Oct 042022
 
 October 4, 2022  Posted by at 8:52 am Finance Tagged with: , , , , , , , , , ,  68 Responses »


Pablo Picasso Cafe Royan [The Coffee] 1940

 

Developing Developments (Kunstler)
The Nord Stream 2 Pipeline Sabotage (Monkeywerx)
Macgregor: US Likely Attacked Nord Stream Pipelines to Isolate Germany (SN)
In Nord Stream Attack, US Sees ‘A Tremendous Opportunity’ (Maté)
Jeffrey Sachs Offers Nord Stream Theory (RT)
Medvedev Comments On Musk’s Ukraine Proposal (RT)
Duma Ratifies Accession Treaties For Donbass, Kherson, Zaporozhye (RT)
Kremlin Comments On Borders Of New Territories (RT)
Kiev’s Counter Attacks On Kherson Have Failed – Official (RT)
British Intelligence Predicted Ukraine War 30 Years Ago (Dec.uk)
Ukraine Grain Deal Not Enough – Moscow (RT)
Belgium Suffers Unplanned Nuclear Reactor Shutdown (RT)
Ukraine Scolds EU Over Aid Delays (RT)
Truss Exposes The Inherent Instability Of Western Democracies (Hryce)
Trump Seeks $475 Million In Defamation Suit Against CNN (ZH)
Hunter Biden Probe to Look Into ‘What Happened in 2020’: Jim Jordan (ET)
The Biggest Problem China Faces Isn’t Real Estate (Balding)

 

 

Best amicus brief ever?!

 

 

Tucker regime change

 

 

 

 

Greenwald Donbass

 

 

Hey! Sanctions!

 

 

 

 

“The Russian negotiation table is open for business. Failing to report to it, Ukraine will have to decide what sort of rump state it will become — a merely half-assed agricultural backwater or a fully ass-blown-off failed state.”

Developing Developments (Kunstler)

What no government official can acknowledge — even among the Euroland victim nations of this awesome stupidity — is that the US demolition of the Nord Streams was an act-of-war against our own allies. By the way, the blogger who styles himself as “Monkey Werx,” notable for tracking the world-wide military flight movements, presents a comprehensive play-by-play of just exactly how the mission was accomplished. I’ll summarize but you can read his full report (click here) for yourself. MW reports that overnight on the 26th of September, a Navy P8 Poseidon submarine-hunter jet flew out of the US to the Baltic. It did not land in the UK to refuel — thus avoiding any tracking complications — but rather rendezvoused over Grudziadz, Poland, with a US Bart-12 mid-air refueling plane, which it hooked up with for more than an hour.

The P8 was equipped with Mk54 air-launched torpedoes. After un-docking from the Bart-12 refueler, the P8 followed a route west along the Nord Stream pipelines, descended to bomb-run altitude, and dropped its weapons. Kaboom. Then, fully refueled, the P8 flew directly back to the USA. Days later, when confronted at the UN by Russia with a yes-or-no question as to US responsibility for the Nord Stream caper, the US representatives refused to answer one way or another. Cute. So, the questions loom: How many more days before Germany and the rest of Euroland begin to apprehend how they have been hosed by America into an economic collapse scenario? (How many days before a team of competent professionals hunts down Klaus Schwab and his colleagues somewhere in Switzerland?) When will the Eurofolk turn on their idiot government leaders and flush them out of office?

When will all (except for psychotic Poland) bail out of the USA’s Ukraine crusade? I will tell you: this will all begin pretty darn soon. And if so, that will be the end of the NATO alliance. Meanwhile, the US-led propaganda campaign has Russia utterly on-the-ropes against a raging and triumphant Ukraine army. Nothing could be further from the truth. Russia made a few tactical retreats the past month in preparation for a final systematic and methodical mopping-up of the remaining Ukraine army. Russia is bringing in Iskander hypersonic missiles, not necessarily nuclear-armed, and will assemble Russian army regulars to replace the mash-up of Donbas militia volunteers who have borne the brunt on the thinly defended line leading to the much talked-about tactical retreat around the Kharkov-Izium-Lyman front. The Russian negotiation table is open for business. Failing to report to it, Ukraine will have to decide what sort of rump state it will become — a merely half-assed agricultural backwater or a fully ass-blown-off failed state.

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“..why fly an aircraft all the way from the United States and not land in the UK for refueling, but instead hook up for an hour plus with another US Air Force refueler out of Germany?”

The Nord Stream 2 Pipeline Sabotage (Monkeywerx)

As we sit here today, October 1, 2022, the United States has no official statement on the sabotage although Biden is pushing the standard doublespeak rhetoric and as they say, the best defense is a good offense. There is, however, an official release from the White House back in February 2022 that states the United States will take further action with Germany to end the Nord Stream Pipeline 2. So let’s look at the flight data logically… The United States has Navy P8’s stationed in the UK so why fly an aircraft all the way from the United States and not land in the UK for refueling, but instead hook up for an hour plus with another US Air Force refueler out of Germany? Could it be that the UK’s new Prime Minister would not condone the activity?

We have already seen her call out Nancy Pelosi who we know is a bobblehead and not in line with the New World Order, and we know the new UK PM is indeed a WEF appointee which is part of the NWO. Clearly, the United States did not want to land in the UK or anywhere else for a reason. Could it also be because it was armed with external weapons or they didn’t want any record of the aircraft in the area? Landing would create a log and even though we see them wipe the flight record data, the airport log is still intact. Let’s talk about the P8 weaponry for a minute. The Navy P8 Poseiden has 11 external hardpoints for mounting weapons as well as an internal bomb bay, and one weapon, in particular, is a High Altitude Anti-Submarine Warfare Weapon Capability (HAAWC) system. HAAWC is an all-weather add-on glide kit that enables the Mk54 torpedo to be launched near or below the cruising altitude of the P8 Poseidon.

What that means: the flight path and altitude of the P8 in question are indeed capable of conducting a “bomb run” on the Nord Stream 2 Pipeline. Now let’s look at the flight specifics. Note the last flight path just before exiting the area runs right along the pipeline in which they could have released the ordinance and continued their climb out, thus exiting the area and returning to the United States. Also, note the little hump just before the climb out (red arrow). That is consistent with a weapons release. Pitch down, increased AoA, weapon release, little bubble up, then a climb out (the blue line is the inbound leg of the same flight). You may also not the flight path. It circles over the area first, then flies downrange and starts the initial bomb run, then it does a quick readjustment on a final bomb run, releases, and exits immediately.

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“You have several inches of concrete around various metal alloys to move the natural gas. So it’s not something that you could simply drop a grenade down at the end of a fish line and disrupt. ”

Macgregor: US Likely Attacked Nord Stream Pipelines to Isolate Germany (SN)

A former Pentagon advisor says the most likely culprits behind the Nord Stream pipeline blasts are the United States and Britain, and that the attack was carried out to prevent Germany from bailing on the war in Ukraine. Retired US Army colonel Douglas Macgregor made the comments during an appearance on the Judging Freedom podcast. Macgregor said a process of elimination rules out Germany, because they are dependent on Nord Stream for their energy security, while it also served no benefit for Russia to have sabotaged its own infrastructure. “Would the Russians destroy their own pipeline? 40 percent of Russian gross national product or GDP consists of foreign currency that comes into the country to purchase natural gas, oil, coal and so forth. So the Russians did not do this. The notion that they did I think is absurd,” Macgregor said.

Referring to Polish MEP Radoslaw Sikorski’s infamous deleted tweet in which he wrote, “Thank you, USA,” Macgregor noted, “Who else might be involved? Well the Poles apparently seem to be very enthusiastic about it.” However, citing reports that more than 500 kg of TNT had been detected in both explosions, the former Pentagon advisor suggested only the United States and British Royal Navy had the capability to pull off the attack. “Then you have to look at who are the state actors that have the capability to do this. And that means the Royal Navy, the United States Navy Special Operations,” said Macgregor. “I think that’s pretty clear. We know that thousands of pounds of TNT were used because these pipelines are enormously robust. You have several inches of concrete around various metal alloys to move the natural gas. So it’s not something that you could simply drop a grenade down at the end of a fish line and disrupt. That means it takes a certain amount of sophistication,” he added.

Macgregor suggested that the motive behind the attacks was to prevent Germany from bailing on the Ukraine war after Berlin began “to give the impression that they were no longer going to go along with this proxy war in Ukraine.” “I’m hesitant to say ‘we know it must have been Washington’. I can’t say that because we just don’t know. But it’s very clear that we have foreclosed Berlin’s options. Berlin was drifting away from this alliance. [Chancellor] Olaf Scholz said ‘I’m not sending any more equipment, I won’t send any tanks’. Now he’s in a bind because the United States has simply robbed him of the option of bailing out. Who’s going to supply him gas and oil and coal and everything else if he bails out? Where does he turn now? And remember, the Germans, who are facing terrible consequences at home refuse to restart nuclear power plants,” the former official said.

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“Nord Stream 2, Trump declared in July 2018, is a “tragedy.“

In Nord Stream Attack, US Sees ‘A Tremendous Opportunity’ (Maté)

Western sanctions on Russia have already led to job losses, skyrocketing bills, and fears of energy rationing amid forecasts of exceptionally cold temperatures ahead. Just before the Nord Stream blasts, the head of German’s steel federation warned that without Russian energy, “a winter of de-industrialization threatens us in Germany.” Ahead of this feared winter of de-industrialization, Blinken’s optimistic response to a now assured shut-off of Russian gas might seem odd for a top diplomat. But it is perfectly consistent with a longstanding US effort to kill Nord Stream for good. In waging a multi-year campaign against Nord Stream, the US has sought to weaken Russia’s economy; undermine Russian integration with the rest of Europe; preserve lucrative transit fees for the US client state in Ukraine; and increase European dependence on US energy, in particular Liquefied Natural Gas (LNG).

In short, the “tremendous opportunity” that Blinken draws from the Nord Stream sabotage derives from the very goals that he imputed to Putin: “the weaponization of energy” for “imperial designs.” As one of Blinken’s predecessors, Condoleezza Rice, explained in 2014: “Over the long-run, you simply want to change the structure of energy dependence. You want to depend more on the North America energy platform.” The US drive to promote dependence on North American energy was escalated by President Donald Trump, who imposed sanctions to stop the Nord Stream 2’s construction while urging the German government to buy American LNG instead. Nord Stream 2, Trump declared in July 2018, is a “tragedy.” In his view, “it’s a horrific thing that’s being done, where you’re feeding billions and billions of dollars… primarily from Germany, into the coffers of Russia.”

Trump’s disdain for the “horrific” Russia-Germany energy project strained US relations with both countries. But because his actions contradicted the predominant Russiagate narrative that he was in fact a Kremlin asset being blackmailed to do Vladimir Putin’s bidding, the Nord Stream sanctions were among many confrontational Trump policies toward Russia that went widely ignored at home. Trump’s sanctions on Nord Stream 2 caused such a rift with Germany that Biden, upon taking office, initially waved them. But the Ukraine crisis gave Biden a backdoor opportunity to revive Trump’s quest. As Russian forces amassed on Ukraine’s borders in 2021, Biden pressured Germany to commit to cancelling Nord Stream 2 in the event of an invasion. When the Germans still refused, the White House announced that it would achieve its goal with or without them. “If Russia invades…then there will be no longer a Nord Stream 2,” Biden declared on February 7, with German Chancellor Olaf Scholz at his side. “We will bring an end to it.”

Trump NS2

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Includes Sachs’ role in the Shock Doctrine. Rarely mentioned.

Jeffrey Sachs Offers Nord Stream Theory (RT)

Economist Jeffrey Sachs speculated on Monday that the sabotage of the Nord Stream pipelines was the work of the US and maybe Poland, to the chagrin of Bloomberg TV hosts who quickly tried to change the subject. Now a professor at Columbia University, Sachs became notorious in Russia for masterminding the “shock therapy” reforms in the 1990s – but has been sharply critical of the West’s approach to the conflict in Ukraine in recent months. Invited to Bloomberg’s ‘Surveillance’ show on Monday, Sachs was asked to comment on Russia he “knew so well” under President Boris Yeltsin. Instead, the hosts scrambled to cut him off after he said the conflict is “on the path of escalation to nuclear war” and did not start in February 2022.

“Most of the world doesn’t see it the way we describe it,” Sachs told Bloomberg’s Tom Keene, at which point co-host Lisa Abramowicz tried to change the subject to inflation in Europe. The EU is in a “very sharp economic downturn,” Sachs agreed. The continent was “getting hammered” by energy shortages, made worse by “the destruction of the Nord Stream pipeline which I would bet was a US action – perhaps US and Poland,” he managed to add before Keene cut him off, asking for evidence of that claim. “Well first of all, there’s direct radar evidence that US helicopters, military helicopters that are normally based in Gdansk, were circling over this area. We also had the threats from the US, earlier in this year, that ‘one way or the other, we are going to end Nord Stream.’ We also have the remarkable statement by [US] Secretary [of State Antony] Blinken last Friday in a press conference; he says ‘this is also a tremendous opportunity.’ Sorry, it’s a strange way to talk if you’re worried about piracy on international infrastructure of vital significance,” Sachs retorted.

“I know this runs counter to our narrative, you’re not allowed to say these things in the West, but the fact of the matter is – all over the world, when I talk to people, they think the US did it,” he added. Abramowicz again tried to change the subject, saying Bloomberg couldn’t provide “counterbalance” to what he was saying. Undeterred, Sachs answered the next question by describing the current situation as “the most dangerous moment since the Cuban Missile Crisis” in 1962, with the US picking fights with both Russia and China, without any attempts to de-escalate things. Currently director of the Center for Sustainable Development at New York’s Columbia University, Sachs gained notoriety among the Russians for his “shock therapy” reforms in 1991-1993. The overhaul of the entire Soviet economy ended up destroying the lives of millions of Russians and handing the country’s wealth over to a handful of oligarchs.

Sachs
https://twitter.com/i/status/1576924480135258112

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“Musk sent hundreds of SpaceX’s Starlink satellites and terminals to Ukraine. Though their stated purpose was humanitarian, Kiev has since admitted to using them for the war effort.”

Medvedev Comments On Musk’s Ukraine Proposal (RT)

After Ukrainian President Vladimir Zelensky and Kiev’s online troll army savaged Elon Musk’s proposal for ending the conflict with Russia, former Russian President Dmitry Medvedev jokingly called the Tesla and SpaceX founder a “shadowy agent” of the Kremlin, comparing him to Stierlitz, the legendary fictional Soviet spy. “Kudos to [Elon Musk]! However, the shadowy agent has lost the cover. Deserves a new rank, fast. His next tweet will run like, Ukraine is an artificial state. Anticipating…” Medvedev tweeted, in English, on Monday evening. On his Telegram channel, in Russian, instead of “shadowy agent” the former president called Musk “Eustace” – a reference to the code name of the main character in the Soviet-era series ‘17 Moments of Spring,’ better known under his German alias Otto von Stierlitz.


Both references were clearly tongue-in-cheek and poked fun not at Musk, but at the utter hysterics of the Ukrainian government and its online influencers over the American billionaire’s earnest peace proposal. Crimea would remain Russian and have its water supply guaranteed, Ukraine would declare neutrality, and the four regions that just joined Russia hold UN-supervised referendums on their fate, Musk suggested earlier in the day. The poll was quickly swamped by what he called the “biggest bot attack I’ve ever seen.” It wasn’t just Kiev’s info-warriors and their Western NAFO backers, however. Ukraine’s departing ambassador to Germany used some very un-diplomatic language, while President Vladimir Zelensky himself launched a poll asking his followers if they preferred Musk who supported Ukraine over this one, who “supports Russia.” Early on in the conflict, Musk sent hundreds of SpaceX’s Starlink satellites and terminals to Ukraine. Though their stated purpose was humanitarian, Kiev has since admitted to using them for the war effort.

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Russia calmly goes through the legal moves. Important point:

“..accession to Russia is the only way to save the people living in the four former Ukrainian territories from shelling by Ukrainian troops. “The only way to end this is reunification [with Russia],”

Duma Ratifies Accession Treaties For Donbass, Kherson, Zaporozhye (RT)

The State Duma has unanimously ratified the treaties on the accession of the Donetsk and Lugansk People’s Republics (DPR and LPR), as well as Kherson and Zaporozhye Regions, to the Russian Federation. President Vladimir Putin submitted the documents regarding the four former Ukrainian territories to the lower house of parliament on Sunday. All four voted overwhelmingly in favor of joining Russia in referendums held between September 23 and 27. Addressing legislators before the vote, Foreign Minister Sergey Lavrov said that accession will “serve the interests of all people of our multiethnic country.” He added that Kiev had oppressed Russian-speaking people, which made the existence of certain territories within the Ukrainian state impossible.


State Duma Speaker Vyacheslav Volodin argued that accession to Russia is the only way to save the people living in the four former Ukrainian territories from shelling by Ukrainian troops. “The only way to end this is reunification [with Russia],” he said. The accession treaties, which were signed by Putin on Friday, were then approved by the Russian Constitutional Court. The next step in the accession process is ratification by the Federation Council, the upper house of Russia’s parliament. The DPR and LPR broke off from Ukraine shortly after the 2014 coup in Kiev. Russia recognized them as independent states in February.

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Kremlin is mocked in the west for not knowing exactly what they incorporated. No, because they want to be precise. To that end, Lavrov has been given special powers to negotiate borders.

Kremlin Comments On Borders Of New Territories (RT)

Moscow has yet to determine the future borders of Kherson and Zaporozhye Regions, which are set to be incorporated into Russia, Kremlin spokesman Dmitry Peskov has told journalists. “We will continue to consult with the residents of those regions on the issue of borders,” the official said on Monday. The two former Ukrainian regions voted last month to break away from Kiev and request being accepted into Russia. However, parts of them are still controlled by Ukrainian troops. The issue of borders came up last week, when President Vladimir Putin signed orders recognizing the two regions’ independence. The documents did not include any reference to the demarcation of the territories. When asked by journalists for clarification, Peskov promised to give an answer later.

Further complicating the situation is the fact that Russian forces are in control of a small chunk of Ukraine’s Nikolaev Region, which borders Kherson Region. Vladimir Saldo, the head of the Kherson administration, claimed last week that the land would be incorporated into Russia. This week, the Russian parliament is scheduled to ratify the unification treaties with the two regions, as well as the Donetsk and Lugansk People’s Republics. The latter two territories, which were recognized as independent by Russia in February, are defined “by the 2014 borders,” according to Peskov. Russian troops and Donbass militias have since seized much of the disputed land, but not all of it.

Kiev blasted the referendums that paved the way for the accession as a “sham”and reiterated its intention to defeat Russia on the battlefield and oust its troops from all land that it claims as Ukrainian. Moscow said the ballots were a legitimate exercise of the right to self-determination.

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180º different from western and Kiev stories.

Kiev’s Counter Attacks On Kherson Have Failed – Official (RT)

Attempts by Ukrainian forces to break through Russia’s defenses in Kherson Region have been thwarted, the deputy head of the local administration, Kirill Stremousov, has said. In a Telegram post on Monday, Stremousov stated that “everything is under control in the Nikolayev direction,”despite Kiev’s efforts to retake the region. He noted that Ukraine’s forces had advanced southward along the Dnieper River to the village of Dudchany before “taking a beating” from Russian Aerospace Forces. The official admitted that the Ukrainians were able to advance a little bit, but noted that the region’s defense systems were working and that “at the moment, the situation is completely under control.” Stremousov concluded by urging people not to give into panic because of what they hear and read on social media. “This is not Kharkov, this is not [Krasny] Liman, we are holding the fence,” he proclaimed.


Russia’s Defense Ministry has also confirmed repelling the attack, stating that over 400 Ukrainian servicemen, 43 tanks and 89 units of special military equipment were eliminated in the Nikolayev-Krivoy Rog area. The announcement comes as Kiev’s forces have mounted large-scale offensives along several points of engagement with Russia. On Saturday, Russian troops were forced to withdraw from their defensive positions in the town of Krasny Liman in the Donetsk People’s Republic after they were nearly encircled by Ukrainian forces, which had brought in reserves and reached a “considerable superiority in men and material.” It has been noted, however, that the Ukrainian side has been suffering significant casualties in the offensive, having reportedly lost over 500 soldiers (200 dead, 320 injured), as well as ten tanks and 25 infantry fighting vehicles during the attack on Krasny Liman, according to the Russian Defense Ministry.

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“It is not entirely clear, even to the Ukrainians, still less to the Russians, that Ukraine is a real country..”

British Intelligence Predicted Ukraine War 30 Years Ago (Dec.uk)

When British intelligence warned that Vladimir Putin was about to attack Ukraine earlier this year, the spooks’ foresight won many plaudits. Yet their prediction mirrored a scenario Whitehall had long known might unfold. In May 1992, just six months after the Soviet Union broke up, Britain’s then Prime Minister John Major was being briefed by his staff. They were concerned about a potential clash between Russia and Ukraine over Crimea. [..] Major’s foreign policy advisor and former ambassador to Moscow, Rodric Braithwaite, wrote a confidential background note that would today be considered heretical. “It is not entirely clear, even to the Ukrainians, still less to the Russians, that Ukraine is a real country,” Braithwaite noted. “Hence the tensions between the two.”

Braithwaite, who went on to chair the Joint Intelligence Committee later in 1992, gave the Prime Minister a potted history of the region, stretching back to the middle ages. He highlighted the “artificial famine which [Soviet leader Joseph] Stalin imposed on the Ukraine in 1930-31, when many millions of peasants were deported or starved to death.” “So it was not surprising then very many Ukrainians greeted the Germans as liberators in 1941, and that large numbers agreed to join the German army”, Braithwaite reasoned, referring to Nazi collaborators during World War II. Although these resistance groups were ultimately defeated by Stalin, Ukrainian nationalism survived as a political movement. “Throughout 1990 the number and size of popular demonstrations for independence swelled,” Braithwaite noted, adding that Russia looked like an “empire” to Ukrainians.

On the other hand, he said: “Russians would simply not recognise the picture. For Russians, the Ukraine is an integral part of Russia, its history and its culture. The Ukrainian language is no more than a dialect”. He went on: “I have not met a single Russian, even among the most sophisticated, who really believes that the Ukraine is now permanently severed from the motherland.” In a candid remark, Braithwaite said: “The Ukrainians know that. They also know that Ukraine itself is divided: between the ultra-nationalist…Western Ukraine…and the East which is predominantly inhabited by ethnic Russians.”

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“In the second half of 2022 we will be able to export up to 30 million tons. This is exactly the volume that we promised within the framework of our agreements with the UN to solve the problem of world hunger..”

Ukraine Grain Deal Not Enough – Moscow (RT)

The deal that unblocked Ukrainian grain exports is not enough to help poor nations put food on the table, Russian Agriculture Minister Dmitry Patrushev said in an interview with RBK news, published on Monday. “As part of this deal, about 4.6 million tons of agro-industrial products were exported from Ukrainian ports. The main product, a little less than half, was corn, about 1.2 million tons was wheat. Of course, this cannot cover the needs of starving countries, including the need for grain. In fact, it is merely a variation in the global market,” the minister stated. Russian Deputy Prime Minister Viktoria Abramchenko recently said that, according to estimations, the global grain market is about 800 million tons.

Patrushev also noted that the main recipients of Ukrainian grain are European countries, which “are not countries that really need it.” The official explained that Russian agricultural products could make a difference, but there are still restrains, which need to be overcome. “There are still barriers that continue to hold back our exports. If we call things by their proper names – these are hidden sanctions on the transportation of [Russian] products… Primarily, it is the limited availability of ships. International logistics companies prefer not to work with our exporters,” the minister explained. He also noted, however, that the problems are being worked out with exporters, and Russian companies which have their own fleet have fewer problems in that area.

According to Patrushev, since the beginning of the agricultural year which stared on July 1, Russia has already delivered about 8.3 million tons of grain to foreign markets, “and the growth rate of exports is increasing every day.” “This season we see an opportunity to supply no less, and maybe even more than 50 million tons of grain to the world market. In the second half of 2022 we will be able to export up to 30 million tons. This is exactly the volume that we promised within the framework of our agreements with the UN to solve the problem of world hunger,” the minister said.

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When it rains.

Belgium Suffers Unplanned Nuclear Reactor Shutdown (RT)

One of Belgium’s six functioning nuclear reactors has shut down unexpectedly, the plant’s operator Engie told VRT News on Monday. The reactor, called Tihange 3, underwent an automatic shutdown at around 8:25am local time at which point “employees then brought the power plant into a safe condition,” the company said. The reasons for the stoppage are unclear but an investigation into the incident has been launched. According to local media, the unexpected shutdown of a reactor that provided 1,038 megawatts of electricity to Belgium would not jeopardize the country’s energy supply. Belgium shut down one of the reactors at its Doel plant “for good” just over a week ago, following through on long-held plans to dismantle its nuclear energy infrastructure even as the EU finds itself in an energy crisis.

Electrabel, which runs the Doel plant, explained that the company was merely fulfilling a 2003 agreement to enact a “gradual phase-out of nuclear energy for industrial electricity production.” Belgium’s reactors had previously supplied half of the country’s electricity needs. All were due to close by 2025 until the government signed a tentative agreement with Electrabel in March to potentially extend the life of the two newest reactors by ten years. This came amid concern about the country’s increasing dependence on fossil fuels, especially from Russia. The unexpectedly stricken Tihange 3 thus had its demise postponed until 2035, as did another reactor at the Doel plant. However, the deal is not binding and efforts to similarly extend the life of the neighboring Tihange 2 reactor past its planned shutdown date of February 1, 2023 were rebuffed in July.

The Belgian government has stressed that clinging to its once-scorned nuclear energy capacity in the EU’s time of need should not be seen as discarding its commitment to renewable energy. At the same time as it revealed the draft agreement to keep Tihange 3 and Doel 4 operational until 2035, it announced a €1.1 billion ($1.2 billion) investment in wind, hydrogen, and solar energy “to give a boost to the transition to climate neutrality.” The investment will also pay for small modular nuclear reactors. As early as 2007, Belgian scientists were warning that closing the country’s nuclear plants would double the price of energy, harm the country’s energy independence, and increase its reliance on fossil fuels. Costs are already at or near record highs across the EU due to sanctions on Russian energy, a situation exacerbated by last week’s alleged sabotage of the Nord Stream pipeline that had previously carried Russian gas to Europe.

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Bite the hand.

Ukraine Scolds EU Over Aid Delays (RT)

Delays in economic aid from the European Union to Ukraine are “unacceptable” and must be resolved to avert disaster, a senior Ukranian official warned, pointing to massive budget shortfalls as the EU approved another $4.9 billion (€5 billion) assistance package. Speaking to Politico on Monday, a top economic adviser to Ukrainian President Vladimir Zelensky, Oleg Ustenko, slammed the European bloc after it agreed to send another tranche of aid between mid-October and the end of the year, insisting his country’s needs must be met sooner. “Our minister of finance is under extreme high pressure, when he sends these checks to the military, to pension funds … we have to have this money in his hands. So something like one week or several weeks’ delay is just not acceptable,” Ustenko told the outlet.

While the EU initially approved $8.8 billion (€9 billion) in assistance last May, only a small fraction of that has been sent so far. The latest move would break up a $4.9 billion (€5 billion) payment into three installments to be transferred before the end of 2022, though the rest of the original package likely won’t be sent until next year. Monday’s agreement followed months of debate between EU member states over the exact form the aid should take, with Germany arguing in favor of grants instead of loans. Berlin has accepted a plan to provide the latest $4.9 billion as a loan, but the body has yet to reach a consensus on the remaining funds. Ukraine has heavily relied on foreign aid since Russia’s attack commenced in February, with the country’s economic output taking a massive hit of up to 40% this year and the government facing a budget gap of some $5 billion per month.

While the United States has raced to inject cash into Ukraine, approving some $20 billion in economic and humanitarian assistance alone, the EU has been more hesitant, instead sending a little over $13 billion between all of its members, according to an aid tracking tool created by the Kiel Institute. American weapons transfers to Kiev have also dwarfed those of Europe by nearly ten-fold. Washington has reportedly noticed the disparity, with US officials recently telling Bloomberg that the Joe Biden administration “has pressed Europe to do more” to support Ukraine and take on “more burden sharing.” Talks on future aid from the EU will be held at an upcoming meeting in the German capital later this month, where Ustenko voiced hopes that member states will be convinced to speed up the process, saying “Berlin is going to be just the next step of these discussions.”

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UK is especially unstable. She has, what, two more weeks?

Truss Exposes The Inherent Instability Of Western Democracies (Hryce)

Even fervent believers in the stability of Western democracies must surely have had their faith shaken last week by the extraordinary economic and political crises created by the newly-minted UK prime minister, Liz Truss. In the week after the prime minister’s hand-picked chancellor, Kwasi Kwarteng, handed down a ‘mini-budget’ on September 23, the English pound crashed; the government bond market took a dive; interest and mortgage rates rose; some mortgage markets shut down; the Bank of England staged a highly unusual fiscal intervention to prevent the collapse of major pension funds; and the IMF criticized Truss in a manner usually reserved for the leaders of debt-ridden banana republics. The global importance of these events and the ongoing economic and political disruption that they will inevitably cause should not be underestimated.

Political commentator Alastair Campbell, formerly Tony Blair’s chief of staff, accurately described last week as “the week that everything changed.” Quite simply, the fact that the Truss mini-budget provided for billions of pounds worth of unfunded and uncosted tax cuts – including, most provocatively, a cut in the 45% top level income tax rate – caused the financial markets to register a serious vote of no confidence in the Truss government, with all the attendant consequences that followed. Incidentally, the events of last week show where real power ultimately lies in the West – and it is definitely not with politicians. Truss’s mini-budget is, of course, a product of the crude neo-liberal economic ideology that she so fanatically believes in, and which proved decisive in attracting the 80,000 or so Thatcher-worshipping members of the Tory party that anointed Truss prime minister only a few weeks ago.

Faced with an economic disaster entirely of her own making – one of her first acts as prime minister was to sack the head of the Treasury – Truss simply doubled down, and retreated petulantly to her Downing Street bunker. She did emerge briefly late last week to do a round of disastrous radio interviews with regional BBC stations – in which Truss continued to robotically tout the benefits of ‘trickle-down economics’, and (unsuccessfully) tried to blame the economic crisis entirely on Russian President Vladimir Putin and the conflict in Ukraine. Not surprisingly, the vast majority of commentators in the UK – irrespective of their political affiliations – have been strongly critical of the Truss mini-budget and the prime minister herself. Even Daily Telegraph columnist Ambrose Evans-Pritchard accused Truss of having “embarked on a course of sheer madness.”

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The Nic Sandmann case may have opened some venues.

Trump Seeks $475 Million In Defamation Suit Against CNN (ZH)

Former President Donald Trump filed a lawsuit against CNN tonight, claiming the so-called news outlet defamed him in an effort to reduce his chances of running for president again in 2024. The suit, which was filed Monday in U.S. District Court in Fort Lauderdale, Florida, alleges Trump has been a “long-time critic” of CNN, “not because CNN does a bad job of reporting the news, but because CNN seeks to create the news.” “CNN’s campaign of dissuasion in the form of libel and slander against the Plaintiff has only escalated in recent months as CNN fears the Plaintiff will run for president in 2024,” the suit reads. “As a part of its concerted effort to tilt the political balance to the Left, CNN has tried to taint the Plaintiff with a series of ever-more scandalous, false, and defamatory labels of ‘racist,’ ‘Russian lackey,’ ‘insurrectionist,’ and ultimately ‘Hitler.’”

Trump seeks $475 million in punitive damages, alleging that CNN “has sought to use its massive influence – purportedly as a ‘trusted’ news source – to defame the Plaintiff in the minds of its viewers and readers for the purpose of defeating him politically, culminating in CNN claiming credit for ‘[getting] Trump out’ in the 2020 presidential election.” The former president notified the outlet in July of his intention to sue for “repeated defamatory statements.” Trump also warned he would sue other outlets he alleges have “defamed and defrauded the public” about the 2020 presidential election results.

As a reminder, Trump had a lawsuit against 2016 Democratic rival Hillary Clinton and former top FBI officials tossed in early September by U.S. District Judge Donald Middlebrooks, who said Trump was “seeking to flaunt a two-hundred-page political manifesto outlining his grievances against those that have opposed him, and this Court is not the appropriate forum.” That is “a high legal bar to clear given First Amendment protections granted to the free press under the Constitution,” according to The Hill. “The New York Times, for example, has not lost a defamation case in more than 50 years.” However, as JustTheNews reports, winning such a case is not impossible, however. Covington Catholic High School student Nick Sandmann successfully secured considerable financial settlements from both CNN and the Washington Post for their coverage of a controversy that suggested the high schooler instigated a confrontation with an Indian activist.

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“51 former intelligence officials signed a letter..”

Hunter Biden Probe to Look Into ‘What Happened in 2020’: Jim Jordan (ET)

If the GOP takes a majority in the House, one of the “key elements” of its investigatory plans into Hunter Biden, the son of President Joe Biden, next year will involve looking into “what happened in 2020,” said Rep. Jim Jordan (R-Ohio). Just weeks before the 2020 presidential election, the New York Post ran a story about Hunter Biden’s overseas business dealings in Ukraine and China, which was promptly dismissed as dubious by mainstream media outlets and suppressed on social media platforms. At the time, 51 former intelligence officials signed a letter claiming that the New York Post’s story had “all the classic earmarks of a Russian information operation.” In an interview with Breitbart, Jordan said that he wants to know on what intelligence the 51 former officials based their letter.

“We had 51 former intelligence officials tell us that this was Russian disinformation. We had the FBI sit down with Facebook and say, ‘Hey, be careful, wink wink. We think there’s Russian disinformation.’ … All that was done to suppress that story, which had an impact on how people voted in the most important election we have, the election for president of the United States,” Jordan told Breitbart. “Did someone from The New York Times tell them something? Did someone from the FBI leak some false—was it this Timothy Thibault, who [has] since left the FBI, who suppressed that information at the FBI? I want to know. That’s pretty important stuff, so I really want to look into that angle.”

Most of the investigative activities related to Hunter Biden would be headquartered at the Oversight Committee, with Rep. James Comer (R-Ky.) expected to lead it. Jordan will continue to remain a member and chair of the Judiciary. Comer plans to look into Hunter Biden’s suspicious banking and business transactions, he added.

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They cannot have a real weight in a reserve currency basket. Not when Xi can devalue by 50% tomorrow morning just because he’s constipated. Nobody wants the yuan, including the Chinese.

The Biggest Problem China Faces Isn’t Real Estate (Balding)

After it joined the World Trade Organization in 2000 and anchored the Chinese yuan (a.k.a. renminbi) to the U.S. dollar, China linked its economy to the United States. Enforcing a fixed exchange rate regime with strict capital controls, China benefited from large inflows and relatively low-interest rates due largely to the low-interest rate environment in the United States. What happens to the Chinese economy when interest rates increase in the United States? Sovereign currency policy faces the intractable dilemma of what economists call the “impossible trinity.” Countries can have a fixed exchange rate, free capital flow, or sovereign monetary policy but must choose only two of three. Economics textbooks give clean and clear definitions of each. Still, in reality, China tried to manipulate each and come out worse due to its attempts to manipulate the laws of economics.

Chinese Communist Party (CCP) technocrats attempted to create a system where they could enjoy the best of the three options and leave behind the worst parts. China implemented a quasi-fixed exchange rate, which is effectively a U.S. dollar index, with tightly controlled capital flows, and a semi-sovereign monetary policy. What almost no one noticed with the convoluted creation of Chinese currency policy attempting to adhere to the ‘impossible trinity’ was that for the last 20 years, China benefited from business cycle synchronization with the United States. Because the yuan was tied directly to the U.S. dollar and the United States kept interest rates low, China could keep its interest rates low. Now that the Federal Reserve (Fed) is raising interest rates, what impact will this have on China?

First, the days of easy money flows to China are over. For large parts of the last 20 years, Chinese interest rates were 3-5 percent higher than the United States. With either a fixed or semi-fixed exchange rate, this gave investors in China access to easy higher returns. With portfolio returns and foreign direct investment based upon interest rate differentials between the United States and China, this drew investor capital with fixed or heavily managed exchange rates creating easy returns. Investors have soured on China as an investment destination for a range of reasons. But when baseline returns are higher in U.S. government debt without any of the China issues, the financial motivation will dry up the biggest reason to send money.

Second, this will place enormous upward pressure on Chinese interest rates right as China’s economy is teetering. For most of the period since 2000, the Chinese and U.S. economies have been highly correlated. This allowed Chinese interest rates to follow the United States and enjoy a sustained period of low-cost money. However, now as the Fed is seeking to tamp down inflation and overheated demand, China is suffering through its weakest economy in probably post-opening up history.

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The atlas moth has wings that mimick two cobras watching her back.

 

 

Support the Automatic Earth in virustime with Paypal, Bitcoin and Patreon.

 

 

 

Mar 172020
 


Edwin Rosskam Shoeshine, 47th Street, Chicago’s main Negro business street 1941

 

A View From Italy’s Coronavirus Frontline (G.)
The UK Only Woke Up “In The Last Few Days” (BF)
Julian Assange’s Mother Calls For His Immediate Release Over COVID19 Fears (ES)
Americans Get a Taste of Life Under Sanctions (MPN)
De Blasio Urges ‘Nationalization’ Of Key Industries (Fox)
Spain Takes Over Private Healthcare Amid More Lockdowns (G.)
Mitt Romney’s Coronavirus Economic Plan: $1,000 To Each American Adult (Vox)
Chinese Scientists Find Infected Monkeys Developed Immunity (SCMP)
New Zealand Launches Massive Spending Package To Combat COVID-19 (G.)
What The ECB Must Do To Save The Euro Zone Economy (SCMP)
EU Calls For 30-Day Ban On Foreigners Entering Bloc (G.)
Things Have Changed (Kunstler)
DOJ Drops Charges Against Russian Troll Farm for 2016 Election Meddling (L&C)

 

 

As the potential and existing economic and political disruption sinks in, everyone comes with their own re-inventions of the wheel. Predictable behavior. The US and UK can still stumble their way towards a worse outcome than necessary, but Italy no longer has such freedom. They made their big mistakes a few weeks ago.

And as politicans get measures, supplies and treatments wrong, they still have room left for gigantic mistakes is responding to economic consequences. Stuck as they may be bewteen the 2-3 weeks they tell you this will last and the many months they say it will.

Unless someoe stops them real soon, they will spend, trillions this time, bailing out banks and large companies that only exist to a large extent because they were bailed 12 years ago as well, and let the people rot away. But then, who are the main campaign contributors?

 

Cases 184,133 (+ 13,281 from yesterday’s 170,852)

Deaths 7,182 (+ 656 from yesterday’s 6,526)

 

From Worldometer yesterday evening (before their day’s close)

 

 

From Worldometer (NOTE: mortality rate is back up to 8%!)

 

 

From SCMP: (Note: the SCMP graph was useful when China was the focal point; they are falling behind now)

 

 

From COVID2019.app: (New format lacks new cases and deaths)

 

 

 

 

Steve Keen

 

 

What it will look like.

A View From Italy’s Coronavirus Frontline (G.)

There are the elderly couples who died hours apart and without their families around them. There is the 47-year-old woman who died at home, and who remained there for almost two days because funeral companies refused to collect her body. There are the doctors who lost their lives after assisting their infected patients. Among the 2,158 people to have been killed by the coronavirus pandemic in Italy as of Monday, the oldest was 95 and the two youngest were 39. “The reality is this virus is spreading like wildfire. Death is not certain, but the contagion is real,” said Luca Franzese, whose sister, Teresa, 47, died at home in Naples on 7 March. “My parents are heartbroken, they are destroyed..”

Teresa, who lived with her elderly parents, sister, brother-in-law and their two children, suffered from epilepsy but was otherwise in good health. A week before she died, she came down with the flu. “My parents called her doctor but they refused to come to the house despite knowing she had a disability,” said Franzese. “She went into a coma on 7 March, we tried to call the emergency hotline, they arrived after 40 minutes. In the meantime, I tried to give her mouth-to-mouth resuscitation.” Teresa tested positive for the virus postmortem. Franzese spoke of his family’s frustration at being “abandoned” by the authorities after his sister was left to die at home.

It was only after he made an appeal for help via Facebook that a local funeral company eventually came to collect her body. But as with other coronavirus victims, she was buried quickly and without ceremony to mitigate the risk of infection posed by her corpse. Her parents, who have underlying health issues, tested negative for the virus, as did Luca and a nephew. The rest of Teresa’s immediate family of seven have tested positive. [..] not all of the dead had other health issues, at least as far as is known. Luca Carrara lost his father, Luigi Carrara, 86, and mother, Severa Belotti, 82, within a few hours of each other. He told the Italian press they were in good health. “I was unable to see my parents, they died alone, that’s what this virus is,” he added. “The truth is this is not a banal flu and if you end up in hospital, you leave either alive or dead.”

https://twitter.com/i/status/1239741543654834179

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Actual headline (way too long): The UK Only Realised “In The Last Few Days” That Its Coronavirus Strategy Would “Likely Result In Hundreds of Thousands of Deaths””

Richard Horton, editor of The Lancet, tweets: “It said it took a study from Imperial to understand the likely burden of COVID-19 on the NHS. But read the first paper we published on COVID-19 on Jan 24. 32% admitted to ITU with 15% mortality. We have wasted 7 weeks. This crisis was entirely preventable.”

The UK Only Woke Up “In The Last Few Days” (BF)

The UK only realised “in the last few days” that attempts to “mitigate” the impact of the coronavirus pandemic would not work, and that it needed to shift to a strategy to “suppress” the outbreak, according to a report by a team of experts who have been advising the government. The report, published by the Imperial College COVID-19 Response Team on Monday night, found that the strategy previously being pursued by the government — dubbed “mitigation” and involving home isolation of suspect cases and their family members but not including restrictions on wider society — would “likely result in hundreds of thousands of deaths and health systems (most notably intensive care units) being overwhelmed many times over”.

The mitigation strategy “focuses on slowing but not necessarily stopping epidemic spread — reducing peak healthcare demand while protecting those most at risk of severe disease from infection”, the report said, reflecting the UK strategy that was outlined last week by Boris Johnson and the chief scientific adviser Patrick Vallance. But the approach was found to be unworkable. “Our most significant conclusion is that mitigation is unlikely to be feasible without emergency surge capacity limits of the UK and US healthcare systems being exceeded many times over,” perhaps by as much as eight times, the report said. In this scenario, the Imperial College team predicted as many as 250,000 deaths in Britain.

“In the UK, this conclusion has only been reached in the last few days,” the report explained, due to new data on likely intensive care unit demand based on the experience of Italy and Britain so far. “We were expecting herd immunity to build. We now realise it’s not possible to cope with that,” professor Azra Ghani, chair of infectious diseases epidemiology at Imperial, told journalists at a briefing on Monday night. As a result, the report — which its authors said had “informed policymaking in the UK and other countries in the last weeks” — said: “We therefore conclude that epidemic suppression is the only viable strategy at the current time.”

A suppression strategy, along the lines of the approach adopted by the Chinese authorities, “aims to reverse epidemic growth, reducing case numbers to low levels and maintaining that situation indefinitely”. It requires “a combination of social distancing of the entire population, home isolation of cases and household quarantine of their family members”, and “may need to be supplemented by school and university closures”. An “intensive intervention package” will have to be “maintained until a vaccine becomes available (potentially 18 months or more)“, the report said, painting an extraordinary picture of what life could be like in the UK for the next year and a half.

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And in a country as screwed up as Britain, jail is the last place to be.

“An Iranian judiciary spokesman says the country has temporarily freed about 85,000 prisoners, including political prisoners, in an attempt to prevent the spread of coronavirus.”

Julian Assange’s Mother Calls For His Immediate Release Over COVID19 Fears (ES)

The mother of imprisoned WikiLeaks founder Julian Assange has appealed for his immediate release from Belmarsh Prison over fears he could catch coronavirus while behind bars. Christine Assange’s plea came after a leading prison boss warned last week that the worsening Covid-19 epidemic will kill inmates throughout the UK, describing the conditions inside jails as a fertile breeding ground for the virus. Coronavirus cases have surged throughout the UK in recent days, with 14 more deaths confirmed on Sunday.


More than 1,500 people nationwide have tested positive for the virus since the outbreak began, but officials say the true figure of people with the disease is likely to be far higher. In a series of posts on social media, Ms Assange described her son as being “weak from chronic illness” and implored Britons and Americans to push politicians into action over his case. Those with underlying health conditions are more at risk of contracting the virus.

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Be kind.

Americans Get a Taste of Life Under Sanctions (MPN)

Across fifty states, Americans are collectively bracing for the incoming COVID-19 pandemic to hit. In the face of the virus, people are resorting to panic buying, stocking up on vital foods and goods, leading to pressing shortages of key products like hand sanitizer and toilet paper. Perhaps more concerning, however, is that health experts all agree that the country is ill-equipped for the coming medical emergency. “We are not prepared, nor is any place prepared for a Wuhan-like outbreak,” said Dr. Eric Toner of Johns Hopkins Center for Health Security. “And we would see the same sort of bad outcomes that they saw in Wuhan – with a very high case fatality rate, due largely to people not being able to access the needed intensive care.”

Chief among the problems is a lack of ventilators, a crucial machine to help critically ill patients breathe properly. New York City, for example, has barely one sixth of the ventilators it would need for a critical outbreak. If things get truly bad, the city has drafted laws to compel prisoners at Rikers Island jail to dig mass graves. One of the principal reasons why the U.S. is so unprepared is that it spends so little on public health in comparison with what it spends on war. The U.S. military’s projected budget is $934 billion per year, the Pentagon’s is $712 billion. In contrast, the Center for Disease Control (CDC) costs the taxpayer only $6.6 billion. At a time of crisis, many Americans are reassessing which organization they feel is truly protecting them from danger. While increasing the military budget, President Trump has consistently argued for cuts to the CDC. Amazingly, the Trump administration confirmed last week that it intends to slash funding from the body, even as the country begins reeling from the impact of COVID-19.

The crippling shortages, inability to move and the likely overwhelming of medical services will give Americans a taste of what it is like to live under sanctions that it imposes on a number of countries worldwide. U.S. sanctions on Venezuela, declared illegal and a “crime against humanity” by the United Nations, are conservatively estimated to have killed more than 40,000 people between 2017 and 2018 alone. Diabetics, for example, have been unable to get insulin because of the embargo, leading to mass deaths. The Cuban government estimates that the American embargo has cost it over $750 billion. Meanwhile, Iran, wracked by the virus that has caused more than 850 confirmed deaths, has been decimated by Trump’s increased sanctions.

The Iranian rial lost 80 percent of its value, food prices doubled, and rents and unemployment soared. Because of the sanctions, patients with conditions like leukemia and epilepsy have been unable to get treatment. After the coronavirus hit it, no country would sell the Islamic Republic basic medical supplies like masks, fearful of reprisals from the world’s only superpower. The shortages are so bad that doctors are being forced to share facemasks with other hospital staff. Eventually the World Health Organization stepped in and began supplying Iran directly. The Iranian government also invented an app to deal with COVID-19, hoping to share information with its citizens to help fight its spread but Google removed it from its app store citing the sanctions that prevent it from promoting anything Iranian-made. The effect of the sanctions in helping spread COVID-19 across Iran and beyond is immeasurable.

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Why is it taking so long? Could it be because these industries pay for campaigns?

De Blasio Urges ‘Nationalization’ Of Key Industries (Fox)

New York City Mayor Bill de Blasio is arguing that the best way to tackle the coronavirus outbreak is for the federal government to take over critical private companies in the medical field and have them running 24 hours a day. The mayor, who made multiple media appearances over the weekend, said that the current situation calls for drastic measures which include nationalizing certain industries. “This is a case for a nationalization, literally a nationalization, of crucial factories and industries that could produce the medical supplies to prepare this country for what we need,” de Blasio told MSNBC’s Joy Reid on Saturday, calling for “24/7 shifts” during what he called a “war-like situation.”


The following day, de Blasio reiterated this message, telling CNN that “the federal government needs to take over the supply chain right now.” He specified the need for companies that make ventilators, surgical masks, and hand sanitizers to be taken over and made to work around the clock. New York state already has started producing hand sanitizer in response to shortages and price gouging. The city itself has also taken drastic steps to deal with the crisis, forcing restaurants to limit themselves to takeout and delivery service, and closing many establishments to prevent the spread of the virus through crowds. The mayor predicted that coronavirus will continue to be a problem “for at least six months.” Sunday evening, it was announced that New York City schools will be shutting down until at least April 20, a measure de Blasio previously had resisted, despite facing pressure to do so.

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Temporarily, but better than nothing.

Spain Takes Over Private Healthcare Amid More Lockdowns (G.)

In Spain, where the coronavirus toll climbed to 309 on Monday with 9,191 confirmed cases, the government announced sweeping measures allowing it to take over private healthcare providers and requisition materials such as face masks and Covid-19 tests. The health minister, Salvador Illa, said private healthcare facilities would be requisitioned for coronavirus patients, and manufacturers and suppliers of healthcare equipment must notify the government within 48 hours. The Spanish government declared a state of emergency on Saturday, placing the country in lockdown and ordering people to leave their homes only if they needed to buy food or medicine or go to work or hospital. The transport minister, José Luis Ábalos, said it was “obvious” the measures would be extended beyond the planned 15-day period.

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Romney is but a follower. Tulsi Gabbard started this. House Resolution HRes 897.

Mitt Romney’s Coronavirus Economic Plan: $1,000 To Each American Adult (Vox)

On Monday, Sen. Mitt Romney, the Utah Republican and former GOP presidential nominee, called for $1,000 cash payments to every American adult as coronavirus measures to keep people in their homes threaten to put millions out of work. “While expansions of paid leave, unemployment insurance, and SNAP benefits are crucial, the check will help fill the gaps for Americans that may not quickly navigate different government options,” Romney argued in a press release. This, to be clear, is not the same as Yang’s proposal. Yang wanted monthly checks as a regular government policy, while Romney is supporting a one-off $1,000 check as an emergency measure. In that context, $1,000 might not be enough:


Former Obama chief economist Jason Furman has proposed payments of as much as $3,000 per adult and $1,500 per child. But the fact that a conservative Republican is proposing unrestricted cash payments during a GOP administration – in which even heavily regulated government programs like food stamps are under attack – is notable. And Romney is not alone in this. Sen. Tom Cotton (R-AR), one of the most conservative members of the Senate GOP and a likely future presidential contender, went on Fox & Friends on Monday morning to call on Congress to dispense with complicated mechanisms like tax credits and instead put “cash in the hands of affected families”:

Some Democrats not in leadership have also been pushing their own versions of this idea. There is already a cash bill in the House from Democratic Reps. Tim Ryan and Ro Khanna that would give at least $1,000 to every American making under $65,000, and as much as $6,000 to some families with children. Harvard economist Greg Mankiw, who served as chief economist to President George W. Bush, has argued that cash payments are needed not so much to stimulate the economy as to help people whose jobs are impossible to perform due to social distancing. It’s a humanitarian measure, not a stimulus measure.


“Financial planners tell people to have six months of living expenses in an emergency fund. Sadly, many people do not,” Mankiw writes on his blog. “Considering the difficulty of identifying the truly needy and the problems inherent in trying to do so, sending every American a $1000 check asap would be a good start. A payroll tax cut makes little sense in this circumstance, because it does nothing for those who can’t work.”

https://twitter.com/i/status/1238516118391791617

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Interesting for 2021, perhaps. Not now.

Chinese Scientists Find Infected Monkeys Developed Immunity (SCMP)

Scientists who infected monkeys with the coronavirus that causes Covid-19 have found that those that recovered developed effective immunity from the disease – a potentially important discovery in the race to develop a vaccine. But the researchers also found that the animals could become infected through their eyes, which means wearing a face mask may not be enough to protect people from the disease. Scientists around the world have been racing to develop a vaccine and the first clinical trials could be held in China and the US within a month. But a number of cases, where people who had tested negative for the disease and were discharged from hospital only to give a positive result a few days later, have cast doubt on the process.

The rate of reoccurrence ranged from 0.1 to 1 per cent nationwide, according to China’s state media reports. However, in some provinces such as Guangdong up to 14 per cent of the discharged patients had reportedly returned to hospital because of the test results. If it turns out that these patients had been reinfected by the same virus, then vaccines will not prove effective. But the monkey experiment carried out by a team from the Chinese Academy of Medical Sciences may help dispel that fear. [..] after tests returned negative results and X-rays showed their internal organs had fully recovered, two monkeys were dosed with the virus through the mouth. The scientists recorded a temporary temperature rise, but other than that everything appeared to stay normal. Autopsies were performed on these two monkeys about two weeks later, and the researchers could not find a trace of the virus in their body.

[..] Professor Zhong Nanshan, a leading government scientist, said in Guangzhou last week that they had found a strong presence of antibodies in recovered patients, which meant the virus could no longer use them as a carrier again. “Now the question everyone cares about is whether the close contacts and family members may be infected because [the patient] tested positive again. So far I have not seen any evidence,” Zhong said.

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People first, not businesses. Wage subsidies for companies is not the way to go. Give people the money, so companies don’t have to pay them, move the salary burden from their books.

New Zealand Launches Massive Spending Package To Combat COVID-19 (G.)

New Zealand’s government has announced a spending package equivalent to 4% of GDP in an attempt to fight the effects of Covid-19 on the economy, in what ministers called the most significant peace-time economic plan in the country’s modern history. It includes covering wages for people who are required to self-isolate but cannot work from home, or those caring for relatives who are sick with the virus, even if they are not sick or do not test positive for Covid-19. “This package is one of the largest in the world on a per capita basis,” Grant Robertson, the finance minister, told reporters at New Zealand’s parliament on Tuesday. On Tuesday, authorities began spot checks on travellers, with two people arriving from south-east Asia already facing deportation for failing to self-isolate.


Stephen Vaughan at Immigration NZ said: “This kind of behaviour is completely irresponsible and will not be tolerated which is why these individuals have been made liable for deportation.” The NZ$12.1bn stimulus includes wage subsidies, bolstering the healthcare sector’s response to the virus, more money for low-income families and those on social welfare, and changes to business tax. New Zealand has only eight confirmed and two probable cases of Covid-19. But a decision to impose strict travel restrictions on the weekend – requiring almost all travellers arriving from anywhere to self-isolate for 14 days – is expected to wreak havoc on business, especially in the country’s tourism sector, New Zealand’s biggest export earner. Businesses hard-hit by the virus – experiencing more than a 30% decline in revenue compared to last year – will be eligible to receive wage subsidies to keep paying staff.

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Disband itself.

What The ECB Must Do To Save The Euro Zone Economy (SCMP)

It doesn’t take much to expose the flaws in the euro zone economy but the coronavirus epidemic has already ripped asunder any hope of getting back to sounder growth for a long time. Europe is clearly heading into recession as the pandemic takes a heavy toll on consumer demand, business activity and financial market confidence. We are heading into uncharted territory with the national lockdowns in Italy and Spain foreshadowing bigger trouble ahead for Europe’s largest economies, Germany and France, with plenty of negative spillover likely for the rest of the region. Just how deep the recession descends depends upon how effectively Europe’s policymakers respond. Judging by the official response so far, it’s no surprise markets are panicking.


Europe’s bond and credit markets are definitely showing the strain. It’s not so much that Germany’s yield curve has turned negative on safe-haven and flight-to-quality flows, but that bond spreads for riskier markets have started to surge. The bellwether 10-year spread of Italian government bonds over equivalent German yields has exploded out to 2.34 per cent in recent days as investors have fled for cover. Talk about Italy’s “doom loop” has resurfaced again, with deepening recession risk, the fragility of the Italian banking sector and the potential threat of future credit default combining to put the wind up the markets. It hasn’t helped that the European Central Bank seems to be turning its back on the bond market’s plight.

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27 countries, 27 different policy sets. What EU?

EU Calls For 30-Day Ban On Foreigners Entering Bloc (G.)

The European commission has proposed a 30-day ban on foreigners entering the bloc as EU governments imposed closures and lockdowns rarely seen outside wartime in a continuing effort to curb the rapid spread of the coronavirus outbreak. As the head of the World Health Organization, Tedros Adhanom Ghebreyesus, urged countries to “test, test, test” for the virus, saying it “cannot be fought blindfolded”, the commission president called for an end to all non-essential travel to Europe. “The less travel, the more we can contain the virus,” Ursula von der Leyen said. “We think non-essential travel should be reduced right now in order to not spread the virus further, be it within the EU or by leaving the EU.”

Von der Leyen said the restrictions – which would not apply to UK nationals – should last for 30 days initially but may be extended if necessary. Permanent EU residents, family members of EU nationals, diplomats, doctors and coronavirus researchers would also be exempted, she said. Officials said the move, which could be approved by leaders in a video conference on Tuesday, was aimed mainly at removing the need for national controls at borders between the 26 members of the passport-free Schengen zone. Germany, which has recorded 5,813 cases and 13 deaths from Covid-19, introduced border controls with Austria, Denmark, France, Luxembourg and Switzerland on Monday, allowing through only those with a valid reason for travel such as residents, cross-border commuters and delivery drivers.

In line with a growing number of EU countries, the federal government and state leaders also agreed to close almost all shops except food stores, banks, pharmacies and petrol stations, ban religious gatherings, shutter hotels and restrict visits to hospitals and care homes. Schools in most German states were closed and Bavaria declared a disaster situation to allow the state’s authorities to push through new restrictions faster. The German president, Frank-Walter Steinmeier, urged citizens to limit their social contacts. “Restrictions on our lives today can save lives tomorrow,” he said.

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“Something old and played-out is limping offstage, and something new is stepping on. Aren’t you glad you watched all those debates?”

Things Have Changed (Kunstler)

Where does this all lead? Eventually, to a land and a people who operate their society in a very different way at a much more modest scale. The task of reorganizing our national life is immense. (There will be plenty to do, so don’t worry about that.) You can forget about the grandiose techno-narcissistic visions of electrified motoring and a robotic nirvana of perpetual sex-crazed leisure. Everything we do has to be downscaled, from whatever manufacturing we can cobble back together to rebuilding commercial ecosystems at a finer grain from region to region — in other words, what we now call small business, geared locally.

Expect giant AgriBiz to founder on a shortage of capital, especially, and expect smaller farms to organize emergently, worked by more humans working together. That is, if we want to keep eating. Expect the small towns in the well-watered parts of the country to revive while the groaning metroplexes spiral down into entropic sclerosis. Consider the value of our vast inland waterway system and the opportunities to move goods on them, when the trucking industry unravels. Consider lending a hand at rebuilding the railroad system in this country.

There will be economic roles and social roles for all those willing to step up to some responsibility. Young people may see tremendous opportunity replacing the wounded economic dinosaurs wobbling across the landscape. It’ll be all about going local and regional and making yourself useful in exchange for a livelihood and the esteem of others around you — aka, your community. Government has been working tirelessly to make itself superfluous, if not completely ineffectual, impotent, and rather loathsome in the face of this crisis that has been slowly-but-visibly building for half a century. Something old and played-out is limping offstage, and something new is stepping on. Aren’t you glad you watched all those debates?

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But don’t worry, the New York Times already runs an article entitled: “Can Russia Use the Coronavirus to Sow Discord Among Americans?”

How can anyone continue to read that rag?

DOJ Drops Charges Against Russian Troll Farm for 2016 Election Meddling (L&C)

And after all of that, the Russian troll farm’s American lawyers have the last laugh? The U.S. Attorney’s Office for the District of Columbia led by former William Barr aide Timothy Shea has filed a motion to dismiss the case against Concord Management and Consulting LLC, which has often been referred to as the Russian troll farm defendant. Concord Management was one of many people or entities charged in a Feb. 2018 indictment by then-special counsel Robert Mueller during his investigation into Russian interference in the 2016 election. Thirteen Russians and three companies were charged in the indictment. Federal prosecutors now want to dismiss their case against Concord Management.


“The United States will continue its efforts to apprehend the individual defendants and bring them before this Court to face the pending charges, but because substantial federal interests are no longer served by continuing with the proceedings against the Concord Defendants, the government moves, respectfully, to dismiss with prejudice Count One of the indictment as to them,” the filing said. The Department of Justice alleged that Yevgeniy Prigozhin, a Russian oligarch nicknamed “Putin’s chef,” and Concord bankrolled the troll farm as part of a massive conspiracy to interfere in the 2016 election.

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Feb 282020
 


Lewis Wickes Hine Gus Hodges, 11, instructs brother Julius 5. I found Gus selling as late as 9 pm, Norfolk VA 1911

 

England Only Has 15 Beds For Worst Respiratory Cases (G.)
Diagnosis Of Coronavirus Patient In California Was Delayed For Days (NPR)
The Last Time This Happened Was Days Before The Great Depression (ZH)
Whistleblower Claims ‘Corrupt Cover-Up’ Of Dangerous Coronavirus Quarantines (ZH)
Greece Reports 4 Coronavirus Cases, Cancels Carnival (K.)
Abe Urges Japan March School Shutdown To Stem Coronavirus (R.)
EU Experts: Closing Borders ‘Ineffective’ For Coronavirus (EUO)
Turkey Says Can’t Contain Europe-Bound Syrian Refugees Amid Idlib Battle (RT)
Idlib Attack That Killed 33 Turkish Soldiers Was ‘Also Against NATO’ (RT)
East Africa Faces New Locust Threat (R.)
Not Quack-Checked! MSM Dives For ‘Chinese Duck Army’ Story (RT)
How Gold Is Manipulated (Rickards)
Biden Treated Ukraine ‘As His Private Property’ – Ex-Prosecutor Shokin (RT)
Ethics Complaint Questions How Devin Nunes Pays For Lawsuits (Hill)
UK Mainstream Media Participate In Assange Crucifixion (Galloway)
Julian Assange Leaked US Files For Political Ends – Lawyers (G.)
Your Man in the Public Gallery – The Assange Hearing Day 3 (Craig Murray)

 

Cases 83,733 (+ 1,314 from yesterday’s 82,419).

Deaths 2,860 (+ 52 from yesterday’s 2,808)

 

• Holland (2), N-Ireland, New Zealand, Nigeria(!!), Lithuania first case
• Italy 653 cases, 17 deaths
• France 38 cases from 18 yesterday
• Germany 14 new cases, total 48
• Iran 245 confirmed cases, 26 deaths
• South Korea 256 new cases, total 2,337, over 1,000 new cases in 48 hours.
• China 327 new cases and 44 new deaths
– 180 million students homeschooled
• California 28 cases, monitoring 8400
• Greece 4 cases
• Starbucks says 85% of Chinese restaurants reopened
• Countries (Japan, UK) prepare to close down schools for months on end

From SCMP:

 

 

From Worldometer (Note: mortality rate down to 7%)

 

 

 

 

 

 

As I said yesterday: Coming to a town near you soon.

England Only Has 15 Beds For Worst Respiratory Cases (G.)

England only has 15 available beds for adults to treat the most severe respiratory failure and will struggle to cope if there are more than 28 patients who need them if the number of coronavirus cases rises, according to the government and NHS documents. Ministers have revealed in parliamentary answers that there are 15 available beds for adult extracorporeal membrane oxygenation (ECMO) treatment at five centres across England. The government said this could be increased in an emergency. There were 30 such beds in total available during the 2018-19 winter flu season. But an NHS England document prepared in November 2017 reveals the system will struggle to cope if more than 28 patients need the treatment, describing that situation as black/critical.

It suggests that if no beds are available “within the designated and surge capacity” in the UK, they might have to be sourced from other countries, for example, from the Karolinska Institute in Sweden. ECMO treatment is used in only the most severe cases of respiratory failure when other treatments are not working. It uses an artificial lung located outside the body to put oxygen into a patient’s blood and continuously pump this blood into and around their body. It has been used to treat Covid-19 cases in China, which is ordering more machines from Germany, according to state media.

In answer to a Labour MP’s question on Thursday about coronavirus preparedness, Jo Churchill, a health minister, said: “Since April 2013, NHS England has commissioned a total of 15 adult respiratory extra corporeal membrane oxygenation beds from five providers in England, with further provision in Scotland. In periods of high demand, capacity can be increased.” Jon Ashworth, the shadow health secretary, questioned the readiness of the NHS to deal with a sharp escalation of coronavirus cases after years of cutbacks. “After years of Tory austerity, we know we’ve lost well over 15,000 beds since 2010,” he said. “We know that last week critical care bed occupancy was running at over 80%…”

https://twitter.com/TVRav/status/1232985651831812096

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Curious: “..in some labs, the third step of that, they were having trouble with getting a quality control validation on that, so it led to inconclusive results,” Azar said. “We now, as of yesterday afternoon, the FDA authorized the use of those tests by using just the first and second step.”

Diagnosis Of Coronavirus Patient In California Was Delayed For Days (NPR)

The first suspected U.S. case of a patient getting the new coronavirus through “community spread” — with no history of travel to affected areas or exposure to someone known to have the COVID-19 illness — was left undiagnosed for days because a request for testing wasn’t initially granted, according to officials at UC Davis Medical Center in Sacramento, Calif. The patient in Northern California is now the 60th confirmed case of the coronavirus in the United States. The Centers for Disease Control and Prevention disclosed the latest case Wednesday evening, as President Trump assigned Vice President Pence to lead the administration’s response to the disease.

“This case was detected through the U.S. public health system — picked up by astute clinicians,” the CDC said in a brief statement about the new patient. UC Davis included more details about the case in its own statement, drawing on an email sent to staff at its medical center. It said the CDC initially ruled out a test for the coronavirus because the patient’s case didn’t match its criteria. “UC Davis Health does not control the testing process,” the hospital noted. The new patient, who lives in Solano County and has not been identified, was transferred to UC Davis Medical in Sacramento County from another hospital this month.

Staff at UC Davis then suspected the patient might be infected with the coronavirus that has caused more than 2,800 deaths. “Upon admission, our team asked public health officials if this case could be COVID-19,” the hospital said. “We requested COVID-19 testing by the CDC, since neither Sacramento County nor CDPH [California Department of Public Health] is doing testing for coronavirus at this time. Since the patient did not fit the existing CDC criteria for COVID-19, a test was not immediately administered. UC Davis Health does not control the testing process.”

[..] The CDC has completed more than 3,600 coronavirus tests, Azar said during a congressional budget hearing on Thursday. While he said it hasn’t had a testing “backlog,” he added that the agency’s test has three steps — and that the last step has posed some problems. “What we found was that in some labs, the third step of that, they were having trouble with getting a quality control validation on that, so it led to inconclusive results,” Azar said. “We now, as of yesterday afternoon, the FDA authorized the use of those tests by using just the first and second step.”

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The “markets” woke up 5-6 weeks late, but now they’re clued in

The Last Time This Happened Was Days Before The Great Depression (ZH)

The US equity market is suffering its worst start to a year since 2009…

In the space of just six days, we went from record high to a ‘correction’ (over 3,000 Dow points and down over 10.5%)…

What is most ominous is the fact that, as NatAlliance Securities reports, “This would be only the second time in history that this has happened. The other? 1928.”

In other words, the only other time the Dow Jones entered a correction this fast from an all time high was months before the start of the Great Depression.

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“..the coronavirus response [is] officially an election issue now…”

Whistleblower Claims ‘Corrupt Cover-Up’ Of Dangerous Coronavirus Quarantines (ZH)

A complaint filed with Health and Human Services (HHS) and promptly leaked to the New York Times alleges that federal health employees interacted with Americans quarantined for possible coronavirus exposure without proper medical training or protective gear, and that health agency leaders engaged in a ‘corrupt cover-up’ when staff members complained, according to the Times. Filed with the Office of the Special Counsel, a whistleblower described as a ‘senior leader’ at HHS said the team was “improperly deployed” to two California military bases to assist with processing American evacuees from coronavirus hot zones in China and elsewhere.

The staff members were sent to Travis Air Force Base and March Air Reserve Base and were ordered to enter quarantined areas, including a hangar where coronavirus evacuees were being received. They were not provided training in safety protocols until five days later, the person said. Without proper training or equipment, some of the exposed staff members moved freely around and off the bases, with at least one person staying in a nearby hotel and leaving California on a commercial flight. Many were unaware of the need to test their temperature three times a day. -New York Times

[..] The Times notes that the complaint comes right after President Trump began to downplay the risks of coronavirus on US soil “amid bipartisan concern about a sluggish and disjointed response by the administration to an illness that public health officials have said is likely to spread through the United States.” In other words, the coronavirus response officially an election issue now.

“The whistle-blower’s account raised questions about whether the Trump administration has taken adequate precautions in its handling of the virus to date, and whether Mr. Trump’s minimization of the risks has been mirrored by other top officials when confronted with potentially disturbing developments.” -New York Times

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Update just in from Reuters:

“Greek woman who recently returned home from northern Italy became Greece’s fourth coronavirus case and is being closely monitored, health authorities said on Friday. The 36-year-old woman has been admitted to a coronavirus isolation unit of the capital’s Attikon Hospital.”

Greece Reports 4 Coronavirus Cases, Cancels Carnival (K.)

Greece reported two new cases of coronavirus in the past 24 hours, bringing the total number of confirmed cases to three, and said it would suspend all carnival celebrations in the country. The health ministry said one of the cases involved a relative of a 38-year-old woman in the northern town of Thessaloniki who became the first confirmed case in Greece. The woman had recently returned from Milan in northern Italy, epicentre of the coronavirus outbreak in Europe. The third reported case, in Athens, was a female who had also visited northern Italy. Among events to be canceled is a carnival parade in the coastal city of Patra slated for March 1, authorities said.

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But the Olympics are on. When you close schools, hospitals close too, because that’s where the mothers work.

Abe Urges Japan March School Shutdown To Stem Coronavirus (R.)

Angry Japanese parents joined bewildered teachers and businesses on Friday in a rush to find new ways to live and work for a month after Prime Minister Shinzo Abe’s shock call for all schools to close in a bid to stop coronavirus spreading. Abe’s unprecedented move late on Thursday to ask local authorities to shut down their schools means students will be out of school from Monday at least until the new academic year starts in early April. Earlier this week the government urged that big gatherings and sports events be scrapped or curtailed for two weeks to contain the virus while pledging that the 2020 Summer Olympics will go ahead in Tokyo.

As of Friday, confirmed cases in Japan topped 200, with four deaths, excluding more than 700 cases and four more deaths from the quarantined cruise liner Diamond Princess. While the virus has hit China hardest so far, causing nearly 80,000 infections and almost 2,800 deaths, according to official Chinese figures, its rapid spread to a number of other countries around in the world in the past week has stoked fresh alarm. Abe’s move – issued as a formal request rather than an order – drew scathing criticism, with health officials left scratching their heads and analysts said the plan was politically motivated and made little sense.

“We’ll just have to get our revenge at the next elections,” @Ayu49Sweetfish tweeted, as working parents with young children were left wondering what to do for the duration. In the northern Hokkaido prefecture, which has seen the largest number of coronavirus cases in Japan, the governor had already announced a closure of all schools until March 4. That left one hospital closing doors to patients without reservations on Friday because about a fifth of its nurses were unable to work while their children were out of school.

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They’ll close their borders to refugees and migrants but not virus carriers. Wonder what happens when Turkey is forced to report corona cases.

EU Experts: Closing Borders ‘Ineffective’ For Coronavirus (EUO)

EU experts said on Thursday (27 February) that refusing entry to an EU country of people with coronavirus symptoms would be counter-productive and “ineffective” to prevent the spread of the virus. “Refusal of entry is not considered an appropriate preventive measure as the virus would spread further” since those potential patients would keep moving in the region without being treated, EU sources said. Instead, the experts advised having “systematic” checks for all those arriving, ensuring a coordinated approach between border guards and national authorities, as well as a real-time exchange of information. The principle of free movement of people in the EU was already in danger in 2015 when some member states introduced border check due to the migration crisis.


Today, six EU countries – Germany, France, Austria, Denmark, Sweden and Norway – still have temporary border controls to prevent irregular migrant flows. However, any member state can notify the EU authorities of the intention of closing borders temporary due to the coronavirus outbreak – a decision that can only be made by member states and that cannot be vetoed by the European Commission. None have yet done so. If national authorities decide to introduce this exceptional measure, it must be justified passing a “test of proportionality”. Additionally, the commission is working on a joint procurement to ensure there is enough protective and medical equipment for health-care workers – and other authorities like the army – over fears that the outbreak of the coronavirus could lead to a supply shortage in some member states. However, this joint initiative has not been launched yet but there is an “increasing interest” among member states to be part of it, EU sources told reporters in Brussels.

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Twitter: “Turkish coastguard not patrolling as before. They just approached a boat heading to Northern #Lesbos and then they left without intercepting” a local from Skala village just told me. It seems that #Turkey‘s government meant what they said.”

Turkey Says Can’t Contain Europe-Bound Syrian Refugees Amid Idlib Battle (RT)

Turkey is no longer able to contain millions of displaced Syrians and has reached “full capacity,” Ankara’s ruling AK party said in a fresh threat to open the floodgates into Europe as tensions over Idlib reach boiling point. With Ankara vowing to go “all in” to halt a Syrian Army offensive to retake Idlib province from rebel militias, AKP spokesman Omer Celik suggested Turkey would soon allow hundreds of thousands of Syrian refugees to pour into Europe, a threat repeatedly made by President Recep Tayyip Erdogan in the past. “Turkey can not bear the pressure of the new refugees, we now say that Turkey is at full capacity,” Celik told CNNTurk early on Friday.

While the spokesman noted Turkey’s refugee policy remains “the same,” he said “We are no longer in a position to hold refugees” amid an expected influx of newly displaced Syrians. An earlier report at Reuters cited an unnamed Turkish official who said much the same, although the official went further in stating that police, coast guard and border security officers had been ordered to “stand down” and allow the refugees to cross into Europe. Turkey and the European Union (EU) struck an agreement in 2016 in hopes of stemming the flow of refugees passing into Europe, with the EU providing some €6 billion ($6.6 billion) to help resettle the displaced people.

Erdogan, however, has slammed the multinational body time and again, insisting it has yet to hand over all of the promised aid. With at least 33 Turkish troops killed in the effort to stop Damascus’ offensive on Idlib – the last remaining militant stronghold, some of which are backed by Ankara – tensions between the two countries have reached new heights. Still engaged in intense skirmishes with militants in Idlib, the Syrian Army has signaled no intention of halting its advance, putting Damascus and Ankara on a collision course as the former fights to reclaim its territory.

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Western media are reluctant to mention Russia, they want the blame to be on Assad. Russia has said that Turkey is supporting terrorists in Syria.

Idlib Attack That Killed 33 Turkish Soldiers Was ‘Also Against NATO’ (RT)

The spokesman for Turkey’s ruling AK party has labelled the Syrian airstrike that allegedly claimed the lives of dozens of Turkish soldiers in rebel-held Idlib an attack on NATO, calling for the US-led alliance to intervene. “We call on NATO to [start] consultations. This is not [an attack] on Turkey only, it is an attack on the international community. A common reaction is needed. The attack was also against NATO,” AKP spokesman Omer Celik told Turkish media on Thursday. At least 33 Turkish soldiers are said to have been killed in Idlib, the last militant stronghold in Syria, in an airstrike Ankara blamed on Damascus. In the wake of initial reports that dozens of Turkish servicemen perished in the raid, Turkish President Receep Erdogan held a 6-hour marathon meeting that concluded early Friday.


The military bloc itself, while pledging support to its “ally Turkey,” has been wary of making any promises. Apparently shocked by reports of the Turkish casualties, US envoy to NATO Kay Bailey Hutchinson reportedly exclaimed “Oh my gosh” in response to the news when speaking to media late Thursday, but dodged the question of whether the US-led alliance would consider invoking Article 5 – which would pave the way for a collective military response to an armed attack on one of its members. However, she did not miss out on a chance to call on Turkey to tear up its deal to buy the Russian-made S-400 missile defense system, while also taking a jab at Moscow: “They see what Russia is, they see what they are doing now” – despite the fact that Ankara has not blamed Moscow for the attack.

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And Pakistan. Now add a coronavirus outbreak.

East Africa Faces New Locust Threat (R.)

Countries in East Africa are racing against time to prevent new swarms of locusts wreaking havoc with crops and livelihoods after the worst infestation in generations. A lack of expertise in controlling the pests is not their only problem: Kenya temporarily ran out of pesticides, Ethiopia needs more planes and Somalia and Yemen, torn by civil war, can’t guarantee exterminators’ safety. Locust swarms have been recorded in the region since biblical times, but unusual weather patterns exacerbated by climate change have created ideal conditions for insect numbers to surge, scientists say. Warmer seas are creating more rain, wakening dormant eggs, and cyclones that disperse the swarms are getting stronger and more frequent.


In Ethiopia the locusts have reached the fertile Rift Valley farmland and stripped grazing grounds in Kenya and Somalia. Swarms can travel up to 150 km (93 miles) a day and contain between 40-80 million locusts per square kilometer. If left unchecked, the number of locusts in East Africa could explode 400-fold by June. That would devastate harvests in a region with more than 19 million hungry people, the U.N. Food and Agriculture Organization (FAO) has warned. Uganda has deployed the military. Kenya has trained hundreds of youth cadets to spray. Lacking pesticides, some security forces in Somalia have shot anti-aircraft guns at swarms darkening the skies. Everyone is racing the rains expected in March: the next generation of larvae is already wriggling from the ground, just as farmers plant their seeds.

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Popular story though.

Not Quack-Checked! MSM Dives For ‘Chinese Duck Army’ Story (RT)

Western media have fallen hard for an apparently fake if adorable story about a 100,000-strong “duck army” China has supposedly marched to fight the billions of locusts currently laying waste to Pakistan’s food supply. Initially published by local Chinese outlet Ningbo Evening News, the clickbait-tastic story, complete with a video showing a herd of ducks supposedly marching in formation, proved impossible to resist – or to factcheck – and spread around the world by the time people started asking questions. Supposedly reputable outlets including the BBC, Bloomberg, and Time unquestioningly parroted the story about “special Chinese ducks” that would be “more effective than pesticide” – not to mention better for the environment – in taking on the ravenous swarms.

Citing Lu Lizhi, said to be a senior researcher with the Zhejiang Academy of Agricultural Sciences, the stories called the ducks a “biological weapon” and predicted they’d be unleashed against the hungry insects “as early as the second half of this year” following a test-run in China’s Xinjiang province. Alas, the story of locust-eating ducks fighting the devastating biblical plague has proved to be largely quackery, media that had covered it began realizing on Thursday. Unfortunately for Pakistan, which declared a national emergency earlier this month over the devastating infestation, an avian army is not waddling to their rescue, and even if they were, they wouldn’t do much good.

The Food and Agriculture Organization did the math and found an army of 100,000 ducks could only eat 20 million locusts in a day, while just one square kilometer of swarming locusts contains anywhere from 40 to 80 million of the insects. Also, swarms may stretch over hundreds of square kilometers, as they have in some locust-stricken areas of Africa.

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Markets are falling off a cliff, and gold hardly moves. That’s what manipulation looks like.

How Gold Is Manipulated (Rickards)

Currently the price of gold is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks. In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold. The easiest way to perform paper manipulation is through COMEX futures. Rigging futures markets is child’s play. You just wait until a little bit before the close and put in a massive sell order. By doing this you scare the other side of the market into lowering their bid price; they back away.

That lower price then gets trumpeted around the world as the “price” of gold, discouraging investors and hurting sentiment. The price decline spooks hedge funds into dumping more gold as they hit “stop-loss” limits on their positions. A self-fulfilling momentum is established where selling begets more selling and the price spirals down for no particular reason except that someone wanted it that way. Eventually a bottom is established and buyers step in, but by then the damage is done. Futures have a huge amount of leverage that can easily reach 20 to 1. For $10 million of cash margin, I can sell $200 million of paper gold.

[..] Another way to manipulate the price is through gold leasing and “unallocated forwards.” “Unallocated” is one of those buzzwords in the gold market. When most large gold buyers want to buy physical gold, they’ll call JPMorgan Chase, HSBC, Citibank, or one of the large gold dealers. They’ll put in an order for, say, $5 million worth of gold. The bank will say fine, send us your money for the gold and we’ll offer you a written contract in a standard form. Yet if you read the contract, it says you own gold on an “unallocated” basis. That means you don’t have designated bars.

There’s no group of gold bars that have your name on them or specific gold bar serial numbers that are registered to you. In practice, unallocated gold allows the bank to sell the same physical gold ten times over to ten different buyers. It’s no different from any other kind of fractional reserve banking. Banks never have as much cash on hand as they do deposits. Every depositor in a bank thinks he can walk in and get cash whenever he wants, but every banker knows the bank doesn’t have that much cash. The bank puts the money out on loan or buys securities; banks are highly leveraged institutions.

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How long can Biden keep this documentary under wraps?

Biden Treated Ukraine ‘As His Private Property’ – Ex-Prosecutor Shokin (RT)

Former top Ukrainian prosecutor Viktor Shokin says he was pushed out under pressure from US Vice President Joe Biden, after he seized the assets of the oligarch behind Burisma, the gas company that employed Biden’s son. President Donald Trump’s efforts to investigate Biden’s role in getting Shokin fired served as a pretext for his impeachment in the House of Representatives back in December. However, after Trump was acquitted by the Senate, the US media forgot about Burisma — and Ukraine. French investigative journalist Olivier Berruyer, founder of popular anti-corruption and economics blog Les Crises, did not.

In the fourth installment of his documentary series ‘UkraineGate: Inconvenient facts,’ Shokin reveals why and how he was ousted and what role the US has played in Ukraine. Shokin tells Berruyer that Biden and the US government had approved his appointment as prosecutor-general — as, indeed, they did all major appointments in Ukraine since the 2014 Maidan upheaval? — and worked with him well until he started getting too close to Burisma. He rejected reports that described his probe as “dormant.” “Biden was acting on behalf of his own interests, and those of his family, and not in the interest of the American people,” Shokin said, adding that Barack Obama’s VP “believed that Ukraine was his private property, his fiefdom and that he could do whatever he wanted here.”

Within a few days of Shokin seizing the assets of Mykola Zlochevsky, the oligarch owner of Burisma, President Petro Poroshenko summoned him and told him to back off. “Don’t you understand what Biden wants from you? Why are you getting into this Burisma stuff again?” Shokin quoted Poroshenko as saying. Within a few weeks, he was replaced by someone Biden called “more solid” – Yuriy Lutsenko, who had no training in law, and whom Shokin describes as a traitor to Ukraine.

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Absolutely non-partisan.

Ethics Complaint Questions How Devin Nunes Pays For Lawsuits (Hill)

A nonpartisan watchdog group in an ethics complaint Wednesday asked Congress to investigate how Rep. Devin Nunes (R-Calif.) is paying for several ongoing lawsuits against critics. In its complaint to the Office of Congressional Ethics, the Campaign Legal Center notes Nunes’s annual congressional salary of $174,000 would likely not cover the costs of the various suits, indicating that he is either receiving free or discounted legal services or working on contingency with an attorney, all of which would require him to disclose the assistance. Nunes has yet to file a legal expense fund with the Office of Congressional Ethics. “Representative Nunes’s overt involvement with the highly-publicized lawsuits threatens to establish a precedent that the Legal Expense Fund regulations no longer apply to Members,” the complaint states. “Although Representative Nunes is entitled to legal representation and he may pursue any legal action to protect and defend his interests, he must comply with House rules,” it continued.


“An [Office of Congressional Ethics] investigation will preserve Representative Nunes’s legal right to counsel while upholding well-established House rules and precedent.” Defendants in Nunes’s lawsuits include Twitter, CNN, McClatchy and two anonymous Twitter accounts that have mocked him. The complaint also claims that even if Nunes was paying Virginia attorney Steven Biss based on contingency — meaning that should Nunes win his cases, Biss would get paid by taking a percentage the resulting award — Biss has also sent two letters demanding apologies for criticisms from Rep. Ted Lieu (D-Calif.) and Nunes’s 2017 opponent Andrew Janz. “Mr. Biss sent a letter to Representative Lieu threatening to bring an ethics complaint against him,” the complaint reads. “An ethics complaint will not result in a monetary award that could support payment under a contingency fee agreement.”

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“..the arrow that flies in the night..”

UK Mainstream Media Participate In Assange Crucifixion (Galloway)

The vast majority of the Fourth Estate in Britain either care nothing for the plight of Julian Assange, or are actively participating in his crucifixion. On the face of it, that makes no sense. If it were the intention of these journalists to actually be worthy of that name, then the proceedings in Belmarsh would be the biggest story in their world. The law being tested in the Woolwich Crown Fort would be a mortal danger to them, a dagger at their throat, a sword of Damocles hanging over their head. The prosecution made perfectly clear that the mere possession by a newspaper or a broadcaster of the foreign state secrets published by Assange would itself be a crime under the US Espionage Act, and thus they themselves open to an extradition request from a foreign state.


Though this statement was made in “open court,” virtually no msm journalist even reported it, never mind condemned it. How has this situation come about? Whatever happened to Woodward and Bernstein, to the Sunday Times devastating campaign against the Thalidomide scandal, the New York Times revelations of the Pentagon Papers? Where is the reporting about My Lai? The answer lies in the words of Francis Bacon four centuries ago, when he foretold of the impact of self-censorship: “the arrow that flies in the night” he called it. You don’t see it but it kills its quarry just the same. If Julian Assange is sent into the dungeons of America, free journalism, free speech and even democracy itself will have been murdered in plain sight. On the British mainstream media watch.

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“Fitzgerald responded that Assange didn’t only seek to change US government policy, but that he succeeded.”

Julian Assange Leaked US Files For Political Ends – Lawyers (G.)

Julian Assange’s legal team has rejected a suggestion by lawyers for US authorities that his actions were not “political offences”, arguing that the WikiLeaks founder had published classified documents to highlight human rights abuses. On the fourth day of Assange’s extradition hearing in London, before proceedings were adjourned until May, his barrister, Edward Fitzgerald QC, said the motives for publishing confidential information about Guantánamo Bay and the actions of the US military in Iraq and Afghanistan were political. Assange faces 18 charges in the US of attempted hacking and breaches of the Espionage Act over the publication of classified US cables a decade ago.

His defence argues that he should be protected from extradition because the US-UK treaty rules it out for political offences. James Lewis QC, a barrister for the US authorities, argued earlier on Thursday that Assange’s actions were not inherently political as they did not have the direct purpose of overthrowing the US government or changing US government policy. “Any bare assertion that WikiLeaks was engaged in a struggle with the US government … needs to be examined far more,” he told Woolwich crown court. Fitzgerald responded that Assange didn’t only seek to change US government policy, but that he succeeded. “WikiLeaks didn’t just seek to induce change, it did induce change,” he said, referring to the withdrawal of US troops from Iraq.

“What other purpose can there be publishing the Apache helicopter strike [video, showing the killing of 12 people] and [US] rules of engagement than to show that the war was being waged in a way that conflicted with fundamental human rights? “What other point can there be to releasing the Guantánamo Bay files than to induce a government change of policy? And the same for revealing civilian deaths in the Iraq war – [it] was to induce a change in government policy.’’

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Murray in court.

Your Man in the Public Gallery – The Assange Hearing Day 3 (Craig Murray)

Edward Fitzgerald made a formal application for Julian to be allowed to sit beside his lawyers in the court. Julian was “a gentle, intellectual man” and not a terrorist. Baraitser replied that releasing Assange from the dock into the body of the court would mean he was released from custody. To achieve that would require an application for bail. Again, the prosecution counsel James Lewis intervened on the side of the defence to try to make Julian’s treatment less extreme. He was not, he suggested diffidently, quite sure that it was correct that it required bail for Julian to be in the body of the court, or that being in the body of the court accompanied by security officers meant that a prisoner was no longer in custody.

Prisoners, even the most dangerous of terrorists, gave evidence from the witness box in the body of the court nest to the lawyers and magistrate. In the High Court prisoners frequently sat with their lawyers in extradition hearings, in extreme cases of violent criminals handcuffed to a security officer. Baraitser replied that Assange might pose a danger to the public. It was a question of health and safety. How did Fitzgerald and Lewis think that she had the ability to carry out the necessary risk assessment? It would have to be up to Group 4 to decide if this was possible. Yes, she really did say that. Group 4 would have to decide.

Baraitser started to throw out jargon like a Dalek when it spins out of control. “Risk assessment” and “health and safety” featured a lot. She started to resemble something worse than a Dalek, a particularly stupid local government officer of a very low grade. “No jurisdiction” – “Up to Group 4”. Recovering slightly, she stated firmly that delivery to custody can only mean delivery to the dock of the court, nowhere else in the room. If the defence wanted him in the courtroom where he could hear proceedings better, they could only apply for bail and his release from custody in general. She then peered at both barristers in the hope this would have sat them down, but both were still on their feet.

In his diffident manner (which I confess is growing on me) Lewis said “the prosecution is neutral on this request, of course but, err, I really don’t think that’s right”. He looked at her like a kindly uncle whose favourite niece has just started drinking tequila from the bottle at a family party. Baraitser concluded the matter by stating that the Defence should submit written arguments by 10am tomorrow on this point, and she would then hold a separate hearing into the question of Julian’s position in the court.

Read more …

 

From Greece.

 

 

 

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Jun 262018
 


Juan de la Corte (1597–1660) Lot And His Daughters Escaping From The Destruction Of Sodom And Gomorrah

 

There is no migration crisis, said an article in Toronto’s Globe and Mail a few days ago. French President Emmanuel Macron followed up over the weekend with “there is no migrant crisis”. Really? If this is not a crisis, what is? Yes, numbers of refugees landing in Europe are down from 2015. But it’s not a numbers game. It’s about people.

If Angela Merkel’s political career is forced to a close next week because the EU cannot agree on a unified refugee policy, will they call it a crisis then? Oh wait, both Macron and the G&M agree that there is a crisis, just not a migration one. No, “the crisis is political opportunism”.

But can the crisis be placed squarely on Trump and Italy’s Salvini, or is perhaps what led to their popularity partly to blame for that popularity? Salvini didn’t bomb Syria, Iraq, Afghanistan and Libya, nor did Trump cause the mayhem in Honduras, Guatemala and El Salvador, which is where most migrants come from. That was Bush, Obama, Billary, Blair, Cameron and their ilk. And before them Kissinger etc.

So who are the political opportunists exactly? “We” have exploited all of Africa, the Middle East and South and Central America for so long and so disgustingly thoroughly that it’s today the zenith of misleading arrogance to blame the consequences on Salvini, Trump and other right wingers.

You could see them coming from miles away. You created them. You literally built the space they occupy. What is happening is that the chaos we created in all these places is now boomeranging right back at us, on our own borders. And we’re not getting out of that chaos until we stop creating it in places where we don’t live. Until we allow people a future where they are born.

No, you’re right, Trump is not going to do that. His role is to disrupt the existing system that has relied on creating chaos for decades (or even longer, if you will). Salvini will play that part in Europe, by blowing up the EU. And after they’ve gone, we must find better people than them, but also better than all the rest that today fill our political classes, if we’re to turn chaos into order.

We have gathered our wealth through theft and murder. Untold millions have died and suffered for our riches. It’s time we acknowledge that. Just like it’s time that we acknowledge just how we choose our political “leaders”. Who all come from a tested model that relies on chaos and obfuscation. Because if we don’t, the chaos will continue and intensify.

Angela Merkel has created a problem for which she now has no possible solution anymore. She’s even allegedly trying to reach quid pro quo deals with Albania, Serbia and Skopje: take 100,000 or so refugees and you can become an EU member. The last gasps of Mutti. Merkel will leave behind a union about to implode. From a refugee crisis as well as a financial crisis. Thanks, Angela.

She should never have left Greece in its own double financial and refugee crisis; she should have helped to make it strong. That’s the de facto task of Europe’s leadership, even as it’s crazy that one country gets to call all the important shots for 27 others.

Too late now. Italy is very aware of how Greece has been treated, and very aware it could be next. What does Rome have to lose? They can afford to be fearless. Why not confront Brussels and Berlin? The union’s in tatters anyway.

As for Trump, he doesn’t have anyone to fear either. The Democrats, just like virtually all left wing parties in Europe, have lost their identity and therefore their voters because of Tony Blair, the Clintons stage act and Obama. The US media have become a lousy tired comedy routine, unable to see that a constant barrage of empty attacks on Trump could only ever make them irrelevant.

The New York Times, WaPo, CNN have created the space that Trump operates in. They might as well be working for him. And meanwhile the folks who actually constructed the multiple crises remain out of sight. And have their minions declare that there is no crisis. Or that it’s just a political one, brought on by opportunists.

Salvini and Trump are not the greatest specimens of the human race, but they are not to blame for what’s going on. Salvini will force Europe to either redo its Dublin accord or redo the EU altogether. Trump will water down his border policies. But the driving force behind all of it, hiding in the shadows, still remains.

And that force controls, as it has for many many years, your parliaments and governments. Want to be angry, want to be outraged? Yeah, right there. It’s not about how Trump treats the children, it’s about why they are there in the first place.

And yes, ICE and Homeland Security should be eliminated, they’re insults to America and to the Founding Fathers. But they’re not Trump’s creations. They were there for him to use. And so he did and does. But c’mon guys, take the blinders off. You can’t see a thing with them on. There is a bigger picture.

 

 

May 012018
 
 May 1, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


Théodore Géricault Prancing Grey Horse 1812

 

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)
The Global Debt Addiction: China’s Out of Control Debt (GT)
Governments Are Nothing Like Households (Coppola)
St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)
US Extends Tariff Exemptions For European Union And Other Allies (CNBC)
Brexit Talks At Risk Of Collapse Over Irish Border (G.)
South Korea President Says Trump Deserves Nobel Peace Prize (R.)
Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)
First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)
That Collapse You Ordered…? (Kunstler)
Are Our Online Lives About To Become ‘Private’ Again? (BBC)
Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

 

 

“..spending increased at three times the pace of revenue growth..”

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)

U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter. “It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said in a Bloomberg TV interview on Monday. “But I think the market can easily handle it.” Earlier on Monday the Treasury said net borrowing totaled $488 billion from January through March, a record for that period and about $47 billion more than it had previously estimated, according to a statement released in Washington. The end-of-March cash balance was $290 billion, compared with an initial estimate of $210 billion.

“By definition supply and demand will equate,” Mnuchin said. “I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries,” he said when asked about the risks of reduced demand for Treasuries and increased supply. The Treasury’s debt-management plans were complicated earlier this year by a political fight that was resolved when lawmakers agreed to suspend the federal debt limit in a two-year budget agreement in February. The U.S.’s need to issue more Treasuries is expected to grow as the fiscal picture deteriorates. The budget deficit widened to $600 billion halfway through the fiscal year, as spending increased at three times the pace of revenue growth in the October-to-March period, according to Treasury figures released earlier this month.

Tax and spending measures approved by Congress and President Donald Trump are expected to push the budget gap to $804 billion in the current fiscal year, from $665 billion in fiscal 2017, and then surpass $1 trillion by 2020, according to the Congressional Budget Office. In an accompanying statement about the state of the economy, the Treasury said Monday that tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”

Read more …

The debt keeps the economy going.

The Global Debt Addiction: China’s Out of Control Debt (GT)

China has developed a craving for consumer goods, the more luxurious, the better. Along with most other countries, China’s credit boom and spending spree are being followed by out-of-control debt. While household debt is spiraling, the Chinese government is pushing to double the size of the economy by 2020 (setting this goal in 2010). This ambitious project will almost certainly entail more lending and increased debts. There is a question as to exactly how much more debt China can handle. China’s debt has been rising steadily, from 141 percent of GDP in 2008 to 256 percent of GDP in 2017. This type of rapidly-increasing debt level has frequently been the precursor of a hard economic fall, and the world is watching China carefully.

While countries such as the U.S. and the U.K. also have large debt-to-GDP ratios, the difference is that both are high-income countries, while China has only reached middle-income status, with only $15,400 in household purchasing power. This is a quarter of the household purchasing power of the US. Getting out of debt on China’s low level of income will be far more difficult than in higher-income nations. [..] China’s economic growth has encouraged widespread home buying and mortgage debts as property prices soar. Mortgage debt has increased by 25 percent in two years. People who have bought during the economic boom are now facing monthly mortgage payments that equal up to half of their monthly income.

Household budgets are stretching to the breaking point. This has forced many to curtail spending elsewhere and putting off other necessary big purchase items. This at a time when the government is encouraging greater consumer consumption.

Read more …

“Austerity is for the good times, not the bad times.”

Governments Are Nothing Like Households (Coppola)

Politicians like to describe government as like a household. When you’ve borrowed too much, you cut your spending so you can pay off debt, don’t you? You might be able to get a better-paid job, which helps you to pay it off faster. But you still budget to reduce your debt over time. Going on a spending spree means tightening your belt later. Similarly, if government borrows too much, there must be austerity to pay it down. Stands to reason, doesn’t it? People understand this reasoning. It is politically popular, especially when times are hard. In March 2009, when the U.S. was in the deepest recession since the 1930s, John Boehner, former Speaker of the House of Representatives, said on CBS News that “it’s time for government to tighten their belts and show the American people that we ‘get it.’”

“Government is like a household” can even win elections. At the height of the financial crisis in 2008, David Cameron, then leader of the U.K.’s Conservative party, wrote this in the (now defunct) News of the World: “This [Labour] government has maxed out our nation’s credit card—and they want to keep on spending by getting another. We believe we need to get a grip, be responsible and help families now in a way that doesn’t cost us our future.” He became the U.K.’s Prime Minister in May 2010. Keynesian economists such as Paul Krugman argue that instead of trying to reduce public deficits in a recession, government should increase spending, helping businesses to grow and providing employment. Government debt will rise, of course, but the government can run fiscal surpluses to pay it down when growth returns. Austerity is for the good times, not the bad times.

But this message has not been heard. In the name of “living within our means,” “balancing the books” and “paying down the debt,” governments on both sides of the Atlantic have pursued austerity policies ever since the Great Recession. The terrible story of Greece shows us that harsh austerity is the wrong medicine for a poorly-performing, highly indebted economy. But Greece is merely the worst example. Many Western countries have suffered deep and lasting damage, both from the Great Recession itself and from premature attempts to reduce public deficits.

Read more …

“..bitcoin units have no intrinsic value” – but currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.”

St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)

The Federal Reserve Bank of St. Louis has provided some high-profile validation for a core premise of Bitcoin and other cryptocurrency. A blog post this week based on an earlier Fed research paper said that “bitcoin units have no intrinsic value” – but added that currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.” The post, titled “Three Ways Bitcoin is Like Regular Currency,” doesn’t precisely endorse Bitcoin or cryptocurrency. In another recent report, the St. Louis Fed was critical of Bitcoin’s inefficiency. Cryptocurrency has also become rife with scams since its surge in value last year, and may constitute a global risk because it enables clandestine money laundering, capital flight, and tax evasion.

But the St. Louis Fed has provided a credible rebuttal to one of the most widespread and misguided criticisms of cryptocurrency: That, because it isn’t tied to a particular real-world commodity, it should have a monetary value of zero. As Fed researchers point out, since decoupling from the gold standard in the early 1970s, almost all global reserve currencies rely on nothing but trust to function as a media of value exchange. In the case of the dollar, that’s mostly trust in the U.S. government and economy. For Bitcoin and other cryptocurrencies, it’s trust in computer code and, at least to some extent, developers.

Surprisingly, the Fed’s new statement also echoes one of the predominant arguments that cryptocurrency fans use to disparage government-backed currency – though in a rather roundabout way. The post argues in part that “there’s a limited supply” of both cash and Bitcoin. The libertarian boosters at the heart of the crytpocurrency movement have often argued that Bitcoin is better than government currency because central banks can devalue national currencies through inflation, while Bitcoin has a strictly fixed supply. Though the Fed’s post points out that it doesn’t actually print cash – in the sense of physical notes – it acknowledges its ability to expand the money supply.

Read more …

Concessions will be forthcoming.

US Extends Tariff Exemptions For European Union And Other Allies (CNBC)

The May 1 deadline for steel and aluminum tariff exemptions for U.S. allies has been extended, the White House said. Instead, the White House has decided to postpone the decision on some allies, including the European Union, for 30 days to allow further discussions. Those extensions will affect the EU, Canada and Mexico. As for Argentina, Australia and Brazil, a senior White House official said agreements have been reached in principle, and they will also receive a 30-day extension so details can be finalized. South Korea’s exemption from tariffs is permanent because it agreed to quotas as part of a new trade deal. Administration officials have asked other countries what level of quotas they would agree to.

One person briefed by the administration told CNBC: “Quotas are an active part of the discussion with every country on the exemption list.” U.S. Trade Representative Robert Lighthizer is leading the process for country exemptions, except for the European Union, which Commerce Secretary Wilbur Ross is leading. The Department of Commerce is also spearheading the process for product exemptions. The National Security Council is overseeing the entire process. The May 1 deadline on the tariff exemptions was set in a presidential memorandum on the topic.

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UK says they have a solution, but not what that is.

Brexit Talks At Risk Of Collapse Over Irish Border (G.)

The EU’s chief Brexit negotiator has warned that talks are at risk if the UK does not soften its red line on the Irish border issue. Speaking to reporters on his third visit to Ireland since the referendum, Michel Barnier said he was “not optimistic” and “not pessimistic” but “determined” that the two sides can break the current impasse on talks. He repeated recent declarations that unless Britain came up with fresh thinking on how to avoid a hard border by the June EU council summit, further talks were in danger of collapsing. “Until we reach this agreement and this operational solution for Northern Ireland, a backstop [solution], and we are ready for any proposal … there is a risk, a real risk,” he said.

But he hinted that the UK would not have to come up with the final deal for Ireland, describing the June summit as “a stepping stone” to the October deadline for the wider Brexit deal to be completed. The Irish prime minister, Leo Varadkar, said Britain’s “approach to negotiations will need to change in some way” if there is to be agreement over the issue. Appearing alongside Varadkar and his deputy, Simon Coveney, Barnier said the EU was “absolutely united” on the Irish question but wanted to work with the UK to find a practical solution. Coveney warned that there would be “difficulties” at the next EU council summit in June in progressing to wider Brexit talks unless the UK commited to wording for a “backstop” solution for the Irish border.

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It would be fun.

South Korea President Says Trump Deserves Nobel Peace Prize (R.)

South Korean President Moon Jae-in said U.S. President Donald Trump deserves a Nobel Peace Prize for his efforts to end the standoff with North Korea over its nuclear weapons program, a South Korean official said on Monday. “President Trump should win the Nobel Peace Prize. What we need is only peace,” Moon told a meeting of senior secretaries, according to a presidential Blue House official who briefed media. Moon and North Korean leader Kim Jong Un on Friday pledged at a summit to end hostilities between their countries and work toward the “complete denuclearization” of the Korean peninsula. Trump is preparing for his own summit with Kim, which he said would take place in the next three to four weeks.

The Trump administration has led a global effort to impose ever stricter sanctions on North Korea and the U.S. president exchanged bellicose threats with Kim in the past year over North Korea’s development of nuclear missiles capable of reaching the United States. In January, Moon said Trump “deserves big credit for bringing about the inter-Korean talks. It could be a resulting work of the U.S.-led sanctions and pressure”. Trump’s predecessor, Barack Obama, won the 2009 Nobel Peace Prize just months into his presidency, an award many thought was premature, given that he had little to show for his peace efforts beyond rhetoric.

Even Obama said he was surprised and by the time he collected the prize in Oslo at the end of that year, he had ordered the tripling of U.S. troops in Afghanistan. As well as Obama, three U.S. presidents have won the Nobel Peace Prize: Theodore Roosevelt, Woodrow Wilson, and Jimmy Carter. Moon’s Nobel Prize comment came in response to a congratulatory message from Lee Hee-ho, the widow of late South Korean President Kim Dae-jung, in which she said Moon deserved to win the prize, the Blue House official said. Moon responded by saying Trump should get it.

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Nothing leaks like Washington.

Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)

Robert Mueller, the special counsel investigating Russian interference in the US election, wants to ask Donald Trump about contact between his former election campaign manager Paul Manafort and Russia, the New York Times reported on Monday. The paper said it had obtained a list of nearly 50 questions that Mueller, investigating Russian meddling in the 2016 presidential election, wants to put to the US president. More than half relate to potential obstruction of justice. “What knowledge did you have of any outreach by your campaign, including by Paul Manafort, to Russia about potential assistance to the campaign?” is one of the more dramatic questions published by the Times.

The pointed reference to Manafort breaks tantalising new ground, since there was no previous evidence linking him to outreach to Moscow. Benjamin Wittes, a senior fellow at the Brookings Institution thinktank in Washington, tweeted: “This is very interesting – strong evidence that there are still collusion threads that are not yet public.” Manafort and his deputy, Rick Gates, pleaded not guilty last October to a 12-count indictment accusing them of conspiring to defraud the US by laundering $30m from their work for a Russia-friendly political party in Ukraine. a dramatic insight into the special counsel’s mind and make clear that Trump is a subject, not a mere witness, in the investigation. It is not yet known whether the president will agree to be interviewed.

One batch of questions relates to alleged coordination between the Trump election campaign and Moscow. Donald Trump Jr’s June 2016 meeting at Trump Tower in New York with a Russian lawyer who promised damaging information about rival Hillary Clinton is naturally under scrutiny. Mueller wants to ask when Trump became aware of the meeting; Trump Jr claimed his father did not know about it in advance.

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Set up a program to bring peace to Central America. Kick out the CIA. They will stop coming.

First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)

The first eight members of a “caravan” of Central American migrants entered U.S. territory to seek asylum on Monday, after a month-long journey through Mexico that drew the wrath of President Donald Trump. The eight women and children walked through a door into the San Ysidro port of entry on the bidding of a customs and border patrol officer, a Reuters witness said, hours after Vice President Mike Pence promised they would be processed in line with U.S. law. About three quarters of claims by Central American asylum seekers are ultimately unsuccessful, resulting in detention and deportation.

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Medium or well-done?

That Collapse You Ordered…? (Kunstler)

I had a fellow on my latest podcast, released Sunday, who insists that the world population will crash 90-plus percent from the current 7.6 billion to 600 million by the end of this century. Jack Alpert heads an outfit called the Stanford Knowledge Integration Lab (SKIL) which he started at Stanford University in 1978 and now runs as a private research foundation. Alpert is primarily an engineer. At 600 million, the living standard in the USA would be on a level with the post-Roman peasantry of Fifth century Europe, but without the charm, since many of the planet’s linked systems — soils, oceans, climate, mineral resources — will be in much greater disarray than was the case 1,500 years ago.

Anyway, that state-of-life may be a way-station to something more dire. Alpert’s optimal case would be a world human population of 50 million, deployed in three “city-states,” in the Pacific Northwest, the Uruguay / Paraguay border region, and China, that could support something close to today’s living standards for a tiny population, along with science and advanced technology, run on hydropower. The rest of world, he says, would just go back to nature, or what’s left of it. Alpert’s project aims to engineer a path to that optimal outcome. I hadn’t encountered quite such an extreme view of the future before, except for some fictional exercises like Cormac McCarthy’s The Road. (Alpert, too, sees cannibalism as one likely byproduct of the journey ahead.)

Obviously, my own venture into the fictionalized future of the World Made by Hand books depicted a much kinder and gentler re-set to life at the circa-1800 level of living, at least in the USA. Apparently, I’m a sentimental softie. Both of us are at odds with the more generic techno-optimists who are waiting patiently for miracle rescue remedies like cold fusion while enjoying re-runs of The Big Bang Theory. (Alpert doesn’t completely rule out as-yet-undeveloped energy sources, though he acknowledges that they’re a low-percentage prospect.) We do agree with basic premise that the energy supply is mainly what supports the way we live now, and that it shows every evidence of entering a deep and destabilizing decline that will halt the activities necessary to keep our networks of dynamic systems running.

A question of interest to many readers is how soon or how rapid the unraveling of these systems might be. When civilizations crumble, it tends to fast-track. The Roman empire seems to be an exception, but in many ways it was far more resilient than ours, being a sort of advanced Flintstones economy, with even its giant-scale activities (e.g. building the Coliseum) being accomplished by human-powered work.

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Never again.

Are Our Online Lives About To Become ‘Private’ Again? (BBC)

In May, tough new privacy laws are being introduced across Europe, offering EU consumers far greater control over their data and large fines for firms which break the rules. It is worth pausing to think about how we got to this point. To begin to understand, we must remember that data can easily be copied, shared and collected from multiple sources. Whenever we use digital devices – everything from web browsers, to phones, loyalty cards and CCTV cameras – we create data that allows advertisers, insurers, the police and others to understand aspects of our lives. Only its availability and the ingenuity of its handler limits what it can tell us. This is very different to a traditional commodity that can be bought and sold: a house, for example.

If you sell your house, the buyer might come to understand something of your personality, perhaps through a taste for high-spec kitchens and red carpets. Beyond that, the potential insight into your life is limited – your diaries and photo albums will have moved with you. With data, it is more complicated. Once you sign up for an online service, constant and often seamless data collection starts. Minimal understanding and agreement are often sufficient for this collection to begin: clicking “I agree” to terms and conditions you may or may not have read can be enough. It’s as if, rather than handing over a clean and tidy house, you have invited the buyer to move in with you and start taking notes: how you behave, whom you talk to, who visits you and who spends the night.

Many people never have a clear understanding of how the data they produce is shared, collected and interpreted. It can be combined with data from other sources, and investigated in unpredictable and unforeseen ways to gain in-depth knowledge about our lives, preferences, and likely future behaviours. This knowledge can be used to influence us in subtle but powerful ways. The advertisements, news, and friends we encounter online are often the result of this nudging. And, unlike a house, the data can be copied again and again at little to no cost, reaching an unlimited number of people. It is clear that the risks to privacy with data are substantial. Recognising this, additional safeguards are being introduced.

Read more …

The damage being done to Britain is unbelievable.

Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

In 2014 Gemma Morton, the headteacher of a large secondary school, told Education Guardian her school had helped to pay for the funeral of a student whose family couldn’t afford it, even after they had sold their car. Three years on, she has helped to pay for two more funerals. “When a child dies, nobody’s saved for it,” says Morton. “There is literally nowhere for families to go apart from the people they already know, and most of them are poverty-struck too.” Over the past few years, as austerity has deepened, more schools and individual teachers are bailing out disadvantaged families because they simply can’t say no. The latest government figures show 100,000 more children propelled into poverty in just 12 months.

There are 4.1 million children – nearly a third of the entire child population – living in households on less than 60% of the average income. At Gill Williams’s primary school in the north-west of England, local supermarkets deliver bread and fresh vegetables three times a week, which are placed in the playground for parents to help themselves. There is rarely a crumb left. Williams says it is not so much that poverty is more severe, but that it has spread. “It’s everybody. Your average family is like that now.” The core group of those needing support in her school is three times larger than when she became a head 10 years ago.

Evidence of hungry children is clear, say teachers. “You notice kids borrowing money from friends to buy food, kids falling asleep, kids saying they’ve got a tummy ache, and they didn’t have breakfast because Mummy didn’t have anything in,” says Morton. She has also seen children taking scraps from the school bins. Heads in poor catchments notice a difference when they attend meetings at other schools. “If you go and see kids in two different areas, they’ll be noticeably different heights,” says Morton.

Read more …

Jan 042017
 
 January 4, 2017  Posted by at 10:29 am Finance Tagged with: , , , , , , , , ,  3 Responses »


Readers browse bomb-damaged library of Holland House, London 1940

The Wrong Things Are Being Forecast (Morgan)
China Calls US ‘A Shooting Star In The Ample Sky Of History’ (G.)
China’s New Year Currency Moves Won’t Make Donald Trump Happy (CNBC)
Banks Create Money From Nothing. And It Gets Worse (ND)
India Government Set To Endorse Universal Basic Income (BI)
US Banks Gear Up To Fight Dodd-Frank Act’s Volcker Rule (R.)
Wall Street Banks Have $2 Trillion European Exposure (Martens)
How to Make America Great Again with Other People’s Money (Orlov)
The Trump Effect Will Accentuate Unrest (Nomi Prins)
Anti-Surveillance Clothing Aims To Hide Wearers From Facial Recognition (G.)
Guardian Report On Ailing Greek Health System Sparks Ugly Row (Kath.)
The Necessity of Maintaining Borders (Kath.)

 

 

If all ‘growth’ is borrowed anyway, and then some, as in every dollar of ‘growth’ takes $10 of debt, maybe you should stop calling it growth?!

The Wrong Things Are Being Forecast (Morgan)

It is customary to use the start of the year to set out some forecasts. Though I’ve not previously done this, I’ve decided to make an exception this time – mainly because I’m convinced that the wrong things are being forecast. Central forecasts tend to focus on real GDP, but in so doing they miss at least three critical parameters. The first is the relationship between growth and borrowing. The second is the absolute scale of debt, and our ability to manage it. The third is the impact of a tightening resource set on the real value of global economic output. Most commentators produce projections for growth in GDP, and mine are for global real growth of around 2.3% between 2017 and 2020. I expect growth to slow, but to remain positive, in countries such as the United States, Britain and China.

It’s worth noting, in passing, that these growth numbers do not do much to boost the prosperity of the individual, since they correspond to very modest per capita improvements once population growth is taken into account. Moreover, the cost of household essentials is likely to grow more rapidly than general inflation through the forecast period. What is more intriguing than straightforward growth projections, and surely more important too, is the trajectory of indebtedness accompanying these growth estimates. Between 2000 and 2015, and expressed at constant 2015 dollar values, global real GDP expanded by $27 trillion – but this came at the expense of $87 trillion in additional indebtedness (a number which excludes the inter-bank or “financial” sector). This meant that, in inflation-adjusted terms, each growth dollar cost $3.25 in net new debt.

If anything, this borrowing-to-growth number may worsen as we look forward, my projection being that the world will add almost $3.60 of new debt for each $1 of reported real growth between now and 2020. On this basis, the world should be taking on about $5.8 trillion of net new debt annually, but preliminary indications are that net borrowing substantially exceeded this number in 2016. China has clearly caught the borrowing bug, whilst big business continues to take on cheap debt and use it to buy back stock. Incredible though it may seem, the shock of 2008-09 appears already to be receding from the collective memory, rebuilding pre-2008 attitudes to debt. On my forecast basis, global real “growth” of $8.2 trillion between now and 2020 is likely to come at a cost of $29 trillion in new debt. If correct, this would lift the global debt-to-GDP ratio to 235% in 2020, compared with 221% in 2015 and 155% in 2000.

Adding everything together, the world would be $116 trillion more indebted in 2020 than in 2000, whilst real GDP would have increased by $35 trillion. Altogether, what we are witnessing is a Ponzi-style financial economy heading for end-game, for four main reasons. First, we have made growth dependent on borrowing, which was never a sustainable model. Second, the ratio of efficiency with which we turn borrowing into growth is getting steadily worse. Third, the demands being made on us by the deterioration of the resource scarcity equation are worsening. Fourth, the ageing of the population is adding further strains to a system that is already nearing over-stretch. One thing seems certain – we cannot, for much longer, carry on as we are. y

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This calls for the poet in Trump to respond.

China Calls US ‘A Shooting Star In The Ample Sky Of History’ (G.)

Donald Trump has doubled down on his plans to transform US trade policy, picking a longtime China critic and protectionist to be America’s next chief trade negotiator. Robert Lighthizer, 69, has advocated for increasing tariffs and repeatedly criticised China for failing to adhere to international trade practices, saying tougher methods were needed to change the system. The move is likely to further alarm Beijing, where state-controlled media said on Wednesday “Trump is just fixated on trade” and warned the president elect “not try to boss China around” on economic and security issues. “May the arrogant Americans realise that the United States of America is perhaps just a shooting star in the ample sky of history,” said an editorial in the Communist party-affiliated Global Times newspaper.

It follows the selection by Trump last month of Peter Navarro to lead a new presidential office for US trade and industrial policy. Navarro has previously described China’s government as a “despicable, parasitic, brutal, brass-knuckled, crass, callous, amoral, ruthless and totally totalitarian imperialist power”. Trump has packed his cabinet with tycoons, vowed to renegotiate trade deals and crack down on what he says are China’s unfair policies. Lighthizer is a former Reagan-era trade official and had a previous stint in the Office of the US Trade Representative, where he travelled the world negotiating deals to curb steel imports. He then went on to a career as a trade lawyer, representing giants such as US Steel Corp working to fend off foreign imports.

In 2011, he wrote in an opinion piece for the Washington Times: “How does allowing China to constantly rig trade in its favour advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China largely because of the actions of its government.” While less prone to bombast than Navarro, he and Lighthizer share the view that China’s economic policies are fundamentally flawed. Years of passivity and drift among US policymakers have allowed the US-China trade deficit to grow to the point where it is widely recognised as a major threat to our economy, Lighthizer wrote. Going forward, US policymakers should take these problems more seriously, and should take a much more aggressive approach in dealing with China.

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Excuse me? “China has put a new chip on the table to counter trade adventurism by the Trump administration.” Other than that, the new capital controls seem to work so far, to an extent.

China’s New Year Currency Moves Won’t Make Donald Trump Happy (CNBC)

Call it a New Year’s greeting from the Chinese government to the incoming administration of Donald Trump. As the president-elect rang in 2017 entertaining guests at his opulent Mar-a-Lago estate, China quietly ushered in a series of measures aimed at better controlling the value of its local currency, the yuan. Throughout his campaign, Trump accused China of “manipulating” the yuan to make Chinese exports more competitive in global markets. China’s latest announcement will likely add fuel to that debate. Unlike countries that mostly let markets determine the value of their currencies, Beijing tries to peg the yuan to a basket of other currencies. Starting Jan. 1, the Chinese State Administration of Foreign Exchange will use a new, broader basket of global currencies to benchmark the yuan’s value.

The change will have the effect of reducing the impact of the U.S. dollar on the official valuation. “This is unambiguously bad news for the United States,” High Frequency Economics Chief Economist Carl Weinberg said in a note to clients Tuesday. “China has put a new chip on the table to counter trade adventurism by the Trump administration.” While China has sought to dampen the value of its currency in the past, the People’s Bank of China has more recently been scrambling to support the yuan. Beijing is deeply concerned that the weakening yuan is encouraging Chinese to shift their wealth out of the country into stronger currencies or other, more stable holdings. China needs a lot of capital in the country in order to continue to fund its growth, which is very heavily reliant on borrowing.

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I was thinking about exactly this, the other day. That a basic income scheme may be a Trojan horse AND a wolf in sheep’s clothing if it comes entirely digitized.

Banks Create Money From Nothing. And It Gets Worse (ND)

Richard Werner, the German professor famous for inventing the term ‘quantitative easing’, says the world is finally waking up to the fact that “banks create money out of nothing” – but warns this realisation has given rise to a new “Orwellian” threat. In an exclusive interview with The New Daily, Professor Werner says the recent campaigns around the world, including in India and Australia, to get rid of cash are coordinated attempts by central bankers to monopolise money creation. “This sudden global talk by the usual suspects about the ‘need to get rid of cash’, ostensibly to fight tax evasion etc, has been so coordinated that it cannot but be part of another plan by central bankers, this time to stay in charge of any emerging reform agenda, by trying to control, and themselves run, the ‘opposition’,” he says.

“Essentially, the Bank of England and others are saying: okay, we admit it, you guys were right, banks create money out of nothing. So now we need to make sure that you guys will not be able to set the agenda of what happens in terms of reforms.” [..] The main point is that the banks do not lend existing money, but add to deposits and the money supply when they ‘lend’. And when those loans are repaid, money is removed from circulation. Thus, the supply of money is constantly being expanded and contracted by banks – which may explain why the ‘credit crunch’ of the global financial crisis was so devastating. Banks weren’t lending, so there was a shortage of money. By some estimates, the banks create upwards of 97% of money, in the form of electronic funds stored in online accounts. Banknotes and coins? They are just tokens of value, printed to represent the money already created by banks.

Professor Werner is pleased the world is waking up to the truth of how money is created, but is very displeased with what he sees as the central bankers’ reaction: the death of cash and the rise of central bank-controlled digital currency. This will further centralise what he describes as the “already excessive and unaccountable powers” of centrals banks, which he argues has been responsible for the bulk of the more than 100 banking crises and boom-bust cycles in the past half-century. “To appear active reformers, they will push the agenda to get rid of bank credit creation. This suits them anyway, as long as they can fix the policy recommendation of any such reform, to be … that the central banks should be the sole issuers of money.”

The professor also fears the global push for ‘basic income’, which is being trialled in parts of Europe and widely discussed in the media, will form part of the central bankers’ attempt to kill off cash. ‘Basic income’ is a popular idea that can be traced back to Sydney and Beatrice Webb, founders of the London School of Economics. It proposes we abolish all welfare payments and replace them with a single ‘basic income’ that everyone, from billionaires to unemployed single mothers, receives. Either we accept the digital currency issued by central banks, or we miss out on basic income payments. That is Professor Werner’s theory of what might happen. His solution to this “Orwellian” future is decentralisation, in the form of lots of non-profit community banks, as exist in his native Germany.

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That same basc income danger of course looms large in India.

India Government Set To Endorse Universal Basic Income (BI)

The Indian government is set to endorse Universal Basic Income, according to one of the leading advocates of the scheme. Professor Guy Standing, an economist who co-founded advocate group Basic Income Earth Network (BIEN) in 1986, told Business Insider that the Indian government will release a report in January which says the idea is “feasible” and “basically the way forward.” The idea behind universal basic income is simple: a regular state payment made to all citizens (one variation specifies adults), regardless of working status. Advocates say it would provide a vital safety net for all citizens and remove inefficient benefit systems currently in place; critics say it would remove the incentive for citizens to work and prove to be wildly expensive.

It has, however, attracted a growing amount of attention across the world, in both rich and developing countries. Standing, professor of development at the School for African and Oriental Studies, is considered one of the leading proponents of UBI. He has advised on numerous UBI pilot schemes, and recently returned from California, where he consulted on a $20 million trial set to launch in California this year. He was closely involved with three major pilot schemes in India — two in Madhya Pradesh, and a smaller one in West Delhi. The pilots in Madhya Pradesh launched in 2010, and provided every man, woman, and child across eight villages with a modest basic income for 18 months. Standing reports that welfare improved dramatically in the villages, “particularly in nutrition among the children, healthcare, sanitation, and school attendance and performance.”

He also says the scheme also turned out some unexpected results. “The most striking thing which we hadn’t actually anticipated is that the emancipatory effect was greater than the monetary effect. It enabled people to have a sense of control. They pooled some of the money to pay down their debts, they increased decisions on escaping from debt bondage. The women developed their own capacity to make their own decision about their own lives. The general tenor of all those communities has been remarkably positive,” he said. “As a consequence of this, the Indian government is coming out with a big report in January. As you can imagine that makes me very excited. It will basically say this is the way forward.”

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No, someone at Reuters really wrote this: “The Obama administration’s regulators and enforcement agencies have been tough on banks..” And then they printed it.

US Banks Gear Up To Fight Dodd-Frank Act’s Volcker Rule (R.)

Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors’ funds for speculative bets on the bank’s own account, a test case of whether Wall Street can flex its muscle in Washington again. In interviews over the past several weeks, half a dozen industry lobbyists said they began meeting with legislative staff after the U.S. election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts. Lobbyists said they plan to present evidence to congressional leaders that the Volcker rule is actually bad for companies, investors and the U.S. economy. Big banks have been making such arguments for years, but the industry’s influence waned significantly in Washington after the financial crisis.

The Obama administration’s regulators and enforcement agencies have been tough on banks, while lawmakers from both parties have seized opportunities to slam Wall Street to score political points. Banks now see opportunities to unravel reforms under President-Elect Donald Trump’s administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said. While an outright repeal of the Volcker rule may not be possible, small but meaningful changes tucked into other legislation would still be a big win, they said. “I don’t think there will be a big, ambitious rollback,” said one big-bank lobbyist who was not authorized to discuss strategy publicly. “There will be four years of regulatory evolution.” Proponents of the Volcker rule say lenders that benefit from government support like deposit insurance should not be gambling with their balance sheets. They also argue such proprietary bets worsened the crisis and drove greedy, unethical behavior across Wall Street.

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Darn Europeans. The US would be fine without them.

Wall Street Banks Have $2 Trillion European Exposure (Martens)

Just 17 days from today, Donald Trump will be sworn in as the nation’s 45th President and deliver his inaugural address. Trump is expected to announce priorities in the areas of education, infrastructure, border security, the economy and curtailing the outsourcing of jobs. But Trump’s agenda will be derailed on all fronts if the big Wall Street banks blow up again as they did in 2008, dragging the U.S. economy into the ditch and requiring another massive taxpayer bailout from a nation already deeply in debt from the last banking crisis. According to a report quietly released by the U.S. Treasury’s Office of Financial Research less than two weeks before Christmas, another financial implosion on Wall Street can’t be ruled out.The Office of Financial Research (OFR), a unit of the U.S. Treasury, was created under the Dodd-Frank financial reform legislation of 2010.

It says its role is to: “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose, and provide policymakers with financial analysis, information, and evaluation of policy tools to mitigate them.” Its 2016 Financial Stability Report, released on December 13, indicates that Wall Street banks have been allowed by their “regulators” to take on unfathomable risks and that dark corners remain in the U.S. financial system that are impenetrable to even this Federal agency that has been tasked with peering into them. At a time when international business headlines are filled with reports of a massive banking bailout in Italy and the potential for systemic risks from Germany’s struggling giant, Deutsche Bank, the OFR report delivers this chilling statement:

“U.S. global systemically important banks (G-SIBs) have more than $2 trillion in total exposures to Europe. Roughly half of those exposures are off-balance-sheet…U.S. G-SIBs have sold more than $800 billion notional in credit derivatives referencing entities domiciled in the EU.”

When a Wall Street bank buys a credit derivative, it is buying protection against a default on its debts by the referenced entity like a European bank or European corporation. But when a Wall Street bank sells credit derivative protection, it is on the hook for the losses if the referenced entity defaults. Regulators will not release to the public the specifics on which Wall Street banks are selling protection on which European banks but just the idea that regulators would allow this buildup of systemic risk in banks holding trillions of dollars in insured deposits after the cataclysmic results of similar hubris in 2008 shows just how little has been accomplished in terms of meaningful U.S. financial reform.

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“What’s a poor bankrupt former superpower to do?” Lovely from Dmitry. Go after Saudi Arabia.

How to Make America Great Again with Other People’s Money (Orlov)

1. It all started when the US decided to leave the British Empire. This event is often portrayed as a tax revolt by rich landholders, but there is more to it than that: it allowed the former colonies to loot and plunder British holdings by funding and outfitting “privateers”—pirates, that is. This went on for quite some time.

2. Another major boost resulted from the Civil War, which destroyed the agrarian economy of the south and by so doing provided cheap labor and feedstocks to industries in the north. Plenty of people in the south are still in psychological recovery from this event, some 15 decades later. It was the first war to be fought on an industrial scale, and a fratricidal war at that. Clearly, Americans are not above turning on their own if there’s a buck or two to be made.

3. Early in the 20th century, World War I provided the US with a rich source of plunder in the form of German reparations. Not only did this fuel the so-called “roaring twenties,” but it also pushed Germany toward embracing fascism in furtherance of the long-term goal of creating a proxy to use against the USSR.

4. When in 1941 this plan came to fruition and Hitler invaded the USSR, the US hoped for a quick Soviet surrender, only joining the fray once it became clear that the Germans would be defeated. In the aftermath of that conflict, the US reaped a gigantic windfall in the form of Jewish money and gold, which fled Europe for the US. It was able to repurpose its wartime industrial production to make civilian products, which had little competition because many industrial centers of production outside of the US had been destroyed during the war.

5. After the USSR collapsed in late 1991, the US sent in consultants who organized a campaign of wholesale looting, with much of the wealth expropriated from the public and shipped overseas. This was the last time the Americans were able to run off with a fantastic amount of other people’s money, giving the US yet another temporary lease on life.

But after that the takings have thinned out. Still, the Americans have kept working at it. They destroyed Iraq, killed Saddam Hussein and ran off with quite a bit of Iraqi gold and treasure. They destroyed Libya, killed Muammar Qaddafy and ran off with Libya’s gold. After organizing the putsch in the Ukraine in 2014, shooting up a crowd using foreign snipers and forcing Viktor Yanukovich into exile, they loaded Ukrainian gold onto a plane under the cover of darkness and took that too. They hoped to do the same in Syria by training and equipping a plucky band of terrorists, but we all know how badly that has turned out for them. But these are all small fry, and the loot from them is too meager to fuel even a temporary, purely notional rekindling of erstwhile American greatness. What’s a poor bankrupt former superpower to do?

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Only point 10 of 10 in Nomi’s “My Political-Financial Road Map for 2017”. But it fits my format quite well. DO read the whole thing.

The Trump Effect Will Accentuate Unrest (Nomi Prins)

Trump is assembling the richest cabinet in the world to conduct the business of the United States, from a political position. The problem with that is several fold. First, there is a woeful lack of public office experience amongst his administration. His supporters may think that means the Washington swamp has been drained to make room for less bureaucratic decisions. But, the swamp has only been clogged. Instead of political elite, it continues business elite, equally ill-suited to put the needs of the everyday American before the needs of their private colleagues and portfolios.

Second, running the US is not like running a business. Other countries are free to do their business apart from the US. If Trump’s doctrine slaps tariffs on imports for instance, it burdens US companies that would need to pay more for required products or materials, putting a strain on the US economy. Playing hard ball with other nations spurs them to engage more closely with each other.That would make the dollar less attractive. This will likely happen during the second half of the year, once it becomes clear the Fed isn’t on a rate hike rampage and Trump isn’t as adept at the economy as he is prevalent on Twitter. Third, an overly aggressive Trump administration, combined with its ample conflicts of interest could render Trump’s and his cohorts’ businesses the target of more terrorism, and could unleash more violence and chaos globally.

Fourth, his doctrine is deregulatory, particularly for the banking sector. Consider that the biggest US banks remain bigger than before the financial crisis. Deregulating them by striking elements of the already tepid Dodd-Frank Act could fall hard on everyone. When the system crashes, it doesn’t care about Republican or Democrat politics. The last time a deregulation and protectionist businessmen filled the US presidential cabinet was in the 1920s. That led to the Crash of 1929 and Great Depression. Today, the only thing keeping a lid on financial calamity is epic amounts of artisanal money. Deregulating an inherently corrupt and coddled banking industry, already floating on said capital assistance, would inevitably cause another crisis during Trump’s first term.

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Nice.

Anti-Surveillance Clothing Aims To Hide Wearers From Facial Recognition (G.)

The use of facial recognition software for commercial purposes is becoming more common, but, as Amazon scans faces in its physical shop and Facebook searches photos of users to add tags to, those concerned about their privacy are fighting back. Berlin-based artist and technologist Adam Harvey aims to overwhelm and confuse these systems by presenting them with thousands of false hits so they can’t tell which faces are real. The Hyperface project involves printing patterns on to clothing or textiles, which then appear to have eyes, mouths and other features that a computer can interpret as a face. This is not the first time Harvey has tried to confuse facial recognition software. During a previous project, CV Dazzle, he attempted to create an aesthetic of makeup and hairstyling that would cause machines to be unable to detect a face.

Speaking at the Chaos Communications Congress hacking conference in Hamburg, Harvey said: “As I’ve looked at in an earlier project, you can change the way you appear, but, in camouflage you can think of the figure and the ground relationship. There’s also an opportunity to modify the ‘ground’, the things that appear next to you, around you, and that can also modify the computer vision confidence score.” Harvey’s Hyperface project aims to do just that, he says, “overloading an algorithm with what it wants, oversaturating an area with faces to divert the gaze of the computer vision algorithm.” The resultant patterns, which Harvey created in conjunction with international interaction studio Hyphen-Labs, can be worn or used to blanket an area. “It can be used to modify the environment around you, whether it’s someone next to you, whether you’re wearing it, maybe around your head or in a new way.”

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“The lives of patients that are lost are considered collateral damage in the conservation of power.”

Guardian Report On Ailing Greek Health System Sparks Ugly Row (Kath.)

A report by The Guardian on Sunday on the problems faced by Greece’s ailing public healthcare system has sparked an ugly war of words between Alternate Health Minister Pavlos Polakis and unionists. The row started with a social media post made by Polakis on Tuesday, in which he accuses the head of the Panhellenic Federation of Public Hospital Employees (POEDIN), Michalis Giannakos, who is extensively quoted in the report, of “despicable lies.” Polakis went on to say that Giannakos’s comments to Guardian reporter Helena Smith were “slandering to the country and the SYRIZA government, which cut off access to the chow trough and special favors,” and called the unionist a “louse.” In the same post, Polakis also suggested that local media quoting Giannakos’s “vomit-inspiring interview” were lashing out at the leftist-government for cutting advertising revenues from the Center of Disease Prevention and Control (KEELPNO).

“No one who works in a public hospital believes you anymore, just your posse of friends,” Polakis said in his comments, which were directed at Giannakos, adding that the data the unionist cited was from 2012 and no longer valid. “Your time has finished, your place is on history’s trash heap,” Polakis said. His comments prompted an equally vehement response from POEDIN on Tuesday, calling Polakis a “political miasma” and accusing Prime Minister Alexis Tsipras of appointing him “to do the dirty work.” “With his latest misspelt, badly written and delusional post on Facebook against the president of POEDIN, Mr. Polakis has once more confirmed that he is the political miasma of the country’s civil and social life,” the union said in its statement.

In the interview, Giannakos suggested that cutbacks are putting patients’ lives at risk by over-taxing dwindling staff and curbing hospitals’ access to basic necessities and equipment. “The interview in The Guardian underscores the collapse of the public health system and public hospitals. Why doesn’t the government use the publication as an opportunity in its negotiations with the lenders to exempt healthcare from the memorandums? It is clear from its reaction that the government intends to achieve high primary surpluses by the continued reduction of public healthcare spending,” POEDIN said. “The lives of patients that are lost are considered collateral damage in the conservation of power.” The union also said that it is planning to take legal action against Polakis, accusing the health official of using “degrading, insulting and wholly inappropriate” language in his post.

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Erdogan makes Greeks nervous. And mainatining your borders, like maintaining your culture, is not a bad thing. Nor will it lead to war. Quite the opposite.

The Necessity of Maintaining Borders (Kath.)

Since the failed coup in Turkey on July 15, I have been rather surprised by the silence of the country’s intellectuals, who up until recently had been very talkative. Whether they kept silent out of fear or discomfort, we should respect it. Nevertheless, Orhan Pamuk’s silence, for instance, cannot go unnoticed. The point is not to carry out direct political interventions, but to bare the essential transformations that Turkish society has gone through in the nearly 15 years that Recep Tayyip Erdogan’s Justice and Development Party (AKP) has been in power – changes that are obvious even to non-Turkish experts like myself. The mere presence (2002-17) of the same party in government for so long makes you wonder about the nature of our neighboring democracy.

I read in Monday’s Corriere della Sera that prior to the attack on Istanbul’s Reina nightclub, Turkey’s director for religious affairs, who represents the state, had accused those preparing to celebrate New Year’s Eve of being “infidels.” Meanwhile, author Burhan Sonmez told the same paper that similar complaints, regarding both Christmas and New Year’s Eve, were made by several leading AKP officials. While Turkey officially condemned the attack, on social media and elsewhere online, many defended the assassin in the name of religion. In a statement claiming responsibility for yet another mass murder, the slaughterers’ group referred to the “apostate Turkish government.” These are the same people Erdogan helped in the past but was forced to drop when he started reaching an understanding with Russia’s Vladimir Putin, abandoning the US, which is helping the Kurds and which forced him to move away from his friend Bashar al-Assad.

There is something wrong with the sultan of democracy. He now claims that Kurdish terrorism is equal to Islamic terrorism. The result of the equation is weekly massacres. How can social cohesion be maintained faced with weekly attacks on civilians from Diyarbakir to Istanbul? How much can you trust a leader who does not hide his autocratic tendencies, who has changed his country’s allies on numerous occasions in the last decade and who undermines his own military and secret service forces? Given that Greece and Europe have based their entire management of the refugee-migrant crisis on Erdogan’s word, should we start worrying? Instead of looking for frigates invading our islets, should we be looking out for dinghies flooding our cities with human despair? Until the world becomes paradise, you need borders, even those at sea.

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Mar 072016
 
 March 7, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


DPC Launch of freighter Howard L. Shaw, Wyandotte, Michigan 1900

Debtor Days Are Over As BIS Calls Time On World Credit Binge (Tel.)
‘Gathering Storm’ For Global Economy As Markets Lose Faith (AFP)
The Bank Of Japan Has Turned Economics On Its Head (BBG)
China Growth Addiction Leaves Deleveraging, Reform in Back Seat (BBG)
China Defends Veracity Of Foreign Exchange Reserves Data (FT)
China’s Leaders Put the Economy on Bubble Watch (WSJ)
China Plans Crackdown on Loans for Home Down-Payments (BBG)
Hong Kong Homes Sales Tumble 70% (BBG)
Grexit Back On The Agenda Again As Greek Economy Unravels (Guardian)
Zombie Banks Are Stalking Europe (BBG)
Threat Of A Synchronised Downturn (Pettifor)
Why The House Price Bubble Still Hasn’t Burst (Steve Keen)
Turkey Steps Up Crackdown on Erdogan Foes on Eve of EU Meetings (BBG)
Turkey Disputes Greek Sovereignty Via NATO Patrols (Kath.)
EU To Focus On Greek Aid, Closing Balkan Migrant Route At Summit (AP)
Tsipras: “We Will Continue To Save Lives” (Reuters) (Reuters)
Surge Of 100,000 Refugees Building In Greece (AFP/L)
Refugee Boat Sinks Off Turkey’s Western Coast, 25 Dead, 15 Rescued (DS)

All we have left is debtors though.

Debtor Days Are Over As BIS Calls Time On World Credit Binge (Tel.)

The world’s credit boom is beginning to show dangerous signs of unraveling, ushering in a period of fresh turmoil for the over-indebted global economy, the Bank of International Settlements has warned. The globe’s top financial watchdog called time on the world’s debt binge, noting that debt issuance and cross border flows in emerging economies slowed for the first time since the aftermath of the global credit crunch at the end of last year. With financial markets thrown into fresh paroxysms in 2016, oscillating between extremes of “hope and fear”, the over-leveraged world was finally approaching a day of reckoning, said Claudio Borio, the bank’s chief economist. “We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time”, he said.

The Swiss authority – known as the “central bank of central banks” – has long rang the alarm bell over the state of global indebtedness, warning that unprecedented monetary policy was storing up problems in a world which still lumbers under weak productivity, insipid growth, and has no appetite for major reforms. In its latest quarterly review, the BIS said some of its starkest warnings were now coming into fruition. It noted that international securities issuance turned negative at the end of last year to the tune of -$47bn – the sharpest contraction since the third quarter of 2012. The retrenchment was largely driven by the financial sector, said the BIS. Meanwhile emerging market debtors – who have embarked on a $3.3 trillion dollar denominated debt spree in the wake of the financial crisis – saw issuance ground to a halt in the second half of the year.

This provided a “telltale” sign that the financial conditions were reaching an inflection point, accompanied by large depreciations in emerging market currencies and slowing domestic growth. “It is as if two waves with different frequencies came together to form a bigger and more destructive one”, said Mr Borio. Global debt now stands at over 200pc of GDP, exceeding levels seen before the financial crash in 2007. Any turning in the credit cycle risks imperiling debtor companies and governments, raising the chances of default and corporate bankruptcies, said the BIS. “If they persist, tighter global liquidity conditions may raise stability risks in some countries, especially those where other indicators already point to a heightened risk of financial stress”, they said.

Ahead of the US Federal Reserve’s landmark decision to raise interest rates for the first time in eight years last December, the BIS had forewarned of an “uneasy market calm” that could quickly turn to debtor distress. This prophecy is seemingly playing out in the first three months of 2016. “The tension between the markets’ tranquility and the underlying economic vulnerabilities had to be resolved at some point,” said Mr Borio. “In the recent quarter, we may have been witnessing the beginning of its resolution.” Debt binges have also been exacerbated by a historic collapse in oil prices. Energy companies from Brazil to Russia are scrambling to service $3 trillion of dollar debt as prices languish at around $30 a barrel – a 70pc decline since late 2014.

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More BIS.

‘Gathering Storm’ For Global Economy As Markets Lose Faith (AFP)

A fragile calm in global financial markets has given way to all-out turbulence, the Bank of International Settlements has said, warning of a “gathering storm” which has long been brewing. In its latest quarterly report, watched closely by investors, the BIS – which is known as the central bank of central banks – also warned that investors were concerned governments around the world were running out of policy options. BIS chief Claudio Borio said the “uneasy calm” of previous months had given way to turbulence and a “gathering storm”. “The tension between the markets’ tranquillity and the underlying economic vulnerabilities had to be resolved at some point. In the recent quarter, we may have been witnessing the beginning of its resolution,” he added.

“We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time,” he warned. Although Asian markets enjoyed another strong day on Monday and continued to claw back the losses of January, the report said said that investors were concerned about what central banks could do in the event of another crisis. “Underlying some of the turbulence was market participants’ growing concern over the dwindling options for policy support in the face of the weakening growth outlook,” the report said. “With fiscal space tight and structural policies largely dormant, central bank measures were seen to be approaching their limits.”

Borio surveyed the major disruptions over the last three months, from the first post-crisis interest rate hike by the US Federal Reserve in December, to accumulating signs of China’s slowdown. In what he termed the second phase of turbulence in the last quarter, Borio said markets were plagued by fears about the health of global banks and the Bank of Japan’s shock decision to impose negative policy rates.

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Japan deserves a lot more scrutiny.

The Bank Of Japan Has Turned Economics On Its Head (BBG)

Call me old fashioned, but I still think prices matter. I vividly recall the first time I studied those simple supply-and-demand graphs as a college freshman, and today, far too many years later, their basic logic remains undeniable. When prices are right, money flows to the most productive endeavors and economies work efficiently. When prices are wrong, crazy things eventually happen, with potentially dire consequences. That’s why we should be very worried about Japan, where things are getting crazy. On March 1, the Japanese government sold benchmark, 10-year bonds at a negative yield for the first time ever. Think about that for a minute. The investors who bought these bonds not only loaned the Japanese government their money. They’re paying for the privilege of doing so.

Why would any sane person do such a thing? A government with debt equivalent to more than 240% of national output – the largest load in the developed world – should surely have to pay investors a tidy sum to convince them to part with their money, not the other way around. But the bond market in Japan has become so distorted that investors believe it’s in their interests to lend money at a cost to themselves. The only explanation is that prices in Japan have gone horribly, horribly awry, and that has made the illogical logical. The culprit is the Bank of Japan. The entire purpose of its unorthodox stimulus programs – QE, negative interest rates – is, in effect, to get prices wrong: to press down interest rates below where they would normally go and force banks to lend money in ways they normally wouldn’t.

The BOJ, in other words, is trying to alter prices to change the incentive structure in the economy in order to engineer certain results – to increase inflation, encourage investment and spark growth. The problem is that the BOJ hasn’t achieved any of those objectives. Inflation in January, by one commonly used measure, was a pathetic zero. GDP has contracted in two of the past three quarters. Instead, the BOJ is creating new problems by undermining the price mechanism. The central bank is buying up so many government bonds that it has effectively stripped them of risk to the investor and cost to the borrower. Investors probably bought up the bonds with negative yields speculating that they could flip them to the BOJ. Meanwhile, since the government can now earn money while borrowing it, the BOJ is removing any urgency for Japan’s politicians to control debt and reduce budget deficits.

Worse, the central bank is undercutting the very goals it’s trying to achieve. By wiping out returns to investors on safe investments like government bonds – the yield curve on them is as flat as a pancake – the BOJ is straining the incomes of savers and dampening the consumption that might help the economy revive. If debt pressures finally do push the government to hike taxes again, spending will take another hit.

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“Li signaled the prospect for more debt days after Moody’s Investors Service lowered its outlook on China’s credit rating to negative from stable because of a surge in borrowing.”

China Growth Addiction Leaves Deleveraging, Reform in Back Seat (BBG)

Rule No.1 in China’s blueprint for the next five years: “give top priority to development.” That’s the word from Premier Li Keqiang’s work report delivered Saturday at the start of the annual National People’s Congress in Beijing. Li acknowledged there would be some difficult battles ahead as he outlined plans to clean up the environment, boost innovation, further urbanize and cut excess capacity in industries like coal and steel. Yet the firmest target remains on the one thing he has the least control over – the nation’s economic growth rate. For 2016, a 6.5% to 7% growth range was outlined, with 6.5% pegged as the baseline through 2020. That would be less than last year’s 6.9% rate, the slowest growth in a quarter century. To reach the new target, the government will permit a record high deficit and has raised its money supply expansion target.

The upshot: debt grows even as growth slows. “The risk is that if stimulus is accelerated but reform continues to lag, the government could end the year with growth on target but even bigger structural problems to deal with,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. The report “confirms that the focus is firmly on supporting short-term growth, with the deleveraging can kicked further down the road.” Li’s plan suggests debt may rise to 258% of GDP this year, from 247% at the end of 2015, they estimate. Li signaled the prospect for more debt days after Moody’s Investors Service lowered its outlook on China’s credit rating to negative from stable because of a surge in borrowing. “Development is of primary importance to China and is the key to solving every problem we face,” Li said in the work report. “Pursuing development is like sailing against the current: you either forge ahead or you drift downstream.”

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Sorry, boys, confidence is in the gutter.

China Defends Veracity Of Foreign Exchange Reserves Data (FT)

China’s official foreign exchange reserves only include highly liquid assets, a top central banker said on Sunday, seeking to reassure investors that authorities have enough ammunition to prevent a sharp fall in the renminbi. Investor sentiment towards China’s currency has turned sharply negative since a surprise devaluation in August, amid unprecedented capital outflows and concern about the health of the economy. Concern over China’s currency policy sparked a global market sell-off early this year. The People’s Bank of China has drawn on its foreign exchange reserves to curb renminbi weakness, but analysts believe the central bank may soon be forced to abandon this policy to prevent reserves dropping below dangerous levels.

Some bearish investors have also expressed skepticism about the reliability of China’s official foreign exchange reserves data, which showed reserves at $3.2tn at the end of January — still the world’s largest despite declining for 19 months. Skeptics say the headline total of reserves exaggerates the resources available to support the renminbi since they suspect it includes illiquid assets such as foreign real estate and private-equity investments that cannot be readily deployed in currency markets. Kyle Bass, the US hedge fund manager who has wagered billions that the renminbi and other Asian currencies will fall, believes China’s true reserves are more than $1tn below the government’s official total. Veteran investor George Soros has also suggested the renminbi may fall further.

Yi Gang, PBoC deputy governor who until January was also head of the foreign exchange regulator, said on Sunday that only highly liquid assets are included in the closely watched headline reserves figure. “I can clearly tell everyone here, those assets that don’t meet liquidity standards are entirely deducted from official foreign exchange reserves,” Mr Yi said. “For example, some illiquid equity investments, some capital injections and some other assets where liquidity isn’t good are entirely outside our foreign exchange reserves.” Beyond foreign real estate and private equity, analysts have questioned whether PBoC’s recent use of foreign currency to inject capital into state-owned policy banks, including at least $93bn injected into China Development Bank and the Export-Import Bank of China last year. There is also uncertainty about whether China’s capital contributions to two newly launched multilateral development banks, the Asia Infrastructure Investment Bank and the Brics bank, have been deducted.

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While continuing to inflate history’s biggest bubble even further.

China’s Leaders Put the Economy on Bubble Watch (WSJ)

China’s leaders made clear they are emphasizing growth over restructuring this year, but suggested they are trying to avoid inflating debt or asset bubbles as they send massive amounts of money coursing through the economy. The government’s announcement of a 6.5% to 7% growth target for 2016 at the start of the National People’s Congress over the weekend came with subtle acknowledgment that some of its efforts to jump-start a persistently decelerating economy have misfired, failing to steer stimulus to the most productive sectors. In his report to the annual legislative session, which opened Saturday, Premier Li Keqiang promised tax cuts that could leave companies with more money to invest.

And for the first time, the Chinese government specified total social financing—a broad measure of credit that includes both bank loans and nonbank lending—as a metric for helping determine monetary policy. In the past, leaders have just said total social financing should be kept at an appropriate level, while they have set clear targets for M2 money supply, which covers all cash in circulation and most bank deposits. Both measures have increased sharply in recent months. But the money-supply measure fails to capture how banks and financial institutions use the funds. For instance, M2 jumped 13.3% last year while total social financing grew 12.4%, according to official data. The discrepancy indicates not all deposits were used by banks to make loans to companies; instead, some of the funds were tapped for such purposes as margin loans for stock-market speculation.

This year, the two targets are paired, with both set to rise 13%. “The government seeks to more accurately show where the money is going, and whether credit is being used to support the real economy,” said Sheng Songcheng, head of the central bank’s survey and statistics department, in an interview. China’s past efforts to direct credit to entrepreneurs and other desired sectors of the economy have fallen short. And its loose monetary policy risks giving inefficient companies more room to avoid shutting down or retooling. Much of China’s breakneck growth over the past two decades has been fueled by state-led investment and debt. Concerns about a credit buildup have grown as the economy has slowed.

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Prices in Shanghai and Shenzhen are totally crazy. And that’s the government’s doing.

China Plans Crackdown on Loans for Home Down-Payments (BBG)

Chinese regulators plan to impose new rules to end the practice of homebuyers taking out loans to cover down-payments, as they step up scrutiny of financing risk in the property market, according to people familiar with the matter. The rules will bar lenders including developers, housing agencies, small-loan companies and peer-to-peer networks from offering loans for down-payments, said the people, who asked not to be named because the matter isn’t yet public. Regulators including the central bank and the China Banking Regulatory Commission will also ask commercial banks to scrutinize mortgage applications and reject those where down-payments come from loans offered by such institutions, the people said.

China is planning the crackdown amid concerns about rising risks in the loan markets and warnings from officials that home prices in some top-tier cities are rising too fast. Shanghai’s most-senior official said the city’s property market has “overheated” and should be more tightly controlled after a recent surge in residential housing prices. As part of the latest moves, regulators will also strengthen the stress tests of property loans, the people said, without offering details. Representatives at the People’s Bank of China and the CBRC didn’t immediately respond to faxed requests for comment. China in November 2014 started easing property curbs amid efforts to revive the world’s second-largest economy. The measures – intended to ease a glut of unsold homes in smaller cities – have instead lifted prices in the country’s biggest population centers.

Prices in Shenzhen jumped 4% in January from a month earlier and have gained 52% over the past year. Values in the financial center of Shanghai have increased 18% in the last 12 months, while those in Beijing advanced about 10%. Regulators last month allowed commercial banks to cut the minimum mortgage down-payment for first-home purchases to 20% from 25% and to 30% from 40% for second homes, except in five big cities with home-buying restrictions. Demand for real estate is also getting a boost from monetary stimulus after the PBOC cut benchmark lending rates six times since 2014, lowered banks’ reserve requirements and flooded the financial system with cash to keep borrowing costs low.

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“Home prices in the city surged 370% from their 2003 trough through the September peak..”

Hong Kong Homes Sales Tumble 70% (BBG)

Hong Kong residential home sales plunged 70% in February from a year earlier to a 25-year low, as falling prices and economic uncertainty deterred buyers. In February, 1,807 homes were sold in Hong Kong, compared with 6,027 a year earlier, according to government statistics. Home sales fell from 2,045 in January, the data show. “The newspapers keep on saying the market is going down and buyers think they can get a cheaper house half-a-year later or one year later so are waiting,” said Thomas Fok, a property agent at Centaline Property Agency in Hong Kong’s upscale Mid-levels West district where he hasn’t made one sale this year.

Property prices have declined 10% from their September highs amid uncertainty over the economy at home and in China, possible interest-rate increases and plans by the government to boost housing supply in the next five years. Senior Hong Kong government officials have ruled out relaxing property curbs, which include extra stamp duties and caps on mortgage levels. [..] Home prices in the city surged 370% from their 2003 trough through the September peak, spurred by low mortgage rates, tight supply of new units and buying from mainland Chinese. This year, BOCOM International Holdings Co. property analyst Alfred Lau has said prices could fall 30% amid a slowdown.

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“I think the situation right now is more dangerous than it was last summer..”: former finance minister Gikas Hardouvelis.

Grexit Back On The Agenda Again As Greek Economy Unravels (Guardian)

European finance ministers will once again deliberate over how to treat Greece’s ongoing debt crisis this week despite the country desperately grappling with refugees pouring across its borders. A meeting on Monday of finance ministers from the eurozone will determine whether creditors are to be given the green light to complete a long-delayed review of Greek economic recovery plans. The review has been held up by disagreement among lenders over how much more Athens needs to cut from public spending. It is seen as key to reviving Greece’s banking sector and restoring business and consumer confidence. “I think the situation right now is more dangerous than it was last summer,” the former finance minister Gikas Hardouvelis told the Guardian.

“Then it was a question of the political will of a few people,” he said, referring to the tumultuous negotiations that paved the way to Athens receiving a third bailout in August. “Now it’s a question of implementing reforms and working hard and if a government doesn’t believe in them and implements them begrudgingly, progress becomes very difficult.” Monday’s meeting comes at an especially sensitive time. Greek unemployment remains the highest in Europe at almost 25% – and just under 50% among the young. Many companies are relocating to Bulgaria, Albania, Romania and Cyprus as a result of over-taxation. Meanwhile, the once booming tourism trade has taken a hit as bookings to Aegean isles have collapsed because of refugee arrivals. Last week, it was announced by Greece’s official statistics agency, Elstat, that the debt-stricken nation had dipped back into recession.

After three emergency bailouts and the biggest debt restructuring in history, talk once again has turned to the country dropping out of the single currency. Businessmen and bankers in private concede that as the economy disintegrates the possibility of a parallel currency is now openly being discussed. “The probability of Grexit is still there,” added Hardouvelis. “It has not gone away. Just look at the yield investors are required to pay on Greek bonds.” Everyone agrees that time is of the essence. Further delays make potentially explosive reforms – starting with the overhaul of the pension system – harder to sell for a leftist-led government that in recent months has faced protest on the streets. “We have no time,” finance minister Euclid Tsakalotos told the European parliament’s economics committee last week. “We hope the IMF will become more reasonable.”

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Europe’s a zombie financially and politically.

Zombie Banks Are Stalking Europe (BBG)

Zombies are stalking Europe — zombie banks that are solvent in name only. The phenomenon is not new. Zombies weighed down Japan for almost 20 years after a real estate bust. They are usually born of financial panics, when loans go bad, capital flees and the value of assets tumbles. There are no good choices when zombie banks are on the march. Shutting them down can cause further panic. Restoring them to health can require hundreds of billions of dollars. But letting them fester can cripple an economy for years, because zombies don’t make the loans healthy businesses need to grow and consumers need to spend. No place has been cozier for zombies since the 2008 global financial crisis than Europe, and no economy has been slower to recover.

Europe has been slow and piecemeal in its approach to the region’s troubled banks. Lenders in Greece received their third cash infusion from the government in 2015. In Italy, the government developed a plan in early 2016 to relieve banks of their soured loans, though it’s expected to have only a limited impact because the program is voluntary. Investors are concerned that Europe’s banks are so weak that they still pose a risk to the economy and financial stability, after crippled banks in Ireland, Portugal, Greece and Spain threatened to pull down their indebted governments between 2010 and 2012. Even after multiple rescues and capital injections, almost a fifth of 130 banks failed a ECB stress test in October 2014, with a total capital shortfall of €25 billion. In an effort to coordinate the response, the ECB was given the job of the central banking regulator at the end of 2014. But even the ECB wasn’t bold enough to put a bullet to zombies’ heads, only requiring banks to be more aggressive on provisioning for bad loans.

One thing about old-fashioned bank runs — when they killed banks they stayed dead. The panics that followed, however, could bring down healthy banks as well, so tools for supporting banks grew up, most notably deposit insurance. Those developments brought with them a thorny question — when to pull the plug. The term “zombie banks” was coined by Edward J. Kane of Boston College in 1987 to refer to U.S. savings and loans institutions that had essentially been wiped out by commercial-mortgage losses but were allowed to stay in business, as regulators put off the pain of shutting them down in the hope that a market rebound would make them whole. By the time they gave up and cleaned up the mess, the losses of the zombies had tripled.

In Japan, zombie banks propped up zombie companies rather than write down their loans, while the banks themselves were kept alive through “regulatory forbearance” — a tacit agreement by the government to pretend that their bad loans were still worth something, an approach that kept the markets calm but contributed to a “lost decade” of economic stagnation. The prime example of a tough approach is Sweden, which in the 1990s responded to a financial crisis by nationalizing its ailing banks — and quickly rebounded.

After the 2008 crisis, the U.S. pumped $300 billion into its banks, but it also conducted stress tests that were more rigorous than Europe’s and forced low-scoring banks to raise private capital. In Europe, countries from Germany to Spain plugged holes in their banks and failed year after year to force losses and recapitalizations as the U.S. had. As a result, European lenders still sit on more than $1 trillion of dud loans, which don’t earn them any money and prevent them from making new loans that the region’s economy needs desperately to grow.

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QE in a nutshell: “..the benefits from these wealth effects will accrue to those households holding most financial assets.”

Threat Of A Synchronised Downturn (Pettifor)

“For the proposition that supply creates its own demand, I shall substitute the proposition that expenditure creates its own income” JM Keynes Collected Writings, Volume XXIX, p. 81

G20 Finance Ministers met in Huangzhou, China recently and refused appeals from both the IMF and the OECD for “urgent collective policy action” that focussed “fiscal policies on investment-led spending”. Instead the world’s finance ministers concluded that “it’s every country for themselves”. Keynes’s simple proposition is compelling: that expenditure will expand national (and international) income (including tax income) and thereby reduce the deficit. But it is a proposition that is anathema to OECD politicians, their friends in the finance sector and their advisers. Instead they adhere stubbornly to the antiquated classical economics embodied in Say’s Law.

Rather than relying on expenditure or investment, the British 2010-2015 Coalition government and then the 2015 Conservative government placed excessive reliance on monetary policy to revive aggregate demand for goods and services. The consequences were predictable. Loose monetary policy enriched those that owned assets – stocks and shares, bonds or property. The evidence of this grotesque enrichment is clearest in London. According to the FT (20 Feb 2016) the owners of South Kensington residential properties have seen “substantial capital appreciation – 45 % over the past five years and a remarkable 155% since 2006.” And as the Bank of England concluded back in 2012 in its paper on the Distributional Effects of Asset Purchases” (i.e. QE): “the benefits from these wealth effects will accrue to those households holding most financial assets.”

By contrast fiscal consolidation (austerity) has since 2010 hurt those that do not own assets – i.e. those who live by hand or by brain, or who are dependent on welfare, and do not benefit from the rent generated by the ownership of assets. Now, the British government is set to impose the largest fiscal consolidation of all OECD countries. Worryingly, it proposes to do so at a time of global economic and financial fragility. But the British government has not been alone in pursuing policies that enrich the already rich, while contracting wider economic activity. Over-reliance on central bankers and monetary policy, coupled with deflationary and contractionary fiscal policy is the cause both of ongoing weakness in OECD countries and of the slow but inexorable decline in world trade since 2011.

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“The problem is that nothing — not even Donald Trump’s popularity — accelerates forever.”

Why The House Price Bubble Still Hasn’t Burst (Steve Keen)

The standard retort to those who claim that Australia has a housing bubble is that it’s all just supply and demand. I can happily agree that it is indeed all just supply and demand and still prove that there is a bubble. Understanding my argument might force you to think more than you normally have to, in which case, tough: it’s about time Australians did some thinking. Fundamentally, the demand for housing comes from the flow of new mortgages. Only the super-rich or the well-heeled offshore buyer can afford to buy property without a mortgage, and the importance of mortgage debt has increased dramatically over time. In the 1970s, you couldn’t get a mortgage without a 30% deposit, so cash made up 30% of the purchase price; now it’s closer to 10%.

So, on the demand side of the supply and demand equation, we have the flow of new mortgage debt. On the supply side, we have two factors: the number of properties for sale and their prices. There is, therefore, a “dynamic tension” (to quote Rocky Horror) between the rate of change of mortgage debt, and the level of house prices: if the monetary value of the flow of new mortgage debt equals the monetary value of the flow of supply, then there’s no pressure forcing prices to change. It follows that there is a relationship between the acceleration of mortgage debt and the rate of change of house prices. So for house prices to rise, the flow of new mortgage debt needs to be not merely positive, but accelerating — growing faster over time.

Lest that sound like standard economic mumbo-jumbo — as Ross Gittins pointed out very well recently, most so-called economic modelling is no more than fantasy (“Tax modelling falls down at the household level”)—Figure 1 shows the empirical evidence for America, where not even Alan Greenspan disputes that there was a bubble. Similar relationships apply for all countries — and for the econometrically minded, the causal relation (as tested on US data) is from accelerating mortgage debt to house prices, not vice-versa.

Is Australia different? No. The same relationship applies here and now: though foreign buyers have certainly played a part, the key factor driving rising Australian house prices in the last three years has been accelerating mortgage debt.

So what’s the problem? The problem is that nothing — not even Donald Trump’s popularity — accelerates forever. At some point, the level of mortgage debt relative to income will stabilise; well before that happens, the acceleration of mortgage debt will decline, and prices will fall. This has already happened twice in recent history in Australia: in 2008 and in 2010. On both occasions, deliberate government policy stopped the fall in prices by encouraging Australians back into mortgage debt — firstly via the First Home Vendors Boost under Rudd and secondly via the RBA’s rate cuts from 2012 which were undertaken with the hope they would encourage more household borrowing. In both cases the acceleration of mortgage debt resumed, as did the bubble in prices.

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Europe’ disgrace.

Turkey Steps Up Crackdown on Erdogan Foes on Eve of EU Meetings (BBG)

Turkish authorities are escalating a crackdown on President Recep Tayyip Erdogan’s opponents, undeterred by possible risks to the nation’s renewed attempts to join the EU. In two days, authorities seized control of the company that owns a leading newspaper, and signaled the possibility of stripping prominent Kurdish lawmakers of their parliamentary immunity. The moves come on the eve of talks on Monday in Brussels between Turkish and EU officials to discuss ways to handle the influx of refugees from Syria. With the EU increasingly seeking Turkey’s help to contain Europe’s worst refugee crisis since World War II, and Ankara’s membership talks at an early stage, Erdogan’s allies are betting that the escalation won’t damage Turkey’s ties with the bloc.

The president expects EU leaders “to turn a blind eye” in return for his “cooperation in curbing Syrian refugee flows to the continent,” said Aykan Erdemir at the Foundation for Defense of Democracies, a policy institute. On Friday, Turkey seized control of the Zaman newspaper, the latest twist in a 2 1/2-year campaign against Fethullah Gulen, a former ally of Erdogan accused of running a “parallel state” to undermine the government. The move sparked clashes between police and anti-government protesters. EU governments revived the entry talks, dormant since November 2013, as part of a package of economic and political incentives to encourage Erdogan to host refugees in Turkey instead of pointing them to Europe.

German Finance Minister Wolfgang Schaeuble said in an interview recorded last week and broadcast on Sunday on BBC’s Andrew Marr show that “it will be a long time before we reach the end of negotiations with Turkey about accession to the EU.” “Actually, the German government has major doubts about whether Turkey should be a full member of the EU, but this is a question for the coming years,” said Schaeuble. “It is not a worry at the present time.” [..] Erdogan knows that the “EU can’t really stop him from eradicating followers of Gulen to putting Kurdish lawmakers on trial for ties to the PKK,” Nihat Ali Ozcan at the Economic Policy Research Foundation in Ankara said. “The EU’s criticism of Erdogan’s policies is not very meaningful at a time when the country’s membership bid is not high on the public’s agenda, and the reliance of the EU on Turkey to handle the refugee crisis and protect Europe against terrorism leaves more room for Erdogan to pursue his own agenda at home.”

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Simmering tensions flare up. Better be careful.

Turkey Disputes Greek Sovereignty Via NATO Patrols (Kath.)

Turkey is disputing Greece’s territorial sovereignty over a string of tiny islands and a part of its air space over the Aegean Sea, according to a confidential document, obtained by Kathimerini, that was submitted to NATO’s Military Committee last month. The 17-point document, which is expected to further strain relations between the neighboring countries, was submitted on February 15, during heated discussions between Greece and Turkey over the terms of deployment of a German-led NATO patrol in the Aegean to stem the flow of refugees. It was the first time that had Turkey disputed Greek sovereignty via an official NATO document.

Turkey’s demands from the Alliance included replacing the term “Aegean air space” with “NATO air space” and refraining from using the Greek names of several tiny islands “that may been seen as the promotion of national interest” – an apparent reference to 16 small islets whose Greek sovereignty has been repeatedly disputed by Ankara. Turkey also disputed Greece’s 10-mile national air space and demanded permission to enter the Athens Flight Information Region (FIR) without submitting flight plans. It further requested that NATO ships do not dock at ports of the Dodecanese islands in the southeast Aegean and claimed supervision of almost half the Aegean Sea for search and rescue operations.

The terms of the NATO patrol in the Aegean were agreed on February 25 after overcoming territorial sensitivities of the two neighbors. The agreement stipulated that the two countries would not operate in each other’s territorial waters and air space. According to several NATO diplomats, one of the stumbling blocks had been where Greek and Turkish ships should patrol and whether that would set a precedent for claims over disputed territorial waters. EU leaders will hold a special meeting Monday in a bid to hammer out a deal that would help contain the number of refugees entering Greece and the rest of the EU.

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They’re really planning to do it: turn Greece into a concentration camp. This will not go well.

EU To Focus On Greek Aid, Closing Balkan Migrant Route At Summit (AP)

European Union leaders will be looking to boost aid to Greece as the Balkan migrant route is effectively sealed, using Monday’s summit as an attempt to restore unity among the 28 member nations after months of increasing bickering and go-it-alone policies, according to a draft statement Sunday. The leaders will also try to persuade Turkey’s prime minister to slow the flow of migrants travelling to Europe and take back thousands who don’t qualify for asylum. In a draft summit statement produced Sunday and seen by The Associated Press, the EU leaders will conclude that “irregular flows of migrants along the Western Balkans route are coming to an end; this route is now closed.”

Because of this, the statement added that “the EU will stand by Greece in this difficult moment and will do its utmost to help manage the situation.” “This is a collective EU responsibility requiring fast and efficient mobilization,” it said in a clear commitment to end the bickering. It said that aid to Greece should centre on urgent humanitarian aid as well as managing its borders and making sure that migrants not in need of international protections are quickly returned to Turkey. The statement will be assessed by the 28 leaders after they have met with Turkish Prime Minister Ahmet Davutoglu. Late Sunday evening, German Chancellor Angela Merkel and Dutch Premier Mark Rutte met with Davutoglu to prepare for the summit.

[..] The EU summit, the second of three in Brussels in just over a month, comes just days after a Turkish court ordered the seizure of the opposition Zaman newspaper. The move has heightened fears over deteriorating media freedom in the country and led to calls for action from the international community, but they will most likely be brushed aside at the high-stakes talks. “In other words, we are accepting a deal to return migrants to a country which imprisons journalists, attacks civil liberties, and with a highly worrying human rights situation,” said Guy Verhofstadt, leader of the ALDE liberal group in the European Parliament on Sunday.

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“We will continue to save lives … and defend the human face of Europe.”

Tsipras: “We Will Continue To Save Lives” (Reuters)

Greece will press for solidarity with refugees and fair burden-sharing among European Union states at Monday’s emergency EU summit with Turkey, Prime Minister Alexis Tsipras said on Sunday, lashing out at border restrictions that led to logjams. Tsipras has accused Austria and Balkan countries of “ruining Europe” by slowing the flow of migrants and refugees heading north from Greece, where some 30,000 are now trapped, waiting for Macedonia to reopen its border so they can head to Germany. With more arriving in the mainland from Greek islands close to Turkish shores, the numbers could swell by 100,000 by the end of this month, EU Migration Commissioner Dimitris Avramopoulos projected on Saturday. “Europe is in a nervous crisis,” Tsipras told his leftist Syriza party’s central committee. “Will a Europe of fear and racism overtake a Europe of solidarity?”

He said central European countries with serious demographic problems and low unemployment could benefit in the long term by taking in millions of refugees, but austerity policies have fed a far-right “monster” opposing the inflows. “Europe today is crushed amidst austerity and closed borders. It keeps its border open to austerity but closed for people fleeing war,” Tsipras said. “Countries, with Austria in the front, want to impose the logic of fortress Europe.” Austrian Chancellor Werner Faymann has urged Germany to set a clear limit on the number of asylum seekers it will accept to help stem a mass influx of refugees that is severely testing European cohesion in the midst of the worst refugee crisis in generations. Tsipras told his party “unilateral” actions to close borders to refugees were condemned by all European institutions. “We are not pointing the finger to any other peoples or countries of Europe. We are against those who succumb to xenophobia and racism,” Tsipras said. “We will continue to save lives … and defend the human face of Europe.”

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Merkel is losing her wits: “Greece should have created 50,000 accommodation places for refugees by the end of 2015..” Why Greece, Angela?

Surge Of 100,000 Refugees Building In Greece (AFP/L)

As EU members continued to bicker, Dimitris Avramopoulos, in charge of migration at the powerful Brussels executive, pointed to upcoming measures, including an overhaul of asylum rules, to help ease tensions. “Hundreds are arriving on a daily basis and Greece is expected to receive another 100,000 by the end of the month,” Avramopoulos told a conference in Athens. Greece lies at the heart of Europe’s greatest migration crisis in six decades after a series of border restrictions on the migrant trail from Austria to Macedonia caused a bottleneck on its soil. Over 30,000 refugees and migrants are now trapped in the country, desperate to head northwards, especially to Germany and Scandinavia. “In a few weeks,” the EU will announce a revision of its asylum regulations to ensure a “fairer distribution of the burden and the responsibility,” Avramopoulous told the conference.

The huge influx of refugees and migrants has caused major divisions within the EU, although European President Donald Tusk on Friday struck an upbeat note about Monday’s summit in Brussels, which will include Turkey. European leaders are expected to use the summit to press Ankara to take back more economic migrants from Greece and reduce the flow of people across the Aegean Sea. Finger-pointing continued within the 28-nation EU bloc on Saturday. German Chancellor Angela Merkel – a key player in the drama – said Greece should have been quicker in preparing to host 50,000 people under an agreement with the European Union in October. “Greece should have created 50,000 accommodation places for refugees by the end of 2015,” Merkel told Bild newspaper in an interview to appear Sunday. “This delay must be addressed as soon as possible as the Greek government must provide decent lodgings to asylum claimants”, she said.

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Safe passage is very possible. But we prefer to let them drown.

Refugee Boat Sinks Off Turkey’s Western Coast, 25 Dead, 15 Rescued (DS)

25 refugees drowned off Turkey’s Aegean coast on Sunday after their boat sank off the western province of Aydin’s district of Didim, Anadolu Agency reported. The Turkish Coast Guard has rescued 15 of the refugees and launched a search and rescue operation to find the other missing refugees with three boats and one helicopter. The total number of refugees is not yet known. The refugees’ nationalities were not immediately released, but they are likely to be Syrians, who comprise the majority of refugees attempting to sneak to the Greek islands from Turkey. Media outlets said three children were among the casualties. It is not known what caused the boat to sink, although a mix of strong winds and boats carrying passengers over their capacities are often the causes of similar tragedies. The local Ihlas News Agency reported that passenger overload was the cause of the disaster.

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Feb 252016
 
 February 25, 2016  Posted by at 2:58 pm Finance Tagged with: , , , , , , , , ,  4 Responses »


Danae Stratou, Ilargi, Yanis Varoufakis and Steve Keen Feb 16 2016

When my mate Steve Keen took me to meet Yanis Varoufakis for dinner last week when we all happened to find ourselves in Athens together, I at least sort of regretted not having the time and space to talk to Yanis about his DiEM25 project for the democratization of Europe. It was a private occasion, there were other people at the dinner table, Steve and Yanis had no seen each other for a while, it was simply not about that.

I did think afterward that it would be great to do this kind of get together more often, and get ideas running, but then realized we are all workaholics and we all live thousands of miles apart, so the odds of that happening are slim at best. And that in turn made me think of how inspiring the years were when I toured the world with my Automatic Earth partner in crime Nicole Foss, how important it is to have people around to bounce off your ideas of what’s going on, how much faster that crystallizes your own ideas.

But as things are, and as they happened, I didn’t have that time with Yanis. And not nearly enough with Steve either, for that matter, who has/is a brain that I would love to pick for days if not weeks, he’s such a brilliant mind. When you have just a few hours, though, the time is filled with drinking wine and catching up with what’s happened in each other’s personal lives, it had been 3 years since we met, and professionally, since Steve knows Nicole very well, they did quite a few presentations together, yada yada.

Immensely gratifying, of course, to be able to renew a friendship like that, but almost as frustrating to not be able to expand on it.

But to get back to Yanis: I think I have two major problems with his DiEM25 project. One is that, as I have written umpteen times before, the very structure of the EU (self-)selects for sociopaths to take up its leading positions. None of them have been democratically elected, and that would be very hard to begin with because no Greek or Portuguese has ever heard of, or has any connection with, some guy from Finland or Poland with a name they can’t pronounce. It wouldn’t just take democratization, you’d have to rewrite the entire machine from scratch.

The second is that I don’t think the EU will last long enough to pull through the democratization process he envisions, and appear at the ‘other end of the tunnel’ in 2025. I just don’t see it. For one thing, because the whole world is set to be hit with the most severe financial crisis in its history between now and then, and Europe will be in the eye of the storm center of that crisis. Talk about democratization, well-intended and needed as it may seem, will be on a back-back burner when that hits.

I first said about a year ago that Angela Merkel should call a UN emergency meeting over the refugee crisis, but she still hasn’t yet. The EU problem in a nutshell: Merkel is the de facto leader of both the EU and Germany. When EU interests, or interests of one or more other EU nations clash with German ones, she has no choice but to pick the German side. Because the Germans elected her, not Europe.

You can either hand over German sovereignty to Brussels or you can fall into trap after trap. These traps will not hurt Germany most -since Merkel calls the shots-, they will hurt the poorer nations first and most. But it is still the worst model one could ever have invented. And since neither Germany nor any other EU member is willing -or ever will be- to give up that sovereignty, there’s only one option: leave the EU.

There are many ways in which European sovereign nations can work together, open borders, promote trade and all these things. The worst possible way is through a bureaucracy like the EU, which may promise an equal voice and treatment and opportunities for all countries, but down the line will always be controlled by the biggest ones. It’s not a coincidence that Germany has a trade surplus.

The clampdown on Greece to keep French and German banks safe should have made clear once and for all where the EU fails. If it’s any consolation: the big economies, too, will fall.

But chances are that before that happens, the union will have splintered apart back into its separate member states. Britain toys with the Brexit idea, the Czechs say if Britain leaves there’ll be a Czexit, Holland wants a referendum on EU membership (Hexit), Marine Le Pen patiently waits for the French economy to go south so she can be elected president and fulfill her promise to take France into a Frexit. And those are just a few examples. Trouble brews just about everywhere.

And there is of course no bigger trouble than the refugee situation. If only European nations would stop bombing the places the refugees were from, that would send a signal that they’re serious about this. But instead after the Paris attacks France and Britain increased their bombing efforts in Syria, supported by Germany and Holland. If that doesn’t say enough about where their priorities lie, what can?

The Balkanization of Europe is well on its way in, appropriately, the Balkan area and surrounding nations. A conference on closing borders in Austria yesterday was attended by Albania, Bosnia, Bulgaria, Kosovo, Croatia, Macedonia, Montenegro, Serbia and Slovenia. But not Greece or Germany. These are not all EU members, but most would like to be. Greece doesn’t like it one bit, it has threatened to block all EU decision until this is resolved, and recalled its ambassador to Vienna today..

Six countries has (re-)introduced border checks: Belgium, France, Austria, Denmark, Norway and Sweden. Many more have have erected razor wire fences. Hungary has the loudest voice; it announced a referendum on refugee quota yesterday. Quota that by the way are not worth the paper they’re written and translated into 20-odd languages on. Out of 160,000 agreed on, only some 500 refugees have been relocated.

The EU’s response so far has been a sort of para-military police force, Frontex, and now even NATO. As if refugees are a military threat. It’s amusing to see that many nations accuse Greece of not closing its borders properly, but never explain how that should be done when that border happens to be at sea. Just like they’ve never sent the people or equipment they vowed to make available. The EU in the end is proving to be toothless.

A German newspaper reports that a government document in Berlin talks about 3.6 million refugees in the country by 2020. That can only make one wonder what Europe will look like in 2020. But more importantly, we should wonder what Greece will look like in, say, a month from now. Since Frontex and NATO can’t stop the refugee flow any more than Greece itself can, and borders to countries to the north are closed, tens if not hundreds of thousands of people may get stranded in the country.

Europe has played a major role in turning Ukraine into a failed state, and did the same in Libya, Iraq and Syria. Unless someone shows some leadership soon and the chaos is stopped from spreading further, Greece could well be next on the list.

What I personally find deep black hilarious is that many if not all of the countries involved have signed a whole slew of both European and international laws, but even something as elementary as the Geneva convention gets thrown out the window seemingly at will. Just as black is the question: do refugees also have the right to asylum when they’re fleeing your own bombs?

The worst choice the EU -and Berlin- have made is to ally with Turkey’s Erdogan the way they have. And to force this inane alliance on Greece too. Erdogan plays everyone off against everyone while pocketing millions from ISIS oil sales to refugee smuggling, and now stands to be paid €3 billion per year to -not- stop refugees from ‘sailing’ from Turkey to Greece. Erdogan will soon start talking about Aegean territorial rights too.

There are bad partnerships -the US and EU with Saudi Arabia, just to name another example-, but relying on Turkey to stop the refugee flow is a real whopper. You could just not bomb Syria, and ask Jordan and Lebanon how you can assist with the refugee situation that’s overwhelming their nations, and even rebuild what you’ve just bombed.

Making a deal with Erdogan only seems to highlight that Europe really couldn’t care less. That they truly see the crisis as their crisis, and not that of the refugees. That it’s the people living in Berlin and Vienna and Amsterdam who get the short end of the stick, not those no longer living in Aleppo.

So when do we get to see a real Balkanization, with armies in streets and confronting each other on borders? And what will the EU ‘leadership’ and Hollande and Merkel do when that time comes?

No, I don’t see an EU left in 2025 ‘to be democratized’. I see a lot of old rifts in Europe’s future. And that’s without even having asked how Europe is going to ‘save’ its banks -and banking system- this time around. Or how they’re planning to tell their present and future pensioners that sorry, but the coffers are empty.

These things will start to play out well before 2025. It won’t be a good time to be a refugee living in Europe.

Feb 222016
 
 February 22, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , ,  4 Responses »


NPC People’s Drug Store, 11th & G streets, Washington DC 1920

NYSE Short Interest Nears Record – And We Know What Happened Last Time (ZH)
EU Chamber Urges China To Cut Excess Production (WSJ)
Biggest Banks’ Commodity Revenue Slid to Lowest in Over a Decade (BBG)
The Metals Crunch Is Forcing Miners To Reconsider Diversification (Economist)
The World’s Biggest Miner May Be About to Toast Its Oil Drillers (BBG)
New Market Storm Could Catch Eurozone Unprepared (Reuters)
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks (BBG)
German Economy Takes a Blow From Weakening Global Demand (BBG)
Germany Isn’t Investing the Way It Used to and That’s a Problem (BBG)
China Yuan Bears Predict More Trouble Ahead (BBG)
Kyle Bass, A Sharpshooting Short-Seller (FT)
As US Shale Sinks, Pipeline Fight Sends Woes Downstream (Reuters)
Chinese Military Ambitions Fuel Asian Arms Race Amid Slowdown (WSJ)
Krugman and the Gang of 4 Need to Apologize (Bill Black)
Greek Attempt To Force Use Of Electronic Money Instead Of Cash Fails (ZH)
New Zealand Super Fund’s $200 Million Loss (NZ Herald)
Long Way To Go: 5th Anniversary of the Christchurch Earthquake (G.)
Macedonia, Serbia Close Borders To Afghan Refugees (AP)
Shadowing The Hellenic Coast Guard’s Refugee Rescues (CCTV)

We’re getting closer.

NYSE Short Interest Nears Record – And We Know What Happened Last Time (ZH)

In the last two months, NYSE Short Interest has risen 4.5%, back over 18 billion shares near the historical record highs of July 2008 (and up 7 of the last 9 months).

There are two very different perspectives on could take when looking at this data… Either a central bank intervenes, or a massive forced buy-in event occurs, and unleashes the mother of all short squeezes, sending the S&P500 to new all time highs, or .. Just as the record short interest in July 2008 correctly predicted the biggest financial crisis in history and all those shorts covered at a huge profit, so another historic market collapse is just around the corner. The correct answer will be revealed in the coming weeks or months… but we know what happened last time…

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Ask nicely. Prety pretty please. Look, China doesn’t want millions of unemployed workers. They’ll want to smear this out over years.

EU Chamber Urges China To Cut Excess Production (WSJ)

The European Union Chamber of Commerce in China urged Beijing to do more to tackle excess industrial production, saying that failed attempts to do so have created a flood of excess goods that threatens to destabilize the global economy. The call comes as Chinese manufacturers, hit by an economic slowdown, are sending products–from tires and steel to solar panels and chemicals–overseas that they can’t sell at home. The EU Chamber, which represents more than 1,600 members across China, said Monday that excess production is plaguing industrial sectors, such as steel, cement and chemicals, but is also spilling over into the consumer economy, including consumer electronics, pharmaceuticals and even food and apparel.

The usage rate for China’s steel in 2014 dropped to 71% from 80% in 2008, the EU Chamber estimated, based on China’s official data. Production increased to 813 million metric tons from 513 million tons during that time, the industry group said. Representatives from Europe’s steel industry, reeling from competition from cheap Chinese steel, last week took to the streets in Brussels to protest alleged unfair trade practices that they claim will worsen if the EU grants market-economy status to China later this year. Such a move would make it more difficult for Europe to impose steep tariffs on Chinese goods. London-based Caparo initiated bankruptcy proceedings in October for 16 of its 20 steel businesses, which employed 1,700 people. Tata Steel of India blamed overproduction in China when it said in January that it would cut 1,050 jobs from its U.K. operations, adding to cuts announced in October.

In a briefing Monday, the EU Chamber, which released a study on China’s industrial overcapacity, said China must act immediately to restructure its economy and overhaul state-owned companies that are pumping out excess goods. It must reduce negative impacts in China, such as job losses and bad debt, and fend off a crisis that could reverberate globally, the chamber said. Chinese leaders have prioritized party reform and anticorruption, but it is time to shift that focus to the economy, said Jörg Wuttke, president of the European Chamber. “The time spent on economic reforms is way down on the priority list.” said Mr. Wuttke.” We believe they have to act now, not wait.”

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Are they betting against their own clients yet?

Biggest Banks’ Commodity Revenue Slid to Lowest in Over a Decade (BBG)

Revenue from commodities at the largest investment banks sank to the weakest in more than a decade last year, laid low by a rout in prices for everything from metals to gas. Income at Goldman Sachs, Morgan Stanley and the 10 other top banks slid by a combined 18% to $4.6 billion, according to analytics firm Coalition. That was the worst performance since the London-based company began tracking the data 11 years ago, and a slump of about two-thirds from the banks’ moneymaking peak in 2008. Revenues are unlikely to return to the heights of $14.1 billion seen at the top of the market, according to George Kuznetsov at Coalition. “The competitive landscape is very different,” Kuznetsov said by phone.

“Financial institutions are now much more regulated. We have significantly less involvement of the banks in the physical commodities market, and banks do not take as much risk as they used to in 2008-09.” The Bloomberg Commodity Index, a measure of investor returns from 22 raw materials, slumped the most in seven years in 2015, led by a plunge in energy and metals. Banks including JPMorgan, Deutsche Bank and Barclays have also been scaling back commodities activity in the past three years amid rising regulatory scrutiny. Even as oil revenues improved last year on increased activity by corporate clients, U.S. curbs on proprietary trading meant banks couldn’t fully take advantage of a 35% plunge in crude by making speculative bets, unlike trading houses and big oil companies.

Last year was one of the best years of all time for trading oil and gas, BP Chief Financial Officer Brian Gilvary said this month. Trafigura’s oil-trading earnings surged to a record last fiscal year. A gauge of industrial-metals prices fell by 24% last year, the most since 2008. Income from energy markets also returned to normal levels after gains in 2014, according to Coalition. “A normalization of the U.S. power and gas markets and weakness in metals and investor products drove the overall decline,” the company said in a report released on Monday. Declining commodities revenues helped bring down the performance for banks’ overall fixed-income divisions, according to Coalition. The analytics company tracks commodities activities including power and gas, oil, metals, coal and agriculture.

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BHP Billiton looks to be in danger.

The Metals Crunch Is Forcing Miners To Reconsider Diversification (Economist)

At the pinnacle of the mining industry sit two Anglo-Australian companies, BHP Billiton and Rio Tinto, which are to iron ore what Saudi Arabia is to oil: the ones who call the shots. Their mines in Pilbara, Western Australia, are vast cash cows; with all-in costs below $30 a tonne, they still generate substantial profits even though prices have slumped from $192 a tonne in 2011 to about $44. They have increased iron-ore production despite slowing demand from China, driving higher-cost producers to the wall—an echo of the Saudis’ strategy in the oil market. But whereas Rio Tinto has doubled down on iron ore, BHP also invested in oil and gas—in which it has nothing like the same heft—at the height of the shale boom. Their differing strategies are a good test of the merits of diversification.

The China-led commodities supercycle encouraged mission creep. Many companies looked for more ways to play the China boom, and rising prices of all raw materials gave them an excuse to cling on to even those projects that were high-cost and low-quality. Now the industry is plagued with debts and oversupply. On February 16th Anglo American, a South African firm that was once the dominant force in mining, said it would sell $3 billion of assets to help pay down debt, eventually exiting the coal and iron-ore businesses that it had spent a fortune developing. That would leave it with a core business of just copper, diamonds and platinum. The day before, Freeport-McMoRan, the world’s largest listed copper producer, was forced to sell a $1 billion stake in an Arizonan copper mine to Sumitomo of Japan, to help cut debts racked up when it expanded into oil and gas.

With Carl Icahn, an American activist investor, agitating for a shake-up, analysts say its energy assets could follow—if there are any buyers. When BHP reports half-yearly results on February 23rd its misadventure in American oil and gas will be of particular concern because it has put the world’s biggest mining firm in the shadow of Rio for the first time. Since BHP merged with Billiton in 2001, its share price has outperformed Rio’s; it made an unsuccessful bid to merge with its rival in 2007. Yet in the past year its shares have done worse. Analysts expect that next week it will cut its annual dividend for the first time since 2001, thereby breaking a promise to raise the dividend year by year. Though Rio ended a similar “progressive dividend” policy this month, it did not cut the 2015 payout.

Read more …

And this is its last desperate call.

The World’s Biggest Miner May Be About to Toast Its Oil Drillers (BBG)

BHP Billiton’s shares began tracking oil prices more closely last year as they headed into the worst energy market downturn in a generation. It may not seem like it, but that could be good news for the world’s biggest miner. Unlike its rivals, BHP has a substantial petroleum unit, valued at about $25 billion by UBS. So while iron ore and most base metal prices are forecast to languish over the remainder of the decade as growth in China slows, the Melbourne-based company’s stock stands to benefit from a projected rebound in crude oil. BHP needs an edge. Its Sydney-traded shares sunk last month to the lowest since 2005 and it’s forecast to report a 86% drop in first-half earnings on Tuesday. On top of that, the producer’s ultimate liability for the deadly Samarco dam burst in Brazil late last year remains uncertain and it’s been warned by Standard & Poor’s that it may face a second credit rating downgrade this year.

An oil rebound could deliver a reboot with Schroders saying this month prices may rally almost two-thirds to as high as $50 a barrel in a few months. BHP has flagged it’s on the lookout for petroleum assets, and is likely to study adding more conventional assets, particularly in the Gulf of Mexico, if distressed competitors are forced to sell, according to Aberdeen Asset Management. BHP “follows oil a lot more closely than iron ore these days,” Michelle Lopez, a Sydney-based investment manager at Aberdeen, which holds BHP shares among the $428 billion of assets it manages globally, said by phone. “When you look at the forward curve, iron ore still looks like it’s going to be at these levels if not a bit lower, whereas there are expectations of a correction in the oil price.”

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Some people are still talking about a recovery. Get real.

New Market Storm Could Catch Eurozone Unprepared (Reuters)

Distracted by an unresolved migration crisis and negotiations on keeping Britain in the EU, euro zone leaders could be caught unprepared by a new storm on financial markets. Global market turmoil since the start of the year has helped set warning lights flashing in euro zone sovereign bond markets. In early February, the premium that investors charge to hold Portuguese, Spanish and Italian government debt rather than German bonds hit some of the highest levels since the euro zone crisis that peaked in 2011-2012. European bank shares have been badly hit by concerns over their high stock of non-performing loans, new regulatory burdens and a squeeze on profits due to sub-zero official interest rates. New EU banking regulations that force shareholders and bondholders to take first losses if a bank needs rescuing are further spooking the market, notably in Italy.

All this comes at a time when public resistance to further austerity measures has surged all over southern Europe, producing unstable results at the ballot box. Furthermore, the storm clouds are gathering above a tenuous and slow euro zone economic recovery – growth is officially forecast to reach 1.9% this year versus around 1.6% in 2015. Southern periphery countries all face budget problems that are fuelling political tension with Brussels. Inflation is also refusing to perk up despite the ECB’s bond-buying programme and negative interest rates, making it harder for heavily indebted euro zone countries to pay down debt. Yet euro zone governments transfixed by differences over sharing out refugees, managing Europe’s porous borders and accommodating British demands for concessions on EU membership terms have a huge amount on their hands already. One French government adviser said the EU had never faced such an accumulation of crises in the last 50 years.

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Yeah, sure: “We’re still looking for some confirmations for the economic growth outlook.”

Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks (BBG)

The cash reward for owning European stocks is about seven times larger than for bonds. Investors are ditching the equities anyway. Even with the Euro Stoxx 50 Index posting its biggest weekly rally since October, managers pulled $4.2 billion from European stock funds in the period ended Feb. 17, the most in more than a year, according to a Bank of America note citing EPFR Global. The withdrawals are coming even as corporate dividends exceed yields on fixed-income assets by the most ever. Investors who leaped into stocks during a similar bond-stock valuation gap just four months ago aren’t eager to do it again: an autumn equity rally quickly evaporated come December.

A Bank of America fund-manager survey this month showed cash allocations rose to a 14-year high and expectations for global growth are the worst since 2011. If anything, the valuation discrepancy between stocks and bonds is likely to get wider, said Simon Wiersma of ING. “The gap between bond and dividend yields will continue expanding,” said Wiersma, an investment manager in Amsterdam. “Investors fear economic growth figures. We’re still looking for some confirmations for the economic growth outlook.” Dividend estimates for sectors like energy and utilities may still be too high for 2016, Wiersma says. Electricite de France and Centrica lowered their payouts last week, and Germany’s RWE suspended its for the first time in at least half a century.

Traders are betting on cuts at oil producer Repsol, which offers Spain’s highest dividend yield. With President Mario Draghi signaling in January that more ECB stimulus may be on its way, traders have been flocking to the debt market. The average yield for securities on the Bloomberg Eurozone Sovereign Bond Index fell to about 0.6%, and more than $2.2 trillion – or one-third of the bonds – offer negative yields. Shorter-maturity debt for nations including Germany, France, Spain and Belgium have touched record, sub-zero levels this month.

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And Germany makes sure to transfer that blow to the rest of the eurozone.

German Economy Takes a Blow From Weakening Global Demand (BBG)

The German economy took a hit this month from weak global demand, with a manufacturing gauge dropping to a 15-month low. Markit Economics said its factory Purchasing Managers Index fell to 50.2, barely above the key 50 level, from 52.3 in January. A services gauge improved slightly, but a composite measure declined to the lowest since July. “The German economy appears to be in the midst of a slowdown,” said Oliver Kolodseike, an economist at Markit. Manufacturing is “near stagnation,” he said. While Germany weathered global headwinds through 2015, maintaining its pace of expansion in the fourth quarter, business confidence has weakened recently.

China’s slowdown is weighing on exports while the equity selloff this year threatens a fragile recovery in the euro area, the country’s largest trading partner. The OECD cut its global growth forecast last week and said both Germany and the euro region will expand less this year than previously estimated. Markit said the slowdown in German output led to increased caution on hiring, with the rate of job creation at the weakest in almost a year. France’s composite Purchasing Managers Index slipped to 49.8 from 50.2 in January. In the 19-nation euro area, both the factory and services measures probably declined this month, according to surveys of economists. Markit will publish those numbers at 9 a.m. London time.

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Germany’s surpluses keep on bleeding its neighbors dry. That is the problem.

Germany Isn’t Investing the Way It Used to and That’s a Problem (BBG)

All the pieces appear to be in place for a surge in corporate investment in Germany – except one critical element. While low borrowing costs, robust domestic consumption and capacity strains mean companies should be itching to spend, the confidence to do so is lacking. Market turmoil, signs of a weaker global demand and Germany’s own aging population are giving bosses plenty of reason to hold back, leaving capital spending as a share of output clinging stubbornly to a five-year low. That matters both for Germany, where the IMF says more capital spending is needed to ensure future growth, and the 19-nation euro area. The strength of the region’s largest economy could be key to whether the currency bloc’s fragile recovery can be sustained.

“Every year since 2013, most pundits including ourselves have been predicting that this is going to be the year that investment really picks up in earnest,” said Timo Klein, an economist at IHS Global Insight in Frankfurt. “But every year something unfolds that clouds the picture, from Ukraine to China, and investment is postponed again. The long-term consequence of this is a reduction in growth potential.” A report on Tuesday will shed more light on the role of investment in Germany’s economic expansion in the fourth quarter. Preliminary data showed gross domestic product rose 0.3%, matching the pace of the previous three months, with government and consumer spending leading the way.

While that’s unspectacular, France and Italy fared worse. The euro zone’s second and third-largest economies cooled, with the latter barely growing, increasing the burden on Germany to be the region’s engine. Yet investment as a share of German GDP fell to less than 20% last year from about 23% at the turn of the century, a Bundesbank study in January showed. Private investment slid to 11.5% from 13.4%, according to Eurostat. In its February bulletin, the Bundesbank said investment should increase because of an “above-average level of capacity utilization.” However, it also said a “key prerequisite” is that external demand picks up.

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One safe bet.

China Yuan Bears Predict More Trouble Ahead (BBG)

Before China’s devaluation in August roiled global markets and spurred some of the hedge fund industry’s biggest names to bet against the yuan, a small cohort of researchers saw the whole thing coming. Now, some of those same forecasters are warning that there’s more turmoil in store – and it’s not just China they’re worried about. Asianomics’s Jim Walker, who predicted the yuan’s four-year advance would end a month before the currency peaked in January 2014, is forecasting a U.S. recession and says 10-year Treasury yields will plunge to all-time lows. Raoul Pal, publisher of the Global Macro Investor report and a yuan bear since 2012, says European bank shares will tumble by half. John Mauldin of Millennium Wave Advisors, who has argued since 2011 that the Chinese currency should weaken, sees the risk of heightened geopolitical instability in the Middle East as lower crude prices strain the budgets of oil-rich countries.

While all three forecasters see scope for further declines in the yuan, they’re also emphasizing risks outside the Chinese economy as the outlook for world growth dims and commodities trade near the lowest levels in more than 15 years. Their bearish stance has gained traction in global markets this year, with share prices from New York to Riyadh and Sydney sliding as investors shifted into gold and sovereign bonds. “There’s a storm of troubles coming,” Pal, a former hedge-fund manager at GLG Partners whose clients now include pension plans and sovereign wealth funds, said in a phone interview from the Cayman Islands. “The risk of a very bad outcome in 2016 and 2017 remains the highest probability.”

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“What we are witnessing is the resetting of the largest macro imbalance the world has ever seen..”

Kyle Bass, A Sharpshooting Short-Seller (FT)

I’ve been to Beijing twice, I don’t care to go back,” Kyle Bass says. “I’m OK with that.” The subprime-shorting, sniper rifle-shooting, spearfishing hedge fund manager from Dallas, Texas, does not fear the ire of the Chinese authorities. He has a decade-long record of putting his mouth where his money is, and if his latest apocalyptic call — that the Communist government does not have the resources to prevent a banking crisis and a vicious currency devaluation — puts him at the centre of the angriest debate in financial markets, well, that is just fine by him. “Anyone who is invested in China, whether you are a pension fund or sovereign wealth fund or a large US or European institution — you better be thinking about this, and not with the reverence that people give to China,” he says.

“Everyone has this embedded belief that China can pull off the ‘triple lindy’ every time they want to do it,” says the former springboard diver, “but our view is they are going to have to have a reset.” Mr Bass is hardly the only hedge fund manager betting on a renminbi devaluation; when Beijing wanted to send a shot across speculators bows last month, it was George Soros who was singled out on the front of the People’s Daily, a government mouthpiece. Yet, thanks to a 12-page dissection of China’s banks, shadow banks and central bank reserves sent to investors in his $1.7bn hedge fund Hayman Capital last week, it is Mr Bass who has given the most strident, forensic and colourful voice to those who suspect China will be forced to revalue the currency sharply lower. “What we are witnessing is the resetting of the largest macro imbalance the world has ever seen,” he wrote.

Banking system losses could be four times as big as those on subprime mortgages in the US during the financial crisis, and the central bank does not have the reserves to plug the hole and defend its currency. “China’s back is completely up against the wall today” and the country is “on the precipice of a large devaluation”. Economists and Beijing have challenged the alarming analysis; Zhou Xiaochuan, the People’s Bank of China governor, gave a rare interview to insist capital outflows were evidence of economic rebalancing rather than capital flight. This is all of a piece with previous declarations by Mr Bass. Since the Great Recession he has predicted sovereign debt crises in Ireland, Greece, Portugal, Spain, the UK, Switzerland and France.

He has compared the Japanese economy to a “Ponzi scheme”. Armageddon does not always come — he admits he was wrong on Switzerland and the UK; and Japan is notably still standing, though a devaluation of the yen meant his bet eventually made money overall there. Hayman’s returns since the financial crisis have been modest by the standards of the greatest hedge fund investors and 2015 was, by his own admission, one of his worst. But enough of Mr Bass’s predictions have come true to justify taking him seriously. One manager of a fund of hedge funds says investing with Mr Bass is like funding a “think-tank” on how to navigate the global economy.

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Creative bankruptcies.

As US Shale Sinks, Pipeline Fight Sends Woes Downstream (Reuters)

Within weeks, two low-profile legal disputes may determine whether an unprecedented wave of bankruptcies expected to hit U.S. oil and gas producers this year will imperil the $500 billion pipeline sector as well. In the two court fights, U.S. energy producers are trying to use Chapter 11 bankruptcy protection to shed long-term contracts with the pipeline operators that gather and process shale gas before it is delivered to consumer markets. The attempts to shed the contracts by Sabine Oil & Gas and Quicksilver Resources are viewed by executives and lawyers as a litmus test for deals worth billions of dollars annually for the so-called midstream sector. Pipeline operators have argued the contracts are secure, but restructuring experts say that if the two producers manage to tear up or renegotiate their deals, others will follow.

That could add a new element of risk for already hard-hit investors in midstream companies, which have plowed up to $30 billion a year into infrastructure to serve the U.S. fracking boom. “It’s a hellacious problem,” said Hugh Ray, a bankruptcy lawyer with McKool Smith in Houston. “It will end with even more bankruptcies.” A judge on New York’s influential bankruptcy court said on Feb. 2 she was inclined to allow Houston-based Sabine to end its pipeline contract, which guaranteed it would ship a minimum volume of gas through a system built by a Cheniere Energy subsidiary until 2024. Sabine’s lawyers argued they could save $35 million by ending the Cheniere contract, and then save millions more by building an entirely new system. Fort Worth, Texas-based Quicksilver’s request to shed a contract with another midstream operator, Crestwood Equity Partners, is set for Feb. 26.

[..] So far, relatively few oil and gas producers have entered bankruptcy, and most were smaller firms. But with oil prices down 70% since mid-2014 and natural gas prices in a prolonged slump, up to a third of them are at risk of bankruptcy this year, consultancy Deloitte said in a Feb. 16 report. Midstream operators have been considered relatively secure as investors and analysts focus on risks to the hundreds of billions of dollars in equity and debt of firms most directly exposed to commodity prices. That’s because firms such as Enterprise Products, Kinder Morgan and Plains All American relied upon multi-year contracts – the kind targeted in the two bankruptcies – that guarantee pipeline operators fixed fees to transport minimum volumes of oil or gas.

Now, with U.S. oil output shrinking and gas production stalling, many of the cash-strapped producers entering bankruptcy will be seeking to rid themselves of pricey agreements, particularly those with so-called minimum volume commitments that require paying for space even if it is not used. “They will be probably among the first things thrown out,” said Michael Grande, director for U.S. midstream energy and infrastructure at Moody’s.

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Volatility writ large.

Chinese Military Ambitions Fuel Asian Arms Race Amid Slowdown (WSJ)

The rapid rise in Chinese military spending and a greater assertiveness in its territorial claims is fueling an arms race in the Asia-Pacific region even though many of the countries involved have been hit by an economic slowdown, new research reports suggest. Of the 10 biggest importers of defense equipment in the past five years, six countries were in the Asia-Pacific region, the Stockholm International Peace Research Institute, or SIPRI, said in an annual report on arms transfers. India was the largest buyer of foreign equipment, with China in third position after Saudi Arabia, the think tank said. Although a country’s spending power is often tied to its economic strength, buyers in the Asia-Pacific region aren’t slashing military budgets even as their economies have come under strain from falling commodity prices and lower growth in China.

“The slight moderation in economic activity had little effect on regional military spending in 2015,” the International Institute for Strategic Studies, or IISS, said in a new report. China, Japan, South Korea, and Indonesia last year were among the countries to announce plans for higher military spending, the IISS said. Lower economic output has driven up Asian military spending as a percentage of GDP to 1.48%, the London-based research organization said, its highest level since at least 2010. China leads the way, accounting for 41% of the region’s military spending, well ahead of No. 2 India at 13.5% and Japan with 11.5%.

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William K. Black: always a pleasure.

Krugman and the Gang of 4 Need to Apologize (Bill Black)

If you depend for your news on the New York Times you have been subjected to a drumbeat of article attacking Bernie Sanders – and the conclusion of everyone “serious” that his economics are daft. In particular, you would “know” that four prior Chairs of the President’s Council of Economic Advisers (CEA) (the Gang of 4) have signed an open letter to Bernie that delivered a death blow to his proposals. Further, you would know that anyone who dared to disagree with these four illustrious economists was so deranged that he or she was acting like a Republican in denial of global climate change. The open letter set its sights on a far less famous economist, Gerald Friedman, of U. Mass at Amherst. It unleashed a personalized dismissal of his competence and integrity.

Four of the Nation’s top economists against one non-famous economists – at a school that studies heterodox economics. That sounds like a fight that the referee should stop in the first round before Friedman is pummeled to death. But why did Paul Krugman need to “tag in” to try to save the Gang of 4 from being routed? Krugman proclaimed that the Gang of 4 had crushed Friedman in a TKO. Tellingly, Krugman claimed that anyone who disagreed with the Gang of 4 must be beyond the pale (like Friedman and Bernie). Indeed, Krugman was so eager to fend off any analysis of the Group of 4’s attacks that he competed with himself rhetorically as to what inner circle of Hell any supporter of Friedman should be consigned. In the 10:44 a.m. variant, Krugman dismissed Bernie as “not ready for prime time” and decreed that it was illegitimate to critique the Gang of 4’s critique.

In Sanders’s case, I don’t think it’s ideology as much as being not ready for prime time — and also of not being willing to face up to the reality that the kind of drastic changes he’s proposing, no matter how desirable, would produce a lot of losers as well as winners. And if your response to these concerns is that they’re all corrupt, all looking for jobs with Hillary, you are very much part of the problem.

The implicit message is that four famous economists had to be correct, therefore anyone who disagreed with them must be a conspiracy theorist who is “very much part of the problem.” Paul doesn’t explain what “the problem” is, but he sure makes it sound awful. Logically, “the problem” has to be progressives supporting Bernie. Two hours later, Paul decided that his poisoned pen had not been toxic enough, he now denounced Sanders as a traitor to the progressives who was on his way “to making Donald Trump president.” To point out the problems in the Gang of 4’s attack on Friedman was to treat them “as right-wing enemies.”

Why was Krugman so fervid in its efforts to smear Friedman and prevent any critique of the Gang of 4’s smear that he revised his article within two hours and amped up his rhetoric to a shrill cry of pain? Well, the second piece admits that Gang of 4’s smear of Friedman “didn’t get into specifics” and that progressives were already rising in disgust at Paul’s arrogance and eagerness to sign onto a smear that claimed “rigor” but actually “didn’t get into specifics” while denouncing a scholar. Paul, falsely, portrayed Friedman as a Bernie supporter. Like Krugman, Friedman is actually a Hillary supporter.

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Greece is a cash country. For one thing, there are still capital controls. People cannot get more than $420 a week or so out of their ATM. That is very limiting in many ways.

Greek Attempt To Force Use Of Electronic Money Instead Of Cash Fails (ZH)

While the “developed world” is only now starting its aggressive push to slowly at first, then very fast ban the use of physical cash as the key gating factor to the global adoption of NIRP (by first eliminating high-denomination bills because they “aid terrorism and spread criminality”) one country has long been doing everything in its power to ween its population away from tax-evasive cash as a medium of payment, and into digital transactions: Greece. The problem, however, is that it has failed. According to Kathimerini, “Greek businesses are not ready for the expansion of plastic money through the compulsory use of credit and debit cards for everyday transactions.” Unlike in the rest of the world where “the stick” approach will likely to be used, in Greece the government has been more gentle by adopting a “carrot” strategy (for now) when it comes to migrating from cash to digital.

The government has told taxpayers that they will have to spend up to a certain amount of their incomes via bank and card transactions in order to qualify for an annual tax-free exemption. This appears to not be a sufficient incentive however, as a large proportion of stores still don’t have the card terminals, or PoS (Points of Sale), required for card payments, while plastic is accepted by very few doctors, plumbers, electricians, lawyers and others who tend to account for the lion’s share of tax evasion recorded in the country. Almost as if the local population realizes that what the government is trying to do is to limit at first, then ultimately ban all cash transactions in the twice recently defaulted nation as well. It also realizes that an annual tax-free exemption means still paying taxes; taxes which could be avoided if one only transacted with cash.

For the government this is bad news, as the lack of tracking of every transaction means that the local population will pay far less taxes: a recent study by the Foundation for Economic and Industrial Research (IOBE) showed that increasing the use of cards for everyday transactions could increase state revenues by anything between 700 million and 1.6 billion euros per year, and that the market’s poor preparation means that the tax burden has been passed on to lawful taxpayers. As a reminder, in Greece, the term “lawful taxpayers” is not quite the same as in most other countries. What is more surprising is that according to data seen by Kathimerini, PoS terminals in Greece amount to just 220,000, and that despite the fact these were effectively forced on enterprises with the imposition of the capital controls, an estimated half of all businesses do not have card terminals. Almost as if the Greeks would rather maintain capital controls than be forced into a digital currency by their Brussels overlords.

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Some things are just plain weird. They invest $150 million in Espirito Santo in July -when everyone already knew something was fishy, but that’s not even the gist-, and then lose it all one month later?! That’s not fish I’m smelling, it’s a rat.

New Zealand Super Fund’s $200 Million Loss (NZ Herald)

Almost $200 million of taxpayer money invested through the Kiwi Superannuation Fund has been lost after a Portuguese bank where the money was invested, supposedly as a “risk free” loan, collapsed. The Super Fund, set up with public money to cover partly the retirement costs of baby boomers, has revealed it had been caught up in last year’s collapse of Banco Espirito Santo (BES) and a US$150m (NZ$198m) investment made in July had been completely wiped out. The investment was a contribution to a Goldman Sachs-organised loan to the Portuguese bank, but only weeks after the money was injected it imploded, with president and founder Ricardo Salgado arrested as part of a criminal investigation into tax evasion.

After disclosing billions of Euros in losses, and facing a run on funds by depositors, the bank collapsed in a heap and was broken up in August. Goldman Sachs, described by Rolling Stone as “the great vampire squid” for their sharp business practices in the run-up to the global financial crisis, today said it would “pursue all appropriate legal remedies without delay” in an attempt to recover the loans to BES. The company also announced that, alongside the Super Fund, they were suing the Central Bank of Portugal over their loans being excluded from the bailout of BES. Despite this legal action, Super Fund chief executive Adrian Orr conceded today the entire investment had been written off as a “conservative” precaution. Finance Minister Bill English, the minister responsible for the Super Fund declined to comment on the spectacular loss, but Green Party MP Russel Norman said Mr English should be demanding answers.

“They have to give some sort of explanation as to why they gambled US$150m in this case, and why it’s come unstuck,” he said. The episode also illustrated what the NZSF should try to avoid, Mr Norman said. “For a fund operating on behalf of the NZ taxpayer, taking these high-risk investments is probably not appropriate,” he said. Mr Orr denied the investment was high-risk and said the NZSF had been covered in the event of BES defaulting. “It was risk-free with insurance,” he said. However, an unusual retrospective rule change in Portugal had resulted in the insurance being voided. Orr added the Super Fund had withdrawn lending to banks in Portugal until the result was overturned. The Fund said the loss amounted to only 0.7% of the firm’s total pool of $27b in assets.

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“Christchurch, home to 366,000 people, who are still shaken daily by thousands of aftershocks..” (Nicole and I were there at the first anniversary)

Long Way To Go: 5th Anniversary of the Christchurch Earthquake (G.)

It was as the clock struck 12.51pm that the last of the 185 names were read out. Then, the 1,000 people who had gathered in the city’s botanic gardens to mark the anniversary of the 2011 Christchurch earthquake fell silent for a minute to remember the moment, five years ago, that the 6.3-magnitude quake struck. Earlier, posies of flowers had been laid in road cones and taped to the safety fences that still litter the city centre half a decade after the disaster turned it largely to rubble.Once the memorial ceremony had finished, talk turned – as it usually does – to the rebuilding of this once-rich, agricultural hub – and what the new Christchurch will look like when it finally rises from the ashes. “There is still some way to go until Christchurch is truly reborn,” said the governor-general, Jerry Mateparae.

His is a sentiment widely shared in Christchurch, home to 366,000 people, who are still shaken daily by thousands of aftershocks – including a significant 5.9 rumble on Valentines day this year and a 5.0-magnitude quake that hit in nearby Blenheim on the anniversary itself. Despite years of clean-up and a recent boom in construction, Christchurch is still in a state of flux, with hundreds of people waiting for insurance payouts and widespread concern about the pace of the rebuild, especially in the heart of the city. The health of Christchurch residents has also fared poorly since the quake. Suicide and domestic violent rates have risen sharply – as has illegal drug use and the spread of sexually transmitted diseases.

Mental health problems are a persistent concern – particularly widespread are incidences of depression, anxiety and post traumatic stress disorder. Waiting lists for state-funded counselling in Christchurch are long, and last week it was reported the government would significantly cut funding to community mental health providers – from $1.6m in 2015 to $200,000 this year. Yet in tandem with the trauma of the quake’s aftermath has come a remarkable flourishing of the creative arts in the garden city. Rachael Welfare, operations director for Gap Filler, a charitable organisation filling the “gaps” of Christchurch with pop-up creative projects, said: “Before the quake, people thought of Christchurch as quite conservative, but now the opportunities have given people a blank canvas, if nothing else, and people are very open-minded about what the spaces could be.”

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Who told them to do this and say damn the Geneva conventions?

Macedonia, Serbia Close Borders To Afghan Refugees (AP)

Former Yugoslav Republic of Macedonia (FYROM) closed its border to Afghan migrants early Sunday, Greek police said, slowing the admission of refugees to a trickle and leaving a growing bottleneck of people stuck at their shared border. A FYROM police spokeswoman denied there was any new prohibition regarding Afghans, blaming the problem on Serbia, the next nation along the Balkans migration route into Western Europe. By early afternoon, about 1,000 migrants were waiting at the Greek border camp in Idomeni – and at a gas station only 17 kilometers (11 miles) away, 80 buses with 4,000 more migrants were waiting to take them to the border. Greek police said FYROM refused to let Afghans through because Serbia made the same decision and officials feared the migrants would get stuck in FYROM.

“The authorities of the Former Yugoslav Republic of Macedonia informed us that, beginning at dawn Sunday, they no longer accept Afghan refugees because the same problem exists at their border with Serbia,” Petros Tanos, spokesman for Greek police’s Central Macedonia division, told The Associated Press. Despite the reports, about 500 migrants of all nationalities made the trek on foot from the gas station to the border Sunday. “I can no longer wait,” said 17-year-old Ali Nowroz, one of the trekkers from the Afghan city of Jaghori Zeba. “We have spent three nights in the cold, we are hungry. They told me that the borders have been closed to us. However, when I started from Afghanistan I knew borders were open for us. I am going to the Idomeni border crossing to find out and ask why they have closed it.”

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Every single day. Numbers are rising as borders are closing. Greece can’t be far away from becoming a failed state

Shadowing The Hellenic Coast Guard’s Refugee Rescues (CCTV)

As Europe tries to deal with the biggest refugee crisis since World War II, improving weather means the pace of migrants and refugees reaching Greece from Turkey will pick up again. On Feb 15., over 4,500 people were rescued across the Aegean Sea in Greece. Since last year, the Hellenic Coast Guard has rescued almost 150,000. CCTV’s Filio Kontrafouri went on patrol with the Hellenic Coast Guard off the Greek island of Lesvos and witnessed what happens after those dinghies, usually loaded with women and children, enter the Greek waters. “For us, all these people are like they are condemned to death,” said Sub-lieutenant Kyriakos Papadopoulos of the Hellenic Coast Guard. “You’ll see when we get to that boat, about which some other colleagues in the area have informed us, even with everyone on board, there is panic. People could move from one side to the other, these boats are not suitable for travel at sea, their life jackets are not suitable and at any moment their life is in danger.”

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Feb 072016
 
 February 7, 2016  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


DPC Chamber of Commerce, Boston MA 1904

$100 Trillion Up in Smoke (Mauldin)
As Big Oil Shrinks, Boards Plot Different Paths Out Of Crisis (Reuters)
Exxon Ends Share Buybacks – It Must Be Acquisition Time (Forbes)
Hess Oil: A “Folly For The Ages” (ZH)
Debt, Defaults, And Devaluations: A Crash Like Nothing Before (Telegraph)
Our Dysfunctional Monetary System (Steve Keen)
Why The Bulls Will Get Slaughtered (Stockman)
Obscure Chinese Firm Dives Into $22 Trillion US Market (BBG)
China’s FX Reserves Decline to $3.23 Trillion (BBG)
The Great Escape from China (Rogoff)
Albert Edwards: China Has Only “Months Left” To Stop Collapse (VW)
Why Doesn’t 4.9% Unemployment Feel Great? (CNN)
Risk of WWIII as Saudi Arabia, Turkey –and Ukraine– Wade Into Syria (Trayner)
EU Ministers Want To Buttress Borders To Stem Refugee Flow (AP)
Austria Threatens To Extend Border Controls (Reuters)
Austria Wants EU To Cover Costs Of Additional Migrants (Reuters)

That is a big number. Add losses in commodities, and you’re talking destruction, of money, credit, virtual wealth, it doesn’t matter anymore what you call it..

$100 Trillion Up in Smoke (Mauldin)

If energy powers the world, then whoever owns that energy must have power over the world. That’s certainly been the case for the last century or two. Ownership of our primary energy source, crude oil, is what made billionaires of John D. Rockefeller, H.L. Hunt, and assorted Middle Eastern kings, emirs, and sheikhs. Oil in the ground is wealth only on paper – you may own that oil, but it earns you nothing until you recover and sell it. Yet paper wealth is still wealth. It goes on your balance sheet as an asset that you can sell. You can use it as collateral to borrow cash and buy other assets. The ongoing oil price collapse is having a severely negative impact on the wealth of those who own oil reserves. The numbers, as you will see below, are almost incomprehensibly big.

They are so big, in fact, that many analysts have simply tuned out. The attitude seems to be, “These numbers blow up my models, so I will ignore them.” Today we’ll stop dancing around the truth and call the oil collapse what it is: global wealth destruction of epic proportions. In mid-2014, crude oil prices were about $100, depending on which grade you wanted to buy. Now prices hover near $30 – roughly a 70% decline in 18 months. That’s well-known, but we usually discuss the price collapse in terms of particular countries or companies: we don’t look at the bigger picture. Last week someone showed me this from Twitter. I almost fell out of my chair.

Stop for a minute. Let that sink in. The total value of all the world’s oil reserves is over $100 trillion less than it was just a year and a half ago.

(By the way, I verified Mr. Levine’s reserve total by consulting the CIA’s World Fact Book. It says total world “proved” oil reserves were 1.656 trillion barrels as of January 1, 2015.) To put these figures in perspective, consider that Google’s parent company, Alphabet, briefly surpassed Apple last week as the planet’s largest publicly traded company. Both are worth around $500 billion, depending on the day. The lost value in crude oil is equivalent to a couple of hundred Googles and Apples going up in smoke. If stock values were crashing to that degree, we would call the losses earth-shattering. Yet otherwise intelligent people are saying the oil collapse is a minor issue.

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They’re all fully unprepared. Deer and headlights.

As Big Oil Shrinks, Boards Plot Different Paths Out Of Crisis (Reuters)

As oil and gas companies cut ever-deeper into the bone to weather their worst downturn in decades, boards have adopted contrasting strategies to lead them out of the crisis. Crude prices have tumbled around 70 percent over the past 18 months to around $35 a barrel, leading to five of the world’s top oil companies reporting sharp declines in profits in recent days. Executives at energy firms face a tough balancing act: they must cut spending to stay financially afloat while preserving the production infrastructure and capacity that will allow them to compete and grow when the market recovers. Companies have opted for differing approaches to secure future growth, often choosing to narrow focus to their areas of expertise and the geographic location of their main assets.

American firms Chevron, ConocoPhillips and Hess are withdrawing from more costly deepwater projects to focus on shale oil fields on their home turf, for example. Britain’s BP is betting on offshore gas in Egypt, while Royal Dutch Shell has opted for an alternative route as it seeks to safeguard its future: the $50 billion takeover of BG Group. In the five years before the downturn began in mid-2014, when crude prices held above $100 a barrel, big energy firms had raced to expand production capacity, including buying stakes in vast, costly fields sometimes located thousands of meters under the sea, and miles from land.

Over the past year however, companies have slashed their overall capital expenditure, scrapping plans for mega projects that cost billions to develop and take up to a decade to bring online. “Companies want to strike a balance between long and short-cycle investments while maintaining a robust balance sheet to fund their way through the down cycle,” said BMO Capital analyst Brendan Warn. Focusing on a specific set of expertise and geographies allowed them to offer investors a “unique value proposition”, he added.

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Quick, before somone figures out what you’ve lost.

Exxon Ends Share Buybacks – It Must Be Acquisition Time (Forbes)

If the company was happy buying its own stock in 2014, it should be all the more eager to buy now that shares are down 25%. Unless it sees a better bargain elsewhere. In its fourth-quarter financial release Tuesday, Exxon Mobil announced a halt to share buybacks. The company purchased $4 billion of its own shares in 2015, and has averaged about $20 billion a year in buybacks over the past decade, according to Reuters. The peak buyback year was 2008, when oil prices hit a record high and Exxon bought in $35 billion worth. At first glance, halting buybacks might seem reasonable. Perhaps amid this oil industry depression Exxon just wants to conserve cash — it also expects to reduce capital spending by $8 billion this year.

But think about it. The key to good investing is to buy low and sell high. If Exxon was happy buying back shares in 2014, when its stock price hit $103, it should be all the more eager to continue buying now that shares are down to $74.50. If Exxon didn’t think its own shares weren’t a great investment it wouldn’t have bought $200 billion of them over the past decade. Don’t take my word for it. As CEO Rex Tillerson said in a statement Tuesday, “The scale and diversity of our cash flows, along with our financial strength, provide us with the confidence to invest through the cycle to create long-term shareholder value.” It’s a hallmark of Exxon’s discipline that it continues to invest whether oil prices are low or high. In 2015 it brought on six big projects with 300,000 barrels per day of new production.

Exxon is not worried about running out of cash. Cash flows were on the order of $30 billion for the year. Even in the fourth quarter it generated net income of $2.8 billion (and $16 billion for the year). And don’t think for a second that Exxon intends to cut its dividend payouts, which totaled $12 billion last year. A more plausible reason Exxon is ending buybacks: it’s preparing to acquire another company whose shares are even more deeply discounted than Exxon’s. And with “just” $3.7 billion in cash on hand at the end of the fourth quarter, its likely that Exxon would use its shares as currency for a buyout. Who would they buy? The options abound for a company still sporting an equity market cap of $318 billion. Anadarko Petroleum has long been rumored to be a prime Exxon target; its shares are down about 65% to a market cap of $19 billion.

Occidental Petroleum float is $51 billion, ConocoPhillips $47 billion and Apache is at $15 billion. Deeper in the discount bin, Marathon Oil shares could be had for $6.5 billion, or Devon Energy for $11 billion. Of course Exxon would also need to assume any debt carried by an acquisition target. But that wouldn’t be a problem — compared with the averaged overleveraged oil company, Exxon has modest gearing with $38 billion in debt outstanding. Other than Royal Dutch Shell ’s $52 billion takeover of BG Group , we haven’t seen a landmark merger during this downturn. The last time things got this bad for the industry, back in 1998, BP bought Amoco for $48 billion and Exxon bought Mobil for $75 billion. Ending buybacks is just Exxon’s way of telling the market it’s ready to make a deal.

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Hess oil is the case study. “..Hess just sold 25 million shares at a price of $39 after purchasing 63 million shares through 2015 at an average price that was more than double, or $83 a share..”

Hess Oil: A “Folly For The Ages” (ZH)

[..] back in 2013, when it was trading at a discount to its peers, Hess became the target of an activist campaign led by Paul Singer’s Elliott Management who demanded a quick boost in the stock price, as a result of which the energy producer decided to exit its refining business (arguably the only line of business that would have benefited from the current depressed oil price) while not only raising its dividend but also authorizing a $4 billion share buyback. The company then boosted its buyback further with proceeds from the sale of its retail gas stations (for $2.9 billion) while growing its debt by $1 billion from 2013 to 2015, leading to the repurchase of a total of 62.7 million shares through the end of 2014 at an average price of $83. The stock price reacted as expected: it soared past $100 from below $60 before Elliott turned up. It then continued to spend more billions under additional buyback all the way through the third quarter of 2015, which however took place just as the worst oil downturn in history was taking place.

And then the stock crashed, as investors finally realized that plunging oil, sliding cash flow and surging debt meant the company found itself in a life and death fight for survival. Which brings us to yesterday, when in an attempt to shore up liquidity and avoid halting its dividend, Hess sold 25 million shares at a price of $39/share: a 10% discount to the prior closing price. As Reuters puts it, the “Hess folly is one for the ages.” The silver lining? Unlike before, when Hess’ weak management team was kicked around by a hedge fund, at least it is being proactive now and scrambling to preserve its business even it means huge pain and dilution for shareholders. The company ended 2015 with $2.7 billion in cash and a big revolving line of credit it hasn’t dipped into yet. Capital just raised will push net debt from 5.4x EBITDA to below four times, according to Cowen estimates.

That should allow Hess to keep investing in future production and pay dividends. If oil remains at $30, however, it has just bought itself a few quarters of time. Still, that does not absolve management of pandering to a vocal shareholder: if instead of spending billions on buybacks Hess had done the right thing and saved the cash, it would not only have avoided the wild swings in the stock price which rewarded just activist investors while punishing long-term holders, and have a far bigger war chest to defend itself from $30 oil. The bottom line: Hess just sold 25 million shares at a price of $39 after purchasing 63 million shares through 2015 at an average price that was more than double, or $83 share. As Reuters concludes, “this modern Hess era is a case study that should be required reading in boardrooms everywhere.”

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The right wing is getting concerned.

Debt, Defaults, And Devaluations: A Crash Like Nothing Before (Telegraph)

A global recession is on the way. This truism of economics holds at any point in which the world is not in the grips of a contraction. The real question is always when and how deep the upcoming downturn will be. “The crash will come, but it would be nice if it came two years from now”, Thomas Thygesen, head of economics at SEB told over 200 commodity investors and analysts in London last month. His audience was rapt with unusual attention. They could be forgiven for thinking the slump had not already arrived. Commodity prices have crashed by two thirds since their peaks in 2014. Oil has borne the brunt of the sell-off, suffering the worst price collapse in modern history. Brent crude has fallen from $115 a barrel in the summer of 2014, to just $27.70 in mid-January.

Plenty of investors sitting in the blue-lit, cavernous surrounds of Bloomberg’s London HQ would have had their fingers burnt by the price capitulation. “They tell you should start your presentations with a joke, but making jokes at a commodities seminar is hardly appropriate these days,” Thygesen told his nervous audience. Major oil price falls have a number of historical precedents. Today’s glutted oil market is often compared to the crash of 1986, the last major episode over global over-supply. Back in the late 90s, a barrel of Brent crude fell to as low as $10 in the wake of the Asian financial crisis. But is the current oil price collapse really like anything the world economy has ever experienced?

For many market watchers, a confluence of factors – led by oil, but encompassing China, the emerging world, and financial markets – are all brewing to create a perfect storm in a global economy that has barely come to terms with the Great Recession. “We are in a very unusual situation where market sentiment is of a different nature to anything we’ve seen before,” says Thygesen. Unlike previous pre-recessionary eras, the current sell-off has seen commodity prices, equities and credit conditions all move in dangerous lockstep. Although a 75pc oil price collapse should represent an unmitigated positive for the world’s fuel thirsty consumers, the sheer scale of the price rout is already imperiling the finances of producer nations from Nigeria to Azerbaijan, and is now threatening to unleash a wave of bankruptcies across corporate America.

It is the prospect of this vicious feedback loop – where low oil prices create financial tail risks that spill over into the real economy – which could now propel the world into a “full blown crisis” adds Thygesen. So will it materialise? The world economy is throwing up reasons to worry, as the globe’s largest emerging markets have shown signs of deterioration over the last six months, says Olivier Blanchard, the former long-serving chief economist of the IMF. “China’s growth is probably less than officially reported. Russia and Brazil are doing very badly. South Africa is flirting with recession. Even India may not be doing as well as was forecast,” says Blanchard, who left the Fund after seven years late last year. As it stands however, he says market ructions still represent a classic case of “herd” behaviour. “Investors worry that other investors know something bad, and so just sell, although they themselves have no new information.”

But a tipping point may well be approaching. According to Blanchard’s calculations, a 20pc decline in stock markets that persists for more than six months, will translate into a decline in consumption of between 0.5pc to 1.0pc. “This would be a serious shock. My biggest fear is precisely that the dramatic shift in mood becomes self-fulfilling”. For now, oil-induced financial stress is concentrated in the energy sector. With Brent set to languish around $30-35 barrel for the rest of the year, prices will persist below the $40-60 barrel break-even point that renders the bulk of US oil and gas companies profitable. Spreads on high yield US energy corporates have soared to unprecedented highs. “They make Lehman look like a walk in the park” says Thygesen. More than a third of the entire US high yield bond index is now vulnerable to crude prices remaining low or falling even further, according to calculations from Oxford Economics.

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My friend Steve is losing his cool, and high time too. Is he really the only economist who undertands this, and can explain it? Y’all better listen closely, then.

“As someone who spent 2 years warning about this crisis before it happened, and another 8 years diagnosing it (and proposing remedies that would, I believe, be effective, if only banks and governments together would implement them), I find this dual idiocy incredibly frustrating. Rather than understanding the real cause of the crisis, we’ve seen the symptom—rising public debt—paraded as its cause. Rather than effective remedies, we’ve had inane policies like QE, which purport to solve the crisis by inflating asset prices when inflated asset prices were one of the symptoms of the bubble that caused the crisis.”

Our Dysfunctional Monetary System (Steve Keen)

The great tragedy of the global economic malaise is that it is caused by a shortage of something that is essentially costless to produce: money. Both banks and governments can produce money at physically trivial costs. Banks create money by creating a loan, and the establishment costs of a loan are miniscule compared to the value of the money created by it—of the order of $3 for every $100 created. Governments create money by running a deficit—by spending more on the public than they get back from the public in taxes. As inefficient as government might be, that process too costs a tiny amount, compared to the amount of money generated by the deficit itself. But despite how easy the money creation process is, in the aftermath to the 2008 crisis, both banks and governments are doing a lousy job of producing the money the public needs, for two very different reasons.

Banks aren’t creating money now because they created too much of it in the past. The booms that preceded the crisis were fuelled by a wave of bank-debt-financed speculation on some useful products (the telecommunications infrastructure of the internet, the DotCom firms that survived the DotCom bubble) and much rubbish (the Liar Loans that are the focus of The Big Short). That lending drove private debt levels to an all-time high across the OECD: the average private debt level is now of the order of 150% of GDP, whereas it was around 60% of GDP in the “Golden Age of Capitalism” during the 1950s and 1960s—see Figure 1.


Figure 1: The private debt mountain that has submerged commerce

In the aftermath of the Subprime bubble, credit-money creation has come to a standstill across the OECD. In the period from 1955 till 1975, credit grew at 8.7% per year in the United States; from 1975 till 2008, it grew at 8% per year; since 2008, it has grown at an average of just 1.5% per year. The same pattern is repeated across the OECD—see Figure 2. Globally, China is the only major country with booming credit growth right now, but that will come crashing down (this probably has already started), and for the same reason as in the West: too much credit-based money has been created already in a speculative bubble.


Figure 2: Credit growth is anaemic now, and will remains so as it has in Japan for 25 years

Japan, of course, got mired in this private debt trap long before the rest of the world succumbed. As Figure 1 shows, its private debt bubble peaked in 1995, and since then it’s had either weak or negative credit growth, so that its private debt to GDP level is now in the middle of the global pack. Economic growth there has come to a standstill since: Japan’s economy grew at an average of 5.4% a year in real terms from 1965 till 1990, when its crisis began; since then, it has grown at a mere 0.4% a year. That gives us a simple way to perform a “what if?”. What if the rest of the OECD is as ineffective at escaping from the private debt trap as Japan has been? Then the best case scenario for global credit growth is that it will match what has happened since Japan “hit the credit wall” in 1990

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Seasonally adjusted slaughter, that is.

Why The Bulls Will Get Slaughtered (Stockman)

Needless to say, none of that stink was detected by Steve Liesman and his band of Jobs Friday half-wits who bloviate on bubblevision after each release. This time the BLS report actually showed the US economy lost 2.989 million jobs between December and January. Yet Moody’s Keynesian pitchman, Mark Zandi described it as “perfect” Yes, the BLS always uses a big seasonal adjustment (SA) in January——so that’s how they got the positive headline number. But the point is that the seasonal adjustment factor for the month is so huge that the resulting month-over-month delta is inherently just plain noise. To wit, the seasonal adjustment factor for the month was 2.165 million. That means the headline jobs gain of 151k reported on Friday amounted to only 7% of the adjustment amount!

Any economist with a modicum of common sense would recognize that even a tiny change in the seasonal adjustment factor would mean a giant variance in the headline figure. So the January SA jobs number cannot possibly reveal any kind of trend whatsoever – good, bad or indifferent. But that didn’t stop Beth Ann Bovino, US chief economist at Standard & Poor’s Rating Services, from dispatching the usual all is swell hopium: “Today’s numbers are about momentum, so while 151,000 new jobs in January is below expectations and off pace from prior months, the data shows America’s recovery is continuing. Amid all the global economic turmoil and domestic market gyrations, positive job growth, the drop in the unemployment rate to 4.9%, and the uptick in wages show the U.S. is heading in the right direction.” Actually, it proves none of those things.

For one thing, the January NSA (non-seasonally adjusted) job loss this year of just under 3 million was 173,000 bigger than last January – suggesting that things are getting worse, not better. In fact, this was the largest January job decline since the 3.69 million job loss in January 2009 during the very bottom months of the Great Recession. So are we really “heading in the right direction” as claimed by Bovino, Zandi and the rest of the Cool-Aid crowd? Well, just consider two alternative seasonal adjustment factors for January that have been used by the BLS in the last five years. Had they used the January 2013 adjustment factor this time, the headline gain would have been 171,000 jobs; and had they used the 2010 adjustment factor there would have been a headline loss of 183,000 jobs. We could say in a variant of the Fox News motto – we report, you decide. But believe me, you can look at years of seasonal adjustment factors for January (or any other month) and not find any consistent, objective formula. They make it up, as needed.

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“..to help bring Chinese companies to U.S. markets..” Which is not that easy on most exchanges.

Obscure Chinese Firm Dives Into $22 Trillion US Market (BBG)

When Cromwell Coulson heard that an obscure Chinese real estate firm had agreed to buy the Chicago Stock Exchange, he was shocked. “My first reaction was, ‘Wow, that’s who they’re selling to?”’ said Coulson, CEO of OTC Markets in New York. “These new buyers have no connection to Chicago’s existing business. They’re completely disconnected from the current business of supporting the Chicago trading community. So wow, that’s out of left field.” While the world has gotten used to seeing Chinese companies snap up overseas businesses, the purchase of a 134-year-old U.S. stock market by Chongqing Casin Enterprise – a little-known property and investment firm from southwestern China – raises a whole host of questions. For starters, why does a provincial Chinese business with no apparent ties to the securities industry have any interest in buying one of America’s smallest equity exchanges? And will U.S. regulators sign off?

So far, Casin Group’s intentions are unclear, with calls to the company’s Chongqing headquarters going unanswered on Friday. If the deal does pass muster with American regulators, it would mark the first-ever Chinese purchase of a U.S. equity exchange, giving Casin Group a foothold in a $22 trillion market where even the smallest bourses have room to grow if they can provide the best price for a stock at any given moment. The Chicago Stock Exchange – a subsidiary of CHX Holdings – is minority-owned by a group including E*Trade, Bank of America, Goldman Sachs and JPMorgan, according to the company. The minority shareholders are also selling their stake, Chicago Stock Exchange CEO John Kerin said. The deal values the exchange at less than $100 million, according to a person familiar with the matter.

Casin Group’s offer, announced on Friday in a statement from the Chicago exchange, comes amid an unprecedented overseas shopping spree by Chinese companies. Businesses from Asia’s largest economy have announced $70 billion of cross-border acquisitions and investments this year, on track to break last year’s record of $123 billion, according to data compiled by Bloomberg. While many of those deals had obvious business rationales, the reasons for Casin Group’s bid are less clear. The company, founded in the 1990s through a privatization of state-owned assets, initially focused on developing real estate projects in Chongqing, before expanding into the environmental and financial industries. While the firm owns stakes in banks and insurers, it has no previous experience owning an exchange. Lu Shengju, the majority owner and chairman of Casin Group, wants to help bring Chinese companies to U.S. markets, according to the statement from Chicago’s bourse.

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Another $100 billion spent. That leaves about 2 months at this pace till alarm bells will start going off.

China’s FX Reserves Decline to $3.23 Trillion (BBG)

China’s foreign-exchange reserves shrank to the smallest since 2012, indicating that the central bank sold dollars as the yuan’s retreat to a five-year low exacerbated depreciation pressure. The world’s largest currency hoard declined by $99.5 billion in January to $3.23 trillion, according to a People’s Bank of China statement released on Sunday. The stockpile fell by more than half a trillion dollars in 2015, the first-ever annual decline. Policy makers fighting to hold up the weakening yuan amid slower economic growth, plunging stocks and increasing outflows have been burning through the reserves. The draw-down has continued since the central bank’s surprise devaluation of the currency in August, when the stockpile tumbled $94 billion, a monthly record at the time.

“While the remaining reserves represent a substantial war chest, the rapid pace of depletion in recent months is simply unsustainable,” said Rajiv Biswas at IHS Global Insight in Singapore. “Domestic private investors and global currency traders see a one-way bet against the currency. This has resulted in large-scale private capital outflows since early 2015 as expectations mount that the PBOC will eventually be forced to capitulate once its reserves are sufficiently depleted.” Capital outflows increased to $158.7 billion in December, the most since September and were $1 trillion last year, according to estimates from Bloomberg Intelligence. That’s more than seven times the amount of cash that left in 2014. The PBOC has stepped up efforts to stem the exodus, warning speculators that they will be punished.

It intervened in the Hong Kong market last month after the yuan’s offshore exchange rate sank to a record 2.9% discount to the onshore rate. Apart from selling dollars, the monetary authority also gave guidance to some Chinese lenders in the city to suspend yuan lending to curb short selling, a move that contributed to the overnight interbank lending rate surging to an all-time high of 66.8% on Jan. 12.

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“Now that Chinese firms have bought up so many US and European companies, money laundering can even be done in-house. ”

The Great Escape from China (Rogoff)

Since 2016 began, the prospect of a major devaluation of China’s renminbi has been hanging over global markets like the Sword of Damocles. No other source of policy uncertainty has been as destabilizing. Few observers doubt that China will have to let the renminbi exchange rate float freely sometime over the next decade. The question is how much drama will take place in the interim, as political and economic imperatives collide. It might seem odd that a country running a $600 billion trade surplus in 2015 should be worried about currency weakness. But a combination of factors, including slowing economic growth and a gradual relaxation of restrictions on investing abroad, has unleashed a torrent of capital outflows. Private citizens are now allowed to take up to $50,000 per year out of the country.

If just one of every 20 Chinese citizens exercised this option, China’s foreign-exchange reserves would be wiped out. At the same time, China’s cash-rich companies have been employing all sorts of devices to get money out. A perfectly legal approach is to lend in renminbi and be repaid in foreign currency. A not-so-legal approach is to issue false or inflated trade invoices – essentially a form of money laundering. For example, a Chinese exporter might report a lower sale price to an American importer than it actually receives, with the difference secretly deposited in dollars into a US bank account (which might in turn be used to purchase a Picasso). Now that Chinese firms have bought up so many US and European companies, money laundering can even be done in-house.

The Chinese hardly invented this idea. After World War II, when a ruined Europe was smothered in foreign-exchange controls, illegal capital flows out of the continent often averaged 10% of the value of trade or more. As one of the world’s largest trading countries, it is virtually impossible for China to keep a tight lid on capital outflows when the incentives to leave become large enough. Indeed, despite the giant trade surplus, the People’s Bank of China has been forced to intervene heavily to prop up the exchange rate – so much so that foreign-currency reserves actually fell by $500 billion in 2015. With such leaky capital controls, China’s war chest of $3 trillion won’t be enough to hold down the fort indefinitely. In fact, the more people worry that the exchange rate is going down, the more they want to get their money out of the country immediately.

That fear, in turn, has been an important factor driving down the Chinese stock market. There is a lot of market speculation that the Chinese will undertake a sizable one-time devaluation, say 10%, to weaken the renminbi enough to ease downward pressure on the exchange rate. But, aside from providing fodder for the likes of Donald Trump, who believes that China is an unfair trader, this would be a very dangerous choice of strategy for a government that financial markets do not really trust. The main risk is that a big devaluation would be interpreted as indicating that China’s economic slowdown is far more severe than people think, in which case money would continue to flee.

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But they can’t afford to wait that long.

Albert Edwards: China Has Only “Months Left” To Stop Collapse (VW)

In this week’s issue of Société Générale’s Global Strategy research note, Edwards writes that “China has burned through almost $800bn of its FX reserves mountain since it peaked at almost $4 trillion in mid-2014. January’s FX data to be released this weekend is set to register another sharp drop of $120bn (consensus estimate).” He goes on: “But at $3.2bn the market remains content that massive firepower remains to support the renminbi. It does not. Our economists estimate that when FX reserves reach $2.8 trillion – which should only take a few more months at this rate – FX reserves will fall below the IMF’s recommended lower bound. If that occurs in the next few months, expect to see a tidal wave of speculative selling, forcing the PBoC to throw in the towel and let the market decide the level of the renminbi exchange rate.”

Edwards’ view is based on the predictions of Société Générale’s China economist Wei Yao. Wei Yao has written that in her view, the PBoC might, “move to a free-float within six months, after burning through a significant amount of FX reserves.” Both Yao and Edwards’ doom-mongering is based on the level of China’s FX reserves. China has been depleting its FX reserves in an effort to slow the pace of currency depreciation. However, if the country continues to spend its reserves at the current rate, FX reserves will fall through the $2.8 trillion level that the IMF believes is the lowest acceptable level. The IMF’s ‘lowest acceptable’ reserves level is based on four specific elements that reflect potential drains on the balance of payments: (1) exports, (2) broad money, (3) short-term external debt, and (4) other liabilities (long-term external debt and portfolio liabilities).

Société Générale’s analysts believe that (assuming the level of short-term external debt at remaining maturity was unchanged from year-end 2014) China’s reserves are at 118% of the recommended level (estimated to be $2.8 trillion). If China’s reserves fall below the key $2.8 trillion level, the market could lose confidence in the PBoC’s ability to resist currency depreciation and manage future balance of payments shocks. Only two major emerging market countries (Malaysia and South Africa) have reserves that are below the IMF’s recommended range and many EM countries now have a more robust reserve balance than China in terms of the percentage above the IMF’s recommended minimum.

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Because it’s just a narrative. More right wing worry signs.

Why Doesn’t 4.9% Unemployment Feel Great? (CNN)

The U.S. unemployment rate just fell below 5% for the first time since 2008. Normally, this would merit a celebration. But these aren’t normal times. The economy is better than it was in the Great Recession, but not even President Obama is ready to declare it’s booming. In a special speech Friday touting the job gains during his presidency, Obama admitted there’s more “to tackle.” “We should be proud of the progress we’ve made…we’ve recovered from the worst economic crisis since the 1930s,” Obama said. He doesn’t believe he gets enough credit for creating over 14 million jobs. People as diverse as Democrat Bernie Sanders and Republican Donald Trump don’t put it gently. They claim the “real” unemployment rate is much higher. Sanders calls the economy “rigged,” and Trump says the U.S. never wins anymore. There are three key reasons why everyone from Main Street to Wall Street isn’t cheering 4.9% unemployment.

1. Fewer adults are working Only 62.7% of adult Americans are working. The so-called Labor Force Participation rate hasn’t been this low since the late 1970s. The rate measures how many people over age 16 are working or actively seeking work. Back in the ’70s, it was low because fewer women worked outside the home. That’s not the story today. Now, three factors are driving the decrease in workers. The first is that a huge part of the adult population, Baby Boomers, are retiring. That’s expected and healthy. It explains about half of the decline in the workforce. The second is more young people are going to college and graduate school. They are studying more, which should be a positive for the nation. But the third one is alarming: some people have just given up on finding work. It’s hard to quantify how many people fall into this dropout category, but it’s large enough to matter. Politicians like Trump talk about it in stump speeches.The WSJ estimates that about 2.6 million of the roughly 92 million American adults who don’t work want a job but aren’t looking for one.

2. Long-term unemployment is still high Another reason why the jobs picture still looks gloomy is that an unusually high number of people can’t find jobs even though they have been looking for a long time. About 2.1 million Americans have been unable to get a job for over half a year. The government calls these people the “long-term unemployed.” During the worst of the Great Recession, 6.8 million people were long-term unemployed. So there’s been improvement, but there are still roughly double the number of long-term unemployed than in normal times.

3. Wage growth is anemic The last big issue is that wages aren’t going up for many Americans. The typical take home pay (often called “median income” by the Census Bureau) is about the same today as it was 20 years ago, once you adjust for inflation. In other words, middle class families aren’t really getting ahead. They’re just getting by. To be fair, this was a problem even before the Great Recession came along, but experts keep predicting wages will go up and it’s not happening. On Friday, Obama tried to celebrate the small gains that have been made in recent months. “This progress is finally starting to translate into bigger paychecks,” he said. But the reality is wage growth is only 2.5% a year. As Sharon Stark of D.A. Davidson notes, normally when unemployment is this low, wage growth should be humming along at about 4% a year.

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So many crazies. Trying to provoke Russia by sending Ukraine’s fascist troops into Syria.

Risk of WWIII as Saudi Arabia, Turkey –and Ukraine– Wade Into Syria (Trayner)

A terrifying array of rival superpowers are wading into the chaotic conflict on opposing sides. Analysts now fear the bloodbath – already longer than World War One – is mutating into a full-scale regional war. Saudi Arabia has threatened to send in ground troops and intelligence reports suggest Turkey is preparing to invade. Ukraine is also weighing up sending in soldiers. If their forces clashed with Russians or Iranians already on the ground, NATO – including Britain – could be dragged into an apocalyptic World War 3. Most military experts see the conflict as a proxy war between Sunni Muslim Saudi Arabia – supported by the US – on one side and Shia Muslim Iran – backed by Russia – on the other. The civil war in Yemen is also a victim of the new power struggle for control of the Middle East – which dates back to the death of Muhammed in 632 AD.

But the new Cold War – which some claim involved Saudi Arabia arming ISIS and Iran backing militants such as the Houthi rebels in Yemen – would turn searing hot if Saudi troops met the Iranian Army on the battlefield. The US fears Saudi Arabia may have obtained – or tried to obtain – nuclear weapons for an final battle with its centuries-old enemy. Tom Wilson, a research fellow for think tank the Henry Jackson Society, said: “The proxy war between Saudi Arabia and Iran is now in a rapid state of escalation. “Saudi talk of sending troops to Syria may be a bluff to try and force the West to take more decisive action in that country instead. “But if the Saudis do put troops on the ground in Syria then this would represent the opening of a major new front in what is increasingly a full scale regional conflict.”

Russia claims aerial photographs reveal Turkey is preparing to invade Syria, its neighbour. Turkish Islamic extremists are already fighting in Syria – some on the side of ISIS – with well-attended funerals for “martyrs” held back home in Turkey. Ultra-nationalist “Grey Wolves” – who want to protect Turkmen living in northern Syria and restore the Ottoman Empire – are also battling the Syrian army and Russian forces. Enmity between Black Sea rivals Russia and Turkey dates back so long a Jewish “oracle” prophesied an apocalyptic war between Russia and Turkey would usher in the End of Days 200 years ago. Turkey is now a member of NATO and if the old enemies came to blows again – as almost happened when Turkey shot down a Russian jet last year – the US and UK would be compelled to back Turkey. Britain has already been dragged into war with Russia by Turkey once: the Crimean War.

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Everything they can do wrong, they do.

EU Ministers Want To Buttress Borders To Stem Refugee Flow (AP)

European Union nations anxious to stem the flow of asylum-seekers coming through the Balkans are increasingly considering sending more help to non-member Former Yugoslav Republic of Macedonia (FYROM) as a better way to protect European borders instead of relying on EU member Greece. With Athens unable to halt the tens of thousands of people making the sea crossing from Turkey, EU nations fear that Europe’s Schengen border-free travel zone could collapse, taking with it one of the cornerstones on which the 28-nation bloc is built. “If Greece is not ready or able to protect the Schengen zone and doesn’t accept any assistance from the EU, then we need another defense line, which is obviously Macedonia and Bulgaria,” Hungarian Foreign Affairs Minister Peter Szijjarto said at Saturday’s meeting of EU foreign ministers in Amsterdam.

An estimated 850,000 migrants arrived in Greece in 2015, overwhelming its coast guard and reception facilities. Aid groups say cash-strapped Greece has shelter for only about 10,000 people, just over 1% of those who have entered. Most of the asylum-seekers then travel on across the Balkans and into the EUs heartland of Germany and beyond. Szijjarto said EU nations are “defenseless from the south. There are thousands of irregular migrants entering the territory of the EU on a daily basis.” Austrian Foreign Minister Sebastian Kurz said the cash-strapped government in Athens still underestimates the crisis. “I still don’t have the feeling that it has dawned on Greece how serious the situation is” for receiving nations like Austria, he said.

The situation has pushed some EU nations to send bilateral aid to FYROM, a non-EU nation, to control its border with EU member Greece. There has been even talk of sending military troops to FYROM to beef up the Greek border. FYROM Foreign Minister Nikola Poposki said after the meeting it did not matter what the aid was technically called. “The essential thing is that we have people and equipment to control the border and do registration where legal crossing should happen,” he said. He said FYROM has already put its own military on the job. “They’re making sure that we have decreased the illegal crossings through our border and were going to continue to make these efforts,” he said.

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There certainly is no such thing as an EU policy.

Austria Threatens To Extend Border Controls (Reuters)

Austria will extend its border controls if Turkey does not take back refugees picked up at sea on their way to Greece, Chancellor Werner Faymann said in an interview with the daily Oesterreich, being published on Sunday. He had earlier said that migrants picked up at the Greek external EU border should be sent back directly to Turkey because this was the only measure that would make a radical enough impact. Austria is set to introduce a new border management system at Spielfeld, a key crossing point on its south-eastern border with Slovenia, which aims at speeding up applications and making the country less attractive to asylum seekers. More such border management facilities on other routes may be needed if Turkey does not respond to his proposal, the chancellor was quoted as saying.

Faymann said Turkey must make a decision by Feb. 18, when EU leaders meet for a summit. It would not be a solution if Turkish border controls led to 10,000 refugees arriving at EU borders instead of 20,000, Faymann was quoted as saying in the interview. “Then we must secure our borders even more,” Faymann said. “To protect internal borders is a makeshift solution. But we have to be prepared.” Ankara and Brussels agreed to slow down the flow of migrants in a Nov. 29 deal, but refugees continue to stream into Greece. Austria, which has a population of 8.4 million and last year received 90,000 applications for asylum, has said that the number of refugees it will accept this year will be limited to 37,500.

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And let me guess, Greece should pay its share?!

Austria Wants EU To Cover Costs Of Additional Migrants (Reuters)

Austria’s Finance Minister Hans-Joerg Schelling has asked the European Commission to provide €600 million to cover the costs of taking in additional refugees, a ministry spokesman said on Saturday. Austria budgeted for 35,000 asylum seekers annually at a cost of €11,000 per person but took in some 90,000 people in 2015, the spokesman quoted the minister as saying in a letter to the head of the EU executive, Jean-Claude Juncker. “Concerning the migration crisis it is high time the Commission returned to its normal function as an independent institution representing the general Community interest and start acting as such,” Schelling said in the letter, part of which was published by the daily Kurier.

Austria and neighboring Germany threw open their borders last year to hundreds of thousands of people pouring into Europe, many of them fleeing conflicts in Syria and elsewhere. Despite an initial outpouring of sympathy for the migrants, public concern about the influx has fueled a rise in support for the far right in Austria. Last week Vienna said it would step up deportations of migrants to countries it deems safe.

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