction in property,” Yao writes in a new report. “While housing sales will likely improve this year, construction and all the industrial activity that depends on it will not. Therefore an upturn in housing sales will not deliver as much of a boost to growth.”

I checked in with Yao about which data series should frighten Beijing most: “It is floor space started,” she says. Property starts (measured in area of floor space) declined 26% year-over-year in December following a 35% plunge in November. That marks a dramatic deepening of the 5.5% plunge seen between January and October 2014. Also last year, parcels of land allotted for new projects slid 25%, a blow for highly-indebted local governments that rely on such sales. It gets worse. Even with contingency plans to stabilize the market, “we believe China’s underlying housing demand is peaking and will soon start declining,” Yao says. That’s a problem given the current oversupply – all those ghost cities – which Yao estimates will require “at least another two years” to work through.

In the meantime, “the traditional correlation between housing sales and indicators like steel use and construction starts will break down.” In Yao’s rosiest scenario, new stimulus measures would only pump up sales 2% and limit the fall in housing starts to 10%. One has to wonder at what cost, too. In the short run, it’s easy to understand why the government is targeting housing prices. As the experiences of Japan, the U.S. and now parts of Europe demonstrate, housing busts take entire economies down with them. But such measures ultimately make China more vulnerable to a crash. A $328 billion surge in new credit in January – the third straight monthly jump – adds to a debt pile that has grown to frightening proportions.

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Personal, I told you: “The word in Brussels is that Schäuble and Varoufakis can hardly bear to be in the same room together.”

Greece Bailout Saga Strains German Patience (Guardian)

The German parliament is expected to agree to extend the eurozone’s bailout of Greece on Friday, capping a tumultuous first four weeks in office for the anti-austerity government in Athens. The next four months will be crueller yet. That will be clear from the debate in the Bundestag in Berlin. Although Chancellor Angela Merkel has never been outvoted in five years of policy decisions on the euro crisis and need not fear defeat on Friday, the endorsement will be grudging and will reek of suspicion of the Greek prime minister, Alexis Tsipras. At least 25 of Merkel’s 311 MPs will oppose or abstain on the Greek rescue vote, in the largest act of dissent on Greece that Merkel has seen from her backbenchers. Patience with Greece is running out in Berlin. It is also turning to exasperation because of what is seen as the intemperate tone of Tsipras and his team.

“There can be no reward for cheek,” said the bestselling Bildzeitung tabloid on Thursday under a one-word banner headline of “Nein, no more billions for greedy Greeks.” Wolfgang Schäuble, the finance minister, told Merkel’s backbenchers that the new Greek government was manipulating eurozone largesse to “trample all over European solidarity”, Der Spiegel reported. The Germans expect the Greeks, beneficiaries of a €240bn rescue, to be grateful. Instead they are seen to be impertinent. No sooner was the ink dry on the deal on Tuesday granting Athens a 17-week loan extension than its finance minister, Yanis Varoufakis, upped the ante and demanded the massive debt burden be partly written off. Schäuble virtually accused the Tsipras team of lying. “The question now is whether one can believe the Greek government’s assurances or not. There’s a lot of doubt in Germany.”

The word in Brussels is that Schäuble and Varoufakis can hardly bear to be in the same room together. The confrontation looks certain to get worse over the next month as Tsipras sets out the fiscal and economic reforms he must enact to win the bailout extension and then, over the summer, a new package of financial aid. That things have turned so sour so quickly is less than surprising. The big centrist governments of the eurozone were never likely to do any favours for a new hard-left Syriza movement dedicated to unpicking five years of German-led response to the crisis – fiscal consolidation or austerity. Why would they help Tsipras, seen by the mainstream as a dangerous demagogue? Besides, helping him would encourage others to follow suit and would mean admitting they got their reaction to the euro crisis wrong.

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Never sell your country to foreigners.

Greece To Stop Privatisations As Syriza Faces Backlash On Deal (AEP)

Greece’s Left-wing Syriza government has vowed to block plans to privatise strategic assets and called for sweeping changes to past deals, risking a fresh clash with the eurozone’s creditor powers just days after a tense deal in Brussels. “We will cancel the privatisation of the Piraeus Port,” said George Stathakis, the economy minister. “It will remain permanently under state majority holding. There is no good reason to turn it into a private monopoly, as we made clear from the first day. “The deal for the sale of the Greek airports will have to be drastically revised. It all goes to one company. There is no way it will get through the Greek parliament.” The new energy minister, Panagiotis Lafazanis, warned that Syriza will not sell the Greek state’s 51pc holding of the electricity utility PPC, power grid ADMIE or state gas company DEPA. “There will be no energy privatisations,” he said.

It is already becoming clear that Syriza’s leadership does not accept a strict, minimalist reading of the Eurogroup text, and is relying on quiet assurances from Brussels and Paris that it has friends in the EU. The defiant signals are making it harder for the German government to dampen criticism over the deal in the Bundestag before it votes on Friday. “Greece will not get a single penny until it complies with its obligations,” said Germany’s finance minister, Wolfgang Schauble. Both the IMF and the ECB say the deal is too loose to pin down Syriza, allowing it to unpick elements of the EU-IMF Troika Memorandum. Mr Stathakis gave strong hints that this is indeed Syriza’s intention. “The Eurogroup meetings went very well,” he said, with a conspiratorial smile. Yet the Syriza leadership risks falling between two stools as it tries to chip away at the austerity regime without triggering Greece’s ejection from the euro.

A closed-door crisis meeting of the party at the Greek parliament erupted in an emotional storm, running for 12 hours as the group’s Left Platform voiced their anger over the retreat in Brussels. “A lot of Syriza MPs are very troubled by the deal and they are being pretty open about it. The fault lines are clear,” said one MP, emerging for a shot of caffeine. “We’re in uncharted territory and we don’t know how this is going to end. But there is a very strong sense that we should hold together come what may. We are not going to split,” he told The Telegraph. Premier Alexis Tsipras sought to rally the troops, assuring them that Syriza had not abandoned its “Thessaloniki Programme” for radical change or capitulated to EMU demands under threat of bankruptcy. Insisting that the document signed in Brussels gives Syriza scope to carry out its democratic revolution, he demanded that rebels stand up and “be counted” if they really mean to vote against the deal.

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Dare throw us out…

Greek Government Raises Concern Over Payment To IMF In March (Kathimerini)

The Euro Working Group discussed Greece’s imminent funding problems on Thursday amid mounting concern about how the country will meet its obligations next months. Earlier in the day, Minister of State for Coordinating Government Operations Alekos Flambouraris suggested that Greece might delay payment to the International Monetary Fund if it cannot find the necessary money. Greece is due to pay the IMF €1.6 billion euros next month but Flambouraris said that Athens might ask to delay this payment for two months. Greece has a total of €7.27 billion in obligations next month of which €4.6 billion is in treasury bills that are due to be rolled over. The government’s first T-bill issue will have to take place by Thursday as €1.6 billion has to be rolled over the next day.

One of the possible solutions to Greece’s funding problem is for its lenders to raise the €15billion limit on T-bill issues but the European Central Bank has so far refused a Greek request for an increase. The German Parliament is on Friday due to approve the extension to Greece’s loan agreement, which includes another €7.2 billion in loans. In Thursday’s test ballot, 22 of 311 lawmakers in Chancellor Angela Merkel’s conservative bloc, comprising her Christian Democrats (CDU) and their Bavarian sister party, the CSU, opposed the extension and five abstained. Their Social Democrat (SPD) coalition partners, with 193 seats, voted unanimously for the extension in their test vote.

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“..exceptionally complicated” with “many obstacles..”

Postponing an IMF Tranche ‘Means Default’ (Kathimerini)

The possibility of Greece postponing the repayment of any debt tranches to the IMF is seen as “exceptionally complicated” with “many obstacles,” according to officials familiar with the subject. They stress that such a move would constitute a “clear default,” with consequences for a large number of other loans Greece has received. A delayed IMF loan repayment would generate multiple consequences, which market professionals estimate would have a negative impact on Greece and its economy, as when the Fund lends money to a country it is always the first to be paid back. If a country forfeits a repayment, this is considered a credit event, or default. Greece is due to pay the IMF €310 million on March 6, €350 million on March 13, €580 million on March 16 and another €350 million on March 20.

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Can he bypass Parliament? Wouldn’t that defeat the whole idea?

After Facing Down SYRIZA MPs, Greek PM Mulls Parliament Vote (Kathimerini)

Prime Minister Alexis Tsipras is to decide in the next 48 hours whether he will allow Parliament to vote on a four-month extension to Greece’s loan agreement or whether he will bypass the House altogether after signs of dissent within his party. The government said on Thursday that it will wait for other eurozone parliaments to vote on the deal, a process which should be completed on Friday, before deciding when or if legislation paving the way for the loan extension would be submitted to the Greek Parliament. Tsipras’s hesitancy comes after a meeting of SYRIZA’s parliamentary group on Wednesday that lasted more than 11 hours. During the debate about Greece’s new agreement with its lenders, a number of MPs expressed disagreement with the deal.

At Tsipras’s insistence, a vote was held at the end of the meeting and some 30 of the party’s 149 lawmakers either voted against the agreement or failed to vote for it. While it is unlikely that there would be such a big rebellion in an actual parliamentary vote, the signs of dissent have been enough to cause concern among Tsipras and his aides, who are even considering the possibility of not bringing the agreement to Parliament and finding another way of ensuring its extension. “My opinion is that it should be brought to Parliament but I cannot tell you what will actually happen,” Minister of State for Coordinating Government Operations Alekos Flambouraris told Mega TV.

He added that he would not expect more than three or four SYRIZA MPs to vote against the deal in a parliamentary ballot. Tsipras also spoke on Thursday at a meeting of the party’s political secretariat, where there was a calmer mood. He is due to appear at SYRIZA’s central committee on Friday and Saturday, and party officials have asked to consult in depth with the body over key decisions. The prime minister is under pressure from opposition parties, which are demanding to know whether he will bring the agreement with the lenders to Parliament. Both New Democracy and PASOK raised questions in the House on Thursday about the government’s intentions.

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Zero hour contracts. Beggars and choosers.

In UK Labour Market ‘Flexibility’ Means Letting Employers Off The Hook (Guardian)

Zero-hours contracts are the ultimate expression of Britain’s “flexible” labour market. Deregulate the workforce, free up firms to hire and fire, and they will be less burdened by fixed costs, leaner and more competitive – and create more jobs. So went the post-Thatcherite consensus. So now we have at least 697,000 workers in the economy who don’t know how many hours they’re going to be working from one week to the next, or sometimes even one day to the next. In theory, they might be footloose and fancy-free – using their spare time to launch a dotcom startup or gig with a band.

Yet these workers, many of whom are juggling more than one zero-hours contract, according to the ONS (which explains why there are 1.8m of them) fit exactly the characteristics of the groups that usually do worst out of the labour market. More than half of them are women – 55%, compared with 47% of the workforce as a whole; and more than a third of them are aged 16–24, compared with 12% of the wider workforce. If zero-hours working were a lifestyle choice, surely more of the workforce’s traditional winners would be doing it? There’s a profound human cost here, of the kind detailed over the past decade by London Citizens’ living-wage campaign, which has been as much about the casualisation of jobs as poverty pay; but there’s also a price for the wider economy.

These easy-come-easy-go workers are highly unlikely to build up the work skills they will need to take them through life; and their employers have little incentive to invest in training and equipping them. Yet building up Britain’s “human capital” is critical to boosting our flagging productivity, and ensuring the economy can grow in the long-term, at a time when some experts fear we may be facing a period of stagnation. Our short-termist employers may need to lose a bit in efficiency, for all of us to gain in economic progress – and who knows, by offering their staff predictability and security, they may find they make gains in loyalty and productivity too.

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“The federal government should keep its hands off of the Internet!”

Internet, RIP? (Ron Paul)

Today the Federal Communications Commission (FCC), a non-elected federal government agency, voted three-to-two to reclassify broadband Internet as a common carrier service under Title II of the Communications Act. This means that – without the vote of Congress, the peoples’ branch of government – a federal agency now claims the power to regulate the Internet. I am surprised that even among civil liberties groups, some claim the federal government increasing regulation of the Internet somehow increases our freedom and liberty. The truth is very different. The adoption of these FCC rules on the Internet represents the largest regulatory power grab in recent history.

The FCC’s newly adopted rule takes the most dynamic means of communication and imposes the regulatory structure designed for public utilities. Federal regulation could also open the door to de facto censorship of ideas perceived as threatening to the political class – ideas like the troops should be brought home, the PATRIOT Act should be repealed, military spending and corporate welfare should be cut, and the Federal Reserve should be audited and ended. The one bright spot in this otherwise disastrous move is that federal regulations making it more difficult to use the Internet will cause more Americans to join our movement for liberty, peace, and prosperity. The federal government should keep its hands off of the Internet!

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“NATO is exempt from the rules it imposes on its enemies.”

NATO’s Russia Border Games (Daniel McAdams, Ron Paul Institute)

When a Russian bomber flew over international waters some 25 miles off the southwest tip of England last week, UK Defense Secretary Michael Fallon called Russia “a real and present danger.” The UK government scrambled jet fighters to meet the Russian aircraft as a show of force. Said Secretary Fallon of the incident, “NATO has to be ready for any kind of aggression from Russia, whatever form it takes.” He added that, “NATO is getting ready,” warning particularly that Russia may soon move to invade the Baltic countries of Estonia, Latvia, and Lithuania. Reading the feverish Twitter feed of NATO’s Supreme Allied Commander Europe, Gen. Phil Breedlove, one would get the impression that NATO is already at war with Russia.

Fighter jets sit menacingly atop aircraft carriers as the General beams about NATO member countries’ commitment to contribute to the fight. The message is clear: Russia is about to attack! NATO has, for no understandable reason, found itself in Russia’s crosshairs. NATO cannot figure out how it is that Russia could possibly feel threatened by its actions, which, unlike Russia’s are not in the slightest provocative. Russian military plane over international waters 25 miles from the UK coast is “real and present danger” to NATO. Yet… Yet yesterday US combat vehicles conducted a military parade and show of military force in Estonia just 300 yards — yards! — from the Russian border. That is just over 60 miles from downtown St. Petersburg.

This is not a provocation, we are to believe. This is not a “real and present danger” to Russia. NATO is exempt from the rules it imposes on its enemies. In the Guardian’s review of a new book by Politics professor George Sakwa, the current fallout from a near quarter century of post-Cold War NATO policies is perfectly captured:

The hawks in the Clinton administration ignored all this, Bush abandoned the anti-ballistic missile treaty and put rockets close to Russia’s borders, and now a decade later, after Russia’s angry reaction to provocations in Georgia in 2008 and Ukraine today, we have what Sakwa rightly calls a “fateful geographical paradox: that Nato exists to manage the risks created by its existence”.

That line bears repeating: “Nato exists to manage the risks created by its existence.”

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Scary that it takes a British paper to unveil this.

Gestapo Tactics At US Police ‘Black Site’ In Chicago Raise Alarms (Guardian)

The US Department of Justice and embattled mayor Rahm Emanuel are under mounting pressure to investigate allegations of what one politician called “CIA or Gestapo tactics” at a secretive Chicago police facility exposed by the Guardian. Politicians and civil-rights groups across the US expressed shock upon hearing descriptions of off-the-books interrogation at Homan Square, the Chicago warehouse that multiple lawyers and one shackled-up protester likened to a US counter-terrorist black site in a Guardian investigation published this week.

As three more people came forward detailing their stories of being “held hostage” and “strapped” inside Homan Square without access to an attorney or an official public record of their detention by Chicago police, officials and activists said the allegations merited further inquiry and risked aggravating wounds over community policing and race that have reached as high as the White House. Caught in the swirl of questions around the complex – still active on Wednesday – was Emanuel, the former chief of staff to Barack Obama who is suddenly facing a mayoral runoff election after failing to win a majority in a contest that has seen debate over police tactics take a central role.

Emanuel’s office refused multiple requests for comment from the Guardian on Wednesday, referring a reporter to an unspecific denial from the Chicago police. But Luis Gutiérrez, the influential Illinois congressman whose shifting support for Emanuel was expected to secure Tuesday’s election, joined a chorus of colleagues in asking for more information about Homan Square. “I had not heard about the story until I read about it in the Guardian,” Gutiérrez said late Wednesday. “I want to get more information, but if the allegations are true, it sounds outrageous.”

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Yes, it can. But it won’t.

Can Europe Stop Migrants Dying In The Mediterranean? (BBC)

More than 3,000 people are estimated to have died in the Mediterranean Sea last year. The Pope has warned the waters are in danger of becoming “a vast cemetery”. People smugglers have been described as the most ruthless travel agents on the planet and the Italian Navy rescue mission has been downsized among claims that helping migrants at sea creates a “pull factor”. What could European countries do to stop these deaths? Four expert witnesses give their perspective with the BBC World Service’s The Inquiry.

Andrea di Nicola: Demand is high for ‘ruthless travel agents’: The Italian criminologist and author spent two years travelling around Africa and the Middle East speaking to smugglers. “When we interview and spend time with the smugglers, they were almost laughing at Europe saying ‘You cannot stop this. If you try and stop this, if you close your border I will earn more, my prices will increase.’ This is what they told us.” Some smugglers pack migrants into unseaworthy boats in the face of winter storms. Others have sent a freighter packed with people on autopilot towards the shore. “Travelling by sea can be the cheapest way into Europe, but a better class of service can be bought.

“A Turkish smuggler made his clients enter Italy on yachts with two or three skippers and they were full of Afghans and Syrians. They were sailing through the Mediterranean Sea during spring time or summer time. It was less risky and more costly for them. “The price paid [by migrants] was something like 7-8,000 euros for each person.” Large, sophisticated networks stretching across continents, comprising thousands of individuals will be hard to stop. “They trust each other. They work together. They are more capable of co-operating among each other in a criminal system than we are among countries of the European Union. This is incredible. “It’s essential [for the EU] to co-operate in terms of judicial and investigative co-operation. For instance, the co-operation with Turkish authorities should be boosted in order to make the life of the smugglers more difficult.”

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“Forming such a large black hole so quickly is hard to interpret with current theories.”

Impossible Black Hole Is More Massive Than 12 Billion Suns (Forbes)

Astronomers have discovered a monster black hole at the cosmic dawn of our Universe powering an ultraluminous, high-energy quasar. The humungous black hole has a mass 12 billion times that of the Sun and its associated quasar pumps out energy a million billion times that of the Sun. Quasars are formed as the central supermassive black hole sucks in surrounding materials and gases, which heats up and emits a tremendous amount of light, so much that it actually push away the material getting sucked in behind it. It is quasars that limit the growth of black holes, which is one of the reasons why this ultraluminous quasar around this gigantic black hole is so puzzling. The other reason is how ancient they are. The quasar is in the high redshift of light, which is a measure of how much the wavelength of the light has been stretched by the expansion of the Universe before it reaches us here on Earth.

Using this measure, scientists are able to date quasars and they’ve put this one in the early cosmic dawn, just 900 million years after the Big Bang. “How can a quasar so luminous, and a black hole so massive, form so early in the history of the universe, at an era soon after the earliest stars and galaxies have just emerged?” asked Xiaohui Fan, Regents’ Professor of Astronomy at the University of Arizona’s Steward Observatory, who co-authored the study in Nature. Team member Dr Fuyan Bian, from the Research School of Astronomy and Astrophysics at the Australian National University (ANU) said the discovery challenged theories of how black holes and quasars are made, adding “Forming such a large black hole so quickly is hard to interpret with current theories.” But the scientists aren’t put off by the mystery of the quasar, it’s exactly what they were looking for.

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So there.

Study Confirms Carbon Dioxide Is Warming The Earth (Space Reporter)

Researchers using spectrometers to measure carbon dioxide levels in Earth’s atmosphere between 2000 and 2010 have confirmed that levels of the greenhouse gas are increasing worldwide. Led by Dan Feldman of the Lawrence Berkeley National Laboratory in California, a team of scientists measured the amount of infrared radiation absorbed by atmospheric gases, specifically carbon dioxide. Increasing levels of atmospheric carbon dioxide are warming the Earth’s surface through a phenomenon known as the greenhouse effect. Carbon dioxide and other greenhouse gases, such as methane, absorb infrared radiation that would ordinarily be sent into space, in a manner similar to the way a greenhouse traps heat, warming temperatures inside it. This phenomenon, known as radiative forcing, occurs when more energy enters the greenhouse–or in this case, the planet–than leaves it.

Feldman and his team measured radiative forcing at two research locations, one in Oklahoma, and the other above the Arctic Circle near Barrow, Alaska. Both sites are owned by the US Department of Energy. Using spectrometers set for accuracy by the United States Office of Weights and Measures, the researchers followed infared radiation arriving on Earth’s surface. That infrared radiation is both absorbed and scattered by greenhouse gases in the planet’s atmosphere. Spectrometers can pinpoint and identify carbon dioxide because like all molecules, it emits and absorbs energy at very specific wavelengths. At both research sites, carbon dioxide in the atmosphere increased by 22 parts per million from 2000 to 2010. The concept of parts per million refers to the volume of carbon dioxide molecules within a million air molecules.

Levels of infared energy directed down to the Earth’s surface also increased at both sites during this period due to being scattered by carbon dioxide. Increasing levels of atmospheric carbon dioxide resulted in more infrared energy being reflected back to Earth instead of being emitted into space. Warming from other sources such as clouds, water vapor, weather, or even faulty instruments was ruled out by the researchers. “This is clear observational evidence that when we add carbon dioxide to the atmosphere, it will push the system to a warmer place,” Feldman said. A report on the study is published in the Feb. 25 issue of the journal Nature. The researchers are now conducting a second study measuring the effect of other greenhouse gases, such as methane, on global warming.

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