Sep 012018
 
 September 1, 2018  Posted by at 8:47 am Finance Tagged with: , , , , , , , ,  


Pablo Picasso Portrait of Daniel-Henry Kahnweiler 1910

 

Delaying NAFTA Deal Is Actually A Win-Win-Win (R.)
The Bank That Nearly Broke Europe (Tooze)
Rebel Leader Alexander Zakharchenko Killed In Explosion In Ukraine (G.)
US Ready To Boost Arms Supplies To Ukraine (G.)
Bad Faith Nation (Kunstler)
Saudi Arabia Hints At Plan To Turn Qatar Into An Island (AFP)
Brazil’s Top Electoral Court Votes Down Lula Candidacy (AFP)
Brexit: Entering The Final Phase (RTE)
The Terrible Human Cost Of Greece’s Bailouts (Coppola)
India Introduces Free Health Care – For Its 500 Million Poorest People (NW)

 

 

But the pending Mexico government change could change that.

Delaying NAFTA Deal Is Actually A Win-Win-Win (R.)

Delaying a revamped North American Free Trade Agreement is actually a win-win-win. Canada and the United States will keep talking despite missing a Friday deadline to conclude trade talks. Negotiators will need to move quickly to avoid the risk of fresh demands from the next Mexican government. But getting a deal that all sides can sell is more important. The mood was tense on Friday as U.S. President Donald Trump acknowledged having told Bloomberg he wasn’t going to make any concessions to his northern neighbor. The United States had already shut the Canadians out of talks for weeks while it negotiated with the Mexican government.

On Monday, Trump hailed a U.S.-Mexico deal on certain NAFTA provisions and threatened auto tariffs on Canada if it didn’t capitulate by the end of the week. Ottawa and Washington also appeared to remain far apart on certain issues. Trump has slammed Canadian tariffs of up to 270 percent on dairy imports. Canada objects to the U.S. demand to eliminate dispute panels for anti-dumping complaints. That’s why it’s encouraging that both sides will continue negotiations next week. The Friday deadline was set because of the 90-day notice period Congress needs before a deal can be concluded. Meeting it would enable Mexican President Enrique Peña Nieto to sign the pact before he leaves office at the end of November.

But the parties have some wiggle room because the deal text doesn’t have to be released until the end of September. Trump gave notice to Congress on Friday that a trade pact with Mexico would be concluded by the end of November, and Canada could join “if it is willing.” Yet Trump’s threat to do a deal with Mexico alone rings hollow because Congress has signaled it would reject a bilateral deal.

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In-deep on Trichet and all his arrogance.

The Bank That Nearly Broke Europe (Tooze)

The ECB often deals with critics by pointing to its limited mandate. But in responding to this crisis, Trichet far overstepped those bounds. His aim was nothing less than regime change. He was trying to use the crisis to force the completion of the still-incomplete constitution of the single currency zone—on conservative terms. He wanted Europe’s politicians to agree to binding fiscal rules, to establish a bond market stabilisation fund independent of the ECB, a fund that would keep the ECB forever clear of any obligation to stand behind public debt. Until the politicians fell into line, he would support the market only in extremis. Playing with fire, the ECB unleashed a conflagration.

When in the spring of 2011 Greece’s centre-left Pasok government suggested that it might be safer to write down or restructure some of its debt, Trichet did not just stonewall—he sought to silence the debate by threatening that if Athens publicly broached the issue, the ECB would cut off the funding lifeline to its banks. In the name of protecting the reputation of Europe’s sovereign borrowers, Trichet made himself into an intransigent defender of creditor interest.

And when market pressure was not enough, Trichet did not hesitate to step across the boundary that notionally separated the central bank from national governments; he issued instructions to the governments of Ireland, Spain and Italy, demanding spending cuts, tax increases and changes to labour law that reached deep into their internal affairs. Trichet used the ECB’s “independence,” and the threat of the bond market, to dictate terms to elected governments.

No such tough medicine was dished out to Europe’s banks, which should, like their American counterparts, have been forced to recapitalise in 2008-2009, even if that meant shareholders had to suffer. When the debts of Ireland’s banks threatened to tip its government over the edge, Trichet still refused point blank to countenance “bailing in” their private creditors to sharing the pain.

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Russia provocation. Which set of warmongers did it? US or Kiev?

Rebel Leader Alexander Zakharchenko Killed In Explosion In Ukraine (G.)

The leader of a Kremlin-backed separatist republic in war-torn eastern Ukraine has been killed in a blast that tore through a cafe close to his official residence in Donetsk. Alexander Zakharchenko, 42, was named prime minister of the so-called Donetsk People’s Republic (DNR) in November 2014. The DNR’s official news agency confirmed his death and said the republic’s finance minister, Alexander Timofeev, was injured when the explosive device went off in the Separ café in the centre of Donetsk. The bomb was planted in a nearby vehicle, Ukrainian media reported.

Zakharchenko is the latest in a series of separatist leaders to have been assassinated during the ongoing conflict in eastern Ukraine, where more than 10,000 people have died since fighting broke between Kremlin-backed separatists and pro-Ukrainian government forces in 2014, according to UN figures. More than 1.5 million people have been displaced by the fighting. Vladimir Putin called the killing a “dastardly” act that aimed to destabilise the fragile peace in the region and the Russian president expressed his condolences to Zakharchenko’s family.

The Russian foreign ministry was quick to react, accusing the Ukrainian government of ordering the “terrorist attack”, although Putin’s later statement did not blame Kiev for the killing. The Ukrainian security service chief, Igor Guskov, said Zakharchenko’s death could have been the result of infighting between rival separatist factions or an operation by Russian special forces. Kiev has previously accused Russia of killing separatist figures who refuse to obey Kremlin orders.

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Big mistake. Russia has no room to back down.

US Ready To Boost Arms Supplies To Ukraine (G.)

Washington is ready to expand arms supplies to Ukraine in order to build up the country’s naval and air defence forces in the face of continuing Russian support for eastern separatists, according to the US special envoy for Ukraine. In an interview with the Guardian, Kurt Volker said there was still a substantial gap between the US and Russia over how a United Nations peacekeeping force could be deployed to end the four-year war, and predicted that Vladimir Putin would wait for presidential and parliamentary elections in Ukraine next year before reconsidering his negotiating position. However, Volker argued that time was not on Putin’s side. He insisted pro-western, anti-Russian sentiment was growing in Ukraine with every passing month.

And he made clear that the Trump administration was “absolutely” prepared to go further in supplying lethal weaponry to Ukrainian forces than the anti-tank missiles it delivered in April.= “They are losing soldiers every week defending their own country,” said Volker, a former US ambassador to Nato. “And so in that context it’s natural for Ukraine to build up its military, engage in self-defense, and it’s natural to seek assistance and is natural that other countries should help them. And of course they need lethal assistance because they’re being shot at.” He added: “We can have a conversation with Ukraine like we would with any other country about what do they need. I think that there’s going to be some discussion about naval capability because as you know their navy was basically taken by Russia. And so they need to rebuild a navy and they have very limited air capability as well. I think we’ll have to look at air defence.”

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“..Mr. Trump slip-sliding towards Hubrisville like some ass-clown pol in a Coen Brothers’ movie..”

Bad Faith Nation (Kunstler)

Radiating anger and, at times, actual malice, Mr. Trump presented exactly the lack of couth that drives his hypothetically more refined “blue” enemies up a tree. His rhetorical skills have not improved since 2016, but his demagogic self-confidence soars as he unwittingly launches himself into a one-man Space Force flying too close to the sun, claiming that he has magically made America great again, mission accomplished! Even the live audience of Hoosier clods appeared strangely restive and unconvinced after an hour of this bellowing, and one got a sense of Mr. Trump slip-sliding towards Hubrisville like some ass-clown pol in a Coen Brothers’ movie about to be run out of the grange hall on a rail.

His error: taking “ownership” of a financialized economy of hallucinated markets run by out-of-control algo robots into a twilight zone of default and insolvency. The “red” and “blue” constituencies at war with each other are essentially the losers and winners in this depraved system. When the hallucination dissolves, the winners will be the new losers and the old losers will be looking to string them up. That scenario remains to be played out as we say our official goodbyes to summer this holiday weekend and turn the corner into portentous autumn. On the “blue” side of things, mendacity rules as usual lately, especially in the Deep State septic abscess that the Russia probe has become.

Department of Justice official Bruce Ohr, twice demoted but still on the payroll, went into a closed congressional hearing and apparently threw everybody but his mother under the bus, laying out an evidence trail of stupendous, flagrant corruption in that perfidious scheme to un-do the election results of 2016. Most amazingly, it was revealed that Mr. Ohr had not been called to testify by special counsel Robert Mueller nor by the federal prosecutor John Huber, who is charged with investigating the FBI / DOJ irregularities surrounding the Russia probe. It is amazing because Mr. Ohr is precisely the pivotal figure in what now looks like an obvious conspiracy to politically weaponize the agencies against the Golden Golem. An awful lot of people have some ‘splainin’ to do on that one, starting with the Attorney General and his deputy. Who will put it to them?

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Planning another invasion?!

Saudi Arabia Hints At Plan To Turn Qatar Into An Island (AFP)

A Saudi official hinted Friday the kingdom was moving forward with a plan to dig a canal that would turn the neighbouring Qatari peninsula into an island, amid a diplomatic feud between the Gulf nations. “I am impatiently waiting for details on the implementation of the Salwa island project, a great, historic project that will change the geography of the region,” Saud al-Qahtani, a senior adviser to Crown Prince Mohammed bin Salman, said on Twitter. The plan, which would physically separate the Qatari peninsula from the Saudi mainland, is the latest stress point in a highly fractious 14-month long dispute between the two states.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and trade ties with Qatar in June 2017, accusing it of supporting terrorism and being too close to Riyadh’s archrival, Iran — charges Doha denies. In April, the pro-government Sabq news website reported government plans to build a channel -– 60 kilometres (38 miles) long and 200 metres wide –- stretching across the kingdom’s border with Qatar. Part of the canal, which would cost up to 2.8 billion riyals ($750 million), would be reserved for a planned nuclear waste facility, it said. Five unnamed companies that specialise in digging canals had been invited to bid for the project and the winner will be announced in September, Makkah newspaper reported in June.

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Corruption rules.

Brazil’s Top Electoral Court Votes Down Lula Candidacy (AFP)

A majority of Brazil’s top electoral court shot down late Friday the candidacy of popular leftist Luiz Inacio Lula da Silva in the country’s upcoming presidential vote, telling the jailed former leader he cannot participate in October’s critical election. The vote punctuated a gripping case that has roiled the country for months, with Lula, 72, remaining the top contender among Brazilians to lead Latin America’s largest economy — despite sitting behind bars since April for accepting a bribe. In an extraordinary session the Superior Electoral Court dashed Lula’s hopes after hours of debate, with the judges voting an overwhelming 6-1 against him.

Shortly thereafter, the former president’s Workers’ Party (PT) vowed to “fight with all means” to secure candidacy for the leftist icon. “We will present all appeals before the courts for the recognition of the rights of Lula provided by law and international treaties ratified by Brazil,” said the party in a statement. “We will defend Lula in the streets, with the people, because he is a candidate of hope.” Lula’s case was a last-minute addition to the court session. The result was expected, but the vote of Judge Edson Fachin, the second to speak, had momentarily rekindled suspense. He relied on Lula’s recent backing from the UN Human Rights Committee, which ruled that the former leader cannot be disqualified from the elections as his legal appeals are ongoing.

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With full deadlock.

Brexit: Entering The Final Phase (RTE)

As we head into September, the assessment of EU officials and diplomats is that August has come and gone with little to show for it. Yes, there has been the publication of over 50 technical notices on a no-deal Brexit, and a flurry of trips to European capitals by Theresa May, Foreign Secretary Jeremy Hunt, and Business Secretary Greg Clark. But there has been no movement from London on the key issues, because the paralysis in the House of Commons still holds. “Objectively in the British system nothing has changed,” says one EU diplomat. “They’re still deeply divided.” As Fleet Street was trumpeting a change of heart on Brexit, the Japanese electronic giant Panasonic quietly announced it was shifting its European headquarters from the UK to the Netherlands.

In a statement the company blamed “potential fiscal obstacles by the application of different rules and regulations between the UK and EU.” So where do things stand? There are just under seven weeks before the European Council in October. In that time Theresa May will have to conclude the Withdrawal Agreement, and reach agreement on a political declaration on the future relationship that will sit alongside the divorce treaty. On the Withdrawal Treaty there are three outstanding issues. The first is on governance – how the EU and UK will resolve their differences in the future. The second is on Geographical Indicators – will the UK respect some 3,000 sensitive EU products such as Champagne and Feta cheese and not start producing their own under those names.

The third, and biggest, obstacle is the Irish backstop. The most recent proposal from London to replace to the European Commission’s draft legal text on the backstop dates back to 7 June. It suggested a Temporary Customs Arrangement (TCA) and a UK-wide backstop that would expire around the end of 2020, when a new trade arrangement would – presumably – take effect. London’s subsequent qualification of the TCA was that the Chequers White Paper would definitively rule out the need for the backstop. That solution is not definitive enough for Dublin or the other member states. A backstop is still needed in the Withdrawal Agreement. So, the deadlock remains.

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One of the world’s best healthcare systems has been gutted.

The Terrible Human Cost Of Greece’s Bailouts (Coppola)

Some people justify Greece’s terrible depression and severe fiscal austerity on the grounds that they are necessary to “reform” the Greek economy. Others even argue that Greeks “deserve” poverty and deprivation. They had a massive party at other people’s expense, after all. Now, it’s payback time. I have heard a lot of this recently. So I am grateful to the medical journal The Lancet for providing me with some ammunition to fire at those who want to play “blame the Greeks”, or who believe that the austerity inflicted on Greek was both mild and necessary, or who simply can’t see the humans behind the numbers. The Lancet has published an analysis of changes in life expectancy in Greece during the recent crisis. It is heavy on numbers and light on anecdote, but even so, it makes grim reading.

Greek mortality has worsened significantly since the beginning of the century. In 2000, the death rate per 100,000 people was 944.5. By 2016, it had risen to 1174.9, with most of the increase taking place from 2010 onwards. Greece’s mortality increase stands in stark contrast to global death rates, which fell during this time. Even in Western Europe, where death rates rose slightly overall, no other country experienced a deterioration on this scale. Cyprus, Greece’s close neighbour, also experienced some worsening of mortality rates around the time of its financial crisis and recession, but not on the scale of Greece. Among the countries included in the study, Greece’s case appears to be exceptional.

But what is causing these additional deaths? The report says it varies with age: “…adverse effects of medical treatment, self-harm, and several types of cancer stood out as consistently increasing in Greece across all ages… Within specific age groups, other causes are apparent, with rapid increases in deaths due to neonatal haemolytic disease and neonatal sepsis in children younger than 5 years, and prominent increases in self-harm among adolescents and young adults. Greek adults aged 15–49 years had increased mortality due to HIV, several treatable neoplasms, all types of cirrhosis, neurological disorders (eg, multiple sclerosis, motor neuron disease), chronic kidney disease, and most types of cardiovascular disease except for ischaemic heart disease and stroke.”

Let me translate this piece of medical jargon into plain English: • Newborn babies are dying of completely treatable conditions. • Adolescents and young adults are killing themselves. • Adolescents and adults are dying of diseases associated with poor diet, alcohol abuse and smoking, and of treatable illnesses.

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That’s the entire EU.

India Introduces Free Health Care – For Its 500 Million Poorest People (NW)

The Indian government will pay for health care for around 500 million of its poorest citizens, with Prime Minister Narendra Modi declaring that the country can reach its potential only with a healthy population. During a speech to mark the country’s independence day on Wednesday, Modi said, “It is essential to ensure that we free the poor of India from the clutches of poverty due to which they cannot afford health care,” The Times of India reported. The National Health Protection Mission—also known as “Modicare”—will give impoverished families health insurance coverage of up to $7,100 every year. This may not seem a lot by American standards, but in a country where the annual per capita income is just over $1,900, it will make a massive difference to those who cannot afford private treatment.

Public hospitals in India offer free, but less sophisticated, care. The system is strained to the point of collapse, with hospitals struggling to secure enough beds and staff to care for the sick. The lack of access for rural communities—where 66 percent of Indians live—forces people to travel many hours to reach urban facilities if they want treatment. This means the private medical sector cares for the majority of India’s patients and charges them accordingly. When the project was announced in February, then-Finance Minister Arun Jaitley declared it the “world’s biggest government-funded health care program.” According to the mission’s chief executive officer, Indu Bhushan, “This is going to be a game changer.” Medical costs are one of the primary causes of poverty in India. Around 63 million Indians fall into poverty each year because of health care bills, and 70% of all charges are paid directly by patients.

Read more …

Aug 292018
 
 August 29, 2018  Posted by at 9:17 am Finance Tagged with: , , , , , , , , , , ,  


Pablo Picasso In “Le Lapin Agile” or harlequin with a glass 1905

 

Almost Half Of Americans Can’t Pay For Their Basic Needs (CBS)
White House Probes Google After Trump Accuses It Of Bias (R.)
Trump Unblocks More Twitter Users After US Court Ruling (R.)
Facebook Censorship, Mad Ben Nimmo and the Atlantic Council (Craig Murray)
The Greatest Fake Bull Ever (Stockman)
China’s Building-Boom Hits A Wall As Shadow-Banking System Collapses (ZH)
A Senator Masquerading as a Gas Station (Dmitry Orlov)
Brazil Sends Army To Border As Venezuelans Flee Crisis At Home (R.)
Syria Ready To Take One Million Returning Refugees – Moscow (AFP)
Just 10 Rivers Carry 95% Of All Plastic Into The Ocean (BT)
Bees Develop Preference For Pesticides (PA)

 

 

Now imagine a shrinking economy thrown in.

Almost Half Of Americans Can’t Pay For Their Basic Needs (CBS)

Four in 10 Americans are struggling to pay for their basic needs such as groceries or housing, a problem even middle-class households confront, according to a new study from the Urban Institute. Despite the U.S. economy being near full employment, 39.4 percent of adults between 18 and 64 years old said they experienced at least one type of material hardship in 2017, according to the study, which surveyed more than 7,500 adults about whether they had trouble paying for housing, utilities, food or health care. The findings surprised researchers at the Urban Institute, who had expected to find high levels of hardship among poor Americans but hadn’t predicted so many middle-class families would also struggle to meet their basic needs.

That may illustrate that a middle-class income “is no guarantee” of protection from hardship, said Michael Karpman, research associate at the Urban Institute’s health Policy Center and a co-author of the report. Against the backdrop of President Donald Trump’s boasting about low unemployment and strong economic growth, the research adds nuance to the problems facing American families. Middle-class households tend to struggle with paying their health care bills rather than utilities, for instance. Health care costs have outpaced wages and inflation, pushing more Americans into high-deductible plans, which can backfire when serious health problems arise.

“A lot of people are looking at the fact that wages aren’t keeping up with household costs as one reason families are having difficulty making ends meet,” Karpman said. “Even for families with health insurance, they may be facing high deductibles that leave them facing high costs.”

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The bias is obvious. How to fight it is not.

White House Probes Google After Trump Accuses It Of Bias (R.)

U.S. President Donald Trump on Tuesday accused Google’s search engine of promoting negative news articles and hiding “fair media” coverage of him, vowing to address the situation without providing evidence or giving details of action he might take. Trump’s attack against the Alphabet Inc unit follows a string of grievances against technology companies, including social media Twitter Inc and Facebook Inc, which he has accused of silencing conservative voices, and Amazon.com Inc, which he has said is hurting small businesses and benefiting from a favorable deal with the U.S. Postal Services. He frequently berates news outlets for what he perceives as unfair coverage.

Google denied any political bias, saying in a statement that its search engine is “not used to set a political agenda and we don’t bias our results toward any political ideology.” Trump said in several tweets on Tuesday that Google search results for “Trump News” were “rigged” against him because they showed only coverage from outlets like CNN and not conservative publications, suggesting the practice was illegal. “I think Google is really taking advantage of our people,” Trump said on Tuesday in the Oval Office. “Google, and Twitter and Facebook, they are really treading on very, very troubled territory, and they have to be careful. It’s not fair to large portions of the population.”

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A pattern emerges. Trump violates 1st amendment when blocking users, but Twitter “retains authority to revoke access”. That cannot stand.

Trump Unblocks More Twitter Users After US Court Ruling (R.)

U.S. President Donald Trump on Tuesday unblocked some additional Twitter users after a federal judge in May said preventing people from following him violated individuals constitutional rights. U.S. District Judge Naomi Reice Buchwald in Manhattan ruled on May 23 that comments on the president’s account, and those of other government officials, were public forums and that blocking Twitter Inc users for their views violated their right to free speech under the First Amendment of the U.S. Constitution. The Knight First Amendment Institute at Columbia University on August 10 sent the Justice Department a list of 41 accounts that had remained blocked from Trump’s @RealDonaldTrump account. The seven users who filed suit had their accounts unblocked in June.

The 41 blocked users include a film producer, screenwriter, photographer and author who had criticized President Trump or his policies. At least 20 of those individuals said on Twitter that Trump had unblocked them on Tuesday. The 41 users were not a comprehensive list of those blocked by Trump. Rosie O’Donnell, a comedian, said on Twitter late Tuesday that she remained blocked. [..] The ruling has raised novel legal issues. The Internet Association, a trade group that represents Twitter, Facebook Inc, Amazon.com, and Alphabet Inc, filed a brief in the case earlier this month that did not back Trump or the blocked users but urged the court to “limit its decision to the unique facts of this case so that its decision does not reach further than necessary or unintentionally disrupt the modern, innovative Internet.”

[..] The Internet Association said the court “should make clear that this case does not implicate the overwhelming majority of social media accounts throughout the Internet.” “Despite any First Amendment status that this court might find in the ‘interactive spaces’ associated with President Trump’s account, Twitter retains authority to revoke access to both his account and the account of any user seeking to comment on President Trump’s account,” the group said.

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Facebook deletes posts from a former UK ambassador.

Facebook Censorship, Mad Ben Nimmo and the Atlantic Council (Craig Murray)

Facebook has deleted all of my posts from July 2017 to last week because I am, apparently, a Russian Bot. For a while I could not add any new posts either, but we recently found a way around that, at least for now. To those of you tempted to say “So what?”, I would point out that over two thirds of visitors to my website arrive via my posting of the articles to Facebook and Twitter. Social media outlets like this blog, which offer an alternative to MSM propaganda, are hugely at the mercy of these corporate gatekeepers.

Facebook’s plunge into censorship is completely open and admitted, as is the fact it is operated for Facebook by the Atlantic Council – the extreme neo-con group part funded by NATO and whose board includes serial war criminal Henry Kissinger, Former CIA Heads Michael Hayden and Michael Morrell, and George Bush’s chief of Homeland Security Michael Chertoff, among a whole list of horrors.

The staff are worse than the Board. Their lead expert on Russian bot detection is an obsessed nutter named Ben Nimmo, whose fragile grip on reality has been completely broken by his elevation to be the internet’s Witchfinder-General. Nimmo, grandly titled “Senior Fellow for Information Defense at the Atlantic Council’s Digital Forensic Research Lab”, is the go-to man for Establishment rubbishing of citizen journalists, and as with Joseph McCarthy or Matthew Clarke, one day society will sufficiently recover its balance for it to be generally acknowledged that this kind of witch-hunt nonsense was not just an aberration, but a manifestation of the evil it claimed to fight.

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“..the generational fiscal catastrophe that looms in the 2020s as 80 million baby-boomers pile onto the social security/medicare wagon.”

The Greatest Fake Bull Ever (Stockman)

the Wall Street stock indices have vastly out-run the meager gains in the main street economy since the pre-crisis peak; and that at this late stage of the business cycle—merely 10 months from the prior record—there is absolutely no plausible risk/reward equation left. That’s because earnings will plummet in the next recession—by 40% or more if history is any guide. And that’s likely to be conservative in view of the elephant in the casino that Wall Street stubbornly refuses to acknowledge. To wit, back in June 2007, the S&P 500 earnings peaked at $85 per share, but that reflected fully $55 per share of after-tax interest expense. Fast forward to the LTM period ending in December 2017 when earnings per share posted at $110 per share, but reflected only $19 per share of after-tax interest expense.

In other words, more than 100% of the gain over the past 11 years was due to the drastic financial repression of the central banks and its impact on corporate interest expense. Yet the central banks of the world—led belatedly by the Fed—have made an epochal pivot to QT (quantitative tightening) and interest rate normalization, even as the value of the interest expense deduction has been reduced to chump change owing to the new effective tax rate of about 15%. So interest expense is marching back up the hill, and it’s not remotely priced-in—not any more than the next recession or the generational fiscal catastrophe that looms in the 2020s as 80 million baby-boomers pile onto the social security/medicare wagon.

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Xi has let the shadows grow to fake the growth, and will have a hard time tackling them now.

China’s Building-Boom Hits A Wall As Shadow-Banking System Collapses (ZH)

Beijing wants to shore up growth without inundating the economy with cheap credit. But, as WSJ’s Walter Russell Mead pointed out previously, it’s not easy… “Chinese leaders know that their country suffers from massive over-investment in construction and manufacturing, that its real-estate market is a bubble that makes the Dutch tulip frenzy look restrained, that both conventional debt and debt in the shadow-banking system are too large and growing too rapidly. But even as the Communist Party centralizes power and clamps down on dissent, it dithers when it comes to the costly and difficult work of shifting China’s economic development onto a sustainable track. Chinese authorities have tried to tackle some of these problems, but often retreat when reforms start to bite and powerful interests push back.”

To see how hard that will be, The Wall Street Journal’s Nathaniel Taplin takes a look at China’s roads and railways. “China is the 800-pound gorilla of global infrastructure. Its building prowess has permeated popular culture, as in the disaster movie “2012” where China constructs giant ships to help humankind escape rising seas. Recently, however, China’s infrastructure build has all but ground to a halt.” Here’s why… The central government last year started to crack down on unregulated, opaque – so-called ‘shadow-bank’ borrowing – alarmed at its vast scale, and potential for corruption.

For five straight months, the shadow banking system has contracted under this pressure, sucking the malinvestment lifeblood out of economic growth and construction booms as Chinese local governments, which account for the bulk of such investment, set up as so-called local-government financing vehicles (off balance sheet), or LGFVs, and have seen an unprecedented net $19 billion outflow in recent months. As WSJ’s Talpin notes, these days Beijing prefers that local governments borrow on-the-books, through the now legal municipal bond market. The problem is that lower-rated and smaller cities are mostly shut out, even though they do most actual capital spending. As a result, investment has kept slowing even though China’s net muni bond issuance in July was three times higher than it was in March.

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“Other Americans just marched around ineffectually, waving banners and shouting antiwar slogans, but not McCain!”

A Senator Masquerading as a Gas Station (Dmitry Orlov)

John McCain is dead, and many people are celebrating whereas they should be sad. He wasn’t a friend of mankind—he was its enemy, but a really bad one. But with such grossly incompetent enemies—who needs friends? McCain did a great deal to destroy America. He devoted his entire lifetime to American destruction. To start with, he was quite effective as a protester against America’s genocidal war on the people of Vietnam. Other Americans just marched around ineffectually, waving banners and shouting antiwar slogans, but not McCain! His own father had a lot to do with starting that war, but McCain made up for that by destroying 26 American war planes. That’s quite something! If every American flyer crashed as many planes, countless innocent lives would have been saved.

Of course, he could have done even better—and he did try. He almost managed to destroy the US aircraft carrier Forrestal by setting it ablaze. To top off his illustrious military career, he surrendered to the enemy and spent five years in a Vietnamese prison. This made him a hero—in Americans’ eyes only, while the rest of the world saw in him a murderer of Vietnamese children. His “martyrdom” as a POW helped pave his way to a political career, first in Congress, then in the Senate. During his obscenely long career in national politics, McCain did what he could to make American “democracy” look like a complete joke and to hasten America’s collapse. This, by the way, wasn’t a tall order: American “democracy” had long been a cesspool—a playground for lobbyists and political technologists based on a fully gerrymandered system of fake elections. But he did his thing, and is therefore twice the hero.

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Fast getting out of hand.

Brazil Sends Army To Border As Venezuelans Flee Crisis At Home (R.)

Brazil said it was sending armed forces to keep order near the Venezuelan border area, while Peru declared a health emergency, as a regional crisis sparked by thousands of Venezuelans fleeing economic collapse escalated on Tuesday. In Brazil, where residents rioted and attacked Venezuelan immigrants in a border town earlier this month, President Michel Temer signed a decree to deploy the armed forces to the border state of Roraima. He said the move was aimed at keeping order and ensuring the safety of immigrants. Peru, meanwhile, declared a 60-day health emergency in two provinces on its northern border, citing “imminent danger” to health and sanitation.

The decree, published in the government’s official gazette, did not give more details on the risks, but health authorities have previously expressed concerns about the spread of diseases such as measles and malaria from migrants. The exodus of Venezuelans to other South American countries is building toward a “crisis moment” comparable to events involving refugees in the Mediterranean, the United Nations said this week. Temer blamed the socialist Venezuelan government of President Nicolas Maduro for the migration crisis. “The problem of Venezuela is no longer one of internal politics. It is a threat to the harmony of the whole continent,” Temer said in a televised address.

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If the US lets Syria rebuild.

Syria Ready To Take One Million Returning Refugees – Moscow (AFP)

Russia’s defence minister said on Tuesday that war-torn Syria would be ready to accept one million returning refugees, following Moscow-backed reconstruction work. “Since 2015, when towns and villages gradually started to be freed, more than one million people have returned home,” Sergei Shoigu said in comments reported by Russian news agencies. “Now every opportunity has been created for the return of roughly one million (more) refugees,” he told journalists. “Huge infrastructure reconstruction work is ongoing, the rebuilding of transport routes and security points so that Syria can begin accepting refugees.”

Russia, a long-time ally of Syria, launched a military intervention in 2015 to support the embattled regime of President Bashar al-Assad, a move that changed the course of the war. Assad and his allies have since recovered swathes of territory and the government is turning its attention to post-conflict reconstruction, with the aid of Moscow. The war that erupted in 2011, one of the most devastating conflicts since World War II, has displaced more than half of Syria’s population, including more than five million beyond its borders. Most of them fled to neighbouring countries, particularly Turkey, Jordan and Lebanon.

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It’ll take a gargantuan effort to stop this.

Just 10 Rivers Carry 95% Of All Plastic Into The Ocean (BT)

Cheap, durable and multifunctional, plastic is one of humanity’s most successful inventions. From the 1950s to 2015, we’ve produced 8.3 billion metric tons of the stuff. By now, it’s everywhere. It’s also non-biodegradable. And that’s devastating the environment. Only 9% of all plastic waste has been recycled, and another 12% has been incinerated. That means that almost 80%—nearly 6.3 billion tons—has turned into waste with no half-life to speak of: condemned to an eternity as landfill, litter or ocean-clogging junk. Every year, plastic kills around 1 million seabirds, 100,000 sea mammals and inestimable numbers of fish. The volume of plastic trash in the world’s oceans is currently estimated to be around 150 million tons. No less than eight million tons are added to that every year—that’s one truckload every minute.

Between 0.5 and 2.75 million tons come from rivers alone. Large rivers are particularly efficient conveyors of plastic waste to the oceans, especially in countries lacking a well-developed waste management infrastructure. Up to 95% of river-borne plastic comes from just 10 rivers, scientists at the Helmholtz Center for Environmental Research in Leipzig, Germany have found. The scientists analysed data on both microplastic debris (<5mm) such as beads and fibres, as well as microplastic objects (plastic bottles, bags, etc.) from 79 sampling sites on 57 of the world’s largest rivers, singling out the 10 mapped out here as the biggest culprits, due to “mismanagement of plastic waste in their watersheds”.

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Nicotine addiction.

Bees Develop Preference For Pesticides (PA)

Bumblebees acquire a taste for pesticide-laced food that can be compared to nicotine addiction in smokers, say scientists. The more of the nicotine-like chemicals they consume, the more they appear to want, a study has shown. The findings suggest that the risk of potentially harmful pesticide-contaminated nectar entering bee colonies is higher than was previously thought. In a series of studies, a team of British researchers offered bumblebees a choice of two sugar solutions, one of which was laced with neonicotinoid pesticides. They found that over time the bees increasingly preferred feeders containing the pesticide-flavoured sugar.

Dr Richard Gill, from the Department of Life Sciences at Imperial College London, said: “Given a choice, naive bees appear to avoid neonicotinoid-treated food. However, as individual bees increasingly experience the treated food they develop a preference for it. “Interestingly, neonicotinoids target nerve receptors in insects that are similar to receptors targeted by nicotine in mammals. “Our findings that bumblebees acquire a taste for neonicotinoids ticks certain symptoms of addictive behaviour, which is intriguing given the addictive properties of nicotine on humans, although more research is needed to determine this in bees.” Controversial neonicotinoid pesticides are chemically similar to nicotine, the addictive compound in tobacco.

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  


Fred Lyon Post&Powell Union Square San Francisco 1947

 

100% Chance of Recession Within 7 Months? (DR)
The Secret Source of Eternal Australian Growth (Steve Keen)
We Need A Public Inquiry Into The Economics Profession (Pettifor)
Where Are The Empty Homes In Kensington? (Whoownsengland)
Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)
Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)
House Republicans Block Russia Sanctions Bill (ZH)
We Are Inches From A New World War (Medium)
Iran Slams Tillerson Call For Regime Change (RT)
The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)
EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)
Europe’s Unserious Plan for Greece (BBG)
Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)
At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

 

 

The numbers say it.

100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

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Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

 

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

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A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

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If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

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Science and technology will not enforce human rights. Moral values will.

Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

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Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

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We’re still not clued in to how dangerous ‘our own’ are.

We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

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No surprise here.

The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

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Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060

EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

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Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

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While taxes have risen. An endless hole.

Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

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So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

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May 202017
 
 May 20, 2017  Posted by at 9:05 am Finance Tagged with: , , , , , , , , , ,  


Minor White Windowsill Daydreaming Rochester NY 1958

 

The Housing Moment Investors Dread Is Here (DDMB)
Home Ownership Among Young UK Families Halves In 20 Years (TiM)
A Monster Eating the Nation (Jim Kunstler)
Democrats Are Falling For Fake News About Russia (Vox)
Harvard Study Reveals Extent of Anti-Trump Media Bias (HeatSt.)
Comey’s 2007 Brush With Scandal: Jim’s Loyalty Was More To Chuck Schumer (SD)
Constitutional Crisis In Washington? More Like Attempted Coup (David Goldman)
Brazil Plea-Bargain Testimony Says President Took $4.6 Million In Bribes (R.)
Maduro to Trump: ‘Get Your Dirty Hands Off Venezuela!’ (R.)
Theresa May To Create New, Government Controlled Internet in UK (Ind.)
Arctic Stronghold of World’s Seeds Flooded After Permafrost Melts (G.)
Varoufakis Claims Tsipras Pressured Him To Accept Creditors’ Demands (K.)
‘They Stole My Money’: Greek Dreams Of Retirement Turn Sour (AP)
Teen Refugees Trapped In Greece Turn To Prostitution (Spiegel)

 

 

Cracks in the mirage.

The Housing Moment Investors Dread Is Here (DDMB)

Amid the carnage in the auto sector, economists have sought solace in the comforts of home, sweet home. A recent Census release suggests that Millennials, long sidelined, have finally started to tiptoe into the home-buying market. The reception to the data was so effusive that other reports, suggesting housing has reached a much different sort of turning point, were lost in the fray. The good news is that the trend is unequivocal, based purely on supply and demand. The bad news is in the actual message. The May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it’s a good time to buy a house and a 12-year high among those who say it’s a good time to sell. Disparities of this breadth tend to coincide with break points and that’s just where we’ve landed in the cycle.

The beginning of May officially marked the advent of a buyers’ market, defined simply as sellers outnumbering buyers by a wide enough margin to trigger falling prices. Yes, it’s the moment buyers have been waiting for. It is also the moment private equity investors, those who’ve crowded out natural buyers, have been dreading. Three factors determine home sales: interest rates, unemployment and prices. The recent decline in interest rates has provided some semblance of relief; purchase applications have bounced off April’s levels, when they were down four% over last year. April and May are obviously critical to the spring sales season. The low unemployment rate would seem to be a huge plus if it wasn’t for the stress building around thousands of layoff announcements across the retail and auto sectors that won’t find their way into this most lagging of economic indicators for months.

That is not to say those getting pink slips don’t know their fate, which should influence home sales going forward. Price is the one bright spot, with one glaring caveat: Falling home prices tend to be associated with a negative macroeconomic backdrop, which does not bode well for any buyer of, well, anything. Dig into the Federal Reserve’s recently released first quarter Senior Loan Officer Survey and you will see nothing of note on the residential mortgage side – banks reported that both loan demand and lending standards remained unchanged in the first three months of the year. But that is the here and now. Demand and supply in the auto sector, where pricing has been under pressure for some time, looked quite similar to that for houses several months back.

According to the Fed survey, at minus 13.3%, demand for auto loans flat-lined in deeply negative territory, as was the case in last year’s fourth quarter, the worst levels of the current expansion. This data point corroborated the Michigan survey, which showed that those who said it was a good time to buy a car fell to the lowest level since August 2014. Meanwhile, demand for credit card loans slid to minus 10.2% from minus 8.3% in the last three months of last year. In the event you’re detecting a trend, households are sending out distress signals that have just begun to be picked up in housing, even as household debt levels recapture their pre-crisis highs.

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A radical change to an entire society, and one that will take decades to absorb.

Home Ownership Among Young UK Families Halves In 20 Years (TiM)

The number of young family owning their own homes has halved across large parts of the country in the space of a generation, and the struggle to get on the housing ladder is not restricted to the South East. Research by The Resolution Foundation found that 31% of 25 to 34-year-olds surveyed were home owners in 2016, compared to 58% in 1994. Regionally, 30% of those surveyed in West Yorkshire owned homes last year, compared to 61% in 1994. Similarly, in Greater Manchester, home ownership levels fell to 29% from 59% over the same 22-year period. The South West also suffered a decline, to 36% last year from 62% in 1994, while East Anglia fell to 34% from 61% in the same period. The decrease was most pronounced in outer London, where home ownership dropped to 20% in 2016 from 55% in 1994.

Big falls were also recorded in other areas of the South East including Brighton, Southampton, Reading and Milton Keynes, with home ownership in the younger age group bracket declined from to 34% last year from 64% in 1994. The Resolution Foundation argued that such a ‘seismic shift’ in home ownership puts the younger generation in a very different position from that of the older, baby boomer generation, leaving many more young families living in the private rented sector. Lindsay Judge, a senior policy analyst at the Resolution Foundation, said: ‘London house prices always dominate the headlines, but with all eyes on the capital we’re missing the bigger picture. ‘From Bristol to East Anglia and up to West Yorkshire, large swathes of young families across the country simply cannot afford to buy their own home.’This has implications for their living standards in the here and now, but also in the future when their children grow up and they approach retirement without this key asset to draw upon in old age.

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“Why do you suppose nations employ foreign ministers and ambassadors, if not to conduct conversations at the highest level with other national leaders? And might these conversations include matters of great sensitivity, that is, classified information?”

A Monster Eating the Nation (Jim Kunstler)

Is there any question now that the Deep State is preparing to expel President Donald Trump from the body politic like a necrotic organ? The Golden Golem of Greatness has floundered pretty badly on the job, it’s true, but his mighty adversaries in the highly politicized federal agencies want him to fail spectacularly, and fast, and they have a lot of help from the NY Times / WashPo / CNN axis of hysteria, as well as such slippery swamp creatures as Lindsey Graham. There are more problematic layers in this matter than in a Moldavian wedding cake. America has been functionally ungovernable for quite a while, well before Trump arrived on the scene. His predecessor managed to misdirect the nation’s attention from the cumulative dysfunction with sheer charm and supernatural placidity — NoDrama Obama.

But there were a few important things he could have accomplished as chief exec, such as directing his attorney general to prosecute Wall Street crime (or fire the attorney general and replace him with someone willing to do the job). He could have broken up the giant TBTF banks. He could have aggressively sponsored legislation to overcome the Citizens United SOTUS decision (unlimited corporate money in politics) by redefining corporate “citizenship.” Stuff like that. But he let it slide, and the nation slid with him down a greasy chute of political collapse. Which we find embodied in Trump, a sort of tragicomic figure who manages to compound all of his other weaknesses of character with a childish impulsiveness that scares folks. It is debatable whether he has simply been rendered incompetent by the afflictions heaped on by his adversaries, or if he is just plain incompetent in, say, the 25th Amendment way.

I think we’ll find out soon enough, because impeachment is a very long and arduous path out of this dark place. The most curious feature of the current crisis, of course, is the idiotic Russia story that has been the fulcrum for levering Trump out of the White House. This was especially funny the past week with the episode involving Russian Foreign Minister Lavrov and Ambassador Kislyak conferring with Trump in the White House about aviation security around the Middle East. The media and the Lindsey Graham wing of the Deep State acted as if Trump had entertained Focalor and Vepar, the Dukes of Hell, in the oval office. Why do you suppose nations employ foreign ministers and ambassadors, if not to conduct conversations at the highest level with other national leaders? And might these conversations include matters of great sensitivity, that is, classified information? If you doubt that then you have no understanding of geopolitics or history.

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The writer starts off quite right, but then veers off into this incomprehensible stuff: “There are even legitimate reasons to believe that Trump’s campaign worked with Russian hackers to undermine Hillary Clinton. That may or may not turn out to be true, but it is least plausible and somewhat supported by the available evidence.”

Legitimate reasons that may not be true? “Somewhat” supported by evidence? That’s where I stop reading.

Democrats Are Falling For Fake News About Russia (Vox)

President Donald Trump is about to resign as a result of the Russia scandal. Bernie Sanders and Sean Hannity are Russian agents. The Russians have paid off House Oversight Chair Jason Chaffetz to the tune of $10 million, using Trump as a go-between. Paul Ryan is a traitor for refusing to investigate Trump’s Russia ties. Libertarian heroine Ayn Rand was a secret Russian agent charged with discrediting the American conservative movement. These are all claims you can find made on a new and growing sector of the internet that functions as a fake news bubble for liberals, something I’ve dubbed the Russiasphere. The mirror image of Breitbart and InfoWars on the right, it focuses nearly exclusively on real and imagined connections between Trump and Russia. The tone is breathless: full of unnamed intelligence sources, certainty that Trump will soon be imprisoned, and fever dream factual assertions that no reputable media outlet has managed to confirm.

Twitter is the Russiasphere’s native habitat. Louise Mensch, a former right-wing British parliamentarian and romance novelist, spreads the newest, punchiest, and often most unfounded Russia gossip to her 283,000 followers on Twitter. Mensch is backed up by a handful of allies, including former NSA spook John Schindler (226,000 followers) and DC-area photographer Claude Taylor (159,000 followers). There’s also a handful of websites, like Palmer Report, that seem devoted nearly exclusively to spreading bizarre assertions like the theory that Ryan and Sen. Majority Leader Mitch McConnell funneled Russian money to Trump — a story that spread widely among the site’s 70,000 Facebook fans. Beyond the numbers, the unfounded left-wing claims, like those on the right, are already seeping into the mainstream discourse.

In March, the New York Times published an op-ed by Mensch instructing members of Congress as to how they should proceed with the Russia investigation (“I have some relevant experience,” she wrote). Two months prior to that, Mensch had penned a lengthy letter to Vladimir Putin titled “Dear Mr. Putin, Let’s Play Chess” — in which she claims to have discovered that Edward Snowden was part of a years-in-the-making Russian plot to discredit Hillary Clinton. Last Thursday, Sen. Ed Markey (D-MA) was forced to apologize for spreading a false claim that a New York grand jury was investigating Trump and Russia. His sources, according to the Guardian’s Jon Swaine, were Mensch and Palmer:

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First, media exposure was a main factor in winning Trump the election. Now, not so much.

Harvard Study Reveals Extent of Anti-Trump Media Bias (HeatSt.)

A major new study out of Harvard University has revealed the true extent of the mainstream media’s bias against Donald Trump. Academics at the Shorenstein Center on Media, Politics and Public Policy analyzed coverage from Trump’s first 100 days in office across 10 major TV and print outlets. They found that the tone of some outlets was negative in as many as 98% of reports, significantly more hostile than the first 100 days of the three previous administrations:

The academics based their study on seven US outlets and three European ones. In America they analyzed CNN, NBC, CBS, Fox News, the New York Times, the Washington Post and the Wall Street Journal. They also took into account the BBC, the UK’s Financial Times and the German public broadcaster ARD. Every outlet was negative more often than positive. Only Fox News, which features some of Trump’s most enthusiastic supporters and is often given special access to the President, even came close to positivity. Fox was ranked 52% negative and 48% positive. The study also divided news items across topics. On immigration, healthcare, and Russia, more than 85% of reports were negative. On the economy, the proportion was more balanced – 54% negative to 46% positive:

The study highlighted one exception: Trump got overwhelmingly positive coverage for launching a cruise missile attack on Syria. Around 80% of all reports were positive about that.

The picture was very different for other recent administrations. The study found that President Obama’s first 100 days got a good write-up overall – with 59% of reports positive. Bill Clinton and George W Bush got overall negative coverage, it found, but to a much lesser extent than Trump. Clinton’s first 100 days got 40% positivity, while Bush’s got 43%. Trump has repeatedly claimed that his treatment by the media is unprecedented in its hostility. This study suggests that, at least when it comes to recent history, he’s right.

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Comey has a past.

Comey’s 2007 Brush With Scandal: Jim’s Loyalty Was More To Chuck Schumer (SD)

[..] the current episode is not the first time Comey and his associates plotted to oust a sitting Republican official through highly orchestrated political theater and carefully crafted narratives in which Comey is the courageous hero bravely fighting to preserve the rule of law. To understand how Comey came to be FBI director in the first place, and how he operates in the political arena, it is important to review the last scandal in which Comey had a front-row seat: the 2007 U.S. attorney firings and the fight over the 2004 reauthorization of Stellar Wind, a mass National Security Agency (NSA) surveillance program designed to mitigate terrorist threats in the wake of the 9/11 attacks. The pivotal scene in the Comey-crafted narrative, a drama that made Comey famous and likely paved the road to his 2013 appointment by President Barack Obama to run the FBI, occurred in a Beltway hospital room in early 2004.

In Comey’s view, Comey was the last honest man in Washington, the only person standing between a White House that rejected any restraints on its power, and the rule of law protecting Americans from illegal mass surveillance. A former White House counsel and attorney general with extensive first-hand experience dealing with Comey, however, paints a very different picture of what happened in that hospital room, and disputes numerous key details. In this account, Comey’s actions showcase a duplicitous, secretive schemer whose true loyalties were not to the officials to whom he reported, but to partisan Democrats like Senate Minority Leader Chuck Schumer (D-N.Y.). To fully understand and appreciate Jim Comey’s approach to politics, the writings and testimony of Alberto Gonzales, who served as both White House counsel and attorney general during the events in question and is intimately aware of Comey’s history of political maneuvering, is absolutely essential.

Gonzales’s descriptions of his interactions with Comey, included in his 2016 book “True Faith And Allegiance,” are detailed and extensive. While his tone is measured, the language he uses to describe Comey’s actions in 2004 and 2007 leaves little doubt about the former top Bush official’s views on Comey’s character. Gonzales’s opinion is clearly colored by the fact that Comey cravenly used him to jumpstart his own political career by going public with surprise (and questionable) testimony that Gonzales had attempted to take advantage of a deathly ill man in order to ram through authorization of an illegal surveillance program. Bush’s Attorney General John Ashcroft had taken ill and was in the hospital at a pivotal time. The legal authorization of a surveillance program meant to find and root out terrorist threats was days from expiring.

What happened in Ashcroft’s hospital room in March of 2004 later became political fodder for a hearing in which Senate Democrats used Comey to dredge up the 2004 hospital meeting to tar Gonzales’ credibility and suggest he was unfit to continue serving as attorney general. As the 2004 and 2007 sagas show, Comey is clearly no stranger to using the unarguably legal dismissal of government employees as the backdrop for casting himself as the story’s protaganist standing up to the forces of corruption. “[I] told my security detail that I needed to get to George Washington Hospital immediately. They turned on the emergency equipment and drove very quickly to the hospital,” Comey testified. “I got out of the car and ran up — literally ran up the stairs with my security detail.” “I was concerned that, given how ill I knew the attorney general was, that there might be an effort to ask him to overrule me when he was in no condition to do that,” Comey said.

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It’s a politics and media crisis.

Constitutional Crisis In Washington? More Like Attempted Coup (David Goldman)

This is NOT a Constitutional crisis, contrary to press hype, but an attempted coup, as a senior Republican statesman told a private briefing this week. As Prof. Jonathan Turley of George Washington University wrote yesterday at TheHill.Com, the much-ballyhooed Comey memo is “pretty thin soup” as far as obstruction of justice is concerned. “Encouraging leniency or advocating for an associate may be improper,” Prof. Turley added, but it doesn’t come close to the legal threshold for impeachment, especially because no criminal proceedings were underway or even contemplated against Gen. Flynn. What exactly is going on? The Democrats never accepted the Trump election victory, and neither did the McCain wing of the Republican Party, which was humiliated and sidelined by Trump. The Wall Street Journal editorial page published a signed op-ed yesterday claiming that Trump’s alleged leak of covert intelligence to Russian Foreign Minister Lavrov showed his unfitness for office.

Presidents and Cabinet members leak secret intelligence frequently, but whether they are held to account for it is a political matter. Obama and his then Defense Secretary Leon Panetta leaked the fact that Seal Team 6 had killed Osama bin Laden as well as the fact that a Pakistani physician had tipped the US off to his whereabouts, life-threatening leaks for which Obama was given a free pass. The object of all of this, said the Republican statesman, is to persuade a sufficient number of Republican congressman and senators to abandon Trump and declare him “unfit” for office. Nothing quite like this ever has happened in American politics. Trump will NOT be caught in an impeachable offense, but his detractors will NOT give up–so a prolonged “cold civil war” (Prof. Angelo Codevilla’s phrase) is likely to paralyze policy-making in Washington for some time. That can’t be good for the stock market.

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He shouldn’t last the weekend.

Brazil Plea-Bargain Testimony Says President Took $4.6 Million In Bribes (R.)

Brazil’s top court released plea-bargain testimony on Friday accusing President Michel Temer and his two predecessors of receiving millions of dollars in bribes, the most damaging development yet in a historic political corruption probe. The testimony made public by the Supreme Court is from executives of the world’s largest meatpacking company, and raises serious doubts about whether Temer can maintain his grip on the presidency. The scandals that have engulfed Brazil’s political class and many business elites reduce the chances that Temer, a conservative who took office after leftist former President Dilma Rousseff was impeached last year, can push through economic reforms crucial for Latin America’s biggest country to recover from its worst recession on record.

The Supreme Court on Thursday said it approved an investigation of Temer for corruption and obstruction of justice. Calls for his resignation intensified, including an editorial in the O Globo newspaper, which is normally criticized by leftists for backing conservative politicians. “This is easily the worst moment in Brazil since we returned to democracy,” said Claudio Couto, a political scientist at the Getulio Vargas Foundation, a top university, calling the claims “the mother of all plea bargains.” “This testimony is hitting everyone, all the major political players and, most importantly, a sitting president,” he added.

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How is it possible that in no western media reports on Venezuela the CIA is ever mentioned? Think they left when Chavez died? Think the country implodes like this all by itself?

Maduro to Trump: ‘Get Your Dirty Hands Off Venezuela!’ (R.)

Venezuelan President Nicolas Maduro blasted Donald Trump on Friday after a fresh round of U.S. sanctions and strong condemnation of his socialist government from the U.S. leader. “Enough meddling … Go home, Donald Trump. Get out of Venezuela,” Maduro thundered in a speech carried on live TV. “Get your dirty hands out of here.” The Trump administration imposed sanctions on the chief judge and seven other members of Venezuela’s Supreme Court on Thursday as punishment for annulling the opposition-led Congress in a series of rulings this year. The new sanctions package was aimed at stepping up pressure on Maduro and his loyalists following a crackdown on street protests and efforts to consolidate his rule of the South American oil-producing country. At the White House on Thursday, Trump expressed dismay at how once-booming Venezuela was now mired in poverty, saying “it’s been unbelievably poorly run” and calling the humanitarian situation “a disgrace to humanity.”

Maduro had initially urged the world to give Trump a chance after he was elected in November but his government unleashed its strongest condemnation to date of the Republican president. “President Trump’s aggressions against the Venezuelan people, its government and its institutions have surpassed all limits,” said a government statement that accused Washington of seeking to destabilize Venezuela and foment foreign intervention. The statement also accused Washington of financing the Venezuelan opposition while ignoring problems at home like income inequality and rights violations. “The extreme positions of a government just starting off only confirmed the discriminatory, racist, xenophobic, and genocidal nature of U.S. elites against humanity and its own people, which has now been heightened by this new administration which asserts white Anglo-Saxon supremacy,” the statement said.

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Classic. Using fear, of terrorism, of pornography, etc., to clamp down on everyone’s freedom, according to a certain party’s views. No privacy for you, guys. Use your votes wisely.

Theresa May To Create New, Government Controlled Internet in UK (Ind.)

Theresa May is planning to introduce huge regulations on the way the internet works, allowing the government to decide what is said online. Particular focus has been drawn to the end of the manifesto, which makes clear that the Tories want to introduce huge changes to the way the internet works. “Some people say that it is not for government to regulate when it comes to technology and the internet,” it states. “We disagree.” Senior Tories confirmed to BuzzFeed News that the phrasing indicates that the government intends to introduce huge restrictions on what people can post, share and publish online. The plans will allow Britain to become “the global leader in the regulation of the use of personal data and the internet”, the manifesto claims.

It comes just soon after the Investigatory Powers Act came into law. That legislation allowed the government to force internet companies to keep records on their customers’ browsing histories, as well as giving ministers the power to break apps like WhatsApp so that messages can be read. The manifesto makes reference to those increased powers, saying that the government will work even harder to ensure there is no “safe space for terrorists to be able to communicate online”. That is apparently a reference in part to its work to encourage technology companies to build backdoors into their encrypted messaging services – which gives the government the ability to read terrorists’ messages, but also weakens the security of everyone else’s messages, technology companies have warned.

The government now appears to be launching a similarly radical change in the way that social networks and internet companies work. While much of the internet is currently controlled by private businesses like Google and Facebook, Theresa May intends to allow government to decide what is and isn’t published, the manifesto suggests.

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They never thought about this?

Arctic Stronghold of World’s Seeds Flooded After Permafrost Melts (G.)

It was designed as an impregnable deep-freeze to protect the world’s most precious seeds from any global disaster and ensure humanity’s food supply forever. But the Global Seed Vault, buried in a mountain deep inside the Arctic circle, has been breached after global warming produced extraordinary temperatures over the winter, sending meltwater gushing into the entrance tunnel. The vault is on the Norwegian island of Spitsbergen and contains almost a million packets of seeds, each a variety of an important food crop. When it was opened in 2008, the deep permafrost through which the vault was sunk was expected to provide “failsafe” protection against “the challenge of natural or man-made disasters”. But soaring temperatures in the Arctic at the end of the world’s hottest ever recorded year led to melting and heavy rain, when light snow should have been falling.

“It was not in our plans to think that the permafrost would not be there and that it would experience extreme weather like that,” said Hege Njaa Aschim, from the Norwegian government, which owns the vault. “A lot of water went into the start of the tunnel and then it froze to ice, so it was like a glacier when you went in,” she told the Guardian. Fortunately, the meltwater did not reach the vault itself, the ice has been hacked out, and the precious seeds remain safe for now at the required storage temperature of -18C. But the breach has questioned the ability of the vault to survive as a lifeline for humanity if catastrophe strikes. “It was supposed to [operate] without the help of humans, but now we are watching the seed vault 24 hours a day,” Aschim said. “We must see what we can do to minimise all the risks and make sure the seed bank can take care of itself.”

The vault’s managers are now waiting to see if the extreme heat of this winter was a one-off or will be repeated or even exceeded as climate change heats the planet. The end of 2016 saw average temperatures over 7C above normal on Spitsbergen, pushing the permafrost above melting point. “The question is whether this is just happening now, or will it escalate?” said Aschim. The Svalbard archipelago, of which Spitsbergen is part, has warmed rapidly in recent decades, according to Ketil Isaksen, from Norway’s Meteorological Institute. “The Arctic and especially Svalbard warms up faster than the rest of the world. The climate is changing dramatically and we are all amazed at how quickly it is going,” Isaksen told Norwegian newspaper Dagbladet.

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I don’t know if they still talk.

Varoufakis Claims Tsipras Pressured Him To Accept Creditors’ Demands (K.)

Former finance minister Yanis Varoufakis on Friday hit out at Prime Minister Alexis Tsipras, claiming that the premier had tried to scare him into yielding to creditors’ demands. “In the summer of 2015 Alexis Tsipras told me that I should fear a new Goudi,” Varoufakis told VICE magazine, referring to a military coup that took place in Greece in 1909 amid simmering social tensions. The former minister, who has launched his own party, DiEM25, said the alleged statement struck him as a threat aimed at forcing him to agree with Tsipras’s decision to give in to creditors. In a Skai TV interview last week, Varoufakis said Greece “will become Kosovo, a protectorate run by an employee of the European Union.”

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Greece’s problem is public debt, not private debt. The people did not cause the crisis, they only pay for it.

‘They Stole My Money’: Greek Dreams Of Retirement Turn Sour (AP)

It was supposed to be a time to look forward to. After decades of work, retirement was for many meant to provide a chance to slow down and enjoy life. A holiday, an evening out with old friends, the odd fishing trip. Instead, many Greek pensioners say they are struggling to get by. The government has repeatedly cuts old age benefits as part of the country’s three international bailouts and many retirees now say they are at breaking point financially. Some have unemployed children they try to help on shrinking pensions, others are seeing rising taxes eat into lifetime savings. A new austerity bill approved in parliament early Friday cuts their pensions even further, putting their plight in focus.

Greece once had a generous pension system – too generous to be sustainable, especially with an aging population. Retirement was possible from as early as the age of 55 after 30 years of work. Many had extra perks: public sector employees could retire as early as 52. Some women with young children could retire with a reduced pension at 50. But the financial crisis left Greece reliant on international creditors, who pushed for economic change – not least to pensions. The standard retirement age is now 67. Many early retirement provisions have been abolished. Including pensions, incomes have dropped 40% over the last seven years of crisis. Here is a look at the problem through the stories of four pensioners.

Mina Griva, 78, widow and former factory worker Griva’s husband, who worked in a steel plant in Greece, died eight years ago. Her initial widow’s pension of €998 ($1,110) and a €300 supplementary pension have been cut to €560 and €150 respectively. “They’ve destroyed us,” said Griva, who now helps out daily at a municipal care center for the elderly. “Pensioners are crying.” A mother of five, she uses her pension to help her son, who’s been unemployed for five years. She moved out of her small Athens apartment to give it to him, and lives in a single room on the last floor of the building. Now, she avidly watches political talk shows on TV to figure out how much further her pension will drop.

Griva left Greece in 1964 and worked for 15 years in Germany, initially as a cleaner in a cheese factory and later working an ironing press in a clothing factory. Times were tough in Greece then, and she worked double eight-hour shifts to send money home to her family. She saved, and eventually had enough to secure homes for her children, and a small apartment for herself. She thought she was securing her family’s future. “We left here to build something,” said Griva. Instead, the austerity measures ate into their lives, with new property taxes, layoffs and income cuts. “Now you can’t even buy a bread ring for your grandchildren,” she said. “I don’t know where this will go. Things are very, very hard.”

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Damn you, Brussels. Damn you, Merkel, Rutte, Hollande, Cameron, Renzi. You created this.

Teen Refugees Trapped In Greece Turn To Prostitution (Spiegel)

Mohammed is approached by a middle-aged man wearing greasy beige pants, a blue shirt and a blue baseball cap. Although the man speaks Greek, the 17-year-old boy from Afghanistan knows exactly what he wants. “No,” Mohammad repeatedly says in English, his voice cracking and his eyes filling with tears. But the man keeps pushing. “Come with me. I will give you food, pay you.” The man only stops when he realizes he is being watched. He then grudgingly walks away and sits down on a nearby bench. From there, he starts scouring the field again, searching for another boy. It was broad daylight on a sunny Tuesday morning on Victoria Square in the heart of Athens. The square has been a meeting place and a makeshift home for thousands of migrants since the refugee crisis hit Greece two years ago – and now it is increasingly becoming a prostitution hub for underage refugees.

Mohammad hasn’t gone that far yet, but he says it is only a matter of time until he goes home with a man. He has just 30 euros left in his pocket, and he is quickly losing hope. “When this money runs out, I fear I will have no other choice but do what the others are doing. Have sex with these older men. What should I do? I have no place to stay, nothing to eat. Should I just die in the park?” he says, finally bursting into tears. Mohammed says he lost his parents in an attack in Afghanistan. He has been in Athens for a month, he says, after fleeing his home alone and reaching the Greek island of Lesbos last February, where he registered as a minor. He then claimed to be an adult to escape the violence in the island’s notorious Moria camp. Since then, despite looking very much like a teenager, with pimples, a small stature and thin voice, he has been turned away from shelters for minors.

When night comes, Mohammad rolls himself up in a blanket on a corner of the square. His only possession is a yellow envelope that he guards closely. Inside, he keeps his refugee registration papers and a single-page CV. According to Mohammad’s papers, he applied for asylum in Lesbos in November 2016. The date set for his interview is January 4, 2018. It is mostly boys from Afghanistan, Pakistan and Syria – who either came alone or were separated from their families along their perilous journey to Europe – who are now waiting for their refugee claims to be processed in Greece. In the meantime, the authorities are supposed to look after them, but there are only 53 shelters with 1,272 spots. Of the approximately 2,000 registered minors, about 800 are housed in large camps, are in police custody or are homeless.

[..] Everyone – the authorities, the NGO workers, the police – know what is going on. But nobody seems willing or able to do anything about it. And this despite the fact that the adult clients are breaking the law, despite the fact that various institutions have devoted themselves to protecting young refugees. But prostitution is booming because the system is failing. Because Greece doesn’t have the resources to take care of underage refugees. Because the processing of asylum applications is chaotic and authorities from one agency don’t know what authorities from other agencies are doing. And because the boys need to file criminal complaints before their clients can be prosecuted.

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Apr 302017
 
 April 30, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Self portrait 1965

 

Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)
US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)
All the Plenary’s Men (BestEvidence)
The National Blues (Jim Kunstler)
‘Taxation Is Theft’ Meme Goes Mainstream (TAM)
Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)
ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)
Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)
Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)
Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)
Matteo Renzi Tries The Macron Approach (Pol.)
EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)
Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)
PwC: Greece Must Reform Or Forget Recovery (K.)

 

 

“On April 28, HOOPP CEO Jim Keohane told BNN in an interview that “for every $1 we lend Home Capital, they’re going to provide us with $2 of mortgages as collateral. That’s where we get our protection from.” So the C$2 billion loan would be backed by C$4 billion in mortgages. In other words, in the eyes of Keohane, these mortgages might be actually worth, when push comes to shove, 50 cents on the dollar.”

Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)

Home Capital is Canada’s biggest “alternative” mortgage lender. It’s not a bank – which today is part of its problem because it cannot create money to lend out; it has to obtain it first by attracting deposits and borrowing money through other channels. Through its subsidiary, Home Trust, it specializes in high-profit mortgages to risky borrowers, with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. This includes subprime borrowers. Since revelations of liar loans surfaced in 2015, things have gone to heck. Now it’s experiencing a run on its deposits. Teetering at the abyss, it obtained a $2 billion bailout loan on Thursday. The terms are onerous. And on Friday, the crux of the deal emerged – the amount of mortgages it has to post as collateral. It’s a doozie.

It sheds some light on what insiders think mortgages and the homes that back them are worth when push comes to shove. A bone-chilling wake-up call for the Canadian housing and mortgage market. This is when the whole construct started falling apart: On July 15, 2015, Home Capital announced that originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured mortgages had plummeted 55%, and that it had axed an unspecified number of brokers. Shares plunged 25% in two days. On July 30, 2015, it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September 2014 into “falsification of income information.” Liar loans. It suspended 45 mortgage brokers who’d together originated in 2014 nearly C$1 billion in residential mortgages, or 12.5% of its total.

The scandal festered. Short sellers circled in formation. On April 26, 2017, Home Capital announced that it’s experiencing a run on its deposits. As of the end of March, its subsidiary Home Trust sat on about C$2 billion in high-interest savings accounts (HISA) it is offering to regular savers. But these folks were pulling their money out, it said, and the pace of the run was accelerating. It also disclosed that it was finalizing a $2 billion bailout loan from the Healthcare of Ontario Pension Plan (HOOPP) which has about $70 billion in assets. The loan would “have a material impact on earnings….” So an expensive loan.

Home Trust would pay a non-refundable commitment fee of $100 million; would be required to make an initial draw of $1 billion at an interest rate of 10%; and would pay a 2.5% standby fee on undrawn funds. So the initial $1 billion for the first 12 months would cost it $225 million in fees and interest, a juicy 22.5%! Once the credit line is fully utilized, the cost of the loan would drop to 15%. Its shares collapsed by 65%. On Friday, April 28, it announced that another C$290 million in deposits were yanked out on Thursday, after C$472 had been yanked out on Wednesday. Its HISA deposits were down to C$521 million, having plunged 75% since late March.y

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Kept the lights on for 100 days.

US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)

Congress gave itself one more week to agree on a spending bill to fund the U.S. government through September, leading into President Donald Trump’s 100th day in office Saturday by keeping the lights on. The 382-30 House vote Friday was followed quickly by unanimous Senate passage of the stopgap spending bill hours before the shutdown deadline. Trump signed the bill Friday evening, according to a White House official. “We feel very good” that lawmakers will be able to pass a full spending bill next week, White House press secretary Sean Spicer told reporters earlier in the day. Leaders of both parties say they’re close to agreement on a broader spending plan after Republicans signaled they would accept Democratic demands that the Trump administration promise to continue paying Obamacare subsidies and to drop its bid for immediate funds for a wall on the Mexican border.

“You shouldn’t create artificial deadlines,” Alabama Republican Representative Gary Palmer said in support of the short-term measure. “If there are things we need to work through, we need to take the time to work through them.” Vermont Senator Patrick Leahy, the top Democrat on the Appropriations Committee, said both sides have made progress on issues including more funds for the National Institutes of Health, opioid funding for states, Pell college grants and money for transit. But he said the talks remain snagged over Republican demands for policy “riders.” “Let’s not govern by partisan manufactured crisis,” he said on the Senate floor. “Stop posturing,” he added as he called for a speedy resolution on the bill sometime next week. “This is no way to govern,” Leahy said before the Senate vote.

Sixteen House Republicans voted against Friday’s stopgap measure. The short-term fix to ward off a government shutdown – on a deadline set months ago – shows the stubborn dysfunction of Congress even with a unified Republican government. House GOP leaders on Thursday abandoned efforts to vote this week on their plan to repeal and replace Obamacare for lack of support in their party. A vote is still possible next week.

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Eye-opening to say the least. Make the coffee extra strong before viewing. Lots of ground gets covered, quickly. And don’t mothball those pitchforks and torches just yet.

All the Plenary’s Men (BestEvidence)

“The King can do no wrong.”
—William Blackstone, Commentaries on the Laws of England

“When the president does it, that means that it is not illegal.”
—Ex-President Richard Nixon, interview with David Frost

The question at bar is why the U.S. Department of Justice has failed to prosecute any too-big-to-fail banks or—more importantly—their bankers, even for admitted crimes. It’s a crucial question, because after eight straight years of unremitting prosecutorial failure, it looks very much as if a select group of top banks can, in fact, do no wrong. If that’s the case, then our constitutional republic isn’t merely in trouble. It’s dead. A person or group of people who satisfy Blackstone’s criterion for ultimate sovereign power—the power to commit crimes with impunity—can’t exist in a nation where the law reigns supreme. And yet here we are a decade after the financial crisis began in earnest, and not one TBTF bank executive has gone to jail.

Legally, the TBTF banks are indistinguishable from the King, since the power to commit crimes with impunity swallows all other sovereign powers; such a power isn’t even supposed to exist in the U.S., and yet it does. Moreover, since there can’t be two kings in a kingdom, the entire U.S. government, from the president on down, is just one of the King’s men under this formulation of power. The real job of the U.S. government, then, isn’t to represent the will of the people at all, it’s to do the King’s bidding. A nation that isn’t governed by law is governed by instead by a king—it’s one or the other—and the president’s inferiority to such an above-the-law sovereign was confirmed over 40 years ago with Nixon’s ouster. The president, unlike the King, answers to the law (despite Nixon’s opinion).

Now, you may say that while the TBTF banks might arguably have the de facto power of the King, that’s a far cry from wielding such power formally (i.e., having de jure criminal immunity). The reply to that objection is set forth in this film, “All the Plenary’s Men,” which is a sequel to “The Veneer of Justice in a Kingdom of Crime.” Another objection, raised by the DOJ itself, is that it HAS prosecuted TBTF bankers, citing cases like that of Raj Rajaratnam. These cases, however, in fact reveal the DOJ acting on behalf of the criminal global banking cartel. On that score, the DOJ’s abysmal track record is by now so extensive and so thorough that it’s possible to spot legal patterns in the DOJ’s protracted miscarriage of justice, and, as you’re about to see, those patterns are very deeply disturbing indeed.

What’s been going on cuts right past a garden variety constitutional crisis like Watergate straight to a crisis of sovereignty. The backdrop for all of this is HSBC’s exoneration in December of 2012 for laundering money for drug dealers and terrorists, about which the House Financial Services Committee issued a report in July of 2016. Whether it was due to the political circus in town at the time, or to the Republican authorship of that report (albeit without dissent), it didn’t get nearly the scrutiny it deserved. You see, prosecutors working on the HSBC case were actually going to indict the bank, but they got overruled, and HSBC and its team of criminals skated. The story of how exactly that reversal came about reveals, if not the King himself, then certainly many of the King’s top men.

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“It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.”

The National Blues (Jim Kunstler)

You can read it in the bodies of the people in the new town square, i.e. the supermarket: people prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sunk in despair, a deadly consolation for lives otherwise filled by empty hours, trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort. These are people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter. They have no prospects for a better life — and, anyway, the sheer notion of that has been reduced to absurd fantasies of Kardashian luxury, i.e. maximum comfort with no purpose other than to enable self-dramatization. And nothing dramatizes a desperate life like a drug habit. It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.

[..] The eerie thing about reading the landscape of despair is that you can see the ghosts of purpose and meaning in it. Before 1970, there were at least five factories in my little town, all designed originally to run on the water power (or hydro-electric) of the Battenkill River, a tributary of the nearby Hudson. The ruins of these enterprises are still there, the red brick walls with the roofs caved in, the twisted chain-link fence that no longer has anything to protect, the broken masonry mill-races. The ghosts of commerce are also plainly visible in the bones of Main Street. These were businesses owned by people who lived in town, who employed other people who lived in town, who often bought and sold things grown or made in and around town.

Every level of this activity occupied people and gave purpose and meaning to their lives, even if the work associated with it was sometimes hard. Altogether, it formed a rich network of interdependence, of networked human lives and family histories. What galls me is how casually the country accepts the forces that it has enabled to wreck these relationships. None of the news reports or “studies” done about opioid addiction will challenge or even mention the deadly logic of Wal Mart and operations like it that systematically destroyed local retail economies (and the lives entailed in them.) The news media would have you believe that we still value “bargain shopping” above all other social dynamics. In the end, we don’t know what we’re talking about.

I’ve maintained for many years that it will probably require the collapse of the current arrangements for the nation to reacquire a reality-based sense of purpose and meaning. I’m kind of glad to see national chain retail failing, one less major bad thing in American life. Trump was just a crude symptom of the sore-beset public’s longing for a new disposition of things. He’ll be swept away in the collapse of the rackets, including the real estate racket that he built his career on. Once the collapse gets underway in earnest, starting with the most toxic racket of all, contemporary finance, there will be a lot to do. The day may dawn in America when people are too busy to resort to opioids, and actually derive some satisfaction from the busy-ness that occupies them.

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Funny but true.

‘Taxation Is Theft’ Meme Goes Mainstream (TAM)

The month of April is a nightmare for anyone with a conscience, as we only have until “tax day” — which usually falls on April 15 — to give the taxman what he says he deserves. So if you pay taxes to Uncle Sam and you’re also aware you’re paying for mass murder in the Middle East and in U.S. streets due to the drug war, you should also feel sick to your stomach as you write that check. To a restaurant customer, this may have served as enough incentive to remind his server that taxation is always immoral — but he didn’t stop there. Last week, a customer at a Missouri restaurant gave the waitress a “personal gift” instead of a tip, writing the now popular line “Taxation is theft” in the tip section of the receipt. In a second note, the fiscally conscious customer added: “This is not a tip. This is a personal gift and not subject to federal or state income taxes.”

With major progressive news outlets like ATTN: reporting on this story, left-leaning reporters started to debate wages in the food and service industries, discussing the fact that tips end up being factored as wages, meaning they are always taxable. But as that discussion developed, reporters were quick to realize that when personal gifts are in the mix, the taxman can’t take part of those earnings away. After all, a gift would have to exceed $13,000 to be subject to taxation, meaning that even if the customer had spent hundreds, the “personal gift” would not amount to anything close to the requirements stipulated by the IRS.

With that, ladies and gentlemen, it becomes easier to not only tip with class, but also with substance, giving your waiter a lesson on what’s moral and how to legally go around the rules to make sure they enjoy their full tip — not just the percentage deemed to be fit by the federal government. As this story becomes part of the popular movement ignited by libertarians, expect to see more progressive news outlets becoming familiarized with the actual concept of taxation. What’s left for us to find out is if they are going to change their tune and start attacking people like this customer when the two-party pendulum swings once again and a fully Democratic slate takes over Washington. Are they going to remain consistent in discussing taxation from the point of view of the worker, or are they going to side with the leech? Only time will tell.

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From separate map picked up on Twitter: “When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.”

Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)

Turkish President Recep Tayyip Erdogan said on Saturday if Ankara and Washington were to join forces they could turn the Syrian city of Raqqa into a “graveyard” for Islamic State of Iraq and the Levant (ISIL). Erdogan also suggested he could launch cross-border operations against Kurdish rebels at any time, just days after the military carried out air strikes in Syria and Iraq, drawing concern from the United States. “America, the coalition, and Turkey can join hands and turn Raqqa into a graveyard for [ISIL],” Erdogan told a business summit in Istanbul. “They [ISIL] will look for a place to hide.” Erdogan’s comments come ahead of a meeting with US President Donald Trump on May 16 – their first face-to-face summit since the real estate mogul and reality TV star took office in January.

Ankara is hopeful about a relationship with Washington under Trump after ties frayed in the final years of Barack Obama’s administration, which limited cooperation between the NATO allies. The two countries have bitterly disagreed over the role of the Kurdish People’s Protection Units (YPG) in Syria. Turkey views the YPG as the Syrian extension of the Kurdish PKK group, which has waged a deadly insurgency against the Turkish state since 1984. But the US is concerned that Turkey’s military operations in Syria are more focused on preventing Syrian Kurds from forming an autonomous region in northern Syria, along Turkey’s border, that could embolden Turkey’s own Kurdish minority.


@Furiouskurd: When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.

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As the only party involved, the Kurds fight for their own land. And they have liberated lots of prisoners, women, children.

ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)

The Kurdish-led Syrian Democratic Forces (SDF) continued the anti-ISIL Euphrates Rage Operation in Western Raqqa and managed to drive the terrorists out of more neighborhoods in al-Tabaqa city, killing over 40 of them. The SDF engaged in heavy fighting with ISIL in al-Tabaqa city and managed to take control of the neighborhoods of al-Nababeleh, al-Zahra and al-Wahab, killing 23 militants. In the meantime, the Kurdish fighters managed to push ISIL back from al-Wahabah and Radio Station in al-Tabaqa, killing 20 militants and capturing 10 others. In relevant developments in the province on Tuesday, the SDF stormed ISIL’s defense lines and took full control over the villages and settlements of Kabash al-Sharqi, Um al-Tonok, Rayan, Tishrin farm, Mosheirehe al-Shamaliyeh, Mosheirefeh al-Janoubiyeh, al-Rahiyat, Beir Jarbou, Jarwa, al-Hattash, Hazimeh, Khalwa Abideh, Holo Abd, Abareh, al-Kaleteh, Sukriyeh and Zohra, inflicting major losses on ISIL.

The Kurdish forces also won back a key neighborhood in the Southern sector of Tabaqa city following a large advance on its Western urban. In the meantime, the SDF managed to seize control over the Alexandria suburb, and now the Kurds have swept through the adjacent Wahab neighborhood. Kurdish forces also secured the island of Jazirat al-Ayd, a few kilometers North of Lake Assad. According to latest reports, around 40% of Tabaqa city has been brought under Kurdish control with just a few hundred ISIL militants left in its Northern sector and around the city center.

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‘..double suspension..’

Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)

Russia has supported a Chinese initiative in the UNSC intended to stabilize the situation on the Korean peninsula. It calls on the North to refrain from missile and nuclear testing, while the US and South Korea should halt military drills in the area.
“Members of the [UN] Security Council have unanimously called upon DPRK [Democratic People’s Republic of Korea] to stop missile and nuclear tests and to fulfil UNSC resolutions,” the Russian Foreign Ministry said in a statement on Saturday following a United Nations Security Council (UNSC) session held in New York earlier on Friday. The UNSC called for a political and diplomatic solution to the nuclear crisis on the Korean Peninsula, the ministry added.

“In this context, the Russian Federation supported a Chinese proposal for a ‘double suspension’ (Pyongyang is to stop missile and nuclear tests and the US and South Korean militaries are to halt drills near North Korea) as a starting point for political negotiations.” However, the council was not able to agree on a common solution, the ministry added. The UNSC session was joined by Russian Deputy Foreign Minister Gennady Gatilov, who urged Washington and Seoul to reconsider their decision to station a THAAD anti-missile system on the Korean Peninsula, warning that it will serve as a “destabilizing factor” in the region.

Gatilov said the Terminal High Altitude Area Defense (THAAD) had been deployed “in line with the vicious logic of creating a global missile shield,” while warning that it is also undermining the security and deterrent capacities of adjacent states, such as China, thus threatening “the existing military balance in the region.” “It is not only we who perceived this step very negatively. We are once again urging both the United States and the Republic of Korea to reconsider its expediency, and other regional states not to yield to the temptation of joining such destabilizing efforts,” the deputy foreign minister said. Ahead of the UNSC session, Chinese Foreign Minister Wang Yi told reporters that a peaceful solution to the Korean crisis is the “only right choice.” “Peaceful settlement of the nuclear issue on the Korean Peninsula through dialogue and negotiations represents the only right choice that is practical and viable,” Wang said.

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Very few Brazil politicians are not involved in one scam or another.

Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)

Just over one year ago, Brazil’s elected President, Dilma Rousseff, was impeached – ostensibly due to budgetary lawbreaking – and replaced with her centrist Vice President, Michel Temer. Since then, virtually every aspect of the nation’s political and economic crisis – especially corruption – has worsened. Temer’s approval ratings have collapsed to single digits. His closest political allies – the same officials who engineered Dilma’s impeachment and installed him in the presidency – recently became the official targets of a sprawling criminal investigation. The President himself has been implicated by new revelations, saved only by the legal immunity he enjoys. It’s almost impossible to imagine a presidency imploding more completely and rapidly than the unelected one imposed by elites on the Brazilian population in the wake of Dilma’s impeachment.

The disgust validly generated by all of these failures finally exploded this week. A nationwide strike, and tumultuous protests in numerous cities, today has paralyzed much of the country, shutting roads, airports and schools. It is the largest strike to hit Brazil in at least two decades. The protests were largely peaceful, but some random violence emerged. The proximate cause of the anger is a set of “reforms” that the Temer government is ushering in that will limit the rights of workers, raise their retirement age by several years, and cut various pension and social security benefits. These austerity measures are being imposed at a time of great suffering, with the unemployment rate rising dramatically and social improvements of the last decade, which raised millions of people out of poverty, unravelling.

[..] During the past three years, Brazilians have been subjected to one revelation after the next of extreme corruption pervading the country’s political and economic class. Scores of corporate executives and long-time party leaders are imprisoned. They include the head of the Brazilian construction giant Odebrecht, the House Speaker who presided over Dilma’s impeachment, and the former governor of the state of Rio de Janeiro. The current House Speaker, and Senate President, and nine of Temer’s ministers are now targets of criminal investigations for bribery and money laundering, as are numerous governors.

In sum, the vast bulk of the top-shelf political and economic elite have proven to be radically corrupt. Billions upon billions of dollars have been stolen from the Brazilian public. Recently released recordings from the judicial confessions of Marcelo Odebrecht, scion of one of Brazil’s richest families, depict a country ruled almost entirely through bribes and criminality, regardless of the ideology or party of political leaders. And yet, even in the wake of this oozing and incomparable elite corruption, the price that is being paid falls overwhelmingly on the victims – ordinary Brazilians – while the culprits prosper.

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Melenchon seeks to hold on to his voters for the June parliamentary elections.

Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)

The leader of a far-left movement who won nearly 20% of the vote in the first round of France’s presidential election, Jean-Luc Mélenchon, told his seven million voters in a YouTube address on Friday that he would not tell them how to vote in the final-round run-off next weekend. As for himself, Mélenchon said that he would cast a ballot, and that it would not be for Marine Le Pen, the candidate of the far-right National Front, who courted his voters in a video of her own on Friday. But Mélenchon also refused to say, like the leaders of other parties across the political spectrum – and celebrities including the French soccer legend Zinedine Zidane – that he would vote for Le Pen’s centrist rival, the former banker Emmanuel Macron, to stop the far-right from gaining power.

Instead, Mélenchon predicted that forcing France to choose between a candidate of “the extreme right” and one of “extreme finance” would led to a political crisis, and left open the possibility that he would submit a blank ballot, a form of protest vote permitted under French electoral law. (Mélenchon’s platform included provisions for voting to be made mandatory, and for blank ballots to be recognized under law.) The appeal for unity, to construct a barrage, or dam, against the rising tide of the far-right, Mélenchon said, was, in fact, a disguised attempt to force voters like him, who profoundly disagree with Macron’s economic policies, to endorse his project. Amid fears that widespread abstention and protest votes for neither candidate could lower the threshold for Le Pen to win with 50% of the valid votes cast, Mélenchon’s refusal to join the sort of united front against Le Pen that led to her father’s defeat in 2002 caused anxiety to spike.

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Chameleons and parrots are us.

Matteo Renzi Tries The Macron Approach (Pol.)

Matteo Renzi toned down the EU-critical rhetoric of his final months as Italian prime minister during his visit to Brussels on Friday to drum up support for his bid to be restored as head of the Democratic Party (PD) in its primaries this weekend. With aides suggesting on social media that French presidential hopeful Emmanuel Macron’s pro-EU stance, which helped him beat Euroskeptic Marine Le Pen in the election’s first round, could be a boost for Renzi, he talked about “Angela, François and I” when referring to German Chancellor Angela Merkel and French President François Hollande. Renzi even stood in front of a display showing the EU flag, and felt the need to explain why, in the run-up to his failed constitutional referendum that cost him the prime ministership last December, he had removed the EU flag from behind his desk.

“It wasn’t anger, it was calculated gesture,” Renzi told PD followers at a hotel near the European Parliament, adding that it was in response to the European Commission demanding Italian action on its budget deficit when it had been hit by an earthquake. The Italian and international media have speculated about the similarities between Renzi and Macron, with Renzi’s slogan for the PD primary this Sunday — In Cammino (“on the way”) — almost a direct translation of the name of Macron’s centrist political movement, En Marche. One close Renzi aide, Giuliano Da Empoli, wrote on Facebook the day after Macron’s first-round victory on April 23 that the French result “shows that one can be at the same time a convinced pro-European and a harsh critic of the status quo.”

That was the tone Renzi tried to strike in Brussels on Friday, repeating his line that the EU “needs radical change” and taking a dig at Germany for its trade surplus, while warning about the dangers of populism. “With the radicals you win the primary elections but then you lose the elections,” he told the audience. In the French campaign, which comes to a head with the second-round vote on May 7, the candidate closest to Renzi’s Democratic Party was Benoît Hamon, who won the ruling Socialist Party’s primaries but took only 6% of the vote on election night. That must resonate for Renzi, who wants to regain control of the PD to prepare a bid for a new term as prime minister in elections due early next year.

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“Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters..” She’s right, all everyone’s done is side WITH Germany. Without a word.

EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)

European Union governments threw down the gauntlet to the U.K. ahead of Brexit talks, listing demands Prime Minister Theresa May must satisfy before they will discuss the trade deal she wants and urging her to be more realistic in her expectations. Any doubts about the scale of the task facing Britain in withdrawing from the EU after four decades were laid to rest at a Brussels summit of the region’s leaders on Saturday. A tough negotiating stance was endorsed unanimously, within minutes and to applause. The U.K. responded by saying it’s bracing for a confrontation. The complexity comes down to the fact that a departure from the world’s biggest trading bloc has never been done and was never supposed to happen. The EU is striving to ensure the U.K. is worse off outside it than inside, not least to avoid setting a precedent.

After agreeing to the terms of separation, then it’s a matter of getting down to the business of what a future relationship might look like. “Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters as she left the meeting. “The British people have made a decision, which we will have to respect. But we remaining 27 now get together in order to speak with one voice.” The Brexit discussions will begin soon after the U.K.’s June election, which May called in part to strengthen her mandate going into talks. The first orders of business will be guaranteeing the rights of 3 million EU citizens living in the Britain and calculating a financial settlement one leader said would be at least €40 billion euros ($44 billion). Only once “sufficient progress’’ is made on those thorny topics and reinforcing the border between the two Irelands will the EU’s attention turn to trade. That looks unlikely to happen before December.

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Merkel tries to deflect the blame for what’s gone wrong, blames local officials for sweeping things under the carpet. Yeah, she would never have had any reason to do just that herself. Plus, she blames ‘Europe’s haphazard policing of its outer borders’, something for which no-one carries more responsibility than … Merkel, the de facto boss of the EU. Mutti Merkel’s just another politician going wherever the wind blows.

Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)

German Chancellor Angela Merkel is talking tough on migrants and crime as she hits the campaign trail for two state elections next month, giving a foretaste of her bid for a fourth term in September. Merkel’s hardened rhetoric was on display in North Rhine-Westphalia, Germany’s most populous state, where her Christian Democratic Union is seeking to end seven years of Social Democratic rule on May 14. On Friday, she’s campaigning east of Hamburg in Schleswig-Holstein, where two polls this week suggest her party has a slim lead over the SPD ahead of a regional vote on May 7. At a CDU rally in the rural Westphalian town of Beverungen, Merkel reaffirmed her push to return migrants who don’t qualify for asylum and attacked the state’s Social Democrat-led government as soft on crime.

She said local officials “tried to sweep under the carpet” lapses in policing around mass sexual assaults on women in Cologne on New Year’s Eve in 2015, an incident that stoked an anti-immigration backlash. “The opportunity for improvement was there,” Merkel told the crowd on Thursday. “Things didn’t get better, so it’s time for a change.” As polls suggest that both Germany’s anti-immigration AfD party and her Social Democratic challenger Martin Schulz are in retreat for now, Merkel is using the opening to rally her CDU behind traditional themes of public safety. At a security conference this week, she said Europe’s haphazard policing of its outer borders compares unfavorably to U.S. immigration checks and must be strengthened.

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PricewaterhouseCoopers gets the first half right: as I’ve said numerous times, Greece cannot recover under present conditions imposed by the Troika. But then PwC loses the thread. Pity but predictable.

PwC: Greece Must Reform Or Forget Recovery (K.)

The extent of the destruction the Greek economy has suffered in the last few years, also undermining the effort to restructure it, becomes clear when comparing specific data, not on a quarterly or annual basis, but over the longer term. The country remains in a vicious cycle of recession, the economy will not grow by more than 1% this year, and any positive signs have proved temporary or insufficient to alter the overall picture. According to “Economic Outlook for Greece 2017-2018,” a study by PricewaterhouseCoopers (PwC), investment in the country’s economy dropped from €60 billion in 2010 to €20 billion last year. Investments are showing no signs of sustainable recovery as savings remain in the red and banks continue to deleverage their financial reports.

Consumption has been in constant decline, with a small recovery last year followed by a fresh drop in recent months. The average disposable income has gone down primarily due to the increased taxation and hikes in social security contributions, while the capital controls remain and banks are dependent on emergency liquidity assistance (ELA) for their financing. PwC notes that disposable incomes are unlikely to grow significantly anytime soon. There are just a few domestic investments that could fuel a recovery and no significant funding for investments is expected from abroad. At the same time it will be hard for fiscal performance to post a significant improvement without any deep structural reforms, including in the social security system.

The banks’ lack of liquidity, the delayed repayment of the state’s dues to its suppliers and the capital controls are likely to persist. PwC further argues that despite the delays in the second bailout review, Greece could avoid any unforeseeable tension and political events and achieve some growth, but not any greater than 1%, and the same challenges will remain next year too. An exit from the vicious cycle, says PwC, will require not only a change in the Greek debt’s sustainability terms, but also a drastic acceleration of structural reforms and the boosting of competitiveness and growth.

Read more …

Jun 192016
 
 June 19, 2016  Posted by at 9:00 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle June 19 2016


Harris&Ewing Car interior. Washington & Old Dominion R.R. 1930

Tracing The Global Market Thread That Could Be Unraveled By Brexit (R.)
Britain’s Rival EU Campaigns Restart (R.)
Hogs to Slaughter (HFarmer)
The Dumbest Monetary Experimental End Game In History (Bohm-Bawerk)
A Palace For Fannie (Mae) – Why The Imperial City Must Be Sacked (Stockman)
Over $50 Million Hacked Dashes Hopes in the World of Virtual Currency (NYT)
Assange Starts 5th Year Cooped In London Embassy (AFP)
Rome Set To Elect First Female Mayor (AFP)
Brazil’s Temer Goverment on Fire, 4th Minister Could Resign (TeleSur)
EU Trying To Bury Report On Turkey Migrant Returns (EUO)

Decentralization.

Tracing The Global Market Thread That Could Be Unraveled By Brexit (R.)

If Britons vote to take their country out of the European Union on June 23, no corner of the global financial market complex will emerge unscathed. The invisible thread that links assets as diverse as gold, bank stocks, the Japanese yen and government bonds would be yanked sharply by Brexit, an event the Bank of England said on Thursday risks “adverse spill-overs to the global economy”. With global interest rates and bond yields the lowest on record, central banks running low on crisis-fighting tools and the post-2008 economic recovery flagging, that thread could quickly unravel, with serious consequences for all markets. So why will the will of one country’s people in one referendum have such a profound impact on global markets?

The answer is partly how interconnected global markets are, and partly timing – the world economic cycle is already very long in the tooth and central banks have far fewer options open to them after nearly a decade of extraordinary policy support. Global interest rates are their lowest for 5,000 years, according to Bank of America, but central banks could still cut them further. That could mean the U.S. Federal Reserve reversing its slow-starting tightening cycle, and ECB and Bank of Japan rates going deeper into negative territory. Lower rates would also depress bond yields even further, tightening the screw on central and commercial banks. Over $8 trillion worth of sovereign bonds already carry a negative yield, according to JPMorgan.

This means holders of Japanese, German and Swiss debt are paying these governments for the privilege of lending to them, in some cases out to 20 years. They are willing to accept they will not get all their money back. Even deeper negative yields would increase these losses, raising further doubt that these are truly “safe haven” assets. But the immediate economic and political uncertainty after a Brexit vote would likely be so great that demand for these bonds would rise anyway, pulling yields even lower. Yield curves, the difference between short- and longer-dated bond borrowing costs, would flatten further. They are already their flattest for years around the developed world, meaning the premium investors expect for holding longer-dated bonds is shrinking.

This is often an ominous signal of low inflation or deflation, and slowing economic growth or possibly recession. If “core” bond yields would likely fall, yields on lower-rated and riskier bonds would likely rise, widening the spread between the two. This would increase the financing pressure on a wide range of companies around the world and governments in euro zone “periphery” countries like Greece, Italy and Spain. Flat yield curves are bad news for banks, who make money from borrowing short-term at low rates and lending longer-term at higher rates. Financial stocks have been hit hard this year as the curve flattening has accelerated. Euro zone banks are down 30% this year, Japanese banks 35%, UK banks 20%, and U.S. banks 10%.

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Various polls contradict each other so much it’s hilarious.

Britain’s Rival EU Campaigns Restart (R.)

The campaign to decide Britain’s membership of the European Union restarted on Sunday after a three-day hiatus following the killing of lawmaker Jo Cox, with Prime Minister David Cameron warning that Britons faced an “existential choice” on Thursday. Campaigning activities ahead of the June 23 EU referendum resumed as two opinion polls showed the ‘Remain’ camp recovering some momentum, although the overall picture remains one of an evenly split electorate. With five days left until Britons cast their ballots, the rival campaigns returned with a raft of interviews and articles in Sunday’s newspapers, covering the familiar immigration versus economy debate that has defined the campaign so far.

Cameron, who leads the campaign to stay in the EU, urged voters to consider the economic impact that leaving the 28-member bloc would have. “We face an existential choice on Thursday,” he wrote in the Sunday Telegraph. “So ask yourself: have I really heard anything – anything at all – to convince me that leaving would be the best thing for the economic security of my family?” Michael Gove, a senior spokesman for the rival ‘Leave’ campaign, played down the role of the referendum in the future of the economy, and said that leaving would actually improve Britain’s economic position. “I can’t foretell the future but I don’t believe that the act of leaving the European Union would make our economic position worse, I think it would make it better,” he said in an interview with the same newspaper.

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“.. generations of fatherless children at every level raising up children who have no connection to anything that isn’t coming from a glowing screen..”

Hogs to Slaughter (HFarmer)

America is a third world country, it’s just not ready to accept that reality yet. Politically it is thoroughly corrupted, economically it is too deeply indebted to ever extricate itself, morally it is without direction, rudderless in dangerous seas and heading for the rocks.

The divides between the wealthy and the impoverished too wide to ever cross, the races and generations set against one another deliberately, provoked hourly by the very people who should be doing everything possible to unite them, armed to the teeth, seething with rage, neutered or enraged by pharmaceuticals, depending upon the age and gender, divided by sex, generations of fatherless children at every level raising up children who have no connection to anything that isn’t coming from a glowing screen- and all the while deliberately it seems, provoking hostility with every nation, every race, every people and persuasion in order to stir up a seething cauldron of slights and revenge for the coming reckoning.

[..] Last night I had a dream. One of the last things I did before I called it quits just after dark was to feed the hogs. I stood on the tailgate of the truck and emptied bags of watermelon rinds and soft mangoes, wilted heads of lettuce, bunches of carrots, apples, sweet yellow hothouse peppers imported from Holland, strawberries by the gallon, string beans, potatoes, cabbages and onions. The sows stood up on the fence rails and lifted their snouts to me to pet, their way of thanking me for the meal although they’d waited all day long for it.

When I finished I broke down the cardboard boxes and rolled up the empty plastic bags and then filled their troughs with fifty gallons of fresh, cool water. The Moon wasn’t quite full and Mars just beneath it, glowing like a jewel, and in the distance the large thunderheads were tipped pink from the last rays of the distant Sun, barn swallows streaking across the top of the orchard feasting on the mosquitoes that came to life in the cooling air.

I thought about these hogs, always hungry, always anticipating the next feeding and how easy they have become to manage since I discovered that simple secret. They will sit patiently waiting for me to bring them food rather than try and escape and find something to eat on their own. They are spoiled by their good fortune, fattening themselves on the food I bring them until they produce the things we require of them- piglets to sell and sausage and bacon to eat. I cannot imagine that the people who have managed to gain control of the levers of power in this world have not only learned from these kinds of lessons, but perfected the intricacies of human manipulation; psychological, pharmaceutical, social and spiritual.

I dreamed that the reasons that government checks and benefits were doled out monthly was no different than the reason I feed the pigs only once a day in large quantities. They grow dependent upon it, it is just large enough to make them feel for the moment like they have something substantial and to be excited about it and so remain close to the source of that disbursement, but it is not enough for them to ever be able to put away for the future so they might have the chance to escape that perpetual bondage, and by the end of their waiting there is only the hunger for the next allotment. No one would choose to live that way voluntarily and so they are led there, like the farmer with his bucket of slops, tapping the edge with a stick as he walks back to the enclosure, every head tilted in his direction, every eye glued to the pail.

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“The US mortgaged their future to foreigners willing to fund this consumption spree. ”

The Dumbest Monetary Experimental End Game In History (Bohm-Bawerk)

Whenever we try to explain the reasons behind the crisis, such as the build-up in non-productive and counterproductive debt (see here, here and here for more details) people ask us why did this happened now, and not earlier? It is a fair question that we have thought about and believe have one simple answer. Bottom line, the world economy is running on a system with no natural correcting mechanisms. As we are never tired of pointing out, the Soviet Union only had one recession, the one in 1989. The system was stable, until it was not. A system that does not correct internal imbalances grows just like a parasitic cancer, eventually killing its host. If unsustainable capital allocations are allowed to continue unchecked, the pool of real savings will at some point be depleted.

At that point recession hits because the structure of production is too capital intensive relative to the level of real saving available. A quick look at US saving and investment rates since the 1950s confirms what we all know to be true; saving and investments are not keeping up with GDP growth. That the trend broke after Nixon took the dollar of gold in 1971 is not a coincidence. Real funding for economic activity were slowly substituted from proper saving towards “forced” saving through fiat money expansion. The inevitable result from such a policy has been the massive increase in debt and drop in the US balance versus the rest of the world. No matter what political leaning the country had, debt kept on rising and its mirror image, the current account balance, kept on falling.

The US mortgaged their future to foreigners willing to fund this consumption spree. No one seemed to care that the US did not build up a productive capital base that could service all this debt in the future. The US, issuer of the world reserve currency, was good as gold. At least that was what the world assumed, and surprisingly enough still do.

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Real estate prices WILL be reset, globally. But the resistance againt the reset is fierce; it will rob too many of their powers and comfort zones.

A Palace For Fannie (Mae) – Why The Imperial City Must Be Sacked (Stockman)

To hear the establishment media tell it, you would think that Attila the Hun was fixing to sack the Imperial City. Would that Donald Trump were that bold or dangerous. Then again, he is a showman of no mean talents. So if there is a maquette of Fannie Mae’s planned new $770 million headquarters somewhere around Washington DC, he could start the sacking right there. Hopefully, he would not hesitate to shatter it with a fusillade of tweets – or even take a jackhammer to it while wearing a Trump hard hat. Fannie Mae is surely a monument to crony capitalist corruption, and living proof that massive state intervention in credit markets is a recipe for disaster. But rather than shut it down after it helped bring the nation’s financial system to the edge of ruin, the beltway pols have come up with an altogether different idea.

To wit, they plan to move Fannie from her already luxurious NW Washington headquarters to this hideous new glass palace to be built in the heart of Washington DC. Could there be a bigger insult to the 15 million families who lost their homes to foreclosure owing to the crash of the giant housing bubble that Fannie Mae and the crony capitalist crooks who ran it helped perpetuate? And that’s to say nothing of the $180 billion of taxpayer money that was pumped into Fannie Mae and the other GSE’s after the house of cards came tumbling down in August 2008. In fact, while the politicians on Capitol Hill have dawdled for eight years without any statutory changes or mandates for even minor reforms, Fannie Mae’s management and its phalanx of K-Street lobbies showed exactly who rules in the Imperial City.

It is the larcenous rule of these syndicates of beltway racketeers, in fact, that has put Donald Trump’s name on the Presidential ballot. So let it be granted that his manners and policy knowledge appear to be on the meager side. Yet it is malodorous tales like that of Fannie Mae’s swank new palace which demonstrate why a disrupter on horseback is exactly what the Imperial City deserves.

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The weakest link is a feature.

Over $50 Million Hacked Dashes Hopes in the World of Virtual Currency (NYT)

A hacker on Friday siphoned more than $50 million of digital money away from an experimental virtual currency project that had been billed as the most successful crowdfunding venture ever — taking with him not just a third of the venture’s money but also the hopes and dreams of thousands of participants who wanted to prove the safety and security of digital currency. The attack most likely puts an end to the project, known as the Decentralized Autonomous Organization, which had raised $160 million in the form of Ether, an alternative to the digital currency Bitcoin. While the computer scientists involved in the project are aiming to tweak the code that underpins Ether in a way that will recover the money, the theft is nevertheless prompting a bigger debate about the viability and principles of virtual currencies like Bitcoin and Ether.

“This is one of the nightmare scenarios everyone was worried about: Someone exploited a weakness in the code of the D.A.O. to empty out a large sum,” Emin Gün Sirer, a computer science professor at Cornell who co-wrote a paper pointing out problems with the project, said on Friday. Central banks and financial firms have been exploring how to use the technology underlying virtual currencies — known as blockchain — to improve their own internal systems. The technology is considered to have advantages in terms of transparency and security. Just last week, Janet L. Yellen, the Federal Reserve chairwoman, told central bankers at a trade industry conference that they should accelerate their efforts to explore blockchain.

But the incident on Friday provided another reminder of how the code can be just as vulnerable to human greed and mistakes as paper bills. The D.A.O. was meant to be a standard-bearer for online currency ventures. It was funded by investors from around the world using Ether, which has become popular over the last year. But just before the project stopped raising money in late May, computer scientists pointed out several vulnerabilities in its underlying code — effectively warning that what happened to the experimental consortium would be possible or even likely. “The D.A.O. is being attacked,” Griff Green, a community organizer with the company that wrote the project’s software, Slock.it, wrote on a chat channel for the project Friday morning. “This is not a drill.”

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Julian deserves much more support from all of us.

Assange Starts 5th Year Cooped In London Embassy (AFP)

WikiLeaks founder Julian Assange starts his fifth year camped out in the Ecuadoran embassy in London on Sunday, an occasion his supporters intend to mark with events celebrating whistleblowers. Supporters said they were planning to stage songs, speeches and readings in several European cities. Assange, 44, is wanted for questioning over a 2010 rape allegation in Sweden but has been inside Ecuador’s UK mission for four full years in a bid to avoid extradition. The anti-secrecy campaigner, who denies the allegation, walked into the embassy of his own free will on June 18, 2012, with Britain on the brink of sending him to Stockholm, and has not left since. His lawyers say he is angry that Swedish prosecutors are still maintaining the European arrest warrant against him.

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This would make my day. “Opposition to Italy’s endemic cronyism and sleaze..”

Rome Set To Elect First Female Mayor (AFP)

Voters in the Italian capital went to the polls Sunday with all signs indicating that they will elect Virginia Raggi as the first female mayor of the Eternal City. Raggi, a 37-year-old lawyer and local councillor, has leapt from anonymity to become one of the best-known faces in Italian politics in the space of only a few months on the campaign trail. The telegenic brunette, whose victory would be a blow for Prime Minister Matteo Renzi, is the rising star of the populist Five Star movement (M5S), the anti-establishment party founded by comedian Beppe Grillo. More than nine million voters are eligible to take part in Sunday’s second round election in 126 communes, including Rome, Milan, Naples, Turin and Bologna.

But all eyes are on Five Star which has emerged as the best-supported opposition to the centre left, Democratic Party (PD)-led coalition of Prime Minister Renzi, and the stakes are extremely high for a movement that was only founded in 2009. With the ebullient Renzi’s star waning slightly, success in Rome could provide a platform for a tilt at national power in general elections due in 2018. The PD also faces defeat in Italy’s financial capital Milan and a tough challenge in Turin. “We are witnessing a historic moment,” Raggi said after the June 5 first round of voting, from which she emerged with 35% of the vote, well ahead of her run-off rival, Roberto Giachetti (24%). It was a remarkable achievement for a party with a very limited organisational apparatus and also for a woman who only entered politics five years ago.

That was a move, she recently told AFP, triggered by the birth of her son Matteo and her determination that he should not grow up in a city beset by the intertwined problems of failing public services and endemic corruption. Opposition to Italy’s endemic cronyism and sleaze is the foundation of M5S’s appeal to voters and the Roman electorate have had their fill of those in recent years. Dozens of local businessmen, officials and politicians are currently on trial for their involvement in a criminal network that ripped off the city to the tune of tens – if not hundreds – of millions. From stealing the funds allocated to get ethnic Roma children to school out of isolated camps, to paving the city’s streets with wafer-thin surfaces, scams abounded for years, according to prosecutors, in what is known as the Mafia Capitale scandal.

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Let’s try and guess how many will be left when the Olympics start.

Brazil’s Temer Goverment on Fire, 4th Minister Could Resign (TeleSur)

Brazil’s current Minister of Education is the latest public official in the Michel Temer administration to be implicated in the country’s political corruption scandal. Brazil’s coup imposed Education Minister Mendonca Filho is being investigated for allegedly receiving an illegal bribe of $29,000 for the purpose of financing his 2014 re-election campaign, Brazil’s General Prosecutor Rodrigo Janot announced Friday, making him the latest official in Temer’s administration who could be forced to stand down. During a Supreme Court hearing Friday, General Prosecutor Janot argued that “evidence of possible bribes for his [Mendonca Filho’s] political campaign” would result in the court having jurisdiction to investigate potential criminal practices.

The allegations stem from records and documents obtained by Brazilian authorities belonging to the former financial director of UTC, Walmir Pinheiro, who last year agreed to a plea bargain testimony. The owner of UTC, Ricardo Pessoa, was also arrested last November after previously admitting to acts of corruption. [..] If convicted the Minister of Education would probably be pressured to resign from his current post, making him the fourth public official to resign or quit since the Temer administration came to power earlier this year.

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The level of “un-democracy” in the EU rises to alarming levels.

EU Trying To Bury Report On Turkey Migrant Returns (EUO)

The European Commission and some member states want to bury a report by an EU agency that is likely to say Turkey is unfit for asylum seekers, EUobserver understands. People sitting on the management board of the Malta-based European Asylum Support Office (EASO), including EU commission staff from the home affairs department, DG Home, are unhappy with EASO’s efforts to determine if Turkey is a safe third country. The management board also includes representatives from all 28 EU member states. “The subject is a sensitive one indeed and so obviously there can be some members of the management which have concerns,” Jean-Pierre Schembri, EASO’s spokesperson told this website on Wednesday (15 June).

The EU’s big migrant swap deal with Ankara largely hinges on designating Turkey as safe enough to send back rejected and unwanted asylum seekers from Greece to Turkey. Signed off in mid-March, the deal aims to stop people from leaving Turkey to seek international protection in the EU. The Greek islands now has on average dozens of new arrivals per day, down from the thousands at the height of the crisis last year. And the EU wants to keep it that way. But the EASO probe could knock a big legal hole in the plan, adding to the chorus of human rights defenders who say it is illegal. EASO management board members are also unhappy because the agency appears to have diverted from its original mandate. The team was supposed to compile a so-called country of origin report for Turkey but then it also started looking into the safe third country issue following a mission to Turkey some two weeks ago.

Read more …

May 102016
 
 May 10, 2016  Posted by at 7:07 am Finance Tagged with: , , , , , , , , , ,  


Alfred Palmer Women as engine mechanics, Douglas Aircraft, Long Beach, CA 1942

The World’s Most Extreme Speculative Mania Unravels in China (BBG)
Iron Ore, Rebar Crash Into Bear Market (ZH)
A Debt Bust Looms For China (Economist)
The Cold, Hard Facts Raining on China’s Commodity Parade (BBG)
In Historic -150% Net Short, Carl Icahn Bets on Imminent Market Collapse (ZH)
Trump Says US Will Never Default Because It Prints the Money (WSJ)
Zombies-To-Be and the Walking Dead of Debt (Steve Keen)
The Recession’s Economic Trauma Has Left Enduring Scars (WSJ)
Japan Will Leave Banks to Carry Out Their Own Stress Tests (BBG)
Trumptopia (Jim Kunstler)
Rousseff Impeachment Vote Annulled, Throwing Brazil Legislature Into Chaos (G.)
85% Of Fort McMurray Has Been Saved, Says Alberta Premier (G.)
Growth Crisis Threatens European Social Fabric, Warns ECB VP (Tel.)
The Choice For Europe: Rescue Greece Or Create A Failed State (Paul Mason)
Official Analysis Suggests Tough Talks Over Greek Debt Relief (WSJ)
Refugees Freed From Detention Centers, Trapped In Limbo On Greek Islands (R.)

The comparison to the Tulip Craze sounds apt.

The World’s Most Extreme Speculative Mania Unravels in China (BBG)

From the Dutch tulip craze of 1637 to America’s dot-com bubble at the turn of the century, history is littered with speculative frenzies that ended badly for investors. But rarely has a mania escalated so rapidly, and spurred such fevered trading, as the great China commodities boom of 2016. Over the span of just two wild months, daily turnover on the nation’s futures markets has jumped by the equivalent of $183 billion, outpacing the headiest days of last year’s Chinese stock bubble and making volumes on the Nasdaq exchange in 2000 look tame. What started as a logical bet – that China’s economic stimulus and industrial reforms would lead to shortages of construction materials – quickly morphed into a full-blown commodities frenzy with little bearing on reality.

As the nation’s army of individual investors piled in, they traded enough cotton in a single day last month to make one pair of jeans for everyone on Earth and shuffled around enough soybeans for 56 billion servings of tofu. Now, as Chinese authorities introduce trading curbs to prevent surging commodities from fueling inflation and undermining plans to shut down inefficient producers, speculators are retreating as fast as they poured in. It’s the latest in a series of boom-bust market cycles that critics say are becoming more extreme as China’s policy makers flood the financial system with cash to stave off an economic hard landing. “You have far too much credit, money sloshing about, money looking for higher returns,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Even in commodities where you could have argued there is some reason for prices to rise, that gets quickly swamped by a nascent bull market and becomes an uncontrollable bubble.” In many ways, China’s financial landscape was ripe for another round of mania. New credit soared to a record in the first quarter, giving individuals and businesses plenty of cash to invest at a time when several of the country’s traditional sources of return looked unattractive. Government debt yields were hovering near record lows, while wealth-management products and company bonds had been rattled by a growing number of corporate defaults. Stocks were still too risky for many investors burned by last year’s crash, and moving money offshore had become harder as the government clamped down on capital outflows.

Read more …

Crazy stuff. And not done yet.

Iron Ore, Rebar Crash Into Bear Market (ZH)

Real demand for steel in China dropped at least 7% in April from the year before, according to Citigroup’s Tracy Liao estimates, so it should not be a total surprise that the frenzied speculative buying in Iron Ore, Rebar, and various other industrial metals in China has crashed back to reality as volumes plunge, dragging The Baltic Dry Freight Index with it as yet another government-manipulated 'signal' collapses into a miasma of malinvestment and unintended consequences. As The Wall Street Journal reports, to the extent that China’s industrial recovery explains why iron ore and steel prices have jumped this year, China’s latest trade data served as a reminder of how brittle this reason is.

China’s steel net exports rose 8.8% in April from a year before and 9.4% between January and April from a year ago. That raises the question: Why are mills exporting more steel when Shanghai front-month futures prices for rebar steel rocketed 48% between January and April, and signaled a potential rise in demand? [..]Real demand for steel in China dropped at least 7% in April from the year before, Citigroup’s Tracy Liao estimates, based on changes in exports and inventories. The drop was at least 5% between January and April from the year before.

That reinforces fears that easy money-fueled speculation is the prime mover of steel and iron ore prices today. That "Churn" is over…

 

Chinese futures prices in both commodities fell sharply again Monday.

 

With Iron Ore now down 22% from the meltup highs, entering a bear market…

 

And Steel Rebar down 25%, extending losses in the US session…

 

And The Baltic Dry Index now down 7 days in a row, down 14% from its "everything is fine in China" highs from 715 to 616 today…

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Even the Economist is waking up to what we’ve been saying for ages…

A Debt Bust Looms For China (Economist)

China was right to turn on the credit taps to prop up growth after the global financial crisis. It was wrong not to turn them off again. The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown. China will not be an exception to that rule. Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending. The reality is grimmer. Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax. China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis.

With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years. But not for ever. When the debt cycle turns, both asset prices and the real economy will be in for a shock. That won’t be fun for anyone. It is true that China has been fastidious in capping its external liabilities (it is a net creditor). Its dangers are home-made. But the damage from a big Chinese credit blow-up would still be immense. China is the world’s second-biggest economy; its banking sector is the biggest, with assets equivalent to 40% of global GDP. Its stockmarkets, even after last year’s crash, are together worth $6 trillion, second only to America’s. And its bond market, at $7.5 trillion, is the world’s third-biggest and growing fast. A mere 2% devaluation of the yuan last summer sent global stockmarkets crashing; a bigger bust would do far worse.

A mild economic slowdown caused trouble for commodity exporters around the world; a hard landing would be painful for all those who benefit from Chinese demand. Optimists have drawn comfort from two ideas. First, over three-plus decades of reform, China’s officials have consistently shown that once they identified problems, they had the will and skill to fix them. Second, control of the financial system—the state owns the major banks and most of their biggest debtors—gave them time to clean things up. Both these sources of comfort are fading away. This is a government not so much guiding events as struggling to keep up with them. In the past year alone, China has spent nearly $200 billion to prop up the stockmarket; $65 billion of bank loans have gone bad; financial frauds have cost investors at least $20 billion; and $600 billion of capital has left the country.

To help pump up growth, officials have inflated a property bubble. Debt is still expanding twice as fast as the economy. At the same time, the government’s grip on finance is slipping. Despite repeated efforts to restrain them, loosely regulated forms of lending are growing quickly: such “shadow assets” have increased by more than 30% annually over the past three years. In theory, shadow banks diversify sources of credit and spread risk away from the regular banks. In practice, the lines between the shadow and formal banking systems are badly blurred.

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Encourage speculation, then crack down on it. Credibility?!

The Cold, Hard Facts Raining on China’s Commodity Parade (BBG)

There’s nothing like facts to get in the way of a good yarn. Prices of everything from steel rebar to cotton are extending losses in China as a slew of bearish data hastens the reversal of a rally last month triggered by speculation that economic stimulus and industrial reforms would drive up demand and curb supplies. Steel futures in Shanghai fell the most since trading began in 2009 after inventories rose while iron ore in Dalian sank as much as 7.1%, extending its retreat from a 13-month high, after data showed Chinese port stockpiles expanded to the highest level in more than a year. Cotton on the Zhengzhou Commodity Exchange, which had surged to an 11-month high, slid 1.5% after China unloaded supply from its reserves. Copper lost 2.1% after the nation’s imports shrank from a record.

“Investors are looking at fundamentals more closely now,” Zhang Yu, a senior analyst with Yongan Futures, said by phone from Hangzhou. “While inventories were built up with the price surges, recent data couldn’t convince people that China’s real economy is bottoming and going to bring demand back.” The rally last month was accompanied by a surge in trading volumes, with as much as 1.7 trillion yuan ($261 billion) in commodity futures changing hands in a single day. That drew comparisons with 2015’s credit-driven stock market rally that preceded a $5 trillion rout, and prompted exchanges to raised transaction fees and margins amid orders from regulators to limit speculation.

As the exchanges stepped in, trading volumes shrank. About 20 million contracts of everything from eggs to steel changed hands on the Dalian Commodity Exchange, Zhengzhou Commodity Exchange and Shanghai Futures Exchange on Friday, down from a peak of 80.6 million contracts on April 22. “Bullish enthusiasm in Chinese commodities futures has been rapidly declining, especially after the exchanges pushed out massive measures to curb speculative trading,” Yu said.

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Where the smart money sits…

In Historic -150% Net Short, Carl Icahn Bets on Imminent Market Collapse (ZH)

Over the past year, based on his increasingly more dour media appearances, billionaire Carl Icahn had been getting progressively more bearish. At first, he was mostly pessimistic about junk bonds, saying last May that “what’s even more dangerous than the actual stock market is the high yield market.” As the year progressed his pessimism become more acute and in December he said that the “meltdown in high yield is just beginning.” It culminated in February when he said on CNBC that a “day of reckoning is coming.” Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that line of thought was quickly squashed two weeks ago when Icahn announced to the shock of ever Apple fanboy that several years after his “no brainer” investment in AAPL, Icahn had officially liquidated his entire stake.

As it turns out, Icahn’s AAPL liquidation was just the appetizer of how truly bearish the legendary investor has become. [..] In the just disclosed 10-Q of Icahn’s investment vehicle, Icahn Enterprises LP in which the 80 year old holds a 90% stake, we find that as of March 31, Carl Icahn – who subsequently divested his entire long AAPL exposure – has been truly putting money, on the short side, where his mouth was in the past quarter. So much so that what on December 31, 2015 was a modest 25% net short, has since exploded into a gargantuan, and unprecedented for Icahn, 149% net short position.

[..] starting in Q3 and Q4, Icahn proceeded to wage into net short territory, with roughly -25% exposure, a number that has increased a record six-fold in just the last quarter! What is just as notable is the dramatic leverage involved on both sides of the flatline, but nothing compares to the near 3x equity leverage on the short side (this is not CDS). As a reminder, Icahn Enterprises used to be run as a hedge fund with outside investors, but Icahn returned outside money in 2011, leaving IEP and Icahn as the two dominant investors. According to Barron’s, the entire fund appears to be about $5.8 billion, with $4 billion coming from Icahn personally. Which means that this is a very substantial bet in dollar terms.

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There’s no bigger pleasure -and confirmation- than have Krugman criticize you.

Trump Says US Will Never Default Because It Prints the Money (WSJ)

Donald Trump fired back at critics Monday over what he claimed was a misrepresentation of his comments on debt of the U.S. government, saying he never advocated the U.S. default on its debt. “First of all, you never have to default because you print the money,” Mr. Trump said in a telephone interview with CNN that was reported on by Politico. In an interview with Fox Business’s Maria Bartiromo, Mr. Trump said that he had proposed that the U.S. government could buy back its own debt at a discount if interest rates rise. The price of earlier issued bonds often fall when interest rates rise. “Certainly I’m not talking about renegotiating with creditors,” Mr. Trump said. Mr. Trump was responding to a New York Times article that ran on Friday that examined a CNBC interview on the prior day.

The article stated that Mr. Trump said he “might reduce the national debt by persuading creditors to accept something less than full payment.” “I would borrow, knowing that if the economy crashed, you could make a deal,” Mr. Trump said in the CNBC interview. “And if the economy was good, it was good. So therefore, you can’t lose.” This provoked alarm from commentators who interpreted it as Mr. Trump saying he would attempt to force Treasury holders to accept less than payment in full. “The reaction from everyone who knows anything about finance or economics was a mix of amazed horror and horrified amazement,” New York Times columnist Paul Krugman wrote.

The market in U.S. Treasuries, which are considered to be among the safest assets in the world, appeared to brush off the report of Mr. Trump’s remarks. Yields on 10-year Treasuries were slightly lower Monday than they were a week earlier. “All I said was that if interest rates goes up, we’ll have a chance to buy back bonds, which is standard,” Mr. Trump said. Mr. Trump’s remarks Monday echo a point made by former Federal Reserve chairman Alan Greenspan a few years ago. “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default,” Mr. Greenspan said.

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Anything Steve is a must.

Zombies-To-Be and the Walking Dead of Debt (Steve Keen)

Using the dynamics of credit –which most other economists ignore– I explain why Japan, the USA and UK are among the “Walking Dead of Debt” and why China, Canada, Australia and South Korea are on their way to joining the Debt Zombies. This presentation is based on work I’m doing for a new 25000 word book for Polity Press entitled “Can we avoid another financial crisis?”, which should be published later this year.

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What official numbers seek to hide away. But we all know anyway.

The Recession’s Economic Trauma Has Left Enduring Scars (WSJ)

About one in six U.S. workers became unemployed during the recession years of 2007, 2008 and 2009. Today, nearly 14 million people are still searching for a job or stuck in part-time jobs because they can’t find full-time work. Even for the millions of Americans back at work, the effects of losing a job will linger, the research suggests. They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs. “The average effects are severe and very long lasting,” said Jennie Brand, a sociologist at University of California, Los Angeles. “There’s no quick recovery.”

U.S. economic output remains stubbornly below its potential level, as estimated by the Congressional Budget Office. And many people probably won’t be back on their feet by the time the next recession arrives. J.P. Morgan Chase & Co. economists recently predicted a new recession was more likely than not within three years. Anger about stagnant wages, among other things, has helped fuel the presidential runs of Donald Trump and Bernie Sanders. When the John J. Heldrich Center for Workforce Development at Rutgers University surveyed Americans after the recession about the causes of high unemployment, their top responses were cheap foreign labor, illegal immigrants and Wall Street bankers.

Labor Department data show 40 million layoffs and other involuntary discharges during the recession that began in December 2007 and ended in June 2009. The official unemployment rate peaked at 10%. Princeton University economist Henry Farber calculated that the rate of job loss from 2007 through 2009 was 16%. As in previous recessions, millions of Americans faced a phenomenon economists sometimes call wage scarring. People who lose a job, even during economic expansions, usually earn less money when they re-enter the workplace. They are out of work for a time and often take a pay cut as the price of returning to work at a new employer or even in a new career.

This time, the damage was exacerbated by the job market’s painfully slow recovery. Extended or repeated spells of unemployment mean more severe earnings losses, and recent years have seen an unusually large number of job seekers out of work for more than six months or stuck in part-time positions. “They had a much harder time finding a job, and in particular a full-time job, which immediately turns into an earnings decline,” Mr. Farber said.

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Better at making things up than the government.

Japan Will Leave Banks to Carry Out Their Own Stress Tests (BBG)

Japan’s financial regulator is stepping up oversight of its biggest banks while stopping well short of imposing the type of intrusive stress tests that have been adopted in the U.S. and Europe. Unlike the Federal Reserve and the Bank of England, which conduct annual examinations of the large banks they supervise, Japan’s Financial Services Agency has no plans to impose its own stress tests on the country’s lenders. Instead, it is looking for ways to verify the banks’ own reviews. “We’re considering if we can come up with a stress test-like setup,” Toshihide Endo, the director-general of the FSA’s supervisory bureau, said in an interview last month. “We don’t plan to impose external tests.”

Japan’s regulator has already signaled a different approach than overseas peers in the way it oversees the country’s banks, with FSA Commissioner Nobuchika Mori condemning a supervisory approach to bankers where the “sentiment of trust seems to have become a thing of the past.” Mitsubishi UFJ Financial Group Inc.’s President Nobuyuki Hirano cautioned global regulators against restricting the use of banks’ own methods for gauging operational risk, questioning the need for authorities to impose a standardized regime when they’re able to review internal models. Japanese taxpayers didn’t have to bail out lenders during the global financial crisis as the nation’s banks escaped the scale of losses incurred by overseas financial institutions.

The regulator may analyze big banks with international operations to see if they’re adequately reflecting risks such as oil price movements and the economic performance of emerging nations in their own stress tests, according to Endo. The FSA may start scrutinizing the stress tests of banks from as early as the second half of this year, he said. MUFG, Japan’s largest lender by market value, runs a number of stress tests on its balance sheet using different scenarios that include measures of interest and exchange rates, stock-market movements and economic growth, according to an e-mailed reply from spokesman Kazunobu Takahara. The impact from the different tests on the bank’s assets and profitability are then estimated, he said.

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Where does the economy meet politics? Does anybody know?

Trumptopia (Jim Kunstler)

For years, it was easy to see the political storm clouds gather over Europe with its fractious coalitions and its ancient babble of conflicts. Marine Le Pen’s Daddy, severe old Jean-Marie, was on the scene in France decades before Donald Trump ascended to glory on the noxious clouds of America’s crapified culture, attended by heavenly hosts of Kardashian angels and the cherub Honey BooBoo. For all the strains in recent American life, the two-party system had seemed as solid as the granite towers of the Brooklyn Bridge. Not even the estimable Teddy Roosevelt could blow up the system when he tried in 1912 — though his Progressive (“Bull Moose”) Party carried California, Pennsylvania, and Minnesota, and he far out-polled the incumbent Republican President Taft, who garnered a measly 8 electoral votes (Democrat Woodrow Wilson won).

Ross Perot made an impact in 1992 — he certainly had a good point about NAFTA and “the giant sucking sound” of jobs draining out of the USA. But his popinjay manner didn’t go over so well, and at the critical moment in the general election he lost his nerve and withdrew, only to foolishly re-enter weeks later. Then there was the Ralph Nader in 2000, whose egoistic crusade arguably put George W. Bush in the White House. Since then, the country see-sawed between the long tenures of two Deep State errand boys from each major party, putting both parties in such a bad odor that Trump now rises on their mephitic fumes. Which raises the question, of course: what exactly is this Deep State? Answer: A leviathan of symbiotic rackets producing maximum incompetence affecting adversely the majority of citizens.

It’s a blood-sucking beast of a hundred-thousand heads draining the USA of its dwindling vitality, lying about its intentions while it advertises the pietistic certainties of the Left and superstitious shibboleths of the Right, leaving a smoking hole in the middle where the practical problems of everyday life used to be worked out by practical means. The Deep State is also the sum of unintended consequences and diminishing returns of a late-stage, bureaucratic, techno-industrial economy cannibalizing itself to stay alive. One obvious conclusion is that this economy has got to change before there is nothing left to eat, and no political figure on the scene, including Trump and Bernie Sanders, has a plausible vision of where this takes us.

Both really just assume that the engine keeps chugging down the track of ever more material wealth that can be distributed differently. The truth is, there will be a lot less material wealth of the kind we’re used to, and a lot less capital representation in the things we call “money.” In fact, the scene at hand today is just a spectacle of the shrewdest and biggest rodents scarfing up the table-scraps of a 200-year-long banquet.

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“..a twist that would stretch the credibility of a House of Cards plot..”

Rousseff Impeachment Vote Annulled, Throwing Brazil Legislature Into Chaos (G.)

Brazil’s new lower house speaker has annulled last month’s impeachment vote against Dilma Rousseff in a twist that would stretch the credibility of a House of Cards plot. The surprise move, which comes just days before the upper house was due to consider the motion, throws the legislature into chaos and could provide a lifeline to the embattled president. Waldir Maranhao, who took over as acting speaker last week, said a new congressional vote would be needed as a result of procedural flaws in the previous session. Maranhao is no friend of the government, prompting speculation that he may be acting on behalf of his predecessor, Eduardo Cunha, who was removed from his post by the supreme court on the grounds that he was interfering in a corruption investigation into his alleged kickbacks from the state-run oil company, Petrobras.

For the moment, however, uncertainty reigns. After last month’s lower house vote, the impeachment process was passed to the senate, where a committee recommended on Friday that the leftist president be put on trial by the full chamber for breaking budget laws. In a news release, Maranhao said the impeachment process should be returned by the senate so that the lower house can vote again. It remained unclear whether his decision could be overruled by the supreme court, the senate or a majority in the house. Brazilian markets fell sharply after the surprising decision was announced. Rousseff, who denies wrongdoing, has been fighting for her political survival for several months as opposition congressmen have pushed aggressively for her ouster.

The full senate had been expected to vote to put Rousseff on trial Wednesday, which would immediately suspend her for the duration of a trial that could last six months. During that period the vice-president, Michel Temer, would replace her as acting president. With appeals and counter-appeals still possible, Rousseff gave a cautious response to the news. “It’s not official. I don’t know the consequences. We should be cautious,” she said, but repeated her determination to keep fighting.

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Had the impression it was worse.

85% Of Fort McMurray Has Been Saved, Says Alberta Premier (G.)

Overwhelming and heart-breaking was how Rachel Notley, the Alberta premier, described the destruction left behind in the wake of a wildfire that continues to rage out of control in northern Alberta. “I was very much struck by the power of the devastation of the fire,” Notley said after touring the city of Fort McMurray on Monday. “It was really quite overwhelming in some spots.” Last week more than 88,000 residents frantically evacuated the oilsands city after shifting winds brought a nearby forest fire to the city’s doorstep. The fire swept through the city in a seemingly random path, leaving behind piles of rubble and twisted metal, burned-out pick-up trucks and charred swing sets in some neighbourhoods. In others, homes sat untouched, their green lawns sharply contrasting with the grey of the city’s worst-hit areas.

Some 2,400 homes and buildings were destroyed or damaged by the fire, said Notley. For the tens of thousands of residents now scattered across the province, many of them wondering whether they have a home to return to, Notley had good news. Some 85% of the city – around 25,000 structures – had been saved. “The city was surrounded by an ocean of fire only a few days ago,” said Notley. “But Fort McMurray and the surrounding community have been saved and it will be rebuilt.” But she cautioned: “That of course doesn’t mean that there aren’t going to be some really heartbreaking images for some people to see when they come back.” The fire has not completely released its grip on the city, said Notley. “There are smouldering hotspots everywhere. Active fire suppression is continuing.”

The wildfire continues to grow in the region, albeit at a much slower pace. By Monday it had swelled to 204,000 hectares – an area more than 22 times the size of Manhattan – but winds were pushing it east, away from communities. It now sits some 25km from the neighbouring province of Saskatchewan. Cooler weather helped crews continue to keep the fire at bay, away from Fort McMurray, Anzac and the Suncor Energy oilsands facility. Currently more than 700 firefighters are battling against the blaze, with another 300 expected to arrive in the area shortly. “This fire is burning out of control out there, it still is, but we are holding the line where we need to, at least for today,” said Notley.

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People like this are so utterly clueless it’s frightening.

Growth Crisis Threatens European Social Fabric, Warns ECB VP (Tel.)

The fragile global recovery could be derailed unless governments step up efforts to support growth and strengthen the European banking system, two central bankers have warned. Vítor Constâncio, vice president of the ECB, said policy inaction combined with declining productivity and weak demographics could lead to a dangerous spiral of lower growth, higher debt and reduced job prospects. This could create unrest in countries already blighted by sky-high unemployment, he warned. The world also faced the prospect of permanently lower growth, Mr Constâncio told an audience at a City Week conference in London. If this materialised, this could result in weaker spending by households and businesses. “There would also very likely be societal implications, as lower economic growth would not be able to create enough jobs for citizens and may exacerbate income inequality,” he said.

Mr Constâncio described the eurozone recovery as “continued” and “moderate”, but said it remained “subject to fragilities”. “While I expect the recovery in the global economy to gather momentum as the headwinds eventually dissipate, there are many factors which could potentially derail it,” he said. Mr Constâncio stressed that the ECB’s massive stimulus package was working, adding that policymakers would “allow some time for the package of measures adopted in March” – including interest rate cuts and an increase in its monthly asset purchases to €80bn, from €60bn – to take effect. But the central banker said government fiscal stimulus and action to boost productivity and “complete Europe’s banking and markets union” would also be needed to boost growth.

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All good and well, but there are strong forces in Brussels and beyond that deliberately seek to create a failed state. And they’re at least half way there.

The Choice For Europe: Rescue Greece Or Create A Failed State (Paul Mason)

Between now and mid-June the European political elite must give its answer to an existential question. Will it honour the deal it made to rescue Greece last July; or will it push the radical left government into default – effectively creating a failed state in Europe? That this is primarily Europe’s dilemma, not Greece’s or the IMF’s, is clear after Monday’s Eurogroup. The IMF boss, Christine Lagarde, warned the Europeans that the fund will not participate in further bailouts without a substantial debt write-off. In turn, the Greek prime minister, Alexis Tsipras, forced through the last of the main austerity measures demanded by creditors: reforms to the pension system that will leave worse off everyone who is receiving more than €1,000 a month, and demand much higher contributions from workers in future.

However, by delaying their approval until now, the lenders have managed, once again, to push Greece towards bankruptcy. Although growth is better than predicted, tax receipts are still dire and bailout disbursements suspended. Worse, and more insidious, the months of callous inaction have pushed the mood in Greek society into a dangerous place. A population that, two years ago, started demanding and giving printed receipts as an act of collective moral renewal, has given up on them once again. The most popular graffiti tag has become “all this political shit”. The only thing that can end the crisis is debt restructuring. One way or another, Europe’s creditors – the taxpayers of Germany, France, the Netherlands etc – have to lose money.

It may be dressed up by extending repayment dates; or it may take the form of the “haircut”, whereby the treasuries of northern Europe – and the ECB – write down the value of the €350bn they have lent Greece. But it has to happen. And that means Germany’s politicians must change their minds. The old problem in Europe was a transnational freemarket economy with no democratic government; a central bank obliged by treaty to impose deflation; and a Germany willing to take the upside of the project – 4% unemployment versus 25% in Greece – but never to lead it. The new problem is different: when the EU overturned the will of the Greek people last year July, it became, effectively, a political entity based on force, not law.

Those applying the force were the German elite and a collection of east European countries who have in common weak democratic traditions, mafia-infested economies and rightwing electorates still traumatised by the Soviet era. Then, in a second act of force, by overturning the Dublin Treaty and letting nearly a million refugees come to Germany, Angela Merkel destroyed the coalition that had imposed the defeat on Greece. Eastern Europe has defied Merkel’s call for refugee quotas and answered her appeal for humanitarianism by putting razor wire at every border choke-point. So, now it’s no longer about austerity: there is a three-way battle for the soul of Europe; between a beleaguered centre that’s seeing its consent to govern drain away; a resurgent nationalist and racist right; and a modernised radical left. The Greek request for debt relief poses to the European centre the question: which side are you on?

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No, it’s true. A team of highly overly paid EU economists has issued a report that ‘analyzes’ (note the first 4 letters) among other things what Greek debt could be 44 years from now. Your challenge: to name something even more useless than that. Hint: paint does dry at some point….

Official Analysis Suggests Tough Talks Over Greek Debt Relief (WSJ)

Greece’s debt may rise to as much as 258.3% of GDP by 2060 or fall to as low as 62.6% of GDP, according to an official analysis of the country’s debt trajectory that heralds tough talks ahead on potential measures to ease Athens’ payment burden. The so-called debt sustainability analysis, or DSA, was drawn up by Greece’s European creditors and has been seen by The Wall Street Journal. The wide divergences in the debt predictions are due to different forecasts on how much Greece’s economy will grow in the coming decades and how much money it can put aside to pay down debt. Under all but the most optimistic scenarios, the document points to serious concerns over Greece’s ability to repay its debt, which stood at 176.9% of GDP at the end of last year.

The results of “this analysis point to serious concerns regarding the sustainability of Greece’s public debt in the long term,” the document says. The document was distributed to officials from eurozone finance ministries Monday morning and will form the basis for a first discussion on possible debt relief among the bloc’s finance ministers Monday afternoon. To reach a deal, the ministers will also have to bring on board the IMF, one of Greece’s biggest creditors. The IMF has consistently had more pessimistic forecasts for Greece’s debt ratio and demanded far-reaching measures to cut the country’s payment burden. Here it has clashed with Germany, which has opposed further debt relief.

“Today we will only have a first discussion on what, when, if and how the debt sustainability or debt relief measures could take place,” said Jeroen Dijsselbloem, the Dutch finance minister who presides over the group of ministers, on his way into Monday’s meeting. The debt sustainability analysis looks at four different scenarios for Greece’s economy and assesses how the country’s debt-to-GDP ratio will fare in each case for the decades up to 2060. The analysis shows that Greece’s debt could fall to as low 62.6% of GDP—almost in line with the currency union’s budget rules—in the most favorable scenario. But under the most pessimistic scenario, debt could rise to 258.3% of GDP by the end of 2060. Under the baseline scenario, which assumes that Greece will fully implement the terms of its bailout program, its debt will peak at 182.9% of GDP in 2016 and fall to 104.9% of GDP by 2060.

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Curiously blind how NGOs blame Greece for conditions, while it’s being squeezed dry by the Troika. As if when you work for Amnesty -and get paid for it-, you can’t figure out that Greece can’t even take care of Greeks.

Refugees Freed From Detention Centers, Trapped In Limbo On Greek Islands (R.)

Migrants and refugees are being freed from detention centres in Greece but remain trapped on its islands until their asylum requests are processed, exposing them to dire living conditions and even the risk of people smugglers, human rights groups say. At least 1,100 people have been released from centres on three islands and more will follow as their 25-day detention limit expires, police officials said. They are forbidden from travelling to the mainland, where most state-run shelters are. Some 8,000 people, many escaping the Syrian war, have arrived on boats from Turkey since March and are held under a European Union deal with Ankara designed to seal off the main route into Europe for over a million people since 2015.

Under the deal, those who do not seek asylum in Greece – and those who are rejected – will be sent back to Turkey. Asylum applications are piling up and rulings can take weeks. The United Nations refugee agency UNHCR said it was supporting government efforts to create new spaces. “All parties are working very hard to meet the needs of the human beings present on Greek islands,” said Chris Boian, a spokesman in Greece. Asked if those stranded on the islands were vulnerable to human traffickers offering to take them to the mainland, Boian said: “The risk does exist and that is the one reason UNHCR advocates full access to asylum and expansion of the asylum service and alternative legal entry channels (to Europe).”

Human rights groups said the government was not doing enough to provide asylum seekers with shelter and medical care while they wait. On Lesbos, many head to an open, municipality-run site. Those who can afford it check into hotels. Others sleep in the open. “Every country that asks people to wait in a certain place has to provide them with basic facilities. That’s not done by Greece,” said Amnesty International’s deputy Europe director, Gauri van Gulik. “It’s either – you’re in prison, or you can sleep rough on an island..”. A government spokesman, Giorgos Kyritis, said the government was doing its best to support refugees and migrants in Greece at the open reception centres, nearly all of which are on the mainland. “The government cannot afford to support these people financially on an individual basis. It’s doing whatever it can to support them in the context of its limited capabilities,” he said.

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Apr 182016
 
 April 18, 2016  Posted by at 9:40 am Finance Tagged with: , , , , , , , , , , ,  


DPC Coaches at Holland House Hotel on Fifth Avenue, NY 1905

Oil Prices Plunge After Doha Output Talks Fail (AFP)
Oil Producers Get Worst Possible Outcome, Destroy Remaining Credibility (R.)
Failure To Reach Oil Output Deal Sparks Selloff Across Emerging Markets (BBG)
Loonie, Aussie Drop After Doha Failure; Yen Near 1 1/2-Year High (BBG)
The Bad Smell Hovering Over The Global Economy (G.)
Untried, Untested, Ready: Remedies for the Global Economy (BBG Ed.)
China’s QoQ and YoY GDP Data Don’t Add Up (BBG)
Is China Ready To Let More State-Owned Enterprises Default? (BBG)
China Makes Plans for 1.8 Million Workers Facing Unemployment (WSJ)
The Trucker’s Nightmare That Could Flatten Europe’s Economy (BBG)
George Osborne: Brexit Would Leave UK ‘Permanently Poorer’ (G.)
Brazilian Congress Votes To Impeach President Dilma Rousseff (G.)
Australia’s Debt Dilemma Raises Downgrade Fears (BBG)
Peter Schiff: ‘Trump’s Right, America Is Broke’ (ZH)
Make America Solvent Again (Jim Grant)
Is Capitalism Entering A New Era? (Kaletsky)
Fears Of ‘The Big One’ As 7 Major Earthquakes Strike Pacific In 96 Hours (E.)

A curious piece of two-bit theater. It failed before it started. Why do it then? The west trying to pit Saudi vs Iran/Russia?

Oil Prices Plunge After Doha Output Talks Fail (AFP)

Oil prices plunged on Monday after the world’s top producers failed to reach an agreement on capping output aimed at easing a global supply glut during a meeting in Doha. Hopes the world’s main producer cartel, OPEC, and other major exporters like Russia would agree to freeze output has helped scrape oil prices off the 13-year lows they touched in February. But crude tanked after top producer Saudi Arabia walked away from the talks, which many hoped would ease a huge surplus in world supplies, because of a boycott by its rival Iran. Oil tumbled in early Asian trade after the collapse of Sunday’s talks, with prices dropping as much as seven% in opening deals.

At around 0100 GMT, US benchmark West Texas Intermediate for May delivery was down $2.11, or 5.23%, from Friday’s close at $38.25 a barrel. Global benchmark Brent crude for June lost 4.71%, or $2.03, to $41.07. “Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson at IG Markets. “With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share.”

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It’s impossible for a reporter to see that no output freeze was ever in the works, simply because no producer can afford a freeze.

Oil Producers Get Worst Possible Outcome, Destroy Remaining Credibility (R.)

It was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests. Expectations for the meeting had been modest at best, with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia’s insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn’t countenance. From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome.

The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports. What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports. The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised. What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the OPEC or erstwhile ally Russia. Brent crude fell nearly 7% in early trade in Asia on Monday, before partly recovering to be down around 4%.

The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal. It’s likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in. This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance for the grouping to reach some sort of agreement. For the time being, OPEC’s credibility is shot, and won’t be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market. However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely.

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Naturally. Sell-off is waning already, by the way. But the trend is clear.

Failure To Reach Oil Output Deal Sparks Selloff Across Emerging Markets (BBG)

The failure by the world’s biggest oil producers to agree on an output freeze spurred a selloff across emerging markets, with stocks halting a seven-day rally as Brent crude plunged as much as 7%. The ringgit led declines in developing-nation currencies as the disappointment stemming from the weekend meeting in Doha disrupted a recovery in commodity prices, putting pressure on Malaysian finances as a net oil exporter. Hopes an agreement would be reached had pushed Brent above $44 a barrel for the first time since December and spurred gains across asset classes in recent days. It’s now headed back toward $41 as the discussions to address a global oil glut stalled after Saudi Arabia and other Gulf nations wouldn’t commit to any deal unless all OPEC members joined, including Iran.

“We have seen a high correlation between oil, commodity prices and emerging assets this year and we have seen a strong run up, so the latest development on the failure to agree on an oil output freeze should spark profit-taking among investors,” said Miles Remington, head of equities at BNP Paribas Securities Indonesia. Energy-related companies fell the most among the 10 industry groups of the MSCI Emerging Markets Index, which dropped 0.7% and retreated from last week’s highest level since November. While that was the biggest decline since April 5, the energy component slid 1.4% and industrial stocks 1%.

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Japan can’t keep this up much longer.

Loonie, Aussie Drop After Doha Failure; Yen Near 1 1/2-Year High (BBG)

The Canadian and Australian dollars dropped as crude tumbled after oil-producing nations failed to reach an accord to freeze output. The yen, used by investors as a haven, rose toward a 17-month high. The currencies of Australia, Canada, Malaysia and Norway all retreated at least 0.7% after negotiations in Doha ended without an agreement from OPEC and other oil producers to freeze supplies. Foreign-exchange traders sought the safety of Japan’s currency as the diplomatic failure threatens to send crude back toward the more than 13-year lows reached in February. World leaders at the end of last week signaled opposition to any efforts from Japan to directly halt the yen’s 11% climb this year.

“Lack of agreement from Doha has hit commodity currencies lower,” said Robert Rennie at Westpac Banking in Sydney. “The prospects of another near-term round of talks appear limited ahead of the June OPEC meeting.” The Aussie dropped 0.8% to 76.65 U.S. cents as of 7:01 a.m. London time, set for the largest decline since April 7. Canada’s loonie tumbled 1.1% to C$1.2962 against the greenback. Crude is the nation’s second-largest export. Malaysia’s ringgit slid 0.8% to 3.9348 per dollar. Oil futures fell as much as 6.8%, the biggest intraday drop since Feb. 1. “The oil price will reset lower and could even retest $30 over the next three months,”said James Purcell at UBS’s wealth-management business in Hong Kong.

“Short term, that will dampen enthusiasm for risk assets. However, markets are being slightly myopic. Economic data have improved in both China and the U.S. of late.” The lack of agreement at Doha highlights the deep divisions between OPEC members, and importantly, within Saudi Arabia, Westpac’s Rennie said. The Aussie should hold support from about 75.75 cents to 76 cents at least through the next day or so, he said. The yen jumped 0.7% to 107.96 per dollar, and touched 107.77. It reached 107.63 on April 11, the strongest since October 2014. Hedge funds and other large speculators pushed wagers on yen strength to a record last week as Japanese authorities appeared reluctant to intervene to reverse the strengthening currency.

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Price discovery is the economy’s biggest enemy.

The Bad Smell Hovering Over The Global Economy (G.)

All is calm. All is still. Share prices are going up. Oil prices are rising. China has stabilised. The eurozone is over the worst. After a panicky start to 2016, investors have decided that things aren’t so bad after all. Put your ear to the ground though, and it is possible to hear the blades whirring. Far away, preparations are being made for helicopter drops of money onto the global economy. With due honour to one of Humphrey Bogart’s many great lines from Casablanca: “Maybe not today, maybe not tomorrow but soon.” But isn’t it true that action by Beijing has boosted activity in China, helping to push oil prices back above $40 a barrel? Has Mario Draghi not announced a fresh stimulus package from the European Central Bank designed to remove the threat of deflation? Are hundreds of thousands of jobs not being created in the US each month?

In each case, the answer is yes. China’s economy appears to have bottomed out. Fears of a $20 oil price have receded. Prices have stopped falling in the eurozone. Employment growth has continued in the US. The International Monetary Fund is forecasting growth in the global economy of just over 3% this year – nothing spectacular, but not a disaster either. Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost. The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.

Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills. For a while, consumer spending was kept going because rock-bottom interest rates allowed auto dealers to offer tempting terms to those of limited means wanting to buy a new car or truck. In an echo of the subprime real estate crisis, vehicle sales are now falling. The hidden problem has been highlighted by Andrew Lapthorne of the French bank Société Générale. Companies have exploited the Federal Reserve’s low interest-rate regime to load up on debt they don’t actually need.

“The proceeds of this debt raising are then largely reinvested back into the equity market via M&A or share buybacks in an attempt to boost share prices in the absence of actual demand,” Lapthorne says. “The effect on US non-financial balance sheets is now starting to look devastating.” He adds that the trigger for a US corporate debt crisis would be falling share prices, something that might easily be caused by the Fed increasing interest rates.

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BBG senior editor David Shipley displays the general fallacy: all that’s there are desperate attempts to go back to something that once was, only in a more centralized fashion. But there’s no going back.

Untried, Untested, Ready: Remedies for the Global Economy (BBG Ed.)

The deeper the slump, economists used to say, the stronger the recovery. They don’t say that anymore. The effects of the crash of 2008 still reverberate, with the latest forecasts for global growth even more dismal than the last. The persistently stagnant world economy is more than just a rebuke to economic theory, of course; it exacts a human toll. And while politicians and central bankers – or economists, for that matter – can’t be faulted for their creativity, their remedies might have more impact if they were bolder and better-coordinated. By ordinary standards, to be sure, governments haven’t been timid. Without fiscal stimulus and aggressive monetary easing in the U.S. and other countries, things would look even worse. And yet, worldwide output is predicted to rise only 3.2% this year, falling still further below the pre-crash trend.

Simply doubling down on current strategies is unlikely to work. Large-scale bond-buying, or so-called quantitative easing, has run into diminishing returns. Negative interest rates, where they’ve been tried, haven’t revived lending, and central banks are unable or unwilling to cut further. What about new fiscal stimulus? Where possible, that would be good – but it’s hardest to do in the very countries that need it most, because that’s where public debt is already dangerously high. True, as the IMF’s new fiscal report says, almost all countries could become more growth-friendly by combining measures to curb public spending in the longer term (for instance, raising the retirement age) with steps to increase demand in the short term (cutting payroll taxes, raising employment subsidies and building infrastructure).

Getting fiscal policy right country by country would surely help – yet probably wouldn’t be enough: No single country can adequately deal with a global shortfall of demand. A finance ministry for the world isn’t happening any time soon. Still, it’s a pity that governments aren’t trying harder to coordinate their fiscal policies more intelligently, or indeed at all. The global slump persists partly because of international spillovers. Better coordination would take these into account: Countries that could safely deploy fiscal stimulus would give some weight to global as well as national conditions, and fiscal policy would be formed interactively. Even within the EU, where you’d expect economic coordination to be the norm, and where the single currency makes it essential, there’s no sign of it.

At the global level, in forums such as the IMF, you might expect the U.S. to take the lead in any such effort. So it should – but it will need to mend its shattered policy-making machinery first. If Washington can’t come to a decision on its own on taxes or spending, the question of coordination doesn’t arise. The last resort, if the slump goes on and governments can’t coordinate better, might be to combine monetary and fiscal policy in a hybrid known (unfortunately) as helicopter money. Governments would cut taxes and/or spend more, but meet the cost by printing money rather than by borrowing. In one variant, central banks might simply send out checks to taxpayers. That’s a startling idea, no doubt – but so was quantitative easing not long ago.

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Quarter-on-quarter annualized growth rate is 4.5%..

China’s QoQ and YoY GDP Data Don’t Add Up (BBG)

China’s growth rates for quarter-on-quarter and year-on-year GDP for the past year don’t match. That, combined with confirmation that 1Q output was underpinned by an unsustainable resurgence in real estate, tarnishes the newly acquired shine on the country’s economic prospects. The initial reaction to the 1Q GDP data, published Friday, was a sigh of relief. Growth at 6.7% year on year was in line with expectations and comfortably inside the government’s 6.5-7% target range. If anyone noticed that the normal quarter-on- quarter data was missing from the National Bureau of Statistics release, few thought anything of it. Then, on Saturday, the quarter-on-quarter data was published, and some of the relief turned to consternation.

Quarter-on-quarter growth in 1Q was just 1.1% – an annualized growth rate of 4.5%, and the lowest print since the data series became available in 2011. Worse, based on the accumulated quarter-on-quarter data over the last year, annual growth in 1Q was just 6.3% – substantially below the NBS’s 6.7% reading for year-on-year growth. Explaining the inconsistency between the two data points is tough to do. Accumulated quarter-on-quarter growth over four quarters should add up to year-on-year growth. In the past, it has. The divergence in the 1Q readings might reflect something as simple as difficulties with seasonal adjustment. Even so, against a backdrop of concerns about data reliability, it can only add to skepticism about China’s true growth rate.

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Xi’s dilemma.

Is China Ready To Let More State-Owned Enterprises Default? (BBG)

China’s state-owned enterprises are likely to suffer more defaults over the next year as the government shows its readiness to shut companies in industries struggling with overcapacity, according to Standard & Poor’s. “In a major policy shift, the central government appears willing to close and liquidate struggling enterprises in the steel, mining, building materials, and shipbuilding industries,” S&P analyst Christopher Lee wrote in a report Monday. “We believe this stance will exacerbate the problems of companies in these cyclical and capital-intensive sectors, which are facing sluggish demand amid slowing investment growth.”

The warning follows S&P’s decision earlier this month to cut China’s sovereign rating outlook to negative from stable because economic rebalancing is likely to proceed more slowly than it had expected. Moody’s Investors Service also downgraded the outlook to negative in March, highlighting surging debt and the government’s ability to enact reforms. The revisions were biased, Finance Minister Lou Jiwei said in Washington on Friday. Premier Li Keqiang has pledged to withdraw support from so-called zombie firms that have wasted financial resources and dragged on economic growth, which is at the slowest in a quarter century. China’s central bank has lowered benchmark interest rates six times since 2014, underpinning a jump in debt to 247% of GDP.

China Railway Materials, a state-backed commodities trader, is seeking to reorganize debt and halted trading on 16.8 billion yuan ($2.6 billion) of bonds this month. Baoding Tianwei last year became the first government-backed company to renege on onshore bonds. Sinosteel defaulted on onshore debt in October. Leverage among the largest state-owned enterprises has reached a “critical” level, according to Lee. It is likely to worsen in 2016 as a weak top line is not fully offset by cost cuts and capital expenditure reductions, he wrote in the report.

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1.8 million is a rounding error in China.

China Makes Plans for 1.8 Million Workers Facing Unemployment (WSJ)

China etched in details of plans to help workers laid off from the bloated coal and steel industries, saying assistance would include career counseling, early retirement and help in starting businesses, among other measures. New guidelines released by seven Chinese ministries over the weekend build on previously announced commitments to restructure the coal and steel industries, whose excess production is dragging on the economy, and to take care of an estimated 1.8 million workers who will be displaced. The new measures place priority on finding jobs and cushioning the transition to reduce the unemployment that the authoritarian government sees as a threat to social stability.

“Proper placement of workers is the key to working to resolve excess capacity,” said the document issued by the labor ministry, the top economic planning agency and others. It urged local governments to “take timely measures to resolve conflicts” and to “avoid ignoring the issue.” Unlike a far-reaching restructuring of state industries two decades ago, Beijing is taking a cautious approach this time around, prompting some economists to caution that the protracted pace may make the situation worse. Government data released Friday showed economic growth slowing slightly in the first quarter, buoyed by new loans, debt and investment in real estate and factories—methods that are likely to lengthen the transition to a more consumer-driven society from one driven by investment and manufacturing.

Western-style “restructuring is not on the horizon here,” said ING economist Tim Condon. “Rebalancing, forget that. That’s for another day.” Government plans call for reducing some 10% to 15% of the excess capacity in the steel and coal sectors over the next several years. That is less than half the portion analysts say is needed to bring supply closer in line with demand. And steel and coal are only two of numerous other industries plagued by overcapacity that haven’t been addressed. The large number of ministries that have signed off on the plan dated April 7 but released more than a week later underscore the sensitivity, importance and breadth of resources China is devoting to the unemployment problem.

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Europe goes blindly into the night.

The Trucker’s Nightmare That Could Flatten Europe’s Economy (BBG)

[..] Germany, Austria, France and Sweden, among others, have reintroduced border checkpoints in some places. They are pressured by Europe’s biggest refugee crisis since World War II – about 1 million migrants arrived in Greece and Italy in 2015 – terrorist attacks, and the growth of anti-immigration movements. But the economic cost of dumping Schengen, at a time when growth across the continent is still weak, would be massive. A permanent return to border controls could lop €470 billion of GDP growth from the European economy over the next 10 years, based on a relatively conservative assumption of costs, according to research published by Germany’s Bertelsmann Foundation. That’s like losing a company almost the size of BMW AG every year for a decade.

The open borders power an economy of more than 400 million people, with 24 million business trips and 57 million cross-border freight transfers happening every year, the European Parliament says. Firms in Germany’s industrial heartland rely on elaborate, just-in-time supply chains that take advantage of lower costs in Hungary and Poland. French supermarket chains are supplied with fresh produce that speeds north from Spain and Portugal. And trans-national commutes have become commonplace since Europeans can easily choose to, say, live in Belgium and work in France. For many Europeans, passport-free travel is part of being, simply, European. For the company hiring driver Unczorg, the security checks increase costs in terms of delays, storage and inventory.

Permanent controls would destroy the business model of German industry, says Rainer Hundsdoerfer, chairman of EBM-Papst. “You get the products you need for assembly here in Germany just in time,” he said by phone. “That’s why the trucks go nonstop. They come here, they unload, they load, and off they go. The cost isn’t the only prime issue” in reinstating border checks. “It’s that we couldn’t even do it.” Nor could anyone else, he adds: “Nothing in German industry, regardless of whether it’s automotives or appliances or ventilators, could exist without the extended workbenches in eastern Europe.”

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This sort of over the top comment could be the biggest gift to the Leave side. Then again, they have Boris Johnson and Nigel Farage as their figureheads. Not going to work.

George Osborne: Brexit Would Leave UK ‘Permanently Poorer’ (G.)

Britain would be “permanently poorer” if voters choose to leave the EU, George Osborne has warned, as a Treasury study claimed the economy would shrink by 6% by 2030, costing every household the equivalent of £4,300 a year. In the starkest warning so far by the government in the referendum campaign, the chancellor describes Brexit as the “most extraordinary self-inflicted wound”. Osborne will embark on one of the government’s most significant moves in the referendum campaign on Monday when he publishes a 200-page Treasury report which sets out the costs and benefits of EU membership. In a Times article the chancellor wrote: “The conclusion is clear for Britain’s economy and for families – leaving the EU would be the most extraordinary self-inflicted wound.”

Osborne warned that the option favoured by Boris Johnson – a deal along the lines of the EU-Canada arrangement – would lead to an economic contraction of 6% by 2030. Supporters of Britain’s EU membership say the EU-Canadian deal would be a disaster for the UK because it excludes financial services, a crucial part of the British economy. The chancellor asked whether this was a “price worth paying” as he said there was no other model for the UK that gave it access to the single market without quotas and tariffs while retaining a say over the rules. Osborne continued: “Put simply : over many years, are you better off or worse off if we leave the EU? The answer is: Britain would be worse off, permanently so, and to the tune of £4,300 a year for every household.”

“It is a well-established doctrine of economic thought that greater openness and interconnectedness boosts the productive potential of our economy. That’s because being an open economy increases competition between our companies, making them more efficient in the face of consumer choice, and creates incentives for business to innovate and to adopt new technologies.”

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One corrupt clan fights the other. Rousseff may well be the cleanest of the bunch.

Brazilian Congress Votes To Impeach President Dilma Rousseff (G.)

Brazilian president Dilma Rousseff suffered a crushing defeat on Sunday as a hostile and corruption-tainted congress voted to impeach her. In a rowdy session of the lower house presided over by the president’s nemesis, house speaker Eduardo Cunha, voting ended late on Sunday evening with 367 of the 513 deputies backing impeachment – comfortably beyond the two-thirds majority of 342 needed to advance the case to the upper house. As the outcome became clear, Jose Guimarães, the leader of the Workers party in the lower house, conceded defeat with more than 80 votes still to be counted. “The fight is now in the courts, the street and the senate,” he said. As the crucial 342nd vote was cast for impeachment, the chamber erupted into cheers and Eu sou Brasileiro, the football chant that has become the anthem of the anti-government protest.

Opposition cries of “coup, coup,coup” were drowned out. In the midst of the raucous scenes the most impassive figure in the chamber was the architect of the political demolition, Cunha. Watched by tens of millions at home and in the streets, the vote – which was announced deputy by deputy – saw the conservative opposition comfortably secure its motion to remove the elected head of state less than halfway through her mandate. There were seven abstentions and two absences, and 137 deputies voted against the move. Once the senate agrees to consider the motion, which is likely within weeks, Rousseff will have to step aside for 180 days and the Workers party government, which has ruled Brazil since 2002, will be at least temporarily replaced by a centre-right administration led by vice-president Michel Temer.

On a dark night, arguably the lowest point was when Jair Bolsonaro, the far-right deputy from Rio de Janeiro, dedicated his yes vote to Carlos Brilhante Ustra, the colonel who headed the Doi-Codi torture unit during the dictatorship era. Rousseff, a former guerrilla, was among those tortured. Bolsonaro’s move prompted left-wing deputy Jean Wyllys to spit towards him. Eduardo Bolsonaro, his son and also a deputy, used his time at the microphone to honour the general responsible for the military coup in 1964. Deputies were called one by one to the microphone by the instigator of the impeachment process, Cunha – an evangelical conservative who is himself accused of perjury and corruption – and one by one they condemned the president. Yes, voted Paulo Maluf, who is on Interpol’s red list for conspiracy. Yes, voted Nilton Capixiba, who is accused of money laundering. “For the love of God, yes!” declared Silas Camara, who is under investigation for forging documents and misappropriating public funds.

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Australia played all on red. Which can you take to mean either China, for exports, or debt, for housing. Realizing that in the ned the house always wins, it’s a suicide strategy.

Australia’s Debt Dilemma Raises Downgrade Fears (BBG)

1986 may seem like a long time ago, but for Australian Treasurer Scott Morrison some of the parallels with his current budget balancing act are getting too close for comfort. Back then, Moody’s and Standard & Poor’s pulled their AAA ratings as weak commodity prices wrecked government income and external finances. With resources again in a funk and a widening funding gap, National Australia Bank and JPMorgan said last week Morrison needs to undertake repairs in his May 3 budget to safeguard the country’s top rankings. Moody’s warned Thursday that debt will grow without revenue-boosting measures. “Moody’s are understandably getting impatient,” said Shane Oliver at Sydney-based AMP Capital Investors.

“We’ve seen each successive budget update push out the return to surplus. This time around – like back in the middle of the ’80s when we did suffer downgrades – we again have a twin deficit problem.” Thirty years ago, then-Treasurer Paul Keating warned the country risked becoming a “banana republic” because of its reliance on resources and it took nearly 17 years to regain the two top credit scores. While Morrison’s language hasn’t been as strident, he has said Australia must live within its means and indicated a focus on reduced spending. The government expects Australia’s budget position to improve in coming years despite the environment for commodity prices as it controls expenditure growth, Finance Minister Mathias Cormann said Thursday in an e-mailed response to questions.

“The Government is committed to responsible budget management which protects our AAA credit rating,” he said. “Our public debt remains low internationally and consistent with our plan, the government is committed to stabilizing and reducing our debt over time.” Australia’s general government net debt is projected to peak at 19.9% in 2017, lower than any Group of Seven economy, according to the IMF’s fiscal monitor. That number has climbed from minus 0.6% in 2009. “One differentiating feature between Australia and other Aaa rated sovereigns is that, while government debt has increased markedly in Australia, it has been more stable for other Aaa sovereigns,” Marie Diron at Moody’s in Singapore wrote. “We expect a further increase in debt and will look at policy measures and the economic environment to review our analysis on this.”

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Japan and Europe are in a much better position than the US? Really?

Peter Schiff: ‘Trump’s Right, America Is Broke’ (ZH)

Euro Pacific Capital’s Peter Schiff sat down with Alex Jones last week to discuss the state of the economy, and where he sees everything going from here. Here are some notable moments from the interview. Regarding how bad things are, and what’s really going on in the economy, Schiff lays out all of the horrible economic data that has come out recently, as well as making sure to take away the crutch everyone uses to explain any and all data misses, which is weather.

“It’s no way to know exactly the timetable, but obviously this economy is already back in recession, and if it’s not in a recession it’s certainly on the cusp of one” “We could be in a negative GDP quarter right now, and I think that if the first quarter is bad the second quarter is going to be worse” “The last couple years we had a rebound in the second quarter because we’ve had very cold winters. Well this winter was the warmest in 120 years so there is nothing to rebound from.”

On the Fed, and current policies, he very bluntly points out that nothing is working, nor has it worked, but of course the central planners will try it all anyway. He also takes a moment to agree with Donald Trump regarding the fact that the U.S. is flat out, undeniably broke.

“The problem for the Fed is how do they launch a new round of stimulus and still pretend the economy is in good shape.” “Negative interest rates are a disaster. It’s not working in Japan, it’s not working in Europe, it’s not going to work here. Just because it doesn’t work doesn’t mean we’re not going to do it, because everything we do doesn’t work and we do it anyway. It shows desperation, that you’ve had all these central bankers lowering interest rates and expecting it to revive the economy. And then when they get down to zero, rather than admit that it didn’t work, because clearly if you go to zero and you still haven’t achieved your objective, maybe it doesn’t work. Instead of admitting that they were wrong, they’re now going negative.”

“The United States, no matter how high inflation gets, we’ll do our best to pretend it doesn’t exist or rationalize it away because we have a lot more debt. America is broke, if you look at Europe and Japan even though there is some debt there, overall those are still creditor nations. The world still owes Europe money, the world still owes Japan money, but America owes more money than all of the other debtor nations combined. Trump is right about that, we are broke, we’re flat broke, and we’re living off this credit bubble and we can’t prick it. Other central banks may be able to raise their rates, but the Fed can’t.”

On how he sees everything unfolding from this point, Peter again points out that the economy is weak and it’s only a matter of time before this entire centrally planned manipulation is exposed for what it is, and becomes a disaster for the Federal Reserve. He likens how investors are behaving today to the dot-com bubble, and the beginning of the global financial crisis.

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“Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes.” “..in six months we would have either a tax revolution or a startling contraction of the budget!”

Make America Solvent Again (Jim Grant)

[..] The public debt will fall due someday. It will have to be repaid or refinanced. If repaid, where would the money come from? It would come from you, naturally. The debt is ultimately a deferred tax. You can calculate your pro rata obligation on your smartphone. Just visit the Treasury website, which posts the debt to the penny, then the Census Bureau’s website, which reports the up-to-the-minute size of the population. Divide the latter by the former and you have the scary truth: $42,998.12 for every man, woman and child, as I write this. In the short term, the debt would no doubt be refinanced, but at which interest rate? At 4.8%, the rate prevailing as recently as 2007, the government would pay more in interest expense –$654 billion– than it does for national defense.

At a blended rate of 6.7%, the average prevailing in the 1990s, the net federal-interest bill would reach $913 billion, which very nearly equals this year’s projected outlay on Social Security. We always need protection against cockeyed economic experimentation. Once a national consensus on money and debt furnished this protective armor. Money was gold and debt was bad, Americans assumed. Most credentialed economists today will smile at these ancient prejudices. Allow me to suggest that our forebears knew something. Keynes himself would recoil at 0% bank-deposit rates, chronically low economic growth and the towering trillions that we have so generously pledged to one another. (All we have to do now is earn the money to pay them.) How do we escape from our self-constructed fiscal jail? According to the Government Accountability Office, unpaid taxes add up to more than $450 billion a year.

Even so, according to the Tax Foundation, Americans spend 6.1 billion hours and $233.8 billion each tax season complying with a federal tax code that runs to 10 million words. Are we quite sure we want no part of the flat-tax idea? An identical low rate on most incomes. No deductions, no H&R Block. Impractical? So is the debt. So is the spending (and the promises to spend more down the road). We need to stop the squandermania. How? By resuming the principled fight that Vivien Kellems waged against the IRS during the Truman Administration. It enraged Kellems, a doughty Connecticut entrepreneur, that she was forced to withhold federal taxes from her employees’ wages. She called it involuntary servitude, and she itched to make her constitutional argument in court. She never got that chance, but she published her plan for a peaceful revolution.

She asked her readers –I ask mine– to really examine the stub of their paycheck. Observe how much your employer pays you and how much less you take home. Notice the dollars withheld for Medicare, Social Security and so forth. If you are like most of us, you stopped looking long ago. You don’t miss the income that you never get to touch. Picking up where Kellems left off, I propose a slight alteration in payday policy. Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes. “Such a payroll policy,” wrote Kellems in her memoir, Taxes, Toil and Trouble, “is entirely legal and if it were universally adopted, in six months we would have either a tax revolution or a startling contraction of the budget!” Black ink, sound money and the spirit of Vivien Kellems are the way forward. “Make America solvent again” is my credo and battle cry. You can fit it on a cap.

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“The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking.” No, it’s that today’s politicians must go.

Is Capitalism Entering A New Era? (Kaletsky)

The defining feature of each successive stage of global capitalism has been a shift in the boundary between economics and politics. In classical nineteenth-century capitalism, politics and economics were idealized as distinct spheres, with interactions between government and business confined to the (necessary) raising of taxes for military adventures and the (harmful) protection of powerful vested interests. In the second, Keynesian version of capitalism, markets were viewed with suspicion, while government intervention was assumed to be correct. In the third phase, dominated by Thatcher and Reagan, these assumptions were reversed: government was usually wrong and the market always right. The fourth phase may come to be defined by the recognition that governments and markets can both be catastrophically wrong.

Acknowledging such thoroughgoing fallibility may seem paralyzing – and the current political mood certainly seems to reflect this. But recognizing fallibility can actually be empowering, because it implies the possibility of improvement in both economics and politics. If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa. If the world is characterized by ambiguity and unpredictability, then the economic theories of the pre-crisis period – rational expectations, efficient markets, and the neutrality of money – must be revised. Moreover, politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions.

This includes not only financial deregulation, but also central bank independence, the separation of monetary and fiscal policies, and the assumption that competitive markets require no government intervention to produce an acceptable income distribution, drive innovation, provide necessary infrastructure, and deliver public goods. It is obvious that new technology and the integration of billions of additional workers into global markets have created opportunities that should mean greater prosperity in the decades ahead than before the crisis. Yet “responsible” politicians everywhere warn citizens about a “new normal” of stagnant growth. No wonder voters are up in arms. People sense that their leaders have powerful economic tools that could boost living standards.

Money could be printed and distributed directly to citizens. Minimum wages could be raised to reduce inequality. Governments could invest much more in infrastructure and innovation at zero cost. Bank regulation could encourage lending, instead of restricting it. But deploying such radical policies would mean rejecting the theories that have dominated economics since the 1980s, together with the institutional arrangements based upon them, such as Europe’s Maastricht Treaty. Few “responsible” people are yet willing to challenge pre-crisis economic orthodoxy. The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking. If responsible politicians refuse, “some rough beast, its hour come at last” will do it for them.

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Japan, Philippines, Tonga, Vanuatu, Ecuador and more

Fears Of ‘The Big One’ As 7 Major Earthquakes Strike Pacific In 96 Hours (E.)

Japan has been worst hit by the tremors. The latest quake to hit the country yesterday, measuring 7.3 on the Richter scale, injured more than 1,000 and trapped people in collapsed buildings, only a day after a quake killed nine people in the same region. Rescue crews searched for survivors of a magnitude 7.3 earthquake that struck Japan’s Kyushu Island, the same region rattled by a 6.2 quake two days earlier. Around 20,000 troops have had to be deployed following the latest 7.3 earthquake at 1.25am local time on Saturday. Roads have also been damaged and big landslides have been reported, there are also 200,000 households without power. The death toll in the latest Kyushu earthquake is 16 people and a previous earthquake that struck the area on Thursday had killed nine people.

There have been other large earthquakes recorded in recent days, including a major one in southern Japan which destroyed buildings and left at least 45 people injured, after Myanmar was rocked on Wednesday. Japan’s Fire and Disaster Management Agency said 7,262 people have sought shelter at 375 centers since Friday in Kumamoto Prefecture. Prime Minister Shinzo Abe vowed to do everything he could to save lives following the disaster. He said: “Nothing is more important than human life and it’s a race against time.” On Thursday, The Japanese Red Cross Kumamoto Hospital confirmed 45 were injured, including five with serious injuries after a quake of magnitude 6.2 to 6.5 and a series of strong aftershocks ripped through Kumamoto city.

Several buildings were damaged or destroyed and at least six people are believed to be trapped under homes in Mashiki. Local reports said one woman was rescued in a critical condition Scientists say there has been an above average number of significant earthquakes across south Asia and the Pacific since the start of the year. The increased frequency has sparked fears of a repeat of the Nepal quake of 2015, where 8,000 people died, or even worse. Roger Bilham, seismologist of University of Colorado, said: “The current conditions might trigger at least four earthquakes greater than 8.0 in magnitude. “And if they delay, the strain accumulated during the centuries provokes more catastrophic mega earthquakes.”

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Mar 052016
 
 March 5, 2016  Posted by at 9:42 am Finance Tagged with: , , , , , , , , ,  


DPC Country store, Venezuela 1905

China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)
China’s Rebalancing Is Overrated (Balding)
China Lays Out Its Vision To Become A Tech Power (Reuters)
Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)
US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)
It Begins: Palace Revolt Against ECB’s NIRP (WS)
What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)
Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)
Brazil Ex-President Lula Detained In Corruption Probe (Reuters)
Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)
Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)
BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)
Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)
What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)
The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)
Athens Given Deadlines For Schengen Requirements (Kath.)
Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)
Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

Saw that coming from miles away.

China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)

China intervened to support its stock market on Friday, helping the benchmark index cap its best weekly gain of 2016 before policy makers meet to approve a five-year road map for the economy, according to two people with direct knowledge of the situation. State-backed funds bought primarily bank shares, while some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during the National People’s Congress and the Chinese People’s Political Consultative Conference, said the people, who asked not to be named because the matter isn’t public. China’s biggest banks, seen as prime targets for state support because of their large weightings in benchmark indexes, paced gains in the $5.5 trillion market on Friday even as small-capitalization shares tumbled.

Authorities have been known to intervene in markets before key national events, with government funds stepping in to boost share prices last August before a military parade celebrating the 70th anniversary of the World War II victory over Japan. “It looks like the national team has been buying as large caps of the Shanghai index jumped, while small caps fell,” said Steve Wang at Reorient Financial Markets in Hong Kong. China’s stock market has become one of the most visible symbols of anxiety toward Asia’s largest economy after a $5 trillion crash last summer rattled global investors. By publicly intervening to support equity prices in 2015, President Xi Jinping’s government has staked some of its credibility as a steward of the economy on the state’s ability to stabilize one of the world’s most volatile markets.

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It’s just word, really: “..by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.”

China’s Rebalancing Is Overrated (Balding)

The optimists’ case for China is fairly straightforward. Yes, the world’s second-largest economy is grinding to its slowest pace in decades. But as investment and manufacturing – traditionally the key drivers of Chinese growth – decline in importance, domestic consumption and services are playing a bigger role: For the first time, services accounted for just over 50% of GDP last year. This much-desired rebalancing should move China toward a far more sustainable growth model. New economy companies in technology, health-care, finance and retail are more productive and less polluting than smokestack industries. Robust consumption – rail traffic is growing at 10% as Chinese spend more on leisure travel, while mobile Internet traffic has doubled – is key to weaning the economy off its addiction to investment.

As unproductive coal mines and steel factories shed workers, labor-intensive services should pick up the slack. A closer look at the data, however, paints a different and decidedly gloomier picture. Take travel. While overall rail traffic is up, total passenger turnover, which accounts for the number of kilometers traveled, grew only 3.1% in 2015. Moreover, it’s important to remember that only 11% of trips are done by rail. (International air travel, which grew 34% last year, only covers 0.2% of trips.) The vast majority of travel takes place by road and highway traffic actually declined last year. If so many more Chinese are going on pleasure trips, why is hotel revenue flat? Similarly, sales at the 100 biggest retailers in China, which one would expect to be thriving if the economy were rebalancing, were down 0.1% in 2015.

Luxury brands have been hit particularly hard (in part because of the ongoing anti-corruption campaign) and sales of even basic consumer durables such as TVs, refrigerators, audio equipment and washing machines are flat or declining. Services are certainly growing faster than manufacturing and real estate. But much of that growth comes from two sectors. The first, financial services, got a major boost in 2015 from the stock-market boom in the first half of the year and from the continuing flood of lending encouraged by the government. If one strips out the contribution made by the sector, consumption continued to slow last year. The bursting of the equity bubble is sure to crimp growth, as may a souring of loans, many of which are going to loss-making heavy industries. Indeed, by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.

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By exercising more state control…

China Lays Out Its Vision To Become A Tech Power (Reuters)

China aims to become a world leader in advanced industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites, the government said in its blueprint for development between 2016 and 2020. In its new draft five-year development plan unveiled on Saturday, Beijing also said it aims to use the internet to bolster a slowing economy and make the country a cyber power. China aims to boost its R&D spending to 2.5% of GDP for the five-year period, compared with 2.1% of GDP in 2011-to-2015. Innovation is the primary driving force for the country’s development, Premier Li Keqiang said in a speech at the start of the annual full session of parliament.

China is hoping to marry its tech sector’s nimbleness and ability to gather and process mountains of data to make other, traditional areas of the economy more advanced and efficient, with an eye to shoring up its slowing economy and helping transition to a growth model that is driven more by services and consumption than by exports and investment. This policy, known as “Internet Plus”, also applies to government, health care and education. As technology has come to permeate every layer of Chinese business and society, controlling technology and using technology to exert control have become key priorities for the government.

China will implement its “cyber power strategy”, the five-year plan said, underscoring the weight Beijing gives to controlling the Internet, both for domestic national security and the aim of becoming a powerful voice in international governance of the web. China aims to increase Internet control capabilities, set up a network security review system, strengthen cyberspace control and promote a multilateral, democratic and transparent international Internet governance system, according to the plan. Since President Xi Jinping came to power in early 2013, the government has increasingly reined in the Internet, seeing the web as a crucial domain for controlling public opinion and eliminating anti-Communist Party sentiment.

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“..if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.”

Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)

Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months. During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100% probability that the U.S. economy would be in a downturn within one year. “It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” he said. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.” Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33%.

Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion. The former partner of George Soros suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering. “If you look at the … payroll tax figures [in the U.S.], you see they’re already flat,” he concluded. “Don’t pay attention to the government numbers, pay attention to the real numbers.” In light of the economic turmoil envisioned by Rogers, he is long the U.S. dollar.

“It might even turn into a bubble,” he said of the greenback. “I mean, if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.” Rogers added that a strengthening U.S. dollar has historically been negative for commodities—the asset class that the investor is best-known for. While the yen is often designated as a risk-off currency, it won’t benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan’s balance sheet, according to Rogers, who said he exited his position in the yen last Friday.

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Don’t hold your breath.

US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)

A U.S. watchdog agency is preparing to investigate whether the Federal Reserve and other regulators are too soft on the banks they are meant to police, after a written request from Democratic lawmakers that marks the latest sign of distrust between Congress and the central bank. Ranking representatives Maxine Waters of the House Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations asked the Government Accountability Office on Oct. 8 to launch a probe of “regulatory capture” and to focus on the New York Fed, according to a letter obtained by Reuters. In an interview, the congressional agency said it has begun planning its approach. The probe, which had not been previously reported or made public, is the first by an outside agency into the perception that government regulators are “captured” by and too deferential toward the bankers they supervise, so that Wall Street benefits at the public’s expense.

Such perceptions have dogged the U.S. central bank since it failed to head off the 2007-2009 financial crisis that sparked a global recession. The Fed’s biggest critics have since been Republicans looking to curb its policy independence, but the request by Democrats could cool its somewhat warmer relationship with the left. “We currently do have some ongoing work looking at the concept known as regulatory capture. We’re in initial stages of outlining that engagement,” Lawrance Evans, director of the GAO’s financial markets and community investment division, said in an interview. The agency will conduct “an assessment across all financial regulators, and the Federal Reserve will be one institution,” he said. It was unclear whether the majority Republicans on the House committee, including Chairman Jeb Hensarling, backed the request from the minority Democrats.

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This is how simple it is. The NIRP boomerang.

It Begins: Palace Revolt Against ECB’s NIRP (WS)

The Association of Bavarian Savings Banks, which represents 71 savings banks in the German State of Bavaria, has had it with the ECB’s negative deposit-rate absurdity, and it’s now instigating a palace revolt. In 2014, when negative interest rates first hit Eurozone banks and ricocheted out from there, Germans called it “punishment interest” (Strafzinsen) because these rates were designed to flog banks and savers until their mood improves. But inexplicably, their mood hasn’t improved. Bank stocks have gotten clobbered as their profits have gotten hit by the negative interest rate environment. Stocks of Eurozone companies in general have come down hard, and the Eurozone economy simply hasn’t responded very well though the ECB is flogging it on a daily basis with its punishment interest.

And so Bavarian savings banks have had enough. The Frankfurter Algemeine has obtained a memo by the Association of Bavarian Savings Banks that openly encourages its member banks to stash cash in their own vaults rather than depositing it at the ECB and paying the penalty interest of 0.3% to the ECB on these deposits. The savings banks therefore are asking if it might be more economical for them to keep high cash values in their safes and not -as usual- store them at the ECB, the memo said. To estimate total costs and determine which would be the better deal -hang on to the cash or send it to the ECB- the association analyzed the costs of additional insurance coverage needed for these higher levels of cash-in-vault and further discussed some options concerning this insurance coverage, or as it says, for ECB-cash protection.

According to its analysis, insurance coverage on cash costs 0.15%, plus insurance tax, in total 0.1785%. This is below the ECB’s punishment rate of 0.3%. Each additional €1,000 of cash in its vault would therefore cost the bank €1.785 per year. But if the bank deposited that €1,000 at the ECB, it would cost €3.00 per year. Multiply the difference of €1.21 by tens or hundreds of millions, and pretty soon you’re talking about some real money. Banks have a total of €245 billion deposited at the ECB. At a deposit rate of negative 0.3%, extrapolated over a year, it costs them €735 million in punishment interest. “Punishment interest is already costing real money,” is how a senior central bankers explained it to the Frankfurter Algemeine.

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More interest rate manipulation damage.

What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)

Not many experts thought that the “emergency” base rate cut to 0.5% on March 5, 2009 would last for long. But seven years later savers have lost around £160bn in interest, while the prospect of rate rises are slipping further into the distance. In the immediate aftermath of the cut to 0.5%, rates for savers remained relatively high. Our analysis shows how cash Isas were offering 3%, and notice accounts 3.5%, in March 2009, and for the next couple of years they hovered around this level. After all, most banks and building societies were desperate for deposits after the great financial crash, so they were willing to pay far above the Bank of England base rate. The real villain turns out to be the Funding for Lending government programme introduced in July 2012, which effectively provided cheap money for cash-strapped lenders.

The effect was almost instantaneous: banks no longer needed to attract cash from savers, so they cut the rates on offer. Susan Hannums of Savingschampion.co.uk says: “While the base rate hitting the record 0.5% was bad enough, it was Funding for Lending that had one of the biggest impacts. Almost overnight, best-buy rates for savers dropped like a stone, followed by an unprecedented number of reductions on existing rates. “Today we’ve hit over 4,000 rate reductions for existing savers, with little sign of this slowing down. This means all savers would be wise to keep checking the rate they are getting, and to switch to improve returns when they are no longer competitive. “With almost 50% of easy-access accounts paying 0.5% or less, and the best-paying 1.55%, it’s easy to see why so many need to switch.”

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Bizarro.

Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)

Argentina plans to return to international credit markets in April with three bonds sales totaling $11.68 billion under U.S. law if Congress swiftly approves a debt deal for holdout creditors, top finance ministry officials told Congress on Friday. Finance Minister Alfonso Prat-Gay said the bonds, which will be used to finance the payouts to investors holding unpaid debt stemming from the country’s 2002 default, would carry maturities of five, ten and thirty years. Prat-Gay and his deputy, Luis Caputo, on Friday presented a package of debt agreements brokered with creditors, including a $4.65 billion cash payout to the main holdouts suing in a Manhattan court led by billionaire Paul Singer. Argentina has now reached provisional settlements with about 85% of bondholders and says negotiations continue with the rest.

“If the deal extends to all holdout investors, the bond issue will be for $11.684 billion. That’s what we need to close this chapter definitively,” Prat-Gay said. The debate in Congress is the first major political test of President Mauricio Macri’s ability to garner cross-party support for his economic reform package, the success of which hinges on ending the festering 14-year debt battle. Legislators will also be asked to repeal two laws blocking settlement of the debt case. Macri’s government is confident it can corral the votes needed to win approval even though the opposition holds a majority in the Senate and Macri holds only the largest minority in the lower chamber. Caputo told legislators the bonds would carry an interest rate of about 7.5%. While debt brokers see healthy appetite for Argentine debt after its prolonged absence from global debt markets, the gloomy global context may weigh.

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“News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.”

Brazil Ex-President Lula Detained In Corruption Probe (Reuters)

Former Brazilian President Luiz Inacio Lula da Silva was briefly detained for questioning on Friday in a federal investigation of a vast corruption scheme, fanning a political crisis that threatens to topple his successor, President Dilma Rousseff. Lula’s questioning in police custody was the highest profile development in a two-year-old graft probe centered on the state oil company Petrobras, which has rocked Brazil’s political and business establishment and deepened the worst recession in decades in Latin America’s biggest economy. The investigation threatens to tarnish the legacy of Brazil’s most powerful politician, whose humble roots and anti-poverty programs made him a folk hero, by putting a legal spotlight on how his left-leaning Workers’ Party consolidated its position since rising to power 13 years ago.

Police picked up Lula at his home on the outskirts of Sao Paulo and released him after three hours of questioning. They said evidence suggested Lula had received illicit benefits from kickbacks at the oil company, Petrobras, in the form of payments and luxury real estate. The evidence against the former president brought the graft investigation closer to his protege Rousseff. She is already fighting off impeachment for allegedly breaking budget rules, weakening her efforts to pull the economy out of recession. Rousseff expressed her disagreement with the police taking her mentor into custody, saying it was “unnecessary” after his voluntary testimony. But she repeated her backing for institutions investigating corruption and said the probe must continue until those responsible were punished. News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.

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Yeah, do fear for the Olympics.

Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)

The ruling party in Brazil has drawn up crisis plans to tap the country’s foreign exchange reserves to fight recession and prevent a surge in unemployment, heightening fears of a populist lurch as the economic crisis deepens. Any such move by Brazil would mark an escalation in the emerging market crisis, leading to intense scrutiny of other countries across the world facing similar difficulties following the collapse of the commodity boom and the end of cheap dollar liquidity from the US Federal Reserve. The plan is in direct conflict with the policies of president Dilma Rousseff and implies a head-on clash between the government and its own political base in the Workers Party (PT), with serious implications for the stability of the currency and Brazil’s debt markets.

It came as official data showed Brazil’s economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, setting the stage for what could be the country’s deepest recession on record. Brazil’s gross domestic product shrank 3.8pc in 2015, capped by another steep contraction in the fourth quarter. It was the steepest annual drop for the country’s GDP since 1990, when hyperinflation and debt default blighted the country’s recent return to democracy. Rui Falcão, the PT’s president, personally drafted the crisis document known as the National Emergency Plan. He reportedly has the backing of former president Lula, Luiz Inacio da Silva. It calls for a draw-down on the country’s $371bn foreign reserves to finance a development and jobs fund, as well as demanding a sharp cut in interest rates, a move that would effectively strip the central bank of its independence.

The 16 proposals together mark a dramatic shift back to the party’s Marxist roots and a rejection of its free-market concordat over recent years. While investors might be willing to accept use of the reserves to back up a stabilisation policy and radical reform, they would be horrified if it was used to finance a last-ditch populist agenda. “If the PT taps the reserves, they risk setting off a run on the currency. This is very dangerous,” said one economist, dismissing the scheme as complete madness. While the reserves are large, they are also opaque since the central bank has taken out $115bn in currency swaps, partly in order to support companies struggling to cope with dollar debts that have suddenly doubled in local terms due to the devaluation of the Brazilian real.

Lisa Schineller, a director of sovereign ratings at Standard & Poor’s, said Brazil’s safety margin on external debt is weaker than it looks, a key reason why the agency downgraded the country deeper into junk status in late February. Total external debt is $470bn, but on top of this there are $200bn of inter-company loans that have a “debt-like” character. “This is a very large order of magnitude. Brazil’s situation is not as strong as some people suggest,” she told The Daily Telegraph. “Their external assets do not exceed their external debts. They are much lower than they have been historically.”

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“There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)

Two giant California pension funds plan to sue Volkswagen in a German court, joining other institutional investors who argue the automaker should pay for losses they experienced since the revelation last year that VW cheated on emissions tests. The California State Teachers’ Retirement System, or CalSTRS, on Friday announced plans to join in a securities case against VW. A spokesman for the California Public Employees’ Retirement System, or CalPERS, confirmed that fund is separately pursuing a similar action. CalSTRS owned about 354,000 common and preferred shares of VW as of Dec. 31. Common shares fell by as much as 37%, and preferreds by as much as 43%, in the first weeks of the mushrooming scandal that began in September. Shares have since recovered somewhat.

CalSTRS said its holdings are now worth $52 million, though the pension fund has not said how much it believes it has lost. Its VW investment is a tiny fraction of the fund’s roughly $180 billion portfolio. “The emissions cheating scandal has badly hurt [VW’s] value,” CalSTRS Chief Executive Jack Ehnes said in a statement Friday. “Volkswagen’s actions are particularly heinous since the company marketed itself as a forward-thinking steward of the environment.” Ehnes said the pension fund hopes to recover money, as well as send a message to VW and the auto industry “that we will not tolerate these illegal actions.” CalPERS, the nation’s largest pension fund, with assets of $279 billion, also holds VW shares, though it has not publicly reported the number of shares since the summer of 2014.

It is not clear whether either pension fund has sold or acquired shares since the emissions scandal. It’s relatively common in the United States for investors to sue public companies following scandal-driven stock slumps, but such suits are less common in Europe, said Bruce Simon, a partner at law firm Pearson Simon & Warshaw, which specializes in class-action and securities litigation. He said the big question for the pension funds and other U.S. investors in VW is how much they’ll be able to recover under German securities law. “There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

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“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable..”

BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)

The pay package for BP chief executive Bob Dudley jumped by $3.2m (£2.1m) last year, despite profits plunging at the oil giant and thousands more staff facing the axe. His total package rose by 20% from $16.4m to $19.6m and was condemned by critics for being the latest example of a company losing “contact with reality” – after BP said a further 3,000 workers would lose their jobs on top of 4,000 gone in January. A further 4,000 went last year, with BP predicting that the oil price downturn would be long-lasting. About 250,000 jobs have been cut in the sector in 18 months. Mr Dudley’s base salary was unchanged at $1.85m but his annual cash bonus rose by $300,000 to $1.3m. Pension contributions soared from $3m to $6.5m.

But the biggest contributor to his package was $7.1m worth of vested performance shares, which he will receive during the current year. BP said one third of this award was based on total shareholder returns, one third on “strategic imperatives”, including safety and operational risk, and the final third on operating cashflow. The company added that the executive directors had “responded early and decisively to the lower oil price environment” – and said Mr Dudley deserved his extra cash because of his performance in a difficult period. “Despite the very challenging environment,” it stated, “BP delivered strong operating and safety performance throughout 2015.

“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable. BP surpassed expectations on most measures ,and directors’ remuneration reflects this.” The pay boost came as the falling oil price and continuing liabilities related to the Gulf of Mexico oil spill in 2010 led BP to report a record 2015 deficit of $6.5bn.

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As talks with EU are ongoing. Too much.

Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)

Turkish police on Friday raided the premises of a daily newspaper staunchly opposed to President Recep Tayyip Erdogan, using tear gas and water cannon to disperse supporters and enter the building to impose a court order placing the media business under administration. Police fired the tear gas and water cannon to move away a hundreds-strong crowd that had formed outside the headquarters of the Zaman newspaper in Istanbul following the court order that was issued earlier in the day, an AFP photographer said. Zaman, closely linked to Erdogan’s arch-foe the US-based preacher Fethullah Gulen, was ordered into administration by the court on the request of Istanbul prosecutors, the state-run Anatolia news agency said.

There was no immediate official explanation for the court’s decision. The move means the court will appoint new managers to run the newspaper, who will be expected to transform its editorial line. Hundreds of supporters had gathered outside the paper’s headquarters in Istanbul awaiting the arrival of bailiffs and security forces after the court order. “We will fight for a free press,” and “We will not remain silent” said placards held by protestors, according to live images broadcast on the pro-Gulen Samanyolu TV. “Democracy will continue and free media will not be silent,” Zaman’s editor-in-chief Abdulhamit Bilici was quoted as saying by the Cihan news agency outside its headquarters. “I believe that free media will continue even if we have to write on the walls. I don’t think it is possible to silence media in the digital age,” he told Cihan, part of the Zaman media group.

[..] The court order had already aroused the concern of the United States, which said it was “the latest in a series of troubling judicial and law enforcement actions taken by the Turkish government targeting media outlets and others critical of it.” “We urge Turkish authorities to ensure their actions uphold the universal democratic values enshrined in their own constitution, including freedom of speech and especially freedom of the press,” State Department spokesman John Kirby said.

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Somehow it’s hard to believe this still continues.

What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)

This column has cheered for an American failure in Ukraine since first forecasting one in the spring of 2014. Brilliant that it is upon us at last. Forcing a nation to live under a neoliberal economic regime so that American corporations can exploit it freely, as the Obama administration proposed when it designated Arseniy Yatsenyuk as prime minister in 2014, is never to be cheered. Turning a nation of 46 million into a bare-toothed front line in America’s obsessive campaign against Russia is never to be cheered. Forcing the Russian-speaking half of the country to live under a government that would ban Russian as a national language if it could is never to be cheered. The only regret, a great regret of mind and heart, is that American failures almost always prove so costly in consequence of the blindness and arrogance of the policy cliques.

Readers may remember when, with a defense authorization bill in debate last June, two congressmen advanced an amendment banning military assistance to “openly neo-Nazi” and “fascist” militias waging war against Ukraine’s eastern regions. John Conyers and Ted Yoho got two things done in a stroke: They forced public acknowledgment that “the repulsive neo-Nazi Azov battalion,” as Conyers put it, was active, and they shamed the (also repulsive) Republican House to pass their legislative amendment unanimously. Obama signed the defense bill then at issue into law just before Thanksgiving. The Conyers-Yoho amendment was deleted but for a single phrase. The bill thus authorizes, among much, much else, $300 million in aid this year to “the military and national security forces in Ukraine.” In a land ruled by euphemisms, the latter category designates the Azov battalion and the numerous other fascist militias on which the Poroshenko government is wholly dependent for its existence.

An omnibus spending bill Obama signed a month later included an additional $250 million for the Ukraine army and its rightist adjuncts. This is your money, taxpayers, should you need reminding. As Obama signed these bills, the White House expressed its satisfaction that “ideological riders” had been stripped out of them. No, you read next to nothing of this in any American newspaper. Yes, you now know what the often-lethal combination of blindness and arrogance looks like in action. Yes, you can now see why American policy in Ukraine must fail if this crisis is ever to come to a rational, humane resolution.

The funds just noted are in addition to a $1 billion loan guarantee—in essence another form of aid—that Secretary of State Kerry announced with fanfare last year. And that is in addition to the International Monetary Fund’s $40 billion bailout program, a $17.5 billion tranche of which is now pending. Since the I.M.F. is the external-relations arm of the U.S. Treasury (and Managing Director Christine Lagarde thus the Treasury’s public-relations face) this is a big commitment on the Obama administration’s part (which is to say yours and mine).

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“Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.”

The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)

“Yesterday was the funeral,” Ramadan says. “It was very cold. We make sure Yasmin always has family around her.” Yasmin wears a red scarf, maroon jumper and blue jeans. She is small and slight. Her face seems unable to assemble itself into any form of meaning. Nothing shapes it. Her eyes are terrible to behold. Blank and pitiless. Yet, in the bare backstreet apartment in Mytilini on the Greek island of Lesbos in which we meet on a sub-zero winter’s night, she is the centre of the room, physically, emotionally, spiritually. The large extended family gathered around Yasmin – a dozen or more brothers, sisters, cousins, nephews, nieces, her mother and her father, Ramadan, an aged carpenter – seem to spin around her. And in this strange vortex nothing holds.

Yasmin’s family has come from Bassouta, an ancient Kurdish town in Afrin, near Aleppo, and joined the great exodus of our age, that of 5 million Syrians fleeing their country to anywhere they can find sanctuary. Old Testament in its stories, epic in scale, inconceivable until you witness it, that great river of refugees spills into neighbouring countries such as Lebanon, Jordan and Turkey, and the overflow – to date more than a million people – washes into Europe across the fatal waters of the Aegean Sea. “We were three hours in a black rubber boat,” Ramadan says. “There were 50 people. We were all on top of each other.” The family show me. They entwine limbs and contort torsos in strange and terrible poses. Yasmin’s nine months pregnant sister, Hanna, says that people were lying on top of her.

I am told how Yasmin was on her knees holding her four-year-old son, Ramo, above her. The air temperature just above freezing, the boat was soon half sunk, and Yasmin wet through. But if she didn’t continue holding Ramo up he might have been crushed to death or drowned beneath the compressed mass of desperate people. Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.

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But how do they see this? How is this not as hollow as can be?

Athens Given Deadlines For Schengen Requirements (Kath.)

Greece was handed Friday a timeline for the improvements it has to make in its border controls by May, as the European Commission presented a step-by-step plan to implement measures, including a new EU border and coast guard, to curb the influx of refugees and migrants to Europe. “We cannot have free movement internally if we cannot manage our external borders effectively,” Migration Commissioner Dimitris Avramopoulos said, as he presented the report ahead of Monday’s summit between the EU and Turkey. According to the Commission’s document, Greece has by March 12 to present its action plan to address concerns about its border controls and explain what action it is taking to correct failings discovered during an inspection in November.

Exactly a month later, Brussels will deliver its assessment on the Greek action plan. A new Schengen evaluation will be carried out by EU experts, who will inspect Greece’s land and sea borders, from April 11-17. Finally, Athens will have to report to the European Council by May 12 on the steps it has taken to meet its recommendations. The report presented Friday estimates that the collapse of passport-free travel in the 26-nation Schengen zone could cost the European economy up to €18 billionß a year.

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10,000 kilometers of coastline.

Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)

Greek Prime Minister Alexis Tsipras said Friday his country can’t stop migrants who want to head to northern Europe, and sharply criticized Balkan countries for shutting their borders. “How can we stop people if they want to keep going?” Tsipras, whose country has faced a major refugee influx via Turkey, told Germany’s top-selling Bild daily. “We cannot imprison people, that would contravene international agreements. We can only help to rescue these people at sea, to supply and register them. Then they all want to move on. That’s why a resettlement process is the only solution.” “They have been bombed in their homes, have risked their lives to escape to come to Greece, the gateway to Europe. But the refugees’ ‘Mecca’ lies to the north.”

Tsipras’s comments came a day after Austria’s foreign minister urged Greece to stop migrants from pursuing their journey to northern Europe, saying Athens should hold new arrivals at registration “hot spots.” Sebastian Kurz told the Sueddeutsche Zeitung in an interview that “those who manage to arrive in Greece should not be allowed to continue on their journey.” But Tsipras retorted that while Greece, as Europe’s main gateway for refugees, had “met more than 100% of our obligations, others haven’t even met 10% and love to criticize us”. “What some countries have agreed and decided goes against all the rules, against the whole of Europe, and we consider it an unfriendly act.” “These countries are destroying Europe!” he charged, according to the German translation.

Athens has been seething over a series of border restrictions along the migrant trail, from Austria to the Former Yugoslav Republic of Macedonia, that has caused a bottleneck in Greece. “Greece is the only country that is fulfilling its obligations,” the leftist leader said, adding that it was now hosting 30,000 refugees. While Greece can protect its land borders, it can’t do the same for some 10,000 kilometers (6,000 miles) of coastline, he said. Tsipras said that “in the end those who are now putting up barbed wire, expelling refugees by force and turning their countries into fortresses, will be isolated in Europe. “We, however, are in an alliance with the countries showing solidarity,” he added, in an apparent reference to Germany, Europe’s top destination for migrants. “And these are the countries with which we had very big problems during the financial crisis,” he said, hinting at Berlin’s tough austerity demands from Greece in return for international bail-out loans.

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Somone better stop Tusk. “..if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them..”

Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

On Thursday, European Council President Donald Tusk, dismissing refugees fleeing war-torn Syria as “economic migrants,” stated, “Do not come to Europe.” Middle East analyst Hafsa Kara-Mustapha sat down with Sputnik’s Brian Becker to discuss the dire status of Middle Eastern refugees in Europe. What will be the impact of European Council President Tusk’s Statements? “First of all, I have to talk about the wording he used,” Kara-Mustapha told Loud & Clear. “He insisted on using the word migrant and specifically using the phrase ‘economic migrant’ when all the people presently coming into Europe are actually war refugees fleeing conflict.” Kara-Mustapha expressed concern that by rebranding the refugees as economic migrants, the EU aims to alter the requirements of member states to provide asylum.

“In effect, when he says that Europe should stop welcoming economic migrants he is actually changing the whole subject and making the issue about economy and migration when simply it is about refugees,” she noted, adding that, “if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them because these people are just coming for financial gain and nobody owes them anything,” observed Kara-Mustapha. In reality, however, “these people are coming to Europe for safety and to avoid the horrors of war.” She also noted that the current aim of European leadership appears to be to fundamentally change public opinion toward refugees by referring to them as “migrants.” The wording, she said, “makes the topic less acceptable to ensure people turn against these refugees… the underlying meaning is that they are coming here for the benefits, to raid the welfare system, and to make money.”

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Mar 042016
 
 March 4, 2016  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  


Edward Meyer School victory garden on First Avenue New York 1944

China’s Coming Mass Layoffs: Past as Prologue? (Diplomat)
Red Ink Rising (Economist)
China Begins to Tackle Its ‘Zombie’ Factory Problem (WSJ)
PBOC Pulls $129 Billion in Biggest Weekly Withdrawal Since 2013 (BBG)
China To Increase Defence Spending By ‘7-8%’ In 2016 (AFP)
“I See Bubbles Bursting Everywhere” (CNBC)
UBS: “The Move In Oil Is TOTALLY Short Squeeze Led” (ZH)
EU Superstate Would Have No Democratic Legitimacy (Tel.)
Brazil’s Economy Slumps To 25-Year Low as GDP Falls 3.8% (Guardian)
Only The IMF Can Now Save Brazil (AEP)
Era Of Zero, Negative Interest Rates Could Last For Years: Barclays (Reuters)
Osborne’s Desire To Further Cut Spending Makes Little Sense (Wolf)
The Economy Simply Explained (AA)
Monsanto’s RoundUp Found in 14 Popular German Beers (NS)
Ballooning Bad Loans in Turkey Worsen as Tourists Flee (BBG)
The Syrian War Will Define The Decade (Reuters)
EU Fate At Stake On Muddy Greek Border (Reuters)
Pensioners Share Their Bread With Refugees At Greek Border (Reuters)
EU Mulls ‘Large-Scale’ Migrant Deportation Scheme (AP)

1990s: “Overnight, tens of millions of workers lost their “iron rice bowls.”

China’s Coming Mass Layoffs: Past as Prologue? (Diplomat)

China’s minister for human resources and social security has said that China will lay off 1.8 million workers in the coal and steel sectors, part of an overall plan to reduce overcapacity and streamline state-owned enterprises. Reuters, citing anonymous sources close to China’s leadership, puts the figure much higher, at 5 to 6 million in layoffs over the next two years. Beijing is aware of the risks such massive layoffs pose for social stability, and it’s already moving to control to damage. A Chinese official recently announced that the national government will set aside 100 billion renminbi ($15.3 billion) to help find new employment for those who lose their jobs to the restructuring.

On Wednesday, a spokesperson for the National Committee of the Chinese People’s Political Consultative Conference, which begins its annual session on Friday, assured journalists that the job losses would be “temporary.” At least publicly, Chinese officials are confident that growth in service sector jobs can absorb most of the layoffs from heavy industry. That may seem unlikely, given the sheer number of the coming layoffs, but remember that China has been through this before – and on an even grander scale. In the late 1990s, China drastically restructured its state-owned enterprises, privatizing some and shutting down others. The result: from 1995 to 2002, over 40 million jobs in the state sector were cut, along with nearly 30 million jobs lost in the manufacturing, mining, and utilities sectors.

Although many of these workers were able to pick up jobs in the newly-growing private sector, the societal and cultural shift entailed in the restricting should not be underestimated. Prior to that wave of reforms, state sector employees (the vast majority of China’s workforce) enjoyed the benefits of an “iron rice bowl,” absolute job security along with social benefits (such as healthcare and pensions) provided by the state. Yet as China transitioned to a capitalistic economy – as “socialism with Chinese characteristics” turned out to be – the state sector and its “iron rice bowl” were proving a financial disaster, particularly in the wake of the Asian Financial Crisis in the late 1990s.

Chinese blogger Yang Hengjun explained the resulting transition as follows: “The reforms of the 1990s resulted in massive lay-offs. Overnight, tens of millions of workers lost their “iron rice bowls.” There were people who didn’t want to accept it, even those who actively resisted, but the government ruled with an iron fist and eventually the reforms went through. Even today, some of these people have grown old on the edge of poverty. On a certain level, we sacrificed them in exchange for huge reforms to the economic system.”

This is the same situation China faces today: the need for economic restructuring that will inevitably cause economic turmoil for millions of Chinese. China’s reforms in the 1990s had obvious benefits for the Chinese economy; the painful transition toward capitalism help usher in the boom-time of double-digit economic growth during the 2000s. There were consequences as well, particularly noticeable in a wealth gap that has grown at the same breakneck pace as China’s economy. Yet, with all the benefits of hindsight, you’d be hard pressed to find a Chinese official who would argue against the state sector restructuring of the late 1990s.

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Ehh..: “..with the right policies, China could survive a deleveraging without too much pain.” That’s true only as long as you don’t understand why deleveraging takes place. You can’t escape it through more debt.

Red Ink Rising (Economist)

How worrying are China’s debts? They are certainly enormous. At the end of 2015 the country’s total debt reached about 240% of GDP. Private debt, at 200% of GDP, is only slightly lower than it was in Japan at the onset of its lost decades, in 1991, and well above the level in America on the eve of the financial crisis of 2007-08. Sooner or later China will have to reduce this pile of debt. History suggests that the process of deleveraging will be painful, and not just for the Chinese. Explosive growth in Chinese debt is a relatively recent phenomenon. Most of it has accumulated since 2008, when the government began pumping credit through the economy to keep it growing as the rest of the world slumped. Chinese companies are responsible for most of the borrowing. The biggest debtors are large state-owned enterprises (SOEs), which responded eagerly to the government’s nudge to spend.

The borrowing binge is still in full swing. In January banks extended $385 billion (3.5% of GDP) in new loans. On February 29th the People’s Bank of China spurred them on, reducing the amount of cash banks must keep in reserve and so freeing another $100 billion for new lending. Signs of stress are multiplying. The value of non-performing loans in China rose from 1.2% of GDP in December 2014 to 1.9% a year later. Many SOEs do not seem to be earning enough to service their debts; instead, they are making up the difference by borrowing yet more. At some point they will have to tighten their belts and start paying down their debts, or banks will have to write them off at a loss—with grim consequences for growth in either case. An IMF working paper published last year identified credit growth as “the single best predictor of financial instability”.

Yet China is not obviously vulnerable to the two most common types of financial crisis. The first is the external sort, like Asia’s in 1997-98. In such cases, foreign lending sparks a boom that eventually fizzles, prompting loans to dry up. Firms, unable to roll over their debts, must cut spending to save money. As consumption and investment slump, net exports rise, helping bring in the money needed to repay foreign creditors. China does not fit this mould, however. More than 95% of its debt is domestic. Capital controls, huge foreign-exchange reserves and a current-account surplus help defend it from capital flight. The other common form of crisis is a domestic balance-sheet recession, like the ones that battered Japan in the early 1990s and America in 2008. In both cases, dud loans swamped the banking system. Central banks then struggled to keep demand growing while firms and households paid down their debts.

China’s banks are certainly at risk from a rash of defaults. Markets now price the big lenders at a discount of about 30% on their book value. Yet whereas America’s Congress agreed to recapitalise banks only in the face of imminent collapse, the Chinese authorities will surely be more generous. The central government’s relatively low level of debt, at just over 40% of GDP, means it has plenty of room to help the banks. Indeed, with the right policies, China could survive a deleveraging without too much pain.

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Begins is the key word.

China Begins to Tackle Its ‘Zombie’ Factory Problem (WSJ)

China’s leaders two decades ago decided that a combination of restructuring, privatization and massive job cuts was needed to revitalize the economy and shake up state industries weighed down by debt, overcapacity and declining profits. An estimated 20 to 35 million people lost jobs in the late 1990s. The same ills are now back, and reform of the country’s swollen industries is expected to feature prominently in China’s next five-year plan as the National People’s Congress, China’s annual legislative session, starts Saturday in Beijing. But this time around, the government is taking a more modest approach to cutting off its “zombie” factories as it confronts slowing economic growth that has unnerved Chinese leaders and global markets and raised fears of social unrest.

Beijing has outlined plans to cut 1.8 million steel and coal workers over the next five years. To ease social pain, it will put 100 billion yuan ($15.3 billion) into a restructuring fund for severance, retraining and relocation. Economists query whether the initiatives are enough. Beijing aims to cut up to 150 million tons of capacity in its steel industry by 2020, for example, but the annual surplus is currently around 400 million tons, according to the China Iron and Steel Association. The outline of China’s restructuring vision can be seen in its traumatized northeastern rust belt. In Jixi, a coal-dust-covered town of boarded-up buildings and sagging chimneys, provincial money is helping the Heilongjiang LongMay Mining trim its bloated payroll.

Between November and January, some 20,000 LongMay workers were transferred to jobs in farming, forestry and sanitation, among others, said Guo Shenming, a security inspector at the company’s Dongshan mine in Jixi. Workers receive 1,800 yuan ($275) a month for three years from the province, after which the new employer picks up the tab, he said. “Coal is a twilight industry,” he said, “so it’s a good chance for workers to get out.” But the coal-industry retrenchment and the 2014 closure of a steel mill has hit Jixi hard, said Mr. Guo, whose family runs a restaurant. “Families used to buy 10 or more pig’s feet for the Lunar New Year holiday, but this year they only got three or four,” he said. LongMay, which had over 250,000 workers in its heyday, now has well below 200,000. But it still lost 2.23 billion yuan in the first half of 2015, according to China Bond Rating, which is affiliated with the central bank. In November, the provincial government stepped in with a 3.8 billion yuan bailout to help the company with its debts.

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Guess this is where you say: Make up your minds already! You can’t micro-manage this.

PBOC Pulls $129 Billion in Biggest Weekly Withdrawal Since 2013 (BBG)

China’s central bank drained the most funds from the financial system in three years, mopping up excess cash after a reserve-requirement ratio cut earlier this week boosted liquidity. The People’s Bank of China pulled a net 840 billion yuan ($129 billion) in the five days through Friday, data compiled by Bloomberg show. While that was the biggest weekly withdrawal since February 2013, money-market rates barely reacted with the RRR reduction releasing an estimated 685 billion yuan into the banking system. The PBOC kept its open-market seven-day interest rate unchanged at 2.25% on Friday. The seven-day repurchase rate, a benchmark gauge of interbank funding availability, fell one basis point Friday and five basis points for the week, according to a weighted average from the National Interbank Funding Center.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was little changed at 2.3%. “The PBOC didn’t seem to plan to add excessive liquidity,” said Qu Qing at Huachuang Securities. “Keeping the interest rate of the operations unchanged also indicated its intention to maintain prudent monetary policy. The RRR cut is only replacing the huge amount of reverse repos due this week.” The central bank auctioned 50 billion yuan of seven-day reverse repos on Friday, bringing this week’s total sales to 320 billion yuan. That’s less than a record 1.16 trillion yuan of contracts maturing this week that will drain funds from the financial system. The PBOC injected an unprecedented 1.7 trillion yuan via such operations in the five weeks running up to the Lunar New Year holidays.

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Where the newly unemployed can go.

China To Increase Defence Spending By ‘7-8%’ In 2016 (AFP)

China will raise its defence spending by between 7-8% this year, a senior official has said, a smaller increase than the double-digit rises of the past as Beijing seeks a more efficient military. China’s budget will rise to around around 980bn yuan ($150bn) as the Beijing regime increases its military heft and asserts its territorial claims in the South China Sea, raising tensions with its neighbours and with Washington. Defence spending last year was budgeted to rise 10.1% to 886.9bn yuan ($135.39bn), which still only represents about one-quarter that of the United States. The US defence budget for 2016 is $573bn. “China’s military budget will continue to grow this year but the margin will be lower than last year and the previous years,” said Fu Ying, spokeswoman for the national people’s congress (NPC), the Communist-controlled parliament.

“It will be between 7-8%.” The exact increase will be announced on Saturday at the opening of the NPC, Fu told reporters. The slowdown in spending comes as president Xi Jinping seeks to craft a more efficient and effective People’s Liberation Army (PLA), the world’s largest standing military. At a giant military parade in Beijing last year to commemorate the 70th anniversary of Japan’s World War II defeat, Xi announced the PLA would be reduced by 300,000 personnel. But the event also saw more than a dozen “carrier-killer” anti-ship ballistic missiles rolling through the streets of the capital, with state television calling them a “trump card” in potential conflicts and “one of China’s key weapons in asymmetric warfare”.

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As we’ve been saying for a very long time. The inevitability far trumps the timing.

“I See Bubbles Bursting Everywhere” (CNBC)

Deflationary tides are lapping the shores of countries across the world and financial bubbles are set to burst everywhere, Vikram Mansharamani, a lecturer at Yale University, told CNBC on Thursday. “I think it all started with the China investment bubble that has burst and that brought with it commodities and that pushed deflation around the world and those ripples are landing on the shore of countries literally everywhere,” the high-profile author and academic said at the Global Financial Markets Forum in Abu Dhabi. Price levels are already falling in parts of Europe. Inflation declined by an annualized 0.2% in the euro zone in February, according to an estimate from the European Union’s statistical body. Annualized inflation was flat in Japan in January (the latest month for which there is official data), but rose by a narrow 0.3% in the U.K.

On Thusday, Mansharamani said that financial bubbles had been fueled by “cheap money” created by highly accommodative monetary policy across developed economies. “I mean, we’ve got a bubble bursting, I would argue, in Australian housing markets — that is beginning to crack; South Africa – the whole economy; Canada – housing and the economy; Brazil. We can keep going on and on,” the academic told CNBC. Financial markets have suffered a rocky ride this year, with significant variation across the world. The U.S. benchmark S&P 500 equity index is down 2.8% since the start of 2016, while China’s Shanghai Composite index has tumbled more than 19%. On Thursday, though, markets were in “risk-on” mode. The CBOE’s VIX — a widely used indicator of risk aversion – dipped to its lowest level in 2016 and “safe-haven” U.S. Treasury notes traded at three-week lows.

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Banks drive up price of oil so borrowers, before going bankrupt, can pay back loans to … banks.

UBS: “The Move In Oil Is TOTALLY Short Squeeze Led” (ZH)

Today, one Wall Street firm confirms that indeed the recent move in oil has nothing to do with fundamentals, and everything to do with positioning, and as UBS explains, “the performance is TOTALLY short-squeeze led.” Here’s why:

RECENT ACTION/ SENTIMENT : Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the read and has been mixed from there but moving higher. And both days, the stocks have lead with energy the best performing subsector in the S&P. Now, there is no doubt that the performance today is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning is. Interestingly, with energy outperforming the market the last few days for the first time in a very long while, I actually got a few long only generalist type calls yesterday. Nothing concrete but generalists who are underweight the space trying to figure out if this is a turning point…

WHAT HAS HELPED FUEL THIS SHORT SQUEEZE?
• Positioning and sentiment very biased to the short side/ underweight. And as we move up, the move is also exxacerbated by short gamma positions that have to cover at higher levels.
• Despite high oil inventories (and still building), most upstream producers (from Exxon on down) have guided to lower than expected production as a result of lower capex.
• Ongoing hopes of a potential agreement between OPEC and non-OPEC members (seems umlikely but now a meeting set for March 20th is reviving some market hopes).
• A couple of supply issues like Kirkuk/Ceyhan pipeline damage taking longer to repair than expected and Farcados force majeure in Nigeria still on going issue.
• Credit players covering equity shorts — evident today that “good credit names” are underperforming and “bad credit names” outperforming.
• We took a day break from equity issuances in the space ystd and this morning… despite energy’s strong performance. Though rest assured we haven’t seen the end of issuances yet (RRC WLL, RSPP, MUR, CRZO GPORare all top of mind)… by the same token all this energy issuances are helping the credit side of things which has also been the culprit of the issue.

One may wonder if the squeeze is forced, or simply momentum driven, although we would like to quickly point us that most of the recent equity offerings by O & G companies who have benefited from the rally have noted in the “use of proceeds” that the raised capital would be used to pay down secured debt, i.e., take out the banks. In other words, it is as if the banks are orchestrating a squeeze to allow the shale companies to raise capital which will then allow them to repay their secured debt to the banks, secured debt whose recoveries as we have recently shown are practically non-existent in bankruptcy.

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“As it stands, the people of the nations of monetary union are farther away from the idea of political union than at any time in the past.”

EU Superstate Would Have No Democratic Legitimacy (Tel.)

The eurozone’s fledgling attempts to create a full-blown fiscal union has no democratic legitimacy, one of the single currency’s founding fathers has warned. Professor Otmar Issing – a former chief economist at the ECB and architect of the euro – said EU policymakers would not dare put their plans to transfer budgetary sovereignty to Brussels before electorates as they would fail at the first hurdle. Speaking of the European Commission’s Five Presidents Report – which lays out plans to shore up the foundations of the euro – Mr Issing said it was a step towards creating a fiscal union “without democratic legitimacy”. “Those who have read [the Five Presidents] report know that. Without political union all transfers will lack democratic legitimacy.

And nobody can be as stupid as to think political union is around the corner,” he told a parliamentary committee at the House of Lords. Prof Issing – who has been a fierce critic of attempts to pool budgetary powers in the euro – said EU elites were afraid to “confront” voters, delaying their plans for integration until after 2017, the year France and Germany hold national elections. “The thrust of all these ideas is going through a back door towards fiscal union,” he said. “Voters in the end will understand what is going on. They will know they are being exploited.” His comments come after prominent voices such as former Bank of England governor Lord King predicted the euro would collapse under the weight of popular disillusion in its weakest economies. But Prof Issing said there was too much “political investment” in the project to allow the euro to collapse.

“It will stay – I am sure about that,” he said. Instead of calling for a giant leap in integration, which would create a euro “superstate” with an EMU parliament and treasury, the German central banker urged policymakers to “stabilise” the current system and return to the original principles of monetary union, which forbids transfers from stronger to weak nations. “In the end, governments are responsible for their own actions,” said Professor Issing. “As it stands, the people of the nations of monetary union are farther away from the idea of political union than at any time in the past.” He also criticised EU plans to set up a banking union that guarantees the deposits of citizens across the 19-country bloc, describing it as an “expropriation of taxpayer money in some countries”.

“The idea of a common deposit insurance is fine, but before you start, you have to clarify bank balance sheets and have a new start. But this is also tricky and complex – there is no simple way out.” Highlighting the democratic constraints the euro has faced since the financial crisis, Professor Issing said he was concerned by developments in Spain and Portugal – where two incumbent bail-out governments have failed to be re-elected after imposing punishing austerity measures. “People have decided for a policy that is different to what is needed for monetary union. This strikes at the core of democracy.”

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Going more wrong by the day.

Brazil’s Economy Slumps To 25-Year Low as GDP Falls 3.8% (Guardian)

Brazil’s economy suffered its worst slump for quarter of a century last year as a global commodity rout, a domestic political crisis and rising inflation forced businesses to slash spending and jobs. Economists warned that the country’s recession had further to run and could deepen amid fresh signs that a drop in demand has continued into 2016. Official figures showed Brazil’s GDP fell 3.8% in 2015, the steepest decline since 1990, when the country was battling hyperinflation. Last year finished on a gloomy note with fourth quarter GDP down 1.4% on the previous quarter against the backdrop of a deepening political corruption scandal. The Brazilian economy is expected to shrink again by more than 3.0% this year, the worst consecutive annual plunges since records began in 1901. Four years ago, the economy was growing by more than 4.0% a year.

The gloomy news will raise pressure on President Dilma Rousseff, who is fighting efforts to impeach her over charges that she used money from state-run banks to plug holes in the budget. More timely figures showed the private sector contracted at a record pace last month. The Brazil composite output index, published by data company Markit, dropped to its lowest since the survey began in 2007. The index, which tracks companies across the economy, dropped to 39 in February, marking the 12th month running below the 50-point mark that separates expansion from contraction. Brazil’s economy had been hit hard by a collapse in commodity and oil prices in the past two years, said Mihir Kapadia at Sun Global Investments. “The situation has been made worse by the high debt levels, especially in foreign currency – essentially in US dollars. Problems of governance, corruption and political issues have created a perfect storm for continued political instability,” Kapadia added.

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No, not even the IMF can.

Only The IMF Can Now Save Brazil (AEP)

Brazil is heading straight into the arms of the IMF. The sooner this grim reality is recognized by the country’s leaders, the safer it will be for the world. The interwoven political and economic crisis has gone beyond the point of no return. The government is frozen. The finance ministry has lost the trust of Brazilian investors and global markets in equal measure. Almost nothing credible is being done to stop the debt trajectory spinning into orbit. Few believe that the ruling Workers Party is either capable or willing to take the drastic austerity measures needed to break out of the policy trap, or that it would suffice at this late stage even if they tried. “There is an enormous fiscal crisis and we’re flirting with a return to hyperinflation. All the debt variables are going in the wrong direction,” said Raul Velloso, the former state secretary of planning.

“There is a loss of confidence in the ability of the government to manage its debts. We face the risk of default,” he said. Three quarters of the budget is effectively untouchable, locked in by a web of welfare payments and regional transfers. President Dilma Rousseff is battling impeachment. Whether she wins or loses over coming months, the congress is too fractured and enflamed to do much about a budget deficit running at over 10pc of GDP. “I have the feeling that nobody wants to take any bold steps, or make any sacrifices,” said Arminio Fraga, the former central bank governor. “Brazil ended up in this situation by doubling down on credit and fiscal expansion. It woke up with the nightmare of a paralyzed country and a ruined model that is not being corrected. It is an economic tragedy,” he told O Estado de Sao Paulo.

Mr Fraga said the collapse is desperately sad because Brazil seemed to be on the right path under president Luis Inacio da Silva, or Lula as everybody knows him. “There was a feeling that the country was getting ahead, and then it vanished. The country suddenly lost itself completely,” he said. It emerged this week that even Lula is under criminal investigation, the latest casualty of the Lava Jato (carwash) scandal. This began as a probe into the abuse of inflated contracts from the state oil giant Petrobras to fund the Workers Party, but is fast engulfing the country’s political elites in a broader purge – akin to Italy’s “mani pulite” scandals in the 1990s. In a sense it is an impressive show of judicial independence. But nobody knows how this will end, and the mood is turning tetchy.

The justice minister resigned this week, angry over pressure from his own Workers Party to rein in the probe. Rui Falcão, the party chief, retorted that basic rights are now being violated by prosecutors acting beyond the rule of law. “We’re seeing the abolition of habeas corpus. It is the democracy of the country that is at stake,” he said. Dilma lost her last chance to win back market trust when her Chicago-trained trouble-shooter, Joaquim Levy, threw in the towel after a year as finance minister, defeated by foot-dragging in the cabinet. Disbelief is by now so pervasive that her government would struggle to restore confidence even if it grasped the nettle. The IMF is the only way out of the impasse.

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Only as long as investors can profit, and banks. Not endless.

Era Of Zero, Negative Interest Rates Could Last For Years: Barclays (Reuters)

The era of zero or negative interest rates, notably in Japan and the euro zone, could extend for several more years as central banks battle persistently low growth and inflation, strategists at Barclays said on Thursday. The downward pressure on interest rates will be strongest in Japan and the euro zone, while the greater flexibility and resilience of the U.S. and UK economies should allow interest rates there to rise quicker, albeit extremely gradually. “Negative nominal interest rates are more than just a passing monetary fad,” Barclays said in its 61st annual Equity Gilt Study. Barclays said the natural rate of interest across the developed world, where borrowing costs are neither stimulative nor restrictive given an economy’s potential growth and inflation rates, is lower than where nominal rates currently stand.

The study finds that real equilibrium policy rates are near-zero across the developed world and may need to fall further below zero in the euro zone and Japan for interest rate policy there to become “sufficiently accommodative”. Michael Gapen, the bank’s chief U.S. economist and co-author of the report, said the way to avoid a repeat of Japan’s experience over the last two decades is to restructure “zombie” banks and firms so that the broader private sector can clean itself up and get itself in shape to start growing again. This could be most difficult in the euro zone, where the mix of slow growth, low inflation and a fractured banking system blighted by bad loans will make it difficult for the ECB to escape low or negative rates.

“The era of low or even negative interest rates across the developed world, particularly in Japan and the euro zone, could last for several years to come,” Gapen said. In 1995 the Bank of Japan lowered its main interest rate to 0.5% to try and reflate the flagging economy. Rates have never been higher since and the BOJ has also injected trillions of yen worth of stimulus via quantitative easing bond purchases. The BOJ is still fighting that battle against low growth and deflation. Earlier this year it adopted negative interest rates on certain bank deposits and became the first G7 rich country to have yields on its benchmark 10-year bonds fall below zero. “We don’t see a ‘Japanification’ of the world. But accommodative policy is here to stay,” said Christian Keller, head of economics research at Barclays and also a co-author of the study. “Before we get to the limits (of these policies), central banks will persist with zero and negative rates,” he said.

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“This is bad history and worse economics.”

Osborne’s Desire To Further Cut Spending Makes Little Sense (Wolf)

George Osborne wants to burnish his image as an iron chancellor of the exchequer. He has already committed to achieving a fiscal surplus by 2019-20. He now suggests that further tightening of fiscal policy may be needed in response to the “storm clouds” he identified when in Shanghai last week. Mr Osborne may be preparing for bad news in his Budget on March 16. The question is whether his plan makes sense. The answer is no. The fiscal objective is itself questionable. The aim is to achieve an overall surplus, unless growth drops below 1%. This is to offer respite in the event of a recession. Just compare what the government would do if a deficit opened up while the economy grew 1.1% for three years (namely, tighten policy), with what it would do if it grew 3%, 0.9% and then 2% (not tighten at all in the second year).

Why should an overall fiscal surplus be important, anyway? The answer is that it is a quicker way to lower the ratio of debt to GDP. But that would only be true if achieving the surplus did not itself slow the growth of GDP. As the Institute for Fiscal Studies notes in its Green Budget, “running a surplus is not necessary to bring debt down as a share of national income”. Moreover, if the government is in a position to invest by borrowing at low real interest rates, as now, it makes sense to do so. The government must worry about its balance sheet, not just its debt. Yet the absurdity of the target is brought out better still by the comments Mr Osborne made last week. He said, first, “this country can only afford what it can afford”; second, “the economy is smaller than we thought”; third, the UK must tighten further, to ensure “economic security”; and, finally, “the last time we didn’t [live within our means] we were right in the front rank of nations facing economic crisis”.

This is bad history and worse economics. It is a myth that the UK’s crisis was due to a failure of the government to live within its means. The truth is the opposite. The government did not have a fiscal crisis. The country had a financial crisis whose economic results were cushioned by the government’s deficits. Again, it is not true that running a fiscal surplus year after year is either necessary or sufficient to achieve “economic security”. It is more important to create a robust financial sector. Yet pressure from the Treasury today seems to be to relax constraints. That may well be far riskier for the UK economy in the long run than modest fiscal deficits.

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Ari Andicropoulos.

The Economy Simply Explained (AA)

Sometimes my friends tell me that they try to read them, but my posts are too complicated. I am using jargon that they don’t understand and probably they are too long and confusingly written. To remedy this, I have decided to try to write a simplified version of this piece I wrote about how the economy works.

How can one picture the economy? The economy should be viewed as a flow of money. This may seem straightforward, but mainstream economic models do not include money at all. And yet, a lot of the workings of the economy can be understood by looking at who receives money and how much of it they spend.

 If everyone is working and producing goods and services, then people need to buy these goods and services. In order for people to buy these products they need to have enough money.

Money received by people for producing things is then spent by these people on more things. This cycle repeats itself and makes the economy run.

What if people don’t have enough money? They can’t buy the goods and services. In a perfect world, the price of everything would go down so that all of what is produced can be bought. Unfortunately, in reality this is not the case.

Why can’t prices go down very easily? The reason that prices can’t adjust very easily to not enough money is that people’s wages tend not to go down. This is called ‘stickiness of wages’. Because people generally don’t like having pay cuts, producers can’t reduce prices or they will be making goods at a loss.

If they can’t reduce prices, what do they do? Instead they cut production and make people unemployed. This then, in turn, reduces the amount of money that people have to buy things. Leading to further job losses.

Eventually what would happen? Without any government intervention, in the end prices and wages would fall enough so that everyone could have a job again. But it is a long and painful process. It is much better to ensure that the correct amount of money is running therough the system.

How much money is the correct amount? A generally accepted nominal GDP growth target is 5% per year. This means that in total 5% more value in goods and services are produced each year. Some of this increase is due to inflation – one pays more for the same number of goods. And some of this is growth – more goods are produced.

But if 5% more £ worth of goods and services are produced, doesn’t that mean that people need to spend 5% more money each year than the year before? Exactly. Every year, for the economy to be healthy, 5% more money needs to be spent than the year before.

Where does this extra money come from? This is a very good question. And it is one that seems to be ignored by most economists.

The problem we have with the economy today is that actually it is being drained of money. If £1m of goods are produced and sold, then in the next year only approximately £970,000 will be spent. People are saving the other £30,000.

To be more exact, the gap between the amount people are saving and the amount of people’s savings from previous years that they are spending comes to 3%, maybe even 4%, of GDP.

Why is this gap so large? There are a number of reasons but it mainly has to do with the difference in spending of the people who receive the money. Working people on low and medium incomes tend to spend most of the money they receive. But savers receiving interest and dividends spend less of it in the economy.

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You expected something else? That German beer purity law (Reinheitsgebot) is 500 years old.

Monsanto’s RoundUp Found in 14 Popular German Beers (NS)

Want a round of Round Up with your beer? The German beer industry is in shock after finding that 14 different popular beer brands have traces of the ‘probably’ carcinogenic herbicide, glyphosate – an ingredient found in Monsanto’s best-selling weed killer, Round Up. Germany’s Agricultural minster is playing down the risks in order to save one of the countries’ best-selling exports. Glyphosate levels were as high as 30 micrograms per liter, even in beer that is supposed to be brewed from only water, malt, and hops. This finding by the Munich Environmental Institute calls into question the rampant spraying of Round Up on both GMO and non-GMO crops around the world, and casts doubt upon Germany’s 500-year-old beer purity law.

The EU Commission was looking to extend approval for the use of glyphosate in Germany, and other EU countries in April for another 15 years. The current license runs out this summer. Following the findings by France, that glyphosate is likely a human carcinogen, as well as the World Health Organization’s cancer research arm, the IARC, finding that glyphosate is a probable carcinogen, glyphosate in Germany’s coveted beer is not a positive discovery for the makers of this herbicide, which include companies like Monsanto. Germany’s farm federation has denied responsibility, saying that malt derived from glyphosate-sprayed barley has been banned. The group admits, though, that glyphosate could have been used on farms prior to the ban, meaning barley could still be grown in glyphosate-drenched soil.

The Bremen office of the brewery giant Anheuser-Busch described the institute’s findings as “not plausible,” citing a bill of health issued by Germany’s Federal Institute for Risk Assessment (BfR) that the amounts of glyphosate found in beer did not pose a threat to consumers. In a statement, the Institute said: “An adult would have to drink around 1,000 liters (264 US gallons) of beer a day to ingest enough quantities to be harmful to health.” As with other Big Ag deniers, they seem to forget that glyphosate exposure comes from multiple sources, aside from just contaminated beer.

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This will make Erdogan all the more dangerous.

Ballooning Bad Loans in Turkey Worsen as Tourists Flee (BBG)

The ailments afflicting Turkey’s economy that have triggered a surge in bad loans look poised to get worse before they get better. Non-performing loans at the nation’s lenders climbed to 3.18 percent of total credit in January, the sixth straight monthly increase and the highest proportion in almost five years, according to data this week from the Ankara-based Banking Regulation and Supervision Agency. BofA Merrill Lynch and Commerzbank said in Februrary corporate distress is deepening in Turkey, making it harder for companies to pay down debts. The rise in bad loans is compounding the challenges for Turkey’s $814 billion banking industry as a combination of currency depreciation, Russian sanctions and waning tourist visits amid a spate of terrorist attacks weigh on the economy.

As the central bank limits funding to tame inflation, the highest borrowing costs in four years and a slow down in loan growth are piling pressure on indebted businesses. “The trend is likely to increase and intensify,” said Apostolos Bantis, a Commerzbank credit analyst in Dubai, who said loans and lira-denominated bonds would be exposed. “While I don’t see the situation running out of control, the impact of Russian sanctions, the blow to the tourism industry, higher funding costs and the weaker currency will all take a toll on the corporate sector,” he said before the data.

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Would tend to agree. But don’t underestimate the coming financial crash.

The Syrian War Will Define The Decade (Reuters)

Many decades have a war that defines them, a conflict that points to much broader truths about the era — and perhaps presages larger things to come. For the 1930s, the Spanish Civil War, the three-year fight between Fascists (helped by Nazi German) and Republicans (armed by the Soviet Union) pointed to the far larger global disaster to come. For the 1980s, the Soviet battle to control Afghanistan, a bloody mess of occupation and insurgency, helped bring forward the collapse of the Soviet Union and set the stage for 9/11 and modern Islamist militancy. For the 1990s, you can take your pick of the Balkans, Somalia, Rwanda or Democratic Republic of Congo. For the 2000s, it was Iraq — the ultimate demonstration of the “unipolar moment” and the limits, dangers and sheer short-livedness of America’s status as unchallenged global superpower.

We are, of course, little more than half way through the current decade. Already, however, it looks as though it has to be Syria’s civil war. In pure human terms, the war dwarfs any other recent conflict. Estimates of the number of Syrian dead range from 270,000 to 470,000 people. The UN estimates up to 7.6 million Syrians are displaced within their own country, with up to 4 million fleeing their homeland. From its relatively small beginnings as a largely unarmed revolt, the Syrian conflict has now dragged in more than a half-dozen countries. Its broader implications continue to grow by the month. While not the sole cause of Europe’s migrant crisis, Syrians make up a significant proportion — perhaps even the majority — of new arrivals on the continent. The sheer numbers are producing political strains that have already torn up the ideal of a “borderless” Europe and may yet wreck the entire EU project.

Syria has exemplified what Financial Times columnist Gideon Rachmann calls a “zero-sum world.” From the beginning, rival regional powers — particularly Shi’ite Iran and Sunni states led by Saudi Arabia — approached the conflict with the assumption that neither side could afford to back down or compromise without letting the other win. From that perspective, Syria is part of a larger regional confrontation that encompasses the war in Yemen, the long-term sectarian battle for control of Iraq and, of course, attempts to rein in Iran, in general, and its nuclear program, in particular. Increasingly, though, the war in Syria has become part of the wider, potentially more dangerous confrontation between Western powers and Russia. That confrontation also goes back years — through Kosovo and the Balkans to the Cold War.

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It’s already lost.

EU Fate At Stake On Muddy Greek Border (Reuters)

In muddy fields straddling the border with Macedonia, a transit camp hosting up to 12,000 homeless migrants in filthy conditions is the most dramatic sign of a new crisis tearing at Greece’s frayed ties with Europe and threatening its stability. For the last year, Greece has largely waved through nearly a million migrants who crossed the Aegean Sea from Turkey on their way to wealthier northern Europe. Now, on top of a searing economic crisis that took it close to ejection from the euro zone a year ago, the European Union’s most enfeebled state is suddenly being turned into what Prime Minister Alexis Tsipras calls a “warehouse of souls”. At least 30,000 people fleeing conflict or poverty in the Middle East and beyond are bottled up in Greece after Western Balkan states effectively closed their borders.

Up to 3,000 more are crossing the Aegean every day despite rough winter seas. “This is an explosive mix which could blow up at any time. You cannot, however, know when,” said Costas Panagopoulos, head of ALCO opinion pollsters. Men, women and children from Afghanistan, Syria and Iraq are packed like sardines in a disused former airport terminal in Athens, crammed into an indoor stadium or sleeping rough in a central square, where two tried to hang themselves last week. The influx is severely straining the resources of a country barely able to look after its own people after a six-year recession – the worst since World War Two – that has shrunk the economy by a quarter and driven unemployment above 25%.

After years of austerity imposed by international lenders, who are now demanding deeper cuts in old-age pensions, ordinary Greeks say they feel abandoned by the European Union. A staggering 92% of respondents in a Public Issue poll published by To Vima newspaper last Sunday said they felt the EU had left Greece to fend for itself. The poll was taken before the European Commission announced €300 million in emergency aid this year to support relief organizations providing food, shelter and care for the migrants. But such promises do little to soften public anger. “I want to spit at them,” said 40-year-old Maria Constantinidou, who is unemployed. “Those European leaders .. should each take 10 migrants home, feed them, look after them and then see how difficult things are.”

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Greeks are Menschen.

Pensioners Share Their Bread With Refugees At Greek Border (Reuters)

Each day, Demetrios Zois buys two loaves of bread. One is for his family, and one for whoever comes knocking on his door. In the past year, there have been plenty of unexpected visitors. He is among 100 mainly elderly people living in Greece’s border community of Idomeni, which has become the focal point of a growing migrant crisis that is proving too big for the country to handle. Around 30,000 migrants and refugees were stranded in Greece on Thursday, with just over a third of them at Idomeni, waiting for the border with Former Yugoslav Republic of Macedonia (FYROM) to open. “We feel very bad for them. We understand they are hungry, but they are 10,000 and we are 100. If more come what will happen?” Zois, an 82-year-old pensioner, told Reuters.

He and his friend Theodoros Moutaftsis watch with growing concern as a tent city in the meadows outside their homes get bigger by the day. “It’s the first thing we check when we wake up in the morning, whether they have gotten closer to the village,” said Moutaftsis, 79. “That and if anything is missing,” he adds. Ten hens disappeared from his garden last month, and he thinks it was people from the camp. “These poor people are hungry. The state isn’t here to help them. It’s totally absent,” he said. There were anything between 11,000 and 12,000 people at the transit camp on Thursday, waiting for the border gate to open to continue their trek further in to Europe.

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This is flat-out illegal. In general, push back is not permitted. International law says that at the very minimum they would have to weigh every single case on an individual basis.

EU Mulls ‘Large-Scale’ Migrant Deportation Scheme (AP)

Turkey is under growing pressure to consider a major escalation in migrant deportations from Greece, a top EU official said Thursday, amid preparations for a highly anticipated summit of EU and Turkish leaders next week. European Council President Donald Tusk ended a six-nation tour of migration crisis countries in Turkey, where 850,000 migrants and refugees left last year for Greek islands. “We agree that the refugee flows still remain far too high,” Tusk said after meeting Turkish Prime Minister Ahmet Davutoglu. “To many in Europe, the most promising method seems to be a fast and large-scale mechanism to ship back irregular migrants arriving in Greece. It would effectively break the business model of the smugglers.”

Tusk was careful to single out illegal economic migrants for possible deportation, not asylum-seekers. And he wasn’t clear who would actually carry out the expulsions: Greece itself, EU border agency Frontex or even other organizations like NATO. Greek officials said Thursday that nearly 32,000 migrants were stranded in the country following a decision by Austria and four ex-Yugolsav countries to drastically reduce the number of transiting migrants. “We consider the (FYROM) border to be closed … Letting 80 through a day is not significant,” Migration Minister Ioannis Mouzals said. He said the army had built 10,000 additional places at temporary shelters since the border closures, with work underway on a further 15,000. But a top U.N. official on migration warned that number of people stranded in Greece could quickly double.

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