It’s amusing to see how views start to converge, at the same time that it’s tiresome to see how long that takes. It’s a good thing that more and more people ‘discover’ how and why austerity, especially in Europe, is such a losing and damaging strategy. It’s just a shame that this happens only after the horses have left the barn and the cows have come home, been fed, bathed, put on lipstick and gone back out to pasture again. Along the same lines, it’s beneficial that the recognition that for a long time economic growth has not been what ‘we’ think it should be, is spreading.
But we lost so much time that we could have used to adapt to the consequences. The stronger parties in all this, the governments, companies, richer individuals, may be wrong, but they have no reason to correct their wrongs: the system appears to work fine for them. They actually make good money because all corrections, all policies and all efforts to hide the negative effects of the gross ‘mistakes’, honest or not, made in economic and political circles are geared towards making them ‘whole’.
The faith in the absurd notion of trickle down ‘economics’ allows them to siphon off future resources from the lower rungs of society, towards themselves in the present. It will take a while for the lower rungs to figure this out. The St. Louis Fed laid it out so clearly this week that I wrote to Nicole saying ‘We’ve been vindicated by the Fed itself.’ That is, the Automatic Earth has said for many years that the peak of our wealth was sometime in the 1970’s or even late 1960’s.
Intriguing questions: was America at its richest right before or right after Nixon took the country off the gold standard in 1971? And whichever of the two one would argue for, why did he do it smack in the middle of peak wealth? Did he cause the downfall or was it already happening?
As per the St. Louis Fed report: “Real GDP growth fell and leveled off in the mid-1970s, then started falling again in the mid-2000s”. What happened during that 30-year period was that we started printing and borrowing with abandon, making both those activities much easier while we did, until the debt load overwhelmed even our widest fantasies ten years ago. And we’ve never recovered from that, if that was not obvious yet. Nor will we.
As the first graph below shows, there was still growth post-Gold Standard but the rate of growth fell and then “leveled off”, only to fall more after, to a point where Real GDP per Capita is presently 0.5% or so -little more than a margin error-. How one would want to combine that with talk of an economic recovery is hard to see. In fact, such talk should be under serious scrutiny by now.
Still, the numbers remain positive, you say. Yes, that’s true. But there’s a caveat, roughly similar to the one regarding energy and the return on it. Where we used to pump oil and get 100 times the energy in return that we needed to pump it, that ratio (EROEI) is now down to 10:1 or less. Alternative energy sources do little better, if at all. Whereas to run a complex society, let alone one like ours that must become more complex as we go along – or die-, we would need somewhere along the lines of a 20:1 to even 30:1 EROEI rate.
Another place where a similar caveat can be found is the amount of dollars it takes to produce a dollar of real growth. That amount has been increasing, and fast, to the point where it takes over $10 to create $1 or growth in the US and Europe, and China too moves towards such numbers.
Both our energy systems and our financial systems are examples of what happens when what we should perhaps call the rate of ‘productivity’ (rather than growth) falls below a critical mass: it becomes impossible to maintain, even keep alive, a society as complex as ours, which requires an increase in complexity to survive. In other words: a Real GDP per Capita growth rate of 0.5% is not enough to stand still, just like oil EROEI of 5:1 is not; there is growth, but not -nearly- enough to keep growing.
One does not get the impression that the St. Louis Fed economists who wrote the report are aware of this -though the title is suggestive enough-, they seem to lean towards the eternal desire for a recovery, but they did write it nonetheless. Do note the sharp drop that coincides with the 1973 oil crisis. We never ‘recovered’.
The U.S. economy expanded by 1.6% in 2016, as measured by real GDP. Real GDP has averaged 2.1% growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3% per year). These lower growth rates could in part be explained by a slowdown in productivity growth and a decline in factor utilization. However, demographic factors and attitudes toward the labor market may also have played significant roles.
The figure below shows a measure of long-run trends in economic activity. It displays the average annual growth rate over the preceding 40 quarters (10 years) for the period 1955 through 2016. (Hence, the first observation in the graph is the first quarter of 1965, and the last is the fourth quarter of 2016.)
Long-run growth rates were high until the mid-1970s. Then, they quickly declined and leveled off at around 3% per year for the following three decades. In the second half of the 2000s, around the last recession, growth contracted again sharply and has been declining ever since. The 10-year average growth rate as of the fourth quarter of 2016 was only 1.3% per year. Total output grows because the economy is more productive and capital is accumulated, but also because the population increases over time.
The same dynamics (or lack thereof) are reflected in a recent piece by Chris Hamilton, in which he argues that global growth -as expressed by growth in energy consumption- has largely been non-existent for years, other than in China. Moreover, China has added a stunning amount of debt to achieve that growth, and since its population growth is about to stagnate -and then turn negative-, this was pretty much all she wrote.
Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.
[..] here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.
China’s core population is essentially peaking this year and beginning a decades long decline (not unlike the world. The chart below shows total Chinese core population peaking, energy consumption stalling, and debt skyrocketing.
The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.
• China of ’85-’00 grew on population and demographic trends.
• China of ’00-’15 grew despite decelerating population growth but on accelerating debt growth…this growth in China kept global growth alive.
• China of ’15-’30 will not grow, will not drive the global economy and absent Chinese growth…the world economy is set to begin an indefinite period of secular contraction. China ceased accumulating US Treasury debt as of July of 2011 and continues to sell while busy accumulating gold since 2011.
Unfortunately, neither quasi-democracies nor quasi-communist states have any politically acceptable solutions to this problem of structural decelerating growth and eventual outright contraction…but that won’t keep them from meddling to stall the inevitable global restructuring.
I can only hope that these data will convince more people that all the times I’ve said that growth is over, it was true. And perhaps even make them think about what follows from there: that when growth is gone, so is all centralization, including globalization, other than by force. This will change the world a lot, and unfortunately not always in peaceful ways.
What seems to have started (but was in the air long before) with Brexit and Trump, is merely a first indication of what’s to come. People will not accept that important decisions that affect them directly are taken by anonymous ‘actors’ somewhere far away, unless this promises and delivers them very concrete and tangible benefits. In fact, many have lost all faith in the whole idea, and that’s why we have Trump and Brexit in the first place.
This turn inward -protectionism if you will-, in the UK, US and many other places, is an inevitable development that follows from declining growth and soaring debt. Entire societies will have to be re-built from the ground up, and people will want to do that themselves, not have it dictated by strangers. At the same time, of course, those who profit most from centralization want that to continue. They can’t, but they will try, and hard.
Equally important, people who wish to try and save existing ‘central institutions’ for less selfish and more peaceful reasons should think twice, because they will fail too. It’s centralization itself that is failing, and the demise of the structures that represent it is but a consequence of that. We will see local structures being built, and only after that possibly -and hopefully- connect to each other. This is a big change, and therefore a big challenge.
Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.
Of that growth in energy consumption, the chart below breaks down the sources of that growth among China (red), India/Africa (gold) and the rest of the world (blue). It’s plain to see the growth of Chinese energy consumption, the decelerating growth among the rest of the world, and the stagnant growth among India / Africa.
But here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.
The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.
Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York. For the year, household debt ballooned by $460 billion — the largest increase in almost a decade. That means the debt loads of Americans are flirting with 2008 levels, when total consumer debt reached a record high of $12.68 trillion. Rising debt hints that banks are extending more credit. Mortgage originations increased to the highest level since the Great Recession. Mortgage balances make up the bulk of household debt and ended the year at $8.48 trillion. However, growth in non-housing debt – which includes credit card debt and student and auto loans – are key factors fueling the rebound in debt.
Student loan debt balances rose by $31 billion in the fourth quarter to a total of $1.31 trillion, according to the report. Auto loans jumped by $22 billion as new auto loan originations for the year climbed to a record high. Credit card debts rose by $32 billion to hit $779 billion. At these rates, the New York Fed expects household debt to reach its previous 2008 peak sometime this year. But while that may sound alarming, there is one big difference between now and 2008, according to the Fed: Fewer delinquencies. At the end of 2016, 4.8% of debts were delinquent, compared to 8.5% of total household debt in the third quarter of 2008. There were also less bankruptcy filings – a little more than 200,000 consumers had a bankruptcy added to their credit report in the final quarter of last year, a 4% drop from the same quarter in 2015.
Bank regulators have been warning, now it’s happening. The New York Fed, in its Household Debt and Credit Report for the fourth quarter 2016, put it this way today: “Household debt increases substantially, approaching previous peak.” It jumped by $226 billion in the quarter, or 1.8%, to the glorious level of $12.58 trillion, “only $99 billion shy of its 2008 third quarter peak.” Yes! Almost there! Keep at it! There’s nothing like loading up consumers with debt to make central bankers outright giddy. Auto loan balances in 2016 surged at the fastest pace in the 18-year history of the data series, the report said, driven by the highest originations of loans ever. Alas, what the auto industry has been dreading is now happening: Delinquencies have begun to surge.
This chart – based on data from the Federal Reserve Board of Governors, which varies slightly from the New York Fed’s data – shows how rapidly auto loan balances have ballooned since the Great Recession. At $1.112 trillion (or $1.16 trillion according to the New York Fed), they’re now 35% higher than they’d been during the crazy peak of the prior bubble. Note that during the $93 billion increase in auto loan balances in 2016, new vehicle sales were essentially flat. No way that this is an auto loan bubble. Not this time. It’s sustainable. Or at least containable when it’s not sustainable, or whatever. These ballooning loans have made the auto sales boom possible.
Subprime car loansThe amount of total open car loans just topped $1 trillion, according to credit ratings firm Experian. But is that a sign of consumer confidence … or a cause for alarm? According to the latest data, from the third quarter of 2016, about 1 in 5 car loans are made to subprime borrowers, at an average interest rate of almost 11%. And broadly speaking, the average car loan in the U.S. is for a balance of almost $30,000 and a monthly payment of about $500. With stats like that, it’s no wonder the default rate on car loans is rising. A study by lending analysis firm Lending Times recently found that auto loan delinquencies are up over 21% compared with 2012 levels. A senior vice president at TransUnion, one of the three major credit rating bureaus, recently said he expects “a modest increase in delinquency” for auto loans going forward, too.
Just image what would happen if rates tick a bit higher. After all, if homeowners who were “underwater” on their homes in 2007 could shrug off the impact of a foreclosure on their credit report and simply walk away from a big mortgage, then why in the world would they stick with a double-digit interest rate on a car loan — especially as that car ages or breaks down? The real weight of these loans continues to hit the balance sheets of lenders, with net subprime losses continuing to march upward in December to 8.52%. Standard & Poor’s U.S. Auto Loan Tracker noted that while some of the acceleration was seasonal, “the year-over-year increases indicate that 2017’s losses could surpass last year’s levels.” No wonder the New York Fed called subprime auto debt a “significant concern” at the end of last year.
Student loans Hedge-fund guru Bill Ackman has said “I think that the government’s going to lose hundreds of millions of dollars” on student loans. And while that may sound like hysterics, when you consider that there is roughly $1.4 trillion in outstanding student debt, according to the Federal Reserve, that number doesn’t seem so far-fetched. Most of that is owned by the federal government via subsidized loans, too, with a recent Bloomberg report estimating the government owned some $850 billion in student loan debt as of 2014. Even a modest default rate would quite literally eat up hundreds of millions of dollars in a hurry. The losses for the government are disturbing, but at least can be made up with higher taxes or cuts elsewhere in the budget. There’s no relief for the millions of young Americans who are stuck paying for their college degree instead of spending on consumer goods.
Government-insured mortgagesAfter the collapse of subprime mortgages during the financial crisis, banks learned a hard lesson about these risky home loans. But if you think that means they avoided all loans to less-than-stellar borrowers, think again. The New York Fed recently juxtaposed the rise of government-insured mortgages vis-à-vis the decline in subprime lending to find that “government insurance programs rapidly expanded and more than filled the void.” That mirrors a report from ProPublica back in 2012 that estimated 9 in 10 mortgages issued at the time were being guaranteed by taxpayers via government-sponsored enterprises such as Fannie Mae and Freddie Mac. And while standards are moderately higher for loans with this government backstop than precrisis loans to subprime borrowers, “they are not low-risk loans,” write the New York Fed economists. “The combination of high leverage and low credit scores documented above translates into extremely high default rates.”
In a scathing editorial published in the Wall Street Journal today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, blasted US banks, saying that they still lacked sufficient capital to withstand a major crisis. Kashkari makes a great analogy. When you’re applying for a mortgage or business loan, sensible banks are supposed to demand a 20% down payment from their borrowers. If you want to buy a $500,000 home, a conservative bank will loan creditworthy borrowers $400,000. The borrower must be able to scratch together a $100,000 down payment. But when banks make investments and buy assets, they aren’t required to do the same thing. Remember that when you deposit money at a bank, you’re essentially loaning them your savings.
As a bank depositor, you’re the lender. The bank is the borrower. Banks pool together their deposits and make various loans and investments. They buy government bonds, financial commercial trade, and fund real estate purchases. Some of their investment decisions make sense. Others are completely idiotic, as we saw in the 2008 financial meltdown. But the larger point is that banks don’t use their own money to make these investments. They use other people’s money. Your money. A bank’s investment portfolio is almost entirely funded with its customers’ savings. Very little of the bank’s own money is at risk. You can see the stark contrast here. If you as an individual want to borrow money to invest in something, you’re obliged to put down 20%, perhaps even much more depending on the asset.
Your down payment provides a substantial cushion for the bank; if you stop paying the loan, the value of the property could decline 20% before the bank loses any money. But if a bank wants to make an investment, they typically don’t have to put down a single penny. The bank’s lenders, i.e. its depositors, put up all the money for the investment. If the investment does well, the bank keeps all the profits. But if the investment does poorly, the bank hasn’t risked any of its own money. The bank’s lenders (i.e. the depositors) are taking on all the risk. This seems pretty one-sided, especially considering that in exchange for assuming all the risk of a bank’s investment decisions, you are rewarded with a miniscule interest rate that fails to keep up with inflation. (After which the government taxes you on the interest that you receive.) It hardly seems worth it.
Vice Admiral Robert Harward has rejected President Trump’s offer to be the new national security adviser, CBS News’ Major Garrett reports. Sources close to the situation told Garrett Harward and the administration had a dispute over staffing the security council. Two sources close to the situation confirm Harward demanded his own team, and the White House resisted. Specifically, Mr. Trump told Deputy National Security Adviser K. T. McFarland that she could retain her post, even after the ouster of National Security Adviser Michael Flynn. Harward refused to keep McFarland as his deputy, and after a day of negotiations over this and other staffing matters, Harward declined to serve as Flynn’s replacement.
Harward, a 60-year-old former Navy SEAL, served as deputy commander of U.S. Central Command under now-Defense Secretary James Mattis. He previously served as deputy commanding general for operations of Joint Special Operations Command at Fort Bragg in North Carolina. Harward has also commanded troops in both Iraq and Afghanistan for six years after the 9/11 attacks. Under President George W. Bush, he served on the National Security Council as director of strategy and policy for the office of combating terrorism.
The tawdry Michael Flynn soap opera boils down to the CIA hemorrhaging leaks to the company town newspaper, leading to the desired endgame: a resounding victory for hardcore neocon/neoliberalcon US Deep State factions in one particular battle. But the war is not over; in fact it’s just beginning. Even before Flynn’s fall, Russian analysts had been avidly discussing whether President Trump is the new Victor Yanukovich – who failed to stop a color revolution at his doorstep. The Made in USA color revolution by the axis of Deep State neocons, Democratic neoliberalcons and corporate media will be pursued, relentlessly, 24/7. But more than Yanukovich, Trump might actually be remixing Little Helmsman Deng Xiaoping: “crossing the river while feeling the stones”. Rather, crossing the swamp while feeling the crocs.
Flynn out may be interpreted as a Trump tactical retreat. After all Flynn may be back – in the shade, much as Roger Stone. If current deputy national security advisor K T McFarland gets the top job – which is what powerful Trump backers are aiming at – the shadowplay Kissinger balance of power, in its 21st century remix, is even strengthened; after all McFarland is a Kissinger asset. Flynn worked with Special Forces; was head of the Defense Intelligence Agency (DIA); handled highly classified top secret information 24/7. He obviously knew all his conversations on an open, unsecure line were monitored. So he had to have morphed into a compound incarnation of the Three Stooges had he positioned himself to be blackmailed by Moscow.
What Flynn and Russian ambassador Sergey Kislyak certainly discussed was cooperation in the fight against ISIS/ISIL/Daesh, and what Moscow might expect in return: the lifting of sanctions. US corporate media didn’t even flinch when US intel admitted they have a transcript of the multiple phone calls between Flynn and Kislyak. So why not release them? Imagine the inter-galactic scandal if these calls were about Russian intel monitoring the US ambassador in Moscow. No one paid attention to the two key passages conveniently buried in the middle of this US corporate media story. 1) “The intelligence official said there had been no finding inside the government that Flynn did anything illegal.” 2) “…the situation became unsustainable – not because of any issue of being compromised by Russia – but because he [Flynn] has lied to the president and the vice president.” Recap: nothing illegal; and Flynn not compromised by Russia. The “crime” – according to Deep State factions: talking to a Russian diplomat.
Vice-President Mike Pence is a key piece in the puzzle; after all his major role is as insider guarantor – at the heart of the Trump administration – of neocon Deep State interests. The CIA did leak. The CIA most certainly has been spying on all Trump operatives. Flynn though fell on his own sword. Classic hubris; his fatal mistake was to strategize by himself – even before he became national security advisor. “Mad Dog” Mattis, T. Rex Tillerson – both, by the way, very close to Kissinger – and most of all Pence did not like it one bit once they were informed.
The world is running out of safe financial assets. One reason may be regulators’ push to make trading safer. A scarcity of safe collateral can create bouts of volatility in the markets where investors fund their purchases. Economists also worry that a lack of quality public-sector assets leads the private sector to create less reliable and riskier substitutes. Global rules increasingly require that investors deposit cash as security, called margin, when they trade with each other. This money is often left at clearinghouses, which are intermediaries that stand between buyers and sellers and step in if one of the parties won’t make good on a transaction. Regulators are trying to give these clearinghouses more heft to make the financial system safer.
The clearinghouses, in turn, have to do something with the cash, and they frequently take it to repurchase, or “repo,” markets, where they lend it out in exchange for high-quality assets such as German bunds or U.S. Treasurys. That has the effect of vacuuming up safe assets. Paradoxically, cash—at least its electronic form—isn’t ultrasafe: It needs to be left in bank deposits, and even the strongest banks have some risk. Treasurys and bunds don’t. Europe’s dearth of safe assets is especially acute. According to a semiannual survey released Tuesday by the International Capital Market Association, demand for collateral in the eurozone increased significantly in the second half of 2016. The ECB and other central banks across the developed world have been blamed for this safe-asset scarcity because they have bought trillions of dollars worth of government bonds in a bid to boost economic growth.
However, during a speech last month, ECB official Yves Mersch pointed to clearinghouses as a key culprit, and warned that “the requirements for trades to be centrally cleared are still being introduced, so the demand from market infrastructure to exchange cash for collateral will rise.” Data are scarce, but the latest figures from the Bank for International Settlements show that more than half of the notional amount outstanding of derivatives transactions was centrally cleared by the end of 2014, after new regulation was enacted—twice as much as in 2009.
Less than two weeks after Mary Jo White was nominated to become Chair of the Securities and Exchange Commission by President Barack Obama on January 24, 2013, White filed an ethics disclosure letter advising that she would “retire” from her position representing Wall Street banks at the law firm Debevoise & Plimpton. White wrote on this subject in great detail, stating:
“Upon confirmation, I will retire from the partnership of Debevoise & Plimpton, LLP. Following my retirement, the law firm will not owe me an outstanding partnership share for either 2012 or any part of 2013. As a retired partner, I will be entitled to the use of secretarial services, office space and a blackberry at the firm’s expense. For the duration of my appointment, I will forgo these three benefits, though I may pay for some secretarial services at my own expense. Pursuant to the Debevoise & Plimpton, LLP Partners Retirement Program, I will receive monthly lifetime retirement payments from the firm commencing the month after my retirement. However, within 60 days of my appointment, the firm will make a lump sum payment, in lieu of making monthly retirement payments for the next four years. Within 60 days of my appointment, I also will receive payouts of my interest in the Debevoise & Plimpton LLP Cash Balance Retirement plan and my capital account.”
Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. She will also fill the newly created position of Senior Chair of the law firm. This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street. The news is also highly significant because it will mark the fourth time in four decades that Mary Jo White has spun through the revolving doors of Debevoise & Plimpton (where she represented serial law violators) to government service (prosecuting serial law violators).
[..] Until there is meaningful legislative reform of political campaign financing and revolving door appointments, Americans will continue to be relegated to the status of dumb tourist in their own country.
“WHEN the vote took place,” says Valérie Pécresse, “it was an opportunity for us to promote Île de France”, the region around Paris of which she is the elected head. Two advertising campaigns were prepared, depending on the result of Britain’s referendum last June on leaving the European Union. The unused copy ran: “You made one good decision. Make another. Choose Paris region.” Brexit has made Paris bolder. Once Britain leaves Europe’s single market, the many international banks and other firms that have made London their EU home will lose the “passports” that allow them to serve clients in the other 27 states. Possibly, mutual recognition by Britain and the EU of each other’s regulatory regimes will persist. But no one can rely on the transition to Brexit being smooth, rather than a feared “cliff edge”. Best to assume the worst.
Britain is expected to start the two-year process of withdrawal next month. Given the time needed to get approval from regulators, find offices and move (or hire) staff, financial firms have long been weighing their options. London will remain Europe’s leading centre, but other cities are keen to take what they can. The Parisians are pushing hardest, pitching their city as London’s partner and peer. “I don’t see the relationship with London as a rivalry,” says Ms Pécresse. “The rivalry is not with London but with Dublin, Amsterdam, Luxembourg and Frankfurt.” Especially, it seems, Frankfurt. Paris has more big local banks, more big companies and more international schools than its German rival. London apart, say the French team, it is Europe’s only “global city”. When, they smirk, did you last take your partner to Frankfurt for the weekend?
This month the Parisians were in London, briefing 80 executives from banks, asset managers, private-equity firms and fintech companies. They are keen to dispel France’s image as an interventionist, high-tax, work-shy place. The headline corporate-tax rate is 33.3% but due to fall to 28% by 2020. A scheme giving income-tax breaks to high earners who have lived outside France for at least five years will now apply for eight years after arrival or return, not five. The Socialists, who run the city itself, and Ms Pécresse’s Republicans are joined in a business-friendly “sacred union”, says Gérard Mestrallet, president of Paris Europlace, which promotes the financial centre. Ms Pécresse and others play down the risk that Marine Le Pen, of the far-right, Eurosceptic National Front will win the presidential election this spring.
Trump’s honeymoon with capital markets is on the rocks, kept alive only by the occasional soundbite about “massive” or “phenomenal” tax cuts; it now appears that the US president’s – until recently – amicable relationship with Russia is also quickly souring. According to Bloomberg, the Kremlin has ordered Russian state media to cut “way back” on their fawning coverage of President Donald Trump, in what three sources told BBG is a “reflection of growing concern among senior Russian officials that the new U.S. administration will be less friendly than first thought.” The Russian president has defended his decision saying it is the result of declining interest among the Russian viewers in Trump’s rise to power, but Bloomberg adds that some of the most popular TV segments on Trump touched on ideas the Kremlin would rather not promote, such as his pledge to “drain the swamp.”
The suggestion is that since Trump is looking to end governmental corruption, the “authoritarian” Putin should be worried; and yet instead of “draining the swamp” Trump has filled it by surrounded himself with precisely those bankers he used as populist examples of all that is wrong with the government. As such, Putin should greet Trump’s failed “swamp draining” although that part did not make it into the Bloomberg report. Putin’s decree comes at a time of rising anti-Russian sentiment in Washington, where U.S. spy and law-enforcement agencies are conducting multiple investigations to determine the full extent of contacts Trump’s advisers had with Russia during and after the 2016 election campaign.
According to Bloomberg, the order marks a stark turnaround from just a few weeks ago when Russia hailed Trump’s presidential victory as the beginning of a new era of cooperation between the former Cold War foes. “Trump’s campaign was watched with rapture as news anchors gushed over the novelty of hearing an American presidential candidate praise Putin. But the wall-to-wall coverage went too far for the Kremlin’s liking.” In January, Trump reportedly received more mentions in the media than Putin, relegating the Russian leader to the No. 2 spot for the first time since he returned to the Kremlin in 2012 after four years as premier, according to Interfax data.”
That said, there has certainly been a chilling in relations between Trump and Putin. In recent weeks, numerous White House officials, including Trump, have criticized Russia for its annexation of Crimea and the subsequent violence in Ukraine. Trump on Wednesday accused Putin of seizing Crimea from Ukraine in a series of Twitter posts that were delivered amid a flurry of allegations that his team has ties to Russia. “Crimea was TAKEN by Russia during the Obama Administration. Was Obama too soft on Russia?” the U.S. president tweeted. As Bloomberg concludes, Russian officials, who had readily commented to local media on earlier news from Washington, suddenly became less talkative after the Crimea comment. And so, with Trump-Putin relations suddenly in purgatory, and Trump’s domestic “Russia-facing” exposure in chaos, it is now unclear how Trump will pivot away to restore what many had hoped would lead to a restoration in normal relations between the two countries.
Delays in the talks between Greece and its lenders have brought back the ghost of Grexit. The grave disagreement between the IMF and the European lenders, Grexit bombshell flying around and Greece’s reluctance to accept additional austerity measures have increase uncertainty among citizens – for one more time. And what do citizens do when they feel political and economical insecurity? The run to banks and withdraw deposits. 2.5 billion euros left Greek banks in the last 45 days. And this despite the capital controls that allow Greeks to withdraw a maximum of just €1,800 per month. However, in better situation are those who brought back cash to the banks. Cash that was largely withdrawn before the capital controls were imposed in July 2015 as a result of a major bank run from November 2014 until end of June 2015.
Those who pulled the cash from under the mattress and brought it to bank are allowed to withdraw money above the €1800 cap. According to newspaper Eidiseis, the cash withdrawal in the last 45 days has set bankers in alert. In addition to cash withdrawals, business loans and mortgage, amounting a total of €500 million, turned red. A sign that the delay in the conclusion of the second review has increased uncertainty among the Greeks, as the daily notes. Speaking to the daily, sources from the Union of Greek Banks said that “time is not working in our favor.” They stressed that the government and the lenders should reach a compromise. Beginning of February, Greek websites for economic news had reported that more than one billion euros was withdrawn in January 2017.
According to a report of November 2015, more than €120 billion left the Greek banks during the years of the crisis. €45 billion left the banks during November 2014 – 2015. 80% of this amount, that is some €36 billion are been kept in homes, company safes or in bank lockers.
Very much in line with what I’ve been saying. China’s dollar reserves are plunging but its dollar-denominated debt soars. A devaluation looks inevitable, and it has to be big because having to do a second one is the worst of all worlds.
The Institute of International Finance reports that capital outflows swelled to a record $725 billion last year. China’s desperate to keep that capital at home to support the economy. And it’s been burning holes in its dollar reserves to support the yuan. Selling its dollar holdings to buy yuan puts footings under the yuan. Makes it more attractive. Halts the capital flight. But the fire can only burn so long before it torches the remaining reserves… A $2.99 trillion war chest or a $3 trillion war chest sounds like plenty. But as Jim Rickards explained recently, it’s not nearly as much as it sounds: “Of the $3 trillion that China has left, only $1 trillion of that is a liquid. One trillion is invested in hedge funds, private equity funds, gold mines, et cetera. That money is not liquid. It cannot be used to support the currency, so remove a trillion.”
That leaves $2 trillion: “Another trillion has to be held on what’s called a precautionary reserve to bail out their banking system. The Chinese banks are completely insolvent. That system is going to need to be bailed out sooner rather than later.” Scratch another trillion: “That leaves only $1 trillion of the original $4 trillion in liquid form. The problem is that capital flight is continuing at a rate of $1 trillion per year, so China will be devoid of usable liquid assets by late 2017.” So now what? Jim has warned that Trump could soon label China a currency manipulator. That has vast implications, as you’ll see. But it’s not just Mr. Rickards. We learn today that a group of analysts at Deutsche Bank is piping an identical tune:
“Sometime in the next few weeks, President Trump or his Treasury secretary may declare China a currency manipulator and propose penalties including tariffs on some or all imports from China unless it ceases this and other alleged unfair trade policies.” And that would invite Chinese retaliation. Tariffs of their own on American goods. And then… China might reach for the nuclear option — a “maxi-devaluation.” Jim again: “We know what Donald Trump has said. China’s going to be labeled a currency manipulator. That’s like firing the first shot in a major currency war. We could see tariffs imposed in both directions, shots in retaliation, a financial war… China will retaliate with what I call their nuclear option, which is a maxi-devaluation of the Chinese yuan.”
If China’s going to be branded a currency manipulator and have its exports slapped with a steep tariff, why not go ahead and devalue? One, it would make Chinese exports more competitive. Two, China could stop depleting its dollar reserves. It would no longer have to burn through dollars to boost the yuan. And three, it could actually halt the capital outflows. How? Many Chinese fear the government will impose stricter capital controls as the situation worsens. So they move their capital out of the country in advance. That brings greater fear of capital controls. And more incentives for capital flight. It’s a vicious cycle. But if China devalues all at once, say, 25% or 30%, it sends this message: The worst is over. You may as well keep your capital in China. There will be no further devaluation.
Germany posted a record trade surplus in 2016, which may further fuel accusations by the Trump administration that Europe’s largest economy is exploiting a “grossly undervalued” euro. Exports climbed 1.2% last year to 1.2 trillion euros ($1.3 trillion), the Federal Statistics Office in Wiesbaden reported on Thursday, while imports rose 0.6% to 954.6 billion euros. That left Germany’s trade surplus at 253 billion euros in 2016. The report feeds into a debate kicked off late last month by Peter Navarro, the head of the White House National Trade Council, who told the Financial Times that Germany is gaining an unfair advantage over the U.S. and other nations with a weak currency.
ECB President Mario Draghi, Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble all rejected the claim that came on the back of President Donald Trump’s promises of renegotiating or tearing up free-trade treaties. “The fact that the German economy is exporting much more than it imports is a source of concern and no reason to be proud” because weak imports are the result of a lack of investment, Marcel Fratzscher, head of the DIW economic institute in Berlin, said in an e-mailed statement. “The record surplus will continue to fuel conflict with the U.S. and within the EU.” Exports fell 3.3% in December from the previous month, the report said, while imports were unchanged. The country’s current-account surplus reached 266 billion euros in 2016.
The carnage continues in the U.S. major oil industry as they sink further and further in the RED. The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures. The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year. [..] While the Federal Government could step in and bail out BIG OIL with printed money, they cannot print barrels of oil. Watch closely as the Thermodynamic Oil Collapse will start to pick up speed over the next five years. According to the most recently released financial reports, the top three U.S. oil companies combined net income was the worst ever. The results can be seen in the chart below:
In 2011, ExxonMobil, Chevron and Conocophillips enjoyed a combined $80.4 billion in net income profits. ExxonMobil recorded the highest net income of the group by posting a $41.1 billion gain, followed by Chevron at $26.9 billion, while ConocoPhillips came in third at $12.4 billion. However, the rapidly falling oil price, since the latter part of 2014, totally gutted the profits at these top oil producers. In just five short years, ExxonMobil’s net income declined to $7.8 billion, Chevron reported its first $460 million loss while ConocoPhillips shaved another $3.6 billion off its bottom line in 2016. Thus, the combined net income of these three oil companies in 2016 totaled $3.7 billion versus $80.4 billion in 2011. Even though these three oil companies posted a combined net income profit of $3.7 billion last year, their financial situation is much worse when we dig a little deeper.
We must remember, net income does not include capital expenditures or dividend payouts. If we look at these oil companies Free Cash Flow, they have been losing money for the past two years. Their combined free cash flow fell from a healthy $46.3 billion in 2011 to a negative $8.7 billion in 2015 and a negative $7.3 billion in 2016. Now, their free cash flow would have been much worse in 2016 if theses companies didn’t reduce their CAPEX spending by nearly a whopping $20 billion.
[..] the free cash flow minus dividend payouts provides us evidence that these oil companies have been seriously in the RED since 2013, not just the past two years displayed in the Free Cash Flow chart. As we can see, the group’s free cash flow minus dividends was a negative $32.8 billion in 2015 and a negative $29 billion last year. Of course, these three companies may have sold some financial investments or assets to reduce these negative values, but a company can’t stay in business for long by selling assets that it would need to use to produce oil in the future. So, what has falling free cash flow and dividends done to ExxonMobil, Chevron and ConocoPhillips long-term debt? You guessed it… it skyrocketed:
More than $1 trillion of junk-rated corporate debt is slated to mature over the next five years, creating a stiff challenge for heavily-indebted businesses if the market for riskier debt were to deteriorate, according to a new report from Moody’s Investors Service. The $1.063 trillion in maturing debt is the highest ever recorded by the ratings firm over a five-year period and also includes the highest single-year volume in 2021, when $402 billion of junk-rated corporate debt is scheduled to come due. Overall, a little more than $2 trillion of corporate debt is scheduled to mature by 2021 when factoring in $944 billion of investment-grade bonds. But it is the volume of junk-rated debt that could be of greater significance, given that investment-grade companies rarely have trouble extending debt maturities even in more difficult conditions.
As it stands, the environment remains highly favorable for junk-rated businesses, making it easy for most to access funds at their choosing. The average junk-bond yield was 5.72% Tuesday, the lowest level since September 2014. Buoyed by rising interest rates, junk-rated bank loans, which feature floating-rate coupons, have performed especially well of late, enabling U.S. companies to refinance $100 billion of loans in January, the largest monthly total in at least a decade, according to data from S&P Global Still, conditions can change quickly in the leveraged finance markets. A year ago, amid concerns that the U.S. was heading toward another recession, the average junk bond yield was nearly 10%, raising the risk that many borrowers would be unable to refinance bonds with looming maturities, hastening their descent into bankruptcy.
Donald Trump’s administration has put itself on a fresh collision course with the European Union after the president’s candidate to be ambassador in Brussels said Greece should leave the euro and predicted the single currency would not survive more than 18 months in its present form. Days after being accused of “outrageous malevolence” towards the EU for publicly declaring that it “needs a little taming”, Ted Malloch courted fresh controversy by saying Greece should have left the eurozone four years ago when it would have been “easier and simpler”. Malloch made his comments as financial markets began to take fright at the possibility of a fresh Greek debt crisis later this year. Shares fell and interest rates on Greek debt rose after it emerged that the EU was at loggerheads with the IMF over whether to give the country more generous debt relief.
“Whether the eurozone survives I think is very much a question that is on the agenda,” he told Greek Skai TV’s late-night chat show Istories. “We have had the exit of the UK, there are elections in other European countries, so I think it is something that will be determined over the course of the next year, year and a half. “Why is Greece again on the brink? It seems like a deja vu. Will it ever end? I think this time I would have to say that the odds are higher that Greece itself will break out of the euro,” Malloch said. The stridently Brexit-supporting businessman, who has yet to be confirmed as the US president’s EU ambassador and is seen by Brussels as a provocative nominee for the post, said he wholeheartedly agreed with Trump’s tweet from 2012 saying Greece should return to the drachma, its former currency.
“I personally think [Trump] was right. I would also say that this probably should have been instigated four years ago, and probably it would have been easier or simpler to do,” Malloch said in the interview with the show’s chief anchor, Alexis Papahelas. Seven years of arduous austerity – the price of the international bailout – had been so bad for the country that it was questionable whether what came next could possibly be worse, Malloch said. In the third bailout in as many years, Greece has lost more than 25% of its GDP due to austerity-fuelled recession, the biggest slump of any advanced western economy in modern times. Without further emergency funding from its €86bn rescue programme, Athens could face a default in July when debt repayments of about €7bn to the European Central Bank mature.
[..] The renewed focus came as the IMF revealed its board was split over how far spending cuts in the country should go, raising fresh doubts over the IMF’s participation in rescue plans for the struggling Greek economy. The IMF believes that the budgetary demands being imposed on Greece by Europe are unreasonable and that the country’s debts will hit 275% of national income by 2060 without fresh assistance. Malloch said: “I have travelled to Greece, met lots of Greek people, I have academic friends in Greece and they say that these austerity plans are really deeply hurting the Greek people, and that the situation is simply unsustainable. So you might have to ask the question if what comes next could possibly be worse than what’s happening now.” The biggest unknown was not a euro exit, but the chaos it would likely engender as Greece moved to a new currency, he said.
French revolution. Ironic that the central bank governor makes Le Pen’s point while trying to ‘push back’: “The Bank of France belongs to all French and is at the service of a French asset – our currency.” That’s exactly Le Pen’s point, it’s just that she doesn’t see the euro as ‘our currency’. For her, that means the franc.
Presidential candidate Marine Le Pen’s chief economic adviser Bernard Monot met with Bank of France Governor Francois Villeroy de Galhau in September and set out her party’s plans to take control of the central bank and use it to finance government spending. The meeting took place on the sidelines of Villeroy de Galhau’s public hearing in Brussels at the economic and monetary committee of the European Parliament, Monot, who also sits on the panel, said in a Feb. 4 interview. The central bank has become one of Le Pen’s key targets as she fleshes out her plans for taking control of the French economy and leaving the euro. She intends to revoke the Bank of France’s independence and use it to finance French welfare payments and service the government’s debts after abandoning the European monetary union.
While the National Front leader is ahead in polling for the first ballot on April 23, she’s still an outsider to become the next president because of the two-round system which requires broad-based support to win the run-off two weeks later. Villeroy de Galhau, who also sits on the governing council of the ECB, pushed back against her proposals in an interview on BFM television Thursday, though he didn’t mention her specifically. “It’s important that we have institutions and a currency that straddle daily turbulence,” the governor said. “The Bank of France belongs to all French and is at the service of a French asset – our currency.” The spread between French 10-year bonds and similarly dated German debt was the widest in more than four years earlier this week, as political uncertainty deterred investors. Villeroy de Galhau described the move as “temporary tension.”
The British economy will be healthier when its dependence on banking goes down. Not richer, but healthier. For instance, home prices can finally fall, a much needed development. There’s nothing good about a one-trick pony.
Global banks in London may have to relocate 1.8 trillion euros ($1.9 trillion) of assets to the continent after Britain withdraws from the European Union, putting as many as 30,000 U.K. jobs at risk, according to Brussels-based research group Bruegel. The assets potentially on the move represent 17% of the U.K. banking system, Bruegel said in a report published Wednesday. Based on discussions with market participants, the researchers estimate that 35% of wholesale banking activity in London can be attributed to dealings with customers inside the EU. Financial firms will have to move that business to countries inside the trading bloc after the U.K. leaves the EU in 2019, likely spelling the end of passporting, where firms seamlessly service the rest of the single market from their London hubs.
Banks, and their clients, are most concerned about a “cliff edge” Brexit, whereby all access is cut off after two years. To safeguard against that loss of access, banks are already in discussions with European regulators about setting up new bases inside the EU and have said they will start the process of moving people within weeks of the government triggering Brexit talks, expected in March. “At a minimum, it is expected that the new EU27-based entities will need to have autonomous boards, full senior management teams, senior account managers and traders, even though much of the back-office might stay in London or elsewhere in the world,” researchers led by Andre Sapir said in the report.
London-based firms will likely have to move about 10,000 employees into these new EU entities, Breugel estimates. An additional 18,000 to 20,000 people in associated professions, such as lawyers, consultants and accountants, may also have to relocate. Bruegel’s estimates are at the conservative end of the spectrum. TheCityUK industry lobby group forecasts as many as 35,000 banking jobs could be relocated, rising to 70,000 when including associated financial services. London Stock Exchange CEO Xavier Rolet has said Brexit would likely see 232,000 jobs leaving the U.K.
The Federal Reserve is dominated by academics who don’t know how finance and the economy really work, according to a former Federal Reserve Bank of Dallas staffer in her new book. Danielle DiMartino Booth, an adviser to Richard Fisher when he was Dallas Fed president, says the economists who control most of the central bank’s seats of power filter their decision-making through theoretical models. That led the institution to miss the forces that created the financial crisis, and then adopt the wrong policies to put the economy back on track, she says. Ms. Booth makes her case in a book called “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” set to be published Tuesday. Her book comes as other Fed critics are pushing for more diversity at the central bank.
They often focus on the dearth of women and minorities among the top officials, but some have said a broader range of educational and professional backgrounds also would widen the central bank’s perspective. Of the 17 Fed governors and regional bank presidents, 16 are white, 13 are men, and 10 have a Ph.D. in economics. Ms. Booth’s arguments echo those of her former boss, who led the Dallas Fed from 2005 to 2015, and frequently voted against the central bank’s aggressive stimulus efforts during and after the financial crisis. “If you rely entirely on theory, you are not going to conduct the right policy, because policies have consequences” that in many cases people with real-world experience are particularly well-suited to spot, Mr. Fisher said in an interview late last year.
Mr. Fisher hired Ms. Booth, a former Wall Street trader turned financial journalist, to work at the Dallas Fed in 2006 on the strength of columns she had written warning about the state of the housing market and financial markets. She eventually rose to be his appointed eyes and ears on financial markets. In her book, Ms. Booth describes a tribe of slow-moving Fed economists who dismiss those without high-level academic credentials. She counts Fed Chairwoman Janet Yellen and former Fed leader Ben Bernanke among them. The Fed’s “modus operandi” is defined by “hubris and myopia,” Ms. Booth writes in an advance copy of the book. “Central bankers have invited politicians to abdicate leadership authority to an inbred society of PhD academics who are infected to their core with groupthink, or as I prefer to think of it: ‘groupstink.’”
“Global systemic risk has been exponentially amplified by the Fed’s actions,” Ms. Booth writes, referring to the central bank’s policies holding interest rates very low since late 2008. “Who will pay when this credit bubble bursts? The poor and middle class, not the elites.” Fed officials have defended their crisis-era stimulus policies, saying they lowered unemployment and helped the housing market recover. Opponents feared near-zero interest rates would cause excessive inflation and dangerous market bubbles, neither of which has happened. Ms. Booth also is among the Fed critics who see a worrisome revolving door between the central bank and the financial firms it regulates. She points to New York Fed President William Dudley, a former Goldman Sachs chief economist, as an illustration of a “codependent” relationship between the central bank and markets. He and three other regional Fed bank presidents have worked for or had associations with Goldman Sachs. With this in mind, she writes, “Goldman has positioned players on the Fed’s chessboard.”
When the Italian central bank’s deputy governor joined a radio phone-in show last week, many callers asked why Italy didn’t ditch the euro and return to its old lira currency. A few years ago such a scenario, that Salvatore Rossi said would lead to “catastrophe and disaster”, would not have been up for public discussion. Now, with the possibility of an election by June, politicians of all stripes are tapping into growing hostility towards the euro. Many Italians hold the single currency responsible for economic decline since its launch in 1999. “We lived much better before the euro,” says Luca Fioravanti, a 32-year-old real estate surveyor from Rome. “Prices have gone up but our salaries have stayed the same, we need to get out and go back to our own sovereign currency.”
The central bank is concerned about the rise in anti-euro sentiment, and a Bank of Italy source told Reuters Rossi’s appearance is part of a plan to reach out to ordinary Italians. Few Italians want to leave the European Union, as Britain chose to do in its referendum last year. Italy was a founding EU member in 1957 and Italians think it has helped maintain peace and stability in Europe. And the ruling Democratic Party (PD) is pro-euro and wants more European integration though it complains that the fiscal rules governing the euro are too rigid. But the three other largest parties are hostile, in various degrees, to Italy’s membership of the single currency in its current form. The PD is due to govern until early 2018, unless elections are called sooner. The PD’s prospects of victory have waned since its leader Matteo Renzi resigned as premier in December after losing a referendum on constitutional reform, and polls suggest that under the current electoral system no party or coalition is likely to win a majority.
Italians used to be among the euro’s biggest supporters but a Eurobarometer survey published in December by the European Commission showed only 41% said the euro was “a good thing”, while 47% called it “a bad thing.” In the Eurobarometer published in April 2002, a few months after the introduction of euro notes and coins, Italy was the second most pro-euro nation after Luxembourg, with 79% expressing a positive opinion. Italy is the only country in the euro zone where per capita output has actually fallen since it joined the euro, according to Eurostat data. Its economy is still 7% smaller than it was before the 2008 financial crisis, and youth unemployment stands at 40%.
The head of Italy’s bank-bailout fund said on Tuesday the country lacked a clear strategy for shifting 356 billion euros ($381 billion) in problem loans. In an extraordinary outburst from a man picked by Rome to help tackle the problem, Alessandro Penati, whose boutique asset management firm was chosen to raise private funds for struggling banks, said he felt “bitter and disillusioned”. His comments exposed tensions within the banking sector over Italy’s rescue efforts. “There is no clear vision of the problem and no strategy,” Penati said at a financial conference in Milan, suggesting that he was virtually working alone on rescues that had revealed “horror stories” within some banks. “There is simply a reaction to a problem and this has been the main difficulty for me over these past few months – I had nobody to relate to.”
The Atlante fund, created 10 months ago following pressure from the government, gathered 4.25 billion euros from around 70 mostly private investors, including Italy’s healthier lenders, to buy up bad loans and invest in weaker banks. But the fund’s investors are already making big writedowns on the value of their stakes in Atlante, which promised them annual returns of 6%. The fund faces ever greater demands for capital and no investors willing to stump up more money. In December, Penati’s plan to buy into Italy’s biggest-ever sale of bad debts – 28 billion euros worth of loans written by struggling bank Monte dei Paschi di Siena (BMPS.MI) — fell apart when the bank failed to find any other major investors.
Penati, a former economist who set up Milan-based Quaestio Capital Management, said the sale had collapsed because it had been tied to a capital raising that had been “badly devised and even more badly executed”. Monte dei Paschi (MPS) is now to be rescued by the state. “It would no longer make sense for Atlante to play a role now. The point is that state intervention is considered a way to solve all problems, but it isn’t … MPS’s bad loan problem remains and how they are going to solve it – I don’t know.”
On Tuesday the Army Corps of Engineers gave notice to Congress that within 24 hours it would grant an easement allowing Energy Transfer Partners to move forward with construction on the Dakota Access Pipeline, which North Dakota’s Standing Rock Sioux tribe and thousands of allies have attempted to halt out of concern for water contamination, dangers to the climate, and damage to sites of religious significance to the tribe. The federal government dismissed those concerns in its filing. “I have determined that there is no cause for completing any additional environmental analysis,” Douglas Lamont, the acting assistant secretary of the Army, wrote in a memorandum. “The COE has full responsibility to take the reasonable steps necessary to execute the requested easement.”
Two weeks earlier, after only four days in office, Trump signed two memoranda instructing federal officials to ram forward approvals for the Dakota Access and Keystone XL pipelines, both of which had been halted by the Obama administration after people mobilized across the U.S. to stop them. On Dakota Access, the Army Corps did just what the president demanded, waiving the standard 14-day waiting period before such a permit becomes official. The tribe has been left with just one day to rally a legal response. Lawyers for the tribe say they will argue in court that an environmental impact statement, mandated by the Army Corps under Obama, was wrongfully terminated. They will likely request a restraining order while the legal battle ensues. Pipeline company lawyers have said that it would take at minimum 83 days for oil to flow from the date that an easement is granted.
Although the tribal government once supported the string of anti-pipeline camps that began popping up last spring, leaders have since insisted that pipeline opponents go home and stay away from the reservation. “Please respect our people and do not come to Standing Rock and instead exercise your First Amendment rights and take this fight to your respective state capitols, to your members of Congress, and to Washington, D.C.,” tribal chairman Dave Archambault said in a statement. Still, the easement announcement is already activating pipeline opponents to return. A “couple thousand people” are headed back to the camps, including contingents of veterans, said former congressional candidate Chase Iron Eyes, a member of the tribe, in a video posted to Facebook.
Hours before the final vote on the triggering of Article 50 the government quietly announced it would allow just 350 unaccompanied Syrian children to come to the UK, thousands short of the figure suggested by government sources last year. The statement from Immigration Minister Robert Goodwill said local authorities indicated “have capacity for around 400 unaccompanied asylum-seeking children until the end of this financial year” and said the country should be “proud” of its contribution to finding homes for refugees. Liberal Democrat leader Tim Farron called the decision “a betrayal of British values”. “Last May, MPs from all parties condemned the Government’s inaction on child refugees in Europe, and voted overwhelmingly to offer help to the thousands of unaccompanied kids who were stranded without their families backed by huge public support,” Mr Farron said.
“Instead, the Government has done the bare minimum, helping only a tiny number of youngsters and appearing to end the programme while thousands still suffer. At the end of December last year the Government had failed to bring a single child refugee to the UK under the Dubs scheme from Greece or Italy where many of these children are trapped.” Ministers introduced the programme last year after coming under intense pressure to give sanctuary to lone children stranded on the continent. Calls for the measure were spearheaded by Lord Dubs, whose amendment to the Immigration Act requires the Government to “make arrangements to relocate to the UK and support a specified number of unaccompanied refugee children from other countries in Europe”.
I am the aunt of Alan Kurdi, the Syrian boy who tragically drowned September 2, 2015. The devastating image of my 2-year old nephew’s lifeless body, lying face-down on the beach in Turkey, was all over the news across the world. Two weeks ago, I got home from work and my husband showed me a video of Tulsi Gabbard talking about her visit to my home country of Syria. The things she was saying about the United States policy of regime change and how the West and the Gulf countries are funding the rebel groups who wind up with the terrorists are true. I was shocked because it’s something no other U.S. politician has the courage to say. Regime change policy has destroyed my country and forced my people to flee. Tulsi’s message was exactly what I have been trying to say for years, but no one wants to listen.
I live in Canada now, but I was born and raised in Damascus, Syria. Growing up, our country was peaceful, beautiful and safe. Our neighbors were Christian, Muslim, Sunni, Shia; all kinds of religion and color. We all lived together and respected each other. Syria is a secular country. In 2011, the war started in Syria. Most of my family was still in Damascus. I was always in close contact with them and talked to them on the phone on a daily basis. For a year, I heard many tragic stories of people, friends, and neighbors who I grew up with having died in this war. Ultimately, my family had to flee to Turkey. I did what everyone would do for their own family to help, I sent them money and I listened to their struggles to survive as refugees in Turkey.
In 2014, I went to Turkey to visit my family and tried to help them. What I saw and experienced is not what we all saw in the news or we heard in the radio. It was worse than I could ever have imagined. I saw people in the streets without homes, without hope. Children were hungry, begging for a piece of bread. I heard many heartbreaking stories from other refugees who were suffering so much and many who had lost loved ones in the war. After I returned to Canada, I decided I wanted to bring my family here as refugees, but I couldn’t get them approved to come in. Eventually, my brother Abdullah and his wife Rehana, like thousands of Syrians, decided they had to take the risk and trust a smuggler they thought would bring them to freedom, safety, and hope. In September 2, 2015, I heard the tragic news that my sister-in-law Rehana and her two sons drowned crossing from Turkey to Greece.
The image of my two year old nephew Alan Kurdi lying face down on a Turkish beach was all over the media across the world. It was the wake up call to the world. Enough suffering. Enough killing. And most importantly, it was my wake up call. [..] Like me, many Syrians are encouraged that Tulsi met with President Bashar Assad in Syria. Tulsi recognizes that we need to talk to him because a political solution is the only way to restore peace in Syria. If the West keeps funding the rebels, we will see more people flee, more bloodshed, and more suffering. My people have suffered for at least six years. This is not about supporting Bashar. This is about ending the war in Syria. We can’t continue like this, supporting regime change. We have seen it before in Iraq, in Libya, and look what happened to them.
As the early days of the Donald Trump administration draw global opprobrium, Societe Generale’s famously bearish strategist Albert Edwards is offering unlikely support. “A lot of what he says on the economic front makes perfect sense to me.” Edwards claimed in his latest note published Thursday. Edwards said the new administration might be a “neo-liberal nightmare” but when the controversial topic of immigration was removed, there was clarity in Trump’s thinking. “We have long written on these pages that Germany is one of the biggest currency manipulators in the world. Germany aggressively refutes any criticism, let alone does anything about it (unlike China),” penned Edwards.
Trump’s team has attacked Germany for using the “grossly undervalued” euro to gain unfair trade advantages with the U.S. as well as trading partners within the European Union. The comments, published Tuesday, sent the euro to an eight-week high against the dollar. Edwards wrote that unless Germany changes its current position it “will have huge implications for both financial markets and the sustainability of the euro zone.” He said while the U.S. Treasury and the European Commission appeared unwilling to take on Berlin, it looked like the Trump administration would act assertively. Edwards, a self-described socialist, also said Trump’s plan to strip back regulation affecting U.S. corporates “rings true”.
“US corporate competitiveness is poor and deteriorating. The World Bank, for example, ranks the US a derisory 51st on how easy it is to start a business,” he wrote. “The only things where the US excels are the ability of companies to get credit and resolving insolvency. So US companies excel at leveraging up and going bust – great!” Edwards described America as a low tax and spend nation that has strangled its corporate sector. He said small business, traditionally the growth engine for jobs, is particularly burdened by regulation and concluded “There is much work indeed for The Donald.”
The United States and Germany are gearing up for a serious clash. Washington’s aim this time is not Germany’s military defeat, as was the case twice last century, but curbing its economic hegemony. Before being sworn in as US president, Donald Trump said that he believed Berlin was using the European Union as a vehicle for its further economic expansion, and the tycoon was right on the money. Speaking to the BBC a few days ago, the man tipped as America’s new ambassador to the European Union, Ted Malloch, expressed his belief that the euro could collapse within the next 18 months. It was a risky prediction, but suggestive of the views prevailing in Washington right now.
The third worrying statement came from the head of the US president’s National Trade Council, Peter Navarro, who told the Financial Times that the euro is a German currency in disguise – an apt observation – that is “grossly undervalued” so that Germany can retain a competitive edge over the United States. His comment is nothing short of a direct challenge and a sign of a more serious confrontation waiting to happen. What is extremely interesting is that Wolfgang Schaeuble, the most fervent of champions of monetary stability and the euro, has so far avoided making a response. Maybe he is aware that when it comes to the US, his firepower is somewhat limited, so he contains his barbs to judgmental comments against Greece and terrorizing Europe’s south.
German Chancellor Angela Merkel muttered something about the European Central Bank’s independence and European Council President Donald Tusk said Trump is a threat to the EU – this is Europe; these are its political leaders, people waiting in fear for America to unfold its policy. This would all be a matter of academic interest were it not for the fact that the looming clash between a US-British alliance and the European establishment poses a major threat to regional stability, and of course to Greece. Bad luck and political imprudence have resulted in Greece being cut off from its own traditional alliances with the US and the UK, now especially so. Given the recent tension with Turkey and the fact that in previous difficult periods Europe stood by as conflict was avoided only thanks to the US’s intervention, it is evident that there are more important issues than the pending bailout review that Athens should be focusing on.
The IMF’s involvement in Greece has been an unmitigated disaster: Time and again, its failure to heed crucial lessons has visited suffering upon the Greek people. When the fund’s directors meet on Monday, they should agree to forgive the country’s debts and get out. The IMF should never have gotten into Greece in the first place. As late as March 2010, with concerns about the Greek government’s ability to pay its debts roiling markets, Europe’s leaders wanted the IMF to stay away. Europeans feared that the fund’s financial assistance to one of their own would signal broader weakness in the currency union. As Jean-Claude Juncker famously put it: “If California had a refinancing problem, the United States wouldn’t go to the IMF.”
Nonetheless, German Chancellor Angela Merkel decided that the IMF’s presence was the signal needed to persuade German citizens that Greece needed urgent financial support and that strict discipline in the use of those funds would be enforced. Merkel’s political priorities coincided with the interests of Managing Director Dominique Strauss Kahn, who was desperate to pull the IMF out of irrelevance. From that moment on, the IMF became Europe’s – mainly Germany’s – instrument in Greece. Then came the cardinal error: At the IMF’s Board, over the fierce opposition of several executive directors, the Europeans and Americans pushed through a bailout program that, contrary to the fund’s rules, did not impose losses on Greece’s private creditors. The decision was based on a spurious claim that “restructuring” private debt would trigger a global financial meltdown.
Thus, European governments and the IMF lent Greece a vast sum to repay its existing creditors. Greece’s debt burden remained unchanged and onerous, and the most vulnerable Greeks were forced to accept crippling austerity to repay the country’s new official creditors. The economy quickly and predictably went into a tailspin. Even when the IMF recognized the error of its ways, it didn’t change course. An internal “strictly confidential” report, later made public, acknowledged that the program was riddled with “notable failures,” including the lack of private debt restructuring and excessive austerity. But the IMF never took responsibility. Instead, it demanded even more austerity throughout 2014.
In December, the public rebelled and brought the opposition Syriza party to power, which only made the IMF’s demands more insistent. At this point, the evidence that the strategy was pushing Greece to economic and financial collapse was overwhelming. It was like requiring a trauma patient to run around the block before being admitted to intensive care. Yet as usual, the inevitable suffering was blamed on Greece’s unwillingness to cooperate.
Almost two decades after the creation of the euro single currency, Italians are proving to be the big losers among the 19 member countries. GDP per capita in real terms shrank 0.4% in the last 18 years, according to Bloomberg calculations based on data from the European Union statistics office up to 2015 and estimates for 2016. While Italy’s economy expanded 6.2% since 1998, its population increased by 6.6% over the period – thus accounting for the per-head drop. “The comparison with other countries clearly shows that the Italian economy has expanded at too-slow a pace over the period,” said Loredana Federico, an economist at UniCredit Bank AG in Milan. “It will be very difficult for Italy to close, in the years to come, the gap with other economies that already returned to the pre-crisis level or even surpassed it.”
Eleven members of the EU introduced the euro as an accounting currency in January 1999; they were later joined by Greece. The actual notes and coins were introduced in January 2002, and expansion of the zone has since continued, with Lithuania becoming the 19th member in 2015. Italy’s per-capita GDP has fared even worse than Greece, which was severely hit by the financial crisis. The value of all goods and services produced in that country rose in the last 18 years by 4% on an individual basis, Bloomberg calculations show. In Germany, the euro region’s largest economy, per-capita output rose by 26.1% since 1998. That makes the citizens of Chancellor Angela Merkel’s nation the winners among all of the bloc’s main economies.
Capital outflows from China surged last year to a record $725 billion and could pick up further if U.S. firms face political pressure to repatriate profits, the Institute of International Finance said on Thursday. The Washington DC-based group, one of the most authoritative trackers of capital movements in and out of the developing world, estimates net Chinese outflows last year were $50 billion higher than in 2015, dwarfing the inflows other emerging economies received. Net outflows in 2014 had been just $160 billion from China, which has seen capital flight pick up in the past couple of years from local businesses and households, partly on expectations that the yuan would weaken against the dollar.
The outflows, which caused a $320 billion decline last year in Chinese foreign exchange reserves, have prompted authorities to strengthen capital curbs. The yuan fell 6.5% against the dollar last year, the biggest ever yearly fall. The IIF estimated China outflows at a heavy $95 billion in December and noted that a rise in protectionism, especially in the United States after the election of President Donald Trump, could exacerbate the situation. Trump and his top trade adviser this week criticised Germany, Japan and China, saying the three key U.S. trading partners were devaluing their currencies to the detriment of U.S. companies and consumers. “If U.S.-based multinational corporates start to repatriate their profits from China, outflows could worsen further in 2017,” the IIF said, referring to pledges of tax breaks to U.S. firms that bring overseas profits back to the country.
But excluding China, the picture for emerging markets appeared brighter, the IIF said, noting net capital inflows last year had amounted to $192 billion, versus $123 billion in 2015. In January, inflows into the stocks and bonds of a group of big emerging economies stood at a five-month high of $12.3 billion, the group added. “January was a much better month for emerging markets but it is too early to tell if this reflects hope for a better outlook – or this is just the eye of the storm,” the IIF note added. The capital exodus from China, however, dominates the picture – the IIF last November forecast the developing world would suffer net capital outflows of $206 billion in 2017, with the vast majority accounted for by China.
As Jeffrey Lacker leads the pack on the Fed’s “concern of overheating” front, last Friday’s 2016 fourth quarter GDP numbers completely contradict the narrative. Coming in at a paltry 1.85% growth rate, the Fed was handed yet another excuse to push off the so-called “normalization of interest rates” further into the future. The Fed’s FOMC again confirmed as much at its February meeting. The Fed has stated for years – since 2008 – that it needed to keep interest rates low in order to support a sustainable recovery. The Fed was allegedly paying close attention to it’s Congressionally-sourced dual mandate to determine when it could start allowing rates to rise. But now it is 2017 and the Fed’s bureaucratic statistics relating to unemployment and price inflation say things are just dandy.
But the GDP numbers, which purport to measure growth, scream the opposite. This is the Fed’s predicament. They’ve held that the dual mandate was their only guide, but it’s becoming quickly evident how irrelevant those numbers are. As it turns out, the third quarter’s 3.5% GDP number was not a sign of coming paradise, but was rather a mocking anomaly. In the past six quarters, only once (third quarter 2016) did the GDP growth rate come in above 2%. Moreover, things are getting worse, not better. 2016’s average growth rate was worse than both 2014 and 2015. Needless to say, Yellen’s credibility, to use a word of the mainstream, should be absolutely shattered. Stimulus and quantitative solutions have been an epic failure.
In light of this, the Fed’s decision to raise the target Federal Funds rate over the coming months is especially painful. Should they choose to do so, they do it in the face of a growth rate that is barely treading water. But if they choose to prolong these target rate hikes, they do so as their own dual mandate components tell them they should be normalizing monetary policy by now.
Despite Trump’s best efforts and positive policies, a collapse could happen any day unless radical steps are taken to prevent it — such as breaking up big banks and banning derivatives. I’ve been warning about this for a while, but now mainstream economists see the danger too. Nobel Prize winner Robert Shiller, for example, sees a stock market crash coming that could be worse than 1929 or 2000. I hope he’s wrong. The problem with a financial panic is that panicked investors don’t care if the president is a Democrat or a Republican; they just want their money back. The same dynamic applies to natural disasters like tsunamis and earthquakes. Once the disaster starts, the dynamics have a life of their own and don’t care if the victims are liberals or conservatives.
Everyone gets hurt just the same. I’m not hoping for it, but this is a lesson Trump may learn the hard way. Above I said collapse means a violent stock market correction, a falling dollar and major rallies in bonds and gold. I expect the latter. The long-term trends favor gold if U.S. growth continues disappoint. The strong dollar story can’t last, so it won’t. The Trump administration has clearly signaled that the day of the strong dollar is over. When you see a coordinated attack on the dollar from the White House, the Treasury and the Fed, you can bet the dollar will weaken. That means a higher dollar price for gold. The dollar may get one last boost from a Fed rate hike in March, but after that, even the Fed will acknowledge that they got it wrong again and start another easing cycle with happy talk and forward guidance.
The Scottish Parliament will vote Tuesday on U.K. Prime Minister Theresa May’s draft law to formally trigger Brexit, a signal that the Scots want their views to be considered as the premier prepares to embark on two years of talks to leave the EU. May’s bill, which would allow her to invoke Article 50 of the EU’s Lisbon Treaty, the formal trigger for exit discussions, passed its first vote in Parliament in London on Wednesday. The draft law will now undergo three days of line-by-line debate in a so-called Committee Stage starting on Monday. Members of Parliament have so far filled a 128-page document with scores of proposed amendments to the 137-word bill, which will then be put to its final vote in the lower chamber, the House of Commons, before being sent up to the House of Lords.
“It is now essential that the Scottish Parliament’s views are heard prior to the end of the committee stage of the Article 50 bill in the House of Commons, so we will lodge a motion to allow Parliament to express its view,” Scottish Minister for U.K. Negotiations on Scotland’s Place in Europe Michael Russell said on Thursday in an e-mailed statement. “I believe that Parliament will send a resounding message that Scotland’s future is in Europe.” The plan by Russell’s Scottish National Party amounts to a political warning to May to heed its concerns as she prepares to negotiate a so-called “hard” Brexit, pulling Britain out of the EU’s single market and customs union, which allow free trade within the bloc. The Scottish vote has no power to affect whether May triggers Brexit because the Supreme Court ruled last month that the semi-autonomous legislature doesn’t get to vote on the process.
The SNP produced a detailed plan for Brexit before Christmas that seeks to force May to negotiate to keep Scotland in the single market, even if the rest of the country pulls out. SNP leaders have repeatedly said that Brexit may lead to another independence referendum in Scotland, which voted overwhelmingly to remain in the EU. May had aimed to trigger Brexit by the end of March without consulting with the central Parliament in London, but was forced to do so after losing a court ruling and subsequent appeal to the Supreme Court. She still aims to stick to her timetable, and is fast-tracking the Article 50 bill through Parliament, aiming to complete its passage through the Lords in early March.
The Department of Education recently released a memo admitting that repayment rates on student loans have been grossly exaggerated. Data from 99.8% of schools across the country has been manipulated to cover up growing problems with the $1.3 trillion in outstanding student loans. New calculations show that more than half of all borrowers from 1,000 different institutions have defaulted on or not paid back a single dollar of their loans over the last seven years. This comes in stark contrast to previous claims and should call into question any statistics provided by government agencies. The American people haven’t fully grasped the long-term implications of loaning a trillion dollars to young people who have no credit or assets.
Increases in tuition seen over the past two decades have become a point of controversy and angst for those who don’t fully understand the contributing factors. Between 1995 and 2015, the average cost of a public, four-year university skyrocketed by well over 200%. Although federal student aid programs are often championed as a necessity, they have been instrumental in making higher education unaffordable. The opportunity to pay for college by working a part-time job evaporated as soon as huge sums of money were handed out to anyone with a pulse. Since students no longer pay their tuition upfront, colleges are able to raise prices in perpetuity, knowing the government will step in and make credit easier and easier to obtain. As an added bonus, outstanding student loans account for 45% of the government’s financial assets.
Subsidizing the lives of an entire generation has turned personal growth and advancement into a choice instead of a necessity. After all, why take risks or work your way up from the bottom when with just a signature, the life you’ve always wanted could be laid at your feet? It’s not hard to figure out why so many people are tempted to take advantage of the instant gratification that comes from student loans, but like everything else in life, they have a price. The same safety net that delays the anxiety of the future also ensures that monthly payments will be owed for decades to come. Procrastinating when faced with pivotal life decisions is an instinct that used to be overcome as a teenager, but today it is worn like a badge of honor well into adulthood.
The policies of intervention haven’t stopped at federal aid, and loan forgiveness is now being offered to those willing to work in the public sector or at a non-profit for ten years. This perverse incentive only serves to drive those desperately in debt further towards government dependence. Productive jobs are created when the needs of others are met in the free market, not by joining the ranks of the state for self-preservation. The idea that success comes exclusively through attending a university has created a stigma against some of the most valuable occupations. The lack of real skill sets has lead to a shortage of welders, electricians, carpenters, and other trade workers. Instead of learning through experience with apprenticeships, many students have embraced four years of sleeping in, drinking heavily, and getting an increasingly useless degree.
At his unveiling on Tuesday night as Donald Trump’s choice to fill the US supreme court vacancy, Neil Gorsuch paid homage not to the man standing beside him, who had just nominated him to one of the most powerful judicial positions in the country, but to a document written 230 years ago. Gorsuch, a federal appellate judge based in Denver, promised that should he get through the confirmation process he would act as a “faithful servant” to what he called “the greatest charter of human liberty the world has ever known”. He was referring to the US constitution, the supreme law of the land drafted in 1787. He was not being rhetorical. Gorsuch describes himself as an “originalist”, indicating that he places overwhelming importance on the original meaning of the constitution as it was understood by “we the people” at the time it was written.
That puts him in a very select group of judges – maybe no more than 30 – who identify themselves as “originalists”. What unites them is that they put as much emphasis on the original understanding of the US constitution as Christian fundamentalists say they put on the original wording of the Bible. Until his death last year, one of the most prominent members of the group was Antonin Scalia, the supreme court justice whom Gorsuch is now lined up to replace. Scalia helped spread the word of originalism among conservative judges in the 1980s as a way of pushing back on what he considered to be the increasingly outlandish opinions of his progressive peers. Judges were there, Scalia argued, not to make up their own laws or politically motivated judgments, but to cleave faithfully to the meaning of the framers’ writings as they were understood back in the 18th century by the American people.
“Originalists ask what the constitution meant at the time it was written, and then argue that the meaning is fixed – it doesn’t change because the world has changed and we now have new problems to deal with,” said Lawrence Solum, a professor at Georgetown Law who is a leading theorist of constitutional originalism. David Feder, a Los Angeles-based lawyer, had first-hand experience of what that meant to Gorsuch in practice when he worked as his law clerk on the federal 10th circuit court of appeals. “Whenever a constitutional issue came up in our cases, [Gorsuch] sent one of his clerks on a deep dive through the historical sources. ‘We need to get this right,’ was the motto – and right meant ‘as originally understood’,” Feder recalled recently in the Yale Journal of Regulation.
German Chancellor Angela Merkel stressed the importance of freedom of opinion in talks with Turkish President Recep Tayyip Erdogan, during a visit meant to help improve frayed ties between the two NATO allies. In her first trip to Ankara since a failed military coup in Turkey last year, Dr Merkel said she had agreed with Mr Erdogan on the need for closer cooperation in the fight against terrorism, including against the Kurdistan Workers’ Party (PKK). Germany and Turkey have been at odds over Ankara’s crackdown on dissidents since the abortive July 15 coup, as well as its allegations – rejected by Berlin – that Germany is harbouring Kurdish and far-left militants.
“With the [attempted] putsch, we saw how the Turkish people stood up for democracy and for the rules of democracy,” Dr Merkel told a news conference on Thursday, when asked about concern over proposed constitutional changes that would strengthen Mr Erdogan’s powers. “In such a time of profound political upheaval, everything must be done to continue to protect the separation of powers and above all freedom of opinion and the diversity of society,” she said, adding she had also raised the issue of press freedom. “Opposition is part of democracy,” Dr Merkel said.
[..] Turkish Deputy Prime Minister Veysi Kaynak said on Wednesday that Berlin was sheltering members of what Ankara calls the “Gulenist Terrorist Organisation” (FETO), referring to the network of US-based Muslim cleric Fethullah Gulen, whom Turkey blames for the coup bid. “If the Gulenists involved in the coup are fleeing to Germany, the Justice Ministry may send information and documents,” Mr Erdogan said, adding that the United States should take quicker action on an extradition request for Mr Gulen. US President Donald Trump’s National Security Adviser,Michael Flynn, has in recent months suggested that Mr Gulen might be extradited as a show of Washington’s support for its Middle Eastern NATO ally. Turkey’s defence minister has urged Berlin to reject the asylum applications and warned that a failure to do so could damage relations. Berlin has said the applications will be considered on a case-by-case basis.
An accord meant to stem the flow of refugees into Europe could collapse if Greece and Germany don’t extradite fugitive Turkish military officers involved in the botched July coup, a chief adviser to Turkish President Recep Tayyip Erdogan said. Erdogan has repeatedly threatened to throw open Turkey’s borders, accusing the European Union of failing to keep its side of the deal, which has run into turbulence following the Turkish government’s crackdown over the coup. Under the agreement, Turkey agreed to block the flow of refugees across its border into Europe in exchange for cash assistance and eased visa requirements for Turkish citizens.
“If Greece and Germany continue their negative attitude toward Turkey, then Turkey has no other option but to relax its hold on migrants,” Erdogan aide Ilnur Cevik said in an interview shortly before Germany’s Chancellor Angela Merkel sat down with Erdogan in Ankara, in part to discuss the accord. “Turkey has nothing to lose because Turkey has not gained anything” from the agreement, Cevik said. Greece has refused to extradite eight fugitive Turkish officers while about 40 others Turkey accuses of involvement in July’s failed coup sought asylum in Germany. “Merkel is coming to explain the unexplainable,” Cevik said. “We see that Germany continues to harbor those who have staged a coup in Turkey, he said.
Following the deaths of three migrants in less than a week and criticism from humanitarian groups, the government has started making progress in improving conditions at the Moria processing center on the eastern Aegean island of Lesvos. Steps have included moving 300 people, mostly families, to another facility at Kara Tepe and providing winter tents to 700 camp residents who were staying in shelters designed for summer despite the cold weather. Plans are also under way to develop a plot right beside the Moria center that has been leased by the Danish Red Cross but left unutilized because of reactions by locals against any initiatives to expand the camp. Meanwhile, Doctors Without Borders has accused the government of failing to provide migrants and refugees with basic necessities. The Moria camp is a “death camp for refugees and migrants,” the NGO said in an announcement on Thursday.
Sterling completed its best January against the dollar in six years after Donald Trump and a key adviser renewed an attack on countries that “exploit” their weak currencies. The value of the pound climbed as high as $1.2593 against the dollar after the US president heavily criticised China and Japan for “play[ing] the money market”. His comments followed a meeting with pharmaceutical executives in which he pledged to bring back drug manufacturing to the US. The rise in sterling’s value on Tuesday rounded off its best January performance against the dollar since 2011 and its first positive start to the year in half a decade. It came as Mr Trump’s trade chief put the US on a collision course with Germany after he accused Berlin of using a “grossly undervalued” euro to “exploit” the US and the rest of the EU.
Peter Navarro, who heads the US president’s new National Trade Council, described the single currency as an “implicit Deutsche Mark” that gave Germany a competitive advantage over its trade partners. The economics professor also said Germany was the main obstacle to a trade deal between the US and European bloc as he dismissed a revival of TTIP talks. “A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Mr Navarro said. “The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity within the EU — ergo, this is a multilateral deal in bilateral dress.”
Mr Trump has highlighted a preference for “one-on-one” trade deals. He pulled the US out of the TPP with 11 Pacific Rim nations on his first full day in office. Mr Navarro told the Financial Times the UK’s decision to leave the EU had “killed” a similar trade deal between the US and Europe. Mr Trump has signalled that the US will engage in trade talks with the UK. Angela Merkel, Germany’s chancellor, said the country had no influence over the euro exchange rate. “I neither want to nor can I do something to change the situation,” she told reporters in Stockholm. Mario Draghi, the ECB’s president, has warned that the country’s persistent current account surplus has contributed to imbalances and hindered growth in the eurozone. Analysis by the OECD suggests the euro is trading below its “fair value”. Data published by the think-tank shows the the euro is the most undervalued currency among the dollar’s major peers.
To repeat for a 1000th time: inflation numbers are meaningless unless money velocity is considered. And velocity is certainly not rising in southern Europe. That in turn would mean if it is rising in Germany – something I haven’t seen any proof of but let’s say it is -, what we see here is a huge threat to the eurozone. Because what is good for Germany is not good for others, and the others will have had enough of it.
The eurozone has reached its inflation target for the first time in four years, but ECB chief Mario Draghi has no time to rest on his laurels: He must now brace for renewed attacks on his easy-money policy in Germany. Overall inflation for the 19 countries that use the euro in January came in at a preliminary 1.8% – within a whisper of the ECB’s official target of “below, but close to, 2%,” but core inflation, which strips out volatile food and energy prices, was unchanged from December at 0.9%, making any immediate change in policy unlikely. However, with German elections looming this September, and top-selling tabloid Bild featuring a “horror curve” showing that despite the spike in inflation –which was even higher in Germany, at 1.9% in January – savers are still earning nothing thanks to the policy of negative rates to spur spending elsewhere in the eurozone, Draghi’s problems are more political than economic.
“Someone has to put a stop to Draghi,” said Jörg Meuthen from the far-right, Euroskeptic Alternative for Germany (AfD), which has high hopes of entering the Bundestag (lower house of parliament) for the first time in September. The party is keen to play on the collective German memory of hyperinflation in the first decades of the 20th century. Other inflation hawks, including mainstream figure like Bavarian Finance Minister Markus Söder, are frustrated with Draghi’s insistence that he cannot tailor monetary policy for the eurozone to the needs of the Germany economy, which is growing much more robustly than neighboring countries who still need the ECB’s support.
With Euroskeptic populists challenging the established order in elections this year in Germany, France and the Netherlands, the ECB will come under increasing pressure to explain why it is doing what it’s doing, said Anatoli Annenkov, economist at Société Générale. While he assumes a slow recovery in core inflation, “we had years and years of downside surprises and now that it is going up, we might also see upside surprises,” he said. Beyond Brexit and fears of protectionist policies from the new U.S. administration, the ECB is bracing for internal pressure from the largest economy in the eurozone. In his most recent press conference, Draghi attempted to project unity among the ECB’s governing council in support of the €2.3 trillion bond-buying program designed to stimulate the eurozone economy.
But that façade crumbled just days later when German executive board member Sabine Lautenschläger suggested it might be time to bring the policy to an end. “All preconditions for a stable rise in inflation exist. I am thus optimistic that we can soon turn to the question of an exit,” she said in a speech last week. Her former boss, Bundesbank President Jens Weidmann, has also signaled that the ECB should let economic data — rather than its previous commitment to keeping quantitative easing running until the end of 2017 — dictate its policy in the coming months.
Japan has rejected Donald Trump’s claims that Tokyo was deliberately weakening the yen to gain an unfair trade advantage over the US. Trump told a meeting of pharmaceutical companies on Tuesday that Japan, along with China and Germany, were guilty of “global freeloading” for using regulation and currency devaluation in their trade dealings with the US. The president’s trade adviser, Peter Navarro, also accused Germany of using a “grossly undervalued” euro to gain an unfair advantage over the US and other EU countries. In unusually frank comments, Japan’s chief cabinet secretary, Yoshihide Suga, said Trump’s criticism “completely misses the mark”. Suga added that the Bank of Japan’s pursuit of monetary easing was intended to boost inflation, not weaken the yen against the dollar.
Japan’s policy was in line with G7 and G20 agreements, he said, adding that Tokyo would continue to respond to “one-sided” currency moves by other countries. Vowing to end the emasculation of US trade, Trump’s said: “You look at what China’s doing, you look at what Japan has done over the years. … they play the money market, they play the devaluation market and we sit there like a bunch of dummies.” According to a transcript of Tuesday’s meeting, Trump said other countries “live on devaluation”. Trump’s outburst, which suggests he could backtrack on his wish to see higher US interest rates, came at the end of the worst January for the dollar for three decades. But that follows a huge rise in the dollar on the back of his election win in November when promises of a huge stimulus for the US economy sent the greenback to 14-year highs.
Donald Trump has joined Russia, China and radical Islam as a threat to the European Union, EU leaders were told on Tuesday by the man chairing a summit where they will debate relations with the United States. European Council President Donald Tusk, a conservative former premier of Poland, wrote to EU national leaders to lay out themes for discussion when they meet in Malta on Friday to discuss the future of their Union as Britain prepares to leave. In vivid language that reflects deep concern in Europe at the new U.S. president’s support for Brexit, as well as his ban on refugees and people from several Muslim countries, Tusk called on Europeans to rally against eurosceptic nationalists at home and take “spectacular steps” to deepen the continent’s integration.
Saying the EU faced the biggest challenges of its 60-year history, Tusk named an “assertive China”, “Russia’s aggressive policy” toward its neighbors and “radical Islam” fuelling anarchy in the Middle East and Africa as key external threats. These, “as well as worrying declarations by the new American administration, all make our future highly unpredictable,” he said. Laying out issues leaders may address in a 60th anniversary declaration at Rome in March, Tusk said the EU unity built after World War Two and the Cold War was needed “to avoid another historic catastrophe”. He also said Americans should not weaken Transatlantic ties fundamental to “global order and peace”.
“The disintegration of the EU will not lead to the restoration of some mythical, full sovereignty of its member states, but to their real and factual dependence on the great superpowers: the United States, Russia and China,” Tusk wrote to the EU leaders. “Only together can we be fully independent.” Senior officials discussed a possible EU response to Trump at a meeting in Brussels on Monday where some governments stressed that Europeans should not be hasty to alienate a key ally, diplomats said. “We don’t want to get fired,” one senior EU diplomat said in reference to Trump’s reality TV catchphrase. Another said that because the full U.S. administration was not yet in place, Europeans should be cautious: “No government in Europe can respond in a coherent manner to this series of orders and tweets,” the diplomat said.
Following a plunge of over 200 points in the Dow Jones Industrial Average yesterday, Trump pivoted to something he thought would please his financial backers on Wall Street. He called the Dodd-Frank financial reform legislation passed in 2010 by the Obama administration a “disaster” and promised to “do a big number” on it soon. The Dow closed down 122 points — now wary of Trump’s fire-ready-aim leadership on complex matters. The legitimate fear across Wall Street right now is that Trump’s zero-vetting approach to rule-by-Executive-Order could leave Wall Street in the same chaotic state as the airports experienced from his ham-fisted approach to immigration. But it’s not just Trump that Wall Street needs to fear: it’s Goldman Sachs as well. Trump has stuffed his administration with so many Goldman Sachs progeny that his administration is now regularly referred to as Government Sachs.
Goldman Sachs has a unique vested interest in repealing chunks of Dodd-Frank while making sure that the Glass-Steagall Act is not reinstated. That’s because when it comes to derivatives, Goldman Sachs is keeping a lot of secrets. The Office of the Comptroller of the Currency (OCC) is the regulator of national banks. Each quarter it publishes a report on the derivative holdings of the biggest Wall Street banks and their holding companies. Its most recent report shows that as of September 30, 2016 Goldman Sachs Bank USA (a taxpayer-backstopped, FDIC insured bank where it holds its derivatives) had “credit exposure to risk-based capital” of 433%. That figure was more than double that of JPMorgan Chase (216%) and six times that of Bank of America (68%).
There’s another big problem with Goldman Sachs: it has a miniscule asset base compared to the big guns on Wall Street but it’s attempting to play in the big leagues in terms of derivatives. As the chart above shows, Goldman Sachs is the third largest holder of derivatives on Wall Street with $45.48 trillion in notionals (face amount). (As of 2015, the entire GDP of the United States was only $18 trillion.) But Goldman only has $880 billion in assets. That ratio compares to JPMorgan Chase with $2.5 trillion in assets and $50.6 trillion in derivatives and Citigroup with $1.8 trillion in assets and $51.78 trillion in derivatives. The amount of these derivatives is insane on all levels but, clearly, Goldman stands out starkly in its ratios.
There’s another highly disturbing aspect of Goldman’s derivatives. Dodd-Frank legislation mandated that derivatives at the big Wall Street banks move into the sunshine by moving out of over-the-counter contracts whose details are known only to the buyer and seller and onto some type of centrally cleared platform. Dodd-Frank was signed into law on July 21, 2010. It’s almost six years later and yet the OCC’s report of September 30, 2016 shows that of the total derivatives held by Goldman Sachs only 24% are centrally cleared versus 76% at Goldman that remain over-the-counter. Again, that’s a far higher %age of over-the-counter contracts than at its peer banks on Wall Street.
Theresa May has set a target date of launching the formal Brexit process on March 9. The Government is aiming to push through its EU Bill through Parliament by March 7, which would allow the Prime Minister to trigger Article 50 at a summit of European leaders on March 9 and 10. MPs will start debating the crucial Brexit legislation today and fiery clashes are expected in the commons chamber as the SNP, Lib Dems and dozens of Labour MPs say they will defy June’s vote to leave the EU and vote against triggering Article 50. Ministers told the House of Lords yesterday that it hopes to have the European Union (Notification of Withdrawal) Bill approved by March 7. The following day – March 8 – is the Budget, before Mrs May travels to Brussels for the long-awaited Brexit showdown with her EU counterparts.
The PM has promised to trigger Article 50, the formal mechanism for quitting the EU, by the end of March. But she does not want to get off on the wrong foot with EU leaders by clashing with the 60th anniversary of the Treaty of Rome, which effectively gave birth to the EU. She could tell her European counterparts of her timetable at a meeting in Malta on Friday. The timetable could be knocked off course if the Lords initiate what is known as parliamentary ‘ping-pong’ by sending the bill back to the Commons with a series of amendments. And in a sign of the trouble ahead for Mrs May, a senior Tory told the Independent: ‘What we are seeing now is a huge raft of amendments being tabled. ‘There are cross party talks going on about this. It’s not going to be plain sailing for the Prime Minster.’
MPs are to vote later on whether to give Theresa May the power to get Brexit negotiations under way. The government is expected to win, with most Conservative and Labour MPs set to back its European Union Bill. But Labour leader Jeremy Corbyn faces a rebellion by some on his side, while the SNP and Liberal Democrats are also promising to oppose ministers. The vote, which will follow two days of parliamentary debate, is expected at about 19:00 GMT. On Monday, politicians made impassioned speeches for and against the bill, which, if passed, will allow Mrs May to trigger Article 50 of the Lisbon Treaty by her own deadline of 31 March. This would get formal Brexit negotiations with the EU started, with the UK expected to leave the 28-member group in 2019.
Brexit Secretary David Davis said MPs had to implement a decision made by the people in last June’s referendum, which the Leave campaign won by 51.9% to 48.1%. Doing otherwise would be viewed “dimly”, he warned. Mr Corbyn has imposed a three-line whip – the strongest possible sanction – on his MPs to back the bill, which is only two lines long. Shadow Brexit secretary Sir Keir Starmer called the vote a “difficult decision” for Labour – most of whose MPs supported Remain in the referendum – but it had to “accept the result”. Two shadow ministers have quit Labour’s front bench in order to oppose the bill, while MPs Stephen Timms and Lyn Brown told the Commons they would also vote against it. A government source said up to 30 Labour MPs were expected to defy Mr Corbyn.
Pressure on the government to help struggling Britons has intensified after a leading thinktank warned that falling living standards for the poor threatened the biggest rise in inequality since Margaret Thatcher was prime minister. The Resolution Foundation said Theresa May would need to make good on her pledge to support “just about managing” households as it released a report showing that rising inflation and an end to recent strong jobs growth would hit the least well-off hardest. Its warnings chime with other forecasts for a squeeze on family budgets on the back of sluggish wage growth, welfare cuts, rising global oil prices and the pound’s sharp fall since the Brexit vote. The drop in sterling has made imports more expensive and there are already signs that is being passed on to consumers, with inflation hitting its highest level for more than two years in December.
The Resolution Foundation’s study found that the current parliament would be the worst for living standards for the poorest half of households since comparable records began in the mid-1960s and the worst since the early years of Thatcher’s 1979-90 premiership for inequality. Since its sharp increase in the early 1980s – a period of high unemployment, factory closures and a cut in the top rate of tax from 83% to 60% – inequality has broadly remained flat. But the Resolution Foundation forecast that between 2015 and the next general election in 2020 incomes for the poorest half of households will fall by 2%. That compares with a rise of 4% during the last parliament and 1% between 2005 and 2010 – the five-year period that included the deepest recession since the 1930s.
Torsten Bell, director of the Resolution Foundation, said: “Britain has enjoyed a welcome mini-boom in living standards in recent years. But that boom is slowing rapidly as inflation rises, productivity flatlines and employment growth slows. “The squeeze in the wake of the financial crisis tended to hit richer households the most. But this time around it’s low- and middle-income families with kids who are set to be worst affected. “This could leave Britain with the worst of both worlds on living standards – the weak income growth of the last parliament and rising inequality from the time Margaret Thatcher was in Downing Street.
A Syrian diplomatic source underlined that the visit by 130 US figures, including three former secretaries and congresspersons, is a “good omen” in the relations between Damascus and Washington. According to the source, Rep. Tulsi Gabbard who had last week said that she met with Syrian President Bashar Assad during a recent trip to the war-torn country, stressed during the meeting that “affairs are going on in a way that an unprecedented opening is seen in the relations between the two sides in different fields”. Referring to three existing scenarios on Syria, she said that the first option is continued war which doesn’t benefit any sides and the US administration will likely oppose it; the second option is the victory of dissidents which is opposed by Trump and he even dismisses interactions with them.
The third option is Assad’s continued ruling over Syria as the best person to manage the country provided that certain considerations will receive attention in the formation of the government, the Syrian source said. According to the source, Gabbard has indirectly spoken about a US plan to pave the ground for Trump’s showoff by annihilation of the ISIS in Raqqa like what was done by former US President Barack Obama. “Raqqa city is a political card important for the world since it is considered as the ISIS’s first base; meantime, ending the war is Raqqa militarily is easy since there are no tunnels and tall buildings in there which facilitates any military measure to annihilate terrorism,” the Syrian diplomatic source said. Back from a weeklong trip to Syria [she] defended her meeting with the war-torn country’s president, saying there’s no possibility of a viable peace agreement unless Bashar Assad is part of the conversation.
Rep. Tulsi Gabbard of Hawaii said she originally had no intention of sitting down with Assad, according to a statement issued by her office detailing her travels. But she changed her mind when the opportunity arose. “I think we should be ready to meet with anyone if there’s a chance it can help bring about an end to this war, which is causing the Syrian people so much suffering,” Gabbard said. Gabbard said that the U.S. has “waged wars of regime change” in Iraq, Libya and Syria. Yet each has resulted “in unimaginable suffering, devastating loss of life, and the strengthening of groups like al-Qaeda” and the Islamic State group, she said. “My visit to Syria has made it abundantly clear,” Gabbard said. “Our counterproductive regime change war does not serve America’s interest, and it certainly isn’t in the interest of the Syrian people.”
Germany began sending tanks and other equipment to Lithuania on Tuesday as part of a NATO mission to beef up the defense of eastern Europe and send a signal of resolve to Russia, which has denounced the build-up as an act of aggression. The German army command said it was sending about 200 vehicles, including 30 tanks, by train to Lithuania along with 450 troops, the first of whom arrived last week. The transports would continue until late February. Seven decades after the end of World War Two, the movement of German troops to eastern Europe, even on a NATO mission, remains a sensitive issue both in Germany and the region. On Monday the U.S. military deployed thousands of soldiers and heavy weaponry to Poland, the Baltic states and southeastern Europe in its biggest build-up since the Cold War.
The movements are part of a strategy agreed by NATO leaders last July to reassure member states that were once part of the Soviet bloc and have been alarmed by Russia’s seizure of the Crimean peninsula from Ukraine in 2014. The 28-nation Western alliance decided to move four battalions totaling 3,000 to 4,000 troops into northeastern Europe on a rotating basis to display its readiness to defend eastern members against any Russian aggression. The deployments focus on Poland and the Baltic states of Estonia, Latvia and Lithuania, which fear Moscow could try to destabilize them by cyber attacks, territorial incursions or other means. Russia denies such intentions and has described NATO’s behavior as aggressive and threatening.
We’re often told that the state and the market have entirely different roles. But meet any number of the people paying the price for Britain’s crash, and you’ll see that they play almost identical parts using similar language and similar bureaucracy. And far from protecting low-paid workers from the depredations of the market, the state wants to hurl more people into it under the pretence that they are shirkers. None of this fits with how social democrats view the state. Having attended my fair share of Labour and other leftwing political meetings, I know that a staple feature is that some grey-haired man in a jumper will leap up towards the end and launch into a good-hearted defence of the state. Public investment, social security, industrial strategy: all will circle back to the state; all will be met with murmurs of approval. And all are a million miles away from the experiences I regularly hear while reporting.
[..] At the end of 2015, a team of academics held a series of two-day discussions with small groups of members of the public across Europe. They were asked only one big question: what should the government do for your children’s generation? Of all the countries, the British were easily the most pessimistic about what could be done – behind even Slovenia. The British liked the NHS and pensions, but thought both would be gone in a generation. They didn’t talk about the good things that could be done by government. Trade unions came up just once in the entire two days. “I found it quite shocking,” recalls Peter Taylor-Gooby, of the University of Kent. “Of all the groups we interviewed, the British had this mood of resigned, reluctant individualism.”
Thirty years ago, Ronald Reagan claimed the nine most terrifying in the English language were: “I’m from the government and I’m here to help.” He said it was a joke; it turned out to be a prophecy. Three decades of both right and left privatising, outsourcing and deregulating have shrunk the public imagination about what their representatives in government can achieve. Put that alongside the shattering of the working class, the smashing of trade unions, and the diminishment of so many other social institutions. The need for the state and collective action hasn’t diminished, but the public belief in it has gone. The state is now either invisible or hostile. This has happened without the pundits and politicians noticing, but its consequences could shape politics for decades.
Editorial in Kathemerini bytThe new British ambassador in Athens, who wastes not one word on what has happened to Greece courtesy of the EU. Not one word! No compassion for the people of Greece, no understanding, not consolation, no hope. Not one word on what Britain intends to do to help Greece. No, the UK wants Greek help. She either doesn’t know what’s going on, or she chooses to blindly ignore it. In both cases, she should not be where she is. She talks about Britain only, as if Britain is the main victim here. Me, me, me. Well, f**king stay home then. Athens now has this dimwit and Victoria Nuland lackey Geoffrey Platt as US ambassador.
As the new British ambassador in Athens, I begin my mission in Greece at a challenging time. I’ve been struck by the anxiety and even sadness expressed by many Greeks about Britain’s withdrawal from the European Union. Much of that is based in uncertainty about what this means for the future of Europe, and for the relationship between the United Kingdom and Greece. That’s understandable. And that was why Prime Minister Theresa May’s speech last week sought to provide as much clarity as possible for our partners about what the United Kingdom is seeking from the forthcoming negotiations and beyond. Above all, we intend to remain the best friend and neighbor possible to our European partners. We are not seeking to undermine the European Union. Indeed it is in the best interests of the UK that the EU should succeed.
A prosperous, stable Greece is a critical element in that, and I believe Greece has a strong interest in the specific outcomes to which the prime minister committed the UK government to pursue on 23 January. First – the prime minister said repeatedly in her speech that our cooperation with all European partners on defense, security and foreign policy, including intelligence sharing, will continue. The security of our citizens is not negotiable. With Greece, that means the highly valued collaboration we have with partners in the Greek armed forces, police, coast guard and customs on migration, counterterrorism, and organized crime will remain a priority. Second, our aim of a bold and ambitious free-trade agreement, which gives British and European companies the maximum freedom to trade across our markets, can only be of benefit to Greece.
The United Kingdom is the second biggest export market for Greece’s pharmaceutical products, and third largest for agricultural products; while the freedom for the British financial and professional services to continue to trade across borders will benefit both the City of London and the Greek shipping sector, one of its most important customers. Third: There is much concern about the status of EU nationals in the UK after Brexit. Britain values very highly the contribution of Greeks who live and work and study in the UK – for example the hugely talented Greek clinical staff in, for example, the National Health Service – as well as the 10,000 Greek students in our universities. The rights and benefits of current students, and those starting in academic year 17/18, are secure to the end of their courses. And we want to guarantee the rights of all EU citizens already living in Britain, as well as the rights of British nationals in other member-states, as early as we can. Greece’s support on this would be very welcome.
Parliament’s approval is needed before the government can trigger article 50 and formally initiate the UK’s departure from the European Union, the supreme court has ruled. The government’s executive powers, inherited through the royal prerogative, are not sufficient to uproot citizens’ rights gained through parliamentary legislation such as the 1972 European Communities Act, the justices have declared. The justices ruled against the government by a majority of eight to three. The eagerly awaited decision by the largest panel of judges ever assembled in Britain’s highest court routes the protracted Brexit process through parliament, handing over to MPs and peers the authority to sanction the UK’s withdrawal. A summary of the decision, which has far-reaching constitutional implications, was delivered by the president of the supreme court, Lord Neuberger of Abbotsbury.
Banks are using the euro less and less in international transactions, with financiers preferring to use dollars – indicating the euro’s declining importance in the global economy. Economists believe sustained political risk in the eurozone, fears that the currency area could fall apart, and the continuing hangover from the sovereign debt crisis have all contributed to the currency’s relative decline. Figures from the Bank of International Settlements show that the euro is being used less in international banking, while the US dollar continues to grow in importance. At the end of September, the BIS figures show, outstanding cross-border business in US dollars amounted to $13.9 trillion (£11.1 trillion), a rise of almost $60bn over previous three months.
By contrast, outstanding cross-border claims in euros fell by almost $160bn to a total of $8.1 trillion. Overall claims globally amount to $28.2 trillion, meaning the US dollar accounts for almost 50pc of the total. The euro is next with 29pc, while the yen is in third place – its $1.7 trillion of claims is 6pc of the total. Sterling is fourth at $1.3 trillion, or a 5pc share. By contrast, in 2012, the euro was a bigger player, with around $11 trillion of cross-border claims, but has faded sharply since then. Around half of the decline in recent years is due to the euro’s fall in value relative to the dollar, making the euro transactions appear smaller when they are compared in a common currency. But the other half is made up in large part by the eurozone’s own problems.
The most fundamental is the fear that the currency area will be stuck in permanent low growth, making investments risky. With the rise of anti-EU politicians such as Marine Le Pen in France there is also the worry that, in extreme circumstances, the euro could break up. “Partly as a result of the sovereign debt crisis, we know from investors outside Europe that they have a lot of question marks about the viability of the eurozone,” said David Owen, chief European economist at Jefferies. He was joined by Alastair Winter at Daniel Stewart, who said: “It may not be politically correct but there is a case that the euro may not survive much beyond this year. The dollar is popular because it offers a standard for value, a bit like the old gold standard. All of the other major currencies present problems.”
Donald Trump has begun his effort to dismantle Barack Obama’s legacy, formally scrapping a flagship trade deal with 11 countries in the Pacific rim. The new president also signed executive orders to ban funding for international groups that provide abortions, and placing a hiring freeze on non-military federal workers. Trump’s decision not to join the Trans-Pacific Partnership (TPP) came as little surprise. During his election campaign he railed against international trade deals, blaming them for job losses and focusing anger in the industrial heartland. Obama had argued that this deal would provide an effective counterweight to China in the region. “Everyone knows what that means, right?” Trump said at Monday’s signing ceremony in the White House. “We’ve been talking about this for a long time. It’s a great thing for the American worker.”
The TPP was never ratified by the Republican-controlled Congress, but several Asian leaders had invested substantial political capital in it. Their countries represent roughly 13.5% of the global economy, according to the World Bank. Trump’s election opponent, the Democrat Hillary Clinton, had also spoken out against the TPP. The move also intensified speculation over the future of the 17-year-old North American Free Trade Agreement (Nafta). There were reports that Trump would sign an executive order on Monday to begin renegotiating terms with Canada and Mexico. He did move to reinstate a ban on providing federal money to international non-government organizations that perform abortions or provide information about them. The policy also prohibits taxpayer funding for groups that lobby to legalize abortion or promote it as a family planning method.
Republican administrations have tended to institute such a ban while Democrats have reversed it, most recently President Obama in 2009. Trump signed it one day after the anniversary of the supreme court’s 1973 Roe v Wade decision that legalized abortion in the US. Activists fear that the precedent is now under threat. The administration was criticized after footage appeared to show only one woman in the room as this executive order, along with the other two, were signed. Only four of Trump’s cabinet picks are women.
Italy’s populist Five Star Movement leader Beppe Grillo has welcomed Donald Trump’s extraordinary rise to power and dismissed the European Union (EU) as a total failure. Mr Grillo described the controversial new US President as a “moderate whose image has been distorted”. He declared he was “very optimistic” about the Trump presidency which he said would reignite the US economy and stop it from playing world police enforcer. In an interview with French magazine Journal du Dimanche, the former stand-up comic expressed his fundamental agreement with Mr Trump’s populist presidential platform. He said: “I read one of his books in which he says some really sensible things on the need, for example, to bring economic activity back to the United States.
“He said what he had to say about Chinese protectionism as well.” Mr Grillo said Mr Trump would use fiscal policy to entice large companies to keep their business in the US instead of taking it south of the border to Mexico and that he would also “relaunch small and medium enterprises”. He said: “Mr Trump will also recall the US Army stationed at the four corners of the world and I agree with all this.” The Italian nationalist accused the media of twisting the “moderate message” of Mr Trump who then “simply adapted to what was being said about him”. He said: “We consequently have a deformed perception of him.” Looking closer to home, M Grillo described the EU as “a total failure” that needed to be re-imagined.
He said: “It is an enormous apparatus, with two parliaments, in Brussels and Strasbourg, to please the French. “Europe was born with Jean Monnet but then was progressively transformed. “I liked the word ‘community’ but then it was called union for the currency, which was to be common and not unique.” He continued: “I am in favour of a different Europe, where each state can adopt its fiscal and monetary system. “I want the Eurobond, a 20% devalued euro for southern European countries, protecting our products against those arriving from abroad, and a revision of the 3% deficit budgetary rule. “I no longer feel the spirit of Europe.”
Trump is the first “populist” US president since Andrew Jackson in 1829 and takes office with a mandate to reverse the course of globalization. Denial is not a strategy and it’s time to face the reality that is coming… the good, the bad, and the ugly. First off, stop underestimating this man – you don’t become leader of the free world through stupidity and luck. The rants and twitter storms are part of a strategy of media control and distraction. Trump knows that if you can’t win, then you change the rules of the game – this is what he has already done with American politics – and what he is about to do to the entire Post-Bretton Woods World Order. If you really want to know a person, watch what they do, and not what they say… or what they tweet. Trump’s business career was largely comprised of three core strategies 1) Leverage 2) Restructure 3) Brand… in that order.
Throughout the late 1970s and 1980s Trump rode a generational decline in interest rates and debt binge to purchase a range of high profile real estate projects including the Grand Hyatt (1978). Trump Tower (1983), the Plaza Hotel (1988) and the Taj Mahal (1988). In the 1990s he went through a total of 6 bankruptcies due to over-leveraged hotel and casino businesses in Atlantic City and New York. In the 2000s he pivoted to move away from debt-driven property investments to building a global brand through the “Apprentice” TV show. Trump will run the country as he ran his businesses…. He will lever, and lever, and lever, and lever… and lever… and then restructure his way to success, or whatever success is defined as by the broadest measure of popularity at any given time. Trumponomics, if it delivers, will be a supply side free for all: massive tax cuts, deficit spending to create jobs, financial and energy deregulation, business creation, and trade protectionism all driving inflation.
More importantly, Trump sees bankruptcy as a tool and not an obligation and will have no problem pushing the US to the limits of debt expansion. “I do play with bankruptcy laws, they’re very good to me!” he once said. Trump may be willing to bring the US to the brink of default if it produces middle class jobs and popularity, and what he understands is that nobody can stop him, not Europe, not China. In a Trump mindset, the US national debt and deficits, or prior commitments (e.g. NATO), are not to be taken seriously as long as we hold all the cards… namely the biggest military in the world, energy independence, world reserve currency, and the world’s largest buyer of consumer goods. He is dangerously right, these geo-political solvency tools are far more powerful than the bankruptcy laws he used to protect his casino assets… the US is just another, bigger, badder, more bankrupt casino with air craft carriers.
The media doesn’t seem to understand that Trump’s overtures to Russia and Taiwan are not diplomatic gaffes but rather forms of economic leverage. He is reminding Europe that NATO is nothing without the US, and reminding China that creditor nations lose trade wars. As a negotiating tactic, it may work … or may drive the world to a hot war… or both. Like it or not – the old rules are gone. Diplomacy has been replaced by Twitter, and the unexpected is now to be expected. Trump’s world is a zero-sum game – and this means a shock doctrine of US centric re-positioning in trade in a dramatic change from the post-World War II order. The US has the largest military, the best geography, best technology innovation, the largest economy, best demographics in the developed world, and shale-driven energy independence to boot.
A discussion that makes a lot of sense. What is being protested? If this is unclear, isn’t that perhaps counterproductive? Can you effectively protest some of Trump’s measures after having demonized him in a wide and general fashion for a long time? Shouldn’t there be millions in the streets right NOW to protest the medieval Golden Gag Rule? Where are they?
The best way to control the opposition is to lead it.
[..] I’d say the most common sign seems to have been some derivative of “Women’s Rights = Human Rights.” I unquestionably agree with this statement, which begs the question, who doesn’t? Well many of the barbaric, feudalist monarchies in the Middle East for starters. Saudi Arabia being a prime example, a place where women are not permitted to drive. Fortunately for them, their money is still green and the Clinton Foundation took plenty of it (between $10 million and $25 million to be exact). Democrats protested that by rigging the primary for her. I didn’t personally attend any of the protests, so I asked my followers on Twitter who did attend to reach out to me and tell me about what they saw. I received lengthy responses from three people. One was a Gary Johnson voter, one a Hillary voter and one didn’t vote at all.
They all pretty much confirmed what you could deduct from the signs. It was a message of “women power,” seemingly focused on women’s rights, specifically abortion and contraception. This brings me to another observation, which will serve as a segue to the final thrust of this article. It appears the emotional driver of the protest was two fold — a serious concern that certain women’s rights will be rolled back, and a form of catharsis for people still reeling from the election loss. This is interesting, because the focal point appears to be not just driven by identify politics, but on preserving already existing rights. Ok, fine, but what about all the ills currently at play? The destruction of the middle class, the surveillance state, the fact that Wall Street owns every single administration no matter who wins. What about the wars and the rapidly metastasizing military-industrial-intelligence complex.
These are things that are currently happening, and have been getting worse under both Republican and Democratic administrations. Does it make sense for all this energy to be focused on a potential threat, as opposed to all of the many ongoing unethical, destructive aspects of American life in 2017? Which brings us to the most important point of this entire article. I don’t want to be too judgmental here. While much of the messaging from the Women’s March seems to have been pretty unserious and divorced from the reality of the many serious issues plaguing the nation, I want to see a silver lining here. I think there’s little doubt that Trump’s election resulted in a certain percentage of the population finally waking up to how much trouble this country is in.
The problem is that many of these people see Trump as the problem to be eliminated, as opposed to the symptom of a sick, destructive society that he actually is. This is where the entire “resistance” can be easily co-opted by the DNC and the rapidly emerging neocon/neoliberal alliance rooted in identity politics, which poses no actual threat to the people actually in power. In this sense, all of this potentially productive energy could tragically be redirected into simply bringing back the same Democratic types that were forcefully rejected during the 2016 election.
After harshly condemning the media over the weekend for its coverage of President Donald Trump’s inauguration, White House Press Secretary Sean Spicer struck a less combative tone during a press conference on Monday. But he nevertheless continued to argue that the media is trying to undermine the president, and stood by a debunked statement that the inauguration drew the “largest audience” of all time. “I believe we have to be honest with the American people,” Spicer said at the briefing, responding to a reporter’s question about his commitment to truth-telling. He added: “I’m going to come out here and tell you the facts as I know them, and if we make a mistake I’ll do our best to correct it.”
Later, however, he lamented that there is a “constant theme to undercut the enormous support” he said Trump has. “There’s an overall frustration when you turn on the television over and over again and get told that there’s this narrative.” The press secretary’s pledge to tell the truth may indicate that the administration hopes to improve its relationship with the media, or at least the appearance of it, following criticism and mockery of Spicer’s hostile interaction with reporters over the weekend. At the same time, his insistence that the media treats Trump with a double standard, and his complaints that the media has created an anti-Trump narrative, highlights how difficult it will be to repair the relationship between the administration and the media.
A new bill has been introduced which would allow the United States to withdraw from the United Nations, and is now beginning to turns heads.
Representative Mike Rogers from Alabama introduced H.R. 193 American Sovereignty Act of 2017 in early January but is just now getting media exposure. The full bill can be seen here on congress.gov. The bill requires: (1) the President to terminate U.S. membership in the United Nations (U.N.), including any organ, specialized agency, commission, or other formally affiliated body; and (2) closure of the U.S. Mission to the United Nations.
The bill prohibits: (1) the authorization of funds for the U.S. assessed or voluntary contribution to the U.N., (2) the authorization of funds for any U.S. contribution to any U.N. military or peacekeeping operation, (3) the expenditure of funds to support the participation of U.S. Armed Forces as part of any U.N. military or peacekeeping operation, (4) U.S. Armed Forces from serving under U.N. command, and (5) diplomatic immunity for U.N. officers or employees.
Clearly, many people would be in favor of such a move and many would oppose it. Many who would support the move believe that the United Nations Agenda 30 is a blueprint for a unipolar world order with a destructive agenda, as Zerohedge reported last year. Regardless of one’s beliefs or opinions on the UN being a front for a new world order, this bill is a direct and bold move against the elite’s plans. For any nation to reclaim true sovereignty from the United Nations is setting a powerful example for the rest of the world. It sends a message that a country does not need a global governing body, but instead can run itself without global oversight.
Essentially, if the U.S. reclaimed sovereignty from the United Nations, it would be the equivalent of what Britain did by reclaiming it’s sovereignty from the European Union…times 10. Perhaps the biggest revelations to come from such news would be the eventual exposure of the level of theft, deception and criminal activity done by the registered corporation known as The United Nations (yes it is a registered corporation).
Returning to the first forty-eight hours of the new regime, first the ceremony itself: there was, to my mind, the disturbing sight of Donald Trump, deep in the Capitol in the grim runway leading out onto the inaugural dais. He lumbered along, so conspicuously alone between the praetorian ranks front and back, overcoat open, that long red slash of necktie dangling ominously, with a mad gleam in his eyes like an old bull being led out to a sacrificial altar. His speech to the multitudes was not exactly what had once passed for presidential oratory. It was not an “address.” It was blunt, direct, unadorned, and simple, a warning to the assembled luminaries meant to prepare them for disempowerment. Surely it was received by many as a threat.
Indeed an awful lot of official behavior has to change if this country expects to carry on as a civilized polity, and Trump’s plain statement was at face value consistent with that idea. But the disassembly of such a vast matrix of rackets is unlikely to be managed without generating a lot of dangerous friction. Such a tall order would require, at least, some finesse. Virtually all the powers of the Deep State are arrayed against him, and he can’t resist taunting them, a dangerous game. Despite the show of an orderly transition, a state of war exists between them. Anyway, given Trump’s cabinet appointments, his “swamp draining” campaign looks like one set of rackets is due to be replaced by a new and perhaps worse set.
Trump was correct that the ruins of industry stand like tombstones on the landscape. The reality may be that an industrial economy is a one-shot deal. When it’s gone, it’s over. Even assuming the money exists to rebuild the factories of the 20th century, how would things be produced in them? By robotics or by brawny men paid $15-an-hour? If it’s robotics, who will the customers be? If it’s low-wage workers, how are they going to pay for the cars and washing machines? If the brawny men are paid $40 an hour, how would we sell our cars and washing machines in foreign markets that pay their workers the equivalent of $1.50 an hour. How can American industry stay afloat with no export market? If we don’t let foreign products into the US, how will Americans buy cars that are far more costly to make here than the products we’ve been getting? There’s no indication that Trump and his people have thought through any of this.
It’s time to talk about the balance sheet. Eight years after the Federal Reserve launched the first of three controversial bond-buying campaigns to help save the U.S. economy, its holdings are stuck at $4.5 trillion, and the question of when to let them shrink is beginning to simmer. Several policy makers have pushed publicly to get the debate started. How the discussion plays out could have big implications for the pace of future interest-rate hikes and for the dollar. “They should start framing this for the market,” said Michael Gapen, chief U.S. economist at Barclays Plc. Investors need to hear what the “balance of policy” will be between the balance sheet and the central bank’s main tool, the federal funds rate, he said.
The sheer weight of the balance sheet helps hold down long-term U.S. borrowing costs, which is why the Fed bought bonds in the first place. If officials allow holdings to mature without continuing their current practice of reinvesting the principal, they could push yields higher by reducing demand in the bond market. The topic has shot to renewed prominence as the outlook for the U.S. economy has brightened. The Fed has raised rates twice in the last 13 months and penciled in three quarter-point moves this year. Moreover, newly-inaugurated President Donald Trump has put expansionary fiscal policy on the horizon. If fiscal stimulus begins to overheat the economy, the Fed might tighten policy more sharply. St. Louis Fed President James Bullard said he’d prefer to use the balance sheet to do some of that lifting, echoing remarks by his Boston colleague Eric Rosengren.
“If you think the economy is growing more rapidly then you want, you can either continue to raise short-term rates, or you can also do balance sheet in conjunction with that,” Rosengren said in a Jan. 9 interview. At the very least, he said, the Fed should be talking about the issue soon. San Francisco Fed President John Williams, Atlanta’s Dennis Lockhart, Philadelphia’s Patrick Harker and Dallas chief Robert Kaplan have all agreed. None of them has expressed urgency, and the topic may not be on the agenda when the Federal Open Market Committee convenes again on Jan. 31. But each knows it can take the FOMC several meetings to make big decisions, and they are likely eyeing where rates will be a year from now. Rosengren is thought by Fed watchers to favor four hikes this year. “I don’t think it’s something they’ll do in 2017,” said Mark Zandi at Moody’s. “My guess is they view this as a 2018 project.”
It’s not in Tsipras’ hands. The EU demands the refugees stay on the islands so they cannot move further north. The EU also makes sure conditions on the islands are miserable with the idea that this keeps others from coming to Europe. And thirdly, they claim moving refugees to the mainland would violate the treaty with Turkey.
The mayors of Lesvos, Chios, Samos, Kos and Leros on Monday jointly presented their demands for measures to ease severe overcrowding at migrant reception centers on their islands during a meeting in Athens with Prime Minister Alexis Tsipras. According to government sources, the meeting was held in a cordial climate and both sides agreed it remained imperative that an agreement between Ankara and the EU to curb human smuggling across the Aegean must not be allowed to collapse. However, though the sources described the mayors’ demands as “logical,” it remained unclear what action, if any, the government plans to respond with. In the meeting with Tsipras, which was also attended by senior officials of the Central Union of Municipalities and Communities of Greece (KEDKE), the mayors emphasized that the situation on the islands was very tense and required immediate action.
They called for the transfer of hundreds of migrants to facilities on the Greek mainland, the improvement of the asylum process so that migrants can leave islands without delay, and measures to boost local economies which have been hit hard by the refugee crisis on top of the country’s financial crisis. Separately, in comments to the News247.gr website, Migration Minister Yiannis Mouzalas remarked that the mass transfer of migrants to the Greek mainland would lead the EU-Turkey deal “to collapse.” He added that while in 2015 refugees accounted for 70 to 80% of arrivals, now 70% of arrivals are economic migrants. According to a report by the Athens-Macedonian News Agency, the interior and defense ministers of several Balkan and Central European countries are planning to meet in Vienna on February 8 to discuss ways of bolstering their borders against illegal immigration.
Hundreds of new refugees and migrants, many of them children, are arriving in Serbia every day despite the prospect of sleeping rough in sub-zero temperatures and reports of violent treatment, Save the Children has said, as it calls on the EU to do more to help. The EU-Turkey deal, which was supposed to stem the flow of refugees arriving in Europe by boat, has meant many refugees are being forced to take a deadlier land route to cross the Balkans, with children as young as eight experiencing harsh weather conditions, dog bites and violent treatment by police and smugglers. Although Serbia is not part of the European Union, it borders Hungary, Bulgaria and Romania, and has become a transit point for those hoping to reach western Europe. About 6,000 people are stuck in Serbia not able to cross the border into Hungary, which is the direction of travel most would like to take.
Serbia does have asylum centres but when space becomes available, many migrants and refugees are too anxious to go to them, fearing that they will be detained indefinitely or deported illegally. Many of them are turning to smugglers for help instead, charities claim. In the past two months, Save the Children estimates that 1,600 cases of illegal push-backs from Hungary and Croatia have been alleged by refugees and migrants, who have been forced – often violently – back into Serbia, despite already having crossed its border. The UN’s refugee agency (UNHCR) confirmed in its weekly briefing that it was continuing to receive hundreds of reports of foreign nationals being expelled from EU countries in the Balkans and sent back to Serbia.
An average of 30 cases a day of “unlawful and clandestine push-backs” highlights a disregard for the human right to an individual assessment of the need for international protection, according to Save the Children. Belgrade “risks becoming a dumping zone, a new Calais where people are stranded and stuck” the humanitarian group Médecins Sans Frontières has warned.
[..] Save the Children estimates that there are up to 100 refugees and migrants arriving in Serbia every day and is supporting the government to refurbish safe spaces and support services prioritising lone children. About 46% of refugee and migrant arrivals in Serbia are children and 20% are unaccompanied. The UNHCR said at least five refugees had died of cold since the start of the year. “Saving lives must be a priority and we urge state authorities across Europe to do more to assist and protect refugees and migrants,” a UNHCR spokeswoman, Cecile Pouilly, told a press briefing in Geneva on Friday. This week, the Serbian authorities made additional temporary space available to get people off the snowy streets and into shelters. The charities have warned, however, that it still far from enough to meet the needs of people who are sleeping rough.
The Automatic Earth ‘celebrates’ its 9th birthday today! Thank you Nicole first of all, and thank all of you, so much, for reading, for commenting, being involved, for your kind donations. A true honor and pleasure.
(Someone had to point it out to me, of course I forgot.)
I’ve tried hard to understand what the women were/are protesting, and what I find is I’m still confused, since it seems they protest anything and everything. Or, as the Atlantic puts it: “the Women’s March was a protest that celebrated protest.” Looks to me like a surefire recipe for handing it to Trump on a platter.
Trump seems to be part of what’s being protested, but what exactly? His “grab the pussy” nonsense? But that was years ago and he was talking about willing women. Stupid and ugly, but it doesn’t make him a threat to all women. His abortion stance? Some of his supporters are pro-lifers for sure, but so far nothing indicates he’ll lead some big turnaround on the issue.
What I think everybody needs to recognize is that there are, and especially will be, very obvious and clearly definable topics linked to this administration that should be vigurously protested and investigated. But this protest doesn’t do any such thing.
Neither does the Democratic party, who can’t locate their own asses anymore. And most of all neither do the media, which for example covered nothing yesterday but a piece of absurd briefing theater about the number of people attending the inauguration. Once again handing the floor to Trump. It’s embarrassing.
Pointing out silly things Trump says that you know everyone in your respective echo chambers will agree with you on is easy, and Trump will keep feeding you. What it is not, though, is journalism. Or politics, for that matter. Or meaningful protest.
The role of Trump, I think, in America, must be that of a wake-up call. But nobody’s waking up.
In the middle of the National Mall, on the same spot that had, the day before, hosted the revelers who had come out for the inauguration of Donald Trump, a crowd of people protesting the new presidency spontaneously formed themselves into a circle. They grasped hands. They invited others in. “Join our circle!” one woman shouted, merrily, to a small group of passersby. They obliged. The expanse—a small spot of emptiness in a space otherwise teeming with people—got steadily larger, until it spanned nearly 100 feet across. If you happened to be flying directly above the Mall during the early afternoon of January 21, as the Women’s March on Washington was in full swing, you would have seen a throng of people—about half a million of them, according to the most recent estimates—punctuated, in the middle, by an ad-hoc little bullseye.
“What is this circle about?” a woman asked one of the circle-standers. “Nobody knows!” the circle-stander replied, cheerfully. The space stayed empty for a moment, as people clasped hands and looked around at each other with grins and “what-now?” expressions. And then: A woman ran through the circle, dancing, waving a sign that read “FREE MELANIA.” The crowd nodded approvingly. Another woman did the same with her sign. A group of three teenage boys danced with their “BAD HOMBRE” placards. The crowd whooped. Soon, several people were using the space as a stage. A woman dressed as a plush vulva shimmied around the circle’s perimeter. The circle-standers laughed and clapped and cheered. They held their phones in their air, taking pictures and videos. They cheered some more.
The Women’s March on Washington began in a similarly ad-hoc manner. The protest sprang to life as an errant idea posted to Facebook, right after Trump won the presidency. The notion weathered controversy to evolve into something that, on Saturday, was funereal in purpose but decidedly celebratory in tone. The march, in pretty much every way including the most literal, opposed the inaugural ceremony that had taken place the day before. On the one hand, it protested President Trump. Its participants wore not designer clothes, but jeans and sneakers and—the unofficial uniform of the event—pink knit caps with ears meant to evoke, and synonymize, cats. It had, in place of somber ritual, a festival-like atmosphere. It featured, instead of pomp and circumstance, people spontaneously breaking into dance on a spontaneously formed dance floor.
And yet in many ways, the march was also extremely similar to the inauguration whose infrastructure it had co-opted, symbolically and otherwise, for its own purposes. The Women’s March on Washington shared a setting—the Capitol, the Mall, the erstwhile inaugural parade route—with the ceremonies of January 20. And, following an election in which the victor lost the popular vote, the protest seems to have bested the inauguration itself in terms of (physical) public turnout. During a time of extreme partisanship and division—a time in which the One America the now-former president once spoke of can seem an ever-more-distant possibility—the Women’s March played out as a kind of alternate-reality inauguration: not necessarily of Hillary Clinton, but of the ideas and ideals her candidacy represented. The Women’s March was an installation ceremony of a sort—not of a new president, but of the political resistance to him.
“I DO NOT ACCEPT THIS FILTHY ROTTEN SYSTEM,” read one sign, carried by Lauren Grace, 35, of Philadelphia. She got the quote from Dorothy Day. And she intended it, Grace explained to me, to protest “a system that sort of left me out.” “We’re told that voting is a sacred right in this country,” Grace said. “But even though Hillary won the popular vote, she still lost. I feel pretty conflicted about a country where that could happen.”
The Women’s March was, to be sure, also a protest march in an extremely traditional vein: It featured leaders—celebrities, activists, celebrity activists—who gave speeches and offered performances on a stage with the Capitol in its background; its participants held signs, and chanted (“This-is-what-a-feminist-looks-like!,” “No-person-is-illegal!”), and commiserated. It was also traditional in that its participants were marching not for one specific thing, but for many related aspirations. Women’s reproductive rights. LGBTQ rights. Immigration rights. Feminism in general (“FEMALES ARE STRONG AS HELL,” one sign went, riffing off a famous feminist’s Netflix show). The environment (“CLIMATE CHANGE IS REAL,” “MAKE THE PLANET GREAT AGAIN”). Science (“Y’ALL NEED SCIENCE”). Facts (“MAKE AMERICA FACT-CHECK AGAIN”). Some signs argued for socialism. Some argued against plutocracy. Some argued for Kindness. Some pled for Peace. Some simply argued that America is Already Great.
This was a big-tent protest, in other words—a messy, joyful coalescence of many different movements. The Women’s March deftly employed, in its rhetoric, the biggest of the big-tent tautologies: The point of this protest wasn’t so much the specific things being protested as it was the very bigness of the crowds who were doing the protesting. This was another way the protest alternate-realitied the presidential inauguration: Just as the official ceremony is meant to celebrate not only the person occupying the presidency, but the presidency itself, the Women’s March was a protest that celebrated protest.
Tyler Durden gets the essence: ..what he is seeing is that he once again is controlling the media narrative, which is focusing on a very immaterial and arbitrary issue, instead of spending time on investigative work and reporting on far more serious issues relating to Trump’s new administration.
In a bizarre first briefing, White House press secretary Sean Spicer on Saturday unloaded a blistering attack on the media and accused it of false reporting about the otherwise irrelevant question of why Trump’s inauguration crowd was visibly smaller than that of Obama’s. Spicer used up virtually all the time in his first official appearance in the Press Briefing Room to denounce news organizations’ focus on the inaugural crowd size, saying “these attempts to lessen the enthusiasm of the inauguration are shameful and wrong.” We wouldn’t necessarily use those words: silly should suffice since if Trump really wanted to “defend” why fewer people attended his inauguration, he can simply say many more of his supporters are employed and had to be at work on Friday, than during either Obama’s 2009 or 2013 inauguration events.
However, the press secretary decided that hyperbole is the better part of valor and said “This was the largest audience to ever witness an inauguration, period, both in person and around the world” Spicer made the allegation despite photographs of the event clearly showed that the Mall was not full in the sections Spicer described, with dwindling-to-nonexistent crowds near the Smithsonian Institution Building and west toward the Washington Monument. There was also sparse attendance along the parade route from the Capitol to the White House. He alleged that some photos of the inauguration were “intentionally framed in a way” that minimized the crowd, without providing examples or evidence.
No official agency provides estimates of the size of gatherings on the Mall. But photos taken from the same vantage point at about the same time of day show that the crowds were far smaller than for President Barack Obama’s first inauguration, which Washington city officials estimated at 1.8 million people.Ultimately, the whole press briefing episode had a surreal undertone, one in which Trump, via his speaker, appears to continue to troll the press, now in the White House. As a seemingly perturbed NYU journalism professor Jay Rosen summarized it “Wow. Sean Spicer walked to the podium. Unloaded on the media for bias. Accused reporters of dishonesty. Walked off without taking questions.” The reaction among the rest of the press was similar.
Spicer took no questions from reporters and he did not say specifically how many people the White House believes attended the inauguration. He said three large sections of the Mall that each held at least 200,000 people were “full when the president took the oath of office.” Earlier on Saturday, in remarks at CIA headquarters in Langley, Trump said that from his vantage point at the podium, “it looked like a million, million and a half people. They showed a field where there were practically nobody standing there, and they said Donald Trump did not draw well.” Trump also said parts of the National Mall “all the way back to the Washington Monument” were “packed.”
Quoted by Bloomberg, former White House spokesman Ari Fleischer said on Twitter after Spicer’s remarks that “This is called a statement you’re told to make by the president. And you know the president is watching.” He is indeed, and what he is seeing is that he once again is controlling the media narrative, which is focusing on a very immaterial and arbitrary issue, instead of spending time on investigative work and reporting on far more serious issues relating to Trump’s new administration.
That was no presidential speech; that was a veritable declaration of war. Threatening in tone. Cold and calculating in logic. Change minus the hope. Donald Trump used the traditional Inauguration Day address to settle a score with the U.S. political establishment going back decades. With four ex-presidents sitting a few feet behind him, the 45th president delivered a populist manifesto. Until his victory, the nation’s political elite used days like these, he told America, to celebrate amongst themselves. Their triumph was not your triumph. Their well-being was not your well-being. But this time, power would transfer not just from one party to the other, but from Washington back to the people. In the people’s name, he will put America “first.” In their name, he will “take back” America’s factories.
In their name, he will “exterminate” Islamic terrorism, end inner-city drug gang “bloodbaths” and get NATO partners like Germany to pay more for Europe’s security. In domestic policy, the Trump agenda sounds like a blueprint for civil war; in foreign policy, it sounds like the dawn of a new ice age. Not that he’s cold-bloodedly planning either one, but he knows where his fiery rhetoric will lead him. The new president loves a good fight, not consensus. He doesn’t want to hug, but to smother, to overwhelm. Yesterday was his day, but the days that follow may belong to his opponents. There are three main opponents that could bring him down politically.
Opponent No. 1: The other America. Across the country, an anti-Trump movement is growing. While only 10,000 people came to an open-air concert in Washington celebrating his victory on the night before the inauguration, 20,000 people took to the streets in New York to protest his elevation. Their signs shouted: Not My President. The security and surveillance costs around Trump Tower on Fifth Avenue, at the corner of 56th Street, is costing taxpayers about a half million dollars – each day.
Opponent No. 2: The Media. Among publishers, producers, filmmakers and journalists, Trump has hardly any friends. CNN, The Washington Post, The New York Times and Hollywood couldn’t warm to the volcanic personality of the new president. Even an unbroken Twitter assault has no chance against such a monolithic wall of media rejection. He hates them, and they hate him right back. He pushes forward his agenda, and they push back unabashedly with theirs. Trump enters The White House with the lowest approval rating ever of an elected president.
Opponent No. 3: The Political Party System. Washington is having an allergic reaction to Trump. Democrats and even Republicans are cooperating on Capitol Hill to investigate the Trump team’s contacts to Russia in a special committee. House Speaker Paul Ryan doesn’t see himself as a Trump follower but as a Trump successor. He is the wolf in sheep’s clothing, biding his time, waiting for an opening. Put another way: Not only Democrats are hoping for an impeachment proceeding. America is now on the brink of a new period of polarization. The demons in this fraternal battle have been unchained. The greatness that Trump seeks will not be borne under these conditions. An icy wind is blowing across the land.
Whenever The New York Times or some other mainstream news outlet holds itself out as a paragon of professional journalism – by wagging a finger at some pro-Trump “fake news” or some Internet “conspiracy theory” – I cringe at the self-delusion and hypocrisy. No one hates fake news and fact-free conspiracy theories more than I do, but the sad truth is that the mainstream press has opened the door to such fantasies by losing the confidence of the American people and becoming little more than the mouthpiece for the Establishment, which spins its own self-serving narratives and tells its own lies. Rather than acting as a watchdog against these deceptions, the Times and its mainstream fellow-travelers have transformed themselves into little more than the Establishment’s apologists and propagandists.
If Iraq is the “enemy,” we are told wild tales about how Iraq’s non-existent WMD is a danger to us all. If Syria is in Washington’s crosshairs, we are given a one-sided account of what’s happening there, black hats for the “regime” and white hats for the “rebels”? If the State Department is backing a coup in Ukraine to oust an elected leader, we are regaled with tales of his corruption and how overthrowing a democratically chosen leader is somehow “democracy promotion.” Currently, we are getting uncritical stenography on every conceivable charge that the U.S. government lodges against Russia. Yet, while this crisis in American journalism has grown more severe in recent years, the pattern is not entirely new. It is reflected in how the mainstream media has missed many of the most significant news stories of modern history and has, more often than not, been an obstacle to getting at the truth.
Then, if the evidence finally becomes so overwhelming that continued denials are no longer tenable, the mainstream media tries to reclaim its tattered credibility by seizing on some new tidbit of evidence and declaring that all that went before were just rumors but now we can take the long whispered story seriously — because the Times says so.
Any country leaving the euro zone would need to settle its claims or debts with the bloc’s payments system before severing ties, ECB President Mario Draghi said. The comment – a rare reference by Draghi to the possibility of the currency zone losing members – came in a letter to two Italian lawmakers in the European Parliament released on Friday. It coincides with a groundswell of anti-euro sentiment in Italy and other euro zone states, fueled in part by last June’s unprecedented decision by Britain to leave the European Union. “If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full,” Draghi said in the letter.
Based on data to end-November from the Target 2 payment system, that would leave Italy with a €358.6 billion ($383.1 billion) bill. The system records flows of payments between euro zone countries. The threat of defaults on cross-border debts has often been credited as one element keeping the euro zone together throughout the financial crisis. As these payments are not generally settled, weaker economies including Italy, Spain and Greece have accumulated huge liabilities towards Target 2 while Germany stands out as the biggest creditor with net claims of €754.1 billion. Target 2 imbalances have worsened in recent months, with Harvard economist Carmen Reinhart warning of capital flight from Italy.
The Trump administration this week will begin laying groundwork for a trade deal between the U.S. and the U.K. that would take effect after Britain leaves the European Union, a White House aide said. Prime Minister Theresa May last week declared Britain is “open for business” as she announced plans to pursue a clean break with the EU, paving the way for the U.K. to eventually strike new trade accords with the continent and other countries. May is to visit Washington this week. Trump officials believe their discussions with her government encouraged May to be more aggressive in exiting the union. She can use any American support to argue the U.K. will prosper outside the bloc although she risks inflaming tensions with EU leaders if they suspect her government is actively negotiating trade deals while still an EU member.
Two of President Donald Trump’s senior advisers, Steve Bannon and son-in-law Jared Kushner, met with U.K. Foreign Secretary Boris Johnson in New York on Jan. 8. The three are preparing for the future pact, the aide said, requesting anonymity because the discussions aren’t public. Bannon, Trump’s National Security Adviser Michael Flynn, and other administration officials have also met with British defense and intelligence leaders, the aide said. President Barack Obama warned in April that if the U.K. pursued Brexit, the country would go to the “back of the queue” for U.S. trade deals. U.K. voters chose to leave the EU anyway in a June referendum, and Trump now appears to be scrapping Obama’s position on the matter. Trump’s team is also considering a deal to reduce barriers between U.S. and British banks, the Sunday Telegraph reported, citing officials from both sides.
Trump has tapped Woody Johnson, the billionaire owner of the New York Jets NFL team, to serve as U.S. ambassador to the U.K., a person familiar with the matter said on Jan. 19. May and Mexican President Enrique Pena Nieto will make visits to the U.S. this month to meet with Trump, White House officials said. May will meet with Trump on Jan. 27, White House Deputy Press Secretary Sarah Huckabee said on Saturday. Pena Nieto will meet with Trump on Jan. 31, said White House Press Secretary Sean Spicer.
Urging people to stop consuming stuff in order to slow the rate of climate change is a gambit that is doomed to fail. It would be helpful if shoppers put off buying a suit or installing a new kitchen, but it’s not going to happen. Demonising those who fly to Barcelona for a long weekend is another tactic that will have almost no impact. It’s not for nothing that economists base many of their assumptions on populations having unlimited wants. Most people strain to acquire stuff that the rich have long taken for granted. Telling them to switch off this desire has never worked and is unlikely to do so now, even when the future of the planet is at stake. In this vein, the accession of Donald Trump to the presidential throne should not be read as a spectacular one-off reaction by a narrow, if electorally important group who missed out on GDP growth.
Consumption is how most people measure progress, and that will still be the case next year and in 10 years’ time, when Trump is long gone. Take a look at the figures for flights in and out of the UK, home of some the world’s busiest airports. City Airport, which is embarking on a £344m expansion, saw 4.3 million passengers in 2015. Heathrow, which has the government’s blessing for its own multibillion-pound development, welcomed 75 million passengers in the same year, Gatwick broke 40 million, and Stansted hit double-digit growth with 22.5 million passengers. Last year, Manchester airport boasted annual growth of 11% after it attracted 23.7 million passengers. And these figures don’t include the huge amount of imported and exported goods that flow through Britain’s airports.
If it’s true that trade is in the UK’s DNA – and the figures support this – any government, of whatever colour, will think twice before standing in the way of airport expansion. That doesn’t mean governments should not think about air travel when searching for ways to tackle climate change. Aircraft makers should be forced to make their planes more efficient, and airport owners must clean up the pollution they create. But this is an exercise in minimising the impact of flying, given that its expansion is inevitable. The same analysis should have applied to the country’s steel plants –and to its other polluting industries. Without a reduction in steel consumption, we must live with its continued production.
European leaders, anxious over Donald Trump’s unpredictability and kind words for the Kremlin, are scrambling to get face time with the new American president before he can meet with Russian President Vladimir Putin, whose provocations have set the continent on edge. One leader has raised with Trump the prospect of a U.S.-EU summit early this year, and the head of NATO — the powerful military alliance Trump has deemed “obsolete” – is angling for an in-person meeting ahead of Putin as well. British Prime Minister Theresa May is working to arrange a meeting in Washington soon after Friday’s inauguration. For European leaders, a meeting with a new American president is always a sought-after – and usually easy-to-obtain – invitation.
But Trump has repeatedly defied precedent, making them deeply uncertain about their standing once he takes office. Throughout his campaign and in recent interviews, Trump has challenged the viability of the EU and NATO, while praising Putin and staking out positions more in line with Moscow than Brussels. “There are efforts on the side of the Europeans to arrange a meeting with Trump as quickly as possible,” Norbert Roettgen, the head of the German Parliament’s foreign committee and a member of Chancellor Angela Merkel’s party, told AP. In fact, eager to stage an early show of Trans-Atlantic solidarity, Donald Tusk – the former Polish prime minister who heads the EU’s Council of member state governments – invited Trump to meet with the EU early in his administration, according to a EU official.
But a senior Trump adviser essentially rebuffed the offer, telling the AP this week that such a gathering would not be a priority for the incoming president, who wants to focus on meetings with individual countries, not the 28-nation bloc. Trump backs Britain’s exit from the EU, casting the populist, anti-establishment movement as a precursor to his own victory. In a recent joint interview with two European newspapers, Trump said of the EU, “I don’t think it matters much for the United States.” Such rhetoric alone was enough to set off alarm bells in Europe. And Trump’s praise for Putin and promise of closer ties to Moscow have deepened the uncertainty.
Donald Trump should lay off talking about the break-up of the European Union, the bloc’s chief executive said on Wednesday, pointing out that Europeans do not push for Ohio to secede from the United States. In pointed remarks on the eve of Trump’s inauguration as U.S. president, Jean-Claude Juncker said the new administration would realize it should not damage transatlantic relations but added it remained unclear what policies Trump would now pursue. Juncker told Germany’s BR television, according to a transcript from the Munich station, that he was sure no EU state wanted to follow Britain’s example and leave the bloc, despite Trump’s forecast this week that others would quit:
“Mr. Trump should also not be indirectly encouraging them to do that,” Juncker said. “We don’t go around calling on Ohio to pull out of the United States.” Juncker, the president of the European Commission, said he had yet to speak to Trump — contrary to what the President-elect said earlier this week. Juncker said Trump had confused him with European Council President Donald Tusk. “Trump spoke to Mr. Tusk and mixed us up,” said Juncker, taking a jab at the American billionaire’s grasp of his new role. “That’s the thing about international politics,” he said. “It’s all in the detail.”
The euro region could break up if political leaders don’t get to grips with the discontent that’s spurring support for populist leaders across the continent, JPMorgan Chase CEO Jamie Dimon said. Dimon said he had hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn’t happened, and if nationalist politicians including France’s Marine Le Pen rise to power in elections across the region “the euro zone may not survive,” Dimon, 60, said in a Bloomberg Television interview with John Micklethwait. “What went wrong is going wrong for everybody, not just going wrong for Britain, but in some ways it looks like they’re kind of doubling down,” Dimon said in the interview Wednesday at the annual meeting of the World Economic Forum in Davos.
Unless leaders address underlying concerns, “you’re going to have the same political things about immigration, the laws of the country, how much power goes to Brussels.” Dimon’s remarks on Europe were unusually pessimistic, coming in a wide-ranging interview in which he also criticized regulations that he said stunt economic growth. But he reiterated optimism for President-elect Donald Trump. Minutes later, Goldman Sachs CEO Lloyd Blankfein also expressed concern about Europe, telling CNBC that leaders are facing a backlash in the midst of a long, complicated process to create an economic bloc. “That’s complicated, that’s very hard to do,” said Blankfein. “It’s not done, and it’s not accomplished. We’re finding the pain of that.” [..] The bottom line is that Europe must become more competitive, Dimon said. “I say this out of respect for the European people, but they’re going to have to change,” he said. “They may be forced by politics, they may be forced by new leadership.”
When someone wants the impossible, in French we say that they want “the butter, the money from the butter, and the dairymaid’s smile”. In more vulgar usage we say they want something rather more from the dairymaid than a smile. This is precisely what we can take away from Theresa May’s speech on the “hard Brexit” she wants. It is “hard” only for the other 27 states but “soft” for Britain – because May wants to keep all the benefits of EU membership and concede nothing in return. That is not really a surprise since she had already announced it in October during the Conservative party conference. She even considers that any other kind of agreement would be unacceptable, because it would amount to “punishing” the British.
May is threatening to turn Britain into a tax haven by way of retaliation, if, by some misfortune, the Europeans refuse to bend to the demands of Her Glorious Majesty’s subjects. We might think we are dreaming, but no: it is either arrogance or recklessness (or, more likely, a mixture of the two). Let’s sum up: on the one hand, of course, May would like a clear, “clean break” with the union, which means no longer sitting in its institutions, contributing to the budget or respecting EU law. On the other hand, she does not want the status of some kind of “partial or associate” member, which would imply having to meet EU’s requirements in all kinds of areas.
Thus far, we get it: the UK will be treated like any other third country – Zimbabwe, for instance. That’s clear and “clean”. But after that it gets complicated, at least for a continental mind that lacks the subtleties of reflection of a product of Oxbridge. Because May considers it possible for British companies to retain the greatest possible access to the single market, in particular to negotiate sectoral customs agreements with the union. And that’s where things get interesting. Because customs duty or no, importing goods into a market presupposes compliance with local norms and standards: to be clear, if the British want to export their cars (which are in fact German or Japanese cars) to the continent, they need to respect European laws. That means submitting (I know, what an awful word) to those laws. So in reality, the clear, “clean break” could only concern one part of UK industry – the part that manufactures for the local market.
National Front leader Marine Le Pen is seeking to turn May’s presidential election into a referendum on the European Union by detailing a strategy to pull France from the bloc and its single currency if she wins. She last ran in 2012 with an initial promise of a sharp and sudden break from the euro, but this time Ms. Le Pen has sought broader support from a splintered French electorate. She says she would organize an orderly exit rather than crashing out with unpredictable consequences. If elected, she and top National Front officials say, her administration will spend its first six months negotiating the creation, along with other disappointed euro nations, of a basket of shadow European currencies. A newly reinstated franc, she says, would eventually be pegged to that basket, replacing the euro.
Ms. Le Pen says other countries struggling to meet European rules would be willing to enter into talks on pulling the EU apart. The threat of having to leave the euro, she says, has been used to blackmail Greece and other Southern European countries into implementing austerity programs their people reject. “The euro has not been used as a currency, but as a weapon—a knife stuck in the ribs of a country to force it to go where the people don’t want to go,” Ms. Le Pen said this month. “Do you think we accept living under this threat, this tutelage? It’s absolutely out of the question.”
[..] An attempt by France, the eurozone’s second-largest economy, to pull out would be far more challenging than Brexit, which doesn’t touch on currency questions. A “Frexit” would likely unleash chaos across the currency union and undermine the broader EU in a way Britain’s departure wouldn’t. No country has attempted to leave the euro, and French polls show that while people want to claw back control from Brussels, a majority wouldn’t vote to leave the currency. The complications of an exit weren’t as clear to Ms. Le Pen in 2012, when she garnered only 17.9% of the presidential vote with her push for a clean break with the euro. “We set off on the idea in 2012 of an immediate exit, slamming the door,” said Jean-Richard Sulzer, a senior economic adviser to Ms. Le Pen. “Things were said too quickly, but this time Marine is much more prudent.”
Donald Trump is right to say America’s NATO allies aren’t paying their fair share. But, to the delight of the arms industry, that may be changing. Trump himself is the change-maker. He reaffirmed his skepticism about the North Atlantic Treaty Organization, and his readiness to make deals with Russia, in European media interviews published last weekend. Trump isn’t famous for his policy consistency, but those positions have held fairly steady – leaving European leaders wondering whether they can still rely on the American security umbrella. “Let’s not fool ourselves,” German Chancellor Angela Merkel said last week. “There is no infinite guarantee.”
So Merkel’s Germany, and many other European nations, are boosting military budgets. The plans predate Trump, and under NATO rules they should’ve been carried out long ago. The alliance expects its members to spend 2% of GDP on defense. But it’s no secret that most of them don’t. The shortfall added up to about $121 billion last year at 2010 prices, according to Bloomberg calculations based on NATO country estimates.
Since Trump is promising to increase America’s already enormous military budget too, the prospect of a European arms-shopping spree is a win-win for suppliers. Investors have noticed: From Raytheon to Lockheed Martin to Thales, defense contractors have hit all-time highs since Trump’s election. “This is the best market for defense in many years, across the board,” said Richard Aboulafia, an aerospace analyst with the Teal Group in Fairfax, Virginia. NATO was established after World War II to protect western democracies against the Soviet Union. A key tenet is that an attack on any alliance member is considered an attack on all. And that’s what Trump has questioned. If Russia moved against one of NATO’s Baltic members, Trump told the New York Times in July, he’d come to their aid only after reviewing whether they have “fulfilled their obligations to us.”
Steve, who is Trump going to be pouring drinks for, as in economic growth and benefits, in 2017?
Steve Keen: He is trying to pour it just for his own economy. And this is going to be the dramatic challenge he faces. Because he is someone who actually knows a lot about money and banks and debt, having used it extensively in his own professional career.
Lelde Smits: And succeeded and failed and hopefully learnt from the failures.
Steve Keen: He’s turned failure into success in many, many ways, and let’s not go there in terms of how beneficial that was for his various suppliers but he understands going bankrupt, he understand re-organisation, he understands finance.
Lelde Smits: So where is this liquid in 2017?
Steve Keen: He’s going to realise at some point he owns his own bank now. Because he’s running the country he is going to spend.
Lelde Smits: So we have the Federal Reserve right?
Steve Keen: The Federal Reserve is there and can top him up as much as it likes.
Lelde Smits: So when does this stop Steve? That’s the magic question.
Steve Keen: It never has to stop. He’s going to enable the American economy to spend dramatically. Taxation is going to be cut. There will be an increase in government spending. There will be a large deficit coming out of that. So the government is going to be creating a lot of money and running a lot of infrastructure projects and so on. There are 4 million Americans who aren’t employed now who were employed in 2000. They are people who are going to get jobs in construction and start spending domestically and so on. And Trump is going to see that as boosting up the American economy. It’s all about Buy America, Made in America and so on.
On Dec. 1, 2008, most of the world’s banks were still panicking through the financial crisis. Lehman Brothers had collapsed. Merrill Lynch had been sold. Citigroup and others had required multibillion-dollar bailouts to survive. But not every institution appeared to be in free fall. That afternoon, at the London outpost of Deutsche Bank, the stolid-seeming, €2 trillion German powerhouse, a group of financiers met to consider a proposal from a team led by a trim, 40-year-old banker named Michele Faissola. The scion of an Italian banking family, Faissola was the head of Deutsche’s global rates unit, a division that created and sold financial instruments tied to interest rates. He’d been studying the problems of one of Deutsche’s clients, Italy’s Banca Monte dei Paschi di Siena, which, as the crisis raged, was down €367 million ($462 million at the time) on a single investment.
Losing that much money was bad; having to include it in the bank’s yearend report to the public, as required by Italian law, was arguably much worse. Monte dei Paschi was the world’s oldest bank. It had been operating since 1472 [..] . If investors were to find out the extent of its losses in the 2008 credit crisis, the consequences would be unpredictable and grave: a run on the bank, a government takeover, or worse. At the Deutsche meeting, Faissola’s team said it had come up with a miraculous solution: a new trade that would make Paschi’s loss disappear. The bankers in the room had seen some financial sleight of hand in their day, but the maneuver that Faissola’s staffers proposed was audacious.
They described a simple trade in two parts. For one half of the deal, Paschi would make a sure-thing, moneymaking bet with Deutsche Bank and use those winnings to extinguish its 2008 trading losses. Of course, Deutsche doesn’t give away money for free, so for the second half of the deal, the Italians would make a bet that was sure to lose. But while the first transaction was immediate, the second would play out slowly, over many years. No sign of the €367 million sinkhole would need to show up when Paschi compiled its yearend financial reports.
Last year, the Earth sweltered under the hottest temperatures in modern times for the third year in a row, US scientists said Wednesday, raising new concerns about the quickening pace of climate change. Temperatures spiked to new national highs in parts of India, Kuwait and Iran, while sea ice melted faster than ever in the fragile Arctic, said the report by the National Oceanic and Atmospheric Administration. Taking a global average of the land and sea surface temperatures for the entire year, NOAA found the data for “2016 was the highest since record keeping began in 1880,” said the announcement. The global average temperature last year was 1.69 Fahrenheit (0.94 Celsius) above the 20th century average, and 0.07 degrees F (0.04 C) warmer than in 2015, the last record-setting year, according to NOAA.
This was “not a huge margin to set a new record but it is larger than the typical margin,” Deke Arndt, chief of NOAA global climate monitoring, said on a conference call with reporters. A separate analysis by the US space agency NASA also found that 2016 was the hottest on record. The World Meteorological Organization in Geneva confirmed the US findings, and noted that atmospheric concentrations of both carbon dioxide and methane reached new highs. The main reason for the rise is the burning of fossil fuels like oil and gas, which send carbon dioxide, methane and other pollutants known as greenhouse gasses into the atmosphere and warm the planet. The mounting toll of industrialization on the Earth’s natural balance is increasingly apparent in the record books of recent decades. “Since the start of the 21st century, the annual global temperature record has been broken five times (2005, 2010, 2014, 2015 and 2016),” said NOAA.
What’s so special about 2C? The simple answer is that it is a target that could be politically agreed on the international stage. It was first suggested in 1975 by the environmental economist William Nordhaus as an upper threshold beyond which we would arrive at a climate unrecognisable to humans. In 1990, the Stockholm Environment Institute recommended 2C as the maximum that should be tolerated, but noted: “Temperature increases beyond 1C may elicit rapid, unpredictable and non-linear responses that could lead to extensive ecosystem damage.” To date, temperatures have risen by almost 1C since 1880. The effects of this warming are already being observed in melting ice, ocean levels rising, worse heat waves and other extreme weather events.
There are negative impacts on farming, the disruption of plant and animal species on land and in the sea, extinctions, the disturbance of water supplies and food production and increased vulnerability, especially among people in poverty in low-income countries. But effects are global. So 2C was never seen as necessarily safe, just a guardrail between dangerous and very dangerous change. To get a sense of what a 2C shift can do, just look in Earth’s rear-view mirror. When the planet was 2C colder than during the industrial revolution, we were in the grip of an ice age and a mile-thick North American ice sheet reached as far south as New York. The same warming again will intensify and accelerate human-driven changes already under way and has been described by James Hansen, one of the first scientists to call global attention to climate change, as a “prescription for long-term disaster”, including an ice-free Arctic.
Nevertheless, in 1996, a European Council of environment ministers, that included a young Angela Merkel, adopted 2C as a target for the EU. International negotiators agreed the same in 2010 in Cancun. It was a commitment repeated in the Paris Climate Accord of 2015 where, pushed by a new group of countries called the Climate Vulnerable Forum, ambitions went one step further, agreeing to hold temperature rises to “well below 2C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5C”.
Top row l-r: brown-headed spider monkey, chimpanzee, Western gorilla; Bottom row l-r: Bornean orangutan, Siau Island tarsier, ring-tailed lemur. Composite: Alamy and Getty Images
More than half of the world’s apes, monkeys, lemurs and lorises are now threatened with extinction as agriculture and industrial activities destroy forest habitats and the animals’ populations are hit by hunting and trade. In the most bleak assessment of primates to date, conservationists found that 60% of the wild species are on course to die out, with three quarters already in steady decline. The report casts doubt on the future of about 300 primate species, including gorillas, chimps, gibbons, marmosets, tarsiers, lemurs and lorises. Anthony Rylands, a senior research scientist at Conservation International who helped to compile the report, said he was “horrified” at the grim picture revealed in the review which drew on the International Union for the Conservation of Nature (IUCN) red list, peer-reviewed science reports and UN databases.
“The scale of this is massive,” Rylands told the Guardian. “Considering the large number of species currently threatened and experiencing population declines, the world will soon be facing a major extinction event if effective action is not implemented immediately,” he writes in the journal Science Advances, with colleagues at the University of Illinois and the National Autonomous University of Mexico. The most dramatic impact on primates has come from agricultural growth. From 1990 to 2010 it has claimed 1.5 million square kilometres of primate habitats, an area three times the size of France. In Sumatra and Borneo, the destruction of forests for oil palm plantations has driven severe declines in orangutan populations. In China, the expansion of rubber plantations has led to the near extinction of the northern white-cheeked crested gibbon and the Hainan gibbon, of which only about 30 or animals survive.
More rubber plantations in India have hit the Bengal slow loris, the western hoolock gibbon and Phayre’s leaf monkey. Primates are spread throughout 90 countries, but two thirds of the species live in just four: Brazil, Madagascar, Indonesia and the Democratic Republic of the Congo (DRC). In Madagascar, 87% of primate species face extinction, along with 73% in Asia, the report states. It adds that humans have “one last opportunity” to reduce or remove the threats facing the animals, to build conservation efforts, and raise worldwide awareness of their predicament. The market for tropical timber has driven up industrial logging and damaged forest areas in Asia, Africa and the neotropics. Mining for minerals and diamonds have also taken a toll. On Dinagat island in the Philippines, gold, nickel and copper mining endanger the Philippine tarsier. In the DRC, hunters working around the tin, gold and diamond mine industry are the greatest threat to the region’s Grauer’s gorilla. The industries at work in tropical forest areas are expected to be served by an extra 25 million km of roads by 2050, further fragmenting the primates’ habitats.
If you were an elephant … You would still feel love, hurt and grief.
“Perhaps one of the reasons we’re so keen to deny non-human creatures minds, consciousness and personhood is that, if they’re people, they’re embarrassingly better people than we are. They build better communities; they live at peace with themselves and aren’t, unlike us, actively psychopathic towards other species. ”
If you were an elephant living wild in a western city, you’d be confused and disgusted. You’d have one two-fingered hand swinging from your face – a hand as sensitive as tumescent genitals, but which could smash a wall or pick a cherry. With that hand you’d explore your best friends’ mouths, just for the sake of friendship. With that hand you’d smell water miles away and the flowers at your feet. You’d sift it all, triaging. Category 1: immediate danger. Category 2: potential threat. Category 3: food and water. Category 4: weather forecasts – short and long range. Category 5: pleasure. Grumbles from trucks and cabs would shudder through the toxic ground, tickle the lamellar corpuscles in your feet and ricochet up your bones. You’d hear with your feet, and your femurs would be microphones.
As you walked 10 miles for your breakfast you’d chatter with your friends in 10 octaves. A nearby human would throb like a bodhran as subsonic waves bounced around her chest. Even if it swayed with grass instead of being covered in concrete and dog shit, the city would be far, far too small for you. You’d feel the ring roads like a corset. You’d smell succulent fields outside, and be wistful. But you’d make the most of what you had. You’d follow a labyrinth of old roads, relying on the wisdom of long-dead elephants, now passed down to your matriarch. You’d have the happiest kind of political system, run by wise old women, appointed for their knowledge of the world and their judgment, uninterested in hierarchy for hierarchy’s sake, and seeking the greatest good for the greatest number.
No room here for the infantile phallocentric Nietzscheanism that is destroying modern human culture. If you were a boy you’d be on the margins, drifting between family groups (but never allowed to disrupt them) or shacked up with your bachelor pals in the elephant equivalent of an unswept bedsit (though usually your behaviour would be gentler, more convivial and more urbane than cohabiting human males). Your function would be to inseminate, and that’s all. Government would be the business of the females. You’d be a communitarian. Relationality would be everything. It’s not that you couldn’t survive alone, although there would certainly be a survival benefit from being a member of a community, just as humans live longer if they are plugged into a church, a mosque or a bowling club.
Yes, at some level your altruism might be reciprocal altruism, where you scratch my back if I scratch yours, or kin selection, where you are somehow persuaded to sacrifice yourself if your death or disadvantage will preserve a gene in a sufficiently closely related gene-bearer. But at a much more obvious and important level you’d be relational – joyously shouldering the duties that come with community – because it made you happy. Why do elephants seek out other elephants? Not primarily for sex, or for an extra arsenal of receptors to pick up the scent of poachers, or because they assume that the others will have found particularly nutritious food, but because they like other elephants.
[..] As an elephant, you’d have a mind. You would, no doubt at all, be conscious. All the evidence agrees. None – absolutely none – disagrees. You’d have a sense of yourself as distinct from other things. When you looked out contemptuously at humans, wondering why they ate obviously contaminated food, opted to be miserable and alone, or wasted energy on pointless aggression and anxiety, it would be your contempt, as opposed to generic elephantine contempt, or reflexive contempt that bypassed your cerebral cortex, or the contempt of your sister. It would be you looking out, and you’d know it was you.
Sometimes you best fight fire with fire. This knowledge goes back to the advent of agriculture. Australian aboriginees have used it since as long as their stories of dream time can remember. For Native Americans it was an essential part of their lives. These days, we need Trump to fight the fire of an elite class world power that is a threat to all of us.
Be stirring as the time; be fire with fire;
Threaten the threatener and outface the brow
Of bragging horror
Shapespeare: King John, 1595
Been greatly enjoying Donald Trump’s pair of interviews with the European press this weekend, in the shape of German scandal paper Bild’s chief, very-right Kai Diekmann, and disgraced Brexiteer Michael Gove for the Sunday Times. What a pair of choices, by the way, what’s next, a Russian interview conducted by Zhirinovsky?. Who picked those clowns? Let’s just hope it was the Trump campaign.
Enjoying it not in the least because Trump is right in just about everything he says. At least, as per what we at the Automatic Earth have been saying about some of the topics involved all along. And we’re not Trump fans, we just think the others are more wrong than he is, and that it’s high time to abolish the EU, and NATO, and sure, the CIA too.
Speaking of which: Chuck Shumer has made it all the way to Senate leader for the Democrats, right? And then he says about Trump’s criticism of US intel and the Steele ‘report’:
“Let me tell you: You take on the intelligence community, they have six ways from Sunday at getting back at you. For a practical, supposedly hard-nosed businessman, he’s being really dumb to do this.”
Want to take any of that back, Chuck? While you still can? Because, you know, threatening the president-elect with the might of the CIA, what does that say about your view of who actually rules the country, Charlie? That’s not a gaffe, that’s what would in America’s better days have been a career buster, buster. But your own rudderless party won’t call you on it, and Trump would love for you to keep your seat; one less worry. Still, c’mon, you just can’t say sh*t like that. It’s beyond any pale. Or, you know, it once was.
What did Trump get right? Here’s what. First, NATO should not exist anymore, since as we’ve said 1000 times, and Ron Paul said 10 times more, it’s merely a hammer looking for a nail, having turned for the purpose, since the dissolution of the Soviet Union, from a defensive collaboration into the planet’s worst aggressor. The 1000s of additional US troops gathered at or close to the Russian border recently are more than plenty evidence of that.
Trump wants far fewer nukes on the planet, and proposes to negotiate a deal with Russia to achieve that goal. Ergo, 30 years after Reagan met Gorbachev in Reykjavik to accomplish just that, Trump must meet Putin in that same spot to do it all over again?! That’s the legacy of NATO. It would be mighty symbolic, though we might want to remember the 1972 Spasski-Bobby Fisher chess ‘world cup’ there, and the American’s paranoia at the time. Not a good example. But they’ll meet someplace, for sure.
Second, Trump likes Brexit. So do we. Beautiful Brexit. Because it is a preliminary step towards the dissolution of the EU, which, as Trump very correctly remarks, has degenerated into a “vehicle for Germany” to compete with the US as a global trading force.
And of course Germany would deny this. After all, didn’t the notorious FinMin Schäuble say -again- just a few days ago that Europe’s problem is not Germany’s surplus, but the weakness of other nations? This week, German foreign ministry spokesman Martin Schäfer added:“For the German government, Europe has never been a means to an end, but a community of fate which, in times of collapsing old orders, is more important than ever.” A community of ‘fate’? An ‘old order’ vs a ‘new order’? Are we taking notes?
Anyway, this is cheap quatsch as long as a huge part of Germany’s surplus comes from its trade with co-EU nations. Because in that scenario, there’s only so much surplus to go around, and the rest will all of necessity run deficits. If that is hard to understand, let’s dive up these stats again, and close that discussion once and for all:
The EU very much IS a vehicle for Germany, and it eats people alive. That has nothing to do with Germany taking in immigrants, it has to do with economic and power policies, with the destruction of Greece and Italy. The structure of the EU makes it possible, inevitable even, that the strongest partner forces all the others to do its will. That really is all you need to know about why the EU is doomed to failure. All the rest is just about describing the process of how that failure unfolds.
Setting and keeping the euro at a rate that is beneficial to Germany condemns poorer EU nations to ever deeper poverty. That’s what those numbers say. And if anyone thinks Schäuble is not aware of either the numbers or the principle itself, get help. Merkel and Schäuble have been elected to represent Germans, but then they wind up making decisions for 400 million other people, who are the victims of the very policies that benefit Germany. There’s nothing difficult about it.
‘Community of Fate’.. Let’s just hope something was lost in translation there. Point is, Trump is right on the money, and he’s about the first person to put it as simply and poignantly as that. The EU is a vehicle for trade domination. It’s a means for Germany and Holland to acquire access to a huge market for their products, free of just about any trade restrictions. Promoted with the flogged dead horse of the ‘tide that lifts all boats’. It does no such thing.
Other than times of open warfare, for countries like Greece and Italy the EU is the worst thing that ever happened to them in a long time. Brussels stands for economic warfare labeled as a unifying force for peace. It’s a blatant lie wrapped in sheep’s clothing. And of course more nations will want to get out, they’d be crazy not to.
Which is what’s so painfully missing from all the Brexit talk in the UK: everyone goes with the idea that the EU will continue to exist as is, just without Britain. The chance of others leaving, and the effect that will have on the ‘Union’, is never discussed. Though it might put the exit from it in a whole different light, politically and especially economically.
Responding to Trump’s comments that Merkel had made an “utterly catastrophic mistake by letting all these illegals into the country”, Gabriel said the increase in the number of people fleeing the Middle East to seek asylum in Europe had partially been a result of US-led wars destabilising the region.
Slamming US foreign policy – and thus the Obama regime, not to mention Angela Merkel’s close friend Hillary Clinton – as a culprit for the European refugee crisis, Gabriel said that “there is a link between America’s flawed interventionist policy, especially the Iraq war, and the refugee crisis, that’s why my advice would be that we shouldn’t tell each other what we have done right or wrong, but that we look into establishing peace in that region and do everything to make sure people can find a home there again,” Gabriel said.
First, if you are against America’s deeply flawed and ‘deeply deadly’ regime change policies of the last few decades, as Gabriel pretends to be, you should be pro-Trump, because the man who will be the next US president a little over 50 hours from now is not only of the same opinion, he will be in a position to do something about it. And while you’re at it, why not tell us of all the heroics Merkel has performed over the past decade of her reign, to make it stop?
And do yourself one better: describe in detail the role your EU partners France and Britain have played in these failures. In which untold trillions were spent and untold millions of lives lost, but in which the arms industries of these nations, and certainly Germany’s too, have made mind-boggling profits. Once you’ve done all that, Mr. Gabriel, feel free to criticize the 45th president of the United States.
“In that area Germany and Europe are already making enormous achievements – and that’s why I also thought it wasn’t right to talk about defence spending, where Mr Trump says we are spending too little to finance Nato. We are making gigantic financial contributions to refugee shelters in the region, and these are also the results of US interventionist policy.” Gabriel, who will likely run as the centre-left candidate against Merkel in Germany’s federal elections in September, said Trump’s election should encourage Europeans to stand up for themselves.
Here is where Gabriel’s foot enters his mouth:
“On the one hand, Trump is an elected president. When he is in office, we will have to work with him and his government – respect for a democratic election alone demands that,” Gabriel said. “On the other hand, you need to have enough self-confidence. This isn’t about making ourselves submissive.
What he says about trade issues, how he might treat German carmakers, the question about Nato, his view on the European Union – all these require a self-confident position, not just on behalf of us Germans but all Europeans. We are not inferior to him, we have something to bring to the table too. “Especially in this phase in which Europe is rather weak, we will have to pull ourselves together and act with self-confidence and stand up for our own interests.”
If that is your idea of exuding confidence, of being and/or appearing strong, Trump will have you for breakfast. “in this phase in which Europe is rather weak, we will have to pull ourselves together”, “you need to have enough self-confidence. This isn’t about making ourselves submissive.” Or how about some genuine pouting: “We are not inferior to him, we have something to bring to the table too.”
No, Mr. Gabriel is not the horse you want to place your bets on. He’s a left wing leader sitting in a government with right wing Merkel, in the kind of flawed consensus model that haunts both the EU and its member states, leaving large groups of people without anyone addressing their issues. This is where ‘populists’ are born. In the US, it gave us Trump.
Gabriel is just one of many who are all wedded to the broken Obama/Merkel/Hillary ideal, financed by a deep state class that profits greatly from the fake notion that what is good for the rich is also good for the poor. Should have given them bread and circuses, guys.
While I tend to largely agree with this, I also think what makes these discussions obsolete is that I haven’t seen a single person talk about the possibility that EU will not survive as is, or the single market, and what that would in turn mean for Brexit. Not a single one. Meanwhile, Britain has declared mudslinging its new national sport, and that will continue to make predicting anything at all very hard.
First, there is very little evidence that membership of the Single Market is worth the costs. Every country in the world has access to the single market, under WTO Rules, although occasionally subject to some very minor tariffs. What you lose by leaving is any voice in how the rules of that market are set, and the hassle and paperwork involved in exporting. How much that is really worth, it is hard to judge. What we do know is that ever since the single market was launched in 1992, the EU has been one of the slowest-growing regions in the world, and that trade between its member states has started to decline. If it is so important to an economy, that is, to put it mildly, a bit odd. The only honest position is to say we have absolutely no idea what difference it will make. No country has left the single market before. But given the obligations that come with it — especially open borders and budget contributions — it may well not be worth much.
Second, it strengthens the U.K.’s negotiating position. If Britain goes into the haggling over the terms of departure saying it has decided to leave the single market, and that there is nothing it really wants from Brussels, then suddenly the conversation changes. After all, there are two things the EU wants from the U.K.: the net budget contribution, which accounts for 7% of its total spending, and access to our market, given that the U.K. runs a massive trade deficit with Europe. The EU doesn’t have to have either — it will get by OK without them. But they are helpful. If the U.K. can offer both, while asking for virtually nothing in return, it is more likely to get what it genuinely wants — which is mainly free access to Europe for its financial sector.
Finally, the politics look right. The Conservative Party has remarkably and quickly reassembled itself as the Brexit Party. That might be the right or the wrong decision, but it is where the majority of the country is right now. After all, Leave won the referendum despite fierce warnings of catastrophe from the rest of the world. Of its opponents, the Liberal Democrats want to go back in, and Labour is hopelessly undecided. If Brexit is a reasonable success — and that simply means it regains control of its borders, and the economy keeps expanding even if it is at a lower rate than before — then the Tories will be rewarded with power for a generation. That makes it a prize worth fighting for.
True, the risks are great. The potential disruption to the economy may be a lot worse than anyone yet realizes. The pound could collapse, inflation could soar, and joblessness start to rise. If any of that happens, May will go down as a catastrophic prime minister. But it is more likely she has called this right — and a hard Brexit will turn out to be best the best option available.
The strong dollar policy—a mantra of Democratic and Republican administrations for more than two decades—may be headed for the scrap heap once Donald Trump is sworn in as president on Friday. Indeed, Trump sent the dollar skittering lower Tuesday after he told The Wall Street Journal that the U.S. currency was “too strong,” in part due to Chinese efforts to hold down the yuan. But while much is made of Trump’s questioning of the need for NATO or the lasting power of the EU, an administration-level push for a weaker currency would hardly be without precedent. It would, however, be an adjustment a generation of investors and traders who came of age in an era when the executive branch at least paid lip service to the notion that a strong dollar was a desirable aim.
The tide last shifted during the Clinton administration after Robert Rubin, the former Goldman Sachs chief, took over as Treasury secretary from Lloyd Bentsen in early 1995. Before that, Bentsen and U.S. Trade Representative Mickey Kantor had often used language that inadvertently—or not—tended to weaken the dollar. Bentsen got the ball rolling early in Clinton’s first term, calling for a stronger yen in a February 1993 appearance and shocking currency traders who duly bid up the Japanese currency. As recounted in a 2001 paper by economists Brad DeLong and Barry Eichengreen, Bentsen saw the stronger yen as potentially helpful in alleviating the U.S. trade deficit, while Kantor saw a weaker dollar providing leverage in trade talks. That may sound a bit familiar. Trump made the U.S. trade deficit a centerpiece of his campaign, using it to argue that it was proof the nation is getting its lunch eaten by competitors in a zero-sum world.
[..] Douglas Borthwick, managing director of Chapdelaine Foreign Exchange, argued in a note earlier this month that an incoming Trump administration, by throwing out the strong dollar policy, could use the currency as a linchpin in implementing its economic agenda: “With a removal of the Strong USD Policy, the US Dollar will weaken against its global counterparts. This will give the FED the ability to normalize US interest rates, as they can use the weaker USD and the resulting inflation as an excuse for raising rates. The FED will then be used by the Administration as a brake on US Dollar weakness. The weaker USD will also force other countries struggling to get their economies moving to rewrite trade agreements in a way that is more advantageous to the US. In other words, we will see a normalization of US Interest rates, and better negotiated trade deals. Both a win for the new Administration.”
One of the persistent strands in U.S. political life is a cultish extremism that approaches fascism. This was given expression and reinforced during the two terms of Barack Obama. “I believe in American exceptionalism with every fiber of my being,” said Obama, who expanded the United States’ favorite military pastime: bombing and death squads (“special operations”) as no other president has done since the Cold War. According to a Council on Foreign Relations survey, in 2016 alone Obama dropped 26,171 bombs. That is 72 bombs every day. He bombed the poorest people on earth, in Afghanistan, Libya, Yemen, Somalia, Syria, Iraq, Pakistan. Every Tuesday — reported the New York Times — he personally selected those who would be murdered by mostly hellfire missiles fired from drones.
Weddings, funerals, shepherds were attacked, along with those attempting to collect the body parts festooning the “terrorist target.” A leading Republican senator, Lindsey Graham, estimated, approvingly, that Obama’s drones killed 4,700 people. “Sometimes you hit innocent people and I hate that,” he said, “but we’ve taken out some very senior members of Al Qaeda.” Like the fascism of the 1930s, big lies are delivered with the precision of a metronome, thanks to an omnipresent media whose description now fits that of the Nuremberg prosecutor: “Before each major aggression, with some few exceptions based on expediency, they initiated a press campaign calculated to weaken their victims and to prepare the German people psychologically … In the propaganda system … it was the daily press and the radio that were the most important weapons.”
The decision by the US president, Barack Obama, to commute the sentence of Chelsea Manning has brought fresh attention to the fate of Julian Assange. On Twitter last week, Assange’s anti-secrecy site WikiLeaks posted: “If Obama grants Manning clemency Assange will agree to US extradition despite clear unconstitutionality of DoJ [Department of Justice] case.” Obama’s move will test the promise. The president commuted Manning’s 35-year sentence, freeing her in May, nearly three decades early. In a statement on Tuesday, Assange said Manning should never have been convicted and described her as “a hero, whose bravery should have been applauded not condemned”. Assange went on to demand that the US government “immediately end its war on whistleblowers and publishers, such as WikiLeaks and myself”, but made no mention of the Twitter pledge.
His lawyer said he has been pressing the Justice Department for updates on an investigation concerning WikiLeaks. The transgender former intelligence analyst, born Bradley Manning, was convicted in August 2013 of espionage and other offences after admitting to leaking 700,000 sensitive military and diplomatic classified documents to WikiLeaks in 2010. Assange has been holed up for more than four years at the Ecuadorian embassy in London. He has refused to meet prosecutors in Sweden, where he remains wanted on an allegation of rape, fearing he would be extradited to the US to face espionage charges if he leaves the embassy. In a statement on Tuesday, a lawyer for Assange did not address whether Assange intended to come to the US.
“For many months, I have asked the DoJ to clarify Mr Assange’s status. I hope it will soon,” Assange’s lawyer, Barry Pollack, said in the statement. “The Department of Justice should not pursue any charges against Mr Assange based on his publication of truthful information and should close its criminal investigation of him immediately.” Another Assange lawyer, Melinda Taylor, said: “Julian’s US lawyers have repeatedly asked the Department of Justice to clarify Julian Assange’s status and would like them to do so now by announcing it is closing the investigation and pursuing no charges.”
Former U.S. intelligence contractor Edward Snowden has been given leave to remain in Russia for another couple of years, a spokeswoman for the Russian foreign ministry said. “Snowden’s residency in Russia has just been extended by another couple of years,” the spokeswoman, Maria Zakharova, said in a post on Facebook.
President Vladimir Putin cracked raunchy jokes on Tuesday as he poked fun at claims that Russian secret services filmed US President-elect Donald Trump with prostitutes. Showing he is familiar with the claims in the explosive dossier, Putin launched into a series of ribald jokes about prostitutes, riffing on Trump’s former role as owner of the Miss Universe beauty contest. The unsubstantiated dossier published by American media last week alleged that Russia had gathered compromising information on Trump, namely videos involving prostitutes at a luxury Moscow hotel, supposedly as a potential means for blackmail. In his first public comments on the claims, Putin rubbished the idea that Russian secret services would have spied on Trump during his 2013 visit to Moscow for the Miss Universe final, as alleged in the dossier.
“Trump when he came to Moscow… wasn’t any kind of political figure, we didn’t even know of his political ambitions,” Putin said, responding to a journalist’s question at a news conference. “Does anyone think that our special services chase every American billionaire? Of course not, it’s just completely ridiculous.” Putin also questioned why Trump would feel the need to hire prostitutes, given his opportunities to meet beautiful women at the Miss Universe contest. “He’s a grown-up for a start and secondly a man who spent his whole life organising beauty contests and meeting the most beautiful women in the world,” Putin said. “I can hardly imagine that he ran off to a hotel to meet our girls of ‘lowered social responsibility’,” said Putin, adding jokingly “although they are of course the best in the world. “I doubt Trump fell for that.”
Putin went on to compare those behind the dossier unfavourably with prostitutes. “The people who order falsifications of the kind that are now circulating against the US president-elect – they are worse than prostitutes, they don’t have any moral limits at all. “The fact that such methods are being used against the US president-elect is a unique case: nothing like this has happened before. “This shows a significant level of degradation of the political elite in the West.”
China’s benchmark money-market rate surged the most in 19 months, with record central bank cash injections being overwhelmed by demand before the Lunar New Year holidays. The People’s Bank of China put in a net 410 billion yuan ($60 billion) through open-market operations on Wednesday, the biggest daily addition since Bloomberg began compiling the data in 2004. That brings the total injections so far this week to 845 billion yuan. The interbank seven-day repurchase rate jumped 17 basis points, the most since June 2015, to 2.58% as of 1:18 p.m. in Shanghai, according to weighted average prices. Demand for cash tends to increase before the Lunar New Year holidays, when households withdraw money to pay for gifts and get-togethers.
Month-end corporate tax payments are adding to the pressure this time, with the break running from Jan. 27 through Feb. 2. The PBOC offered 200 billion yuan of seven-day reverse repos and 260 billion yuan of 28-day contracts, compared with 50 billion yuan of loans maturing on Wednesday. “The PBOC aims to ensure that the liquidity situation remains adequate, while the 28-day reverse repo is apparently targeted at covering the holidays,” said Frances Cheung at Societe Generale. “There could also be preparation for any indirect tightening impact from potential outflows.” China’s central bank has been offering more 28-day reverse repos than one-week loans in the past two weeks, while curbing the injection of cheaper, short-term funds amid efforts to lower leverage in the financial system. It drained a net 595 billion yuan in the first week of January, before switching to a net injection of 100 billion yuan last week as the seasonal funding demand started to emerge.
Average new home prices in China’s 70 major cities rose 12.4% in December from a year earlier, slowing slightly from a 12.6% increase in November, an official survey showed on Wednesday. Compared with a month earlier, home prices rose 0.3% nationwide, slowing from November’s 0.6%, according to Reuters calculations from data issued by the National Bureau of Statistics (NBS). Shenzhen, Shanghai and Beijing prices rose 23.5%, 26.5% and 25.9%, respectively, from a year earlier. Monthly growth in Shanghai and Shenzhen slowed but was unchanged in Beijing as local governments’ tightening measures took effect.
China relied heavily on a surging real estate market and government stimulus to help drive economic growth in 2016, but policymakers have grown concerned that the property frenzy will fuel price bubbles and risk a market crash, with serious consequences for the broader economy. Soaring home prices have prompted more than 20 Chinese cities to tighten lending requirements on house purchases, while regulators have told banks to strengthen their risk management on property loans.
The rust-belt province of Liaoning fabricated fiscal numbers from 2011 to 2014, local officials have said, raising fresh doubts about the accuracy of China’s economic data just days ahead of the release of the nation’s full-year growth report. City and county governments in the northwestern region committed fiscal data fraud in the period, Governor Chen Qiufa said at a meeting with provincial lawmakers Tuesday, according to state-run People’s Daily. Fiscal revenues were inflated by at least 20 percent, and some other economic data were also false, the paper said, without specifying categories. Chen said the data were made up because officials wanted to advance their careers. The fraud misled the central government’s judgment of Liaoning’s economic status, he said, citing a report from the National Audit Office in 2016.
With growth now moderating, officials have sought to improve the credibility of economic data as diffusing financial risks becomes a key policy consideration, along with keeping growth ticking along at a rapid clip. Ning Jizhe, head of the National Bureau of Statistics, has said China should prevent fake economic data and increase the quality of its statistics. Liaoning has seen an unprecedented purge of more than 500 deputies from its legislature. The deputies were implicated in vote buying and bribery in the first provincial-level case of its kind in the Communist Party’s almost seven-decade rule, according to the official Xinhua News Agency. Former provincial party chief Wang Min, who led Liaoning from 2009 until 2015, was earlier expelled following corruption allegations by China’s top anti-graft watchdog.
Saudi Arabia’s oil sheikhs insisted defiantly in Davos that they have defeated the challenge of the American shale industry and restored the balance to the global oil markets after two years of trauma and glut. The country’s energy minister Khalid Al-Falih said US oil frackers had survived only by tapping the most prolific wells and would face surging costs once again as recovery builds, while cannibalisation of their plant will prevent a rapid rebound in US output. “Their supply infrastructure has been decimated,” he said, speaking at the World Economic Forum. Mr Al-Falih admitted for the first time that Saudi Arabia’s decision to flood the world crude markets in 2014 and force a collapse in prices was essentially aimed at US shale frackers, a claim always denied in the past.
“If we had cut production and kept prices at three-digit levels, they would have kept adding one million barrels a day each year, for year after year. Saudi production would have been three million barrels day less in 2017 under that scenario. It was not sustainable,” he said. US drillers bridle at the suggestion that the Saudis won, insisting that they held Opec and Russia to a standstill, forcing them to capitulate last November with an agreement by 22 states to trim output by 1.2m barrels a day, and even that may not prove enough. “Opec engaged in a price war against US producers and they lost,” said Kenneth Hersh from Energy Capital. “This has brought the cost structure down for the whole world. There is no longer a cartel any more.”
Amin Nasser, head of Saudi Aramco, insisted that the job of knocking back shale is largely accomplished and that the market would rebalance by the first half of this year. The cycle is now switching to the opposite extreme. He warned that the world needs $1 trillion of fresh investment in oil projects each year just to keep up with growing demand, and the risk of “price spikes” later this decade is rising fast. The warning was echoed by Fatih Birol, head of the International Energy Agency, who fears a looming oil shortage after an unprecedented collapse in spending on exploration and development over the last two years. “Alarm bells will be ringing if there is no major new investment this year,” he said.
The oil market got a stark reminder Tuesday that rising oil production in the U.S. could upend efforts by major producers to bring global supply and demand for crude back in to balance. Just ahead of the settlement for oil futures prices on the New York Mercantile Exchange on Tuesday, the Energy Information Administration released a report on drilling productivity—forecasting a monthly rise of 41,000 barrels a day in February oil production to 4.748 million barrels a day. “That is bearish for oil and a concern for OPEC,” said James Williams, energy economist at WTRG Economics, pointing out that the volume of new oil per rig has climbed because of gains in efficiency.
“If maintained, the expected February production gain means production from the shale plays will be up at least a half million barrels per day by the end of the year,” said Williams. Prices for February West Texas Intermediate crude lost the bulk of the day’s gain on Tuesday to settle with a modest 11-cent climb at $52.48 a barrel. “Since rigs are higher now than in December and should continue to increase, that means a half million [barrel-per-day] gain in production by year-end is a conservative estimate,” Williams said. “Most OPEC members expected this, but U.S. shale production will be the closest monitored data after OPEC’s own compliance with quotas,” he said.
Centre-right politician Antonio Tajani was elected the new president of the European Parliament on Tuesday after defeating his socialist rival, a fellow Italian, in a daylong series of votes. The new speaker, 63, a former EU commissioner and an ally of former premier Silvio Berlusconi, succeeds German Social Democrat Martin Schulz at a time of crisis for the European Union. Britain wants a divorce deal that needs the legislature’s blessing while old adversary Russia and old ally the United States both pose new threats to EU survivors holding together. Schulz’s tenure saw close cooperation with the centre-right head of the EU executive, Jean-Claude Juncker, but ended with recriminations over the end of a left-right grand coalition. That could spell trouble for the smooth passage of EU laws on a range of issues.
And the win for Tajani, who beat centre-left leader and fellow Italian Gianni Pittella by 351 votes to 282 in a fourth-round runoff, gives the right a lock on three pivotal EU political institutions. That has stirred some calls for change from either Juncker at the European Commission or Donald Tusk, who chairs the European Council of national leaders. However, there is no clear consensus for such changes. Tajani, mindful of the scars left by an unusually bruising battle over a post which can be a powerful influence on which EU rules are made, promised to be “a president for all of you”. His eventual victory came with backing from pro-EU liberals as well as from the ruling conservative parties of Britain and Poland, both of them sharply critical of the EU’s failings. They bristle at the EU impinging on national sovereignty and see it as bureaucratic and wasteful.
By the time the market opened in London, Lehman’s demise was official. Hayes instant-messaged one of his trusted brokers in the City to tell him what direction he wanted Libor to move. Typically, he skipped any pleasantries. “Cash mate, really need it lower,” Hayes typed. “What’s the score?” The broker sent his assurances and, over the next few hours, followed a well-worn routine. Whenever one of the Libor-setting banks called and asked his opinion on what the benchmark would do, the broker said – incredibly, given the calamitous news – that the rate was likely to fall. Libor may have featured in hundreds of trillions of dollars of loans and derivatives, but this was how it was set: conversations among men who were, depending on the day, indifferent, optimistic or frightened.
When Hayes checked the official figures later that night, he saw to his relief that yen Libor had fallen. Hayes was not out of danger yet. Over the next three days, he barely left the office, surviving on three hours of sleep a night. As the market convulsed, his profit and loss jumped around from minus $20 million to plus $8 million in just hours, but Hayes had another ace up his sleeve. ICAP, the world’s biggest inter-dealer broker, sent out a “Libor prediction” email each day at around 7am to the individuals at the banks responsible for submitting Libor. Hayes messaged an insider at ICAP and instructed him to skew the predictions lower. Amid the chaos, Libor was the one thing Hayes believed he had some control over. He cranked his network to the max, offering his brokers extra payments for their cooperation and calling in favours at banks around the world.
By Thursday, 18 September, Hayes was exhausted. This was the moment he had been working towards all week. If Libor jumped today, all his puppeteering would have been for nothing. Libor moves in increments called basis points, equal to one one-hundredth of a percentage point, and every tick was worth roughly $750,000 to his bottom line. For the umpteenth time since Lehman faltered, Hayes reached out to his brokers in London. “I need you to keep it as low as possible, all right?” he told one of them in a message. “I’ll pay you, you know, $50,000, $100,000, whatever. Whatever you want, all right?” “All right,” the broker repeated. “I’m a man of my word,” Hayes said. “I know you are. No, that’s done, right, leave it to me,” the broker said.